CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1996
Registration No. 333-5364
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
THE STANDISH CARE COMPANY
(Exact Name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 8316
(State or other jurisdiction of (Primary Standard
incorporation or organization) Industrial 04-3069586
Classification Code (I.R.S. Employer Identification No.)
Number)
</TABLE>
6 New England Executive Park
Burlington, Massachusetts 01803
(617) 270-4500
--------------
(Address, including zip code and telephone number,
including area code of Registrant's Principal Executive Offices)
MICHAEL J. DOYLE, CHAIRMAN
THE STANDISH CARE COMPANY
6 New England Executive Park
Burlington, Massachusetts 01803
(617) 270-4500
--------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
Copy to:
DAVID A. GARBUS, ESQUIRE
ROBINSON & COLE
One Boston Place
Boston, Massachusetts 02108
(617) 557-5900
-------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement and
upon consummation of the Merger as described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum
Title Of Each Class Of Amount to be Offering Price Amount of
Securities To Be Registered Registered (1) Per Share (2) Registration Fee
----------------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 50,540,000 shares $3.625 $63,175
</TABLE>
(1) This Registration Statement covers the maximum number of shares of the
Registrant's Common Stock that may be issued in connection with the
Merger described in the enclosed Proxy Statement-Prospectus. Includes
540,000 shares of the Registrant's Common Stock that may be issued to
National Westminster Bank Plc, New York Branch, as financial advisor to
CareMatrix, as described in the enclosed Proxy Statement-Prospectus.
(2) Pursuant to Rule 457(l) computed on the basis of the market value of the
Registrant's Common Stock that may be issued in the Merger. The value of
the Registrant's Common Stock is computed in accordance with Rule 457(c)
on the basis of the closing price per share of the Registrant's Common
Stock reported on the Nasdaq Small Cap Market on August 2, 1996.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<PAGE>
THE STANDISH CARE COMPANY
Cross Reference Sheet
(Between Items in Part I of Form S-4 and Prospectus)
<TABLE>
<CAPTION>
Item Number in Form S-4 and Caption Location in Proxy Statement-Prospectus
---------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Cover Page of Proxy
Front Cover Page of Prospectus Statement-Prospectus
2. Inside Front and Outside Back Cover Pages of Table of Contents; Available Information
Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information Summary; Risk Factors
4. Terms of the Transaction Summary; The Merger; Agreement and Plan of Merger
5. Pro Forma Financial Information Selected Historical and Unaudited Pro Forma
Financial Data; Post-Merger CareMatrix (New
Standish)-Unaudited Pro Forma Combined Financial
Statements
6. Material Contacts with the Company Being Acquired
Summary; The Merger; Agreement and Plan of Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters *
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants *
11. Incorporation of Certain Information by Reference *
12. Information with Respect to S-2 or S-3 Registrants *
13. Incorporation of Certain Information by Reference *
14. Information with Respect to Registrants other than
S-2 or S-3 Registrants Summary; Selected Historical and Unaudited Combined
Pro Forma Financial Data; Risk Factors; Unaudited
Pro Forma Combined Financial Information;
Management's Discussion and Analysis of Financial
Condition and Results of Operations for Standish;
Business of Standish; Management of Standish;
Principal Stockholders and Security Ownership of
Standish
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies *
16. Information with Respect to S-2 or S-3 Companies *
<PAGE>
17. Information with Respect to Companies Other than S-2
or S-3 Companies Summary; Selected Historical and Unaudited Combined
Pro Forma Financial Data; Risk Factors; Business of
CareMatrix; Management of CareMatrix; Principal
Stockholders and Security Ownership of Management of
CareMatrix; Management's Discussion and Analysis of
Financial Condition and Results of Operations for
CareMatrix
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations Cover Page; Summary; The Merger; Agreement and Plan
are to be Solicited of Merger; Principal Stockholders and Security
Ownership of Management of Standish; Election of
Directors
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer *
</TABLE>
- -------------
*Indicates that Item is omitted because it is not applicable or answer is in
the negative.
<PAGE>
PRELIMINARY PROXY MATERIAL --
Confidential, For Use of the Commission Only
THE STANDISH CARE COMPANY
Needham, Massachusetts 02194
(617) 433-1000
September , 1996
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
The Standish Care Company ("Standish") to be held on October , 1996 at
Standish's executive offices at 197 First Avenue, Needham, Massachusetts
02194, starting at 10:00 a.m. local time.
At this important meeting you will be asked to approve the separate
mergers of twelve wholly-owned subsidiaries of Standish with and into one of
twelve affiliated corporations (collectively, the "Merger") which are known
as CareMatrix of Massachusetts, Inc., CareMatrix of Amber Lights, Inc.,
CareMatrix of Amethyst Arbor, Inc., CareMatrix of Emerald Springs, Inc.,
CareMatrix of Cypress Station, Inc., CarePlex of Cragganmore, Inc., CarePlex
of Homestead, Inc., CareMatrix of Darien, Inc., CarePlex of Miami Shores,
Inc., CareMatrix of ARI, Inc., CCC of Maryland, Inc. and A.M.A. New Jersey
Development, Inc. (each a "CareMatrix Corporation" and collectively,
"CareMatrix") and which are owned by a group of persons consisting of Abraham
D. Gosman, Andrew D. Gosman, Michael M. Gosman, certain key CareMatrix
employees and others (collectively, the "CareMatrix Stockholders").
As a result of the Merger, Standish would issue an aggregate of 50,000,000
shares of Standish's common stock to the CareMatrix Stockholders. The Merger
would result in the CareMatrix Stockholders holding approximately 91% of
Standish common stock on a fully-diluted and fully-converted basis.
Upon consummation of the Merger, the CareMatrix Corporations will be the
surviving corporations, and exist as subsidiaries of Standish. Standish will
be headquartered in Needham, Massachusetts. Standish's Board of Directors
will consist of seven persons and will include Michael J. Doyle, currently
Standish's Chief Executive Officer and a member of the Board, Abraham D.
Gosman of CareMatrix, as Chairman, and Andrew D. Gosman of CareMatrix, who
will serve as Vice Chairman, as well as four outside directors. Mr. Doyle
will be the Chief Executive Officer upon consummation of the Merger.
Details of the proposed Merger are described in the accompanying Proxy
Statement-Prospectus. This important document contains information called for
by requirements of Federal securities laws and the Securities and Exchange
Commission, which are applicable to Standish. You are urged to give this
document your prompt attention and consult with such advisors as you may
think desirable.
After a thorough examination of the Merger conducted with the assistance
of outside financial and legal advisors, Standish's Board of Directors has
unanimously approved the Merger and the Merger Agreement and unanimously
recommends that you vote FOR the proposal relating to it.
Approval of the Merger requires the affirmative vote of a majority of the
issued and outstanding shares of Standish Common Stock and Standish Series A
Preferred Stock taken together and voting as a class. It is, therefore,
important that your shares be represented and voted at the Special Meeting.
All Stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to
fill-in, sign, date and return the enclosed proxy (blue form) as promptly as
possible in the postage-paid envelope enclosed for that purpose. If you do
find it possible to attend the Special Meeting and wish to vote in person,
you may withdraw your proxy card at that time.
On behalf of the Board of Directors
Sincerely,
Michael J. Doyle
Chairman and Chief Executive Officer
<PAGE>
PRELIMINARY PROXY MATERIAL --
Confidential, For Use of the Commission Only
THE STANDISH CARE COMPANY
197 First Avenue
Needham, Massachusetts 02194
(617) 433-1000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held October , 1996
To the Stockholders of The Standish Care Company:
A Special Meeting of Stockholders of The Standish Care Company
("Standish") will be held at Standish's executive offices at 197 First
Avenue, Needham, Massachusetts 02194, Massachusetts on October , 1996, at
10:00 a.m. local time, to consider and act upon the following proposals:
1. Approval of an Agreement and Plan of Merger by and among Standish,
twelve wholly-owned subsidiaries of Standish ("Standish Subs"), twelve
affiliated corporations which are known as CareMatrix of Massachusetts, Inc.,
CareMatrix of Amber Lights, Inc., CareMatrix of Amethyst Arbor, Inc.,
CareMatrix of Emerald Springs, Inc., CareMatrix of Cypress Station, Inc.,
CarePlex of Cragganmore, Inc., CarePlex of Homestead, Inc., CareMatrix of
Darien, Inc., CarePlex of Miami Shores, Inc., CareMatrix of ARI, Inc. and
A.M.A. New Jersey Development, Inc. (each a "CareMatrix Corporation" and
collectively, "CareMatrix") and which are owned by a group of persons
consisting of Abraham D. Gosman, Andrew D. Gosman, Michael M. Gosman, certain
key CareMatrix employees and others (collectively, the "CareMatrix
Stockholders"), pursuant to which each of the Standish Subs will be merged
with and into a CareMatrix Corporation and the CareMatrix Stockholders will
receive an aggregate of 50,000,000 shares of Common Stock of Standish, $.01
par value per share ("Standish Common Stock").
2. To consider and act upon a proposal to amend Standish's Restated
Certificate of Incorporation to increase the number of authorized shares of
Standish Common Stock, from 30,000,000 shares to 75,000,000 shares (the
"Authorized Stock Amendment");
3. To consider and act upon a proposed amendment to Standish's Restated
1991 Combination Stock Option Plan, as described in the enclosed Proxy
Statement-Prospectus;
4. To elect five persons to the Standish Board of Directors to serve until
the earlier of (a) the next Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified or (b) the consummation
of the Merger in accordance with the Merger Agreement; and
5. To consider and transact such other business as may properly come
before the Special Meeting or any adjournment or postponement thereof.
Only holders of Standish Common Stock and Series A Preferred Stock of
record at the close of business on , 1996 are entitled to notice of
and to vote at the Special Meeting.
All Stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to
fill-in, sign, date and return the enclosed proxy (blue form) as promptly as
possible in the postage-paid envelope enclosed for that purpose. If you do
find it possible to attend the Standish Special Meeting and wish to vote in
person, you may withdraw your proxy card at that time.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you must obtain and bring to the meeting a
letter from the broker, bank or other nominee confirming your beneficial
ownership of the shares. Further, in such case, in order to vote your shares
at the meeting, you must obtain from the record holder a proxy issued in your
name.
By Order of the Board of Directors
Daniel O. Gaquin
Secretary
Boston, Massachusetts
September , 1996
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE FILL-IN, SIGN AND DATE
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
Confidential, for Use of the Commission Only
PRELIMINARY PROXY STATEMENT--PROSPECTUS
THE STANDISH CARE COMPANY
PROXY STATEMENT FOR
Special Meeting Of Stockholders
To Be Held October , 1996
-------------
THE STANDISH CARE COMPANY
50,540,000 SHARES OF COMMON STOCK
-------------
The Standish Care Company, a Delaware corporation ("Standish"), has filed
a Registration Statement on Form S-4 under the Securities Act of 1933, as
amended ("Securities Act"), relating to 50,000,000 shares of Standish common
stock, $.01 par value (the "Standish Common Stock"), to be issued in
connection with the proposed mergers of twelve wholly-owned subsidiaries of
Standish ("Standish Subs") with and into one of twelve affiliated
corporations which are known as CareMatrix of Massachusetts, Inc., CareMatrix
of Amber Lights, Inc., CareMatrix of Amethyst Arbor, Inc., CareMatrix of
Emerald Springs, Inc., CareMatrix of Cypress Station, Inc., CarePlex of
Cragganmore, Inc., CarePlex of Homestead, Inc., CareMatrix of Darien, Inc.,
CarePlex of Miami Shores, Inc., CareMatrix of ARI, Inc., CCC of Maryland,
Inc. and A.M.A. New Jersey Development, Inc. (each a "CareMatrix Corporation"
and collectively, "CareMatrix") and which are owned by a group of persons
consisting of Abraham D. Gosman, Andrew D. Gosman, Michael M. Gosman, certain
key CareMatrix employees and others (collectively, the "CareMatrix
Stockholders") and the resale of the shares of Standish Common Stock issued
to CareMatrix Stockholders at the Effective Time of the Merger.
The Registration Statement of which this Proxy Statement-Prospectus forms
a part also covers up to 540,000 shares of Standish Common Stock that may be
issued to National Westminster Bank Plc, New York Branch, ("NatWest") as
financial advisor to CareMatrix. See "The Merger--Interests of Certain
Persons in the Merger-- Advisory Fees."
This Proxy Statement-Prospectus is being furnished to holders of the
shares of Standish Common Stock and of Standish's Series A Cumulative
Convertible Preferred Stock, $.01 par value per share ("Series A Preferred
Stock") in connection with the solicitation of proxies for use at the special
meeting of Stockholders of Standish (the "Standish Special Meeting") to be
held on October , 1996, at 10:00 a.m., at Standish's executive offices at
197 First Avenue, Needham, Massachusetts 02194 and at any adjournment or
postponement thereof.
See "Risk Factors" beginning on page for a discussion of certain
factors that should be considered by Standish Stockholders in determining how
to vote with respect to matters to be considered at the Standish Special
Meeting.
All information herein with respect to CareMatrix has been furnished by
CareMatrix.
- --------------------------------
THE SECURITIES OF STANDISH OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
COMMISSION NOR HAS THE COMMISSION OR ANY STATE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------
The date of this Proxy Statement-Prospectus is September , 1996. This
Proxy Statement-Prospectus and the related Form of Proxy are first being
mailed to the Stockholders of Standish on September , 1996.
<PAGE>
No person is authorized to give any information or to make any
representations other than those contained herein and, if given or made, such
information must not be relied upon as having been authorized by CareMatrix
or Standish. This document does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do
so or to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Proxy Statement-Prospectus nor any
distribution of shares of Standish Common Stock shall, under any
circumstances, create any implication that there has not been any change in
the affairs of Standish or CareMatrix since the date hereof.
AVAILABLE INFORMATION
Standish has filed a Registration Statement on Form S-4 under the
Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "Commission") covering the shares of
the Standish Common Stock to be issued in connection with the Mergers of the
twelve wholly-owned subsidiaries of Standish, a Delaware corporation, which
subsidiaries are known as Standish Acquisition 1, Inc., Standish Acquisition
2, Inc., Standish Acquisition 3, Inc., Standish Acquisition 4, Inc., Standish
Acquisition 5, Inc., Standish Acquisition 6, Inc., Standish Acquisition 7,
Inc., Standish Acquisition 8, Inc., Standish Acquisition 9, Inc., Standish
Acquisition 10, Inc., Standish Acquisition 11, Inc. and Standish Acquisition
12, Inc. (collectively, the "Standish Subs") with and into one of twelve
affiliated corporations, which affiliated corporations are known as
CareMatrix of Massachusetts, Inc., CareMatrix of Amber Lights, Inc.,
CareMatrix of Amethyst Arbor, Inc., CareMatrix of Emerald Springs, Inc.,
CareMatrix of Cypress Station, Inc., CarePlex of Cragganmore, Inc., CarePlex
of Homestead, Inc., CareMatrix of Darien, Inc., CarePlex of Miami Shores,
Inc., CareMatrix of ARI, Inc., CCC of Maryland, Inc. and A.M.A. New Jersey
Development, Inc. (each a "CareMatrix Corporation" and collectively,
"CareMatrix").
As permitted by the rules and regulations of the Commission, this Proxy
Statement-Prospectus omits certain information contained in the Registration
Statement on file with the Commission. For further information pertaining to
the securities offered hereby, reference is made to the Registration
Statement and the exhibits thereto, which may be inspected and copied at, and
copies of such material may be obtained at prescribed rates from, the
principal office of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following regional offices of the
Commission: New York Regional Office at 7 World Trade Center, 13th Floor, New
York, New York 10048; and Chicago Regional Office at Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661. Copies of all or any portion of
the material may be obtained from the Public Reference Section of the
Commission upon payment of the prescribed fees.
Standish is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other
information with the Commission. Such reports, proxy and information
statements, and other information filed by Standish with the Commission in
accordance with the Exchange Act may be inspected, without charge, at the
Public Reference Section of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the
Commission: New York Regional Office at 7 World Trade Center, 13th Floor, New
York, New York 10048; and Chicago Regional Office at Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661. Copies of all or any portion of
the material may be obtained from the Public Reference Section of the
Commission upon payment of the prescribed fees. Such materials call also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.
Washington, D.C. 20006. The Commission maintains a site on the World Wide Web
(http:// www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants that submit electronic filings to
the Commission.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Available Information ii
Table of Contents iii
Summary of Proxy Statement-Prospectus 1
Selected Historical and Unaudited Combined Pro Forma Financial Data 6
Risk Factors 8
Solicitation, Voting and Revocation of Proxies 14
The Merger 15
Market Prices and Dividends 37
Unaudited Pro Forma Combined Financial Statements 39
Management's Discussion and Analysis of Financial Condition and Results of Operations
for Standish 44
Business of Standish 51
Management of Standish 60
Principal Stockholders and Security Ownership of Management of Standish 67
Business of CareMatrix 69
Management of CareMatrix 75
Principal Stockholders and Security Ownership of Management of CareMatrix 76
Management's Discussion and Analysis of Financial Condition and Results of Operations
for CareMatrix 78
Description of Standish Capital Stock 80
Other Matters to be Considered at Standish Special Meeting
Proposal No. 2--Amendment to the Standish Restated Certificate of Incorporation 84
Proposal No. 3--Amendment to Standish Stock Option Plan 85
Proposal No. 4--Election of Directors 86
Other Matters 87
Experts 87
Presence of Independent Public Accountants 88
Legal Opinions 88
Stockholder Proposals 88
Index to Financial Statements F-1
Appendix I--Agreement and Plan of Merger I-1
Appendix II--Opinion of Stonebridge Associates, LLC II-1
Appendix III--Proposed Article Fourth of Standish's Restated Certificate
of Incorporation III-1
Appendix IV--Proposed Amendment No. 5 to Standish 1991 Restated
Stock Option Plan IV-1
</TABLE>
iii
<PAGE>
SUMMARY OF PROXY STATEMENT-PROSPECTUS
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement- Prospectus together with information
concerning Standish and CareMatrix, the proposed Merger and the Standish
Common Stock, the Standish Preferred Stock and the common stock of
CareMatrix, respectively. Reference is made to, and this Summary is qualified
in its entirety by, the more detailed information contained in this Proxy
Statement- Prospectus, the Appendices hereto and the documents referred to
herein, including the Agreement and Plan of Merger, dated as of July 3, 1996,
by and among Standish, twelve wholly-owned subsidiaries of Standish
("Standish Subs"), twelve affiliated corporations which are known as
CareMatrix of Massachusetts, Inc., CareMatrix of Amber Lights, Inc.,
CareMatrix of Amethyst Arbor, Inc., CareMatrix of Emerald Springs, Inc.,
CareMatrix of Cypress Station, Inc., CarePlex of Cragganmore, Inc., CarePlex
of Homestead, Inc., CareMatrix of Darien, Inc., CarePlex of Miami Shores,
Inc., CareMatrix of ARI, Inc., CCC of Maryland, Inc. and A.M.A. New Jersey
Development, Inc. (each a "CareMatrix Corporation" and collectively,
"CareMatrix") and which are owned by a group of persons consisting of Abraham
D. Gosman, Andrew D. Gosman, Michael M. Gosman, certain key CareMatrix
employees and others (collectively, the "CareMatrix Stockholders"), pursuant
to which each of the Standish Subs will be merged with and into a CareMatrix
Corporation (the "Merger Agreement") which is attached to this Proxy
Statement-Prospectus as Appendix I.
THE STANDISH SPECIAL MEETING
Time, Date and Place of Meeting
The special meeting (the "Standish Special Meeting") of Stockholders of
Standish will be held at 10:00 a.m., local time, on October , 1996, 197
First Avenue, Needham, Massachusetts 02194. The Standish Special Meeting is
being held in lieu of Standish's 1996 Annual Meeting.
Record Date
Only holders of record of shares of Standish Common Stock and of Series A
Preferred Stock at the close of business on September , 1996 will be
entitled to vote at the Standish Special Meeting. See "Solicitation, Voting
and Revocation of Proxies."
Purpose of the Meeting
The purpose of the Standish Special Meeting is to consider and vote upon a
proposal (i) to approve and adopt the Merger Agreement which provides for the
merger of each of the Standish Subs with and into one of the CareMatrix
Corporations (the "Merger"); (ii) to approve and adopt an amendment to the
Standish Restated Certificate of Incorporation, as amended (the "Standish
Restated Certificate of Incorporation") to increase the number of authorized
shares of Standish Common Stock, from 30,000,000 shares to 75,000,000 shares
(the "Authorized Stock Amendment"); (iii) to approve and adopt an amendment
to Standish's Restated 1991 Combination Stock Option Plan to increase from
785,000 to 2,000,000 the total number of shares of Standish's Common Stock
reserved for issuance thereunder (the "Stock Option Plan Amendment"); and
(iv) to elect five persons to the Standish Board of Directors to serve until
the earlier of (a) the next Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified or (b) the consummation
of the Merger in accordance with the Merger Agreement. For more detailed
information, see "Other Matters to be Considered at Standish Special
Meeting--Proposal No. 2--Amendment to Standish Restated Certificate of
Incorporation" and "--Proposal No. 3--Amendment to Standish Stock Option
Plan" and "--Proposal No. 4--Election of Directors."
For information concerning the consideration offered to the CareMatrix
Stockholders in the Merger, see "Merger Terms" in this Summary. For more
detailed information, see "The Merger--Terms of the Merger Agreement"; and
"Description of Standish Capital Stock."
Shares Outstanding on the Record Date Entitled to Vote
On the record date, shares of Standish Common Stock and
shares of Series A Preferred Stock were issued and outstanding and entitled
to vote at the Standish Special Meeting.
1
<PAGE>
Vote Required
The holders of a majority in interest of all Standish Common Stock and
Series A Preferred Stock issued and outstanding and taken together as a class
are required to be present in person or represented by proxy at the Standish
Special Meeting in order to constitute a quorum for the transaction of
business.
Approval of the Merger Agreement at the Standish Special Meeting requires
the affirmative vote of a majority of the issued and outstanding shares of
Standish Common Stock and Series A Preferred Stock entitled to vote taken
together as a class.
Approval of the proposal authorizing the Authorized Stock Amendment will
require the affirmative vote of a majority of the outstanding shares of
Standish Common Stock and of Series A Preferred Stock taken together voting
as a class. The five nominees for election as Directors of Standish who
receive the greatest number of votes properly cast by Stockholders present in
person or represented by proxy at the Standish Special Meeting will be
elected Directors of Standish. Approval of the Stock Option Plan Amendment
and approval of any other matter properly coming before the Standish Special
Meeting will require the affirmative vote of the holders of at least a
majority of shares of the Standish Common Stock and the Series A Preferred
Stock taken together as a class and represented at the Standish Special
Meeting.
THE MERGER
The Parties
Standish. The Standish Care Company ("Standish"), a Delaware corporation,
is a publicly-held assisted living company engaged in the business of
providing long term care services through the operation and management of
assisted living communities throughout the eastern United States. See
"Business of Standish." Standish's principal executive offices are located at
197 First Avenue, Needham, Massachusetts 02194 and its telephone number is
(617) 433-1000.
CareMatrix. CareMatrix consists of a group of twelve affiliated
corporations which are privately-held and in the business of the development,
operation and management of assisted living communities and other senior care
facilities. Each of the CareMatrix Corporations is a Delaware corporation
except A.M.A. New Jersey Development, Inc., which is a New Jersey
corporation. See "Business of CareMatrix." CareMatrix's principal executive
offices are located at 197 First Avenue, Needham, Massachusetts 02194, and
its telephone number is (617) 433-1000.
Standish Subs. Each of the Standish Subs is a Delaware corporation and a
wholly-owned subsidiary of Standish formed for the purpose of the Merger.
Merger Terms
In the Merger, each of the Standish Subs will be merged with and into a
CareMatrix Corporation, which CareMatrix Corporations will be the surviving
corporations and will become subsidiaries of Standish. In addition, Standish
will change its name to "CareMatrix Corporation" (herein referred to as "New
Standish").
At the effective time of the Merger (the "Effective Time"), the shares of
common stock of the CareMatrix Corporations shall, by virtue of the Merger
and without any action on the part of any holder hereof, be converted into
the right to receive an aggregate of 50,000,000 of newly issued, fully-paid
and non-assessable shares of common stock, par value $.01 per share, of
Standish ("Standish Common Stock") allocated as set forth in the Merger
Agreement. The shares of Standish Common Stock issuable in exchange for the
shares of stock of each CareMatrix Corporation are referred to as the "Merger
Consideration."
The Merger Consideration was arrived at as a result of arms-length
negotiations between representatives of CareMatrix and Standish and approved
by the Standish Board of Directors, based on consultation with Stonebridge
Associates, LLC ("Stonebridge") and Prager, McCarthy & Sealy, as financial
advisors (the "Financial Advisors") to the Standish Board of Directors. It
should be recognized, however, that the Standish Common Stock will be newly
issued in the Merger and that the market value of the CareMatrix Common Stock
to be exchanged in the aggregate for 50,000,000 shares of Standish Common
Stock in the Merger, at the Effective Time, may be more or less than
2
<PAGE>
the value of the aggregate number of shares of Standish Common Stock to be
issued in the Merger, depending on market prices.
Recommendations of the Board of Directors; Opinion of Financial Advisor
The Board of Directors of Standish believes that the terms of the Merger
are fair to and in the best interest of the Stockholders of Standish. The
decision of the Board of Directors of Standish to approve the Merger
Agreement, the Authorized Stock Amendment and the Stock Option Plan Amendment
and to recommend the approval of the proposal authorizing the Authorized
Stock Amendment and the Stock Option Plan Amendment to the Stockholders of
Standish was based upon a number of considerations described in "The
Merger--Reasons for the Merger and Recommendation of the Board of Directors
of Standish." In reaching its decision, the Board of Directors of Standish
was advised by Stonebridge, one of Standish's Financial Advisors, that based
on Stonebridge's analyses, the resulting approximately 9% ownership of the
outstanding shares of Standish Common Stock to be retained by Standish's
current Stockholders after giving effect to the Standish Common Stock to be
issued to the CareMatrix Stockholders in the Merger, is fair to Standish's
current Stockholders from a financial point of view. See "The Merger--Opinion
of Financial Advisor."
The Board of Directors of Standish unanimously recommends that the
Stockholders of Standish vote FOR the adoption of the proposals approving and
authorizing the Merger Agreement, the Authorized Stock Amendment and the
Stock Option Plan Amendment, respectively.
Management of Standish's Business after the Merger; Interests of Certain
Persons in the Merger
The CareMatrix Corporations' businesses will be carried on under their
present names and management, as subsidiaries of New Standish. Following
consummation of the Merger, New Standish's business will be carried on under
the name "CareMatrix Corporation." Pursuant to the terms of the Merger
Agreement, upon consummation of the Merger, New Standish will be obligated to
increase its Board of Directors to seven persons and name as directors,
Messrs. Abraham D. Gosman and Andrew D. Gosman, who are presently CareMatrix
Stockholders, as well as Michael J. Doyle, who is currently Standish's Chief
Executive Officer, and four outside directors not yet identified. For further
information regarding the interests of certain persons in the Merger, see
"The Merger-- Interests of Certain Persons in the Merger."
Accounting Treatment
Standish and CareMatrix intend to treat the Merger as a "reverse
acquisition" for accounting purposes, with CareMatrix treated as the
accounting acquiror, even though New Standish will be the survivor for legal
purposes. See "The Merger--Accounting Treatment."
Conditions and Termination
The Merger is subject to certain conditions pursuant to the Merger
Agreement which, if not fulfilled or waived, permit termination by the party
entitled to the benefit thereof. In the event that the Merger is not
consummated by February 15, 1997 (which date is subject to extension for up
to an additional three months), either Standish or CareMatrix may terminate
the Merger. See "The Merger--Terms of the Merger Agreement."
Effective Time of the Merger
Standish and CareMatrix intend to consummate the Merger as soon as
practicable after the adoption of the proposal authorizing the Merger
Agreement, the Authorized Stock Amendment and the Stock Option Plan Amendment
by the Stockholders of Standish and after all conditions to the Merger have
been satisfied or waived.
Dissenters' Rights
The Delaware General Corporation Law does not provide for dissenters'
rights to holders of Standish Common Stock or Series A Preferred Stock with
respect to the proposal to approve the Merger Agreement inasmuch as Standish
is not a "constituent corporation" within the purview of applicable
provisions of the Delaware General Corporation Law. Further, there are no
dissenters' rights with respect to the other proposals to be considered at
the Standish Special Meeting.
3
<PAGE>
Description of Standish Capital Stock
As of the date of this Proxy Statement-Prospectus, Standish is authorized
to issue 30,000,000 shares of Standish Common Stock, of which
shares are outstanding; 345,268 shares of preferred stock, $.01 par value per
share, issuable in series--Series A Preferred Stock, of which are
outstanding, and Series B Cumulative Convertible Preferred Stock, $.01 par
value per share ("Series B Preferred Stock"), of which 100 are outstanding.
See "Description of Capital Stock."
Market Prices
Standish Common Stock is currently traded on the Nasdaq Small Cap System
and is quoted under the symbol "STAN". The following table sets forth for the
periods indicated the range of high and low sales prices as reported on
Nasdaq from Standish's fiscal year ended December 31, 1993 to and including
July 31, 1996.
High Low
----- ------
FISCAL YEAR ENDED DECEMBER 31, 1993
First Quarter 5-3/4 4-1/8
Second Quarter 5-1/8 3-5/8
Third Quarter 4-1/2 3-5/8
Fourth Quarter 6-1/2 4-1/8
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter 6-3/4 5-3/8
Second Quarter 5-3/8 3-3/8
Third Quarter 4-1/8 2-7/16
Fourth Quarter 2-11/16 2-1/4
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter 2-1/2 1-7/8
Second Quarter 2-1/4 2
Third Quarter 2-7/8 2-1/4
Fourth Quarter 4-1/8 2-3/8
FISCAL YEAR ENDING DECEMBER 31, 1996
First Quarter 4-7/16 2-7/8
Second Quarter 5-7/8 2-1/8
Third Quarter through July 31, 1996 4-3/8 3-5/8
On June 3, 1996, the last full trading day preceding the first public
announcement of the Merger, the closing price for the Standish Common Stock
was $2-15/16 per share. On , 1996, the closing price for the
Standish Common Stock as reported in The Wall Street Journal was $ . per
share.
There is no public trading market for the common stock of CareMatrix.
4
<PAGE>
Regulatory Approvals
Standish and CareMatrix believe that they have complied with all Federal
and state regulatory requirements and obtained all governmental approvals
necessary in connection with the Merger other than the filing of certificates
with the Secretaries of State of the State of Delaware and the State of New
Jersey, as applicable, and compliance with certain state securities laws and
related requirements in connection with the issuance of the Standish Common
Stock to the CareMatrix Stockholders in accordance with the Merger Agreement.
OTHER MATTERS
Authorized Stock Amendment
At the Standish Special Meeting, Standish Stockholders will also be asked
to approve and adopt an amendment to the Standish Restated Certificate of
Incorporation to increase the number of authorized shares of Standish Common
Stock from 30,000,000 shares to 75,000,000 shares. Such Amendment is required
in order to permit Standish to consummate the Merger Agreement with
CareMatrix. See "Other Matters to be Considered at Standish Special
Meeting--Proposal No. 2--Amendment to the Standish Restated Certificate of
Incorporation."
Stock Option Plan Amendment
At the Special Standish Meeting, Standish Stockholders will be asked to
approve and adopt an amendment to Standish's 1991 Restated Combination Stock
Option Plan to increase from 785,000 to 2,000,000 the total authorized shares
of Standish Common Stock reserved for issuance thereunder. The Stock Option
Plan Amendment is necessary in order to permit Standish to issue the full
number of shares of Standish Common Stock required to be issued pursuant to
the grant of the Management Options to Michael J. Doyle and Kenneth M. Miles,
the Chairman of the Board and Chief Financial Officer, respectively, of
Standish. See "The Merger--Interest of Certain Persons in the Merger" and
"Other Matters to be Considered at Standish Special Meeting--Proposal No. 3--
Amendment to the Standish Stock Option Plan."
Election of Directors
At the Standish Special Meeting, Standish Stockholders will also be asked
to vote for and elect five persons to the Standish Board of Directors. Each
director elected at the Special Standish Meeting will hold office until the
earlier of (a) the next Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified or (b) the consummation
of the Merger in accordance with the Merger Agreement. See "Management of
Standish" and "Other Matters to be Considered at Standish Special
Meeting--Proposal No. 4--Election of Directors."
5
<PAGE>
SELECTED HISTORICAL AND UNAUDITED COMBINED PRO FORMA FINANCIAL DATA
(in thousands, except per share data)
The historical financial data of Standish and CareMatrix for the periods
indicated have been derived from their respective historical consolidated and
combined financial statements, and should be read in conjunction with such
financial statements and the notes thereto, which are included in this Proxy
Statement-Prospectus.
The selected unaudited combined pro forma financial data of Post-Merger
CareMatrix (New Standish) are derived from the unaudited pro forma combined
financial statements of Post-Merger CareMatrix, and should be read in
conjunction with such unaudited pro forma statements and notes thereto which
are included in this Proxy Statement-Prospectus. The unaudited pro forma data
are presented for illustrative purposes only and are not necessarily
indicative of the operating results or financial position that would have
existed if the Merger had occurred on January 1, 1995, nor are they
necessarily indicative of the future operating results or financial position
of Post- Merger CareMatrix.
<TABLE>
<CAPTION>
STANDISH Six Months
------------------------------- Ended
----------Year Ended December 31,----------- June 30,
1991 1992 1993 1994 1995 1996
------ ------- ------- ------- ------- ----------
(Audited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $ 202 $ 1,006 $ 1,731 $ 6,709 $ 8,436 $4,670
---- ----- ----- ----- ----- --------
Operating costs and expenses 836 3,078 3,049 9,823 9,940 5,023
---- ----- ----- ----- ----- --------
Loss from operations (634) (2,072) (1,318) (3,114) (1,504) (353)
Interest income (44) (145) (42) (20) (153) (29)
Interest expense 168 912 352 1,109 1,500 823
Other (income) expense (98) (1,557) (533) (31) (558) (743)
---- ----- ----- ----- ----- --------
Loss $ (660) $(1,282) $(1,095) $(4,172) $(2,293) $ (404)
==== ===== ===== ===== ===== ========
Loss per share $(1.05) $ (1.02) $ (.95) $ (1.81) $ (.71) $ (.13)
</TABLE>
<TABLE>
<CAPTION>
------------December 31,------------ June 30,
1991 1992 1993 1994 1995 1996
------ ------- ------- ------- ------- ----------
(Audited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $387 $714 $1,065 $233 $368 $356
Working capital (deficit) 184 (181) 569 (1,068) (1,584) (3,474)
Total assets 11,453 3,505 13,657 13,419 15,975 15,528
Long-term debt, less current
maturities 10,266 1,375 5,652 8,440 12,457 10,461
Stockholders' equity (deficit) (429) 927 6,065 2,327 18 (373)
</TABLE>
6
<PAGE>
SELECTED HISTORICAL AND UNAUDITED COMBINED PRO FORMA FINANCIAL DATA,
continued
(in thousands, except per share data)
<TABLE>
<CAPTION>
Post-Merger CareMatrix
CAREMATRIX Historical Pro Forma Combined
---------- ----------------------------------------- ------------------------
June 24, 1994 Six
(Inception) Year Ended Months Year Ended Six Months
to December Ended December Ended
December 31, 31, June 30, 31, June 30,
1994 1995 1996 1995 1996
--------------- ---------- -------- ---------- ----------
(Audited) (Audited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues $ 366 $ 2,485 $ 2,389 $ 10,921 $ 7,059
Operating costs and
expenses 2,865 9,147 5,591 20,098 11,120
------------- -------- ------ -------- --------
Loss from operations (2,499) (6,662) (3,202) (9,177) (4,061)
Interest income (24) (153) (53)
Interest expense 56 544 559 2,044 1,382
Other -- -- -- (558) (743)
------------- -------- ------ -------- --------
Loss $(2,555) $(7,206) $(3,737) $(10,510) $(4,647)
============= ======== ====== ======== ========
Pro forma loss per share $ (0.19) $ (0.09)
======== ========
</TABLE>
<TABLE>
<CAPTION>
------December 31,------ June 30, June 30,
1994 1995 1996 1996
--------------- ---------- -------- ----------
(Audited) (Audited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 2 $ 145 $ 2,028 $ 3,284
Working capital (deficit) 174 (691) 1,286 (2,288)
Total assets 330 2,410 6,022 44,380
Long-term debt, less
current maturities 2,730 9,661 16,992 30,753
Stockholders' equity
(deficit) (2,555) (9,762) (13,498) 3,326
</TABLE>
7
<PAGE>
RISK FACTORS
The Stockholders of Standish should consider carefully the factors set
forth below, as well as the other information set forth in this Proxy
Statement-Prospectus, in determining whether to vote for the approval and
adoption of the Merger Agreement, the approval of the proposals authorizing
the Authorized Stock Amendment and the Stock Option Plan Amendment and with
respect to the other matters to be considered at the Standish Special
Meeting.
History of Continuing Losses From Standish Operations. Since its formation in
October 1989, Standish has experienced significant losses from operations.
Through June 30, 1996, Standish had cumulative losses from operations of $9.2
million. For the year ended December 31, 1995, Standish incurred a loss from
operations of $1.5 million (including $263,000 in the aggregate for severance
costs). During the three months and six months ended June 30, 1996, Standish
sustained losses from operations of $122,000 and $353,000, respectively. At
June 30, 1996, Standish's accumulated deficit was $10.3 million. Standish
expects to continue to incur losses from operations through at least the end
of 1996, whether or not the Merger is consummated. There can be no assurance
that Standish will be able to generate income from operations or net income
at any time, whether from its existing operations or from any communities
that are operated in the future. If Standish fails to achieve profitability,
Standish's and/or New Standish's viability could be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations for Standish" and the Standish Financial
Statements.
History of Continuing Losses From CareMatrix Operations. Since its formation
in June 1994, CareMatrix has experienced significant losses from operations.
Through June 30, 1996, CareMatrix had cumulative losses from operations of
$12.4 million. For the year ended December 31, 1995, CareMatrix incurred a
loss from operations of $6.7 million (including an $895,000 provision for
closing a facility). During the six months ended June 30, 1996, CareMatrix
sustained losses from operations of $3.2 million. At June 30, 1996,
CareMatrix's accumulated deficit was $13.5 million. CareMatrix may incur
losses from operations through at least the end of 1996, whether or not the
Merger is consummated. There can be no assurance that CareMatrix will be able
to generate income from operations or net income at any time, whether from
its existing operations or from any communities that are operated in the
future. If CareMatrix fails to achieve profitability, New Standish's
viability could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations for
CareMatrix" and the CareMatrix Financial Statements.
Standish Working Capital and Liquidity Deficiencies. Since its inception,
Standish has experienced working capital and liquidity deficiencies. Standish
has provided for its working capital and liquidity needs through sales of
securities in the public markets, including its initial public offering of
Standish Common Stock in February 1992 and its public offering of Series A
Preferred Stock in September and October 1993, through private placements of
debt and equity securities and through the sale of assets for cash as well as
through the deferral of certain payables and preferred stock dividends. Some
of these transactions were with affiliated parties. Although Standish
believes that it will have sufficient funds to meet its working capital needs
for its existing operations for at least 12 months following the completion
of the Merger, there can be no assurance that Standish's working capital
requirements will not exceed those currently anticipated by Standish.
Moreover, to the extent Standish acquires communities which do not generate
operating cash flow (after interest and community rent expense), Standish may
be required to seek additional financing for working capital and liquidity
purposes. In the event Standish is not able to meet its working capital or
liquidity needs with bank borrowings (which to date have been unavailable to
Standish) or other financing sources, it would become necessary for Standish
to consider reductions in its then existing operations and the deferral of
any planned capital expenditures as well as to reassess the timing and extent
of its acquisition program. See "--Adverse Impact of Merger on Standish Net
Operating Loss Carryforwards" below, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations for Standish."
CareMatrix Reliance Upon Related Party for Working Capital. CareMatrix's
working capital requirements have been funded historically through loans made
available by Abraham D. Gosman, the principal CareMatrix Stockholder. At
December 31, 1995 and December 31, 1994, CareMatrix had borrowed
approximately $9.7 million and $2.7 million, respectively, from Mr. Gosman.
At June 30, 1996, $17.0 million was owed to Mr. Gosman. These loans bear
interest at the prime rate, payable upon demand, and the principal is
repayable in January 1998. Although CareMatrix expects to obtain additional
financing, as required, from Mr. Gosman for working capital purposes, Mr.
Gosman is under no obligation to provide such additional financing
indefinitely. There can be no assurance that such financing can be obtained
from Mr. Gosman, in which event CareMatrix would be required to seek
additional financing for working capital purposes from other sources. There
can be no assurance that CareMatrix will be able
8
<PAGE>
to obtain such financing on acceptable terms, if at all. See "--Dependence by
CareMatrix on Related Party Agreements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations for CareMatrix."
Difficulties Associated with Integrating the Operations of Standish and
CareMatrix. Standish and CareMatrix believe that they can successfully
integrate and manage the combined operations of Standish and CareMatrix, as
well as achieve certain economies of scale. However, because of the inherent
uncertainties associated with efforts to integrate and manage the operations
of the two companies, there can be no assurance that New Standish will be
successful in such integration and management, that any cost savings or
operating synergies will be realized, or that there will not be offsetting
increases in other expenses or other charges to earnings resulting from the
combined operations. It is expected that New Standish will establish a
reserve for severance and other non-recurring charges expected to be incurred
in connection with the Merger and integration of operations. While Standish
has no current plans to do so, New Standish may elect to dispose of certain
of its communities and may, as a result, incur further non-recurring
expenses. See "Selected Historical and Unaudited Combined Pro Forma Financial
Data" and "Unaudited Pro Forma Combined Financial Statements."
Development and Construction Risks. During the next three years, and subject
to approval and consummation of the Merger, New Standish plans to develop
approximately 40 new facilities with a capacity of approximately 5,500
residents. New Standish's ability to achieve these development plans will
depend upon a variety of factors, many of which are beyond New Standish's
control. There can be no assurance that New Standish will not suffer delays
in its development program, which could slow New Standish's growth. The
successful development of additional facilities will involve a number of
risks, including the possibility that New Standish may be unable to locate
suitable sites at acceptable prices or may be unable to obtain, or may
experience delays in obtaining, necessary zoning, land use, building,
occupancy, licensing and other required governmental permits and
authorizations. New Standish may also incur construction costs that exceed
original estimates or even so-called guaranteed maximum cost construction
contracts, and may not complete construction projects on schedule. New
Standish will rely on third-party general contractors to construct its new
facilities. There can be no assurance that New Standish will not experience
difficulties in working with general contractors and subcontractors, which
could result in increased construction costs and delays. Further, facility
development is subject to a number of contingencies over which New Standish
will have little control and that may adversely affect project cost and
completion time, including shortages of, or the inability to obtain, labor or
materials, the inability of the general contractor or subcontractors to
perform under their contracts, strikes, adverse weather conditions and
changes in applicable laws or regulations or in the method of applying such
laws and regulations. Accordingly, if New Standish is unable to achieve its
development plans, its business, financial condition and results of
operations could be materially adversely affected. See "Business of
CareMatrix--Development Strategies."
Need for Additional Financing. To achieve its growth objectives, New Standish
and/or the third parties or related parties with which it enters into
agreements will need to obtain sufficient financial resources to fund New
Standish's development, construction and acquisition activities. The
estimated cost to complete and lease approximately 40 new communities
targeted for completion over the next three years is between $300 million and
$400 million, which substantially exceeds the combined financial resources of
Standish and CareMatrix. Accordingly, New Standish's future growth will
depend on its ability and/or the ability of some third parties or related
parties to obtain additional financing on acceptable terms and on a
continuous basis. Standish and CareMatrix currently estimate that New
Standish will be required to seek additional funding through public or
private financing sources, including equity or debt financing promptly
following consummation of the Merger. If additional funds are raised by
issuing equity securities, New Standish stockholders will experience
dilution. There can be no assurance that adequate funding will be available
as needed or on terms acceptable to New Standish. A lack of funds may require
New Standish to delay or eliminate all or some of its development projects
and acquisition plans. See "--Dependence by CareMatrix on Related Party
Agreements" below.
9
<PAGE>
Substantial Debt Obligations. On a pro forma basis, New Standish's long-term
debt would have been $33.6 million had the Merger taken place on June 30,
1996. Included in this amount is $20.3 million of long-term debt of
CareMatrix, all of which was due to Abraham D. Gosman, the principal
CareMatrix Stockholder. Long-term debt may increase significantly as New
Standish pursues its growth strategy. There can be no assurance that New
Standish will generate sufficient cash flow to meet its obligations. Any
payment or other default with respect to such obligations could cause the
lender to foreclose upon any collateral securing the indebtedness or, in the
case of an operating lease, could terminate the lease, with a consequent loss
of income and asset value to New Standish. Moreover, because of cross-default
and cross-collateralization provisions in certain of New Standish's
mortgages, debt instruments and leases, a default by New Standish on one of
its payment obligations could result in acceleration of other obligations and
adversely affect a significant number of New Standish's other communities and
facilities. See "--Potential Adverse Effects of Certain Relationships" below,
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations for Standish--Liquidity and Capital Resources."
Potential Adverse Effects of Certain Relationships. Standish has entered into
various transactions with Emeritus Corp. ("Emeritus"), a publicly-held
company. Emeritus, among other things, operates and manages assisted living
communities similar to those of Standish. In June 1994, Standish obtained a
$2.0 million credit facility from Emeritus for working capital purposes,
under which the entire $2.0 million is currently outstanding. Advances under
this facility were made through the purchase by Emeritus of Standish's
Convertible Debentures due June 10, 1998 (the "Convertible Debentures"),
which bear interest at 8.5% per annum and which are convertible into shares
of Standish's Common Stock at a conversion price currently equal to $4.16 per
share (subject to anti- dilution adjustments). Concurrently with the
establishment of this facility, Standish sold 200,000 shares of Standish
Common Stock to Emeritus for a price of $4.16 per share (or $832,000 in the
aggregate), and issued to Emeritus four-year warrants to purchase an
additional 50,000 shares of Standish Common Stock at an exercise price
currently equal to $4.16 per share (subject to anti-dilution adjustments). At
the same time, Standish and Daniel R. Baty, the Chairman and a principal
stockholder of Emeritus, entered into a three-year consulting agreement in
consideration for which Standish issued to Mr. Baty four-year warrants to
purchase 50,000 shares of Standish Common Stock at an exercise price
currently equal to $4.16 per share (subject to anti-dilution adjustments). As
of July 31, 1996, Emeritus and Mr. Baty owned beneficially approximately
780,769 shares in the aggregate, or approximately 18.3%, of Standish Common
Stock. Upon consummation of the Merger, Emeritus and Mr. Baty will have
beneficial ownership of approximately 1.4% of Standish Common Stock. See
"Principal Stockholders and Security Ownership of Management of Standish."
In addition to its financial relationships with Emeritus and Mr. Baty,
Standish and Emeritus also acquired 51% and 49% ownership interests,
respectively, in the limited liability company which purchased the Sunny
Knoll community. In connection with the Sunny Knoll transaction, Standish
borrowed $600,000 from Emeritus to fund cash payments to the seller at
closing and Standish guaranteed an aggregate of $1.85 million of the
obligations of that limited liability company payable to the seller in future
years. Emeritus guaranteed $1.1 million of these same obligations.
On January 23, 1996, Standish received from Emeritus a notice of
termination with respect to its Management and Marketing Agreement
("Agreement") at the Pines of Tewksbury. In its notice, Emeritus alleges that
Standish was in material breach of its Agreement. On January 25, 1996,
Standish responded to this notice, asserting that under the terms and
conditions of the Agreement, Standish could only be terminated by Emeritus if
Standish fails to cure any alleged default in performance under the Agreement
within thirty days (or longer period if a cure, pursued with reasonable
diligence, reasonably requires greater than 30 days) after written notice of
an alleged default. There can be no assurance that Standish will be able to
resolve amicably its disputes or to continue to maintain satisfactory
relations with Emeritus. In addition, there can be no assurance that further
conflicts will not arise from these relationships or that Emeritus will not
take action to compete more directly with Standish. In the event that
Standish's relationship with Emeritus or Mr. Baty were to change, or if
Emeritus were to take such action, Standish could be adversely affected.
Standish has financed three acquisition transactions involving seven
communities (including financing expansions at two of these communities after
the acquisitions were completed) with Health Care REIT, Inc. ("Health Care
REIT") in an aggregate amount of $10.75 million. Health Care REIT, an
independent third party, is a real estate investment trust which invests in
health care facilities. These transactions were structured so that the assets
were acquired by Health Care REIT and leased to Standish under either
operating lease or capital lease arrangements. In addition, Health Care REIT
may have a right to provide financing for future acquisitions completed
10
<PAGE>
by Standish up to an aggregate additional amount of $19.25 million. If
Standish were unable to obtain waivers of such right from Health Care REIT,
Standish could be precluded from seeking financing on terms more favorable to
it than those offered by Health Care REIT. If Health Care REIT were to
decline to finance a proposed acquisition, Standish would seek alternative
financing through bank borrowings (which to date generally have been
unavailable to Standish), debt or equity financing or other sources or a
combination thereof. To the extent it obtains financing from Health Care
REIT, Standish is obligated to issue warrants entitling Health Care REIT to
purchase one share of Standish Common Stock at an exercise price which is
currently $4.16 per share (subject to anti-dilution adjustments) for every
$300 advanced. To date, Standish has issued to Health Care REIT warrants to
purchase 36,722 shares of Standish Common Stock. The warrants are exercisable
for five years from the date of issuance, subject to extension under certain
circumstances.
During 1994 and 1995, Standish was in violation of certain covenants under
its agreements with Health Care REIT. Standish obtained waivers of those
violations. There can be no assurance that Standish will not be in violation
of its covenants in the future or that Standish will be able to obtain
waivers of any violations which may arise in the future. Any such violations,
if not waived, would give Health Care REIT certain rights and/or remedies
under the lease agreements pursuant to which Standish operates the affected
communities, including the right of acceleration of all lease payments, the
right of possession and the right to terminate the leases, which, if
exercised, would have material adverse effects upon Standish. In addition,
Standish and Health Care REIT may become subject to various conflicts of
interest in their relationship, arising in part from Health Care REIT's other
activities, which include financing competitors of Standish. There can be no
assurance that such conflicts of interest will not have an adverse effect
upon Standish. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations for Standish."
In addition to its relationships with CareMatrix under the Merger
Agreement, Standish borrowed $1.0 million for working capital purposes from a
corporation controlled by Abraham D. Gosman, the principal CareMatrix
Stockholder, in accordance with the term sheet with respect to the business
combination between Standish and CareMatrix which was signed on June 3, 1996
(the "Term Sheet") and which outlined the provisions upon which the Merger
Agreement was prepared. In addition to executing its promissory note to
evidence the working capital borrowing, Standish entered into a Mortgage and
Option Agreement (the "Mortgage and Option Agreement") with such corporation
under which all advances on the working capital loan would be secured by a
subordinate lien deed of trust on Standish's Bailey Village community,
subordinate to certain prior mortgages. On July 30, 1996, Mr. Gosman
purchased from Standish 100 shares of the newly created Series B Preferred
Stock for a purchase price of $14,000 per share or $1.4 million in the
aggregate. The Series B Preferred Stock provides for a cumulative dividend
rate of 10% per annum, payable quarterly in arrears beginning on December 31,
1996, and carries a liquidation preference of $14,000 per share, plus any
accumulated and unpaid dividends. The Series B Preferred Stock is convertible
into shares of Standish Common Stock at a conversion price equal to $4.16 per
share (subject to customary anti-dilution adjustments). Concurrently with the
sale of the Series B Preferred Stock to Mr. Gosman, Standish issued to Mr.
Gosman five-year warrants to purchase an additional 400,000 shares of
Standish Common Stock at an exercise price equal to $4.16 per share (subject
to customary anti-dilution adjustments). Accordingly, as of July 31, 1996,
Mr. Gosman is deemed to have owned beneficially approximately 736,538 shares,
or approximately 16.6%, of Standish Common Stock. Upon consummation of the
Merger, Mr. Gosman will have beneficial ownership of approximately 77.8% of
Standish Common Stock. Standish used $1.0 million from the proceeds of its
sale of Series B Preferred Stock to Mr. Gosman to repay its earlier $1.0
million working capital borrowing. Standish expects to use the $400,000
balance of the proceeds from the sale of Series B Preferred Stock for working
capital purposes pending consummation of the Merger. See "The
Merger--Interest of Certain Persons in the Merger," "Management's Discussion
and Analysis of Financial Condition and Results of Operations for Standish,"
and "Principal Stockholders and Security Ownership of Management of Standish"
and "Principal Stockholders and Security Ownership of Management of
CareMatrix."
Dependence by CareMatrix on Related Party Agreements. It is expected that
CareMatrix will enter into agreements with related parties in connection with
a significant number of transactions, including development, management and
lease agreements. It is expected that CareMatrix and a particular related
party will, generally, at the time of the signing of a development agreement,
simultaneously enter into a management services agreement for a 10 to 20 year
period to become effective upon completion of construction of the project.
Each such management agreement is expected to contain an option, on behalf of
CareMatrix, to convert the management agreement into a lease for fair market
rental value, for an initial term of 10 years with a minimum of two five-year
extension periods. CareMatrix does not, however, expect that it will in all
cases manage each facility upon completion. Abraham D.
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Gosman is the principal owner of the related party entity with which
CareMatrix expects to enter into most such agreements. No such agreements
between CareMatrix and such related party exist as of the date of this Proxy
Statement-Prospectus and there can be no assurance that Mr. Gosman will enter
or will cause such related party to enter into such agreements with
CareMatrix in the future. If CareMatrix does not enter into such agreements
with Mr. Gosman or such related party, the business, financial condition and
results of operations of New Standish could be materially and adversely
affected.
Residence Staffing and Labor Costs. Standish now competes and New Standish
will compete with other providers of long-term care with respect to
attracting and retaining qualified and skilled personnel. New Standish will
be dependent upon its ability to attract and retain management personnel
responsible for the day-to-day operations of each of New Standish's
residences. Any inability of New Standish to attract or retain qualified
residence management personnel could have a material adverse effect on New
Standish's financial condition or results of operations. In addition, a
possible shortage of nurses or trained personnel may require New Standish to
enhance its wage and benefits package in order to compete in the hiring and
retention of such personnel. New Standish will also be dependent upon the
available labor pool of semi-skilled and unskilled employees in each of the
markets in which it will operate. No assurance can be given that New
Standish's labor costs will not increase, both in absolute dollars and in a
percentage of net revenues, or that, if they do increase, they can be matched
by corresponding increases in rates charged to residents. Any significant
failure by New Standish to attract and retain qualified management and staff
personnel, to control its labor costs or to pass on any increased labor costs
to residents through rate increases would have a material adverse effect on
New Standish's business, operating results and financial condition.
Competition. The long-term care industry is highly competitive and, given the
relatively low barriers to entry and continuing health care cost containment
pressures, Standish expects that the assisted living segment of such industry
will become increasingly competitive in the future. Standish competes with
other companies providing assisted living services as well as numerous other
companies providing similar service and care alternatives, such as home
health care agencies, congregate care facilities, retirement communities and
skilled nursing facilities. While Standish believes there is a need for
additional assisted living residences in the markets where it is and where
New Standish will be constructing or developing residences, Standish expects
that as assisted living residences receive increased attention and the number
of states which include assisted living services in their Medicaid programs
increases, competition will increase from new market entrants, many of whom
may have substantially greater financial resources than Standish and New
Standish. No assurance can be given that increased competition will not
adversely effect Standish's and New Standish's ability to attract or retain
residents or maintain its existing rate structures or to establish new rate
structures effectively. Moreover, in implementing its growth strategy, New
Standish expects to face competition for development and acquisition
opportunities from local developers and regional and national assisted living
companies. Some of New Standish's present and potential competitors have, or
may have access to, greater financial resources than those of New Standish.
Consequently, there can be no assurance that New Standish will not encounter
increased competition in the future which could limit its ability to attract
and retain residents, to maintain or increase resident service fees or to
expand its business and could have a material adverse effect on New
Standish's financial condition, results of operations and prospects.
Dependence on Attracting Seniors with Sufficient Resources to Pay. Standish
currently relies, and for the foreseeable future New Standish expects to
rely, primarily on the ability of its residents to pay for services from
their own and their families' financial resources. Generally, only elderly
adults with income or assets meeting or exceeding the comparable median in
the regions where Standish's assisted living residences are, and where New
Standish's residences are expected to be, located can afford the applicable
fees for its residences. Inflation or other circumstances which adversely
affect the ability of residents and potential residents to pay for assisted
living services could have an adverse effect on New Standish. In the event
that New Standish encounters difficulty in attracting seniors with adequate
resources to pay for New Standish's services, New Standish would be adversely
affected.
Government Regulation. Health care is an area of extensive and frequent
regulatory change. The assisted living industry is relatively new, and,
accordingly, the manner and extent to which it is regulated at the Federal
and state levels are evolving. Changes in the laws or new interpretations of
existing laws may have a significant impact on Standish's and New Standish's
methods and costs of doing business. Standish is, and New Standish will be,
subject to varying degrees of regulation and licensing by health or social
service agencies and other regulatory authorities in the various states and
localities where it operates or intends to operate.
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New Standish's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses in rapidly changing regulatory environments. Any failure to satisfy
applicable regulations or to procure or maintain a required license could have a
material adverse effect on New Standish's financial condition, results of
operations and prospects. New Standish's operations could also be adversely
affected by, among other things, regulatory developments such as revisions in
building code requirements for assisted living residences, mandatory increases
in the scope and quality of care to be offered to residents and revisions in
licensing and certification standards. There can be no assurance that Federal,
state or local laws or regulations will not be imposed or expanded which would
materially adversely impact Standish's and New Standish's business, financial
condition, results of operations or prospects, respectively. New Standish's
residence operations are also subject to health and other state and local
government regulations.
Investigations or reviews conducted by state regulators also may adversely
affect Standish. From December 1994 until March 1995, the State of Florida
conducted a review of operating policies and procedures at Standish's Lowry
community, during which time the community was subject to a moratorium
imposed by the State on the admission of new residents pending correction of
various deficiencies. Revenue at that community was adversely affected while
the moratorium remained in effect.
In addition, in most states in which Standish participates in government
reimbursement programs, Standish communities are subject to Federal and/or
state requirements or provisions which prohibit certain business practices
and relationships that might affect the provision and cost of health care
services reimbursable under Medicaid. Standish's failure to comply with the
regulations and requirements applicable to a community could result in the
imposition of significant fines and increased costs, a revocation of
Standish's license to operate that community, and, if sufficiently serious in
nature, the inability of Standish to maintain or obtain licenses to operate
other communities. Those events could have a material adverse effect on
Standish's operations and on its ability to make acquisitions. See "Business
of Standish--Government Regulation."
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients
to such providers. These laws prohibit, among other things, certain direct
and indirect payments that are intended to induce the referral of patients
to, the arranging for services by, or the recommending of, a particular
provider of health care items or services. The Medicare/Medicaid
anti-kickback law has been broadly interpreted to apply to certain
contractual relationships between health care providers and sources of
patient referral. Similar state laws vary from state to state, are sometimes
vague and seldom have been interpreted by courts or regulatory agencies.
Violation of these laws can result in loss of licensure, civil and criminal
penalties, and exclusion of health care providers or suppliers from
participation in (i.e., furnishing covered items or services to beneficiaries
of) the Medicare and Medicaid programs. Although Standish is not a Medicare
or Medicaid provider or supplier, it is, and it is expected that New Standish
will be, subject to these laws. There can be no assurance that such laws will
be interpreted in a manner consistent with the practices of Standish and/or
New Standish. See "Business of Standish-- Government Regulation."
Environmental Risks. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be held liable for the cost of removal or remediation of
certain hazardous or toxic substances, including, without limitation,
asbestos-containing materials, that could be located on, in or under such
property. Such laws and regulations often impose liability whether or not the
owner or operator knew of, or was responsible for, the presence of the
hazardous or toxic substances. The costs of any required remediation or
removal of these substances could be substantial and the liability of an
owner or operator as to any property is generally not limited under such laws
and regulations and could exceed the property's value and the aggregate
assets of the owner or operator. The presence of these substances or failure
to remediate such substances properly may also adversely affect the owner's
ability to sell or rent the property, or to borrow using the property as
collateral. Under these laws and regulations, an owner, operator or an entity
that arranges for the disposal of hazardous or toxic substances, such as
asbestos-containing materials, at a disposal site may also be liable for the
costs of any required remediation or removal of the hazardous or toxic
substances at the disposal site. In connection with the ownership or
operation of its properties, Standish and/or New Standish could be liable for
these costs, as well as certain other costs, including governmental fines and
injuries to persons or properties. As a result, the presence, with or without
Standish and/or New Standish's knowledge, of hazardous or toxic substances at
any property held or operated by Standish and/or New Standish, or acquired or
operated by Standish and/or New Standish in the future, could have an adverse
effect on its or their business, financial condition and results of
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operations. Environmental audits performed on properties leased or managed by
CareMatrix have not revealed any significant environmental liability that
management believes would have a material adverse effect on New Standish's
business, financial condition or results of operations. No assurance can be
given that existing environmental audits with respect to any of the
properties leased or managed by CareMatrix reveal all environmental
liabilities.
Liability and Insurance. Standish's business entails an inherent risk of
liability. In recent years, participants in the long-term care industry,
including Standish, have become subject to an increasing number of lawsuits
alleging negligence or related legal theories, many of which involve large
claims and significant legal costs. Standish is from time to time subject to
such suits as a result of the nature of its business. Standish currently
maintains insurance policies in amounts and with such coverage and
deductibles as it believes are adequate, based on the nature and risks of its
business, historical experience and industry standards. Standish currently
maintains professional liability insurance and general liability insurance.
Standish's medical professional liability coverage is limited to $1.0 million
per occurrence and $2.0 million in the aggregate for all claims per annual
policy period. The non-medical, management professional liability insurance
coverage is limited to $1.0 million per wrongful act and $1.0 million in the
aggregate. The general liability insurance is limited to $1.0 million per
occurrence and $2.0 million in the aggregate, with additional specific
limitations of $100,000 per event (premises damage), $5,000 per event
(medical expenses) and $1,000 per event (patient's property damage). Standish
also has an umbrella excess liability protection policy in the total amount
of $10.0 million. There can be no assurance that claims will not arise which
are in excess of Standish's insurance coverage or are not covered by
Standish's insurance coverage. A successful claim against Standish not
covered by, or in excess of, Standish's insurance could have a material
adverse effect on Standish's financial condition and results of operations.
Claims against Standish, regardless of their merit or eventual outcome, may
also have a material adverse effect on Standish's ability to attract
residents or expand its business and would require management to devote time
to matters unrelated to the operation of Standish's business. In addition,
Standish's insurance policies must be renewed annually and there can be no
assurance that Standish will be able to continue to obtain liability
insurance coverage in the future or, if available, that such coverage will be
available on acceptable terms. CareMatrix's businesses face similar risks.
Adverse Impact of Merger on Standish Net Operating Loss
Carryforwards. Standish has net operating loss carryforwards of approximately
$12.0 million. These carryforwards, if unused, will expire from 2004 to 2010.
The issuance of the Standish Common Stock upon consummation of the Merger
will subject the utilization of Standish's net operating loss carryforwards
to substantial limitations. The inability to obtain the full benefit of the
net operating loss carryforwards may reduce the amount of cash which might
otherwise be available to Standish for working capital and other purposes.
See "--Standish Working Capital and Liquidity Deficiencies" above and Note L
to the Standish Financial Statements.
Control by CareMatrix Stockholders. As a result of the Merger, the
CareMatrix Stockholders will become the beneficial owners of approximately
91% of the outstanding Standish Common Stock on a fully-diluted and fully-
converted basis and will be able to exercise control on all matters,
including the election of directors. Moreover, Abraham D. Gosman, directly or
as a trustee of trusts for the benefit of his sons, Andrew D. Gosman and
Michael M. Gosman, will be deemed to be the beneficial owner of approximately
77.8% of the outstanding Standish Common Stock following the Merger.
Accordingly, following the Merger, Mr. Gosman will have the ability, by
voting shares of Standish Common Stock, to significantly influence (i) the
election of New Standish's Board of Directors and, thus, the direction and
future operations of New Standish, and (ii) the outcome of all other matters
submitted to New Standish's stockholders, including mergers, consolidations,
and the sale of all or substantially all of New Standish's assets. See
"Principal Stockholders and Security Ownership of Management of CareMatrix."
SOLICITATION, VOTING AND REVOCATION OF PROXIES
Standish
The Standish Board of Directors has fixed the close of business on
September , 1996, as the record date for determination of Stockholders
entitled to notice of, and to vote at, the Standish Special Meeting. As of
September , 1996, shares of Standish Common Stock were issued and
outstanding, each entitled to one vote per share and shares of Series A
Preferred Stock were issued and outstanding, each entitled to one vote per
share, with both classes taken together voting as a single class. The holders
of a majority in interest of all Standish Common Stock and Series A Preferred
Stock issued and outstanding and taken together as a class are required to be
present
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in person or represented by proxy at the Meeting in order to constitute a
quorum for the transaction of business. Approval of the proposal authorizing
the Merger and the Authorized Stock Amendment requires the affirmative vote
of a majority of the outstanding shares of Standish Common Stock and Series A
Preferred Stock, taken together voting as a class. The five nominees for
election as Directors of the Standish who receive the greatest number of
votes properly cast by stockholders present in person or represented by proxy
at the Meeting will be elected Directors of Standish. Approval of the Stock
Option Plan Amendment and approval of any other matter properly coming before
the Standish Special Meeting will require the affirmative vote of the holders
of at least a majority of shares of Standish Common Stock and the Series A
Preferred Stock taken together as a class and represented at the Meeting.
The executive officers, directors and affiliates of Standish own an
aggregate of approximately 5% of the outstanding shares of Standish Common
Stock entitled to vote at the Standish Special Meeting and have informed
Standish that they intend to vote in FAVOR of each of these proposals.
CareMatrix
The CareMatrix Stockholders adopted the Merger Agreement on August , 1996.
Voting and Revocation
Proxies received by the Standish Board of Directors in the proper form
will be voted at the Standish Special Meeting and any adjournments thereof,
as specified therein by the Stockholders executing such proxies. Any proxy
that does not specify to the contrary will be voted in FAVOR of the Merger
Agreement and each of the proposals authorizing the Authorized Stock
Amendment and the Stock Option Plan Amendment and FOR the five nominees for
election as Directors.
The votes of Stockholders present in person or represented by proxy at the
Meeting will be tabulated by an inspector of elections appointed by Standish.
At the Standish Special Meeting, (i) in determining whether the Merger
Agreement, the Authorized Stock Amendment and the Stock Option Plan Amendment
have received the required number of affirmative votes, abstentions and
"broker non-votes" will have the same effect as a vote against each such
proposal (i.e. Proposals No. 1, No. 2 and No. 3) and (ii) in determining
whether the director nominees have received the requisite number of
affirmative votes, abstentions and broker non-votes will have no effect on
the outcome of the vote for the election of directors. Abstentions and broker
non-votes, however, will be counted for purposes of determining the presence
or absence of a quorum.
A Stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Standish Special Meeting by filing with the Secretary or
Assistant Secretary of Standish at 197 First Avenue, Needham, Massachusetts
02194, a written revocation or a duly executed proxy bearing a later date, or
by voting his shares in person at the Standish Special Meeting.
The cost of the solicitation of proxies from Stockholders of Standish will
be borne by Standish. In addition, proxies may be solicited by additional
mailings or communications, personal interviews, telephone, and telegram by
the directors, officers, employees, or agents of Standish, at no additional
compensation. Upon request, Standish will reimburse brokers, custodians,
nominees, and fiduciaries for reasonable expenses incurred by them in
forwarding proxy materials to beneficial owners of each share of Standish
Common Stock and Series A Preferred Stock. Standish has engaged Morrow & Co.
for proxy solicitation services and expects to pay Morrow approximately
$4,500, for such services, plus reasonable out-of-pocket expenses.
THE MERGER
Background of the Merger
Since its inception in 1989, Standish has pursued a strategy of growth
designed to take advantage of its corporate level experience, its skill in
operating assisted living facilities, and the economic benefit derived from
the geographic diversity of operating communities in different states. It has
been the opinion of the Board of Directors and management that such growth
was critical to increasing the value of the Stockholders' interest in
Standish. This growth has been achieved primarily through the acquisition of
assisted living facilities, as well as through entering into management and
development agreements with third parties, under which Standish manages
existing facilities or plans and oversees the development of new facilities.
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Standish last raised public capital through an offering of equity
securities in September and October, 1993. By the end of 1994, the working
capital and acquisition funds provided by that offering were largely
exhausted and Standish's Board of Directors had become concerned that
Standish's further growth and future profitability would be hindered by lack
of access to adequate capital. That concern was heightened by the belief that
the market price for Standish's publicly traded Common Stock (which during
the first quarter of 1995 fell into a historically low trading range) did not
reflect Standish's real value, making it difficult for Standish to raise
capital in the public markets without unduly diluting the interests of
existing Standish Stockholders.
After a series of discussions and reexamination of Standish's market
position, operational strengths and weaknesses, and strategic direction, the
Board formed the judgment that the strategy which was most likely to promote
increased value for Stockholders was to continue to seek additional capital
sources, possibly through a business combination or affiliation with another
company, to fund further growth. The Board felt that expanding and broadening
Standish's access to additional development opportunities and growth capital
would permit Standish to leverage its corporate-level operational skills and
expertise over additional facilities, and also that Standish's failure to
continue on that course would prevent Standish from gaining access to growth
capital.
Accordingly, Standish initiated discussions with a number of third parties
with a view toward exploring new sources of financing to support Standish's
strategic direction, including opportunities for business combinations or
other affiliations. In aid of its efforts to investigate new sources of
capital, in March of 1995 Standish also engaged National Westminster Bank Plc
(New York Branch) Ltd. ("NatWest") as a financial advisor. NatWest's efforts
focused on finding and assisting Standish in negotiating the acquisition of
assisted living facilities, to be financed through an underwritten public
offering of Standish's Common Stock. With NatWest's assistance, Standish
approached and/or was contacted by several companies engaged in providing
assisted living services and by other companies engaged in the health care
service market, to discuss on a confidential basis their interest in
exploring a strategic transaction with Standish.
At the same time, Standish continued to pursue its own independent
discussions with third parties. On May 1, 1995, Standish, in partnership with
and with loan financing from Emeritus Corporation ("Emeritus"), then a
privately-held assisted living company headquartered in Seattle, Washington,
which earlier had provided other financing to Standish through the purchase
of Standish Common Stock and certain Convertible Debentures, completed the
acquisition of the Sunny Knoll community in Franklin, New Hampshire, a
facility which provides care for residents with Alzheimer's.
Between the beginning of 1995 and the end of July 1995, Standish, either
directly or through NatWest, engaged in discussions with a number of
companies or other persons concerning the possibility of a business
combination or other affiliation providing favorable access to sources of
capital for acquisitions. All such discussions were governed by appropriate
confidentiality agreements designed to safeguard Standish's confidential
information and to permit Standish to manage carefully the disclosure of
sensitive business information.
By the end of July 1995, Standish had negotiated an Asset Purchase
Agreement providing for the purchase by Standish of a regional chain of four
assisted living communities operating under the "Green Meadows" name for an
aggregate purchase price of $22.6 million in cash payable at the closing.
Standish was planning to finance the acquisition through a public offering of
its Common Stock through an underwriting group to be managed by NatWest. In
connection with those transactions, Standish had drafted and was prepared to
file a Registration Statement for those shares on Form S-1 under the
Securities Act. On August 1, 1995, Standish issued a press release announcing
the execution of its agreement to acquire the Green Meadows facilities.
However, because shortly thereafter NatWest informed Standish that NatWest
believed that a public offering might not be accomplished at the then market
price of approximately $2.50 per share, Standish's Board of Directors
determined that proceeding with the public offering would be unduly dilutive
of the interests of existing Stockholders.
Consequently, Standish then decided to explore discussions with other
companies concerning a possible transaction under which Standish either (i)
would itself be acquired on favorable terms by another company at the same
time it completed the Green Meadows acquisition or (ii) would assign its
rights and obligations under the Green Meadows acquisition agreement to
another entity in exchange for an appropriate fee calculated to compensate
Standish for its work in finding the Green Meadows acquisition, performing
extensive due diligence investigations, and negotiating the acquisition on
favorable terms.
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In August 1995, NatWest introduced Standish to a New York Stock
Exchange-traded company which was engaged in the health services industry and
which had expressed an interest in acquiring an assisted living company.
Standish and that third party exchanged information under confidentiality
agreements. After approximately two days of discussions, the parties negotiated
a transaction by which that company would acquire all of Standish's issued and
outstanding Common Stock in exchange for stock in the acquiring company in a
transaction which would qualify as a tax-free reorganization. After signing a
preliminary letter of intent, the would-be acquiror made due diligence visits to
the Green Meadows communities and conducted a brief business, legal and
financial due diligence review of Standish. Under that letter of intent,
Standish had assigned its rights to the Green Meadows acquisition in exchange
for a $1.0 million fee, and a right to be reimbursed for approximately $325,000
for expenses and a deposit paid by Standish in connection with the Green Meadows
acquisition agreement. Following site visits by the would- be acquiror to the
Green Meadows communities during the last weekend of August, and under the
pressure of having to make immediate payment of the $1.0 million fee if it
decided to proceed, the would-be acquiror decided that it did not want to
proceed with the proposed merger transaction with Standish or to acquire the
Green Meadows communities. Thereupon, Standish and the would-be acquiror
mutually terminated their letter of intent without any payments or obligations
of one party to the other.
Standish then determined that it would be impracticable to complete the
Green Meadows acquisition, and sought to realize as much benefit as it could
by assigning its rights under the Asset Purchase Agreement to another third
party. Shortly thereafter, on August 31, 1995, Standish entered into the
Assignment and Assumption Agreement with Emeritus, under which the Green
Meadows acquisition was assigned to Emeritus for a fee of $1.0 million
payable in installments.
During the next few months, Standish turned its management focus
principally to continued improvement of operating performance and results at
its facilities, but also continued to investigate capital formation
alternatives; and in that connection Standish engaged in preliminary
discussions and exchanged certain information under confidentiality
agreements with third parties regarding their potential interest in possible
business combinations. In October 1995, Standish was approached by RAS
Securities Corp. ("RAS"), the underwriter of Standish's Convertible Preferred
Stock offering in September and October 1993, as to that firm's interest in
introducing Standish to a prospective business combination opportunity. On
October 6, 1995 Standish and RAS entered into an agreement to permit RAS, on
a non-exclusive basis, to introduce Standish to certain third parties and the
basis upon which RAS would be compensated in connection with any such
efforts. That agreement excluded certain candidates. RAS introduced Standish
to a third party, preliminary information was exchanged between Standish and
that third party on a confidential basis, but no negotiations regarding a
possible business combination ensued.
On August 29, 1995, Standish held a meeting to discuss a possible
transaction with Integrated Health Services, Inc. ("IHS"), another large New
York Stock Exchange-traded company which engaged in various segments of the
health services industry, other than the assisted living segment. The parties
discussed the possible strategic fit between the two organizations, and
exchanged confidentiality agreements. Pursuant to those confidentiality
agreements, certain information was exchanged. Following that meeting,
representatives of the two companies discussed in more detail their possible
strategic fit and the complementary operating plans that they were exploring.
On December 13, 1995, in New York City, Mr. Doyle, Standish's Chairman and
Chief Executive Officer, met with Robert Elkins, M.D., the Chairman and Chief
Executive Officer of IHS, to discuss further a possible business combination.
On December 20, 1995, Mr. Doyle and Mr. Miles, Standish's Chief Financial
Officer, met again with Dr. Elkins in Naples, Florida. Shortly thereafter, in
December 1995, in the course of a series of telephone calls, Mr. Doyle
indicated to representatives of IHS that if the discussions were to continue
leading toward possible acquisition of Standish, the per share consideration
would have to be approximately $5.00 per share of Standish Common Stock.
On December 29, 1995, IHS submitted a proposal to acquire all of
Standish's issued and outstanding capital stock. On Friday, January 12, 1996,
after two weeks of negotiation and analysis of various key issues, including
provisions in the letter of intent prohibiting Standish from soliciting other
offers from third-party acquirors, but permitting Standish, at the cost of
either a topping fee of $1.0 million (payable if another transaction was
consummated within six months) or a termination fee of $1.0 million (payable
if Standish terminated the IHS transactions for other reasons), to consider
and accept an unsolicited third-party offer if the Board were to determine
that such offer was more favorable to Stockholders than the terms of the IHS
offer, the parties executed a letter of intent (the "Original Letter of
Intent") outlining an agreement under which Standish would merge with IHS.
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On the morning of Monday, January 12, 1996, Standish issued a press release
to announce that it had entered into a letter of intent to merge Standish with
IHS in a cash merger based on a $5.00 per share price for the Standish Common
Stock. It was indicated that the merger would be subject to various conditions,
including IHS completing its due diligence review and its requirement for a one
year indemnification escrow of approximately $1.5 million in the aggregate, or
approximately $.30 per share. This escrow was to be used to secure any
indemnification claims under the definitive merger agreement as ultimately
negotiated. If as a result of indemnification claims the full amount of the
escrow fund were exhausted, holders of Standish Common Stock would have realized
cash merger consideration of $4.70 per share, net.
Shortly thereafter, representatives of Standish and IHS met to begin the
due diligence review contemplated by the Original Letter of Intent. At the
first meeting of those representatives, the financial adviser to IHS, Smith
Barney, suggested that the parties consider restructuring the transaction to
begin the merger process with a cash tender offer pursuant to a definitive
merger agreement as a means of accelerating the timetable. Following
discussions and analysis by advisers to both parties, Standish and IHS
determined to amend their earlier letter of intent to reflect proceeding by
way of a cash tender offer for both Standish Common Stock and Series A
Preferred Stock to be followed by a merger under the definitive merger
agreement. On February 6, 1996 the parties reached agreement on an amended
letter of intent (the "Amended Letter of Intent") which was signed on
February 7, 1996. A press release announcing the terms of the amended letter
of intent was issued on February 8, 1996.
In determining to proceed by cash tender offer under a definitive merger
agreement, the parties agreed that the escrow fund for indemnification claims
should be eliminated. However, after extensive discussions, both Standish
(with three of its five directors participating in the discussions) and IHS
determined that the tender offer price and the consideration to be paid in
the second step merger should be set at $4.80 per share of Standish Common
Stock and $13.48 per share of Series A Preferred Stock, respectively, in
recognition of the elimination of the escrow fund. Standish polled its two
outside directors by telephone to confirm their approval of the revised
structure of the business combination with the cash tender offer and the
resulting net prices of $4.80 and $13.48 per share, which were unanimously
approved, subject to confirmation by a financial adviser as to the fairness,
from a financial view point, of those prices to Standish's Stockholders.
Negotiations as to a definitive merger agreement between representations
of Standish and IHS continued through the end of February 1996. During the
two-week period preceding the signing of the Amended Letter of Intent,
Standish interviewed and obtained written proposals from three firms to act
as financial advisor to Standish in connection with the business combination.
As a result of that process, on February 1, 1996, Standish engaged Houlihan
Lokey Howard & Zukin ("Houlihan Lokey") to provide it with independent
financial advice regarding the fairness of the IHS proposed tender offer and
merger.
On February 20, 1996, Standish's Board of Directors convened in connection
with considering the proposed merger. The then current draft of the IHS
Merger Agreement was presented to the Board along with other information,
including a presentation by representatives of Houlihan Lokey as to financial
considerations presented by the proposed IHS merger. Houlihan Lokey made a
preliminary presentation of its opinion, from a financial point of view, that
the consideration offered by IHS in the offer and merger was fair to
Standish's Stockholders. After discussion, Standish's Board of Directors
unanimously approved the merger agreement in the form presented to the
meeting and authorized the executive officers of Standish to complete
negotiations to reach agreement on a definitive merger agreement with IHS.
On or about March 1, 1996, IHS advised Standish that IHS would not proceed
with the transaction provided for in the Amended Letter of Intent, claiming
that, according to IHS's financial advisor, the acquisition of Standish was
no longer desirable from IHS's strategic point of view even though IHS had
previously advised Standish that IHS's Board of Directors had considered and
approved the proposed merger transaction on the terms set forth in the
Amended Letter of Intent. On or about April 9, 1996, Standish asserted a
claim against IHS based on IHS's unilateral breach of its contractual
obligations under its Amended Letter of Intent with Standish as well for its
duties of good faith and fair dealing. As of the date hereof, Standish has
not commenced any litigation with respect to its claim against IHS.
Immediately following IHS's announcement to Standish as to its
determination not to proceed with the transaction provided for in the Amended
Letter of Intent, Standish and Emeritus began discussions as to a possible
stock-for-stock business combination. Following a series of telephone
conferences and face-to-face meetings by and among Messrs. Doyle and Miles on
behalf of Standish and representatives of Emeritus, Standish and Emeritus
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entered into an agreement in principle for the acquisition of Standish by
Emeritus in a tax-free stock-for-stock exchange. Under the agreement in
principle, Standish Stockholders would receive 0.1845 shares of Emeritus
common stock for each share of Standish Common Stock and holders of Series A
Preferred Stock would receive 0.1845 shares of Emeritus common stock for each
share of Standish Common Stock into which the Series A Preferred Stock was
convertible. Based on the $21.00 per share closing price for Emeritus common
stock on the American Stock Exchange on the date of the signing of the
agreement in principal, the exchange ratio was based on a closing price for
Standish Common Stock of approximately $3.87 per share. The proposed
Standish/Emeritus merger was subject to a number of conditions including
Standish renegotiating and restructuring its financing arrangements with
HealthCare REIT to the reasonable satisfaction of Emeritus, the merger being
treated as a pooling of interests for accounting purposes, the merger
qualifying as a tax-free reorganization, the parties negotiating a definitive
merger agreement and Standish and Emeritus making appropriate filings under
the Hart-Scott-Rodino Anti-trust Improvement Act. The agreement in principle
also contemplated that 5% of the Emeritus common stock to be issued in the
merger would be deposited in an escrow for a period of one year following the
closing and during which period Emeritus would be entitled to recover from
the escrowed shares the amount of any loss or damages arising from any
material breach of representations and warranties in the definitive merger
agreement or any breach by Standish of covenants on its part contained
therein.
Following execution of the agreement in principle, representatives of
Standish and Emeritus exchanged extensive due diligence materials, visited
each other's communities, and began negotiations on the definitive merger
agreement and related closing documents for the transaction. During that
process and after approximately one month of negotiations and exchange of
proposals and counterproposals with respect to various business matters,
Standish determined that Emeritus was seeking substantial purchase price
adjustments. Following continued negotiations between the parties, on or
about May 1, 1996, Emeritus advised Standish that it would proceed with the
merger with a reduction to the purchase price, which price reduction would
have put a value of Standish Common Stock of approximately $3.25 per share,
assuming that Emeritus would insist on a $21.00 per share exchange valuation
for its own common stock. Finally, on Friday evening, May 3, 1996, Mr. Doyle
advised representatives of Emeritus that Standish would not proceed with the
merger transaction on the revised terms as suggested by Emeritus. On May 6,
1996, Standish announced that it had terminated its agreement in principle
with Emeritus since the parties could not agree on an exchange ratio for the
merger transaction.
Following issuance by Standish of its press announcement with respect to
termination of the agreement in principal with Emeritus, Mr. Doyle received a
telephone call later that day from Andrew D. Gosman of CareMatrix to
ascertain whether or not Standish would be interested in entering into
discussions about a business combination involving CareMatrix and Standish.
Mr. Doyle stated that Standish would be interested in discussing such a
business combination and suggested that such a discussion be held as soon as
possible. Later that day, at about 2:00 p.m., Messrs. Doyle and Miles,
representing Standish, and Messrs. Andrew D. Gosman, Michael M. Gosman and
Michael Zaccaro, representing CareMatrix, met for about two hours and
discussed the advantages and disadvantages of working out a business
combination between the two companies. The individuals present discussed
structuring the business combination as a stock for stock transaction. The
persons present agreed to meet again on May 8, 1996 in New York City with
NatWest, acting as the Financial Advisor for CareMatrix.
On May 8, 1996, a meeting was held at the St. Regis Hotel in New York City
among Messrs. Doyle and Miles from Standish, Andrew D. Gosman and Michael M.
Gosman from CareMatrix and representatives from NatWest. At that meeting, a
possible business combination between Standish and CareMatrix was discussed
including structuring such a transaction as a stock-for-stock transaction. It
was agreed by those persons present that further discussions should be held
and that a term sheet should be drafted as a frame of reference for further
discussions. On May 15, 1996 Standish received a draft term sheet from
NatWest outlining a proposed structure of a business combination of the
companies. Mr. Doyle had a telephone conversation with Andrew D. Gosman later
that afternoon, discussing the pros and cons of such a business combination.
Messrs. Doyle and Gosman agreed that the parties should meet again on May 22,
1996 to discuss further a proposed term sheet.
On May 22, 1996, from approximately 11:00 a.m. to 2:00 p.m. a meeting was
held in Palm Beach, Florida among Mr. Doyle from Standish, Abraham, Andrew
and Michael Gosman from CareMatrix and a representative from NatWest. At that
meeting, many of the points of a proposed term sheet were agreed upon on a
preliminary basis subject to further discussions. An additional meeting was
held on May 31, 1996 at which Messrs. Doyle and Miles on behalf of Standish
and Andrew D. Gosman and James Clary, III, Esquire on behalf of CareMatrix
discussed the proposed term sheet in
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further detail. Later that day, a conference telephone call was held between
Messrs. Doyle, Miles and Michael Brenan of Standish, Messrs. Abraham, Andrew
and Michael Gosman and James Clary, III, Esquire, on behalf of CareMatrix,
David A. Garbus, Esquire, of the law firm of Robinson & Cole, the attorneys
for Standish, Michael J. Bohnen, Esquire, of the law firm of Nutter,
McClennen & Fish, LLP, the attorneys for CareMatrix, and representatives of
NatWest. During that conference call, various open issues in the proposed
term sheet were negotiated and a consensus was reached as to those major
outstanding issues and the representatives of CareMatrix and Standish
instructed their respective attorneys to revise the term sheet and present
the revised version for review and signature. Redrafts of the term sheet were
thereafter exchanged by and among Standish and CareMatrix and their
respective legal counsel and NatWest.
At its meeting on June 3, 1996, Mr. Doyle reported to the Standish Board
on the status of the recent discussion with CareMatrix, and presented the
then current draft of a term sheet. The Standish Board of Directors
considered and authorized the execution of a term sheet with CareMatrix. The
Board also authorized the grant of incentive stock options to each of Messrs.
Doyle and Miles (the "Management Options") as contemplated by the draft term
sheet. After considering other financial advisory firms and conferring with
Standish's legal counsel, the Standish Board agreed to engage Stonebridge and
Prager, McCarthy & Sealy as its Financial Advisors. See "--Interests of
Certain Persons in the Merger."
Finally, during the evening on June 3, 1996, a term sheet (the "Term
Sheet") was agreed upon and signed between Standish and CareMatrix. The
provisions of a press release were also circulated and agreed upon. Early on
June 4, 1996, Standish requested and received from the Nasdaq Small Cap
Market a delay in the opening of trading in Standish Common Stock pending an
announcement as to a prospective business combination with CareMatrix.
Shortly thereafter Standish announced that it had agreed in principle to the
terms contained in the Term Sheet with CareMatrix regarding the proposed
Merger.
In accordance with the Term Sheet, a corporation controlled by Abraham D.
Gosman loaned Standish $1.0 million for working capital purposes, $500,000 of
which was advanced on June 4, 1996 and $500,000 of which was advanced on July
10, 1996. Standish executed and delivered to such corporation its promissory
note to evidence the working capital borrowing and entered into a Mortgage
and Option Agreement with such corporation under which all advances on the
working capital loan would be secured by a subordinate lien deed of trust on
Standish's Bailey Village community, subordinate to certain prior mortgages.
That working capital loan was subsequently repaid by Standish on July 30,
1996. See "--Interests of Certain Persons in the Merger," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Standish."
The Standish Board next met on June 28, 1996 and considered provisions
from drafts of the Merger Agreement prepared in contemplation of the proposed
Merger and the negotiations with CareMatrix regarding the terms of such a
transaction. The Standish Board also considered the proposed merger
consideration. The Standish Board also voted to ratify the issuance of the
Management Options to Messrs. Doyle and Miles on June 3, 1996.
During the June 28th Board meeting, the Financial Advisors delivered a
report to the Standish Board which included an oral summary by Stonebridge as
to its opinion, which was later confirmed in writing on July 10, 1996, that
the Merger would be fair to the Standish Stockholders from a financial point
of view. See "The Merger-- Opinion of Financial Advisor." On July 3, 1996,
Standish and CareMatrix executed the Merger Agreement, subject to approval by
their respective Boards of Directors and stockholders. On July 10, 1996, the
Standish Board and the CareMatrix Board unanimously approved the Merger and
the Merger Agreement.
Reasons for the Merger and Recommendation of the Board of Directors of
Standish
The Standish Board has unanimously concluded that the Merger Agreement and
the terms of the Merger are fair and in the best interests of Standish and
Standish's Stockholders and has approved the Merger and the Merger Agreement.
The members of the Standish Board unanimously recommend that persons entitled
to vote Standish Common Stock vote for approval of the Merger Agreement at
the Standish Special Meeting.
In reaching its conclusion, the Standish Board considered a number of
factors, including the following:
(1) information with respect to the earnings, financial condition,
business, assets, prospects, liabilities and management of each company and
general economic conditions;
(2) Standish's current forecasts of revenue and earnings;
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(3) by combining with CareMatrix, Standish could increase its size and
accelerate expansion within market areas in which Standish was currently
operating; gain access to a development pipeline including existing properties
and sites under option or other contractual arrangements; the anticipated
positive effects of complementary business; access to new capital formation
opportunities based on CareMatrix's development pipeline, assisted living
communities and other senior living facilities; opportunities to realize the
efficiencies and synergies available by combining corporate overhead functions;
access by Standish to a senior management team and other personnel with
capabilities to implement a complementary business strategy of a development and
geographic expansion; the history and track record of the CareMatrix principals
and senior management in managing and operating other health care service
enterprises successfully;
(4) the written opinion of Stonebridge that, based on Stonebridge's
analyses, the resulting approximately 9% ownership of the outstanding shares
of Standish Common Stock to be retained by Standish's current Stockholders
after giving effect to the Standish Common Stock to be issued to the
CareMatrix Stockholders in the Merger, is fair to Standish's current
Stockholders from a financial point of view;
(5) the fact that while the Merger will create substantial ownership
dilution for holders of Standish Common Stock, such holders will have the
opportunity of continuing their interest in an ongoing and expanded
corporation with potential for future growth, and the fact that such ongoing
corporation will have, immediately after the Merger, the business of Standish
and the business of CareMatrix as each existed immediately prior to the
Merger, but that the business of the ongoing corporation may thereafter
change;
(6) recent market prices for the Standish Common Stock;
(7) the fact that Standish has explored and negotiated offers to acquire
Standish from a large number of parties and held discussions with a number of
such parties and even entered into preliminary agreements in principle, but
that the Standish Board determined not to continue such discussions based on
disagreements over price and the perception that such agreements if
consummated would not have been in the best interests of Standish's
Stockholders;
(8) the ability of Standish to terminate the Merger Agreement upon paying
$2.0 million to CareMatrix as a Topping Fee if a third party makes a bona
fide proposal which could result in Stockholders of Standish receiving value
for their shares of Standish Common Stock in excess of the Merger
Consideration and if counsel gives a written opinion that the discharge of
the Standish directors' fiduciary duties requires the Standish Board to
negotiate with and provide information to such third party; and
(9) the terms and conditions of the Merger Agreement, and the fact that
the provisions of the Merger Agreement were established through arm's-length
negotiations between Standish and CareMatrix and their financial and legal
advisors.
The members of the Standish Board considered each of the factors listed
above prior to authorizing the Merger Agreement in light of their knowledge
of the business and operations of Standish and their business judgment. The
Standish Board considered those factors in their totality and, in view of the
wide variety of factors considered, did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in making their determination.
If the Merger is not approved by the Standish Stockholders, the Standish
Board expects to continue Standish as an ongoing business. No other
alternatives to the Merger are presently being considered by the Standish
Board.
Standish's Board of Directors unanimously authorized Standish to enter
into the Merger Agreement; has determined that the Merger is in the best
interests of, and is on terms that are fair to, Standish and its
Stockholders; and unanimously recommends that the Stockholders vote in favor
of the approval and adoption of the Merger Agreement.
Opinion of Financial Advisor
Standish engaged Stonebridge Associates, LLC ("Stonebridge") and Prager,
McCarthy & Sealy as its financial advisors ("Financial Advisors") to render
certain financial advisory services to Standish concerning Standish's
proposed merger with CareMatrix.
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As part of its role as Financial Advisor to Standish, Stonebridge was engaged
to render an opinion, as investment bankers, with respect to the fairness to
Standish's current stockholders, from a financial point of view, of the
resulting ownership of the outstanding shares of Standish Common Stock to be
retained by Standish's current stockholders after giving effect to Standish
Common Stock be issued to the CareMatrix Stockholders in the Merger. At the July
10, 1996 meeting of Standish's Board of Directors, Stonebridge rendered its oral
opinion to the Board. At the conclusion of the meeting, Stonebridge also
delivered a written confirmation of its opinion (the "Stonebridge Opinion").
Pursuant to the terms of its engagement with Standish, Stonebridge has
agreed to deliver an updated written opinion as of the date of the final
Proxy Statement-Prospectus. The Financial Advisors have not made and do not
intend to make any review or analysis with respect to the Merger after the
date of the final Proxy Statement-Prospectus.
The full text of the Stonebridge Opinion, which sets forth the assumptions
made, the matters considered, the scope and limitations of the review
undertaken and the procedures followed by Stonebridge in rendering its
opinion, is attached to this Proxy Statement-Prospectus as part of Appendix
II, and is incorporated herein by reference. STANDISH STOCKHOLDERS SHOULD
READ THE STONEBRIDGE OPINION CAREFULLY IN ITS ENTIRETY. The summary of the
Stonebridge Opinion set forth below is qualified in its entirety by reference
to the Stonebridge Opinion. Standish Stockholders should note that the
opinion expressed by Stonebridge was provided for the information of the
Standish Board of Directors only in connection with its consideration of the
Merger.
Except as described below, no limitations were imposed by Standish on the
scope of Stonebridge's investigation or the procedures to be followed by
Stonebridge in rendering its Opinion. Stonebridge's engagement did not
include a solicitation of potential third party purchasers for all or part of
Standish and Stonebridge did not make any such solicitation in connection
with its opinion. Stonebridge was not requested to opine as to, and the
Stonebridge Opinion did not in any manner address, Standish's underlying
decision to proceed with the transaction contemplated in the Merger
Agreement, nor has Stonebridge been requested to make, or made, any
recommendation to Standish's Board of Directors as to the number of shares of
Standish Common Stock to be issued in the Merger. The Stonebridge Opinion is
not intended to be and does not constitute a recommendation to any Standish
Stockholder as to whether or not to vote in favor of the Merger.
In rendering its Opinion, Stonebridge took into account its assessment of
general economic, market, financial and other conditions, as well as its
experience in connection with similar transactions and securities evaluation,
generally. The Stonebridge Opinion was necessarily based upon conditions as
they existed and can be evaluated as of the date of the Stonebridge Opinion.
Stonebridge was not engaged to solicit, and did not solicit, potential
purchasers for Standish, and did not consider specific alternative
transactions involving Standish. For the purposes of rendering its Opinion,
Stonebridge assumed that all conditions precedent to the consummation of the
Merger would be satisfied and accordingly expressed no opinion as to the
likelihood that the Merger would be consummated.
In connection with rendering the Stonebridge Opinion, Stonebridge reviewed
and examined, among other items, the following: (i) the Merger Agreement,
(ii) certain publicly available information concerning Standish, including
the Annual Reports on Form 10-K and proxy statements of Standish for each of
the fiscal years in the three year period ended December 31, 1995 and
Quarterly Report on Form 10-Q of Standish for the quarter ended March 31,
1996, (iii) unaudited financial statements for CareMatrix for the year ended
December 31, 1995 and unaudited financial statements for the five months
ended May 31, 1996, (iv) certain documentation with regard to assisted living
and long-term care facilities to be developed, managed, operated, owned or
leased by Standish and CareMatrix, (v) financial and operating information
with respect to the business, operations and prospects of Standish and
CareMatrix, (vi) certain internal business plans and financial forecasts
prepared by the respective managements of Standish and of CareMatrix, and
(vii) certain publicly available information concerning other assisted living
and long-term care facility companies, the trading markets for such
companies' securities and the nature and terms of certain other merger and
acquisition transactions Stonebridge believed to be relevant to its inquiry.
During the course of its review Stonebridge met and had discussions with the
management of Standish and CareMatrix concerning each company's business and
operations, assets, liabilities, present financial condition, the general
condition and future prospects for the businesses in which each is engaged
and other matters which Stonebridge Associates believed to be relevant.
In conducting its review and analysis and in arriving at the Stonebridge
Opinion, Stonebridge took into account such accepted financial and investment
banking procedures and considerations as it deemed to be relevant, including,
among others: (i) a review of the trading history of Standish Common Stock,
(ii) a review of the historical
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and current financial condition and operating characteristics of Standish and
of CareMatrix as compared with those of other companies it deemed comparable,
(iii) a review of equity market valuation parameters for securities of
companies it deemed comparable, (iv) a review of the nature and financial
terms of certain transactions that it considered relevant for comparison with
the financial terms of the Merger, (v) a discounted cash flow analysis of
Standish, CareMatrix and the combined company and (vi) a review of the
contribution by each of Standish and CareMatrix to the combined company's
revenue, earnings before interest, taxes, depreciation amortization and rent,
and net income. In addition, Stonebridge performed such other analyses and
examinations and considered such information and financial, economic and
market data as it deemed relevant.
In its review and examination and in arriving at the Stonebridge Opinion,
Stonebridge assumed and relied upon, without independent verification, the
accuracy and completeness of the financial and other information that was
available to it from public sources, or that was provided to it by Standish,
CareMatrix or their representatives. Stonebridge did not make, nor has
obtained, any independent evaluation or appraisal of the assets or
liabilities of either company. With respect to the financial forecasts,
Stonebridge has assumed that they have been reasonably prepared on the bases
reflecting the best currently available estimates and judgments of Standish's
and CareMatrix's management as to the future operating and financial
performance of each of the companies and that such forecasts will be realized
in the amounts and in the time period currently estimated by such
managements. The Stonebridge Opinion is necessarily based upon general
economic, market, financial and other conditions as they existed and could be
evaluated as of the date of the Stonebridge Opinion. Stonebridge expressed no
opinion as to what the value of the Standish Common Stock will be when issued
to the CareMatrix Stockholders pursuant to the Merger or the prices at which
the Standish Common Stock will trade subsequent to the Merger.
In connection with its analysis and the Stonebridge Opinion, Stonebridge
performed a variety of financial and comparative analyses, including those
described below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular
circumstances, and therefore such an opinion is not necessarily susceptible
to summary description. Furthermore, in arriving at its opinion, Stonebridge
did not attribute any particular weight to any analysis or factor considered
by it, but rather made qualitative judgements as to the significance and
relevance of each analysis and factor. Accordingly, Stonebridge believes that
its analyses must be considered as a whole and that considering any portion
of such analyses and the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying the Stonebridge Opinion. In performing its analyses, Stonebridge
made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
the control of Standish and CareMatrix. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than as set forth therein. Any theoretical or implied values derived from
these analyses are not necessarily indicative of actual fair market values,
which may be significantly more or less favorable than as set forth therein.
In addition, analyses relating to the value of businesses do not purport to
be appraisals or to reflect the prices at which businesses may actually be
sold.
The following is a summary of the presentation Stonebridge made to the
Standish Board of Directors on July 10, 1996.
Transaction Overview
Stonebridge observed that, upon the issuance of 50,000,000 shares of
Standish Common Stock to CareMatrix Stockholders pursuant to the Merger
Agreement, and assuming that Standish's current stockholders own 4,964,758
shares on a fully-diluted basis, CareMatrix Stockholders will own
approximately 91% of the outstanding shares of common stock in the combined
company subsequent to the Merger. That percentage ownership implied a
relative equity ownership ratio of 10.1 to 1 in favor of the CareMatrix
Stockholders.
Discounted Cash Flow Analysis
Stonebridge performed several discounted cash flow analyses for
CareMatrix, Standish and the combined company. These analyses were based upon
the following: (i) two estimates of projected financial performance for
CareMatrix (a management case and a conservative case) on a stand-alone
basis, as developed using CareMatrix's business plan and discussions with
CareMatrix's and Standish's managements; (ii) an estimate of projected
financial performance of Standish as provided by Standish's management; and
(iii) two estimates of projected financial performance of the combined
company as developed in discussion with Standish's management.
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CareMatrix Stand-Alone. Stonebridge analyzed the valuation of CareMatrix
based upon an unlevered discounted cash flow ("DCF") analysis of the projected
five year financial performance of CareMatrix as presented in CareMatrix's
business plan prepared by CareMatrix's management ("Management Case").
Stonebridge discounted to present value the projected stream of after-tax
discounted cash flows and the terminal value (defined as the estimated future
sale value) of CareMatrix as reflected in the Management Case, using discount
rates ranging from 16% to 20%, which were chosen to reflect different
assumptions, including the risk assumptions applied by Stonebridge to the
financial forecasts. The terminal value was based on multiples of 2.0 to 2.5
times projected 2001 revenues. This analysis indicated an implied equity
valuation range of $287.7 million to $419.8 million for CareMatrix.
Because the vast majority of CareMatrix's revenues are not projected to be
realized until after 1998, Stonebridge, in consultation with Standish
management, prepared a conservative set of financial projections for
CareMatrix ("Conservative Case"), incorporating a range of probabilities of
success to be applied to CareMatrix facilities currently under development.
The purpose of this analysis was to provide a basis for considering the
relative equity ownership stakes on a more conservative basis, to reflect the
uncertainty concerning the timing and financial performance of CareMatrix's
pipeline of proposed facilities to be developed. In the Conservative Case,
Stonebridge also valued the long-term care nursing facilities of CareMatrix
at a separate terminal value. The terminal value used was one times estimated
2001 revenue for such properties. This analysis indicated an implied equity
valuation range for CareMatrix of $203.7 million to $290.7 million.
Standish Stand-Alone. Stonebridge also aggregated the present value of
Standish's after-tax cash flows through the year 2001 for the projection of
financial performance prepared by Standish's management. Stonebridge
discounted these cash flows at discount rates ranging from 12% to 16%, which
reflect the different characteristics of Standish's business as compared to
that of CareMatrix. The terminal value was computed based upon multiples of
projected 2001 revenues of between 2.0 and 2.5 times. This analysis indicated
an implied equity valuation range of $21.2 million to $28.0 million for
Standish.
Implied Equity Ownership Ratio. Comparing CareMatrix's DCF valuation range
using the Management Case to Standish's DCF valuation range resulted in an
implied equity ownership ratio range of 10.3 to 1 and 19.8 to l in favor of
CareMatrix Stockholders. Employing a comparison of the CareMatrix
Conservative Case DCF valuation range to Standish's DCF valuation range
resulted in an implied equity ownership ratio range of between 7.3 to l and
13.6 to 1.
Pro Forma Merger Analysis
The DCF analysis employed by Stonebridge for Standish on a stand-alone
basis yielded an implied per share valuation range of between $4.27 and
$5.64. Stonebridge analyzed certain pro forma effects on earnings, cash flow
and capitalization resulting from the Merger for the period through 2001.
Stonebridge aggregated the present values of cash flows for the combined
company incorporating the Conservative Case for CareMatrix, projected
Standish financial performance, and certain projected overhead savings and
transaction costs estimated by Standish's management. The analysis for the
combined company assumed the issuance of 50,000,000 shares of Standish Common
Stock to the CareMatrix Stockholders as contemplated by the Merger Agreement.
The results of this analysis yielded an implied per share equity value of
between $5.03 and $6.97, representing an average accretive difference on the
estimated per share equity value between the combined company and Standish on
a stand-alone basis of 21.0%.
Contribution Analysis
In reviewing the proposed relative equity ownership ratio contemplated in
the Merger, Stonebridge computed the relative contributions of each of
CareMatrix and Standish to the pro forma estimated combined revenue, earnings
before interest, taxes, depreciation, amortization and rent ("EBITDAR") and
net income for the years 1997 through 2001. For the analysis, Stonebridge
employed the Conservative Case of CareMatrix's projected financial
performance and the projected financial performance of Standish as prepared
by Standish's management. Stonebridge noted that CareMatrix's contribution to
revenue averaged 10.4 times Standish's contribution for the five year time
period. CareMatrix' EBITDAR and net income contribution averaged 11.8 and
15.6 times, respectively, Standish's contribution.
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Comparable Public Company Analysis
Stonebridge reviewed and compared selected historical, current and
projected financial and operating data of CareMatrix and Standish to the
corresponding data of certain publicly traded companies that Stonebridge
considered comparable based on industry focus, market value, and corporate
structure. CareMatrix and Standish were compared with a peer group of
publicly traded assisted living services companies consisting of ARV Assisted
Living, Inc., Assisted Living Concepts, Inc., Emeritus Corporation, Just Like
Home, Inc., Karrington Health, Inc., Regent Assisted Living, Inc., Sterling
House Corporation, and Sunrise Assisted Living, Inc. Historical and current
financial data compared included total capitalization, market equity
capitalization, revenue, operating income, net income, earnings per share,
operating margin and net income margin. Projected financial data reviewed
included estimated 1996 revenues and projected earnings per share for the
period 1998 through 2000. Due to the lack of operating income and net income
among CareMatrix and Standish, and the absence of meaningful operating and
net income among the peer companies, Stonebridge believed that a purely
quantitative comparable company analysis based on historical and current
financial performance would not be particularly meaningful within the context
of the Merger. Accordingly, Stonebridge analyzed these peer group companies'
current equity market valuations as a multiple of projected 1996 revenues and
of projected 1998, 1999, and 2000 net income.
Stonebridge noted that the mean and median equity capitalization values as
multiples of estimated 1996 revenues for the peer group of companies were
between 2.3 and 2.4 times. Estimates for 1996 revenues for the peer group of
companies were derived from published equity research reports on those
companies from several Wall Street investment banking firms. Applying those
multiples to CareMatrix and Standish's projected 1996 revenues yielded equity
valuations of between $60.2 million and $62.0 million for CareMatrix and
$22.1 million and $22.8 million for Standish. An implied ownership ratio of
between 2.6 to l and to 2.8 to l was then derived. Due to the relatively
small number of currently open and operating facilities of each company, the
estimated level of 1996 revenues is not particularly reflective of either
CareMatrix's or Standish's potential financial performance. Projected profits
and earnings are a major component of current estimated value for companies
in the assisted living service industry; therefore, Stonebridge did not
consider this analysis to be particularly meaningful.
Stonebridge calculated that the mean and median equity capitalization to
projected earnings multiples for the peer group of companies for the years
1998-2000 were, respectively, 15.4 and 15.4 times, 10.9 and 11.2 times and
8.4 and 9.1 times. Earnings estimates for 1998-2000 for the peer group of
companies were derived from published equity research reports on those
companies from several Wall Street investment banking firms. Applying these
multiples to the Conservative Case earnings estimate for CareMatrix produced
estimated equity values for CareMatrix of $115.9 to $116.1 million, $164.1 to
$168.6 million and $171.3 to $185.5 million. The same analysis applied to
Standish's projected earnings yielded estimated equity values of $6.6 to $6.7
million , $9.2 to $9.5 million and $9.8 to $10.6 million, producing implied
equity ownership ratios of 17.3 to l to 17.6 to 1 incorporating estimated
1998 earnings; 17.3 to 1 to 18.3 to 1 incorporating estimated 1999 earnings;
and 16.2 to 1 to 18.9 to l incorporating estimated 2000 earnings. The average
implied equity ownership ratio range suggested by this analysis was 16.2 to 1
to 18.9 to l. When incorporating CareMatrix's Management Case projections
into this analysis, the average implied equity ownership range increased to
23.1 to l to 27.0 to 1.
Analysis of Premiums Paid
Because the issuance of 50,000,000 shares of the Standish Common Stock to
the CareMatrix Stockholders results in effective control of Standish by the
CareMatrix Stockholders, Stonebridge concluded that the market price of the
Standish Common Stock post announcement of the proposed Merger should reflect
a premium benefiting Standish's current stockholders that is appropriate to
the premiums paid in similar acquisition transactions.
Stonebridge reviewed and analyzed the results of 16 selected completed
acquisitions involving targets in the health care service industry which had
been announced since June of 1993. Stonebridge noted that for these
acquisitions, the premiums paid relative to the stock price one day prior to
the announcement ranged from 20.7% to 46.4% (excluding negative premiums)
with a mean of 35.8%. Stonebridge also noted that premiums paid relative to
the stock price 30 days prior to announcement in these acquisitions ranged
from 20.7% to 55.8% with a mean of 36.0%. At the date of the Stonebridge
Opinion, the price of the Standish Common Stock, which reflected the
potential issuance of 50,000,000 shares of Standish Common Stock to the
CareMatrix Stockholders, represented a 68.1% premium to Standish's stock
price both one day and 30 days prior to the announcement of the Merger.
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Terms of Engagement
Stonebridge as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, private placements, corporate restructurings
and valuations for estate, corporate and other purposes. Stonebridge, in
conjunction with Prager, McCarthy & Sealy, has acted as financial advisor to
Standish in connection with the Merger, and the Financial Advisors will
receive a fee for their services.
After the announcement of an agreement in principle relating to the
proposed Merger, Standish selected the Financial Advisors to assist in its
review of the proposed Merger. The selection of the Financial Advisors was
based on a number of factors including: (i) the Financial Advisors' knowledge
of the assisted living and senior care industry; (ii) the Financial Advisors'
experience in advising on transactions of the type contemplated by the Merger
Agreement; and (iii) the general reputation and experience of the Financial
Advisors in handling sophisticated acquisition transactions.
Pursuant to an agreement letter between Standish and the Financial
Advisors, Standish has agreed to pay the Financial Advisors $200,000 in
connection with their services as financial advisors to Standish, including
Stonebridge 's preparation of the Stonebridge Opinion. Of such fee, $25,000
was payable to Stonebridge upon the commencement of the preparation of the
Stonebridge Opinion and $50,000 was payable upon the delivery of the
Stonebridge Opinion on July 10, 1996. Additionally, Standish will pay the
Financial Advisors $15,000 per month and the balance of the $200,000 upon
consummation of the Merger. In addition, Standish has agreed to indemnify the
Financial Advisors against certain liabilities to which the Financial
Advisors may become subject arising in connection with the rendering of
financial advisory services to Standish, and to reimburse the Financial
Advisors for their reasonable out-of-pocket expenses.
Terms of the Merger Agreement
This portion of the Proxy Statement-Prospectus describes various aspects
of the Merger. The following description does not purport to be complete and
is qualified in its entirety by reference to the Agreement and Plan of Merger
attached hereto as Appendix I and incorporated herein by reference. All
Stockholders of Standish are urged to read the Merger Agreement in its
entirety.
General
The Merger Agreement provides that, subject to the satisfaction or, in
certain cases, waiver of certain conditions (including, among other things,
adoption of the Merger Agreement by the Stockholders of Standish and
CareMatrix, receipt by Standish of an updated Fairness Opinion and receipt of
all necessary material regulatory approvals), Standish Subs will be merged
with and into the CareMatrix Corporations and the separate corporate
existence of the Standish Subs will cease. The CareMatrix Corporations will
be the surviving corporations and the CareMatrix Stockholders will become
Stockholders of Standish. All outstanding shares of the Standish Subs will be
cancelled and each corporation resulting from the Merger will issue one share
of stock to Standish and become a wholly owned subsidiary of Standish. Such
shares of Standish Common Stock will be allocated among the CareMatrix
Stockholders as provided in the Merger Agreement.
Conversion of CareMatrix Capital Stock; Effects on Standish Stockholders;
Dissenters' Rights
Conversion of CareMatrix Common Stock. At the Effective Time, the
aggregate shares of Common Stock of the CareMatrix Corporations issued and
outstanding shall, by virtue of the Merger and without any action on the part
of any holder thereof, cease to be outstanding and will be converted into the
right to receive an aggregate of 50,000,000 newly issued, fully-paid and
non-assessable shares of Standish Common Stock.
Issuance of Additional Standish Common Stock in Lieu of Fractional
Shares. No fractional shares of Standish Common Stock will be issued in the
Merger, but, in lieu thereof, the CareMatrix Stockholders whose conversion of
CareMatrix Common Stock results in more or less than one whole share of
Standish Common Stock will have their shares rounded to the nearest whole
number.
Dissenters' Rights. No conversion of CareMatrix Common Stock into Standish
Common Stock shall be made with respect to any share of CareMatrix Common
Stock as to which the CareMatrix Stockholder has properly elected to exercise
any rights to dissent and obtain payment of the fair value of his shares
under the Delaware General Corporation Law or the New Jersey Business
Corporation Act, as applicable. The Delaware General Corporation
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Law does not provide for dissenters' rights to holders of Standish Common
Stock or Series A Preferred Stock with respect to the proposal to approve the
Merger Agreement inasmuch as Standish is not a "constituent corporation"
within the purview of applicable provisions of the Delaware General
Corporation Law. Further, there are no dissenters' rights with respect to the
other proposals to be considered at the Standish Special Meeting.
Surrender of Certificates
Manner of Exchange. CareMatrix and Standish have selected American
Securities Transfer, Incorporated, of Denver, Colorado, as exchange agent
(the "Exchange Agent") to effect the exchange of certificates representing
shares of CareMatrix Common Stock in connection with the Merger. Promptly
after the Effective Time, the Exchange Agent will mail to each holder of
record (other than holders of CareMatrix Common Stock who have properly
demanded and perfected dissenters' rights under the Delaware General
Corporation Law or New Jersey Business Corporation Act, as applicable) of
certificates which immediately prior to the Effective Time represented
outstanding shares of CareMatrix Common Stock, a notice advising the holder
of the effectiveness of the Merger accompanied by a transmittal form (the
"Certificate Transmittal Form"). The Certificate Transmittal Form will
contain instructions with respect to the surrender of certificates
representing CareMatrix Common Stock to be exchanged for shares of Standish
Common Stock (together with cash in lieu of any fractional share) and will
specify that delivery will be effected, and risk of loss and title to such
certificates will pass, only upon delivery of the certificates to the
Exchange Agent. Upon surrender, in accordance with the instructions contained
in the Certificate Transmittal Form, to the Exchange Agent of certificates
representing shares of CareMatrix Common Stock, the holder thereof will be
entitled to receive in exchange therefor a certificate(s) representing the
appropriate number of shares of Standish Common Stock to which such holder is
entitled including where appropriate shares of Standish Common Stock in lieu
of any fractional share of Standish Common Stock.
Rights of Holders of CareMatrix Stock Certificates Prior to
Surrender. Prior to the time certificates representing shares of CareMatrix
Common Stock are surrendered, dividends and other distributions declared or
payable to holders of record of Standish Common Stock as of any time
subsequent to the Effective Time will be paid to the holder of any
unsurrendered certificate representing CareMatrix Common Stock, and such
holder's other rights as a Stockholder of Standish (including, if applicable,
the right to vote on any matter submitted to Standish Stockholders for their
approval) will continue. However, at the Effective Time, in the event a
holder fails to physically surrender his certificates representing CareMatrix
Common Stock for exchange, no dividend or other distribution payable to
holders of record will be paid to any CareMatrix Stockholder until such
holder physically surrenders for exchange his certificates representing
shares of CareMatrix Common Stock and Standish may suspend such Stockholder's
other rights as a Stockholder, including his right to vote, at any time
beginning at the Effective Time until such holder physically surrenders his
certificates representing CareMatrix Common Stock for exchange. Upon
surrender by any such Stockholder of his certificates representing CareMatrix
Common Stock to the Exchange Agent, the former CareMatrix Stockholder will
receive certificates representing the shares of Standish Common Stock into
which such Stockholder's shares of CareMatrix Common Stock were converted and
the dividends or other distributions (without interest) that have theretofore
become payable with respect to such shares of Standish Common Stock since the
Effective Time (or such longer period as determined by Standish) and, if
suspended, such Stockholder's other rights as a Stockholder will thereupon be
restored.
Name
At the Effective Time, Standish will change its name to "CareMatrix
Corporation."
Conduct of Business Pending the Merger
General. The Merger Agreement contains certain restrictions, some of which
are reciprocal, on the conduct of the respective businesses of CareMatrix and
Standish pending the consummation of the Merger. In particular, unless the
prior written consent of the other party is obtained, or as permitted by the
Merger Agreement, prior to the Effective Time, the Merger Agreement requires
Standish and its respective subsidiaries and CareMatrix to:
(a) conduct its operations according to its usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
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(b) use its reasonable efforts to preserve intact its business organization
and goodwill, keep available the services of its officers and employees, and
maintain satisfactory relationships with those persons having business
relationships with it;
(c) amend its charter documents or By-Laws, except as provided for in the
Merger Agreement;
(d) promptly notify the other party of any material emergency or other
material change in its condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties and of any litigation or
governmental complaints, investigations or hearing (or communications
indicating that the same may be contemplated);
(e) refrain from and avoid: (i) incurring or obligating itself to incur
any capital expenditure in excess of $20,000, incurring any long-term
indebtedness in addition to that outstanding on the date hereof (other than
loans from CareMatrix) or any other indebtedness or liability other than in
the ordinary course of business; (ii) making any loans, advances or capital
contributions to, or investments in, any other person, other than travel or
other advances to employees consistent with past practice; or (iii) assuming,
guaranteeing, endorsing or otherwise become liable or responsible (whether
directly, contingently, or otherwise) for the obligations of any other
person, except to endorse checks for collection or deposit in the ordinary
course of business;
(f) declare or pay any dividend or distribution on any shares of its
capital stock; or
(g) agree in writing or otherwise to take any of the foregoing actions or
any action that would make any representation or warranty in the Merger
Agreement untrue or incorrect as of the date hereof or as of the Effective
Time, as if made as of such time.
Options, Warrants and Employee Benefits
At July 31, 1996, CareMatrix had issued options to purchase approximately
300,000 shares of CareMatrix Common Stock. Subject to approval by Standish
Stockholders of the Stock Option Plan Amendment, the holders of such options
will receive in exchange therefor stock options under the Standish Stock
Option Plan to purchase an aggregate of shares of Standish Common Stock at a
purchase price of $ per share.
The Merger Agreement provides that Standish shall notify CareMatrix
promptly after any change in its capitalization or the issuance of any
options or warrants to acquire any shares of its capital stock not existing
on the date hereof; and shall not permit any of its subsidiaries to, (i)
except pursuant to the exercise of options, warrants, conversion rights and
other contractual rights existing at the Effective Time as listed in the
Merger Agreement, issue any shares of its capital stock, effect any stock
split or otherwise change its capitalization as it exists on the date hereof,
(ii) grant, confer or award any option, warrant, conversion right or other
right to acquire any shares of its capital stock not existing at the
Effective Time and listed in the Merger Agreement, (iii) accelerate the
vesting or exerciseability of any option, warrant, conversion right or other
right to acquire any shares of its capital stock, (iv) increase, or permit
any of its subsidiaries to increase, any compensation or enter into or amend
any employment agreement with any of its present or future officers,
directors or employees except for the payment of cash bonuses to officers or
employees pursuant to and consistent with existing plans or programs
described in the Merger Agreement, or (v) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any respect.
The Merger Agreement provides that CareMatrix shall not (i) increase any
compensation or enter into or amend any employment agreement with any of its
present or future officers, directors or employees except for the payment of
cash bonuses to officers or employees pursuant to and consistent with
existing plans or programs described in the Merger Agreement, or (ii) adopt
any new employee benefit plan (including any stock option, stock benefit or
stock purchase plan) or amend any existing employee benefit plan in any
respect.
Transfer of Assets
Pursuant to the Merger Agreement, both Standish and CareMatrix have agreed
not to sell, lease or otherwise dispose of any of their respective assets
which are material, individually or in the aggregate, except in the ordinary
course of business. Furthermore, prior to the Effective Time and subject to
the Merger Agreement, each CareMatrix Corporation will not, without the prior
written consent of Standish, (i) assign, convey, pledge, mortgage, or
otherwise transfer or agree to transfer any interest in or right of such
CareMatrix Corporation or of any other entity of the kind specified in (ii)
below to receive or otherwise recognize any development or management fees or
other
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revenues in respect of certain identified projects, and (ii) permit either
Abraham D. Gosman, Andrew D. Gosman or Michael M. Gosman, or any entity
controlled by any of them (other than a CareMatrix Corporation), to engage in
the management and/or development of an assisted and/or independent living
facility.
In addition, each of the CareMatrix Corporations will, prior to the
Effective Time, effectuate the assignment and transfer of any right, title or
interest that it may have, or any other entity of the kind specified in (ii)
above may have, in certain identified projects subject to a reservation of
the rights to manage or turnkey develop each such project, and to cause such
other entities to transfer to CareMatrix their rights to earn development
fees, management fees or other similar operating revenues from such projects.
Each CareMatrix Corporation also will, with respect to such projects, execute
definitive management, turnkey development or joint venture agreements
substantially in the forms required by the Merger Agreement immediately prior
to or at the Effective Time by the proposed third party purchaser of the land
upon which each such project is to be developed; provided, however, that
prior to the execution of such definitive management and turnkey development
agreement, the applicable CareMatrix Corporation shall have completed a
review of title, survey, environmental and such other customary due diligence
materials relating to such project and shall have determined that the matters
disclosed by such materials shall not have a material adverse effect upon the
project.
No Solicitations and Standstill
The Merger Agreement provides that until consummation of the Merger, or
the earlier termination of the Merger in accordance with its terms (the
"Non-Solicitation Period"), Standish and each officer, director, employee,
consultant, advisor, agent or investment banker of Standish and its
subsidiaries will not, directly or indirectly, solicit, encourage or consider
alternative offers for any merger or any business combination transaction
involving Standish or the Standish business or for the sale of any of
Standish Common Stock, or the lease, purchase option, or sale of any material
assets of Standish or the Standish business from parties other than
CareMatrix (each, an "Alternative Proposal"). However, notwithstanding the
foregoing, Standish may participate in discussions or negotiations with, and
may furnish information (pursuant to confidentiality agreements having
provisions not less restrictive than those set forth in the Confidentiality
Agreement entered into between CareMatrix and Standish) to any third party
(i) which on or before the end of the Non-Solicitation Period, sought to
engage in such discussions or negotiations or requested such information or
(ii) which seeks to engage in discussions or negotiations or requires such
information if, in either case, the Board of Directors of Standish
determines, based on the written opinion of Robinson & Cole or other legal
counsel reasonably acceptable to Standish ("Legal Counsel"), that failing to
engage in such discussions or negotiations or provide such information would
reasonably be expected to violate the fiduciary duties of the Board of
Directors of Standish. The Board of Directors of Standish may take and
disclose to Standish's Stockholders a position with respect to any tender
offer and make such disclosure to the Stockholders of Standish as may be
required under applicable law; provided, that the Board of Directors of
Standish shall not recommend that the Stockholders of Standish tender their
shares unless such recommendation is permitted under the Merger Agreement.
Unless the Board of Directors of Standish determines, based on the written
opinion of Legal Counsel, that doing so would reasonably be expected to
violate the fiduciary duties of the Board of Directors of Standish, (i)
Standish promptly shall advise CareMatrix orally and in writing of any
Alternative Proposal or any inquiry with respect to or which could lead to
any Alternative Proposal and the identity of the person making any such
Alternative Proposal or inquiry and (ii) Standish shall include in any such
notice a description of the terms and conditions of any such Alternative
Proposal or inquiry.
The Merger Agreement also provides that, until the earlier to occur of (a)
consummation of the Merger or (b) the expiration of one (1) year following
the termination of the Merger Agreement, neither CareMatrix nor any of its
affiliates (as defined in Rule 12b-2 under the Exchange Act) will (i) bid
for, acquire or seek to acquire any of the assets of the Standish business or
any voting or debt securities or preferred stock of Standish, or any rights
or options to acquire such ownership, or take any action to effect a change
of control of Standish, or initiate contact with any other person in an
effort to solicit, encourage or assist such person in a takeover proposal
involving Standish; (ii) deposit any voting securities of Standish in a
voting trust or subject any such securities to any arrangement, understanding
or agreement with respect to the voting, holding or disposition of such
securities; (iii) become a member of a partnership, limited partnership,
syndicate or other group, or otherwise act in concert with any person for the
purpose of acquiring, holding, voting or disposing of securities of Standish;
or (iv) seek to have called, or caused to be called, any meeting of
Stockholders of Standish, or initiate, propose or solicit any proxy or
consent of Stockholders of Standish for the approval of any proposal, or
participate in the taking of any action
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by written consent of Stockholders of Standish in lieu of a meeting, or seek
or propose to influence or control the management or policies of Standish, or
to obtain representation on the Board of Directors of Standish.
Conditions to the Merger
The respective obligations of CareMatrix and Standish to effect the Merger
are subject to the satisfaction prior to the Effective Time of certain
conditions, including, but not limited to, the following significant
conditions (some of which may be waived):
(a) in the case of each party, performance in all material respects at or
prior to the Effective Time of the agreements and covenants required to be
performed by the other party and no material or adverse change with respect
to each party;
(b) in the case of each party, the truth and correctness in all material
respects as of the Effective Time and the date of signing of the Merger
Agreement of the representations and warranties of the other party contained
in the Merger Agreement, except as expressly contemplated by the Merger
Agreement and except for any representation and warranty made as of a
specified date (which shall be true and correct as of such date);
(c) adoption of the Merger Agreement by the requisite approval and votes
of the Stockholders and Board of Directors of CareMatrix and Standish, as the
case may be, and the production and execution of all documents necessary to
consummate the Merger, including but not limited to, the resolutions,
certificates of good standing, charter documents, bylaws and estoppel
certificates from lessors of and for both CareMatrix and Standish and their
related subsidiaries and affiliates, if and where, necessary;
(d) CareMatrix and Standish shall have obtained all requisite approvals
and consents of, and made all filings with, all governmental agencies and
third parties, including the requirements of the Hart-Scott-Rodino Anti-trust
Improvements Act of 1976, as amended, required to consummate the transactions
contemplated by the Merger Agreement and to prevent the termination of any
material right, privilege, license, or agreement of either party or any of
their respective subsidiaries, without any conditions or restrictions which
would so materially and adversely affect the economic or business assumptions
of the Merger as to render inadvisable its consummation in the reasonable
judgment of the Board of Directors of both CareMatrix and Standish and no
stop order shall be effective with respect the Form S-4 Registration
Statement of which this Proxy Statement-Prospectus is a part (see "Terms Of
The Merger--Regulatory Approvals");
(e) CareMatrix shall have received from Standish's independent public
accountants a certificate letter, dated as of the Effective Time, stating
that, for financial reporting purposes, the Merger qualifies as a purchase by
CareMatrix of Standish (see "The Merger--Accounting Treatment");
(f) absence of any temporary restraining order, injunction, or other order
by any federal or state court or agency which enjoins or prohibits
consummation of the Merger. In addition, no action, suit, investigation or
proceeding brought by any governmental agency or instrumentality or any
holder of 10% or more of the voting securities of Standish shall be pending
or, to the knowledge of the parties to this Agreement, threatened (in
writing, in the case of threatened action by any security holder), before any
court or governmental body (i) to restrain, prohibit, restrict or delay, or
to obtain damages or a discovery order in respect of this Agreement or the
consummation of the Merger and there is no insolvency proceeding of any
character including without limitation, bankruptcy, receivership,
reorganization, dissolution or arrangement with creditors, voluntary or
involuntary, affecting Standish or any of its subsidiaries shall be pending,
and neither Standish nor any Standish Subsidiary shall have taken any action
in contemplation of, or which would constitute the basis for, the institution
of such proceedings;
(g) receipt by each of CareMatrix and Standish of a written opinion from
legal counsel;
(h) the Registration Statement shall have been declared effective by the
Commission and shall not be subject to a stop order suspending the
effectiveness of the Registration Statement and no proceedings for the
purpose of suspending the effectiveness of the Registration Statement shall
be pending before or threatened by the Commission;
(i) Standish shall have entered into amended and restated employment
agreements with Michael J. Doyle and Kenneth M. Miles, as set forth in the
Merger Agreement;
(j) There shall not have occurred (i) in any general suspension of trading
in, or limitation on prices for, or other extraordinary event affecting
securities on The Nasdaq National Market, (ii) a declaration of a banking
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moratorium or any suspension payments in respect of banks in the United
States, (iii) any material limitation (whether or not mandatory) by any
governmental authority on, or any other event which might affect the
extension of credit by lending institutions, or (iv) in the case of any of
the foregoing existing on the date hereof, a material acceleration or
worsening thereof; and
(k) Standish shall have received the written opinion of Stonebridge
addressed to the Board of Directors of Standish dated as of date reasonably
proximate to the date of the Proxy Statement-Prospectus to Standish's
Stockholders, to the effect that, as of the date of such opinion, the
resulting ownership of the outstanding shares of Standish Common Stock to be
retained by Standish current Stockholders after giving effect to the shares
of Standish Common Stock to be issued to the CareMatrix Stockholders is fair,
from a financial point of view, to Standish and the Stockholders of Standish,
and such opinion shall not have been withdrawn; and, in addition, Standish
shall have obtained such investment banking firm opinion as may be necessary
in connection with the Merger to avoid exclusion of coverage under its
directors and officers liability insurance policy.
Waiver of Conditions, Amendment, or Termination of the Merger Agreement
Waiver. The Merger Agreement provides that either CareMatrix or Standish
may waive the terms and provisions of the Merger Agreement by written
document executed by the party entitled to the benefits of such terms or
provisions.
Amendment. The Merger Agreement provides that either party may, with the
express approval of the other, in writing, modify or amend the Merger
Agreement in writing.
Termination. The Merger Agreement may be terminated and the Merger
abandoned, at any time prior to the Effective Time:
(a) by mutual written consents duly authorized by the Boards of Directors
of CareMatrix and Standish for any reason;
(b) by Standish or CareMatrix if:
(i) any court or governmental body of competent jurisdiction shall have
issued an order, decree or ruling, or taken any other action, permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement, provided that no such termination
shall be permitted unless the party seeking such termination shall have
used its reasonable best efforts to oppose such issuance or taking; or
(ii) either party commits any material breach of its representations,
warranties or covenants set forth in the Merger Agreement and such breach
has not been cured within ten days after written notice is given to
terminate the Merger Agreement as a result of such breach.
(c) by CareMatrix or Standish, if the closing conditions specified in the
Merger Agreement have not been satisfied or waived by February 15, 1997, or
by such later date not more than three months thereafter which Standish and
CareMatrix shall mutually select (the "Termination Date");
(d) by Standish (i) pursuant to a Permitted Action, as described above
under "No Solicitations and Standstill" or (ii) at any time following an
Alternative Proposal as set out in the Merger Agreement, the Board of
Directors of Standish determines, based on the written opinion of Legal
Counsel, that such termination is required in order for the Board of
Directors of Standish to comply with its fiduciary duties; or
(e) by CareMatrix, if the Board of Directors of Standish takes any
Permitted Action or if a vote of Standish's Stockholders results in the
rejection of the adoption or authorization of this Agreement by such
Stockholders.
Effect of Termination
In the event of the termination of the Merger Agreement and abandonment of
the Merger:
(a) the Merger Agreement, except for certain specified provisions, would
forthwith become void and be of no effect, without any liability on the part
of any party or its affiliates, directors, officers or Stockholders; provided
that such termination would not relieve any party to the Merger Agreement of
liability for breach of the Agreement; and
(b) if the representations and warranties of CareMatrix shall be true,
complete and correct in all material respects as of the time of termination
and CareMatrix has performed and complied in all material respects with all
agreements on its parts contained in the Merger Agreement and:
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(i) an Alternative Proposal is commenced, publicly disclosed or
communicated to Standish and, as a result of such Alternative Proposal, the
Board of Directors of Standish takes any Permitted Action and enters into an
agreement for any Alternative Proposal or terminates this agreement or this
Agreement is terminated by CareMatrix following Standish's taking a Permitted
Action; or
(ii) an Alternative Proposal is publicly commenced, proposed or disclosed
and this Agreement is terminated following the failure of Standish's
Stockholders to approve this Agreement at the Stockholders meeting,
and within twelve months following such termination, an Alternative Proposal
is consummated involving consideration (or implicit valuation) for the
Standish Common Stock on a fully diluted basis having a present value greater
than the value ascribed to the Standish Common Stock in the Merger (a "Higher
Transaction"), then Standish would be obligated to pay to CareMatrix within
ten business days following such occurrence a fee (the "Topping Fee"), in
cash of $2.0 million less the amount of any Standish Break-Up Fee as full and
complete liquidated damages (in no event will Standish be obligated to pay
more than one Topping Fee with respect to all Higher Transactions);
(c) in the event that the Merger Agreement is terminated as a result of a
material breach by Standish or by Standish as a result of the exercise of its
fiduciary duties in connection with the receipt of an Alternative Proposal or
as a result of a failure of any condition that is a condition to the
obligation of CareMatrix to close (other than within specified exceptions)
and CareMatrix is not then in material breach of its representations and
warranties or covenants contained in the Merger Agreement, Standish shall
thereupon become obligated to pay to CareMatrix $500,000 (the "Standish
Break-Up Fee");
(d) in the event that the Merger Agreement is terminated as a result of a
material breach by CareMatrix or as a result of a failure of any condition
that is a condition to the obligation of Standish to close (other than
certain specified conditions) and Standish is not then in material breach of
its representations and warranties or covenants contained in the Merger
Agreement, CareMatrix shall thereupon become obligated to pay to Standish
$500,000 (the "CareMatrix Break-Up Fee"); and
(e) in the event Standish is obligated to pay the Standish Break-Up Fee to
CareMatrix and CareMatrix is obligated to pay the CareMatrix Break-Up Fee to
Standish, then neither party shall be obligated to pay to the other party
either the Standish Break-Up Fee or the CareMatrix Break-Up Fee.
Effective Time
The Merger becomes effective when CareMatrix and Standish file appropriate
certificates with, and such filings are accepted by, the Secretaries of State
of the State of Delaware and New Jersey, as applicable. Upon the Merger
becoming effective, the Standish Subs will be merged with and into the
CareMatrix Corporations and the separate corporate existence of the Standish
Subs will cease. The CareMatrix Corporations will be the surviving
corporations and the shareholders of the CareMatrix Corporations will become
shareholders of Standish. All outstanding shares of the Standish Subs will be
cancelled and each corporation resulting from the Merger will issue one share
of stock to Standish and become a wholly owned subsidiary of Standish. For a
description of circumstances under which CareMatrix or Standish may terminate
the Merger Agreement, see "--Waiver of Conditions, Amendment, or Termination
of the Merger Agreement." If not so terminated by either Board of Directors,
the Effective Time will occur as promptly as practicable after the date upon
which all of the conditions to the Merger are satisfied or duly waived or at
such other time and date as CareMatrix and Standish may agree. CareMatrix and
Standish currently anticipate that the Merger will be completed during the
fourth quarter of 1996, but, in any event, prior to December 31, 1996. See
"--Regulatory Approvals."
Resales of Standish Common Stock Received in the Merger
The Standish Common Stock that will be issued if the Merger is consummated
will have been registered under the Securities Act, and will be freely
transferable, except for shares received by persons, including directors and
executive officers of CareMatrix, who may be deemed to be "affiliates" of
CareMatrix and Standish, as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act ("Affiliates"). Affiliates may not sell
their shares of Standish Common Stock acquired pursuant to the Merger, except
(a) pursuant to an effective registration statement under the Securities Act
covering those shares, (b) in compliance with Rule 145, or (c) in the opinion
of counsel reasonably satisfactory to Standish, pursuant to another
applicable exemption from the registration requirements of the Securities
Act.
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<PAGE>
The certificates representing shares of Standish Common Stock to be issued to
Affiliates in the Merger will bear a legend summarizing the foregoing
restriction, and Standish will give its transfer agent stop transfer
instructions with respect to the Standish Common Stock that Affiliates receive
in connection with the Merger.
This Proxy Statement-Prospectus does not cover resales by Affiliates of
the Standish Common Stock. No person is authorized to make use of this Proxy
Statement-Prospectus in connection with any such resales.
Interests of Certain Persons in the Merger
In considering the recommendations of its Board of Directors with respect
to the Merger, Standish's Stockholders should be aware that certain members
of Standish's and Standish's management and Boards of Directors and
CareMatrix's and CareMatrix's Board of Directors, respectively, may have
certain interests in the Merger that are in addition to the interests of
Stockholders of Standish and the CareMatrix Stockholders generally. The Board
of Directors of each of Standish and CareMatrix was aware of these interests
and considered them, among other matters, in approving the Merger Agreement
and the transactions contemplated thereby. See "--Board of Directors and
Management of Standish at Effective Time."
Indemnification. Pursuant to the Merger Agreement, Standish and, from and
after the Effective Time, New Standish, have agreed to indemnify to the full
extent permitted under the Delaware General Corporation Law, each person who
is or was a director or officer of Standish at or prior to the Effective
Time, from and against certain claims, losses and liabilities arising out of
the fact that such person was or is a director or officer of Standish or
arising out of or based upon the Merger Agreement or the transactions
contemplated thereby. New Standish will maintain for a period of three years
Standish's existing directors' and officers' liability insurance policies
with respect to claims arising before the Effective Time.
Employment Agreements. Standish currently has employment agreements with
Mr. Doyle, Chairman and Chief Executive Officer, and Mr. Miles, Chief
Financial Officer and Treasurer. The employment agreement with Mr. Doyle, as
amended effective as of July 1, 1995, provides for an initial employment term
ending December 31, 1997, continuing thereafter on year-to-year renewal
terms, subject to either Standish's or the employee's electing not to renew,
an annual base salary of $165,000 through December 31, 1997, bonus
compensation to be determined by the Board of Directors of Standish in its
sole discretion up to 40% of Mr. Doyle's annual base salary, restrictions
against competition with Standish, an automobile allowance of $10,000 per
annum and payment of premiums (amounting to approximately $6,300 in 1995) on
a life insurance policy in the amount of $500,000 for a beneficiary to be
designated by Mr. Doyle. Such policy is in addition to the key man life
insurance policy to be maintained by and for the benefit of Standish.
The employment agreement between Standish and Mr. Miles is similar in
structure to Mr. Doyle's, and contains substantially the same provisions and
term through December 31, 1997, subject to renewal on a year-to-year basis,
except that Mr. Miles agreement provides for an annual base salary of
$105,000 and a 25% bonus limit, and makes no provision for life insurance.
Both of the employment agreements described above provide also that if the
employee's employment terminates within a 24-month period following the
occurrence of certain changes in control because, among other events, either
(a) his employment is not renewed by Standish, (b) his employment is
involuntarily terminated other than for cause as of a date prior to the end
of the initial term or any renewal term or (c) a change in his duties occurs,
he is entitled to receive a lump sum severance payment within 30 days after
ceasing to be employed equal to 2.99 times (in the case of Mr. Doyle) and 1.0
times (in the case of Mr. Miles), respectively, the yearly average total
compensation (consisting of base salary and any cash bonus) payable with
respect to the previous five full calendar years.
Under the Term Sheet, it was agreed that Mr. Doyle would serve New
Standish as Chief Executive Officer and that he would be compensated at a
rate of $250,000 per annum plus a bonus to be determined by the Board of
Directors. In addition, under the Term Sheet, it was agreed that Mr. Miles
would serve New Standish as Senior Vice President of Finance and would be
compensated at the rate of $125,000 per annum plus a bonus to be determined
by the Board of Directors. Also, the Term Sheet provided for the recognition
of the grant of stock options to Messrs. Doyle and Miles for an aggregate of
500,000 and 250,000 shares, respectively. The Merger Agreement includes as
exhibits the proposed Third Amended and Restated Employment Agreement between
Standish and Mr. Doyle and the Amended and Restated Employment Agreement
between Standish and Mr. Miles, which would give
33
<PAGE>
effect to the provisions of the Term Sheet. Such Agreements would become
effective as of the Effective Time. Both of such exhibits are included in
Appendix I of this Proxy Statement-Prospectus.
Management Stock Options. On June 3, 1996, the Board of Directors of
Standish authorized the grant of the Management Options to Mr. Doyle to
purchase 50,000 shares of Standish Common Stock and to Mr. Miles to purchase
25,000 shares of Standish Common Stock, respectively, at a purchase price
equal to $2.94 per share, the closing sale price of the Standish Common Stock
in the over-the-counter-market as reported in The Wall Street Journal on that
day, with the number of shares for which such options could be exercised
subject to increase upon consummation of the Merger by multiplying the number
of shares issuable upon exercise by the greater of (a) the number ten or (b)
the number which is a fraction (the "Fraction"), the numerator of which would
be the aggregate number of shares of Standish Common Stock to be issued to
the CareMatrix Stockholders under the then proposed Agreement and Plan of
Merger and the denominator of which would be the number of shares of Standish
Common Stock issued and outstanding immediately prior to the Effective Time
including all shares issued between the date of signing and the Effective
Time upon exercise of options, warrants and other similar rights. At its
Board Meeting on June 28, 1996, and after reviewing the then most recent
draft of the proposed Agreement and Plan of Merger between Standish and
CareMatrix, the Board ratified the grant of such Management Options. As of
that date, Standish executed and delivered to Messrs. Doyle and Miles written
option agreements to purchase 50,000 shares and 25,000 shares of Standish
Common Stock, respectively, at the purchase price of $2.94 per share and
vesting in installments over two years. In both cases, the number of shares
for which Options could be exercised were subject to increase by multiplying
the 50,000 share number or the 25,000 share number, as applicable, by the
greater of (i) the number ten or (ii) the Fraction. In accordance with action
taken by the Standish Board of Directors on July 29 and August 5, 1996, the
Management Options of both Messrs. Doyle and Miles were modified to provide
for immediate vesting of all of such Options and for fixing the Fraction at
ten. For purposes of this Proxy Statement- Prospectus, unless otherwise
indicated, it has been assumed that Messrs. Doyle and Miles will be entitled
to exercise their Options for 500,000 and 250,000 shares, respectively.
Acceleration of Options. In accordance with resolutions adopted by the
Standish Board of Directors in September 1995, each option then outstanding
whether or not currently exercisable, will automatically become fully vested
upon consummation of the Merger.
Termination Agreement. In August 1996, Standish and Michael J. Brenan, the
President and Chief Operating Officer of Standish, entered into an agreement
(the "Termination Agreement") under which Mr. Brenan resigned as a Director
and Officer of Standish and his employment was terminated. Mr. Brenan has
agreed to make himself available to provide consulting services for which he
would be entitled to receive consulting fees of approximately $12,500 per
month, payable through the earlier to occur of the Effective Time or November
15, 1996. Under the Termination Agreement, Standish will make a lump sum
severance payment to Mr. Brenan in the amount of $150,000 (less any
consulting fees) payable at the earlier to occur of the Effective Time or
November 15, 1996, will provide family health insurance through December 31,
1996 and a moving allowance not to exceed $5,000. The Termination Agreement
also provides for acceleration of the vesting of Mr. Brenan's unexercised
stock options to purchase 45,000 shares of Standish Common Stock at a
purchase price of $2.38 per share. In addition, the Termination Agreement
prohibits Mr. Brenan, for a period of one year beginning at the Effective
Time, from engaging in any competing activity within a twenty-mile radius of
any Standish offices or Standish-operated communities or CareMatrix
facilities or development sites.
Advisory Fees. In accordance with the Term Sheet and an agreement between
CareMatrix and NatWest dated July 10, 1996, following consummation of the
Merger, NatWest will receive advisory fees payable in Standish Common Stock
or cash, at the election of New Standish, equal to one (1%) percent of (a)
the shares of Standish Common Stock outstanding upon consummation of the
Merger, or (b) the market value of such shares based on the closing price of
Standish Common Stock immediately preceding consummation of the Merger.
In accordance with Standish's engagement of its Financial Advisors, upon
consummation of the Merger, the Financial Advisors will receive advisory fees
of $200,000 in the aggregate, less the amount of prior payments made by
Standish to the Financial Advisors for their financial advisory services. See
"--Opinion of Financial Advisor."
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<PAGE>
Board of Directors and Management of Standish at Effective Time
At the Effective Time, the Chairman, the President and Chief Operating
Officer and the Treasurer and Chief Financial Officer of Standish shall
resign or be removed, new positions of Chief Executive Officer, Vice Chairman
and Senior Vice President of Finance, respectively, shall be created and,
concurrently therewith, the following persons shall be elected or appointed
to the position listed opposite their name:
<TABLE>
<CAPTION>
Name Present Company Affiliation Position
- ---- --------------------------- --------
<S> <C> <C>
Abraham D. Gosman CareMatrix Chairman, Board of Directors
Michael J. Doyle Standish Chief Executive Officer
Andrew D. Gosman CareMatrix Vice Chairman
Robert M. Kaufman CareMatrix President
Michael M. Gosman CareMatrix Executive Vice President
James M. Clary, III CareMatrix Executive Vice President, General Counsel and
Secretary
Joel A. Kanter, Ph.D. CareMatrix Executive Vice President
Marc H. Benson CareMatrix Chief Operating Officer
Kenneth M. Miles Standish Senior Vice President of Finance
</TABLE>
At the Effective Time, each of the members of the Board of Directors of
Standish shall resign or be removed and, concurrently therewith, Abraham D.
Gosman, Michael J. Doyle and Andrew D. Gosman shall be appointed to the Board
of Directors of New Standish. In addition, the foregoing Board of Directors
will expand the Board to seven and appoint four outside directors to fill the
vacancies.
Indemnification. Following the Effective Time, Standish will maintain the
indemnification rights currently provided by it with respect to matters
occurring before the Effective Time in favor of its respective current and
former employees, directors, and officers and, if applicable, in favor of the
employees, directors, and officers of its respective subsidiaries, on terms
no less favorable than those provided in the charter or by-laws or
regulations of CareMatrix or Standish or as otherwise in effect on the date
of the Merger Agreement. See "--Interests of Certain Persons in the
Merger--Indemnification."
Directors' and Officers' Liability Insurance. Following the Effective
Time, Standish expects to maintain the directors' and officers' liability
insurance policies maintained by it at the date of the Merger Agreement. See
"-- Interests of Certain Persons in the Merger--Indemnification."
See "Management of Standish" for disclosure regarding the directors and
those individuals who will serve as officers of New Standish.
Accounting Treatment
The Merger transaction of CareMatrix with and into Standish will be
recorded as a "reverse acquisition" for accounting purposes, with CareMatrix
treated as the accounting acquiror, even though Standish will be the survivor
for legal purposes. In a reverse acquisition, the accounting acquiror is
treated as the surviving entity even though Standish's legal existence does
not change and the financial statements reflect the historical financial
statements of CareMatrix. CareMatrix, as the accounting acquiror, treated the
Merger as a purchase acquisition. The Merger will be recorded using the
historical basis for the assets and liabilities of CareMatrix, and the
estimated fair market value of Standish's assets and liabilities. See
"Unaudited Pro Forma Combined Financial Information."
Federal Income Tax Consequences of the Merger
There will be no material Federal income tax consequences to the Standish
Stockholders as a result of the Merger. With respect to Standish, however,
issuance of the Standish Common Stock to the CareMatrix Stockholders upon
consummation of the Merger will subject the utilization of Standish's net
operating loss carryforwards to substantial limitations. A ruling from the
Internal Revenue Service is not being sought with regard to the Federal
income tax consequences of the Merger. See "Risk Factors--Adverse Impact of
Merger on Standish Net Operating Loss Carryforwards."
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<PAGE>
CareMatrix Stockholders are urged to consult their own tax advisors as to the
Federal or any other tax consequences as a result of the Merger.
Operation of New Standish after the Merger
Operation of New Standish. Following the Merger, Standish's business will
be carried on by New Standish under the name of "CareMatrix Corporation." New
Standish's headquarters and operations will continue at 197 First Avenue,
Needham, Massachusetts 02194. See "--Board of Directors and Management of
Standish at Effective Time."
Employee Benefits. As a result of the Merger, New Standish shall become
the sponsoring employer for the 401(k) Employee Savings Plan for employees of
both New Standish and CareMatrix, taken together. In addition, New Standish
shall assume CareMatrix's obligations with respect to its health, dental and
other customary employee plans.
Regulatory Approvals
Standish and CareMatrix believe that they have complied with all federal
and state regulatory requirements and obtained all governmental approvals
necessary in connection with the Merger other than the filing of certificates
with the Secretaries of the States of Delaware and New Jersey and compliance
with certain state securities laws requirements in connection with the
issuance of the Standish Common Stock to the CareMatrix Stockholders.
Related Party Transactions
In May 1996, Standish and CareMatrix exchanged confidentiality agreements
(the "Confidentiality Agreements") with respect to all information previously
exchanged or to be exchanged by them in the negotiation and evaluation of the
Merger. Copies of the Confidentiality Agreements have been filed with the
Commission as exhibits to the Registration Statement of which this Proxy
Statement-Prospectus forms a part. See "Available Information."
In accordance with the Term Sheet, Standish borrowed $1.0 million from a
corporation controlled by Abraham D. Gosman, the principal CareMatrix
Stockholder, for working capital purposes, which borrowing was secured by the
grant of a subordinate mortgage on Standish's Bailey Village Community. On
July 30, 1996, Standish sold to Mr. Gosman 100 shares of Series B Preferred
Stock for a purchase price of $1.4 million. Standish used $1.0 million of the
proceeds from this stock sale to repay its earlier $1.0 million working
capital borrowing. Concurrently with the sale of the Series B Preferred
Stock, Standish issued warrants to Mr. Gosman to purchase 400,000 shares of
Standish Common Stock at an initial exercise price of $4.16 per share. See
"Risk Factors--Potential Conflicts of Interest of Certain Executive Officers
and Directors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations for Standish" and "Description of Standish Capital
Stock."
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<PAGE>
MARKET PRICES AND DIVIDENDS
Market Prices
The Standish Common Stock is currently traded on the Nasdaq Small Cap
System and is quoted under the symbol "STAN". The following table sets forth
for the periods indicated the range of high and low sales prices as reported
on Nasdaq from Standish's fiscal year ended December 31, 1993 to and
including July 31, 1996.
High Low
----- ------
FISCAL YEAR ENDED DECEMBER 31, 1993
First Quarter 5-3/4 4-1/8
Second Quarter 5-1/8 3-5/8
Third Quarter 4-1/2 3-5/8
Fourth Quarter 6-1/2 4-1/8
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter 6-3/4 5-3/8
Second Quarter 5-3/8 3-3/8
Third Quarter 4-1/8 2-7/16
Fourth Quarter 2-11/16 2-1/4
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter 2-1/2 1-7/8
Second Quarter 2-1/4 2
Third Quarter 2-7/8 2-1/4
Fourth Quarter 4-1/8 2-3/8
FISCAL YEAR ENDING DECEMBER 31, 1996
First Quarter 4-7/16 2-7/8
Second Quarter 5-7/8 2-1/8
Third Quarter through July 31, 1996 4-3/8 3-5/8
On June 3, 1996, the last full trading day preceding the first public
announcement of the Merger, the closing price for the Standish Common Stock
was $2-15/16 per share. On , 1996, the closing price for the Standish Common
Stock as reported in The Wall Street Journal was $. per share.
Dividend Policy
Standish has not declared or paid any cash dividends on its Common Stock
since its inception and does not currently plan to declare or pay any cash
dividends on its Common Stock in the foreseeable future. Dividends may be
paid only out of legally available funds as proscribed by statute, subject to
the discretion of Standish's Board of Directors. In addition, Standish's
ability to pay cash dividends is restricted by the provisions of its Restated
Certification of Incorporation pertaining to the Series A Preferred Stock and
the Series B Preferred Stock, respectively. In that regard, no dividends may
be paid on any shares of Standish Common Stock unless and until all
accumulated and unpaid dividends on both the Series A and Series B Preferred
Stock have been declared and paid in full.
Holders of Series A Preferred Stock are entitled to receive if, when and
as declared by the Board of Directors out of funds legally available as
prescribed by statute, dividends at the rate of $1.00 per share per year,
payable quarterly on September 30, December 31, March 31 and June 30 of each
year, commencing September 30, 1993. Any dividends accrued but not paid on
the Series A Preferred Stock accumulate and must be declared and paid in full
before any dividends may be paid on shares of any other capital stock
(including the Standish Common Stock) ranking junior to the Series A
Preferred Stock. Dividends were in arrears for the quarters ended June 30,
1994, September 30, 1994, December 31, 1994, September 30, 1995, December 31,
1995, March 31, 1996 and June 30, 1996. Quarterly dividends in arrears
totaled approximately $207,300 as of June 30, 1996. No interest is payable on
any accrued but unpaid dividends on the Series A Preferred Stock. The next
scheduled dividend payment date for the Series A Preferred Stock is September
30, 1996 and Standish does not expect to make payment of that dividend.
Except for payment of dividends on its Series A and Series B Preferred Stock,
Standish's current policy is to retain any future earnings to finance future
growth. As a result of Standish's failure to pay quarterly dividend on its
Series A Preferred Stock, holders of outstanding Series A Preferred Stock are
entitled to vote with
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<PAGE>
holders of Standish Common Stock on all matters thereafter submitted to
stockholders including the election of directors.
Holders of Series B Preferred Stock are entitled to receive if, when and
as declared by the Board of Directors out of funds legally available as
prescribed by statute, dividends at the rate of $1,400.00 per share per year,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1996. Any dividends accrued but not paid on the
Series B Preferred Stock accumulate and must be declared and paid in full
before any dividends may be paid on shares of any other capital stock
(including the Common Stock) ranking junior to the Series B Preferred Stock.
No interest is payable on any accrued but unpaid dividends on the Series B
Preferred Stock. Except for payment of dividends on its Series A and Series B
Preferred Stock, Standish's current policy is to retain any future earnings
to finance future growth.
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<PAGE>
POST-MERGER CAREMATRIX (NEW STANDISH)
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Under the terms of the Merger Agreement, Standish will issue 50,000,000
shares of Standish Common Stock in exchange for all the outstanding shares of
Common Stock of CareMatrix. The Merger of CareMatrix and Standish will be
accounted for as a reverse acquisition, whereby CareMatrix is the acquiror
for accounting purposes. Accordingly, the financial history presented will be
that of CareMatrix. Therefore, the Post-Merger CareMatrix Unaudited Pro Forma
Combined Statement of Operations for the year ended December 31, 1995 and the
six month period ended June 30, 1996 presents the CareMatrix Combined
Statement of Operations for the year ended December 31, 1995 and the six
month period ended June 30, 1996 adjusted for the following effects of the
Merger: (i) increased amortization resulting from goodwill generated in the
purchase accounting treatment of the Merger, (ii) increased depreciation from
the recording of Standish fixed assets at fair market value, (iii) increased
compensation expense to reflect new employment agreements, and (iv) increased
amortization and depreciation to reflect the purchase of management contracts
and fixed assets by CareMatrix concurrent with the Merger closing, as if the
Merger had occurred on January 1, 1995. The Post-Merger CareMatrix Unaudited
Pro Forma Combined Balance Sheet as of June 30, 1996, presents the CareMatrix
Balance Sheet as of June 30, 1996, adjusted for the following effects of the
Merger: (i) the value of the common stock deemed to be issued by the
accounting acquiror; (ii) the purchase adjustments, including goodwill
generated in the purchase accounting treatment of the Merger; (iii) equity
and debt transactions of Standish that occurred in July 1996 subsequent to
the June 30, 1996 balance sheet; and (iv) the purchase of management
contracts and fixed assets by CareMatrix concurrent with the Merger closing.
The Post-Merger CareMatrix Unaudited Pro Forma Combined Financial
Statements do not purport to be indicative of the results of operations which
actually would have occurred had the Merger taken place on January 1, 1995,
or which may be expected to occur in the future. The Post-Merger Unaudited
Pro Forma Combined Financial Statements should be read in conjunction with
the CareMatrix Financial Statements and Standish Financial Statements
included elsewhere in this Proxy Statement-Prospectus.
39
<PAGE>
POST-MERGER CAREMATRIX
PRO FORMA COMBINED BALANCE SHEET
June 30, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CareMatrix Standish Adjustments Combined
--------- ------- ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,028 $ 356 $ 900(2,3) $3,284
Accounts receivable, net 939 178 1,117
Prepaid expenses and other current assets 318 802 1,120
------- ----- -------
Total current assets 3,285 1,336 5,521
Property, plant & equipment, net 1,444 10,916 3,833(4,5) 16,193
Note receivable 770 770
Goodwill and other intangibles, net 1,661 18,097(4,5) 19,758
Other assets 523 1,615 2,138
------- ----- -------- -------
Total assets $ 6,022 $ 15,528 $ 44,380
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 841 $ 1,081 $ 1,500(4) $ 3,422
Accrued interest -- stockholder 1,158 1,158
Current portion of long-term debt 3,316 (500)(2,3) 2,816
Other current liabilities 413 413
------- ----- -------- -------
Total current liabilities 1,999 4,810 7,809
Due to stockholder 16,992 3,300(5) 20,292
Long-term debt 10,461 10,461
Other long-term liabilities 529 521 1,333(4) 2,383
Minority interest 109 109
Stockholders' equity
Preferred stock 920 1,400(3) 1,400
Common stock 35 543(1) 543
Additional paid-in capital 8,964 14,881(1) 14,881
Accumulated deficit (13,498) (10,292) (13,498)
------- ----- -------
Total stockholders' equity (deficit) (13,498) (373) 3,326
------- ----- -------
Total liabilities and stockholders'
equity $ 6,022 $ 15,528 $ 44,380
======= ===== =======
</TABLE>
See accompanying notes to the Pro Forma Combined Financial Statements.
40
<PAGE>
POST-MERGER CAREMATRIX
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the six months ended June 30, 1996
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CareMatrix Standish Adjustments Combined
--------- ------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 2,389 $4,670 $ 7,059
Operating costs and expenses
Salaries, wages and benefits 1,575 53(3) 1,628
Salaries, wages and benefits -- related
party 1,406 1,406
Community operating expense 3,209 3,209
Community rent expense 304 304
Selling, general and administrative expense 931 931
Depreciation and amortization expense 65 393 306(1)
91(2)
56(4) 911
Other operating expenses 2,007 186 2,193
Other -- related party expense 538 538
------- ----- -------
Total operating costs and expenses 5,591 5,023 11,120
Interest income (24) (29) (53)
Interest expense 559 823 1,382
Other (743) (743)
Loss $(3,737) $ (404) $(4,647)
Loss per common share ($0.09)
Shares outstanding 54,330(5)
</TABLE>
See accompanying notes to the Pro Forma Combined Financial Statements.
41
<PAGE>
POST-MERGER CAREMATRIX
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CareMatrix Standish Adjustments Combined
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 2,485 $ 8,436 $ 10,921
Operating costs and expenses
Salaries, wages and benefits 2,100 105(3) 2,205
Salaries, wages and benefits -- related
party 2,123 2,123
Community operating expense 5,961 5,961
Community rent expense 616 616
Selling, general and administrative expense 2,347 2,347
Depreciation and amortization expense 3 680 612(1)
112(4)
182(2) 1,589
Provision for closure loss 895 895
Other operating expenses 3,009 336 3,345
Other -- related party expense 1,017 1,017
------- ----- --------
Total operating costs and expenses 9,147 9,940 20,098
Interest income (153) (153)
Interest expense 544 1,500 2,044
Assignment fee from related party (1,000) (1,000)
Other 442 442
Loss $(7,206) $(2,293) $(10,510)
======== ======== =========
Loss per common share ($0.19)
Shares outstanding 54,3305
</TABLE>
See accompanying notes to the Pro Forma Combined Financial Statements.
42
<PAGE>
Notes to Pro Forma Combined Balance Sheet (dollar amounts in thousands)
1. To record the 4,330,000 shares issued at a value of $15,424 by
CareMatrix in consideration for Standish and the related merger costs.
2. To record the $500 of proceeds received by Standish on July 10, 1996
pursuant to a promissory note.
3. To record the issuance of $1,400 of Series B Preferred Stock by
Standish on July 30, 1996 and the repayment of a $1,000 promissory note
with the proceeds.
4. To adjust the assets and liabilities of Standish to their estimated
fair value and to recognize other liabilities in connection with the
purchase transaction:
Net assets of Standish at June 30, 1996 $ (373)
Writeup of fixed assets to fair market value 3,333
Tax effect of fixed asset writeup (1,333)
Provision for the cost of closing certain facilities (1,000)
Acquisition costs (500)
Goodwill recorded 15,297
------
$15,424
5. To record the purchase of management contracts for $2,800 and fixed
assets for $500 by CareMatrix concurrent with the closing of the Merger.
Notes to Pro Forma Combined Statements of Operations
1. To reflect the amortization of goodwill over a period of 25 years.
2. To adjust depreciation expense to reflect the writeup of fixed assets
to fair market value and the purchase of additional fixed assets
concurrent with the merger closing.
3. Increased compensation expense to reflect new employment agreements
signed at the time of the transaction.
4. To reflect the amortization of management contracts purchased
concurrent with the merger closing over the lives of the contracts (25
years).
5. Reflects CareMatrix's 50,000,000 shares plus the 4,330,000 shares
issued by CareMatrix in consideration for Standish and the related merger
costs.
43
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR STANDISH
Overview. Standish is a long term care services company which operates
assisted living communities throughout the eastern United States. Standish
also provides management, marketing, development and other services to third
party owners of assisted living communities. Since its organization in
October 1989, Standish has achieved significant growth in revenues, primarily
by acquiring existing senior living communities and by providing management,
marketing, development and other services to communities owned by third
parties, but it has not realized income from operations. Standish operates
ten communities for its own account with a resident capacity of 516, and
provides managing and marketing services for four communities with a resident
capacity of 385. For the three and six months ended June 30, 1996, Standish
generated total revenues of $2,346,000 and $4,670,000, respectively, and
incurred a loss from operations of $122,000 and $353,000, respectively.
In February 1996, Standish consummated agreements with Cornish Realty
Associates, L.P. ("Cornish") and the principals of its corporate general
partner. Under the agreements, Standish agreed to resign as the manager of
Laurelmead effective April 1, 1996. In addition, Standish sold its limited
partnership investment interest in Cornish to the two principals of the
corporate general partner for an amount equal to the sum of Standish's then
remaining $125,000 capital investment in Cornish plus an amount equivalent to
the accrued priority return on that capital investment less certain
adjustments. The net amount due Standish of $215,000 is payable as follows:
monthly installments of $10,000 each for the months of May through October
1996, the sum of $80,000 in December 1996 and the sum of $75,000 in December
1997.
On March 15, 1996, Standish and Emeritus jointly announced the signing of
an agreement in principal to merge in a tax-free stock-for-stock transaction.
On May 6, 1996, Standish announced it had terminated Merger discussions with
Emeritus. Standish and Emeritus could not reach agreement on an exchange
ratio.
On March 25, 1996, Standish received approximately $825,000 in back
management fees, prior investments and advances in connection with the
refinancing and sale by a third party owner of the Fox Ridge Manor community
located in Dover, Pennsylvania. Standish recorded a gain of approximately
$596,000 related to this transaction in the first quarter of 1996. That
community had been owned by Senior Lifestyles, Inc. ("SLI"), a third party,
and Standish had managed that community for SLI since July 1992. Standish has
been retained by the new owner, Northwood Retirement Community, Inc.
("Northwood"), a Pennsylvania not-for-profit corporation, to manage the Fox
Ridge community under a three year management agreement (with two 1 year
renewable options). Standish expects to receive management fees in a fixed
monthly amount of approximately $5,200 plus an additional incentive
management fee of approximately 2% of monthly operating revenues during the
term of its new management agreement. Under certain circumstances, the fixed
and incentive management fees may be subordinate to payments due certain
holders of bonds issued in connection with the acquisition of Fox Ridge by
the new owner. Simultaneously with its management agreement, Standish made
available to Northwood a $150,000 line of credit to be used by the new owner
in connection with the Fox Ridge Manor community. In connection with these
transactions, SLI bonds in the face amount of $900,000 (the "Group A SLI
Bonds") resold by Standish to an investor group in 1993 and guaranteed by
Standish as to the payment of interest and principal, were refinanced and
exchanged for new subordinated 1996 Series C Bonds in the face amount of
$800,000. Of these bonds, $750,000 face amount are held for the benefit of
the investor group and $50,000 are held for the benefit of Standish. Standish
has provided credit enhancement commitments to the investor group with
respect to the $750,000 1996 Series C bonds. Reference is made to Standish's
financial statements and the footnotes to the financial statements included
in this Proxy Statement-Prospectus.
Standish anticipates an improvement in operating cash flow during the
remainder of 1996 as compared to 1995 primarily as a result of Standish's
continuing efforts to improve operating performance of certain of the
communities operated by it for its own account and the expansion of its
Statesville, North Carolina community. However, Standish expects to continue
to incur losses from operations through at least the third quarter of 1996.
Of the ten communities currently operated by Standish for its own account,
two communities (Bailey and Sunny Knoll) are owned and the others are leased
under either capital lease or operating lease arrangements. Community rent
expense represents lease payments paid by Standish as lessee under operating
lease arrangements at its Piedmont Village and Bailey Suites communities.
Standish recognizes service revenue in the period in which it provides
services to residents at the communities that it operates for its own
account. Management fees and marketing revenue are realized in the period in
which
44
<PAGE>
Standish provides services. Development fees and other revenue are recorded
when Standish fulfills its contractual obligations and all contingencies for
payment are met.
The results of operations for the three and six month periods ended June
30, 1996 include the accounts of Standish, Bailey Retirement Center, Inc.,
("Bailey"), an assisted living community in Gainesville, Florida which
Standish acquired in July 1992, Dominion Villages, Inc. ("Dominion"), a chain
of three assisted living communities in the Tidewater, Virginia area which
Standish acquired on November 10, 1993, Lowry Village, Inc. ("Lowry"), a
stand-alone Alzheimer's facility in Tampa, Florida which Standish acquired in
January 1994, Piedmont Villages, Inc. ("Piedmont"), a chain of three assisted
living facilities in North Carolina which Standish acquired on March 2, 1994,
Bailey Home Suites ("Bailey Suites"), an assisted living community in
Gainesville, Florida which Standish began leasing in September 1994 and Lakes
Region, L.L.C. ("Sunny Knoll"). Standish and Emeritus, through a limited
liability company, acquired 51% and 49% ownership interests, respectively, in
the Sunny Knoll community located in Franklin, New Hampshire on May 1, 1995.
The results of operations for the three and six month periods ended June
30, 1995 include the accounts of Standish, Bailey, Dominion, Lowry, Piedmont
and Bailey Suites. The results of operations also include the accounts of
Sunny Knoll for the period May 1, 1995 to June 30, 1995.
The following table sets forth the approximate percentage of Standish's
total revenues represented by certain items from Standish's consolidated
financial statements for the respective periods presented:
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------------ ------------------ ------------------ --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Service revenue 93.5% 85.6% 93.8% 88.4%
Management fees and marketing revenue 3.7 8.9 4.6 7.7
Development fees and other revenue 2.8 5.5 1.6 3.9
100.0 100.0 100.0 100.0
----- ----- ----- ------
Operating costs and expenses:
Community operating expense 69.3 66.1 68.7 69.1
Community rent expense 6.6 6.5 6.6 6.8
Selling, general and administrative
expense 19.8 28.4 19.9 29.0
Transaction termination costs 1.2 -- 4.0 --
Depreciation and amortization expense 8.3 7.7 8.4 8.1
----- ----- ----- ------
Total operating costs and expenses 105.2 108.7 107.6 113.0
Loss from operations (5.2) (8.7) (7.6) (13.0)
Interest expense (17.3) (16.9) (17.6) (17.1)
Interest income 0.8 1.9 0.6 2.0
Other income 4.3 -- 15.0 --
Minority interest 1.2 1.1 1.0 1.3
------ ------ ------ ------
Loss before income taxes (16.2) (22.6) (8.6) (26.8)
====== ====== ====== ======
</TABLE>
The following table sets forth the approximate percentage of Standish's
service revenue represented by certain items from the Company's consolidated
financial statements for the respective periods presented:
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------------ ------------------ ------------------ --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Service revenue 100.0% 100.0% 100.0% 100.0%
Community operating expense 74.1 77.2 73.2 78.2
Community rent expense 7.0 7.6 6.9 7.7
</TABLE>
45
<PAGE>
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 Compared to the Six Months Ended June 30, 1995
Revenues
Revenues for the three and six month periods ended June 30, 1996 were
$2,346,000 and $4,670,000, representing increases of $155,000 or 7% and
$689,000 or 17%, respectively, from revenues of approximately $2,191,000 and
$3,981,000 in the comparable periods in 1995.
Service revenue for the three and six month periods ended June 30, 1996
were $2,193,000 and $4,380,000, representing increases of $318,000 or 17% and
$862,000 or 25%, respectively, from service revenue of $1,875,000 and
$3,518,000 in the comparable periods in 1995. Of these increases, $87,000 and
$369,000 respectively, was attributable to service revenue for the Sunny
Knoll community acquired by Standish in May 1995 and thus not fully reflected
in Standish's results for the first two quarters of 1995. The $231,000 and
$493,000 balances of these increases in service revenue were primarily
attributable to higher service revenues at certain of the communities
operated by Standish throughout both periods, primarily due to increased
resident census and higher average service fee rates at these communities.
Management fees and marketing revenue for the three and six month periods
ended June 30, 1996 were $88,000 and $213,000, representing decreases of
$108,000 or 55% and $92,000 or 30%, respectively, from management fees and
marketing revenue of $196,000 and $305,000 in the comparable periods in 1995.
The higher management fees and marketing revenue during the 1995 comparable
periods were attributable primarily to $100,000 of management fee revenue
Standish recorded during the second quarter of 1995 related to Crystal Cove,
a senior living community in Florida. These management fees reflect a partial
recovery of $132,000 of management fees related to Crystal Cove which
Standish had written off in 1992. Standish resigned as manager of Crystal
Cove during the second quarter of 1995.
Development fees and other revenue for the three and six month periods
ended June 30, 1996 were $65,000 and $77,000, representing a decrease of
$55,000 or 46% and $81,000 or 51%, respectively, from development fees and
other revenue of $120,000 and $158,000 in the comparable periods in 1995.
Development fees and other revenue for the three and six month periods ended
June 30, 1996 were primarily comprised of fees associated with one assisted
living community being developed in Cambridge, Massachusetts while
development fees and other revenue in the comparable periods in 1995 were
primarily related to fees associated with assisted living communities being
developed in Pikesville, Maryland, Cambridge, Massachusetts and the
Laurelmead community which was co- developed by Standish and Cornish in
Providence, Rhode Island.
Community Operating Expense
Community operating expense for the three and six month periods ended June
30, 1996 were $1,626,000 and $3,208,000, representing increases of $178,000
or 13% and $458,000 or 17%, respectively, from community operating expense of
$1,448,000 and $2,750,000 in the comparable periods in 1995. As a percentage
of service revenue, community operating expense decreased to 74.1% and 73.2%
for the three and six month periods ended June 30, 1996, respectively, versus
77.2% and 78.2% in the comparable periods in 1995. Of the increases in the
amount of community operating expense, $82,000 and $255,000, respectively was
attributable to community operating expense for the Sunny Knoll community
acquired by Standish in May 1995 and thus not fully reflected in Standish's
results for the first two quarters of 1995. The $96,000 and $203,000
remaining increases in community operating expense was primarily attributable
to increased community operating expense at Standish's Piedmont and Bailey
communities. The increase in community operating expense at Piedmont was
primarily due to an increase in census while the increase at Bailey was
primarily due to increases in staffing.
Community Rent Expense
Community rent expense represents lease payments Standish is required to
make under operating leases at its Piedmont Villages and Bailey Suites
communities. Community rent expense for the three and six month periods ended
June 30, 1996 were $154,000 and $304,000, representing increases of $12,000
or 9% and $32,000 or 12%, respectively, from community rent expense of
$142,000 and $272,000 in the comparable periods in 1995. As a percentage of
service revenue, community rent expense decreased to 7.0% and 6.9% for the
three and six month periods ended June 30, 1996, respectively, versus 7.6%
and 7.7% in the comparable periods in 1995. The increase
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<PAGE>
in the amount of community rent expense is primarily due to increased lease
advances at Piedmont to fund the expansion at Standish's Statesville, North
Carolina community. The decrease in community rent expense as a percentage of
service revenue was primarily due to the allocation of these expenses over
increased levels of total revenues for the first two quarters of 1996.
Selling, General and Administrative Expense
Selling, general and administrative expense for the three and six month
periods ended June 30, 1996 were $463,000 and $931,000, representing
decreases of $160,000 or 26% and $225,000 or 19%, respectively, from selling,
general and administrative expense of $623,000 and $1,156,000 in the
comparable periods in 1995. As a percentage of total revenues, selling,
general and administrative expense decreased to 19.8% and 19.9% for the three
and six month periods ended June 30, 1996, respectively, versus 28.4% and
29.0% in the comparable periods in 1995. The decrease in the amount of
selling, general and administrative expense for the three and six month
periods ended June 30, 1996 versus the comparable periods in 1995 was due
primarily to decreases in salaries, recruitment costs, consulting costs,
marketing and public relations costs and travel and related costs. The
decrease in selling, general and administrative expense as a percentage of
total revenues was due to reduced spending and the allocation of these
expenses over increased levels of total revenues for the first two quarters
of 1996.
Transaction Termination Costs
Transaction termination costs were $27,000 and $186,000 for the three and
six month periods June 30, 1996, respectively. These costs represent legal,
accounting, travel and other related costs primarily associated with the
proposed merger between Integrated Health Services, Inc. ("IHS") and
Standish. In February 1996, IHS informed Standish that it was terminating
their business combination discussions. Transaction termination costs also
include legal, accounting, travel and other related costs associated with the
proposed merger between Emeritus Corporation ("Emeritus") and Standish. In
May 1996, Standish informed Emeritus that it was terminating those merger
discussions. Standish and Emeritus could not agree on an exchange ratio.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three and six month periods
ended June 30, 1996 was approximately $197,000 and $393,000, representing
increases of $28,000 or 17% and $72,000 or 22%, respectively, from
depreciation and amortization expense of $169,000 and $321,000 in the
comparable periods in 1995. As a percentage of total revenues, depreciation
and amortization expense increased to 8.3% and 8.4% for the three and six
month periods ended June 30, 1996, respectively, versus 7.7% and 8.1% in the
comparable periods in 1995. Of the increases in the amount of depreciation
and amortization expense, $9,000 and $34,000, respectively, was attributable
to depreciation and amortization expense for the Sunny Knoll community
acquired by Standish in May 1995 and thus not fully reflected in Standish's
results for the first two quarters of 1995. The increase in the amount of
depreciation and amortization expense was also attributable to higher
depreciation and amortization expense at Dominion due to certain additions at
that facility during the three and six month periods ended June 30, 1996
versus the comparable periods in 1995. The increase in depreciation and
amortization expense was also attributable to amortization of a non-compete
agreement with a former Director and officer of Standish.
Interest Expense
Interest expense for the three and six month periods ended June 30, 1996
was $406,000 and $824,000, representing increases of $36,000 or 10% and
$146,000 or 22%, respectively, from interest expense of $370,000 and $678,000
for the comparable periods in 1995. As a percentage of total revenues,
interest expense was 17.3% and 17.6% for the three and six month periods
ended June 30, 1996, respectively, versus 16.9% and 17.1% for the comparable
periods in 1995. The increases in the amount of interest expense is
attributable primarily to interest expense due to increased borrowings
associated with Dominion Village, and interest expense associated with the
acquisition of Sunny Knoll which was acquired on May 1, 1995.
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<PAGE>
Interest Income
Interest income for the three and six month periods ended June 30, 1996
was $18,000 and $29,000, representing decreases of $24,000 and $52,000
respectively, compared to interest income of $42,000 and $81,000 in the
comparable periods in 1995. As a percentage of total revenues, interest
income was 0.8% and 0.6% for the three and six month periods ended June 30,
1996, respectively, versus 1.9% and 2.0% in the comparable periods in 1995.
Interest income for the three and six month periods ended June 30, 1996
represents interest earned on cash and cash equivalents. Interest income for
the three and six month periods ended June 30, 1995 is primarily comprised of
the accrued preferred return at the rate of 15% per annum on Standish's
investment in Laurelmead.
Minority Interest
Minority interest for the three and six month periods ended June 30, 1996
was $29,000 and $48,000, representing an increase of $5,000 or 21% and a
decrease of $2,000 or 4% respectively, versus $24,000 and $50,000 in the
comparable periods in 1995. As a percentage of total revenues, minority
interest was 1.2% and 1.0% for the three and six month periods ended June 30,
1996, respectively, versus 1.1% and 1.3% in the comparable periods in 1995.
The increases in the amount of minority interest reflect the increased losses
associated with Lowry and the corresponding chargeback of 20% of these losses
to the minority partners. These increases were partially offset by the
allocation of 49% of the income of Sunny Knoll to the minority partner.
Other Income
Other income for the three and six month periods ended June 30, 1996 was
$100,000 and $696,000. Other income for the three months ended June 30, 1996
represents Standish's portion of the proceeds to which it is entitled in
connection with the sale of The Pines of Tewksbury community by Emeritus to a
third party. In addition to its development, management and marketing
contracts and its rights to 15% of excess cash flow, Standish owns a 15%
residual interest to share in the proceeds of a sale or refinancing of The
Pines of Tewksbury community. Other income for the six months ended June 30,
1996 is primarily composed of cash received for previously reserved
management fees and certain investments in SLI which Standish received in
connection with the sale and financing of Fox Ridge Manor to Northwood and
the refinancing of that community's related debt.
Liquidity and Capital Resources
Since its inception, Standish has experienced working capital and
liquidity deficiencies. Standish has provided for its working capital and
liquidity needs through sales of securities in the public markets, including
its initial public offering of Common Stock in February 1992 and its public
offering of Convertible Preferred Stock in September and October 1993,
through private placements of debt and equity securities and through the sale
of assets for cash, as well as through the deferral of certain payables and
preferred stock dividends. Some of these transactions were with affiliated
parties.
Cash and equivalents at June 30, 1996 were approximately $356,000 compared
to approximately $368,000 at December 31, 1995, a decrease of $12,000 or 3%.
At June 30, 1996, Standish had a working capital deficit of approximately
$3,474,000 compared to a working capital deficit of $1,584,000 at December
31, 1995.
During the six months ended June 30, 1996, Standish financed its working
capital and general corporate needs primarily through four sources: (i)
approximately $825,000 in back management fees and related investments from
the refinancing of Fox Ridge Manor; (ii) $500,000 in connection with a $1.0
million promissory note between Standish and a corporation controlled by
Abraham D. Gosman (the balance of $500,000 was received on July 10, 1996);
(iii) $300,000 in connection with its assignment of the Green Meadows
communities to Emeritus and (iv) $250,000 in connection with a promissory
note between Standish and IHS.
Standish used the proceeds from these sources (counting only the initial
$500,000 borrowed from a corporation controlled by Mr. Gosman on June 4,
1996) approximately as follows: (i) $626,000 to reduce accounts payable
including certain professional fee payments; (ii) $509,000 to fund the
working capital needs of Standish; (iii) $180,000 to pay down existing debt;
(iv) $171,000 to fund interest payments associated with Standish's
convertible debentures; (v) $200,000 to fund a line of credit to Northwood in
connection with Standish's management of Fox Ridge Manor and to fund other
costs associated with the Fox Ridge transaction; (vi) $104,000 to fund
additions to property, plant and equipment; and (vii) $97,000 for other
corporate and community matters.
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<PAGE>
On July 10, 1996, the corporation controlled by Mr. Gosman funded the
second installment of $500,000 in connection with its promissory note with
Standish. On July 30, 1996, through the issuance and sale to the principal
stockholder of CareMatrix (the "purchaser"), for $14,000 per share or $1.4
million in the aggregate, Standish issued 100 shares of its newly created
Series B Preferred Stock with a liquidation value of $14,000 per share.
Standish used a portion of the proceeds from the share issuance to repay the
promissory note of $1.0 million and obtained an additional $400,000 to be
used for working capital purposes. The Series B Preferred Stock is redeemable
by Standish at any time after December 1, 1996 at $14,000 per share plus
accrued dividends provided that the market price of the Standish Common Stock
exceeds 150% of the conversion price ($4.16) then in effect for twenty
consecutive trading days. The Series B Preferred Stock will be entitled to a
quarterly dividend of $350 per share with quarterly dividend payments on each
of December 31, March 31, June 30 and September 30. Concurrently with the
issuance of the Series B Preferred Stock, Standish issued five year warrants
to the purchaser to purchase 400,000 shares of Standish's Common Stock at an
exercise price of $4.16 per share.
At June 30, 1994, Standish had outstanding 782,350 shares of Series A
Preferred Stock. Effective July 1, 1994, Standish consummated an Exchange
Offer (the "Offer") pursuant to which it exchanged 2.6 shares of its Common
Stock for each share of Series A Preferred Stock tendered. Subsequent to the
Offer, there were 128,050 shares of Series A Preferred Stock outstanding. The
Offer had the effect of decreasing Standish's quarterly dividend requirement
on the Series A Preferred Stock from $195,588 to $32,013. Since issuing the
Series A Preferred Stock in September 1993, Standish has failed to make seven
quarterly dividend payments. Series A Preferred Stockholders who tendered
their shares in the Offer forfeited any right to a dividend for the quarter
ended June 30, 1994. At September 30, 1995, Standish was in arrears on four
quarterly dividends of approximately $32,013, or approximately $128,050 in
the aggregate. Under the terms of the Series A Preferred Stock, should
Standish fail to pay any portion of the quarterly dividend on its Series A
Preferred Stock on four separate payment dates, whether or not consecutively,
holders of the Series A Preferred Stock would be entitled to voting rights,
including the election of directors. These voting rights became effective on
September 30, 1995 when Standish's Board of Directors voted to omit the
dividend for the quarter ended September 30, 1995, the fourth such dividend
which had been omitted. In addition, each quarterly dividend not paid results
in a $0.25 reduction in the initial $5.00 per share conversion price. The
conversion price at June 30, 1996 was $3.25 per share (subject to
anti-dilution adjustments).
As of June 30, 1996, Standish had financed three acquisition transactions
involving seven communities with Health Care REIT in the aggregate amount of
$10.75 million. These transactions were structured so that the assets were
acquired by Health Care REIT and leased to Standish under either operating
lease or capital lease arrangements. Health Care REIT may have a right to
provide financing for future acquisitions completed by Standish up to an
aggregate additional amount of $19.250 million. Under the terms of the
agreement, Health Care REIT is entitled to receive a warrant to purchase one
share of Standish's Common Stock at an exercise price which is currently
$4.16 per share (subject to anti-dilution adjustments), for every $300
advanced. In March 1995, Standish agreed to re-price all warrants previously
granted to Health Care REIT from $7.09 to $4.16 per share. To date, Standish
has granted Health Care REIT, on account of such financing, warrants to
purchase approximately 35,833 shares of Standish Common Stock. The warrants
are exercisable for five years from the date of issuance, subject to
extension under certain circumstances.
During 1995, Standish did not comply with certain of its debt covenants
(primarily related to the debt coverage ratio requirements associated with
its Dominion, Lowry and Piedmont lease agreements). In addition, Standish did
not comply with its covenant of maintaining at least $500,000 of consolidated
net worth. In March 1996, Standish (a) obtained waivers for each of the
defaults which occurred in 1995 and (b) modified certain of its covenants for
1996. The modified covenants for 1996 require Dominion, Lowry and Piedmont to
maintain a combined quarterly weighted debt coverage ratio of at least 1.0 to
1.0 through December 31, 1996 and requires Standish to maintain a
consolidated negative net worth no greater than $110,000, $609,000, $1.0
million and $1.4 million for the quarters ended March 31, June 30, September
30 and December 31, 1996, respectively.
There can be no assurance that Standish will not be in violation of its
covenants in the future or that Standish will be able to obtain waivers of
such violations that may arise in the future. Any such violations, if not
waived, would give Health Care REIT certain rights and/or remedies under the
lease agreements pursuant to which Standish operates the affected
communities, including rights of acceleration of all lease payments, rights
of possession and rights to terminate the lease, which, if exercised, would
have a material adverse effect upon Standish.
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<PAGE>
The growth of Standish will be dependent primarily on its ability to: (i)
continue to expand and improve the results of its existing operations; (ii)
identify and make suitable acquisitions of assisted living communities or
companies which own, lease or manage such communities; and (iii) develop
communities for its own account. Standish has been and will continue to be
dependent upon third party financing for acquisitions and developments. There
can be no assurance that financing for acquisitions or developments will be
available to Standish on acceptable terms, if at all. Even if Standish is
able to obtain financing, the financing terms may impose burdens or
restrictions on Standish's future operations. Moreover, to the extent
Standish acquires or develops communities which do not generate operating
cash flow (after interest and/or community rent expense), Standish may be
required to seek additional financing for working capital and liquidity
purposes. Further, any additional financing obtained by Standish could have a
dilutive effect on then existing stockholders. In the event Standish is not
able to meet its working capital or liquidity needs with bank borrowings
(which to date have been unavailable to Standish) or other financing sources,
it would become necessary for Standish to implement a cost reduction plan for
its then existing operations and consider the sale of certain assets to raise
working capital and potentially defer any planned capital expenditures and to
reassess the timing and extent of its acquisition and development program.
Based upon management's ability to implement these plans, Standish believes
it has sufficient resources to meet its cash flow needs through December 31,
1996.
Although Standish anticipates an improvement in operating cash flow during
1996 as a result primarily of Standish's continuing efforts to improve the
operating performance of certain of its owned communities, Standish expects
to continue to incur losses from operations through at least the end of 1996,
whether or not the Merger is consummated.. The magnitude of Standish's
potential cash flow deficit makes it likely that it will for some time remain
dependent on external sources of cash to finance both its operations and its
community acquisition and development activities, which are key to its
continued growth and eventual profitability. There can be no assurance,
however, that Standish will be able to obtain additional financing for its
operations and its community acquisition and development activities.
Forward-Looking Information is Subject to Risk and Uncertainty
Certain statements in the foregoing management's discussion and analysis
of financial condition and results of operations contain "forward-looking"
information (as defined in the Private Securities Litigation Reform Act of
1995) that involves risk and uncertainty, including Standish's expectations
as to the success of its efforts to improve operations of its owned
communities, the success of fill-up of expanded communities and access to
additional financing. Actual future results and trends may differ materially
depending on a variety of factors including successful implementation of
Standish's operating plans, certain regulatory uncertainties as more states
implement regulations relating to assisted living communities, possible
contractual disputes and/or termination of agreements and dealing with
alleged failures to perform in connection with third party owners and
operators of communities for which Standish provides services.
50
<PAGE>
BUSINESS OF STANDISH
Standish. Standish is a long term care services company which operates
assisted living communities throughout the eastern United States, primarily
in suburban and small town locations. In addition to operating for its own
account the communities which it owns or leases, Standish also provides
management, marketing, development and other services to third party owners
of assisted living communities. Residents of Standish's communities are
primarily frail elderly individuals, or seniors, who pay for Standish's
services from their own financial resources. Standish believes that its
communities are attractive to those seniors who do not require 24-hour
skilled nursing care but do require supervision and assistance with
activities of daily living ("ADL's"), such as bathing, dressing, grooming,
toileting, ambulating and eating. Certain health care services are also
provided at Standish's communities, including medication supervision and
health monitoring. Other support services at Standish's communities include
24-hour staffing, emergency call systems, restaurant-style dining,
housekeeping and laundry service, maintenance and social and recreational
activities. Standish's operating approach allows seniors to reside in a
private or semi-private residential unit for a monthly fee which is based on
the overall care needs of each resident.
Since its inception in 1989, Standish has grown primarily through
acquisitions. Standish currently operates or manages fourteen assisted living
communities with a resident capacity of 901 located in Massachusetts,
Virginia, North Carolina, Florida, Pennsylvania and New Hampshire. Of these,
ten communities are operated by Standish for its own account and four
communities are managed by Standish for third parties under management
agreements. Standish has selected the communities which it operates for its
own account and which it manages for third parties on the basis of its belief
that small- to medium-sized assisted living communities have a higher
likelihood of achieving operating success, particularly during initial
occupancy periods and in cases where the community's operations are being
repositioned. Moreover, Standish believes that these small- to medium-sized
communities are better suited to develop a long term care setting which
emphasizes personalized care and continuity of residence. Standish believes
that the physical layouts, combined with the operating philosophy of its
assisted living communities, also contribute to resident satisfaction and
allow seniors residing at Standish's communities to maintain a greater degree
of autonomy.
Standish's target market consists of seniors age 75 and older. This age
group is one of the fastest growing segments of the United States population
and is expected to grow by 26% between 1990 and 2000. The growth of this
segment is increasing the demand for all types of long term care. Standish
believes that assisted living is becoming a more common approach to providing
long term care for seniors, particularly in light of the increasing emphasis
at federal and state government levels on cost containment for long term
care, nursing home operators' focus on patients whose care needs are more
acute, the relative affluence of the most elderly segment of the population,
and the decreasing availability of family care. The services provided in an
assisted living facility traditionally have been paid for by non-governmental
sources, and Standish believes that this will continue to be the case at
least for the foreseeable future. Standish believes that the cost to the
resident for assisted living services is approximately 60% to 65% of the cost
to the resident for skilled nursing care in private rooms at nursing
facilities. Standish's growth strategy relies primarily on acquiring assisted
living communities with potential for operating improvement and, to a lesser
extent, on providing management, marketing, development and other services to
assisted living communities owned by third parties. Standish believes that
its management activities, which contributed approximately 6% of its revenues
for the year ended December 31, 1995, enable it to use the experience which
it has gained over the last six years of operating assisted living
communities to enhance its revenues while, at the same time, diversifying
geographically its base of operations.
Standish's acquisition strategy focuses primarily on groupings of two or
more communities in its existing or new markets. Using its expertise in
operating assisted living communities, Standish seeks to improve both the
quality of care provided by its communities and the operating margins at
these communities. Standish seeks to achieve these operating margin
improvements primarily by: (i) increasing occupancy levels through extensive
marketing efforts to area hospitals and other referral sources and through
programs designed to offer residents a range of care and service options to
allow them to remain in Standish's communities as they age; (ii) increasing
revenues through modifications in rate structures, where appropriate; and
(iii) identifying opportunities to create operating efficiencies and to
reduce costs. As part of this strategy, Standish seeks to enhance operating
results through the provision of extended care services at an additional fee
to residents who require greater assistance with ADL's and through the
introduction of specialty health care services, such as early and mid-stage
Alzheimer's care and short-term respite care.
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The Assisted Living Market. The long term care industry encompasses a broad
range of accommodations and health care services that are provided primarily to
seniors. For seniors who require limited services, home-based care in their own
or family members' homes or in congregate living or retirement centers offers a
viable option for assistance on an "as required" basis. For seniors who are
interested in a community housing option, congregate and retirement centers
offer services which are often limited to meals, housekeeping and laundry. As a
senior's needs for assistance increase, care in an assisted living community is
often preferable and more cost-effective than home-based care. Assisted living
residents usually enter a community when other living accommodations no longer
provide the level of care required by the individual. An assisted living
community can provide assistance with various activities of daily living (such
as bathing, dressing, grooming, toileting, ambulating and eating), support
services (such as housekeeping and laundry service), and routine health care
services (such as medication supervision and health monitoring), while allowing
seniors to preserve a high degree of autonomy. For seniors who need more
intensive or continuous 24-hour care, a skilled nursing facility may be
required. Generally, residents of assisted living communities require higher
levels of care than residents of congregate and retirement living centers, but
require lower levels of care than patients in skilled nursing facilities.
Because seniors in assisted living communities require less labor-intensive
services, Standish believes that the cost of providing assisted living services
is typically 60% to 65% of the cost of providing skilled nursing care in private
rooms at nursing facilities. Standish believes that a number of demographic,
regulatory and other trends which are described below are contributing to the
rapid growth in the assisted living market.
Aging Population. The primary market for assisted living services is
comprised of seniors aged 75 and older. This age group is one of the fastest
growing segments of the U.S. population. According to the U.S. Census Bureau,
this population will increase from approximately 13.2 million in 1990 to over
16.6 million, or 26%, by the year 2000. The population of seniors aged 85 and
over is expected to increase from approximately 3.1 million in 1990 to over
4.3 million, or 39%, by the year 2000. As the number of seniors aged 75 and
over continues to grow, Standish believes that there will be corresponding
increases in the number of those seniors who need assistance with activities
of daily living. According to the U.S. General Accounting Office, in 1991
there were over 7.0 million people in the U.S. who needed assistance with
activities of daily living, and the number of people who need such assistance
was expected to double by the year 2020.
Restricted Supply of Nursing Homes Beds. The majority of the states in the
U.S. have adopted certificate of need ("CON") or similar statutes which
generally require that, prior to the construction of new nursing facility
beds, the provision of new services or the making of certain capital
expenditures the cost of which would be reimbursable either in whole or in
part by one or more state funded programs, a state agency must determine that
a need exists for the new beds or other proposed activities. Standish
believes that this CON process tends to restrict the supply of licensed
nursing facility beds. Standish also believes that high construction costs,
limitations on government reimbursement for the full costs of construction,
and start-up expenses also act to constrain growth in the supply of such
facilities and beds.
Cost Containment Pressures. In response to rapidly rising health care
costs, governmental and private pay sources have adopted cost containment
measures that have encouraged reduced lengths of stay in hospitals. The
Federal government has acted to curtail increases in health care costs under
Medicare by limiting acute care hospital reimbursement for specific services
to pre-established fixed amounts. Private insurers have begun to limit
reimbursement for medical services in general to predetermined "reasonable
charges", while managed care organizations, such as health maintenance
organizations, are attempting to limit the hospitalization costs by
negotiating for discounted rates for hospital services and by monitoring and
reducing hospital use. In response, hospitals are discharging patients
earlier and referring seniors, who may be too sick or frail to manage their
lives without assistance, to nursing homes where the cost of providing care
is lower than in a hospital.
As a result of these factors, there has been an increase in the number of
discharged hospital patients seeking nursing facility care. At the same time,
nursing facility operators are continuing to focus on improving occupancy and
expanding service to sub-acute patients requiring significantly higher levels
of nursing care. As a result, Standish believes that there has been a
decrease in the number of skilled nursing beds available to patients with
lower acuity levels and that this trend should increase the demand for
assisted living communities. Moreover, third party payors are increasingly
becoming involved in determining the appropriate health care setting for
their insured or clients based primarily on cost and quality of care.
Standish believes that cost containment pressures should encourage health
care delivery networks to align themselves with assisted living providers in
order to utilize these lower-priced
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alternatives to acute and nursing care. Studies indicate that between 25% and
40% of nursing home patients could be more appropriately cared for in a less
institutional, less costly environment such as an assisted living community.
Senior Affluence. According to the U.S. Census Bureau, the average net
income per senior citizen household member is nine percent higher than in
non-senior citizen households. In addition, seniors frequently have
accumulated equity, primarily through home ownership. As a consequence,
Standish's target population is comprised of middle to upper middle income
seniors who have accumulated some assets and receive income from sources such
as investments and pensions, as well as from Social Security. Standish
believes that many of these seniors have the economic resources to pay for an
assisted living alternative to traditional long-term care.
Reduced Reliance on Family Care. Historically, the family has been the
primary provider of care for seniors. However, Standish believes that the
increase in the percentage of women in the work force and the increased
mobility in society are reducing the role of the family as the traditional
care giver for aging seniors. Standish believes that this trend will make it
necessary for many seniors to look outside the family for assistance as they
age.
Operating and Growth Strategy. Since its inception Standish has grown
primarily through acquisitions. In 1992, Standish operated two communities
with a resident capacity of 206 for its own account and currently operates
ten communities with a resident capacity of 516 for its own account. In
addition, Standish currently is managing four communities with a resident
capacity of 385 for third parties under management agreements.
Standish plans to continue to grow, primarily by acquiring assisted living
communities with the potential for operating improvement and, to a lesser
extent, by providing management, marketing, development and other services to
assisted living communities owned by third parties. Standish intends to focus
its acquisition program primarily on groups of two or more communities in its
existing or new markets. Using its expertise in operating assisted living
communities, Standish seeks to improve both the quality of care provided by
its communities and the operating margins at these communities. Standish
seeks to achieve these operating margin improvements primarily by: (i)
increasing occupancy levels through extensive marketing efforts to area
hospitals and other referral sources and through programs designed to offer
residents a range of care and service options to allow them to remain in
Standish's communities as they age; (ii) increasing revenues through
modifications in rate structures, where appropriate; and (iii) identifying
opportunities to create operating efficiencies and to reduce costs. Standish
believes that the physical layouts, combined with the operating philosophy of
its assisted living communities, also contribute to resident satisfaction and
allow seniors residing at Standish's communities to maintain a greater degree
of autonomy.
Standish utilizes specially designed and individualized care programs,
which Standish centrally manages, to maximize the quality and continium of
care provided to the residents of its communities. Standish regularly
monitors and modifies these programs as needed. Standish has found that
quality of care and operating efficiency are enhanced not only by customizing
care plans, but also by designing or modifying the configuration of its
communities so as to create a "care village" with "neighborhoods" or
residents having similar care needs residing in close proximity. These small,
twelve to fifteen unit neighborhood groupings allow Standish's staff to be
better acquainted with and to tailor and monitor the provision of services to
each resident. In addition to enhancing the quality of care, these
neighborhood groupings allow staffing hours to be adjusted as the acuity
levels of residents change. The neighborhood groups also allow Standish to
train its staff to perform a variety of functions (i.e. to be
"cross-trained"). Accordingly, Standish believes that these neighborhood
groupings lead to higher job satisfaction and lower staff turnover and,
ultimately, higher resident satisfaction. Finally, because there are often
several care villages in a single community, Standish is able to offer
residents a range of care and service options. These care and service options
in turn, allow residents to remain in Standish's community as they age,
thereby minimizing the personal disruption associated with relocation and the
cost to Standish associated with attracting additional residents.
Standish believes that its emphasis on quality and continium of care will
enable it to increase occupancy and enhance revenue. By creating a long term
care setting which maximizes resident autonomy and provides customized care
programs, Standish seeks to attract seniors at an earlier stage of their
search for long term care, before they have the need for the higher level of
care provided in a skilled nursing environment. By providing programs
designed to offer residents a range of care and service options as their
needs change, Standish seeks to achieve greater continuity of care, enabling
seniors to "age in place" and thus maintain their residency for longer
periods of time. These programs include the provision of extended care
services at an additional fee to residents who require greater assistance
with ADL's and specialty health care services, such as early and mid-stage
Alzheimer's care and short-term respite care.
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The average resident capacity of the assisted living communities which
Standish operates for its own account is currently 52. Standish intends to focus
on facilities in the 60- to 100-resident size range as it pursues its
acquisition strategy. Standish has selected the communities which it operates
for its own account on the basis of its belief that small- to medium-sized
assisted living communities have a higher likelihood of achieving operating
success, particularly during initial occupancy periods and in cases where the
community's operations are better suited to develop a long term care setting
which emphasizes personalized care and continuity of residence. It is Standish's
experience that communities comprising 60 to 100 residents are small enough to
offer marketing and operating advantages but large enough to foster economies of
scale. Standish believes that this feature positions its assisted living
communities to achieve and maintain higher, more stable rates of occupancy.
Another major component of Standish's operating strategy is to continue to
integrate its assisted living communities into the health care continuum of
providers in the markets in which it operates. One objective of this strategy
is to assure residents and their families that, should the need arise for
additional health care services, Standish has relationships with local
hospitals, home health care agencies and skilled nursing facilities which
should allow for the provision of the most appropriate level of care. Thus,
Standish seeks to establish relationships with local hospitals (including
joint marketing efforts when appropriate), home health care agencies,
alliances with visiting nurse associations and, on a more limited basis,
priority transfer agreements with local, high quality nursing homes. In
addition to the benefits that can be made available to residents, the
implementation of this operating strategy has strengthened and expanded
Standish's network of referral services. Standish believes that approximately
equal proportions of its current resident base has resulted from referrals
from local hospitals, nursing homes and adult children and other
decision-makers. Standish also will continue to seek contracts to provide
third parties with management and marketing services. The average resident
capacity of the communities which Standish currently manages for third
parties is 96. Since management fees are based on percentages of community
gross revenues, Standish believes that its management of these communities
enables Standish to realize higher management fees than would be realized
from managing smaller resident capacity communities. Standish believes that
its management activities, which contributed approximately 6% of its revenues
for the year ended December 31, 1995, enable it to use the experience which
it has gained over the last six years of operating assisted living
communities to enhance its revenues while, at the same time, diversifying
geographically its base of operations. Standish's strategy for obtaining
these contracts focuses on the following sources: (i) hospitals and other
health care providers who own senior living communities or projects; (ii)
real estate developers and other non-health care professionals who have built
or purchased senior living communities or projects; (iii) non-profit, church
or other religiously-affiliated groups who own senior living communities; and
(iv) lenders who are managing senior living communities after defaults by
borrowers.
Standish's development strategy focuses on third party alliances and joint
development services, which enable Standish to define and limit its
development efforts and to leverage the time and skills of its management and
that of its development partners. In addition, in Standish's experience,
joint development alliances typically lead to opportunities for additional
marketing and management contracts. Moreover, joint development alliances
often afford access to development financing and in some cases, this
financing may be available on terms more favorable than those Standish would
enjoy access to independent of the alliance.
Assisted Living and Specialized Services Provided by Standish. Standish
provides its residents with personal assistance with ADL's, such as bathing,
dressing, grooming, toileting, ambulating and eating. In addition to
assistance with ADL's, Standish's support services for its residents include
24-hour staffing, emergency call systems, restaurant-style dining,
housekeeping and laundry services, maintenance and social and recreational
activities. Standish charges its residents an all-inclusive standard fee for
their ADL's and support services.
For those seniors whose care needs warrant more extensive assistance with
ADL's than offered on a standard basis, Standish provides extended care
services for an additional charge. This more intensive level of service,
which is offered on a 24-hour basis, is designed to address the particular
needs of each resident. In certain of its communities, Standish also offers
specialized care utilizing specially-trained personnel who care for residents
suffering from the early and mid-stages of Alzheimer's disease. As these
residents reach more advanced stages of Alzheimer's disease or have other
impairments which require a level of care not provided by Standish, those
residents are referred to other health care providers.
Management, Marketing and Development Services to Third Parties. Standish's
management agreements typically provide for a fixed term of up to three years,
subject to earlier termination by the owner of the facility
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in the case of a breach of the agreement by Standish. Nearly all of
Standish's management agreements permit automatic extensions from year to
year unless either party elects to allow the agreement to expire as
scheduled. However, there can be no assurance that any of the management
agreements to which Standish is a party will continue to be renewed or
otherwise remain in effect or will not be terminated in the event of a breach
by Standish. Standish's management fees are typically based on percentages,
ranging from 4.5% to 5.5% of community monthly gross revenues. In some cases,
Standish is also entitled to certain incentive fees and/or residual sharing
arrangements.
In addition to a base management fee of 4.5% of monthly revenues of
Standish Village at Lower Mills, Standish is entitled to a base marketing fee
of $1,400 per move-in. As holder of a 30% interest in the corporate general
partner of Adams Square, Standish is entitled to share in certain cash flow
and capital distributions to the corporate general partner when certain
milestones are achieved. Since Standish held a limited partnership interest
in the predecessor of Adams Square, it is also entitled to reimbursement of
certain out-of-pocket expenses and deferred development fees as priority
payments from the cash flow, if any, of Adams Square.
Under its three year management agreement (with two one-year renewable
options) with Northwood Retirement Community, Inc., dated March 21, 1996 to
manage the Fox Ridge community in Dover, Pennsylvania (which Standish had
managed for the previous owner), Standish is entitled to a monthly base
management fee of approximately $5,200 per month and an incentive management
fee of 2% of monthly gross operating revenues. These management fees are
subject to subordination under certain circumstances pursuant to the
provisions of the new owner's financing arrangements.
In addition to a base management fee of $7,500 or 5.5% of monthly gross
revenues of Cadbury Commons, whichever is higher, Standish is entitled to a
marketing fee of $1,200 per move-in.
In addition to a base management fee of $4,000 with respect to Cortland
House, Standish is entitled to an incentive management fee of 10% of net
operating income. Standish is also entitled to a base marketing fee of $2,500
per month for twenty-four months up to $60,000. Standish is also entitled to
an incentive monthly fee of $500 per move-in for a maximum of eighty
move-ins.
Standish provides development services for senior living communities owned
by third parties. In some cases, Standish acquires a minor equity position to
obtain these engagements. Standish also pursues development opportunities
through joint development alliances in which Standish holds or expects to
hold more substantial equity positions, although less than a majority. In
most cases, Standish charges a fixed fee in connection with its provision of
development services to third parties. Standish charges separate fees for
marketing services, which fees are usually based on a fixed dollar amount if
specified milestones are achieved or on a fixed dollar amount per available
bed payable upon occupancy by a resident. Standish recognizes revenue from
its development engagements as services are performed and all contingencies
for payment are met. Typically, these engagements provide for progress
payments to Standish as certain milestones are reached. For example, these
milestones may include the passage of time (e.g., 30, 60, 90 and/or 120
days), the receipt of zoning and other permit approvals, the closing of
construction financing, the commencement of construction and the issuance of
a certificate of occupancy for all or a specified portion of a project.
Service Revenue Sources. Standish currently and for the foreseeable future
expects to rely primarily on the ability of its residents to pay Standish's
charges from their own resources and/or the resources of their families.
Although care in an assisted living environment tends to be less expensive
than nursing care in most markets, typically only seniors with income or
assets exceeding the regional median will be able to afford Standish's fees.
Inflation or other circumstances which adversely affect the ability of
seniors to pay for services such as assisted living could have an adverse
effect on Standish. In the event Standish encounters difficulty in attracting
seniors with adequate resources to pay for Standish's services, Standish
would be adversely affected. For example, it could become necessary for
Standish to modify its business strategy of relying primarily on the private
pay market for its residents. These modifications might include increased
reliance on the limited number of government reimbursement programs.
Currently, the Federal government provides no reimbursement for the type
of assisted living services which Standish provides. Although some states,
including Florida, Massachusetts, Virginia and North Carolina, do have
reimbursement programs in place, in many cases the level of reimbursement is
insufficient to cover the costs of delivering the level of care which
Standish currently provides. Approximately 80% of the residents of Standish's
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three Piedmont Village communities receive benefits under North Carolina's
special assistance program, eligibility for which is determined using
Medicaid-like criteria focusing on matters such as a resident's income level
and assets. Standish is eligible to collect special assistance money from
residents for room and board, food service and personal care services
provided to them in accordance with state regulations. These payments range
from $975 to $1,089 per month, which benefit amounts Standish accepts as full
payment for its standard assisted living services. Under state regulations
currently in effect, special assistance benefits are paid by the state
directly to residents, and are paid by them, in turn, to the communities
where they live. Under regulations which went into effect in late October
1995, Standish collects from special-assistance subsidized residents only for
room and board and is reimbursed by the state at prescribed rates for
personal care services provided over and above room and board.
Standish currently relies upon government reimbursement programs at its
communities in Florida and Virginia to a substantially lesser extent than in
North Carolina. Standish currently serves approximately 12 residents in
Florida and Virginia who are eligible for subsidies in the form of additional
payments for those who receive Supplemental Security Insurance ("SSI"). SSI
is a Federal recipient assistance program administered primarily at the state
level, which among other things, provides financial assistance to indigent
persons requiring placement in a residential care facility (which are similar
to Standish's assisted living communities in Florida and Virginia).
Qualifications are generally similar to those of Medicaid. As a result of the
reliance on these government reimbursement programs, Standish is subject to
various regulatory and government reimbursement policies. Although Standish
believes that it is in substantial compliance with these governmental
policies and regulations, there can be no assurance that Standish will
continue to meet the requirements for participation in these programs.
Payments to Standish under the North Carolina and the other government
reimbursement programs in which Standish participates are currently
sufficient to cover virtually all the operating (but not financing) costs
allocable to Standish's participating residents. Payments to Standish under
the SSI program are currently sufficient to cover a substantial portion, but
not all, of the operating costs of furnishing services to Standish's limited
number of SSI residents. Payments under SSI do not cover Standish's financing
costs.
As residents participating in state or SSI programs depart Standish's
communities, Standish seeks to replace them with private pay residents. These
efforts have been successful, particularly at Bailey Village in Florida and
at the Dominion Village communities in Virginia. There can be no assurance,
however, that Standish can continue to improve its private pay mix at its
communities or that Standish will not in the future become more dependent on
government reimbursement programs.
Administration. Standish provides management support services to each of
its operated and managed communities, including the development of operating
standards, recruiting and training, and financial and accounting services. As
Standish acquires or develops additional communities, it expects to realize
savings through regionally combined purchasing of supplies and equipment.
Through these programs, Standish strives to provide efficient and quality
services in the operation of its communities. Each community is operated
under the direction of an administrator ( who must be licensed in those
jurisdictions where such licensing is required) who is responsible for
supervising the day-to-day operation of the community.
Competition. The number of assisted living communities in the U.S. is
increasing rapidly and the ownership of these communities is highly
fragmented. The industry has been subject to pressures which have resulted in
consolidation of small local operations into larger, multi-facility
operations. Standish believes that factors such as increasing care
requirements and a changing regulatory environment have limited the
effectiveness of operators who lack the expertise and financial resources to
compete effectively. While there are several national and regional companies
that provide senior living alternatives, Standish anticipates that its
primary source of competition will come from the smaller local and regional
assisted living operating, management and development companies. Standish's
competitors include other assisted living communities as well as retirement
facilities and communities, home health care agencies and to a lesser extent
nursing homes and convalescent centers. Standish's competitors include
not-for-profit or charitable operators. In addition, some of Standish's
competitors have significantly greater resources, experience and recognition
within the health care community than does Standish.
Standish believes that nursing homes and independent living retirement
communities, although ostensibly competitors, offer a level of service which
is less appropriate for Standish's target population. As a consequence,
Standish expects that its major competition will come from other assisted
living communities, especially those communities located within the same
geographic area as Standish's. Currently, there are relatively few assisted
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living communities in the primary markets served by Standish. Where Standish
faces direct local competition from other assisted living communities,
Standish believes that quality of service, reputation, location, physical
appearance of the living environment and price will all be significant
competitive factors.
Government Regulation. Standish is subject to varying degrees of
regulation and licensing by health care agencies and other regulatory
authorities in the various states and localities in which it operates or may
operate. While regulations and licensing requirements vary significantly from
state to state, they generally include requirements relating to such matters
as licensure, fire safety, sanitation, staff training, staffing levels, and
living accommodations such as size of rooms, number of bathrooms and
ventilation, as well as regulatory requirements related more specifically to
certain of the health care services provided by Standish. The success of
Standish will be dependent in part upon its ability to satisfy those
regulations and requirements and to maintain any required licenses.
Standish's operations could also be adversely affected by, among other
things, regulatory developments such as mandatory increases in the scope and
quality of care to be afforded residents and revisions in licensing and
certification standards. In Massachusetts, new legislation governing assisted
living became effective in June 1995. This legislature requires that every
assisted living residence in Massachusetts obtain and maintain certification,
and imposes certain financial reporting and operational requirements on their
sponsors. In addition, Massachusetts, like other states where Standish
operates, has adopted a "Patient's Bill of Rights" for residents which sets
forth, among other things, standards dealing with such issues as prescribed
treatment and the maintenance of residents' confidentiality, allowing
residents access to telephones and mail, allowing residents to see their
lawyers and requiring residents to be treated with dignity. Standish does not
anticipate that compliance with these provisions will have an adverse effect
on its operations. In the ordinary course of its business, Standish receives
notices of deficiencies for failure to comply with various regulatory
requirements. In nearly all cases, Standish and the agencies have agreed upon
the measures to be taken to correct the noted deficiencies and the
communities have been brought into compliance usually within 30 days.
However, in the case of Standish's Lowry community located in Tampa, Florida,
Standish's deficiency correction program extended over approximately a three
month period, during which Standish was subject to a moratorium against
admitting new residents. By approximately March 6, 1995, the deficiencies at
Lowry had been corrected, and new residents were admitted commencing April 6,
1995.
Failure of Standish to satisfy the regulations and requirements applicable
to a community could result in the imposition of significant fines and
increased costs, a revocation of Standish's license to operate that
community, and, where sufficiently serious in nature, the inability of
Standish to maintain or obtain licenses to operate other communities. These
actions could have a material adverse effect on Standish's current operations
and on its ability to make new acquisitions in the future.
As a provider of services under Medicaid and related state requirement
reimbursement programs, Standish is subject to the Fraud and Abuse
Provisions. The Fraud and Abuse Provisions prohibit any bribe, kickback,
rebate or remuneration of any kind in return for the referral of Medicaid
patients, or to induce the purchasing, leasing, ordering or arranging of any
goods or services to be paid for by Medicaid. Violations of these Provisions
may result in civil and criminal penalties and exclusions from participation
in the Medicaid program. The Inspector General of the U.S. Department of
Health and Human Services issued "safe harbor" regulations specifying certain
business practices which are exempt from sanctions under the Fraud and Abuse
Provisions. Several states in which Standish operates or expects to operate
have laws that prohibit certain direct or indirect payments or fee-splitting
arrangements between health care providers if such arrangements are designed
to induce or encourage the referral of patients to a particular provider.
Standish at all times seeks to comply with all applicable fraud and abuse
laws. There can be no assurance that administrative or judicial
interpretation of existing laws or regulations or enactments of laws or
regulations will not have a material adverse effect on Standish's results of
operations or financial condition.
Liability and Insurance. In recent years, participants in the long term
care industry have been subject to an increasing number of lawsuits alleging
malpractice or related legal theories, many of which involve large claims and
significant legal costs. It is expected that Standish from time to time will
be subject to such suits as a result of the nature of its business. Standish
currently maintains insurance policies in amounts and with such coverages and
deductibles which are deemed appropriate by Standish, based upon the nature
and risks of its business, historical experience and industry standards.
There can be no assurance, however, that claims in excess of Standish's
insurance coverage or claims not covered by such insurance will not arise. A
successful claim against Standish not covered by, or in excess of, Standish's
insurance coverage could have a material adverse effect upon Standish's
financial condition and results of operations. In addition, Standish's
insurance policies must be renewed annually. There can
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be no assurance that Standish will be able to obtain liability insurance
coverage in the future or that, if such coverage is available, the terms of
such coverage will be acceptable to Standish.
Employees. As of June 30, 1996, Standish had 10 full-time corporate
employees and employed 302 persons full or part-time at Standish's Bailey,
Bailey Suites, Dominion Village, Lowry, Piedmont Village and Sunny Knoll
communities. In addition, administrators of certain managed communities,
while not employees of Standish, are under supervision of Standish. None of
the corporate or community employees is represented by a union. Standish
considers its employee relations to be good. Although Standish believes it is
able to employ sufficient skilled personnel to staff the communities it
operates or manages, a shortage of skilled personnel in any of the geographic
areas in which it operates could adversely affect Standish's ability to
recruit and retain qualified employees and its operating expenses.
Properties. Standish's executive office is located in Needham,
Massachusetts. Standish sub-leases this space from CareMatrix and pays $5,000
per month for such space and certain support services. This arrangement
commenced August 15, 1996 and expires on the earlier of consummation of the
Merger or December 31, 1996.
Standish owns or leases for its own account ten assisted living
communities with a resident capacity of 516. The Bailey community is owned by
Standish, subject to a bank mortgage securing debt of approximately $1.0
million. Standish owns a 51% interest in the New Hampshire limited liability
company through which Sunny Knoll was acquired. With the exception of the
Bailey, Bailey Suites, and the Sunny Knoll communities, all other communities
currently operated by Standish for its own account are leased under operating
or capital leases from Health Care REIT expiring from November 2003 to March
2004 (subject to renewal and purchase options). Subject to periodic
renovation and routine maintenance Standish considers all of these properties
to be suitable for their intended use. Standish anticipates making capital
improvements to its communities totaling approximately $265,000 during the
twelve month period ending December 31, 1996. In addition to operating for
its own account the communities which it owns or leases, Standish also
provides management, marketing, development and other services to third party
owners of assisted living communities.
Set forth below is a summary of certain information regarding the
communities owned and leased by Standish for its own account.
58
<PAGE>
The Standish Care Company
<TABLE>
<CAPTION>
As of June 30, 1996
---------------------
Date Resident Avg. Rate/1) Occupancy
Community Location Care Level Ownership Acquired Capacity Resident (1) Rate (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Owned/Leased
- ------------
Florida
Bailey Suites (6) Gainesville Assisted Living Leased Nov-94 14 $1,563 84.79%
Bailey Village Gainesville Assisted Living Owned Jul-92 72 $1,482 87.82%
Courtyard at Lowry Place (7) (8) Tampa Dementia Care Leased Jan-94 74 $1,638 49.96%
New Hampshire
Sunny Knoll (9) Franklin Dementia Care Owned May-95 32 $3,573 83.75%
North Carolina
Piedmont Village at Newton (6) Newton Assisted Living Leased Mar-94 39 $1,121 99.82%
Piedmont Village at Statesville (6) Statesville Assisted Living Leased Mar-94 75 $1,158 99.91%
Piedmont Village at Yadkinville (6) Yadkinville Assisted Living Leased Mar-94 50 $1,098 97.46%
Virginia
Dominion Village at Chesapeake (7) Chesapeake Assisted Living Leased Nov-93 55 $1,469 81.95%
Dominion Village at Poquoson (7) Poquoson Assisted Living Leased Nov-93 45 $1,956 92.00%
Dominion Village at Williamsburg (7) Williamsburg Assisted Living Leased Nov-93 60 $1,927 88.55%
- --------------------------------------------------------------------------------------------------------------------------------
Total, Owned/Leased 516 $1,616 85.48%
- --------------------------------------------------------------------------------------------------------------------------------
Managed
- -------
Massachusetts Contract Term
--------------
Cadbury Commons (3) Cambridge Assisted Living -- Sept-96-Sept-01 82 $ 0 0.00%
Cortland House of Leominster (4) Leominster Assisted Living -- Sept-95-Sept-00 74 $2,461 24.91%
Standish Village at Lower Mills (10) Boston Assisted Living -- Apr-94-Apr-04 93 $2,674 82.76%
Pennsylvania
Fox Ridge Manor Dover Assisted Living -- Mar-96-Mar-99 136 $1,313 85.54%
- --------------------------------------------------------------------------------------------------------------------------------
Total, Managed (5) 385 $2,011 69.88%
- --------------------------------------------------------------------------------------------------------------------------------
Total, Owned/Leased, and Managed 901 $1,762 79.71%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Footnotes
1 Average rate per resident is determined by dividing the residence's total
monthly service revenues for the period by full month equivalency FME
census for the period.
2 Occupancy is determined by dividing FME census for the period by resident
capacity.
3 Cadbury Commons opened on July 8, 1996 and therefore had no occupants as
of June 30, 1996. As of that date, 44 residences had been pre-leased.
4 Courtland House of Leominster opened on May 7, 1996. As manager, Standish
is entitled to 10% of excess cash flow under certain circumstances.
5 Cadbury Commons has been included in the resident capacity total but not
in the weighted average calculations for average rate per resident or
occupancy rate.
6 Denotes operating lease.
7 Denotes capital lease.
8 A 20% minority interest is owned by a third party.
9 A 49% minority interest is owned by Emeritus, a principal stockholder of
Standish.
10 Standish holds a 30% interest in the corporate general partner which owns
a 1% interest in the owner partnership.
59
<PAGE>
Environmental
The management of Standish believes that Standish and its operating
subsidiaries are in material compliance with applicable Federal, state and
local environmental regulations. Compliance with these regulations has not in
the past had any material effect on Standish's consolidated earnings nor does
Standish anticipate that compliance with existing regulations will have any
such effect in the future.
Legal Proceedings
Standish from time to time is named as a defendant in lawsuits which arise
in the normal course of its business. As of August 1, 1996, Standish was
involved in six such lawsuits. Standish believes it has meritorious defenses
to each of the complaints and is vigorously defending its position in each
claim. Should Standish be found to be liable in any instance, management
believes that resulting claim against Standish, if any, would not be
material.
MANAGEMENT OF STANDISH
Directors and Officers
The directors and executive officers of Standish are as follows:
Name Age Position
- ---------------------- ------ ------------------------------------
Michael J. Doyle 38 Chairman of the Board and Chief
Executive Officer
Kenneth M. Miles 36 Chief Financial Officer, Treasurer,
Assistant Secretary and Director
Marshall S. Sterman* 64 Director
Robert W. DeVore*/** 55 Director
John A. Carucci*** 37 Director
- -------------
*Member of the Compensation Committee
**Member of the Audit Committee
***Mr. Carucci was elected as a director of Standish effective as of
August 15, 1996
Mr. Doyle founded Standish and has served as its Chief Executive Officer
since its inception in October 1989. Mr. Doyle also became Chairman of the
Board in January, 1994. Mr. Doyle has been involved in health care and senior
housing for 14 years. From 1984 to 1986, Mr. Doyle served as the Director of
Development for the Hillhaven Corporation, an owner and operator of assisted
living, independent living communities and nursing facilities. From 1986 to
October 1989, Mr. Doyle served as vice president of Voluntary Hospitals of
America Development Company, a developer and operator of senior living
communities and related projects. In these and other capacities, Mr. Doyle
has been involved in the development of a substantial number of independent
and assisted living communities and nursing facilities. Mr. Doyle received an
M.B.A. degree from the University of Chicago, where he was a Kaiser Fellow
specializing in health administration and finance and a B.S. from Tufts
University. Mr. Doyle is a member of the American College of Health Care
Executives. He is a founding member, director and is on the executive
committee of the Assisted Living Facilities Association of America ("ALFAA").
Mr. Doyle is a founder and a director of the Massachusetts Assisted Living
Facilities Association. He is also a corporator of Lawrence Memorial
Hospital. Mr. Doyle has been a featured speaker at numerous local, regional
and national industry conferences and he is also the author of numerous
articles published in local and national publications.
Mr. Miles joined Standish in August 1992, becoming its Controller and, in
1993, also its Treasurer and a Vice President. Mr. Miles consented to become
a director of Standish effective January 1996. On November 1, 1994, he became
Standish's Chief Financial Officer. He oversees the development
implementation and review of all financial systems, and is responsible for
assuring compliance with applicable tax and regulatory reporting
requirements. Prior to joining Standish, Mr. Miles was employed by Coopers &
Lybrand for five years and specialized in the high-tech and health care
industries. Mr. Miles is a Certified Public Accountant in the Commonwealth of
Massachusetts and a member of the Massachusetts Society of Certified Public
Accountants and the American Institute of Certified Public Accountants. Mr.
Miles received his B.S. degree from the University of Lowell with a
concentration in finance.
60
<PAGE>
Mr. Sterman has served as a director of Standish since its organization. For
more than the past five years, Mr. Sterman has been the President of The
Mayflower Group, Ltd. ("Mayflower"), a merchant banking firm with investment
interests in various commercial and real estate ventures. Mr. Sterman is a
director of Microfluidics International Corporation, Epigen, Inc., U.S. Lan
Systems Corporation and Software Services of America, Inc., publicly-held
companies. Mr. Sterman is a Fellow of Brandeis University, where he received his
B.A. degree. He also received an M.B.A. degree from Harvard University.
Mr. DeVore is the President of Stonybrook, an executive search firm
focusing on the Health Care Industry which he reactivated in November 1994.
Mr. DeVore has been a director of Standish since 1992. From July, 1992 to
October 1994, Mr. DeVore was employed as a consultant for Heidrick &
Struggles, a management consulting company. He also is President of Par
Management, Inc., a real estate company. From 1986 to June 1992, he was the
Chairman and sole Stockholder of a management consulting and facility
development company specializing in health care and real estate projects. Mr.
DeVore received a Master of Architecture degree from the Harvard Graduate
School of Design, and his B.A. from Harvard College.
Mr. Carucci has consented to become a Director of Standish effective as of
August 15, 1996. For more than the past five years, Mr. Carucci has been a
partner of the public accounting firm, Harte, Carucci & Driscoll, P.C. of
Woburn, Massachusetts. He is a corporator of the Winchester Hospital and is a
member of the Winchester Hospital Development Committee. Mr. Carucci is a
member of the American Institute of Certified Public Accountants, the
Massachusetts Society of Certified Public Accountants and a former member of
the State Tax Committee and Non-Profit Committee of the Massachusetts
Society of Certified Public Accountants. Mr. Carucci received his B.S. degree
from Bentley College in 1980 and his Master of Science in Taxation degree
from Bentley College in 1987.
All directors are elected to hold office until the next annual meeting of
Stockholders and until their successors are duly elected and qualified.
Executive officers serve at the discretion of the Board of Directors.
Michael J. Brenan, age 48, who had served as a Director and as President
and Chief Operating Officer since July 1, 1995, will not be standing for
re-election as a Director. See "Other Matters to be Considered at Standish
Special Meeting--Proposal No. 4--Election of Directors." Effective August 15,
1996, Mr. Brenan resigned as President and Chief Operating Officer to pursue
other interests. See "The Merger--Interests of Certain Persons in the
Merger--Termination Agreement."
Executive Compensation
The following Summary Compensation Table sets forth the annual and long
term compensation paid by Standish with regard to 1993, 1994 and 1995 to Mr.
Doyle, its Chief Executive Officer, and to the other individuals who served
as executive officers of Standish as of December 31, 1995 and whose cash
compensation exceeded $100,000 for services in all capacities to Standish.
Information regarding the annual and long term compensation paid by Standish
to individuals who formerly served as executive officers of Standish and
whose cash compensation exceeded $100,000 during the fiscal year ended
December 31, 1995 is set forth in the footnotes to the Summary Compensation
Table.
61
<PAGE>
SUMMARY COMPENSATION(1)
<TABLE>
<CAPTION>
Securities/
Underlying
Name and Other Annual Options/SARs/ All Other
Principal Position Year Salary($) Bonus($) Compensation($) ($) (2) Compensation
- ---------------------- --- ------------------ --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Doyle, 1995 157,500 (3) ** (4) -- 50,000 (7)
Chairman and Chief 1994 150,000 * * ** (5)
Executive Officer 1993 150,000 19,500 19,528 50,000
Michael J. Brenan, 1995 67,998 (3) (6)
President and Chief
Operating Officer ** (4) ** (6) 45,000 (7)
Kenneth M. Miles, 1995 90,000 (3)
Chief Financial 1994 * * * (8) 35,000 (7)
Officer and 1993 * * * **
Treasurer ** ** 19,500
C. Joel Glovsky, 1995 150,000 (3) (9) ** -- (9) ** (9)
Executive Vice 1994 150,000* 22,000 (8) **
President 1993 127,500 19,500 * 15,000
</TABLE>
- -------------
* Amount insufficient to be reportable under applicable rules of the
Commission.
** No such awards were made to the individual during the relevant fiscal
years.
(1) In addition to the information shown on the table above in respect of the
four named executive officers (the "Named Executive Officers"), during
1994 Standish paid a salary of $95,000 to Christopher W. Hollister, who
resigned from his position as Standish's Executive Vice President and a
director effective May 1995. During 1994, Mr. Hollister received a
housing relocation allowance of $25,000 and an automobile allowance of
$8,000. During 1994, Standish also paid salary in the amount of $101,327
to G. Faye Godwin, who resigned from her position as Standish's Chief
Operating Officer in May 1995. During 1994 Standish granted options to
Ms. Godwin under its 1991 Combination Stock Option Plan (the "Plan") to
purchase 50,000 shares of its Common Stock at a price of $6.25 per share.
Two-thirds of those options had not vested and expired in May 1995 upon
the termination of her employment. In accordance with the terms of the
Plan. Ms. Godwin's remaining options expired within three months of her
departure from Standish.
(2) In February 1995, Standish adjusted the exercise price of shares issuable
upon exercise of stock options previously awarded or granted to the named
executive officers by replacing such options with a like number of
options repriced to $2.00 per share, which was the closing bid price for
the Common Stock as reported by Nasdaq for the day preceding the date
such repricing was authorized.
(3) All compensation figures shown for 1995 reflect the amounts which the
named executive officer received by year end at the annual base salary
increased from $150,000 to $165,000 as of July 1, 1995. Mr. Brenan's
employment with Standish commended as of July 25, 1995 at an annual base
salary of $150,000. Mr. Miles annual base salary increased from $75,000
to $105,000 as of July 1, 1995. Dr. Glovsky's annual base salary was
$150,000.
(4) Bonus compensation, if any, is determined by Standish's Board of
Directors in its sole discretion up to 40%, 30% and 25% of the annual
base salaries of Messrs. Doyle, Brenan and Miles, respectively. No
bonuses were paid in 1995.
(5) Under the terms of his employment agreement, Mr. Doyle is entitled to
receive an automobile allowance of $10,000 per annum and payment of
premiums of approximately $624 on a life insurance policy for a
beneficiary designated by Mr. Doyle. During 1993, Mr. Doyle received an
automobile allowance of $10,000 and a housing relocation allowance of
$9,000.
(6) Under the terms of his employment agreement, Mr. Brenan was entitled to
receive an automobile allowance of $6,000 per annum. Mr. Brenan resigned
from his position as President and Chief Operating Officer of Standish
and Director effective August 15, 1996. For amounts of consulting fees, a
lump sum severance
62
<PAGE>
payment and other sums and benefits payable to Mr. Brenan under the
Termination Agreement, see "The Merger--Interest of Certain Persons in
the Merger."
(7) Stock options were granted to each of Messrs. Doyle, Brenan and Miles,
dated as of July 1, 1995 at an exercise price per share as established in
September 1995 at $2.38 per share. In the case of Messrs. Doyle and
Miles, the options vest over two years, with one-third vesting on the
date of grant and an additional one-third on each anniversary provided
that the grantee remains in the employ of the company. In the case of Mr.
Brenan, vesting of his options was accelerated under this Termination
Agreement. See "The Merger--Interest on Certain Persons in the Merger."
(8) Under the terms of his employment agreement, Mr. Miles is entitled to
receive an automobile allowance of $6,000 per annum, effective as of
March 1, 1996.
(9) During 1994 Dr. Glovsky received an automobile allowance of $9,492 and
Standish paid premiums in the amount of $12,508 on an insurance policy on
Dr. Glovsky's life for a beneficiary to be designated by him. Dr. Glovsky
retired from his position as an Executive Vice President of Standish and
director effective December 31, 1995. For amounts of severance pay and
other sums and benefits to be paid or granted to Dr. Glovsky in
connection with his early retirement from Standish, see "Employment and
Related Agreements" below.
Directors' Compensation
Directors who are not employees of Standish or who do not receive
compensation for services receive a payment of $500 for each Board meeting
attended. Directors are also entitled to receive reimbursement for out-
of-pocket expenses incurred in attending each meeting. In addition, on May
26, 1993, Standish granted to Mr. DeVore warrants to purchase 15,000 shares
of Standish Common Stock at an exercise price of $4.50 per share in
recognition of his services as a director and pursuant to action taken by the
Board of Directors in June 1995, the expiration date of these warrants was
extended from February 6, 1997 to February 6, 1999. Also, effective November
12, 1993, Standish granted to each of Messrs. DeVore and Sterman and Dr.
Jeffrey F. Rayport, who then was a director of Standish, options to purchase
15,000 shares each of Standish Common Stock at an exercise price of $4.25 per
share in recognition of their respective services as directors. Pursuant to
action taken by the Board of Directors in February 1995, the exercise price
of these options was adjusted to $2.00 per share, which was the closing bid
for the Standish Common Stock as reported by Nasdaq Small Cap Market for the
day preceding the date such action was taken.
Directors who are not employees of Standish are eligible to participate in
Standish's 1995 Non-Qualified Stock Option Plan for Non-Employee Directors
(the "1995 Non-Qualified Stock Option Plan") which was adopted by Standish's
stockholders in June 1995. Non-employee directors are automatically granted
options to purchase 6,000 shares of Standish Common Stock pursuant to the
1995 Non-Qualified Stock Option Plan upon being elected or re-elected a
director, subject to vesting over three years, based upon the formula
provisions of the Plan. Pursuant to such plan, Standish granted options to
purchase 6,000 shares of Standish Common Stock in June 1995 to each of
Messrs. DeVore and Sterman and Dr. Rayport. Dr. Rayport surrendered his
options when he resigned as a director in July 1995.
Employment and Related Agreements
Standish currently has employment agreements with Mr. Doyle, Chairman and
Chief Executive Officer and Mr. Miles, Chief Financial Officer and Treasurer.
See "The Merger--Interests of Certain Persons in the Merger--Employment
Agreements."
In May 1995, Standish and Mr. Hollister entered into an agreement (the
"Hollister Termination Agreement") under which his employment was terminated.
Under the Hollister Termination Agreement, Standish made severance payments
to Mr. Hollister of $7,917 per month and continued to provide health
insurance and reimbursement for automobile expense for the six-month period
following May 26, 1995. The Hollister Termination Agreement also provided for
surrender and cancellation of Mr. Hollister's unexercised stock options to
purchase 35,000 shares of Standish Common Stock in exchange for a cash
payment in the amount of $35,000 to be made to him in 12 monthly installments
beginning on October 1, 1995. In addition, the Hollister Termination
Agreement prohibits Mr. Hollister, for a period of one year beginning on May
26, 1995, from engaging in any competing activity within a twenty-mile radius
of any Standish offices or Standish-operated communities.
63
<PAGE>
During 1995, Standish also had an employment agreement with Dr. Glovsky,
which provided for a term of employment through December 31, 1997, a base annual
salary of $150,000 and various other benefits.
On December 29, 1995, Standish and Dr. Glovsky, a co-founder, director and
officer of Standish, entered into an Early Retirement and Non-Competition
Agreement (the "Early Retirement Agreement"). Under the terms of the Early
Retirement Agreement, Dr. Glovsky resigned as a director and an officer of
Standish effective December 31, 1995, Standish and Dr. Glovsky agreed to
terminate his employment agreement which was scheduled to expire on December
31, 1997 and Standish agreed to enter into a five year consulting
arrangement. Under the Early Retirement Agreement, Dr. Glovsky will provide
services to Standish on an as needed basis over the next five years. Standish
will pay Dr. Glovsky $60,000 per annum for these services and will also
provide Dr. Glovsky with health insurance, life insurance and other certain
benefits through 1997. As part of the Early Retirement Agreement, Standish
also agreed to forgive loans totalling approximately $139,000 (including
interest) that Standish had extended to Dr. Glovsky as well as pay
approximately $49,900 for income taxes on behalf of Dr. Glovsky for the
forgiveness of these loans. Standish also entered into a non-compete
agreement with Dr. Glovsky providing for payments totalling $40,000 under a
promissory note and fully vested Dr. Glovsky's stock options.
Until Dr. Glovsky's shares of Standish Common Stock beneficially owned by
him are acquired as part of a merger or take-over proposal at a per share
value of at least $5.00 or are otherwise disposed by Dr. Glovsky, whichever
shall occur first, but not after December 31, 1996, Dr. Glovsky's monthly
consulting fee under the Early Retirement Agreement will be increased by
$4,000 per month and his non-compete note is subject to adjustment and Dr.
Glovsky has the right to require Standish to purchase up to 65,000 of his
shares at a purchase price of $6.00 per share.
During 1995 and 1996, Standish had an employment agreement with Michael J.
Brenan, which provided for a term of employment through December 31, 1997, a
base salary of $150,000 and various other benefits. As noted above, effective
August 15, 1996, Mr. Brenan resigned as a Director, officer and employee. See
"The Merger--Interests of Certain Persons in the Merger--Termination
Agreement."
Compensation Committee Interlocks and Insider Participation
Messrs. DeVore and Sterman served as members of the Compensation Committee
of the Board of Directors. Reference is made to the discussion under
"Directors' Compensation", "Executive Compensation" as to information
concerning options granted or held by Messrs. DeVore and Sterman.
Limitation of Liability and Indemnification Agreements
As permitted by the Delaware General Corporation Law, Standish's Restated
Certificate of Incorporation provides for the elimination, subject to certain
conditions, for the personal liability of directors of Standish for monetary
damages for breach of their fiduciary duties.
Standish's by-laws provide for the indemnification of directors and
officers. In addition, Standish has entered into indemnification agreements
with each of its directors. Standish may also enter into similar agreements
with certain of Standish's officers who are not also directors. Generally,
Standish's by-laws and the indemnification agreements attempt to provide the
maximum protection permitted by Delaware law with respect to indemnification
of directors and officers.
The indemnification agreements, like Standish's by-laws, provide that
Standish will pay certain amounts incurred by a director or officer in
connection with any civil or criminal action or proceeding, and specifically
including actions by or in the name of Standish (derivative suits), where the
individual's involvement is by reason of the fact that he is or was a
director or officer. Such amounts include, to the maximum extent permitted by
law, attorney's fees, judgments, civil or criminal fines, settlement amounts,
and other expenses customarily incurred in connection with legal proceedings.
Under the indemnification agreements and Standish's by-laws, a director or
officer will not receive indemnification if he is found not to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of Standish.
64
<PAGE>
Stock Option Plans
Standish's 1991 Combination Stock Option Plan (as amended and restated to
date, the "Stock Option Plan") was adopted initially in October 1991, and has
been amended several times subsequently, most recently at the Annual Meeting
of Stockholders held June 19, 1995, in order to increase the number of shares
of Standish Common Stock reserved for issuance under it. The number of shares
currently reserved for issuance under the Stock Option Plan is 785,000. The
purpose of the Stock Option Plan is to provide long-term incentives and
rewards to Standish's key employees, officers, directors and others in a
position to contribute to the success of Standish.
Under the Stock Option Plan, Standish may grant both incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended ("incentive stock options"), and options which are not
qualified as incentive stock options ("non-qualified stock options").
Incentive stock options may be granted only to persons who are employees of
Standish at the time of the grant, which may include officers and directors
(other than members of the Compensation Committee) who are also employees.
Non-qualified stock options may be granted to officers, directors (other than
members of the Compensation Committee) or employees of, or consultants or
advisors to, Standish at the time of the grant, and other persons, provided
that directors who serve on the Compensation Committee are not eligible to
receive options under the Stock Option Plan.
No stock appreciation rights ("SARs") have been granted by Standish. None
of the Named Executive Officers exercised stock options during 1995, and no
stock options were repriced during 1995, except on February 18, 1995, as
permitted by the terms of the Stock Option Plan, the Board of Directors
determined to make appropriate adjustments in the exercise price of stock
options previously awarded under the Stock Option Plan to take into account
the effect of issuance of a substantial number of shares of Standish Common
Stock pursuant to the exchange offer (the "Exchange Offer") made by Standish
in 1994, pursuant to which, on the basis of a 2.6:1 ratio, an aggregate of
1,701,180 shares of Standish Common Stock were issue in exchange for 654,300
shares of Standish's Series A Preferred Stock. Pursuant to the adjustments
adopted by the Board of Directors, Standish exchanged options to purchase an
aggregate of 205,700 shares of Standish Common Stock for outstanding options
to purchase a like number of shares and the exercise price was set at $2.00
per share (the closing sale price as reported by Nasdaq Small Cap Market for
the day immediately preceding the Board's determination to make such
adjustment).
Directors who are not also employees of Standish are eligible to
participate in Standish's 1995 Non-Qualified Stock Option Plan. Under the
1995 Non-Qualified Stock Option Plan, each non- employee director, upon
becoming a director, is automatically granted options to purchase 6,000
shares of Standish Common Stock, subject to vesting over three years, and
options to purchase additional shares hereafter are based upon the formula
provisions of said Plan. In June 1995, pursuant to the 1995 Non-Qualified
Stock Option Plan, Standish granted options to purchase 6,000 shares of
Standish Common Stock to each of Messrs. DeVore and Sterman and Dr. Rayport.
Dr. Rayport surrendered his options when he resigned as a director in July
1995.
65
<PAGE>
<TABLE>
<CAPTION>
Options/SAR Grants in 1995
Individual Grants
% of Total
Number of Securities Options/SARs
Underlying Granted to Exercise or
Options/SAR's Employees in Base Price
Name Granted 1995 ($/sh) Expiration Date
----------------- ---------------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Michael J. Doyle 50,000 23.9% $2.38 7/1/05
Michael J. Brenan 45,000 21.5% $2.38 7/1/05
Kenneth M. Miles 35,000 16.7% $2.38 7/1/05
</TABLE>
None of the Named Executive Officers exercised stock options during 1995,
and no stock options were repriced during 1995 except, as noted above, action
by the Board of Directors to reprice outstanding stock options was taken in
February 1995.
Standish does not maintain a long-term incentive plan.
Certain Relationships and Related Transactions
Reference is made to the discussion under "Risk Factors--Potential Adverse
Effects of Certain Relationships," "The Merger--Interests of Certain Persons
in the Merger" and "-- Related Party Transactions" for information concerning
certain transactions between Standish and its directors, executive officers
or any security holder who is known to Standish to own of record or
beneficially more than 5% of Standish Common Stock or Series A Preferred
Stock.
66
<PAGE>
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF STANDISH
The following table sets forth information regarding the beneficial
ownership of Standish Common Stock, as of July 31, 1996 by each Director and
each Named Executive Officer, by persons who beneficially own 5% or more of
the outstanding shares of Standish Common Stock and Series A Preferred Stock,
and by all Directors and executive officers of Standish as a group. The
beneficial ownership information described and set forth below is based on
information furnished by the specified persons and is determined in
accordance with Rule 13d-3 under the Exchange Act. It does not constitute an
admission of beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
Series A
Common Stock Preferred Stock
Beneficially Owned(1) Beneficially Owned(1)
Name and Address of Beneficial Owner Number Percentage(2) Number Percentage
- ------------------------------------------------- ------------------- ---------- ------------------- -----------
<S> <C> <C> <C> <C>
Emeritus Corporation 780,769(3) 18.3% 0
Market Place 1
2001 Western Ave
Seattle, WA 98121
Abraham D. Gosman 736,538(4) 16.6% 0
777 South Flagler Drive
West Palm Beach, FL 33401
Robert A. Schneider 512,232(5) 7.9% 14,000(5) 48.3%
2 Broadway
New York, NY 10004
Michael J. Doyle 305,699(6) 12.6% 0
Deltec Asset Mgmt. Corp. 263,385(7) 7.1% 10,000(7) 34.5%
535 Madison Ave.
New York, NY 10022
Kenneth M. Miles 79,500(8) 2.1% 0
Michael J. Brenan(9) 45,000(9) 1.2% 0
Marshall S. Sterman 19,200(10) * 0
Robert W. DeVore 29,000(11) * 0
Dr. C. Joel Glovsky(12) 63,523 1.7% 0
John A. Carucci 0 * 0
All directors and executive officers as a group 541,922 13.5% 0
(six persons including certain of the above-
named individuals)
</TABLE>
- -------------
* Represents less than 1%.
1 Includes shares which may be acquired within 60 days of July 31, 1996
pursuant to exercise or conversion of outstanding options, warrants and
convertible securities of Standish.
2 The percentages shown are based on 3,697,366 shares of Standish Common
Stock and 29,000 shares of Series A Preferred Stock, respectively,
outstanding plus, as to each individual and group listed, the number of
shares of Standish Common Stock and/or Series A Preferred Stock deemed to
be owned by such holder pursuant to Rule 13d-3 under the Exchange Act,
assuming exercise or conversion of outstanding options, warrants and
convertible securities of Standish held by such holder which are
exercisable within 60 days of July 31, 1996, after application of
anti-dilution adjustments in respect of such holders.
3 Consists of (a) 200,000 shares of Standish Common Stock currently owned by
Emeritus Corporation ("Emeritus"), (b) 480,769 shares of Standish Common
Stock currently issuable upon conversion of the Convertible Debentures at
an initial conversion price of $4.16 per share, subject to customary
anti-dilution
67
<PAGE>
adjustments, (c) 50,000 shares of Standish Common Stock issuable pursuant
to currently exercisable warrants held by Emeritus, as well as (d) 50,000
shares of Standish Common Stock issuable to Daniel R. Baty, the Chairman of
Emeritus, pursuant to currently exercisable warrants held by Mr. Baty. Mr.
Baty disclaims beneficial ownership of the shares owned by Emeritus.
4 Consists of (a) 336,538 shares of Standish Common Stock currently issuable
upon conversion of the Series B Preferred Stock at an initial conversion
price of $4.16 per share, subject to customary anti-dilution adjustments
and (b) 400,000 shares of Standish Common Stock issuable to Mr. Gosman, a
principal stockholder of CareMatrix, pursuant to currently exercisable
warrants held by Mr. Gosman at an initial exercise price of $4.16 per
share, subject to customary anti-dilution adjustments.
5 As part of a group consisting of himself and RAS, a New York corporation
having its principal place of business at 2 Broadway, New York, NY 10004,
Mr. Schneider is the Chief Executive Officer and together with his wife
owns 100% of the stock of RAS. The Standish Common Stock listed as
beneficially owned consist of (a) 151,150 shares currently held by RAS; (b)
45,490 shares issuable upon the exercise of currently exercisable warrants
issued February 14, 1992 and held by Schneider and/or RAS; (c) 45,585
shares of Standish Common Stock issuable upon the conversion of 14,000
shares of Series A Preferred Stock and 236,975 shares of Standish Common
Stock, respectively, which may be acquired upon the exercise of currently
exercisable warrants issued September 1, 1993 and held by Schneider and/or
RAS; and (d) 33,032 shares of Standish Common Stock issuable upon exercise
of currently exercisable warrants issued June 10, 1994 and held by
Schneider. Mr. Schneider disclaims beneficial ownership of the shares held
by his spouse.
6 Includes 45,339 shares held by Mr. Doyle's spouse and 13,560 shares held by
trusts for the benefit of each of Mr. Doyle's two minor children. Mr. Doyle
disclaims beneficial ownership of the shares held by his spouse and by the
two trusts. Also includes (a) 50,000 shares which may be acquired within 60
days pursuant to options dated as of February 28, 1995, (b) 50,000 shares
which may be acquired within 60 days pursuant to options dated as of July
1, 1995 and (c) 50,000 shares (subject to increase to as many as 500,000
shares upon consummation of the Merger) which may be acquired within 60
days pursuant to the Management Options dated as of June 28, 1996. See "The
Merger--Interests of Certain Persons in the Merger."
7 The 263,385 shares of Standish Common Stock currently owned beneficially by
Deltec Asset Management ("Deltec") consist of shares held for the account
of certain of its brokerage or investment advisory clients over whose
accounts it exercises discretionary authority as to voting, disposition and
other matters and includes 28,093 shares currently issuable upon conversion
of 10,000 shares of Series A Preferred Stock currently owned by Deltec.
8 Includes (a) 54,500 shares of Standish Common Stock which may be acquired
within 60 days pursuant to options dated as of November 12, 1993 or July 1,
1995 and (b) 25,000 shares (subject to increase to 250,000 shares upon
consummation of the Merger) which may be acquired within 60 days pursuant
to the Management Options dated as of June 28, 1996. See "The
Merger--Interests of Certain Persons in the Merger."
9 Consists of 45,000 shares of Standish Common Stock which may be acquired
within 60 days pursuant to options dated as of July 1, 1995. Effective
August 15, 1996, Mr. Brenan resigned as a director, officer and employee of
Standish. See "The Merger--Interests of Certain Persons in the
Merger--Termination Agreement."
10 The wife of Marshall S. Sterman, a Director of Standish, is the beneficial
owner of 5,200 shares of Standish Common Stock. Under rules of the
Commission, Mr. Sterman may be deemed to be the beneficial owner of the
shares of Standish Common Stock owned by Mrs. Sterman. However, Mr.
Sterman disclaims beneficial ownership of all such shares other than
14,000 shares which may be acquired by him within 60 days upon the
exercise of options.
11 Consists of 29,000 shares of Standish Common Stock which may be acquired
within 60 days pursuant to options and warrants.
12 Dr. C. Joel Glovsky resigned as a director and executive officer of
Standish, effective as of December 31, 1995.
68
<PAGE>
BUSINESS OF CAREMATRIX
CareMatrix is focused on becoming a leading provider of assisted living
services. CareMatrix is currently developing, constructing and operating
facilities with an aggregate capacity of approximately 5,500 residents
throughout the United States.
The corporations comprising CareMatrix and its predecessors were
incorporated in Delaware in 1994, 1995 and 1996, except for A.M.A. of New
Jersey Development, Inc., which was incorporated in New Jersey in 1995.
CareMatrix's principal place of business is 197 First Avenue Needham,
Massachusetts 02194, and its telephone number at that location is (617)
433-1000.
CareMatrix has never paid cash dividends and does not anticipate paying
cash dividends in the foreseeable future. The Board of Directors intends to
reinvest all earnings in the business of CareMatrix to support the future
growth of its operations.
Overview
CareMatrix is focused on becoming a leading provider of assisted living
services. CareMatrix is currently developing, constructing and operating
facilities with an aggregate capacity of approximately 5,500 residents
throughout the United States.
CareMatrix expects to utilize the assisted living facility as a focal
point to provide a continuum of care for its residents. When combined with
independent living, there will be a natural transition to assisted living as
the residents' physical needs dictate. In combination with extended care
facilities, assisted living facilities will provide a source of residents
that require more complex services. The assisted living facility will have a
distinct Alzheimer's component. By integrating these three levels of care
with the assisted living facility in a campus-style setting, there will be a
reduction in the trauma of moving residents to alternative settings.
Marketing CareMatrix's assisted living product with other modalities will
create an advantage over free-standing assisted living facilities.
[Assisted Living/Alzheimer's Treatment Graphic
CareMatrix intends to capitalize on the extensive experience of its
principals in providing healthcare services to the elderly in a changing
healthcare delivery system. In implementing its growth strategies, CareMatrix
has the following objectives: (i) to be a low cost provider of quality
personalized services in anticipation of a fully-capitated managed care
environment (ii) to offer a full range of assisted living and alternative
services to private pay and Medicaid waiver eligible residents and (iii) to
rapidly develop its assisted living residences and other medical related
facilities in distinct geographic markets primarily in campus-style settings.
69
<PAGE>
The Assisted Living Industry
Assisted living is increasingly becoming the setting preferred by
prospective residents and their families in which to care for the elderly.
Assisted living offers residents greater independence and allows them to age
in place in a residential setting, which CareMatrix believes will result in a
higher quality of life than that experienced in more institutional or
clinical settings.
The assisted living industry is highly fragmented and characterized by
numerous small operators. Moreover, the scope of assisted living services
varies substantially from one operator to another. Although the assisted
living industry is currently undergoing a rapid expansion, only a limited
number of assisted living operators provide a comprehensive range of assisted
living services designed to permit residents to age in place within the
facility as they develop further physical or cognitive frailties.
CareMatrix believes that assisted living is one of the fastest growing
segments of elderly care and will continue to experience significant growth.
Assisted living facilities are residential care settings that both fill a gap
between extended care and independent living and offer a cost-effective and
high quality alternative to extended care facilities. Although there are
certain similarities between the custodial services provided at assisted
living facilities, the average cost is approximately two-thirds of that at
extended care facilities. The lower costs are due in part to the lower acuity
level of assisted living residents and the less regulated nature of the types
of services provided at assisted living facilities.
Elderly Population Growth. The rapid increase of the elderly population is
a key component that will support the growth of residential care for seniors
during this decade and beyond. Currently, there are over 30 million Americans
aged 65 or older. That number is forecast to grow to approximately 40 million
by the year 2010. People 85 and older comprise the fastest growing age group.
Between 1990 and 2010, this population segment is expected to increase 100%
from 3.3 million to 6.6 million. Factors, such as medical advances, wellness
programs and the fitness and nutrition movements make it more likely that
such life expectancy trends will continue.
Sources of Revenues. CareMatrix currently and for the foreseeable future
expects to rely primarily on the ability of the residents to pay their
service fees from their own resources and/or the resources of their families.
In some instances the resident's health insurance program may reimburse costs
of care under an "alternative care benefit." Some state and local governments
offer rent or service subsidies for low income residents. While a substantial
amount of CareMatrix's revenues are expected to come from private payors,
CareMatrix will be creating residential models to accommodate those covered
by alternative care benefits or other subsidies.
Medicaid reimburses for room and board services only in institutional
settings (hospitals and nursing homes); however, through the state waiver
process, Medicaid is available to cover the cost of assisted living services.
Currently, 13 states have granted Medicaid waivers which permit these federal
funds to be used for residents in assisted living facilities. CareMatrix
expects that, given the cost effectiveness of assisted living as an
alternative to nursing care in extended care facilities, more states will
permit Medicaid monies to be directed to the assisted living setting.
Development Strategies
Development. The principals of CareMatrix have extensive experience in
the development of assisted living residences and independent living
communities, extended care facilities, transitional care and rehabilitation
facilities. Several of these projects have been campus configured.
CareMatrix's senior management and market research personnel will identify
new markets based on criteria in CareMatrix market analysis reports,
proximity to existing regions in which CareMatrix is established and state
regulatory issues affecting assisted living. Based on this review, CareMatrix
will identify specific target markets and sites and conduct initial market
and financial feasibility studies to determine whether or not to pursue such
opportunities further. On projects that it elects to pursue, CareMatrix will
coordinate all aspects of each project, including obtaining the final permits
and approvals, design, construction and scheduling and capital budgeting.
CareMatrix's development strategy is to cluster new projects in campus
settings in distinct geographic regions that meet CareMatrix's standards.
CareMatrix's next senior housing development projects are scheduled to open
in southern Arizona, south Florida , various locations in Connecticut, north
and central New Jersey, and Westchester and Nassau Counties in New York.
These regions will constitute CareMatrix's most immediate focus areas for
cluster development.
70
<PAGE>
The following table sets forth certain information regarding facilities
currently operated, under construction or under development by CareMatrix:
<TABLE>
<CAPTION>
CareMatrix
Post Expected
Resident Capacity Anticipated Opening ------------------------
---------------------------- Construction
Location AL IL EC Total Owner Interest Status Start Opening
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona
Peoria 80 40 0 120 JV/RP None Development Dec-96 Oct-97
Tucson 80 40 0 120 JV/RP None Development Feb-97 Dec-97
Yuma 80 60 0 140 JV/RP None Development Sept-96 July-97
----------------------------
240 140 0 380
Connecticut
Ridgefield 55 70 0 125 Related Party Manager Development Mar-97 Jan-98
Southington 96 0 0 96 JV/RP Manager Construction Jun-96 Apr-97
Avon 108 0 0 108 Third Party Manager Development Oct-96 Aug-97
Cheshire 104 0 0 104 Third Party Manager Development Nov-96 Sep-97
Darien 67 19 0 86 JV/RP Manager Development Aug-96 Jun-97
Woodbridge 90 0 0 90 Third Party Manager Development Oct-96 Aug-97
Wallingford 80 0 0 80 JV/RP Manager Development -tbd- -tbd-
Stamford 0 168 0 168 JV/RP Manager Operating -- --
----------------------------
600 257 0 857
Florida
Bonita Bay 82 66 0 148 Related Party Manager Development May-97 Mar-98
Jensen Beach 82 66 0 148 Related Party Manager Development Feb-97 Dec-97
Boynton Beach 82 66 0 148 Related Party Manager Development Jan-97 Nov-97
Deerfield Beach 80 48 0 128 Related Party Manager Development Feb-97 Dec-97
Palm Beach 0 101 0 101 Related Party Manager Construction -- Oct-96
Homestead 0 0 56 56 Third Party Manager Operating -- --
Harbour Island 82 66 0 148 Related Party Manager Development Jan-97 Nov-97
Miami 0 0 120 120 Third Party Manager Operating -- --
----------------------------
408 413 176 997
Georgia
Atlanta 82 66 0 148 Related Party Manager Development May-97 Mar-98
Macon 82 66 0 148 Related Party Manager Development Mar-97 Jan-98
Warner Robins 82 66 0 148 Related Party Manager Development Mar-97 Jan-98
----------------------------
246 198 0 444
Massachusetts
Needham 58 0 142 200 Related Party Manager Operating -- --
Plymouth 0 0 150 150 Third Party Earn-out Operating -- --
Raynham 0 0 154 154 Third Party Earn-out Operating -- --
Auburn 0 0 154 154 Third Party Earn-out Operating -- --
W. Bridgewater 0 0 150 150 Third Party Earn-out Operating -- --
Dedham 0 0 142 142 Related Party Manager Construction -- Aug-96
Millbury 0 0 154 154 Third Party None Construction -- Dec-96
----------------------------
58 0 1,046 1,104
Maryland
Silver Spring 0 0 138 138 CareMatrix Lessee Operating -- --
North Carolina
Durham 82 66 0 148 Related Party Manager Development Dec-96 Oct-97
New Jersey
Livingston 118 0 0 118 Related Party Manager Development Sep-97 Jun-98
Park Ridge 100 0 210 310 Related Party Manager Development Oct-96 Aug-97
Princeton 83 0 180 263 Related Party Manager Construction -- Mar-97
----------------------------
301 0 390 691
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
CareMatrix
Post Expected
Resident Capacity Anticipated Opening ------------------------
---------------------------- Construction
Location AL IL EC Total Owner Interest Status Start Opening
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New York
Glen Cove 80 0 0 80 JV/RP Manager Development Sep-96 Jul-97
Ossining 0 122 0 122 JV/RP Manager Development Sep-96 Jul-97
Roslyn 106 0 0 106 JV/RP Manager Development Sep-97 Jul-98
Great Neck 140 0 0 140 JV/RP Manager Development Sep-97 Jul-98
Kew Gardens 140 0 0 140 Related Party Manager Development Apr-97 Feb-98
---------------------------
466 122 0 588
Texas
Houston 82 66 0 148 Related Party Manager Development Sep-96 Jul-97
---------------------------------------------------------------------------------------------------------------------------
TOTAL 2,483 1,262 1,750 5,495
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
AL = assisted living
IL = independent living
EC = extended care
JV/RP = related party in joint venture with a third party
Market Approach. CareMatrix believes that assisted living, senior housing,
and related facilities are market driven. CareMatrix's market approach has grown
out of its development, healthcare and hospitality experience. That is, the best
facilities and services are highly responsive to market demand and capacity.
Therefore, CareMatrix plans to develop, manage, and operate a range of prototype
facilities, all with flexible, market driven, resident programs, including
freestanding assisted living residences, assisted living facilities combined
with independent living and/or extended care, and assisted living facilities
with a distinct Alzheimer's component. Many of these projects will be developed
in campus-style settings.
As part of the market approach, CareMatrix performs a market analysis report
("MAR") for all new projects. The MAR model approach was pioneered internally
and has been utilized in the assessment of over 50 potential markets. CareMatrix
believes that its MAR methodology combined with the years of experience of its
senior market specialists provides a competitive advantage in measuring senior
living demand. The MAR model is not a static one, but rather is being
continually updated to accommodate new information and changes in the assisted
living and senior housing markets.
Essentially, CareMatrix's MAR model takes the available demographic data for
a particular market area and modifies it according to a number of assumptions to
produce a market area grade. That grade has interpretive value in and of itself,
and in addition provides a basis for comparison with other projects and sites
which CareMatrix has evaluated.
CareMatrix's market demand model involves the following steps:
(bullet) Establishment of the appropriate primary and secondary market areas,
taking into account natural boundaries, major travel routes and
local perceptions and migration patterns;
(bullet) Generation of demographic data through on-line access to the
Claritas Corporation, a firm which makes demographic projections
from the most recent United States census;
(bullet) Identification of all existing and proposed senior living settings
which might compete with the proposed project, including information
on project size, pricing structure, unit structure and
configuration, and occupancy levels;
(bullet) Determination of the appropriate threshold income level required by
the project through projected monthly fees, the proportion of annual
income that residents are willing to spend, and assets that can be
converted to income to help defray living expenses;
(bullet) Quantification of the number of age and income qualified
householders in the target market, based upon the threshold income
and the nature of the proposed project;
72
<PAGE>
(bullet) Reduction of the target market pool based on assumptions for
functional ability and living status; and
(bullet) Inclusion of the Family Influencer population (income tested
individuals between 45 and 64 years of age who may affect a senior's
decision to seek assisted living and/or to relocate for an assisted
living placement) as an additional measure of the quality of a
particular market.
Operating Strategies
Social and Medical Models. CareMatrix's social model for assisted living
provides comprehensive residential services including dining, housekeeping,
apartment and building maintenance, laundry and transportation. In addition,
care programs are included and the services provided are individualized to
meet each resident's particular needs. The level of medical care in assisted
living communities varies by provider choice and state regulatory guidelines.
While the types of services at CareMatrix's assisted living facilities may
vary to accommodate the needs of its residents, each of its communities
offers the privacy and dignity of a private apartment and schedules that are
not as regimented as in an extended care facility. Subject to regulatory
limitations, in certain locations CareMatrix will follow the "medical model"
approach to assisted living wherein, as needed, medical services are provided
in the assisted living setting. CareMatrix's medical model will be responsive
to residents whose care needs exceed normal service capabilities as they age
in place.
Management and Marketing. CareMatrix's management and marketing expertise
draws upon its broad base of experience and in-depth knowledge of the fields
of housing and healthcare for seniors. Project marketing is conducted by
CareMatrix's marketing division. The efforts from such division have
contributed to the success at its current assisted living facilities which
are full and operate with waiting lists.
Although CareMatrix encourages facility-based management, especially in
the areas of resident programs and direct resident marketing, CareMatrix also
provides a corporate support and oversight to help insure quality and
financial controls, and to achieve the most cost effective operating systems.
In addition to management supervision and a broad range of corporate
marketing assistance, operating support services that also originate from
CareMatrix's corporate headquarters include quality assurance, food service
management, accounting and finance, installation and management of management
information systems, purchasing, billing, legal, regulatory compliance, human
resources, insurance and building maintenance and improvements.
Services. CareMatrix facilities are designed to offer a supportive setting
and assistance with activities of daily living. CareMatrix's facilities are
orientated to cater to residents who, for a variety of reasons do not
typically need the 24-hour skilled medical care provided in extended care
facilities. In providing services to these residents, CareMatrix seeks to
respond to their individual needs and to improve their quality of life and,
as such, this individualized assistance is available 24 hours a day. Among
the basic services provided in CareMatrix facilities are the provision of
three meals per day, laundry, housekeeping and maintenance. CareMatrix also
makes available support services including personal care and routine nursing
care, social and recreational services, transportation and other services as
dictated by the resident. CareMatrix's personal care services include
bathing, dressing, personal hygiene, grooming, as well as eating and
ambulating assistance. Routine nursing services are also made available in
accordance to the residents' individual needs and state regulatory
requirements. These services include assistance with taking medication, skin
care and injections. CareMatrix also arranges access to additional services
beyond its provision of basic housing and related services, including
organized social and recreational activities, physical therapy, pharmacy
services and the sale or lease of durable medical equipment. While a typical
package of basic services is provided to each of its residents, CareMatrix
also accommodates the changing needs of its residents through the use of
individual service programs and appropriate staffing levels.
Financing Strategy
CareMatrix intends to finance its acquisitions using a wide variety of
financing, including bond financing, pension funds, real estate investment
trusts, public or private debt and equity, mortgage and sale/leaseback
financing, as well as relying on owner financing in the case of certain of
the projects being developed for related and third parties. CareMatrix will
select the most appropriate financing sources on terms which it believes are
consistent with prevailing market conditions and will seek to maintain an
appropriate capital structure.
73
<PAGE>
Insurance
Health care companies are subject to medical malpractice, personal injury
and other liability claims which are customary risks inherent in the
operation of health facilities and are generally covered by insurance.
CareMatrix maintains property, liability and professional malpractice
insurance policies in amounts and with such coverages and deductibles which
are deemed appropriate by management, based upon historical claims, industry
standards, and the nature and risks of its business. CareMatrix provides
medical malpractice insurance for its employee physicians and also requires
that non-employee physicians practicing at its facilities carry medical
malpractice insurance to cover their respective individual professional
liabilities. 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 at reasonable premium rates. Any substantial
increase in the cost of such insurance or the unavailability of any such
coverages could have an adverse effect on CareMatrix's business.
Employees
As of June 30, 1996, CareMatrix employed approximately 100 full-time
employees. None of CareMatrix's employees is represented by any labor union.
Management believes that its labor relations are good.
Certain Transactions
See "Risk Factors--Dependence by CareMatrix on Related Party Agreements"
and "Risk Factors--CareMatrix Reliance Upon Related Party for Working
Capital," for information concerning transactions between CareMatrix and
Abraham D. Gosman.
Legal Proceedings
CareMatrix is not a party to any legal proceedings which could have a
material adverse effect on its financial position.
74
<PAGE>
MANAGEMENT OF CAREMATRIX
Directors and Executive Officers
Abraham D. Gosman's successful record in health care enables CareMatrix to
attract and retain leading industry executives committed to the financial
success of CareMatrix. CareMatrix is guided by an experienced senior
management team, the majority of whom have had an extensive health care
background. In addition to the executive group, CareMatrix was strengthened
further by hiring additional executives with specific areas of expertise in
assisted living and senior housing.
As a result, CareMatrix is the beneficiary of an executive staff with
corporate continuity, as well as substantial and successful experience in all
disciplines related to assisted living and senior housing development,
management, financing, and marketing.
The following table sets forth certain information concerning each of the
persons who are directors or executive officers of CareMatrix and who are
expected to become directors or executive officers of New Standish following
the Merger. See "Board of Directors and Management of Standish at Effective
Time."
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ -- ---------------------------------------------------------
<S> <C> <C>
Abraham D. Gosman 67 Chairman
Andrew D. Gosman 30 Vice Chairman; Director
Robert M. Kaufman 47 President
Michael M. Gosman 32 Executive Vice President--Assisted Living
James M. Clary, III, Esquire 35 Executive Vice President, General Counsel and Secretary
Joel A. Kanter, Ph.D. 46 Executive Vice President
Marc H. Benson 40 Chief Operating Officer
</TABLE>
- -------------
The following is a biographical summary of the executive officers and
directors of CareMatrix.
Abraham D. Gosman is Chairman of CareMatrix. He has also served since
January, 1996 as the Chairman of the Board of Directors, President and Chief
Executive Officer of PhyMatrix Corp. Prior to that, he founded and was the
principal owner of The Mediplex Group, Inc. ("Mediplex"), a diversified
health care company, and its predecessor companies for more than 15 years,
with the exception of a period from April 1986 to August 1990 when Mediplex
was owned by Avon Products, Inc. ("Avon"). He was the Chief Executive Officer
of Mediplex from its inception to September 1988 and assumed that position
again after Mediplex was purchased from Avon in August 1990. In addition, he
has served as Chairman of the Board of Trustees and Chief Executive Officer
of Meditrust, the nation's largest health care real estate investment trust,
since its inception in 1985.
Andrew D. Gosman is Vice Chairman of CareMatrix. Previously, he served as
Executive Vice President of Development for Continuum Care Corporation
("Continuum"), from June, 1994 to January, 1996. He has also served as a Vice
President of AMA Funding Corporation and AMA Venture Corporation, two closely
held investment and development concerns, since March, 1992. He has
participated in a number of health care venture capital transactions.
Robert M. Kaufman is President of CareMatrix. Previously, he spent the last
twenty-four years with Coopers & Lybrand L.L.P., the last fifteen as a
partner. He has specialized in the for-profit healthcare, real estate and
retail/consumer products industries. Mr. Kaufman has significant experience
advising companies in the long-term care, senior housing and physician
practice sectors in such areas as business and strategic planning, deal
negotiations and structure, public and private financing, real estate
development and management. In addition, he has been a member of Coopers &
Lybrand's mergers and acquisitions group and served on their Board of
Partners, the Firm's nationally elected oversight committee.
75
<PAGE>
Michael M. Gosman is Executive Vice President--Assisted Living of CareMatrix.
Previously, he served as the Executive Vice President of Finance and
Administration for Continuum, from June, 1994 to January, 1996. He served as
the Director of Special Projects for Diamond Health Group, Inc. where he was
responsible for organizing financing packages and structuring acquisitions,
from January, 1990 to June, 1993. Prior to that, he was a financial analyst
for Meditrust.
James M. Clary, III is Executive Vice President, General Counsel and
Secretary of CareMatrix. Previously, he served as Legal Counsel and Senior
Vice President for Continuum. Prior to that, he served as Associate Counsel
to Meditrust, from June 1993 to August 1994. Prior to joining Meditrust, Mr.
Clary was a Senior Associate with the Boston law firm of Choate, Hall &
Stewart, from December 1991 to June 1993, and the Boston law firm of Nutter,
McClennen & Fish, from October 1987 to December 1991, where he specialized in
the areas of real estate, health care, and corporate law.
Joel A. Kanter is Executive Vice President of CareMatrix. Previously, he
served as Senior Vice President of Development and Acquisitions for Continuum
from June, 1994 to January, 1996. Prior to that, he served since April 1986
in a variety of development capacities with Mediplex, including terms as its
Senior Vice President of Administration and Senior Vice President of
Development. From 1981 through 1986, Dr. Kanter served as the Director of the
Massachusetts State Senate's Committee on Post Audit and Oversight.
Marc H. Benson is Chief Operating Officer of CareMatrix. Previously, he
served as a Vice President/Director of Operations for Manor Care's southeast
district where he had primary operating responsibility for ManorCare's
assisted living and Alzheimer's facilities in the southeastern portion of the
United States, from September, 1995 to July, 1996. Prior to joining Manor
Care, Mr. Benson served as Director of Operations for Beverly Enterprises
where he managed senior housing, assisted living, skilled nursing and home
health care centers in seven states from 1992 to September, 1995. He served
as Director of Finance of Beverly Enterprises from 1990 to 1992. In addition
to his many years in senior housing and long-term care, Mr. Benson has an
extensive background in hospitality.
There are no family relationships among CareMatrix's officers and directors,
except that Andrew D. Gosman and Michael M. Gosman are Abraham D. Gosman's
sons.
Officers are appointed by and serve at the discretion of the Board of
Directors. The officers, other than Abraham Gosman, will devote a majority or
substantially all of their business time to the business and affairs of
CareMatrix.
Compensation of Directors
Members of the Board of Directors will receive annual compensation for
serving on the Board, and will be entitled to reimbursement of reasonable
out-of-pocket expenses incurred by them in attending meetings of the Board of
Directors.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF
MANAGEMENT OF CAREMATRIX
There is currently no established public trading market for the Common
Stock of CareMatrix. As of July 31, 1996, there were 17 holders of Common
Stock. The following table sets forth, as of July 31, 1996, certain
information regarding the beneficial ownership of shares of Common Stock by
each person known by CareMatrix to be the beneficial owner of more than 5% of
outstanding Common Stock, by each director of CareMatrix and by all directors
and executive officers as a group. Except as otherwise indicated below, all
Common Stock is owned directly, and the indicated person has sole voting and
investment power with respect to all Common Stock shown as beneficially owned
by such person:
76
<PAGE>
<TABLE>
<CAPTION>
Amount of Beneficial Ownership
---------------------------------------------------------
Percentage of Shares of
--------------------------------------------
Shares of CareMatrix New Standish
Name CareMatrix before Merger (1) after Merger (2)
- --------------------------------------------- --------- -------------------- --------------------
<S> <C> <C> <C>
Abraham D. Gosman
777 South Flagler Drive
West Palm Beach, FL 33401 (3) 83.2% 77.8%
All directors and executive officers as a
group (7 persons) 94.2% 87.9%
</TABLE>
- -------------
(1) Percentage of beneficial ownership of CareMatrix prior to the Merger.
(2) Percentage of beneficial ownership of New Standish after the Merger. The
percentages shown are based on 53,697,366 shares of Standish Common Stock
and 29,000 shares of Series A Preferred Stock outstanding plus, as to
each individual and group listed, the number of shares of New Standish
Common Stock deemed to be owned by such holder pursuant to Rule 13d-3
under the Exchange Act, assuming conversion of outstanding options and
warrants and convertible securities of New Standish held by such holder
which are exercisable within 60 days of July 31, 1996, after application
of anti-dilution adjustments in respect of such holders.
(3) Includes 1,802 shares of CCC of Maryland, Inc. owned directly and
14,948.6 shares of A.M.A. New Jersey Development, Inc. and 1,549.8 shares
of each of the other CareMatrix Corporations held by Abraham D. Gosman as
trustee for the benefit of each of his sons, Andrew D. Gosman (a director
of CareMatrix) and Michael M. Gosman. As trustee, Abraham D. Gosman has
investment power with respect to all such shares and voting power with
respect to 49% of the outstanding shares of CareMatrix.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR CAREMATRIX
General
CareMatrix consists of a group of twelve affiliated corporations which are
privately-held and are in the business of the development, operation and
management of assisted living communities and other senior care facilities.
Results of Operations
The following discussion reviews the results of operations for the period
from June 24, 1994 (inception) to December 31, 1994 (the "1994 Period"), the
year ended December 31, 1995 and the six months ended June 30, 1996 (the
"1996 Period").
The Combined Historical Audited and Unaudited Financial Statements and the
Notes thereto included elsewhere in this Proxy Statement-Prospectus present
the results of operations of the entities which have been operated under
common control on a combined basis. All of the operations of CareMatrix began
subsequent to June 23, 1994. As a result, CareMatrix believes that any period
to period comparisons and percentage relationships within periods are not
meaningful.
Revenues
During the 1994 Period, the year ended December 31, 1995 and the 1996
Period, CareMatrix derived revenues from one or more of the following
services: the operation of an inpatient extended care facility in Maryland;
the operation of an outpatient rehabilitation facility in Georgia; and the
management of two inpatient extended care facilities in Florida.
Net revenues were $0.4 million for the 1994 Period and consisted of
revenues attributable to outpatient rehabilitation services. CareMatrix
purchased the outpatient rehabilitation facility during November 1994.
Net revenues for the year ended December 31, 1995 were $2.5 million. Such
revenues during this period consisted of $1.1 million or 44% related to
outpatient rehabilitation services; and $1.4 million or 56% related to
inpatient nursing services. CareMatrix operated the outpatient rehabilitation
facility for ten months during 1995 until its closure during November 1995.
The inpatient nursing facility revenues were for the period August 15, 1995
(date of lease inception) to December 31, 1995 for a 138-bed extended care
facility in Silver Spring, Maryland.
Net revenues for the 1996 Period were $2.4 million. Such revenues during
this period consisted of $2.2 million or 92% related to inpatient nursing
services; and $0.2 million or 8% related to the management of extended care
facilities. CareMatrix entered into two management agreements during December
1995, for the provision of management services to extended care facilities in
Homestead, Florida and Miami, Florida.
General Corporate Expenses
For the 1994 Period, the year ended December 31, 1995 and the 1996 Period,
expressed as a percentage of net revenues, general corporate expenses were
447%, 175% and 114%, respectively. General corporate expenses will continue
to increase in gross dollars, but this expense as a percentage of net
revenues is expected to continue to decline. No income tax provision was
recorded due to CareMatrix's tax loss and the inability of CareMatrix to use
the benefits which primarily accrue to Abraham D. Gosman.
Facility Operating Expenses
For the 1994 Period, the year ended December 31, 1995 and the 1996 Period,
expressed as a percentage of net revenues, facility operating expenses were
324%, 185% and 115%, respectively. Included in facility operating expenses
for the 1994 Period is a $0.8 million charge recorded to writedown assets at
the outpatient rehabilitation facility to their net realizable value.
Included in facility operating expenses for the year ended December 31, 1995
is a $0.9 million charge recorded to provide for the remaining lease
obligation at the outpatient rehabilitation facility. Facility operating
expenses also include rent expense of $45,868, $0.6 million and $0.5 million
for the 1994 period, the year ended December 31, 1995 and the 1996 Period,
respectively. The change in rent expense is attributable primarily to the ten
year lease entered into during August 1995 for the extended care facility in
Silver Spring, Maryland.
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Depreciation and Amortization
CareMatrix's depreciation and amortization expense was $3,603, $2,931 and
$65,164 for the 1994 Period, the year ended December 31, 1995 and the 1996
Period, respectively. The increase in depreciation represents depreciation on
the $1.5 million invested in capital improvements from August 15, 1995 (date
of lease inception) on the 138-bed extended care facility in Silver Spring,
Maryland.
Interest Expense
CareMatrix's interest expense was $55,856, $0.5 million and $0.6 million
for the 1994 period, the year ended December 31, 1995 and the 1996 Period,
respectively. The increase in interest expense results from the interest on
additional advances from the principal stockholder.
Liquidity and Capital Resources
Cash used by operating activities was $3.9 million for the 1996 Period and
is primarily attributable to the loss of $3.7 million for the 1996 Period.
Cash used by operating activities was $6.0 million for the year ended
December 31, 1995 and primarily represents the loss of $7.2 million offset by
the $0.9 million accrual for the remaining lease obligation at the outpatient
rehabilitation facility.
Cash used by operating activities was $2.0 million for the 1994 Period and
primarily represents the $2.6 million loss offset by the $0.8 million charge
recorded to write-down assets at the outpatient rehabilitation facility to
their net realizable value.
Cash used by investing activities was $1.5 million for the 1996 Period.
This primarily represents the $0.8 million used by CareMatrix for capital
expenditures for the 138-bed extended care facility in Silver Spring,
Maryland and the $0.7 million note receivable advanced pursuant to a
management agreement with an extended care facility in Miami, Florida.
Cash used by investing activities was $0.7 million for the year ended
December 31, 1995 and primarily represents capital expenditures for the
138-bed extended care facility in Silver Spring, Maryland.
Cash used by investing activities was $0.7 million for the 1994 Period and
primarily represents the cash required to purchase an outpatient
rehabilitation facility in Atlanta, Georgia.
Cash provided by financing activities was $7.3 million, $6.9 million and
$2.7 million for the 1994 Period, the year ended December 31, 1995 and the
1996 Period, respectively, and represents the advances from the principal
stockholder.
At June 30, 1996, CareMatrix's principal source of liquidity consisted of
$2.0 million in cash. CareMatrix also had $2.0 million of current liabilities
(which includes approximately $1.2 million of interest due to the principal
stockholder). Until the consummation of the Merger, CareMatrix intends to
seek additional financing from Abraham Gosman to the extent necessary for
working capital purposes, although Mr. Gosman is under no obligation to
provide such additional financing indefinitely. All loans from Mr. Gosman
bear interest at a rate equal to the prime rate.
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DESCRIPTION OF STANDISH CAPITAL STOCK
General
The following is a brief description of the capital stock of Standish's
Restated Certificate of Incorporation, as amended to the date of this Proxy
Statement-Prospectus ("Standish Restated Certificate of Incorporation"), and
in Standish's By-Laws, as amended. A copy of the Standish Restated
Certificate of Incorporation and of Standish's By-Laws, as amended have been
filed as exhibits to or have been incorporated by reference in, the
Registration Statement of which this Proxy Statement-Prospectus forms a part.
The description which follows is qualified in its entirety by reference to
the full text of the Standish Restated Certificate of Incorporation and
By-Laws, as amended.
Standish is authorized to issue 30,000,000 shares of Common Stock, $.01
par value per share, and 345,268 shares of preferred stock, $.01 par value
per share (the "Preferred Stock") in series as noted below under the headings
"Preferred Stock," and "Series A Preferred Stock" and "Series B Preferred
Stock." Standish has 3,697,366 shares of Common Stock, 29,000 shares of
Series A Preferred Stock and 100 shares of Series B Preferred Stock issued
and outstanding.
Common Stock
Each holder of Common Stock is entitled to share ratably on a
share-for-share basis with respect to any dividends paid on the Common Stock
when, as and if declared by the Board of Directors out of funds legally
available as proscribed by statute. Each holder of Common Stock is entitled
to one vote for each share held of record. The Common Stock is not entitled
to conversion or preemptive rights and is not subject to redemption. Upon
liquidation, dissolution or winding-up of Standish, the holders of Common
Stock are entitled to share ratably in the net assets legally available for
distribution after the liquidating distribution to the holders of the Series
A and Series B Preferred Stock. All outstanding shares of Common Stock are
fully paid and nonassessable.
Preferred Stock
Standish's Board of Directors is authorized to establish and designate the
classes, series, voting powers, designations, preferences and relative,
participating, optional or other rights, and such qualifications, limitations
and restrictions of the Preferred Stock as the Board, in its sole discretion,
may determine without further vote or action of the Stockholders, except as
and to the extent described below under the heading "--Series A Preferred
Stock--Voting Rights" and "--Series B Preferred Stock--Voting Rights."
The rights, preferences, privileges, and restrictions or qualifications or
different series of Preferred Stock may differ with respect to dividend
rates, amounts payable on liquidation, voting rights, conversion rights,
redemption provisions, sinking fund provisions, and other matters. The
issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or could adversely
affect the rights and powers, including voting rights, of holders of Common
Stock.
The existence of the Preferred Stock, and the power of the Board of
Directors of Standish to set its terms and issue a series of Preferred Stock
at any time without Stockholder approval, could have certain anti-takeover
effects. These effects include that of making Standish a less attractive
target for a "hostile" takeover bid or discouraging the making of a Merger
proposal, or rendering it more difficult either to assume control of Standish
through the acquisition of a large block of Common Stock or to remove
incumbent management, even if such actions could be beneficial to the
Stockholders of Standish.
Series A Preferred Stock
Standish has 29,000 shares of Series A Preferred Stock outstanding. The
designations, rights, powers, preferences, qualifications and limitations of
the Series A Preferred Stock are set forth in a Certificate of Designations
of Series A Cumulative Convertible Preferred Stock filed with the Secretary
of State of the State of Delaware. All outstanding shares of Series A
Preferred Stock are fully-paid and nonassessable.
The following is a summary of the terms of the Series A Preferred Stock.
This summary is not intended to be complete, and is subject to and qualified
in its entirety by reference to the above-mentioned Certificate of
Designations on file with the Secretary of State of the State of Delaware.
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Dividends. The holders of the Series A Preferred Stock are entitled to
dividends at the rate of $1.00 per share per annum, payable quarterly in arrears
on September 30, December 31, March 31 and June 30 of each year. Such rights to
receive dividends are subject to declaration of the dividend by the Board of
Directors out of funds legally available for that purpose as prescribed by
statute. Dividends are cumulative, and accrue (whether or not declared), without
interest, from the first day of each quarterly period.
No dividends may be paid on any shares of capital stock ranking junior to
the Series A Preferred Stock (including Common Stock) unless and until all
accumulated and unpaid dividends on the Series A Preferred Stock have been
declared and paid in full.
Conversion. Each share of Series A Preferred Stock is convertible at the
holder's election, at any time prior to redemption, into shares of Common
Stock. The conversion rate was set initially at two shares of Common Stock
for each share of Series A Preferred Stock; as of the date of this Proxy
Statement-Prospectus the conversion rate has been adjusted to approximately
3.2561 to reflect the seven dividends on the Series A Preferred Stock which
Standish has failed to pay since approximately June 30, 1994. In addition,
the conversion rate is subject from time to time to customary anti-dilution
adjustments, including adjustments for the failure of Standish to pay a
dividend on the Series A Preferred Stock within 30 days of a dividend payment
date. Payment of accumulated and unpaid dividends will be made upon
conversion to the extent of legally available funds as prescribed by statute.
The right to convert the Series A Preferred Stock terminates on the date
fixed for redemption.
Redemption. At any time on or after September 1, 1996, Standish may, at
its option, redeem the Series A Preferred Stock, in whole and not in part, at
a redemption price of $10.00 per share, plus accumulated and unpaid
dividends, provided that, for a period of 20 consecutive trading days ending
within 10 days prior to the notice of redemption, the market price of the
Common Stock has been at 150% of the conversion price then in effect.
Voting Rights. The holders of the Series A Preferred Stock are not
entitled to vote, except as set forth below and as provided by applicable
law. On matters as to which those holders do have such voting rights, they
are entitled to one vote per share of Series A Preferred Stock.
The affirmative vote of the holders of 66-2/3% of the outstanding shares
of the Series A Preferred Stock, voting as a separate class, is necessary for
Standish to: (a) amend any provision of its Restated Certificate of
Incorporation in any way which would effect a material, adverse change in the
rights, preferences, privileges or powers of, or the restrictions provided
for the benefit of, the Series A Preferred Stock; (b) authorize or issue any
other stock or securities which would have rights superior to or on parity
with those of the Series A Preferred Stock with respect to the payment of
dividends or the participation in liquidating distributions of Standish, or
which would be convertible into or exchangeable for such stock or securities;
or (c) merge with or consolidate into any corporation, firm or entity, or
sell, lease or otherwise dispose of all or substantially all of its assets,
unless Standish is the surviving entity.
Since Standish has failed to pay dividends for four quarterly dividend
payment periods, whether or not consecutively, the holders of the Series A
Preferred Stock are entitled to vote together with the holders of Common
Stock on all matters submitted to Standish's Stockholders, including the
election of directors. Once in effect, such voting rights are not terminated
by the payment of all accrued dividends.
Liquidation. In the event of any liquidation, dissolution or winding-up of
Standish, to the extent that liquidation proceeds or other assets of Standish
are available for distribution to Stockholders, the holders of Series A
Preferred Stock will be entitled to receive a liquidating distribution of
$10.00 per share, plus any accumulated and unpaid dividends, before any
payment or distribution may be made or set apart for the holders of Common
Stock or any stock ranking junior to the Series A Preferred Stock.
Miscellaneous. Standish is not subject to any mandatory redemption or
sinking fund provisions with respect to the Series A Preferred Stock. The
holders of Series A Preferred Stock are not entitled to preemptive rights to
subscribe for or to purchase any shares or securities of any class which may
at any time be issued, sold or offered for sale by Standish. Shares of Series
A Preferred Stock redeemed or otherwise purchased by Standish shall be
retired by Standish and shall be unavailable for subsequent issuance.
Pursuant to Standish's Exchange Offer in 1994, an aggregate of 1,701,180
shares of Common Stock were issued in exchange for 654,300 shares of Series A
Preferred Stock.
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Series B Preferred Stock
Standish has 100 shares of Series B Preferred Stock outstanding. The
designations, rights, powers, preferences, qualifications and limitations of
the Series B Preferred Stock are set forth in a Certificate of Designations
of Series B Cumulative Convertible Preferred Stock filed with the Secretary
of State of the State of Delaware. All outstanding shares of Series B
Preferred Stock are fully paid and nonassessable.
The following is a summary of the terms of the Series B Preferred Stock.
This summary is not intended to be complete, and is subject to and qualified
in its entirety by reference to the above-mentioned Certificate of
Designations on file with the Secretary of State of the State of Delaware.
Dividends. The holders of the Series B Preferred Stock are entitled to
dividends at the rate of $1,400.00 per share per annum, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year. Such
rights to receive dividends are subject to declaration of the dividend by the
Board of Directors out of funds legally available for that purpose as
prescribed by statute. Dividends are cumulative, and accrue (whether or not
declared), without interest, from the first day of each quarterly period.
However, no dividends may be paid on the Series B Preferred Stock unless and
until all accumulated and unpaid dividends on the Series A Preferred Stock
have been declared and paid in full.
No dividends may be paid on any shares of capital stock ranking junior to
the Preferred Stock (including Common Stock) unless and until all accumulated
and unpaid dividends on the Series B Preferred Stock have been declared and
paid in full.
Conversion. Each share of Series B Preferred Stock is convertible at the
holder's election, at any time prior to redemption, into shares of Common
Stock, at the conversion rate of 3,365 shares of Common Stock for each share
of Series B Preferred Stock. The conversion rate is subject from time to time
to customary anti-dilution adjustments, including adjustments for the failure
of Standish to pay a dividend on the Series B Preferred Stock within 30 days
of a dividend payment date. Payment of accumulated and unpaid dividends will
be made upon conversion to the extent of legally available funds as
prescribed by statute. The right to convert the Series B Preferred Stock
terminates on the date fixed for redemption.
Redemption. At any time on or after December 1, 1996, Standish may, at its
option, redeem the Series B Preferred Stock, in whole and not in part, at a
redemption price of $14,000 per share, plus accumulated and unpaid dividends,
provided that, for a period of 20 consecutive trading days ending within 10
days prior to the notice of redemption, the market price of the Common Stock
has been at 150% of the conversion price then in effect.
Voting Rights. The holders of the Series B Preferred Stock are not
entitled to vote, except as set forth below and as provided by applicable
law. On matters as to which those holders do have such voting rights, they
are entitled to one vote per share of Series B Preferred Stock.
The affirmative vote of the holders of 66-2/3% of the outstanding shares
of the Series B Preferred Stock, voting as a separate class, is necessary for
Standish to: (a) amend any provision of its Restated Certificate of
Incorporation in any way which would effect a material, adverse change in the
rights, preferences, privileges or powers of, or the restrictions provided
for the benefit of, the Series B Preferred Stock; (b) authorize or issue any
other stock or securities which would have rights superior to or on parity
with those of the Series B Preferred Stock with respect to the payment of
dividends or the participation in liquidating distributions of Standish, or
which would be convertible into or exchangeable for such stock or securities;
or (c) merge with or consolidate into any corporation, firm or entity, or
sell, lease or otherwise dispose of all or substantially all of its assets,
unless Standish is the surviving entity.
In the event that Standish fails to pay dividends for four quarterly
dividend payment periods, whether or not consecutively, the holders of the
Series B Preferred Stock are entitled to vote together with the holders of
Common Stock on all matters submitted to Standish's Stockholders, including
the election of directors. Once in effect, such voting rights are not
terminated by the payment of all accrued dividends.
Liquidation. In the event of any liquidation, dissolution or winding-up of
Standish, to the extent that liquidation proceeds or other assets of Standish
are available for distribution to Stockholders, the holders of Series B
Preferred Stock will be entitled to receive a liquidating distribution of
$14,000.00 per share, plus any accumulated and unpaid dividends, before any
payment or distribution may be made or set apart for the holders of Common
Stock or any stock ranking junior to the Series B Preferred Stock.
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Miscellaneous. Standish is not subject to any mandatory redemption or sinking
fund provisions with respect to the Series B Preferred Stock. The holders of
Series B Preferred Stock are not entitled to preemptive rights to subscribe for
or to purchase any shares or securities of any class which may at any time be
issued, sold or offered for sale by Standish. Shares of Series B Preferred Stock
redeemed or otherwise purchased by Standish shall be retired by Standish and
shall be unavailable for subsequent issuance.
Certain Provisions of the Certificate of Incorporation
Section 102 of the Delaware General Corporation Law authorizes a Delaware
corporation to include a provision in its certificate of incorporation
limiting or eliminating the personal liability of its directors to the
corporation and its Stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that, when
acting on behalf of the corporation, directors exercise an informed business
judgment based on all material information reasonably available to them.
Absent the limitations authorized by such provision, directors are
accountable to corporations and their Stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Although Section 102 of the Delaware General Corporation Law does not change
a director's duty of care, it enables corporations to limit available relief
to equitable remedies such as injunction or rescission.
Pursuant to Section 102 of the Delaware General Corporation Law, the
Restated Certificate of Incorporation of Standish limits the personal
liability of its directors (in their capacity as directors but not in their
capacity as officers) to Standish or its Stockholders to the fullest extent
permitted by the Delaware General Corporation Law. Specifically, a director
will not be personally liable to Standish or its Stockholders for monetary
damages for breach of fiduciary duty as a director, except for (i) any breach
of the director's duty of loyalty to Standish or it Stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases, redemptions or other distributions, and (iv) any
transaction from which the director derived an improper personal benefit.
The inclusion of this provision may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter Stockholders or management from bringing a lawsuit against directors
for breach of their duty of care, even though such an action, if successful,
might otherwise have benefitted Standish and its Stockholders. However, the
inclusion of this provision together with provisions of the By-Laws of
Standish which require Standish to indemnify its officers and directors
against certain liabilities is intended to enable Standish to attract
qualified persons to serve as directors who might otherwise be reluctant to
do so.
Transfer Agent and Registrar
American Securities Transfer, Incorporated, of Denver, Colorado is the
transfer agent and registrar for the Common Stock and Series A Preferred
Stock of Standish.
Comparison of Rights of Holders of Standish Common Stock and CareMatrix
Common Stock
Standish and all but one of the CareMatrix Corporations are incorporated
under the laws of the State of Delaware. The rights of the Stockholders of
Standish and all but that one CareMatrix Corporation are governed by the
Delaware General Corporation Law and by their respective bylaws and
certificates of incorporation, as restated. Upon consummation of the Merger,
the CareMatrix Stockholders will become holders of Standish Common Stock.
Their rights will be governed by the Delaware General Corporation Law, the
Standish Restated Certificate of Incorporation, and Standish's By-Laws.
Except as disclosed herein, there are no material differences between the
rights of Standish Stockholders and CareMatrix Stockholders.
Business Combinations
Several material differences exist in Delaware between the statutory
rights of stockholders of a company that is required to file reports under
the Exchange Act (an "Exchange Act Company") and stockholders of a company
that is not required to file reports under the Exchange Act. Standish is an
Exchange Act Company while CareMatrix is not.
The Delaware General Corporation Law provides certain "fair price"
protections to stockholders of a corporation which is an Exchange Act
Company, in connection with business combinations between such corporation
and any interested stockholder. Such provisions are not applicable to
Standish since Standish does not have a class of voting stock listed on a
national securities exchange, authorized for quotation on the Nasdaq National
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Stock Market or held of record by more than 2,000 stockholders. Such
provisions are not applicable to CareMatrix since CareMatrix is not an
Exchange Act Company. However, the Standish Restated Certificate of
Incorporation contains comparable "fair price" protections but with certain
variations as compared to the Delaware statutory provisions. The Standish
Restated Certificate of Incorporation defines a "related person" (i.e., an
interested stockholder) as an individual or corporation which becomes after
October 31, 1991 the beneficial owner of 5% or more of the outstanding voting
stock of Standish (a "Related Person"). A beneficial owner includes an
individual or corporate entity which owns voting stock with any affiliates or
associates, or which has the right to acquire, or power to direct, the vote
or disposition of, voting stock.
Transactions between Standish and a Related Person must be approved by
Standish's Board of Directors, and additionally by the holders of two-thirds
of the voting power of the outstanding shares of voting stock of Standish,
excluding that voting stock held by a Related Person who is, or whose
affiliate or associate is, a party to the business transaction.
The above approval requirements apply to any direct or indirect purchase
or other acquisition in one or more transactions by Standish of any of the
outstanding voting stock of any class from any one or more individuals or
entities known by Standish to be a Related Person, who has beneficially owned
such security or right for less than two years prior to the date of such
purchase or other acquisition, at a price in excess of the fair market value
(as defined in the Standish Restated Certificate of Incorporation). Such
affirmative vote shall be required notwithstanding the fact that no vote may
be required, or that a lesser percentage may be specified by law or any
agreement with any national securities exchange, or otherwise, but no such
affirmative vote shall be required with respect to any purchase or other
acquisition of securities made as part of (i) a tender or exchange offer by
Standish to purchase securities of the same class made on the same terms to
all holders of such securities and complying with the applicable requirements
of the Exchange Act and the rules and regulations thereunder, or any
successor rule or regulation or (ii) pursuant to an open-market purchase
program conducted in accordance with the requirements of Rule 10b-18
promulgated by the Commission pursuant to the Exchange Act or any successor
rule or regulation.
The Standish Restated Certificate of Incorporation also requires the
Standish Board of Directors to consider what is in the best interests of the
corporation in connection with mergers, consolidations, or sales of all or
substantially all of a corporation's assets whether or not in the ordinary
course of business. In considering what the best interests of the corporation
are in connection with such transactions, the Board of Directors shall give
due consideration not only to the price or other consideration being offered,
but also to all relevant factors, including the interests of Standish's
employees, suppliers, creditors and customers, the economy of the state,
region and nation, community and societal considerations, and the long-term
as well as short-term interests of the corporation and its stockholders,
including the possibility that those interests may be best served by the
continued independence of the corporation.
The foregoing description of the material differences between the
statutory rights of the Stockholders of Standish and the Stockholders of
CareMatrix does not purport to be complete. Such differences can be
determined in full by references to the Delaware General Corporation Law, the
Standish Restated Certificate of Incorporation and Standish's By-Laws and the
Certificate of Incorporation and By-Laws of each of the CareMatrix
Corporations.
OTHER MATTERS TO BE CONSIDERED AT STANDISH SPECIAL MEETING
PROPOSAL NO. 2
AMENDMENT TO THE STANDISH RESTATED CERTIFICATE OF INCORPORATION
At the Standish Special Meeting, Standish Stockholders will consider and
vote upon the proposal authorizing the Authorized Stock Amendment. Approval
of the proposal authorizing the Amendment is necessary to effect the Merger.
The Amendment will be effective irrespective of whether or not the Merger is
consummated. The Standish Board has adopted a resolution, subject to approval
by the Standish Stockholders, approving and authorizing the Authorized Stock
Amendment.
The Amendment would increase Standish's authorized shares of Standish
Common Stock from 30,000,000 to 75,000,000. As of July 31, 1996, there were
3,697,366 shares of Standish Common Stock outstanding and 1,655,597 shares
reserved for issuance upon the conversion or exercise of outstanding
securities or options of
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Standish, leaving 24,647,037 shares of Standish Common Stock unreserved and
available for future issuance as of that date. Further, it is anticipated
that approximately 50,000,000 shares of Standish Common Stock will be issued
in the Merger. The actual number of shares of Standish Common Stock to be
reserved in connection with the Merger will depend upon the extent to which
CareMatrix Stockholders exercise their appraisal rights.
As a result of the limited number of shares of Standish Common Stock
available for issuance, the Merger cannot be effected without increasing the
authorized Standish Common Stock. The additional issuance of shares would
result in only 19,647,037 unreserved and unissued shares of Standish Common
Stock being available for future issuance after giving effect to the Merger.
A purpose of the amendment to increase the authorized Standish Common Stock
is to provide additional authorized shares of Standish Common Stock that
would be available for possible future financings, acquisitions, stock
dividends or splits, employee stock options or other corporate purposes. The
availability of such shares for future issuance would give Standish greater
flexibility and allow shares of Standish Common Stock to be issued by action
of the Standish Board without the expense and delay of a special
Stockholders' meeting. While Standish has stated its intention to consider
future acquisitions, it has no present plans with respect to any specific
acquisition involving issuance of Standish Common Stock as consideration or
with respect to any future financings or stock dividends or splits.
Approval of the Merger Agreement and approval of the proposal authorizing
the Authorized Stock Amendment are necessary in order to consummate the
Merger. A copy proposed Article Fourth of the Standish Restated Certificate
of Incorporation, as amended by the Authorized Stock Amendment, is attached
as Appendix IV.
If the Authorized Stock Amendment is adopted at the Standish Special
Meeting, it is Standish's intention to file a certificate setting forth the
Amendment with the Secretary of the State of Delaware as promptly as possible
in order to make the Amendment effective. Upon the filing of such
certificate, all stockholders of Standish will be bound by the Authorized
Stock Amendment whether or not they have voted to adopt the resolution
authorizing the same.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE AUTHORIZED STOCK AMENDMENT TO STANDISH'S RESTATED CERTIFICATE OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
THIRTY MILLION SHARES TO SEVENTY-FIVE MILLION SHARES, WHICH IS DESIGNATED AS
PROPOSAL NO. 2 ON THE ENCLOSED PROXY.
PROPOSAL NO. 3
AMENDMENT TO THE STANDISH STOCK OPTION PLAN
Subject to approval of the Stockholders, the Board of Directors has
approved an amendment to Standish's Restated 1991 Combination Stock Option
Plan (as previously amended and now in effect, the "Stock Option Plan")
increasing from 785,000 to 2,000,000 the total number of shares of Standish
Common Stock reserved for issuance pursuant to options granted under the
Stock Option Plan.
Under the Stock Option Plan, a total of 785,000 shares of Common Stock
presently are reserved for issuance upon the exercise of options granted
under the Plan. As of July 31, 1996 a total of 348,200 stock options had been
granted under the Stock Option Plan to employees and outside Directors of
Standish, exercisable over varying periods of time and covering an aggregate
of 348,200 shares of Common Stock. The exercise price on all outstanding
options is the fair market value of the Common Stock at the time of grant of
each option.
Starting in 1993, Standish began utilizing grants of stock options as
long-term incentives for directors, executive officers and other employees in
lieu of additional cash compensation. During 1994, options to purchase an
aggregate of 62,000 shares (vesting over three years) were granted to two
officers, neither of whom was a Director of Standish. In June 1995, Standish
granted options to key employees of the company to purchase an aggregate of
61,500 shares of Standish Common Stock at an exercise price of $2.25. As of
July 1, 1995, Standish also granted stock options to Messrs. Doyle, Miles and
Brenan to purchase 50,000, 35,000 and 45,000 shares, respectively, at an
exercise price of $2.38 per share. On June 3, 1996, the Board of Directors of
Standish authorized the grant of the Management Options to Mr. Doyle to
purchase 50,000 shares of Standish Common Stock and to Mr. Miles to purchase
25,000 shares of Standish Common Stock, respectively, at a purchase price
equal to $2.94 per share, with the number of shares for which such Options
could be exercised subject to increase by multiplying the number
85
<PAGE>
of shares issuable upon exercise by the greater of (a) the number ten (10) or
(b) the number which is a fraction, the numerator of which shall be the
aggregate number of shares of Standish Common Stock to be issued pursuant to
Section 1.5 of the Merger Agreement (50,000,000 shares in the aggregate) and
the denominator of which shall be the number of shares of Standish Common
Stock issued and outstanding as of the Closing Date, including all shares
issued between the date of the Merger Agreement and such Closing Date upon
the exercise of options, warrants and other similar rights. See "The
Merger--Interests of Certain Persons in the Merger." The Board of Directors
is of the opinion that the Stock Option Plan has helped Standish compete for,
motivate and retain high caliber Directors, executives and other key
employees, particularly in a time when the growth of Standish has absorbed
much of its available cash, and that it is in the best interests of Standish
to amend the Stock Option Plan by increasing from 785,000 to 2,000,000 the
total number of shares of Common Stock reserved for issuance pursuant to
options granted under the Plan.
The amendment will permit the continuation of option grants as Standish
grows and its personnel needs expand, thereby providing long-term incentives
to attract, motivate and retain the Directors, executive officers and other
key salaried employees vital to Standish's future success.
The material terms of the Stock Option Plan are described elsewhere in
this Proxy Statement-Prospectus, under "Management of Standish--Stock Option
Plans."
As options expire unexercised, the underlying shares again become
available for the grant of new options. Options on a total of 110,700 shares
of Common Stock, granted at an option price of $2.00 per share, will expire
at various dates up to January 18, 1999.
It has been the practice of Standish not to register for public sale
shares of Common Stock subject to options granted under the Stock Option
Plan, relying on the exemption from registration provided in S.4(2) of the
Securities Act. Following consummation of the Merger, Standish expects to
register such shares for public sale in accordance with the Securities Act.
The closing price of the Common Stock of Standish on July 31, 1996 on the
Nasdaq Small Cap Market was $4.00.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
COMPANY'S RESTATED 1991 COMBINATION STOCK OPTION PLAN INCREASING FROM 785,000
TO 2,000,000 THE TOTAL NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
UPON EXERCISE OF OPTIONS GRANTED UNDER THE PLAN, WHICH IS DESIGNATED AS
PROPOSAL NO. 3 ON THE ENCLOSED PROXY.
PROPOSAL NO. 4
ELECTION OF DIRECTORS
At the Standish Special Meeting, five Directors are to be elected to serve
for a term expiring at the 1997 Annual Meeting of Stockholders. The persons
named below will be nominated by the Board of Directors for election as
Directors. All of these nominees are currently serving as Directors of the
Company, and, except for Kenneth M. Miles and John A. Carucci, all were
elected as Directors at the 1995 Annual Meeting of Stockholders. Mr. Miles
was elected a Director January 1996. Mr. Carucci was elected as a Director by
the Board of Directors, effective as of August 15, 1996, to fill the vacancy
created upon the resignation of Michael J. Brenan as a Director effective as
of that date. See "Management of Standish."
Management has made inquiries and believes that each of the nominees will
be willing and able to serve if elected. If any nominee at the time of the
election is unable or unwilling to serve or is otherwise unavailable for
election, discretionary authority is reserved to vote for a substitute chosen
by the Board of Directors, or the Board may reduce the number of Directors.
The proposed nominees are not being nominated pursuant to any arrangement or
understanding with any person.
Set forth under "Management of Standish" is certain biographical
information concerning the nominees.
86
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE FOLLOWING PERSONS AS DIRECTORS OF THE COMPANY:
Director
Name Age Position Since
- ---------------------- -- ------------------------------- --------
Michael J. Doyle 38 Chairman, Chief Executive
Officer and Director 1989
Kenneth M. Miles 36 Chief Financial Officer,
Treasurer, Assistant
Secretary and Director 1996
Marshall S. Sterman 63 Director 1989
Robert W. DeVore 54 Director 1991
John A. Carucci 37 Director 1996
OTHER MATTERS
As of the date of this Proxy Statement-Prospectus, the Board of Directors
of Standish does not intend to present, and has not been informed that any
other person intends to present, any matter for action at the Standish
Special Meeting other than as discussed in this Proxy Statement-Prospectus.
If any other matters properly come before such Standish Special Meeting, it
is intended that the holders of the proxies will act in accordance with their
best judgment.
EXPERTS
The consolidated financial statements of the The Standish Care Company for
the three year period ended December 31, 1995 included in this Proxy
Statement-Prospectus have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as indicated in their report with respect thereto,
0nd are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
The combined financial statements of CareMatrix for the year ended
December 31, 1995 and for the period from June 24, 1994 (inception) to
December 31, 1994, included in this Proxy Statement-Prospectus have been
audited by Coopers & Lybrand L.L.P., independent accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
The combined statements of operations, changes in stockholders' deficit
and cash flows of Bailey Retirement Center, Inc. for the year ended December
31, 1993, included in the Standish Financial Statements, appearing elsewhere
in this Proxy Statement-Prospectus, have been included herein in reliance on
the reports of Lovelace, Roby & Company, P.A., independent accountants, given
on the authority of that firm as experts in accounting and auditing.
PRESENCE OF INDEPENDENT PUBLIC ACCOUNTANTS
The Standish Board has appointed Coopers & Lybrand L.L.P. to audit the
books and financial records of Standish for the fiscal year ending December
31, 1996. Representatives of Coopers & Lybrand L.L.P. are expected to be
present at the Standish Special Meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
LEGAL OPINIONS
The validity of the Standish Common Stock issued in connection with the
Merger will be passed upon by Robinson & Cole, Boston, Massachusetts, counsel
to Standish.
STOCKHOLDER PROPOSALS
Whether or not the Merger is consummated, Standish's Stockholders will be
entitled to submit proposals to be considered for inclusion in the Proxy
Statement for the 1997 Annual Meeting of Stockholders. Such proposals must be
received by Standish at its principal offices in Needham, Massachusetts a
reasonable time before the solicitation of proxies is made. A proponent of
such a proposal must comply with the proxy rules under the Exchange Act.
87
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-------
<S> <C>
The Standish Care Company
Report of Coopers & Lybrand L.L.P., Independent Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-3
Consolidated Statements of Operations, for the years ended
December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows, for the years ended December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Stockholders' Equity, for the years ended December 31, 1995, 1994
and 1993 F-8
Notes to Consolidated Financial Statements F-9
Consolidated Interim Financial Statements (unaudited):
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 F-30
Consolidated Statements of Operations for the three and six months ended June 30, 1996
and 1995 F-31
Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 F-32
Notes to Consolidated Financial Statements F-33
CareMatrix
Report of Coopers & Lybrand L.L.P., Independent Accountants F-39
Combined Financial Statements:
Combined Balance Sheets as of June 30, 1996 (unaudited) December 31, 1995 and December 31,
1994 F-40
Combined Statements of Operations and Stockholders' Deficit, for the six months ended June 30,
1996 (unaudited), the year ended December 31, 1995 and the period June 24, 1994 (Inception)
to December 31, 1994 F-41
Combined Statements of Cash Flows, for the six months ended June 30, 1996 (unaudited), the
year ended December 31, 1995 and the period June 24, 1994 (Inception) to December 31, 1994 F-42
Notes to Consolidated Financial Statements F-43
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The Standish Care Company:
We have audited the accompanying consolidated balance sheets of The Standish
Care Company and its subsidiaries as of December 31, 1995 and 1994, the
related consolidated statements of operations, stockholders' equity, and cash
flows, for each of the three years ended December 31, 1995. These financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of the Bailey Retirement Center, Inc., a wholly-owned subsidiary
of the Company, whose financial statements represent 52% of consolidated
revenues for the year ended December 1993. These statements were audited by
other auditors whose report has been forwarded to us, and our opinion,
insofar as it relates to the amounts included for the Bailey Retirement
Center, Inc., 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 that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Standish
Care Company and its subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 14, 1996, except as to
information presented
in Notes I (paragraphs 7 and 8)
and R, for which the date
is March 29, 1996.
F-2
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 367,631 $ 232,716
Restricted cash 199,719 94,823
Accounts receivable, less allowance for doubtful accounts
of $448,425 and $360,946 at December 31, 1995 and
1994, respectively 176,818 115,385
Note receivable 2,835 25,000
Interest receivable 14,245 --
Due from related parties 437,234 286,942
Other current assets 39,545 55,954
------------ --------------
Total current assets 1,238,027 810,820
Prepaid deposits -- 27,651
Restricted deposits 610,732 547,982
Assets held for sale 24,471 23,487
Investment in Adams Square Limited Partnership 127,000 127,000
Investment in Cornish Realty Associates, L.P. 125,000 250,000
Note receivable 50,467 30,000
Due from related parties 130,215 114,539
Property, plant and equipment, net 11,079,454 10,415,928
Prepaid lease deposit, net 539,843 605,947
Non-compete agreement, net 219,671 76,466
Resident leases, net 176,979 226,643
Goodwill, net 1,504,000 --
Other assets, net 148,972 162,491
------------ --------------
Total assets $15,974,831 $13,418,954
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 522,992 $ 573,454
Accrued payroll and related taxes 217,304 211,040
Accrued severance costs 232,874 --
Accrued professional fees 570,997 192,743
Accrued development costs -- 100,000
Advance for expansions 4,086 --
Resident security deposits 172,945 82,679
Current portion of long-term debt 626,298 392,434
Other current liabilities 474,913 326,461
------------ --------------
Total current liabilities 2,822,409 1,878,811
Deferred gain on sale of bonds 520,815 529,331
Long-term debt 12,457,003 8,439,911
Minority interest 156,970 243,600
Commitments and contingencies
Stockholders' equity
Preferred stock (aggregate liquidation preference of $1,281,175 and
$1,376,538 at December 31, 1995 and December 31, 1994,
respectively) 1,125,000 1,280,500
Common stock, $.01 par value 30,000,000 and 10,000,000 shares
authorized
and 3,435,826 and 3,395,152 shares issued and outstanding at
December 31, 1995 and December 31, 1994, respectively 34,359 33,952
Additional paid-in capital 8,746,096 8,607,171
Accumulated deficit (9,887,821) (7,594,322)
------------ --------------
Total stockholders' equity 17,634 2,327,301
------------ --------------
Total liabilities and stockholders' equity $15,974,831 $13,418,954
============ ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended For the year ended For the year ended
December 31, December 31, December 31,
1995 1994 1993
------------------ ------------------ --------------------
<S> <C> <C> <C>
Revenues:
Service revenue $ 7,701,951 $ 6,126,883 $ 1,193,287
Management fees and marketing revenue 511,831 276,529 440,707
Development fees and other revenue 222,100 305,197 97,091
----------------- ----------------- ------------------
8,435,882 6,708,609 1,731,085
Operating costs and expenses:
Community operating expense 5,960,638 5,042,334 1,013,096
Community rent expense 615,580 406,898 --
Selling, general and administrative expense 2,347,034 2,509,426 1,512,861
Depreciation and amortization expense 679,621 693,385 283,351
Provision for Corporate doubtful accounts 74,125 338,112 240,000
Severance costs 263,413 -- --
Write off of investment in Development
projects -- 832,703 --
----------------- ----------------- ------------------
Total operating costs and expenses 9,940,411 9,822,858 3,049,308
----------------- ----------------- ------------------
Loss from operations (1,504,529) (3,114,249) (1,318,223)
Interest expense (1,500,458) (1,109,422) (351,518)
Interest income 153,115 20,281 41,872
Write-off of financing costs and other
related costs (528,257) -- --
Assignment fee from Related Party 1,000,000 -- --
Gain on sale of bonds -- -- 158,000
Gain on sale of land -- -- 376,167
Minority interest 86,630 31,400 --
----------------- ----------------- ------------------
Loss before income taxes (2,293,499) (4,171,990) (1,093,702)
Provision for income taxes -- -- (1,300)
----------------- ----------------- ------------------
Net loss ($ 2,293,499) ($ 4,171,990) ($ 1,095,002)
================= ================= ==================
Net loss per common share ($0.71) ($1.81) ($0.95)
Weighted average number of common shares
outstanding 3,393,026 2,462,785 1,442,718
================= ================= ==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(2,293,499) $(4,171,990) $(1,095,002)
Adjustments to reconcile net loss to net cash used
by operating activities:
Gain on sale of bonds -- -- (158,000)
Gain on sale of land -- -- (376,167)
Depreciation and amortization 679,621 693,385 283,351
Accretion associated with capital lease obligations 363,001 193,229 29,341
Other income (1,000,000) -- --
Write-off of financing costs and other related
costs 528,257 -- --
Write-off of capitalized management contract costs -- 41,802 --
Write-off of interest in Development projects -- 832,703 --
Write-off of officers loan and associated taxes 188,413 -- --
Write-off of costs associated with termination
agreement 75,000 -- --
Provision for corporate doubtful accounts 74,125 338,112 240,000
Provision for facility doubtful accounts 109,767 10,290 --
Amortization of deferred costs 102,604 57,640 --
Minority interest in net (loss) of consolidated
partnership (86,630) (31,400) --
Compensation expense associated with issuance of
warrants 37,857 14,571 --
Increase in accounts receivable (245,345) (207,442) (251,866)
Increase in interest receivable (14,245) -- --
Decrease (increase) in note receivable 1,698 (25,000) --
Decrease (increase) in due from related parties 157,201 (238,640) (174,964)
Decrease (increase) in due from lender -- 108,000 (108,000)
Decrease (increase) in other current assets 16,409 94,464 (87,306)
(Decrease) increase in accounts payable (50,462) 291,759 197,504
Increase in accrued payroll and related taxes 6,264 87,160 123,880
Increase in accrued professional fees 378,254 86,246 51,387
Decrease in accrued compensation -- (67,820) (29,065)
Deferred legal costs and commissions in connection
with bond sale -- -- (19,964)
Increase (decrease) in other current liabilities 135,785 236,712 (12,568)
--------- --------- -----------
Net cash used by operating activities (835,925) (1,656,219) (1,387,439)
--------- --------- -----------
INVESTING ACTIVITIES:
Assignment fee from related party 700,000 -- --
Costs associated with assignment income (228,589) -- --
Additions to property, plant and equipment (915,386) (219,506) (226,539)
Investment in Dominion Villages, Inc. -- -- (2,283,843)
Investment in Lowry -- (82,848) --
Investment in Piedmont Villages, Inc. -- (456,520) --
Cash invested in Bailey refinancing -- (244,090) --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------
1995 1994 1993
--------- ---------- ------------
<S> <C> <C> <C>
Investment in Sunny Knoll $ (150,000) $ -- $ --
Refundable deposits tendered -- (45,550) --
Increase in resident security deposits 90,266 45,169 --
Return of previous investment in Cornish Realty
Associates, Ltd. 125,000 250,000 --
Use of prepaid deposit (27,651) -- --
Proceeds from sale of land -- -- 456,000
(Repurchase) proceeds from sale of bonds (19,000) (15,200) 758,500
Investment in affiliates -- (222,140) (897,820)
Deposit for Lowry acquisition -- -- (1,175,000)
Cash received as part of the refinancing of the
Lowry acquisition -- 1,267,294 --
Funds in escrow restricted for refinancing -- -- (50,000)
Return of funds in escrow restricted for refinancing -- 48,530 --
Refund of previous investment in Partnership -- 30,041 --
Security for letter of credit deposited at bank (62,750) (240,000) (231,200)
Deposits to establish debt service reserve fund -- (62,544) --
Working capital loan to Lower Mills (123,169) -- --
Increase in other investments -- (30,000) (160,987)
------- -------- ----------
Net cash (used) provided by investing activities (611,279) 22,636 (3,810,889)
------- -------- ----------
FINANCING ACTIVITIES:
Expenses of proposed financing (299,668) -- --
Proceeds from borrowings 2,281,000 2,068,296 --
Costs associated with the exchange offer -- (211,572) --
Proceeds from issuance of preferred stock -- -- 7,823,500
Expenses associated with offering of preferred
stock -- -- (1,717,923)
Proceeds from issuance of common stock -- 832,000 500,000
Retirement of old preferred stock and dividends -- -- (205,000)
Loan refinancing costs -- (24,546) --
Payment of Convertible Preferred Stock dividends (64,025) (195,588) (237,962)
Repayment of debt (133,698) (235,995) (510,000)
Principal payments on capital lease obligations (201,490) (1,430,985) (103,649)
------- -------- ----------
Net cash provided by financing activities 1,582,119 801,610 5,548,966
------- -------- ----------
Net increase (decrease) in cash and cash equivalents 134,915 (831,973) 350,638
------- -------- ----------
Cash and cash equivalents at beginning of year 232,716 1,064,689 714,051
------- -------- ----------
Cash and cash equivalents at end of year $ 367,631 $ 232,716 $ 1,064,689
======= ======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURES:
1. Interest paid in 1995, 1994 and 1993 was $1,337,067, $1,090,049 and
$329,382, respectively.
NON-CASH TRANSACTIONS:
1. The Company purchased property, plant and equipment by capital lease
totaling $13,288 during the twelve months ended December 31, 1993.
2. On November 10, 1993, the Company entered into a capital lease in which
the Company leased assets totaling $7,059,952.
3. During 1993, the Company converted 305 shares of a previous series of
preferred stock into an aggregate of 63,523 shares of common stock at a
conversion rate of $6.00 per share.
4. During 1994 the Company committed to fund up to $100,000 of working
capital at Standish Village at Lower Mills.
5. At December 31, 1994, the Company was holding $82,679 in Resident
Security Deposits.
6. In January 1994, the Company executed a $127,000 demand note to the
general partner of Adams Square as part of its initial capitalization.
7. During 1994, the Company wrote off $269,000 of its note receivable and
$221,000 of deferred gain associated with its sale of a parcel of land in
Florida.
8. On July 1, 1994, the Company consummated an exchange offer for 654,300
shares of its Series A Cumulative Convertible Preferred Stock to 1,701,180
shares of its common stock. After this transaction, there were 128,050
shares remaining at $10.00 per share or $1,280,500.
9. On January 1, 1994, the Company entered into a capital lease in which
the Company leased assets totaling $1,851,331. These assets were comprised
of land of $257,189, building of $1,455,132 and furniture, fixtures and
equipment of $139,010. Simultaneous with this transaction, the Company
also entered into a non-compete agreement with the sellers, of which the
Company allocated $95,594 to this agreement and the seller also retained a
20% minority interest recorded by the Company at $275,000. The minority
interest partners received 2 notes for $137,500 each, of which one was
paid in full in 1994.
10. In January 1994, as part of the refinancing of Bailey, The Company
obtained seller financing of $100,000 in the form of a promissory note
payable over 5 years and bearing interest at 9%.
11. In March 1994, the Company as part of its Piedmont Villages
acquisition issued notes to certain principals and sellers of the the
transaction totaling $160,000.
12. In December 1994, The Company purchased an adjacent parcel of land to
its Bailey project from the previous seller for $200,000.
13. The Company purchased property, plant & equipment by capital leases
totaling $104,065 during 1994.
14. In May 1995, The Company purchased Sunny Knoll Retirement Home. The
Company purchased assets totaling $2,500,000, of which $40,000 was
allocated to land, $835,000 to the building, $32,000 to equipment,
$1,536,000 to goodwill and $57,000 to a non-compete agreement. This
transaction was partially financed with a seller note of $1,100,000 and an
assumption of the seller's mortgage in the amount of $750,000. The Company
also borrowed $600,000 from Emeritus.
15. In December 1995, the Company entered into an early retirement and
non-compete agreement with a founder of the Company. In connection with
this transaction, the Company has recorded $263,413 of costs in 1995.
16. During 1995, The Company recognized $1,000,000 of assignment fee
income of which $700,000 was received during the year and $300,000 is
non-cash and is included in due from related parties.
17. In December 1995, the Company exchanged 15,550 shares of Series A
Cumulative Convertible Preferred Stock for 40,674 shares of common stock.
After this transaction, there were 112,500 shares remaining at $10.00 per
share or $1,125,000.
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid-In
------------------ ----------------------
Shares Amount Shares Amount Capital
-------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 1,330,449 $13,304 392 $ 490,000 $ 2,750,808
Issuance of common stock 100,000 1,000 499,000
Redemption of a portion of the
Series A and all of the Series B
"old" preferred stock (87) (108,865)
Issuance of common stock to a
related party upon conversion of
a portion of Series A and all of
the Series C "old" preferred
stock 63,523 635 (305) (381,135) 380,500
Issuance of Cumulative Convertible
Preferred Stock 782,350 7,823,500 (1,711,922)
Dividends paid (269,813)
Net loss
------ ---- ------ -------- --------
Balance, December 31, 1993 1,493,972 $14,939 782,350 $ 7,823,500 $ 1,648,573
------ ---- ------ -------- --------
Issuance of common stock through a
private placement 200,000 2,000 830,000
Exchange offer of a portion of the
Series A Cumulative Convertible
Preferred Stock 1,701,180 17,013 (654,300) (6,543,000) 6,309,615
Dividends paid (195,588)
Restrictions on stock satisfied
upon terms of the Development
Agency Agreement 14,571
Net loss
------ ---- ------ -------- --------
Balance, December 31, 1994 3,395,152 $33,952 128,050 $ 1,280,500 $ 8,607,171
------ ---- ------ -------- --------
Exchange offer of a portion of the
Series A Cumulative Convertible
Preferred Stock 40,674 407 (15,550) (155,500) 155,093
Dividends paid (64,025)
Compensatory stock options 10,000
Compensation expense associated
with issuance of warrants 37,857
Net loss
------ ---- ------ -------- --------
Balance, December 31, 1995 3,435,826 $34,359 112,500 $ 1,125,000 $ 8,746,096
====== ==== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Stockholders'
Deficit Equity
---------------------- ---------------
<S> <C> <C>
Balance, December 31, 1992 ($ 2,327,330) $ 926,782
Issuance of common stock 500,000
Redemption of a portion of the
Series A and all of the Series B
"old" preferred stock (108,865)
Issuance of common stock to a
related party upon conversion of
a portion of Series A and all of
the Series C "old" preferred
stock
Issuance of Cumulative Convertible
Preferred Stock 6,111,578
Dividends paid (269,813)
Net loss (1,095,002) (1,095,002)
-------------------- -------------
Balance, December 31, 1993 ($ 3,422,332) $ 6,064,680
-------------------- -------------
Issuance of common stock through a
private placement 832,000
Exchange offer of a portion of the
Series A Cumulative Convertible
Preferred Stock (216,372)
Dividends paid (195,588)
Restrictions on stock satisfied
upon terms of the Development
Agency Agreement 14,571
Net loss (4,171,990) (4,171,990)
-------------------- -------------
Balance, December 31, 1994 ($ 7,594,322) $ 2,327,301
-------------------- -------------
Exchange offer of a portion of the
Series A Cumulative Convertible
Preferred Stock
Dividends paid (64,025)
Compensatory stock options 10,000
Compensation expense associated
with issuance of warrants 37,857
Net loss (2,293,499) (2,293,499)
-------------------- -------------
Balance, December 31, 1995 ($ 9,887,821) $ 17,634
==================== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Nature of Business
The Standish Care Company (the "Company") is a long term care services
company which operates assisted living communities throughout the eastern
United States. The Company also provides management, marketing, development
and other services to third party owners of assisted living communities.
B. Summary of Significant Accounting Policies
Principles of Consolidation
The 1993 consolidated financial statements include the accounts of the
Company, Bailey Retirement Center, Inc. ("Bailey"), Dominion Villages, Inc.
("Dominion") and Standish Marketing. Bailey is a senior living community
located in Gainesville, Florida, which the Company acquired in July 1992. The
acquisition was accounted for under the purchase method of accounting.
Dominion acquired a chain of three assisted living communities in Virginia on
November 10, 1993. Title to the assets was assigned to a third party lender
who is leasing the assets back to Dominion. This transaction was accounted
for as a capital lease. The results of Dominion are included in the
consolidated financial statements for the period from November 10, 1993 to
December 31, 1993 (Notes F and J). Standish Marketing was formed in January
1993 and until July 1, 1995 was a cost center for all marketing costs of the
communities owned or leased by Company subsidiaries.
The 1994 consolidated financial statements include the accounts of the
Company, Bailey, Dominion, Standish Marketing, Lowry Village Limited
Partnership ("Lowry"), Piedmont Villages, Inc. ("Piedmont"), and Bailey Home
Suites ("Bailey Suites"). Lowry is a Florida limited partnership which is 80%
owned by the Company. Lowry purchased an assisted living facility in Tampa,
Florida effective January 1, 1994. On February 11, 1994, title to the assets
was assigned to a third party lender who is leasing the assets back to Lowry.
This transaction is being accounted for as a capital lease. Piedmont was
formed to purchase a chain of three assisted living facilities in North
Carolina on March 2, 1994. Title to the assets was assigned to a third party
lender who is leasing the assets back to Piedmont. This transaction was
accounted for as an operating lease. The results of Piedmont are included in
the consolidated financial statements for the period March 2, 1994 to
December 31, 1994 (Note J). Bailey Suites is a 15 unit assisted living
community in Gainesville, Florida which the Company began leasing in
September 1994. The results of Bailey Suites are included in the consolidated
financial statements for the period September 1, 1994 to December 31, 1994.
The Bailey Suites transaction has been recorded as an operating lease.
The 1995 consolidated financial statements include the accounts of the
Company, Bailey, Dominion, Standish Marketing, Lowry, Piedmont, Bailey Suites
and Lakes Region L.L.C. ("Sunny Knoll"). The Company and Emeritus Corporation
("Emeritus"), a related party, through a limited liability company, acquired
51% and 49% ownership interests, respectively, in the Sunny Knoll community
located in Franklin, New Hampshire on May 1, 1995. The acquisition was
accounted for under the purchase method of accounting and is included in the
consolidated financial statements of the Company for the period May 1, 1995
to December 31, 1995 (Note F). The results of Standish Marketing have been
reclassified from selling, administrative and general expenses to community
operating expense for the years ended December 31, 1995 and December 31, 1994
for presentation purposes in amounts of $139,840 and $361,277, respectively.
Intercompany accounts and transactions have been eliminated from the
consolidated financial statements.
Investments in limited partnerships (Note E) in which the Company owns
less than 20%, are accounted for by the cost method of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, is effective for financial statements for fiscal years
beginning after December 15, 1995. The Company will continue to measure
F-9
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary of Significant Accounting Policies (Continued)
compensation cost using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees.
In fiscal year 1996, the Company will disclose stock based compensation under
FAS 123.
Revenue Recognition
Service revenue fees paid by residents for housing, health care and other
related services are recognized in the period services are rendered.
Management fees are recognized in the period in which the Company provides
services. Development fees and other revenue are recorded when the Company
fulfills its contractual obligations.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with
original maturities of three months or less when purchased to be cash
equivalents.
Restricted Cash
At December 31, 1995 and 1994, restricted cash was comprised of the
following:
December 31, December 31,
1995 1994
-------------- ------------
Resident security deposits $172,945 $82,679
Capital improvements reserve--Bailey 15,481 12,144
Expansion funds--Piedmont 10,261 --
Real estate tax escrow--Sunny Knoll 1,032 --
---------- ---------
$199,719 $94,823
========== =========
Restricted Deposits
At December 31, 1995 and 1994, restricted deposits was comprised of the
following:
December 31, December 31,
1995 1994
-------------- ------------
Cash collateral for letter of
credit--Dominion $231,200 $231,200
Cash collateral for letter of credit--Lowry 65,000 65,000
Cash collateral for letter of
credit--Piedmont 237,750 175,000
Debt service reserve--Bailey refinancing 61,032 61,032
Debt service reserve--SLI Bonds 15,750 15,750
---------- ---------
$610,732 $547,982
========== =========
The letters of credit are required under the terms of the financing
agreements for Dominion, Lowry and Piedmont. The letters of credit are
required to stay in place for the ten year life of the leases. The Bailey
debt service reserve is required to stay in place for the five year life of
the loan. The debt service reserve fund related to SLI represents two months
of interest on the $900,000 face amount Group A SLI Subordinated Bonds (as
defined in Note G) outstanding, for which the Company provided certain credit
enhancements to the purchaser of the Group A SLI Bonds in the form of a
guarantee in January 1993 (Notes C and G).
Property, Plant and Equipment
Property, plant and equipment is stated at cost. The cost and related
accumulated depreciation of assets sold or otherwise disposed of are removed
from the related accounts and the resulting gain or loss is reflected in
income. Major additions and improvements are capitalized; repairs and
maintenance are charged to expense as incurred. The straight-line method is
used to depreciate the cost of property, plant and equipment over their
estimated useful lives as follows:
F-10
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary of Significant Accounting Policies (Continued)
Description Period
- ------------------------------------- --------------
Buildings and improvements 30-32 years
Equipment, furniture and fixtures 5-7 years
Prepaid Lease Deposit
At December 31, 1995 and 1994, the prepaid lease deposit represents the
Company's investment and related closing costs associated with the purchase
of Piedmont. The Company accounted for this transaction as an operating
lease. This balance is being amortized over ten years, the life of the lease.
Non-Compete Agreement
In connection with the Company's purchase of Lowry, the Company and the
sellers entered into a non-compete agreement. The Company allocated a portion
of the purchase price, approximately $95,000, to the non-compete agreement.
The Company is amortizing this balance over the term of the non-compete
agreement which is five years. In connection with the Company's purchase of
Sunny Knoll, the Company and the sellers entered into a non-compete
agreement. The Company allocated a portion of the purchase price,
approximately $57,000, to the non-compete agreement. The Company is
amortizing this balance over the term of the non-compete agreement which is
three years.
On December 29, 1995, the Company and Dr. Glovsky entered into an Early
Retirement and Non-Competition Agreement. As consideration for entering into
the non-compete agreement, Dr. Glovsky is entitled to receive $40,000 subject
to increase in the event Dr. Glovsky's shares are acquired at a per share
value of less than $6.00. The Company has calculated $118,000 as the
non-compete payment (Note H). The Company will amortize this balance over the
term of the non-compete which is three years.
Resident Leases
At December 31, 1995 and 1994, resident leases represent the portion of
the purchase price attributable to certain resident leases of the Bailey
acquisition in July 1992. This amount is being amortized over seven years,
the expected resident occupancy term.
Goodwill
At December 31, 1995, Goodwill represents the excess of the acquisition
cost of Sunny Knoll over the fair value of the net assets acquired. Goodwill
of $1,536,000 is being amortized over 32 years. Amortization expense recorded
for 1995, 1994 and 1993 was $32,000, $0 and $0, respectively.
Other Assets
December 31, December 31,
1995 1994
-------------- ------------
Investment in SLI Bonds (Note G) $100,000 $100,000
Closing costs associated with the Bailey
refinancing 24,670 31,636
Organizational costs 9,712 17,058
Security Deposits 13,587 13,587
Other 1,003 210
---------- ---------
$148,972 $162,491
========== =========
Organizational costs are amortized over a period of sixty months. The
costs associated with the Bailey refinancing are being amortized over five
years, the life of the loan.
F-11
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary of Significant Accounting Policies (Continued)
Income Taxes
In the first quarter of 1993, the Company adopted Financial Accounting
Standards No. 109 entitled "Accounting for Income Taxes" (FAS 109). The
adoption of this pronouncement had no impact on the consolidated financial
statements of the Company for the year ended December 31, 1993.
The Company follows the liability method for accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are recorded
based on the difference between the tax basis of assets and liabilities and
their carrying amounts for financial reporting purposes.
Computation of Earnings Per Share
Net loss per common share is computed by dividing the net loss for the
year plus any dividends accrued, paid, or in arrears on the Company's $.01
par value Series A Cumulative Convertible Preferred Stock ("Convertible
Preferred Stock") by the weighted average number of outstanding shares of
common stock. Dividends paid in 1995 and 1994 totaled approximately $64,025
and $195,588, respectively. Dividends were in arrears for the quarters ended
June 30, 1994, September 30, 1994, December 31, 1994, September 30, 1995 and
December 31, 1995. At December 31, 1995, the aggregate dividends in arrears
on Convertible Preferred Stock totaled $156,175 (Note Q).
Write-off of Financing Costs and Other Related Costs
Write-off of financing costs and other related costs of approximately
$528,000 for the year ended December 31, 1995 represents legal, accounting,
printing, due diligence and other related costs the Company incurred in
connection with a proposed financing and its proposed related acquisition of
four assisted living communities (the "Acquisition"). No such costs were
incurred in either 1994 or 1993.
In August 1995, the Company decided not to proceed with its financing and
also assigned to Emeritus its rights and obligations to the Acquisition in
exchange for an assignment fee (Note H). As a result, the Company wrote off
the costs associated with both its proposed financing and the Acquisition.
Provision for Doubtful Accounts
The Company recorded $74,000, $338,000 and $240,000 to provide for
potentially uncollectible accounts receivable related to certain management
and marketing contracts at December 31, 1995, 1994, and 1993, respectively.
The Company also recorded a provision for community doubtful accounts of
$110,000, $9,000 and $0 at December 31, 1995, 1994 and 1993, respectively.
The amounts have been included in community operating expenses.
Severance Costs
Severance Costs of $232,874 for the year ended December 31, 1995
represents certain costs associated with an Early Retirement and
Non-Competition Agreement between the Company and Dr. C. Joel Glovsky, a
co-founder and former Director and Officer of the Company. No such expense
was recorded in either 1994 or 1993 (Notes H and M).
Write-off of Investment in Development Projects
In 1994, the Company wrote-off approximately $833,000 of costs associated
with various developments in which the Company either is no longer holding an
interest or in which the estimated realizable value was significantly
decreased. No such expense was recorded in either 1995 or 1993.
F-12
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. Summary of Significant Accounting Policies (Continued)
Assignment Fee from Related Party
Other income of $1,000,000 for the year ended December 31, 1995 represents
the assignment fee (payable in installments) the Company recognized for
assigning its rights and obligations of the Acquisition to Emeritus. No such
fee was recorded in either 1994 or 1993. At December 31, 1995, $300,000 of
this fee was included in the current portion of Due From Related Parties.
Reclassification
Certain amounts in the 1993 and 1994 consolidated financial statements
have been reclassified to conform with the 1995 presentation.
C. Financial Instruments and Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash investments and receivables.
The Company places its cash investments in short term highly liquid
investments. All other cash is held in various banks, each of which is a
federally insured financial institution. Receivables are primarily from
management, marketing and development fees and its assignment fees due from
Emeritus (Notes B and H). Management has established a reserve of
approximately $448,000 at December 31, 1995 and $361,000 at December 31, 1994
to account for the potential uncollectability of certain outstanding
balances. In addition, approximately $96,000 and $54,000 of certain accounts
receivable were written off during 1995 and 1994, respectively. Management
believes all other accounts receivable outstanding to be fully collectible.
As of December 31, 1995 and 1994, respectively, the Company held SLI Bonds
(Note G) related to two communities, Fox Ridge Manor and Victoria Manor, with
a carrying value of $24,471 and $23,487. The future value of these Bonds is
dependent on the cash flows of these communities and the ability of SLI to
pay interest on the bonds on a current basis. These bonds accrue interest at
10.5% but interest payments are subordinated to senior debt service as well
as to management fees payable to the Company. Currently, the cash flows of
SLI are not adequate to support subordinated debt service payments. A portion
of the SLI Bonds are currently held for sale and other portions of such Bonds
were sold in separate transactions in the first, second and third quarters of
1993, for amounts in excess of the carrying value. Certain of the sales
involved credit enhancements provided by the Company (Notes B and G). During
1994 and the first quarter of 1995, the Company repurchased SLI subordinated
bonds at their par value of $24,700 (Note G).
D. Public Offering of Preferred Stock
The Company completed a public offering on September 9, 1993 of 700,000
shares of Convertible Preferred Stock. In addition, on October 22, 1993,
pursuant to an over-allotment option, the Company sold an additional 82,350
shares of Convertible Preferred Stock. Net proceeds from the sales of
Convertible Preferred Stock, after subtracting costs such as underwriting,
legal, accounting and printing fees, were approximately $6,112,000.
F-13
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E. Investments in Limited Partnerships
The following table summarizes the activity in the investment in limited
partnerships account for the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Standish Adams Cornish Realty
Oaktree L.P. Square L.P. Associates L.P. Total
--------------- -------------- ---------------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 524,164 $ -- $ 500,000 $1,024,164
Investment in Partnership 449,140 -- -- 449,140
Transfer of interest (127,000) 127,000 -- --
Return of investment (30,041) -- (250,000) (280,041)
Write-off of a portion of investment (816,263) -- -- (816,263)
---------- -------- ---------- ----------
Balance at December 31, 1994 $ -- $127,000 $ 250,000 $ 377,000
Return on investment $ -- $ -- (125,000) (125,000)
---------- -------- ---------- ----------
Balance at December 31, 1995 $ -- $127,000 $ 125,000 $ 252,000
========== ========= ========== ==========
</TABLE>
Development Agency Agreement
In December 1993, the Company terminated the Development Agency Agreement
dated October 1, 1991 and amended December 31, 1992, with a former affiliate
of the Company (the "Development Agent"). During 1991, the Company and the
Development Agent made equity contributions totaling $125,000 each for the
development of a community. In addition, in November 1991, the Company
authorized the issuance of 6,301 restricted shares of its common stock for no
consideration to the Development Agent effective at the date of the Company's
Initial Public Offering of its common stock in 1992. The Company recognized
in 1994 approximately $14,571 as expense which represented the fair market
value of the stock on the date that the restrictions on this stock lapsed.
Standish Oaktree/Adams Square Limited Partnership
In December 1993, the partners of Standish Oaktree Limited Partnership
agreed to dissolve the partnership. Pursuant to the dissolution, the Company,
through its wholly-owned subsidiary, Standish/Oaktree Development Corp.,
holds 30% of the 1% partnership interest of Adams Square, Inc., the General
Partner of Adams Square Limited Partnership. Adams Square Limited Partnership
owns the Standish Village at Lower Mills community ("Lower Mills") located in
Dorchester, Massachusetts. The Standish Oaktree Limited Partnership withdrew
as a general and limited partner of the Adams Square Partnership in 1993.
Chevron USA, an unrelated third party, holds a 99% limited partner interest.
However, cash flow and capital distributions are allocated differently under
certain circumstances, subject to certain priority distributions, some of
which are to the Company.
The Company has been retained as the manager and marketing agent for the
community. The Company also is entitled to reimbursement of certain
out-of-pocket expenses and development fees as priority payments from cash
flow. In January 1994, the Company executed a $127,000 demand note to the
General Partner of the Adams Square Partnership as part of its initial
capitalization. The Company also funded approximately $123,000 of working
capital deficits associated with Standish Village at Lower Mills during 1995.
At December 31, 1995, approximately $23,000 was included in Due From Related
Parties.
Cornish Realty Associates, L.P.
At December 31, 1993, the investment in Cornish Realty Associates, L.P.
("Cornish") represented two separate $250,000 investments made during 1993
for the Laurelmead development project in Providence, Rhode Island. In March
1993, the Company entered into a marketing and management agreement with
Cornish with respect to the independent living portion of that community.
This contract stipulated that the Company would receive a marketing fee of
$2,500 per month (Note H).
In October, 1993, the Company and Cornish modified the terms of the
Company's marketing fees in light of changes in the marketing strategy and to
provide further incentive to the Company to achieve its sales goal. Under
F-14
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E. Investments in Limited Partnerships (Continued)
these modified terms, the Company, upon the sale and closing of 155
independent living units or 95% of available units, whichever is less (on or
before the date which is one year after that date on which the first resident
moves into the community), would be entitled to a lump-sum marketing fee of
$300,000. If the sales goal is not fully achieved within that one-year
period, the marketing fee payable to the Company will decrease at the rate of
$1,000 for each day until either the sales goal is achieved or the expiration
of 300 days. As of February 12, 1996, 119 independent living units have been
sold and the one-year sale completion period commenced on November 18, 1994.
The Company recognized revenue of $60,000 of the $300,000 total potential
marketing fee in the first quarter of 1994 as 87 units had been sold to date.
At December 31, 1995, the Company wrote off the $60,000 marketing fee revenue
it recorded in the first quarter of 1994.
Simultaneously, the Company and Cornish agreed to reduce the Company's
investment in Cornish from a 12.375% limited partnership interest to a 6.188%
limited partnership interest. Accordingly, in February, 1994 Cornish returned
half of the Company's $500,000 investment or $250,000.
The limited partnership agreement stipulates that upon the receipt of a
prescribed dollar value of sale proceeds, the Company is entitled to receive
its remaining initial investment of $250,000. In addition, the Company is
entitled to a preferred return on its investment at the rate of 15% per
annum. In accordance with the terms of the agreement, the Company received
$125,000 of its remaining $250,000 investment during the first quarter of
1995. During 1995, the Company accrued approximately $100,000 of preferred
return. The Company included this amount in interest income in its
consolidated statement of operations (Note H).
F. Property, Plant and Equipment
Property, plant and equipment at December 31, 1995 and 1994 consisted of
the following:
1995 1994
---------- -----------
Land $ 1,616,628 $ 1,576,628
Land improvements 21,964 21,964
Furniture, fixtures and equipment 1,221,239 1,132,721
Buildings and improvements 9,313,995 8,290,867
----------- -----------
12,173,826 11,022,180
Less accumulated depreciation (1,094,372) (606,252)
----------- -----------
$11,079,454 $10,415,928
=========== ===========
On November 10, 1993, the Company entered into a capital lease arrangement
to lease various land, furniture and buildings of Dominion. Based on a
valuation performed on the assets covered under the Company's lease agreement
by an outside independent appraiser and additional costs associated with this
transaction such as the assumption of debt and closing costs, the Company
allocated the present value of the lease payment as follows: $700,189 to
land, $348,353 to furniture, fixtures and equipment and $6,011,410 to
buildings. Accumulated depreciation includes $507,797 and $237,624 for these
assets at December 31, 1995 and 1994 (Note J).
On February 11, 1994, the Company entered into a capital lease agreement
to lease the land, furniture and the building of the Lowry community. Based
on an independent appraisal of the property and the amount of debt financing
provided by a lender and additional costs associated with this transaction
such as the assumption of debt and closing costs, the Company allocated the
present value of the lease payments as follows: $257,189 to land, $139,010 to
furniture, fixtures and equipment and $1,455,132 to the building. Accumulated
depreciation includes $134,280 and $67,140 for these assets at December 31,
1995 and 1994 (Note J).
The Company and Emeritus, through a limited liability company, acquired a
51% and 49% ownership interest, respectively, in the Sunny Knoll community
located in Franklin, New Hampshire in May 1995. The acquisition
F-15
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F. Property, Plant and Equipment (Continued)
was accounted for using the purchase method of accounting. The total purchase
price was approximately $2,500,000. The purchase price exceeded the fair
value of the building and equipment by $1,536,000. This amount has been
recorded as goodwill and is being amortized over 32 years. The purchase price
was funded with (a) a $1,100,000 note from the seller which bears interest at
12% per annum through April 1996 and 14% per annum thereafter and matures on
April 30, 1997, (b) a mortgage from a bank which the Company assumed for
$750,000 which bears interest at prime plus 1.75% and matures in April 1997,
(c) a $600,000 note from Emeritus bearing interest at 10% and which matures
on April 30, 1998 and (d) $150,000 funded by the Company. The Company
guaranteed approximately $1,850,000 of the obligations of the limited
liability company payable to the seller in future years. Emeritus guaranteed
$1,100,000 of these same obligations. The Company is entitled to a management
fee equal to 5% of gross revenues, a preferred return of 10% on its $150,000
investment and 20% of the excess cash flow after management fees, debt
service and funding of reserves. Emeritus is entitled to a 10% preferred
return on its $600,000 note and 80% of the excess cash flow until its note is
repaid in full. After Emeritus' note is repaid in full, the Company and
Emeritus split excess cash flow in accordance with their economic interests,
51% to the Company and 49% to Emeritus.
G. Assets Held for Sale
Land
At December 31, 1992, the Company held a parcel of land it owned in
Florida for sale, which it sold in January 1993. This land had a basis of
approximately $128,000 and was sold for $725,000, of which the Company
received $456,000 in cash and a note for $269,000. The Company used the
proceeds from this sale to pay down the existing mortgage on the land and its
outstanding $188,000 letter of credit. The total 1993 gain with respect to
this transaction was $597,000. The Company recognized the gain to the extent
cash was received. The remainder of the gain was deferred. The note beared
interest at 12% per annum. Interest and principal were payable to the Company
within ten (10) days of written notice to the borrower. In 1994, the Company
determined there was substantial doubt regarding the collectability of the
note. Accordingly, the Company wrote off the note receivable of $269,000 and
the corresponding $221,000 deferred gain in 1994. The net charge to the 1994
consolidated statement of operations was $48,000.
Subordinated Debt Securities
Among the communities managed by the Company for the account of third
parties are two communities in Pennsylvania owned by SLI; Fox Ridge Manor and
Victoria Manor ("SLI Communities"). In July 1992, the Company paid $500,000
for a management contract with SLI for these communities and to purchase
subordinated bonds of SLI (the "SLI Bonds"), having a face value of
$1,495,000. Based on a valuation performed by an investment banking firm, the
Company allocated the $500,000 purchase price as follows: $238,000 to the
management contract and $262,000 to the SLI bonds. During 1993, the Company
resold SLI bonds in the aggregate face amount of $1,303,500 which bear
interest at 10.5% annually with interest payments due semi-annually in three
separate transactions. In the first of these transactions, the Company
resold, for $550,000, SLI bonds in the face amount of $900,000 (the "Group A
SLI Bonds") to an investor group and guaranteed the payment of interest and
principal on such bonds. In the second transaction, the Company resold, for
$203,500; SLI bonds in the face amount of $203,500 (the "Group B SLI Bonds")
to a second investor group and guaranteed the payment of interest and
principal on such bonds. Because of such guarantees, the Company deferred
recognition of its $538,000 aggregate gain in these two resale transactions.
In the third 1993 transaction, the Company resold, for $200,000, SLI bonds in
the face amount of $200,000 (the "Group C SLI Bonds"), to another investor
group. The Company provided no guarantee or other credit enhancement
commitment in connection with the resale of the Group C SLI Bonds.
Since the cash flows of the SLI Communities have been insufficient to fund
the interest payments on the Group A SLI Bonds and the Group B SLI Bonds, the
Company is funding total interest payments of $115,000 per year
F-16
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
G. Assets Held for Sale (Continued)
on the Group A and Group B SLI Bonds. Because of the uncertainty of the
ability of the SLI Communities to generate adequate cash flow to fund the
debt service requirements on the SLI Bonds, the Company expects that its
payments of interest on the Group A and Group B SLI Bonds will continue for
an indefinite period. The first scheduled payment of principal on the Group A
SLI Bonds in the amount of $10,300 is due in October 1996, and the first
scheduled payment of principal on the Group B SLI Bonds in the amount of
approximately $2,300 is due October 1996. Thereafter, scheduled annual
payment of principal on the Group A SLI Bonds, beginning in the amount of
$10,300 and increasing in amount to $90,000 in the year 2018, and on the
Group B SLI Bonds, beginning in the amount of $2,300 and increasing in amount
to $20,700, are due to increase until October 2018. Bond payments extend
through October 2019. At this time, the Company is uncertain as to whether it
will be required to make the principal payments on the Group A SLI Bonds
and/or the Group B SLI Bonds.
Under the terms of the sale agreement for the Group A SLI Bonds, the
Company was obligated to place the first two months of interest payments due
on such Group A SLI Bonds in an escrow account. The Company subordinated its
management fee to the payment of the bond interest. Accordingly, the Company
deposits with the escrow agent a balance equal to the interest payable at the
beginning of each month. The terms of the sale agreement require the Company
to substitute another management agreement of equal or greater value in the
event the Company is discharged as manager of SLI, or management fees are not
received for three consecutive months and an equivalent dollar amount is not
paid by the Company. The Company has the right to repurchase the Group A SLI
Bonds during the periods February 1 through May 31, 1997, 1998 and 1999 at a
price of $630,000, $720,000 and $810,000, respectively, less any principal
payment made to that point.
The sale of the bonds in the first quarter of 1993 resulted in proceeds
exceeding carrying value by $488,000. During the first quarter of 1993, the
Company recognized a gain of $158,000 on the sale of the Group C SLI Bonds
with no credit enhancements. The Company deferred the entire gain of
$371,000, related to the sale of the Group A SLI Bonds which were credit
enhanced, pending improved cash flows from the SLI communities. The Company
also deferred approximately $20,000 of legal costs and commissions associated
with the sale of the Group A SLI Bonds and netted this balance against the
deferred gain in connection with that sale. The Company deferred the entire
gain totaling approximately $187,000 associated with the sale of the Group B
SLI Bonds.
During 1994 and the first quarter of 1995, the Company repurchased Group C
SLI Bonds at their face amount of $24,700. At December 31, 1995, the carrying
value on the Company's balance sheet of the remaining $221,000 face amount of
SLI bonds outstanding is $24,471.
H. Related Party Transactions
The Company has conducted various transactions with its officers,
directors, principal stockholders and/or their affiliated companies and
unconsolidated affiliates. Accounts affected by these transactions were as
follows (See also Note I):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1995 1994 1993
-------- ------ -------
<S> <C> <C> <C>
Accounts receivable from Carriage Hill Retirement
Center, Inc. ("Carriage Hill") owned by Emeritus for
management fees $ 16,493 $ 18,966 $ --
Accounts receivable from Emeritus for assignment fees,
management fees, and reimbursable expenses 314,371 -- --
Accounts receivable from Crystal Cove for management
fees and other costs -- 20,658 20,185
Accounts receivable from Cornish for development
management and marketing fees and other costs 55,693 114,276 33,867
</TABLE>
F-17
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
H. Related Party Transactions (Continued)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
<S> <C> <C> <C>
Accounts receivable from Cornish for interest on
investment $ 99,545 $ -- $ --
Accounts receivable from Adams Square Limited
Partnership for reimbursement of management and
marketing fees and other costs 73,847 111,125 --
Due from an affiliate of a former director and officer -- -- 11,284
Due from minority partner for reimbursement of certain
costs -- 21,917 --
Loans to officers including a balance of $0, $102,039
and $65,242 to C. Joel Glovsky, an executive officer
and director of the Company (Note L) 7,500 114,539 77,742
Assignment fee from Emeritus (Note B) 1,000,000 -- --
Interest income on interest receivable from loans to
officers -- -- 797
Management fee revenue from Carriage Hill 107,914 36,997 --
Development fee revenue from Emeritus 20,000 20,000 --
Interest expense to Emeritus related to the convertible
debentures 145,198 23,664 --
Management fee revenue from Cornish 94,920 67,500 --
Marketing fee revenue from Cornish -- 60,000 12,500
Development fee revenue from Cornish 75,000 128,000 72,000
Interest income from Cornish 99,545 -- --
Consulting fee paid to affiliate of stockholder -- -- 40,000
Management fee revenue from Crystal Cove 99,650 -- 15,000
Management fees from Adams Square Limited Partnership 57,497 27,000 --
Marketing fees from Adams Square Limited Partnership 86,800 26,600 --
Expenses incurred through or reimbursed to
stockholders, directors and their affiliates:
Selling and Marketing 78,735 81,966 66,880
General and Administrative 9,069 15,852 5,747
</TABLE>
The Company's Other Income of $1,000,000 consists of the assignment fee
realized by the Company from its assignment to Emeritus of August 31, 1995 of
the Company's rights and obligations to the Acquisition (Note B). As of
December 31, 1995, the Company had received $700,000 of the assignment fee.
On December 29, 1995, the Company and Dr. C. Joel Glovsky ("Dr. Glovsky"),
a co-founder, director and officer of the Company, entered into an Early
Retirement and Non-Competition Agreement (Note M).
On December 5, 1995, the Company received a notice of default from
Cornish, the general partner of Laurelmead, a 161 unit independent living
community in Providence, Rhode Island with respect to its Management and
Marketing Agreement, as amended (the "Agreement"). The notice of default
alleged numerous instances in which Cornish alleges the Company did not
comply with the Management and Marketing Agreement and commenced the
Company's 30 day cure period thereunder. The Company believes it has complied
with the terms and conditions of the Agreement and that it is entitled to its
full compensation due under the Agreement.
F-18
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
H. Related Party Transactions (Continued)
Furthermore, the Company maintains that Cornish itself is in breach of its
express and implied obligations under the Agreement.
The parties have entered into an agreement whereby Standish has agreed to
resign as the Manager of Laurelmead effective April 1, 1996. The Company will
receive management fees through March 31, 1996. The Company will also receive
its limited partnership interest in Cornish Realty Associates, L.P. of
$125,000 and its accrued interest on its investment. The balance is payable
as follows: $10,000 per month for six months beginning in May 1996 and ending
in October 1996, $80,000 is payable on December 15, 1996 and a final payment
of $75,000 is payable on December 15, 1997.
On January 23, 1996, the Company received from Emeritus a notice of
termination with respect to its Management and Marketing Agreement
("Agreement") at the Pines of Tewksbury. In its notice, Emeritus alleges that
the Company is in material breach of its Agreement. On January 25, 1996, the
Company responded to this notice. The Company's position is that under the
terms and conditions of the Agreement, the Company may only be terminated by
Emeritus if the Company fails to cure any alleged default in performance
under the Agreement within thirty days (or longer period if a cure, pursued
with reasonable diligence, reasonably requires greater than 30 days) after
written notice of an alleged default.
I. Short-term borrowings and long-term debt
Short-term borrowings and long-term debt at December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Bailey Mortgage payable with interest at the one-month London
Interbank offered rate for US dollars plus 2.25% (8.08% at
December 31, 1995), principal payable monthly in varying amounts.
All remaining principal and interest due in February 1999,
collateralized by real estate. $936,804 $973,550
Sunny Knoll Mortgage Payable with interest equal to the base rate
of Primary Bank plus 1.75% (11% at December 31, 1995), principal
payable monthly in varying amounts, all remaining principal due
April 1997, collateralized by real estate. 744,764 --
Notes payable:
Note payable with 9% interest, principal payments of varying
amounts and interest payable over five years 66,853 86,285
Note payable with interest at the lender's prime rate plus 1%
(9.50% at December 31, 1995), payable in fifty-nine installments
of $833 each month. All remaining principal and interest due in
December 2000, collateralized by real estate 140,000 150,000
Note payable with 9.47% interest and principal due December 1999,
collateralized by automobile 14,901 23,296
Note payable with 14.99% interest and principal payments in
varying amounts, due by January 1996, collateralized by
furniture -- 890
Notes payable with 9% interest and principal payments in varying
amounts due February 1997 149,430 155,672
Note payable to a minority partner with 8% interest, entire
principal balance is due April 1997 (previously due December 1996) 137,500 137,500
Note payable to Adams Square L.P., interest-free, due on demand 127,000 127,000
</TABLE>
F-19
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. Short-term borrowings and long-term debt (Continued)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable with 12% interest through April 1996, and 14%
thereafter, entire principal due April 1997 $ 1,100,000 $ --
Note payable to Emeritus with 10% interest, quarterly principal
payments based on excess cash flow, all remaining principal due
April 1998, collateralized by the Company's stock in Sunny
Knoll 551,732 --
Deferred liability associated with the Piedmont operating lease 160,244 57,639
----------- ----------
Subtotal 4,129,228 1,711,832
Convertible debentures with 8.5% interest due in June 1998,
convertible to common stock at $4.16 per share 2,000,000 895,000
Capital lease obligations (Note J) 6,954,073 6,225,513
----------- ----------
Subtotal 13,083,301 8,832,345
Less current maturities 626,298 392,434
----------- ----------
Long-term debt $12,457,003 $8,439,911
=========== ==========
</TABLE>
The most restrictive covenants with respect to the Bailey mortgage
borrowing requires Bailey to maintain an annual debt coverage ratio of 1.5 to
1. In addition, under the terms of the loan, the Company was required to
establish a debt service reserve fund of approximately $61,032 which
represents six monthly debt service payments. The Company was also required
to establish a depreciation fund of $2,500 and the Company is required to
deposit an additional $2,500 into this fund each month. The depreciation fund
may only be used for capital improvements at Bailey.
In June 1994, the Company completed a financing transaction with Emeritus
and its chairman Daniel R. Baty. Emeritus has provided the Company with
$2,000,000 in working capital loans in the form of convertible debentures
which are convertible at the option of the holder, and, in certain cases at
the election of the Company, into common stock at a price of $4.16 per share,
subject to customary anti-dilution adjustments. The working capital loans
accrue interest at 8.5% and are due June 1998. The most restrictive covenant
with respect to the convertible debentures is a cross default clause which
allows Emeritus to accelerate the repayment of the debentures by declaring
the unpaid principal balance and all accrued interest on the debentures due
and payable immediately.
The most restrictive covenants with respect to the Sunny Knoll debt
requires Sunny Knoll to maintain a minimum of twenty (20) residents and an
average daily rate per resident of $110. Sunny Knoll is also required to
maintain a debt service coverage ratio of at least 1.1 to 1.0, and the
Company and Emeritus must also maintain readily available liquid assets of
not less than $750,000.
The most restrictive covenants with respect to the Dominion, Lowry and
Piedmont leases require each entity to maintain a debt coverage ratio of 1.15
to 1.0 during the first year of the lease and 1.25 and 1.0 thereafter. In
addition, the Company as guarantor of the lease payments is required to
maintain consolidated net worth of at least $3,000,000.
During 1994, the Company did not comply with certain of its debt covenants
(primarily related to the debt coverage ratio requirements) associated with
its Dominion, Lowry and Piedmont Lease agreements. The Company obtained
waivers for each of these debt covenant violations through December 31, 1994
and a modification of the debt coverage ratio requirements for 1995. The
modified covenants for 1995 required the Company to maintain a consolidated
net worth of not less than $500,000, and Dominion, Lowry and Piedmont to
maintain a combined quarterly weighted debt coverage ratio of at least .75 to
1.00 through December 31, 1995. In addition, selling, general and
administrative expenses as a percentage of revenues are not to exceed 30%,
25% and 20% for the years ending December 31, 1995, 1996 and 1997,
respectively. Subsequent to December 31, 1995, Dominion, Lowry and Piedmont
will each be required to maintain a quarterly debt coverage ratio of 1.25 to
1.0.
F-20
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. Short-term borrowings and long-term debt (Continued)
During 1995, the Company did not comply with certain of its debt
covenants, primarily related to the debt coverage ratio requirements
associated with its Dominion, Lowry and Piedmont lease agreements. In
addition, the Company did not comply with its covenant of maintaining at
least $500,000 of consolidated net worth. In March 1996, the Company (a)
obtained waivers for each of the defaults which occurred in 1995 and (b)
modified certain covenants for 1996. The modified covenants for 1996 require
Dominion, Lowry and Piedmont to maintain a combined quarterly average debt
coverage ratio of at least 1.0 to 1.0 through December 31, 1996 and requires
the Company to maintain a consolidated negative net worth no greater than
$110,000, $609,000, $1,000,000 and $1,350,000 for the quarters ended March
31, June 30, September 30 and December 31, 1996, respectively.
On February 20, 1996, the note payable to a minority partner was revised
to extend the maturity date from December 31, 1996 to April 1, 1997.
At December 31, 1995, the maturities of the notes, convertible debentures
and capital leases over the next five fiscal years are as follows:
<TABLE>
<CAPTION>
Notes Convertible Capital
Payable Debentures Leases Total
--------- --------- ---------- ------------
<S> <C> <C> <C> <C>
1996 $ 545,756 $ -- $ 773,644 $ 1,319,400
1997 1,522,293 -- 796,240 2,318,533
1998 974,823 2,000,000 816,042 3,790,865
1999 826,112 -- 841,825 1,667,937
2000 100,000 -- 863,790 963,790
Thereafter 160,246 -- 3,133,373 3,293,619
BPO* -- -- 2,863,546 2,863,546
Less amounts representing interest -- -- (3,134,389) (3,134,389)
--------- --------- ---------- ----------
Subtotal 4,129,230 2,000,000 6,954,071 13,083,301
Less current maturities 408,256 -- 218,042 626,298
--------- --------- ---------- ----------
Total long-term debt $3,720,974 $2,000,000 $ 6,736,029 $12,457,003
========== ========== =========== ===========
</TABLE>
* Obligation associated with the bargain purchase option of the Dominion
and Lowry leases.
Interest paid in the years ended December 31, 1995, 1994, and 1993 was
$1,337,067, $1,090,049 and $329,382, respectively.
J. Leases
Dominion
On November 10, 1993, the Company and Dominion, a Virginia corporation and
wholly-owned subsidiary of the Company, entered into a transaction with a
lender under which (1) the Company assigned its rights to acquire the
Facilities under the Purchase and Sale agreement to the lender, (2) the
lender acquired title to the Facilities, (3) the lender leased the Facilities
to Dominion, and (4) the Company guaranteed the obligations of Dominion under
the lease with the lender. The lease to Dominion is for an initial term of
ten years and Dominion has the right to extend the term for two additional
periods of five years each. On June 28, 1995 the Company received $576,000 of
additional funding. The lease terms remain the same except that the Company
is required to make monthly payments to the lender based on a lease advance
of $5,200,000 and an applicable lease interest rate. Interest on the lease is
based on the ten year interest rate for treasury notes plus 5%. In addition,
the interest rate increases by 40 basis points per year in years 2-6 of the
lease and 33 basis points in years 7-10.
Dominion also has an option to purchase the facilities which is
exercisable prior to the expiration of the initial term and each extension
period. This option to purchase qualifies as a bargain purchase option. The
Company is
F-21
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
J. Leases (Continued)
accreting the bargain purchase option over the lease term of ten years given
that the purchase option is exercisable at an amount less than the current
fair market value.
Lowry
On February 11, 1994, the Company and Lowry, a Florida partnership and 80%
owned subsidiary of the Company, entered into a transaction with a lender
under which (1) the Company assigned its rights to acquire the facility under
a purchase and sale agreement to the lender, (2) the lender acquired title to
the facility, (3) the lender leased the facility to Lowry, and (4) the
Company guaranteed the obligations of Lowry under the lease with the lender.
The lease to Lowry is for an initial term of ten years and Lowry has the
right to extend the term for two additional periods of five years each. The
Company is required to make monthly payments to the lender based on a lease
advance of $1,300,000 and an applicable lease interest rate. Interest on the
lease is based on the ten year interest rate for treasury notes plus 5%. In
addition, the interest rate increases by 40 basis points per year in years
2-6 of the lease and 33 basis points in years 7-10.
Lowry also has an option to purchase the facilities which is exercisable
prior to the expiration of the initial term and each extension period. This
option to purchase qualifies as a bargain purchase option. The Company is
accreting the bargain purchase option over the lease term of ten years given
that the purchase option is exercisable at an amount less than the current
fair market value.
Piedmont
On March 2, 1994, the Company and Piedmont, a North Carolina corporation
and wholly owned subsidiary of the Company, entered into a transaction with a
lender under which (1) the Company assigned its rights to acquire the
facility under the purchase and sale agreement to the lender, (2) the lender
acquired title to the facility, (3) the lender leased the facility to
Piedmont, and (4) the Company guaranteed the obligations of Piedmont under
the lease with the lender. The lease to Piedmont is for an initial term of
ten years and Piedmont has the right to extend the term for two additional
periods of five years each. On May 25, 1995 the lender made a $750,000 lease
advance. Lease terms remain unchanged except that the Company is required to
make monthly payments to the lender based on a lease advance of $4,250,000
and an applicable lease interest rate. Interest on the lease is based on the
ten year interest rate for treasury notes plus 5%. In addition, the interest
rate increases by 40 basis points per year in years 2-6 of the lease and 33
basis points in years 7-10. This transaction has been accounted for as an
operating lease by the Company.
Bailey Suites
On July 26, 1994, the Company entered into a lease agreement to lease a 15
unit facility in Gainesville, Florida for a two year period with the right to
extend the term of the lease for five additional periods of two years. The
Company is required to pay rent of $1,250 per month, pay the lessor's
mortgage of $2,437 per month and pay all operating expenses of the community
including real estate taxes and insurance. The Company is entitled to a
$3,500 per month management fee, may earn marketing fees upon the achievement
of certain occupancy milestones and is entitled to 40% of any excess cash
flow of the community.
Other Leases
The Company leases its offices and certain equipment under operating
leases, which expire at various dates through 1997. The Company has the
option to purchase the equipment at fair market value at the end of the
leases. In addition, the Company is treating its Piedmont acquisition as an
operating lease which expires in the year 2004. At December 31, 1995, the
future minimum lease payments under non-cancelable leases are as follows:
F-22
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
J. Leases (Continued)
Year Ended Operating Capital
December 31, Leases Leases
- ------------------------------------------- --------- ------------
1996 $ 633,931 $ 773,644
1997 556,217 796,240
1998 549,525 816,042
1999 566,525 841,825
2000 581,312 863,790
Thereafter 1,917,723 3,133,373
---------- ----------
Net minimum lease payments 4,805,233 7,224,914
BPO* -- 2,863,546
Less amounts representing interest -- (3,134,389)
---------- ----------
Present value of minimum lease payments due $4,805,233 $ 6,954,071
========== ===========
* Obligation associated with the bargain purchase option of the Dominion
and Lowry leases.
Rent expense of $93,563, $60,202 and $82,593 for the years ended December
31, 1995, 1994, and 1993, respectively, was charged to operations. In 1995,
1994 and 1993, the Company subleased its former office space and recorded
$7,851, $12,000 and $41,573, respectively, in sublease rental income. The
sublease agreement expired in January 1996. The Company recorded $566,612,
$390,558 and $0 of rent expense for Piedmont in 1995, 1994 and 1993,
respectively and $48,968, $16,341 and $0 of rent expense for Bailey Suites in
1995, 1994 and 1993, respectively.
K. Proforma Results of Operations
The following represents the unaudited pro forma results of operations as
if Sunny Knoll was acquired at the beginning of 1995 and as if Sunny Knoll
and Piedmont were acquired, through the aforementioned lease transaction, at
the beginning of the prior year. The pro forma operating results do not
include the results of Bailey Suites. This entity is not considered a
significant subsidiary as it represents less than 10% of the Company's
assets.
1995 1994
---------- ------------
Net revenues $ 8,834,686 $ 7,986,298
Loss before extraordinary items (2,159,322) (4,170,511)
Net loss (2,159,322) (4,170,511)
Net loss per common share (.67) (1.81)
The pro forma operating results include results of operations for 1995 and
1994 with increased depreciation and amortization on property, plant and
equipment associated with the lease of Piedmont and the acquisition of Sunny
Knoll.
The pro forma information given above does not purport to be indicative of
the results that actually would have been attained if the operations were
combined during the period presented, and is not intended to be a projection
of future results or trends.
L. Income Taxes
At December 31, 1995, the Company has available for federal income tax
purposes, subject to limitations under Section 382 of the Internal Revenue
Code, net operating loss carryforwards of approximately $11,136,000 for tax
reporting purposes. There are no significant book to tax differences
associated with these temporary differences. Carryforwards expire in the
years 2004 through 2010.
F-23
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
L. Income Taxes (Continued)
Effective January 1, 1993 the Company adopted the provisions of FAS 109,
"Accounting for Income Taxes." Deferred income taxes under the liability
method required by FAS 109 reflect the net effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. There are no
significant book to tax differences associated with these temporary
differences. A valuation allowance is recognized if it is more likely than
not that some portion of the deferred asset will not be realized.
There was no cumulative effect of adopting FAS 109 on the Company's net
loss for the year ended December 31, 1993.
The Company's deferred tax assets are comprised of the following at
December 31, 1995:
Loss carryforward and other deferred assets $ 4,371,000
Deferred tax asset valuation allowance (4,371,000)
-----------
$ --
===========
The valuation allowance has been established since the use of the loss
carryforwards is uncertain. The loss carryforwards and the related valuation
allowance have increased since January 1995 by approximately $840,450 as a
result of operating losses for the year ended December 31, 1995.
The provision for income taxes as of December 31, 1993 is comprised solely
of current state taxes payable.
M. Commitments and Contingencies
Employment Contracts
The Company has entered into employment agreements with certain of its
executives, which provide for payments to these executives of either 2.99
times or 1.0 times their average annual salary in the event they are
terminated by the Company within a twenty-four (24) month period following
certain changes in control. The maximum contingent liability under these
agreements at December 31, 1995 was approximately $635,000.
Early Retirement and Non-Competition Agreement
On December 29, 1995, the Company and Dr. C. Joel Glovsky ("Dr. Glovsky"),
a co-founder, director and officer of the Company, entered into an Early
Retirement and Non-Competition Agreement (the "Agreement"). Under the terms
of the Agreement, Dr. Glovsky resigned as a director and an officer of the
Company effective December 31, 1995, the Company and Dr. Glovsky agreed to
terminate his employment agreement which was scheduled to expire on December
31, 1997 and the Company agreed to enter into a five year consulting
agreement with Dr. Glovsky. Under the terms of the Consulting Agreement, Dr.
Glovsky will provide services to the Company on an as needed basis over the
next five (5) years. The Company will pay Dr. Glovsky $60,000 per annum for
these services and will also provide Dr. Glovsky with health insurance, life
insurance and other certain benefits through 1997. As part of the Agreement,
the Company also agreed to forgive loans that the Company had extended to Dr.
Glovsky as well as pay income taxes on behalf of Dr. Glovsky for the
forgiveness of these loans. The Company also entered into a non-compete
agreement with Dr. Glovsky and fully vested Dr. Glovsky's stock options. The
following summarizes the components of the Agreement:
F-24
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
M. Commitments and Contingencies (Continued)
<TABLE>
<CAPTION>
<S> <C>
Consulting agreement and related benefits $434,000
Forgiveness of loans totaling $138,539 including taxes related to the forgiveness of
these loans of $49,874 188,413
Non-compete agreement 118,000
Compensation expense related to the acceleration of the vesting of Dr. Glovsky's
stock options 10,000
--------
$750,413
========
</TABLE>
At December 31, 1995, the Company has expensed $263,413 of the total
$750,413 charge associated with the Agreement. The $263,413 is comprised of
the following components:
<TABLE>
<CAPTION>
<S> <C>
Write-off of loans previously granted to Dr. Glovsky and related taxes $188,413
Compensation and related benefits 65,000
Compensation expense related to the acceleration of the vesting of Dr. Glovsky's
stock options 10,000
--------
$263,413
========
</TABLE>
The Company will record compensation expense of approximately $369,000
over the next five years as Dr. Glovsky provides services under the
consulting agreement. In addition, the Company capitalized the cost
associated with the non-compete agreement and will amortize the balance over
the life of the non-compete agreement which is three years.
If Dr. Glovsky's shares beneficially owned by him are not acquired in or
as part of a merger or take-over proposal on or before December 31, 1996 at a
per share value of at least $5.00, Dr. Glovsky's monthly consulting fee will
be increased by $4,000 per month and Dr. Glovsky has the right to require the
Company to purchase up to 65,000 of his shares at a purchase price of $6.00
per share.
N. Legal Proceedings
The Company from time to time is named a defendant in lawsuits which arise
in the normal course of its business. As of February 14, 1996, the Company
was involved in seven such lawsuits. The Company believes it has meritorious
defenses to each of the complaints and is vigorously defending its position
in each claim. Should the Company be found to be liable in any instance,
management believes that the resulting claim against the Company, if any,
would not be material.
O. Stock Option Plans
In October 1991, the Company adopted the 1991 Combination Stock Option
Plan (the "Option Plan"). The Option Plan provides for the granting to key
employees of the Company, stock options intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), as well as "non-qualified options" not
intended to qualify. A total of 135,000 shares of common stock were reserved
for issuance under the Option Plan. In August 1993, the stockholders approved
an amendment to the Plan which increased the shares to be reserved for
issuance to 285,000 shares. In May 1994, the stockholders approved an
amendment to the plan which increased the shares to be reserved for issuance
to 535,000 shares. In June 1995, the stockholders approved an amendment to
the plan which increased the shares to be reserved for issuance to 785,000
shares. The Option Plan is administered by the Board of Directors.
Subject to the terms of the Option Plan, the Board of Directors are
authorized to select options and determine the number of shares covered by
each option, its exercise price and other terms. Options under the 1991 Plan
may not be granted after August 31, 2001. The exercise price of incentive
stock options granted under the Option Plan may not be less than the fair
market value of the Company's common stock on the date of grant and cannot be
F-25
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
O. Stock Option Plans (Continued)
less than 110% of such fair market value with respect to any incentive stock
option granted to a participant who owns 10% or more of the Company's
outstanding common stock. The exercise price of non-qualified options granted
under the Option Plan cannot be less than 50% of the fair market value of the
Company's common stock on the date of grant. Options become exercisable in
equal annual installments over two to three years. The period within which
any option may be exercised cannot exceed ten years from the date of grant.
Options pursuant to the 1991 Plan held by a terminated employee expire three
months after the Option holder ceases to be an employee except in the event
of death or disability.
In June 1995, the Company's stockholders approved the 1995 Non-Qualified
Stock Option Plan for Non-Employee Directors (the "Directors Plan"). The
Directors Plan provides that each year on the first Friday following the
Company's Annual Meeting of Stockholders (the "Grant Date"), each individual
elected, re-elected or continuing as a Non-Employee Director will
automatically receive a non-qualified stock option for 6,000 shares of Common
Stock, subject to adjustment resulting from changes in capitalization.
180,000 shares of Common Stock are reserved for issuance under the Directors
Plan. Options granted under the Directors Plan vest one-third on the Grant
Date, one-third on the Friday prior to the first Annual Meeting of
Stockholders following the Grant Date, and one-third on the Friday prior to
the second Annual Meeting of Stockholders following the grant date. Options
under the Directors Plan expire ten years from the date of grant.
Under the Directors Plan's formula, the exercise price for options granted
will be either 100% of the simple average of the high and low price at which
the Common Stock traded on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") Small-Cap System on the date of the grant or
the last sale price of Common Stock on the NASDAQ on the date of grant,
whichever is higher.
Information concerning options to purchase shares of common stock under
both the Option Plan and the Director's Plan for the years ended December 31,
1993, 1994 and 1995 is as follows:
Shares Exercise Price
-------- ------------------
Outstanding at December 31, 1993 209,700 $4.25 to $4.50
Granted 62,000 $4.50 to $6.25
Exercised -- --
Expired (4,000) $4.50
------- --------------
Outstanding at December 31, 1994 267,700 $4.25 to $6.25
Granted 209,500 $2.25 to $2.38
Exercised -- --
Expired (161,167) $2.00 to $2.28
-------- --------------
Outstanding at December 31, 1995 316,033 $2.00 to $2.38
======== ==============
Options to purchase 0, 68,567 and 157,800 were exercisable at December 31,
1993, 1994 and 1995, respectively. The number of shares available for the
granting of options at the beginning and end of 1994 and 1995 were 75,300 and
263,300 and 263,300 and 303,800, respectively. On February 28, 1995, the
Company's Board of Directors voted in accordance with the provisions of the
Company's Option Plan to re-price all of the then outstanding options to
$2.00 per share, the closing price on the day immediately preceding the Board
meeting.
F-26
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
P. Warrants
Information concerning warrants to purchase shares of common stock for the
years ended December 31, 1993, 1994 and 1995 is as follows:
Shares Exercise Price
------ ------------------
Outstanding at December 31, 1992 156,000 $4.13 to $7.09
Granted 205,413 $7.09 to $8.25
Exercised -- --
Expired -- --
---- -----------------
Outstanding at December 31, 1993 361,413 $4.13 to $8.25
Granted 186,000 $4.16 to $7.09
Exercised -- --
Expired -- --
---- -----------------
Outstanding at December 31, 1994 547,413 $4.13 to $8.25
Granted 34,420 $4.16
Exercised -- --
Expired -- --
---- -----------------
Outstanding at December 31, 1995 581,833 $4.13 to $8.25
==== =================
Vesting period for warrants outstanding range from warrants that vest
immediately to others vesting over a five year period. At December 31, 1995
and 1994, respectively, 565,166 and 514,080 warrants were exercisable. Of the
warrants granted in 1995 and 1994, 31,413 were re-priced from $7.09 to $4.16
per share in March 1995. Of the 186,000 warrants issued in 1994, 100,000 of
the warrants were issued to Emeritus (Note H).
Q. Preferred Stock
In September 1993, the Company issued 700,000 shares of $.01 par value
Series A Cumulative Convertible Preferred Stock (the "Convertible Preferred
Stock") for $10 per share. In October 1993, the Company issued an additional
82,350 shares of the Convertible Preferred Stock also at $10 per share. The
Company is authorized to issue 1,000,000 shares of the preferred stock
generally. At December 31, 1993, there were 782,350 shares of Convertible
Preferred Stock outstanding.
In March 1994, the Company filed an issuer tender offer statement (the
"Offer") on Schedule 13E-4 with the Securities and Exchange Commission which
the Company offered to exchange 2.6 shares of the Company's common stock for
each outstanding share of the Company's Convertible Preferred Stock. The
Offer expired on July 1, 1994. Those stockholders who tendered their
preferred shares for shares of common stock forfeited any accrued dividends.
Of the 782,350 shares of the Company's Convertible Preferred Stock
outstanding at the commencement of the Offer, 654,300 or 84% were tendered
pursuant to the Offer and accepted for exchange by the Company. On December
31, 1994, there were 128,050 preferred shares outstanding.
The Convertible Preferred Stock ranks with respect to dividends and upon
liquidation, dissolution or winding up, senior to the Common Stock. Dividends
are cumulative from the date of original issue at the rate of $1.00 per share
per annum, payable quarterly on September 30, December 31, March 31 and June
30 of each year. Dividends are declared at the Board of Directors' discretion
and paid out of funds legally available therefor. The Company paid cash
dividends on the Convertible Preferred Stock of approximately $195,588 on
March 31, 1994. The Board of Directors voted to omit the payout of the
dividend on the Convertible Preferred Stock for the quarters ending June 30,
1994, September 30, 1994 and December 31, 1994. The Company paid cash
dividends on the Convertible Preferred Stock of approximately $32,013 on both
March 31, 1995 and June 30, 1995. The Board of Directors voted to omit the
payout of the dividend on the Convertible Preferred Stock for the quarters
ending September 30, 1995 and December 31, 1995. These dividends, although
not declared or paid, remain cumulative without interest. Failure to pay any
quarterly dividend results in a reduction of the conversion price but not
below the then par value of
F-27
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Q. Preferred Stock (Continued)
the shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock. Dividends in arrears totaled $156,175 at December 31, 1995.
In December 1995, certain preferred shareholders of the Company converted
their Convertible Preferred Stock to Common Stock. These preferred
shareholders converted 15,550 preferred shares to 40,674 common shares at the
conversion rate then in effect. At December 31, 1995 there were 112,500
preferred shares outstanding.
The Convertible Preferred Stock is convertible at any time prior to
redemption into, initially, two shares of Common Stock for each share of the
Convertible Preferred Stock. The initial conversion price is equal to $5.00
per share and is subject to adjustment under certain circumstances. The
conversion price of the Convertible Preferred Stock at December 31, 1995 was
$3.56. The Convertible Preferred Stock is redeemable by the Company after
September 1, 1996 at $10.00 per share, plus accrued but unpaid dividends,
under certain circumstances.
Upon liquidation, dissolution or winding up of the Company, holders of the
Convertible Preferred Stock are entitled to receive a preferential
liquidation distribution equivalent to $10.00 per share plus accumulated and
unpaid dividends before any distribution to holders of the Common Stock or
any capital stock ranking junior to the Convertible Preferred Stock.
Holders of the Convertible Preferred Stock will not have voting rights
except (i) with respect to the creation, authorization or issuance of capital
stock ranking senior to or in parity with (in certain respects) to the
Convertible Preferred Stock and with respect to certain amendments to the
Company's Restated Certificate of Incorporation, (ii) if the Company shall
have failed to declare and pay or set apart for payment in full the
preferential dividends accumulated on the Convertible Preferred Stock for any
four quarterly dividend payment periods, whether or not consecutively, (iii)
in connection with a consolidation into or merger with any corporation, firm
or entity, or sale, lease or other disposition of all or substantially all of
the Company's assets unless the Company is the surviving entity, and (iv) as
otherwise required by law. Except for clause (ii) above, holders of the
Convertible Preferred Stock shall be entitled to one vote per share of
Convertible Preferred Stock, voting separately as a single class, on all
matters on which the Convertible Preferred Stock is entitled to vote. In the
event the Company fails to pay current dividends as provided in clause (ii)
above, holders of the Convertible Preferred Stock shall be entitled to vote,
on a one vote per share of Convertible Preferred Stock basis, with the
holders of Common Stock on all matters thereafter submitted including the
election of directors.
R. Subsequent Events
Working Capital Loan
On January 16, 1996, pursuant to a letter of intent for a then proposed
business combination, Integrated Health Services, Inc. ("IHS") loaned the sum
of $250,000 to the Company for working capital purposes. This loan is
repayable to IHS in accordance with a promissory note which bears interest at
8.5%, interest payable semi-annually. Under certain circumstances up to
$100,000 of the promissory note could become payable prior to the maturity
date of January 15, 1998.
Signing of Letter of Intent
On March 15, 1996, the Company and Emeritus jointly announced the signing
of an agreement in principal to merge in a tax-free stock-for-stock
transaction. Under the terms of the agreement in principal, shareholders of
the Company would receive .1845 shares (subject to adjustment under certain
circumstances) of Emeritus Common Stock for each share of Standish Common
Stock outstanding or issuable upon conversion of the Company's Convertible
Preferred Stock. The Exchange ratio was based on a market price of $21.00 per
share of Emeritus Common Stock. There will be a one year escrow of 5% of the
Emeritus Common Stock issued in the transaction to cover any inaccuracies in
the representations and warranties. The transaction is subject to negotiation
and
F-28
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
R. Subsequent Events (Continued)
execution of a definitive merger agreement and will be subject to approval by
the Company's shareholders. The transaction will also be conditioned on
qualifying the transaction as a "pooling of interests" and as a tax-free
reorganization under the Internal Revenue Code.
Fox Ridge Manor Transaction
On March 25, 1996, the Company received approximately $825,000 for back
management fees and prior investments in connection with the refinancing and
sale by a third party owner of the Fox Ridge Manor community located in
Dover, Pennsylvania. The Company expects to record a gain on this transaction
of approximately $600,000. The Company has also made available to Northwood
Retirement Community, Inc., the new owner of the Community, a $150,000 line
of credit to be used by the new owner in connection with the Fox Ridge Manor
community.
F-29
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 355,939 $ 367,631
Restricted cash 385,745 199,719
Accounts receivable, less allowance for doubtful accounts of
$159,747 and $448,425 at June 30, 1996 and
December 31, 1995, respectively 176,546 176,818
Due from related parties 177,625 437,234
Other current assets 239,378 56,625
------------ -----------
Total current assets 1,335,233 1,238,027
Restricted deposits 610,732 610,732
Investment in Adams Square Limited Partnership 127,000 127,000
Investment in Cornish Realty Associates, L.P. -- 125,000
Due from related parties 30,670 130,215
Property, plant and equipment, net 10,916,034 11,079,454
Prepaid lease deposit, net 506,792 539,843
Non-compete agreement, net 180,940 219,671
Resident leases, net 152,145 176,979
Goodwill, net 1,480,000 1,504,000
Other assets, net 188,529 223,910
------------ -----------
Total assets $ 15,528,075 $15,974,831
============ ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable $ 269,058 522,992
Accrued payroll and related taxes 228,251 217,304
Accrued severance costs 142,000 232,874
Accrued professional fees 441,963 570,997
Resident security deposits 158,442 172,945
Current portion of long-term debt 3,315,586 626,298
Other current liabilities 254,059 478,999
------------ -----------
Total current liabilities 4,809,359 2,822,409
Deferred gain on sale of bonds 520,815 520,815
Long-term debt 10,461,569 12,457,003
Minority interest 108,969 156,970
Commitments and contingencies
Stockholders' (deficit) equity:
Preferred stock (aggregate liquidation preference of
$1,127,300 and $1,281,175 at June 30, 1996 and December 31,
1995, respectively) 920,000 1,125,000
Common stock, $.01 par value 30,000,000 shares authorized and
3,501,053 and 3,435,826 shares issued and outstanding at June
30, 1996 and December 31, 1995 35,011 34,359
Additional paid-in capital 8,963,953 8,746,096
Accumulated deficit (10,291,601) (9,887,821)
------------ -----------
Total stockholders' (deficit) equity $ (372,637) 17,634
------------ -----------
Total liabilities and stockholders' (deficit) equity $ 15,528,075 $15,974,831
============ ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-30
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------- ------------- --------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Service revenue $2,193,107 $1,875,183 $4,380,316 $ 3,517,717
Management fees and marketing revenue 87,708 195,741 213,152 304,811
Development fees and other revenue 65,250 120,000 76,500 158,000
---------- ---------- ---------- -----------
2,346,065 2,190,924 4,669,968 3,980,528
Operating costs and expenses:
Community operating expense 1,626,134 1,448,080 3,208,438 2,749,877
Community rent expense 154,459 142,141 304,230 271,688
Selling, general and administrative
expense 463,478 622,575 930,804 1,156,127
Transaction termination costs 27,381 -- 186,352 --
Depreciation and amortization expense 196,637 168,876 393,269 320,747
---------- ---------- ---------- -----------
Total operating costs and expenses 2,468,089 2,381,672 5,023,093 4,498,439
---------- ---------- ---------- -----------
Loss from operations (122,024) (190,748) (353,125) (517,911)
Interest expense (405,875) (370,249) (823,524) (678,322)
Interest income 17,970 41,909 28,618 81,232
Other income 100,000 -- 696,249 --
Minority interest 28,894 24,253 48,002 49,941
---------- ---------- ---------- -----------
Loss before income taxes (381,035) (494,835) (403,780) (1,065,060)
Provision for income taxes -- -- -- --
---------- ---------- ---------- -----------
Net loss $ (381,035) $ (494,835) $ (403,780) $(1,065,060)
========== ========== ========== ===========
Net loss per common share $ (0.12) $ (0.16) $ (0.13) $ (0.33)
Weighted average number of common shares
outstanding 3,442,718 3,395,152 3,439,272 3,395,152
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-31
<PAGE>
THE STANDISH CARE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1996 1995
------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (403,780) $(1,065,060)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 393,269 320,747
Accretion associated with capital lease obligations 100,648 104,548
Amortization of deferred costs 23,670 34,584
Minority interest in net (loss) of consolidated partnership (48,002) (49,941)
Compensation expense associated with issuance of warrants 6,333 12,667
Other income (696,249) 0
(Increase) in restricted cash (186,026) (638,907)
Decrease (increase) in accounts receivable 272 (28,781)
Decrease (increase) in due from related parties 359,154 (47,570)
Increase in other current assets (132,753) (27,069)
Increase in interest receivable -- (9,202)
Decrease in note receivable -- 1,226
(Decrease) increase in accounts payable (253,934) 34,174
Increase in accrued payroll and related taxes 10,947 16,636
(Decrease) in accrued severance costs (90,874) --
(Decrease) increase in accrued professional fees (129,034) 25,573
(Decrease) increase in other current liabilities (224,940) 35,167
----------- -----------
Net cash used by operating activities (1,271,299) (1,281,208)
----------- -----------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (104,090) (1,122,713)
(Decrease) increase in security deposits -- 91,528
Return of previous investment in Cornish Realty Associates,
Ltd. -- 125,000
Use of prepaid deposit -- 27,651
Proceeds from sale of bonds 825,554 (19,000)
Cash deposited to collateralize letters of credit -- (62,750)
Funding of accrued development costs -- (54,498)
(Increase) in other assets (38,769) --
----------- -----------
Net cash provided by investing activities 682,695 (1,014,782)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from excercise of stock options $ 7,375 --
Increase in advance for expansion costs -- $ 750,000
Payment of Convertible Preferred Stock dividends -- (64,025)
Proceeds from borrowings $ 750,000 $ 2,281,000
Repayment of debt (163,822) (28,118)
Principal payments on capital lease obligations (16,641) (23,605)
----------- -----------
Net cash provided by financing activities 576,912 2,915,252
----------- -----------
Net increase in cash and cash equivalents (11,692) 619,262
----------- -----------
Cash and cash equivalents at beginning of year 367,631 232,716
----------- -----------
Cash and cash equivalents at end of period $ 355,939 $ 851,978
=========== ===========
NON-CASH ACTIVITIES
Purchase of property, plant and equipment by seller note
financing $ 0 $ 1,852,000
Dividends accrued but not paid on Convertible Preferred Stock $ 51,125 $ 32,013
Conversion of 20,500 shares of preferred stock to 61,727 shares
(.01 par value) of common stock $ 205,000 $ 0
Refinancing fee from third party $ 100,000 $ 0
Reclass of a portion of the Cornish investment to related party $ 50,000 $ 0
Reclass of a portion of the Cornish investment to other assets $ 75,000 $ 0
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-32
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
The accompanying financial statements and notes do not include all of the
disclosures made in the Company's Annual Report on Form 10-K and related Form
10-K/A for 1995, which should be read in conjunction with these statements.
The financial information included herein has not been audited. However, in
the opinion of Management, the financial statements include all adjustments
necessary for a fair presentation of the quarterly results. The results of
the three and six month periods ended June 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
B. Restricted Cash
Restricted cash consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ----------------
(unaudited)
<S> <C> <C>
Resident security deposits $159,573 $172,945
Reserve, line of credit -Northwood Retirement, Inc. 150,534 --
Credit enhancement escrow--Fox Ridge 50,000 --
Capital improvements reserve--Bailey 14,032 15,481
Expansion funds--Piedmont 10,421 10,261
Real estate tax escrow-Sunny Knoll 1,185 1,032
-------- --------
$385,745 $199,719
======== ========
</TABLE>
C. Related Party Transactions
The Company has conducted various transactions with its officers,
directors, and principal stockholders and/or their affiliated companies and
unconsolidated affiliates. Accounts affected by these transactions were as
follows:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1996
--------------
(unaudited)
<S> <C>
Accounts receivable from Emeritus Corporation ("Emeritus") for refinancing fee $100,000
Accounts receivable from Emeritus for management fees and reimbursable expenses 36,800
Accounts receivable from Adams Square Limited Partnership for management fees,
marketing fees and reimbursable expenses 40,825
Note receivable from Adams Square Limited Partnership 23,170
Loan to Officer 7,500
Management fees and marketing revenue from Emeritus 14,900
Management fees from Cornish 27,402
Management fees from Adams Square Limited Partnership 51,367
Marketing fee revenue from Adams Square Limited Partnership 21,000
Expenses incurred through or reimbursed to stockholders, officers, directors and
their affiliates:
Selling and marketing 69,695
General and administrative 2,000
</TABLE>
F-33
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
D. Restricted Deposits (Continued)
Restricted deposits consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ----------------
(unaudited)
<S> <C> <C>
Cash collateral for letter of
credit--Piedmont $237,750 $237,750
Cash collateral for letter of
credit--Dominion 231,200 231,200
Cash collateral for letter of credit--Lowry 65,000 65,000
Debt service reserve--Bailey refinancing 61,032 61,032
Debt service reserve--Northwood Bonds 15,750 15,750
-------- --------
$610,732 $610,732
======== ========
</TABLE>
The letters of credit are required under the terms of the financing
agreements for Dominion, Lowry and Piedmont. The letters of credit are
required to stay in place for the duration of the leases. The Bailey debt
service reserve is required to stay in place for the five-year life of the
loan. The debt service reserve fund related to the Northwood Bonds represents
approximately two months of interest on the face amount of $750,000 of
Northwood Bonds outstanding for which the Company provided certain credit
enhancements in the form of guarantees in March 1996.
E. Property, Plant & Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ----------------
(unaudited)
<S> <C> <C>
Land $ 1,616,628 $ 1,616,628
Land improvements 24,864 21,964
Furniture, fixtures and
equipment 1,242,760 1,221,239
Buildings and improvements 9,393,664 9,313,995
----------- -----------
12,277,916 12,173,826
Less accumulated depreciation (1,361,882) (1,094,372)
----------- -----------
$10,916,034 $11,079,454
=========== ===========
</TABLE>
F. Short-term Borrowings and Long-term Debt
Short-term borrowings and long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
--------------- --------------------
(unaudited)
<S> <C> <C>
Mortgages Payable:
Bailey mortgage payable with interest at the one-month
London Interbank offered rate for US dollars plus 2.25%
(9.05% at June 30, 1996), principal payable monthly in
varying amounts. All remaining principal and interest due
in February 1999, collateralized by real estate. $918,044 $936,804
F-34
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F. Short-term Borrowings and Long-term Debt (Continued)
June 30, 1996 December 31, 1995
--------------- --------------------
Sunny Knoll mortgage payable with interest equal to the base
rate of Primary Bank plus 1.75% (10.75% at June 30, 1996),
principal payable monthly in varying amounts, all remaining
principal due April 1997, collateralized by real estate. $739,985 $744,764
Notes payable:
Note payable with 9% interest, principal payments of
varying amounts and interest payable over five years. All
remaining principal and interest due January 1999,
collateralized by a second mortgage on Bailey Village. 57,227 66,853
Note payable with interest at First Union Bank and Trust's
prime rate plus 1% (9.25% at June 30, 1996), payable in
fifty-nine installments of $833 each month. All remaining
principal and interest due in December 2000,
collateralized by real estate 135,000 140,000
Note payable with 9.47% interest and principal due
December1999, collateralized by automobile 12,779 14,901
Notes payable with 9% interest and principal payments in
varying amounts due February 1997 146,096 149,430
Note payable to a minority partner with 8% interest, entire
principal balance is due April 1997 137,500 137,500
Note payable to Adams Square L.P., interest-free, due on
demand 127,000 127,000
Note payable with 12% interest through April 1996, and 14%
thereafter, entire principal due April 1997 1,100,000 1,100,000
Note payable to Emeritus with 10% interest, quarterly
principal payments based on excess cash flow, all
remaining principal due April 1998, collateralized by the
Company's stock in Sunny Knoll 431,532 551,732
Note payable to Integrated Health Services, Inc. with 8.5%
interest payable semi-annually. Under certain
circumstances, $100,000 could become due prior to January
15, 1998. Otherwise, entire principal is due January 15,
1998. (Note K) 250,000 --
Note payable to CareMatrix Corporation ("CareMatrix") with
10% interest payable annually. All principal and accrued
interest due on October 1, 1996 subject to an extension
until April 1, 1997 at the election of CareMatrix,
collateralized by a subordinate mortgage on Bailey
Village. (Notes K and M) 500,000 --
Deferred liability associated with the Piedmont operating
lease 183,914 160,244
---------- ----------------
Subtotal 4,739,077 4,129,228
F-35
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F. Short-term Borrowings and Long-term Debt (Continued)
June 30, 1996 December 31, 1995
--------------- --------------------
(unaudited)
Convertible debentures payable to Emeritus with 8.5%
interest due in June 1998, convertible to common stock at
$4.16 per share (subject to anti-dilution adjustments) $ 2,000,000 $ 2,000,000
Capital lease obligations 7,038,078 6,954,073
----------- -----------
Subtotal 13,777,155 13,083,301
Less current maturities 3,315,586 626,298
----------- -----------
Long-term debt $10,461,569 $12,457,003
=========== ===========
</TABLE>
G. Omission of Preferred Stock Dividend
On June 28, 1996, the Company's Board of Directors voted to omit the $.25
quarterly dividend on the Series A Cumulative Convertible Preferred Stock
("Convertible Preferred Stock") for the quarter ended June 30, 1996. These
dividends, although not declared or paid, remain cumulative without interest.
Failure to pay any quarterly dividend results in a reduction of the
conversion price of the shares of Common Stock issuable upon conversion of
the Convertible Preferred Stock. As a result of omitting more than four
quarterly dividend payments, holders of the Convertible Preferred Stock are
entitled to vote, on a one vote per share of Convertible Stock basis, with
the holders of Common Stock on all matters submitted to stockholders
including the election of directors.
H. Earnings Per Share
Net loss per common share is computed by dividing the net loss for the
period plus any dividends accrued, paid or in arrears on the Company's
Convertible Preferred Stock by the weighted average number of outstanding
shares of common stock. Dividends paid in the three and six month periods
ended June 30, 1996 and June 30, 1995 totaled $0, $0, $32,013 and $64,025
respectively. As of June 30, 1996, aggregate dividends in arrears on the
Convertible Preferred Stock totaled approximately $207,300 and the conversion
price of the Preferred Stock was $3.25 (subject to anti-dilution
adjustments).
I. Pro Forma Results of Operations
The following represents the unaudited pro forma results of operations as
if Sunny Knoll was acquired at the beginning of 1995:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
----------------------
(unaudited)
<S> <C>
Net revenues 4,379,332
Loss before extraordinary items (930,883)
Net loss (930,883)
Net loss per common share (.29)
</TABLE>
The pro forma operating results include results of operations for the six
months ended June 30, 1995 with increased depreciation and amortization on
property, plant and equipment associated with the acquisition of Sunny Knoll.
The pro forma information given above does not purport to be indicative of
the results that actually would have been attained if the operations were
combined during the period presented, and is not intended to be a projection
of future results or trends.
F-36
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
J. Stock Option Grants (Continued)
In June 1996, the Company's Board of Directors voted to grant 75,000 stock
options to two officers and directors of the Company which allow the holder
of such stock options to purchase shares of the Company's common stock at
$2.94 per share, the closing stock price on the day immediately preceding the
Board Meeting. The stock options contain a provision which increases the
amount of the stock options up to a maximum of 750,000 shares at the time of
the closing of the merger with CareMatrix (Note L).
K. Commitments and Contingencies
Working Capital Loans
On January 16, 1996, pursuant to a letter of intent for a then proposed
business combination, Integrated Health Services, Inc. ("IHS") loaned the sum
of $250,000 to the Company for working capital purposes. In February 1996,
IHS informed the Company that it was terminating their business combination
discussions. This loan could become repayable to IHS in accordance with a
promissory note which bears interest at 8.5%, interest payable semi-annually.
Under certain circumstances up to $100,000 of the promissory note could
become payable prior to the maturity date of January 15, 1998. On or about
April 9, 1996, the Company asserted a claim against IHS based on IHS's
unilateral breach of its contractual obligations under its letter of intent
with the Company as well as for its duties of good faith and fair dealing. In
addition, the Company has asserted claims that IHS's conduct constitutes
unfair and deceptive trade practices under applicable Massachusetts law.
Although no law suit has been commenced by the Company, the Company intends
to vigorously pursue its claims against IHS.
On June 3, 1996, pursuant to a term sheet for a proposed business
combination, CareMatrix Corporation loaned the sum of $1,000,000 to the
Company for working capital purposes. The note is due on October 1, 1996
subject to an extension until April 1, 1997 at the election of CareMatrix.
The note bears interest at 10% and interest is payable annually. In
accordance with the terms of the promissory note, CareMatrix advanced
$500,000 to the Company upon the signing of the term sheet and $500,000 upon
the execution of the merger agreement. (Note M)
L. CareMatrix Merger Transaction
In June 1996, the Company announced that it had signed a term sheet with
CareMatrix Corporation, a privately held group of twelve separate
corporations ("CareMatrix"), under which the Company would acquire all of the
assets and operations of CareMatrix and the Company would issue between 40
million and 50 million shares of its common stock to the stockholders of
CareMatrix subject to due diligence and negotiation of a definitive merger
agreement. On July 3, 1996, the Company and CareMatrix entered into a
definitive Agreement and Plan of Merger (the "Merger Agreement") under which
twelve subsidiary corporations of the Company would be merged into CareMatrix
and the Company would issue 50 million shares of its common stock to the
stockholders of CareMatrix. The Merger Agreement was approved by the Boards
of Directors of the Company and CareMatrix on July 10, 1996. The Merger
Agreement is subject to the approval of both the Company's and CareMatrix's
stockholders, the receipt of an updated fairness opinion and other customary
closing conditions.
M. Subsequent Events
On July 10, 1996, CareMatrix funded the second installment of $500,000 in
connection with its promissory note with the Company. On July 30, 1996,
through the issuance and sale to a principal stockholder of CareMatrix (the
"purchaser"), for $14,000 per share or $1,400,000 in the aggregate, the
Company issued 100 shares of its newly created Series B Convertible Preferred
Stock (the "Series B Stock") with a liquidation value of $14,000 per share.
The Company used a portion of the proceeds from the share issuance to repay
the promissory note of $1,000,000 and obtained an additional $400,000 to be
used for working capital purposes. The Series B Stock is redeemable by the
Company at any time after December 1, 1996 at $14,000 per share plus accrued
dividends provided that the market price of the common stock exceeds 150% of
the conversion price ($4.16) then in effect for twenty consecutive trading
days. The Series B Stock will be entitled to a quarterly dividend of $350 per
share with quarterly dividend payments on each of December 31, March 31, June
30 and September 30. Concurrently with the issuance
F-37
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
M. Subsequent Events (Continued)
of the Series B Stock, the Company issued five year warrants to the purchaser
to purchase 400,000 shares of the Company's common stock at an exercise price
of $4.16 per share.
The following data represents certain unaudited pro forma information of
the Company assuming the issuance of the Series B Stock and the repayment of
the promissory note occurred on June 30, 1996.
<TABLE>
<S> <C>
Working capital $(2,074,126)
Total assets 16,428,075
Current portion of long-term debt 2,815,586
Long-term debt 10,461,569
Total shareholders equity 1,027,363
</TABLE>
N. Reclassification
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform with the 1996 presentation.
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of CareMatrix:
We have audited the accompanying combined balance sheets of CareMatrix as of
December 31, 1995 and 1994 and the related combined statements of operations
and stockholders' deficit and cash flows for the year ended December 31, 1995
and the period from June 24, 1994 (inception) to December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of CareMatrix as of
December 31, 1995 and 1994 and the combined results of its operations and its
cash flows for the year ended December 31, 1995 and the period from June 24,
1994 (inception) to December 31, 1994 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 24, 1996
The accompanying notes are an integral part of the
consolidated financial statements.
F-39
<PAGE>
CAREMATRIX
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1996 1995 1994
----------- -------------- --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,027,763 $ 144,643 $ 1,788
Receivables
Accounts receivable, net of allowance for doubtful
accounts of $304,425, $247,706 and $36,700 at
June 30, 1996,
December 31, 1995 and 1994, respectively 939,231 837,787 328,535
Other receivables 99,286 -- --
Prepaid expenses and other current assets 218,759 185,647 --
------------ ----------- -----------
Total current assets 3,285,039 1,168,077 330,323
Property, plant and equipment, net (Note 4) 1,444,435 730,017 --
Note receivable (Note 11) 769,904 -- --
Deposits and other assets (Note 6) 522,644 511,750 --
------------ ----------- -----------
Total assets $ 6,022,022 $ 2,409,844 $ 330,323
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable 203,093 651,860 42,120
Accrued compensation 109,104 171,777 30,676
Accrued liabilities (Note 5) 528,832 436,178 27,232
Accrued interest--stockholder (Note 9) 1,158,479 599,427 55,856
------------ ----------- -----------
Total current liabilities 1,999,508 1,859,242 155,884
Due to stockholder (Note 9) 16,992,096 9,661,381 2,729,791
Accrued closure costs--long term (Note 5) 528,788 650,816 --
------------ ----------- -----------
Total liabilities 19,520,392 12,171,439 2,885,675
Commitments and contingencies (Note 7)
Stockholders' deficit:
Accumulated deficit (13,498,370) (9,761,595) (2,555,352)
------------ ----------- -----------
Total stockholders' deficit (13,498,370) (9,761,595) (2,555,352)
------------ ----------- -----------
Total liabilities and stockholders' deficit $ 6,022,022 $ 2,409,844 $ 330,323
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE>
CAREMATRIX
COMBINED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Six Months June 24, 1994
Ended Year Ended (Inception) to
June 30, December 31, December 31,
1996 1995 1994
------------ -------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Net revenues $ 2,389,069 $ 2,484,857 $ 366,214
------------ ----------- ------------
Operating costs and administrative expenses:
Salaries, wages and benefits 1,574,653 2,100,097 253,048
Salaries, wages and benefits--related
party (Note 9) 1,406,297 2,123,152 579,078
Professional fees 24,309 163,158 36,781
Professional fees--related party (Note 9) 476,603 493,269 260,411
Supplies 326,079 275,706 11,848
Supplies--related party (Note 9) 82,169 166,136 124,726
Utilities 126,636 126,216 19,448
Utilities--related party (Note 9) 79,199 113,653 117,374
Depreciation and amortization 65,164 2,931 3,603
Rent 544,775 645,702 45,868
Rent--related party (Note 9) 143,985 422,468 240,239
Provision for writedown of assets (Note 3) -- -- 757,095
Provision for closure loss (Note 3) -- 894,872 --
Provision for bad debts 56,719 211,006 36,700
Other 146,811 392,186 63,099
Other--related party, primarily
administrative, development and
marketing costs (Note 9) 537,765 1,016,977 316,392
------------ ----------- ------------
Total operating costs and
administrative expenses 5,591,164 9,147,529 2,865,710
Interest income (24,372) -- --
Interest expense--stockholder (Note 9) 559,052 543,571 55,856
------------ ----------- ------------
Loss (Note 2) $ (3,736,775) $(7,206,243) $(2,555,352)
============ =========== ===========
Accumulated deficit at beginning of period (9,761,595) (2,555,352) --
------------ ----------- ------------
Accumulated deficit at end of period $(13,498,370) $(9,761,595) $(2,555,352)
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE>
CAREMATRIX
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months June 24, 1994
Ended Year Ended (Inception) to
June 30, December 31, December 31,
1996 1995 1994
------------ -------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Loss $(3,736,775) $(7,206,243) $(2,555,352)
Noncash items included in net loss:
Depreciation and amortization 65,164 2,931 3,603
Provision for writedown of assets -- -- 757,095
Provision for closure loss -- 894,872 --
Changes in receivables (101,444) (509,252) (328,535)
Changes in accounts payable and accrued
liabilities 18,238 1,467,225 127,056
Changes in other assets (143,292) (697,397) --
Net cash used by operating activities (3,898,109) (6,047,864) (1,996,133)
----------- ----------- -----------
Cash flows from investing activities
Capital expenditures (779,582) (740,871) (29,764)
Note receivable (769,904) -- --
Acquisition, net of cash acquired (Note 10) -- -- (702,106)
----------- ----------- -----------
Net cash used by investing activities (1,549,486) (740,871) (731,870)
----------- ----------- -----------
Cash flows from financing activities
Advances of funds from stockholder 7,330,715 6,931,590 2,729,791
----------- ----------- -----------
Net cash provided by financing activities 7,330,715 6,931,590 2,729,791
----------- ----------- -----------
Increase in cash and cash equivalents 1,883,120 142,855 1,788
Cash and cash equivalents, beginning of period 144,643 1,788 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 2,027,763 $ 144,643 $ 1,788
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Nature of Business and Organization
The combined financial statements of CareMatrix ("the Company") for the
period June 24, 1994 (inception) through December 31, 1994 (audited), the
year ended December 31, 1995 (audited), and the six months ending June 30,
1996 (unaudited) have been prepared to reflect the combination of business
entities which have been operated since their date of inception under common
control by Abraham D. Gosman ("Mr. Gosman"), principal stockholder of the
Company, directly or through trusts.
During the periods covered by these financial statements, the Company
derived revenues from one or more of the following services: the operation of
an inpatient nursing facility in Maryland; the operation of an outpatient
rehabilitation facility in Georgia; and the management of two inpatient
nursing facilities in Florida.
The Company intends to provide development, management and other services
in connection with the establishment of assisted living facilities, nursing
homes and other health care facilities.
The entities operated under common control are non-taxpaying (i.e.,
primarily S Corporations, which results in taxes being the responsibility of
the respective owners), and therefore the financial statements have been
presented as further described in Note 2.
2. Summary of Significant Accounting Policies
Estimates Used in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used when accounting for the collectibility of receivables and third
party settlements, depreciation and amortization and contingencies.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid instruments with
original maturities at the time of purchase of three months or less.
Revenue Recognition
Net revenues are reported at the estimated realizable amounts from
patients, third-party payors and others for services rendered. Revenue under
certain third-party payor agreements is subject to audit and retroactive
adjustments. Provisions for estimated third-party payor settlements and
adjustments are estimated in the period the related services are rendered and
adjusted in future periods as final settlements are determined. The provision
and related allowance are adjusted periodically, based upon an evaluation of
historical collection experience with specific payors for particular
services, anticipated reimbursement levels with specific payors for new
services, industry reimbursement trends, and other relevant factors.
Third Party Reimbursement
For the year ended December 31, 1995 and for the period from June 24, 1994
(inception) to December 31, 1994, approximately 46% and 16%, respectively, of
the Company's net revenue was derived primarily from the participation of the
Company's nursing home and outpatient rehabilitation facility in Medicare and
Medicaid programs. Medicare compensates the Company on a "cost reimbursement"
basis. Medicaid compensates the Company for nursing services, patient care
and administrative and routine services based on interim payments and
re-indexed rate payments (final settlements) subject to ceilings. In addition
to extensive existing governmental
F-43
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies
(Continued)
health care regulation, there are numerous initiatives at the federal and
state levels for comprehensive reforms affecting the payment for and
availability of health care services. Legislative changes to federal or state
reimbursement systems could adversely and retroactively affect recorded
revenues.
Property and Equipment
Additions are recorded at cost and depreciation is recorded principally by
use of the straight-line method for buildings, improvements and equipment
over their useful lives or, in the case of leasehold improvements, over the
life of the lease, if shorter. Upon disposition, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss
is included in income. Maintenance and repairs are charged to expense as
incurred. Major renewals or improvements are capitalized.
Income Taxes
The entities included in these financial statements are S Corporations or
partnerships; accordingly, income tax liabilities are the responsibility of
the respective owners or partners. Provisions for income taxes and deferred
assets and liabilities of the taxable entities have not been reflected in
these combined financial statements since there is no taxable income on a
combined basis.
Stock Based Compensation
The Company is adopting Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." This standard requires the
Company to report the fair value for stock-based compensation plans either
through recognition or disclosure. The Company will disclose the pro forma
net income and pro forma net income per common and common equivalent share
amounts assuming the fair value method was adopted on January 1, 1996. The
adoption of this standard will not impact the Company's results of
operations, financial position or cash flows.
Long-Lived Assets
The Company periodically assesses the recoverability of long-lived assets,
including property, plant and equipment and intangibles, when there are
indications of potential impairment based on estimates of undiscounted future
cash flows. The amount of impairment is calculated by comparing anticipated
discounted future cash flows with the carrying value of the related asset. In
performing this analysis, management considers such factors as current
results, trends and future prospects, in addition to other economic factors.
The Company is required to implement 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. As the Company currently
evaluates the realizability of its long-lived assets, including property,
plant and equipment and intangibles, adoption of the statement is not
anticipated to have a material effect on the Company's financial statements.
3. Acquisitions
During November 1994, the Company purchased the assets of an outpatient
rehabilitation facility in Atlanta, Georgia, for $702,106. In connection with
the purchase, the Company also assumed the lease obligation for the facility
for which the current lease term expires in August 1999. The acquisition was
accounted for as a purchase and $566,312 of such purchase price was recorded
as goodwill. For the period June 24, 1994 (inception) to December 31, 1994,
the Company recorded a charge of $757,095 to write off impaired assets
related to the acquisition. During 1995, the Company ceased operations at
this outpatient rehabilitation facility and recorded a provision for such
closure in the amount of $894,872 which approximates the remaining lease
obligations.
F-44
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
Useful December 31,
Life -------------
(Years) 1995
---------- -------------
<S> <C> <C>
Furniture and fixtures 5-7 $256,074
Equipment 3-10 65,719
Computer software 3 11,568
Leasehold improvements 4-20 399,587
--------
Property and equipment, gross 732,948
Less accumulated depreciation (2,931)
--------
Property and equipment, net $730,017
========
</TABLE>
Depreciation expense was $2,931 and $1,263, respectively, for the year
ended December 31, 1995 and the period June 24, 1994 (inception) to December
31, 1994.
5. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
------- -------
<S> <C> <C>
Accrued closure costs $244,056 $ --
Accrued rent 88,542 --
Other 103,580 27,232
-------- -------
Total accrued liabilities $436,178 $27,232
======== =======
</TABLE>
The accrued closure costs are for the closure of the outpatient
rehabilitation facility (see Note 3) and represent the current portion of the
remaining lease obligation. Closure costs in the amount of $894,872 were
accrued at December 31, 1995; $650,816 of this amount is classified as a long
term liability at December 31, 1995.
6. Lease Commitments
The Company leases various office space and certain equipment pursuant to
operating lease agreements.
Future minimum lease commitments at December 31, 1995 consisted of the
following:
<TABLE>
<S> <C>
1996 $ 1,121,277
1997 1,173,405
1998 1,223,405
1999 1,196,083
2000 1,095,833
Thereafter 5,381,250
-----------
$11,191,253
===========
</TABLE>
During August 1995, the Company entered into a ten year lease for a
138-bed nursing facility in Silver Spring, Maryland. In connection with this
lease the Company has made a $500,000 security deposit. In addition, the
lease requires that the Company provide an irrevocable letter of credit in
the amount of $1,000,000 to the lessor prior to August 15, 1996. The letter
of credit is required to remain in place until the lessor is provided with a
guarantee from a public company with a net worth greater than $10,000,000.
The Company has also been granted an option to purchase the facility during
the seventh year of the lease for a purchase price of $8,000,000.
F-45
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
7. Commitments and Contingencies (Continued)
The Company has entered into employment agreements with certain of its
employees, which include, among other terms, noncompetition provisions and
salary and benefits continuation.
8. Management Agreements
During December 1995, the Company entered into a management agreement,
with an initial term of five years, to manage a 54-bed nursing facility in
Homestead, Florida. In accordance with the provisions of the management
agreement, the Company receives a fixed management fee plus an incentive
management fee which is calculated as a percentage of net revenues. The fixed
management fee ranges from $80,000 during the first year of the agreement to
$140,000 during the fifth year of the agreement. The incentive management fee
ranges from 2.9% of net revenues during the first year of the agreement to
2.13% of net revenues during the fifth year of the agreement.
During December 1995, the Company entered into a management agreement,
with an initial term of five years, to manage a 120-bed nursing facility in
Miami, Florida. The management agreement provides for a management fee which
is based upon a maximum of 6% of net revenues during the first year and 5% of
net revenues thereafter. In accordance with the management agreement, the
Company agreed to lend to the operator of the facility an Operating Loan for
working capital. The Operating Loan is evidenced by a promissory note (and
collateralized by accounts receivable), bears interest at the prime rate plus
two percent and has a final maturity upon the termination or expiration of
the management agreement.
9. Related Party
For the year ended December 31, 1995 and the period June 24, 1994
(inception) to December 31, 1994, Continuum Care of Massachusetts, Inc.,
whose principal stockholder is Mr. Gosman, provided management services to
the Company. Fees for these services in the amount of $4,335,655 and
$1,638,220, respectively, have been included in the financial statements and
consist of the following:
<TABLE>
<CAPTION>
June 24, 1994
Year Ended (Inception) to
--------------- ------------------
December 31,
-------------------------------------
1995 1994
--------------- ------------------
<S> <C> <C>
Salaries, wages and benefits $2,123,152 $ 579,078
Supplies 166,136 124,726
Professional fees 493,269 260,411
Utilities 113,653 117,374
Rent 422,468 240,239
Other 1,016,977 316,392
---------- ----------
$4,335,655 $1,638,220
========== ==========
</TABLE>
Such fees are based on the discretion of Continuum Care of Massachusetts,
Inc. and may not be indicative of what they would have been if the Company
had performed these services internally or had contracted for such services
with unaffiliated entities. Included in rent is rent expense of $311,639 and
$193,600 for the year ended December 31, 1995 and the period June 24, 1994
(inception) to December 31, 1994, respectively, for the Company's principal
office space in Needham, Massachusetts. The lessee of the office space is
Continuum Care of Massachusetts, Inc. The remaining rent expense represents
various operating leases for equipment.
The Company intends to provide development and other services in
connection with the establishment of assisted living facilities, nursing
homes and other health care facilities. The Company will provide these
services to or for the benefit of the owners of the new facilities, which
owners are either corporations or limited partnerships and, in some cases,
the owners of such will be stockholders of the Company.
F-46
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
9. Related Party (Continued)
Meditrust, a publicly traded real estate investment trust with assets in
excess of $1.7 billion of which Mr. Gosman is the Chairman of the Board and
Chief Executive Officer, has provided financing to a skilled nursing/
assisted living facility owned principally by Mr. Gosman, which is to be
managed subsequent to the merger by the Company, in the aggregate amount of
$20,109,241 at December 31, 1995.
At December 31, 1995 and December 31, 1994, the Company had borrowed
$9,661,381 and $2,729,791, respectively, from Mr. Gosman. Interest on such
outstanding indebtedness at the prime rate of interest during the year ended
December 31, 1995 and the period June 24, 1994 (inception) to December 31,
1994 was $543,571 and $55,856, respectively. The borrowings from Mr. Gosman
have a maturity date of January 1998. Interest on the borrowings is payable
upon demand. The Company will obtain additional financing, as required, from
Mr. Gosman for working capital purposes.
10. Supplemental Cash Flow Information
During the period from June 24, 1994 (inception) to December 31, 1994 the
Company acquired the assets and assumed certain liabilities of the entity
described in Note 3. The transaction had the following non-cash impact on the
balance sheet:
<TABLE>
<CAPTION>
December 31, 1994
------------------
<S> <C>
Current assets $ 93,123
Property, plant and equipment 71,381
Intangibles 566,312
Current liabilities (28,710)
</TABLE>
11. Subsequent Events
During 1996 the Company, pursuant to the management agreement for the
120-bed nursing facility in Miami, Florida, advanced the Operator of the
facility $769,904 for working capital purposes.
During July 1996, the Company entered into a merger agreement with The
Standish Care Company ("Standish"). Under the merger agreement Standish, as
the surviving company in the merger, will acquire all of the assets and
operations of the Company and will issue 50 million shares of its common
stock to the stockholders of the Company. The merger transaction of the
Company with and into Standish will be recorded as a "reverse acquisition"
for accounting purposes, with the Company treated as the accounting acquiror,
even though Standish will be the survivor for legal purposes. In a reverse
acquisition, the accounting acquiror is treated as the surviving entity even
though Standish's legal existence does not change and the financial
statements reflect the historical financial statements of the Company. The
Company, as the accounting acquiror, will treat the merger as a purchase
acquisition. The merger will be recorded using the historical cost basis for
the assets and liabilities of the Company, and the estimated fair value of
Standish's assets and liabilities. Consummation of the merger is subject to
approval by both companies' Boards of Directors and stockholders and other
closing conditions.
During July 1996, the Company entered into agreements with a third party
whereby such third party will provide day to day management of the following
facilities which are currently in operation: (i) the 54-bed nursing facility
in Homestead, Florida; (ii) the 120-bed nursing facility in Miami, Florida;
(iii) the 138-bed leased facility in Silver Spring, Maryland; and (iv) the
142-bed facility in Needham, Massachusetts.
The Company has adopted a stock option plan for issuance of common stock
to key employees and directors of the Company. Under this plan, the exercise
provision and price of the options will be established on an individual basis
generally with the exercise price of the options being not less than the
market price of the underlying stock at the date of grant. The Company has
issued options to purchase approximately 300,000 shares at the fair market
value at the date of grant.
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Appendix I
AGREEMENT AND PLAN OF MERGER
This Agreement is made and entered into effective as of July 3, 1996 by
and among The Standish Care Company, a Delaware corporation ("Standish"),
each of the corporations listed on Schedule I hereto (each of which is
referred to herein as an "Acquisition Corporation") which have joined herein
by executing this Agreement and each of the corporations listed on Schedule
II hereto (each of which is referred to herein as a "CareMatrix Corporation"
and all of which are collectively referred to as "CareMatrix").
BACKGROUND
A. Standish is engaged in the business of providing long term care
services through the operation and management of assisted living communities
throughout the eastern United States. CareMatrix is also engaged in the
business of providing long term care services through the operation and
management of assisted living communities.
B. Each Acquisition Corporation is a wholly-owned subsidiary of Standish.
C. CareMatrix and Standish have determined that it is in the best
interests of each to effect a merger of each Acquisition Corporation with and
into a specified CareMatrix Corporation as set forth in Schedule III hereto
(the "Merger") as provided in this Agreement.
D. Pursuant to the Merger, the holders of shares of common stock, par
value $.01 per share, of each CareMatrix Corporation (the "CareMatrix Common
Stock") will receive shares of common stock of Standish in the manner set
forth in Article I of this Agreement and upon the terms and conditions
otherwise set forth in this Agreement.
E. The Merger is fair and in the best interests of the stockholders of the
respective corporations.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Execution, Filing and Effective Time. On the Closing Date (as
hereinafter defined) and subject to the terms and conditions hereinafter set
forth, the parties hereto agree to cause the Merger to be consummated by
filing with the Delaware Secretary of State Certificates of Merger (the
"Certificates of Merger") in the forms set forth in Exhibit 1.1 hereto, duly
executed and acknowledged, and taking all such further actions as may be
required by law to make the Merger effective. The Merger shall become
effective when the Certificates of Merger are so filed in accordance with the
Delaware General Corporation Law (the "Delaware Law"), and the time at which
the Merger becomes effective is referred to herein as the "Effective Time."
1.2 Constituent and Surviving Corporations; Effect of Merger. The
CareMatrix Corporations and the Acquisition Corporations shall be the
constituent corporations in the Merger, and the CareMatrix Corporations shall
be the surviving corporations in the Merger (in such capacity, the CareMatrix
Corporations are sometimes hereinafter referred to as the "Surviving
Corporations"). At the Effective Time, the Merger shall have the effect set
forth in Section 259 of the Delaware Law.
1.3 Certificate of Incorporation and Bylaws. At the Effective Time, the
Certificates of Incorporation of the CareMatrix Corporations shall be the
Certificates of Incorporation of the Surviving Corporations and the By- laws
of the CareMatrix Corporations as in effect at the Effective Time shall be
the By-laws of the Surviving Corporations.
At the Effective Time, the Restated Certificate of Incorporation of
Standish shall be amended solely to increase to 75,000,000 the number of
authorized shares of Standish Common Stock and to change the name of Standish
to CareMatrix Corporation (the "Standish Certificate Amendment"). At the
Effective Time, the By-Laws of Standish shall be the current By-Laws of
Standish amended solely to authorize the positions created pursuant to
Section 1.4(a) hereof (the "Standish By-Laws Amendment").
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1.4 Officers and Boards of Directors. At the Effective Time:
(a) The Chairman, the President and Chief Operating Officer and the
Treasurer and Chief Financial Officer of Standish shall resign or be
removed, new positions of Chief Executive Officer and Senior Vice
President of Finance, respectively, shall be created in accordance with
the Standish By-Laws Amendment and, concurrently therewith, the following
persons shall be elected or appointed to the position listed opposite his
name:
<TABLE>
<CAPTION>
<S> <C>
Abraham D. Gosman -- Chairman, Board of Directors
Michael J. Doyle -- Chief Executive Officer
Andrew D. Gosman -- President
Kenneth M. Miles -- Senior Vice President of Finance
</TABLE>
The Chief Financial Officer shall be designated by the foregoing Chief
Executive Officer and President.
(b) Except as set forth in this subsection, each of the members of the
Board of Directors of Standish shall resign or be removed and,
concurrently therewith, the following persons shall be appointed to the
Board of Directors:
Abraham D. Gosman
Michael J. Doyle
Andrew D. Gosman
In addition, four outside directors shall be appointed by the foregoing
Board of Directors to fill the vacancies created by resignation or removal
of the aforementioned directors.
(c) At the Effective Time, the following persons shall be appointed to
the position with respect to the CareMatrix Corporations set forth
opposite his name:
<TABLE>
<CAPTION>
<S> <C>
Michael M. Gosman -- Executive Vice President
Joel A. Kanter -- Executive Vice President
James M. Clary, III -- General Counsel, Executive Vice President
and Secretary
Michael J. Zaccaro -- Senior Vice President
Jonathan R. Banton -- Senior Vice President
Kevin J. Maley -- Senior Vice President
</TABLE>
1.5 Conversion of Stock and Other Securities of the Constituent
Corporations.
(a) The shares of Common Stock of the CareMatrix Corporations issued
and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of any holder thereof, be
converted into the right to receive an aggregate of fifty million
(50,000,000) newly issued, fully paid, and non-assessable shares of common
stock, par value $.01 per share, of Standish ("Standish Common Stock")
allocated as set forth on Exhibit 1.5(a), upon surrender of the
certificates formerly representing shares of CareMatrix Common Stock.
(b) Each share of common stock of an Acquisition Corporation
outstanding immediately prior to the Effective Time shall, on such date,
by virtue of the Merger and without any action on the part of any holder
thereof, be cancelled and each Surviving Corporation shall issue one (1)
share of its common stock to Standish.
(c) No fractional shares of Standish Common Stock shall be issued.
Instead, stockholders of CareMatrix whose conversion of CareMatrix Common
Stock results in more or less than one whole share of Standish Common
Stock will have their shares rounded to the nearest whole number. The
shares of Standish Common Stock issuable in exchange for each share of
CareMatrix Common Stock are referred to herein as the "Merger
Consideration."
(d) All shares issued to the stockholders of CareMatrix representing
the Merger Consideration shall be registered on a Form S-4 Registration
Statement (the "Form S-4 Registration Statement") to be filed by Standish
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"). The Form S-4
Registration Statement shall also register for resale the shares of
Standish Common Stock issued to the affiliates of CareMatrix listed on
Exhibit 1.5(d) at the Effective Time
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of the Merger. Standish shall cause the Form S-4 Registration Statement to
be declared effective at the earliest practicable date and to continue to
be effective and usable for their intended purposes for as long as any
Standish Common Stock continues to be held by any of the foregoing
affiliates and such shares are restricted securities and therefore
required under the federal securities laws to be resold under Rule 145
promulgated under the Securities Act or through an effective registration
statement under applicable Commission regulations. Notwithstanding the
foregoing, Standish is allowed to let the Form S-4 Registration Statement
be "stale", or unusable, for up to one hundred twenty (120) consecutive
days at a time, but no more than one hundred eighty (180) total days in
any successive twelve month period, if the reason for such unusability is
an announced acquisition, disposition or other event which would require a
post-effective amendment or a supplement to an existing registration
statement under Commission regulations or any other occurrence which under
Commission regulations causes the Form S-4 Registration Statement to be
unusable. If the Form S-4 Registration Statement becomes stale or
unusable, Standish shall use its best efforts to file a post-effective
amendment at the earliest practicable date so that the Form S-4
Registration Statement will be usable.
(e) Each share of CareMatrix Common Stock held in the treasury of any
of the CareMatrix Corporations immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and retired and
cease to exist and no payment shall be made with respect thereto.
1.6 Exchange Agent. Prior to the Effective Time, CareMatrix and Standish
shall appoint American Securities Transfer, Incorporated, Standish's transfer
agent, or such other mutually acceptable bank or trust company as agent (the
"Exchange Agent") for the purpose of exchanging certificates representing
shares of CareMatrix Common Stock outstanding immediately prior to the
Effective Time for the Merger Consideration.
1.7 Exchange of Stock Certificates.
(a) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder of a CareMatrix Corporation, as of the Effective
Time, of an outstanding certificate or certificates which immediately
prior to the Effective Time represented shares of CareMatrix Common Stock
(the "Certificates") a form letter of transmittal and instructions
advising such holder of the relevant terms of the exchange effected by the
Merger and the procedure for surrendering to the Exchange Agent such
Certificates for exchange for use in effecting the surrender of the
Certificates. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate or certificates representing the Merger Consideration
multiplied by the number of shares of CareMatrix Common Stock represented
by such Certificate and such surrendered Certificate shall then be
cancelled. Until surrendered in accordance with the provisions of this
Section 1.7, each Certificate shall represent for all purposes the right
to receive Merger Consideration multiplied by the number of shares of
CareMatrix Common Stock represented by such Certificate.
(b) At and after the Effective Time there shall be no transfers of
shares of CareMatrix Common Stock which were outstanding immediately prior
to the Effective Time on the stock transfer books of any CareMatrix
Corporation. If, after the Effective Time, Certificates are presented to
CareMatrix or the Exchange Agent, they shall be cancelled and exchanged
for the Merger Consideration multiplied by the number of shares of
CareMatrix Common Stock represented by such Certificates as provided in
this Article I. At the close of business on the day prior to the Effective
Time the stock ledger of each CareMatrix Corporation shall be closed.
(c) From and after the Effective Time, holders of Certificates
formerly evidencing shares of CareMatrix Common Stock shall cease to have
any rights as stockholders of CareMatrix, except as provided herein or by
law. Notwithstanding the foregoing in this Section 1.7, neither the
Surviving Corporations nor Standish shall be liable to any holder of
shares of CareMatrix Common Stock for any Merger Consideration delivered
to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.8 Dissenting Shares. Notwithstanding the provisions of Section 1.5(a),
no share of CareMatrix Common Stock outstanding immediately prior to the
Effective Time that is held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded appraisal for
such shares in accordance with the Delaware Law shall not be converted into a
right to receive the Merger Consideration, unless such holder fails to
perfect or withdraws or otherwise loses such holder's right to appraisal
under the Delaware Law. If, after the Effective Time, such holder fails to
perfect or withdraws or loses his right to appraisal, such shares shall be
treated
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as though they had been converted as of the Effective Time into a right to
receive the Merger Consideration, without interest. On or before the SEC
Filing Date, the Merger shall have been approved by the stockholders of
CareMatrix, and the holders of no more than five percent (5%) of the
CareMatrix shares shall have demanded appraisal rights in accordance with
Delaware law.
1.9 Updated CareMatrix Financial Statements. As soon as reasonably
practicable, but in no event later than 25 days following the date of this
Agreement, CareMatrix shall prepare, with the assistance and cooperation of
Standish, and deliver to Standish a combined unaudited balance sheet of
CareMatrix as of June 30, 1996 (the "June 30 CareMatrix Balance Sheet") and
related statements of operations and retained earnings and cash flows for the
three and six month periods then ended, (the "June 30 CareMatrix Financial
Statements") together with a combined unaudited pro forma balance sheet (as
of June 30, 1996) and income statement (for the six months ended June 30,
1996). Within 35 days following the date of this Agreement CareMatrix shall
deliver to Standish a letter (the "Procedures Letter") relating to the June
30 CareMatrix Balance Sheet and the June 30 CareMatrix Financial Statements
from Coopers & Lybrand L.L.P. ("C&L"), CareMatrix's independent public
accountants, in form and substance agreed upon by C&L and Standish, covering
agreed upon procedures meeting the requirements of SAS 71.
ARTICLE II
CLOSING
2.1 The Closing Date. Subject to the satisfaction or waiver of each of
the conditions contained in Articles IX and X of this Agreement, the closing
of the Merger and the other transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Nutter, McClennen & Fish, LLP,
One International Place, Boston, Massachusetts at 10:00 a.m. on a date
agreeable to the parties within five (5) business days after the satisfaction
or waiver of all conditions to Closing set forth in Articles IX and X, or on
such other date or at such other location or time as may be agreed upon by
the parties (such date and time being called the "Closing Date"), but in no
event later than the Termination Date (as defined in Section 12.1(c)).
2.2 The Closing. At the Closing, the CareMatrix Corporations, Standish
and the Acquisition Corporations shall each deliver to each other such
certificates, instruments, documents and opinions as are set forth in
Articles IX and X, each of which shall be fully executed and completed, as
appropriate.
2.3 Filing Certificate of Merger. Contemporaneous with the Closing, the
duly executed Certificates of Merger shall be filed with the Delaware
Secretary of State.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STANDISH
Standish represents and warrants to CareMatrix as follows:
3.1 Organization and Qualification. Standish is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Standish is qualified as a foreign corporation in each
jurisdiction where it is required to be so qualified.
3.2 The Subsidiaries of Standish. Schedule 3.2 of the separate
Disclosure Schedule to be delivered by Standish to, and approved by,
CareMatrix on or before July 9, 1996 (the "Standish Disclosure Schedule")
sets forth correctly the name, jurisdiction of organization, states in which
it is qualified to do business, activities and ownership control of each
entity in which Standish, directly or indirectly, owns any interest
(individually, a "Standish Subsidiary," and collectively, the "Standish
Subsidiaries"). Except as shown on Schedule 3.2(a) of the Standish Disclosure
Schedule, each Standish Subsidiary is qualified to do business as a foreign
entity in each jurisdiction where it is required to be so qualified except
where the failure to be so qualified would not, individually or in the
aggregate, cause a Material Adverse Change (as hereinafter defined) with
respect to Standish. All issued and outstanding shares or other ownership
interests of the Standish Subsidiaries are duly authorized, validly issued,
fully-paid and nonassessable and, except as set forth on Schedule 3.2 (a) of
the Standish Disclosure Schedule, Standish or a Standish Subsidiary is the
sole owner of all such issued and outstanding shares or other ownership
interests. Except as shown on Schedule 3.2(b) of the Standish Disclosure
Schedule, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
contracts or commitments that require any Standish Subsidiary to issue, sell
or otherwise cause to become outstanding any of its capital stock,
partnership interests or other securities. There are no outstanding or
authorized
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stock appreciation, phantom stock, profit participation or similar rights
with respect to the Standish Subsidiaries. Except as shown on Schedule 3.2(c)
of the Standish Disclosure Schedule, there are no stockholders' agreements,
voting trusts, proxies or other agreements or understandings with respect to
the voting or ownership of the capital stock or partnership interests of the
Standish Subsidiaries. Except as set forth on Schedule 3.2 of the Standish
Disclosure Schedule, Standish does not control directly or indirectly or have
any direct or indirect equity participation in any corporation, partnership,
joint venture, trust or other business association other than the Standish
Subsidiaries.
3.3 Capitalization. The authorized capital stock of Standish consists
of: 30,000,000 shares of Standish Common Stock, $.01 par value, of which
3,609,453 shares are outstanding; and 999,568 shares of Preferred Stock, par
value $.01 per share, of which 875,000 have been designated Series A
Cumulative Preferred Stock (the "Standish Preferred Stock") of which 56,000
shares are outstanding. At the Closing Date, the authorized capital stock of
Standish shall consist of 75,000,000 shares of Common Stock, and there shall
be no more than 5,500,000 shares of Standish Common Stock issued and
outstanding, including all shares issued between the date hereof and the
Closing Date upon the exercise of options, warrants and other similar rights.
All of the outstanding shares of Standish Common Stock have been validly
issued and are fully-paid and nonassessable. Except as set forth in Schedule
3.3 (a) of the Standish Disclosure Schedule, there are outstanding no
options, warrants, rights, or other agreements or commitments obligating
Standish to issue or sell shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock. Standish has no obligation to register any shares of Standish Common
Stock under the Securities Act. Except as shown on Schedule 3.3(c) of the
Standish Disclosure Schedule, Standish is not obligated directly, indirectly
or contingently to purchase or redeem any shares of Standish Common Stock.
3.4 Corporate Power and Authority. Standish and the Standish
Subsidiaries have full corporate or partnership power and authority to carry
on their businesses as now being conducted in the jurisdictions where such
businesses are now conducted and to own, operate and lease the Standish
Properties. This Agreement, the Merger and the other transactions
contemplated hereby have been duly and unanimously approved by the Board of
Directors of Standish, subject to the approval of the Agreement and the
Merger and the Standish Certificate Amendment by the stockholders of
Standish. Standish has full corporate power and authority to enter into this
Agreement and, subject to the approval of the Agreement and the Merger and
the Standish Certificate Amendment by the stockholders of Standish, to
consummate the Merger and the other transactions contemplated hereby, and
this Agreement and each of the other agreements to be executed and delivered
by Standish in connection herewith constitute the legal, valid and binding
obligations of Standish enforceable against it in accordance with their
respective terms.
3.5 No Violation. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby and the
consummation of the Merger and the other transactions contemplated hereby,
nor the performance of this Agreement and such other documents and
instruments in compliance with the terms and conditions hereof and thereof,
except as set forth in Schedule 3.5 of the Standish Disclosure Schedule, will
(i) violate, conflict with or result in any breach of any trust agreement,
charter document, by-law, judgment, decree, order, statute or regulation
applicable to Standish or any Standish Subsidiary, (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority (other than filing the Certificate of
Merger and the Standish Certificate Amendment with the Delaware Secretary of
State), (iii) violate, conflict with or result in a breach, default or
termination or give rise to any right of termination, cancellation or
acceleration of the maturity of any payment date of any obligation of
Standish or any Standish Subsidiary or increase or otherwise affect the
obligations of Standish or any Standish Subsidiary under any law, rule,
regulation or any judgment, decree, order, governmental permit, license or
order or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, agreement or other instrument or obligation related
to Standish or any Standish Subsidiary or to Standish's ability to consummate
the Merger and the other transactions contemplated hereby, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents, in form and substance satisfactory to
CareMatrix, have been or will be obtained in writing and provided to
CareMatrix at or prior to the Closing, (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Standish or any
Standish Subsidiary or (v) result in the creation of any liability, claim,
assessment, security interest, lien, restriction, encumbrance, or right,
title or interest in others (collectively, a "Claim") upon or against the
properties of Standish or any Standish Subsidiary.
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3.6 SEC Documents. Standish has delivered to CareMatrix a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by it with the Commission (as any such documents have
since the time of their filing been amended, the "SEC Documents") since
January 1, 1993, which are all the documents (other than preliminary
material) that it was required to file with the Commission since such date.
As of their respective dates, the SEC Documents complied with the
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and
regulations of the Commission thereunder applicable to such SEC Documents,
and none of the SEC Documents contained any untrue statement of material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All agreements, contracts and other
documents required to be filed as exhibits to any of the SEC Documents have
been so filed. Since January 1, 1993 Standish has timely filed all reports,
registration statements and other filings required to be filed with the
Commission under the rules and regulations of the Commission.
3.7 Financial Statements. The financial statements of Standish included
within the SEC Documents (the "Standish Financial Statements") fairly present
the financial position of Standish and the Standish Subsidiaries as of their
respective dates and accurately set forth the results of operations for the
periods presented therein, as the case may be, all in conformity with
generally accepted accounting principles ("GAAP") and the applicable
accounting requirements of the Commission (with respect to financial
statements filed with the Commission), consistently applied, of Standish and
the Standish Subsidiaries, except as otherwise noted therein. Any financial
statements prepared by Standish after the March 31, 1996 quarterly financial
statements will be prepared in accordance with GAAP and the applicable
accounting requirements of the Commission (with respect to any financial
statements filed with the Commission), consistently applied, and will fairly
present the financial position as of their respective dates and accurately
set forth the results of operations for the periods presented therein, of
Standish and the Standish Subsidiaries, except as otherwise noted therein.
3.8 Absence of Undisclosed Liabilities. Except as set forth or reserved
against in the balance sheet (the "Balance Sheet") as of March 31, 1996 (the
"March Balance Sheet Date") included in the Financial Statements or disclosed
in the notes thereto, Standish (i) did not have as of the March Balance Sheet
Date any liability or obligation of any nature, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, including without
limitation liabilities that may become known or arise after the date hereof
and which relate to transactions entered into or any state of facts existing
on or before the March Balance Sheet Date, which would be required under GAAP
to be shown in such balance sheet or referenced in the notes thereto, and
(ii) except as shown on Schedule 3.8 of the Standish Disclosure Schedule has
not incurred since the March Balance Sheet Date any such liability or
obligation except in the ordinary course of business.
3.9 Conduct of Business Since the March Balance Sheet Date. Since the
March Balance Sheet Date, except as set forth on Schedule 3.9 of the Standish
Disclosure Schedule, there has been no Material Adverse Change (as
hereinafter defined) with respect to Standish, and no such Material Adverse
Change is threatened, contemplated or anticipated. As used herein, the term
"Material Adverse Change" shall mean, (i) with respect to Standish, (a) a
material adverse change in the Financial Condition (as hereinafter defined)
of Standish and the Standish Subsidiaries or (b) a material adverse change in
the business or prospects of Standish and the Standish Subsidiaries taken as
a whole; (ii) with respect to CareMatrix, (a) a material adverse change in
the Financial Condition (as defined in Section 4.8 hereof) of the CareMatrix
Corporations taken as a whole or (b) a material adverse change in the results
of operations, assets, liabilities, business or prospects of the CareMatrix
Corporations taken as a whole and (iii) with respect to any other person or
entity, a material adverse change in the Financial Condition, results of
operations, assets, liabilities, business or prospects of such person or
entity. As used in this Section 3.9, "material adverse change in the
Financial Condition" of Standish and the Standish Subsidiaries shall mean a
reduction of more than $2,000,000 in the Net Working Capital (Deficit) (as
hereinafter defined) of Standish from the Net Working Capital (Deficit) as of
the March Balance Sheet Date to the Net Working Capital (Deficit) as of the
last day of the calendar month immediately preceding the Closing Date (the
"Final Net Working Capital (Deficit)"), as shown on a balance sheet prepared
by Standish (the "Determination Balance Sheet"). The term "Net Working
Capital (Deficit)" shall mean, with reference to Standish's existing balance
sheet classifications, the difference between (a) "Total current assets" as
reduced by "Due from related parties" and (b) "Total current liabilities," as
reduced by "Current portion of long-term debt". For purposes of the foregoing
calculation, the following shall be excluded from the determination of Final
Net Working Capital: any proceeds from the exercise of stock options after
the March Balance Sheet Date. Standish shall not change the classification of
any items shown on the Balance Sheet in its preparation of the Determination
Balance Sheet, and the Determination Balance Sheet shall
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include all of the expenses and fees incurred and reasonably anticipated to
be incurred by Standish in connection with the Merger. The determination of
Final Net Working Capital (Deficit) shall be made in accordance with GAAP,
consistently applied.
Since the March Balance Sheet Date, except as set forth on Schedule 3.9 of
the Standish Disclosure Schedule, neither Standish nor any Standish
Subsidiary has taken or agreed to take any action that would obligate
Standish or any Standish Subsidiary to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business;
(b) entered into or agreed to enter into any transaction, agreement or
commitment, or suffered the occurrence of any event or events (i) that has
interfered or is reasonably likely to interfere with the normal and usual
operations of the business of Standish or any Standish Subsidiary or (ii)
that, singly or in the aggregate, has resulted or is reasonably likely to
result in a Material Adverse Change with respect to Standish;
(c) incurred or increased any indebtedness for borrowed money or any
capital lease obligations other than to CareMatrix, or assumed,
guaranteed, endorsed or otherwise become responsible for the obligations
of any other individual, partnership, firm or corporation (except to
endorse checks for collection for deposit in the ordinary course of
business), or made any loan or advance to any individual, partnership,
firm or corporation;
(d) except in connection with a loan from CareMatrix to Standish,
mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred or otherwise disposed of,
any of the properties or assets of Standish or any Standish Subsidiary,
including any cancelled, released, hypothecated or assigned indebtedness
owed to Standish or any Standish Subsidiary, or any claims held by
Standish or any Standish Subsidiary;
(e) made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer or otherwise, or by the
purchase of any property or assets of any other individual, partnership,
firm or corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock or property, or any combination thereof) in
respect of the capital stock of Standish, or redeemed or otherwise
acquired, directly or indirectly, any shares of capital stock of Standish;
(g) paid any long-term liability, otherwise than in accordance with
its terms;
(h) paid any bonus compensation to any officer, director, stockholder
or employee of Standish or any Standish Subsidiary or otherwise increased
the compensation paid or payable to any of the foregoing, except as
contemplated pursuant to this Agreement;
(i) sold, assigned or transferred any patents, trademarks, trade
names, logos, copyrights, formulae or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any
capital stock of Standish, (ii) to sell any assets of Standish or any
Standish Subsidiary other than in the ordinary course of business, (iii)
to effect any merger, consolidation or other reorganization of Standish or
any Standish Subsidiary, or (iv) to enter into any agreement with respect
thereto; or
(k) paid any expenses or fees of counsel, accountants or consultants
for services in preparation for or in connection with this Agreement or
the transactions contemplated hereunder in excess of $650,000.
3.10 Tangible Properties. Schedule 3.10(a) of the Standish Disclosure
Schedule contains a true and complete list showing the remaining balance of
the capitalized value of furniture, fixtures and equipment owned or leased by
Standish or the Standish Subsidiaries, which had an individual value of $500
or more when purchased or leased ("Furniture, Fixtures and Equipment"). In
addition to the Furniture, Fixtures and Equipment, Standish and the Standish
Subsidiaries own or lease miscellaneous other fixed assets, fixtures,
furnishings, furniture, office supplies, computer hardware, and software,
tools, machinery, equipment, spare parts and other tangible property, which
had an individual value of less than $500 when leased or purchased (the
"Standish Miscellaneous Personal Property", and collectively with the
Furniture, Fixtures and Equipment, the "Standish Tangible Personal
Property").
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Except as listed on Schedule 3.10 (b) of the Standish Disclosure Schedule
with respect to leased Standish Tangible Personal Property, Standish and the
Standish Subsidiaries have good and marketable title free and clear of all
Claims to the Standish Tangible Personal Property owned by Standish or any
Standish Subsidiary. With respect to any Standish Tangible Personal Property
leased by Standish or any Standish Subsidiary, all leases, conditional sale
contracts, franchises or licenses pursuant to which Standish or any Standish
Subsidiary may hold or use (or permit others to hold or use) such Standish
Tangible Personal Property are valid and in full force and effect, and,
except as set forth in Schedule 3.10(c) of the Standish Disclosure Schedule,
there is not under any of such instruments any existing default or event of
default or event which with notice or lapse of time or both would constitute
such a default; and Standish's or any Standish Subsidiary's possession and
use of such property has not been disturbed and no claim has been asserted
against Standish or any Standish Subsidiary adverse to their rights in such
leasehold interests. All Standish Tangible Personal Property is adequate and
usable for the purposes for which it is currently used and each item of
Standish Tangible Personal Property, whether owned or leased, is in good
operating condition, reasonable wear and tear excepted, and has been properly
maintained and repaired. The Standish Tangible Personal Property comprises
all the equipment necessary for the continuing operation of the Standish
Improvements (as hereinafter defined) in the manner in which they have been
operated to date.
3.11 Real Property.
(a) All real property owned or leased by Standish or any Standish
Subsidiary (the "Standish Properties"), together with the improvements
thereon (the "Standish Improvements") is described in Schedule 3.11(a) of
the Standish Disclosure Schedule. Locations of real property owned by
Standish or any Standish Subsidiary are hereby referred to as "Standish
Owned Locations." Schedule 3.11(a) of the Standish Disclosure Schedule
includes a materially accurate summary reflecting the location, land
acreage, brief history, services and maximum legal unit and bed capacities
of each of the Standish Properties. Schedule 3.11(a) sets forth a list of
all real property subject to purchase options in favor of Standish (such
purchase options are herein referred to as the "Standish Purchase
Options", and such locations are herein referred to as the "Standish
Option Locations"). Where the term "Standish Properties" is used in these
representations and warranties, the same shall, unless the context
otherwise requires, include all of the locations referred to as Standish
Option Locations.
(b) The descriptive information concerning the Standish Properties set
forth in Schedule 3.11(a) of the Standish Disclosure Schedule is true,
accurate and complete in all material respects. Except as shown on
Schedule 3.11(a) of the Standish Disclosure Schedule, Standish and the
Standish Subsidiaries do not own or lease or have any rights or interest
in any other real property other than the Standish Properties. Where the
term "Standish Properties" is used in these representations and
warranties, the same shall mean all of the properties and interests
constituting the Standish Properties and each individual property or
interest.
(c) As set forth on Schedule 3.11(c), Standish or the applicable
Standish Subsidiary is the legal fee simple or leasehold titleholder of
the Standish Properties and has good, marketable and insurable (at normal
rates) title to the Standish Properties free and clear of all mortgages
and security interests, Standish Tenant Leases (as hereinafter defined),
licenses, claims, options, options to purchase, liens, covenants,
conditions, restrictions, rights-of-way, easements, judgments,
encumbrances and other matters affecting title to the Standish Properties,
except for those identified on Schedule 3.11(c) of the Standish Disclosure
Schedule (the "Standish Permitted Encumbrances"). Each survey of the
Standish Properties heretofore delivered to CareMatrix and listed on
Schedule 3.11(c) is current, complete, accurate, true and correct except
as otherwise set forth on said Schedule 3.11(c). True, accurate and
complete copies of those title insurance policies relative to the Standish
Properties and the Standish Permitted Encumbrances, which policies are as
described or referred to in Schedule 3.11(c) of the Standish Disclosure
Schedule, have been delivered by Standish to CareMatrix, and a list
thereof is set forth on Schedule 3.11(c). Except as set forth in Schedule
3.11(c) of the Standish Disclosure Schedule, there is no pending
litigation or dispute or, to the best of Standish's knowledge, basis for
dispute concerning the location of the lines and corners of the boundaries
of the lots constituting the Standish Properties. None of the Standish
Permitted Encumbrances has or is likely to have a material adverse impact
upon, nor interfere with or impede, in any material respect, the conduct
of the business of the Standish Properties as currently conducted. Except
as set forth in Schedule 3.11(c) of the Standish Disclosure Schedule, none
of the Standish Improvements (i) encroaches onto adjoining lands or (ii)
encroaches on or over any easements or rights of way included in the
Standish Permitted Encumbrances or (iii) violates any building setback
lines on a plat of subdivision or filed in the public records, in each
case in a manner that adversely
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effects the value of any Standish Property. There are no encroachments
onto the Standish Properties of any building, structure, or other
improvement located on adjoining property.
(d) Listed on Schedule 3.11(d) of the Standish Disclosure Schedule are
all of the leases, including all amendments and modifications thereto and
any letter agreements, memoranda of leases, notices of lease,
nondisturbance agreements pertaining thereto, pursuant to which Standish
or the Standish Subsidiaries occupy all or any portion of the locations
constituting the Standish Properties (such leases are herein referred to
as the "Standish Occupancy Leases", and such locations are herein referred
to as the "Standish Leased Locations"). The rent, term, extension options,
additional charges and other material terms set forth for each of the
Standish Leased Locations are set forth on Schedule 3.11(d) of the
Standish Disclosure Schedule. There is no default by either the respective
landlord or Standish (or the applicable Standish Subsidiary) under any of
the Standish Occupancy Leases or by the respective landlord under any
financing documents relating to any Standish Property which is the subject
of a Standish Occupancy Lease, either asserted by written notice or known
to Standish, nor, to the best of Standish's knowledge, any condition
which, with the giving of notice or the lapse of time, or both, would
constitute a payment default or other material default, and there are no
monetary obligations of Standish or any Standish Subsidiary under any
Standish Occupancy Lease or such financing documents which are, as of the
date hereof, due and unpaid. Standish and the Standish Subsidiaries have
posted security deposits for the performance of their obligations under
the Standish Occupancy Leases, as set forth on Schedule 3.11(d) of the
Standish Disclosure Schedule, and there are no claims or charges against
such security deposits which have been or, to the best of Standish's
knowledge, may be asserted.
(e) There are no leases, subleases, tenancies, licenses, occupancy
agreements or other agreements pursuant to which parties other than
Standish or the Standish Subsidiaries hold rights to use or occupy all or
any portion of the Standish Properties (such leases, subleases, tenancies,
licenses, occupancy agreements and other agreements are herein referred to
as the "Standish Tenant Leases").
(f) Neither Standish nor any Standish Subsidiary is in default, nor do
any circumstances exist which, with notice or the passage of time, or
both, would give rise to a default under any of the documents, recorded or
unrecorded, relating to the Standish Properties or with respect to any
contractual obligations that would have a material adverse effect on the
Standish Properties.
(g) Schedule 3.11(g) of the Standish Disclosure Schedule is a true and
complete schedule of all contractual obligations that involve payments or
receipts by Standish or the Standish Subsidiaries of more than $5,000 in
any single case, relative to the ongoing construction, maintenance,
security, or operations of the Standish Properties excluding, however,
warranties and guaranties, showing as to each of the contractual
obligations: (i) date of the contractual obligation and each amendment
thereof; (ii) name of vendor; (iii) type of service; (iv) termination date
of the contractual obligation; (v) the basis for calculating amounts to
become due thereunder; and (vi) whether and upon what terms either party
may terminate such agreement without cause.
(h) Except as set forth in Schedule 3.11(h) of the Standish Disclosure
Schedule, Standish has not been advised of and is not aware of any defect
in the condition of the Standish Properties, or any portion thereof, which
has not been corrected and which will materially impair the operation of
the Standish Properties as presently operated or as proposed to be
operated. Standish has not been advised of and is not aware of any
material defect in the Standish Improvements, the structural elements
thereof, the mechanical systems (including without limitation all heating,
ventilating, air conditioning, plumbing, electrical, elevator, security,
utility and sprinkler systems) therein, the roofs or the parking and
loading areas. The construction of all of the Standish Improvements has
been fully completed, and, except as set forth in Schedule 3.11(h) of the
Standish Disclosure Schedule, all sums owing on account thereof have been
paid in full.
(i) All water, sewer, gas, electric, telephone, drainage and other
utility equipment, facilities and services required by Law or necessary
for the proper operation of the Standish Properties and the Standish
Improvements as they are now being operated are installed and connected to
the Standish Improvements pursuant to valid permits, are adequate to
service the Standish Improvements and are in good operating condition. To
the best of Standish's knowledge, no fact, condition, or proceeding exists
which would result in the termination or impairment of the furnishing of
services to the Standish Properties of water, sewer, gas, electric,
telephone, drainage and other such utility services.
(j) Except as set forth on Schedule 3.11(j), the Standish Improvements
are free from infestation by rodents, termites or other insects or
animals.
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(k) To the best of Standish's knowledge, the Standish Improvements
were completed and installed in accordance with plans, which were approved
by all governmental authorities having jurisdiction thereof. Standish has
delivered to CareMatrix true, correct and complete copies of those
drawings or plans as are currently in Standish's possession and which
depict the Standish Properties and Standish Improvements as built (the
"Standish Plans"). There is legal and adequate access to the Standish
Properties at all points so identified in the Standish Plans and such
access is directly from the Standish Properties onto public ways as so
identified, and not by means of any lease, license, easement or other
agreement. All Standish Improvements constructed by Standish or any
Standish Subsidiary on any portion of the Standish Properties affected by
any Standish Occupancy Lease are in accordance with Standish Occupancy
Lease requirements.
(l) Listed on Schedule 3.11(l) of the Standish Disclosure Schedule is
a true and complete list of all written warranties and guaranties held by
Standish or any Standish Subsidiary with respect to the Standish
Properties and the Standish Improvements, including all Standish Tangible
Personal Property relating thereto. Expiration dates of each warranty are
shown on Schedule 3.11(l).
(m) There are no pending or, to the best of Standish's knowledge,
threatened requests, applications or proceedings to alter or restrict the
zoning or other use restrictions applicable to the Standish Properties.
Neither Standish nor any Standish Subsidiary has received notice from any
municipal, state, federal or other governmental authority of violations of
any Law issued in respect of the Standish Properties which have not been
heretofore corrected, and, to the best of Standish's knowledge, no such
violations exist. The Standish Improvements and the present uses are
permitted, conforming structures and uses as a matter of right and not
pursuant to any "grandfathered" or non-conforming structure or use status
or pursuant to any variance, special permit, license or other approval.
Standish has not received notice of and is not aware of any plan, study or
effort by any governmental agency or authority which would materially
adversely affect the present use or zoning of the Standish Properties or
which would modify or realign any adjacent street or highway.
(n) There are presently in effect all licenses, permits, approvals and
other authorizations necessary for the current use, occupancy and
operation of the Standish Properties. Such licenses, permits, approvals
and other authorizations are listed in Schedule 3.11(n) of the Standish
Disclosure Schedule hereto. No such license, permit, approval or other
authorization (i) contains any restrictions or conditions that would have
a material adverse effect on the Standish Properties or (ii) is subject to
any "linkage" or similar obligation. All applicable fees currently due and
payable with respect thereto have been paid in full (and no fees or other
payments with respect thereto shall accrue or become due and payable in
the future). All of such licenses, permits, approvals and other
authorizations are in full force and effect and shall remain in effect
indefinitely subject to the conditions contained therein, without
expiration or need of renewal thereof.
(o) To the best knowledge of Standish, the soil condition of the
Standish Owned Locations is such that it will support all of the Standish
Improvements thereon for the foreseeable life of such Standish
Improvements without the need for unusual or new subsurface excavations,
fill, footings, caissons or other installations. The Standish Improvements
on the Standish Owned Locations, as built, were constructed in a manner
compatible with the soil conditions at the time of construction and to the
best knowledge of Standish, all necessary excavations, fill, footings,
caissons or other installations were provided. Except as set forth in
Schedule 3.11(o) of the Standish Disclosure Schedule, none of the Standish
Improvements is located in an area designated by the Federal Insurance
Administration or any other governmental authority having jurisdiction
over the Standish Properties as having special flood or mud slide hazards
or being within the 100- year flood plan.
(p) There are no pending or threatened condemnation or similar
proceedings or assessments affecting any of the Standish Properties, nor
to the best of Standish's knowledge, is any such condemnation or
assessment contemplated by any governmental authority.
3.12 Licenses and Permits. Schedule 3.12 of the Standish Disclosure
Schedule lists all licenses, permits, pending applications, consents,
approvals and authorizations of or from any public or governmental agency,
held by Standish and each Standish Subsidiary or used in or otherwise
necessary for the conduct of the business operations of Standish and the
Standish Subsidiaries (the "Standish Business") (collectively, the "Permits")
together with any conditions imposed thereon. Standish and the Standish
Subsidiaries have complied with all conditions and requirements imposed by
the Permits and neither Standish nor any Standish Subsidiary has received any
notice
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of, or has any reason to believe, that any appropriate authority intends to
cancel, terminate or suspend any of the Permits or that valid grounds for
such cancellation, termination or suspension exist. Except as set forth on
Schedule 3.12 of the Standish Disclosure Schedule, no other permits other
than the Permits are necessary to operate the Standish Business. Standish and
the Standish Subsidiaries own or have the right to use the Permits in
accordance with the terms thereof without any conflict or alleged conflict or
infringement with the rights of others and subject to no Claim. Each Permit
is and immediately after the Merger will be valid and in full force and
effect and no Permit will be subject to termination or be terminated or
adversely affected by the Merger.
3.13 Intellectual Property. Standish and the Standish Subsidiaries own,
or are licensed or otherwise have the full and unrestricted right to use, all
patents, trademarks, trade names, copyrights, technology, know-how, trade
secrets, processes, formulas and techniques used in connection with the
operation of the Standish Business (collectively, the "Intellectual
Property") and all Intellectual Property is described or listed in Schedule
3.13 of the Standish Disclosure Schedule, except trade secrets which have
been separately disclosed to CareMatrix. Neither Standish nor any Standish
Subsidiary has granted to any other person any license or other right to use
in any manner any of the Intellectual Property, whether or not requiring the
payment of royalties. To the best knowledge of Standish (i) no other person
has a right or license granted directly or indirectly by or through Standish
or any Standish Subsidiary to use any Intellectual Property; (ii) none of the
Intellectual Property is being infringed by others, or is subject to any
outstanding order, decree, judgment or stipulation; and (iii) there are no
claims or demands of any other person, and no proceedings have been
instituted, or are pending or, to the best knowledge of Standish, threatened,
relating to the Intellectual Property.
3.14 Outstanding Commitments. Schedule 3.14 of the Standish Disclosure
Schedule sets forth a list and description of all existing contracts,
agreements, leases and subleases (other than Standish Occupancy Leases and
Standish Tenant Leases), commitments, licenses and franchises that involve
payments or receipts by Standish or any Standish Subsidiary of more than
$5,000 in any single case (collectively, the "Standish Contracts"), whether
written or oral, to which Standish or any Standish Subsidiary is a party or
which relate to the Standish Business. Standish has delivered or made
available to CareMatrix true, correct and complete copies of all written
Standish Contracts and Schedule 3.14(a) of the Standish Disclosure Schedule
contains an accurate and complete description of all Standish Contracts which
are not in writing. All of the Standish Contracts are in full force and
effect except as set forth in Schedule 3.14(b) of the Standish Disclosure
Schedule. Standish and each Standish Subsidiary which is a party to and each
other party to each of the Standish Contracts have performed all the material
obligations required to be performed by them to date, and there is not under
any of the Standish Contracts any existing default or event of default or
event which with notice or lapse of time or both would constitute such a
default. Neither Standish nor any Standish Subsidiary has (i) any present
expectation or intention of not fully performing all its obligations under
each of the Standish Contracts to which it is a party or (ii) except as set
forth on Schedule 3.14(b) of the Standish Disclosure Schedule, any knowledge
of any breach or anticipated breach by any other party to any of the Standish
Contracts. Except as set forth in Schedule 3.14(b) of the Standish Disclosure
Schedule, none of the Standish Contracts has been terminated or notice of
termination given with respect thereto, no notice has been given by any party
thereto of any alleged default thereunder by any party thereto, and neither
Standish nor any Standish Subsidiary is aware of any intention or right of
any party to any Standish Contract to default another party to any Standish
Contract. Except as set forth in Schedule 3.14(b) of the Standish Disclosure
Schedule, there exists no actual or, to the best knowledge of Standish,
threatened termination, cancellation or limitation of the business
relationship of Standish or any Standish Subsidiary with any party to any
Standish Contract.
3.15 Litigation. Except as set forth on Schedule 3.15 of the Standish
Disclosure Schedule, there is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of Standish's knowledge, threatened
against or affecting Standish or any Standish Subsidiary (whether or not
Standish or any Standish Subsidiary is a party or prospective party thereto),
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) pending or, to the best of
Standish's knowledge, threatened arbitration proceeding relating to Standish
or any Standish Subsidiary or (iii) governmental inquiry pending or, to the
best of Standish's knowledge, threatened against or involving Standish or any
Standish Subsidiary, and there is no basis for any of the foregoing. Except
for item 5 on Schedule 3.15 of the Standish Disclosure Statement, any
potential liability arising from any such action, suit, claim, proceeding or
investigation is fully covered by insurance or will not have a material
adverse impact on Standish. Except as set forth on Schedule 3.15 of the
Standish Disclosure Schedule, neither Standish nor any Standish Subsidiary
has received any opinion or memorandum or legal advice from legal counsel to
the effect that it is exposed, from a
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legal standpoint, to any liability or disadvantage which may be material to
the prospects, financial condition, operations, property or affairs of the
Standish Business. Except as set forth on Schedule 3.15 of the Standish
Disclosure Schedule, there are no outstanding orders, writs, judgments,
injunctions or decrees of any court, governmental agency or arbitral tribunal
against, involving or affecting Standish or any Standish Subsidiary, and
there are no facts or circumstances which may result in institution of any
action, suit, claim or legal, administrative or arbitration proceeding or
investigation against, involving or affecting Standish or any Standish
Subsidiary, their assets or properties, or the Merger or the transactions
contemplated hereby. Neither Standish nor any Standish Subsidiary is in
default with respect to any order, writ, injunction or decree known to or
served upon it from any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. Except as set forth on Schedule 3.15 of
the Standish Disclosure Schedule, there is no action, suit or proceeding by
Standish or any Standish Subsidiary or their affiliates pending or threatened
against others. Except as set forth on Schedule 3.15 of the Standish
Disclosure Schedule, none of the following has occurred within five (5) years
prior to the date hereof with respect to Standish or any Standish Subsidiary:
(a) Neither Standish nor any Standish Subsidiary nor, to their best
knowledge, any current employee thereof, has been convicted in a criminal
proceeding or has been named or is a subject of a criminal, governmental
or other regulatory investigatory proceeding (excluding traffic
violations);
(b) Neither Standish nor any Standish Subsidiary nor, to their best
knowledge, any current employee thereof, has been or is the subject of any
order, judgment or decree of any court, governmental agency or other
regulatory body permanently or temporarily enjoining, barring, suspending
or limiting it or any such person from engaging in any type of business or
professional practice or activities; or
(c) Neither Standish nor any Standish Subsidiary nor, to their best
knowledge, any current employee thereof, has been found by a court of
competent jurisdiction in a civil action or by any governmental agency or
other regulatory body to have violated any Law.
3.16 Compliance with Law. Except as set forth in Schedule 3.16 of the
Standish Disclosure Schedule, neither Standish nor any Standish Subsidiary is
subject to any judgment, order, writ, injunction or decree and Standish and
each Standish Subsidiary have complied with and are not in default under, all
laws, ordinances, legal requirements, rules, regulations and orders
applicable to it, its operations, properties, assets, products and services,
including, without limitation, the Medicare and Medicaid Patient and Program
Protection Act of 1987 and the Omnibus Budget Reconciliation Act of 1993.
There is no existing law, rule, regulation or order, and Standish is not
aware of any proposed law, rule, regulation or order, whether federal or
state, which would prohibit or materially restrict Standish and the Standish
Subsidiaries from, or otherwise materially adversely affect Standish and the
Standish Subsidiaries in, conducting the Standish Business.
3.17 Labor and Employee Relations. Neither Standish nor any Standish
Subsidiary is a party to or bound by any collective bargaining agreement with
any labor organization, group or association covering any of its employees,
and Standish has no knowledge of any attempt to organize any of their
employees by any person, unit or group seeking to act as their bargaining
agent. Except as set forth in Schedule 3.17 of the Standish Disclosure
Schedule, there are no pending or threatened charges (by employees, their
representatives or governmental authorities) of unfair labor practices or of
employment discrimination or of any other wrongful action with respect to any
aspect of employment of any employee of Standish or any Standish Subsidiary.
3.18 Certain Employees. Set forth on Schedule 3.18 is a list of the
names of all of the key employees and consultants currently employed by
Standish or any Standish Subsidiary in connection with the Standish Business,
together with the title or job classification of each such person and his or
her current compensation. Except as set forth on Schedule 3.18 of the
Standish Disclosure Schedule, none of such persons has (i) an employment
agreement or understanding, whether oral or written, with Standish or any
Standish Subsidiary which is not terminable on thirty (30) days or less
notice by Standish or any Standish Subsidiary without cost or other liability
to Standish or any Standish Subsidiary or (ii) a non-competition,
non-disclosure and/or non-solicitation agreement or understanding with
Standish or any Standish Subsidiary, whether written or oral, and all such
employment and other agreements are set forth in Schedule 3.18 of the
Standish Disclosure Schedule hereto. Each person listed on Schedule 3.18 of
the Standish Disclosure Schedule who is required to be licensed by applicable
state law in order to perform his or her duties is so licensed. Set forth on
Schedule 3.18 of the Standish Disclosure Schedule is the amount, if any, of
any severance liability of Standish or any Standish Subsidiary with respect
to each person listed on Schedule 3.18.
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3.19 Employee Benefits. Set forth on Schedule 3.19 of the Standish
Disclosure Schedule is a list of all pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive, bonus,
vacation, severance, disability, hospitalization, medical insurance, life
insurance, fringe benefit, welfare and other employee benefit plans, programs
or arrangements, whether formal or informal, oral or written, under which
employees of Standish or any Standish Subsidiary may be entitled to benefits
or Standish or any Standish Subsidiary may have any liability (collectively,
the "Standish Plans"). Through the Closing Date all such Standish Plans shall
be maintained by Standish or each Standish Subsidiary in full force and
effect. Neither Standish nor any Standish Subsidiary contributes, or has ever
been required to contribute, to any plan subject to Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or to any
multiemployer plan, as defined in section 3(37) or section 4001(a)(3) of
ERISA.
Each Standish Plan has been established and administered in accordance
with its terms and in compliance with the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), ERISA and other
applicable laws, rules and regulations. Each Standish Plan which is intended
to be qualified within the meaning of section 401(a) of the Code is so
qualified and has received a favorable determination letter with respect to
its qualification and, to the best knowledge of Standish, no event has
occurred which would cause the loss of such qualification. Each Standish Plan
which is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of Subtitle A of the Code meets such requirements.
With respect to each Standish Plan, no actions, suits or claims (other
than claims for benefits in the ordinary course) are pending or threatened,
and no facts or circumstances exist which could give rise to any such
actions, suits or claims. Neither Standish, any Standish Subsidiary nor any
other party has engaged in a prohibited transaction, as defined under section
4975 of the Code or section 406 of ERISA, with respect to any Standish Plan,
and no fiduciary with respect to any Standish Plan has, to the best knowledge
of Standish, breached any fiduciary duty to such Standish Plan under Part 4
of Title I of ERISA or other applicable law. No event has occurred and no
condition exists that would subject Standish or any Standish Subsidiary to
any tax, fine or penalty imposed by the Code, ERISA or other applicable law.
All required contributions have been made by Standish to each of the Plans
and there is no funding deficiency with respect to any of the Standish Plans.
Each Standish Plan may be amended or terminated in accordance with its terms
without obligation or liability, other than those obligations and liabilities
for which specific assets have been set aside or reserved for on the balance
sheet as of the March Balance Sheet Date included in the Financial Statements
of Standish and those obligations and liabilities reflected by the terms of
the Standish Plan documents. There are no unfunded obligations under any
Standish Plan providing benefits to employees of Standish or any Standish
Subsidiary during employment or after termination of their employment.
3.20 Insurance. Standish is, and will be through the Closing Date,
adequately insured with responsible insurers in respect of their properties,
assets and business against risks normally insured against by companies in
similar lines of business under similar circumstances. Schedule 3.20 of the
Standish Disclosure Schedule correctly describes (by type, carrier, policy
number, limits, premium and expiration date) the insurance coverage carried
by Standish and the Standish Subsidiaries with respect to the Standish
Business, which insurance will remain in full force and effect with respect
to all events occurring prior to the Closing. Standish and the Standish
Subsidiaries (i) have not failed to give any notice or present any claim
under any such policy or binder in due and timely fashion, (ii) have not
received notice of cancellation or non-renewal of any such policy or binder,
(iii) are not aware of any threatened or proposed cancellation or non-renewal
of any such policy or binder and (iv) have not received notice of and are not
otherwise aware of any insurance premiums which will be materially increased
in the future. There are no outstanding claims under any such policy which
have gone unpaid for more than forty-five (45) days, or as to which the
insurer has disclaimed liability.
3.21 Transactions With Affiliates. Except as contemplated by this
Agreement and except as set forth in Schedule 3.21 of the Standish Disclosure
Schedule and only with respect to transactions giving rise to current or
contingent liabilities of Standish or any Standish Subsidiary, no current or
former holder of 5% or more of any class of capital stock of Standish or any
Standish Subsidiary at the time such transaction was entered into, or any
director, officer or employee of Standish or any Standish Subsidiary, or
member of the family of any such person, or any corporation, partnership,
trust or other entity in which any such person, or any member of the family
of any such person, has an interest or is an officer, director, trustee,
partner or holder of any equity interest, is a party to any transaction with
Standish or any Standish Subsidiary, including any contract, agreement or
other arrangement providing for the employment of, furnishing of services by,
rental of real or personal property from, or otherwise requiring payments or
involving other obligations to or from such person.
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3.22 Taxes. Except as set forth in Schedule 3.22 of the Standish
Disclosure Schedule, Standish and the Standish Subsidiaries have filed all
tax returns and reports required to be filed, including without limitation,
returns and estimated returns, with respect to federal, state, foreign and
local taxes, and, except as set forth in Schedule 3.22 of the Standish
Disclosure Schedule, have paid in full all taxes shown due thereon and all
estimated taxes when due (together with all interest, penalties, assessments
and deficiencies assessed in connection therewith due through the date
hereof). Neither Standish nor any Standish Subsidiary is required to pay any
other taxes except as shown in such tax returns, reports and information
filings. All such returns, reports, and information filings required to be
filed, including any amendments to date, have been prepared in good faith and
without negligence or misrepresentation. Standish and each Standish
Subsidiary has either paid or, in accordance with GAAP applied consistently
with prior periods, adequately provided for, by reserves or other proper
accounting treatment shown in the records and books of account, its liability
for all taxes of every kind, including without limitation, its liability for
federal, state and municipal income or franchise tax for the current tax year
and for all prior years. Standish has no knowledge of any proposed or
threatened assessment or reassessment of federal, state or municipal income
or franchise taxes. The United States federal income tax returns of Standish
have been examined by the Internal Revenue Service for all taxable years
through and including the fiscal year ended December 31, 1994. In addition,
at the date hereof, Standish and the Standish Subsidiaries have deducted and
remitted all withholding tax or source deductions when due to the appropriate
governmental authority as required by law or Standish and the Standish
Subsidiaries have adequately provided for such deductions by reserves or
other proper accounting treatment their books and records of account. Neither
Standish nor any Standish Subsidiary (i) has executed any waiver to extend,
or otherwise taken or failed to take any action that would have the effect of
extending, the applicable statute of limitations with respect to its tax
liabilities, (ii) is a "consenting corporation" within the meaning of Section
341(f) of the Code, (iii) has been at any time taxable as other than
Subchapter C corporation under the Code or has failed to file all tax returns
consistent with this characterization, (iv) has been a member of any
consolidated group (other than with Standish and the Standish Subsidiaries)
for tax purposes or (v) does not have, or will fail to have, all records and
information necessary for the timely and accurate filing of any tax returns
due after the date hereof, including any returns due after the Closing Date
which relate to the period prior to the Closing Date.
3.23 Brokers. No agent, person or firm acting on behalf of Standish and
the Standish Subsidiaries or under their authority is or will be entitled to
a financial advisory fee, brokerage commission, finder's fee or like payment
in connection with the transactions contemplated hereby, except Prager,
McCarthy & Sealy and Stonebridge Associates L.L.C. (the "Standish Financial
Advisors"), and Standish shall bear sole responsibility for the payment of
all fees of the Standish Financial Advisors in connection with the
transactions contemplated hereby, which shall not exceed $200,000 plus
reasonable out of pocket costs.
3.24 Environmental Laws.
(a) Standish and the Standish Subsidiaries have operated and continue
to operate the Standish Facilities and the Standish Business in compliance
with all Laws (as hereinafter defined) relating to (i) pollution or
protection of the environment, natural resources or human health from any
Hazardous Substances (as hereinafter defined) or (ii) nuisance, trespass
or "toxic tort", including, without limitation, Laws relating to
emissions, discharges, releases or threatened releases of any Hazardous
Substance or otherwise relating to the manufacture, processing,
importation, distribution, use, generation, treatment, storage, disposal,
transportation or handling of any Hazardous Substance (collectively,
"Environmental Laws").
(b) No Standish Property nor, to the best knowledge of Standish, any
real property contiguous thereto, is or has been designated by any state,
local or federal agency or body as a hazardous waste disposal site or a
site or location requiring investigation concerning, or management,
clean-up or removal of, any Hazardous Substance.
(c) There is no civil, criminal or investigative action, suit,
litigation, hearing, communication (written or oral), demand, claim,
citation, notice or notice of violation, warning, consent decree, judgment
or order by any person or entity alleging, claiming, concerning or finding
liability or potential liability arising out of, based on or resulting
from, in whole or in part, (a) the actual or alleged presence, threatened
release, release, emission, disposal, storage, treatment, transportation,
generation, manufacture or use of any Hazardous Substance at or from any
location or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Laws (collectively, "Environmental
Claims"), pending or, to the best knowledge of Standish, threatened
against Standish or any Standish Subsidiary or against any person or
entity whose liability
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for any Environmental Claim Standish or any Standish Subsidiary has or may
have retained or assumed either contractually or by operation of law.
There are no past or present actions, activities, circumstances,
conditions, events, incidents or practices, including, without limitation,
the release, threatened release, emission, discharge, disposal, storage,
treatment, transportation, generation, manufacture or use of any Hazardous
Substance that could form the basis of any Environmental Claim against
Standish or any Standish Subsidiary or, to Standish's best knowledge,
against any person or entity whose liability for any Environmental Claim
Standish or any Standish Subsidiary has or may have retained or assumed
either contractually or by operation of law.
(d) All Waste (as hereinafter defined) generated in connection with
the business, operations, assets and properties of Standish and the
Standish Subsidiaries has been (i) treated, stored or disposed of by or at
facilities duly licensed pursuant to applicable Environmental Laws and
(ii) transported to such facilities by transporters duly licensed pursuant
to applicable Environmental Laws. Standish has maintained true and
complete records relating to the generation, transportation, treatment,
storage and disposal of Waste generated in connection with the business,
operations, assets and properties of Standish and the Standish
Subsidiaries.
(e) Standish has delivered to CareMatrix all environmental inspection
reports ("Environmental Reports") in the possession of Standish or its
past or present consultants or advisors or those reports as have been
prepared by any person or entity concerning compliance with applicable
Environmental Laws of Standish's business, operations, assets or
properties or the use, manufacture, importation, processing, storage,
treatment, transportation, release or disposal therefrom, therein or
thereon of any Hazardous Substance and as are listed on Schedule 3.24 of
the Standish Disclosure Schedule.
(f) As used herein, "Hazardous Substance" means any chemical,
pollutant, contaminant, waste (including, without limitation, toxic,
hazardous, infectious, sanitary, solid, radioactive and petroleum waste
collectively, "Waste"), toxic substance, hazardous substance, extremely
hazardous substance, hazardous material, radioactive material, oil and
petroleum product, as such terms, or any similar terms, are or shall be
used under any applicable federal, state, local and foreign laws,
regulations, rules, ordinances, permits (including, without limitation,
authorizations, approvals, registrations and licenses), administrative
orders, judicial decisions or the like (all, collectively, "Laws")
relating to pollution or protection of the environment, natural resources
or human health.
3.25 Corporate Records. The corporate record books of Standish and each
Standish Subsidiary are in good order, complete, accurate, up to date, with
all necessary signatures, and set forth all meetings and actions taken by the
stockholders and directors, and all votes of the stockholders or directors
set forth in certificates furnished to anyone at any time heretofore.
3.26 Accounts Receivable. Except as set forth in Schedule 3.26 of the
Standish Disclosure Schedule, all of the accounts receivable of Standish and
the Standish Subsidiaries shown or reflected on the most recent balance sheet
in the Financial Statements, less the reserve for doubtful accounts in the
amount shown on such balance sheet, are valid and enforceable claims and
subject to no setoff or counterclaim. Standish has no accounts or loans
receivable from any of its directors, officers or employees in excess of
$7,500 in the aggregate.
3.27 Proxy Statement. The Proxy Statement to be mailed to stockholders
of Standish in connection with the solicitation of proxies on behalf of
Standish's Board of Directors for the meeting of stockholders of Standish to
be held to seek the approval of this Agreement and the Merger (the "Proxy
Statement"), at the time of its mailing to such stockholders and at the time
of such meeting, will not contain any untrue statement of a material fact or
omit to state a material fact concerning Standish, the Standish Subsidiaries
or the Merger or omit to state a material fact required or necessary to be
stated therein in order to make the statements contained therein concerning
Standish, the Standish Subsidiaries or the Merger, in light of the
circumstances under which they are made, not misleading; except that,
Standish makes no representation or warranty with respect to any statement,
information or omission relating to CareMatrix or its affiliates provided to
Standish in writing for inclusion in the Proxy Statement. The Form S-4
Registration Statement, at the time of its effectiveness and thereafter, will
not contain any untrue statement of a material fact or omit to state a
material fact concerning Standish, the Standish Subsidiaries or the Merger or
omit to state a material fact required or necessary to be stated therein in
order to make the statements contained therein concerning Standish, the
Standish Subsidiaries or the Merger, in light of the circumstances under
which they are made, not misleading; except that, Standish makes no
representation or warranty with respect to any statement, information or
omission relating to CareMatrix or its affiliates provided to Standish in
writing for inclusion in the Form S-4 Registration Statement.
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3.28 Certain Practices. Standish and the Standish Subsidiaries have
complied with any and all rules, regulations, policies and procedures of
third party payors with respect to billing for services. Neither Standish,
any Standish Subsidiary nor any stockholder, director, officer, or employee
of Standish or any Standish Subsidiary has, directly or indirectly, given or
agreed to give remuneration, in cash or in kind, in order to induce business
reimbursable under Medicare, Medicaid or any health care insurer or provider
which could subject Standish or any Standish Subsidiary to any damage or
penalty in any civil, criminal or governmental litigation or proceeding.
Neither Standish nor any Standish Subsidiary has at any time established or
maintained any fund or asset for any illegal purpose or made any false
entries or any books or records for any reason.
3.29 Disclosure. All documents and schedules delivered or to be
delivered by or on behalf of Standish and each Standish Subsidiary in
connection with this Agreement, the Merger and the transactions contemplated
hereby are true, complete and correct. Neither this Agreement, nor any
Schedule or Exhibit to this Agreement contains any untrue statement by
Standish of a material fact or an omission by Standish of a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which made, not misleading.
3.30 Contracts and Other Documents. Except for those contracts,
agreements, license agreements, vendor agreements, purchase orders,
commitments, sales orders, supply arrangements and other agreements which are
listed in the Standish Disclosure Schedule (collectively, the "Contracts") or
which have been entered into by Standish in the ordinary course of business
and do not involve payment or receipt of more than $10,000.00, and those
Leases in the Standish Disclosure Schedule , Standish is not party to any
Contract, Lease or similar document. All the Contracts are valid, binding and
enforceable and in full force and effect, and there are no (i) notices of
violation or (ii) existing material defaults (or events that, with notice or
lapse of time or both, would constitute material defaults) on the part of
Standish or to the knowledge of Standish on the part of any other party
thereto. Copies of the Contracts have been heretofore delivered to CareMatrix
by Standish or its counsel and such copies are true and complete and include
all amendments, supplements and modifications thereto; each such Contract
will be subject to obtaining any consent listed in the Standish Disclosure
Schedule and will continue to be in full force and effect on the same terms
and conditions immediately after the Closing without the need for any action
on the part of CareMatrix.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CAREMATRIX CORPORATIONS
Each of the CareMatrix Corporations represents and warrants to Standish
and the Acquisition Corporations as follows:
4.1 Organization and Qualification. Each of the CareMatrix Corporations
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware (except for A.M.A. New Jersey Development,
Inc. which is duly organized, validly existing and in good standing under the
laws of the State of New Jersey) and is qualified as a foreign corporation in
each jurisdiction where it is required to be so qualified except where the
failure to be so qualified would not, individually or in the aggregate, cause
a Material Adverse Change with respect to CareMatrix.
4.2 The Subsidiaries of CareMatrix. CareMatrix does not control directly
or indirectly or have any direct or indirect equity participation in any
corporation. Except as set forth on Schedule 4.2 of the separate Disclosure
Schedule to be delivered by CareMatrix to, and approved by, Standish on or
before July 9, 1996 (the "CareMatrix Disclosure Schedule"), CareMatrix does
not control directly or indirectly or have any direct or indirect equity
participation in any partnership, joint venture, trust or other business
association.
4.3 Capitalization. The authorized capital stock of each of the
CareMatrix Corporations consists of 5,000 shares of CareMatrix Common Stock,
of which 5,000 shares are outstanding, except that the authorized and
outstanding shares of CCC of Maryland, Inc. are 3,000 and 1,000,
respectively, and the authorized and outstanding shares of A.M.A. New Jersey
Development, Inc. are 20,000 and 11,710, respectively. The authorized and
outstanding capital stock of CareMatrix may be increased prior to the
Effective Date and CareMatrix will promptly notify Standish of any such
increase. Schedule 4.3 sets forth a list of the beneficial and record owners
of the issued and outstanding shares of Common Stock of each CareMatrix
Corporation and their affiliation or association, if any, with CareMatrix.
All of the outstanding shares of CareMatrix Common Stock have been validly
issued and are fully-paid and nonassessable. Except as set forth on Schedule
4.3 of the CareMatrix Disclosure Schedule, there
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are outstanding no options, warrants, rights, or other agreements or
commitments obligating any CareMatrix Corporation to issue or sell shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock. The CareMatrix Corporations
are not obligated directly, indirectly or contingently to purchase or redeem
any shares of CareMatrix Common Stock.
4.4 Corporate Power and Authority. The CareMatrix Corporations have full
corporate or partnership power and authority to carry on their businesses as
now being conducted in the jurisdictions where such businesses are now
conducted and to operate and lease the CareMatrix Leased Properties. This
Agreement, the Merger and the other transactions contemplated hereby have
been duly and unanimously approved by the Board of Directors and stockholders
of each CareMatrix Corporation. The CareMatrix Corporations has full
corporate power and authority to enter into this Agreement and to consummate
the Merger and the other transactions contemplated hereby, and this Agreement
and each of the other agreements to be executed and delivered by any
CareMatrix Corporation in connection herewith constitute the legal, valid and
binding obligations of such corporation enforceable against it in accordance
with their respective terms.
4.5 No Violation. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby and the
consummation of the Merger and the other transactions contemplated hereby,
nor the performance of this Agreement and such other documents and
instruments in compliance with the terms and conditions hereof and thereof,
except as set forth in Schedule 4.5 of the CareMatrix Disclosure Schedule,
will (i) violate, conflict with or result in any breach of any trust
agreement, charter document, by-law, judgment, decree, order, statute or
regulation applicable to CareMatrix, (ii) violate, conflict with or result in
a breach, default or termination or give rise to any right of termination,
cancellation or acceleration of the maturity of any payment date of any
obligation of CareMatrix or increase or otherwise affect the obligations of
CareMatrix under any law, rule, regulation or any judgment, decree, order,
governmental permit, license or order or any of the terms, conditions or
provisions of any mortgage, indenture, note, license, agreement or other
instrument or obligation related to CareMatrix or to CareMatrix's ability to
consummate the Merger and the other transactions contemplated hereby, except
for such defaults (or rights of termination, cancellation or acceleration) as
to which requisite waivers or consents, in form and substance satisfactory to
Standish, have been or will be obtained in writing and provided to Standish
at or prior to the Closing, (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to CareMatrix or (iv) result
in the creation of any Claim upon or against the properties of CareMatrix.
4.6 Financial Statements. CareMatrix has delivered to Standish
internally prepared combined unaudited financial statements of the CareMatrix
Corporations as of December 31, 1995 and for the year then ended and combined
unaudited financial statements of the CareMatrix Corporations as of May 31,
1996 (the "May Balance Sheet Date") and for the five months then ended (the
"CareMatrix Financial Statements"). The CareMatrix Financial Statements
fairly present the historical combined financial position of the CareMatrix
Corporations as of their respective dates and accurately set forth the
results of operations for the periods presented therein, as the case may be,
all in conformity with GAAP, consistently applied, of the CareMatrix
Corporations, except as otherwise noted therein. Any financial statements
prepared by CareMatrix after the May 31, 1996 financial statements will be
prepared in accordance with GAAP, consistently applied, and will fairly
present the financial position as of their respective dates and accurately
set forth the results of operations for the periods presented therein, of
CareMatrix, except as otherwise noted therein.
4.7 Absence of Undisclosed Liabilities. Except as set forth or reserved
against in the balance sheet (the "CareMatrix Balance Sheet") as of the May
Balance Sheet Date included in the CareMatrix Financial Statements,
CareMatrix (i) did not have as of the May Balance Sheet Date any liability or
obligation of any nature, whether accrued, absolute, contingent, or otherwise
and whether due or to become due, including without limitation liabilities
that may become known or arise after the date hereof and which relate to
transactions entered into or any state of facts existing on or before the May
Balance Sheet Date, which would be required under GAAP to be shown in such
balance sheet, and (ii) except for its obligation to make the CareMatrix
Working Capital Loan contemporaneously with the execution and delivery of
this Agreement and as shown on Schedule 4.7 of the CareMatrix Disclosure
Statement has not incurred since the May Balance Sheet Date any such
liability or obligation except in the ordinary course of business.
4.8 Conduct of Business Since the May Balance Sheet Date. Since the May
Balance Sheet Date, except as set forth on Schedule 4.8(a) of the CareMatrix
Disclosure Schedule, there has been no Material Adverse Change with respect
to CareMatrix, and no such Material Adverse Change is threatened,
contemplated or anticipated. As
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used in this Section 4.8, "Material adverse change in the Financial Condition
of CareMatrix" shall mean an increase of more than $7,500,000 in the Due to
Shareholder of CareMatrix from the Net Working Capital (Deficit) as of the
May Balance Sheet Date to the Due to Shareholder as of the last day of the
calendar month immediately preceding the Closing Date (the "Final Due to
Shareholder"), as shown on a balance sheet prepared by CareMatrix (the
"Determination Balance Sheet"). CareMatrix shall not change the
classification of any items shown on the Balance Sheet in its preparation of
the Determination Balance Sheet, and the Determination Balance Sheet shall
include all of the expenses and fees incurred and reasonably anticipated to
be incurred by CareMatrix in connection with the Merger. The determination of
Final Due to Shareholder shall be made in accordance with GAAP, consistently
applied.
Since the May Balance Sheet Date, except as set forth on Schedule 4.8(b),
CareMatrix has not taken or agreed to take any action that would obligate any
CareMatrix Corporation to have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business;
(b) entered into or agreed to enter into any transaction, agreement or
commitment, or suffered the occurrence of any event or events (i) that has
interfered or is reasonably likely to interfere with the normal and usual
operations of the business of CareMatrix or (ii) that, singly or in the
aggregate, has resulted or is reasonably likely to result in a Material
Adverse Change with respect to CareMatrix;
(c) except for additional funds provided by the Gosmans and reflected
on the financial statement as Due to Shareholder, incurred or increased
any indebtedness for borrowed money or any capital lease obligations, or
assumed, guaranteed, endorsed or otherwise become responsible for the
obligations of any other individual, partnership, firm or corporation
(except to endorse checks for collection for deposit in the ordinary
course of business), or made any loan or advance to any individual,
partnership, firm or corporation;
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred or otherwise disposed of,
any of the properties or assets of CareMatrix, including any cancelled,
released, hypothecated or assigned indebtedness owed to CareMatrix, or any
claims held by CareMatrix;
(e) except with respect to the conversion of related party debt to
equity, made any investment of a capital nature or entered into a
commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer or otherwise, or by the
purchase of any property or assets of any other individual, partnership,
firm or corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock or property, or any combination thereof) in
respect of the capital stock of any CareMatrix Corporation, or, paid more
than $5,000,000 to redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of any of the CareMatrix Corporations;
(g) paid any long-term liability, otherwise than in accordance with
its terms;
(h) since January 1, 1996 paid any bonus compensation in excess of
$120,000 to any officer, director, stockholder or employee of CareMatrix
or otherwise increased the compensation paid or payable to any of the
foregoing by an amount in excess of $50,000, except as contemplated
pursuant to this Agreement;
(i) sold, assigned or transferred any patents, trademarks, trade
names, logos, copyrights, formulae or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any
capital stock of any of the CareMatrix Corporations, (ii) to sell any
assets of CareMatrix other than in the ordinary course of business, (iii)
to effect any merger, consolidation or other reorganization of CareMatrix,
or (iv) to enter into any agreement with respect thereto; or
(k) paid any expenses or fees of counsel, accountants or consultants
for services in preparation for or in connection with this Agreement or
the transactions contemplated hereunder in excess of $1,000,000, exclusive
of payments to National Westminster Bank Plc, New York Branch ("NatWest")
substantially as described in the draft agreement previously furnished to
Standish.
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4.9 Tangible Properties. "Schedule 4.9(a) of the CareMatrix Disclosure
Schedule contains a true and complete list showing the capitalized value of
Furniture, Fixtures and Equipment owned or leased by CareMatrix. In addition
to the Furniture, Fixtures and Equipment, CareMatrix owns or leases
miscellaneous other fixed assets, fixtures, furnishings, furniture, office
supplies, computer hardware, and software, automobiles, tools, machinery,
equipment, spare parts and other tangible property, which had an individual
value of less than $1,000 when leased or purchased (the "CareMatrix
Miscellaneous Personal Property", and collectively with the Furniture,
Fixtures and Equipment, the "CareMatrix Tangible Personal Property"). Except
as listed on Schedule 4.9(b) of the CareMatrix Disclosure Schedule with
respect to leased CareMatrix Tangible Personal Property, CareMatrix has good
and marketable title free and clear of all Claims to the CareMatrix Tangible
Personal Property owned by CareMatrix. With respect to any CareMatrix
Tangible Personal Property leased by CareMatrix, all leases, conditional sale
contracts, franchises or licenses pursuant to which CareMatrix may hold or
use (or permit others to hold or use) such CareMatrix Tangible Personal
Property are valid and in full force and effect, and there is not under any
of such instruments any existing default or event of default or event which
with notice or lapse of time or both would constitute such a default; and
CareMatrix's possession and use of such property has not been disturbed and
no claim has been asserted against CareMatrix adverse to their rights in such
leasehold interests. All CareMatrix Tangible Personal Property is adequate
and usable for the purposes for which it is currently used and each item of
CareMatrix Tangible Personal Property, whether owned or leased, is in good
operating condition, reasonable wear and tear excepted, and has been properly
maintained and repaired. CareMatrix Tangible Personal Property comprises all
the equipment necessary for the continuing operation of the CareMatrix
Improvements (as hereinafter defined) in the manner in which they have been
operated to date.
4.10 Real Property.
(a) CareMatrix owns no real property. All real property leased or
managed by CareMatrix (the "CareMatrix Leased or Managed Properties"),
together with the improvements thereon (the "CareMatrix Improvements") is
described in Schedule 4.10(a) of the CareMatrix Disclosure Schedule.
Schedule 4.10(a) of the CareMatrix Disclosure Schedule includes, to the
extent available, a materially accurate summary reflecting the location,
land acreage, services and maximum legal unit and bed capacities of each
of the CareMatrix Leased or Managed Properties. Schedule 4.10(a) sets
forth a list of all real property subject to options to purchase or lease
in favor of CareMatrix (such purchase options are herein referred to as
the "CareMatrix Property Options", and such locations are herein referred
to as the "CareMatrix Option Locations"). Within 25 days after the date of
this Agreement, CareMatrix shall deliver to Standish a materially accurate
summary (to be known as Schedule 4.10A) reflecting the location, land
acreage, proposed services, current development plan and currently planned
maximum legal unit and bed capacities of each such location subject to a
CareMatrix Property Option and the proposed development agent, joint
venture, partner or other similar relationship if and to the extent such a
relationship exists, and the affiliation of the other contracting party to
CareMatrix or any of the CareMatrix Stockholders. Where the term
"CareMatrix Leased or Managed Properties" is used in these representations
and warranties, the same shall, unless the context otherwise requires,
include all of the locations referred to as CareMatrix Option Locations.
(b) The information concerning the CareMatrix Leased or Managed
Properties set forth in Schedule 4.10(a) of the CareMatrix Disclosure
Schedule is true, accurate and complete in all material respects, but does
not contain information relating to managed properties. Except as shown on
Schedule 4.10(a) of the CareMatrix Disclosure Schedule, CareMatrix does
not own or lease or have any rights or interest in any other real property
other than the CareMatrix Leased or Managed Properties. Where the term
"CareMatrix Leased or Managed Properties" is used in these representations
and warranties, the same shall mean all of the properties and interests
constituting the CareMatrix Leased or Managed Properties and each
individual property or interest.
(c) [omitted.]
(d) [omitted.]
(e) Except as set forth in Schedule 4.10(e) of the CareMatrix
Disclosure Schedule, there are no leases, subleases, tenancies, licenses,
occupancy agreements or other agreements pursuant to which parties other
than CareMatrix hold rights to use or occupy all or any portion of the
CareMatrix Leased or Managed Properties (such leases, subleases,
tenancies, licenses, occupancy agreements and other agreements are herein
referred to as the "CareMatrix Tenant Leases").
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(f) CareMatrix is not in default, nor do any circumstances exist
which, with notice or the passage of time, or both, would give rise to a
default under any of the documents to which CareMatrix is a party,
recorded or unrecorded, relating to the CareMatrix Leased or Managed
Properties or with respect to any contractual obligations of CareMatrix
that would have a material adverse effect on the CareMatrix Occupancy
Leases.
(g) Schedule 4.10(g) of the CareMatrix Disclosure Schedule is a true
and complete schedule of all contractual obligations that involve payments
or receipts by CareMatrix of more than $5,000 in any single case, relative
to the ongoing development or construction, maintenance, security,
management or operations of the CareMatrix Leased or Managed Properties
excluding, however, warranties and guaranties, showing as to each of the
contractual obligations: (i) date of the contractual obligation and each
amendment thereof; (ii) name of vendor; (iii) type of service; (iv)
termination date of the contractual obligation; (v) the basis for
calculating amounts to become due thereunder; and (vi) whether and upon
what terms either party may terminate such agreement without cause.
(h) CareMatrix has not been advised of and is not aware of any defect
in the condition of the CareMatrix Leased or Managed Properties, or any
portion thereof, which has not been corrected and which will materially
impair the operation of the CareMatrix Leased or Managed Properties as
presently operated or as proposed to be operated. CareMatrix has not been
advised of and is not aware of any material defect in the CareMatrix
Improvements, the structural elements thereof, the mechanical systems
(including, without limitation, all heating, ventilating, air
conditioning, plumbing, electrical, elevator, security, utility and
sprinkler systems) therein, the roofs or the parking and loading areas.
The construction of all of the CareMatrix Improvements has been fully
completed, and, except as set forth in Schedule 4.10(h) of the CareMatrix
Disclosure Schedule, all sums owing on account thereof have been paid in
full.
(i) All water, sewer, gas, electric, telephone, drainage and other
utility equipment, facilities and services required by law or necessary
for the proper operation of the CareMatrix Leased or Managed Properties
and the CareMatrix Improvements as they are now being operated are
installed and connected to the CareMatrix Improvements pursuant to valid
permits, are adequate to service the CareMatrix Improvements and are in
good operating condition. To the best of CareMatrix's knowledge, no fact,
condition, or proceeding exists which would result in the termination or
impairment of the furnishing of services to the CareMatrix Leased or
Managed Properties of water, sewer, gas, electric, telephone, drainage and
other such utility services.
(j) The CareMatrix Improvements are free from infestation by rodents,
termites or other insects or animals.
(k) To the best of CareMatrix's knowledge, the CareMatrix Improvements
were completed and installed in accordance with plans, which were approved
by all governmental authorities having jurisdiction thereof. CareMatrix
has delivered, or made available, to Standish true, correct and complete
copies of those drawings or plans as are currently in CareMatrix's
possession and which depict the CareMatrix Leased or Managed Properties
and the CareMatrix Improvements as built (the "CareMatrix As-Built
Plans"). Except as disclosed on Schedule 4.10(k) of the CareMatrix
Disclosure Schedule, there is legal and adequate access to the CareMatrix
Leased or Managed Properties at all points so identified in the CareMatrix
Plans and such access is directly from the CareMatrix Leased or Managed
Properties onto public ways as so identified, and not by means of any
lease, license, easement or other agreement. All CareMatrix Improvements
constructed by CareMatrix on any portion of the CareMatrix Leased or
Managed Properties affected by any CareMatrix Occupancy Lease are in
accordance with the CareMatrix Occupancy Lease requirements.
(l) Listed on Schedule 4.10(l) of the CareMatrix Disclosure Schedule
is a true and complete list of all written warranties and guaranties held
by CareMatrix with respect to the CareMatrix Leased or Managed Properties
and the CareMatrix Improvements, including all CareMatrix Tangible
Personal Property relating thereto.
(m) There are no pending or, to the best of CareMatrix's knowledge,
threatened requests, applications or proceedings to alter or restrict the
zoning or other use restrictions applicable to the CareMatrix Leased or
Managed Properties. CareMatrix has not received notice from any municipal,
state, federal or other governmental authority of violations of any Law
issued in respect of the CareMatrix Leased or Managed Properties which
have not been heretofore corrected, and, to the best of CareMatrix's
knowledge, no such
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violations exist. CareMatrix has not received notice of and is not aware
of any plan, study or effort by any governmental agency or authority which
would materially adversely affect the present use or zoning of the
CareMatrix Leased or Managed Properties or which would modify or realign
any adjacent street or highway.
(n) To the best knowledge of CareMatrix, there are presently in effect
all licenses, permits, approvals and other authorizations necessary for
the current use, occupancy and operation by CareMatrix, if any, of the
CareMatrix Leased or Managed Properties. Such licenses, permits, approvals
and other authorizations are listed in Schedule 4.10(n) of the CareMatrix
Disclosure Schedule hereto. No such license, permit, approval or other
authorization (i) contains any restrictions or conditions that would have
a material adverse effect on the CareMatrix Leased or Managed Properties
or (ii) is subject to any "linkage" or similar obligation. All applicable
fees currently due and payable with respect thereto have been paid in full
(and no fees or other payments with respect thereto shall accrue or become
due and payable in the future). All of such licenses, permits, approvals
and other authorizations are in full force and effect and shall remain in
effect indefinitely subject to the conditions contained therein, without
expiration or need of renewal thereof.
(o) [omitted.]
(p) There are no pending or threatened condemnation or similar
proceedings or assessments affecting any of the CareMatrix Leased or
Managed Properties, nor to the best of CareMatrix's knowledge, is any such
condemnation or assessment contemplated by any governmental authority.
4.11 Licenses and Permits. Schedule 4.11 of the CareMatrix Disclosure
Schedule lists all licenses, permits, pending applications, consents,
approvals and authorizations of or from any public or governmental agency,
held by CareMatrix or used in or otherwise necessary for the conduct of the
business operations of CareMatrix (the "CareMatrix Business") (collectively,
the "CareMatrix Permits") together with any conditions imposed thereon.
CareMatrix has complied with all conditions and requirements imposed by the
CareMatrix Permits and, except as set forth in Schedule 4.11(a), CareMatrix
has not received any notice of, or has any reason to believe, that any
appropriate authority intends to cancel, terminate or suspend any of the
CareMatrix Permits or that valid grounds for such cancellation, termination
or suspension exist. Except as set forth on Schedule 4.11 of the CareMatrix
Disclosure Schedule, no other permits other than the CareMatrix Permits are
necessary to operate the CareMatrix Business. CareMatrix owns or has the
right to use the CareMatrix Permits in accordance with the terms thereof
without any conflict or alleged conflict or infringement with the rights of
others and subject to no Claim. Each CareMatrix Permit is and immediately
after the Merger will be valid and in full force and effect and no CareMatrix
Permit will be subject to termination or be terminated or adversely affected
by the Merger.
4.12 Intellectual Property. CareMatrix owns, or is licensed or otherwise
has the full and unrestricted right to use, all patents, trademarks, trade
names, copyrights, technology, know-how, trade secrets, processes, formulas
and techniques used in connection with the current operation of the
CareMatrix Business (collectively, the "CareMatrix Intellectual Property")
and all CareMatrix Intellectual Property is described or listed in Schedule
4.12 of the CareMatrix Disclosure Schedule, except trade secrets which have
been separately disclosed to Standish. CareMatrix has not granted to any
other person any license or other right to use in any manner any of the
CareMatrix Intellectual Property, whether or not requiring the payment of
royalties. Except as set forth in Schedule 4.12, to the best knowledge of
CareMatrix (i) no other person has a right or license granted directly or
indirectly by or through CareMatrix to use any CareMatrix Intellectual
Property; (ii) none of the CareMatrix Intellectual Property is being
infringed by others, or is subject to any outstanding order, decree, judgment
or stipulation; and (iii) there are no claims or demands of any other person,
and no proceedings have been instituted, or are pending or, to the best
knowledge of CareMatrix, threatened, relating to the CareMatrix Intellectual
Property.
4.13 Outstanding Commitments. Schedule 4.13 of the CareMatrix Disclosure
Schedule sets forth a list and description of all existing contracts,
agreements, leases and subleases (other than the CareMatrix Occupancy Leases
and CareMatrix Tenant Leases), commitments, licenses and franchises that
involve payments or receipts by CareMatrix of more than $5,000 in any single
case (collectively, the "CareMatrix Contracts"), whether written or oral, to
which any CareMatrix Corporation is a party or which relate to the CareMatrix
Business. CareMatrix has delivered or made available to Standish true,
correct and complete copies of all written CareMatrix Contracts and Schedule
4.13 of the CareMatrix Disclosure Schedule contains an accurate and complete
description of all CareMatrix Contracts which are not in writing. All of the
CareMatrix Contracts are in full force and effect. CareMatrix and each other
party to each of the CareMatrix Contracts have performed all the material
obligations
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required to be performed by them to date, and there is not under any of the
CareMatrix Contracts any existing default or event of default or event which
with notice or lapse of time or both would constitute such a default.
CareMatrix has not (i) any present expectation or intention of not fully
performing all its obligations under each of the CareMatrix Contracts to
which it is a party or (ii) any knowledge of any breach or anticipated breach
by any other party to any of the CareMatrix Contracts. None of the CareMatrix
Contracts has been terminated or notice of termination given with respect
thereto, no notice has been given by any party thereto of any alleged default
thereunder by any party thereto, and CareMatrix is not aware of any intention
or right of any party to any CareMatrix Contract to default another party to
any CareMatrix Contract. There exists no actual or, to the best knowledge of
CareMatrix, threatened termination, cancellation or limitation of the
business relationship of CareMatrix with any party to any CareMatrix
Contract.
Within 25 days after the date of this Agreement, CareMatrix shall deliver
to Standish a list and description (to be known as Schedule 4.13A) of all
existing contracts, agreements, leases and subleases, commitments, licenses
and franchises that involve payments or receipts of more than $5,000 in any
single case (collectively, the "Affiliate Contracts"), whether written or
oral, to which any entity owned or controlled by Abraham D. Gosman, Andrew D.
Gosman and/or Michael M. Gosman (a "Gosman Entity") is a party which relate
to any project described in the Corporate Forecast. As of the date of the
delivery of Schedule 4.13A, CareMatrix shall have delivered or made available
to Standish true, correct and complete copies of all written Affiliate
Contracts and Schedule 4.13A shall contain an accurate and complete
description of all Affiliate Contracts which are not in writing. As of the
date of the delivery of Schedule 4.13A, except as may be set forth on
Schedule 4.13A, all of the Affiliate Contracts shall be in full force and
effect. As of the date of the delivery of Schedule 4.13A, except as may be
set forth on Schedule 4.13A, each party to each of the Affiliate Contracts
shall have performed all the material obligations required to be performed by
them to date, and there shall not be under any of the Affiliate Contracts any
existing default or event of default or event which with notice or lapse of
time or both would constitute such a default. As of the date of the delivery
of Schedule 4.13A, except as may be set forth on Schedule 4.13A, none of the
Affiliate Contracts shall have been terminated or notice of termination given
with respect thereto, no notice shall have been given by any party thereto of
any alleged default thereunder by any party thereto, and CareMatrix shall not
be aware of any intention or right of any party to any Affiliate Contract to
default another party to any Affiliate Contract.
4.14 Litigation. Except as set forth on Schedule 4.14 of the CareMatrix
Disclosure Schedule, there is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of CareMatrix's best knowledge,
threatened against or affect CareMatrix (whether or not CareMatrix is a party
or prospective party thereto), at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) pending
or, to the best of CareMatrix's knowledge, threatened arbitration proceeding
relating to CareMatrix or (iii) governmental inquiry pending or, to the best
of CareMatrix's knowledge, threatened against or involving CareMatrix, and
there is no basis for any of the foregoing. Except as set forth on Schedule
4.14 of the CareMatrix Disclosure Schedule, CareMatrix has not received any
opinion or memorandum or legal advice from legal counsel to the effect that
it is exposed, from a legal standpoint, to any liability or disadvantage
which may be material to the prospects, financial condition, operations,
property or affairs of the CareMatrix Business. Except as set forth on
Schedule 4.14 of the CareMatrix Disclosure Schedule, there are no outstanding
orders, writs, judgments, injunctions or decrees of any court, governmental
agency or arbitral tribunal against, involving or affecting CareMatrix, and
there are no facts or circumstances which may result in institution of any
action, suit, claim or legal, administrative or arbitration proceeding or
investigation against, involving or affecting CareMatrix, their assets or
properties, or the Merger or the transactions contemplated hereby. CareMatrix
is not in default with respect to any order, writ, injunction or decree known
to or served upon it from any court or of any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. Except as set forth on Schedule 4.14 of
the CareMatrix Disclosure Schedule, there is no action, suit or proceeding by
CareMatrix or their affiliates pending or threatened against others. Except
as set forth on Schedule 4.14 of the CareMatrix Disclosure Schedule, none of
the following has occurred within five (5) years prior to the date hereof
with respect to CareMatrix:
(a) Neither CareMatrix nor, to its best knowledge, any current
employee thereof, has been convicted in a criminal proceeding or has been
named or is a subject of a criminal, governmental or other regulatory
investigatory proceeding (excluding traffic violations);
(b) Neither CareMatrix nor, to its best knowledge, any current
employee thereof, has been or is the subject of any order, judgment or
decree of any court, governmental agency or other regulatory body
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permanently or temporarily enjoining, barring, suspending or limiting it
or any such person from engaging in any type of business or professional
practice or activities; or
(c) Neither CareMatrix nor, to its best knowledge, any current
employee thereof, has been found by a court of competent jurisdiction in a
civil action or by any governmental agency or other regulatory body to
have violated any Law.
4.15 Compliance with Law. Except as set forth in Schedule 4.15 of the
CareMatrix Disclosure Schedule, CareMatrix is not subject to any judgment,
order, writ, injunction or decree and CareMatrix has complied with and are
not in default under, all laws, ordinances, legal requirements, rules,
regulations and orders applicable to it, its operations, properties, assets,
products and services, including, without limitation, the Medicare and
Medicaid Patient and Program Protection Act of 1987 and the Omnibus Budget
Reconciliation Act of 1994.
4.16 Labor and Employee Relations. No CareMatrix Corporation is a party
to or bound by any collective bargaining agreement with any labor
organization, group or association covering any of its employees, and
CareMatrix has no knowledge of any attempt to organize any of their employees
by any person, unit or group seeking to act as their bargaining agent. Except
as set forth in Schedule 4.16 of the CareMatrix Disclosure Schedule, there
are no pending or threatened charges (by employees, their representatives or
governmental authorities) of unfair labor practices or of employment
discrimination or of any other wrongful action with respect to any aspect of
employment of any employee of CareMatrix.
4.17 Certain Employees. Set forth on Schedule 4.17 of the CareMatrix
Disclosure Schedule is a list of the names of all of the employees and
consultants employed by CareMatrix in connection with the CareMatrix
Business, together with the title or job classification of each such person
and his or her current compensation. Except as set forth on Schedule 4.17 of
the CareMatrix Disclosure Schedule, none of such persons has (i) an
employment agreement or understanding, whether oral or written, with
CareMatrix which is not terminable on thirty (30) days or less notice by
CareMatrix without cost or other liability to CareMatrix or (ii) a
non-competition, non-disclosure and/or non-solicitation agreement or
understanding with CareMatrix, whether written or oral, and all such
employment and other agreements are set forth in Schedule 4.17 of the
CareMatrix Disclosure Schedule hereto. No person listed on Schedule 4.17 of
the CareMatrix Disclosure Schedule has indicated that he or she intends to
terminate his or her employment with CareMatrix or seek a material change in
his or her duties or status. Each person listed on Schedule 4.17 of the
CareMatrix Disclosure Schedule who is required to be licensed by applicable
state law in order to perform his or her duties is so licensed. Set forth on
Schedule 4.17 of the CareMatrix Disclosure Schedule is the amount, if any, of
any severance liability of CareMatrix with respect to each person listed on
Schedule 4.17 of the CareMatrix Disclosure Schedule.
4.18 Employee Benefits. Set forth on Schedule 4.18 of the CareMatrix
Disclosure Schedule is a list of all pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive, bonus,
vacation, severance, disability, hospitalization, medical insurance, life
insurance, fringe benefit, welfare and other employee benefit plans, programs
or arrangements, whether formal or informal, oral or written, under which
employees of CareMatrix may be entitled to benefits or CareMatrix may have
any liability (collectively, the "CareMatrix Plans"). Through the Closing
Date all such CareMatrix Plans shall be maintained by CareMatrix in full
force and effect. CareMatrix does not contribute, or has ever been required
to contribute, to any plan subject to Title IV of ERISA or to any
multiemployer plan, as defined in section 3(37) or section 4001(a)(3) of
ERISA.
Each CareMatrix Plan has been established and administered in accordance
with its terms and in compliance with the applicable provisions of the Code,
ERISA and other applicable laws, rules and regulations. Each CareMatrix Plan
which is intended to be qualified within the meaning of section 401(a) of the
Code is so qualified and has received a favorable determination letter with
respect to its qualification and, to the best knowledge of CareMatrix, no
event has occurred which would cause the loss of such qualification. Each
CareMatrix Plan which is intended to meet the requirements for tax-favored
treatment under Subchapter B of Chapter 1 of Subtitle A of the Code meets
such requirements.
With respect to each CareMatrix Plan, no actions, suits or claims (other
than claims for benefits in the ordinary course) are pending or threatened,
and no facts or circumstances exist which could give rise to any such
actions, suits or claims. CareMatrix has not engaged in a prohibited
transaction, as defined under section 4975 of the Code or section 406 of
ERISA, with respect to any CareMatrix Plan, and no fiduciary with respect to
any CareMatrix Plan has, to the best knowledge of CareMatrix, breached any
fiduciary duty to such CareMatrix Plan
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under Part 4 of Title I of ERISA or other applicable law. No event has
occurred and no condition exists that would subject CareMatrix to any tax,
fine or penalty imposed by the Code, ERISA or other applicable law. All
required contributions have been made by CareMatrix to each of the Plans and
there is no funding deficiency with respect to any of CareMatrix Plans. Each
CareMatrix Plan may be amended or terminated in accordance with its terms
without obligation or liability, other than those obligations and liabilities
for which specific assets have been set aside or reserved for on the balance
sheet as of the May Balance Sheet Date included in the CareMatrix Financial
Statements and those obligations and liabilities reflected by the terms of
the CareMatrix Plan documents. There are no unfunded obligations under any
CareMatrix Plan providing benefits to employees of CareMatrix during
employment or after termination of their employment.
4.19 Insurance. CareMatrix is, and will be through the Closing Date,
adequately insured with responsible insurers in respect of their properties,
assets and business against risks normally insured against by companies in
similar lines of business under similar circumstances. Schedule 4.19 of the
CareMatrix Disclosure Schedule correctly describes (by type, carrier, policy
number, limits, premium and expiration date) the insurance coverage carried
by CareMatrix with respect to the CareMatrix Business, which insurance will
remain in full force and effect with respect to all events occurring prior to
the Closing. CareMatrix (i) has not failed to give any notice or present any
claim under any such policy or binder in due and timely fashion, (ii) has not
received notice of cancellation or non-renewal of any such policy or binder,
(iii) is not aware of any threatened or proposed cancellation or non- renewal
of any such policy or binder and (iv) have not received notice of and are not
otherwise aware of any insurance premiums which will be materially increased
in the future. There are no outstanding claims under any such policy which
have gone unpaid for more than forty-five (45) days, or as to which the
insurer has disclaimed liability.
4.20 Transactions With Affiliates. Except as contemplated by this
Agreement and except as set forth in Schedule 4.20 of the CareMatrix
Disclosure Schedule hereto and only with respect to transactions giving rise
to current or contingent liabilities of CareMatrix, no current or former
holder of 5% or more of any class of capital stock of any CareMatrix
Corporation at the time such transaction was entered into, or any director,
officer or employee of CareMatrix, or member of the family of any such
person, or any corporation, partnership, trust or other entity in which any
such person, or any member of the family of any such person, has an interest
or is an officer, director, trustee, partner or holder of any equity
interest, is a party to any transaction with CareMatrix, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from, or
otherwise requiring payments or involving other obligations to or from such
person.
4.21 Taxes. Each of the CareMatrix Corporations has filed all tax
returns and reports required to be filed, including, without limitation,
returns and estimated returns, with respect to federal, state, foreign and
local taxes, and have paid in full all taxes shown due thereon and all
estimated taxes when due (together with all interest, penalties, assessments
and deficiencies assessed in connection therewith due through the date
hereof). CareMatrix is not required to pay any other taxes except as shown in
such tax returns, reports and information filings. All such returns, reports,
and information filings required to be filed, including any amendments to
date, have been prepared in good faith and without negligence or
misrepresentation. CareMatrix has either paid or, in accordance with GAAP
applied consistently with prior periods, adequately provided for, by reserves
or other proper accounting treatment shown in the records and books of
account, its liability for all taxes of every kind, including, without
limitation, its liability for federal, state and municipal income or
franchise tax for the current tax year and for all prior years. CareMatrix
has no knowledge of any proposed or threatened assessment or reassessment of
federal, state or municipal income or franchise taxes. The United States
federal income tax returns of CareMatrix have not been examined by the
Internal Revenue Service. In addition, at the date hereof, CareMatrix has
deducted and remitted all withholding tax or source deductions when due to
the appropriate governmental authority as required by law or CareMatrix has
adequately provided for such deductions by reserves or other proper
accounting treatment their books and records of account. CareMatrix (i) has
not executed any waiver to extend, or otherwise taken or failed to take any
action that would have the effect of extending, the applicable statute of
limitations with respect to its tax liabilities, (ii) is not a "consenting
corporation" within the meaning of Section 341(f) of the Code, (iii) has not
been a member of any consolidated group (other than with CareMatrix
Corporations) for tax purposes or (iv) has, or will have, all records and
information necessary for the timely and accurate filing of any tax returns
due after the date hereof, including any returns due after the Closing Date
which relate to the period prior to the Closing Date.
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4.22 Brokers. No agent, person or firm acting on behalf of CareMatrix or
under their authority is or will be entitled to a financial advisory fee,
brokerage commission, finder's fee or like payment in connection with the
transactions contemplated hereby, except NatWest.
4.23 Environmental Laws.
(a) CareMatrix has operated and continue to operate the CareMatrix
Facilities and the CareMatrix Business in compliance with all
Environmental Laws.
(b) No CareMatrix Leased or Managed Property nor, to the best
knowledge of CareMatrix, any real property contiguous thereto, is or has
been designated by any state, local or federal agency or body as a
hazardous waste disposal site or a site or location requiring
investigation concerning, or management, clean-up or removal of, any
Hazardous Substance.
(c) There is no civil, criminal or investigative action, suit,
litigation, hearing, communication (written or oral), demand, claim,
citation, notice or notice of violation, warning, consent decree, judgment
or order by any person or entity alleging, claiming, concerning or finding
liability or potential liability arising out of, based on or resulting
from, in whole or in part, (a) the actual or alleged presence, threatened
release, release, emission, disposal, storage, treatment, transportation,
generation, manufacture or use of any Hazardous Substance at or from any
location or (b) circumstances forming the basis of any Environmental
Claims pending or threatened against CareMatrix or against any person or
entity whose liability for any Environmental Claim CareMatrix has or may
have retained or assumed either contractually or by operation of law.
There are no past or present actions, activities, circumstances,
conditions, events, incidents or practices, including, without limitation,
the release, threatened release, emission, discharge, disposal, storage,
treatment, transportation, generation, manufacture or use of any Hazardous
Substance that could form the basis of any Environmental Claim against
CareMatrix or, to CareMatrix's best knowledge, against any person or
entity whose liability for any Environmental Claim CareMatrix has or may
have retained or assumed either contractually or by operation of law.
(d) All Waste generated in connection with the business, operations,
assets and properties of CareMatrix has been (i) treated, stored or
disposed of by or at facilities duly licensed pursuant to applicable
Environmental Laws and (ii) transported to such facilities by transporters
duly licensed pursuant to applicable Environmental Laws. CareMatrix has
maintained true and complete records relating to the generation,
transportation, treatment, storage and disposal of Waste generated in
connection with the business, operations, assets and properties of
CareMatrix.
(e) CareMatrix has delivered to Standish all Environmental Reports in
possession of CareMatrix or its past or present consultants and advisors
or those reports as have been prepared by any person or entity concerning
compliance with applicable Environmental Laws of CareMatrix's business,
operations, assets or properties or the use, manufacture, importation,
processing, storage, treatment, transportation, release or disposal
therefrom, therein or thereon of any Hazardous Substance. All such
Environmental Reports are listed on Schedule 4.23 of the CareMatrix
Disclosure Schedule.
4.24 Corporate Records. The corporate record books of each CareMatrix
Corporation are in good order, complete, accurate, up to date, with all
necessary signatures, and set forth all meetings and actions taken by the
stockholders and directors, and all votes of the stockholders or directors
set forth in certificates furnished to anyone at any time heretofore.
4.25 Accounts Receivable. All of the accounts receivable of CareMatrix
shown or reflected on the most recent balance sheet in the CareMatrix
Financial Statements, less the reserve for doubtful accounts in the amount
shown on such balance sheet, are valid and enforceable claims and subject to
no setoff or counterclaim. CareMatrix has no accounts or loans receivable
from any of its directors, officers or employees in excess of $7,500 in the
aggregate.
4.26 Proxy Statement. Within 35 days of the date of this Agreement,
CareMatrix shall furnish Standish with a correct and complete copy of the
audited December 31, 1995 CareMatrix Financial Statements and the notes and
schedules thereto prepared in accordance with GAAP, together with other
written information relating to CareMatrix for inclusion in the Proxy
Statement. Such CareMatrix Financial Statements and other information
relating to CareMatrix furnished in writing by CareMatrix to Standish for
inclusion in the Proxy Statement, at the
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time of the mailing of the Proxy Statement to Standish's stockholders and at
the time of the meeting of Standish's stockholders, will not contain any
untrue statement of a material fact or omit to state a material fact
concerning CareMatrix or omit to state a material fact required or necessary
to be stated therein in order to make the statements contained therein
concerning CareMatrix, in light of the circumstances under which they are
made, not misleading. Information relating to CareMatrix furnished in writing
by CareMatrix to Standish for inclusion in the Form S-4 Registration
Statement, at the time of its effectiveness, will not contain any untrue
statement of a material fact or omit to state a material fact concerning
CareMatrix or omit to state a material fact required or necessary to be
stated therein in order to make the statements contained therein concerning
CareMatrix, in light of the circumstances under which they are made, not
misleading.
4.27 Certain Practices. CareMatrix have complied with any and all rules,
regulations, policies and procedures of third party payors with respect to
billing for services. Neither CareMatrix nor any stockholder, director,
officer, or employee of CareMatrix has, directly or indirectly, given or
agreed to give remuneration, in cash or in kind, in order to induce business
reimbursable under Medicare, Medicaid or any health care insurer or provider
which could subject CareMatrix to any damage or penalty in any civil,
criminal or governmental litigation or proceeding. CareMatrix has not at any
time established or maintained any fund or asset for any illegal purpose or
made any false entries or any books or records for any reason.
4.28 Disclosure. All documents and schedules delivered or to be
delivered by or on behalf of CareMatrix in connection with this Agreement,
the Merger and the transactions contemplated hereby are true, complete and
correct. Neither this Agreement, nor any Schedule or Exhibit to this
Agreement contains any untrue statement by CareMatrix of a material fact or
an omission by CareMatrix of a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which made, not
misleading.
4.29 Contracts and Other Documents. Except for those contracts,
agreements, license agreements, vendor agreements, purchase orders,
commitments, sales orders, supply arrangements and other agreements which are
listed in the CareMatrix Disclosure Schedules (collectively, the "Contracts")
or which have been entered into by the CareMatrix Corporations in the
ordinary course of business and do not involve payment or receipt of more
than $10,000.00, and those Leases in the CareMatrix Disclosure Schedules, no
CareMatrix Corporation is a party to any Contract, Lease or similar document.
All the Contacts are valid, binding and enforceable and in full force and
effect, and there are no (i) notices of violation or (ii) existing material
defaults (or events that, with notice or lapse of time or both, would
constitute material defaults) on the part of a CareMatrix Corporation or to
the knowledge of such CareMatrix Corporation on the part of any other party
thereto. Copies of the Contracts have been heretofore delivered to Standish
by CareMatrix or its counsel and such copies are true and complete and
include all amendments, supplements and modifications thereto; each such
Contract will be subject to obtaining any consent listed in the CareMatrix
Disclosure Schedules and will continue to be in full force and effect on the
same terms and conditions immediately after the Closing without the need for
any action on the part of Standish.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
Each Acquisition Corporation represents and warrants to CareMatrix as
follows:
5.1 Organization. Each Acquisition Corporation is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Standish owns all of the issued and outstanding shares of
capital stock of each Acquisition Corporation.
5.2 Power and Authority. Each Acquisition Corporation has full corporate
power and authority to carry on its business as now being conducted and to
own, operate and lease its properties in the places where such business is
now conducted and such properties are now owned, leased or operated. This
Agreement and the transactions contemplated hereby have been duly approved by
the Board of Directors and the sole stockholder of each Acquisition
Corporation. Each Acquisition Corporation has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, and this Agreement and all other agreements to be
executed and delivered by each Acquisition Corporation in connection herewith
constitute the legal, valid and binding obligations of each Acquisition
Corporation enforceable against it in accordance with their respective terms.
5.3 No Violation. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, the consummation
of the transactions contemplated hereby or thereby, nor the
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performance of this Agreement and such other documents and instruments in
compliance with the terms and conditions hereof and thereof will (i) conflict
with or result in any breach of any trust agreement, charter documents,
by-law, judgment, decree, order, statute or regulation applicable to each
Acquisition Corporation, (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, (iii) result in a breach of or default (or give rise to any right
of termination, cancellation or acceleration) under any law, rule or
regulation or any judgment, decree, order, governmental permit, license or
order or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, agreement or other instrument to which each
Acquisition Corporation is a party or (v) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to each
Acquisition Corporation.
5.4 Broker. No agent, broker, person or firm acted on behalf of any
Acquisition Corporation or under its authority in connection with any of the
transactions contemplated hereby.
5.5 Disclosure. The representations and warranties made by each
Acquisition Corporation in this Agreement do not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained herein, in light of the circumstances in which they are
made, not misleading.
ARTICLE VI
COVENANTS OF STANDISH AND ACQUISITION
Standish and each Acquisition Corporation covenant and agree with
CareMatrix as follows:
6.1 Best Efforts Cooperation. Subject to the provisions of Section 6.9,
until the Closing, Standish and each Acquisition Corporation shall use their
best efforts in good faith to perform and fulfill, or cause to be performed
and fulfilled, all conditions and obligations to be fulfilled, or performed
by them hereunder, to the end that the transactions contemplated hereby will
be fully and timely consummated.
6.2 Access. Until the Closing, Standish shall give CareMatrix, and its
attorneys, accountants and other authorized representatives complete access,
upon reasonable notice and at reasonable times, to Standish's and the
Standish Subsidiaries' offices, suppliers, employees, business and financial
records, contracts, business plans, budgets and projections, agreements and
commitments and other documents and information concerning the Standish
Business and persons employed by or doing business with Standish and the
Standish Subsidiaries, except such documents covered by the attorney-client
privilege. In order that CareMatrix may have full opportunity to make such
examination and investigation as they may desire of the Standish Business,
Standish and the Standish Subsidiaries will furnish CareMatrix and its
representatives during such period with all such information as such
representatives may reasonably request and cause the respective officers,
employees, consultants, agents, accountants and attorneys of Standish and the
Standish Subsidiaries to cooperate fully with the representatives of
CareMatrix in connection with such review and examination and to make full
disclosure to CareMatrix of all material facts affecting Standish's financial
condition and the operations, properties and prospects of the Standish
Business; provided, however, that CareMatrix will, unless the Closing occurs,
hold the documents and information concerning Standish and the Standish
Business confidential in accordance with Section 8.5 hereof.
6.3 Insurance. Until the Closing, Standish and the Standish Subsidiaries
shall maintain with financially sound and reputable insurers, insurance
against such casualties and contingencies and of such types and in such
amounts as is customary for companies similarly situated.
6.4 Compliance with Laws. Until the Closing, Standish shall conduct the
Standish Business in compliance with all applicable laws, rules, regulations
and orders, including, without limitation the Medicare and Medicaid Patient
Protection Act of 1987, the Omnibus Budget Reconciliation Act of 1993 and the
rules and regulations of third party payors.
6.5 Keeping of Books and Records. Until the Closing, Standish shall keep
adequate records and books of account, in which complete entries will be made
in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions and in which all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with the Standish Business shall be
made.
6.6 Conduct of Business. Prior to the Effective Time, unless CareMatrix
shall have consented in writing thereto, Standish:
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(a) shall, and shall cause each of the Standish Subsidiaries to,
conduct its operations according to its usual, regular and ordinary course
in substantially the same manner as heretofore conducted;
(b) shall use its reasonable efforts, and shall cause each of the
Standish Subsidiaries to use its reasonable efforts, to preserve intact
its business organization and goodwill, keep available the services of its
officers and employees, and maintain satisfactory relationships with those
persons having business relationships with it;
(c) shall not, and shall not permit the Standish Subsidiaries to,
amend its charter documents or By- laws, except as provided for in this
Agreement;
(d) shall promptly notify CareMatrix of any material emergency or
other material change in its or any Standish Subsidiary's condition
(financial or otherwise), business, properties, assets, liabilities,
prospects or the normal course of its or any Standish Subsidiary's
businesses or in the operation of its or any Standish Subsidiary's
properties and of any litigation or governmental complaints,
investigations or hearings (or communications indicating that the same may
be contemplated);
(e) shall notify Standish promptly after any change in its
capitalization or the issuance of any options or warrants to acquire any
shares of its capital stock not existing on the date hereof; and shall not
permit the Standish Subsidiaries to, (i) except pursuant to the exercise
of options, warrants, conversion rights and other contractual rights
existing on the date hereof and listed on Schedule 3.3 of the Standish
Disclosure Schedule, issue any shares of its capital stock, effect any
stock split or otherwise change its capitalization as it exists on the
date hereof, (ii) grant, confer or award any option, warrant, conversion
right or other right to acquire any shares of its capital stock not
existing on the date hereof and listed on Schedule 3.3 of the Standish
Disclosure Schedule, (iii) accelerate the vesting or exercisability of any
option, warrant, conversion right or other right to acquire any shares of
its capital stock, (iv) increase, or permit any of the Standish
Subsidiaries to increase, any compensation or enter into or amend any
employment agreement with any of its present or future officers, directors
or employees except for the payment of cash bonuses to officers or
employees pursuant to and consistent with existing plans or programs
described on Schedules 3.18 of the Standish Disclosure Schedule and 3.19
of the Standish Disclosure Schedule, (v) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or
amend any existing employee benefit plan in any respect or (vi) sell,
lease or otherwise dispose of any of its assets which are material,
individually or in the aggregate, except in the ordinary course of
business;
(f) shall not, and shall not permit the Standish Subsidiaries to, (i)
incur or obligate itself to incur any capital expenditure in excess of
$20,000, incur any long-term indebtedness in addition to that outstanding
on the date hereof (other than loans from CareMatrix) or any other
indebtedness or liability other than in the ordinary course of business;
(ii) make any loans, advances or capital contributions to, or investments
in, any other person, other than travel or other advances to employees
consistent with past practice; or (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently, or
otherwise) for the obligations of any other person, except to endorse
checks for collection or deposit in the ordinary course of business;
(g) declare or pay any dividend or distribution on any shares of its
capital stock; or
(h) agree, or permit any Standish Subsidiary to agree, in writing or
otherwise to take any of the foregoing actions or any action that would
make any representation or warranty in this Agreement untrue or incorrect
as of the date hereof or as of the Effective Time, as if made as of such
time.
6.7 Litigation. Until the Closing, Standish will promptly notify
CareMatrix of any lawsuits, claims, proceedings or investigations which are
threatened or commenced against or by Standish and any Standish Subsidiary or
their affiliates, or against any employee, consultant or director of Standish
or any Standish Subsidiary.
6.8 Continued Effectiveness of Representations and Warranties. From the
date hereof up to and including the Closing Date, (i) Standish and the
Standish Subsidiaries will conduct the Standish Business in a manner such
that the representations and warranties of Standish and Acquisition contained
herein shall continue to be true and correct on and as of the Closing Date as
if made on and as of the Closing Date, except for changes and events arising
as a consequence of the Merger, or actions in the ordinary and usual course
of business after the date hereof which would not result in a Material
Adverse Change on the properties, assets, operations or condition (financial
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or otherwise) or prospects of the Standish Business; and (ii) Standish will
advise CareMatrix promptly in writing of any condition or circumstance
occurring from the date hereof up to and including the Closing Date which
could cause any representations or warranties of Standish or Acquisition to
become untrue.
6.9 No Negotiations. (a) Until the Closing, or the earlier termination
of this Agreement in accordance with its terms (the "Non-Solicitation
Period"), Standish and each officer, director, employee, consultant, advisor,
agent or investment banker of Standish and each Standish Subsidiary will not,
directly or indirectly, solicit, encourage or consider alternative offers for
any merger or any business combination transaction involving Standish or the
Standish Business or for the sale of any of Standish Common Stock, or the
lease, purchase option, or sale of any material assets of Standish or the
Standish Business from parties other than CareMatrix, (each, an "Alternative
Proposal"). Notwithstanding the foregoing first sentence of this Section 6.9,
Standish may participate in discussions or negotiations with, and may furnish
information (pursuant to confidentiality agreements having provisions not
less restrictive than those set forth in the Confidentiality Agreement
entered into between CareMatrix and Standish) to any third party (i) which on
or before the end of the Non-Solicitation Period, sought to engage in such
discussions or negotiations or requested such information or (ii) which seeks
to engage in discussions or negotiations or request such information if, in
either case, the Board of Directors of Standish determines, based on the
written opinion of Robinson & Cole or other legal counsel reasonably
acceptable to Standish ("Legal Counsel"), that failing to engage in such
discussions or negotiations or provide such information would reasonably be
expected to violate the fiduciary duties of the Board of Directors of
Standish. The Board of Directors of Standish may take and disclose to
Standish's stockholders a position with respect to any tender offer and make
such disclosure to the stockholders of Standish as may be required under
applicable law; provided that the Board of Directors of Standish shall not
recommend that the stockholders of Standish tender their shares unless such
recommendation is permitted by the first sentence of Section 6.9(c).
(b) Unless the Board of Directors of Standish determines, based on the
written opinion of Legal Counsel, that doing so would reasonably be
expected to violate the fiduciary duties of the Board of Directors of
Standish, (i) Standish promptly shall advise CareMatrix orally and in
writing of any Alternative Proposal or any inquiry with respect to or
which could lead to any Alternative Proposal and the identity of the
person making any such Alternative Proposal or inquiry and (ii) Standish
shall include in any such notice a description of the terms and conditions
of any such Alternative Proposal or inquiry.
(c) Notwithstanding anything to the contrary in this Agreement, the
Board of Directors of Standish shall be permitted from time to time to
take the following actions in the circumstances described below:
(i) to withdraw or modify its approval or recommendations of this
Agreement or the Merger in a manner adverse to CareMatrix; or
(ii) to approve or recommend or enter into an agreement with respect
to an Alternative Proposal; or
(iii) to terminate this Agreement
in each case if (A) an Alternative Proposal is commenced, publicly
disclosed or communicated to Standish and (B) the Board of Directors of
Standish determines, based on the written opinion of Legal Counsel, that
such action is required in order to comply with its fiduciary duties. No
action by the Board of Directors of Standish permitted by the preceding
sentence (each, a "Permitted Action") shall constitute a breach of this
Agreement by Standish.
6.10 Monthly Statements. Until the Closing, Standish will deliver to
CareMatrix monthly financial statements for Standish within thirty (30) days
after the end of each month.
6.11 Further Assurances. Standish will use its best efforts to have all
present officers and directors of Standish and each Standish Subsidiary
execute whatever minutes of meetings or other instruments and to take
whatever action as may be necessary or desirable to effect, perfect or
confirm of record of otherwise, in the Surviving Corporation, full right,
title and interest in and to the business, properties and assets now
conducted or owned by Standish, free and clear of all restrictions, liens,
encumbrances, rights, title and interests in others, or to collect, realize
upon, gain possession of, or otherwise acquire full right, title and interest
in and to such business, properties and assets, or to carry out the intent
and purposes of the transactions contemplated hereby.
6.12 Certain Agreements. Neither Standish nor any Standish Subsidiary
will agree to do or cause to be done any of the acts which Standish has
covenanted not to do under this Article VI.
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ARTICLE VII
COVENANTS OF CAREMATRIX
7.1 Best Efforts Cooperation. CareMatrix covenants and agrees that it
shall use its best efforts in good faith to perform and fulfill all
conditions and obligations to be fulfilled or performed by it hereunder to
the end that the transactions contemplated hereby will be fully and timely
consummated.
7.2 Access. Until the Closing, CareMatrix shall give Standish, and its
attorneys, accountants and other authorized representatives complete access,
upon reasonable notice and at reasonable times, to CareMatrix's offices,
suppliers, employees, business and financial records, contracts, business
plans, budgets and projections, agreements and commitments and other
documents and information concerning the CareMatrix Business and persons
employed by or doing business with CareMatrix, except such documents covered
by the attorney-client privilege. In order that Standish may have full
opportunity to make such examination and investigation as they may desire of
the CareMatrix Business, CareMatrix will furnish Standish and its
representatives during such period with all such information as such
representatives may reasonably request and cause the respective officers,
employees, consultants, agents, accountants and attorneys of CareMatrix to
cooperate fully with the representatives of Standish in connection with such
review and examination and to make full disclosure to Standish of all
material facts affecting CareMatrix's financial condition and the operations,
properties and prospects of the CareMatrix Business; provided, however, that
Standish will, unless the Closing occurs, hold the documents and information
concerning CareMatrix and the CareMatrix Business confidential in accordance
with Section 8.5 hereof.
7.3 Insurance. Until the Closing, CareMatrix shall maintain with
financially sound and reputable insurers, insurance against such casualties
and contingencies and of such types and in such amounts as is customary for
companies similarly situated.
7.4 Compliance with Laws. Until the Closing, CareMatrix shall conduct
the CareMatrix Business in compliance with all applicable laws, rules,
regulations and orders, including, without limitation, the Medicare and
Medicaid Patient Protection Act of 1987, the Omnibus Budget Reconciliation
Act of 1993 and the rules and regulations of third party payors.
7.5 Keeping of Books and Records. Until the Closing, CareMatrix shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions and in which all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with the CareMatrix Business shall be
made.
7.6 Conduct of Business. Prior to the Effective Time, unless Standish
shall have consented in writing thereto, each CareMatrix Corporation:
(a) shall conduct its operations according to its usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(b) shall use its reasonable efforts to preserve intact its business
organization and goodwill, keep available the services of its officers and
employees, and maintain satisfactory relationships with those persons
having business relationships with it;
(c) shall not amend its charter documents or By-laws, except as
provided for in this Agreement;
(d) shall promptly notify Standish of any material emergency or other
material change in its condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties and of any litigation or
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(e) shall not (i) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers, directors
or employees except for the payment of cash bonuses to officers or
employees pursuant to and consistent with existing plans or programs
described on Schedules 4.17 and 4.18 of the CareMatrix Disclosure
Schedule, (ii) adopt any new employee benefit plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any respect or (iii) sell, lease or otherwise
dispose of any of its assets which are material, individually or in the
aggregate, except in the ordinary course of business;
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(f) shall not (i) incur or obligate itself to incur any capital
expenditure in excess of $20,000, incur any long-term indebtedness in
addition to that outstanding on the date hereof or any other indebtedness
or liability other than in the ordinary course of business; (ii) make any
loans, advances or capital contributions to, or investments in, any other
person, other than travel or other advances to employees consistent with
past practice; or (iii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently, or otherwise) for
the obligations of any other person, except to endorse checks for
collection or deposit in the ordinary course of business;
(g) declare or pay any dividend or distribution on any shares of its
capital stock; or
(h) agree in writing or otherwise to take any of the foregoing actions
or any action that would make any representation or warranty in this
Agreement untrue or incorrect as of the date hereof or as of the Effective
Time, as if made as of such time; provided, however, that nothing
contained in this Agreement shall limit the ability of CareMatrix to
pursue its current acquisition and development strategy.
7.7 Litigation. Until the Closing, CareMatrix will promptly notify
Standish of any lawsuits, claims, proceedings or investigations which are
threatened or commenced against or by CareMatrix its affiliates, or against
any employee, consultant or director of CareMatrix.
7.8 Continued Effectiveness of Representations and Warranties. From the
date hereof up to and including the Closing Date, (i) CareMatrix will conduct
the CareMatrix Business in a manner such that the representations and
warranties contained herein of CareMatrix shall continue to be true and
correct on and as of the Closing Date as if made on and as of the Closing
Date, except for changes and events arising as a consequence of the Merger,
or actions in the ordinary and usual course of business after the date hereof
which would not result in a Material Adverse Change on the properties,
assets, operations or condition (financial or otherwise) or prospects of the
CareMatrix Business; and (ii) CareMatrix will advise Standish promptly in
writing of any condition or circumstance occurring from the date hereof up to
and including the Closing Date which could cause any representations or
warranties of CareMatrix to become untrue.
7.9 Standstill. Until the earlier to occur of (a) consummation of the
Merger or (b) the expiration of one (1) year following the termination of
this Agreement, neither CareMatrix nor any of its affiliates (as defined in
Rule 12b-2 under the Exchange Act) will:
(i) Bid for, acquire or seek to acquire any of the assets of the
Standish Business or any voting or debt securities or preferred
stock of Standish, or any rights or options to acquire such
ownership, or take any action to effect a change of control of
Standish, or initiate contact with any other person in an effort
to solicit, encourage or assist such person in a takeover
proposal involving Standish;
(ii) Deposit any voting securities of Standish in a voting trust or
subject any such securities to any arrangement, understanding or
agreement with respect to the voting, holding or disposition of
such securities;
(iii) Become a member of a partnership, limited partnership, syndicate
or other group, or otherwise act in concert with any person for
the purpose of acquiring, holding, voting or disposing of
securities of Standish; or
(iv) Seek to have called, or caused to be called, any meeting of
stockholders of Standish, or initiate, propose or solicit any
proxy or consent of stockholders of Standish for the approval of
any proposal, or participate in the taking of any action by
written consent of stockholders of Standish in lieu of a meeting,
or seek or propose to influence or control the management or
policies of Standish, or to obtain representation on the Board of
Directors of Standish;
provided, however, that the foregoing provisions of this Section 7.9 shall
not be applicable in the event the Merger is not consummated because of the
failure of any condition specified in Sections 9.1 or 9.2.
7.10 Monthly Statements. Until the Closing, CareMatrix will deliver to
Standish monthly financial statements for CareMatrix prepared in accordance
with GAAP within thirty (30) days after the end of each month.
7.11 Further Assurances. CareMatrix will use its best efforts to have
all present officers and directors of each CareMatrix Corporation execute
whatever minutes of meetings or other instruments and to take whatever action
as may
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be necessary or desirable to effect, perfect or confirm of record of
otherwise, in the Surviving Corporations, full right, title and interest in
and to the business, properties and assets now conducted or owned by
CareMatrix or which CareMatrix has represented to Standish in writing as set
forth in that certain "CareMatrix Corporation Corporate Forecast--June 1996"
(the "CareMatrix Forecast") previously delivered by CareMatrix to Standish,
will be conducted by CareMatrix, free and clear of all restrictions, liens,
encumbrances, rights, title and interests in others, or to collect, realize
upon, gain possession of, or otherwise acquire full right, title and interest
in and to such business, properties and assets, or to carry out the intent
and purposes of the transactions contemplated hereby.
7.12 Certain Agreements. CareMatrix will not agree to do or cause to be
done any of the acts which CareMatrix has covenanted not to do under this
Article VII.
7.13 Stockholder Approval. Each CareMatrix Corporation shall promptly
submit this Agreement and the transactions contemplated herein for the
approval of its stockholders at a meeting of stockholders. Subject to the
fiduciary duties of the Board of Directors of CareMatrix under applicable
law, the Board of Directors of each CareMatrix Corporation has agreed to
recommend to its stockholders approval of the Merger. Subject to the
fiduciary duties of the Board of Directors of each CareMatrix Corporation
under applicable law, each CareMatrix Corporation shall use its best efforts
to obtain stockholder approval and adoption of this Agreement and the
transactions contemplated hereby prior to the SEC Filing Date, and to cause
any of its directors, who are also stockholders, to vote in favor thereof.
7.14 Restrictive Covenant. Prior to the Effective Time and subject to
Schedule 4.5, each CareMatrix Corporation shall not, without the prior
written consent of Standish, (i) assign, convey, pledge, mortgage, or
otherwise transfer or agree to transfer any interest in or right of such
CareMatrix Corporation or of any other entity of the kind specified in (ii)
below to receive or otherwise recognize any development or management fees or
other revenues in respect of the projects identified in the CareMatrix
Forecast, and (ii) permit either Abraham D. Gosman, Andrew D. Gosman or
Michael M. Gosman, or any entity controlled by any of them (other than a
CareMatrix Corporation), to engage in the management and/or development of an
assisted and/or independent living facility.
In addition, each of the CareMatrix Corporations covenants and agrees that
prior to the Closing, it shall effectuate (subject to the obligations and
requirements set forth on Schedule 4.5 with respect to projects involving any
unaffiliated joint venture participant, which obligations and requirements
the CareMatrix Corporation hereby agree to use their best efforts to
effectuate) the assignment and transfer of any right, title or interest that
it may have, or any other entity of the kind specified in (ii) above may
have, in the projects described in the CareMatrix Forecast, subject to a
reservation of the rights to manage or turnkey develop each such project, and
to cause such other entities to transfer to CareMatrix their rights to earn
development fees, management fees or other similar operating revenues from
such projects. Finally, each CareMatrix Corporation hereby covenants and
agrees, with respect to such projects, to execute definitive management,
turnkey development or joint venture agreements substantially in the forms
set forth in Schedule 7.14 of the CareMatrix Disclosure Schedule immediately
prior to or simultaneously with the closing by the proposed third party
purchaser of the land upon which each such project is to be developed;
provided, however, that prior to the execution of such definitive management
and turnkey development agreement, the applicable CareMatrix Corporation
shall have completed a review of title, survey, environmental and such other
customary due diligence materials relating to such project and shall have
determined that the matters disclosed by such materials shall not have a
material adverse effect upon the project.
ARTICLE VIII
MUTUAL COVENANTS
8.1 General Covenants. Following the execution of this Agreement, each
Acquisition Corporation , Standish and each CareMatrix Corporation agree:
(a) If any event should occur, either within or without the knowledge
or control of any party, which would prevent fulfillment of the conditions
to the obligations of any party hereto to consummate the transactions
contemplated by this Agreement, to use its or their reasonable efforts to
cure the same as expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable
and necessary to obtain the consent of any governmental instrumentality or
any third party to accomplish the transactions contemplated by this
Agreement;
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(c) To deliver such other instruments of title, certificates,
consents, endorsements, assignments, assumptions and other documents or
instruments, in form reasonably acceptable to the party requesting the
same and its counsel, as may be reasonably necessary to carry out and/or
to comply with the terms of this Agreement and the transactions
contemplated herein;
(d) To confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally and in writing of
any change or event resulting in, or which, insofar as can reasonably be
foreseen could result in, a Material Adverse Change on such party or which
would cause or constitute a material breach of any of the representations,
warranties or covenants of such party contained herein;
(e) To file all reports required to be filed by each of them or their
affiliates with the Commission between the date hereof and the Closing
Date and to deliver to the other (or its counsel) copies of all such
reports promptly after the same are filed; and
(f) To provide the other (or its counsel) promptly with copies of all
other filings made by such party with any state or federal governmental
entity in connection with this Agreement or the transactions contemplated
hereby.
8.2 Proxy Statement and Fairness Opinion. Following the execution of
this Agreement, each Acquisition Corporation, Standish and each CareMatrix
Corporation agree:
(a) Standish shall use its best efforts in good faith to prepare and
file with the Commission within forty-five (45) days after the date hereof
(the "SEC Filing Date") the Proxy Statement and the Form S-4 Registration
Statement;
(b) Standish shall use its best efforts in good faith to obtain the
written opinion of Stonebridge Associates, LLC addressed to the Board of
Directors of Standish dated as of a date reasonably proximate to the date
of the Proxy Statement to Standish's stockholders, to the effect that, as
of the date of such opinion, the resulting ownership of the outstanding
shares of Standish Common Stock to be retained by Standish current
stockholders after giving effect to the shares of Standish Common Stock to
be issued to the stockholders of CareMatrix is fair, from a financial
point of view, to the stockholders of Standish;
(c) Standish and each Acquisition Corporation shall take any action
required to be taken under the Delaware Law and the laws, rules and
regulations of the Commission in connection with the consummation of the
transactions contemplated by this Agreement;
(d) CareMatrix shall cooperate in the preparation and filing of the
Proxy Statement and the Form S-4 Registration Statement and all
information furnished for use therein by either party shall be reasonably
satisfactory to the other; provided, however, that neither party shall
have any liability to the other or to any third party for any information
contained therein which is furnished in writing by the other party for
inclusion in the Proxy Statement or the Form S-4 Registration Statement;
(e) After the filing of the Proxy Statement and the Form S-4
Registration Statement, Standish shall notify CareMatrix promptly of the
receipt of the comments of the Commission and of any request by the
Commission for amendments or supplements to the Proxy Statement or the
Form S-4 Registration Statement or for additional information and shall
supply CareMatrix with copies of all correspondence between Standish or
its representatives and the Commission or members of its staff with
respect thereto;
(f) Prior to the approval of the Merger by Standish's stockholders,
CareMatrix shall correct any material information provided by it to be
used in the Proxy Statement or the Form S-4 Registration Statement that
shall have become false or misleading in any material respect and Standish
shall take all steps necessary to file with the Commission and have
cleared by the Commission any amendment or supplement to the Proxy
Statement or the Form S-4 Registration Statement and to cause the same as
so corrected to be disseminated to the stockholders of Standish, to the
extent required by applicable law; provided, however, that prior to the
dissemination thereof, (i) CareMatrix and Standish shall consult with each
other with respect to such amendment or supplement and (ii) Standish shall
afford CareMatrix with a reasonable opportunity to comment on disclosure
relating to CareMatrix or its affiliates and shall ensure that such
disclosure is reasonably satisfactory to CareMatrix; and
(g) CareMatrix and Standish shall promptly furnish to each other all
information, and take such other actions as may reasonably be requested in
connection with any action by either of them in furtherance of the
provisions of this Section 8.2.
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8.3 Stockholder Approval. Standish shall promptly submit this Agreement
and the transactions contemplated herein for the approval of its stockholders
at a meeting of stockholders. Subject to the fiduciary duties of the Board of
Directors of Standish under applicable law, the Board of Directors of
Standish has agreed to recommend to its stockholders approval of the Merger.
Subject to the fiduciary duties of the Board of Directors of Standish under
applicable law, Standish shall use its best efforts to obtain stockholder
approval and adoption of this Agreement and the transactions contemplated
hereby by September 30, 1996, and to cause any of its directors, who are also
stockholders, to vote in favor thereof.
8.4 Public Announcements. The parties shall consult with each other
prior to the issuance by either party of any press release or any written
statement with respect to this Agreement or the transactions contemplated
hereby.
8.5 Confidentiality. As used herein, "Confidential Information" means
any information or data that a party has acquired from another party that is
confidential or not otherwise available to the public, whether oral or
written, including without limitation any analyses, computations, studies or
other documents prepared from such information or data by or for the
directors, officers, employees, agents or representatives of such party
(collectively, the "Representatives"), but excluding information or data
which (i) the party can demonstrate it lawfully obtained or developed prior
to May 22, 1996, (ii) became available to the public other than as a result
of such party's violation of this Agreement, (iii) became available to such
party from a source other than the other party if that source was not bound
by a confidentiality agreement with such other party and such source lawfully
obtained such information or data, or (iv) is required to be disclosed by
applicable law, provided that promptly after being compelled to disclose any
such information or data, the party being so compelled shall provide prompt
notice thereof to the other party so that such other party may seek a
protective order or other appropriate remedy. Each party covenants and agrees
that it and its Representatives shall keep confidential and shall not
disclose all Confidential Information, except to its Representatives and
lenders who need to know such information and agree to keep it confidential.
Each party shall be responsible for any breach of this provision by its
Representatives. In the event that the Closing does not occur, each party
will promptly return to the other all copies of such other party's
Confidential Information.
8.6 Hart-Scott-Rodino Filing.
(a) If required by law, Standish and CareMatrix agree to file with the
Antitrust Division of the United States Department of Justice and the
Federal Trade Commission a Notification and Report Form in accordance with
the notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and to use their
best efforts to achieve the prompt termination or expiration of the
waiting period or any extension thereof provided for under the HSR Act as
a prerequisite to the consummation of the transactions provided for
herein. CareMatrix and Standish shall each bear one-half of the expense of
any filing fees required under the HSR Act as a result of the proposed
Merger.
(b) Nothing in this Section 8.6 shall be construed as requiring any
party to this Agreement or its affiliates to (i) sell or otherwise dispose
of any of its assets or voting securities other than as otherwise
contemplated by this Agreement or (ii) take any action which either would
result in a Material Adverse Change in any such party or its affiliates or
would materially impair the value of the Standish Business or the
CareMatrix Business.
ARTICLE IX
CONDITIONS TO CAREMATRIX'S OBLIGATIONS
The obligation of CareMatrix to consummate the transactions contemplated
hereby is subject to the satisfaction, on or before the Closing Date, of the
following conditions each of which may be waived by CareMatrix in its sole
discretion.
9.1 Representations and Warranties True. All of the representations and
warranties of Standish and Acquisition contained in this Agreement or in any
Schedules or other documents attached hereto or referred to herein or
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be true, correct and complete in all material respects on and as
of the date hereof and on and as of the Closing Date, as if made on and as of
the Closing Date. On the Closing Date, the Chairman of the Board or Chief
Financial Officer of Standish and Acquisition shall have executed and
delivered to CareMatrix a certificate, in form and substance satisfactory to
CareMatrix and its counsel, to such effect.
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9.2 Performance. Standish and Acquisition shall have performed and
complied in all material respects with all covenants and agreements contained
herein required to be performed or complied with by them prior to or at the
Closing Date. The Chairman of the Board or Chief Financial Officer of
Standish and Acquisition shall have executed and delivered to CareMatrix a
certificate, in form and substance satisfactory to CareMatrix and its
counsel, to such effect and to the further effect that all of the conditions
set forth in this Article IX have been satisfied.
9.3 Consents. Standish and Acquisition shall have obtained all requisite
approvals and consents of, and made all requisite filings with, all
governmental entities and third parties which are necessary to be obtained or
made to (i) permit the valid execution, delivery and performance by Standish
and Acquisition of this Agreement, including without limitation the Merger,
and (ii) prevent any Permit or agreement relating to the Standish Business
from terminating prior to its scheduled termination as a result of the
consummation of the transactions contemplated hereby. In addition, CareMatrix
shall have received or obtained all licenses, permits, consents, approvals
and authorizations from any public or governmental agency or any third party
necessary as a result of the Merger, and any appeal period with respect to
the same shall have expired without an objection thereto having been filed.
In addition, the Form S-4 Registration Statement shall have been declared
effective under the Securities Act and no stop order shall be effective with
respect thereto.
9.4 [Omitted.]
9.5 HSR Act Requirements. The filing and waiting period requirements
under the HSR Act shall have been complied with and shall have expired or
terminated.
9.6 No Material Adverse Change. No Material Adverse Change with respect
to Standish or Acquisition shall have occurred.
9.7 No Actions, Suits or Proceedings. As of the Closing Date, no action,
suit, investigation or proceeding brought by any governmental agency or
instrumentality or any holder of 10% or more of the voting securities of
Standish shall be pending or, to the knowledge of the parties to this
Agreement, threatened (in writing, in the case of threatened action by any
security holder), before any court or governmental body (i) to restrain,
prohibit, restrict or delay, or to obtain damages or a discovery order in
respect of this Agreement or the consummation of the Merger, (ii) which has
resulted or could reasonably be expected to result in a Material Adverse
Change with respect to Standish or (iii) which has or could reasonably be
expected to adversely affect the operation of the Standish Business or has or
could reasonably be expected to result in the imposition of liability on
Standish or any Standish Subsidiary. No order, decree or judgment of any
court or governmental body shall have been issued and remain in effect at the
Closing restraining, prohibiting, restricting or delaying, the consummation
of the transactions contemplated by this Agreement. No insolvency proceeding
of any character including without limitation, bankruptcy, receivership,
reorganization, dissolution or arrangement with creditors, voluntary or
involuntary, affecting Standish or any Standish Subsidiary shall be pending,
and neither Standish nor any Standish Subsidiary shall have taken any action
in contemplation of, or which would constitute the basis for, the institution
of any such proceedings.
9.8 No Material Adverse Economic Event. There shall not have occurred
(i) any general suspension of trading in, or limitation on prices for, or
other extraordinary event affecting securities on the New York Stock Exchange
or NASDAQ National Market, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) any
material limitation (whether or not mandatory) by any governmental authority
on, or any other event which might affect the extension of credit by, lending
institutions, or (iv) in the case of any of the foregoing existing on the
date hereof, a material acceleration or worsening thereof.
9.9 Opinion of Counsel. CareMatrix shall have received the opinion of
Robinson & Cole, counsel to Standish and Acquisition, substantially in the
form set forth as Exhibit 9.9 hereto.
9.10 Accountants. CareMatrix shall have received from Standish's
independent public accountants a certificate or letter, dated the Closing
Date, to the effect that the Merger will be accounted for as a purchase by
CareMatrix of Standish.
9.11 Closing Documents. Standish and Acquisition shall have delivered
all of the resolutions, certificates, documents and instruments required by
this Agreement, including without limitation:
(a) Resolutions of the Boards of Directors and stockholders of
Standish and Acquisition, certified by their respective Secretaries, and
other evidence satisfactory to CareMatrix that the requisite consent of
the stockholders of Standish has been obtained;
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(b) Certificates of Good Standing with respect to Standish and each
Standish Subsidiary issued by the Secretary of State of its state of
incorporation and of any state where it is qualified to do business as a
foreign corporation;
(c) Copies of the charter documents and By-laws of Standish and each
Standish Subsidiary certified by the Secretary of State of its state of
incorporation and by its secretary;
(d) Resignations of all officers and directors of Standish to the
extent provided in Section 1.4 and of each Subsidiary effective as of the
Effective Time;
(e) Estoppel Certificates from the lessors under each of the Standish
Occupancy Leases in form and substance satisfactory to CareMatrix; and
(f) Non-disturbance agreements executed and delivered by each
mortgagee of each Standish Leased Premises listed on Schedule 3.11(d) in
form and substance satisfactory to CareMatrix.
9.12 Dissenting Standish Stockholders. Holders of shares of Standish
Common Stock representing ten percent (10%) or more of the outstanding shares
of Standish Common Stock shall not have demanded appraisal for their shares
in accordance with Delaware Law.
9.13 [omitted.]
9.14 [omitted.]
9.15 Employment Agreements. Standish shall have entered into amended and
restated employment agreements (the "Employment Agreements") with Michael J.
Doyle and Kenneth M. Miles substantially in the form attached hereto as
Exhibit 9.15.
9.16 Approval of CareMatrix and Its Counsel. All actions, proceedings,
consents, instruments and documents required to be delivered by, or at the
bequest or direction of, Standish or Acquisition hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to CareMatrix and its counsel.
9.17 Board Approval. On or before July 10, 1996, the Board of Directors
of Standish and each Acquisition Corporation shall have (i) determined that
the Merger is fair and in the best interests of their stockholders (ii)
approved and adopted this Agreement and the transactions contemplated hereby,
and (iii) resolved to recommend to the stockholders of such corporation that
they approve this Agreement and the Merger.
ARTICLE X
CONDITIONS TO STANDISH'S AND ACQUISITION'S OBLIGATIONS
The obligation of Standish to consummate the transactions contemplated
hereby is subject to the satisfaction, on or before the Closing Date, of the
following conditions, each of which may be waived by Standish in its sole
discretion:
10.1 Representations and Warranties to be True and Correct. The
representations and warranties contained in Article IV shall be true,
complete and correct in all material respects, on and as of the Closing Date,
as if made on and as of such date, and CareMatrix shall have delivered to
Standish a certificate, in form and substance satisfactory to Standish and
its counsel, to such effect.
10.2 Performance. CareMatrix shall have performed and complied in all
material respects with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
Chairman of the Board or President of CareMatrix shall have delivered a
certificate to Standish in form and substance reasonably satisfactory to
Standish and its counsel to such effect.
10.3 Consents. CareMatrix shall have obtained all requisite approvals
and consents of, and made all requisite filings with, all governmental
entities and third parties which are necessary to be obtained or made to (i)
permit the valid execution, delivery and performance by CareMatrix of this
Agreement, including without limitation the Merger, and (ii) prevent any
Permit or agreement relating to the CareMatrix Business from terminating
prior to its scheduled termination as a result of the consummation of the
transactions contemplated hereby. In addition, Standish shall have received
or obtained all licenses, permits, consents, approvals and authorizations
from any public or governmental agency or any third party necessary as a
result of the Merger, and any appeal period with
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respect to the same shall have expired without an objection thereto having
been filed. In addition, the Form S-4 Registration Statement shall have been
declared effective under the Securities Act and no stop order shall be
effective with respect thereto.
10.4 Stockholder Approval and Conditions Precedent. The Merger shall
have been approved by the stockholders of Standish.
10.5 HSR Act Requirements. The filing and waiting period requirements
under the HSR Act shall have been complied with and shall have expired or
terminated.
10.6 No Material Adverse Change. No Material Adverse Change with respect
to CareMatrix shall have occurred.
10.7 No Actions, Suits or Proceedings. As of the Closing Date, no
action, suit, investigation or proceeding brought by any governmental agency
or instrumentality shall be pending or, to the knowledge of the parties to
this Agreement, threatened, before any court or governmental body (i) to
restrain, prohibit, restrict or delay, or to obtain damages or a discovery
order in respect of this Agreement or the consummation of the Merger, (ii)
which has resulted or could reasonably be expected to result in a Material
Adverse Change with respect to CareMatrix or (iii) which has or could
reasonably be expected to adversely affect the operation of the CareMatrix
Business or the consummation of a material portion of the CareMatrix
Portfolio Transfers or has or could reasonably be expected to result in the
imposition of liability on CareMatrix. No order, decree or judgment of any
court or governmental body shall have been issued and remain in effect at the
Closing restraining, prohibiting, restricting or delaying, the consummation
of the transactions contemplated by this Agreement. No insolvency proceeding
of any character including without limitation, bankruptcy, receivership,
reorganization, dissolution or arrangement with creditors, voluntary or
involuntary, affecting CareMatrix shall be pending, and CareMatrix shall not
have taken any action in contemplation of, or which would constitute the
basis for, the institution of any such proceedings.
10.8 Opinion of CareMatrix's Counsel. Standish and Acquisition shall
have received from Nutter, McClennen & Fish, LLP an opinion dated as of the
Closing Date substantially in the form of Exhibit 10.5 hereto.
10.9 Fairness Opinion. Standish shall have received the written opinion
of Stonebridge Associates, LLP addressed to the Board of Directors of
Standish dated as of a date reasonably proximate to the date of the Proxy
Statement to Standish's stockholders, to the effect that, as of the date of
such opinion, the resulting ownership of the outstanding shares of Standish
Common Stock to be retained by Standish current stockholders after giving
effect to the shares of Standish Common Stock to be issued to the
stockholders of CareMatrix is fair, from a financial point of view, to
Standish and the stockholders of Standish, and such opinion shall not have
been withdrawn. Standish shall have obtained such investment banking firm
opinion as may be necessary in connection with the Merger to avoid exclusion
of coverage under its directors and officers liability insurance policy.
10.10 Acquisition Corporations. Each of the Acquisition Corporations
shall have executed this Agreement.
10.11 Closing Documents. CareMatrix shall have delivered all of the
resolutions, certificates, documents and instruments required to be delivered
by it by this Agreement, including, without limitation:
(a) resolutions of the Board of Directors and stockholders of
CareMatrix, certified by its secretary, and other evidence satisfactory to
Standish that the requisite consent of the stockholders of CareMatrix has
been obtained;
(b) certificates of good standing with respect to each CareMatrix
Corporation issued by the Secretary of State of its state of incorporation
and of any state where it is qualified to do business as a foreign
corporation;
(c) copies of the charter documents and by-laws of each CareMatrix
Corporation certified by the Secretary of State of its state of
incorporation and by its secretary;
(d) resignations of directors of CareMatrix to the extent provided in
Section 1.4 effective as of the Effective Time; and
(e) estoppel certificates from the lessors under each of the
CareMatrix Occupancy Leases, other than the lease of which CareMatrix of
ARI is a tenant.
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10.13 [Omitted.]
10.14 Employment Agreements. Standish shall have entered into the
Employment Agreements.
10.15 Approval of Standish, Acquisition and their Counsel. All actions,
proceedings, consents, instruments and documents required to be delivered by,
or at the behest or direction of, CareMatrix hereunder or incident to its
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to Standish and its counsel.
10.16 Board Approval. On or before July 10, 1996, the Board of Directors
of each CareMatrix Corporation shall have (i) determined that the Merger is
fair and in the best interests of their stockholders (ii) approved and
adopted this Agreement and the transactions contemplated hereby, and (iii)
resolved to recommend to the stockholders of such corporation that they
approve this Agreement and the Merger.
ARTICLE XI
SURVIVAL
No representation, warranty and agreement of the parties set forth in this
Agreement or any of the rights and remedies of the other party for any one or
more breaches thereof shall survive the Closing. All representations,
warranties and agreements of the parties set forth in this Agreement and all
of the rights and remedies of the other party for any one or more breaches
thereof shall be shall be effective regardless of any investigation that may
have been made at any time by or on behalf of any party or its directors,
officers, employees or agents.
ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Closing:
(a) By mutual written consent duly authorized by the Board of
Directors of Standish and CareMatrix;
(b) By Standish or CareMatrix if
(i) any court or governmental body of competent jurisdiction shall
have issued an order, decree or ruling, or taken any other
action, permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement,
provided that no termination shall be permitted under this
paragraph unless the party seeking such termination shall have
used its reasonable best efforts to oppose such issuance or
taking;
(ii) the other party commits any material breach of its
representations, warranties or covenants set forth herein and
such breach has not been cured within ten (10) days after
written notice is given to terminate this Agreement as a result
of such breach; or
(iii) the Board of Directors of the other party fails to approve and
recommend adoption of this Agreement on or before July 10, 1996.
(c) By CareMatrix or Standish if the conditions set forth in Articles
IX or X respectively have not been satisfied or waived by February 15,
1997, or by such later date not more than three (3) months thereafter
which Standish and CareMatrix shall mutually select (the "Termination
Date");
(d) By Standish (i) pursuant to a Permitted Action, as specified in
Section 6.9(c), or (ii) at any time following an Alternative Proposal, the
Board of Directors of Standish determines, based on the written opinion of
Legal Counsel, that such termination is required in order for the Board of
Directors of Standish to comply with its fiduciary duties;
(e) By CareMatrix, if the Board of Directors of Standish takes any
Permitted Action or if a vote of Standish's stockholders results in the
rejection of the adoption or authorization of this Agreement by such
stockholders; or
(f) By CareMatrix if the preliminary Proxy Statement or the Form S-4
Registration Statement shall not have been filed with the Commission
within forty-five (45) days after the date hereof.
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Upon the occurrence of any of the events specified in this Section 12.1
(other than paragraph (a) hereof), written notice of such event shall
forthwith be given to the other parties to this Agreement, whereupon this
Agreement shall terminate and the Merger shall be abandoned.
12.2 Effect of Termination. In the event of the termination of this
Agreement and abandonment of the Merger pursuant to Section 12.1:
(a) This Agreement, except for the provisions of Section 8.5 and
Articles XI, XII and XIII, shall forthwith become void and be of no
effect, without any liability on the part of any party or its affiliates,
directors, officers or stockholders; provided that nothing in this Section
12.2(a) shall relieve any party to this Agreement of liability for breach
of this Agreement; and
(b) If the conditions set forth in Section 10.1 and 10.2 are satisfied
and:
(i) an Alternative Proposal is commenced, publicly disclosed or
communicated to Standish and, as a result of such Alternative
Proposal, the Board of Directors of Standish takes any Permitted
Action and enters into an agreement for any Alternative Proposal
or terminates this Agreement or this Agreement is terminated by
CareMatrix following Standish's taking a Permitted Action; or
(ii) an Alternative Proposal is publicly commenced, proposed or
disclosed and this Agreement is terminated following the failure
of Standish's stockholders to approve this Agreement at the
stockholders meeting,
and within twelve (12) months following such termination, an Alternative
Proposal is consummated involving consideration (or implicit valuation) for
the Standish Common Stock on a fully diluted basis having a present value
greater than the value ascribed to the Standish Common Stock in the Merger (a
"Higher Transaction"), then Standish shall pay to CareMatrix within ten (10)
business days following such occurrence a fee (the "Topping Fee"), in cash of
Two Million Dollars ($2,000,000.00) less any amount paid pursuant to Section
12.2(c) as full and complete liquidated damages, it being specifically
understood and agreed that in the event of such a termination the damages
suffered by CareMatrix will be difficult to ascertain. In no event shall
Standish be obligated to pay more than one (1) Topping Fee with respect to
all Higher Transactions.
(c) In the event that this Agreement is terminated pursuant to
Sections 12.1(b)(ii) or (iii) or 12.1(d) or as a result of a failure of
any condition set forth in Article IX (other than Sections 9.5, 9.7, 9.8
and 9.10) and the conditions set forth in Sections 10.1 and 10.2 are
satisfied, Standish shall thereupon become obligated to pay to CareMatrix
Five Hundred Thousand Dollars ($500,000.00) (the "Standish Break Up Fee").
(d) In the event that this Agreement is terminated pursuant to Section
12.1(b)(ii) or (iii) or as a result of a failure of any condition set
forth in Article X (other than Sections 10.5, 10.7 or 10.9) and the
conditions set forth in Sections 9.1, and 9.2 are satisfied, CareMatrix
shall thereupon become obligated to pay to Standish Five Hundred Thousand
Dollars ($500,000.00) (the "CareMatrix Break Up Fee").
(e) In the event that Standish is obligated to pay the Standish Break
Up Fee to CareMatrix pursuant to Section 12.2(c) and CareMatrix is
obligated to pay the CareMatrix Break Up Fee to Standish pursuant to
Section 12.2(d), then neither party shall be obligated to pay to the other
party either the Standish Break Up Fee or the CareMatrix Break Up Fee.
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ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telex, telecopy or facsimile transmission with a confirmatory copy by regular
mail, (iii) sent by recognized overnight courier or (iv) sent by registered
or certified mail, return receipt requested, postage prepaid.
If to CareMatrix:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attn: Andrew D. Gosman, President
Facsimile telephone number: 617-433-1191
with a copy to:
James M. Clary, III, Esq.
at such address
with an additional copy to:
Michael J. Bohnen, Esq.
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Facsimile telephone number: 617-973-9748
If to Standish or Acquisition:
The Standish Care Company
6 New England Executive Park
Burlington, MA 01803
Attn: Michael J. Doyle, Chairman
Facsimile telephone number: 617-270-4501
With a copy to:
David A. Garbus, Esq.
Robinson & Cole
One Boston Place
Boston, MA 022108-4404
Facsimile telephone number: 617-557-5999
All notices, requests, consents and other communications hereunder shall
be deemed to have been properly given (i) if by hand, at the time of the
delivery thereof to the receiving party at the address of such party set
forth above, (ii) if made by telex, telecopy or facsimile transmission, at
the time that receipt thereof has been acknowledged by electronic
confirmation or otherwise, (iii) if sent by overnight courier, on the next
business day following the day such notice is delivered to the courier
service or (iv) if sent by registered or certified mail, on the fifth
business day following the day such mailing is made.
13.2 Entire Agreement. This Agreement together with the Exhibits and
Schedules hereto and the other documents executed and to be executed in
connection herewith (together, the "Documents") embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in the Documents shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
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13.3 Modifications and Amendments. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by
all parties hereto.
13.4 Waivers and Consents. No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such
right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The election
of any remedy by a party hereto shall not constitute a waiver of the right of
such party to pursue other available remedies. No notice to or demand on a
party not expressly required under this Agreement shall entitle the party
receiving such notice or demand to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
party giving such notice or demand to any other or further action in any
circumstances without such notice or demand. The terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted, only
by written document executed by the party entitled to the benefits of such
terms or provisions. No such waiver or consent shall be deemed to be or shall
constitute a waiver or consent with respect to any other terms or provisions
of this Agreement, whether or not similar. Each such waiver or consent shall
be effective only in the specific instance and for the purpose for which it
was given, and shall not constitute a continuing waiver or consent.
13.5 Assignment. Neither this Agreement, nor any right hereunder, may be
assigned by any of the parties hereto without the prior written consent of
the other parties.
13.6 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their permitted assigns, and
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement. Nothing in this Agreement shall be construed to
create any rights or obligations except among the parties hereto, and no
person or entity shall be regarded as a third-party beneficiary of this
Agreement.
13.7 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the
substantive internal laws of the State of Delaware, without giving effect to
conflict of law principles and rules thereof that would lead to the
application of the substantive laws of another jurisdiction.
13.8 Jurisdiction and Service of Process. Any legal action or proceeding
with respect to this Agreement may be brought in the courts of the
Commonwealth of Massachusetts or the State of Delaware, or of the United
States of America for the District of Massachusetts or the District of
Delaware. By execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereby
irrevocably waive any objection or defense that they may now or hereafter
have to the assertion of personal jurisdiction by any such court in any such
action or to the laying of the venue of any such action in any such court,
and hereby waive, to the extent not prohibited by law, and agree not to
assert, by way of motion, as a defense, or otherwise, in any such proceeding,
any claim that it is not subject to the jurisdiction of the above-named
courts for such proceedings. Each of the parties hereto irrevocably consents
to the service of process of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered mail,
postage prepaid, to the party at its address set forth in Section 13.1 hereof
and irrevocably waives any objection or defense that it may now or hereafter
have to the sufficiency of any such service of process in any such action.
Nothing in this Section 13.8 shall affect the rights of the parties to
commence any such action in any other forum or to serve process in any such
action in any other manner permitted by law.
13.9 Severability. In the event that any court of competent jurisdiction
shall finally determine that any provision, or any portion thereof, contained
in this Agreement shall be void or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court determines it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall determine any such provision, or portion thereof
wholly unenforceable, the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
13.10 Interpretation. The parties hereto acknowledge and agree that: (i)
each party and its counsel reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision; (ii) the
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rule of construction to the effect that any ambiguities are resolved against
the drafting party shall not be employed in the interpretation of this
Agreement; and (iii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party, regardless of which party was generally responsible for the
preparation of this Agreement.
13.11 Headings and Captions. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
13.12 Choice of Remedies and Enforcement. The parties shall be entitled
to pursue any and all remedies available to them, in law or in equity, in the
event of a breach of this Agreement. Each of the parties hereto acknowledges
and agrees that the rights acquired by each party hereunder are unique and
that irreparable damage would occur in the event that any of the provisions
of this Agreement to be performed by the other party were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
in addition to any other remedy to which the parties hereto are entitled at
law or in equity, each party hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by the other party and to
enforce specifically the terms and provisions hereof in any federal or state
court to which the parties have agreed hereunder to submit to jurisdiction.
13.13 Expenses. Except as set forth in Section 12.2 hereof, each of the
parties hereto shall pay its own fees and expenses (including the fees of any
attorneys, accountants, appraisers or others engaged by such party) in
connection with this Agreement and the transactions contemplated hereby
whether or not the transactions contemplated hereby are consummated.
13.14 Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each Acquisition Corporation, Standish and each
CareMatrix Corporation have executed this Agreement as of the day and year
first above written.
THE STANDISH CARE COMPANY
By: /s/ Michael J. Doyle
---------------------------
Title: Chairman of the Board
ATTEST:
By: /s/ Kenneth M. Miles
- ------------------------------
STANDISH ACQUISITION 1, INC.
STANDISH ACQUISITION 3, INC.
STANDISH ACQUISITION 5, INC.
STANDISH ACQUISITION 7, INC.
STANDISH ACQUISITION 9, INC.
STANDISH ACQUISITION 11, INC.
STANDISH ACQUISITION 2, INC.
STANDISH ACQUISITION 4, INC.
STANDISH ACQUISITION 6, INC.
STANDISH ACQUISITION 8, INC.
STANDISH ACQUISITION 10, INC.
STANDISH ACQUISITION 12, INC.
By: /s/ Michael J. Doyle
------------------------------
Title: Chairman of the Board
ATTEST:
By: /s/ Kenneth M. Miles
---------------------------
Title: Assistant Secretary
CAREMATRIX OF MASSACHUSETTS, INC.
CAREMATRIX OF AMETHYST ARBOR, INC.
CAREMATRIX OF CYPRESS STATION, INC.
CAREMATRIX OF CRAGGANMORE, INC.
CAREMATRIX OF DARIEN, INC.
CAREMATRIX OF ARI, INC.
CAREMATRIX OF AMBER LIGHTS, INC.
CAREMATRIX OF EMERALD SPRINGS, INC.
CCC OF MARYLAND, INC.
CAREPLEX OF HOMESTEAD, INC.
CAREPLEX OF MIAMI SHORES, INC.
A.M.A. NEW JERSEY DEVELOPMENT, INC.
By: /s/ Andrew D. Gosman
----------------------
Title: President
ATTEST:
/s/ J.M. Clary, Jr.
Title: General Council/EVP
I-43
<PAGE>
SCHEDULE I
STANDISH ACQUISITION 1, INC.
STANDISH ACQUISITION 2, INC.
STANDISH ACQUISITION 3, INC.
STANDISH ACQUISITION 4, INC.
STANDISH ACQUISITION 5, INC.
STANDISH ACQUISITION 6, INC.
STANDISH ACQUISITION 7, INC.
STANDISH ACQUISITION 8, INC.
STANDISH ACQUISITION 9, INC.
STANDISH ACQUISITION 10, INC.
STANDISH ACQUISITION 11, INC.
STANDISH ACQUISITION 12, INC.
SCHEDULE II
CAREMATRIX OF MASSACHUSETTS, INC.
CAREMATRIX OF AMBER LIGHTS, INC.
CAREMATRIX OF AMETHYST ARBOR, INC.
CAREMATRIX OF EMERALD SPRINGS, INC.
CAREMATRIX OF CYPRESS STATION, INC.
CCC OF MARYLAND, INC.
CAREMATRIX OF CRAGGANMORE, INC.
CAREPLEX OF HOMESTEAD, INC.
CAREMATRIX OF DARIEN, INC.
CAREPLEX OF MIAMI SHORES, INC.
CAREMATRIX OF ARI, INC.
A.M.A. NEW JERSEY DEVELOPMENT, INC.
SCHEDULE III
Each of the Schedule I corporations listed above will be merged into the
Schedule II corporation listed above opposite its name.
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<PAGE>
Exhibit 1.1
TO
AGREEMENT AND PLAN
OF
MERGER
The following form relates to the merger of two Delaware corporations. To
the extent that corporations of different states will merge pursuant to this
Agreement, such certificate of merger and/or other documents or instruments
shall be prepared and filed with the applicable secretaries of state and/or
other state agencies as necessary in accordance with the laws of such states
in order to effectuate the merger of said entities.
CERTIFICATE OF MERGER
OF
STANDISH ACQUISITION , INC.
INTO
CAREMATRIX OF , INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, does hereby certify:
1. That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name of Corporation State of Incorporation
CareMatrix of , Inc. Delaware
Standish Acquisition , Inc. Delaware
2. That an Agreement and Plan of Merger (the "Merger Agreement") between
the parties to the merger has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with the
requirements of Section 251 of the General Corporation Law of the State of
Delaware.
3. That the surviving corporation in the merger is CareMatrix of
, Inc.
4. That the Certificate of Incorporation of the surviving corporation
shall be the certificate of incorporation of CareMatrix of , Inc.
5. That the executed Merger Agreement is on file at the principal place of
business of the surviving corporation. The address of the principal place of
business of the surviving corporation is 197 First Avenue, Needham, MA 02194.
6. That a copy of the Merger Agreement will be furnished by the surviving
corporation on request and without cost to any stockholder of any constituent
corporation.
CAREMATRIX OF , Inc.
Dated: By:
---------------------------------
Andrew D. Gosman, President
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<PAGE>
Exhibit 1.5(a)
TO
AGREEMENT AND PLAN
OF
MERGER
<TABLE>
<CAPTION>
Percentage
Company Allocation
-------------------------------------------- -----------
<S> <C>
CareMatrix of Massachusetts, Inc. ........... 8.333%
CareMatrix of Amethyst Arbor, Inc. .......... 8.333%
CareMatrix of Cypress Station, Inc. ......... 8.333%
CareMatrix of Cragganmore, Inc. ............. 8.333%
CareMatrix of Darien, Inc. .................. 8.333%
CareMatrix of ARI, Inc. ..................... 8.333%
CareMatrix of Amber Lights, Inc. ............ 8.333%
CareMatrix of Emerald Springs, Inc. ......... 8.333%
CarePlex of Homestead, Inc. ................. 8.333%
CarePlex of Miami Shores, Inc. .............. 8.333%
CCC of Maryland, Inc. ....................... 8.333%
A.M.A. New Jersey Development, Inc. ......... 8.333%
</TABLE>
Shares of Standish Common Stock shall be issued to the holders of the
common stock of each of the above corporations in proportion to their
respective percentages of ownership of the total outstanding shares of common
stock of such corporation.
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<PAGE>
Schedule 1.5(d)
TO
AGREEMENT AND PLAN
OF
MERGER
Abraham D. Gosman
Andrew D. Gosman
Michael M. Gosman
Johathan R. Banton
James M. Clary, III
Timothy J. Coburn
Edward E. Goldman
Joel A. Kanter
Frederick R. Leathers
Kevin J. Maley
Richard S. Mann
Robert A. Miller
Elizabeth Murphy
William A. Sanger
Craig J. Wilkos
Michael Zaccaro
I-47
<PAGE>
THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Agreement entered into as of this day of September, 1996, by and
between The Standish Care Company, a Delaware corporation with its principal
place of business at 6 New England Executive Park, Burlington, Massachusetts
01803 (hereinafter referred to as the "Company"), and Michael J. Doyle
(hereinafter called the "Employee"), residing in Winchester, Massachusetts.
W I T N E S S E T H:
WHEREAS, the Company is a health care services company specializing in
assisted-living, a service-intensive form of housing for frail but functional
seniors. The Company's two principal business activities are acquiring and
operating assisted-living communities, primarily in the eastern United
States, and providing development, management, marketing and other services
to third party owners of other assisted living communities; and
WHEREAS, the Employee is experienced in the business which the Company
operates; and
WHEREAS, the Company has employed the Employee since 1989, first as
President and Chief Executive Officer, then, effective as of January 1, 1994,
as Chairman of the Board as well as President and Chief Executive Officer of
the Company; and
WHEREAS, the Company and the Employee are parties to that certain Second
Amended and Restated Employment Agreement dated as of July 1, 1995
(hereinafter called the "Employment Agreement") providing for the terms and
conditions governing Employee's employment with the Company; and
WHEREAS, the Company, subsidiary acquisition corporations of the Company
(the "Company Subsidiary"), twelve companies engaged in the business of
providing long-term care services through the operation and management of
assisted living communities owned by a common group of stockholders (each a
"CareMatrix Corporation" and collectively, "CareMatrix") have entered into an
Agreement and Plan of Merger dated as of July , 1996 (the "Merger
Agreement") pursuant to which the Company will acquire CareMatrix and issue
to the stockholders of CareMatrix an aggregate of million ( )
newly issued shares of Common Stock of the Company (the "CareMatrix Business
Combination");
WHEREAS, a condition precedent to the consummation of the CareMatrix
Business Combination and related transactions contemplated by the Merger
Agreement is the execution of this Third Amended and Restated Employment
Agreement by and between the Company and the Employee; and
WHEREAS, the Company and the Employee desire to consummate the
transactions contemplated by the Merger Agreement and to execute this
Agreement; and
WHEREAS, the Company's Board of Directors considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders; and
WHEREAS, in this connection, the Company further recognizes that, as is
the case with many publicly held corporations, the possibility of a change of
control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in distraction or
other potentially disturbing circumstances to the detriment of the Company
and its stockholders; and
WHEREAS, the Board of Directors has further determined that it is
appropriate to reinforce and encourage the continued attention and dedication
of members of the Company's management to their assigned duties without
distraction in circumstances arising from the possibility of a change in
control of the Company; and
WHEREAS, the Company desires to induce the Employee to remain in the
employ of the Company with an assurance of fair treatment to reduce the
distractions and other adverse effects on his performance which are inherent
in a hostile takeover threat; and
WHEREAS, the Company and the Employee desire to amend and restate in their
entirety the terms and conditions of the Employment Agreement and otherwise
governing Employee's employment with the Company and by execution of this
Agreement specifically agree that all prior agreements between the parties
hereto pertaining to Employee's employment with the Company are null and void
and of no force and effect.
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<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto, it is hereby agreed by and between the Company and the
Employee as follows:
1. Definitions. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Beneficial Owner" means with respect to any security any person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares voting power, which
includes the power to vote, or to direct the voting of, such security;
and/or investment power, which includes the power to dispose, or to direct
the disposition of, such security, and shall be determined in a manner
consistent with Rule 13d-2 under the Securities Exchange Act of 1934
("1934 Act"), as now in effect and as the same may be amended from time to
time.
(b) "Business Combination" means any of the following transactions:
(x) a merger or consolidation of the Company (except for a merger in
respect of which, pursuant to Section 251(f) of the Delaware General
Corporation Law, as now in effect and as the same may be amended from time
to time, no vote of the stockholders of the Company is required); (y) a
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in
one transaction or a series of transactions), whether as part of a
dissolution or otherwise, of assets of the Company or of any direct or
indirect majority-owned subsidiary of the Company (other than to any
direct or indirect wholly-owned subsidiary or to the Company) having an
aggregate market value equal to 90 percent or more of either that
aggregate market value of all of the assets of the Company determined on a
consolidated basis or the aggregate market value of all the outstanding
stock of the Company; or (z) a consummated tender or exchange offer for
50% or more of the outstanding voting stock of the Company by any person
other than the Company itself.
(c) "Change in Control" of the Company shall be deemed to have
occurred if:
(i) any person (as defined in Section 13(d) or 14(d)(2) of the 1934
Act shall have become the Beneficial Owner of 35 percent or more
of the combined voting power of the Company's Voting Securities
(other than the Employee, or any other person who is Beneficial
Owner of such 35 percent threshold at the date of this
Agreement), not counting for purposes of such 35 percent
threshold any Voting Securities acquired from the Employee;
(ii) 80 percent of the Incumbent Board shall have ceased for any
reason to constitute a majority the Board;
(iii) the stockholders approve by the requisite vote any Business
Combination; or
(iv) the stockholders approve the complete liquidate or dissolution of
the Company.
(d) "Good Reason" means any of the following (without the Employee's
express written consent):
(i) the assignment of duties inconsistent with Employee's duties as
Chairman and Chief Executive Officer of the Company immediately
prior to the Change in Control of the Company, or a change of an
adverse nature in the Employee's position an officer or Director
of the Company prior to a Change in Control of the Company, or
any removal from or any failure to reelect the Employee to any
of such positions, except in connection with termination of the
Employee's employment for reasons specified in paragraphs (b),
(c) or (d) of Section 10 hereof; or
(ii) any failure by the Company to continue in effect any benefit or
arrangement (including, without limitation, the Company's group
life insurance plan, senior executive life insurance supplement
and medical, accident and disability plans) which the Employee
is participating at the time of a Change in Control of the
Company, or the taking of any action by the Company which would
adversely affect the Employee's participating in or materially
reduce the Employee's benefits thereto deprive the Employee of
any material fringe benefit enjoyed by the Employee at the time
of a Change in Control of the Company;
(iii) any failure by the Company to continue in effect the Company's
Restated 1991 Combination Stock Option Plan;
I-49
<PAGE>
(iv) a change in the location of the Employee's principal place of
work away from the area of the United States located east of the
Mississippi River;
(v) any breach by the Company of any material provision of this
Agreement not cured within 60 days thereof; or
(vi) any failure by the Company to obtain the assumption of this
Agreement by any successor or assignee of the Company.
(e) "Hostile Change of Control" means a transaction, event or election
constituting a Change in Control, which was not approved by, or, in an
election, the directors elected were not nominated or elected by, at least
a majority of the Incumbent Board in office immediately prior to the
Change in Control.
(f) "Incumbent Board" means individuals, including the Employee, who
constitute a majority of the Board of Directors of the Company as
constituted on the date of this Agreement; provided, that any individual
becoming a director subsequent to the date of this Agreement whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least 80 percent of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board.
(g) "Voting Securities" means the Company's outstanding securities
entitled to vote generally in the election of directors.
2. Term. The initial term of this Agreement ("Initial Term") shall
commence on the date hereof and expire on September , 1999, and thereafter
shall continue on a year to year basis for an indefinite number of renewal
terms ("Renewal Terms") unless either party otherwise elects upon six (6)
months written notice to the other prior to expiration of the Initial Term or
any then effective Renewal Term, subject in case of both the Initial Term and
any Renewal Term to earlier termination as provided herein.
3. Duties and Responsibilities. The Employee shall be employed as Chief
Executive Officer of the Company and the Chief Executive Officer of each
CareMatrix Corporation or in such other capacities as the Board of Directors
may from time to time reasonably determine recognizing the nature and scope
of the Employee's employment. The Employee shall have full rights, benefits,
powers and responsibilities customarily associated with such office. The
Employee agrees to perform such duties and discharge such responsibilities in
a faithful manner and to the best of his ability. The Employee agrees to
devote his full business time, energy and experience to the business and
affairs of the Company and to use his best efforts to promote the interests
of the Company. The Employee may delegate duties to other employees as he, in
his sole discretion, reasonably determines is in the best interest of the
Company; provided however, the Employee shall at all times operate under the
authority and power given to him by the Board of Directors of the Company.
4. Employment and Compensation. The Company agrees to employ the
Employee and the Employee agrees to be employed by the Company for the
performance of the duties set forth above at a base annual salary ("Base
Salary") at the rate of Two Hundred Fifty Thousand Dollars ($250,000) for the
period beginning on the date hereof and ending on September , 1999, and
thereafter unless and until increased, payable in arrears in equal
semi-monthly installments. Any increases to the Employee's Base Salary shall
be made at the discretion of the Board of Directors.
5. Employee Benefits. The Company shall provide the Employee an annual
automobile allowance of $10,000, plus operating expenses and minor repairs,
and a parking space at the Company's executive offices. The Employee shall be
entitled to the comprehensive health benefits package in existence from time
to time for the executive officers of the Company, including but not limited
to Blue Cross/Blue Shield-Master Health Plus or comparable coverage. In the
event such coverage is dropped by the Company, a similar comprehensive health
insurance plan shall be provided to the Employee. The Employee will be
entitled to participate in the CareMatrix 401(k) Employee Savings Plan
without any waiting period. The Employee shall also receive such additional
benefits, if any, provided for the executive officers of the Company that may
be authorized from time to time by the Board of Directors of the Company in
its sole discretion.
I-50
<PAGE>
6. Bonus. The Employee shall receive a bonus. The determination of the
amount of such bonus, if any, and the time and method of payment of such
bonus shall be vested in the sole discretion of the Board of Directors of the
Company.
7. Withholding Taxes. The Company shall have the right to deduct or
withhold from any payments made to the Employee all taxes which may be
required to be deducted or withheld under any provision of law (including,
but not limited to, Social Security payments, income tax withholding and any
other deduction or withholding required by law) now in effect or which may
become effective any time during the term of this Agreement.
8. Expenses. Subject to the authority of the Board of Directors of the
Company to fix and determine policies relating to such matters, the Company
agrees to reimburse the Employee for all reasonable expenses incurred by him
as the Company deems ordinary and necessary, in connection with the business
of the Company and as are represented by appropriate documentation.
9. Insurance. The Company shall acquire and maintain a policy of
insurance to be owned by and for the benefit of the Employee and a
beneficiary to be designated by the Employee, covering the Employee for life
insurance in the amount of $500,000. The Employee agrees that the Company, in
its sole discretion, may acquire and maintain a policy or policies of
insurance to be owned by and for the benefit of the Company, covering the
Employee for life, medical or disability insurance in any amounts deemed
advisable by the Company, and the Employee waivers any rights, title or
interest in and to any of such policies representing such insurance. The
Employee agrees to submit to any required examination and to execute, sign
and deliver all applications and other documents necessary to effectuate such
insurance coverage.
10. Termination of Employment.
(a) Termination Due to Hostile Changes in Control. If a Hostile Change
in Control of the Company occurs while the Employee is still employed by
the Company and the Employee's employment is terminated as of a date prior
to the end of the Initial Term of any Renewal Term within a 24-month
period thereafter, the Employee shall be entitled to the compensation set
forth below in the next succeeding paragraph unless such termination is
demonstrated by the Company to be a result of (1) the Employee's
disability or death (as provided for in Section 10(b) below), (2) the
Employee's termination for cause (as provided for in Section 10(c) below),
or (3) the Employee's election to terminate his employment other than for
Good Reason (as defined in Section 1(c) above).
If the Company terminates the Employee's employment other than as set
forth in the immediately preceding paragraph of this Section 10(a), then the
Company must pay the Employee a lump sum severance payment (the "Lump Sum
Severance Payment"), in cash, equal to 2.99 times the yearly average of his
total compensation (consisting of Base Salary and any cash bonus) payable to
the Employee with respect to the five full calendar years (or such lesser
number since the calendar year ended December 31, 1992) preceding the Change
in Control of the Company; provided, however, that if the Lump Sum Severance
Payment under this Section 10(a), either alone or together with other
payments which the Employee has the right to receive from the Company, would
constitute a "parachute payment" (as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code")), such Lump Sum Severance
Payment shall be reduced to the largest amount as will result in no portion
of the lump sum severance payment being subject to the excise tax imposed
under Section 4999 of the Code. The determination of any reduction in the
lump sum payment pursuant to the immediately preceding sentence shall be made
by the Employee in good faith, and such determination shall be conclusive and
binding on the Company.
(b) Termination Due to Disability or Death. In the event that the
Employee is unable to perform his duties hereunder on account of illness
or other incapacity (other than death), and such illness or other
incapacity shall prevent him from performing the same for a period of six
or more consecutive months, the Company shall have the right, on 30 days'
prior written notice to the Employee, to terminate his employment pursuant
to this Agreement, and in such event the Company shall not be obligated to
pay the Employee any further compensation, except for any amounts due him
or accrued by him up to the date of such termination. In the event that
the Employee dies, his employment pursuant to this Agreement shall
terminate effective at the end of the month during which his death occurs.
(c) Termination by the Company for Certain Other Events. The Company
shall have the right to terminate Employee's employment under this
Agreement upon at least 30 days' prior written notice to
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<PAGE>
Employee and without any obligation from and after the effective date of
such termination to pay any further compensation or furnish any other
benefits of any nature whatsoever, in the event (a) there is a good faith
finding by a majority of the entire Board of Directors of the Company of
dishonesty or wilful misconduct by the Employee in performing his assigned
duties, or (b) the Employee is convicted of, or enters a plea of guilty or
nolo contendre to, any crime involving moral turpitude or any felony which
has the effect of causing termination or suspension of any license or
permit which the Company holds or which materially and adversely affects
the Company.
(d) Termination by Either Party. Notwithstanding any other provision
hereof to the contrary, employment pursuant to this Agreement may be
terminated by either party, if there has been a breach in any material
respect of this Agreement by the other party and such breach has not been
cured within 30 days of written notice to the breaching party.
(e) Continued Payment in Certain Event. Termination of employment
pursuant to this Agreement by the Company for any other reason not covered
under any of paragraphs (a), (b), (c) or (d) above will not relieve the
Company of its obligation to continue payment of the remaining portion of
Base Salary compensation due under this Agreement for the balance of the
Initial Term only, unless the Company shall have paid the Lump Sum
Severance Payment in accordance with Section 10(a).
11. Non-Competition.
(a) For so long as Employee is employed by the Company, and (i) for a
period of one (1) year after termination of employment by the Company
under Section 10(b) (other than death), 10(c) or 10(d) or by the employee
for any reason other than as stated in Section 10(d), and (ii) for a
period of six months after termination by the Company for any reason not
stated in Section 10, as the case may be (the "Non-Competition Period"),
Employee will not, without the express written consent of the Company,
directly or indirectly, engage in, participate in, or assist, as owner,
part-owner, partner, director, officer, trustee, employee, agent or
consultant, or in any other capacity, any business organization the
business or activities of which are substantially similar to or directly
competitive with any business or activity conducted by the Company,
including without limitation the planning, development, management,
operation, leasing and acquisition of, or providing consulting services
pertaining to, independent living facilities, assisted living facilities,
nursing homes and other health care facilities or a home health care
program for the elderly, or small retirement living projects within a
twenty (20) mile radius of Company head-quarters, any Company regional
office or any assisted-living facility or community operated by the
Company or planned to operated by the Company during the term of the
Employee's employment by the Company.
(b) In addition, during the Non-Competition Period the Employee will
not (i) attempt to hire any director, officer, employee or agent of the
Company, (ii) assist in such attempt hiring by any other person, (iii)
encourage any person to terminate his or her employment or business
relationship with the Company, (iv) encourage any customer or supplier of
the Company to terminate its relationship with the Company, (v) obtain,
assist in obtaining, for Employee's own benefit (other than indirectly as
an employee of the Company) any customer of the Company, (vi) encourage
any customer or supplier not to enter in or renew a business relationship
with the Company.
(c) The Employee acknowledges and agrees that foregoing territorial,
time and other limitations are reasonable and properly required for the
adequate protection of the business and affairs of the Company, and in the
event that any of territorial, time or other limitations is found to be
unreasonable by a court of competent jurisdiction, the Employee agrees and
submits to the reduction of such territorial, time or other limitations to
such an area, period or otherwise as the court may determine to be
reasonable. In the event that any limitation under this Section 11 is
found to be unreasonable or otherwise invalid in whole or in part in any
jurisdiction, the Employee agrees that such limitation shall be and remain
valid in other jurisdictions.
(d) The Employee acknowledges, warrants and agrees that the
restrictive covenants contained in this Section 11 are necessary for the
protection of the Company's legitimate business interests and are
reasonable in scope and content.
(e) Nothing in paragraphs (a)--(d) of this Section 11 shall preclude
Employee from making passive investments in more than 5% of a class of
securities of any business enterprise registered under the Securities
I-52
<PAGE>
Exchange Act of 1934 the business or activities of which are substantially
similar to or directly competitive with the Company as proscribed under
Section 11(a) above.
12. Protection of Proprietary Information. During the course of his
employment as an executive officer of the Company the Employee will have
access to and will gain knowledge with respect to all of the activities and
lines of business the Company will enter, including the planning,
development, management and operation of independent living and assisted
living facilities, nursing homes and other health care facilities and a home
health care program for elderly or infirm people and small retirement living
projects, the Company's research and development techniques with respect to
such facilities, homes, projects and programs, the preparation of market and
demand and cost containment studies, project evaluation methods, facility
development programs, management techniques related to all aspects of such
facilities, homes, projects and programs and related businesses and other
valuable and confidential information relating to the business and activities
of the Company ("Confidential Information"). The parties acknowledge that
unauthorized disclosure or misuse of the Confidential Information could cause
irreparable damage to the Company. The parties also agree that covenants by
the Employee not to make unauthorized disclosures of the Confidential
Information and not to use the Confidential Information after the termination
of the Employee's employment with the Company in a business in competition
with that of the Company are essential to the growth and stability of the
business of the Company. Accordingly, the Employee agrees that, except as
required by his duties under this Agreement, he shall not use or disclose to
anyone at any time during or after the term of his employment by the Company
any Confidential Information obtained by him in the course of his employment
with the Company.
The parties acknowledge that the Employee has obtained valuable knowledge,
experience, and information relative generally to the business the Company
presently intends to pursue prior to his employment with the Company (the
"Prior Confidential Information"). The Prior Confidential Information shall
be deemed to be Confidential Information for purposes of this Section.
However, the Prior Confidential Information shall be subject to the
nondisclosure requirements of this Section for time periods identical to
those in Section 11(a) relating to the Non-Competition Period and for the
related termination reasons contained therein, rather than the infinite time
limitations provided in this Section 11 for the Confidential Information.
13. Remedies. In the event of any breach or threatened breach by the
Employee of the provisions of Sections 11 or 12 of this Agreement, the
Company shall be entitled to an injunction restraining such breach in
addition to, and not to the exclusion of, other remedies or relief. Employee
acknowledges that his employment by Company imposes on him a duty to act
prudently and for the benefit of Company in all matters connected with or
related to his employment and the officers he holds in the Company. Employee
agrees that in the event that he violates his duty of loyalty to Company, in
addition to any and all other remedies which the Company may have available
to it, Company will be entitled, at its election, to recover from Employee
(i) the value of anything belonging to the Company which Employee uses in
breach of such duty, or (ii) any benefit which Employee receives as a result
of violating his duty of loyalty, or its proceeds, and the Company shall also
be entitled to recover from Employee the amount of damages thereby caused. In
the event of termination of Employee's employment for breach in any material
respect of any of the covenants under this Employment Agreement, Employee
agrees that he shall thereby forfeit all rights granted to him under any
stock option, profit participation, bonus or deferred compensation
arrangement of the Company then existing in which he participates or has an
interest or right, to the extent permitted by law. Nothing herein shall be
construed as prohibiting either party from pursuing any other remedies
available to him or it for any other breach or threatened breach of this
Agreement by the other party, including the recovery of damages from the
other party.
14. Notices. Any notice or other communication pursuant to this
Agreement shall be in writing and shall be personally delivered or sent by
certified or registered mail or by commercial overnight (receipted) courier
addressed to the respective parties as follows:
If to the Company, to:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention: Andrew D. Gosman, President
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<PAGE>
If to the Employee, to:
Michael J. Doyle, Chief Executive Officer
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
15. Governing Law. This Agreement shall be governed in all respects by
the laws of the Commonwealth of Massachusetts.
16. Waiver. Any waiver of a breach of any of the provisions of this
Agreement shall not be deemed to be a waiver of any other provision or breach
of this Agreement.
17. Effect of Headings. Any title of an article or section heading
herein contained is for convenience of reference only, and shall not affect
the meaning or construction of any of the provisions hereof.
18. Miscellaneous.
(a) The parties agree that each provision contained in this Agreement
shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the
enforceability of any of the other clauses herein. Moreover, if one or
more of the provisions contained in this Agreement shall for any reason be
held to be excessively broad as to scope, activity or subject so as to be
unenforceable at all, such provision or provisions shall be construed by
the appropriate judicial body by limiting and reducing it or them, so as
to be enforceable to the extent compatible with the applicable law.
(b) This Agreement contains the whole agreement as such relates to the
subject matter hereof between the parties hereto and the parties expressly
acknowledge that there are no inducements, promises, terms, conditions or
obligations made or entered into by the Company or the Employee other than
contained herein. This Agreement may not be amended except by a writing
signed by both parties.
19. Effect of Prior Agreements/Entire Agreement. The parties agree that
any prior written or oral agreements relating to the subject matter hereof
are hereby terminated and are superseded by this agreement. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof, and all promises, representations, understandings,
warranties and agreements with reference to the subject matter hereof and
inducements to the making of this Agreement relied upon by any party hereto
have been expressed herein.
IN WITNESS WHEREOF, the parties hereto or their duly authorized
representatives have signed, sealed and delivered this Agreement effective as
of the day and year first above written.
CAREMATRIX CORPORATION
By:
-----------------------------
Andrew D. Gosman, President
EMPLOYEE
-----------------------------
Michael J. Doyle
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Agreement entered into as of this day of September, 1996, by and
between The Standish Care Company, a Delaware corporation with its principal
place of business at 6 New England Executive Park, Burlington, Massachusetts
01803 (hereinafter referred to as the "Company"), and Kenneth M. Miles
(hereinafter called the "Employee"), residing in Chelmsford, Massachusetts.
W I T N E S S E T H:
WHEREAS, the Company is a health care services company specializing in
assisted-living, a service-intensive form of housing for frail but functional
seniors. The Company's two principal business activities are acquiring and
operating assisted-living communities, primarily in the eastern United
States, and providing development, management, marketing and other services
to third party owners of other assisted living communities; and
WHEREAS, the Employee is experienced in the business which the Company
operates; and
WHEREAS, the Company has employed the Employee since 1992, first as
Controller, then as Treasurer and a Vice President and, effective as of
November 1, 1994, as Chief Financial Officer of the Company; and
WHEREAS, the Company and the Employee are parties to that certain
Employment Agreement dated as of July 1, 1995, as amended by that First
Amendment dated as of March 1, 1996 (hereinafter called the "Employment
Agreement") providing for the terms and conditions governing Employee's
employment with the Company; and
WHEREAS, the Company, subsidiary acquisition corporations of the Company
(the "Company Subsidiary"), approximately twelve companies engaged in the
business of providing long-term care services through the operation and
management of assisted living communities owned by a common group of
stockholders (each a "CareMatrix Corporation" and collectively, "CareMatrix")
have entered into an Agreement and Plan of Merger dated as of July , 1996
(the "Merger Agreement") pursuant to which the Company will acquire
CareMatrix and issue to the stockholders of CareMatrix an aggregate of
million ( ) newly issued shares of Common Stock of the Company
(the "CareMatrix Business Combination");
WHEREAS, a condition precedent to the consummation of the CareMatrix
Business Combination and related transactions contemplated by the Merger
Agreement is the execution of this Amended and Restated Employment Agreement
by and between the Company and the Employee; and
WHEREAS, the Company and the Employee desire to consummate the
transactions contemplated by the Merger Agreement and to execute this
Agreement; and
WHEREAS, the Company's Board of Directors considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders; and
WHEREAS, in this connection, the Company further recognizes that, as is
the case with many publicly held corporations, the possibility of a change of
control may arise and that such possibility, and the uncertainty and
questions which it may raise among management, may result in distraction or
other potentially disturbing circumstances to the detriment of the Company
and its stockholders; and
WHEREAS, the Board of Directors has further determined that it is
appropriate to reinforce and encourage the continued attention and dedication
of members of the Company's management to their assigned duties without
distraction in circumstances arising from the possibility of a change in
control of the Company; and
WHEREAS, the Company desires to induce the Employee to remain in the
employ of the Company with an assurance of fair treatment to reduce the
distractions and other adverse effects on his performance which are inherent
in a hostile takeover threat; and
WHEREAS, the Company and the Employee desire to amend and restate in their
entirety the terms and conditions governing Employee's employment with
theCompany and by execution of this Agreement specifically agree that all
prior agreements between the parties hereto pertaining to Employee's
employment with the Company are null and void and of no force and effect.
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<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto, it is hereby agreed by and between the Company and the
Employee as follows:
1. Definitions. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Beneficial Owner" means with respect to any security any person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares voting power, which
includes the power to vote, or to direct the voting of, such security;
and/or investment power, which includes the power to dispose, or to direct
the disposition of, such security, and shall be determined in a manner
consistent with Rule 13d-2 under the Securities Exchange Act of 1934
("1934 Act"), as now in effect and as the same may be amended from time to
time.
(b) "Business Combination" means any of the following transactions:
(x) a merger or consolidation of the Company (except for a merger in
respect of which, pursuant to Section 251(f) of the Delaware General
Corporation Law, as now in effect and as the same may be amended from time
to time, no vote of the stockholders of the Company is required); (y) a
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in
one transaction or a series of transactions), whether as part of a
dissolution or otherwise, of assets of the Company or of any direct or
indirect majority-owned subsidiary of the Company (other than to any
direct or indirect wholly-owned subsidiary or to the Company) having an
aggregate market value equal to 90 percent or more of either that
aggregate market value of all of the assets of the Company determined on a
consolidated basis or the aggregate market value of all the outstanding
stock of the Company; or (z) a consummated tender or exchange offer for
50% or more of the outstanding voting stock of the Company by any person
other than the Company itself.
(c) "Change in Control" of the Company shall be deemed to have
occurred if:
(i) any person (as defined in Section 13(d) or 14(d)(2) of the 1934
Act shall have become the Beneficial Owner of 35 percent or more
of the combined voting power of the Company's Voting Securities
(other than the Employee, Michael J. Doyle ("Doyle"), the
Company's Chairman and Chief Executive Officer, or any other
person who is Beneficial Owner of such 35 percent threshold at
the date of this Agreement), not counting purposes of such 35
percent threshold any Voting Securities acquired from the
Employee or Doyle;
(ii) 80 percent of the Incumbent Board shall have ceased for any
reason to constitute a majority the Board;
(iii) the stockholders approve by the requisite vote any Business
Combination; or (iv) the stockholders approve the complete
liquidate or dissolution of the Company.
(d) "Good Reason" means any of the following (without the Employee's
express written consent):
(i) the assignment of duties inconsistent with Employee's duties as
Chief Financial Officer of the Company immediately prior to the
Change in Control of the Company, or a change of an adverse
nature in the Employee's position an officer or Director of the
Company prior to a Change in Control of the Company, or any
removal from or any failure to reelect the Employee to any of
such positions, except in connection with termination of the
Employee's employment for reasons specified in paragraphs (b),
(c) or (d) of Section 10 hereof; or
(ii) any failure by the Company to continue in effect any benefit or
arrangement (including, without limitation, the Company's group
life insurance plan, senior executive life insurance supplement
and medical, accident and disability plans) which the Employee
is participating at the time of a Change in Control of the
Company, or the taking of any action by the Company which would
adversely affect the Employee's participating in or materially
reduce the Employee's benefits thereto deprive the Employee of
any material fringe benefit enjoyed by the Employee at the time
of a Change in Control of the Company;
(iii) any failure by the Company to continue in effect the Company's
Restated 1991 Combination Stock Option Plan;
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<PAGE>
(iv) a change in the location of the Employee's principal place of
work away from the area of the United States located east of
the Mississippi River;
(v) any breach by the Company of any material provision of this
Agreement not cured within 60 days thereof; or
(vi) any failure by the Company to obtain the assumption of this
Agreement by any successor or assignee of the Company.
(e) "Hostile Change of Control" means a transaction, event or election
constituting a Change in Control, which was not approved by, or, in an
election, the directors elected were not nominated or elected by, at least
a majority of the Incumbent Board in office immediately prior to the
Change in Control.
(f) "Incumbent Board" means individuals, including the Employee, who
constitute a majority of the Board of Directors of the Company as
constituted on the date of this Agreement; provided, that any individual
becoming a director subsequent to the date of this Agreement whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least 80 percent of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board.
(g) "Voting Securities" means the Company's outstanding securities
entitled to vote generally in the election of directors.
2. Term. The initial term of this Agreement ("Initial Term") shall
commence on the date hereof and expire on September , 1998, and thereafter
shall continue on a year to year basis for an indefinite number of renewal
terms ("Renewal Terms") unless either party otherwise elects upon six (6)
months written notice to the other prior to expiration of the Initial Term or
any then effective Renewal Term, subject in case of both the Initial Term and
any Renewal Term to earlier termination as provided herein.
3. Duties and Responsibilities. The Employee shall be employed as Senior
Vice President of Finance of the Company and Senior Vice President of Finance
of each CareMatrix Corporation or in such other capacities as the Board of
Directors may from time to time reasonably determine recognizing the nature
and scope of the Employee's employment. The Employee shall have full rights,
benefits, powers and responsibilities customarily associated with such
office. The Employee agrees to perform such duties and discharge such
responsibilities in a faithful manner and to the best of his ability. The
Employee agrees to devote his full business time, energy and experience to
the business and affairs of the Company and to use his best efforts to
promote the interests of the Company. The Employee shall bear the
responsibility for the development, implementation and review of all
financial systems and regulatory and tax reporting of the Company. The
Employee may delegate duties to other employees as he, in his sole
discretion, reasonably determines is in the best interest of the Company;
provided however, the Employee shall at all times operate under the authority
and power given to him by the Board of Directors of the Company.
4. Employment and Compensation. The Company agrees to employ the
Employee and the Employee agrees to be employed by the Company for the
performance of the duties set forth above at a base annual salary ("Base
Salary") at the rate of One Hundred Twenty-Five Thousand Dollars ($125,000)
for the period beginning on the date hereof and ending on September ,
1998, and thereafter unless and until increased, payable in arrears in equal
semi-monthly installments. Any increases to the Employee's Base Salary shall
be made at the discretion of the Board of Directors.
5. Employee Benefits. The Company shall provide the Employee an annual
automobile allowance of $6,000, plus operating expense and minor repairs and
a parking space at the Company's executive offices. The Employee shall be
entitled to the comprehensive benefits package in existence from time to time
for the executive officers of the Company, including but not limited to Blue
Cross/Blue Shield--Master Health Plus or comparable coverage. In the event
such coverage is dropped by the Company, a similar comprehensive health
insurance plan shall be provided to the Employee. The Employee will be
entitled to participate in the CareMatrix 401(k) Employee Savings Plan
without any waiting period. The Employee shall also receive such additional
benefits, if any, provided
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<PAGE>
for the executive officers of the Company that may be authorized from time to
time by the Board of Directors of the Company in its sole discretion.
6. Bonus. The Employee shall receive a bonus. The determination of the
amount of such bonus, if any, and the time and method of payment of such
bonus shall be vested in the sole discretion of the Board of Directors of the
Company.
7. Withholding Taxes. The Company shall have the right to deduct or
withhold from any payments made to the Employee all taxes which may be
required to be deducted or withheld under any provision of law (including,
but not limited to, Social Security payments, income tax withholding and any
other deduction or withholding required by law) now in effect or which may
become effective any time during the term of this Agreement.
8. Expenses. Subject to the authority of the Board of Directors of the
Company to fix and determine policies relating to such matters, the Company
agrees to reimburse the Employee for all reasonable expenses incurred by him
as the Company deems ordinary and necessary, in connection with the business
of the Company and as are represented by appropriate documentation.
9. Insurance. The Employee agrees that the Company, in its sole
discretion, may acquire and maintain a policy or policies of insurance to be
owned by and for the benefit of the Company, covering the Employee for life,
medical or disability insurance in any amounts deemed advisable by the
Company, and the Employee waivers any rights, title or interest in and to any
of such policies representing such insurance. The Employee agrees to submit
to any required examination and to execute, sign and deliver all applications
and other documents necessary to effectuate such insurance coverage.
10. Termination of Employment.
(a) Termination Due to Hostile Changes in Control. If a Hostile Change
in Control of the Company occurs while the Employee is still employed by
the Company and the Employee's employment is terminated as of a date prior
to the end of the Initial Term of any Renewal Term within a 24-month
period thereafter, the Employee shall be entitled to the compensation set
forth below in the next succeeding paragraph unless such termination is
demonstrated by the Company to be a result of (1) the Employee's
disability or death (as provided for in Section 10(b) below), (2) the
Employee's termination for cause (as provided for in Section 10(c) below),
or (3) the Employee's election to terminate his employment other than for
Good Reason (as defined in Section 1(c) above).
If the Company terminates the Employee's employment other than as set
forth in the immediately preceding paragraph of this Section 10(a), then the
Company must pay the Employee a lump sum severance payment (the "Lump Sum
Severance Payment"), in cash, equal to 1.00 times the yearly average of his
total compensation (consisting of Base Salary and any cash bonus) payable to
the Employee with respect to the five full calendar years (or such lesser
number since the calendar year ended December 31, 1992) preceding the Change
in Control of the Company; provided, however, that if the Lump Sum Severance
Payment under this Section 10(a), either alone or together with other
payments which the Employee has the right to receive from the Company, would
constitute a "parachute payment" (as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code")), such Lump Sum Severance
Payment shall be reduced to the largest amount as will result in no portion
of the lump sum severance payment being subject to the excise tax imposed
under Section 4999 of the Code. The determination of any reduction in the
lump sum payment pursuant to the immediately preceding sentence shall be made
by the Employee in good faith, and such determination shall be conclusive and
binding on the Company.
(b) Termination Due to Disability or Death. In the event that the
Employee is unable to perform his duties hereunder on account of illness
or other incapacity (other than death), and such illness or other
incapacity shall prevent him from performing the same for a period of six
or more consecutive months, the Company shall have the right, on 30 days'
prior written notice to the Employee, to terminate his employment pursuant
to this Agreement, and in such event the Company shall not be obligated to
pay the Employee any further compensation, except for any amounts due him
or accrued by him up to the date of such termination. In the event that
the Employee dies, his employment pursuant to this Agreement shall
terminate effective at the end of the month during which his death occurs.
(c) Termination by the Company for Certain Other Events. The Company
shall have the right to terminate Employee's employment under this
Agreement upon at least 30 days' prior written notice to
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<PAGE>
Employee and without any obligation from and after the effective date of
such termination to pay any further compensation or furnish any other
benefits of any nature whatsoever, in the event (a) there is a good faith
finding by a majority of the entire Board of Directors of the Company of
dishonesty or wilful misconduct by the Employee in performing his assigned
duties, or (b) the Employee is convicted of, or enters a plea of guilty or
nolo contendre to, any crime involving moral turpitude or any felony which
has the effect of causing termination or suspension of any license or
permit which the Company holds or which materially and adversely affects
the Company.
(d) Termination by Either Party. Notwithstanding any other provision
hereof to the contrary, employment pursuant to this Agreement may be
terminated by either party, if there has been a breach in any material
respect of this Agreement by the other party and such breach has not been
cured within 30 days of written notice to the breaching party.
(e) Continued Payment in Certain Event. Termination of employment
pursuant to this Agreement by the Company for any other reason not covered
under any of paragraphs (a), (b), (c) or (d) above will not relieve the
Company of its obligation to continue payment of the remaining portion of
Base Salary compensation due under this Agreement for the balance of the
Initial Term only, unless the Company shall have paid the Lump Sum
Severance Payment in accordance with Section 10(a).
11. Non-Competition.
(a) For so long as Employee is employed by the Company, and (i) for a
period of one (1) year after termination of employment by the Company
under Section 10(b) (other than death), 10(c) or 10(d) or by the employee
for any reason other than as stated in Section 10(d), and (ii) for a
period of six months after termination by the Company for any reason not
stated in Section 10, as the case may be (the "Non-Competition Period"),
Employee will not, without the express written consent of the Company,
directly or indirectly, engage in, participate in, or assist, as owner,
part-owner, partner, director, officer, trustee, employee, agent or
consultant, or in any other capacity, any business organization the
business or activities of which are substantially similar to or directly
competitive with any business or activity conducted by the Company,
including without limitation the planning, development, management,
operation, leasing and acquisition of, or providing consulting services
pertaining to, independent living facilities, assisted living facilities,
nursing homes and other health care facilities or a home health care
program for the elderly, or small retirement living projects within a
twenty (20) mile radius of Company head-quarters, any Company regional
officers or any assisted-living facility or community operated by the
Company or planned to operated by the Company during the term of the
Employee's employment by the Company.
(b) In addition, during the Non-Competition Period the Employee will
not (i) attempt to hire any director, officer, employee or agent of the
Company, (ii) assist in such attempt hiring by any other person, (iii)
encourage any person to terminate his or her employment or business
relationship with the Company, (iv) encourage any customer or supplier of
the Company to terminate its relationship with the Company, (v) obtain,
assist in obtaining, for Employee's own benefit (other than indirectly as
an employee of the Company) any customer of the Company, (vi) encourage
any customer or supplier not to enter in or renew a business relationship
with the Company.
(c) The Employee acknowledges and agrees that foregoing territorial,
time and other limitations are reasonable and properly required for the
adequate protection of the business and affairs of the Company, and in the
event that any of territorial, time or other limitations is found to be
unreasonable by a court of competent jurisdiction, the Employee agrees and
submits to the reduction of such territorial, time or other limitations to
such an area, period or otherwise as the court may determine to be
reasonable. In the event that any limitation under this Section 11 is
found to be unreasonable or otherwise invalid in whole or in part in any
jurisdiction, the Employee agrees that such limitation shall be and remain
valid in other jurisdictions.
(d) The Employee acknowledges, warrants and agrees that the
restrictive covenants contained in this Section 11 are necessary for the
protection of the Company's legitimate business interests and are
reasonable in scope and content.
(e) Nothing in paragraphs (a)--(d) of this Section 11 shall preclude
Employee from making passive investments in more than 5% of a class of
securities of any business enterprise registered under the Securities
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Exchange Act of 1934 the business or activities of which are substantially
similar to or directly competitive with the Company as proscribed under
Section 11(a) above.
12. Protection of Proprietary Information. During the course of his
employment as an executive officer of the Company the Employee will have
access to and will gain knowledge with respect to all of the activities and
lines of business the Company will enter, including the planning,
development, management and operation of independent living and assisted
living facilities, nursing homes and other health care facilities and a home
health care program for elderly or infirm people and small retirement living
projects, the Company's research and development techniques with respect to
such facilities, homes, projects and programs, the preparation of market and
demand and cost containment studies, project evaluation methods, facility
development programs, management techniques related to all aspects of such
facilities, homes, projects and programs and related businesses and other
valuable and confidential information relating to the business and activities
of the Company ("Confidential Information"). The parties acknowledge that
unauthorized disclosure or misuse of the Confidential Information could cause
irreparable damage to the Company. The parties also agree that covenants by
the Employee not to make unauthorized disclosures of the Confidential
Information and not to use the Confidential Information after the termination
of the Employee's employment with the Company in a business in competition
with that of the Company are essential to the growth and stability of the
business of the Company. Accordingly, the Employee agrees that, except as
required by his duties under this Agreement, he shall not use or disclose to
anyone at any time during or after the term of his employment by the Company
any Confidential Information obtained by him in the course of his employment
with the Company.
The parties acknowledge that the Employee has obtained valuable knowledge,
experience, and information relative generally to the business the Company
presently intends to pursue prior to his employment with the Company (the
"Prior Confidential Information"). The Prior Confidential Information shall
be deemed to be Confidential Information for purposes of this Section.
However, the Prior Confidential Information shall be subject to the
nondisclosure requirements of this Section for time periods identical to
those in Section 11(a) relating to the Non-Competition Period and for the
related termination reasons contained therein, rather than the infinite time
limitations provided in this Section 11 for the Confidential Information.
13. Remedies. In the event of any breach or threatened breach by the
Employee of the provisions of Sections 11 or 12 of this Agreement, the
Company shall be entitled to an injunction restraining such breach in
addition to, and not to the exclusion of, other remedies or relief. Employee
acknowledges that his employment by Company imposes on him a duty to act
prudently and for the benefit of Company in all matters connected with or
related to his employment and the officers he holds in the Company. Employee
agrees that in the event that he violates his duty of loyalty to Company, in
addition to any and all other remedies which the Company may have available
to it, Company will be entitled, at its election, to recover from Employee
(i) the value of anything belonging to the Company which Employee uses in
breach of such duty, or (ii) any benefit which Employee receives as a result
of violating his duty of loyalty, or its proceeds, and the Company shall also
be entitled to recover from Employee the amount of damages thereby caused. In
the event of termination of Employee's employment for breach in any material
respect of any of the covenants under this Employment Agreement, Employee
agrees that he shall thereby forfeit all rights granted to him under any
stock option, profit participation, bonus or deferred compensation
arrangement of the Company then existing in which he participates or has an
interest or right, to the extent permitted by law. Nothing herein shall be
construed as prohibiting either party from pursuing any other remedies
available to him or it for any other breach or threatened breach of this
Agreement by the other party, including the recovery of damages from the
other party.
14. Notices. Any notice or other communication pursuant to this
Agreement shall be in writing and shall be personally delivered or sent by
certified or registered mail or by commercial overnight (receipted) courier
addressed to the respective parties as follows:
If to the Company, to:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attn: Andrew D. Gosman, President
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If to the Employee, to:
Kenneth M. Miles, Senior Vice President of Finance
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
15. Governing Law. This Agreement shall be governed in all respects by
the laws of the Commonwealth of Massachusetts.
16. Waiver. Any waiver of a breach of any of the provisions of this
Agreement shall not be deemed to be a waiver of any other provision or breach
of this Agreement.
17. Effect of Headings. Any title of an article or section heading
herein contained is for convenience of reference only, and shall not affect
the meaning or construction of any of the provisions hereof.
18. Miscellaneous.
(a) The parties agree that each provision contained in this Agreement
shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the
enforceability of any of the other clauses herein. Moreover, if one or
more of the provisions contained in this Agreement shall for any reason be
held to be excessively broad as to scope, activity or subject so as to be
unenforceable at all, such provision or provisions shall be construed by
the appropriate judicial body by limiting and reducing it or them, so as
to be enforceable to the extent compatible with the applicable law.
(b) This Agreement contains the whole agreement as such relates to the
subject matter hereof between the parties hereto and the parties expressly
acknowledge that there are no inducements, promises, terms, conditions or
obligations made or entered into by the Company or the Employee other than
contained herein. This Agreement may not be amended except by a writing
signed by both parties.
19. Effect of Prior Agreements/Entire Agreement. The parties agree that
any prior written or oral agreements relating to the subject matter hereof
are hereby terminated and are superseded by this agreement. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof, and all promises, representations, understandings,
warranties and agreements with reference to the subject matter hereof and
inducements to the making of this Agreement relied upon by any party hereto
have been expressed herein.
IN WITNESS WHEREOF, the parties hereto or their duly authorized
representatives have signed, sealed and delivered this Agreement effective as
of the day and year first above written.
CAREMATRIX CORPORATION
By: ___________________________
Andrew D. Gosman, President
EMPLOYEE
_______________________________
Kenneth M. Miles
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Appendix II
July 10, 1996
The Board of Directors
The Standish Care Company
6 New England Executive Park
Burlington, MA 01803
Gentlemen:
We understand that The Standish Care Company (the "Company") has entered
into an Agreement and Plan of Merger among certain corporations referred to
as the CareMatrix Corporations (collectively referred to as "CareMatrix"),
the Company, and certain corporations referred to as the Acquisition
Corporations, dated July 3, 1996 (the "Merger Agreement"), pursuant to which
each Acquisition Corporation will be merged with and into a specified
CareMatrix Corporation. Stockholders of the CareMatrix Corporations will
receive an aggregate of 50 million newly issued shares of Company common
stock, par value $ .01 per share ("Standish Common Stock") in exchange for
shares of common stock of the CareMatrix Corporations, and the CareMatrix
Corporations will become wholly-owned subsidiaries of Standish (the
"Merger"). The terms and conditions of the Merger are set forth in the Merger
Agreement.
In connection with the Merger, you have asked us to render our opinion, as
investment bankers, as to the fairness to the Company's current stockholders,
from a financial point of view, of the resulting ownership of the outstanding
shares of the Company's common stock to be retained by the Company's current
stockholders after giving effect to the Standish Common Stock to be issued to
the stockholders of CareMatrix in the Merger. We have not been requested to
opine as to, and our opinion has not in any manner addressed, the Company's
underlying decision to proceed with the Merger.
As you are aware, we have acted as financial advisor to the Company in
connection with the Merger and will receive a fee for services which include
the rendering of this opinion. In addition, the Company has agreed to
indemnify us against certain liabilities arising out of providing these
services. As part of our investment banking business, we are continually
engaged in the valuation of businesses and their securities in connection
with mergers, acquisitions, divestitures, leveraged buyouts and private
placements of debt and equity securities.
In connection with rendering the opinion, we have reviewed and examined,
among other items, the following: (i) the Merger Agreement, (ii) certain
publicly available information concerning the Company, including the Annual
Reports on Form 10-K and proxy statements of the Company for each of the
fiscal years in the three year period ended December 31, 1995 and Quarterly
Report on Form 10-Q of the Company for the quarter ended March 31, 1996,
(iii) unaudited financial statements for CareMatrix for the year ended
December 31, 1995 and unaudited financial statements for the five months
ended May 31, 1996, (iv) certain documentation with regard to assisted living
and long-term care facilities to be developed, managed, operated, owned or
leased by the Company and CareMatrix, (v) financial and operating information
with respect to the business, operations and prospects of the Company and
CareMatrix, (vi) certain internal business plans and financial forecasts
prepared by the respective managements of the Company and of CareMatrix, and
(vii) certain publicly available information concerning other assisted living
and long-term care facility companies, the trading markets for such
companies' securities and the nature and terms of certain other merger and
acquisition transactions we believe to be relevant to our inquiry. During the
course of our review we met and had discussions with the management of the
Company and CareMatrix concerning each company's business and operations,
assets, liabilities, present financial condition, the general condition and
future prospects for the businesses in which each is engaged and other
matters which we believe to be relevant.
In our review and examination and in arriving at our opinion, we have
examined and relied upon the accuracy and completeness of all financial and
other information that was available to us from public sources, that was
provided to us by the Company, CareMatrix or their representatives, or that
was otherwise reviewed by us, and we have not attempted independently to
verify any such information. We have not made, nor have we obtained, any
independent evaluation or appraisal of the assets or liabilities of either
company. With respect to the financial and business forecasts, we have
assumed that they have been reasonably prepared on the bases reflecting the
best currently available estimates and judgments of the Company's and
CareMatrix's management as to the future operating and financial performance
of each company, and that such forecasts will be realized in the amounts and
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in the time periods currently estimated by such managements. We have relied
upon the representations of the Company and CareMatrix contained in the
Merger Agreement with respect to legal and other matters. We have assumed for
purposes of our opinion that, immediately prior to the time the Merger
becomes effective, all options, warrants and convertible securities with
respect to the Company's common stock shall have been exercised or converted
and that there shall be 4,964,758 shares of the Company's common stock
outstanding.
In conducting our review and analysis and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed to be
relevant, including, among others, (i) a review of the trading history of the
Company's common stock, (ii) a review of the historical and current financial
condition and operating characteristics of the Company and of CareMatrix as
compared with those of other companies we deemed comparable, (iii) a review
of equity market valuation parameters for securities of companies we deemed
comparable, (iv) a review of the nature and financial terms of certain
transactions that we considered relevant for comparison with the financial
terms of the Merger, and (v) a discounted cash flow analysis of the Company,
CareMatrix and the newly merged entity. In addition, we performed such other
analyses and examinations and considered such information and financial
economic and market data as we deemed relevant.
In rendering our opinion, we have taken into account our assessment of
general economic, market, financial and other conditions, as well as our
experience in connection with similar transactions and securities evaluation,
generally. Our opinion necessarily is based upon conditions as they exist and
can be evaluated on the date hereof. We were not engaged to solicit, and have
not solicited, potential purchasers for the Company, and we did not consider
specific alternative transactions involving the Company. For the purposes of
rendering this opinion, we have assumed that all conditions precedent to the
consummation of the Merger will be satisfied and accordingly express no
opinion as to the likelihood that the Merger will be consummated.
We are not expressing any opinion as to what the value of the Standish
Common Stock will be when issued to the stockholders of CareMatrix pursuant
to the Merger or the prices at which the Company's common stock will trade
subsequent to the Merger. This opinion is not intended to be and does not
constitute a recommendation to any holder of the Company's common stock as to
whether or not to vote in favor of the Merger.
It is understood that this opinion is for the information of the Board of
Directors only in connection with its consideration of the Merger. This
opinion may not otherwise be quoted or referred to, in whole or in part,
without our written consent. However, this opinion may be included in full in
any Proxy Statement, Prospectus or schedule filed under the Securities
Exchange Act of 1934, as amended, that is used in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion, as
investment bankers, that as of the date hereof, the resulting ownership of
the outstanding shares of Company common stock to be retained by the
Company's current stockholders after giving effect to the Standish Common
Stock to be issued to the stockholders of CareMatrix in the Merger, is fair
to the Company's current stockholders from a financial point of view.
Very truly yours,
/s/ Stonebridge Associates, LLC
STONEBRIDGE ASSOCIATES, LLC
II-2
<PAGE>
Appendix III
PROPOSED ARTICLE FOURTH OF
STANDISH'S RESTATED
CERTIFICATE OF INCORPORATION
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is:
75,000,000 shares of Common stock, $.01 par value per share; plus
345,268 shares of Preferred Stock, $.01 par value per share.
III-1
<PAGE>
Appendix IV
THE STANDISH CARE COMPANY
AMENDMENT NO. 5
TO
RESTATED 1991 COMBINATION STOCK OPTION PLAN
The Standish Care Company, a Delaware corporation (the "Corporation"),
hereby adopts the following Amendment, effective as of June 28, 1996, to The
Standish Care Company Restated 1991 Combination Stock Option Plan (the "1991
Plan"):
Section VI of the 1991 Plan is hereby amended by deleting the first
sentence thereof and substituting the following new first sentence:
"The number of shares of Common Stock that may be the subject of awards
under this 1991 Plan shall not exceed an aggregate of 2,000,000 shares."
THE STANDISH CARE COMPANY
By: /s/ Michael J. Doyle
-----------------------------
Michael J. Doyle,
Chairman and
Chief Executive Officer
IV-1
<PAGE>
PRELIMINARY PROXY MATERIAL--
Confidential, For Use of the Commission Only
THE STANDISH CARE COMPANY
6 New England Executive Park, Burlington, Massachusetts 01803
The undersigned hereby appoints, Michael J. Doyle and Kenneth M. Miles, and
each of them acting singly, with full power of substitution, attorneys and
proxies to represent the undersigned at the Special Meeting of Stockholders
of The Standish Care Company to be held on October , 1996 and at any
adjournments thereof with all power which the undersigned would possess if
personally present, and to vote all shares of stock which the undersigned may
be entitled to vote at said meeting upon the matters set forth in the Notice
of Special Meeting in accordance with the following instructions and with
discretionary authority on such other matters as may come before the Special
Meeting or any adjounment thereof. All previous proxies are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED
AS DIRECTED BY THE UNDERSIGNED AND, IF NO DIRECTION IS INDICATED, IT WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3 SET FORTH BELOW AND FOR THE ELECTION OF THE
NOMINEES AS DIRECTORS.
(1) Approval and adoption of the Agreement and Plan of Merger dated as of
July 3, 1996 by and among the Company, 12 wholly-owned subsidiaries of
the Company and 12 affiliated corporations which collectively are known
as "CareMatrix" and are owned by a group of persons which includes
Abraham D. Gosman, Andrew D. Gosman and Michael M. Gosman and certain key
employees of CareMatrix and others.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) Proposed amendment to the Company's Restated Certificate of
Incorporation, increasing the number of authorized shares of Common
Stock, $.01 par value per share, from 30,000,000 to 75,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Proposed amendment to the Company's Restated 1991 Combination Stock
Option Plan, increasing from 785,000 to 2,000,000 the total number of
shares of Common Stock available for options granted under the Plan.
[ ] FOR [ ] AGAINST [ ]ABSTAIN
(4) Election of Directors:
Nominees: Michael J. Doyle, Kenneth M. Miles, Marshall S. Sterman, Robert
W. DeVore and John A. Carucci
[ ] FOR all nominees [ ] WITHHELD from all nominees
[ ] FOR, except vote withheld from the following nominee(s):
(Instructions: to withhold authority to vote for any individual nominee,
write the nominee's name in the space provided above.)
<PAGE>
[ ] Check here for address change and note change below
[ ] Check here if you plan to attend the meeting
New address: _____________________________________________________________
(Please complete, date, sign and mail in the enclosed envelope)
(Signature should be the same as the name printed on your stock certificate.
Executors, administrators, trustees, guardians, attorneys, and officers of
the corporation should add their titles when signing.)
Signature -------------------------------------------------------------------
Date ------------------------------------------------------------------, 1996
Signature --------------------------------------------------------------------
Date ------------------------------------------------------------------, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 11 of the Registrant's Restated Certificate of Incorporation
eliminates the personal liability of directors to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty to the full
extent permitted by Delaware law. Article VII of the Registrant's By-Laws
provides that the Registrant indemnify its officers and directors to the full
extent permitted by the Delaware General Corporation Law. Section 145 of the
Delaware General Corporation Law authorizes a corporation to indemnify
directors, officers and employees unless such party has been adjudicated in
any proceeding not to have acted in good faith in the reasonable belief that
his action was in the best interest of the corporation. See "Management of
Standish--Limitation of Liability and Indemnification Agreements" in Part I
of this Registration Statement for a description of indemnification
agreements the Registrant has entered into with its directors. The effect of
these provisions is to permit indemnification by the Registrant for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act").
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits The following exhibits are filed as part of this Registration
Statement on Form S-4.
- -------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<S> <C>
2.01 Lease/Purchase Agreement dated as of July 1, 1992 by and among Mark V. Barrow, M.D. and Mary B.
Barrow, Victoria Enterprises, Inc., and Bailey Retirement Center, Inc. (12)
2.02 Purchase and Sale Agreement dated as of February 24, 1992 between the Registrant and Life Prime,
Inc., relating to purchase by the Registrant of assets comprising Heritage Word, Heritage Place
and Heritage Common communities (2)
2.03 Asset Transfer Agreement dated February 24, 1994 by and between Chapman and Cood Enterprises and
the Registrant, related to Statesville Village, Statesville, North Carolina (5)
2.04 Asset Transfer Agreement dated February 24, 1994 by and between C-M Villas and the Registrant,
related to Yadkin Village, Yadkinville, North Carolina (5)
2.05 Asset Transfer Agreement dated February 24, 1994 by and between Jerry R. Chapman and the
Registrant, related to Catawba House, Newton, North Carolina (5)
2.06 Lease Agreement dated July 26, 1994, James Post and Elizabeth Bass Horton-Post, as landlord and
Bailey Retirement Center, Inc., as tenant for property in Gainesville, Florida, known as Bailey
Homes Suites (13)
2.07 Asset Purchase Agreement dated January 12, 1995 by and among Sunny Knoll Retirement Home, Inc.,
Donna Holden and Peter Holden, and the Registrant (with exhibits and schedules attached thereto)
(7)
2.08 Amendment and Restatement of Asset Purchase Agreement dated as of May 1, 1995 by and among Sunny
Knoll Retirement Home, Inc., Donna Holden and Peter Holden, Benjamin Bartley, L.L.C. and the
Registrant and Lake Region Villages, L.L.C. (with exhibits and schedules attached thereto) (7)
2.09 Agreement and Plan of Merger dated as July 3, 1996 by and among the Registrant, each of the
Standish Subs and each of the CareMatrix Corporations (with certain exhibits and schedules
attached thereto) contained in Appendix I in the Proxy Statement-Prospectus included in Part I of
this Registration Statement (*)
3.01 Restated Certificate of Incorporation of the Registrant (1)
3.02 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant filed August
23, 1993 (2)
3.03 Certificate of Designations of the Registrant filed on August 31, 1993 (2)
3.04 Certificate of Correction of the Registrant filed on September 1, 1993 (2)
3.05 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant filed June 8,
1994 (13)
II-1
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
3.06 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant filed June 30,
1995 (13)
3.07 Certificate of Retirement and Prohibition of Reissuance of Shares of the Registrant filed July 28,
1995 (13)
3.08 Certificate of Designations of the Registrant filed July 30, 1996 (*)
3.09 By-Laws of the Registrant (3)
3.10 Amendment to By-Laws of the Registrant dated July 24, 1995 (13)
4.01 Specimen Certificate for Common Stock (3)
5.01 Legal Opinion of Robinson & Cole (**)
10.01 Lease Agreement dated as of November 10, 1993, between Health Care REIT, Inc. and Dominion Villages
Inc. (6)
10.02 Lease Guaranty by the Registrant to Health Care REIT, Inc. dated November 10, 1993, related to the
obligations of Dominion Villages, Inc. under its Lease Agreement (6)
10.03 Lease Agreement dated February 11, 1994 between Health Care REIT, Inc. and Lowry Village Limited
Partnership (6)
10.04 Lease Guaranty by the Registrant to Health Care REIT, Inc., dated February 11, 1994, related to the
obligations of Lowry Village Limited Partnership under its Lease Agreement (6)
10.05 Management Agreement dated January 1, 1994, by and between Lowry Village Limited Partnership and
the Registrant (6)
10.06 Lease Agreement dated as of March 2, 1994, between Health Care REIT, Inc. and Piedmont Villages,
Inc. (6)
10.07 Lease Guaranty by the Registrant to Health Care REIT, Inc. dated March 1, 1994, related to the
obligations of Piedmont Villages, Inc. under its Lease Agreement (6)
10.08 Commitment Letter dated October 5, 1993, between Health Care REIT, Inc., a corporate wholly owned
subsidiary to be formed by Registrant, as amended March 31, 1995 (13)
10.09 Warrants dated November 9, 1993, January 13, 1994, February 4, 1994, March 1, 1994, May 25, 1995
and June 28, 1995 to purchase an aggregate of 35,833 shares of the Registrant's Common Stock
issued to Health Care REIT, Inc. (13)
10.10 Adams Square Limited Partnership First Amended and Restated Limited Partnership Agreement dated as
of January 31, 1994 (with certain exhibits attached) (13)
10.11 Operating Agreement of Lakes Region Villages L.L.C. dated May 1, 1995 (13)
10.12 Amended and Restated Employment Agreement dated October 1, 1991 between Registrant and Michael J.
Doyle (3)
10.13 Amendment to Amended and Restated Employment Agreement dated January 1, 1993 between the Registrant
and Michael J. Doyle (4)
10.14 Amendment No. 2 to Amended and Restated Employment Agreement dated July 29, 1993 between the
Registrant and Michael J. Doyle (2)
10.15 Second Amended and Restated Employment Agreement dated as of July 1, 1995 between the Registrant
and Michael J. Doyle (13)
10.16 First Amendment to Second Amended and Restated Employment Agreement dated as of March 1, 1996
between the Registrant and Michael J. Doyle (13)
10.17 Form of Third Amended and Restated Employment Agreement between the Registrant and Michael J. Doyle
contained in Appendix I in the Proxy Statement-Prospectus included in Part I of this Registration
Statement(*)
10.18 New Employment Agreement dated as of December 1, 1995 between the Registrant and Michael J. Brenan
(13)
10.19 First Amendment to New Employment Agreement dated as of March 1, 1996 between the Registrant and
Michael J. Brenan (13)
10.20 Form of Termination Agreement dated as of August 15, 1996 between the Registrant and Michael J.
Brenan (**)
10.21 Employment Agreement dated as of July 1, 1995 between the Registrant and Kenneth M. Miles (13)
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
10.22 First Amendment to Employment Agreement dated as of March 1, 1996 between the Registrant and
Kenneth M. Miles (13)
10.23 Form of Amended and Restated Employment Agreement between the Registrant and Kenneth M. Miles
contained in Appendix I in the Proxy Statement-Prospectus included in Part I of this Registration
Statement (*)
10.24 Agreement between the Registrant and Christopher W. Hollister dated as of May 26, 1995 related to
termination of employment and the surrender of unexercised options to purchase 35,000 shares of
stock (13)
10.25 Amended and Restated Employment Agreement dated March 1, 1993 between the Registrant and C. Joel
Glovsky (4)
10.26 Early Retirement and Non-Competition Agreement dated as of December 29, 1995, between the
Registrant and C. Joel Glovsky, relating to early retirement, consulting services, non- complete
covenants and related matters (11)
10.27 Restated 1991 Combination Stock Option Plan of the Registrant (8)
10.28 Amendment to the Registrant's Restated 1991 Combination Stock Option Plan (2)
10.29 Amendment No. 2 to Registrant's Restated 1991 Combination Stock Option Plan (13)
10.30 Amendment No. 3 to Registrant's Restated 1991 Combination Stock Option Plan (13)
10.31 Amendment No. 4 to Registrant's Restated 1991 Combination Stock Option Plan (13)
10.32 1995 Non-Qualified Stock Option Plan for Non-Employee Directors ("1995 Non-Employee Directors'
Plan") (13)
10.33 Warrants dated May 26, 1993 to purchase an aggregate of 15,000 shares of the Registrant's Common
Stock granted to Robert W. DeVore at a price of $4.50 per share (13)
10.34 Form of Stock Option Exchange Agreements dated as of February 28, 1995 between the Registrant and
each of Michael J. Doyle, C. Joel Glovsky, Marshall S. Sterman, Robert W. DeVore, Jeffrey R.
Rayport, Kenneth M. Miles, Christopher W. Hollister and Faye Godwin relating to repricing of
stock options (13)
10.35 Stock Option Agreement between the Registrant and Christopher W. Hollister dated February 28, 1995
for 35,000 shares of stock at a price of $2.00 per share (13)
10.36 Stock Option Agreement between the Registrant and Michael J. Doyle dated February 28, 1995 for
50,000 shares of stock at a price of $2.00 per share (13)
10.37 Stock Option Agreement between the Registrant and C. Joel Glovsky dated February 28, 1995 for
15,000 shares of stock at a price of $2.00 per share (13)
10.38 Stock Option Agreement between the Registrant and Marshall S. Sterman dated February 28, 1995 for
15,000 shares of stock at a price of $2.00 per share (13)
10.39 Stock Option Agreement between the Registrant and Jeffrey F. Rayport dated February 28, 1995 for
15,000 shares of stock at a price of $2.00 per share (13)
10.40 Stock Option Agreement between the Registrant and Kenneth M. Miles dated February 28, 1995 for
4,500 shares of stock at $2.00 per share (13)
10.41 Stock Option Agreement between the Registrant and Kenneth M. Miles dated February 28, 1995 for
15,000 shares of stock at $2.00 per share (13)
10.42 Stock Option Agreement between the Registrant and Robert W. DeVore dated February 28, 1995 for
15,000 shares of stock at $2.00 per share (13)
10.43 Stock Option Agreement between and the Registrant and Marshall S. Sterman, dated as of June 23,
1995, for 6,000 shares of common stock at a price of $2.28 per share, under the 1995 Non-Employee
Directors' Plan (13)
10.44 Stock Option Agreement between the Registrant and Robert W. DeVore, dated as of June 23, 1995, for
6,000 shares of the Registrant's Common Stock at a purchase price of $2.28 per share, under the
1995 Non-Employee Directors' Plan (13)
10.45 Stock Option Agreement between the Registrant and Michael J. Doyle dated as of July 1, 1995, for
50,000 shares of stock at a price of $2.38 a share (13)
10.46 Stock Option Agreement between the Registrant and Kenneth M. Miles dated as of July 1, 1995, for
35,000 shares of stock at a price of $2.38 a share (13)
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
10.47 Stock Option Agreement between the Registrant and Michael J. Brenan dated as of July 1, 1995 for
45,000 shares of stock at a price of $2.38 a share (13)
10.48 Stock Option Agreement between the Registrant and Faye Godwin dated February 28, 1995 for 50,000
shares of stock at a price of $6.25 per share (expired) (13)
10.49 Form of Amended and Restated Stock Option Agreement between the Registrant and Michael J. Doyle
dated as of June 28, 1996 for 50,000 shares of the Registrant's Common Stock at a price of $2.94
a share (*)
10.50 Form of Amended and Restated Stock Option Agreement between the Registrant and Kenneth M. Miles
dated as of June 28, 1996 for 25,000 shares of the Registrant's Common Stock at a price of $2.94
a share (*)
10.51 Gain Participation Agreement between the Registrant and certain limited partners of Lakeview
Estates of Sandestin, L.P. dated October 30, 1991 (3)
10.52 Purchase Agreement dated as of January 28, 1993 between the Registrant and Manold Company as
representative and agent for the "Purchasers" listed therein, relating to sale by the Registrant
of subordinated bonds on Senior Lifestyles, Inc. projects, 50,000 shares of the Registrant's
Common Stock and Stock Purchase Warrants to purchase an aggregate of 50,000 shares of the
Registrant's Common Stock (4)
10.53 Form of Stock Purchase Warrants dated as of January 28, 1993, numbered 1 to 10, inclusive, to
purchase an aggregate of 50,000 shares of the Registrant's Common Stock, issued to the
"Purchasers" under the Purchase Agreement (Exhibit 10.52) (4)
10.54 Form of Agreement dated as of March 21, 1996, by and between the Registrant and Manold, as
representative and agent for the "Purchasers" listed therein, relating to the exchange of Bonds
issued on behalf of Senior Lifestyles, Inc. and registered in the name of the Registrant,
including bonds which are held beneficially and physically by The Manold Company, and are the
subject of the Registrant's 1993 Agreement with The Manold Company, in exchange for cash and
subordinate bonds issued by the York County Industrial Development Authority on behalf of
Northwood Retirement Community, Inc. (13)
10.55 Management Agreement between the Registrant and Northwood Retirement Community, Inc., dated March
20, 1996, for the management of Fox Ridge Manor, in York County, Pennsylvania (13)
10.56 Revolving Loan and Security Agreement between the Registrant and Northwood Retirement Community,
Inc. dated as of March 21, 1996 (13)
10.57 $150,000 Promissory Note from Northwood Retirement Community, Inc. to the order of the Registrant
dated as of March 21, 1996 (13)
10.58 Subordinated Trust Indenture between the Northwood Retirement Community, Inc. and First Valley
Bank, as Subordinated Trustee dated as of March 21, 1996 (13)
10.59 Mortgage from the York County Industrial Development Authority to First Valley Bank, as
Subordinated Trustee dated as of March 21, 1996 (13)
10.60 Form of Pledge, Security, Escrow and Subordination Agreement between the Registrant and The Manold
Company dated as of March 21, 1996 (13)
10.61 Management Agreement dated July 6, 1995 by and between Cortland House and the Registrant for the
management of Cortland House, Leominster, MA (13)
10.62 Management Agreement dated as of March 1, 1995 by and between CJK Enterprises and the Registrant
for the management of Cadbury Commons, Dorchester, MA (13)
10.63 Limited Partnership Agreement of Standish Oaktree Limited Partnership dated as of April 30, 1993,
by and among Stan/Oak Development Corp., Oaktree, Inc. and CJK Enterprises Limited Partnership
(2)
10.64 Agreement of Limited Partnership of Cornish Realty Associates, L.P., bearing an unspecified date in
1993, by and among Cornish Realty, Inc., as general partner, and the Registrant and other persons
executing the Agreement from time to time, as limited partners (2)
II-4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
10.65 Purchase Agreement dated as of March 23, 1996, by and among the Registrant, as Seller, Cornish
Realty Associates, L.P., Laurelmead Cooperative, Laurelmead Nursing Center L.L.C., James J.
Skeffington and Arnold B. Chace, Jr., relating to the sale by the Registrant of the Registrant's
limited partnership interest in Cornish Realty Associates, L.P. (13)
10.66 Amended and Restated Development Agency Agreement, dated as of April 30, 1993, by and among
Oaktree, Inc., Arthur A. Klipfel, III, The Standish Oaktree Partnership, L.P. and the Registrant
(2)
10.67 Agreement dated May 5, 1993, between the Registrant Tyler R. Ruhlman, d/b/a Central Capital, and
Mayflower Partners, Inc., relating to a consulting fee payable in connection with the purchase by
the Registrant of the Virginia Chain (2)
10.68 Management Agreement and Marketing Services Agreement between Adams Square Limited Partnership and
the Registrant dated January 29, 1994 (6)
10.69 Development Services and Reimbursement Agreement between Adams Square Limited Partnership and
Stan/Oak Development Corp., dated January 31, 1994 (6)
10.70 $127,000 Demand Note from the Registrant to Adams Square, Inc. dated January 31, 1994 (6)
10.71 Unconditional Guaranty from the Registrant to SAI Mortgage Group, Inc., dated February 25, 1994 (6)
10.72 Management and Marketing Agreement between Cornish Realty Associates, L.P., Laurelmead Cooperative
and the Registration dated October, 1993 (6)
10.73 First Amendment to Management and Marketing Agreement between Cornish Realty Associates, L.P.,
Laurelmead Cooperative and the Registrant, dated March 23, 1993 (6)
10.74 Laurelmead Resignation Agreement dated February 23, 1996, among the Registrant, Cornish Realty
Associates, L.P. and Laurelmead Cooperative (13)
10.75 $1,000,000 Promissory Note from Bailey Retirement Center, Inc. and the Registrant to First Union
National Bank of Florida dated January 26, 1994 (6)
10.76 Mortgage from Bailey Retirement Center, Inc. and the Registrant to First Union National Bank of
Florida dated January 26, 1994 (13)
10.77 $100,000 Promissory Note from Bailey Retirement Center, Inc. to Mark V. Barrow, M.D. and Mary B.
Barrow, dated January 26, 1994 (13)
10.78 Mortgage from Bailey Retirement Center, Inc. to Mark V. Barrow, M.D. and Mary B. Barrow, dated
January 26, 1994 (13)
10.79 Form of $150,000 Promissory Note from Bailey Retirement Center, Inc. and the Registrant to First
Union National Bank of Florida dated December 2, 1994 (13)
10.80 Mortgage from Bailey Retirement Center, Inc. and the Registrant to First Union National Bank of
Florida dated December 2, 1994 (13)
10.81 Convertible Debenture Agreement between the Registrant and Columbia Pacific Group, Inc. dated June
10, 1994 (9)
10.82 Form of Convertible Debenture issued in accordance with the Assisted Living of America, Inc. n/k/a
Emeritus Corp. working capital credit facility (Exhibit 10.81) (9)
10.83 Warrant dated June 10, 1994 to purchase an aggregate of 50,000 shares of the Registrant's Common
Stock issued to Assisted Living of America, Inc. n/k/a Emeritus Corp. (9)
10.84 Warranted Dated June 10, 1994 to purchase an aggregate of 50,000 shares of the Registrant's Common
Stock issued to Daniel R. Baty (9)
10.85 Registration Rights Agreement dated June 10, 1994 between the Registrant, Columbia Pacific Group,
Inc. and Daniel R. Baty (9)
10.86 Advisory Agreement between the Registrant and Daniel R. Baty dated as of June 10, 1994 (9)
10.87 Management Agreement dated June 29, 1995 between Emeritus Corp. and the Registrant, for the
management of Woodholme Commons in Pikesville, MD (13)
10.88 Management Agreement dated June 9, 1995 by and between Emeritus Corp. and the Registrant for the
management of The Pines of Tewskbury, Tewksbury, MA (13)
II-5
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
10.89 Asset Purchase Agreement dated as of July 28, 1995 by and among Painted Post Partnership, Allentown
Personal Care General Partnership, Unity Partnership and Saulsbury General Partnership, each of
the partners of such partnerships, P. Jules Patt, as the managing general partner of each of the
foregoing named general partnerships and individually, and the Registrant relating to the Green
Meadows Acquisition (the "Asset Purchase Agreement") (13)
10.90 Assignment and Assumption Agreement dated August 31, 1995, by and between the Registrant and
Emeritus Corp., relating to the assignment of the Registrant's rights and obligations as
purchaser under the Asset Purchase Agreement dated as of July 28, 1995 with a group of
partnerships, as seller (10)
10.91 Stock Purchase Warrant dated February 13, 1992 to purchase an aggregate of 67,000 shares of the
Registrant's Common Stock issued to J. Edmund & Co. (3) [Those warrants were split-up by the
holder and as of the date hereof, those warrants are held by Dennis Waldman, John Deshazo and
Roger O. Peterkin III.]
10.92 Underwriter's Warrant Agreement dated as of August 31, 1993 issued to RAS Securities corp. (2)
10.93 Warrants dated June 10, 1994 to purchase an aggregate of 32,500 shares of Registrant's Common Stock
issued to RAS Securities Corp. (13)
10.94 Draft of Warrants dated September 29, 1994, to purchase an aggregate of 37,500 Common Shares issued
to The Equity Group, Inc. as partial consideration for public relations services (13)
10.95 Warrants dated January 15, 1995 to purchase an aggregate of 30,000 shares of Registrant's Common
Stock issued to Neil Berkman Associates (13)
10.96 Form of Indemnification Agreement for officers and directors (3)
10.97 Confidentiality Agreements dated May 20 and May 22, 1996 exchanged between the Registrant and
CareMatrix (*)
10.98 Preferred Stock Purchase Agreement dated as of July 30, 1996 between the Registrant and Abraham D.
Gosman (*)
10.99 Warrants dated July 30, 1996 to purchase an aggregate of 400,000 shares of the Registrant's Common
Stock issued to Abraham D. Gosman (*)
10.100 Registration Rights Agreement dated as of July 30, 1996 between the Registrant and Abraham D.
Gosman (*)
21.01 Subsidiaries of the Company
23.01 Consent of Robinson & Cole (contained in Exhibit 5.01) (**)
23.02 Consent of Coopers & Lybrand (*)
23.03 Consent of Lovelace, Roby & Company, P.A. (*)
23.05 Consent of John A. Carucci (*)
24.01 Power of Attorney (contained in Part II of this Registration Statement)
</TABLE>
- -------------
* Filed herewith.
** To be filed by amendment.
In accordance with Rule 411 under the Securities Act of 1933, as amended,
the following documents are hereby incorporated by reference:
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-18 (No. 33-43187-B)
(2) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-64720)
(3) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-18 (No. 33-44966-B)
(4) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992
(5) Filed as an Exhibit to the Registrant's Report on Form 8-K dated March
10, 1994
(6) Filed as an Exhibit to the Registrant's Report on Form 10-K dated for the
fiscal year ended December 31, 1993
(7) Filed as an Exhibit to the Registrant's Report on Form 8-K dated May 4,
1995
(8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991
II-6
<PAGE>
(9) Filed as an Exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1994
(10) Filed as an Exhibit to the Registrant's Report on Form 8-K dated October
5, 1995
(11) Filed as an Exhibit to the Registrant's Report on Form 8-K dated January
3, 1996
(12) Filed as an Exhibit to the Registrant's Report on Form 8-K dated July
20, 1992
(13) Filed as an Exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1995
(b) Financial Statement Schedules
THE STANDISH CARE COMPANY
Schedule II--Valuation and Qualifying Accounts
- -------------
Item 22. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under "Item 20
Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities bring registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10 (b), 11 or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145 (c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(e) (2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (e) (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10 (a) (3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth
of Massachusetts, on August 5, 1996.
The Standish Care Company
By: /s/ Michael J. Doyle
-------------------------------------
Michael J. Doyle
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below on this Registration Statement hereby constitutes and appoints Michael
J. Doyle and Kenneth M. Miles and each one of them, with full power to act
without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing) to sign any and
all amendments to this Registration Statement (including post-effective
amendments and amendment thereto) and any registration statement relating to
the same offering as this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file
the name, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing, ratifying and confirming all
that said attorneys-in-fact and agents or any of them or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------- ----------------------------------------- ----------------
<S> <C> <C>
/s/ Michael J. Doyle Director, Chairman and
--------------------- Chief Executive Officer
Michael J. Doyle (Principal Executive
Officer)
August 5, 1996
/s/ Kenneth M. Miles Chief Financial Officer and
--------------------- Treasurer (Principal
Kenneth M. Miles Financial and Accounting
Officer)
August 5, 1996
Director
-------------------
Michael J. Brenan August , 1996
/s/ Marshall S. Sterman Director
-----------------------
Marshall S. Sterman August 5, 1996
Director
-------------------
Robert W. DeVore August , 1996
</TABLE>
II-8
<PAGE>
THE STANDISH CARE COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charges to Charged to
beginning costs other Balance at end
Description of period and expenses accounts Deductions of period
-------------------------- ---------------- ------------ ------------ --------- --------------
<S> <C> <C> <C> <C> <C>
Balance at 1/1/93 $ 0 -- -- -- $ 0
Amounts reserved and then
written off against
related parties -- $132,000 -- ($132,000) --
Allowance for doubtful
accounts 108,000 -- -- -- --
--------- -------- --------- --------- --------
Balance at 12/31/93 $108,000 $132,000 -- ($132,000) $108,000
Allowance for doubtful
accounts -- 252,946 -- -- --
--------- -------- --------- --------- --------
Balance at 12/31/94 $108,000 $252,946 $0 -- $360,946
--------- -------- --------- --------- --------
Allowance for doubtful
accounts -- 87,479 -- -- --
-------- -------- --------- --------- --------
Balance at 12/31/95 $360,946 $ 87,479 $0 $ 0 $448,425
======== ======== ========= ========= ========
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
2.01 Lease/Purchase Agreement dated as of July 1, 1992 by and
among Mark V. Barrow, M.D. and Mary B. Barrow, Victoria
Enterprises, Inc., and Bailey Retirement Center, Inc. (12)
2.02 Purchase and Sale Agreement dated as of February 24, 1992
between the Registrant and Life Prime, Inc., relating to
purchase by the Registrant of assets comprising Heritage
Word, Heritage Place and Heritage Common communities (2)
2.03 Asset Transfer Agreement dated February 24, 1994 by and
between Chapman and Cood Enterprises and the Registrant,
related to Statesville Village, Statesville, North Carolina
(5)
2.04 Asset Transfer Agreement dated February 24, 1994 by and
between C-M Villas and the Registrant, related to Yadkin
Village, Yadkinville, North Carolina (5)
2.05 Asset Transfer Agreement dated February 24, 1994 by and
between Jerry R. Chapman and the Registrant, related to
Catawba House, Newton, North Carolina (5)
2.06 Lease Agreement dated July 26, 1994, James Post and Elizabeth
Bass Horton-Post, as landlord and Bailey Retirement
Center, Inc., as tenant for property in Gainesville,
Florida, known as Bailey Homes Suites (13)
2.07 Asset Purchase Agreement dated January 12, 1995 by and among
Sunny Knoll Retirement Home, Inc., Donna Holden and Peter
Holden, and the Registrant (with exhibits and schedules
attached thereto) (7)
2.08 Amendment and Restatement of Asset Purchase Agreement dated
as of May 1, 1995 by and among Sunny Knoll Retirement Home,
Inc., Donna Holden and Peter Holden, Benjamin Bartley,
L.L.C. and the Registrant and Lake Region Villages, L.L.C.
(with exhibits and schedules attached thereto) (7)
2.09 Agreement and Plan of Merger dated as July 3, 1996 by and
among the Registrant, each of the Standish Subs and each of
the CareMatrix Corporations (with certain exhibits and
schedules attached thereto) contained in Appendix I in the
Proxy Statement-Prospectus included in Part I of this
Registration Statement (*)
3.01 Restated Certificate of Incorporation of the Registrant (1)
3.02 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant filed August 23, 1993 (2)
3.03 Certificate of Designations of the Registrant filed on August
31, 1993 (2)
3.04 Certificate of Correction of the Registrant filed on
September 1, 1993 (2)
3.05 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant filed June 8, 1994 (13)
3.06 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant filed June 30, 1995 (13)
3.07 Certificate of Retirement and Prohibition of Reissuance of
Shares of the Registrant filed July 28, 1995 (13)
3.08 Certificate of Designations of the Registrant filed July 30,
1996 (*)
3.09 By-Laws of the Registrant (3)
3.10 Amendment to By-Laws of the Registrant dated July 24, 1995
(13)
4.01 Specimen Certificate for Common Stock (3)
5.01 Legal Opinion of Robinson & Cole (**)
10.01 Lease Agreement dated as of November 10, 1993, between Health
Care REIT, Inc. and Dominion Villages Inc. (6)
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
10.02 Lease Guaranty by the Registrant to Health Care REIT, Inc.
dated November 10, 1993, related to the obligations of
Dominion Villages, Inc. under its Lease Agreement (6)
10.03 Lease Agreement dated February 11, 1994 between Health Care
REIT, Inc. and Lowry Village Limited Partnership (6)
10.04 Lease Guaranty by the Registrant to Health Care REIT, Inc.,
dated February 11, 1994, related to the obligations of
Lowry Village Limited Partnership under its Lease Agreement
(6)
10.05 Management Agreement dated January 1, 1994, by and between
Lowry Village Limited Partnership and the Registrant (6)
10.06 Lease Agreement dated as of March 2, 1994, between Health
Care REIT, Inc. and Piedmont Villages, Inc. (6)
10.07 Lease Guaranty by the Registrant to Health Care REIT, Inc.
dated March 1, 1994, related to the obligations of Piedmont
Villages, Inc. under its Lease Agreement (6)
10.08 Commitment Letter dated October 5, 1993, between Health Care
REIT, Inc., a corporate wholly owned subsidiary to be
formed by Registrant, as amended March 31, 1995 (13)
10.09 Warrants dated November 9, 1993, January 13, 1994, February
4, 1994, March 1, 1994, May 25, 1995 and June 28, 1995 to
purchase an aggregate of 35,833 shares of the Registrant's
Common Stock issued to Health Care REIT, Inc. (13)
10.10 Adams Square Limited Partnership First Amended and Restated
Limited Partnership Agreement dated as of January 31, 1994
(with certain exhibits attached) (13)
10.11 Operating Agreement of Lakes Region Villages L.L.C. dated May
1, 1995 (13)
10.12 Amended and Restated Employment Agreement dated October 1,
1991 between Registrant and Michael J. Doyle (3)
10.13 Amendment to Amended and Restated Employment Agreement dated
January 1, 1993 between the Registrant and Michael J. Doyle
(4)
10.14 Amendment No. 2 to Amended and Restated Employment Agreement
dated July 29, 1993 between the Registrant and Michael J.
Doyle (2)
10.15 Second Amended and Restated Employment Agreement dated as of
July 1, 1995 between the Registrant and Michael J. Doyle
(13)
10.16 First Amendment to Second Amended and Restated Employment
Agreement dated as of March 1, 1996 between the Registrant
and Michael J. Doyle (13)
10.17 Form of Third Amended and Restated Employment Agreement
between the Registrant and Michael J. Doyle contained in
Appendix I in the Proxy Statement-Prospectus included in
Part I of this Registration Statement(*)
10.18 New Employment Agreement dated as of December 1, 1995 between
the Registrant and Michael J. Brenan (13)
10.19 First Amendment to New Employment Agreement dated as of March
1, 1996 between the Registrant and Michael J. Brenan (13)
10.20 Form of Termination Agreement dated as of August 15, 1996
between the Registrant and Michael J. Brenan (**)
10.21 Employment Agreement dated as of July 1, 1995 between the
Registrant and Kenneth M. Miles (13)
10.22 First Amendment to Employment Agreement dated as of March 1,
1996 between the Registrant and Kenneth M. Miles (13)
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
10.23 Form of Amended and Restated Employment Agreement between the
Registrant and Kenneth M. Miles contained in Appendix I in
the Proxy Statement-Prospectus included in Part I of this
Registration Statement (*)
10.24 Agreement between the Registrant and Christopher W. Hollister
dated as of May 26, 1995 related to termination of
employment and the surrender of unexercised options to
purchase 35,000 shares of stock (13)
10.25 Amended and Restated Employment Agreement dated March 1, 1993
between the Registrant and C. Joel Glovsky (4)
10.26 Early Retirement and Non-Competition Agreement dated as of
December 29, 1995, between the Registrant and C. Joel
Glovsky, relating to early retirement, consulting services,
non-complete covenants and related matters (11)
10.27 Restated 1991 Combination Stock Option Plan of the Registrant
(8)
10.28 Amendment to the Registrant's Restated 1991 Combination Stock
Option Plan (2)
10.29 Amendment No. 2 to Registrant's Restated 1991 Combination
Stock Option Plan (13)
10.30 Amendment No. 3 to Registrant's Restated 1991 Combination
Stock Option Plan (13)
10.31 Amendment No. 4 to Registrant's Restated 1991 Combination
Stock Option Plan (13)
10.32 1995 Non-Qualified Stock Option Plan for Non-Employee
Directors ("1995 Non-Employee Directors' Plan") (13)
10.33 Warrants dated May 26, 1993 to purchase an aggregate of
15,000 shares of the Registrant's Common Stock granted to
Robert W. DeVore at a price of $4.50 per share (13)
10.34 Form of Stock Option Exchange Agreements dated as of February
28, 1995 between the Registrant and each of Michael J.
Doyle, C. Joel Glovsky, Marshall S. Sterman, Robert W.
DeVore, Jeffrey R. Rayport, Kenneth M. Miles, Christopher
W. Hollister and Faye Godwin relating to repricing of stock
options (13)
10.35 Stock Option Agreement between the Registrant and Christopher
W. Hollister dated February 28, 1995 for 35,000 shares of
stock at a price of $2.00 per share (13)
10.36 Stock Option Agreement between the Registrant and Michael J.
Doyle dated February 28, 1995 for 50,000 shares of stock at
a price of $2.00 per share (13)
10.37 Stock Option Agreement between the Registrant and C. Joel
Glovsky dated February 28, 1995 for 15,000 shares of stock
at a price of $2.00 per share (13)
10.38 Stock Option Agreement between the Registrant and Marshall S.
Sterman dated February 28, 1995 for 15,000 shares of stock
at a price of $2.00 per share (13)
10.39 Stock Option Agreement between the Registrant and Jeffrey F.
Rayport dated February 28, 1995 for 15,000 shares of stock
at a price of $2.00 per share (13)
10.40 Stock Option Agreement between the Registrant and Kenneth M.
Miles dated February 28, 1995 for 4,500 shares of stock at
$2.00 per share (13)
10.41 Stock Option Agreement between the Registrant and Kenneth M.
Miles dated February 28, 1995 for 15,000 shares of stock at
$2.00 per share (13)
10.42 Stock Option Agreement between the Registrant and Robert W.
DeVore dated February 28, 1995 for 15,000 shares of stock
at $2.00 per share (13)
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
10.43 Stock Option Agreement between and the Registrant and
Marshall S. Sterman, dated as of June 23, 1995, for 6,000
shares of common stock at a price of $2.28 per share, under
the 1995 Non-Employee Directors' Plan (13)
10.44 Stock Option Agreement between the Registrant and Robert W.
DeVore, dated as of June 23, 1995, for 6,000 shares of the
Registrant's Common Stock at a purchase price of $2.28 per
share, under the 1995 Non-Employee Directors' Plan (13)
10.45 Stock Option Agreement between the Registrant and Michael J.
Doyle dated as of July 1, 1995, for 50,000 shares of stock
at a price of $2.38 a share (13)
10.46 Stock Option Agreement between the Registrant and Kenneth M.
Miles dated as of July 1, 1995, for 35,000 shares of stock
at a price of $2.38 a share (13)
10.47 Stock Option Agreement between the Registrant and Michael J.
Brenan dated as of July 1, 1995 for 45,000 shares of stock
at a price of $2.38 a share (13)
10.48 Stock Option Agreement between the Registrant and Faye Godwin
dated February 28, 1995 for 50,000 shares of stock at a
price of $6.25 per share (expired) (13)
10.49 Form of Amended and Restated Stock Option Agreement between
the Registrant and Michael J. Doyle dated as of June 28,
1996 for 50,000 shares of the Registrant's Common Stock at
a price of $2.94 a share (*)
10.50 Form of Amended and Restated Stock Option Agreement between
the Registrant and Kenneth M. Miles dated as of June 28,
1996 for 25,000 shares of the Registrant's Common Stock at
a price of $2.94 a share (*)
10.51 Gain Participation Agreement between the Registrant and
certain limited partners of Lakeview Estates of Sandestin,
L.P. dated October 30, 1991 (3)
10.52 Purchase Agreement dated as of January 28, 1993 between the
Registrant and Manold Company as representative and agent
for the "Purchasers" listed therein, relating to sale by
the Registrant of subordinated bonds on Senior Lifestyles,
Inc. projects, 50,000 shares of the Registrant's Common
Stock and Stock Purchase Warrants to purchase an aggregate
of 50,000 shares of the Registrant's Common Stock (4)
10.53 Form of Stock Purchase Warrants dated as of January 28, 1993,
numbered 1 to 10, inclusive, to purchase an aggregate of
50,000 shares of the Registrant's Common Stock, issued to
the "Purchasers" under the Purchase Agreement (Exhibit
10.52) (4)
10.54 Form of Agreement dated as of March 21, 1996, by and between
the Registrant and Manold, as representative and agent for
the "Purchasers" listed therein, relating to the exchange
of Bonds issued on behalf of Senior Lifestyles, Inc. and
registered in the name of the Registrant, including bonds
which are held beneficially and physically by The Manold
Company, and are the subject of the Registrant's 1993
Agreement with The Manold Company, in exchange for cash and
subordinate bonds issued by the York County Industrial
Development Authority on behalf of Northwood Retirement
Community, Inc. (13)
10.55 Management Agreement between the Registrant and Northwood
Retirement Community, Inc., dated March 20, 1996, for the
management of Fox Ridge Manor, in York County, Pennsylvania
(13)
10.56 Revolving Loan and Security Agreement between the Registrant
and Northwood Retirement Community, Inc. dated as of March
21, 1996 (13)
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
10.57 $150,000 Promissory Note from Northwood Retirement Community,
Inc. to the order of the Registrant dated as of March 21,
1996 (13)
10.58 Subordinated Trust Indenture between the Northwood Retirement
Community, Inc. and First Valley Bank, as Subordinated
Trustee dated as of March 21, 1996 (13)
10.59 Mortgage from the York County Industrial Development
Authority to First Valley Bank, as Subordinated Trustee
dated as of March 21, 1996 (13)
10.60 Form of Pledge, Security, Escrow and Subordination Agreement
between the Registrant and The Manold Company dated as of
March 21, 1996 (13)
10.61 Management Agreement dated July 6, 1995 by and between
Cortland House and the Registrant for the management of
Cortland House, Leominster, MA (13)
10.62 Management Agreement dated as of March 1, 1995 by and between
CJK Enterprises and the Registrant for the management of
Cadbury Commons, Dorchester, MA (13)
10.63 Limited Partnership Agreement of Standish Oaktree Limited
Partnership dated as of April 30, 1993, by and among
Stan/Oak Development Corp., Oaktree, Inc. and CJK
Enterprises Limited Partnership (2)
10.64 Agreement of Limited Partnership of Cornish Realty
Associates, L.P., bearing an unspecified date in 1993, by
and among Cornish Realty, Inc., as general partner, and the
Registrant and other persons executing the Agreement from
time to time, as limited partners (2)
10.65 Purchase Agreement dated as of March 23, 1996, by and among
the Registrant, as Seller, Cornish Realty Associates, L.P.,
Laurelmead Cooperative, Laurelmead Nursing Center L.L.C.,
James J. Skeffington and Arnold B. Chace, Jr., relating to
the sale by the Registrant of the Registrant's limited
partnership interest in Cornish Realty Associates, L.P.
(13)
10.66 Amended and Restated Development Agency Agreement, dated as
of April 30, 1993, by and among Oaktree, Inc., Arthur A.
Klipfel, III, The Standish Oaktree Partnership, L.P. and
the Registrant (2)
10.67 Agreement dated May 5, 1993, between the Registrant Tyler R.
Ruhlman, d/b/a Central Capital, and Mayflower Partners,
Inc., relating to a consulting fee payable in connection
with the purchase by the Registrant of the Virginia Chain
(2)
10.68 Management Agreement and Marketing Services Agreement between
Adams Square Limited Partnership and the Registrant dated
January 29, 1994 (6)
10.69 Development Services and Reimbursement Agreement between
Adams Square Limited Partnership and Stan/Oak Development
Corp., dated January 31, 1994 (6)
10.70 $127,000 Demand Note from the Registrant to Adams Square,
Inc. dated January 31, 1994 (6)
10.71 Unconditional Guaranty from the Registrant to SAI Mortgage
Group, Inc., dated February 25, 1994 (6)
10.72 Management and Marketing Agreement between Cornish Realty
Associates, L.P., Laurelmead Cooperative and the
Registration dated October, 1993 (6)
10.73 First Amendment to Management and Marketing Agreement between
Cornish Realty Associates, L.P., Laurelmead Cooperative and
the Registrant, dated March 23, 1993 (6)
10.74 Laurelmead Resignation Agreement dated February 23, 1996,
among the Registrant, Cornish Realty Associates, L.P. and
Laurelmead Cooperative (13)
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
10.75 $1,000,000 Promissory Note from Bailey Retirement Center,
Inc. and the Registrant to First Union National Bank of
Florida dated January 26, 1994 (6)
10.76 Mortgage from Bailey Retirement Center, Inc. and the
Registrant to First Union National Bank of Florida dated
January 26, 1994 (13)
10.77 $100,000 Promissory Note from Bailey Retirement Center, Inc.
to Mark V. Barrow, M.D. and Mary B. Barrow, dated January
26, 1994 (13)
10.78 Mortgage from Bailey Retirement Center, Inc. to Mark V.
Barrow, M.D. and Mary B. Barrow, dated January 26, 1994
(13)
10.79 Form of $150,000 Promissory Note from Bailey Retirement
Center, Inc. and the Registrant to First Union National
Bank of Florida dated December 2, 1994 (13)
10.80 Mortgage from Bailey Retirement Center, Inc. and the
Registrant to First Union National Bank of Florida dated
December 2, 1994 (13)
10.81 Convertible Debenture Agreement between the Registrant and
Columbia Pacific Group, Inc. dated June 10, 1994 (9)
10.82 Form of Convertible Debenture issued in accordance with the
Assisted Living of America, Inc. n/k/a Emeritus Corp.
working capital credit facility (Exhibit 10.81) (9)
10.83 Warrant dated June 10, 1994 to purchase an aggregate of
50,000 shares of the Registrant's Common Stock issued to
Assisted Living of America, Inc. n/k/a Emeritus Corp. (9)
10.84 Warranted Dated June 10, 1994 to purchase an aggregate of
50,000 shares of the Registrant's Common Stock issued to
Daniel R. Baty (9)
10.85 Registration Rights Agreement dated June 10, 1994 between the
Registrant, Columbia Pacific Group, Inc. and Daniel R. Baty
(9)
10.86 Advisory Agreement between the Registrant and Daniel R. Baty
dated as of June 10, 1994 (9)
10.87 Management Agreement dated June 29, 1995 between Emeritus
Corp. and the Registrant, for the management of Woodholme
Commons in Pikesville, MD (13)
10.88 Management Agreement dated June 9, 1995 by and between
Emeritus Corp. and the Registrant for the management of The
Pines of Tewskbury, Tewksbury, MA (13)
10.89 Asset Purchase Agreement dated as of July 28, 1995 by and
among Painted Post Partnership, Allentown Personal Care
General Partnership, Unity Partnership and Saulsbury
General Partnership, each of the partners of such
partnerships, P. Jules Patt, as the managing general
partner of each of the foregoing named general partnerships
and individually, and the Registrant relating to the Green
Meadows Acquisition (the "Asset Purchase Agreement") (13)
10.90 Assignment and Assumption Agreement dated August 31, 1995, by
and between the Registrant and Emeritus Corp., relating to
the assignment of the Registrant's rights and obligations
as purchaser under the Asset Purchase Agreement dated as of
July 28, 1995 with a group of partnerships, as seller (10)
10.91 Stock Purchase Warrant dated February 13, 1992 to purchase an
aggregate of 67,000 shares of the Registrant's Common Stock
issued to J. Edmund & Co. (3) [Those warrants were split-up
by the holder and as of the date hereof, those warrants are
held by Dennis Waldman, John Deshazo and Roger O. Peterkin
III.]
</TABLE>
E-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------- ---------
<S> <C> <C>
10.92 Underwriter's Warrant Agreement dated as of August 31, 1993
issued to RAS Securities corp. (2)
10.93 Warrants dated June 10, 1994 to purchase an aggregate of
32,500 shares of Registrant's Common Stock issued to RAS
Securities Corp. (13)
10.94 Draft of Warrants dated September 29, 1994, to purchase an
aggregate of 37,500 Common Shares issued to The Equity
Group, Inc. as partial consideration for public relations
services (13)
10.95 Warrants dated January 15, 1995 to purchase an aggregate of
30,000 shares of Registrant's Common Stock issued to Neil
Berkman Associates (13)
10.96 Form of Indemnification Agreement for officers and directors
(3)
10.97 Confidentiality Agreements dated May 20 and May 22, 1996
exchanged between the Registrant and CareMatrix (*)
10.98 Preferred Stock Purchase Agreement dated as of July 30, 1996
between the Registrant and Abraham D. Gosman (*)
10.99 Warrants dated July 30, 1996 to purchase an aggregate of
400,000 shares of the Registrant's Common Stock issued to
Abraham D. Gosman (*)
10.100 Registration Rights Agreement dated as of July 30, 1996
between the Registrant and Abraham D. Gosman (*)
21.01 Subsidiaries of the Company
23.01 Consent of Robinson & Cole (contained in Exhibit 5.01) (**)
23.02 Consent of Coopers & Lybrand (*)
23.03 Consent of Lovelace, Roby & Company, P.A. (*)
23.05 Consent of John A. Carucci (*)
24.01 Power of Attorney (contained in Part II of this Registration
Statement)
</TABLE>
- -------------
* Filed herewith.
** To be filed by amendment.
In accordance with Rule 411 under the Securities Act of 1933, as amended,
the following documents are hereby incorporated by reference:
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-18 (No. 33-43187-B)
(2) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-64720)
(3) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-18 (No. 33-44966-B)
(4) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992
(5) Filed as an Exhibit to the Registrant's Report on Form 8-K dated March
10, 1994
(6) Filed as an Exhibit to the Registrant's Report on Form 10-K dated for the
fiscal year ended December 31, 1993
(7) Filed as an Exhibit to the Registrant's Report on Form 8-K dated May 4,
1995
(8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991
(9) Filed as an Exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1994
(10) Filed as an Exhibit to the Registrant's Report on Form 8-K dated October
5, 1995
(11) Filed as an Exhibit to the Registrant's Report on Form 8-K dated January
3, 1996
(12) Filed as an Exhibit to the Registrant's Report on Form 8-K dated July
20, 1992
(13) Filed as an Exhibit to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1995
E-7
Exhibit 3.08
CERTIFICATE OF DESIGNATIONS OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
THE STANDISH CARE COMPANY
----------------------------------------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
---------------------------------------------------
The Standish Care Company (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That pursuant to authority conferred upon the Board of Directors of
the Corporation by its Restated Certificate of Incorporation, as heretofore
amended, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, acting at a
meeting duly called and held on July 29, 1996, adopted the following resolution
which remains in full force and effect as of the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation by Article FIFTH of the Restated
Certificate of Incorporation of the Corporation, as amended, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors hereby creates and establishes and authorizes the issuance of a
series of Preferred Stock of the Corporation, such series to consist of 100
shares of the Corporation's authorized and unissued Remaining Preferred Stock,
each share having a par value of $.01, and the Board of Directors hereby fixes
the designation of such series and hereby determines the powers, preferences
rights, qualifications, limitations and restrictions of such series as follows:
1. Designation and Number. The designation of the one series of Remaining
Preferred Stock fixed by this resolution shall be "Series B Cumulative
Convertible Preferred Stock" (hereinafter referred to as the "Series B
Convertible Preferred Stock") and the number of shares constituting such series
shall be 100. Any capitalized term not otherwise defined herein but which is
defined in said Article FIFTH shall have the meaning ascribed thereto in said
Article FIFTH.
2. Rank. The Series B Convertible Preferred Stock shall
rank: (i) prior to all of the Corporation's Common Stock, par value
$.01 per share ("Common Stock"); (ii) prior to (x) any other class
<PAGE>
of the Corporation's common stock hereafter authorized, (y) any other class of
the Corporation's stock hereafter authorized, however designated, that has the
right (subject to any prior right of any class or series of Remaining Preferred
Stock) to dividends or to participate in any distribution to stockholders of the
assets upon voluntary or involuntary liquidation, dissolution or winding up or
of the earnings of the Corporation without limit as to per-share amount, and (z)
any other class or series of capital stock of the Corporation hereafter created
either specifically ranking by its terms junior to the Series B Convertible
Preferred Stock or not specifically ranking by its terms senior to or on parity
with Series B Convertible Preferred Stock (collectively with the Common Stock,
"Junior Securities"); (iii) subject to the provisions of subparagraph 4(ii)
hereof, on parity with any Remaining Preferred Stock of the Corporation
hereafter created specifically ranking by its terms on parity with the Series B
Convertible Preferred Stock ("Parity Securities"); and (iv) subject to the
provisions of subparagraph 4(ii) hereof, junior to (x) the Corporation's Series
A Cumulative Convertible Preferred Stock heretofore created, established and
authorized by the Board of Directors, acting by unanimous written consent dated
August 30, 1993, a Certificate of Designation for which was heretofore filed
with the Secretary of State of the State of Delaware on August 31, 1993 (the
"Series A Convertible Preferred Stock") and any Remaining Preferred Stock of the
Corporation hereafter created specifically ranking by its terms senior to the
Series B Convertible Preferred Stock ("Senior Securities"), in each case, as to
payment of dividends or as to distributions of assets to stockholders upon
liquidation, dissolution or winding up of the Corporation or otherwise, whether
voluntary or involuntary (all such distributions being referred to collectively
as "Distributions").
3. Dividends.
(i) The dividend rate of the Series B Convertible Preferred Stock shall be
computed at a rate of $1,400.00 per share per annum, as adjusted for stock
splits, stock dividends, recapitalizations, reclassifications and similar
events, from the date of issuance of the Series B Convertible Preferred Stock.
Dividends shall be payable quarterly in arrears out of funds legally available
as proscribed by statute on September 30, December 31, March 31 and June 30 of
each year, commencing December 31, 1996 (each, a "Series B Dividend Payment
Date"). Dividends on shares of Series B Convertible Preferred Stock shall be
cumulative and shall accrue (whether or not declared), without interest, from
the first day of the quarterly period in which such dividend may be payable as
herein provided, except with respect to the first quarterly dividend after the
date of issuance which shall accrue from the date of issuance of the Series B
Convertible Preferred Stock. On each Series B Dividend Payment Date all
dividends which shall have accrued on each share of Series B Convertible
Preferred Stock outstanding on the applicable record date shall accumulate and
be deemed to become "due." Any dividend which shall not be paid on the Series B
Dividend Payment Date on which it shall become due
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<PAGE>
shall be deemed to be "past due" (a "Cumulated Series B Dividend") until such
Cumulated Series B Dividend shall have been paid.
(ii) The Board of Directors shall declare and pay current dividends out of
funds legally available as proscribed by statute (after giving effect to the
payment of all requisite dividends on Senior Securities). To the extent that the
Board of Directors shall fail to pay dividends on the Series B Convertible
Preferred Stock within 30 days of a Series B Dividend Payment Date (whether or
not funds are legally available therefor), the Conversion Price (as defined in
subparagraph 5(i) hereof) shall be adjusted as provided in subparagraph 5(i)(I)
hereof. In addition in the event the Corporation shall fail. to pay dividends on
the Series B Convertible Preferred Stock on four Series B Dividend Payment
Dates, whether or not consecutively, the holders of the Series B Convertible
Preferred Stock shall be entitled to the voting rights set forth in subparagraph
4(iii) hereof.
(iii) In order to determine the holders of Series B Convertible Preferred
Stock entitled to receive dividends, the Corporation shall fix a record date not
more than 30 days prior to any Series B Dividend Payment Date. If Any such
Series B Dividend Payment Date should fall on a day that is not a Business Day,
then the Corporation shall pay the applicable dividend on the next succeeding
Business Day. "Business Day" shall mean a day other than a Saturday, Sunday or
other day on which any national securities exchange or quotation system on which
the Common Stock of the Corporation is traded or quoted is authorized or
required by law to close.
(iv) The Corporation shall not: (A) pay or declare and set apart for
payment any dividends or Distributions on any of the Corporation's Junior
Securities, other than dividends payable in the form of additional shares of the
same Junior Security as that on which such dividend is declared or (B) redeem,
purchase or otherwise acquire any shares of Junior Securities or any right,
warrant or option to acquire any Junior Securities, unless full Cumulated Series
B Dividends have been, or contemporaneously ore, paid or declared and set apart
for such payment on the Series B Convertible Preferred Stock.
(v) No full dividends shall be paid or declared and set apart for payment
on any class or series of Parity Securities for any period unless full Cumulated
Series B Dividends have been, or contemporaneously are, paid or declared and set
apart for such payment on the Series B Convertible Preferred Stock for all
dividend payment periods terminating on or prior to the date of payment of such
full Cumulated Series B Dividends. No full dividends shall be paid or declared
and set apart for payment on the Series B Convertible Preferred Stock for any
period unless full
- 3 -
<PAGE>
cumulative dividends have been, or contemporaneously are, paid or declared and
set apart for payment on the Parity Securities, for all dividend periods
terminating on or prior to the date of payment of such full Cumulated Series B
Dividends. When dividends are not paid in full upon the Series B Convertible
Preferred Stock and the Parity Securities, all dividends paid or declared and
set apart for payment upon shares of Series B Convertible Preferred Stock and
the Parity Securities shall be paid or declared and set apart for payment pro
rata, so that the amount of dividends paid or declared and set apart for payment
per share on the Series B Convertible Preferred Stock and the Parity Securities
shall in all cases bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of Series B Convertible Preferred Stock and
the Parity Securities bear to each other (without taking into account the
dividends so paid and those so declared and set apart for payment).
4. Voting Rights.
(i) Except as may otherwise be provided herein or as required by law the
holders of the shares of Series B Convertible Preferred Stock ("Series B
Holders") shall not be entitled to vote in respect of such shares.
(ii) The affirmative vote, in person or by proxy, of the Series B Holders
of 66 2/3% of the outstanding shares of the Series B Convertible Preferred
Stock, voting as a single class, on a one-vote-per-share of Series B Convertible
Preferred Stock basis, shall be necessary for the Corporation to: (a) amend,
repeal or modify any provision of, or add any provision to, the Corporation's
Restated Certificate of Incorporation if such action would alter or change the
rights, preferences, privileges or powers of, or the restrictions provided for
the benefit of, the Series B Convertible Preferred Stock so as to affect the
Series B Convertible Preferred Stock adversely; (b) authorize, create or issue
any additional shares of Series B Convertible Preferred Stock, or authorize or
create shares of any class or series of stock having any preference or priority
as to dividends or any liquidation preference superior to or on a parity with
any such preference or priority of the Series B Convertible Preferred Stock, or
authorize, create or issue shares of any class or series or any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having optional rights to purchase, any shares of the Corporation having any
such preference or priority or having rights similar to the Series B Convertible
Preferred Stock; (c) reclassify the shares of Common Stock or any other Junior
Securities into shares of Series B Convertible Preferred Stock or into Senior
Securities or Parity Securities; (d) merge with or consolidate into any
corporation, firm or entity, or sell, lease or otherwise dispose of all or
substantially all of its assets unless the Corporation is the
- 4 -
<PAGE>
surviving entity; (e) authorize, create or issue any class or series of Senior
Securities; or (f) authorize, create or issue any class or series of Parity
Securities; provided, however, that no such vote shall be required pursuant to
clause (e) or (f) in the event the Corporation shall then have the right to
redeem or purchase the Series B Convertible Preferred Stock and, prior to the
date of issuance of such new class or series of Senior Securities or Parity
Securities provision shall have been made for the redemption or purchase of all
of the outstanding shares of Series B Convertible Preferred Stock and such
redemption or purchase occurs on or prior to the date of issuance of such new
series or class of Senior Securities or Parity Securities
(iii) In the event the corporation shall fail to pay current dividends on
the Series B Convertible Preferred Stock on four Series B Dividend Payment
Dates, whether or not consecutively, the Series B Holders shall be entitled to
vote, on a one-vote-per-share basis, with the holders of the Common Stock on all
matters thereafter submitted to the Company's stockholders, including election
of directors. The Series B Holders shall continue to be entitled to the
foregoing right to vote notwithstanding the subsequent payment of any or all of
such dividends.
(iv) On all matters on which the Series B Convertible Preferred Stock is
entitled to vote by law, the Series B Holders shall be entitled to vote per
share of Series B Convertible Preferred Stock, voting separately as a single
class.
5. Conversion Rights.
(i) Each share of Series B Convertible Preferred Stock may be converted,
at the option of each Series B Holder, at any time and from time to time, into
fully-paid and non-assessable shares of Common Stock, provided, however, a
Series B Holder's right to so convert shares of Series B Convertible Preferred
Stock shall terminate as to shares thereof that are redeemed by the Corporation
on the Redemption Date (as hereinafter defined) herefor as provided in and
subject to the terms and conditions of subparagraph 7(iii) hereof. The number of
shares of Common Stock to which the Series B Holder of each share of Series B
Convertible Preferred Stock shall be entitled upon conversion shall be the
product obtained by multiplying the number of shares of Series B Convertible
Preferred Stock to be converted by the Conversion Rate; in addition, the Series
B Holder shall be entitled upon conversion to receive cash in an amount equal to
all Cumulated Series B Dividends on each share of Series B Convertible Preferred
Stock so converted, provided, there are funds legally available as proscribed by
statute. To the extent the Corporation shall not have funds legally available to
pay all such Cumulated Series B Dividends, the Corporation's obligation to make
such payment shall be deferred
- 5 -
<PAGE>
until the first date on which the Corporation shall have funds legally available
for all or a portion of such payment, which shall then be made in whole or in
part, as the case may be, until such Cumulated Series B Dividends hall have been
paid in full. The "Conversion Rate" shall be (A) $14,000.000 divided by (B) the
Conversion Price (as hereinafter defined). The conversion price ("Conversion
Price") shall be $4.16 and shall be adjusted from time to time as set forth in
subsection (ii) hereof. The Corporation shall not issue fractional shares of
Common Stock upon conversion of Series B Convertible Preferred Stock but, in
lieu thereof, shall pay to a Series B Holder cash in an amount equal to such
fraction multiplied by the Last Sale Price of the Common Stock on the trading
day prior to the date on which the shares are converted. "Last Sale Price" shall
mean the reported last sale price regular way or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations ("NASDAQ") National
Market System or Small Cap Market, as applicable, or if the Common Stock is not
listed or admitted to trading on any national securities exchange or quoted on
such NASDAQ National Market System or Small Cap Market, as applicable, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose.
(ii) Procedure for Conversion. The Series B Convertible Preferred Stock
shall be converted into Common Stock in the following manner:
(A) Shares of Series B Convertible Preferred Stock received by the
Corporation in exchange for Common Stock shall be retired and canceled and shall
no longer be available for issuance.
(B) A Series B Holder shall give notice to the Corporation by mail of its
desire to convert all or a portion of the shares of Series B Convertible
Preferred Stock owned by such Series B Holder. Such notice shall be accompanied
by certificates, duly endorsed for conversion, evidencing the number of shares
of Series B Convertible Preferred Stock such Series B Holder desires to convert,
together with cash, if any, required by subparagraph 5(ii)(C) hereof. The
Corporation will, as soon as practicable thereafter, deliver to such Series B
Holder or to such Series B Holder's nominee or nominees, a certificate or
certificates for the appropriate number of shares of Common Stock, together with
cash, as provided in subparagraph 5(i), with respect to any fractional shares
otherwise issuable upon conversion, and cash in all amount equal to all
- 6 -
<PAGE>
Cumulated Series B Dividends on each share of Series B Preferred Stock so
converted, provided there are funds legally available as proscribed by statute,
and, in the event of a partial conversion, a certificate representing the
balance, if any, of the shares of Series B Convertible Preferred Stock converted
by the surrendered certificate or certificates but not converted to Common
Stock. To the extent the Corporation shall not have funds legally available to
pay all such Cumulated Series B Dividends, the Corporation's obligation to make
such payment shall be deferred until the first date on which the Corporation
shall have funds legally available for all or a portion of such payment, which
shall then be made in whole or in part, as the case may be, until such Cumulated
Series B Dividends shall have been paid in full.
(C) In the event that shares of Series B Convertible Preferred Stock are
surrendered for conversion on any date during the period from the close of
business on a record date fixed for determining the Series B Holders entitled to
receive dividends to the opening of business on the corresponding Series B
Dividend Payment Date, the Series B Holder must also deliver to the Corporation
an amount equal to the dividend payable with respect to such shares of Series B
Convertible Preferred Stock on such Series B Dividend Payment Date and shall
continue to be entitled to receive such dividend on such Series B Dividend
Payment Date. In the event that the date on which the shares are converted is
the Series B Dividend Payment Date, such Series B Holder will be entitled to
receive the dividend payable with respect to such Series B Convertible Preferred
Stock and shall not be required to include any payment in the amount of the
dividend payable with respect to such converted shares of Series B Convertible
Preferred Stock.
(D) If, prior to the date on which all shares of Series B Convertible
Preferred Stock are converted, the Corporation shall (l) pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock, (2)
subdivide its outstanding Common Stock, (3) combine its outstanding Common Stock
into a smaller number of shares of Common Stock or (4) issue by reclassification
of its Common Stock other securities of the Corporation, the Conversion Price in
effect on the opening of business on the record date for determining
stockholders entitled to participating in such transaction shall thereupon be
adjusted, or, if necessary, the right to convert shall be amended, such that the
number of shares of Common Stock receivable upon conversion of the shares of
Series B Convertible Preferred Stock immediately prior thereto shall be adjusted
so that the Series B Holder shall be entitled to receive, upon the conversion of
such shares of Series B Convertible Preferred Stock, the kind and number of
shares of Common Stock or other securities of the Corporation which it would
have owned or would have been entitled to receive after the happening of any of
the events described above had the series A Convertible Preferred
- 7 -
<PAGE>
Stock been converted immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this
subparagraph 5(ii)(D) shall become effective immediately after the effective
date of such event and such adjustment shall be retroactive to the record date,
if any, for such event. Except as provided in this subparagraph 5(ii)(D), no
adjustment with respect to any ordinary dividends (made out of current earnings)
on shares of Common Stock shall be made.
(E) Except in respect of transactions described in subparagraph 5(ii)(D)
above and except in respect of "Excluded Rights" as described and defined in
subparagraph 5(ii)(L) below, if prior to the date on which all shares of Series
B Convertible Preferred Stock are converted, the Corporation shall sell or issue
Common Stock or rights, options, warrants or convertible securities (or rights,
options or warrants to purchase convertible securities), other than Excluded
Rights, containing the right to subscribe for or purchase shares of Common Stock
(collectively, "Rights"), and the sale or issuance price per share of Common
Stock (or in the case of Rights, the sum of the consideration paid or payable
for any such Right entitling the holder hereof to acquire one share of Common
Stock and shall conversion of any such Right to acquire one share of Common
Stock) is less than $4.16, the Conversion Price shall there upon be adjusted
such that the number of shares of Common Stock receivable upon conversion of the
Series B Convertible Preferred Stock shall be that number determined by
multiplying (1) the number of shares of Common Stock receivable upon conversion
of the shares of Series B Convertible Preferred Stock immediately prior to such
issuance or sale by (2) a fraction (not to be less than one) with a numerator
equal to the product of the number of shares of Common Stock outstanding after
giving effect to such sale or issuance (and assuming, in the case of Rights that
such Rights had been fully exercised or converted, as the case may be) and $4.16
and a denominator equal to the sum of (x) the product of the number of shares of
Common Stock outstanding immediately before the date of issuance or sale or the
record ate, as the case may be, multiplied by $4.16 and (y) the aggregate
consideration received or deemed to be received by the Corporation for the
shares of Common Stock to be so issued or sold or to be purchased or subscribed
for upon exercise of such Rights. For the purpose of such adjustments, the
Common Stock which the holders of any such Rights shall be entitled to subscribe
for or purchase shall be deemed to be issued and outstanding as of the date of
such issuance or sale or the record date, as the case may be.
(F) Except in respect of transactions described in subparagraph 5(ii)(D)
above, if, prior to the date on which all shares of Series B Convertible
Preferred Stock are converted the Corporation shall declare, order, pay or make
a dividend or other distribution (including without limitation any distribution
of
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<PAGE>
cash, other or additional stock or other securities or property or options, by
way of dividend or spin-off, reclassification, recapitalization or similar
corporate rearrangement or otherwise, but excluding dividends described in the
last sentence of subparagraph 5(ii)(D) on the Common Stock), then, in each case,
the Conversion Price shall thereupon be adjusted such that the number of shares
of Common Stock thereafter receivable upon the conversion of shares of Series B
Convertible Preferred Stock shall be determined by multiplying (l) the number of
shares of Common Stock theretofore receivable upon conversion of the shares of
the Series B Convertible Preferred Stock by (2) a fraction, of which the
numerator shall be the then Conversion Price on the record date for the
determination of stockholders entitled to receive such dividend or other
distribution, and of which the denominator shall be such Conversion Price on
such date minus the amount of such dividend or distribution applicable to one
share of Common Stock. The Board of Directors of the Corporation shall determine
the amount of such dividend or distribution allocable to one share of Common
Stock and such determination, if reasonable and based upon the Board of
Directors' good faith business judgment, shall be binding upon the Series B
Holder. Such adjustment shall be made whenever any such distribution is made and
shall become effective on the date of distribution retroactive to the record
date for the determination of stockholders entitled to receive such
distribution.
(G) Upon the expiration of any Rights if such shall not have been
exercised, the Conversion Price, to the extent that shares of Series B
Convertible Preferred Stock have not been converted, shall, upon such
expiration, be readjusted and shall thereafter be such as they would have been
had they been originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (l) the fact that the only shares
of Common Stock so issued were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Rights and (2) such shares of Common
Stock, if any, were issued or sold for the consideration actually received by
the Corporation (including for purposes hereof, any underwriting discounts or
selling Commissions paid by the Corporation) for the issuance, sale or grant of
all such Rights, whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Conversion Price by a
proportion (relative to the Conversion price in effect immediately prior to such
readjustment) in excess of the inverse of the aggregate proportional adjustment
thereof made in respect of the issue, sale, grant or assumption of such Rights.
If the consideration provided for in any Right or the additional
consideration, if any, payable upon the conversion or exchange of any Right
shall be reduced, or the rate at which any Right is exercisable or convertible
into or exchangeable for shares
- 9 -
<PAGE>
of Common Stock shall be increased, at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then, effective
concurrently with each such change, the Conversion price then in effect shall
first be adjusted to eliminate the effects (if any) of the issuance (or deemed
issuance) of such Right on the Conversion Price and then readjusted as if such
Right had been issued on the date of such change with the terms in effect after
such change, but only if as a result of such adjustment the Conversion Price
then in effect hereunder is thereby reduced.
(H) If, prior to the date on which the shares of Series B Convertible
Preferred Stock are converted, the Corporation shall (l) reorganize, reclassify
or otherwise change the number of outstanding shares of Common Stock, (2)
consolidate with or merge with or into another person resulting in a
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock, (3) sell or otherwise transfer all or substantially all of the
assets of the Corporation, then a Series B Holder shall thereafter have the have
the right to convert such shares of Series B Convertible Preferred Stock into
the kind and amount of stock, securities or assets, if any, such Series B Holder
would have been entitled to receive upon such reorganization, reclassification,
consolidation, merger, sale or transfer had such Series B Holder converted its
shares of Series B Convertible Preferred Stock into Common Stock immediately
prior to such transaction, all subject to further adjustments as provided
herein.
(I) Notwithstanding anything to the contrary in this paragraph 5, if the
Corporation shall fail to pay dividends on the Series B Convertible Preferred
Stock within 30 days of a Series B Dividend Payment Date (whether or not funds
are legally available therefor), the Conversion Price shall thereupon be reduced
by $.25 but not below the then par value of the shares of Common Stock issuable
upon Conversion of the Convertible Preferred Stock.
(J) For the purposes of this paragraph 5: (x) the consideration for the
issue or sale of any additional shares of Common Stock shall, irrespective of
the accounting treatment of such consideration, be deemed to be the
consideration actually received by the Corporation and (1) insofar as it
consists of cash, be computed at the net amount of cash received by the
Corporation, plus any expenses paid or incurred by the Corporation and any
commissions or compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in connection with
such issue or sale, (2) insofar as it consists of property (including
securities) other than cash, be computed at the fair value thereof at the time
of such issue or sale, as determined in good faith by the Board of Directors of
the Corporation, and (3) in case additional shares of Common Stock are
- 10 -
<PAGE>
issued or sold together with other stock or securities or other assets of the
Corporation for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (l) and (2) above,
allocable to such additional shares of Common Stock, all as determined in good
faith by the Board of Directors of the Corporation; (y) additional shares of
Common Stock deemed to have been issued pursuant to subparagraph 5(ii)(G),
relating to Rights, shall be deemed to have been issued for a consideration per
share determined by dividing (1) the total amount, if any, received by the
Corporation as consideration for the issue, sale or grant of the Rights in
question, less the value of the Rights not actually received by the Corporation
as consideration therefor, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provisions contained therein for a subsequent adjustment of such
consideration to protect against dilution) payable to the Corporation upon the
exercise in or the conversion or exchange of such Rights or, in the case of
Rights which are rights, options or warrants for convertible securities, the
exercise of such Rights for convertible securities and the conversion or
exchange of such convertible securities, in each case computing such
consideration as provided in the foregoing clause (x) of this subparagraph
5(ii)(J)(5), by (2) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to protect against dilution)
issuable upon the exercise conversion or exchange of such Rights; and (z)
additional shares of Common Stock deemed to have been issued pursuant to
subparagraphs 5(ii)(D) and (F), relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration. For the purposes of
this paragraph 5, the term "Common Stock" shall mean (i) the class of stock
designated as Common Stock in the Restated Certificate of incorporation of the
Corporation as may be amended as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value or from par value to no par
value, or from no par value to par value.
(K) No adjustment in the Conversion Price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this
subparagraph 5(ii)(K)), would require an increase or decrease of at least one
and one-half percent (1 1/2%) in the Conversion Rate; provided, however, that
any adjustments which by reason of this subparagraph 5(ii)(K) are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this subparagraph 5(ii)(K) shall be made to
the nearest cent.
- 11 -
<PAGE>
(L) Notwithstanding anything to the contrary in this paragraph 5, no
adjustments shall be made (1) upon conversion of the Series A Convertible
Preferred Stock, (2) upon conversion of the Series B Convertible Preferred
Stock, (3) upon exercise of options granted or to be granted (the "Stock
Options") under the Corporation's Restated 1991 Combination Stock Option Plan as
now or hereafter adopted or amended from time to time to purchase up to an
aggregate of 2,000,000 shares of Common Stock, (4) in connection with the
issuance of up to approximately 555,000 shares of Common Stock to National
Westminster Bank Plc, New York Branch, as a financial advisor to CareMatrix
under a Merger Agreement dated as of July 3, 1996 and (5) upon the exercise of
warrants outstanding on the date hereof (including warrants to purchase an
aggregate of 400,000 shares of Common Stock issued to the Series B Holder on or
about the date hereof) (together with the Stock Options, the "Excluded Rights")
to purchase up to 732,201 shares of Common Stock at a weighted average exercise
price of $4.74 per share (subject to anti-dilution adjustments in accordance
with the terms of such warrants as in effect on the date hereof).
(M) Whenever the Conversion Price is adjusted pursuant to any of the
foregoing provisions of this paragraph 5, the Corporation shall forthwith
prepare a written statement signed by the president or any vice president and
the treasurer or any assistant treasurer or the secretary or any assistant
secretary of the Corporation, setting forth the adjusted Conversion Rate
determined as provided in this paragraph 5, and in reasonable detail the facts
requiring such adjustment. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (a) the consideration received or
deemed to be received by the Corporation for any additional shares of Common
Stock issued or sold or deemed to have been issued or sold, (b) the Conversion
Price for the Series B Convertible Preferred Stock as then in effect, (c) the
number of additional shares of Common Stock, and (d) the type and amount if any,
of other property which at the time would be received upon conversion of the
Series B Convertible Preferred Stock. Such statement shall be filed among the
permanent records of the Corporation and a copy thereof shall be furnished to
any Series B Holder requesting the same, in writing, and at all reasonable times
during business hours be open to inspection by the Series B Holders. Within 1O
days of the event requiring an adjustment to the Conversion Price, the
Corporation shall also cause a notice, at its expense, stating that such an
adjustment has been made and setting forth the adjusted conversion rate, to be
mailed, first-class, postage prepaid, to all then Series B Holders of record at
their addresses as the same appear on the stock records of the Corporation.
- 12 -
<PAGE>
(N) If a Series B Holder has delivered notice to the Corporation of his
desire to convert all or a portion of his shares Of Series B Convertible
Preferred Stock, and certificates, duly endorsed for conversion in respect of
such shares and cash, if any, required by subparagraph 5(ii)(C) hereof, then all
shares of Series B Convertible Preferred Stock so tendered to the Corporation
shall be deemed to be no longer outstanding and, notwithstanding the failure of
the Corporation to issue the Common Stock, such Series B Holder shall be deemed,
for all purposes, to be a holder of the number of shares of Common Stock into
which the shares of Series B Convertible Preferred Stock such Series B Holder is
entitled to receive pursuant to the terms of this paragraph 5 in each case as of
the close of business on the date on which such conversion notice is delivered.
In the event such Series B Holder has delivered notice to the Corporation of his
desire to convert all or a portion of his shares of Series B Convertible
Preferred Stock, such Series B Holder shall retain the right to receive all
Cumulated Series B Dividends payable on the shares so converted, as provided in
this paragraph 5, notwithstanding any such conversion.
(O) The Corporation shall not, by amendment of its Restated Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but shall at all times in
good faith assist in the carrying out of all the provisions of this paragraph 5.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued Common Stock the full number of shares of Common Stock
deliverable upon the conversion of all the then outstanding shares of Series B
Convertible Preferred Stock and shall take all such action and obtain all such
permits or orders as may be necessary to enable the Corporation to validly and
legally issue fully paid and non-assessable shares of Common Stock upon the
conversion of Series B Convertible Preferred Stock. The Corporation shall obtain
prior to or concurrently with the first issuance of the Series B Convertible
Preferred Stock, and shall use its best efforts to maintain for as long as any
shares of Series B Convertible Preferred Stock shall be outstanding, the
authorization for the listing of shares of Common Stock issuable upon conversion
of the Series B Convertible Preferred Stock on the NASDAQ National Market System
or Small Cap Market, as applicable. The Corporation shall pay any and all
transfer, stamp and other like taxes that may be payable in resPect of the
issuance or delivery of shares of Common Stock on conversion of the Series B
Convertible Preferred Stock.
(P) In the event of any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any
- 13 -
<PAGE>
dividend (other than a cash dividend which is the some as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
record holder of Series B Convertible Preferred Stock, or their designated
nominee, at least 20 days prior to the date the record is to be taken, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution. The Corporation shall also Provide notice to
other holders (other than record holders) upon receipt by the Corporation of a
written request therefor and which shall include a statement of such holder's
beneficial interest in the Corporation's Series B Convertible Preferred Stock.
6. Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
amount that shall be paid to a Series B Holder of each share of Series B
Convertible Preferred Stock shall be $14,000.00 and an additional sum equal to
all Cumulated Series B Dividends on a share of Series B Convertible Preferred
Stock, subject to appropriate adjustment to reflect any stock split, stock
dividend, combination, recapitalization or reorganization (hereinafter called
the "Liquidation Price"), and no more. Upon any liquidation, dissolution or
winding up of the Corporation, the Series B Holders will be entitled to be paid
after payment or provisions for payment of the debts and other liabilities of
the Corporation and after payment or provision for payment is made upon any
Senior Securities. but before any Distribution or payment is made upon any
Junior Securities an amount in cash equal to the aggregate Liquidation Price of
all shares outstanding, and the Series B Holders will not be entitled to any
further payment. If, upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the Series B
Holders and the holders of Parity Securities (the "Parity Holders") are
insufficient to permit payment to such Series B Holders and the Parity Holders
of the aggregate amount which they are entitled to be paid, then the available
assets to be distributed will be distributed ratably among such Series B Holders
and Parity Holders based upon the aggregate Liquidation Price of the Series B
Convertible Preferred Stock and the aggregate liquidation preference of any
Parity Securities hold by each such Series B Holder and Parity Holder,
respectively. The Corporation will mail written notice of such liquidation,
dissolution or winding up not less than 60 days prior to the payment date stated
therein, to each Series B Holder of record.
A consolidation or merger of the Corporation with or into any other
corporation or entity (whether or not the Corporation is the surviving entity
if, after the merger or consolidation, more than 50% of the stock of the
Corporation is owned by persons who were not stockholders of the Corporation
prior to the merger or consolidation), or a sale of all or substantially all of
the assets
- 14 -
<PAGE>
of the Corporation, shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this paragraph 6.
7. Redemption.
(i) Time of Redemption. The Corporation may, at its option, redeem the
Series B Convertible Preferred Stock, in whole and not in part, out of funds
legally available therefor, by action of the Board of Directors, at any time on
or after December 1, 1996 at a redemption price of $14,000.00 per share, plus
all Cumulated Series B Dividends on a share of Series B Convertible Preferred
Stock, upon notice and in the manner set forth in, and subject to the conditions
of, this paragraph 7; provided, the current market price of the Common Stock
(the closing sale price is reported by the NASDAQ National Market System or
Small Cap Market, as applicable, or it not traded thereon, the high bid price as
reported by NASDAQ or, if not quoted thereon, the high bid price in the National
Quotation Bureau sheet listing for the Common Stock) equals or exceeds 150% of
the Conversion Price then in effect for 20 consecutive trading days ending no
more than 10 days prior to the date of notice of redemption.
(ii) Priority of Redemption. None of the shares of any class or series of
Parity Securities shall be redeemed, repurchased or otherwise acquired unless
full Cumulated Series B Dividends have been, or contemporaneously are, paid or
declared and set apart for such payment on the Series B Convertible Preferred
Stock for all dividend payment periods terminating on or prior to the date of
payment of such full Cumulated Series B Dividends. None of the shares of Series
B Convertible Preferred Stock shall be redeemed, repurchased or otherwise
acquired unless full cumulative dividends have been, or contemporaneously are
paid or declared and set apart for payment on the Parity Securities, for all
dividend periods terminating on or prior to the Redemption Date of the Series B
Convertible Preferred Stock.
(iii) Procedures for Redemption. The Series B Convertible Preferred Stock
shall be redeemed pursuant to Subparagraph 7(i) above in the following manner:
(A) Shares of Series B Convertible Preferred Stock redeemed, purchase or
otherwise acquired by the Corporation shall be retired and canceled and shall no
longer be available for issuance.
(B) In the event of a redemption of shares of Series B Convertible
Preferred Stock pursuant to subparagraph 7(i), notice of redemption of all
shares of Series B Convertible Preferred Stock shall be given by the Corporation
not less than 30 nor more then 60 days prior to the Business Day designated in
such notice (the
- 15 -
<PAGE>
"Redemption Date"), by mail postage prepaid to Series B Holders at their
respective addresses than appearing on the records of the Corporation and shall
also be published, on or about the date of such mailing, in the National Edition
of the Wall Street Journal. Such notice of redemption shall specify the
Redemption Date and the redemption price plus the Cumulated Series B Dividends
on a share of Series B Convertible Preferred Stock, if any (the "Redemption
Price"), and the place or places of payment. The conversion rights of the Series
B Holders shall continue until the Redemption Date (provided no default by the
Corporation in the payment of the Redemption Price shall have occurred and be
continuing, and in the event of any such default the Series B Holders'
conversion rights shall continue until such shares are actually redeemed or
converted) and such notice shall state the then effective Conversion Price and
that the right of Series B Holders to exercise their conversion rights shall
terminate at the close of business on the Redemption Date (provided no default
by the Corporation in the payment of the Redemption Price shall have occurred
and be continuing). On or before the Redemption Date, each Series B Holder shall
surrender to the Corporation or its designated agent, at such place as it may
designate in the redemption notice, certificates, duly endorsed for transfer,
evidencing the number of shares of Series B Convertible Preferred Stock held by
such Series B Holder. Upon such surrender, the Series B Holder shall be entitled
to receive payment of the Redemption Price without interest.
(C) If on the Redemption Date (1) notice of redemption has been mailed or
delivered as provided herein, (2) the Corporation has deposited with an
independent payment agent funds necessary to pay the amount due for all shares
of Series B Convertible Preferred Stock subject to such redemption, and (3) all
such funds are available for the sole purpose of paying such amount, then,
unless the Corporation defaults on the payment of the Redemption Price, all
shares of Series B Convertible Preferred Stock subject to redemption shall,
whether or not the certificates for such shares have been surrendered for
cancellation, be deemed to be no longer outstanding for any purpose and all
rights with respect to such shares shall cease, except the right of the Series B
Holder to receive the Redemption Price, without interest; provided, however,
that the Corporation shall not have to so redeem any shares of Series B
Convertible Preferred Stock which have been converted to Common Stock prior to
the date of such redemption. If the Corporation shall not have funds legally
available for redemption of shares to be redeemed pursuant to subparagraph 7(i)
on the Redemption Date, the notice of redemption shall be null and void and at
such time as the Corporation shall have funds legally available for redemption
of such shares and shall determine to redeem the Series B Convertible Preferred
Stock on the terms and conditions set forth in subparagraph 7(i), a new notice
of
- 16 -
<PAGE>
redemption to Series B Holders shall be required to effect such
redemption.
SECOND: That said determination of the designation and the relative
powers, preferences, rights, qualifications, limitations and restrictions
thereof, relating to the Series B Convertible Preferred Stock, was duly made by
the Board of Directors pursuant to the provisions of the Restated Certificate of
incorporation of the Corporation, as amended, in accordance with the provisions
of Section 151 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Michael J. Doyle, its Chairman and Chief Executive Officer, and
attested by Kenneth M. Miles, its Assistant Secretary, as of this 30th day of
July, 1996.
THE STANDISH CARE COMPANY
By: [Signature of Michael J. Doyle]
----------------------------------
Michael J. Doyle,
Chairman and Chief Executive
Officer
ATTEST:
By: [Signature of Kenneth M. Miles]
----------------------------------
Kenneth M. Miles,
Assistant Secretary
- 17 -
Exhibit 10.49
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
This Amended and Restated Stock Option Agreement made as of June 28, 1996
between The Standish Care Company, a Delaware corporation (hereinafter called
the "Company") and Michael J. Doyle (hereinafter called the "Optionee").
The Company and the Optionee are parties to that certan Stock Option
Agreement dated as of June 28, 1996 (the "Original Option Agreement")
providing for the grant to the Optionee pursuant to the Restated 1991
Combination Stock Option Plan of the Company certain options to purchase
shares of the Common Stock, subject to certain vesting provisions (the
"Vesting Provisions"). The Board of Directors of the Company has determined
that the Vesting Provisions shall be deleted so that the Options granted
pursuant to the Original Option Agreement may be exercised immediately in
their entirety. The Board has further determined to, and the Company and the
Optionee desire to, and restate in its entirety the terms and conditions of
the Original Option Agreement accordingly.
In consideration of the foregoing and of the actual covenants and
agreements of the parties hereto, it is hereby agreed by and between the
Company and the Optionee that the Original Option Agreement is hereby amended
and restated to read in its entirey as follows:
The Board of Directors of the Company has determined that it is to the
advantage and interest of the Company and its stockholders, pursuant to the
Restated l99l Combination Stock Option Plan (hereinafter called the "Plan"),
to grant the options provided for herein to the Optionee as an incentive for
the Optionee to assist the Company in reaching its long term goals and as an
incentive for increased efforts on behalf of the Company.
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:
l. The options granted herein shall in all respects be governed by and
subject to the terms and conditions of the Plan. All terms in the Plan
shall have the same meaning in this agreement as in the Plan. In the
event of an inconsistency between this agreement and the Plan, the Plan
shall govern. Optionee acknowledges that he has been given a copy of
the Plan and afforded an opportunity to read the Plan carefully.
2. The Company grants to Optionee the right to purchase on the terms and
conditions of the Plan and as hereinafter set forth, an aggregate total
of 50,000 shares (subject to adjustment as set forth below in this
Section 2) of the Common Stock of the Company at a purchase price of
$2.94 per share (the closing sale price in the over the counter market
as reported in the Wall Street Journal on June 3, 1996 (the date
preceding the initial determination by the Board of Directors of the
Company to grant these options). The number of shares for which the
options granted herein may be exercised shall be subject to increase by
multiplying the 50,000 shares issuable upon exercise of this option by
the number ten at the "Effective Time" as defined in that certain
Agreement and Plan of Merger (the "Merger Agreement") dated July 3,
1996 by and among the Company, twelve wholly-owned subsidiaries of the
Company denominated as "Acquisition Corporations" and CareMatrix of
Massachusetts, Inc. and a number of affiliated constituent corporations
(collectively, "CareMatrix"). The options granted herein may be
exercised in their entirety from and after the date hereof. Any
unexercised portion of the options shall expire at the end of five
years from the date hereof.
3. The options granted hereunder shall be exercisable by the Optionee from
time to time by delivery of written notice specifying therein the
number of shares which the Optionee has elected to purchase and the
payment in cash to the Company of the purchase price of the shares
which the Optionee shall then elect to purchase.
4. The options granted hereunder and the rights and privileges conferred
hereby shall be exercisable only by the Optionee, his heirs, executors,
or administrators and shall not be transferable or be assignable, and
if the Optionee shall attempt to make any such transfer or assignment
of the option granted hereunder, such attempt to transfer or assign
shall be void and have not effect and the Company shall have the right
to terminate this agreement as of the date of such purported transfer
or assignment.
1
<PAGE>
5. The Company shall at all times during the term of this agreement
reserve and keep available such number of shares of its Common Stock as
will be sufficient to satisfy requirement of this agreement. The
reserved shares may be either authorized and unissued shares of its
common stock or treasury stock, or partly unissued and partly treasury,
at the Company's sole discretion.
6. This stock option is intended to be an Incentive Stock Option, as that
term is described in Section 422A of the Internal Revenue Code of 1986,
as amended.
7. By accepting these options, the Optionee agrees for himself, his heirs
and legatees that any and all shares purchased hereunder shall be
acquired without the intent to distribute the shares, and, upon
issuance of any or all of the shares subject to the option granted
hereunder, the Optionee, his heirs or legatees receiving such shares,
shall deliver to the Company a representation, in writing that such
shares are being acquired in good faith without the intent to
distribute such shares.
8. The Board of Directors of the Company may, in its sole discretion,
cancel in whole or in part the unexercised portion of these options at
any time that it determines that the Optionee is no longer performing
services of value to the Company or is otherwise acting in a manner
inimical to the best interests of the Company.
9. In the event of the death of the Optionee while these options are
outstanding, the options may be exercised by his estate or by the
person who acquired the right to exercise such options by bequest or
inheritance but only if and to the extent that Optionee was entitled
to exercise the options at the date of his death. Such right must be
exercised no more than one year following the date of death or prior
to the expiration of the option, whichever occurs earlier.
This agreement is entered into pursuant to a resolution on June 3, 1996,
ratifying resolutions of the Company's Board of Directors adopted on June 28,
1996 and resolutions of the Company's Board of Directors adopted on July 29,
1996 as to amending and restating the foregoing agreement in its entirety as
aforesaid and to take effect as of July 3, 1996.
IN WITNESS WHEREOF, the Company has caused this Amended and Restated Stock
Option Agreement to be duly executed by its authorized officer and the
Optionee has executed this agreement as of the effective date.
THE STANDISH CARE COMPANY
By: /s/
----------------------------------
Kenneth M. Miles
Chief Financial Officer
OPTIONEE:
/s/
--------------------------------------
Michael J. Doyle
2
Exhibit 10.50
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
This Amended and Restated Option Agreement made as of June 28, 1996
between The Standish Care Company, a Delaware corporation (hereinafter called
the "Company") and Kenneth M. Miles (hereinafter called the "Optionee").
The Company and the Optionee are parties to that certan Stock Option
Agreement dated as of June 28, 1996 (the "Original Option Agreement")
providing for the grant to the Optionee pursuant to the Restated 1991
Combination Stock Option Plan of the Company certain options to purchase
shares of the Common Stock, subject to certain vesting provisions (the
"Vesting Provisions"). The Board of Directors of the Company has determined
that the Vesting Provisions shall be deleted so that the Options granted
pursuant to the Original Option Agreement may be exercised immediately in
their entirety. The Board has further determined to, and the Company and the
Optionee desire to, and restate in its entirety the terms and conditions of
the Original Option Agreement accordingly.
In consideration of the foregoing and of the actual covenants and
agreements of the parties hereto, it is hereby agreed by and between the
Company and the Optionee that the Original Option Agreement is hereby amended
and restated to read in its entirey as follows:
The Board of Directors of the Company has determined that it is to the
advantage and interest of the Company and its stockholders, pursuant to the
Restated l99l Combination Stock Option Plan (hereinafter called the "Plan"),
to grant the options provided for herein to the Optionee as an incentive for
the Optionee to assist the Company in reaching its long term goals and as an
incentive for increased efforts on behalf of the Company.
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:
l. The options granted herein shall in all respects be governed by and
subject to the terms and conditions of the Plan. All terms in the Plan
shall have the same meaning in this agreement as in the Plan. In the
event of an inconsistency between this agreement and the Plan, the Plan
shall govern. Optionee acknowledges that he has been given a copy of
the Plan and afforded an opportunity to read the Plan carefully.
2. The Company grants to Optionee the right to purchase on the terms and
conditions of the Plan and as hereinafter set forth, an aggregate total
of 25,000 shares (subject to adjustment as set forth below in this
Section 2) of the Common Stock of the Company at a purchase price of
$2.94 per share (the closing sale price in the over the counter market
as reported in the Wall Street Journal on June 3, 1996 (the date
preceding the initial determination by the Board of Directors of the
Company to grant these options). The number of shares for which the
options granted herein may be exercised shall be subject to increase by
multiplying the 25,000 shares issuable upon exercise of this option by
the number ten at the "Effective Time" as defined in that certain
Agreement and Plan of Merger (the "Merger Agreement") to be dated July
3, 1996 by and among the Company, twelve wholly-owned subsidiaries of
the Company denominated as "Acquisition Corporations" and CareMatrix of
Massachusetts, Inc. and a number of affiliated constituent corporations
(collectively, "CareMatrix"). The options granted herein may be
exercised in their entirety from and after the date hereof. Any
unexercised portion of the options shall expire at the end of five
years from the date hereof.
3. The options granted hereunder shall be exercisable by the Optionee from
time to time by delivery of written notice specifying therein the
number of shares which the Optionee has elected to purchase and the
payment in cash to the Company of the purchase price of the shares
which the Optionee shall then elect to purchase.
4. The options granted hereunder and the rights and privileges conferred
hereby shall be exercisable only by the Optionee, his heirs, executors,
or administrators and shall not be transferable or be assignable, and
1
<PAGE>
if the Optionee shall attempt to make any such transfer or assignment
of the option granted hereunder, such attempt to transfer or assign
shall be void and have not effect and the Company shall have the right
to terminate this agreement as of the date of such purported transfer
or assignment.
5. The Company shall at all times during the term of this agreement
reserve and keep available such number of shares of its Common Stock as
will be sufficient to satisfy requirement of this agreement. The
reserved shares may be either authorized and unissued shares of its
common stock or treasury stock, or partly unissued and partly treasury,
at the Company's sole discretion.
6. This stock option is intended to be an Incentive Stock Option, as that
term is described in Section 422A of the Internal Revenue Code of l986,
as amended.
7. By accepting these options, the Optionee agrees for himself, his heirs
and legatees that any and all shares purchased hereunder shall be
acquired without the intent to distribute the shares, and, upon
issuance of any or all of the shares subject to the option granted
hereunder, the Optionee, his heirs or legatees receiving such shares,
shall deliver to the Company a representation, in writing that such
shares are being acquired in good faith without the intent to
distribute such shares.
8. The Board of Directors of the Company may, in its sole discretion,
cancel in whole or in part the unexercised portion of these options at
any time that it determines that the Optionee is no longer performing
services of value to the Company or is otherwise acting in a manner
inimical to the best interests of the Company.
9. In the event of the death of the Optionee while these options are
outstanding, the options may be exercised by his estate or by the
person who acquired the right to exercise such options by bequest or
inheritance but only if and to the extent that Optionee was entitled to
exercise the options at the date of his death. Such right must be
exercised no more than one year following the date of death or prior to
the expiration of the option, whichever occurs earlier.
This agreement is entered into pursuant to a resolution on June 3, 1996,
ratifying resolutions of the Company's Board of Directors adopted on June 28,
1996 and resolutions of the Company's Board of Directors adopted on July 29,
1996 as to amending and restating the foregoing agreement in its entirety as
aforesaid and to take effect as of July 3, 1996.
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Option Agreement to be duly executed by its authorized officer and the
Optionee has executed this agreement as of the effective date.
THE STANDISH CARE COMPANY
By: /s/
----------------------------------
Michael J. Doyle,
Chief Executive Officer
OPTIONEE:
/s/
--------------------------------------
Kenneth M. Miles
2
Exhibit 10.97
STANDISH/CAREMATRIX CONFIDENTIALITY AGREEMENTS
May 20, 1996
CareMatrix Corporation
Attn:
Re: Confidentiality Agreement
Gentlemen:
This letter (the "Confidentiality Agreement") sets forth our mutual
agreements regarding the confidentiality of the Information (as hereinafter
defined) to be furnished by either The Standish Care Company ("Standish") or
CareMatrix Corporation ("CareMatrix") to our respective Representatives (as
hereinafter defined) in connection with the evaluation of, and discussions
and negotiations relating to, a possible transaction (the "Transaction")
between Standish and CareMatrix.
For purposes of this Confidentiality Agreement, the following defined term
shall have the meanings indicated:
(a) "Information" means all information and evaluation materials, written
or oral, received before or after the date hereof by a Recipient (as
hereinafter defined) from a Provider (as hereinafter defined), and all
notes, memoranda, analyses, compilations, forecasts, studies, copies,
extracts, reproductions and other documents prepared by a Recipient,
which contain or reflect any such information or materials; provided,
however, the term "Information" does not include information or
materials which (i) are or become generally available to the public
other than as a result of disclosure by a Recipient, or (ii) are or
become available to a Recipient from a source other than a Provider,
who, to the best of the Recipient's knowledge, was not prohibited from
disclosing such information by a legal, contractual or fiduciary
obligation to a Provider.
(b) "Provider" means Standish and each of its Representatives on the one
hand and CareMatrix and each of its Representatives on the other hand.
(c) "Recipient" means (i) with respect to Information for which Standish
is the Provider, CareMatrix and each of its Representatives and (ii)
with respect to Information for which CareMatrix is the Provider,
Standish and each of its Representatives, as the case may be.
(d) "Representative" means the directors, officers, employees, attorneys,
accountants, consultants, financial advisors, engineers and other
agents acting under the supervision or control of, or at the request
of, any of the foregoing persons.
Each Recipient shall use the Information only in connection with the
evaluation of, and discussions and negotiations relating to, the Transaction
and not for any purpose detrimental to Standish or CareMatrix, as the case
may be, shall keep the Information confidential, and shall not (except as
required by applicable law, regulation or legal process), without prior
written consent of the Provider, disclose the Information to any third person
in any manner whatsoever. No Recipient may utilize the Information in its own
business or make any usage of any of the Information other than in connection
with the Transaction. The Information may be disclosed only to
Representatives (i) who need to know the Information for the purposes of
evaluation of, or the discussions and negotiations related to, the
Transaction, (ii) who are informed of the confidential nature of the
Information and (iii) who shall be obligated to act in compliance with this
Confidentiality Agreement. Standish and CareMatrix shall each cause its
respective Representatives to comply with this Confidentiality Agreement.
CareMatrix shall be responsible for any breach of this Confidentiality
Agreement by its Representatives, and Standish shall be responsible for any
breach of this Confidentiality Agreement by its Representatives, as the case
may be.
A Recipient's obligations with respect to any item of Information
disclosed to it shall terminate if that item of Information becomes disclosed
in published literature or otherwise becomes generally available to the
public;
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<PAGE>
provided, however, that such public disclosure did not result, directly or
indirectly, from any act, omission, or fault of such Recipient, with respect
to that item of Information.
If any person shall seek to compel a Recipient to disclose any of the
Information, that Recipient will notify both Standish and CareMatrix promptly
so that Standish, as to Information for which it is the Provider, or
CareMatrix, as to Information for which it is the Provider, as the case may
be, may seek a protective order or other appropriate remedy. In the event a
protective order or other remedy is obtained, the Recipient will furnish only
that portion of the Information, which it is advised by legal counsel is
legally required to be furnished.
Except as specifically provided for in this Confidentiality Agreement,
neither this Confidentiality Agreement nor the provision of any Information
shall give rise to any commitment or obligation on the part of Standish or
CareMatrix with respect to the Transaction, and each of Standish and
CareMatrix shall be free to determine at any time whether or not to proceed
with the Transaction. Upon written request by Standish or CareMatrix, each
Recipient will either (a) promptly destroy all copies of the Information in
its possession and confirm such destruction to Standish or CareMatrix, as
applicable, in writing, or (b) promptly deliver to CareMatrix or Standish, as
applicable, all such copies. Neither Standish or CareMatrix makes any
representation or warranty as to the accuracy or completeness of the
Information provided by it, and neither Standish or CareMatrix shall have any
liability as a result of reliance by the other or any Recipient upon the
Information, except in each case as may be set forth in a definitive written
agreement by and between Standish and CareMatrix regarding the Transaction.
Until the expiration of one year following the termination of CareMatrix's
evaluation of the Information and any discussions with Standish regarding the
Transaction, neither CareMatrix nor any of its affiliates (as defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended) will:
(a) Bid for, acquire or seek to acquire any of the assets of the
businesses or any voting or debt securities or preferred stock of
Standish, or any rights or options to acquire such ownership, or take
any action to effect a change of control of Standish, or initiate
contact with any other person in an effort to solicit, encourage or
assist such person in a takeover proposal involving Standish;
(b) Deposit any voting securities of Standish in a voting trust or subject
any such securities to any arrangement, understanding or agreement
with respect to the voting, holding or disposition of such securities;
(c) Become a member of a partnership, limited partnership, syndicate or
other group, or otherwise act in concert with any person for the
purpose of acquiring, holding, voting or disposing of securities of
Standish; or
(d) Seek to have called, or caused to be called, any meeting of
stockholders of Standish, or initiate, propose or solicit any proxy or
consent of stockholders of Standish for the approval of any proposal,
or participate in the taking of any action by written consent of
stockholders of Standish in lieu of a meeting, or seek or propose to
influence or control the management or policies of Standish, or to
obtain representation on the Board of Directors of Standish.
Each of Standish and CareMatrix acknowledge and agree that remedies at law
are inadequate to protect Standish and CareMatrix, respectively, against any
actual or threatened breach of this Agreement, and each of Standish and
CareMatrix shall be entitled to equitable relief, including injunctive relief
and specific performance, in the event of any such breach or threatened
breach. Such remedies shall not be deemed exclusive, but shall be in addition
to all other remedies available at law or in equity. No failure or delay in
exercising any right under this Confidentiality Agreement shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise of such right.
No provision of this Confidentiality Agreement may be waived or amended
nor any consent given, except by written instrument signed by Standish and
CareMatrix. This Agreement shall be governed by and construed in accordance
with the provisions of Delaware law. In case any provision of this
Confidentiality Agreement shall be found by a court of competent jurisdiction
to be invalid or unenforceable, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
This Confidentiality Agreement is for the benefit of each of Standish and
CareMatrix and their respective legal representatives, successors and
assigns.
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The terms and conditions of this Confidentiality Agreement shall expire
only pursuant to a written agreement to that affect by and between Standish
and CareMatrix or otherwise pursuant to the provisions of any written
agreement pertaining to the Transaction by and between Standish and
CareMatrix.
If the foregoing fully and completely sets forth our mutual understandings
and agreements with respect to the subject matter hereof, please execute the
enclosed copy and return it to me via facsimile transmission by 5:00 p.m.
E.S.T. on May 20, 1996 and for overnight delivery on May 21, 1996.
Thank you.
Very truly yours,
THE STANDISH CARE COMPANY
By: /s/ Michael J. Doyle
---------------------------------
Michael J. Doyle, Chairman
and Chief Executive Officer
ACKNOWLEDGED, ACCEPTED
AND AGREED TO AS OF THE
DATE FIRST ABOVE WRITTEN
CAREMATRIX CORPORATION
By:
----------------------------
Name:
Title:
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May 22, 1996
Th
e Standish Care Company
Six New England Executive Park
Burlington, Massachusetts 01803
Attention: Michael Doyle
Chairman and CEO
Dear Mr. Doyle:
In order to allow The Standish Care Company ("Standish") evaluate its
possible interest in entering into certain agreements concerning a possible
transaction (the "Transaction") with CareMatrix Corporation and/or certain
affiliates thereof (collectively, "CareMatrix"), CareMatrix has agreed that
we or our representatives will furnish you or your representatives with
certain information on the terms and conditions set forth herein.
As a condition to our or our representatives furnishing such information,
you agree as follows:
1. Nondisclosure of Confidential Information. You and your directors,
officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants), agents and
potential financing sources and joint venture partners with respect to
the Transaction (collectively, "your Representatives") (a) will use the
Confidential Information (as defined in Section 2) only in connection
with the Transaction, and (b) will keep the Confidential Information
confidential, and will not (except as required by applicable law,
regulation or legal process, and only after compliance with Section 4),
without the prior written consent of CareMatrix, disclose any
Confidential Information in any manner whatsoever; provided, however,
that you may reveal the Confidential Information to your Representatives
(i) who need to know the Confidential Information for the purpose of
evaluating the Transaction, (ii) who are informed by you of the
confidential nature of the Confidential Information and (iii) who agree
to act in accordance with the terms of this Agreement. You will cause
your Representatives to observe the terms of this Agreement, and you will
be responsible for any breach of this Agreement by any of your
Representatives.
2. Confidential Information. As used herein, "Confidential Information"
means all information, whether written or oral (including, without
limitation, all such data, reports, interpretations, forecasts,
projections, records and any other documents containing or otherwise
incorporating information concerning CareMatrix, relating to CareMatrix
or its operations, or the Transaction, furnished before or after the date
hereof by CareMatrix or our directors, officers, employees, affiliates,
representatives (including, without limitation, financial advisors,
attorneys and accountants) or agents (collectively, "our
Representatives") to you or your Representatives and all forecasts,
studies, summaries, analyses or other documents prepared by you or your
Representatives in connection with your or their review of, or your
interest in, the Transaction which contain or reflect any such
information. The term Confidential Information will not, however, include
information which (i) is or becomes generally available to and known by
the public (other than as a result of a disclosure by you or your
Representatives), (ii) is or becomes available to you on a
non-confidential basis from a source (other than us or our
Representatives), provided that such source is not prohibited from
disclosing such information to you by a legal, contractual or fiduciary
obligation to us or another party or (iii) is independently developed by
you.
3. Nondisclosure of Discussions. Without our prior written consent, you and
your Representatives will not (except as required by applicable law,
regulation or legal process, and only after compliance with Section 4),
disclose to any person the fact that the Confidential Information exists
or has been made available.
4. Notice Preceding Compelled Disclosure. In the event that you or any of
your Representatives are requested pursuant to, or become compelled by,
applicable law, regulation or legal process to disclose any of the
Confidential Information, you will provide us with prompt written notice
so that we may seek a protective order or other appropriate remedy or, in
our sole discretion, waive compliance with the terms of this Agreement.
In the event that no such protective order or other remedy is obtained,
or that CareMatrix waives compliance
4
<PAGE>
with the terms of this Agreement, you will furnish only that portion of the
Confidentiality Information which you are advised by counsel is legally
required and will exercise all reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the Confidential
Information.
5. Return of Confidential Information. If you determine not to proceed with
the Transaction, you will promptly inform us of that decision and, in
that case, and at any time upon the request of us or any of our
Representatives, you will either (i) promptly deliver to us at your own
expense all copies of the written Confidential Information in your or
your Representatives' possession, or (ii) promptly destroy all copies of
the written Confidential Information in your or your Representatives'
possession and confirm such destruction to us in writing. Any oral
Confidential Information will continue to be subject to the terms of this
Agreement.
6. No Warranties. You understand and acknowledge that, by executing this
Agreement, neither we, nor our other Representatives, nor any of our
respective officers, directors, employees, agents or controlling persons
within the meaning of Section 20 of the Securities Exchange Act of 1934,
as amended, are making any express or implied representation or warranty
as to the accuracy or completeness of the Confidential Information, and
you agree that no such person will have any liability relating to the
Confidential Information or for any errors therein or omissions therefrom
by virtue of executing this Agreement. Only such representations and
warranties as may be included in any definitive agreement with respect to
the Transaction, subject to such limitations and restrictions as may be
contained therein, may be relied upon by you or will have any legal
effect.
7. Equitable Remedies. You acknowledge that legal remedies would not be
sufficient protection against any actual or threatened breach of this
Agreement by you or by your Representatives. Accordingly, without
limiting any other rights and remedies available to us, we shall be
entitled to equitable relief, including specific performance and
injunctive relief, in the event of any breach or threatened breach of
this Agreement.
8. Definitive Agreement. You understand and agree that no contract or
agreement with respect to the Transaction shall be deemed to exist
between you and us unless and until such time, neither we nor any of our
Representatives will have any liability to you with respect to the
Transaction, whether by virtue of this Agreement, any other written or
oral expression with respect to the Transaction or otherwise.
9. No Waiver. It is further understood and agreed that no failure or delay
by us in exercising any right, power or privilege hereunder will operate
as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any
right, power or privilege hereunder.
10. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts applicable
to contracts executed in and to be performed therein.
11. Notices. Any notice or communication required under this Agreement shall
be in writing and shall be deemed properly given when sent, if delivered
by personal service or courier service or when received, if sent by
certified or registered mail, postage prepaid, return receipt requested,
by facsimile transmission or by recognized overnight courier, to the
parties at the following addresses:
If to Standish:
The Standish Care Company
Six New England Executive Park
Burlington, Massachusetts 01803
Attention: Michael Doyle
with a copy to:
-------------
-------------
-------------
-------------
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If to CareMatrix:
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Attention: Andrew D. Gosman
with a copy to:
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Attention: James M. Clary, III, Esq.
12. Reciprocal Obligations. The parties acknowledge and agree that certain
information, written and oral relating to Standish and its operations and
the Transaction, will be furnished after the date hereof by you and your
Representatives to us and our Representatives. We and our Representatives
(a) will use such information only in connection with the Transaction and
keep such information confidential on the same terms and conditions
applicable to you and your Representatives with respect to the
Confidential Information and (b) agree that all other terms of this
Agreement (other than this Section 12) shall apply mutatis mutandis in
relation to such information and our obligations hereunder with respect
to such information.
13. Entire Agreement: Amendment. This Agreement contains the entire agreement
between you and us concerning the confidentiality of the Confidential
Information, and no modifications of this Agreement or waiver of the
terms and conditions hereof will be binding upon you or us, unless
approved in writing by each of you and us.
14. Termination. The obligations of the parties hereunder shall expire on the
earlier of (a) the execution of the definitive agreement or agreements
evidencing the Transaction and (b) the date which is one (1) year after
the date hereof.
Please confirm your agreement with the foregoing by signing and returning
to the undersigned the duplicate copy of this Agreement enclosed herewith.
Very truly yours,
CAREMATRIX CORPORATION
By: -----------------------------
Andrew D. Gosman
President
ACCEPTED AND AGREED
THIS ____DAY OF MAY, 1996:
THE STANDISH CARE COMPANY
By:
-----------------------------------
Michael Doyle
Chairman & Chief Executive Officer
6
Exhibit 10.98
PREFERRED STOCK PURCHASE AGREEMENT dated as of July 30, 1996, is entered into
by and among The Standish Care Company, a Delaware corporation (the "Company"),
and Abraham D. Gosman, an individual with an office at 777 South Flagler Drive,
West Palm Beach, Florida, 33401 (referred to hereinafter as the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has, or before the Closing (as defined in
Section 2) will have, duly authorized the Series B Cumulative Convertible
Preferred Stock, $.01 par value per share (the "Series B Preferred Stock"),
having the rights, restrictions, privileges and preferences set forth in the
Certificate of Designation attached hereto as Exhibit A (the "Certificate").
The Board of Directors of the Company has, or on or before the Closing will
have, adopted the Certificate and filed the Certificate with the Secretary of
State of the State of Delaware.
1.2 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing the Company will sell and issue to the Purchaser,
and the Purchaser will purchase, One Hundred (100) shares of Series B
Preferred Stock (collectively, the "Shares") for a purchase price of $14,000
per share.
2. The Closing. The closing of the sale and purchase of the Shares under
this Agreement (the "Closing") shall take place at the offices of Nutter,
McClennen & Fish, LLP, One International Place, Boston, Massachusetts at 1:00
P.M. on July 30, 1996. At the Closing, the Company will deliver to the
Purchaser a certificate for the 100 Shares, registered in the name of the
Purchaser, and the purchase price shall be paid by the Purchaser by wire
transfer, certified or bank check, or other method acceptable to the Company.
The date of the Closing is hereinafter referred to as the "Closing Date." If
at the Closing any of the conditions specified in Section 5 shall not have
been fulfilled, the Purchaser shall, at his election, be relieved of all of
his obligations under this Agreement without thereby waiving any other rights
he may have by reason of such failure or such non-fulfillment.
3. Representations of the Company. Reference is made to the Agreement
and Plan of Merger dated July 3, 1996 (the "Merger Agreement") by and among
the Company, twelve of its subsidiaries and twelve other named corporations.
Except as disclosed by the Company in the Standish Disclosure Schedule
referred to in the Merger Agreement, the Company hereby incorporates herein
by reference all of its representations and warranties contained in the
Merger Agreement and authorizes the Purchaser to rely thereon as though such
representations and warranties were fully set forth herein. In addition, the
Company hereby represents and warrants to the Purchaser as follows:
3.1 Issuance of Shares. The issuance, sale and delivery of the Shares in
accordance with this Agreement, and the issuance and delivery of the shares
of Common Stock issuable upon conversion of the Shares or exercise of the
"Warrants" (as such term is hereinafter defined), have been, or will be on or
prior to the Closing, duly authorized and reserved for issuance, as the case
may be, by all necessary corporate action on the part of the Company. The
shares of Common Stock issuable upon conversion of the Shares or exercise of
the Warrants, when issued upon such conversion or exercise, will be duly and
validly issued, fully paid and non-assessable.
3.2 Authority for Agreement. The execution, delivery and performance by
the Company of this Agreement and the Registration Rights Agreement (as
defined in Section 5.8), have been duly authorized by all necessary corporate
action, and this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company. This Agreement and the
Registration Rights Agreement constitute valid and binding obligations of the
Company enforceable in accordance with their respective terms. The execution
of and performance of the transactions contemplated by this Agreement and the
Registration Rights Agreement and compliance with their provisions by the
Company will not violate any provision of law and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute default under, its Certificate of Incorporation or By-Laws or any
indenture, lease, agreement or other instrument to which the Company is a
party or by which it or any or its properties is bound, or any decree,
judgment, order, statute, rule or regulation applicable to the Company or its
properties.
3.3 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with,
any governmental authority is required on the part of the
1
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Company in connection with the execution, delivery and performance of this
Agreement, the offer, issuance, sale and delivery of the Shares or the
Warrants, or the other transactions to be consummated at the Closing, as
contemplated by this Agreement, except such filings as shall have been made
prior to and shall be effective on and as of the Closing. Based in part upon
the representations made by the Purchaser in Section 4 of this Agreement, the
offer and sale of the Shares and the Warrants to the Purchaser will be in
compliance with applicable federal and state securities laws.
3.4 Absence of Changes. Since July 3, 1996, there has not been any
material adverse change in the assets, liabilities, financial condition,
operations or prospects of the Company or any event or condition of any
character that has affected, or may affect, materially and adversely, the
Company's business or prospects.
3.5 Disclosures. Neither this Agreement nor any exhibit hereto, nor any
report, certificate or instrument furnished to the Purchaser or his counsel
in connection with the transaction contemplated by this Agreement, when read
together, contains or will contain any material misstatement of fact or omits
or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. The Company knows of no information or fact which
has or would have a material adverse effect on the financial condition,
business or prospects of the Company which has not been disclosed to the
Purchaser.
4. Representations of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
4.1 Investment. Such Purchaser is acquiring his Shares and his Warrants,
and the shares of Common Stock into which the Shares may be converted or the
Warrants may be exercised, for his own account for investment and not with a
view to, or for sale in connection with, any distribution thereof, nor with
any present intention of distributing or selling the same; and such Purchaser
has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition thereof.
4.2 Authority. Such Purchaser has full power and authority to enter into
and to perform this Agreement in accordance with its terms.
4.3 Experience. Such Purchaser has sufficient business and financial
knowledge and experience so as to be capable of evaluating the merits and
risks of his its investment in the Company.
4.4 Accredited Investor. The Purchaser has reviewed the representations
concerning the Company contained in this Agreement and the Merger Agreement,
and has made such inquiry as the Purchaser has desired concerning the
Company, its business, assets, liabilities, risks and personnel. Officers of
the Company have made available to the Purchaser any and all written
information which the Purchaser has requested and have answered inquiries
made by the Purchaser. The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"), and understands that the Company has relied upon the
Purchaser being an accredited investor in deciding to proceed with the
transactions contemplated hereby, and in ascertaining the requirements of law
applicable to the issuance and the sale of the Shares and Warrants, and the
issuance of shares of Common Stock upon conversion of the Shares or upon
exercise of the Warrants; provided, however, that the Purchaser shall have
certain rights to registration of such shares of Common Stock pursuant to the
Registration Rights Agreement.
5. Conditions to Purchase of Shares.
The obligation of the Purchaser to purchase the Shares at the Closing is
subject to the fulfillment, or the waiver by the Purchaser, of the following
conditions on or before the Closing Date:
5.1 Accuracy of Representations and Warranties. Each representation and
warranty contained in Section 3 shall be true on and as of the Closing Date
with the same effect as though such representation and warranty had been made
on and as of that date.
5.2 Performance. The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the Closing.
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<PAGE>
5.3 Opinion of Counsel. The Purchaser shall have received an opinion
from Robinson & Cole, counsel for the Company, dated the Closing Date,
addressed to the Purchaser, and satisfactory in form and substance to the
Purchaser, to the effect that:
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to conduct its business as presently conducted, to enter into
and perform this Agreement and the Registration Rights Agreement, and to
carry out the transactions contemplated herein and therein. The Company is
duly qualified to do business as a foreign corporation in every jurisdiction
in which the failure to so qualify would have a material adverse effect on
the operations or financial condition of the Company.
(b) The authorized capital stock of the Company consists of: 30,000,000
shares of Common Stock, $.01 par value, of which 3,697,366 shares are
outstanding; 345,268 shares of Series A Cumulative Convertible Preferred
Stock, par value $.01 per share. of which 29,000 shares are outstanding and,
subject to the filing of the Certificate with the Secretary of State of the
State of Delaware, 100 shares of Series B Preferred Stock to be issued to the
Purchaser under this Agreement. All issued and outstanding shares of the
Company's Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable and free of preemptive rights.
(c) The issuance, sale and delivery of the Shares by the Company in
accordance with this Agreement, and the issuance and delivery of the shares
of Common Stock issuable upon conversion of the Shares and exercise of the
Warrants, have been duly authorized and reserved for issuance, as the case
may be, by all necessary corporate action on the part of the Company, and the
Shares when so issued, sold and delivered against payment therefor in
accordance with the provisions of this Agreement, and the shares of Common
Stock issuable upon conversion of the Shares and upon exercise of the
Warrants, when issued upon such conversion or exercise, will be duly and
validly issued, fully paid and non-assessable.
(d) The execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement have been duly authorized by
all necessary corporate action, and this Agreement and the Registration
Rights Agreement have been duly executed and delivered by the Company. This
Agreement and the Registration Rights Agreement constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization or similar law affecting generally the enforcement
of creditors' rights and subject to a court's discretionary authority with
respect to the granting of a decree ordering specific performance or other
equitable remedies. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement, and the offer, issue and sale of the
Shares hereunder, will not conflict with, or result in any breach of any of
the terms, conditions, or provisions of, or constitute a default under, the
Restated Certificate of Incorporation, as amended or By-Laws of the Company,
or any indenture, lease, agreement, or other instrument known to such counsel
to which the Company is a party or by which it or any of its properties are
bound, or any decree, judgment or order specifically naming the Company and
known to such counsel.
(e) Except as obtained and in effect at the Closing, no consent, approval,
order or authorization of, or registration, qualification, designation,
declaration, or filing with, any governmental authority (other than filings
required to be made after the Closing under applicable federal and state
securities laws) is required on the part of the Company in connection with
the execution and delivery of this Agreement, or the offer, issue, sale and
delivery of the Shares, or the other transactions to be consummated at the
Closing pursuant to this Agreement.
(f) Based on the representations of the Purchaser in Section 4 as to
certain factual matters, the offer and sale of the Shares pursuant to this
Agreement are exempt from the registration requirements of the Securities Act
and the securities registration requirements of the Massachusetts Uniform
Securities Act.
5.4 Certificates and Documents. The Company shall have delivered to
counsel to the Purchaser:
(i) A copy of the Restated Certificate of Incorporation of the Company, as
amended and in effect prior to the Closing Date, certified by the Secretary
of State of Delaware;
(ii) Certificate, as of the most recent practicable date, as to the legal
existence of the Company issued by the Secretary of State of Delaware;
(iii) By-Laws of the Company, certified by its Assistant Secretary as of
the Closing Date; and
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(iv) Resolutions of the Board of Directors of the Company, authorizing and
approving all matters in connection with this Agreement and the transactions
contemplated hereby, certified by the Assistant Secretary of the Company as
of the Closing Date.
5.5 Performance by The Purchaser. The Purchaser shall have performed his
obligations under Section 1.2 of this Agreement.
5.6 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate, executed by the Chief Financial Officer of the
Company, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections 5.1 and 5.2 of this Agreement.
5.7 Other Matters. All corporate and other proceedings in connection
with the transactions contemplated at the Closing by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchaser and his counsel, and the
Purchaser and his counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably
request.
5.8 Registration Rights Agreement. The Registration Rights Agreement
attached hereto as Exhibit B (the "Registration Rights Agreement") shall have
been executed and delivered by the Company and the Purchaser.
6. Covenants of the Company.
6.1 Inspection.
(a) Without limiting any rights otherwise granted pursuant to law, the
Purchaser shall have the right, subject to the confidentiality provisions set
forth in subsection (b) below, upon reasonable notice and during normal
business hours, to inspect (and copy if desired) all books and records of the
Company, whether financial, corporate, sales related (including projections)
or otherwise, to discuss the Company's business and finances with its
officers and other employees and to visit and inspect the facilities and
properties owned or leased by the Company.
(b) Purchaser shall keep confidential and not disclose, any non-public
information concerning the Company disclosed to or acquired by the Purchaser
pursuant to the provisions of this Agreement or the Registration Rights
Agreement (collectively, "Confidential Information"), and shall employ such
Confidential Information only in connection with his interests as a holder of
the Shares, the Warrants or the shares of Common Stock issuable upon
conversion of the Shares or exercise of the Warrants.
6.2 Financial Statements and Other Information.
(a) The Company will deliver to the Purchaser with reasonable promptness,
such information and data regarding the Company as the Purchaser may from
time to time reasonably request.
(b) The Company will deliver to the Purchaser such notices, information
and data with respect to the Company as the Company delivers to the holders
of its Common Stock generally.
6.3 Material Changes and Litigation. The Company will promptly notify
the Purchaser of any material adverse change in the business, properties,
assets or condition, financial or otherwise, of the Company and of any
litigation or governmental proceeding or investigation pending or, to the
best knowledge of the Company, threatened against the Company or against any
officer, director, key employee or principal stockholder of the Company
materially adversely affecting (or which, if adversely determined, would
materially adversely affect) its present or proposed business, properties,
assets or condition, taken as a whole.
6.4 Warrants. For $10.00, the Company will sell to the Purchaser, and
the Purchaser will purchase, the "Warrants," in the form attached hereto as
Exhibit C, to purchase an aggregate of 400,000 shares of Common Stock for an
exercise price of $4.16 per share.
7. Successors and Assigns. Except as provided in Section 12, the
provisions of this Agreement shall be binding upon, and inure to the benefit
of, the respective successors, assigns, heirs, executors and administrators
of the parties hereto.
8. Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the closing of the transactions
contemplated hereby.
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9. [Intentionally Omitted]
10. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 6 New England Executive Park, Burlington, MA 01803
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to David A.
Garbus, Esq., Robinson & Cole, One Boston Place, Boston, MA 02108;
If to the Purchaser, at their respective addresses set forth above, or at
such other addresses or addresses as may have been furnished to the company
in writing by such Purchaser, with a copy to Michael J. Bohnen, Esq., Nutter,
McClennen & Fish, LLP, One International Place, Boston, MA 02110.
Notices provided in accordance with this Section 10 shall be deemed
delivered upon personal delivery or on the second business day after deposit
in the mail.
11. Brokers. The Company and the Purchaser (i) represents and warrants
to the other party hereto that he or it has retained no finder or broker or
taken any other action that would result in the payment of any brokerage fee
or sales commission in connection with the transactions contemplated by this
Agreement, and (ii) will indemnify and save the other party harmless from and
against any and all claims, liabilities or obligations with respect to
brokerage or finders' fees or commissions, or consulting fees in connection
with the transactions contemplated by this Agreement asserted by any person
on the basis of any statement or representation alleged to have been made by
such indemnifying party.
12. Entire Agreement. This Agreement and the Registration Rights
Agreement embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings relating to such subject matter.
13. Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) with the
written consent of the Company and the holders of at least 51% of the
Registrable Shares (as defined in the Registration Rights Agreement). Any
amendment or waiver effected in accordance with this Section 13 shall be
binding upon each holder of any Series B Preferred Stock and any Warrants
(including shares of Common Stock into which such Shares have been converted
and for which such Warrants shall have been exercised), each future holder of
all such securities and the Company. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
term, condition or provision.
14. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the day and year first above written.
THE STANDISH CARE COMPANY:
By: /s/ Michael J. Doyle
------------------------------------
Michael J. Doyle,
Chairman and Chief Execuitve Officer
PURCHASER:
----------------------------------------
Abraham D. Gosman
c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
6
Exhibit 10.99
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES WHICH MAY BE ACQUIRED
UPON THE EXERCISE OF THIS COMMON STOCK PURCHASE WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER
OR NOT FOR CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATION OF THE ACT.
Void after July 31, 2001, Right to Purchase 400,000 Shares of Common
or otherwise as provided herein. Stock (subject to adjustment) of The
Standish Care Company
THE STANDISH CARE COMPANY
COMMON STOCK PURCHASE WARRANT
The Standish Care Company, a Delaware corporation (the "Company"), for value
received and subject to the terms set forth below, hereby grants to Abraham D.
Gosman, his registered successors and assigns (the "Holder"), the right to
purchase from the Company at any time or from time to time before 3:00 P.M.,
Boston, Massachusetts time, on July 31, 2001, Four Hundred Thousand (400,000)
fully paid and non-assessable shares of the Common Stock, par value $.01 per
share, of the Company, at the purchase price of $4.16 per share (the "Exercise
Price"). The Exercise Price and the number and character of such shares of
Common Stock purchasable pursuant to the rights granted under this Warrant are
subject to adjustment as provided herein.
This Warrant is subject to the following provisions:
1. Definitions. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) "Common Stock" means all stock of any class or classes (however
designated) of the Company, authorized upon the Issue Date or thereafter, the
holders of which shall have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in
the absence of contingencies, be entitled to vote for the election of a
majority of directors of the Company (even though the right so to vote has
been suspended by the happening of such a contingency).
(b) "Issue Date" means July 30, 1996.
(c) "Market Price" means, as to shares of the Common Stock: (i) if the
shares of the Common Stock are listed on any national securities exchange or
quoted on the National Association of Security Dealers, Inc. Automated
Quotation System, ("NASDAQ") National Market System ("NMS") or Small Cap
Market, the average of the daily closing prices for the fifteen (15)
consecutive business days commencing twenty (20) business days before the day
in question (the "Trading Period"); or (ii) if the shares of the Common Stock
are neither listed on any national securities exchange nor quoted on NASDAQ,
the higher of (x) the Exercise Price then in effect, or (y) the tangible book
value per share of Common Stock as of the end of the Company's immediately
preceding fiscal year.
(d) "Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or other) which the
Holder of this Warrant at any time shall be entitled to receive, or shall
have received, upon the exercise of this Warrant, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 3.2 hereof or otherwise.
(e) "Person" means, without limitation, an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization, or a
government or any department or agency thereof.
(f) "This Warrant" means, collectively, this Warrant and all other stock
purchase warrants issued in exchange therefor or replacement thereof.
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2. Exercise of Warrant.
2.1 Exercise Period. The Holder may exercise this Warrant, in whole or
in part (but not as to a fractional share of Common Stock), at any time and
from time to time after the Issue Date and prior to 3:00 p.m. Boston,
Massachusetts time on July 31, 2001.
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been exercised at such time as the
Company has received all of the following items (the "Exercise Date"):
(i) a completed Subscription Agreement as described in Section 2.4 hereof,
executed by the Person exercising all or part of the purchase rights
represented by this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit B hereto,
evidencing the assignment of this Warrant to the Purchaser together with any
documentation required pursuant to Section 8(a) hereof; and
(iv) a check payable to the order of the Company in an amount equal to the
product of the Exercise Price multiplied by the number of shares of Common
Stock being purchased upon such exercise.
(b) As soon as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days after the Exercise Date, the
Company at its expense will cause to be issued in the name of and delivered
to the Holder hereof, or as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled upon such exercise,
together with any other stock or other securities and property (including
cash, where applicable) to which the Holder is entitled upon exercise.
(c) Unless this Warrant has expired or all of the purchase rights
represented hereby have been exercised, the Company at its expense will,
within ten (10) days after the Exercise Date, issue and deliver to or upon
the order of the Holder hereof a new Warrant or Warrants of like tenor, in
the name of the Holder or as the Holder (upon payment by the Holder of any
applicable transfer taxes) may request, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock remaining issuable
under this Warrant.
(d) The Common Stock (or Other Securities) issuable upon the exercise of
this Warrant will be deemed to have been issued to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have
become the record holder of such Common Stock (or Other Securities) on the
Exercise Date.
(e) The issuance of certificates for shares of Common Stock (or Other
Securities) upon exercise of this Warrant will be made without charge to the
Holder or the Purchaser for any issuance tax in respect thereof or any other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Common Stock (or Other Securities).
2.3 Acknowledgment of Continuing Obligations. The Company will, at the
time of the exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to the Holder any
rights to which the Holder shall continue to be entitled after such exercise
in accordance with the provisions of this Warrant, provided that if the
Holder shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to the Holder any such rights.
2.4 Subscription Agreement. The Subscription Agreement will be
substantially in the form set forth in Exhibit A hereto, except that if the
shares of Common Stock (or Other Securities) issuable upon exercise of this
Warrant are not to be issued in the name of the Holder hereof, the
Subscription Agreement will also state the name of the Person to whom the
certificates for the shares of Common Stock (or Other Securities) are to be
issued, and if the number of shares of Common Stock (or Other Securities) to
be issued does not include all the shares of Common Stock (or Other
Securities) issuable hereunder, it will also state the name of the Person to
whom a new Warrant for the unexercised portion of the rights hereunder is to
be delivered.
2.5 Fractional Shares. If a fractional share of Common Stock would, but
for the provisions of Section 2.1 hereof, be issuable upon exercise of the
rights represented by this Warrant, the Company will, within ten (10)
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days after the Exercise Date, deliver to the Purchaser a check payable to the
Purchaser in lieu of such fractional share, in an amount equal to the Market
Price of such fractional share as of the close of business on the Exercise
Date.
3. Adjustments.
3.1 Adjustments for Stock Splits, Etc. If the Company shall at any time
after the Issue Date subdivide its outstanding Common Stock or Other
Securities, by split-up or otherwise, or combine its outstanding Common Stock
or Other Securities, or issue additional shares of its capital stock in
payment of a stock dividend in respect of its Common Stock or Other
Securities, the number of shares issuable on the exercise of the unexercised
portion of this Warrant shall forthwith be proportionately increased in the
case of a subdivision or stock dividend, or proportionately decreased in the
case of combination, and the Exercise Price then applicable to shares covered
by the unexercised portion of this Warrant shall forthwith be proportionately
decreased in the case of a subdivision or stock dividend, or proportionately
increased in the case of combination.
3.2 Adjustment for Reclassification, Reorganization, Etc. In case of any
reclassification, capital reorganization, or change of the outstanding Common
Stock or Other Securities (other than as a result of a subdivision,
combination or stock dividend), or in the case of any consolidation of the
Company with, or merger of the Company into, another Person (other than a
consolidation or merger in which the Company is the continuing corporation
and which does not result in any reclassification or change of the
outstanding Common Stock or Other Securities of the Company), or in case of
any sale or conveyance to one or more Persons of the property of the Company
as an entirety or substantially as an entirety at any time prior to the
expiration of this Warrant, then, as a condition of such reclassification,
reorganization, change, consolidation, merger, sale or conveyance, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder of this
Warrant, so that the Holder of this Warrant shall have the right at any time
prior to the expiration of this Warrant to purchase, at a total price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, reorganization, change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock or Other Securities of the Company as to which this Warrant
was exercisable immediately prior to such reclassification, reorganization,
change, consolidation, merger, sale or conveyance, and in any such case
appropriate provision shall be made with respect to the rights and interests
of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Exercise
Price and of the number of shares purchasable upon exercise of this Warrant)
shall thereafter be on to any shares of stock, and other securities and
property, thereafter deliverable upon exercise hereof. If, as a consequence
of any such transaction, solely cash, and no securities or other property of
any kind, is deliverable upon exercise of this Warrant, then, in such event,
the Company may terminate this Warrant by giving the Holder hereof written
notice thereof. Such notice shall specify the date (at least thirty (30) days
subsequent to the date on which notice is given) on which, at 3:00 p. m.,
Boston, Massachusetts time, this Warrant shall terminate. Notwithstanding any
such notice, this Warrant shall remain exercisable, and otherwise in full
force and effect, until such time of termination.
3.3 Adjustment for Dividends. In case the Company shall, at any time or
from time to time after the Issue Date, pay any dividend or make any other
distribution upon its Common Stock (or Other Securities) payable in cash,
property or securities of a corporation other than the Company, then
forthwith upon the payment of such dividend, or the making of such other
distribution, as the case may be, the Exercise Price then in effect shall be
reduced by the amount of such dividend or other distribution in respect of
each outstanding share of Common Stock (or Other Securities). The Board of
Directors of the Company shall determine the fair value of any dividend or
other distribution made upon Common Stock of the Company payable in property
or securities of a corporation other than the Company.
3.4 Adjustment for Issue of Stock at Less than Exercise Price. (a) In
case the Company shall, at any time or from time to time after the Issue
Date, issue or agree to issue by warrants, convertible securities, stock
options or otherwise, any of its Common Stock or Other Securities, including
treasury shares, (other than any shares issued in respect of "Excluded
Rights" as described and defined in subparagraph (b) below and transactions
to which Sections 3.1 or 3.2 of this Warrant applies), for a consideration
per share less than the Exercise Price per share in effect immediately prior
to the time of such issue or sale, then forthwith upon such issue or sale, or
agreement to issue or sell, said Exercise Price shall be reduced to a price
(calculated to the nearest cent) determined by dividing
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(x) an amount equal to (A) the product obtained by multiplying the number of
shares of the Company's Common Stock outstanding (or then deemed to be
outstanding as herein provided) immediately prior to such issue by the
Exercise Price in effect at such time plus (B) the consideration received by
the Company upon such issue by (y) the number of shares of the Company's
Common Stock outstanding (or then deemed to be outstanding as herein
provided) immediately after such issue. Whenever the Exercise Price is
adjusted as provided in this Section 3.4, the aggregate number of shares of
Common Stock (or Other Securities) which the holder of this Warrant shall
thereafter be entitled to purchase at such adjusted Exercise Price shall be
increased to the number of shares determined by multiplying the number of
shares of Common Stock (or Other Securities) issuable upon exercise of this
Warrant immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment, and dividing the product so obtained by
such adjusted Exercise Price. For the purposes of this Section 3.4, the
number of shares of Common Stock (or Other Securities) deemed to be
outstanding at any given tireasury of the Company but shall include all
shares issuable or to become issuable under any agreements, warrants
(including this Warrant), convertible securities, stock options, similar
rights or otherwise (hereinafter in this Section 3.4 referred to as
"Options"). The Board of Directors of the Company shall determine the fair
value of the amount of consideration other than money received by the Company
upon the issue by it of any of its securities. Such Board shall, in case any
Common Stock (or Other Securities) or Options for the purchase thereof are
issued with other stock, securities or assets of the Company, determine what
part of the consideration received therefor is applicable to the issue of the
Common Stock (or Other Securities) or Options for the purchase thereof. If,
as provided herein, the Exercise Price is adjusted as a consequence of the
Company's issuance of Options, no further adjustment of the Exercise Price
shall be made upon the subsequent issuance of Common Stock (or Other
Securities) upon the exercise of such Options. To the extent that Options
expire without having been exercised, the Exercise Price computed upon their
issuance, and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed to take into account only the shares of Common
Stock (or Other Securities) actually issued upon the exercise of such
Options. In any such recomputation, the consideration applicable to the
shares of Common Stock (or Other Securities) issued shall be the aggregate
consideration which was received by the Company upon the issuance of such
Options, whether or not exercised, plus the additional consideration actually
received by the Company upon the exercise thereof. No recomputation shall
have the effect of increasing the Exercise Price by an amount in excess of
the adjustment thereof made in respect of the issuance of the expired
Options.
(b) Notwithstanding anything to the contrary in this Warrant, no adjustments
shall be made (1) upon the convle Preferred Stock, (2) upon conversion of the
Series B Convertible Preferred Stock, (3) upon the exercise of options
granted or to be granted (the "Stock Options") under the Company's Restated
1991 Combination Stock Option Plan as now or hereafter adopted or amended
from time to time to purchase up to an aggregate of 2,000,000 shares of
Common Stock, (4) in connection with the issuance of up to approximately
550,000 shares of Common Stock to National Westminster Bank, Plc, New York
Branch, as a financial advisor to CareMatrix under a Merger Agreement dated
as of July 3, 1996 and (5) upon the exercise of warrants outstanding on the
date hereof (including warrants to purchase an aggregate of 400,000 shares of
Common Stock issued to the Series B Holder on or about the date hereof)
(together with the Stock Options, the "Excluded Rights") to purchase up to
732,201 shares of Common Stock at a weighted average exercise price of $4.74
per share (subject to anti-dilution adjustments in accordance with the terms
of such warrants as in effect on the date hereof).
3.5 Certificate of Adjustment. Whenever the Exercise Price or the number
of shares issuable hereunder is adjusted, as herein provided, the Company
shall promptly deliver to the registered Holder of this Warrant a certificate
of the Treasurer of the Company, which certificate shall state (i) the
Exercise Price and the number of shares of Common Stock (or Other Securities)
issuable hereunder after such adjustment, (ii) the facts requiring such
adjustment, and (iii) the method of calculation for such adjustment and
increase or decrease.
3.6 Small Adjustments. No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease in the
Exercise Price of at least one percent; provided, however, that any
adjustments which by reason of this Section 3.6 are not required to be made
immediately shall be carried forward and taken into account at the time of
exercise of this Warrant or any subsequent adjustment in the Exercise Price
which, singly or in combination with any adjustment carried forward, is
required to be made under Sections 3.1, 3.2, 3.3, or 3.4.
4. No Dilution or Impairment. The Company will not, by amendment of its
corporate charter or By-Laws or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
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any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all action as may be necessary or appropriate in order to protect the rights
of the Holder of this Warrant against dilution, or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of Stock (or Other Securities) receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock (or Other Securities) upon the exercise
of this Warrant, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary
or involuntary dissolution, liquidation or winding-up without the written
consent of the Holder of this Warrant, and (d) will not transfer all or
substantially all of its properties and assets to any other Person (corporate
or otherwise), or consolidate with or merge into any other Person or permit
any such Person to consolidate with or merge into the Company (if the Company
is not the surviving Person), unless such other Person shall expressly assume
in writing and agree to be bound by all the terms of this Warrant.
5. Notices of Record Date Etc. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities of the company for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right
to subscribe for, purchase, or otherwise acquire any shares of stock of any
class of the Company or any other securities or property, or to receive any
other right; or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to or consolidation or
merger of the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company; or
(d) any proposed issue or grant by the Company of any shares of stock of
any class or any other securities of the Company, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities of the Company (other than (i) the issue of Common
Stock (or Other Securities) on the exercise of this Warrant, (ii) stock
options to purchase shares of Common Stock which may be granted to employees
of the Company or the issuance of such shares pursuant to the exercise of
such options, and (iii) any shares issued in transactions to which Sections
3.1, 3.2 or 3.4 of this Warrant applies);
then and in each such event the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding- up is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock of any class or other securities of the Company, or rights or
options with respect thereto, proposed to be issued or granted, the date of
such proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed
at least twenty (20) days prior to the date therein specified.
6. Reservation of Stock, etc. , Issuable on Exercise of Warrant. The Company
will at all times reserve ane and delivery upon the exercise of this Warrant,
all shares of Common Stock (or Other Securities) from time to time issuable
upon the exercise of this Warrant.
7. Purchase Rights. If at any time the Company grants, issues or sells any
rights or options to subscribe for or to purchase stock, warrants, securities
or other property pro rata to the record holders of any class of Common Stock
(or Other Securities) (the "Purchase Rights"), then the Holder of this
Warrant will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock (or
Other Securities) acquirable upon exercise of this Warrant had this Warrant
been fully exercised immediately prior to the date on which a record was
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record was taken, the date as of which the
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record holders of Common Stock (or Other Securities) were determined for the
grant, issuance or sale of such Purchase Rights.
8. Disposition of This Warrant, Common Stock, Etc.
(a) The Holder of this Warrant and any transferee hereof or of the Common
Stock (or Other Securities) with respect to which this Warrant may be
exercisable, by their acceptance hereof, hereby understand and agree that
this Warrant and the Common Stock (or Other Securities) with respect to which
this Warrant may be exercisable have not been registered under the Securities
Act of 1933, as amended (the "Act"), and may not be sold, pledged,
hypothecated, donated, or otherwise transferred (whether or not for
consideration) without an effective registration statement under the Act or
an opinion satisfactory to the Company of counsel satisfactory to the Company
and/or submission to the Company of such other evidence as may be
satisfactory to counsel to the Company, in each such case, to the effect that
any such transfer shall not be in violation of the Act. It shall be a
condition to the transfer of this Warrant that any transferee thereof deliver
to the Company its written agreement to accept and be bound by all of the
terms and conditions of this Warrant.
(b) The stock certificates of the Company that will evidence the shares of
Common Stock (or Other Securities) with respect to which this Warrant may be
exercisable will be imprinted with a conspicuous legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION SATISFACTORY TO THE COMPANY OF COUNSEL
SATISFACTORY TO THE COMPANY AND/OR SUBMISSION TO THE COMPANY OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE,
TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT."
9. Rights and Obligations of Warrant Holder. The Holder of this Warrant
shall not, by virtue hereof, be entitled to any voting rights or other rights
as a stockholder of the Company. No provision of this Warrant, in the absence
of affirmative actions by the Holder to purchase Common Stock (or Other
Securities) of the Company by exercising this Warrant, and no enumeration in
this Warrant of the rights or privileges of the Holder, will give rise to any
liability of such Holder for the Exercise Price of Common Stock (or Other
Securities) acquirable by exercise hereof or as a stockholder of the Company.
10. Transfer of Warrants. Subject to compliance with the restrictions on
transfer applicable to this Warrant referred to in Section 8 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part,
without charge to the registered Holder, upon surrender of this Warrant with
a properly executed Assignment (in substantially the form attached hereto as
Exhibit B), to the Company, and the Company at its expense will issue and
deliver to or upon the order of the Holder hereof a new Warrant or Warrants
in such denomination or denominations as may be requested, but otherwise of
like tenor, in the name of the Holder or as the Holder (upon payment of any
applicable transfer taxes) may direct.
11. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Remedies. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
13. Company Records. Until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
<PAGE>
14. Miscellaneous.
14.1 Notices. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first class mail, postage prepaid,
to such address as may have been furnished to the Company in writing by such
Holder, or, until an address is so furnished, to and at the address of the
last Holder of this Warrant who has so furnished an address to the Company.
All communications from the Holder of this Warrant to the Company shall be
mailed by first class mail, postage prepaid, to 6 New England Executive Park,
Burlington, MA 01803, or such other address as may have been furnished to the
Holder in writing by the Company.
14.2 Amendment and Waiver. Except as otherwise provided herein, this
Warrant and any term hereof may be amended, waived, discharged or terminated
only by an instrument in writing signed by the party against which
enforcement of such amendment, waiver, discharge or termination is sought.
14.3 Governing Law; Descriptive Headings. This Warrant shall be construed
and enforced in accordance with and governed by the laws of the Commonwealth
of Massachusetts. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof.
Dated: July 30, 1996
THE STANDISH CARE COMPANY
By: /s/ Michael J. Doyle
------------------------------------
Michael J. Doyle,
Chairman and Chief Executive Officer
[Corporate Seal]
ATTEST:
- ------------------------
Secretary
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EXHIBIT A
SUBSCRIPTION AGREEMENT
[To be signed only upon exercise of Warrant]
To:
Date:
The undersigned, the Holder of the within Warrant, pursuant to the
provisions set forth in the within Warrant, hereby irrevocably elects to
exercise the purchase rights represented by such Warrant for, and agrees to
subscribe for and purchase thereunder, shares of the Common Stock
(or Other Securities) covered by such Warrant and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to, , whose
address is: . If said number of shares is less than all the
shares covered by such Warrant, a new Warrant shall be registered in the name
of the undersigned and delivered to the address stated below.
Signature ______________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant or on the form of
Assignment attached as Exhibit B
thereto.)
Address_______________________________
_______________________________
8
<PAGE>
EXHIBIT B
ASSIGNMENT
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant with respect to
the number of shares of the Common Stock (or Other Securities) covered
thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature ____________________________
(Signature must con-form in
all respects to name of
Holder as specified on the
face of the Warrant.)
Address________________________________
9
Exhibit 10.100
Registration Rights Agreement
AGREEMENT made as of this 30th day of July, 1996, among The Standish Care
Company a Delaware corporation (the "Company"), and the party designated as
Purchaser on the signature page to this Agreement (the "Purchaser")
(collectively, the "Parties").
WHEREAS, the Purchaser has agreed to purchase 100 shares of Series B
Cumulative Convertible Preferred Stock, $.01 par value per share, of the
Company ("Series B Preferred Stock") which is convertible into shares of
Common Stock ("Common Stock") of the Company;
WHEREAS, the Purchaser has agreed to purchase Warrants (the "Warrants") to
purchase an aggregate of 400,000 shares of Common Stock of the Company;
WHEREAS, as a condition of such purchase the Purchaser has requested
certain rights to require the Company to register his shares of Common Stock
of the Company for public distribution;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any similar federal statute successor thereto, and the rules and regulations
of the Commission issued under such Act, as they each may, from time to time,
be in effect.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of
the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"Registrable Shares" means (i) the shares of Common Stock issued or
issuable upon conversion of the shares of Series B Preferred Stock issued
under the Stock Purchase Agreement; (ii) the shares of Common Stock issued or
issuable upon exercise of the Warrants; and (iii) any other shares of Common
Stock of the Company issued in respect of such shares (because of stock
splits, stock dividends, reclassifications, recapitalization, or similar
events); provided, however, that shares of Common Stock which are Registrable
Shares shall cease to be Registrable Shares upon any sale pursuant to a
Registration Statement, Section 4(1) of the Securities Act or Rule 144 under
the Securities Act, or any sale in any manner to a person or entity which, by
virtue of Section 11 of this Agreement, is not entitled to the rights
provided by this Agreement. Registrable Shares shall not include shares of
Common Stock which may be sold by a Stockholder to the public immediately
without registration, including shares of Common Stock which may be sold
within a period of 90 days under Rule 144 (or any successor regulation
thereto) promulgated under the Securities Act, unless at the time of the
proposed sale such Stockholder, after the use of his best efforts, is unable
to arrange for an unregistered managed block distribution of such shares by a
recognized investment banking firm which specializes in such block
distributions. Wherever reference is made in this Agreement or the Stock
Purchase Agreement to a request or consent of holders of a certain percentage
of Registrable Shares, or to a number or percentage of Registrable Shares
held by a Stockholder, such reference shall include shares of Common Stock
issuable upon conversion of the Shares even though such conversion has not
yet been effected.
"Securities Act" means the Securities Act of 1933, as amended, and any
similar Federal statute successor thereto, and the rules and regulations of
the Commission issued under such Act, as they each may, from time to time, be
in effect.
"Shares" shall have the meaning specified in the Stock Purchase Agreement.
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<PAGE>
"Stockholders" means the Purchaser and any persons or entities to whom the
rights granted under this Agreement are transferred as permitted by Section
11 hereof.
"Stock Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement of even date herewith among the Company and the Purchaser.
"Warrants" means The Standish Care Company Common Stock Purchase Warrant
dated July 30, 1996
2. Sale or Transfer of Shares; Legend.
(a) The Shares, the Warrants and the Registrable Shares and shares issued in
respect of the Shares or the Registrable Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the
effect that such sale or transfer is exempt from the registration
requirements of the Securities Act.
(b) Each certificate representing the Shares, the Warrants and the
Registrable Shares, and shares issued in respect of the Shares and the
Registrable Shares, shall bear a legend substantially in the following form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be offered, sold or
otherwise transferred or pledged unless and until such shares are registered
under such Act or an opinion of counsel reasonably satisfactory to the
Company is obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing
any Registrable Shares, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
3. Demand Registrations.
(a) A Stockholder or Stockholders holding in the aggregate more than 25% of
the Registrable Shares may request, in writing, that the Company effect the
registration on Form S-1 or Form S-2 (or any successor form) of Registrable
Shares owned by such Stockholder or Stockholders. If the holders initiating
the registration intend to distribute the Registrable Shares by means of an
underwriting, they shall so advise the Company in their request. In the event
such registration is underwritten, the right of other Stockholders to
participate shall be conditioned on such Stockholders' participation in such
underwriting. Upon receipt of any such request, the Company shall promptly
give written notice of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have
included in such registration such of their Registrable Shares as such
Stockholders may request in such notice of election, subject to the approval
of the underwriter managing the offering. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration,
on Form S-1 or Form S-2 (or any successor form), of all Registrable Shares
which the Company has been requested to so register.
(b) The Company shall not be required to effect more than 3 registrations
pursuant to paragraph (a) above; provided that a registration effected under
paragraph (a) above shall not be counted for the purpose of this limitation
unless the Stockholders shall have succeeded in selling at least 80% of the
Registrable Shares requested to be included in such registration.
(c) At any time after the Company becomes eligible to file a Registration
Statement on Form S-3 (or any successor form relating to secondary
offerings), a Stockholder or Stockholders holding in the aggregate at least
25% of the Registrable Shares may request the Company, in writing, to effect
the registration on Form S-3 (or such successor form). Upon receipt of any
such request, the Company shall promptly give written notice of such proposed
registration to all Stockholders. Such Stockholders shall have the right, by
giving written notice to the Company within 30 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election. Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration on Form S-3, or such successor form,
of all Registrable Shares which the Company has been requested to register.
(d) In the event that Registrable Shares are sold pursuant to a
Registration Statement in an underwritten offering pursuant to this Section
3, the Company agrees to enter into an underwriting agreement containing
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<PAGE>
customary representations and warranties with respect to the business and
operations of an issuer of the securities being registered and customary
covenants and agreements to be performed by such issuer, including without
limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.
(e) In the case of any registration effected pursuant to this Section 3,
the requesting Stockholders shall have the right to designate the managing
underwriter in any underwritten offering, subject to the approval of the
Company, which approval may not be unreasonably withheld or delayed.
4. "Piggyback" Registration.
(a) If at any time the Company proposes to file a Registration Statement,
other than pursuant to Section 3 hereof, it will, prior to such filing, give
written notice to all Stockholders of its intention to do so and, upon the
written request of a Stockholder or Stockholders given within 20 days after
the Company provides such notice (which request shall state the intended
method of disposition of such Registrable Shares), the Company shall use its
best efforts to cause all Registrable Shares, which the Company has been
requested by such Stockholder or Stockholders to register, to be registered
under the Securities Act to the extent necessary to permit their sale or
other disposition in accordance with the intended methods of distribution
specified in the request of such Stockholder or Stockholders; provided that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 4 without obligation to any Stockholder.
(b) In connection with any offering under this Section 4 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such underwriting unless the requesting Stockholders accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it.
(c) If in the opinion of the managing underwriter the registration of all,
or part of, the Registrable Shares which the holders have requested to be
included pursuant to this Section 4 would materially and adversely affect
such public offering, then the Company shall be required to include in the
underwriting only that number of Registrable Shares, if any, which the
managing underwriter believes may be sold without causing such adverse
effect, but in no event shall the amount of Registrable Shares included in
the offering be reduced below 25% of the total amount of securities included
in the offering. If the number of Registrable Shares to be included in the
underwriting in accordance with the foregoing is less than the total number
of shares which the holders of Registrable Shares have requested to be
included, then the holders of Registrable Shares who have requested
registration shall participate in the underwriting pro rata based upon their
total ownership of the aggregate number of shares requested to be included in
such registration by the Stockholders and by holders granted registration
rights in accordance with Section 9 (or in any other proportion as agreed
upon by all holders entitled to such rights).
5. Registration Procedures.
If and whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any of the
Registrable Shares under the Securities Act, the Company shall as
expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(b) prepare and file with the Commission any amendments and supplements to
the Registration Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration Statement effective
for a period of not less than 120 days from the effective date;
(c) furnish to each selling Stockholder such reasonable numbers of copies
of the prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the selling
Stockholder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Shares owned by the selling Stockholder;
and
(d) use its best efforts to register or qualify the Registrable Shares
covered by the Registration Statement under the securities or Blue Sky laws
of such states as the selling Stockholders shall reasonably request, and do
any and all other acts and things that may be necessary or desirable to
enable the selling Stockholders to consummate the public sale or other
disposition in such jurisdictions of the Registrable Shares owned by the
selling Stockholders;
3
<PAGE>
provided, however, that the Company shall not be required in connection with
this paragraph (d) to qualify as a foreign corporation, execute a general
consent to service of process or subject itself to taxation in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the selling
Stockholders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers
of the Registrable Shares.
6. Allocation of Expenses.
The Company will pay all Registration Expenses of all registrations under
this Agreement. For purposes of this Section, the term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with
Section 5, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Stockholders, but excluding
underwriting discounts and selling commissions relating to the Registrable
Shares.
7. Indemnification.
(a) In the event of any registration of any of the Registrable Shares under
the Securities Act pursuant to this Agreement, the Company will indemnify and
hold harmless the seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to
which such seller, underwriter or controlling person may become subject under
the Securities Act, the Exchange Act, state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such
seller, underwriter and each such controlling person for any legal or any
other expenses reasonably incurred by such seller, underwriter or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission
made in such Registration Statement, preliminary prospectus or prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
seller, underwriter or controlling person specifically for uereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors and officers and each underwriter
(if any) and each person, if any, who controls the Company or any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to
which the Company, such directors and officers, underwriter or controlling
person may become subject under the Securities Act, Exchange Act, state
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon
any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such
seller, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
however, that the obligations of such Stockholders hereunder shall be limited
to an amount equal to the proceeds to each Stockholder of the Registrable
Shares of such stockholder sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party
4
<PAGE>
has actual knowledge of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld); and, provided, further, that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7. The Indemnified
Party may participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if representation
of such Indemnified Party by the counsel retained by the Indemnifying Part
would be inappropriate due to actual or potential differing interests between
the Indemnified Party and any other party represented by such counsel in such
proceeding; provided, however, that under no circumstances will the
Indemnifying Party be required under this Section 7 to pay the expenses of
more than one counsel for the Indemnified Parties. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
(d) If the indemnification provided for in this Section 7 is unavailable
or insufficient to hold harmless an Indemnified Party under this Section 7 in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to herein, then each Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in the
same proportion as the net proceeds from the offering (before deducting
expenses) received by such Indemnifying Party bear to the total net proceeds
from the offering (before deducting expenses) received by it exceeds the
amount of any damages which such Indemnifying Party has otherwise been
required to pay by reason of its indemnification obligations under this
Section 7. No person guilty of fraudulent misrepresentation within the
meaning of Section 11 of the Securities Act shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. The
contribution obligations of each Indemnifying Party under this Section 7 are
several and not joint.
8. Information by Holder. Each holder of Registrable Shares included in
any registration shall furnish to the Company such information regarding such
holder and the distribution proposed by such holder as the Company may
request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in Section 5.
9. Limitations on Subsequent Registration Rights. The Company shall not,
without the prior written consent of the Stockholders holding a majority of
the Registrable Shares, enter into any agreement (other than this Agreement)
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder to include securities of the
Company in any registration filed under Section 3 or 4, unless, under the
terms of such agreement the rights of such holders to include securities in a
registration filed by the Company are no more favorable to such holders than
the rights granted to the Stockholders under Sections 3 and 4.
10. Rule 144 Requirements. The Company agrees to:
(a) make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Exchange
Act (at any time after it has become subject to such reporting requirements);
and
(c) furnish to any holder of Registrable Shares upon request a written
statement by the Company as to its compliance with the information
requirements of said Rule 144 (at any time after 90 days after the closing of
the first sale of securities by the Company pursuant to a Registration
Statement), and of the reporting requirements of the Exchange Act (at any
time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company as such holder may reasonably request to
avail itself of any similar rule or regulation of the Commission allowing it
to sell any such securities without registration.
5
<PAGE>
11. Transfers of Certain Rights.
(a) The rights granted to the Stockholders hereunder may be transferred by
such Stockholder to any transferee who acquires at least 20% of the Shares or
Registrable Shares; provided, however, that the Company is given written
notice by the transferee at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to
which such rights are being assigned.
(b) Transferees. Any transferee to whom rights under this Agreement are
transferred shall, as a condition to such transfer, deliver to the Company a
written instrument by which such transferee agrees to be bound by the
obligations imposed upon the Stockholder under this Agreement to the same
extent as if such transferee were a Stockholder hereunder.
(c) Anything in this Agreement to the contrary notwithstanding, any
Stockholder which is a partnership or corporation may transfer rights granted
to such Stockholder under this Agreement to any partner or stockholder
thereof to whom Registrable Shares are transferred and who delivers to the
Company a written instrument by which such transferee agrees to be bound by
the obligations imposed upon Stockholders under this Agreement to the same
extent as if such transferee were a Stockholder hereunder. In the event of
such transfer, such partner or stockholder shall be deemed a Stockholder for
purposes of this Section 11 and may again transfer such rights to any other
person or entity which acquires Registrable Shares from such partner or
stockholder, subject to and in accordance with Sections 11(a) and (b) hereof.
12. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid, to the parties at the addresses set forth under their
respective names below, or to such other address as any party may provide in
writing to the others.
13. Entire Agreement. This Agreement, and the Stock Purchase Agreement,
embody the entire agreement and the understanding between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements
and understandings relating to such subject matter.
14. Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of a majority of the
Registrable Shares; provided, that it may be amended with the consent of the
holders of less than all Registrable Shares only in a manner which affects
all Registrable Shares in the same fashion. Any amendment or waiver effected
in accordance with this Section 14 shall be binding upon each holder of any
Shares or Registrable Shares, each future holder of all such securities and
the Company. No waivers of or exceptions to any term, condition or provision
of this Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
THE STANDISH CARE COMPANY:
By: /s/ Michael J. Doyle
------------------------------------
Michael J. Doyle,
Chairman and Chief Execuitve Officer
PURCHASER:
----------------------------------------
Abraham D. Gosman
Address: c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
7
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of
Subsidiary (1) Organization
- ---------------------------------------- -----------------
Bailey Retirement Center, Inc. Florida
Dominion Villages, Inc. Virginia
Lowry Village, Inc. Florida
Lowry Village Limited Partnership Florida
Piedmont Villages, Inc. North Carolina
Standish Marketing, Inc. Florida
Bailey Home Suites Florida
Standish Lakes Region Villages, Inc. New Hampshire
Lakes Region Villages LLC New Hampshire
- ----------------------
(1) All subsidiaries are wholly owned, directly, or indirectly, by the
Company, except Lowry Village Limited Partnership, which is 80% owned, and
Lakes Region Villages LLC, which is 51% owned.
Exhibit 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. ) of our report dated February 14, 1996, except as to
information presented in Notes I (paragraphs 7 and 8) and R, for which the date
is March 29, 1996, on our audits of the financial statements and financial
statement schedule of The Standish Care Company. We also consent to the
reference to our firm under the caption "Experts."
Boston, Massachusetts
Ausust 5, 1996 [Signature of Coopers & Lybrand L.L.P.]
<PAGE>
CONSENT OF INDPEDNDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333- ) of our report dated July 24, 1996, on our audits of the
financial statements of CareMatrix. We also consent to the reference to our
firm under the caption "Experts."
[Signature of Coopers & Lybrand L.L.P.]
Boston, Massachusetts
Ausust 5, 1996
Exhibit 23.03
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our Firm under the Caption "Experts" and to
the use of our report (dated February 23, 1994) on the balance sheet of
Bailey Retirement Center, Inc. as of December 31, 1993 and the related
statements of operations, changes in stockholders' deficit, and cash flows
for the year then ended as an exhibit in this Registration Statement (Form
S-4) and related proxy statement-prospectus of The Standish Care Company for
the registration of 50,540,000 shares of its common stock.
LOVELACE, ROBY & COMPANY, P.A.
Certified Public Accountants
Orlando, Florida
August 5, 1996
1
EXHIBIT 23.05
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
I hereby consent to the reference to me as a prospective director of The
Standish Care Company where it appears in this Registration Statement,
including the Prospectus constituting a part thereof and any amendment
thereto.
/s/ John A. Carucci
----------------------------------
John A. Carucci
August 5, 1996
