As filed with the Securities and Exchange Commission on October 22, 1996
Registration No. 333-11455
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
Amendment No. 2
to
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------
CAREMATRIX CORPORATION
(Exact Name Of Registrant As Specified In Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 8316 04-3069586
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
197 First Avenue
Needham, Massachusetts 02194
(617) 433-1000
(Address, including zip code, and telephone number,
including area code of Registrant's principal executive offices)
-------------
Robert M. Kaufman
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
(617) 433-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------
Copies of all communications to:
<TABLE>
<CAPTION>
<S> <C> <C>
Michael J. Bohnen, Esq. David A. Garbus, Esq. Joseph W. Armbrust, Jr., Esq.
Nutter, McClennen & Fish, LLP Robinson & Cole Brown & Wood LLP
One International Place One Boston Place One World Trade Center
Boston, MA 02110 Boston, MA 02108 New York, NY 10048
(617) 439-2000 (617) 557-5900 (212) 839-5300
</TABLE>
-------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If the Form is a post-effective amendment filed pursuant to Rule 426(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [x]
-------------
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 the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
==============================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION
Dated October 22, 1996 6,250,000 Shares
[CAREMATRIX LOGO]
(formerly The Standish Care Company)
Common Stock
-------------
All of the shares of Common Stock, par value $.05 per share (the "Shares"),
offered hereby are being offered by CareMatrix Corporation (the "Company").
Up to 937,500 additional Shares may be sold by certain stockholders of the
Company (the "Selling Stockholders") if the Underwriters exercise their
over-allotment option. The Company will not receive any of the proceeds from
the sale of Shares by the Selling Stockholders. See "Principal and Selling
Stockholders" and "Underwriting."
-------------
The Common Stock is included in the Nasdaq Small Cap System under the symbol
"STAND." On October 3, 1996, the last reported sales price for the Common
Stock on the Nasdaq Small Cap System was $21 1/4 per Share, giving effect to a
one-for-five reverse stock split effective October 14, 1996. Prior to the
Offering, however, only a limited number of Shares have traded publicly. See
"Price Range of Common Stock and Dividends." The Company has been approved
for listing on the American Stock Exchange under the symbol "CMD."
-------------
See "Risk Factors" beginning on page 7 for a discussion of certain
information that should be considered by prospective investors.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THE OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions (1) Company (2)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
Total (3) $ $ $
========================================================================
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,000,000.
(3) The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to an additional 937,500 Shares to cover over-allotments, if
any, from the Selling Stockholders pro rata. If all such Shares are
purchased, the total price to public, underwriting discounts and
commissions and proceeds to the Selling Stockholders will be $ , $
and $ , respectively. See "Underwriting."
-------------
The Shares are offered by the several Underwriters named herein when, as and
if received and accepted by them, subject to their right to reject any order
in whole or in part and subject to certain other conditions. It is expected
that delivery of the Shares will be made in New York, New York on or about
, 1996.
-------------
Dean Witter Reynolds Inc.
NatWest Securities Limited
PaineWebber Incorporated
Robertson, Stephens & Company
Smith Barney Inc.
, 1996
<PAGE>
[CareMatrix logo]
PROVIDING A
COMPREHENSIVE RANGE
OF ASSISTED LIVING SERVICES
TO AMERICA'S SENIORS.
[Photo of Elderly man and woman inside a photo of two windows from
outside a building]
For United Kingdom Purchasers: The shares of Common Stock offered hereby
may not be offered or sold in the United Kingdom other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments, whether as principal or agent (except in circumstances that
do not constitute an offer to the public within the meaning of the Public
Offers of Securities Regulations 1995 or the Financial Services Act 1986) and
this Prospectus may only be issued or passed on to any person in the United
Kingdom if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the Prospectus may otherwise lawfully be issued
or passed on.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
COMMON STOCK ON THE NASDAQ SMALL CAP SYSTEM IN ACCORDANCE WITH RULE 10b-6A
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
SUPPORTIVE
EXTENDED CARE ASSISTED LIVING INDEPENDENT LIVING
[INTERIOR PHOTO [4 PHOTOS DEPICTING [INTERIOR
DEPICTING---------------------->RESIDENTS OF--------------------->PHOTO
RESIDENT AND ASSISTED LIVING DEPICTING
CAREGIVER] FACILITY] RESIDENTS]
| | |
| | |
| | |
| | |
| | |
| ALZHEIMER'S TREATMENT |
| [PHOTO |
| DEPICTING |
-----------------------------RESIDENT]--------------------------
CareMatrix expects to utilize its assisted living facilities to
serve as the foundation from which it will provide a continuum of
care for its residents. When integrated with supportive
independent living facilities, extended care facilities, and
Alzheimer's care programs, the Company will have the ability to
provide a less stressful transition for its residents either in the
same facility, within a campus setting, or to a nearby facility.
The provision of a full range of quality senior residential services
at each CareMatrix assisted living facility, permits residents to
age in place by meeting their changing personal and health care needs.
To accomplish this, CareMatrix is developing comprehensive service
packages and integrated campuses which will enable the Company to
become a leading provider of assisted living services to seniors
with a fully integrated matrix of social and health care services
models.
[PHOTO DEPICTING RESIDENTS IN DINING ROOM]
Fine dining is an integral part of each CareMatrix community. In
our handsome dining rooms, delicious chef-prepared meals, served
with a choice of wines, make dining truly elegant.
[PHOTO OF FACILITY EXTERIOR]
Comfortable, well-appointed common areas, including beautifully
landscaped courtyards and gardens are a hallmark of each CareMatrix
community. Residents enjoy companionship and security, enhanced by
services and a thoughtful, professional staff.
[PHOTO OF FACILITY EXTERIOR]
Our residents enjoy quality housing in senior care parks. As
residents' needs for health care and assistance become greater,
those needs can be met by professional caregivers who deliver
services in a highly cost-effective way.
[PHOTO DEPICTING RESIDENTS IN UNIT]
At CareMatrix, comfort, companionship, and distinctive apartment
living come together to give residents the independence they
desire along with the amenities and support necessary for security
and peace of mind.
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such
other information and representations must not be relied upon as having been
authorized by the Company or the Underwriters. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to its date. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than
the registered securities to which it relates. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is
unlawful.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Available Information 3
Prospectus Summary 4
Risk Factors 7
The Company 13
Use of Proceeds 13
Price Range of Common Stock and Dividends 14
Capitalization 15
Dilution 16
Unaudited Pro Forma Financial Information 17
Selected Combined Financial Data of the Company 23
Management's Discussion and Analysis of Financial
Condition and Results of Operations of the
Company 24
Selected Financial Data of Standish 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Standish 27
Business 36
Management 49
Certain Transactions 57
Principal and Selling Stockholders 62
Description of Capital Stock 64
Shares Eligible for Future Sale 69
Underwriting 70
Legal Matters 71
Experts 71
Index to Financial Statements F-1
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (herein, together with all
amendments, exhibits and schedules thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement and the exhibits and schedules
thereto on file with the Commission pursuant to the Securities Act and the
rules and regulations of the Commission thereunder. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and, in each instance, reference is made to the
contract or document filed as an exhibit to the Registration Statement and
incorporated by reference herein. The Company is subject to the information
requirements of the Exchange Act and in accordance therewith files reports,
proxy statements and other information with the Commission (collectively,
"Exchange Act Filings"). The Registration Statement, including the exhibits
and schedules thereto, as well as the Company's Exchange Act Filings, may be
obtained from the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the public
reference section of the Commission at its Washington address upon payment of
the fees prescribed by the Commission, or may be examined without charge at
the offices of the Commission, or accessed through the Commission's Internet
address at http://www.sec.gov.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Prospective investors should consider carefully
the information set forth under "Risk Factors." Unless otherwise indicated,
information in this Prospectus assumes (i) no exercise of the Underwriters'
option to purchase from the Selling Stockholders up to 937,500 additional
shares of Common Stock to cover over-allotments, if any, and (ii) a
one-for-five reverse stock split of the Company's Common Stock effective
October 14, 1996 (the "Reverse Split").
The Company
CareMatrix Corporation (the "Company") (formerly known as The Standish
Care Company) is a provider of assisted living services, operating 20
facilities in eight states with a capacity of approximately 1,580 residents.
Of these facilities, two are owned, nine are leased and nine are managed. The
Company's three year growth objective is to develop at least 60 new
facilities, with a capacity of approximately 7,200 residents, and to acquire
additional assisted living facilities or operations. Currently, the Company
is developing 28 facilities, of which four facilities are now under
construction. The Company's strategy is to provide a full range of assisted
living and related services across a range of pricing options.
The Company believes that it can effectively and efficiently respond to a
variety of the needs of seniors as they age and require additional care. The
Company expects its assisted living facilities to serve as the foundation
from which it will provide a continuum of care for its residents. When its
assisted living facilities are integrated with supportive independent living
facilities, skilled nursing/rehabilitation facilities and Alzheimer's care
programs, the Company believes that it will have the ability to provide a
less stressful transition for those of its residents who need a higher degree
of care to more supportive environments either within the same facility, in a
campus setting or in a nearby facility. The Company believes that by offering
such a continuum of care to its residents, it will be better able to respond
to resident needs than free-standing assisted living facilities that do not
provide the flexibility for their residents to age in place.
The Company intends to provide at all of its assisted living facilities a
full range of quality senior residential services that are designed to permit
residents to age in place by meeting their evolving personal and health care
needs. To accomplish this objective, the Company is developing comprehensive
service packages and integrated campuses that the Company believes will
enable it to become a leading provider of assisted living services to seniors
within a fully integrated matrix of social and healthcare service models.
The Company believes that the popularity of assisted living and other
senior care alternatives will increase the demand for quality facilities that
provide such services across upper, moderate and lower income markets. The
Company is developing four such models to meet this anticipated demand:
(bullet) Chancellor Park--These facilities will provide supportive
independent and assisted living services and are designed to serve primarily
upper income residents. The capacity of this model ranges from 100 to 160
residents. The average monthly service fee paid by residents will range from
approximately $2,300 to $4,900.
(bullet) Chancellor Gardens--These facilities, which target a broader
population base, will provide similiar services to moderate and upper income
residents. This model typically accommodates 80 to 140 residents. The average
monthly service fee paid by residents will range from approximately $1,400 to
$3,000.
(bullet) Chancellor Village--These facilities, which further broaden the
Company's service market, are designed to accommodate lower income residents
and Medicaid-eligible residents. This model typically accommodates 80 to 100
residents. The average monthly service fee for residents will range from
approximately $900 to $2,000.
(bullet) Chancellor Place--These facilities, which will be free-standing
or integrated within other Company facilities to provide a continuum of care,
are specially designed to meet the programmatic needs of residents with early
or intermediate Alzheimer's disease and other forms of dementia. This model,
which targets upper income seniors, accommodates 40 to 80 residents. The
average monthly service fee paid by residents will range from approximately
$3,200 to $3,600.
4
<PAGE>
Upon the completion of the Offering, the Company will implement an
aggressive development and acquisition program designed to enhance the
Company's ability to achieve its growth strategy. The Company will seek to
cluster its facilities within selected geographic regions to achieve
marketing, cost and service advantages. The Company believes that by
combining different levels of care in a single, integrated campus or facility
or through a network of facilities within a distinct market, it will be able
to respond to the varied needs of seniors as they age, meet the cost
containment objectives of private and governmental payor sources and create
significant competitive advantages.
The Company's senior management team has extensive experience in
developing, operating and managing senior residence facilities. The Company
expects that the facilities it plans to develop and subsequently manage or
lease over the next three years will be developed for both related and
unrelated parties. See "Risk Factors-- Dependence by the Company on Related
Party Agreements" and "Business--Development and Acquisition."
On October 4, 1996, twelve wholly owned subsidiaries of The Standish Care
Company ("Standish") were merged into twelve corporations controlled by
Abraham D. Gosman, members of his family and certain members of senior
management (collectively, "Pre-Merger CareMatrix"), with the stockholders of
Pre-Merger CareMatrix receiving approximately 92% of the then outstanding
shares of Standish common stock (the "Merger"). Following the Merger, The
Standish Care Company changed its name to CareMatrix Corporation. The Merger
was accounted for as a reverse acquisition, whereby Pre-Merger CareMatrix is
treated as the acquiror for accounting purposes.
The Offering
<TABLE>
<CAPTION>
<S> <C>
Common Stock Offered 6,250,000 shares
Common Stock to be Outstanding After the Offering 17,116,000 shares (1) (2)
Use of Proceeds To finance future acquisitions and development, to repay
outstanding debt to, and redeem the Series B Preferred Stock
held by, the Company's principal stockholder, to pay
dividends in arrears on the Series A Preferred Stock and for
working capital purposes. See "Use of Proceeds."
American Stock Exchange symbol CMD
</TABLE>
- -------------
(1) Does not include (i) an aggregate of 323,151 shares of Common Stock
issuable following the completion of the Offering upon exercise or
conversion of outstanding warrants and convertible securities of the
Company and (ii) an aggregate of 1,600,000 shares of Common Stock
reserved for issuance under the Company's stock option/equity incentive
plans, of which approximately 680,000 have been granted at an average
exercise price of approximately $14.50 per share. See "Capitalization,"
"Management" and "Shares Eligible for Future Sale."
(2) Includes 108,000 shares of Common Stock to be issued as a fee in connection
with the Merger and 19,140 shares of Common Stock issuable upon the expected
conversion of the Series A Preferred Stock. See Note 3 to Unaudited Pro
Forma Combined Balance Sheet and "Underwriting."
5
<PAGE>
Summary Combined Financial Data
The following table sets forth the historical combined financial
information of the Company and pro forma financial information to give effect
to the Merger, the purchase in July 1996 of certain assets from an entity
controlled by the Company's principal stockholder (the "Asset Purchase"), the
Reverse Split and the sale of the Common Stock offered hereby. The Merger was
accounted for as a reverse acquisition, whereby Pre-Merger CareMatrix is
deemed the acquiror for accounting purposes. Accordingly, the financial
history presented is that of Pre-Merger CareMatrix.
<TABLE>
<CAPTION>
Pro Forma
Pro Forma (2) As Adjusted (3)
------------------------ --------------------------
June 24,
1994 Six Six
(Inception) Year Ended Months Year Ended Months Year Ended Six Months
to December Ended December Ended December Ended
December 31, 31, June 30, 31, June 30, 31, June 30,
1994 (1) 1995 (1) 1996 (1) 1995 1996 1995 1996
------------ ----------- --------- ----------- --------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $ 366 $ 2,485 $ 2,389 $ 10,921 $ 7,059 $ 10,921 $ 7,059
Operating costs and expenses 2,865 9,147 5,591 20,113 11,128 20,113 11,128
------------ ----------- --------- ----------- --------- ----------- -----------
Loss from operations (2,499) (6,662) (3,202) (9,192) (4,069) (9,192) (4,069)
Interest income -- -- (24) (153) (53) (153) (53)
Interest expense 56 544 559 2,044 1,382 1,500 823
Other -- -- -- (558) (743) (558) (743)
------------ ----------- --------- ----------- --------- ----------- -----------
Loss (4) $(2,555) $(7,206) $(3,737) $(10,525) $(4,655) $ (9,981) $(4,096)
============ =========== ========= =========== ========= =========== ===========
Pro forma loss per share $ (0.97) $ (0.43) $ (0.58) $ (0.24)
Shares outstanding 10,866 10,866 17,116 17,116
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------
Pro Forma
Historical Pro Forma As Adjusted
(1) (5) (6)
----------- ---------- --------------
(in thousands)
Balance Sheet Data:
<S> <C> <C> <C>
Cash and cash equivalents $ 2,028 $ 3,284 $104,064
Working capital (deficit) 1,286 (3,038) 98,900
Total assets 6,022 44,464 145,244
Long-term debt, less current maturities (7) 16,992 30,753 10,461
Stockholders' equity (deficit) (13,498) 3,326 125,556
</TABLE>
- -------------
(1) The historical combined financial data represents the combined financial
position and results of operations for the Company for the periods
presented.
(2) Gives effect to the Merger, the Asset Purchase and the Reverse Split as
if such transactions had occurred as of January 1, 1995. See "Unaudited
Pro Forma Financial Information."
(3) Gives effect to (i) the Merger, the Asset Purchase and the Reverse Split
and (ii) the sale of Common Stock offered hereby (assuming a public
offering price of $21.25 per share) and the application of the net
proceeds therefrom, as if such transactions had occurred as of January 1,
1995. See "Use of Proceeds" and "Unaudited Pro Forma Financial
Information."
(4) Provisions for income taxes have not been reflected in these combined
financial statements since there is no taxable income on a combined
basis. See Note 2 of the CareMatrix Combined Financial Statements.
(5) Adjusted to give effect to the Merger and the Asset Purchase as if such
transactions had occurred on June 30, 1996. See "Unaudited Pro Forma
Financial Information."
(6) Adjusted to give effect to (i) the Merger and the Asset Purchase and (ii)
the sale of the Common Stock offered hereby (assuming a public offering
price of $21.25 per share) and the application of the net proceeds
therefrom as if such transactions had occurred on June 30, 1996. See "Use
of Proceeds" and "Unaudited Pro Forma Financial Information."
(7) Includes debt due to stockholder.
6
<PAGE>
RISK FACTORS
Potential investors should consider carefully the following factors, as
well as the more detailed information contained elsewhere in this Prospectus,
before making a decision to invest in the Common Stock offered hereby. This
Prospectus contains certain forward-looking statements regarding the
Company's future plans, operations and prospects, which involve risks and
uncertainties. The Company's actual results could differ materially from the
results anticipated in these forward-looking statements as a result of
certain of the factors set forth under "Risk Factors" and elsewhere in this
Prospectus.
History of Losses From Operations; Accumulated Deficit. From its inception
on June 24, 1994 through June 30, 1996, the Company experienced significant
losses from operations. Through June 30, 1996, the Company had cumulative
losses from operations of $12.4 million. For the year ended December 31, 1995
and the six months ended June 30, 1996, the Company incurred losses from
operations of $6.7 million (including an $895,000 provision for closing a
facility) and $3.2 million, respectively. At June 30, 1996, the Company's
accumulated deficit was $13.5 million. On a pro forma basis giving effect to
the Merger and the Asset Purchase, for the year ended December 31, 1995 and
the six months ended June 30, 1996, the Company incurred losses from
operations of $9.2 million and $4.1 million, respectively. The Company
expects to incur losses from operations through at least the end of 1996 and
may continue to have losses thereafter. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company" and
the CareMatrix Combined Financial Statements. There can be no assurance that
the Company will be able to generate income from operations or net income at
any time, whether from its existing operations or from any facilities that
are operated in the future. Failure of the Company to achieve profitability
could have a material adverse effect on the future viability of the Company.
Dependence by the Company on Related Party Agreements. It is expected that
the Company will enter into agreements with related parties in connection
with a significant number of transactions, including development, management
and lease agreements. Generally, the Company will enter into development
agreements whereby construction financing is obtained by the related or third
parties. The Company expects that risks related to construction and the
initial operation of the facilities it develops will be borne primarily by
such related or third parties. The Company expects that it will not enter
into management agreements with these parties until completion of the
construction of such facilities or upon acquisition of completed facilities.
These management agreements would generally be for a ten-year period, with
annual fees approximating 5% of gross revenues (less contractual adjustments
for uncollectible accounts). The Company also expects to have the option to
convert such management agreements into fair market value leases (which will
be a negotiated percentage of total project costs) for a ten-year initial
term with three to four five-year fair market value renewal options. Abraham
D. Gosman is the principal owner, and certain members of the Company's senior
management and stockholders also have an ownership interest in, Chancellor
Senior Housing Group, Inc. and certain like entities ("Chancellor"), with
which the Company expects to enter into most such agreements. Failure of the
Company to continue to enter into such agreements with Chancellor or other
such related parties, or the inability of Chancellor to secure all necessary
financing at acceptable terms, could have a material adverse effect on the
Company. See "--Need for Additional Financing," "Business--Development and
Acquisition" and "Certain Transactions."
Need for Additional Financing. The Company's development and acquisition
strategy will require substantial capital resources. The estimated cumulative
cost to complete approximately 60 new facilities, with an aggregate capacity
of approximately 7,200 residents, targeted for completion over the next three
years is between $600 million and $700 million, which substantially exceeds
the financial resources of the Company and Chancellor. The Company's future
growth will depend primarily on the ability of related parties, such as
Chancellor, for whom the Company develops facilities to obtain financing on
acceptable terms. To finance its capital needs, the Company plans both to
incur indebtedness and to issue, from time to time, additional debt or equity
securities, including Common Stock or convertible notes, in connection with
its acquisitions and affiliations. If additional funds are raised through the
issuance of equity securities, dilution to the Company's stockholders may
result, and if additional funds are raised through the incurrence of debt,
the Company would likely become subject to certain covenants that impose
restrictions on its operations and finances. There can be no assurance that
the Company or such related parties will be able to raise additional capital
when needed, on satisfactory terms or at all. Historically, the Company has
relied upon equity and loans provided primarily by Abraham D. Gosman, the
Company's Chairman of the Board and principal stockholder, or companies
affiliated with him. See "--Substantial Debt and Lease Obligations." Upon
completion of the Offering, all loans from Mr. Gosman will be repaid. There
can be no assurance that any additional financing from Mr. Gosman, Chancellor
or any other sources
7
<PAGE>
will be available after completion of the Offering. Any limitation on the
Company's ability to obtain additional financing could have a material
adverse effect on the Company. See "Use of Proceeds" and "Certain
Transactions."
Substantial Debt and Lease Obligations. At June 30, 1996, the Company's
pro forma total debt, as adjusted for the Offering, was $13.3 million. Debt
service and annual operating lease payment obligations are expected to
increase significantly as the Company pursues its growth strategy. A
significant portion of these obligations may be to related parties. There can
be no assurance that the Company will generate sufficient cash flow to meet
its obligations. Any payment default or other default with respect to such
obligations could cause a 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 the Company.
Moreover, because certain of the Company's mortgages, debt instruments and
leases may contain cross-default and cross-collateralization provisions, a
default by the Company on one of its payment obligations could result in
acceleration of other obligations and adversely affect a significant number
of the Company's other facilities. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of the Company--Liquidity
and Capital Resources" and "Certain Transactions."
Development and Construction Risks. During the next three years, the
Company plans to develop approximately 60 new facilities with a resident
capacity of approximately 7,200 residents. The Company's ability to achieve
its development goals will depend upon a variety of factors, many of which
are beyond the Company's control. There can be no assurance that the Company
will not suffer delays in its development program . The successful
development of additional facilities will involve a number of risks,
including the possibility that the Company may be unable to locate suitable
sites at acceptable prices or may be unable to obtain, or may experience
delays in obtaining, necessary certificates of need, zoning, land use,
building, occupancy, licensing and other required governmental permits and
authorizations. The Company 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. The
Company will rely on third- party general contractors to construct its new
facilities. There can be no assurance that the Company 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 the Company
will have little control and that could have a material adverse effect on
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. Failure of the Company to achieve its
development goals could have a material adverse effect on the Company.
Accordingly, there can be no assurance that the facilities listed in
"Business-- Development and Acquisition" as being in development or under
construction will ultimately be completed.
Risks Related to Acquisition Strategy. The Company's strategy includes
growth through acquisition. The Company is subject to various risks
associated with its acquisition growth strategy, including the risk that the
Company will be unable to identify or acquire suitable acquisition candidates
or to integrate the acquired companies into the Company's operations. Any
failure of the Company to identify and consummate economically feasible
acquisitions could have a material adverse effect on the Company. There can
be no assurance that the Company will be able to achieve and manage its
planned acquisition growth, that the liabilities assumed by the Company in
any acquisition will not have a material adverse effect on the Company or
that the addition of facilities will be profitable for the Company.
Difficulties Associated with Integrating the Operations of Standish and
Pre-Merger CareMatrix. The Company believes that it can successfully
integrate and manage the combined operations of Standish and Pre- Merger
CareMatrix, as well as achieve certain economies of scale. Because of the
inherent uncertainties associated with efforts to integrate and manage the
operations of the two companies, however, there can be no assurance that the
Company 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. The Company may elect to dispose of certain of
its facilities and may, as a result, incur non-recurring expenses. See
"Unaudited Pro Forma Financial Information."
Dependence on Attracting Seniors with Sufficient Resources to Pay. The
Company expects to rely primarily on the ability of its residents to pay for
services from their own and their families' financial resources. Generally,
only seniors with income or assets meeting or exceeding the comparable median
in the regions where the Company's assisted living facilities are located can
afford the applicable fees for its facilities for an extended period of time.
Any difficulty in attracting seniors with adequate resources to pay for the
Company's services could have a material
8
<PAGE>
adverse effect on the Company. Inflation or other circumstances which
adversely affect the ability of the Company's residents and potential
residents to pay for assisted living services could also have a material
adverse effect on the Company.
Dependence Upon Key Personnel. The Company is dependent upon the ability
and experience of its executive officers, including its Chairman, and there
can be no assurance that the Company will be able to retain all of such
officers. The failure of such officers to remain active in the Company's
management could have a material adverse effect on the Company. There can be
no assurance that the anticipated contributions of senior management will be
realized, and the failure of such contributions to be realized could have a
material adverse effect on the Company.
Risks Related to Goodwill. At June 30, 1996, the Company's pro forma total
assets, as adjusted for the Offering, were approximately $145.2 million, of
which approximately $18.5 million, or approximately 12.7% of total assets,
was goodwill. Goodwill is the excess of cost over the fair value of the net
assets of businesses acquired. There can be no assurance that the value of
such goodwill will ever be realized by the Company. This goodwill is being
amortized on a straight-line basis over 25 years. The Company evaluates on a
regular basis whether events and circumstances have occurred that indicate
all or a portion of the carrying amount of goodwill may no longer be
recoverable, in which case an additional charge to earnings would become
necessary. Although at June 30, 1996 the net unamortized balance of goodwill
is not considered to be impaired, any such future determination requiring the
write-off of a significant portion of unamortized goodwill could have a
material adverse effect on the Company. See "Unaudited Pro Forma Financial
Information."
Competition. The assisted living industry is highly competitive and, given
the relatively low barriers to entry and continuing healthcare cost
containment pressures, the Company expects that it will become increasingly
competitive in the future. The Company 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 the Company believes there is a need for additional
assisted living residences in the markets where it intends to develop
facilities, the Company expects that, as assisted living facilities receive
increased attention, competition will increase from new market entrants.
Moreover, in implementing its growth strategy, the Company expects to face
competition for development and acquisition opportunities from local
developers and regional and national assisted living companies. Some of the
Company's present and potential competitors have, or may have access to,
greater financial resources than those of the Company. Consequently,
increased competition in the future could limit the Company's ability to
attract and retain residents, to maintain or increase resident service fees
or to expand its business. As a result, any increased competition could have
a material adverse effect on the Company. See "Business-Competition."
Discretionary Use of Proceeds; Significant Net Proceeds to Principal
Stockholder. The Company will have broad discretion in using the net proceeds
received by the Company from the Offering. While approximately $23.1 million
of the net proceeds received by the Company will be used to repay debt to,
and redeem the Series B Preferred Stock held by, the Company's principal
stockholder, the Company expects to use approximately $100.8 million of the
remaining net proceeds to acquire and develop additional facilities. Although
the Company currently has four facilities under construction and an
additional 28 facilities under development, the Company will have broad
discretion in modifying its current acquisition and development plan,
selecting and developing future sites, acquiring additional facilities and
otherwise using the net proceeds of the Offering. See "Use of Proceeds,"
"Business-- Development and Acquisition" and "Principal and Selling
Stockholders."
Limited Experience with New Service Models and Facility Designs. The
Company's success is dependent, in part, on its ability to develop and offer
new service models and facility designs to prospective residents of its
facilities. Currently, the Company does not have extensive operating
experience with these new service models and facility designs, and the
failure of the Company to successfully implement and integrate these new
service models and facility designs could have a material adverse effect on
the Company. See "Business--Service Models."
Potential Conflicts of Interest. Abraham D. Gosman, the Company's
principal stockholder and Chairman, and certain members of the Company's
senior management, have a controlling ownership interest in Chancellor with
which the Company expects to enter into development, management and lease
agreements. These agreements will be on terms that the Company believes will
be fair and no less favorable to the Company than those which the Company
could have obtained from unaffiliated third parties. Such ownership interests
in Chancellor and other healthcare entities that compete with the Company,
however, may create actual or potential conflicts of interest on
9
<PAGE>
the part of these members of the Company's management. In the case of such
related party transactions, it is the Company's policy to require that any
such transactions be approved by a majority of the disinterested members of
the Executive Committee of the Board of Directors. See "Business--Development
and Acquisitions" and "Certain Transactions."
Control by Management. Members of the Board of Directors and management
will be the beneficial owners of approximately 55.4% of the outstanding
Common Stock after the Offering. Abraham D. Gosman, together with his sons,
Andrew D. Gosman and Michael M. Gosman, all of whom are members of the Board
of Directors and executive officers of the Company, will be deemed to be the
beneficial owners of approximately 49.7% of the outstanding Common Stock
after the Offering. Accordingly, management will have the ability, and the
Gosmans may have the ability, by voting shares of Common Stock, to determine
(i) the election of the Company's Board of Directors and, thus, the direction
and future operations of the Company, and (ii) the outcome of all other
matters submitted to the Company's stockholders, including mergers,
consolidations and the sale of all or substantially all of the Company's
assets. See "Principal and Selling Stockholders."
Residence Staffing and Labor Costs. The Company competes with other
providers of assisted living services with respect to attracting and
retaining qualified and skilled personnel. The Company is dependent upon its
ability to attract and retain management personnel responsible for the
day-to-day operations of each of the Company's facilities. In addition, a
possible shortage of nurses or trained personnel may require the Company to
enhance its wage and benefits package in order to compete in the hiring and
retention of such personnel or to hire more expensive temporary personnel.
The Company 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. Any significant failure by the Company 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 could
have a material adverse effect on the Company.
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 the Company's methods and
costs of doing business. The Company is 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.
The Company'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 the Company. Furthermore, certain
regulatory developments such as revisions in building code requirements for
assisted living facilities, mandatory increases in the scope and quality of
care to be offered to residents and revisions in licensing and certification
standards could have a material adverse effect on the Company. There can be
no assurance that Federal, state or local laws or regulations will not be
imposed or expanded which would have a material adverse effect on the
Company. The Company's operations are also subject to health and other state
and local government regulations.
In addition, in most states in which the Company participates in
government reimbursement programs, the Company's operations 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. The Company's failure to
comply with the regulations and requirements applicable to a facility could
result in the imposition of significant fines and increased costs, a
revocation of the Company's license to operate that facility, and, if
sufficiently serious in nature, the inability of the Company to maintain or
obtain licenses to operate other facilities. Any such event could have a
material adverse effect on the Company. See "Business-- 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 healthcare items or services. The Medicare/Medicaid anti-kickback
law has been broadly interpreted to apply to certain contractual
relationships between healthcare 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 healthcare providers or suppliers from
10
<PAGE>
participation in (i.e., furnishing covered items or services to beneficiaries
of) the Medicare and Medicaid programs. It is expected that the Company 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 the Company, and any
interpretation inconsistent with the practices of the Company could have a
material adverse effect on the Company. See "Business--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. As a result, the presence, with or without the Company's knowledge,
of hazardous or toxic substances at any property held or operated by the
Company, or acquired or operated by the Company in the future, could have a
material adverse effect on the Company. Environmental audits performed on
properties leased or managed by the Company have not revealed any significant
environmental liability that management believes would have a material
adverse effect on the Company; however, there can be no assurance that
existing environmental audits with respect to any of the properties leased or
managed by the Company have revealed all environmental liabilities. See
"Business--Government Regulation."
Liability and Insurance. The Company's business entails an inherent risk
of liability. In recent years, participants in the assisted living and
long-term care industry, including the Company, 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. The Company
is from time to time subject to such suits as a result of the nature of its
business. The Company 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. The Company currently maintains professional liability insurance
and general liability insurance. There can be no assurance that claims will
not arise which are in excess of the Company's insurance coverage or are not
covered by the Company's insurance. Any successful claim against the Company
not covered by, or in excess of, the Company's insurance could have a
material adverse effect on the Company. Claims against the Company,
regardless of their merit or eventual outcome, may also have a material
adverse effect on the Company's ability to attract residents or expand its
business and would require management to devote time to matters unrelated to
the operation of the Company's business. In addition, the Company's insurance
policies must be renewed annually, and there can be no assurance that the
Company 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. See "Business--Insurance."
Dependence on Reimbursement by Third-Party Payors. A portion of the
Company's revenues from the services it provides for skilled nursing
facilities will be dependent upon reimbursement from third-party payors,
including Medicare, state Medicaid programs and private insurers. There can
be no assurance that the Company's proportionate percentage of revenue
received from Medicare and Medicaid programs will not increase or that such
revenues will fully pay the cost of providing services to residents covered
by Medicare and Medicaid. The revenues and profitability of the Company will
be affected by the continuing efforts of governmental and private third-party
payors to contain or reduce the costs of health care by attempting to lower
reimbursement rates, increasing case management review of services and
negotiating reduced contract pricing. In an attempt to reduce the Federal and
certain state budget deficits, there have been, and management expects that
there will continue to be, a number of proposals to limit Medicare and
Medicaid reimbursement in general. Adoption of any such proposals at either
the Federal or the state level could have a material adverse effect on the
Company.
Certain Anti-takeover Provisions. Certain provisions of the Company's
Restated Certificate of Incorporation and By-laws and of Delaware General
Corporation Law could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of the Company
and limit the price that certain investors might be willing to pay in the
future for shares of the Common Stock. Certain of these provisions provide
for the issuance, without further stockholder approval, of preferred stock
with rights and privileges which could be senior to the Common Stock, the
payment of a "fair price" (or board approval by continuing directors) in
connection with certain business combinations with interested stockholders,
no right of the stockholders to call a special meeting of stockholders,
restrictions on the ability of stockholders to nominate directors and submit
proposals to be considered at stockholders' meetings, and a super-majority
voting requirement in connection with the removal of directors and the
adoption of stockholders' amendments to the By-laws. The Company also is
subject to Section 203 of the Delaware General Corporation Law which, subject
to certain exceptions, prohibits a Delaware corporation from engaging in any
of a broad range of business combinations with any "interested stockholder"
for
11
<PAGE>
a period of three years following the date that such stockholder became an
interested stockholder. See "Management" and "Description of Capital Stock."
Possible Volatility of Stock Price. The market price of the Common Stock
could be subject to significant fluctuations in response to various factors
and events, including the liquidity of the market for the Common Stock,
variations in the Company's operating results, new statutes or regulations or
changes in the interpretation of existing statutes or regulations affecting
the healthcare industry, generally, or assisted living companies, in
particular. In addition, the stock market in recent years has experienced
broad price and volume fluctuations that often have been unrelated to the
operating performance of particular companies. These market fluctuations
could have a material adverse effect on the market price of the Common Stock.
Dividend Policy. The Company has never declared or paid any dividends on
its Common Stock. The Company expects to retain any earnings to finance the
operations and expansion of the Company's business. See "Price Range of
Common Stock and Dividends."
Immediate and Substantial Dilution. The purchasers of the shares of Common
Stock offered hereby will experience immediate and substantial dilution in
the net tangible book value of their shares of Common Stock in the amount of
$15.17 per share. In the event the Company issues additional shares of Common
Stock in the future, including shares that may be issued in connection with
future acquisitions, purchasers of Common Stock in the Offering may
experience further dilution in the net tangible book value per share of
Common Stock. See "Dilution."
12
<PAGE>
THE COMPANY
The Standish Care Company ("Standish") was incorporated in Delaware in
October 1989. On October 4, 1996, twelve wholly owned subsidiaries of
Standish were merged into the twelve corporations comprising Pre-Merger
CareMatrix, owned primarily by Abraham, Andrew and Michael Gosman. The
stockholders of Pre-Merger CareMatrix received approximately 92% of the
outstanding shares of Common Stock of the Company. The managements of
Standish and Pre-Merger CareMatrix determined that a merger of their
companies would result in a stronger enterprise with greater potential for
expansion. Furthermore, they believed that the Merger would combine a strong
base of existing facilities in attractive markets with a large number of
facilities under development or construction, strengthen the senior
management team and improve the Company's access to equity and debt capital.
On October 14, 1996, the Company changed its name to CareMatrix Corporation
and effected the Reverse Split. The Merger was accounted for as a reverse
acquisition, whereby Pre-Merger CareMatrix is treated as the acquiror for
accounting purposes. Accordingly, the financial history of the Company
presented herein is that of Pre- Merger CareMatrix.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02194 and its telephone number at that address is (617)
433-1000. Unless otherwise indicated herein or required by the context,
references to the "Company" include its subsidiaries.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 6,250,000 shares of
Common Stock being offered hereby (assuming a public offering price of $21.25
per share and after deducting the estimated underwriting discounts and
commissions and offering expenses) are estimated to be approximately
$123,843,750. The Company intends to use the net proceeds of the Offering (i)
to finance the acquisition and development of additional assisted living and
other facilities; (ii) to repay outstanding debt to its principal stockholder
(including accrued interest) in the amount of approximately $21,450,000 at
June 30, 1996 (used primarily for working capital and, to a lesser extent,
incurred in connection with the Asset Purchase), which debt bears interest at
the prime rate (8.25% as of October 1, 1996) payable on demand and the
principal of which is payable in January 1998; (iii) to redeem the Series B
Preferred Stock held by the Company's principal stockholder at a redemption
price of $1,400,000 plus accrued dividends; (iv) to pay dividends in arrears
on its Series A Preferred Stock in the amount of $214,050; and (v) for
working capital purposes. Pending use of the net proceeds of the Offering,
the Company will invest such funds in short-term and medium-term, investment
grade, interest-bearing obligations. The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders
pursuant to the exercise of the Underwriters' over- allotment option. See
"Capitalization" and "Certain Transactions."
13
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is currently traded on the Nasdaq Small Cap System and is
quoted under the symbol "STAND." All sales prices set forth below prior to
October 4, 1996 reflect the price of Standish common stock prior to the
Merger. The following table sets forth for the periods indicated the range of
high and low sales prices as reported on the Nasdaq Small Cap System,
adjusted to reflect the one-for-five Reverse Split.
<TABLE>
<CAPTION>
High Low
---- ----
<S> <C> <C>
Fiscal Year Ended December 31, 1994
First Quarter 33 3/4 25 5/8
Second Quarter 26 7/8 15
Third Quarter 20 5/8 11 1/4
Fourth Quarter 13 7/16 10
Fiscal Year Ended December 31, 1995
First Quarter 12 1/2 9 3/8
Second Quarter 13 1/8 10
Third Quarter 14 3/8 11 1/4
Fourth Quarter 20 5/8 11 1/4
Fiscal Year Ending December 31, 1996
First Quarter 22 21/32 14 3/8
Second Quarter 29 3/8 10 5/8
Third Quarter 26 7/8 17 1/2
Fourth Quarter (through October 14, 1996) 21 7/8 20 5/16
</TABLE>
On October 3, 1996, the closing price for the Common Stock as quoted on
the Nasdaq Small Cap System was $21-1/4 as adjusted to give effect to the
Reverse Split. Prior to the Offering, however, only a limited number of
Shares have traded publicly. As of October 3, 1996, there were approximately
91 stockholders of record. The Common Stock has been approved for listing on
the American Stock Exchange.
The Company 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 the Company's Board of Directors. In addition, the
Company's ability to pay cash dividends is restricted by the provisions of
its Restated Certificate 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 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. The Company intends to
use a portion of the net proceeds of the offering to pay the $214,050 of
accrued but unpaid dividends on its Series A Preferred Stock and to redeem
all of its Series B Preferred Stock. See "Certain Transactions" and Note Q to
the Standish Consolidated Financial Statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1996 (i) on a historical basis, (ii) pro forma to give effect to the
Merger and the Asset Purchase, and (iii) as further adjusted to give effect
to the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds." This table should be read in conjunction
with the CareMatrix Combined Financial Statements and the Unaudited Pro Forma
Financial Information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------
Pro Forma
Historical Pro Forma As Adjusted
---------- --------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Current portion of long-term debt $ -- $ 2,816 $ 2,816
========== ========= =============
Long-term debt, net of current portion $ -- $ 10,461 $ 10,461
Due to stockholder 16,992 20,292 --
---------- --------- -------------
16,992 30,753 10,461
Stockholders' equity:
Series B Preferred Stock -- 1,400 --
Common Stock, par value $.05; 75,000,000
shares authorized; 10,866,000 shares issued
and outstanding, pro forma; 17,116,000
shares issued and outstanding, pro forma as
adjusted (1) (2) (3) -- 543 856
Additional paid in capital -- 14,881 138,198
Retained earnings (accumulated deficit) (13,498) (13,498) (13,498)
---------- --------- -------------
Total stockholders' equity (deficit) (13,498) 3,326 125,556
---------- --------- -------------
Total capitalization $ 3,494 $ 34,079 $136,017
========== ========= =============
</TABLE>
- -------------
(1) Adjusted to give effect to the Reverse Split.
(2) Does not include (i) an aggregate of 323,151 shares of Common Stock
issuable following the completion of the Offering upon exercise or
conversion of outstanding warrants and convertible securities of the
Company, and (ii) an aggregate of 1,600,000 shares of Common Stock
reserved for issuance under the Company's stock option/equity incentive
plans, of which approximately 680,000 have been granted at an average
exercise price of approximately $14.50 per share. See "Management,"
"Description of Capital Stock" and "Shares Eligible for Future Sale."
(3) Includes 108,000 shares of Common Stock to be issued as a fee in
connection with the Merger and assumes the conversion of the Series A
Preferred Stock into 19,140 shares of Common Stock. See Note 3 to
Unaudited Pro Forma Combined Balance Sheet and "Underwriting."
15
<PAGE>
DILUTION
The Company's pro forma net tangible book value (deficit) as of June 30,
1996 was $(18,182,000) or $(1.67) per share. Pro forma net tangible book
value (deficit) per share is determined by dividing the net tangible book
value (tangible assets less liabilities) of the Company (giving effect to the
Merger) by the number of shares of Common Stock outstanding at that date.
Assuming the receipt by the Company of the net proceeds from the sale of
6,250,000 shares of Common Stock offered hereby at an assumed offering price
of $21.25 per share, the adjusted pro forma net tangible book value of the
Company as of June 30, 1996 would have been $104,048,000 or $6.08 per share.
This represents an immediate increase in pro forma net tangible book value of
$7.75 per share to existing stockholders and an immediate dilution of $15.17
per share to new investors. All per share amounts have been restated to
reflect the Reverse Split effective October 14, 1996. The following table
illustrates this dilution per share:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price per share $21.25
Pro forma net tangible book value (deficit) per share $(1.67)
Increase per share attributable to the Offering 7.75
-------
Adjusted pro forma net tangible book value per share after
the offering 6.08
-------
Dilution to new investors $15.17
=======
</TABLE>
16
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
In connection with the Merger Agreement, Standish issued 10,000,000 shares
of Standish common stock (as adjusted to give effect to the Reverse Split) in
exchange for all the outstanding shares of common stock of Pre- Merger
CareMatrix. The Merger was accounted for as a reverse acquisition, whereby
Pre-Merger CareMatrix is the acquiror for accounting purposes. Accordingly,
the financial history presented is that of Pre-Merger CareMatrix. Therefore,
the CareMatrix Unaudited Pro Forma Combined Statements of Operations for the
year ended December 31, 1995 and the six months ended June 30, 1996 present
the CareMatrix Combined Statements of Operations for the year ended December
31, 1995 and the six months ended June 30, 1996 adjusted for the sale of
Common Stock offered hereby and the application of the net proceeds
therefrom, the Reverse Split and 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 Asset Purchase, as if such
transactions had occurred as of January 1, 1995. The CareMatrix Unaudited Pro
Forma Combined Balance Sheet as of June 30, 1996, presents the CareMatrix
Combined Balance Sheet as of June 30, 1996, adjusted for the sale of Common
Stock offered hereby and the application of the net proceeds therefrom, the
Reverse Split and 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 Asset Purchase.
The CareMatrix Unaudited Pro Forma Combined Financial Statements do not
purport to be indicative of the results of operations that actually would
have occurred had the Merger and Offering taken place on January 1, 1995, or
that may be expected to occur in the future. The CareMatrix Unaudited Pro
Forma Combined Financial Statements should be read in conjunction with the
CareMatrix Combined Financial Statements and the Standish Consolidated
Financial Statements included elsewhere in this Prospectus.
17
<PAGE>
CAREMATRIX
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Offering Pro Forma
CareMatrix Standish Adjustments Pro Forma Adjustments As Adjusted
---------- -------- --------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,028 $ 356 $ 500 (1) $ 3,284 $100,780 (6) $104,064
400 (2)
Accounts receivable, net 939 177 1,116 1,116
Prepaid expenses and other
current assets 318 803 1,121 1,121
---------- -------- --------- ----------- -------------
Total current assets 3,285 1,336 5,521 106,301
Property, plant & equipment, net 1,444 10,916 1,667 (4) 14,527 14,527
500 (5)
Note receivable 770 770 770
Goodwill and other intangibles, 21,508 21,508
net 1,661 17,047 (4)
2,800 (5)
Other assets 523 1,615 2,138 2,138
---------- -------- --------- ----------- -------------
Total assets $ 6,022 $ 15,528 $ 44,464 $145,244
========== ======== ========= =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued $ 841 $ 1,081 $ 2,250 (4) $ 4,172 $ 4,172
expenses
Accrued interest--stockholder 1,158 1,158 (1,158)(6) 0
Current portion of long-term 2,816 2,816
debt 3,316 500 (1)
(1,000)(2)
Other current liabilities 413 413 413
---------- -------- --------------- --------- -------------
Total current liabilities 1,999 4,810 8,559 7,401
Due to stockholder 16,992 3,300 (5) 20,292 (20,292)(6) 0
Long-term debt 10,461 10,461 10,461
Other long-term liabilities 529 521 667 (4) 1,717 1,717
Minority interest 109 109 109
Stockholders' equity:
Preferred stock 920 1,400 (2) 1,400 (1,400)(6) 0
(920)(7)
Common stock 35 543 (3) 543 313 (6) 856
(35)(7)
Additional paid-in capital 8,964 14,881 (3) 14,881 123,531 (6)
(8,964)(7)
(214)(6) 138,198
Accumulated deficit (13,498) (10,292) 10,292 (7) (13,498) (13,498)
---------- -------- --------------- --------- -------------
Total stockholders' equity
(deficit) (13,498) (373) 3,326 125,556
---------- -------- --------- -------------
Total liabilities and
stockholders' equity $ 6,022 $ 15,528 $ 44,464 $145,244
========== ======== ========= =============
</TABLE>
See accompanying notes to the Pro Forma Combined Financial Statements.
18
<PAGE>
CAREMATRIX
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the six months ended June 30, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Offering Pro Forma
CareMatrix Standish Adjustments Pro Forma Adjustments As Adjusted
---------- -------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 2,389 $4,670 $ 7,059 $ 7,059
Operating costs and expenses
Salaries, wages and benefits 1,575 53 (3) 1,628 1,628
Salaries, wages and benefits-- 1,406 1,406 1,406
related party
Community operating expense 3,209 3,209 3,209
Community rent expense 304 304 304
Selling, general and 931 931 931
administrative expense
Depreciation and amortization 65 393 341 (1)
expense
64 (2)
56 (4) 919 919
Other operating expenses 2,007 186 2,193 2,193
Other--related party expense 538 538 538
---------- -------- --------- -------------
Total operating costs and 5,591 5,023 11,128 11,128
expenses
Interest income (24) (29) (53) (53)
Interest expense 559 823 1,382 (559) (6) 823
Other (743) (743) (743)
---------- -------- --------- -------------
Loss $(3,737) $ (404) $(4,655) (4,096)
========== ======== ========= =============
Loss per common share $ (0.43) $ (0.24)
Shares outstanding 10,866(5) 17,116 (7)
</TABLE>
See accompanying notes to the Pro Forma Combined Financial Statements
19
<PAGE>
CAREMATRIX
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Offering Pro Forma
CareMatrix Standish Adjustments Pro Forma Adjustments As Adjusted
---------- -------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 2,485 $ 8,436 $ 10,921 $10,921
Operating costs and expenses
Salaries, wages and benefits 2,100 105 (3) 2,205 2,205
Salaries, wages and benefits-- 2,123 2,123 2,123
related party
Community operating expense 5,961 5,961 5,961
Community rent expense 616 616 616
Selling, general and 2,347 2,347 2,347
administrative expense
Depreciation and amortization 3 680 682 (1)
expense
127 (2)
112 (4) 1,604 1,604
Provision for closure loss 895 895 895
Other operating expenses 3,009 336 3,345 3,345
Other--related party expense 1,017 1,017 1,017
---------- -------- --------- -------------
Total operating costs and 9,147 9,940 20,113 20,113
expenses
Interest income (153) (153) (153)
Interest expense 544 1,500 2,044 (544) (6) 1,500
Assignment fee from related party (1,000) (1,000) (1,000)
Other 442 442 442
---------- -------- --------- -------------
Loss $(7,206) $(2,293) $(10,525) $(9,981)
========== ======== ========= =============
Loss per common share $ (0.97) $ (0.58)
Shares outstanding 10,866(5) 17,116(7)
</TABLE>
See accompanying notes to the Pro Forma Combined Financial Statements
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(dollar amounts in thousands)
Notes to Unaudited Pro Forma Combined Balance Sheet
(1) To record the $500 of proceeds received by Standish on July 10, 1996
pursuant to a $1,000 promissory note.
(2) 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.
(3) To record the issuance of approximately 866,000 shares of Common Stock
(as adjusted to give effect to the Reverse Split) at a value of $15,424 by
CareMatrix in consideration for Standish and the related merger costs
(assumes conversion of all Series A Preferred Stock into Common Stock).
(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:
<TABLE>
<CAPTION>
<S> <C>
Net assets of Standish at June 30, 1996 $ (373)
Writeup of fixed assets to fair market value 1,667
Tax effect of fixed asset writeup (667)
Provision for the cost of closing or subleasing certain Standish facilities and the
write off of related fixed assets (1,750)
Acquisition costs (500)
Goodwill recorded 17,047
---------
$15,424
=========
</TABLE>
(5) To record the purchase from a related party of management contracts
for $2,800 and fixed assets for $500 by CareMatrix in July 1996.
(6) Reflects the issuance of 6,250,000 shares of Common Stock and the use
of the net offering proceeds ($123,844 net of underwriting fees and
expenses) to pay amounts Due to stockholder including accrued interest, to
redeem the Series B Preferred Stock, and to pay unpaid cumulative
preferred stock dividends on the Series A Preferred Stock as follows:
<TABLE>
<CAPTION>
<S> <C>
Net proceeds to CareMatrix $123,844
Repay Due to stockholder (20,292)
Repay accrued interest due to stockholder (1,158)
Redeem Series B Preferred Stock (1,400)
Pay cumulative preferred stock dividends on the Series A Preferred Stock (214)
----------
Net increase in cash $100,780
==========
</TABLE>
(7) To eliminate Standish equity accounts in conjunction with purchase
accounting.
Notes to Unaudited 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 as
follows:
<TABLE>
<CAPTION>
Depreciation Expense
Adjustments
--------------------------
Year Ended Six Months
December Ended
Depreciable 31, June 30,
Item Amounts Lives 1995 1996
--------------------------------------------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Assets written up to fair market value $1,667 30 $ 56 $28
Fixed assets acquired from a related party 500 7 71 36
----------- -----------
Total $127 $64
=========== ===========
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(dollar amounts in thousands)
Notes to Unaudited Pro Forma Combined Statements of Operations (Continued)
(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 in July
1996 over the lives of the contracts (25 years).
(5) Reflects CareMatrix's 50,000,000 pre-Reverse Split shares and the
4,330,000 pre-Reverse Split shares issued by CareMatrix in consideration
for Standish and the related merger costs, adjusted for the Reverse Split
to 10,866,000 shares in the aggregate.
(6) Reflects the reduction of interest expense resulting from the use of
Offering proceeds to pay amounts Due to stockholder.
(7) Reflects the issuance of 6,250,000 shares of Common Stock pursuant to
the Offering.
22
<PAGE>
SELECTED COMBINED FINANCIAL DATA OF THE COMPANY
(in thousands, except per share data)
The following table sets forth the historical combined financial
information of the Company and pro forma financial information to give effect
to the Merger, the Asset Purchase and the sale of the Common Stock offered
hereby. The Merger was accounted for as a reverse acquisition, whereby
Pre-Merger CareMatrix is the acquiror for accounting purposes. Accordingly,
the financial history presented is that of Pre-Merger CareMatrix. The pro
forma financial information was prepared to illustrate the effects of the
Merger, the Asset Purchase, the Reverse Split and the Offering. The pro forma
financial information does not purport to be indicative of the results of
operations which actually would have occurred had the Merger, the Asset
Purchase and Offering taken place on January 1, 1995, or which may be
expected to occur in the future. The pro forma financial information should
be read in conjunction with the CareMatrix Combined Financial Statements, the
Standish Consolidated Financial Statements and the Unaudited Pro Forma
Financial Information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Pro Forma
Pro Forma As Adjusted (3)
Six Six
June 24, 1994 Year Ended Months Year Ended Months Year Ended Six Months
(Inception) to December Ended December Ended December Ended
December 31, 31, June 30, 31, June 30, 31, June 30,
1994 (1) 1995 (1) 1996 (1) 1995 (2) 1996 (6) 1995 1996
-------------- ----------- --------- ----------- --------- ----------- -----------
(Audited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $ 366 $ 2,485 $ 2,389 $ 10,921 $ 7,059 $10,921 $ 7,059
Operating costs and expenses 2,865 9,147 5,591 20,113 11,128 20,113 11,128
-------------- ----------- --------- ----------- --------- ----------- -----------
Loss from operations (2,499) (6,662) (3,202) (9,192) (4,069) (9,192) (4,069)
Interest income (24) (153) (53) (153) (53)
Interest expense 56 544 559 2,044 1,382 1,500 823
Other -- -- -- (558) (743) (558) (743)
-------------- ----------- --------- ----------- --------- ----------- -----------
Loss (4) $(2,555) $(7,206) $(3,737) $(10,525) $(4,655) $(9,981) $(4,096)
============== =========== ========= =========== ========= =========== ===========
Pro forma loss per share $ (0.97) $ (0.43) $ (0.58) $ (0.24)
Shares outstanding 10,866 10,866 17,116 17,116
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30, 1996
--------------------- ----------------------------------------------------
Pro Forma
1994 (1) 1995 (1) Historical (1) Pro Forma (5) As Adjusted (6)
--------- --------- --------------- -------------- ----------------
(Audited) (Unaudited) (Unaudited) (Unaudited)
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2 $ 145 $ 2,028 $ 3,284 104,064
Working capital (deficit) 174 (691) 1,286 (3,038) 98,900
Total assets 330 2,410 6,022 44,464 145,244
Long-term debt, less current
maturities (7) 2,730 9,661 16,992 30,753 10,461
Stockholders' equity (deficit) (2,555) (9,762) (13,498) 3,326 125,556
</TABLE>
- -------------
(1) The historical combined financial data represent the combined
financial position and results of operations for the Company for the
periods presented.
(2) Gives effect to the Merger, the Asset Purchase and the Reverse Split
as if such transactions had occurred as of January 1, 1995. See
"Unaudited Pro Forma Financial Information."
(3) Gives effect to (i) the Merger, the Asset Purchase and the Reverse
Split and (ii) the sale of Common Stock offered hereby (assuming a
public offering price of $21.25 per share) and the application of the
net proceeds therefrom, as if such transactions had occurred as of
January 1, 1995. See "Use of Proceeds" and "Unaudited Pro Forma
Financial Information."
(4) Provisions for income taxes have not been reflected in these combined
financial statements since there is no taxable income on a combined
basis. See Note 2 to the CareMatrix Combined Financial Statements.
(5) Adjusted to give effect to the Merger and the Asset Purchase as if
such transactions had occurred on June 30, 1996. See "Unaudited Pro
Forma Financial Information."
(6) Adjusted to give effect to (i) the Merger and the Asset Purchase and
(ii) the sale of Common Stock offered hereby (assuming a public
offering price of $21.25 per share) and the application of the net
proceeds therefrom as if such transactions had occurred on June 30,
1996. See "Use of Proceeds" and "Unaudited Pro Forma Financial
Information."
(7) Includes debt due to stockholder.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
General
On October 4, 1996, the Company consummated the Merger. In the Merger,
Standish, as the surviving company in the Merger, acquired all of the assets
and operations of Pre-Merger CareMatrix and issued 10,000,000 shares of its
Common Stock (as adjusted to give effect to the Reverse Split) to the
stockholders of Pre-Merger CareMatrix. The Merger was treated as a "reverse
acquisition" for accounting purposes, with Pre-Merger CareMatrix treated as
the accounting acquiror, even though Standish was 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 of the Company reflect the historical financial
statements of Pre-Merger CareMatrix. The Company, as the accounting acquiror,
treats the Merger as a purchase acquisition. The Merger was recorded using
the historical cost basis for the assets and liabilities of Pre-Merger
CareMatrix, and the estimated fair value of Standish's assets and
liabilities.
Results of Operations
The following discussion reviews the Company's 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"), respectively. The CareMatrix Combined Financial
Statements and the Notes thereto included elsewhere in this Prospectus
present the results of operations of the entities that have been operated
under common control on a combined basis. All of the operations of the
Company began subsequent to June 23, 1994. As a result, the Company believes
that any period to period comparisons and percentage relationships within
periods are not meaningful. The Company's revenues following the Merger will
primarily consist of resident and management fees from the facilities it
owns, leases or manages, and development fees from the facilities it develops
for related and unrelated parties. The nature and amount of such revenues
will depend on the Company's ability to implement successfully its strategic
growth plans. See "Risk Factors" and "Business--Business Strategy." The
Company expects to incur losses from operations through at least the end of
1996 and may continue to have losses thereafter. See "Risk Factors--History
of Losses from Operations; Accumulated Deficit" and "--Dependence by the
Company on Related Party Agreements."
Revenues. During the 1994 Period, the year ended December 31, 1995 and the
1996 Period, the Company 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. The Company
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. The Company 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. The Company 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 represent primarily salaries, wages and benefits and
professional fees for administration, marketing and facility development of
the Company. General corporate expenses will continue to increase in absolute
terms, but this expense as a percentage of net revenues is expected to
continue to decline. Historically, these expenses have been paid to a related
party, Continuum Care of Massachusetts, Inc. in the form of management fees.
Following the Merger, the Company's reliance on Continuum Care of
Massachusetts, Inc., for personnel and services has been significantly
reduced.
24
<PAGE>
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.
Depreciation and Amortization. The Company'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. The Company'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 payable at the prime rate 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 the Company 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 $2.7 million, $6.9 million and $7.3 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, the Company's principal source of liquidity consisted of
$2.0 million in cash. The Company also had $2.0 million of current
liabilities (which includes approximately $1.2 million of interest due to the
Company's principal stockholder). The Company intends to seek additional
financing from Abraham D. Gosman to the extent necessary for working capital
purposes prior to the Offering, although Mr. Gosman is under no obligation to
provide such additional financing. It is expected that once the Offering is
completed, Mr. Gosman will no longer provide funding for the Company. All
loans from Mr. Gosman bear interest at a rate equal to the prime rate.
On a pro forma basis after the Merger and Offering and the application of
the net proceeds of the Offering as set forth in "Use of Proceeds," the
Company will have working capital of $98.9 million (including cash and cash
equivalents of $104.1 million). In addition, the Company will have $10.5
million of long-term debt.
The Company will require resources in the future to fund the planned
acquisition and development of additional assisted living, supportive
independent and extended care facilities as well as its working capital
requirements. The Company expects to fund these resource requirements with
the net proceeds from the Offering and related party or third party financing
of certain assisted living facilities. The Company and Chancellor are
presently in discussions with a number of parties to secure commitments
regarding sources of additional financing. Furthermore, the Company intends
to seek bank borrowings and other debt or equity financings to provide
additional sources of capital in the future. See "Risk Factors--Need for
Additional Financing."
25
<PAGE>
SELECTED FINANCIAL DATA OF STANDISH
(dollar amounts in thousands, except per share data)
The Merger was accounted for as a reverse acquisition, whereby Pre-Merger
CareMatrix is deemed the acquiror for accounting purposes. The following
selected financial data for Standish are included herein as a predecessor
company of Pre-Merger CareMatrix within the meaning of the applicable
regulations of the Commission (as adjusted to give effect to the Reverse
Split).
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------------ --------------------
1991 1992 1993 1994 1995 1995 1996
------- -------- -------- -------- -------- -------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Service revenue $ 20 $ 689 $ 1,193 $ 6,127 $ 7,702 $ 3,518 $ 4,380
Management fees and marketing
revenue 98 287 441 277 512 305 213
Development fees and
other revenue 83 30 97 305 222 158 77
------- -------- -------- -------- -------- -------- ---------
202 1,006 1,731 6,709 8,436 3,981 4,670
------- -------- -------- -------- -------- -------- ---------
Operating costs and expenses:
Community operating expense 162 1,179 1,013 5,042 5,961 2,750 3,208
Community rent expense -- -- -- 407 616 272 304
Selling, general and admin. expense 652 1,397 1,513 2,509 2,347 1,156 931
Depreciation and amortization 22 370 283 693 680 321 393
Provision for doubtful accounts -- 132 240 338 74 -- --
Severance costs -- -- -- -- 263 -- --
Transaction termination costs -- -- -- -- -- -- 186
Write-off of investments in development
projects -- -- -- 833 -- -- --
------- -------- -------- -------- -------- -------- ---------
Total operating costs and expenses 836 3,078 3,049 9,823 9,940 4,498 5,023
------- -------- -------- -------- -------- -------- ---------
Loss from operations (634) (2,072) (1,318) (3,114) (1,505) (518) (353)
Interest expense (168) (913) (352) (1,109) (1,500) (678) (824)
Interest income 44 145 42 20 153 81 29
Write-off of financing costs and other
related costs -- -- -- -- (528) -- --
Assignment fee from related party -- -- -- -- 1,000 -- --
Gain on sale of bonds -- -- 158 -- -- -- --
Gain on sale of land -- -- 376 -- -- -- --
Gain on sale of interest in affiliate -- 1,557 -- -- -- -- --
Other income -- -- -- -- -- -- 696
Minority interest 98 -- -- 31 87 50 48
------- -------- -------- -------- -------- -------- ---------
Loss before income taxes $ (660) $(1,282) $(1,094) $(4,172) $(2,293) $(1,065) $ (404)
------- -------- -------- -------- -------- -------- ---------
Provision for income taxes -- -- (1) -- -- -- --
------- -------- -------- -------- -------- -------- ---------
Net loss $ (660) $(1,282) $(1,095) $(4,172) $(2,293) $(1,065) $ (404)
======= ======== ======== ======== ======== ======== =========
Net loss per common share $ (5.25) $ (5.10) $ (4.75) $ (9.05) $ (3.55) $ (1.65) $ (0.65)
Weighted average number of common shares
outstanding 126 252 289 493 679 679 688
Balance Sheet Data:
Total assets $11,453 $ 3,505 $13,657 $13,419 $15,975 $17,600 $15,528
Convertible debt 231 -- -- 895 2,000 2,000 2,000
Long-term debt (excluding convertible
debt) 10,266 1,375 5,652 7,545 10,457 10,676 8,462
Stockholders' equity (deficit) (429) 927 6,065 2,327 18 1,211 (373)
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF STANDISH
Overview
Organized in October 1989, Standish operates assisted living communities
throughout the eastern United States and provides management, marketing,
development and other services to third party owners of assisted living
communities. 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. Prior to the Merger, Standish operated ten communities for its own
account with a resident capacity of 516, and provided managing and marketing
services for four communities with a resident capacity of 385.
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. 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. See Notes C, G and R to the Standish Consolidated Financial
Statements.
The results of operations for the six month period ended June 30, 1996
include the accounts of Standish, Bailey Retirement Center, Inc. ("Bailey"),
an assisted living community in Gainesville, Florida that Standish acquired
in July 1992, Dominion Villages, Inc. ("Dominion"), a chain of three assisted
living communities in the Tidewater, Virginia area which Standish acquired in
November 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 that Standish acquired in March 1994, Bailey Home Suites
("Bailey Suites"), an assisted living community in Gainesville, Florida that
Standish began leasing in September 1994 and Lakes Region, L.L.C. ("Sunny
Knoll"). Standish and Emeritus Corporation ("Emeritus"), through a limited
liability company, acquired 51% and 49% ownership interests, respectively, in
the Sunny Knoll community located in Franklin, New Hampshire in May 1995.
The results of operations for the six month period 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.
27
<PAGE>
The following table sets forth the approximate percentage of Standish's
total revenues represented by certain items from Standish's consolidated
statement of operations for the respective periods presented:
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, ended June 30,
1995 1994 1993 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Service revenue 91.3% 91.3% 68.9% 88.4% 93.8%
Management fees and marketing revenue 6.1 4.1 25.5 7.7 4.6
Development fees and other revenue 2.6 4.6 5.6 3.9 1.6
------- ------- ------- ------- -------
Total revenues 100.0 100.0 100.0 100.0 100.0
Operating costs and expenses:
Community operating expense 70.7 75.2 58.5 69.1 68.7
Community rent expense 7.3 6.1 -- 6.8 6.6
Selling, general and administrative expense 27.8 37.4 87.4 29.0 19.9
Transaction termination costs -- -- -- -- 4.0
Depreciation and amortization expense 8.1 10.3 16.4 8.1 8.4
Provision for corporate doubtful accounts 0.9 5.0 13.9 -- --
Severance costs 3.1 -- -- -- --
Write-off of investment in development projects -- 12.4 -- -- --
------- ------- ------- ------- -------
Total operating costs and expenses 117.9 146.4 176.2 113.0 107.6
------- ------- ------- ------- -------
Income (loss) from operations (17.9) (46.4) (76.2) (13.0) (7.6)
Interest expense (17.7) (16.5) (20.3) (17.1) (17.6)
Interest income 1.8 0.3 2.4 2.0 0.6
Other income -- -- -- -- 15.0
Write-off of financing costs and other related costs (6.3) -- -- -- --
Assignment fee from related party 11.9 -- -- -- --
Gain on sale of bonds -- -- 9.1 -- --
Gain on sale of land -- -- 21.7 -- --
Minority interest 1.0 0.4 -- 1.3 1.0
------- ------- ------- ------- -------
Income (loss) before income taxes (27.2)% (62.2)% (63.3)% (26.8)% (8.6)%
======= ======= ======= ======= =======
</TABLE>
Results of Operations
Six Months Ended June 30, 1996 Compared to the Six Months Ended June 30, 1995
Revenues. Revenues for the six month period ended June 30, 1996 were
$4,670,000, representing an increase of $689,000, or 17%, from revenues of
approximately $3,981,000 in the comparable period in 1995.
Service revenue for the six month period ended June 30, 1996 was
$4,380,000, representing an increase of $862,000, or 25%, from service
revenue of $3,518,000 in the comparable period in 1995. Of this increase,
$369,000 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 $493,000 balance of this
increase in service revenue was primarily attributable to higher service
revenues at certain of the communities operated by Standish throughout the
period, primarily due to increased resident census and higher average service
fee rates at these communities.
Management fees and marketing revenue for the six month period ended June
30, 1996 was $213,000, representing a decrease of $92,000, or 30%, from
management fees and marketing revenue of $305,000 in the comparable period in
1995. The higher management fees and marketing revenue during the 1995
comparable period was 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.
28
<PAGE>
Development fees and other revenue for the six month period ended June 30,
1996 was $77,000, representing a decrease of $81,000, or 51%, from
development fees and other revenue of $158,000 in the comparable period in
1995. Development fees and other revenue for the six month period ended June
30, 1996 was primarily comprised of fees associated with one assisted living
community being developed in Cambridge, Massachusetts while development fees
and other revenue in the comparable period in 1995 was 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 Realty Associates, L.P.
("Cornish") in Providence, Rhode Island.
Community Operating Expense. Community operating expense for the six month
period ended June 30, 1996 was $3,208,000, representing an increase of
$458,000, or 17%, from community operating expense of $2,750,000 in the
comparable period in 1995. As a percentage of service revenue, community
operating expense decreased to 73.2% for the six month period ended June 30,
1996, versus 78.2% in the comparable period in 1995. Of the increase in the
amount of community operating expense, $255,000 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 $203,000 remaining increase 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 six month
period ended June 30, 1996 was $304,000, representing an increase of $32,000,
or 12%, from community rent expense of $272,000 in the comparable period in
1995. As a percentage of service revenue, community rent expense decreased to
6.9% for the six month period ended June 30, 1996, versus 7.7% in the
comparable period in 1995. The increase in the amount of community rent
expense is primarily due to increased lease advances in connection with the
expansion of 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 six month period ended June 30, 1996 was
$931,000, representing a decrease of $225,000, or 19%, from selling, general
and administrative expense of $1,156,000 in the comparable period in 1995. As
a percentage of total revenues, selling, general and administrative expense
decreased to 19.9% for the six month period ended June 30, 1996, versus 29.0%
in the comparable period in 1995. The decrease in the amount of selling,
general and administrative expense for the six month period ended June 30,
1996 versus the comparable period 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 $186,000
for the six month period June 30, 1996. 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 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 six month period ended June 30, 1996 was approximately
$393,000, representing an increase of $72,000, or 22%, from depreciation and
amortization expense of $321,000 in the comparable period in 1995. As a
percentage of total revenues, depreciation and amortization expense increased
to 8.4% for the six month period ended June 30, 1996, versus 8.1% in the
comparable period in 1995. Of the increase in the amount of depreciation and
amortization expense, $34,000 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
29
<PAGE>
expense at Dominion due to certain additions at those facilities during the
six month period ended June 30, 1996 versus the comparable period 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 six month period ended June 30,
1996 was $824,000, representing an increase of $146,000, or 22%, from
interest expense of $678,000 for the comparable period in 1995. As a
percentage of total revenues, interest expense was 17.6% for the six month
period ended June 30, 1996, versus 17.1% for the comparable period in 1995.
The increase 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.
Interest Income. Interest income for the six month period ended June 30,
1996 was $29,000, representing a decrease of $52,000, or 64%, compared to
interest income of $81,000 in the comparable period in 1995. As a percentage
of total revenues, interest income was 0.6% for the six month period ended
June 30, 1996, versus 2.0% in the comparable period in 1995. Interest income
for the six month period ended June 30, 1996 represents interest earned on
cash and cash equivalents. Interest income for the six month period 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.
Other Income. Other income for the six month period ended June 30, 1996
was $696,000. 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. Other income also 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.
Minority Interest. Minority interest for the six month period ended June
30, 1996 was $48,000, representing a decrease of $2,000, or 4% versus $50,000
in the comparable period in 1995. As a percentage of total revenues, minority
interest was 1.0% for the six month period ended June 30, 1996, versus 1.3%
for the comparable period in 1995.
Year ended December 31, 1995 Compared to the Year ended December 31, 1994
Revenues. Revenues for the year ended December 31, 1995 were $8,436,000,
representing an increase of $1,727,000, or 26%, from revenues of $6,709,000
in 1994.
Service revenue for the year ended December 31, 1995 was $7,702,000,
representing an increase of $1,575,000, or 26%, from service revenue of
$6,127,000 in 1994. Of this increase, $808,000 was attributable to the
acquisition of Sunny Knoll consummated in May 1995 and $142,000 was
attributable to the acquisition of Bailey Suites consummated in September
1994. The remaining $625,000 increase in service revenue was attributable to
an increase in service revenue of communities operated by Standish throughout
both years. This increase was primarily attributable to growth in resident
census and higher average rates charged for services provided at these
communities. Partially offsetting these increases was a $299,000 decrease in
service revenue at Standish Lowry community. This decrease was primarily
attributable to a significant decrease in the census at this facility.
Management fees and marketing revenue for the year ended December 31, 1995
was $512,000, representing an increase of $235,000, or 85%, from management
fee and marketing revenue of $277,000 in 1994. The increase in management
fees and marketing revenue in 1995 was primarily due to increased management
and marketing fees on certain of Standish management agreements due to
increased occupancy at these facilities. The increase was also attributable
to $100,000 of management fees Standish received related to Crystal Cove, a
senior living community in Florida. The 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 year ended December 31, 1995
was $222,000, representing a decrease of $83,000, or 27%, from development
fee revenue of $305,000 in 1994. The decrease in development fee revenue was
primarily attributable to certain development contracts which expired during
1995 in which
30
<PAGE>
Standish completed its responsibilities under these development contracts.
These expired contracts were partially offset by two new development
contracts Standish acquired during 1995.
Community Operating Expense. Community operating expense for the year
ended December 31, 1995 was $5,961,000, representing an increase of $919,000,
or 18%, from community operating expense of $5,042,000 in 1994. As a
percentage of service revenue, community operating expense was 77.4% and
82.3% for the years ended December 31, 1995 and 1994, respectively. Of the
$919,000 increase in the amount of community operating expense, $410,000 was
attributable to the Sunny Knoll acquisition which was consummated in May 1995
and $54,000 was attributable to the Bailey Suites lease which began in
September 1994. The remaining $455,000 increase was attributable to an
increase in community operating expense of communities operated by Standish
throughout both years, primarily due to increases in resident occupancy at
these communities. The decrease in community operating expense as a
percentage of service revenue was due primarily to the acquisition of Sunny
Knoll and improved operating margins at the Bailey, Dominion and Piedmont
communities and to increased occupancy at certain of Standish's communities.
Community Rent Expense. Community rent expense represents lease payments
Standish is required to make under operating leases at Piedmont Village and
Bailey Suites. Community rent expense for the year ended December 31, 1995
was $616,000, representing an increase of $209,000, or 51%, from community
rent expense of $407,000 in 1994. As a percentage of service revenue,
community rent expense was 8.0% and 6.6% for the years ended December 31,
1995 and 1994, respectively. The increase in the amount of community rent
expense is due primarily to the timing of both the Piedmont acquisition
(consummated in March 1994) and the Bailey Suites acquisition (consummated in
September 1994).
Selling, General and Administrative Expense. Selling, general and
administrative expense for the year ended December 31, 1995 was $2,347,000,
representing a decrease of $162,000, or 6%, from selling, general and
administrative expense of $2,509,000 in 1994. As a percentage of total
revenues, selling, general and administrative expense was 27.8% and 37.4% for
the years ended December 31, 1995 and 1994, respectively. The decrease in the
amount of selling, general and administrative expense was primarily
attributable to a decrease in salaries and employee benefits, professional
fees, travel and related costs, public relations, printing and consulting
costs. The decrease in selling, general and administrative expense as a
percentage of total revenues was due to lower spending levels in 1995 and the
allocation of these expenses over increased levels of total revenues in 1995.
Depreciation and Amortization Expense. Depreciation and amortization
expense for the year ended December 31, 1995 was $680,000, representing a
decrease of $13,000, or 2%, from depreciation and amortization expense of
$693,000 in 1994. As a percentage of total revenues, depreciation and
amortization expense was 8.1% and 10.3% for the years ended December 31, 1995
and 1994, respectively. The decrease in the amount of depreciation and
amortization expense was primarily due to a decrease in the amount of
corporate depreciation and amortization expense. This decrease was due to the
write-off of capitalized SLI management contract costs as of December 31,
1994. Due to the write-off of those contract costs, no amortization expense
of the contract costs was recorded during 1995. Standish recorded
approximately $79,000 of amortization expense related to these contract costs
in 1994. This decrease was partially offset by an increase in depreciation
and amortization expense of approximately $66,000 related to Sunny Knoll
which acquisition was consummated in May 1995. The decrease in depreciation
and amortization expense as a percentage of total revenues was due primarily
to the allocation of these expenses over increased levels of total revenues
in 1995.
Provision for Corporate Doubtful Accounts. Provision for corporate
doubtful accounts for the year ended December 31, 1995 was $74,000,
representing a decrease of $264,000, or 78%, from provision for corporate
doubtful accounts of $338,000 in 1994. As a percentage of total revenues,
provision for doubtful accounts was .9% and 5.0% for the years ended December
31, 1995 and 1994, respectively. The decrease in provision for corporate
doubtful accounts as a percentage of total revenues was due to a lower level
of write-offs and the allocation of these expenses over increased levels of
total revenues.
Severance Costs. Severance costs represents the cost associated with an
Early Retirement and Non- Competition Agreement Standish entered into
effective December 31, 1995 with a former officer and director of Standish.
Severance costs for the year ended December 31, 1995 were $263,000 versus
none in 1994.
Interest Expense. Interest expense for the year ended December 31, 1995
was $1,500,000, representing an increase of $391,000, or 35%, from interest
expense of $1,109,000 in 1994. As a percentage of total revenues,
31
<PAGE>
interest expense was 17.7% and 16.5% for the years ended December 31, 1995
and 1994, respectively. The increase in the amount of interest expense was
due primarily to increased interest expense on increased borrowings for
working capital purposes primarily derived from the convertible debentures
sold to Emeritus and borrowings associated with Standish's acquisition of
Sunny Knoll in May 1995.
Interest Income. Interest income for the year ended December 31, 1995 was
$153,000, representing an increase of $133,000, or 665%, from the interest
income of $20,000 in 1994. As a percentage of total revenues, interest income
was 1.8% and 0.3% for the years ended December 31, 1995 and 1994,
respectively. The increase in the amount of interest income was primarily due
to interest associated with Standish's investment in Cornish which earns
interest at the rate of 15% per annum.
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 Standish incurred in connection with a
proposed financing and its then proposed related acquisition of the Green
Meadows communities pursuant to the "Green Meadows Agreement." Write-off of
financing costs and other related costs for the year ended December 31, 1995
were $528,000 versus none in 1994.
In September 1995, Standish decided not to proceed with its financing and
also assigned its rights and obligations to the Green Meadows Agreement to
Emeritus. As such, Standish wrote off the costs associated with both its
proposed financing and the Green Meadows Agreement.
Assignment fee from Related Party. Assignment fee from related party
represents the fee Standish recognized for assigning its rights and
obligations to the Green Meadows Agreement to Emeritus. Assignment fee from
related party for the year ended December 31, 1995 was $1,000,000 versus none
in 1994.
Minority Interest. Minority interest for the year ended December 31, 1995
was $87,000, representing an increase of $56,000, or 181%, from minority
interest of $31,000 in 1994. As a percentage of total revenues, minority
interest was 1.0% and .4% for the years ended December 1995 and 1994,
respectively. The increase in the amount of minority interest is due to
increased losses in 1995 at Lowry. Standish owns 80% of Lowry. These losses
were partially offset by income from Sunny Knoll. Standish owns 51% of Sunny
Knoll.
Year ended December 31, 1994 Compared to the Year ended December 31, 1993
Revenues. Revenues for the year ended December 31, 1994 were $6,709,000,
representing an increase of $4,978,000, or 288%, from revenues of $1,731,000
in 1993.
Service revenue for the year ended December 31, 1994 was $6,127,000,
representing an increase of $4,934,000, or 414%, from service revenue of
$1,193,000 in the comparable period in 1993. Of this increase, $4.7 million
was attributable to acquisitions consummated by Standish either during the
fourth quarter of 1993 or during the first quarter of 1994. The remaining
$200,000 increase in service revenue was attributable to an increase in
service revenue at communities operated by Standish throughout both periods.
This increase was primarily attributable to growth in resident census and
higher average rates charged for services provided at those communities.
Management fees and marketing revenue for the year ended December 31, 1994
were $277,000, representing a decrease of $164,000, or 37%, from management
fees and marketing revenue of $441,000 in 1993. The decrease in management
fees was primarily attributable to a decrease of $163,000 from 1993 to 1994
in the management fees recorded by Standish under its management contract
with SLI. The decrease in management fees was attributable also to the
expiration of a management and marketing contract on December 31, 1993 and
the termination of a management contract at another facility, also in
December 1993. These decreases in management fees were offset in part by
certain new management contracts which began generating revenue in 1994.
Development fees and other revenue for the year ended December 31, 1994
was $305,000, representing an increase of $208,000, or 214%, from development
fee revenue of $97,000 in 1993. Of this increase, $128,000 was a development
fee recorded by Standish in connection with development services provided by
it at Laurelmead. The remaining increase was attributable to various other
new development contracts which Standish entered into during 1994.
Community Operating Expense. Community operating expense for the year
ended December 31, 1994 was $5,042,000, representing an increase of
$4,029,000, or 398%, from community operating expense of $1,013,000 in 1993.
As a percentage of service revenue, community operating expense was 82.3% and
84.9% for the years
32
<PAGE>
ended December 31, 1994 and 1993, respectively. Of the $4,029,000 increase in
the amount of community operating expense, approximately $3,600,000 was
attributable to the Dominion Village acquisition, which was consummated
during the fourth quarter of 1993, and the Lowry and Piedmont Villages
acquisitions, which were consummated during the first quarter of 1994. The
remainder of the increase reflects an increase in community operating expense
of communities operated by Standish throughout both years, primarily due to
increases in resident occupancy at those communities. The decrease in
community operating expense as percentage of service revenue was due
primarily to improved operating margins at the Dominion Village and Bailey
communities and to increased occupancy at these communities.
Community Rent Expense. Community rent expense for the year ended December
31, 1994 was $407,000. Standish did not incur any community rent expense in
1993. As a percentage of service revenue, community rent expense was 6.6% for
the year ended December 31, 1994.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the year ended December 31, 1994 was $2,509,000,
representing an increase of $996,000, or 66%, from selling, general and
administrative expense of $1,513,000 in 1993. As a percentage of total
revenues, selling, general and administrative expense was 37.4% and 87.4% for
the years ended December 31, 1994 and 1993, respectively. Approximately
$600,000 of the amount of the increase in selling, general and administrative
expense was attributable to increased salaries, wages, related payroll taxes
and benefits for the additional personnel required to support Standish's
significantly increased volume of business. The increase was also due to
increased legal and printing costs of $228,000, increased marketing and
public relations costs of approximately $177,000, and higher travel and
related costs of approximately $101,000, all due to the increased levels of
revenues in 1994. The decrease in selling, general and administrative expense
as a percentage of net revenues was due to the allocation of these expenses
over increased levels of total revenues in 1994.
Depreciation and Amortization Expense. Depreciation and amortization
expense for the year ended December 31, 1994 was $693,000, representing an
increase of $410,000, or 145%, from depreciation and amortization expense of
$283,000 in 1993. As a percentage of total revenues, depreciation and
amortization expense were 10.3% and 16.3% for the years ended December 31,
1994 and 1993, respectively. The increase in the amount of depreciation
expense in 1994 as compared to 1993 was due almost entirely to depreciation
and amortization expense associated with the Dominion Villages acquisition
Standish consummated in the fourth quarter of 1993 and the Lowry and Piedmont
Village acquisitions consummated in the first quarter of 1994. The decrease
in depreciation and amortization expense as a percentage of total revenues
was due to the allocation of these expenses over increased levels of total
revenues in 1994.
Provision For Corporate Doubtful Accounts. Provisions for corporate
doubtful accounts for the year ended December 31, 1994 were $338,000,
representing an increase of $98,000, or 41%, from provisions for corporate
doubtful accounts of $240,000 in 1993. As a percentage of total revenues,
provisions for corporate doubtful accounts was 5.0% and 13.9% for the years
ended December 31, 1994 and 1993, respectively. The $338,000 of write-offs
and provisions for doubtful accounts in 1994 was related primarily to
write-offs of fees deemed uncollectible in connection with Standish's SLI
management contract. The entire $240,000 of write-offs and provisions for
doubtful accounts in 1993 was comprised of fees which were deemed
uncollectible in connection with Standish's SLI management contract.
Write-off of Investment in Development Projects. Write-off of investment
in development projects for the year ended December 31, 1994 was $833,000.
The write-off of investments in development projects related to write-offs of
investments in developments in which Standish either was no longer holding an
interest or in which the estimated realizable value had significantly
decreased. No such write-off of investment in development projects was
incurred in the comparable period in 1993. As a percentage of total revenues,
write-off of investment in development projects was 12.4% for the year ended
December 31, 1994.
Interest Expense. Interest expense for the year ended December 31, 1994
was $1,109,000, representing an increase of $757,000, or 215%, from interest
expense of $352,000 in 1993. As a percentage of total revenues, interest
expense was 16.5% and 20.3% for the years ended December 31, 1994 and 1993,
respectively. The increase in the amount of interest expense was attributable
primarily to interest expense associated with three acquisitions Standish
consummated in the fourth quarter of 1993 and the first quarter of 1994. The
decrease in interest expense as a
33
<PAGE>
percentage of total revenues was attributable to the allocation of this
expense over increased levels of total revenues in 1994.
Gain on Sale of Interest in Affiliate and Other Assets. In 1994, Standish
did not record a gain on sale of interest in affiliate and other assets. In
1993, Standish resold the Group C SLI Bonds and recognized a gain of
$158,000. Standish also sold a parcel of land in 1993. The total gain with
respect to this transaction was $597,000, of which $221,000 was deferred as
this portion of the sales proceeds was received in the form of a note.
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 Pre-Merger CareMatrix (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 Pre-Merger CareMatrix 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.
On July 10, 1996, Pre-Merger CareMatrix 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 Abraham D. Gosman 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 Common
Stock exceeds 150% of the conversion price ($20.80, adjusted to give effect
to the Reverse Split) 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 80,000
shares of Common Stock at an exercise price of $20.80 per share (as adjusted
to give effect to the Reverse Split).
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 shares of its Common Stock
for shares 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 eight
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
34
<PAGE>
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 $1.25 reduction in the initial
$20.00 per share conversion price (as adjusted to reflect the Reverse Split).
The conversion price at June 30, 1996 was $16.25 per share, as adjusted to
reflect the Reverse Split (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 $19.25 million. Under the terms of the
agreement, Health Care REIT is entitled to receive a warrant to purchase one
pre-Reverse Split shares of 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 pre-Reverse
Split warrants previously granted to Health Care REIT from $7.09 to $4.16 per
share (or from $35.45 to $20.80 per share, as adjusted to give effect to the
Reverse Split). To date, Standish has granted Health Care REIT, on account of
such financing, warrants to purchase approximately 7,167 shares of Common
Stock (as adjusted to give effect to the Reverse Split). The warrants are
exercisable from five to ten years from the date of issuance, subject to
extension under certain circumstances.
For information concerning certain of Standish's debt covenants (primarily
related to the debt coverage ratio requirements associated with its Dominion,
Lowry and Piedmont lease agreements), see Note I to the Standish Consolidated
Financial Statements.
35
<PAGE>
BUSINESS
Overview
CareMatrix Corporation (the "Company") (formerly known as The Standish
Care Company) is a provider of assisted living services, operating 20
facilities in nine states with a capacity of approximately 1,580 residents.
Of these facilities, two are owned, nine are leased and nine are managed. The
Company's three year growth objective is to develop at least 60 new
facilities, with a capacity of approximately 7,200 residents, and to acquire
additional assisted living facilities or operations. Currently, the Company
is developing 28 facilities, of which four facilities are now under
construction. The Company's strategy is to provide a full range of assisted
living and related services across a range of pricing options.
The Company believes that it can effectively and efficiently respond to a
variety of the needs of seniors as they age and require additional care. The
Company expects its assisted living facilities to serve as the foundation
from which it will provide a continuum of care for its residents. When its
assisted living facilities are integrated with supportive independent living
facilities, skilled nursing/rehabilitation facilities and Alzheimer's care
programs, the Company believes that it will have the ability to provide a
less stressful transition for those of its residents who need a higher degree
of care to more supportive environments either within the same facility, in a
campus setting or in a nearby facility. The Company believes that by offering
such a continuum of care to its residents, it will be better able to respond
to resident needs than free-standing assisted living facilities that do not
provide the flexibility for their residents to age in place.
The Company intends to provide at all of its assisted living facilities a
full range of quality senior residential services that are designed to permit
residents to age in place by meeting their evolving personal and health care
needs. To accomplish this objective, the Company is developing comprehensive
service packages and integrated campuses that the Company believes will
enable it to become a leading provider of assisted living services to seniors
within a fully integrated matrix of social and healthcare service models.
Assisted Living Industry
The Company believes that the assisted living industry is evolving as the
preferred alternative to meet the growing demands for a cost effective
setting for those seniors who cannot live independently due to physical or
cognitive frailties but who do not require the more intensive medical
attention provided by a skilled nursing facility. According to industry
estimates, the assisted and independent living industries generated
approximately $10 billion to $12 billion in revenues in 1995.
Generally, assisted living represents a combination of housing and 24-hour
per day personal support services designed to assist seniors with the
activities of daily living ("ADLs"), which include bathing, eating, personal
hygiene, grooming, ambulating and dressing. Certain assisted living
facilities may offer higher levels of personal assistance for residents with
Alzheimer's disease or other forms of dementia.
The Company believes that few assisted living operators provide a
comprehensive range of assisted living services in conjunction with other
levels of services ranging from supportive independent living to skilled
nursing care and short-term rehabilitation. The Company intends to provide
this range of services that will enable seniors to age in place within a
facility, an integrated campus or a cluster market region.
The Company believes that a number of factors will allow assisted living
companies to continue as one of the fastest growing segments of senior care:
Consumer Preference. The Company believes that assisted living is
increasingly becoming the setting preferred by prospective residents as well
as their families, who are often the decision makers for seniors. Assisted
living is a cost effective alternative to other types of facilities, offers
seniors greater independence and allows them to age in place in a residential
setting.
Cost Effectiveness. The average annual cost for a patient in a skilled
nursing home approaches $40,000. The average cost for a private pay patient
in a skilled nursing home can exceed $75,000 per year in certain markets. In
contrast, assisted living services are provided at a cost which is generally
30% to 50% lower than skilled nursing facilities located in the same region.
Additionally, the Company also believes that the cost of assisted living
services compares favorably with home health care particularly when costs
associated with housing, meals and personal care assistance are taken into
account.
Demographics and Changing Family Dynamics. The target market for the
Company's services are persons generally 75 years and older, one of the
fastest growing segments of the U.S. population. According to the U.S. Census
36
<PAGE>
Bureau, the portion of the U.S. population age 75 and older is expected to
increase by 28.7%, from approximately 13.0 million in 1990 to approximately
16.8 million by the year 2000, and the number of persons age 85 and older, as
a segment of the U.S. population, is expected to increase by 43%, from
approximately 3.0 million in 1990 to over 4.3 million by the year 2000.
Furthermore, the number of persons afflicted with Alzheimer's disease is also
expected to grow in the coming years. According to data published by the
Alzheimer's Association, this group will grow from the current 3.8 million
people to 4.8 million, or an increase of 26.3%, by the year 2000. As
Alzheimer's disease and other forms of dementia are more likely to occur as a
person ages, the increasing life expectancy of seniors is expected to result
in a greater number of persons afflicted with Alzheimer's disease and other
forms of dementia in future years absent breakthroughs in medical research.
According to the United States Bureau of the Census, the median income
of the elderly population has been increasing. Accordingly, the Company
believes that the number of seniors who are able to afford high-quality senior
residential services, such as those offered by the Company, has also increased.
In addition, the number of two-income households has increased over the
last decade and the geographical separation of senior family members from
their adult children has risen with the geographic mobility of the U.S.
population. As a result, many families that traditionally would have provided
the type of care and services offered by the Company to senior family members
are in less of a position to do so.
Supply/Demand Imbalance. While the senior population is growing
significantly, the supply of skilled nursing beds per thousand is declining.
This imbalance may be attributed to a number of factors in addition to the
aging of the population. Many states, in an effort to maintain controls of
Medicaid expenditures on long-term care, have implemented more restrictive
certificate of need regulations or similar legislation that restricts the
supply of licensed skilled nursing facility beds. Additionally, acuity-based
reimbursement systems have encouraged skilled nursing facilities to focus on
higher acuity patients. The Company also believes that high construction
costs and limits on government reimbursement for the full cost of
construction and start-up expenses also will constrain the growth and supply
of traditional skilled nursing beds. These factors, taken in combination,
result in relatively fewer skilled nursing beds available for the increasing
number of seniors who require assistance with ADLs but do not require 24-hour
medical attention.
Business Strategy
Provide a Full Range of Senior Residential Services. The Company expects
its existing and future assisted living facilities to serve as the foundation
on which it will provide a continuum of care for its seniors within cluster
market regions. When such facilities are combined with supportive independent
living and skilled nursing/ rehabilitation facilities and an Alzheimer's care
program, the Company's facilities will have the resources to provide a less
stressful transition for its residents to environments with higher degrees of
care when required. The Company believes that by combining different levels
of care in a single facility, on an integrated campus or in nearby
facilities, it will gain an advantage over those competitors that operate
free-standing assisted living facilities and that do not have similar
flexibility to allow their residents to age in place.
[Graphic flow chart]
- ------------- ----------- -------------
Supportive Skilled
Independent ----> Assisted ----> Nursing/
Living Living Rehabilitation
- ------------- ----------- -------------
|
| | /\
| | |
| | |
| \/ |
| ---------- |
| Alzheimer's |
------> Care -------
----------
37
<PAGE>
Provide Services across a Range of Pricing Options. In addition to
providing a broad range of services, the Company believes it will be able to
serve nearly all income segments of the senior population by providing these
services over a range of pricing options. The Company provides, and is
developing models designed to provide, these services to both the moderate
and upper income markets. Also, the Company provides, and is developing
models intended to provide, assisted living services for lower income and
Medicaid-eligible individuals.
Upper Income Markets. A key component of the Company's strategy is to
address the needs and demands of the more affluent, upper income senior
population generally located in metropolitan or suburban areas. A number
of specific markets have been targeted, including Fairfield County in
Connecticut, Middlesex County in Massachusetts, Westchester County, Nassau
County and New York City in New York, Bergen County in New Jersey and Palm
Beach County in Florida and other areas in which the Company has commenced
development. The "Chancellor Park" models planned for these markets are
generally more spacious and provide a greater range of services than other
models. Rates currently charged or planned for facilities in these market
areas range from $2,300 per month to $4,900 per month.
Moderate Income Markets. Many of the Company's development activities
are geared toward providing its range of services in attractive settings
that are affordable to the moderate income senior population. The
"Chancellor Gardens" models planned for these markets contain spacious
public areas, unit sizes slightly smaller than those in the upper income
markets. The Company offers a basic service package with more services
provided on an "a la carte" basis. Monthly rates range from $1,400 to
$3,000. Specific areas targeted for development of this product line
include Arizona, Florida, Georgia, Maryland, North Carolina and Texas.
Lower Income Markets and Medicaid Waiver States. A number of states have
obtained Federal waivers to allow Medicaid-eligible individuals to receive
assisted living services in a variety of settings. Generally, monthly
rates allowed under the waiver program fall on the low end of the market
rates for assisted living services and range from approximately $900 to
$2,000 per month. The Company currently provides, or is developing
facilities intended to provide, assisted living services to lower income
residents and Medicaid- eligible residents in certain of those states that
have obtained Federal Medicaid waivers. The "Chancellor Village" models
planned for these markets are generally smaller, some with shared units,
and provide a basic package of services in the monthly rate. The Company
operates such facilities in North Carolina and has targeted attractive
locations in Medicaid waiver states such as Florida, Georgia, Maryland and
Texas. See "--Government Funding."
Offer Personalized, Quality Care and Services. The Company's strategy
includes providing its residents with personalized, quality care and
services. The Company, through its facility-based staff, develops a care plan
for each resident based on professional assessments and family consultations.
The care plan is updated regularly based on the needs of the resident by the
facility's healthcare and social service staff in conjunction with the
resident, the resident's physician and family members. The Company maintains
a quality assurance program with the goal of meeting and exceeding the
expectations of its residents and their families. The Company pays special
attention to recruitment, screening and training of all personnel assigned to
serve its residents and surveys its own facilities to ensure that its quality
standards are being maintained.
Develop Regional Cluster Markets. The Company seeks to be a leading
provider of assisted living services and related residential services in each
of its current and targeted cluster market regions. By positioning itself in
such cluster regions, the Company believes it can become the provider of
choice in a particular market through increased community familiarity. This
strategy will also help enable it to achieve operational management
efficiencies within these markets. The Company targets middle to upper income
metropolitan and suburban areas which have well-established populations of
persons 75 years or older. Regional markets currently targeted for cluster
development are located in a number of states, including Arizona,
Connecticut, Florida, Georgia, Massachusetts, New Jersey, New York, North
Carolina and Texas.
Develop Hospital and Managed Care Relationships. The Company intends to
develop relationships with regional hospital systems, managed care
organizations and other referral sources to provide services to discharged
patients that will offer a full continuum of care in the areas of assisted
living, supportive independent living, Alzheimer's care and skilled
nursing/rehabilitative care.
38
<PAGE>
Service Models
While providing services ranging from supportive independent living to
skilled nursing/rehabilitative care, the primary focus of the services
provided by the Company is the various assisted living service models
developed by the Company.
Assisted Living. The Company offers a full range of assisted living
services based on individual resident needs. The Company has found that
resident needs generally fall in one or more of the following categories: (i)
those requiring socialization and interaction with others but needing
assistance with only the instrumental activities of daily living ("IADLs"),
(ii) those requiring physical support or assistance with ADLs, and (iii)
those who require assistance due to Alzheimer's disease or other cognitive
impairment.
Based on these resident needs, the Company has developed three service
categories that can be implemented either individually or in combination with
one another within the same facility or in a campus setting.
Healthcare Services Model. This service model provides a lower cost
alternative for individuals needing lower acuity services than those
available in a skilled nursing facility, making this model an attractive
choice for managed care organizations and insurance companies seeking more
cost efficient programs. The Healthcare Services Model is designed to meet
the needs of two different market segments. This model will provide long-
term care services to moderate and upper income seniors who are generally
75 years of age or older and require assistance with at least two ADLs. In
addition, it serves as a step-down provider of services as an alternative
to a skilled nursing facility, where it will emphasize short-term stays in
a variety of rehabilitative situations and also provide pre-operative and
post-operative care services. In both instances, the need for these
services is due primarily to physical limitations rather than cognitive
impairment. Personal care assistance with ADLs is provided on a 24-hour
basis and averages between one and two hours per day for each resident.
Other services include ongoing health screenings and assessments, three
meals daily, transportation, social and recreational activities,
housekeeping and personal laundry. Where permitted by state law, the
Company also provides residents with medication assistance which includes
monitoring, supervision and dispensing. Residents are encouraged to
participate in the PEP program.
Alzheimer's Model. Alzheimer's care services are provided for residents
with early or intermediate stage Alzheimer's disease in specially-designed
freestanding facilities or as distinct components contained within an
assisted living facility. Residents with Alzheimer's disease or other
forms of dementia require high levels of care and services as a result of
the decline of their cognitive abilities. In addition to the personal care
services provided in traditional assisted living facilities, additional
services are provided to include stimulation, behavior management, special
activities, intervention and therapeutic programs. Staffing is generally
15% to 20% higher in order to meet the needs of this population group.
Within this model, the Company creates a home-like setting that addresses
the cognitive limitations of its residents. In the Alzheimer's Model, the
Company generally charges monthly rates which are 20% to 40% higher than
the rates for more traditional assisted living services.
Social Model. Within this model, the Company provides three meals daily,
housekeeping, personal laundry services, transportation, 24-hour security,
health screening and assessment as well as personal care services.
Additionally, there is a greater focus on resident interaction as well as
social and recreational activities. The service package generally includes
up to thirty minutes per day of personal care assistance with additional
fees for services beyond the basic package. Residents are encouraged to
participate in the Company's individually tailored Personalized Exercise
Program (PEP) conducted within the facility's wellness center. The
program, developed in conjunction with Tufts University, encourages
independence through exercise by improving flexibility, balance, strength
and endurance. The wellness centers are staffed with nursing personnel
24-hours per day.
Supportive Independent Living. Supportive independent living is provided
for seniors who require a residential environment that offers available
health care services but who do not yet need assistance with ADLs. The
Company provides this level of service in both moderate and upper income
markets. The Company believes that the supportive independent living service
broadens the market attractiveness of each facility or integrated campus by
providing a residential setting for those seniors who wish to maintain their
independence but desire a supportive environment. Services provided include
daily meals, transportation, social and recreational activities, laundry,
housekeeping and health care monitoring. Depending on government regulation,
personal care and medical
39
<PAGE>
services are available through either facility staff or through home health
care agencies. Residents generally pay a monthly rate to cover all services,
which is approximately 20% to 30% less than the rate for more traditional
assisted living services.
Skilled Nursing/Rehabilitation. In certain cluster market regions, the
Company provides skilled nursing/ rehabilitative services within a skilled
nursing facility setting. These services include both short-term
rehabilitation and traditional long-term care and will be an important
component of the continuum of care provided by the Company within an
integrated campus setting or within cluster market regions. The short-term
rehabilitation component addresses the needs of patients requiring short-term
rehabilitation or therapy services, generally after a hospital stay.
Company Operations
The Company centralizes many of its financial, administrative and
operational functions at its corporate headquarters. Such centralization
allows facility-based personnel to focus on resident care and ensures that
Company-wide policies and procedures are maintained. Corporate personnel with
expertise in administration, nursing, marketing, food service, social
services, financial management and plant maintenance directly assist and
supervise personnel at the facility level. The Company believes that these
corporate resources enable each facility to provide services to its residents
in a more professional and cost effective manner. The Company also intends to
develop regional offices in certain cluster market regions to enhance its
ability to manage its development and operational activities.
Facility Staffing. Each of the Company's facilities has an Administrator
or Executive Director responsible for the day-to-day operations of the
facility. The Administrator is supported by the Director of Resident Care,
typically a licensed nurse who oversees the nursing personnel and personal
care assistants and who is directly responsible for the day-to-day care of
the residents. Other key management personnel typically include a Social
Services Director, a Marketing Director, a Food Services Director, an
Activities Director and a Director of Environmental Services. Additionally,
those facilities which offer additional services, such as Alzheimer's care,
also include a Director of Specialty Services and additional management or
medical staff as warranted. The Company has attracted and continues to
attract highly dedicated and experienced personnel. The Company believes that
education, training, staff development and staff recognition enhance the
effectiveness of its employees. The Company provides training in all aspects
of facility operations as well as specialized training for programs offered.
The Company encourages continuing education and provides a tuition
reimbursement plan for its employees. The Company believes it provides
competitive wages and employee benefits enabling it to attract and maintain
qualified personnel. The Company has developed employee recognition and
incentive programs that increase employee awareness of the importance of
providing high quality care and services to residents.
Financial Management. Corporate personnel oversee cash management, billing
and collection, accounts payable, payroll and all other financial and
accounting functions. The Company monitors and controls operating expenses
for each of its facilities through monthly budgeting, standardized management
reporting and centralized purchasing.
Quality Assurance. The Company's quality assurance program is intended to
achieve and maintain a high degree of resident and family satisfaction with
the care and services it provides. The Company coordinates the implementation
of its quality assurance program at each of its facilities through its
corporate personnel. The Company encourages resident and family participation
and seeks feedback from families and residents through surveys conducted on a
regular basis. In addition, facility inspections are conducted regularly by
corporate staff. These inspections, performed semi-monthly, review all
aspects of operations, care and services provided and the overall appearance
and cleanliness of the facility. See "--Business Strategy."
Marketing. The Company's marketing efforts are implemented on a regional
and local level, all under the supervision of the corporate marketing staff.
This structure provides greater cost effectiveness through cost sharing and
ensures a consistency in the presentation of the Company to the various
regional marketplaces. These efforts are intended to create awareness of the
Company and its services among prospective residents, their families,
professional referral sources and other key decision makers. The corporate
marketing office develops overall strategies to promote the Company and its
service offerings throughout the markets in which the Company is currently
operating and has targeted. The corporate marketing staff conducts regional
and state-wide surveys of age and income-qualified seniors to help ensure
that the Company is meeting the needs and demands of that
40
<PAGE>
marketplace. To further both market awareness of the Company by prospective
residents and to more accurately assess the needs and demands of seniors, the
Company regularly conducts regional focus groups. Corporate personnel develop
the overall marketing strategies for each facility, produce all marketing
materials, maintain marketing databases, oversee direct mailings, place all
media advertising and assist facility personnel in the initial development
and continuing refinement of marketing plans for each facility.
Corporate and regional marketing offices commence marketing of each
newly-developed facility nine to 12 months prior to the scheduled facility
opening. Approximately six months prior to each facility opening, a marketing
director and marketing sales person are hired for each facility. They are
responsible for community outreach activities and community relations, the
coordination of referral activities, conducting facility tours and providing
information to prospective residents and their families with respect to the
Company's facilities and services.
Facilities
Three basic designs have been developed for the Company's existing and
future facilities: (i) the stand-alone assisted living facility, (ii) the
combined assisted living/supportive independent living facility, and (iii)
the stand- alone Alzheimer's care facility. Each combined facility
incorporates separate entrances for supportive independent living and
assisted living units. Community spaces are adjacent to a large lobby/living
room that opens into a secure courtyard. The assisted living and supportive
independent living areas are connected by a single story service core which
houses a combined kitchen and separate dining rooms that open out onto a
secured courtyard. Shared facilities include central laundry, beauty/barber
facilities and a wellness center. The unit wings are designed in a modular
fashion which allows for modification of the size of the facility in
increments of 12 units. This modular design allows for greater development
flexibility and encourages social interaction. Current designs include
facilities ranging in size from 82 to 118 units for stand-alone assisted
living facilities. Combined assisted living/supportive independent living
designs range from 124 to 148 units. The residential wings are three stories
and are accented by a large living room centrally located and adjacent to
elevators on each floor. The Alzheimer's care facility design is generally
smaller than the Company's other facility designs to accommodate the
cognitive limitations and needs of its residents. The design accommodates a
minimum of 32 units which house up to 40 residents and can be expanded to
include as many as 64 units, or 80 residents. Key features generally include
indoor and outdoor wandering paths, a simulated town square area, secure
outdoor spaces and directional aids and other coding to assist residents in
"way finding."
Three basic exterior designs have been developed for implementation in
various geographic regions. The New England colonial, designed primarily for
use in the Northeast, incorporates detailed wood trim with cedar clapboards
and cedar shingles. The Jeffersonian colonial, designed primarily for use in
the Mid-Atlantic states, is comprised of masonry with cast stone lintels. The
Regency, designed primarily for use in the Southeast and Southwest, combines
Florida regency and Southwestern details.
Units for which the Social Model services are provided are generally more
spacious than in other assisted living models, range in size from 360 square
feet to 800 square feet and include a full kitchen and spacious walk-in
closets. Units in the Healthcare Services Model generally range in size from
320 square feet to 725 square feet, and many include walk-in closets, storage
areas and kitchenettes. Units in the Alzheimer's Model range in size from 300
square feet to 500 square feet and furnishings are designed to take into
account the cognitive limitations of its residents. All units include private
bath, emergency call systems in the bedroom and bathroom, closet space, cable
television and telephone service.
The Company occupies executive offices located in Needham, Massachusetts
under a lease expiring in 2001.
41
<PAGE>
The following tables set forth certain information regarding facilities
currently owned, leased or managed by the Company:
<TABLE>
<CAPTION>
Date Acquired As of June 30, 1996
--------------------------
or Commencement Avg.
of Management Services Resident Rate/ Occupancy
Facility Location Care Level (1) Capacity Resident Rate
- --------------------------------------- ----------- ----------------- ----------------------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
OWNED/LEASED
- -------------
Florida
Bailey Suites (2) Gainesville Assisted Living Nov-94 14 $1,563 85%
Bailey Village (3) Gainesville Assisted Living Jul-92 72 1,482 88%
Courtyard at Lowry Place (4) (5) Tampa Alzheimer's Care Jan-94 74 1,638 50%
Maryland
Silver Spring (2) Silver Spring Skilled Nursing Sept-95 138 3,366 78%
New Hampshire
Sunny Knoll (6) Franklin Alzheimer's Care May-95 32 3,573 84%
North Carolina
Piedmont Village at Newton (2) Newton Assisted Living Mar-94 39 1,121 100%
Piedmont Village at Statesville (2) Statesville Assisted Living Mar-94 75 1,158 100%
Piedmont Village at Yadkinville (2) Yadkinville Assisted Living Mar-94 50 1,098 98%
Virginia
Dominion Village at Chesapeake (4) Chesapeake Assisted Living Nov-93 55 1,469 82%
Dominion Village at Poquoson (4) Poquoson Assisted Living Nov-93 45 1,956 92%
Dominion Village at Williamsburg (4) Williamsburg Assisted Living Nov-93 60 1,927 89%
------- -------- -------
Subtotal 654 1,986 86%
------- -------- -------
MANAGED (1)
- -------------
Connecticut
Westfield Court (7) Stamford Independent Living Sep-91 168 3,200 100%
Florida
Homestead Manor Homestead Skilled Nursing Dec-95 56 3,602 95%
Franco Miami Skilled Nursing Dec-95 120 6,357 49%
Massachusetts
Cadbury Commons (8) Cambridge Assisted Living Sept-96 82 N/A N/A
Courtland House of Leominster (9) Leominster Assisted Living May-96 74 2,461 25%
Standish Village at Lower Mills (10) Boston Assisted Living Apr-94 93 2,674 83%
Avery Crossing (7) Needham Assisted Living July-96 58 3,188 88%
Avery Manor (7) Needham Skilled Nursing July-96 142 7,766 74%
Pennsylvania
Fox Ridge Manor Dover Assisted Living Mar-96 136 1,313 86%
------- -------- -------
Subtotal 929 3,659 85%
------- -------- -------
Total 1,583 $2,968 85%
======= ======== =======
</TABLE>
- -------------
N/A = Not Applicable.
(1) Management contracts typically have a term of 5 years.
(2) Operating lease.
(3) 100% owned by the Company, subject to mortgages securing debt in the
aggregate amount of $1.1 million.
(4) Capital lease.
(5) A 20% minority interest in the lessee is owned by a third party.
(6) A 49% minority interest is owned by a third party.
(7) Managed for a related party.
(8) Cadbury Commons opened on July 8, 1996 and therefore had no occupants as
of June 30, 1996. As of that date, 44 units had been pre- leased.
Cadbury Commons has been included in the resident capacity total but not
in the calculations for average rate per resident or occupancy rate.
(9) Courtland House of Leominster opened on May 7, 1996; however, the
Company began earning management fees in September 1995. In addition to
such base management fees, as manager, the Company is entitled to 10% of
excess cash flow under certain circumstances.
(10) The Company holds a 30% interest in the corporate general partner, which
owns a 1% interest in the owner partnership.
42
<PAGE>
Development and Acquisition
Development Activities. The Company's senior management team has extensive
experience in the development of assisted living, supportive independent
living and skilled nursing/rehabilitation facilities. The Company currently
plans to develop approximately 60 facilities with a capacity of approximately
7,200 residents over the next three years.
The Company believes that it is able to differentiate itself from many of
its competitors because of its in-house market research and development
capabilities. It has the ability to target potential markets, perform the
appropriate market studies, identify zoning issues and determine the
appropriate size and configuration of facilities to develop and/or acquire.
With respect to properties that it intends to develop, the Company will
coordinate all aspects of each project, including obtaining the final permits
and approvals, design, construction and capital budgeting.
Facilities will be developed primarily in conjunction with: (i) related
party entities, (ii) joint ventures in which related parties have some level
of ownership, ranging from minority to majority ownership and (iii) third
parties. It is anticipated that a majority of the facilities developed in the
next three to four years will be for Chancellor and other related party
entities, owned primarily by Abraham D. Gosman, members of his family and
other members of the Company's senior management. The Company expects that it
will only enter into agreements with entities that it believes have
demonstrated the capability to obtain the financing necessary to construct
and own the facilities. The Company recognizes development fees on a
percentage of completion basis. Development fees are intended to cover costs
and to return a targeted level of profit to the Company. See "Risk
Factors--Development and Construction Risks" and "Certain Transactions."
Generally, the Company will enter into development agreements whereby
construction financing is obtained by the related or third parties. The
Company expects that risks related to construction and the initial operation
of the facilities it develops will be borne primarily by related or third
parties. The Company expects that it will not enter into management
agreements with these parties until completion of the construction of such
facilities or upon acquisition of completed facilities. These management
agreements would generally be for a ten-year period, with annual fees
approximating 5% of net revenues. The Company also expects to have the option
to convert such management agreements into fair market value leases (which
will be a negotiated percentage of total project costs) for a ten-year
initial term with three to four five-year fair market value renewal options.
There may also be an option to acquire the facility at fair market value at
the end of the initial term or option periods. The Company expects to
exercise the lease option at such time as the facilities reach stabilization.
The related party is likely to sell many of the developed facilities to REITs
(possibly including Meditrust, whose Chairman is Abraham D. Gosman) or other
financing sources; however, no such agreements are currently in place. Any
such sale would be subject to any management, lease or purchase terms already
in place. See "Certain Transactions."
The Company expects that its development projects for joint ventures and
third parties will be turnkey projects and will not result in either
management contracts or leases, although the Company may seek such contracts
where attractive.
The primary milestones in the development process are (i) site selection
and signing of a development contract, (ii) permitting and approvals
necessary to commence construction and (iii) completion of construction. Once
a market has been identified, site selection and signing of a development
contract typically take approximately one to three months. Land permitting
generally takes five to 12 months and is typically the most difficult step in
the development process due to the Company's selection of sites in
established communities which usually require site rezoning. Facility
construction normally takes 12 months. After a facility receives a
certificate of occupancy, residents usually begin to move in immediately.
The Company's development activities are coordinated by its experienced
development staff of approximately 20 people, which has extensive real estate
acquisition, engineering, general construction and project management
experience. Architectural design and hands-on construction functions are
usually contracted to outside architects and contractors.
43
<PAGE>
The following table sets forth certain information regarding facilities
for which the zoning, permitting or construction process has commenced and
which the Company is developing (except as noted) and/or expecting to manage.
For each of the locations set forth on the table, the anticipated owner has,
at a minimum, an option to purchase the real estate on which the facility is
to be or is being developed.
<TABLE>
<CAPTION>
Construction
Schedule
-------------------------
Resident Capacity Anticipated
-------------------------------- Post
Assisted Independent Skilled Anticipated Opening
Location Living Living Nursing Total Owner (1) Interest Status Start Completion
- ---------------- ------- ---------- ------- ----- ------------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona
Yuma 80 40 -- 120 Joint Venture None Construction Commenced Q3-97
Peoria 80 40 -- 120 Joint Venture None Development Q1-97 Q4-97
Tucson 80 40 -- 120 Joint Venture None Development Q2-97 Q2-98
-------- ----------- -------- -----
240 120 0 360
Connecticut
Southington 96 -- -- 96 Joint Venture None Construction Commenced Q2-97
Darien 67 19 -- 86 Joint Venture Manager Construction Commenced Q3-97
Avon 108 -- -- 108 Third Party Manager Development Q4-96 Q3-97
Woodbridge 90 -- -- 90 Third Party Manager Development Q4-96 Q4-97
Cheshire 104 -- -- 104 Third Party Manager Development Q4-96 Q4-97
Ridgefield 55 70 -- 125 Related Party Manager (2) Development Q1-97 Q1-98
Milford 108 -- -- 108 Third Party Manager Development Q2-97 Q2-98
Hamden 108 -- -- 108 Third Party Manager Development Q2-97 Q2-98
-------- ----------- -------- -----
736 89 0 825
Florida
Palm Beach -- 101 -- 101 Related Party Manager (2) Construction(3) Commenced Q4-96
Jensen Beach 82 66 -- 148 Related Party Manager (2) Development Q1-97 Q4-97
Deerfield Beach 80 48 -- 128 Related Party Manager (2) Development Q1-97 Q4-97
Bonita Bay 82 66 -- 148 Related Party Manager (2) Development Q2-97 Q1-98
-------- ----------- -------- -----
244 281 0 525
Georgia
Atlanta 82 66 -- 148 Related Party Manager (2) Development Q1-97 Q1-98
Macon 82 66 -- 148 Related Party Manager (2) Development Q2-97 Q2-98
-------- ----------- -------- -----
164 132 0 296
Maine
Saco 30 -- -- 30 Related Party Manager (2) Development Q2-97 Q1-98
-------- ----------- -------- -----
30 0 0 30
Maryland
Ellicott City 82 66 -- 148 Related Party Manager (2) Development Q2-97 Q1-98
-------- ----------- -------- -----
82 66 0 148
Massachusetts(4)
Dedham -- -- 142 142 Related Party Manager (2) Construction(3) Commenced Q4-96
Millbury -- -- 154 154 Third Party None Construction Commenced Q4-96
-------- ----------- -------- -----
0 0 296 296
New Jersey
Princeton 83 -- 180 263 Related Party Manager (2) Construction(3) Commenced Q2-97
Park Ridge 100 -- 210 310 Related Party Manager (2) Development Q4-96 Q4-97
Livingston 118 -- -- 118 Related Party Manager (2) Development Q4-97 Q3-98
-------- ----------- -------- -----
301 0 390 691
New York(5)
Ossining 122 -- -- 122 Joint Venture Manager Construction Commenced Q2-97
Glen Cove 80 -- -- 80 Joint Venture Manager Development (3) Q4-96 Q3-97
Upper Nyack 148 -- -- 148 Related Party Manager (2) Development Q3-97 Q2-98
Great Neck 140 -- -- 140 Joint Venture Manager Development Q3-97 Q3-98
Rye Brook 166 -- -- 166 Joint Venture Manager Development Q3-98 Q3-99
-------- ----------- -------- -----
656 0 0 656
North Carolina
Durham 82 66 -- 148 Related Party Manager (2) Development Q4-96 Q4-97
-------- ----------- -------- -----
82 66 0 148
Texas
Houston 82 66 -- 148 Related Party Manager (2) Development Q4-96 Q3-97
-------- ----------- -------- -----
82 66 0 148
Virginia
Reston 82 66 -- 148 Related Party Manager (2) Development Q3-97 Q3-98
-------- ----------- -------- -----
82 66 0 148
Total 2,699 886 686 4,271
======== =========== ======== =====
</TABLE>
- -------------
(1) Joint Venture refers to a joint venture between Chancellor and a
third party.
(2) The Company has or intends to have an option to lease this facility.
(3) The Company will manage the facility on completion of construction
but does not have development rights.
(4) In addition, the Company derives earn-out revenues from four skilled
nursing facilities which it previously developed in Massachusetts but
does not currently manage.
(5) The New York facilities will be operated as senior residential
facilities with assisted living services to be provided by licensed
healthcare agencies.
44
<PAGE>
Facilities under development may not be constructed for a variety of
reasons, including zoning, permitting, health care licensing and cost related
issues. See "Risk Factors--Development and Construction Risks." In addition
to facilities listed in the "Status" column as under development, the Company
is also engaged in preliminary development activities with respect to other
possible sites for future facilities.
Acquisition Activities. In addition to its development activities, the
Company intends to aggressively pursue acquisitions of existing facilities,
management agreements and/or leases to the extent that they complement its
growth strategy by helping to augment existing cluster markets or enter new
markets. Such acquisitions will depend on a number of factors, including the
advantages of acquiring a facility versus leasing for its own benefit,
regional or local competition, reputation and quality of the facilities and
contribution of the facility to operating results.
The Company's acquisition team has extensive experience in numerous areas,
including market assessment, budget development, project scheduling and
documentation for its transactions. All potential acquisitions are presented
to the Company's Board of Directors or its Executive Committee before
authorization is provided for the Company to proceed.
The current fragmentation of the assisted living industry, combined with
the Company's financial resources following completion of this Offering,
should provide the opportunity to consider a number of acquisitions. The
Company's senior management team has extensive acquisition experience as well
as contacts with a large number of facility owners and operators throughout
the country. The Company believes that through the reputation of its
management and the quality of the facilities it owns, operates and is
currently developing, it will become an attractive acquiror for potential
target facilities. The Company intends to pursue other single and portfolio
acquisitions that meet its quality standards and present the opportunity to
increase its profitability. See "Risk Factors--Need for Additional Financing"
and "--Risks Related to Acquisition Strategy."
Competition
Providers of assisted living services compete for residents primarily on
the basis of quality of care, reputation, physical appearance of the
facilities, price, services offered, family preferences, physician referrals
and location. Some of the Company's competitors operate on a not-for-profit
basis or as charitable organizations. Some of the Company's competitors are
significantly larger than the Company and have, or may obtain, greater
resources than those of the Company.
The long-term care industry generally is highly competitive and the
Company expects that the assisted living business in particular will become
more competitive in the future. The Company will be competing with numerous
other companies providing similar long-term care alternatives such as home
health agencies, life care at home, community-based service programs,
retirement communities and convalescent centers. While there presently are
few assisted living residences existing in the markets the Company intends to
serve, the Company expects that as assisted living receives greater attention
competition will grow from new market entrants, including companies focused
primarily on assisted living. Nursing facilities that provide long-term care
services are also a potential source of competition for the Company.
The Company believes that there is moderate competition for less expensive
segments of the private market and for Medicaid-eligible residents in small
communities. Management's experience indicates that seniors who move into
assisted living facilities frequently choose facilities near their homes,
therefore the Company's major competitors are other long-term care facilities
within the same geographic area as its facilities.
Goverment Funding
Assisted living residents or their families generally pay the cost of care
from their own financial resources. Depending on the nature of an
individual's health insurance program or long-term care insurance policy, the
individual may receive reimbursement for costs of care under an "alternative
care benefit." Government funding for assisted living has been limited. Some
state or local governments offer housing subsidies for rent or housing-
related services for low income seniors. Others may provide subsidies in the
form of additional payment for those who receive Supplemental Security Income
("SSI"). Medicaid provides insurance for certain financially or medically
needy persons, regardless of age, and is funded jointly by federal, state and
local governments. Medicaid reimbursement varies from state to state.
In 1981, the federal government approved a Medicaid waiver program called
Home and Community-Based Care which was designed to permit states to develop
programs specific to the health care and housing needs of
45
<PAGE>
the low-income elderly eligible for nursing home placement (a "Medicaid
Waiver Program"). Under a Medicaid Waiver Program, states apply to the Health
Care Financing Administration for a waiver to use Medicaid funds to support
community-based options for low-income elderly who need long-term care. These
waivers permit states to reallocate a portion of Medicaid funding for nursing
facility care to other forms of care such as assisted living. In 1994, the
federal government implemented new regulations which empowered states to
further expand their Medicaid Waiver Programs and eliminated restrictions on
the amount of Medicaid funding states could allocate to community-based care,
such as assisted living. A limited number of states currently have such
programs operating that allow them to pay for assisted living care. Without a
Medicaid Waiver Program, states can only use federal Medicaid funds for
long-term care in nursing facilities.
The Company expects that state Medicaid and Medicare reimbursement
programs will constitute an additional source of future revenues for the
Company at its skilled nursing and rehabilitation centers. Medicaid programs
typically provide for fixed rate payment to health care providers. Providers
must accept reimbursement from Medicaid as payment in full for all covered
services rendered to Medicaid patients. Medicare is a federally-funded and
administered health insurance program that provides coverage for a wide range
of health care services, including intensive rehabilitation, skilled nursing
and certain related medical services. With respect to skilled nursing and
rehabilitation, Medicare is a retrospective payment system in which each
facility receives an interim payment during the year, which is later adjusted
to reflect actual allowable direct and indirect costs of services based on
the submission of a cost report at the end of each year. There can be no
assurance that either Medicaid or Medicare will pay rates that recognize all
of the Company's costs of providing services to residents covered by those
programs. See "Risk Factors--Dependence on Reimbursement by Third Party
Payors."
Government Regulation
The health care industry is subject to substantial Federal, state and
local regulation. The various layers of governmental regulation affect the
Company's business by controlling its growth, requiring licensure or
certification of its facilities, regulating the use of its facilities and
controlling reimbursement to the Company for services provided. Licensing,
certification and other applicable governmental regulations vary from
jurisdiction to jurisdiction and are revised periodically. It is not possible
to predict the content or impact of future legislation and regulations
affecting the health care industry. See "Risk Factors--Government
Regulation."
Many of the states in which the Company operates have adopted certificate
of need statutes applicable to the assisted living and skilled nursing
services provided by the Company. Such statutes provide generally that, prior
to the addition of new services or the making of certain capital expenditures
exceeding defined levels, a state agency must determine that a need exists
for such proposed activities. Failure to obtain the necessary state approval
can result in the inability to provide the service, operate the facility or
complete the addition or other change, and can also result in the imposition
of sanctions or adverse action in respect of the facility's license and
reimbursement. To date, the Company has generally not experienced any
difficulty in obtaining such state approvals where required.
The ability of the Company to operate profitably will depend in part upon
the Company obtaining and maintaining all necessary licenses, certificates of
need and other approvals and operating in compliance with applicable health
care regulations.
Under Massachusetts law, if any person owns, directly and/or indirectly,
5% or more of the outstanding shares or certain obligations of a health care
provider, then such provider must disclose certain information about such
person to the Massachusetts Department of Public Welfare. If any person owns
10% or more of the outstanding shares of the Company, then the Company may be
required to identify such person to the Massachusetts Department of Public
Health and to disclose to the Massachusetts Rate Setting Commission any
transactions between such persons and any facility operated by the Company,
as the case may be, in Massachusetts. Under New York regulations, a
corporation may not be licensed to operate certain health care facilities
unless all of its stockholders are specifically identified, approved
individuals or are corporations, trusts, partnerships and other entities
owned by such individuals. Other states as well as the U.S. Department of
Health and Human Services may have similar requirements to disclose the names
of persons or entities owning more than certain specified percentages of the
outstanding securities of corporations.
In Massachusetts, assisted living facilities must be certified by the
Department of Elder Affairs. The Department's regulations set forth
requirements relating to disclosure of ownership interests, physical plant
requirements, service standards and service plans, record keeping, staffing
and training. The regulations set forth
46
<PAGE>
the rights of assisted living residents and required provisions of residency
agreements. Failure to observe the Department's regulations could result in
the suspension or loss of certification of the facility. The Company believes
that its Massachusetts facilities currently meet the requirements of the
Department's regulations. Assisted living facilities are generally subject to
less extensive regulation than skilled nursing facilities.
Some residents may require ancillary health services from time to time,
such as skilled nursing, therapy, pharmacy or other health services. In
Massachusetts, these services must be provided by persons or entities that
are specifically licensed or certified, as applicable, to provide such health
care services. The Company may from time to time enter into agreements with
other entities to provide ancillary services where it is not itself licensed
or certified to provide them.
Investigations or reviews conducted by state regulators also may adversely
affect the Company. From December 1994 until March 1995, the State of Florida
conducted a review of operating policies and procedures at Standish's Lowry
facility, 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. Although the moratorium has been lifted, revenues at that
facility continue to be adversely affected.
In certain states, the Company's assisted living facilities are subject to
certain state regulations and licensing requirements. In order to qualify as
a state licensed facility and therefore eligible to receive Medicaid funding,
the Company's facilities must comply with regulations which address, among
other things, staffing, physical design, required services and resident
profile. The Company expects that it will obtain licenses in states as
required. The Company's residences are also subject to various local building
codes and other ordinances, including fire safety codes. These requirements
vary from state to state and are monitored, to varying degrees, by state
agencies.
In order to participate in the Medicare program, a skilled nursing
facility must be licensed and certified as a provider of skilled nursing
services. Effective October 1, 1990, the Omnibus Budget Reconciliation Act of
1987 ("OBRA") eliminated the different certification standards for "skilled"
and "intermediate care" nursing facilities under the Medicaid program in
favor of a single "nursing facility" standard. This standard requires, among
other things, that the Company have at least one registered nurse on each day
shift and one licensed nurse on each other shift, and increases training
requirements for nurse's aides by requiring a minimum number of training
hours and a certification test before a nurse's aide can commence work.
States continue to be required to certify that nursing facilities provide
"skilled care" in order to obtain Medicare reimbursement.
The laws of many states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion. Although the Company believes
its operations are in compliance with such laws, the Company's business
operations have not been the subject of judicial or regulatory
interpretation. There can be no assurance that review of the Company's
business by courts or regulatory authorities will not result in
determinations that could adversely affect the operations of the Company or
that the health care regulatory environment will not change so as to restrict
the Company's existing operations or their expansion. In addition, the
regulatory framework of certain jurisdictions may limit the Company's
expansion into such jurisdictions if the Company is unable to modify its
operational structure to conform with such regulatory framework.
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 the Company does not receive
all of its total revenues from certain Medicaid waiver programs and is
otherwise not a Medicare or Medicaid provider or supplier, it is subject to
these laws because (i) the state laws typically apply regardless of whether
Medicare or Medicaid payments are at issue and (ii) as required under some
state licensure laws, and for the convenience of its residents, some of the
Company's assisted living facilities maintain contracts with certain health
care providers and practitioners, including
47
<PAGE>
pharmacies, visiting nurse organizations and hospices, through which the
health care providers made their health care items or services (some of which
may be covered by Medicare or Medicaid) available to the Company's residents.
There can be no assurance that such laws will be interpreted in a manner
consistent with the practices of the Company.
In addition, the Company is subject to various Federal, state and local
environmental laws and regulations. Such laws and regulations often impose
liability whether or not the owner or operator knew of, or was responsible
for, the presence of 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 contamination 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, the Company could be liable for these costs, as
well as certain other costs, including governmental fines and injuries to
persons or properties. See "Risk Factors--Environmental Risks."
The Company believes that the structure and composition of government, and
specifically health care, regulations will continue to change and, as a
result, regularly monitors developments in the law. The Company expects to
modify its agreements and operations from time to time as the business and
regulatory environment changes. While the Company believes it will be able to
structure all its agreements and operations in accordance with applicable
law, there can be no assurance that its arrangements will not be successfully
challenged. See "Risk Factors--Government Regulation."
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. The
Company 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. The Company 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. The Company currently maintains professional liability insurance
and general liability insurance. The Company'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. The Company also has an umbrella excess liability
protection policy in the total amount of $10.0 million. 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 the Company's business. See "Risk Factors--Liability and
Insurance."
Employees
As of September 30, 1996, the Company had approximately 300 full-time
employees. In addition, administrators of certain managed facilities, while
not employees of the Company, are under the supervision of the Company. None
of the Company's employees is represented by a union. The Company considers
its employee relations to be good. Although the Company believes it is able
to employ sufficient skilled personnel to staff the facilities it operates or
manages, a shortage of skilled personnel in any of the geographic areas in
which it operates could adversely affect the Company's ability to recruit and
retain qualified employees and its operating expenses.
Legal Proceedings
The Company is involved in various lawsuits and claims arising in the
course of its business. In the opinion of management of the Company, although
the outcomes of these suits and claims are uncertain, in the aggregate they
should not have a material adverse effect on the Company's business,
financial condition and results of operations.
48
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning each of the
persons who are directors or executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
-------------------- --- -------------------------------------------------
<S> <C> <C>
Abraham D. Gosman 67 Chairman of the Board; Director
Andrew D. Gosman 30 Vice Chairman; Executive Vice President; Director
Michael J. Doyle 38 Chief Executive Officer; Director
Robert M. Kaufman 47 President
Michael M. Gosman 33 Executive Vice President--Acquisition and
Development; Director
James M. Clary, III 35 Executive Vice President, General Counsel and
Secretary
Joel A. Kanter 46 Executive Vice President
Harold E. Nash, III 43 Executive Vice President--Construction/Planning and
Zoning
Michael J. Zaccaro 39 Executive Vice President--Operations
Marc H. Benson 40 Chief Operating Officer
Donald J. Amaral 44 Director
H. Loy Anderson, Jr. 52 Director
Rev. Bedros Baharian 79 Director
Stephen E. Ronai 59 Director
</TABLE>
Abraham D. Gosman has served as Chairman of the Board of Directors of the
Company since October 4, 1996. 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 has served as Vice Chairman of the Board of Directors and
Executive Vice President of the Company since October 4, 1996 and as
President of Pre-Merger CareMatrix from January through July 1996.
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.
Michael J. Doyle has served as Chief Executive Officer and a member of the
Board of Directors of the Company since October 4, 1996. Mr. Doyle, the
founder of Standish, served as the Chief Executive Officer of the Company
from its inception in 1989 and also as its Chairman from January 1994 to
October 1996. 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. Mr. Doyle is a member of the American
College of Health Care Executives and a director of the Assisted Living
Facilities Association of America and the Massachusetts Assisted Living
Facilities Association. He is also a corporator of Lawrence Memorial
Hospital.
Robert M. Kaufman has served as President of the Company since October 4,
1996 and as President of Pre- Merger CareMatrix since July 9, 1996.
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
49
<PAGE>
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.
Michael M. Gosman has served as a member of the Board of Directors and
Executive Vice President-- Acquisition and Development of the Company since
October 4, 1996 and as Executive Vice President-Assisted Living of Pre-Merger
CareMatrix from January 1996 until the closing of the Merger. 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 has served as Executive Vice President, General
Counsel and Secretary of the Company since October 4, 1996 and as Executive
Vice President, General Counsel and Secretary of Pre-Merger CareMatrix from
December 1995 until the closing of the Merger. 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 has served as Executive Vice President of the Company since
October 4, 1996 and as Executive Vice President of Pre-Merger CareMatrix from
December 1995 until the closing of the Merger. 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.
Harold E. Nash, III has served as Executive Vice
President--Construction/Planning and Zoning of the Company since October 4,
1996 and as Executive Vice President of Pre-Merger CareMatrix from August
1996 until the closing of the Merger. From 1991 to March 31, 1996, he served
as Vice President of Suffolk Construction Company, Inc., with primary
responsibility as Director of Design Build Services and Pre-Construction
Services. Prior to joining Suffolk Construction Company, Mr. Nash was a Vice
President of two diversified development companies from 1984 to 1991.
Michael J. Zaccaro has served as Executive Vice President--Operations of
the Company since October 4, 1996 and as Senior Vice President of Pre-Merger
CareMatrix from December 1995 until the closing of the Merger. From 1990 to
1995, Mr. Zaccaro served as a Senior Vice President of Continuum Care
Corporation and of GWZ Development Corp.
Marc H. Benson has served as Chief Operating Officer of the Company since
October 4, 1996 and as Chief Operating Officer of Pre-Merger CareMatrix from
August 25, 1996 until the closing of the Merger. Previously, he served as a
Vice President/Director of Operations for ManorCare, Inc.'s southeast
district where he had primary operating responsibility for ManorCare, Inc.'s
assisted living and Alzheimer's facilities in the southeastern portion of the
United States, from September 1995 to July 1996. Prior to joining ManorCare,
Inc., 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 the Retirement Living Division Beverly Enterprises
from 1990 to 1992.
Donald J. Amaral has served as a director of the Company since October 4,
1996. Mr. Amaral has served as director, President and Chief Executive
Officer of Coram HealthCare Corp. since October 13, 1995. Previously, he was
President and Chief Operating Officer of OrNda Healthcorp ("OrNda") from
April 1994 to August 1995, and served in various executive positions with
Summit Health Ltd. ("Summit") from October 1989 to April 1994, including
President and Chief Executive Officer between October 1991 and April 1994.
Summit was merged into OrNda in April 1994. Prior to joining Summit, Mr.
Amaral was President and Chief Operating Officer of Mediplex from 1986 until
October 1989. Mr. Amaral is also a member of the Board of Directors of Summit
Care Corporation.
H. Loy Anderson, Jr. has served as a director of the Company since October
4, 1996. He has served as President, Chief Executive Officer and a director
of Palm Beach National Bank & Trust Company since June 1990.
50
<PAGE>
Rev. Bedros Baharian has served as a director of the Company since October
4, 1996. Rev. Baharian is a consultant and private investor. He has also
served as Chairman of the Board of FACT Retirement Services, a not-
for-profit owner and manager of continuing retirement communities in
California since 1994. He served as Chairman of the Board of Teachers
Assistance Life Care Centers, Inc. from 1990 to 1993 and as a board member of
Casa de las Campanas from 1990 to 1994. He is a founder and past president of
the New England Elderly Housing Association.
Stephen E. Ronai has served as a director of the Company since October 4,
1996. Mr. Ronai has been a partner in the Connecticut law firm of Murtha,
Cullina, Richter and Pinney since 1984 where he serves as Chairman of the
firm's Health Care Department. He is a member of the American Academy of
Healthcare Attorneys of the American Hospital Association, and from 1989 to
1995, he served as a member of the Board of Directors of the National Health
Lawyers Association. Mr. Ronai has been a director of PhyMatrix Corp. since
January 1996.
Officers are appointed by and serve at the discretion of the Board of
Directors. The officers, other than Abraham D. Gosman, will devote a majority
or substantially all of their business time to the business and affairs of
the Company. Andrew D. Gosman and Michael M. Gosman are sons of Abraham D.
Gosman. No other family relationship exists among the Company's directors and
executive officers.
Executive Committee. The members of the Executive Committee of the
Company's Board of Directors are Messrs. Andrew D. Gosman, Doyle, Amaral and
Rev. Baharian. The Executive Committee exercises all the powers of the Board
of Directors between meetings of the Board of Directors, except such powers
as are reserved to the Board of Directors by law.
Audit Committee. The members of the Audit Committee of the Company's Board
of Directors are Messrs. Amaral, Anderson and Rev. Baharian, all of whom are
independent directors. The Audit Committee makes recommendations concerning
the engagement of independent public accountants, reviews with the
independent public accountants the plans for and results of the audit,
approves professional services provided by the independent public
accountants, reviews the independence of the independent public accountants,
considers the range of audit and non- audit fees and reviews the adequacy of
the Company's internal accounting controls.
Compensation Committee. The members of the Compensation Committee of the
Company's Board of Directors are H. Loy Anderson, Jr. and Rev. Baharian. The
Compensation Committee establishes a general compensation policy for the
Company and approves increases both in directors' fees and in salaries paid
to officers and senior employees of the Company. The Compensation Committee
administers all of the Company's employee benefit plans. The Compensation
Committee determines, subject to the provisions of the Company's plans, the
directors, officers and employees of the Company eligible to participate in
any of the plans, the extent of such participation and terms and conditions
under which benefits may be vested, received or exercised. There are no
interlocks among the members of the Compensation Committee.
Executive Compensation
The Company. The current annual salaries for the ten executive officers of
the Company aggregate $1,800,000. No executive officer of the Company
receives an annual salary in excess of $250,000, exclusive of discretionary
bonuses and other forms of compensation.
Pre-Merger CareMatrix. During the period from June 24, 1994 (inception)
through December 31, 1994, and during the year ended December 31, 1995, there
were no executive officers of Pre-Merger CareMatrix whose salary and bonus
paid or accrued by Pre-Merger CareMatrix exceeded $100,000 because management
services for the Company were purchased from Continuum Care of Massachusetts,
Inc., a corporation owned primarily by Abraham D. Gosman, certain members of
his family and the Company's senior management.
Standish. As required by the regulations promulgated under the Securities
Act, 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 $100,000 during the fiscal year ended
December 31, 1995 is set forth in the footnotes to the Summary Compensation
Table.
51
<PAGE>
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Securities
Underlying
Name and Other Annual Options/SARs($) 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) **(4) **(6) 45,000 (7)
President and Chief
Operating Officer
Kenneth M. Miles, 1995 90,000 (3) * *(8) 35,000 (7)
Chief Financial 1994 * * * **
Officer and 1993 * ** ** 19,500
Treasurer
C. Joel Glovsky, 1995 150,000 (3) ** -- **
Executive Vice 1994 150,000 * 22,000(9) **
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 the Company paid a salary of $95,000 to Christopher W. Hollister,
who resigned from his position as the Company'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, the Company also paid salary in the amount of
$101,327 to G. Faye Godwin, who resigned from her position as the
Company's Chief Operating Officer in May 1995. During 1994 the Company
granted options to Ms. Godwin under its 1991 Combination Stock Option
Plan (the "Plan") to purchase 50,000 pre-Reverse Split shares of its
Common Stock at a pre-Reverse Split 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 the Company.
(2) In February 1995, the Company 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 ($10.00 adjusted to give effect to
the Reverse Split), 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 under their respective
employment agreements. Mr. Doyle's annual base salary increased from
$150,000 to $165,000 as of July 1, 1995. Mr. Brenan's employment with the
Company commenced 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 the Company'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 the Company
and Director effective August 15, 1996. For amounts of consulting fees, a
lump sum severance payment and other sums and benefits payable to Mr.
Brenan under the Termination Agreement, see "--Termination Agreements."
52
<PAGE>
(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 ($11.90 adjusted to give effect to the
Reverse Split). 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
"--Employment Agreements" and "--Termination Agreements."
(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
the Company 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 the
Company 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 the Company. See
"--Termination Agreements."
Compensation of Directors
Officers who are members of the Board of Directors do not receive
compensation for serving on the Board. Each other member of the Board
receives annual compensation of $15,000 for serving on the Board, plus a fee
of $1,000 for each Board of Directors' meeting attended and $500 for
telephonic meetings. In addition, such directors receive an additional fee of
$500 for each committee meeting attended, except that only one fee will be
paid in the event that more than one such meeting is held on a single day.
All directors receive reimbursement of reasonable expenses incurred in
attending Board and committee meetings and otherwise carrying out their
duties.
Employment Agreements
The Company currently has employment agreements with Mr. Doyle, Chief
Executive Officer, Mr. Miles, Senior Vice President of Finance and Mr.
Benson, Chief Operating Officer. The employment agreement with Mr. Doyle, as
amended effective as of September 27, 1996, provides for an initial
employment term ending December 31, 1999, continuing thereafter on
year-to-year renewal terms, subject to either the Company's or the employee's
electing not to renew, an annual base salary of $250,000 through December 31,
1999, bonus compensation to be determined by the Board of Directors of the
Company in its sole discretion, restrictions against competition with the
Company, 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 the Company.
The employment agreement between the Company and Mr. Miles is similar in
structure to Mr. Doyle's, and contains substantially the same provisions,
except that Mr. Miles' agreement (i) provides for a term through December 31,
1998, subject to renewal on a year-to-year basis, (ii) provides for an annual
base salary of $125,000 plus bonus compensation to be determined by the Board
of Directors in its sole discretion, and (iii) 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 the Company, (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) the average yearly total compensation
(consisting of base salary and any cash bonus) payable with respect to the
previous five full calendar years.
The employment agreement between the Company and Mr. Benson provides for
an initial employment term ending August 26, 1999 and continuing thereafter
on a year-to-year basis, subject to the Company's or Mr. Benson's election
not to renew. The agreement provides for an annual base salary of $175,000,
bonus compensation granted in the sole discretion of the Company, a monthly
car allowance of $550 and a grant of options to purchase 26,200 shares of
Common Stock at an exercise price of $20.00 per share vesting in equal
increments over three years beginning in August 1997 (as adjusted to reflect
the Reverse Split). Mr. Benson's agreement may be terminated by the Company
without cause upon written notice or by Mr. Benson in the event of a failure
of the Company to
53
<PAGE>
substantially perform its duties under the agreement. Upon any such
termination, Mr. Benson would be entitled to receive his salary payments for
the twelve months following such termination.
Termination Agreements
During 1995, the Company 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, the Company and Dr. Glovsky, a co-founder, director and officer of the
Company, 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 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 arrangement.
Under the Early Retirement Agreement, Dr. Glovsky will provide services to
the Company on an as needed basis over the next five 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 certain other benefits
through 1997. As part of the Early Retirement Agreement, the Company also
agreed to forgive loans totalling approximately $139,000 (including interest)
that the Company 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. The Company 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 the Company 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 $25.00 (as adjusted to give effect to the Reverse Split) 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, his non-compete
note is subject to adjustment and Dr. Glovsky has the right to require the
Company to purchase up to 13,000 (as adjusted to give effect to the Reverse
Split) of his shares at a purchase price of $30.00 per share (as adjusted to
give effect to the Reverse Split).
During 1995 and 1996, the Company 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. Effective August 15,
1996, Mr. Brenan resigned as a director, officer and employee. In August
1996, the Company and Michael J. Brenan, the then President and Chief
Operating Officer of the Company, entered into an agreement (the "Termination
Agreement") under which Mr. Brenan resigned as a director and officer of the
Company 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 consummation of the Merger. Under the Termination
Agreement, the Company made a lump sum severance payment to Mr. Brenan in the
amount of $150,000 (less any consulting fees previously paid), 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 9,000
shares of Common Stock at a purchase price of $11.90 per share (as adjusted
to reflect the Reverse Split). In addition, the Termination Agreement
prohibits Mr. Brenan, for a period of one year beginning September 27, 1996
from engaging in any competing activity within a twenty-mile radius of any
offices or Company-operated communities, facilities or development sites.
Limitation of Liability and Indemnification Agreements
As permitted by the Delaware General Corporation Law, the Company's
Restated Certificate of Incorporation provides for the elimination, subject
to certain conditions, of the personal liability of directors of the Company
for monetary damages for breach of their fiduciary duties.
The Company's By-Laws provide for the indemnification of directors and
officers. In addition, the Company has entered into indemnification
agreements with each of its directors. The Company may also enter into
similar agreements with certain of the Company's officers who are not also
directors. Generally, the Company'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 the Company's By-Laws, provide that
the Company will pay certain amounts incurred by a director or officer in
connection with any civil or criminal action or proceeding, and
54
<PAGE>
specifically including actions by or in the name of the Company (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 the
Company'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 the Company.
Stock Option Plans
The Company'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 Special
Meeting of Stockholders held October 3, 1996, in order to increase the number
of shares of Common Stock reserved for issuance under it. The number of
shares currently reserved for issuance under the Stock Option Plan is 400,000
(as adjusted to give effect to the Reverse Split). The purpose of the Stock
Option Plan is to provide long-term incentives and rewards to the Company's
key employees, officers, directors and others in a position to contribute to
the success of the Company.
Under the Stock Option Plan, the Company 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
the Company 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, the Company 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 have been granted by the Company. 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 Common Stock pursuant
to the exchange offer (the "Exchange Offer") made by the Company in 1994,
pursuant to which an aggregate of 1,701,180 shares of pre-Reverse Split
Common Stock were issued in exchange for 654,300 shares of Series A Preferred
Stock. Pursuant to the adjustments adopted by the Board of Directors, the
Company exchanged options to purchase an aggregate of 205,700 shares of
pre-Reverse Split Common Stock for outstanding options to purchase a like
number of shares and the exercise price was set at $2.00 per share (the
closing sale price as reported by the Nasdaq Small Cap System for the trading
day immediately preceding the Board's determination to make such adjustment).
Directors who are not also employees of the Company are eligible to
participate in the Company's 1995 Non- Qualified Stock Option Plan. Under the
1995 Non-Qualified Stock Option Plan, each non- employee director, upon
becoming a director, is automatically granted options to purchase 1,200
post-Reverse Split shares of Common Stock, subject to vesting over three
years, and options to purchase additional shares hereafter are based upon the
formula provisions of said Plan. In June 1995, pursuant to the 1995
Non-Qualified Stock Option Plan, the Company granted options to purchase
1,200 post-Reverse Split shares of Common Stock to each of Messrs. DeVore and
Sterman and Dr. Rayport. Dr. Rayport surrendered his options when he resigned
as a director in July 1995.
OPTIONS GRANTS IN 1995
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------
Number of Securities % of Total
Underlying Options Exercise or
Options Granted to Base Price
Name Granted(#) (1) Employees in 1995 ($/sh) (1) Expiration Date
- -------------------- -------------------- ------------------ ------------- ----------------
<S> <C> <C> <C> <C>
Michael J. Doyle 10,000 23.9% $11.90 7/1/05
Michael J. Brenan 9,000 21.5% $11.90 7/1/05
Kenneth M. Miles 7,000 16.7% $11.90 7/1/05
</TABLE>
- -------------
(1) As adjusted to give effect to the Reverse Split.
55
<PAGE>
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. In June 1996, Standish granted to Messrs. Doyle and Miles
stock options to purchase 10,000 and 5,000 shares, respectively (increased
upon consummation of the Merger to 100,000 and 50,000 shares, respectively,
and as adjusted to give effect to the Reverse Split), of Common Stock at an
exercise price of $14.70 per share, the closing sale price of the Common
Stock on the Nasdaq Small Cap System on the date of initial grant
authorization (adjusted to give effect to the Reverse Split). By action taken
by the Standish's Board of Directors on July 29 and August 15, 1996, these
options were modified to provide for immediate vesting in lieu of the
original vesting in installments over two years.
1996 Equity Incentive Plan
In October 1996, the Company adopted the 1996 Equity Incentive Plan (the
"Equity Plan") which provides for the award ("Award") of up to 1,200,000
shares of Common Stock (as adjusted to give effect to the Reverse Split) in
the form of incentive stock options ("ISOs"), non-qualified stock options
("Non-Qualified Stock Options"), restricted stock, performance shares and
stock appreciation rights. All employees, directors and consultants of the
Company and any of its subsidiaries are eligible to participate in the Equity
Plan.
The Equity Plan is administered by the Compensation Committee (the
"Committee"), which determines who shall receive Awards from those employees
and directors who are eligible to participate in the Equity Plan, the type of
Award to be made, the number of shares of Common Stock which may be acquired
pursuant to the Award and the specific terms and conditions of each Award,
including the purchase price, term, vesting schedule, restrictions on
transfer and any other conditions and limitations applicable to the Awards or
their exercise. The purchase price per share of Common Stock cannot be less
than 100% of the fair market value of the Common Stock on the date of grant
with respect to ISOs. ISOs cannot be exercisable more than ten years
following the date of grant and Non- Qualified Stock Options cannot be
exercisable more than ten years and one day following the date of grant. The
Committee may at any time accelerate the exercisability of all or any portion
of any option.
Each Award may be made alone, in addition to or in relation to any other
Award. The terms of each Award need not be identical, and the Committee need
not treat participants uniformly. Except as otherwise provided by the Equity
Plan or a particular Award, any determination with respect to an Award may be
made by the Committee at the time of award or at any time thereafter. The
Committee determines whether Awards are settled in whole or in part in cash,
Common Stock, other securities of the Company, Awards or other property.
The Committee may amend, modify or terminate any outstanding Award,
including substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an ISO to
a Non-Qualified Stock Option, if the participant consents to such action, or
if the Committee determines that the action would not materially and
adversely affect the participant. Awards may not be made under the Equity
Plan after September 1, 2006, but outstanding Awards may extend beyond such
date.
The number of shares of Common Stock issuable pursuant to the Equity Plan
may not be changed except by approval of the stockholders. However, in the
event that the Committee determines that any stock dividend, extraordinary
cash dividend, creation of a class of equity securities, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares, warrants or rights offering to purchase Common Stock at a
price substantially below fair market value, or other similar transaction
affects the Common Stock such that an adjustment is required to preserve the
benefits intended to be made available under the Equity Plan, the Committee
may adjust equitably the number and kind of shares of stock or securities in
respect of which Awards may be made under the Equity Plan, the number and
kind of shares subject to outstanding Awards, and the award, exercise or
conversion price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect
to an outstanding Award. In addition, in the event of a consolidation or
merger in which the Company is not the surviving corporation of an
acquisition of substantially all the Company's shares or sale of
substantially all the Company's assets, then if the Committee so determines,
all outstanding Awards will terminate, provided that at least 20 days before
the effective date of such a corporate event, the Committee will either (i)
make all outstanding Awards exercisable immediately prior to the corporate
event, or (ii) if there is a surviving or acquiring corporation, arrange to
have that corporation or its affiliate grant to participants replacement
Awards. Common Stock subject to Awards that expire or are terminated prior to
exercise
56
<PAGE>
or Common Stock that has been forfeited under the Equity Plan will be
available for future Awards under the Equity Plan. Both treasury shares and
authorized but unissued shares may be used to satisfy Awards under the Equity
Plan.
The Equity Plan may be amended from time to time by the Committee or
terminated in its entirety; however, no amendment may be made without
stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement. Furthermore, such amendment may not
affect adversely the rights of a participant with respect to any previously
made Award unless the participant consents.
Following the Merger, options to purchase approximately 460,000 shares of
Common Stock (as adjusted to give effect to the Reverse Split) were issued
pursuant to the Equity Plan to employees of Pre-Merger CareMatrix who became
employees of the Company in exchange for options granted to them in 1996 by
Pre-Merger CareMatrix. Such options have an average exercise price of
approximately $14.75 per share. None of such options is exercisable prior to
December 31, 1996.
CERTAIN TRANSACTIONS
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 Abraham D. 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
(Inception) to Year Ended
---------------- ---------------
December 31,
------------------------------------
1994 1995
---------------- ---------------
<S> <C> <C>
Salaries, wages and benefits $ 579,078 $2,123,152
Supplies 124,726 166,136
Professional fees 260,411 493,269
Utilities 117,374 113,653
Rent 240,239 422,468
Other 316,392 1,016,977
---------------- ---------------
$1,638,220 $4,335,655
================ ===============
</TABLE>
Such fees were based on the discretion of the parties 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. Payments to Continuum Care of Massachusetts, Inc., for salaries and
wages were substantially reduced subsequent to July 1996.
The Company intends to provide development, management and other services
in connection with the establishment of assisted living facilities, skilled
nursing facilities and other health care facilities to or for the benefit of
Chancellor, which will be the owner of the new facilities. Abraham D. Gosman
is the principal owner of, and certain members of the Company's senior
management and stockholders also have an ownership interest in, Chancellor.
As used herein, a "Chancellor Entity" is Chancellor Senior Housing Group,
Inc. or a company in which Abraham D. Gosman has an ownership interest in
excess of 90%.
On September 1, 1996, the Company and a Chancellor Entity entered into a
Development and Turnkey Services Agreement (the "Global Services Agreement")
in connection with the development and management of assisted living,
supportive independent living and skilled nursing/rehabilitation facilities
by the Company for such Chancellor Entities. Pursuant to the Global Services
Agreement, upon the closing of the purchase of the real estate by the
Chancellor Entity and the receipt of final, non-appealable zoning approvals
for the facility to be developed, the parties expect to enter into a
development agreement, the form of which is attached to the Global Services
Agreement (the "Global Development Agreement"), prior to the commencement of
construction of the facility. The Global Development Agreement provides for a
development fee that the Company expects will range between 4% and 7% of
total project costs, depending on the individual transaction and determined
on the date of signing. Upon completion of the construction of a facility,
and pursuant to the Global Development Agreement, the parties will enter into
a management agreement, the form of which is attached to the Global
Development Agreement (the
57
<PAGE>
"Global Management Agreement"), pursuant to which the Company expects to earn
a management fee equal to approximately 5% of gross revenues. The Company
expects that each Global Management Agreement will have a 10 year term with
three five-year renewal options in favor of the Company. Each Global
Management Agreement is expected to contain an option granting the Company
the right to lease each facility at a fair market value rental to be a
negotiated percentage of total project costs determined on the date of
execution (the "Lease Option"). The Lease Option will have an initial 10-year
term and will grant the Company three to four five-year fair market value
renewal options. The Lease Option will contain an option to purchase the
facility at a price equal to the then fair market value. The Company also
expects that, to the extent solely development or solely management
opportunities present themselves with such Chancellor Entities, it will
utilize the Global Development Agreement or the Global Management Agreement
on a stand alone basis.
On July 3, 1996, the Company was assigned the right to co-develop and
manage an assisted/independent living facility in Darien, Connecticut from a
Chancellor Entity. The Company currently expects to enter into a Global
Development Agreement and a Global Management Agreement with Stony Brook
Court, LLC, in which a Chancellor Entity has a 50% interest.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Deerfield Beach, Florida and was
assigned rights under a purchase and sale agreement concerning a parcel of
land in such location by a Chancellor Entity. The Company simultaneously
assigned its rights under the purchase and sale agreement to another
Chancellor Entity. The Company expects to enter into a Global Development
Agreement and a Global Management Agreement relating to the proposed
Deerfield facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Macon, Georgia and assigned its
rights under a letter agreement dated June 3, 1996 granting a right to
purchase a parcel of land in such location to such Chancellor Entity. The
Company expects to enter into a Global Development Agreement and a Global
Management Agreement concerning the proposed Macon facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Livingston, New Jersey and assigned
its rights under a purchase and sale agreement, dated July 9, 1993, relating
to a parcel of land in Livingston to such Chancellor Entity. The Company
expects to enter into a Global Development Agreement and a Global Management
Agreement relating to the proposed Livingston facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop an assisted/independent living
facility in Park Ridge, New Jersey and was assigned by such Chancellor Entity
its rights, duties and obligations under a management agreement with a third
party having an initial term of ten years and an option in favor of the
Company to renew for an additional ten year term. The Company is entitled to
receive as a management fee under such agreement a monthly fee equal to the
facility's positive cash flow each month, if any. The Company expects to
enter into a Global Development Agreement concerning this facility.
On July 3, 1996, pursuant to an assignment agreement, the Company was
granted by a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Jensen Beach, Florida and assigned to
such Chancellor Entity its right under a purchase agreement, dated February
27, 1996, relating to a parcel of land in Jensen Beach. The Company expects
to enter into a Global Development Agreement and a Global Management
Agreement relating to the proposed Jensen Beach facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Bonita Springs, Florida and assigned
to such Chancellor Entity its rights under an option agreement dated May 3,
1996 to purchase a parcel of land in Bonita Springs. The Company expects to
enter into a Global Development Agreement and a Global Management Agreement
relating to the proposed Bonita Springs facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Ridgefield, Connecticut and was
assigned rights under a purchase and option agreement concerning a parcel of
land in said location by a Chancellor Entity.
58
<PAGE>
The Company in turn assigned its rights under the purchase option agreement
to another Chancellor Entity. The Company expects to enter into a Global
Development Agreement and a Global Management Agreement relating to the
proposed Ridgefield facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Durham, North Carolina and assigned
its rights under a purchase agreement, dated May 29, 1996, relating to a
parcel of land in Durham to such Chancellor Entity. The Company expects to
enter into a Global Development Agreement and a Global Management Agreement
relating to the proposed Durham facility.
On July 3, 1996, pursuant to an assignment agreement, the Company was
granted by a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Atlanta, Georgia and assigned its
rights under four options to purchase certain parcels of land in that same
location to such Chancellor Entity. The Company expects to enter into a
Global Development Agreement and a Global Management Agreement relating to
the proposed Atlanta facility.
The Company is currently negotiating the specific terms of a Global
Management Agreement with a Chancellor Entity with respect to a senior
hotel/assisted living facility in Palm Beach, Florida currently being
developed by another party.
The Company expects to enter into agreements similar to the Global
Development Agreement and the Global Management Agreement with G&B Limited
Liability Company, in which a Chancellor Entity has a 50% interest, relating
to a facility to be located in Rye Brook, New York.
The Company expects to enter into separate Global Development Agreements
and Global Management Agreements with separate Chancellor Entities with
respect to assisted/independent living facilities in Saco, Maine, Ellicott,
Maryland, Upper Nyack, New York and Reston, Virginia.
The Company expects to enter into a Global Management Agreement with
respect to an assisted/independent living facility in Princeton, New Jersey.
The Company has entered into a development agreement, dated March 8, 1996,
with Netwest Development Corporation ("Netwest") and Emerald Springs
Associates General Partnership, in which a Chancellor Entity has an 85%
interest, to co-develop an assisted living/supportive independent living
facility in Yuma, Arizona. The development agreement provides that the
Company will be paid a fixed price for the development, construction and
furnishing of the project. The Company expects to earn development fee income
to the extent the Company's total development costs are less than the
contract price.
The Company has entered into a development agreement, dated August 28,
1996, with Netwest and Amethyst Arbor Associates General Partnership, in
which a Chancellor Entity has an 85% interest, to co-develop an assisted
living/supportive independent living facility in Peoria, Arizona. The
development agreement provides that the Company will be paid a fixed price
for the development, construction and furnishing of the project; the Company
expects to earn development fee income to the extent the Company's total
development costs are less than the contract price.
The Company is currently negotiating a development agreement with Netwest
and Amber Lights Associates General Partnership, in which a Chancellor Entity
will have an 85% interest, to co-develop an assisted living/ supportive
independent living facility in Tucson, Arizona. The development agreement
will provide that the Company will be paid a fixed price for the development,
construction and furnishing of the Project; the Company expects to earn
development fee income to the extent its total costs are less than the fixed
price. In connection with the development of this facility, the Company was
assigned pursuant to an assignment agreement, dated July 3, 1996, rights
under a letter of intent, dated December 11, 1995, to participate in the
joint venture that will own the proposed Tucson facility and to develop such
facility for the joint venture. The Company in turn assigned its rights to
participate in the joint venture to another Chancellor Entity.
The Company has entered into a turnkey construction agreement, dated
August 14, 1996, with Atlantic Development Group, LLC and Cambridge House
Associates General Partnership ("Cambridge House Partnership"), in which a
Chancellor Entity has a 70% interest, to co-develop an assisted living
facility in Ossining, New York. Pursuant to this agreement, the Company is
entitled to a development fee of $200,000 and a construction supervision fee
of $5,000 per month during the course of construction of the project. The
Company has also entered
59
<PAGE>
into a management agreement, dated as of August 14, 1996, with Cambridge
House Partnership to manage this facility with a ten year initial term and
two five-year renewal options in favor of the Company. Pursuant to this
agreement, the Company shall receive a management fee equal to 5% of gross
revenues of the facility (less contractual adjustments for uncollectible
accounts).
The Company has entered into a management agreement, dated as of June 30,
1996, with a Chancellor Entity, to manage a facility in Dedham,
Massachusetts. Pursuant to this agreement, which extends for a 10-year
period, with three five-year renewal periods at the Company's option, the
Company shall receive a management fee equal to 5% of gross revenues of the
facility (less contractual adjustments for uncollectible accounts).
The Company has entered into a management agreement, dated June 30, 1996,
with a Chancellor Entity to manage skilled nursing and assisted living
facilities in Needham, Massachusetts. Pursuant to this agrement, which has a
20 year term with three five-year renewal periods at the Company's option,
the Company shall receive a management fee equal to 5% of gross revenues of
the facilities (less contractual adjustments for uncollectible accounts). The
Company acquired the management contract for the facilities from a Chancellor
Entity for $2.8 million in cash.
The Company has entered into an assignment agreement, dated as of June 25,
1996, with a Chancellor Entity to develop a skilled nursing facility in
Millbury, Massachusetts, in accordance with the turnkey construction
contract, dated October 19, 1994, as amended, between Sun Healthcare Group,
Inc. and CCC of Florida, Inc. Pursuant to the Millbury construction contract,
the Company shall receive a development fee equal to the difference, if any,
between the contract price and the actual construction costs.
On October 3, 1996, the Company executed a turnkey construction contract
with Cragganmore Associates Limited Partnership ("Cragganmore"), in which a
Chancellor Entity has an 80% interest, to develop an assisted living facility
in Southington, Connecticut and pursuant to which the Company will receive a
development fee equal to the difference between the contract price and the
actual costs of development and construction. The Company was assigned the
right to enter into such contract pursuant to the assignment agreement, dated
July 3, 1996, with a Chancellor Entity, assigning to the Company the right to
develop this facility.
On July 3, 1996, pursuant to an assignment agreement, the Company obtained
from a Chancellor Entity the right to develop and manage an
assisted/independent living facility in Houston, Texas. On September 1, 1996,
the Company entered into a development agreement with such Chancellor Entity
which provides that the Company will earn a development fee of $875,000. The
Company also expects to enter into a management agreement substantially
similar to the Global Management Agreement.
On July 3, 1996, pursuant to an assignment agreement, the Company assigned
its rights, duties and obligations to a Chancellor Entity with respect to its
rights under a letter of intent to participate in the joint venture that
would own senior housing facilities to be developed in Glen Cove, Roslyn, and
Great Neck, New York and Wallingford, Connecticut. The Company retained the
rights under such letter of intent to develop and manage such facilities. On
October 3, 1996, the Company entered into a management agreement concerning
the proposed Glen Cove facility with a term of 15 years with two five-year
renewal options in favor of the Company and a management fee equal to 5% of
gross revenues. The Company expects to enter into a turnkey development
agreement with such Chancellor Entity to co-develop the senior housing
facility in Great Neck. Pursuant to this agreement the Company expects to
receive a development fee the amount of which will be negotiated prior to
construction.
The Company has entered into (i) an assignment agreement, dated as of June
6, 1996, with a Chancellor Entity to develop a skilled nursing facility in
West Bridgewater, Massachusetts, in accordance with the turnkey construction
contract, dated April 20, 1995, as amended, between West Bridgewater Medical
Investors Limited Partnership and Continuum Care of West Bridgewater, Inc.;
(ii) an assignment agreement, dated as of June 6, 1996, with a Chancellor
Entity to develop a skilled nursing facility in Auburn, Massachusetts, in
accordance with the turnkey construction contract, dated March 3, 1994, as
amended, between Auburn Medical Investors, Limited Partnership and Continuum
Care Corporation; (iii) an assignment agreement, dated as of June 6, 1996,
with a Chancellor Entity to develop a skilled nursing facility in Plymouth,
Massachusetts, in accordance with the turnkey construction contract, dated
March 3, 1994, as amended, between Plymouth Medical Investors Limited
Partnership and Continuum Care Corporation; and (iv) an assignment agreement,
dated as of June 6, 1996, with a Chancellor Entity to develop a skilled
nursing facility in Raynham, Massachusetts, in accordance with the turnkey
construction contract, dated March 3, 1994, as amended, between Raynham
Medical Investors Limited Partnership and Continuum Care
60
<PAGE>
Corporation. The development of the facilities under each of the agreements
listed in clauses (i) through (iv) has been completed, and the Company is
entitled to receive future payments based upon occupancy levels and cash flow
coverage, the necessary minimum thresholds of which have not yet been
reached. In the aggregate, the Company expects to receive approximately
$1,000,000. Prior payments under these contracts were made to a Chancellor
Entity prior to the assignment of such agreements.
In July 1996, the Company purchased certain assets in connection with the
facility in Needham, Massachusetts from a Chancellor Entity at a purchase
price of $500,000.
Meditrust, a publicly traded real estate investment trust with assets in
excess of $1.7 billion and of which Abraham D. Gosman is the Chairman of the
Board and Chief Executive Officer, has provided financing to a skilled
nursing/assisted living facility located in Needham, Massachusetts and owned
principally by Mr. Gosman, 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 accrues 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. Prior to the completion of the Offering and at Mr.
Gosman's sole discretion, the Company may obtain additional financing from
Mr. Gosman for working capital purposes. The Company intends to use a portion
of the net proceeds of the Offering to repay this indebtedness. See "Risk
Factors--Need for Additional Financing" and "--Substantial Debt and Lease
Obligations."
In June and July 1996, Standish borrowed an aggregate of $1.0 million for
working capital purposes from Pre- Merger CareMatrix. In addition to
executing a promissory note to evidence the obligation, Standish entered into
a mortgage and option agreement with Pre-Merger CareMatrix 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, Abraham D. 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, $1.0 million of which
was used to satisfy the working capital loan from Pre-Merger CareMatrix. 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 Common Stock at a conversion price equal to $20.80 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 80,000 shares of Common Stock at
an exercise price equal to $20.80 per share (subject to customary
anti-dilution adjustments). The Company intends to use a portion of the net
proceeds of the Offering to redeem the Series B Preferred Stock. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations for Standish" and "Principal and Selling Stockholders."
It is the general policy of the Company not to enter into any transaction,
or amend in a manner adverse to the Company any existing transaction, in
which an affiliate of the Company has a material interest, unless a majority
of the disinterested directors approve the terms thereof. See "Risk
Factors--Dependence by the Company on Related Party Agreements" and
"--Potential Conflicts of Interest."
61
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
Common Stock. The following table and the notes thereto set forth
information regarding the beneficial ownership of Common Stock of the
Company, as of October 4, 1996, by each Director and each Named Executive
Officer, by persons who beneficially own 5% or more of the outstanding shares
of Common Stock, by other Selling Stockholders and by all Directors and
executive officers of the Company 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>
Shares of Common
Stock Beneficially
Owned After Offering
Shares of Common Assuming Full Exercise
Stock Beneficially of the Underwriters'
Name and Address of Beneficial Owner Owned Prior to Offering (1) Number of Shares Over-allotment Option (1)
- --------------------------------------- --------------------------- Being Sold Subject ----------------------------
to the Underwriters'
Number of Shares Percent(2) Over-allotment Option Number of Shares Percent(2)
---------------- ---------- ---------------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Abraham D. Gosman (3) 8,508,489 79.2% 829,027 7,783,103 45.8%
777 South Flagler Drive
West Palm Beach, FL 33401
Andrew D. Gosman 3,178,840 (4) 29.6% -- 3,178,840 (4) 18.7%
197 First Avenue
Needham, MA 02194
Michael M. Gosman 3,178,840 (4) 29.6% -- 3,178,840 (4) 18.7%
197 First Avenue
Needham, MA 02194
Michael J. Doyle 151,139 (5) 1.4% -- 151,139 (5) *
Kenneth M. Miles 60,900 (6) * -- 60,900 (6) *
Donald J. Amaral -- * -- -- --
H. Loy Anderson, Jr. 550 * -- 550 *
Rev. Bedros Baharian -- -- -- -- --
Stephen E. Ronai -- -- -- -- --
Jonathan R. Banton (7) 164,130 1.5% 16,120 148,044 *
Timothy J. Coburn (8) 54,347 * 5,338 49,020 *
Edward E. Goldman (9) 40,760 * 4,003 36,765 *
Joel A. Kanter (7) 200,000 1.9% 19,642 180,398 1.1%
Frederick R. Leathers (7) 111,413 1.0% 10,942 100,493 *
Kevin J. Maley (7) 40,760 * 4,003 36,765 *
Richard S. Mann (10) 81,644 * 8,018 73,990 *
Robert A. Miller (9) 111,413 1.0% 10,942 100,493 *
William A. Sanger (9) 81,521 * 8,006 73,531 *
Craig J. Wilkos (7) 54,347 * 5,338 49,020 *
Michael J. Zaccaro (7) 164,130 1.5% 16,120 148,044 *
All directors and executive officers as
a group (14 persons including certain of
the above-named individuals) 9,485,208 88.3% 864,789 8,620,419 50.7%
</TABLE>
- -------------
* Represents less than 1%.
62
<PAGE>
(1) Includes shares which may be acquired within 60 days of September 30,
1996 pursuant to exercise or conversion of outstanding options, warrants
and convertible securities of the Company. The table does not show the
9,000 shares subject to options held by Michael J. Brenan or the 12,704
shares owned by Dr. C. Joel Glovsky, who are no longer officers or
directors of the Company. Their share ownership represents less than 1%
of the outstanding shares of Common Stock.
(2) The percentages shown are based on 10,740,775 shares of Common Stock as
of September 30, 1996, giving effect to the Reverse Split, (16,990,775
shares of Common Stock, giving effect to the Reverse Split, upon
completion of the Offering) and 27,000 shares of Series A Preferred
Stock, respectively, outstanding plus, as to each individual and group
listed, the number of shares of 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 the Company held by such holder
which are exercisable within 60 days of September 30, 1996, after
application of anti-dilution adjustments in respect of such holders.
(3) Consists of (a) 703,432 shares of Common Stock owned directly, (b)
7,737,750 shares of Common Stock held by Abraham D. Gosman as trustee for
the benefit of each of his sons, Andrew D. Gosman and Michael M. Gosman
who are directors of the Company (as trustee, Abraham D. Gosman has
investment power with respect to all such shares and voting power with
respect to 4,558,910 of such shares), and (c) 67,307 shares of Common
Stock currently issuable upon conversion of the Series B Preferred Stock
at an initial conversion price of $20.80 per share (as adjusted to give
effect to the Reverse Split), subject to customary anti-dilution
adjustments.
(4) 7,737,750 shares (71.9% of the outstanding shares) of Common Stock are
held in trust for Andrew and Michael Gosman by their father, Abraham D.
Gosman, who has sole investment power with respect to all of the shares
and sole voting power with respect to 4,558,910 of the shares. Andrew and
Michael Gosman have shared voting power with respect to 3,178,840 shares.
(5) Includes 9,067 shares held by Mr. Doyle's spouse and 2,712 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) 10,000 shares which may be acquired
within 60 days pursuant to options dated as of February 28, 1995, (b)
10,000 shares which may be acquired within 60 days pursuant to options
dated as of July 1, 1995 and (c) 100,000 shares which may be acquired
within 60 days pursuant to the Management Options dated as of June 28,
1996.
(6) Includes (a) 10,900 shares of Common Stock which may be acquired within
60 days pursuant to options dated as of February 27, 1993, November 12,
1993 and July 1, 1995 and (b) 50,000 shares which may be acquired within
60 days pursuant to the Management Options dated as of June 28, 1996.
(7) The business address for the indicated Selling Stockholder is 197 First
Avenue, Needham, MA 02194.
(8) Mr. Coburn's address is 86 Juniper Lane, P.O. Box 1046, Glastonbury, CT
06033.
(9) The business address for the indicated Selling Stockholder is 777 South
Flagler Drive, Suite 1000E, West Palm Beach, Florida 33401.
(10) Mr. Mann's address is 55 William Street, Needham, Massachusetts 02194.
Series A Preferred Stock. As of September 30, 1996, Robert A. Schneider
and Deltec Asset Mgmt. Corp. ("Deltec") beneficially owned 14,000 and 10,000
shares, respectively, representing 51.9% and 37.0% of the outstanding shares
of the Company's Series A Preferred Stock. Mr. Schneider's address is 2
Broadway, New York, NY 10004. Deltec's address is 535 Madison Ave., New York,
NY 10022.
63
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
The following is a brief description of the capital stock of the Company.
The Company is authorized to issue 75,000,000 shares of Common Stock, $.05
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." The Company has 10,740,775 shares of Common Stock, 27,000 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 the Company, 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
The Company'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 headings "--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 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 the Company 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 the Company 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
the Company.
Series A Preferred Stock
The Company has 27,000 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.
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.
64
<PAGE>
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
Prospectus, the conversion rate has been adjusted to approximately 0.70892 to
reflect the eight dividends on the Series A Preferred Stock which Standish
(the predecessor of the Company) had failed to pay since approximately June
30, 1994 and the Reverse Split. In addition, the conversion rate is subject
from time to time to customary anti-dilution adjustments, including
adjustments for the failure of the Company 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, the Company 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. As of September 30, 1996, the
conversion price was equal to $14.10, as adjusted to reflect the Reverse Stock
Split. The conversion price is subject to adjustment if, among other factors,
the Company should fail to make future dividend payments on the Series A
Preferred Stock when due.
Voting Rights. Because the Company had failed to pay dividends for four
quarterly dividend payment periods, the holders of the Series A Preferred
Stock are entitled to vote together with the holders of Common Stock on all
matters submitted to the Company's Stockholders, including the election of
directors. Once in effect, such voting rights are not terminated by the
payment of all accrued dividends. The holders of the Series A Preferred Stock
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
the Company 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 the Company,
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 the Company is the surviving entity.
Liquidation. In the event of any liquidation, dissolution or winding-up of
the Company, to the extent that liquidation proceeds or other assets of the
Company 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. The Company 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 the Company. Shares of
Series A Preferred Stock redeemed or otherwise purchased by the Company shall
be retired by the Company and shall be unavailable for subsequent issuance.
Pursuant to Standish's Exchange Offer in 1994, an aggregate of 340,236 shares
of Common Stock (as adjusted to give effect to the Reverse Split) were issued
in exchange for 654,300 shares of Series A Preferred Stock.
Series B Preferred Stock
The Company has 100 shares of Series B Preferred Stock outstanding which
is to be redeemed with the proceeds of the Offering. 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.
65
<PAGE>
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 per share per annum, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year. Such
right to receive dividends is 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, however, 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 673 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, the Company 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.
The Series B Preferred Stock will be redeemed with the proceeds of the
Offering. See "Use of Proceeds."
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 the Company,
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 the Company is the surviving entity.
In the event that the Company 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 the Company'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
the Company, to the extent that liquidation proceeds or other assets of the
Company are available for distribution to Stockholders, the holders of Series
B Preferred Stock will be entitled to receive a liquidating distribution of
$14,000 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.
Miscellaneous. The Company 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
66
<PAGE>
for sale by the Company. Shares of Series B Preferred Stock redeemed or
otherwise purchased by the Company shall be retired by the Company and shall
be unavailable for subsequent issuance.
Certain Provisions of the Restated 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 the Company limits the personal
liability of its directors (in their capacity as directors but not in their
capacity as officers) to the Company or its stockholders to the fullest
extent permitted by the Delaware General Corporation Law. Specifically, a
director will not be personally liable to the Company 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 the Company or its
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 the Company and its stockholders. The
inclusion of this provision, however, together with provisions of the By-Laws
of the Company which require the Company to indemnify its officers and
directors against certain liabilities is intended to enable the Company to
attract qualified persons to serve as directors who might otherwise be
reluctant to do so.
Transfer Agent and Registrar
American Securities Transfer & Trust, Inc. of Denver, Colorado is the
transfer agent and registrar for the Common Stock and Series A Preferred
Stock of the Company.
Business Combinations
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 currently not applicable
to the Company because the Company does not have a class of voting stock
listed on a national securities exchange, authorized for quotation on the
Nasdaq National Stock Market or held of record by more than 2,000
stockholders. The Company's Restated Certificate of Incorporation contains
comparable "fair price" protections but with certain variations as compared
to the Delaware statutory provisions. The Company's Restated Certificate of
Incorporation defines a "Related Person" (i.e., an interested stockholder) as
an individual or corporation which becomes the beneficial owner of 5% or more
of the outstanding voting stock of the Company after October 31, 1991. 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 the Company and a Related Person must be approved by
the Company's Board of Directors, and additionally by the holders of
two-thirds of the voting power of the outstanding shares of voting stock of
the Company, 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 the Company of any of the
outstanding voting stock of any class from any one or more individuals or
entities known by the Company 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
67
<PAGE>
value (as defined in the Company's 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
the Company 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 Company's Restated Certificate of Incorporation also requires the
Board of Directors to consider what is in the best interests of the Company
in connection with mergers, consolidations, or sales of all or substantially
all of the Company's assets whether or not in the ordinary course of
business. In considering what the best interests of the Company 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 the Company'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 Company.
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law which, with certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any
"interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned
(a) by persons who are directors and officers and (b) by employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer, or (iii) on or after such date, the business
combination is approved by the Board of Directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least
66-2/3% of the outstanding voting stock which is not owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (a)
the owner of 15% or more of the outstanding voting stock of the corporation
or (b) an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation at any time within
the three-year period immediately prior to the date on which it is sought to
be determined whether such person is an interested stockholder.
Registration Rights
Abraham D. Gosman has been granted certain rights by the Company with
respect to the registration under the Securities Act of the 80,000 shares
issuable to him on exercise of the warrants (excluding shares issuable upon
the conversion of the Series B Preferred Stock held by him that will be
redeemed by the Company with a portion of the net proceeds from this
Offering. See "Use of Proceeds.")
In addition, certain other stockholders have registration rights with
respect to an aggregate of approximately 243,133 shares (after giving effect
to the Reverse Split) of Common Stock upon the exercise of the outstanding
warrants and the convertible securities, exclusive of those held by Mr.
Gosman. The holder of warrants and convertible securities with respect to an
aggregate of approximately 72,216 shares (after giving effect to the Reverse
Split) of Common Stock has requested that the Company register such shares in
this Offering. The Company does not expect to register such shares in this
Offering.
68
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 16,990,775 shares
of Common Stock outstanding. Of these shares, all of the 6,250,000 shares
sold in the Offering (7,187,500 shares if the Underwriters exercise their
over-allotment option in full) will be freely tradable without restriction
under the Securities Act, except for any such shares which may be acquired by
an affiliate of the Company as that term is defined in Rule 144 of the
General Rules and Regulations promulgated under the Securities Act ("Rule
144"). The 9,485,208 shares held by affiliates of the Company will be
eligible for sale in the open market, subject to the contractual lockup
provisions and applicable requirements of Rule 144 described below.
In general, under Rule 144, as currently in effect, an affiliate is
entitled to sell a number of shares within any three-month period that does
not exceed the greater of (i) one percent of the then outstanding shares of
the Common Stock or (ii) the average weekly reported volume of trading of the
Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements pertaining to the manner of
such sales, notices of such sales and the availability of current public
information concerning the Company.
The Company, its directors and executive officers and certain other
stockholders have agreed that they will not offer, sell, contract to sell,
pledge, grant any option for the sale of, or otherwise dispose or cause the
disposition of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for such shares, for a period of 180 days after
the date of the Underwriting Agreement without the prior written consent of
Dean Witter Reynolds Inc. Upon completion of the Offering, sales of
substantial amounts of Common Stock by existing stockholders could have an
adverse impact on the market price of the Common Stock. No predictions can be
made as to the effect, if any, that market sales of shares by existing
stockholders or the availability of such shares for future sale will have on
the market price of shares of Common Stock prevailing from time to time.
69
<PAGE>
UNDERWRITING
The Underwriters named below, for whom Dean Witter Reynolds Inc., NatWest
Securities Limited, PaineWebber Incorporated, Robertson, Stephens & Company
LLC and Smith Barney Inc. are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement (a copy of which has been filed as
an exhibit to the Registration Statement), to purchase from the Company the
number of shares of Common Stock set forth opposite their respective names in
the table below:
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
Dean Witter Reynolds Inc.
NatWest Securities Limited
PaineWebber Incorporated
Robertson, Stephens & Company LLC
Smith Barney Inc.
----------------------
Total 6,250,000
======================
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligation is such that they must purchase all of the shares (other than
those subject to the over-allotment option) if any are purchased.
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock directly to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers (who
may include the Underwriters) at such public offering price less a concession
not to exceed $ per share. Such dealers may reallow a concession not to
exceed $ per share to other dealers. After the public offering, the public
offering price may be reduced and concessions and reallowances to dealers may
be changed by the Underwriters. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales to any account over
which they exercise discretionary authority. The Representatives intend to
make a market in the Common Stock after completion of the Offering.
The Selling Stockholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to an additional 937,500 shares of Common Stock pro rata from the
Selling Stockholders at the public offering price, less underwriting
discounts and commissions to cover over- allotments, if any. After
commencement of this offering, the Underwriters may confirm sales subject to
the over- allotment option.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the Common Stock offered hereby and subject to certain
exceptions, it will not offer any Common Stock within the United States, its
territories or possessions, or to persons who are citizens thereof or
residents therein. The Underwriting Agreement does not limit sale of the
Common Stock offered hereby outside of the United States.
NatWest Securities Limited has further represented and agreed that (a) it
has not offered or sold and will not offer or sell any shares of Common Stock
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(whether as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Financial Services Act 1986 (the
"Act"); (b) it has complied and will comply with all applicable provisions of
the Act with respect to anything done by it in relation to the shares of
Common Stock in, from, or otherwise involving the United Kingdom; and (c) it
has only issued or passed on and will only issue or pass on, in the United
70
<PAGE>
Kingdom, any document that consists of or any part of listing particulars,
supplementary listing particulars, or any other document required or
permitted to be published by listing rules under Part IV of the Act, to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person
to whom the document may otherwise lawfully be issued or passed on.
National Westminster Bank Plc ("NatWest"), an affiliate of NatWest
Securities Limited served as a financial advisor to Standish in 1995 and also
served as financial advisor to Pre-Merger CareMatrix in connection with the
Merger. NatWest will receive a fee of approximately 108,000 shares of Common
Stock (as adjusted to give effect to the Reverse Split) in connection with
the Merger.
The Company has agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company, its directors and executive officers and certain other
stockholders have agreed that they will not offer, sell, contract to sell,
pledge, grant any option for the sale of, or otherwise dispose or cause the
disposition of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for such shares, for a period of 180 days after
the date of the Underwriting Agreement without the prior written consent of
Dean Witter Reynolds Inc. Upon completion of the Offering, sales of
substantial amounts of Common Stock by existing stockholders could have an
adverse impact on the market price of the Common Stock. No predictions can be
made as to the effect, if any, that market sales of shares by existing
stockholders or the availability of such shares for future sale will have on
the market price of shares of Common Stock prevailing from time to time.
In connection with this offering, the Underwriters and other selling group
members may engage in passive market making transactions in the Common Stock
on the Nasdaq Small Cap System in accordance with Rule 10b-6A under the
Exchange Act. Passive market making consists of displaying bids on the Nasdaq
Small Cap System limited by the price of independent market makers and
effecting purchases limited by such prices and in response to order flow. Net
purchases by a passive market maker on each day are limited to a specified
percentage of the passive market maker's average daily trading volume in the
Common Stock during a specified prior period and must be discontinued when
such limit is reached. Passive market making may stabilize the market price
of the Common Stock at a level above that which might otherwise prevail and,
if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Nutter, McClennen & Fish, LLP, Boston, Massachusetts and for the
Underwriters by Brown & Wood LLP, New York, New York.
EXPERTS
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 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 consolidated financial statements of Standish for the three year
period ended December 31, 1995 included in this 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 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.
71
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-------
<S> <C>
CareMatrix
Report of Coopers & Lybrand L.L.P., Independent Accountants F-2
Combined Financial Statements:
Combined Balance Sheets as of June 30, 1996 (unaudited) December 31, 1995 and December 31,
1994 F-3
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-4
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-5
Notes to Combined Financial Statements F-6
The Standish Care Company
Report of Coopers & Lybrand L.L.P., Independent Accountants F-11
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-12
Consolidated Statements of Operations, for the years ended
December 31, 1995, 1994 and 1993 F-13
Consolidated Statements of Cash Flows,
for the years ended December 31, 1995, 1994 and 1993 F-14
Consolidated Statements of Stockholders' Equity, for the years ended
December 31, 1995, 1994 and 1993 F-17
Notes to Consolidated Financial Statements F-18
Consolidated Interim Financial Statements (unaudited):
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 F-39
Consolidated Statements of Operations for the three and six months ended June 30, 1996
and 1995 F-40
Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 F-41
Notes to Consolidated Financial Statements F-42
</TABLE>
F-1
<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
F-2
<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 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 (Notes 6 and 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-3
<PAGE>
CAREMATRIX
COMBINED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
June 24, 1994
Six Months Ended Year Ended (Inception) to
June 30, 1996 December 31, 1995 December 31, 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-4
<PAGE>
CAREMATRIX
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
June 24, 1994
Six Months Ended Year Ended (Inception) to
June 30, 1996 December 31, 1995 December 31, 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-5
<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 ended 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-6
<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 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 and equipment and
intangibles, adoption of the statement is not anticipated to have a material
effect on the Company's financial statements.
3. Acquisition
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-7
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
4. Property and Equipment
Property and equipment consists of the following:
Estimated December 31,
Useful Life -------------
(Years) 1995
---------------- -------------
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
========
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:
December 31,
------------------
1995 1994
-------- -------
Accrued closure costs $244,056 $ --
Accrued rent 88,542 --
Other 103,580 27,232
-------- -------
Total accrued liabilities $436,178 $27,232
======== =======
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:
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
===========
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.
7. Commitments and Contingencies
The Company has entered into employment agreements with certain of its
employees, which include, among other terms, noncompetition provisions and
salary and benefits continuation.
F-8
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
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:
Year June 24, 1994
Ended (Inception) to
----------- --------------
December 31,
------------------------------
1995 1994
----------- ----------
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
========== ==========
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.
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 located in Needham, Massachusetts and owned principally by Mr.
Gosman, in the aggregate amount of $20,109,241 at December 31, 1995.
F-9
<PAGE>
CAREMATRIX
NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
9. Related Party (Continued)
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 prior to an equity offering.
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:
Current assets $ 93,123
Property, plant and equipment 71,381
Intangibles 566,312
Current liabilities (28,710)
11. Subsequent Events (Unaudited)
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.
In July 1996, the Company acquired a management contract from an entity
principally owned by Mr. Gosman for $2,800,000 to manage a 142-bed facility in
Needham, Massachusetts. The contract, which extends for a 25 year period,
provides for an annual management fee of approximately five percent of gross
revenues.
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: (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.
In August 1996, the Company adopted a stock option plan for officers and
employees to purchase up to 6,000,000 shares of its stock. All options allow for
the purchase of the stock at prices not less than the fair value of such stock
at the date of grant. Options granted under the plan vest over a two to three
year period and expire ten years after the date of grant. As of August 31, 1996,
approximately 2,300,000 options were granted and outstanding at prices ranging
from $2.00 to $4.00 per share.
F-10
<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, based on our audit and the report of the other auditors, 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-11
<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-12
<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-13
<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-14
<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-15
<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-16
<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 Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------- ----- ------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 1,330,449 $13,304 392 $ 490,000 $ 2,750,808 ($ 2,327,330) $ 926,782
Issuance of common stock 100,000 1,000 499,000 500,000
Redemption of a portion of
the Series A and all of
the Series B "old"
preferred stock (87) (108,865) (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) 6,111,578
Dividends paid (269,813) (269,813)
Net loss (1,095,002) (1,095,002)
--------- ------- -------- ----------- ----------- ----------- -----------
Balance, December 31, 1993 1,493,972 $14,939 782,350 $ 7,823,500 $ 1,648,573 ($ 3,422,332) $ 6,064,680
--------- ------- -------- ----------- ----------- ----------- -----------
Issuance of common stock
through a private
placement 200,000 2,000 830,000 832,000
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 (216,372)
Dividends paid (195,588) (195,588)
Restrictions on stock
satisfied upon terms of
the Development Agency
Agreement 14,571 14,571
Net loss (4,171,990) (4,171,990)
--------- ------- -------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 3,395,152 $33,952 128,050 $ 1,280,500 $ 8,607,171 ($ 7,594,322) $ 2,327,301
--------- ------- -------- ----------- ----------- ----------- -----------
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) (64,025)
Compensatory stock options 10,000 10,000
Compensation expense
associated with issuance
of warrants 37,857 37,857
Net loss (2,293,499) (2,293,499)
--------- ------- ------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 3,435,826 $34,359 112,500 $ 1,125,000 $ 8,746,096 ($ 9,887,821) $ 17,634
========= ======= ======= =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-17
<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-18
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Related Party (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, 1995 December 31, 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:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------ --------------------
<S> <C> <C>
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
======== ========
</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 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-19
<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
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------ --------------------
<S> <C> <C>
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
======== ========
</TABLE>
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-20
<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-21
<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-22
<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 of 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-23
<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-24
<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-25
<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-26
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
H. Related Party Transactions (Continued)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1995 1994 1993
---- ---- ----
<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-27
<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
F-28
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. Short-term borrowings and long-term debt (Continued)
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-29
<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-30
<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-31
<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-32
<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-33
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
M. Commitments and contingencies (Continued)
<TABLE>
<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>
<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-34
<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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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, 1996 December 31, 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-42
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
D. Restricted Deposits
Restricted deposits consists of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 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:
June 30, 1996 December 31, 1995
------------------ --------------------
(unaudited)
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
=========== ===========
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
</TABLE>
F-43
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F. Short-term Borrowings And Long-term Debt (Continued)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------------ --------------------
(Unaudited)
<S> <C> <C>
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
December 1999, 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 a corporation controlled by Abraham D.
Gosman, the principal stockholder of 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 the lender, 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
</TABLE>
F-44
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F. Short-term Borrowings and Long-term Debt (Continued)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------------ --------------------
(Unaudited)
<S> <C> <C>
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:
Six Months Ended
June 30, 1995
-------------------
(unaudited)
Net revenues 4,379,332
Loss before extraordinary items (930,883)
Net loss (930,883)
Net loss per common share (.29)
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-45
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
J. Stock Option Grants
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, a corporation controlled by Abraham D. Gosman, the principal
stockholder of CareMatrix, 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 such corporation. The note
bears interest at 10% and interest is payable annually. In accordance with the
terms of the promissory note, such corporation 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, a corporation controlled by Abraham D. Gosman, the
principal stockholder of 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
F-46
<PAGE>
THE STANDISH CARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
M. Subsequent Events (Continued)
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 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.
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
N. Reclassification
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform with the 1996 presentation.
F-47
<PAGE>
<PAGE>
[CAREMATRIX LOGO]
[MAP OF THE UNITED STATES COLORED TO DEPICT STATES WHERE FACILITIES ARE
CURRENTLY UNDER DEVELOPMENT, UNDER CONSTRUCTION, OPERATED OR TO BE MANAGED BY
CAREMATRIX]
Total Resident
Location Capacity Status
- -----------------------------------------------------------
ARIZONA
Peoria 120 D
Tucson 120 D
Yuma 120 C
---
360
CONNECTICUT
Avon 108 D
Cheshire 104 D
Darien 86 C
Hamden 108 D
Milford 108 D
Ridgefield 125 D
Southington 96 C
Stamford 168 O
Woodbridge 90 D
---
993
FLORIDA
Bonita Bay 148 D
Deerfield Beach 128 D
Gainesville 14 O
Gainesville 72 O
Homestead 56 O
Jensen Beach 148 D
Miami 120 O
Palm Beach 101 C
Tampa 74 O
---
861
GEORGIA
Atlanta 148 D
Macon 148 D
---
296
MAINE
Saco 30 D
---
30
MARYLAND
Ellicott City 148 D
Silver Spring 138 O
---
286
MASSACHUSETTS
Boston 93 O
Cambridge 82 O
Dedham 142 C
Leominster 74 O
Millbury 154 C
Needham 58 O
Needham 142 O
---
745
NEW HAMPSHIRE
Franklin 32 O
---
32
NEW JERSEY
Livingston 118 D
Park Ridge 310 D
Princeton 263 C
---
691
NEW YORK
Glen Cove 80 D
Great Neck 140 D
Ossining 122 C
Rye Brook 166 D
Upper Nyack 148 D
---
656
NORTH CAROLINA
Durham 148 D
Newton 39 O
Statesville 75 O
Yadkinville 50 O
---
312
PENNSYLVANIA
Dover 136 O
---
136
TEXAS
Houston 148 D
---
148
VIRGINIA
Chesapeake 55 O
Poquoson 45 O
Reston 148 D
Williamsburg 60 O
---
308
D--Development C--Construction O--Operating/Managing
<PAGE>
[logo]
(formerly The Standish Care Company)
6,250,000 Shares
Common Stock
PROSPECTUS
Dean Witter Reynolds Inc.
NatWest Securities Limited
PaineWebber Incorporated
Robertson, Stephens & Company
Smith Barney Inc.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by the Company in
connection with the offering. All amounts are estimated except for the
Registration Fee, NASD Fee and Nasdaq Listing Fee.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $ 46,569
NASD Fee $ 14,875
American Stock Exchange
Listing Fee $ 50,000
Printing and Engraving Expenses $ 300,000
Legal Fees and Expenses $ 250,000
Accounting Fees and Expenses $ 175,000
Blue Sky Fees and Expenses $ 35,000
Miscellaneous $ 128,556
----------
TOTAL $1,000,000
==========
</TABLE>
- -------------
Item 14. Indemnification of Directors and Officers
The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law, as amended, which provides that a
corporation may indemnify any person who was or is a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite an adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Article 11 of the Company's Restated Certificate of Incorporation
eliminates the personal liability of directors to the Company or its
stockholders for monetary damages for breach of fiduciary duty to the full
extent permitted by Delaware law. Article VII of the Company's By-Laws
provides that the Company indemnify its officers and directors to the full
extent permitted by the Delaware General Corporation Law.
The Company has entered into indemnification agreements with each of its
directors. The Company may also enter into similar agreements with certain of
its officers who are not also directors. Generally, the Company'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.
II-1
<PAGE>
The indemnification agreements provide that the Company 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 the Company (derivative suits), where the individual's
involvement is by reason of the fact that he is or was a director or officer
of the Company. 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 the Company'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 the Company.
The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.
Item 15. Recent Sales of Unregistered Securities
(1) On November 12, 1993, the Company granted to each of Robert W. DeVore,
Marshal S. Sterman and Jeffrey F. Rayport options to purchase 15,000
shares of Common Stock in recognition of services as directors of the
Company.*
(2) Between November 10, 1993 and June 28, 1995, the Company issued warrants
to purchase an aggregate of 35,833 shares of Common Stock to Health Care
REIT, Inc. under acquisition financing arrangements described in Part I
of this Registration Statement.*
(3) On June 10, 1994, the Company issued $2,000,000 principal amount of
Convertible Debentures ("Convertible Debentures") to Columbia Pacific
Group, Inc. ("CP") under a working capital credit facility and at the
same time the Company issued to CP (a) 200,000 shares of Common Stock for
an aggregate purchase price of $832,000 and (b) warrants to purchase an
aggregate of 50,000 shares of Common Stock for no additional
consideration. Subsequently, CP assigned to one of its affiliates,
Emeritus Corporation ("Emeritus"), all of CP's rights and obligations in
respect of the Convertible Debentures, the 200,000 shares of Common Stock
and the warrants to purchase 50,000 shares of Common Stock.*
(4) On June 10, 1994, at the time of consummation of the transactions
described in the preceding paragraph (3), the Company issued warrants to
purchase 50,000 shares of Common Stock to Daniel R. Baty, the Chairman
and principal stockholder of Emeritus, in consideration for Mr. Baty
entering into a three year Advisory Agreement with the Company.*
(5) On June 10, 1994, the Company issued warrants to purchase an aggregate of
32,500 shares of Common Stock to RAS Securities Corp. as consideration
for investment banking services.*
(6) On September 29, 1994, the Company issued warrants to purchase an
aggregate of 37,500 shares of Common Stock to The Equity Group, Inc. as
partial consideration for public relations services.*
(7) On January 15, 1995, the Company issued warrants to purchase an aggregate
of 30,000 shares of Common Stock to Neil G. Berkman Associates as partial
consideration for public relations services.*
(8) On July 31, 1996, the Company sold 100 shares of its Series B Preferred
Stock to Abraham D. Gosman.
(9) On July 31, 1996, the Company issued to Abraham D. Gosman a warrant to
purchase 80,000 shares of Common Stock.
- -------------
*Does not reflect the Reverse Split.
In addition to the foregoing transactions, the Company has granted stock
options to purchase an aggregate of 201,040 shares of Common Stock to certain
of its officers and key employees under its Restated 1991 Combination Stock
Option Plan, an aggregate of 7,200 shares of Common Stock to three directors
under its 1995 Non-Qualified Stock Option Plan for Non-Employee Directors and
460,000 under its 1996 Equity Incentive Plan.
The securities issued in the foregoing transactions were not registered
under the Securities Act in reliance upon the exemptions from registration
set forth in Sections 3(b) and/or 4(2) of the Securities Act.
Item 16. Exhibits and Financial Statements
(a) Exhibits. The following is a list of exhibits which are incorporated
as part of the Registration Statement by reference.
II-2
<PAGE>
- -------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
<S> <C>
1.01 Form of Underwriting Agreement
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 Subsidiaries and Pre-Merger CareMatrix (with certain exhibits and
schedules attached thereto) (14)
2.10 Agreement and Plan of Merger by and among AMA New Jersey Development, Inc., Standish
Acquisition 12, Inc. and The Standish Care Company (+)
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 Registration
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 (14)
3.09 By-Laws of the Registrant (3)
3.10 Amendment to By-Laws of the Registrant dated July 24, 1995 (13)
3.11 Certificate of Amendment to Restated Certificate of Incorporation filed on October 3, 1996 (15)
3.12 Certificate of Amendment of Restated Certificate of Incorporation of The Standish Care Company (+)
4.01 Specimen Certificate for Common Stock (3)
5.01 Legal Opinion of Nutter, McClennen & Fish, LLP (*)
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)
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
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 (14)
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 Termination Agreement dated as of August 15, 1996 between the Registrant and Michael J.
Brenan (14)
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)
10.23 Form of Amended and Restated Employment Agreement between the Registrant and Kenneth M.
Miles (14)
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)
II-4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
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)
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 (14)
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 (14)
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)
II-5
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
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)
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 Registrant 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)
II-6
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
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 Warrant 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 (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)
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 (14)
10.98 Preferred Stock Purchase Agreement dated as of July 30, 1996 between the Registrant and
Abraham D. Gosman (14)
II-7
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
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 (14)
10.100 First Amendment to Warrant dated as of July 30, 1996 (+)
10.101 Registration Rights Agreement dated as of July 30, 1996 between the Registrant and
Abraham D. Gosman (14)
10.102 Employment Agreement dated July 29, 1996 by and between CareMatrix of Massachusetts,
Inc. and Marc H. Benson. (15)
10.103 1996 Equity Incentive Plan (+)
10.104 Lease Agreement concerning 197 First Avenue office space. (+)
10.105 Assignment Agreement dated July 3, 1996 by and between CareMatrix of Massachusetts, Inc.
("CMM") and Chancellor of Massachusetts, Inc. (Tampa, Florida)
10.106 Assignment Agreement dated July 3, 1996 by and between CMM and Chancellor of Massachusetts, Inc.
(Atlanta, Georgia) (+)
10.107 Assignment Agreement dated July 3, 1996 by and between CMM and Chancellor of
Massachusetts, Inc. (Boynton Beach, Florida) (+)
10.108 Management Agreement, dated as of June 30, 1996, between CMM and Continuum Care of
Dedham, Inc. (Dedham, Massachusetts) (+)
10.109 Management Agreement, dated as of July 1996, between CMM and Continuum Care of Needham,
Inc. (Needham, Massachusetts) (+)
10.110 Assignment Agreement, dated as of June 6, 1996, between CMM and Continuum Care of West
Bridgewater, Inc. (West Bridgewater, Massachusetts) (+)
10.111 Assignment Agreement, dated as of June 6, 1996, between CMM and Continuum Care of
Massachusetts, Inc. (Auburn, Massachusetts) (+)
10.112 [Intentionally Omitted]
10.113 Assignment Agreement, dated as of June 6, 1996, between CMM and Continuum Care of
Massachusetts, Inc. (Plymouth, Massachusetts) (+)
10.114 Assignment Agreement, dated June 6, 1996, between CMM and Continuum Care of
Massachusetts, Inc. (Raynham, Massachusetts) (+)
10.115 Development Agreement, dated September 1, 1996, between CareMatrix of Cypress Station,
Inc. and Chancellor of Houston, Inc. (Houston, Texas) (+)
10.116 Assignment Agreement, dated July 3, 1996, by and among AMA Funding Corporation,
CareMatrix of Massachusetts, Inc., and Chancellor of Massachusetts, Inc. (Peoria,
Arizona) (+)
10.117 Turnkey Construction Agreement, dated August 14, 1996, by and among CMM, Atlantic on
the Hudson, LLC and Cambridge House Associates General Partnership (Ossining) (*)
10.118 Management Agreement, dated October 3, 1996, among CMM and The Mayfair at Glen Cove,
LLC and Hassett-Belfer Senior Housing, LLC. (Glen Cove, New York) (+)
10.119 Development Agreement, dated March 8, 1996, between CareMatrix of Emerald Springs Inc./
Netwest of Yuma, Inc. and Emerald Springs Associates General Partnership (Yuma) (+)
10.120 Development Agreement, dated August 28, 1996, between CareMatrix of Amethyst Arbor,
Inc./Netwest Development Corporation and Amethyst Arbor Associates General
Partnership (Peoria) (+)
10.121 Assignment Agreement, dated as of June 6, 1996 between CCC of Connecticut, Inc. and
CareMatrix of Massachusetts, Inc. (Westfield Court, Connecticut) (+)
10.122 Assignment Agreement, dated July 3, 1996, by and between Chancellor of Houston, Inc.
and CareMatrix of Massachusetts, Inc. (Houston, Texas) (+)
10.123 Assignment Agreement, dated July 3, 1996, by and between Continuum Care of
Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Ridgefield, Connecticut)
(+)
10.124 Assignment Agreement, dated June 6, 1996, by and between CCC of Florida, Inc. and
CareMatrix of Massachusetts, Inc. (Millbury, Massachusetts) (+)
II-8
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------
10.125 Assignment Agreement, dated July 3, 1996, by and among AMA Funding Corporation,
CareMatrix of Massachusetts, Inc., and Chancellor of Massachusetts, Inc. (Tucson,
Arizona) (+)
10.126 Management Agreement, dated August 14, 1996, by and among CMM and Cambridge House
Associates General Partnership (Ossining) (+)
10.127 Assignment Agreement, dated July 3, 1996, by and between CarePlex of Southington, Inc.,
and Chancellor of Massachusetts, Inc. (Southington, Connecticut) (+)
10.128 Assignment Agreement, dated July 3, 1996, by and among The CarePlex Group, Inc.,
CareMatrix of Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Deerfield
Beach, Florida) (+)
10.129 Development Agreement, dated April 18, 1996, by and between Cheshire Care, LLC and
CareMatrix Corporation (Cheshire) (+)
10.130 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc. and Chancellor of Massachusetts, Inc. (Atlanta, Georgia) (+)
10.131 Purchase and Sale Agreement, dated May 1996, between CMM (f/k/a CareMatrix Corporation)
and Ensign-Bickford Realty Corporation (Avon, Connecticut) (+)
10.132 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc. and Chancellor of Massachusetts, Inc. (Macon, Georgia) (+)
10.133 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc. and Chancellor of Massachusetts, Inc. (Durham, North Carolina) (+)
10.134 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc. and Chancellor of Massachusetts, Inc. (Livingston, New Jersey) (+)
10.135 Assignment and Assumption of Management Agreement, dated July 3, 1996, by and between
CCC of New Jersey, Inc. and CareMatrix of Massachusetts, Inc. (Park Ridge, New
Jersey) (+)
10.136 Agreement, dated July 3, 1996, by and between CCC of New Jersey, Inc. and CareMatrix of
Massachusetts, Inc. (+)
10.137 Development Agreement, dated April 18, 1996, by and between Woodbridge Care, LLC and
CareMatrix Corporation (Woodbridge) (+)
10.138 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc., and Chancellor of Massachusetts, Inc. (Glen Cove, Roslyn, Great Neck,
Wallingford) (+)
10.139 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc. and Chancellor of Massachusetts, Inc. (Bonita Springs, Florida) (+)
10.140 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Massachusetts,
Inc. and Chancellor of Massachusetts, Inc. (Jensen Beach, Florida) (+)
10.141 Assignment Agreement, dated July 3, 1996, by and between CareMatrix of Stony Brook,
Inc. and CareMatrix of Massachusetts, Inc. (Darien, Connecticut) (+)
10.142 Agreement of Sale, dated September 6, 1996, by and between Reston Land Corporation and
CMM (Reston) (+)
10.143 Deposit Receipt and Sales Agreement, dated September 5, 1996, between Bonita Bay
Properties, Inc. and CMM (Bonita Bay, Florida) (+)
10.144 Global Services Agreement, dated September 1, 1996, between Chancellor Senior Housing
Group, Inc. and CMM (+)
21.01 Subsidiaries of the Company (+)
23.01 Consent of Nutter, McClennen & Fish, LLP (contained in Exhibit 5.01) (*)
23.02 Consents of Coopers & Lybrand L.L.P.+
23.03 Consent of Lovelace, Roby & Company, P.A.+
23.04 Consent of Donald J. Amaral (15)
23.05 Consent of H. Loy Anderson, Jr. (15)
23.06 Consent of Rev. Bedros Baharian (15)
23.07 Consent of Stephen E. Ronai (15)
24.01 Powers of Attorney (contained in Page S-2 to the Registration Statement)
</TABLE>
- -------------
* To be filed by Amendment.
+ Filed herewith.
II-9
<PAGE>
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
(14) Filed as an Exhibit to the Registrant's Registration Statement on Form
S-4 (No. 333-5364)
(15) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1
(File No. 333-11455)
(b) Financial Statement Schedules
SCHEDULE II -- Valuation and Qualifying Accounts
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, 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 the 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 against such director, officer or
controlling person in connection with the securities being 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.
The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A under the Securities
Act and contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective. (2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
II-10
<PAGE>
securities offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
II-11
<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 $ 0 $240,000 -- ($132,000) $108,000
Allowance for
doubtful
accounts -- 252,946 -- -- --
------------------ ------------- ------------- ---------- ---------------
Balance at
12/31/94 $108,000 $252,946 -- -- $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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, Commonwealth of Massachusetts, on October 22, 1996.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
-------------------------
Robert M. Kaufman
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to 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/ Robert M. Kaufman
- --------------------- President and Treasurer October 22, 1996
Robert M. Kaufman (Principal Executive Officer and
Principal Accounting Officer)
- ---------------------
Abraham D. Gosman Chairman and Director October --, 1996
/s/ Andrew D. Gosman*
- ---------------------
Andrew D. Gosman Vice Chairman and Director October 22, 1996
/s/ Michael M. Gosman
- ---------------------
Michael M. Gosman Executive Vice President October 22, 1996
and Director
/s/ Michael J. Doyle*
- ---------------------
Michael J. Doyle Chief Executive Officer October 22, 1996
and Director
*By: /s/ Richard M. Kaufman
--------------------------
Richard M. Kaufman
Attorney-in-fact
</TABLE>
S-2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below on this Amendment to Registration Statement hereby constitutes and
appoints Robert M. Kaufman, James M. Clary, III and Michael J. Bohnen, and each
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 (including post-effective
amendments and amendments thereto) to this Amendment to Registration Statement
on Form S-1 of the Registrant, and to file the same, 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
requisite and necessary fully to all intents and purposes as he might or could
do in person thereby 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 hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Donald J. Amaral
- --------------------------
Donald J. Amaral Director October 18, 1996
/s/ H. Loy Anderson, Jr.
- --------------------------
H. Loy Anderson, Jr. Director October 18, 1996
/s/ Rev. Bedros Baharian Director October 18, 1996
- --------------------------
Rev. Bedros Baharian
/s/ Stephen E. Ronai Director October 18, 1996
- --------------------------
Stephen E. Ronai
S-3
AGREEMENT AND PLAN OF MERGER
This Agreement is made and entered by AMA New Jersey Development, Inc., a
New Jersey corporation ("AMA" and sometimes referred to herein as the
"Surviving Corporation") and Standish Acquisition 12, Inc., a Delaware
corporation ("Acquisition"), and The Standish Care Company, a Delaware
corporation ("Standish").
WHEREAS, AMA has authorized capital stock of 60,000 shares of common
stock, no par value per share (the "AMA Common Stock"), of which 36,800
shares are issued and outstanding.
WHEREAS, Acquisition has authorized capital stock of 3,000 shares of
common stock, par value $.01 per share (the "Acquisition Common Stock"), of
which 1 share is issued and outstanding; and
WHEREAS, the Boards of Directors of AMA and Acquisition have determined
that a merger of Acquisition with and into AMA pursuant to the terms and
conditions of this Agreement (the "Merger"), and for the consideration set
forth herein, is advisable and in the best interests of the stockholders of
AMA and Acquisition.
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
At the Effective Time (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 New Jersey Secretary of State a
Certificate of Merger (the "Certificate of Merger") in the form required by
applicable law, duly executed and acknowledged by the Surviving Corporation,
and taking all such further actions as may be required by law to make the
Merger effective. The Merger shall become effective upon the filing of the
Certificate of Merger with the New Jersey Secretary of State (the "Effective
Time") and AMA will be the surviving corporation.
ARTICLE II
CONVERSION OF SHARES
Each share of AMA Common Stock issued and outstanding at the Effective
Time shall be changed and converted into 113.225 shares of Common Stock of
Standish which shall thereupon be issued, fully paid and nonassessable. At
the Effective Time, all outstanding shares of Acquisition shall be converted
into one share of AMA Common Stock.
<PAGE>
ARTICLE III
CERTIFICATE OF INCORPORATION AND BYLAWS
From and after the Effective Time, and until thereafter amended as
provided by law, the Certificate of Incorporation of AMA as in effect at the
Effective Time shall be and continue to be the Certificate of Incorporation
of the Surviving Corporation. From and after the Effective Time, and until
thereafter amended as provided by law, the by-laws of AMA as in effect at the
Effective Time shall be and continue to be the by-laws of the Surviving
Corporation.
ARTICLE IV
OFFICERS AND BOARDS OF DIRECTORS
From and after the Effective Time, the directors and the officers of AMA
shall be and continue to be the directors and officers of the Surviving
Corporation, until their successors are duly elected and qualified.
***
-2-
<PAGE>
IN WITNESS WHEREOF, AMA, Standish and Acquisition have executed this
Agreement as of the of , 1996.
AMA NEW JERSEY DEVELOPMENT, INC.
By: /s/ Robert M. Kaufman
------------------------------
Robert M. Kaufman
President
ATTEST:
/s/ James M. Clary, III
- -----------------------
STANDISH ACQUISITION 12, INC.
By: /s/ Michael J. Doyle
------------------------------
Michael J. Doyle
Chairman and President
ATTEST:
/s/ Kenneth Miles
- -----------------
THE STANDISH CARE COMPANY
By: /s/ Michael J. Doyle
-------------------------------
Michael J. Doyle, President
and Chief Executive Officer
ATTEST:
/s/ Kenneth Miles
- -----------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE STANDISH CARE COMPANY
-------------
Pursuant to Sections 228 and 242 of the General
Corporation Law of the State of Delaware
-------------
The Standish Care Company, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of Delaware on October 6, 1989. A Restated
Certificate of Incorporation was filed with the Secretary of State of Delaware
on November 18, 1991 (the "First Restated Certificate"), and a Restated
Certificate of Incorporation was filed with the Secretary of State of Delaware
on February 4, 1992 (the "Second Restated Certificate"). The Second Restated
Certificate has been amended by: (a) a Certificate of Amendment filed with the
Secretary of State of Delaware on August 23, 1993; (b) a Certificate of
Designations of Series A Cumulative Convertible Preferred Stock filed with the
Secretary of State of Delaware on August 31, 1993; (c) a Certificate of
Correction of Certificate of Designations of Preferred Stock filed with the
Secretary of State of Delaware on September 1, 1993; (d) a Certificate of
Retirement and Prohibition of Reissuance of Shares filed with the Secretary of
State of Delaware on October 21, 1993; (e) a Certificate of Amendment filed with
the Secretary of State of Delaware on June 8, 1994; (f) a Certificate of
Amendment filed with the Secretary of State of Delaware on June 30, 1995; (g) a
Certificate of Designations of Series B Cumulative Convertible Preferred Stock
filed with the Secretary of State of Delaware on July 30, 1996; and (h) a
Certificate of Amendment filed with the Secretary of State of Delaware on
October 3, 1996.
2. The Second Restated Certificate, as amended, is hereby further amended
as follows:
(a) by striking out Article FIRST in its entirety and by substituting
in lieu thereof a new Article FIRST, to read as follows:
'FIRST: The name of the corporation is CareMatrix Corporation.'
(b) by striking out Article FOURTH in its entirety and by substituting
in lieu thereof a new Article FOURTH, to read as follows:
'FOURTH: (a) The total number of shares of stock
which the corporation shall have the authority to issue is
Seventy Five Million Three Hundred Forty-Five Thousand Two
Hundred Sixty-Eight (75,345,268) shares, consisting of
Seventy Five Million (75,000,000) shares of Common Stock,
par value $.05 per share ('Common Stock'), and Three Hundred
Forty-Five Thousand Two Hundred Sixty-Eight (345,268) shares
of Preferred Stock, par value $.01 per share.
<PAGE>
(b) Each five (5) shares of authorized Common Stock,
par value $.01, issued and outstanding or standing in the
name of the Corporation at the close of business on the
stated effective date (the "Effective Date") of this
Certificate of Amendment ("Amendment") shall, upon such
Effective Date, thereupon automatically be reclassified and
changed into one (1) validly issued, fully paid and
nonassessable share of Common Stock, par value $.05. Each
holder of record of shares of Common Stock to be so
reclassified and changed shall on the Effective Date become
the record owner of the number of shares of Common Stock as
shall result from such reclassification and change. Each
such record holder shall be entitled to receive, upon the
surrender of the certificate or certificates representing
the shares of Common Stock to be so reclassified and changed
at the office of the transfer agent of the Corporation in
such form and accompanied by such documents, if any, as may
be prescribed by the transfer agent of the Corporation, a
new certificate or certificates representing the number of
shares of Common Stock of which he or she is the record
owner after giving effect to the provisions of this Article
FOURTH. The Corporation shall not issue fractional shares
with respect to the reclassification and change, and instead
shall pay cash in lieu thereof in an amount to be determined
by the Board of Directors.'
3. That in lieu of a meeting and a vote of stockholders, a majority of the
stockholders of the Company have given written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
4. That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
5. This Certificate of Amendment shall be effective upon October 14, 1996.
IN WITNESS WHEREOF, The Standish Care Company has caused this Certificate
of Amendment of the Restated Certificate of Incorporation to be signed by its
duly authorized officer, this 10th day of October, 1996.
THE STANDISH CARE COMPANY
By: /s/ James M. Clary, III
------------------------
James M. Clary, III
Executive Vice President
-2-
Exhibit 10.100
First Amendment to Warrant
This First Amendment (the "First Amendment") to that certain The Standish
Care Company Common Stock Purchase Warrant to purchase 400,000 shares of common
stock of The Standish Care Company (the "Warrant") dated as of September 4, 1996
is made by and between The Standish Care Company (the "Company") and Abraham D.
Gosman (the "Holder").
WHEREAS, the Company and the Holder deem it in the best of each of their
interests to amend the Warrant.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
that Section 2.1 of the Warrant is amended by replacing the words "the Issue
Date" with "eight months after the Issue Date."
IN WITNESS WHEREOF, and pursuant to Section 14.2 of the Warrant, the
parties hereto have hereby set their hands and seals as of the day and year
first above written.
The Standish Care Company
/s/ Michael J. Doyle
--------------------------------
By: Michael J. Doyle
Chairman and Chief Executive Officer
Holder:
/s/ Abraham D. Gosman
--------------------------------
Abraham D. Gosman
Exhibit 10.103
CAREMATRIX CORPORATION
1996 EQUITY INCENTIVE PLAN
Section 1. Purpose and Duration
1.1 Purposes. The purposes of the Plan are to attract, retain and
motivate employees and consultants of the Company, its Parent (if any), and any
present or future Subsidiaries to enable them to participate in the growth of
the Company by providing for or increasing the proprietary interests of such
persons in the Company.
1.2 Effective Date. The Plan is effective as of its adoption by the
Board, subject to approval by the stockholders of the Company. Prior to such
stockholder approval, the Board may grant Awards conditioned on stockholder
approval. If such stockholder approval is not obtained at or before the first
annual meeting of stockholders to occur after the adoption of the Plan by the
Board but in any event within twelve months after adoption by the Board, the
Plan and any Awards made thereunder shall be null and void.
1.3 Expiration Date. The Plan shall expire on September 1, 2006.
In no event shall any Awards be made under the Plan after the expiration of the
Plan, but Awards previously granted may extend beyond expiration of the Plan.
Section 2. Definitions
As used in the Plan, the following capitalized words shall have the
meanings indicated below:
"1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
"Award" means, individually or collectively, a grant under the Plan
of Options, SARs, Performance Shares, Restricted Stock or Stock Units.
"Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
"Committee" means any committee of the Board appointed by the Board
to administer the Plan in accordance with Section 3.1.
<PAGE>
"Company" means CareMatrix Corporation, a Delaware corporation, or
any successor thereto.
"Director" means any individual who is a member of the Board.
"Fair Market Value" means, with respect to a Share, the fair market
thereof as of the relevant date of determination, as determined in accordance
with a valuation methodology approved by the Board in good faith (or in the
absence of such determination, the closing price of the Shares as reported by
The Nasdaq Stock Market's National Market or any successor thereto, on the
applicable date of determination (or if such date shall not be a trading day,
on the last trading day previous thereto)) but in no event less than, in the
case of newly issued stock, the par value per Share.
"Grant Date" means the effective date of an Award as specified by the
Board and set forth in the applicable Award Agreement.
"Incentive Stock Option" or "ISO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code.
"Nonqualified Stock Option" or "NQO" means an option to purchase
Shares awarded to a Participant under Section 6 of the Plan that is not intended
to be an ISO.
"Option" means an ISO or an NQO.
"Parent" means a "parent corporation" as that term is defined in
Section 424 of the Code.
"Participant" means an individual eligible to receive Awards under
the Plan who has been selected by the Board to receive an Award under the Plan.
"Performance Cycle" means the period of time selected by the Board
during which performance is measured for the purpose of determining the extent
to which an Award of Performance Shares has been earned. More than one
Performance Cycle may be in progress at any one time and the duration of
Performance Cycles may differ from each other.
"Performance Share" means a Share awarded to a Participant under
Section 8 of the Plan that entitles the Participant to acquire Shares upon the
attainment of specified performance goals.
"Plan" means the Equity Incentive Plan set forth in this document and
as hereafter amended from time to time in accordance with Section 13.
"Restricted Period" means the period of time selected by the Board
during which Shares of Restricted Stock are subject to forfeiture and/or
restrictions on transferability.
"Restricted Stock" means Shares awarded to a Participant under
Section 9 of the Plan pursuant to an Award that entitles the Participant to
acquire Shares for a purchase price (which may be zero), subject to such
conditions, including a Company right during a specified period or periods to
repurchase such Shares at their original purchase price (or to require
forfeiture of such Shares if the purchase price was zero) upon the Participant's
termination of employment.
"SAR" or "Stock Appreciation Right" means an Award that is designated
as an SAR pursuant to Section 7 of the Plan, granted alone or in connection with
a related Award, entitling a Participant to receive an amount in cash or Shares
or a combination thereof having a value equal to (or if the Board shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
Share on the date of exercise
A-2
<PAGE>
over the Fair Market Value of a Share on the Grant Date (or over the Option
exercise price, if the Stock Appreciation Right was granted in tandem with an
Option) multiplied by the number of Shares with respect to which the Stock
Appreciation Right is exercised.
"Shares" means shares of the Company's common stock, par value
$0.01 per share.
"Stock Unit" means an Award of a Share or a unit valued in whole or
in part by reference to, or otherwise based on, the value of a Share, granted to
a Participant under Section 10 of the Plan.
"Subsidiary" means a "subsidiary corporation" as that term is
defined in Section 424 of the Code.
Section 3. Administration of the Plan
3.1 The Board. The Plan shall be administered by the Board. The Board
may, in its discretion, delegate some or all of its powers with respect to the
Plan to the Committee, in which event all references in the Plan (as
appropriate) shall be deemed to refer to the Committee. The Committee, if one is
appointed, shall consist of two or more Non-Employee Directors (as defined in
the 1934 Act).
3.2 Authority of the Board. The Board shall have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the operation of the Plan as it shall consider advisable from time to
time, to interpret the provisions of the Plan and any Award, and to decide all
disputes arising in connection with the Plan. The Board's decisions and
interpretations shall be final and binding.
Section 4. Eligibility
4.1 Participants. The persons eligible to receive Awards under the
Plan shall be all executive officers of the Company, its Parent (if any), and
any Subsidiaries and other employees, consultants and advisers who, in the
opinion of the Board, are in a position to make a contribution to the success of
the Company, its Parent (if any), and any Subsidiaries. Directors, including
directors who are not employees, of the Company, its Parent (if any), and any
Subsidiaries, shall be eligible to receive Awards under the Plan.
Section 5. Stock Available for Awards
5.1 Number of Shares. Awards may be made under the Plan for up to Six
Million (6,000,000) Shares. Shares issued under the Plan may consist in whole or
in part of authorized but unissued Shares or treasury Shares.
5.2 Lapsed, Forfeited or Expired Awards. If any Award in respect of
Shares expires or is terminated before exercise or is forfeited for any reason,
the Shares subject to such Award, to the extent of such expiration, termination,
or forfeiture, shall again be available for award under the Plan.
5.3 Maximum Number of Shares to a Single Participant in any Calendar
Year. In no event shall any Participant receive in any calendar year Awards
under the Plan and any other grants for more than Six Hundred Thousand (600,000)
Shares.
A-3
<PAGE>
Section 6 Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the
Plan, the Board may award Options and determine the number of shares to be
covered by each Option, the exercise price therefor, the term of the Option, and
any other conditions and limitations applicable to the exercise of the Option.
The Board may grant ISOs, NQOs or a combination thereof.
6.2 Exercise Price. Subject to the provisions of this Section 6, the
exercise price for each Option shall be determined by the Board in its sole
discretion.
6.3 Restrictions on Option Transferability and Exercisability. No
Option shall be transferable by the Participant other than by will or the laws
of descent and distribution, and all Options shall be exercisable, during the
Participant's lifetime, only by the Participant; provided, however, that the
Board may provide that an NQO is transferable by the Participant and exercisable
by persons other than the Participant upon such terms and conditions as the
Board shall determine.
6.4 Certain Additional Provisions for Incentive Stock Options
6.4.1 Exercise Price. In the case of an ISO, the exercise price shall
be not less than one hundred percent (100%) of the Fair Market Value per Share
on the Grant Date; provided, however, that if on the Grant Date the Participant
(together with persons whose stock ownership is attributed to the Participant
pursuant to Section 424(d) of the Code) owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, its Parent (if any) or any Subsidiaries, the exercise price shall be
not less than one hundred and ten percent (110%) of the Fair Market Value of a
Share on the Grant Date.
6.4.2 Exercisability. Subject to Section 12.3, the aggregate Fair
Market Value (determined on the Grant Date(s)) of the Shares with respect to
which ISOs are exercisable for the first time by any Participant during any
calendar year (under all plans of the Company, its Parent (if any) and any
Subsidiaries) shall not exceed $100,000.
6.4.3 Eligibility. ISOs may be granted only to persons who are
employees of the Company, its Parent (if any) or any Subsidiaries on the Grant
Date.
6.4.4 Expiration. No ISO may be exercised after the expiration of one
day less than ten (10) years from the Grant Date; provided, however, that if the
Option is granted to a Participant who, together with persons whose stock
ownership is attributed to the Participant pursuant to Section 424(d) of the
Code, owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, its Parent (if any) or any
Subsidiaries, the ISO may not be exercised after the expiration of one day less
than five (5) years from the Grant Date.
6.4.5 Compliance with Section 422 of the Code. The terms and
conditions of ISOs shall be subject to and comply with Section 422 of the Code
or any successor provision.
6.4.6 Notice to Company of Disqualifying Disposition. Each
Participant who receives an ISO shall notify the Company in writing
immediately after the Participant makes a Disqualifying Disposition of any
Shares received pursuant to the exercise of an ISO. The term "Disqualifying
Disposition" means any disposition (including any sale) of Shares before the
later of (a) two years after the Participant was granted
A-4
<PAGE>
the ISO under which he acquired such Shares, or (b) one year after the
Participant acquired such Shares by exercising the ISO.
6.4.7 Substitute Options. Notwithstanding the provisions of Section
6.4.1, in the event that the Company, its Parent (if any) or any Subsidiary
consummates a transaction described in Section 424(a) of the Code (relating to
the acquisition of property or stock from an unrelated corporation), individuals
who become employees or consultants of the Company, its Parent (if any) or any
Subsidiary on account of such transaction may be granted ISOs in substitution
for options granted by their former employer. The Board, in its sole discretion
and consistent with Section 424(a) of the Code, shall determine the exercise
price of such substitute Options.
6.5 NQO Presumption. Options granted pursuant to the Plan shall be
presumed to be NQOs unless expressly designated ISOs.
Section 7 Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and provisions of the Plan,
the Board may award SARs in tandem with another Award (at or after the Grant
Date of the other Award), or alone and unrelated to another Award, and may
determine the terms and conditions applicable thereto, including the form of
payment.
7.2 Termination of SARs. SARs granted in tandem with an ISO shall
terminate to the extent that the related ISO is exercised, and the related ISO
shall terminate to the extent that the tandem SARs are exercised.
Section 8 Performance Shares
8.1 Grant of Performance Shares. The Board may award Performance
Shares to Participants and determine the performance goals applicable to each
such Award, the number of Shares for each Performance Cycle, the duration of
each Performance Cycle and all other limitations and conditions applicable to
the awarded Performance Shares. The payment value of each Performance Share
shall be equal to the Fair Market Value of one Share on the date the Performance
Share is earned or, in the discretion of the Board, on the date the Board
determines that the Performance Share has been earned.
8.2 Adjustment of Performance Goals. Except as provided in an Award,
during any Performance Cycle, the Board may adjust the performance goals for
such Performance Cycle as it deems equitable in recognition of unusual or
non-recurring events affecting the Company, changes in applicable tax laws or
accounting principles, or such other factors as the Board shall determine.
8.3 Written Certification. As soon as practical after the end of a
Performance Cycle, the Board shall certify in writing the extent to which the
performance goals applicable to each Participant for the Performance Cycle were
achieved or exceeded and the number of Performance Shares which have been earned
on the basis of performance in relation to the established performance goals.
A-5
<PAGE>
Section 9 Restricted Stock
9.1 Grant of Restricted Stock. The Board may award Shares of
Restricted Stock and determine the purchase price, if any, therefor, the
duration of the Restricted Period and the conditions under which the Shares may
be forfeited to or repurchased by the Company and the other terms and conditions
of such Awards. The Board may modify or waive the restrictions with respect to
any Restricted Stock. Shares of Restricted Stock may be issued for no cash
consideration or such minimum consideration as may be required by applicable
law.
9.2 Transferability. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as permitted by
the Board, during the Restricted Period.
9.3 Evidence of Award. Shares of Restricted Stock shall be evidenced
in such manner as the Board may determine. Any certificates issued in respect of
Shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
and stock power to the Participant.
9.4 Shareholder Rights. A Participant shall have all the rights of a
shareholder with respect to Restricted Stock awarded, including voting and
dividend rights, unless otherwise provided in the Award Agreement.
Section 10. Stock Units
10.1 Grant of Stock Units. Subject to the terms and provisions of the
Plan, the Board may award Stock Units subject to such terms, restrictions,
conditions, performance criteria, vesting requirements and payment rules as the
Board shall determine.
10.2 Consideration. Shares awarded in connection with a Stock Unit
shall be issued for no cash consideration or such minimum consideration as may
be required by applicable law.
Section 11 Other Awards
11.1 Grant of Other Awards. The Board shall have the authority to
specify the terms and provisions of other forms of equity-based or
equity-related Awards not described above which the Board determines to be
consistent with the purpose of the Plan and the interests of the Company, which
Awards may provide for cash payments based in whole or in part on the value or
future value of Shares, for the acquisition or future acquisition of Shares, or
any combination thereof. Other Awards may also include cash payments (including
the cash payment of dividend equivalents) under the Plan which may be based on
one or more criteria determined by the Board that are unrelated to the value of
the Shares and that may be granted in tandem with, or independent of, other
Awards under the Plan.
Section 12 General Provisions Applicable to Awards
A-6
<PAGE>
12.1 Legal and Regulatory Matters. The delivery of Shares shall be
subject to compliance with (i) applicable federal and state laws and
regulations, (ii) the listing requirements of a stock exchange, if the
outstanding Shares are at the time listed on any such exchange, and (iii) the
Company's counsel's approval of all other legal matters in connection with the
issuance and delivery of such Shares. If the sale of Shares has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to receipt of the Shares, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Shares bear an appropriate legend restricting transfer.
12.2 Written Award Agreement. The terms and provisions of an Award
shall be set forth in a written Award Agreement approved by the Board and
delivered or made available to the Participant as soon as practicable following
the Grant Date. Where the Award is an Option Award, the Award Agreement shall
specify whether the Option is intended to be an ISO or a NQO.
12.3 Determination of Restrictions on the Award. The vesting,
exercisability, payment and other restrictions applicable to an Award (which may
include, without limitation, restrictions on transferability or provision for
mandatory resale to the Company) shall be determined by the Board and set forth
in the applicable Award Agreement. Notwithstanding the foregoing, the Board may
accelerate (i) the vesting or payment of any Award (including an ISO), (ii) the
lapse of restrictions on any Award (including an Award of Restricted Stock) or
(iii) the date on which any Option or SAR first becomes exercisable.
12.4 Mergers, etc. Notwithstanding any other provision of the Plan,
in the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding shares by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets, then if the Board so
determines, all outstanding Awards shall terminate, provided that at least 20
days prior to the effective date of any such merger, consolidation or sale of
assets, the Board shall either (i) make all outstanding Awards exercisable
immediately prior to the consummation of such merger, consolidation or sale of
assets or (ii) if there is a surviving or acquiring corporation, arrange,
subject to consummation of the merger, consolidation or sale of assets, to have
that corporation or an affiliate of that corporation assume outstanding awards
and/or grant to Participants replacement Awards, which Awards in the case of
ISOs shall satisfy, in the discretion of the Board, the requirements of
section 424(a) of the Code.
12.5 Termination of Employment. For purposes of the Plan, the
following events shall not be deemed a termination of employment of a
Participant: (i) a transfer to the employment of the Company from its Parent (if
any) or from a Subsidiary, or from the Company to its Parent (if any) or to a
Subsidiary, or from one Subsidiary to another; or (ii) an approved leave of
absence for military service or sickness, or for any other purpose approved by
the Company, if the Participant's right to employment is guaranteed either by a
statute or by contract or under the policy pursuant to which the leave of
absence was granted or if the Board otherwise so provides in writing. For
purposes of the Plan, employees of a Subsidiary or Parent (if any) shall be
deemed to have terminated their employment on the date on which such Subsidiary
or Parent ceases to be a Subsidiary or Parent of the Company, as the case may
be.
12.5.1 Date of Termination of Employment. The date of a Participant's
termination of employment for any reason shall be determined in the sole
discretion of the Board.
12.5.2 Effect of Termination of Employment. The Board shall have full
authority to determine and specify in the applicable Award Agreement the effect,
if any, that a Participant's termination of
A-7
<PAGE>
employment for any reason will have on the vesting, exercisability, payment or
lapse of restrictions applicable to an outstanding Award.
12.6 Grant of Awards. Each Award may be made alone, in addition to or
in relation to any other Award. The terms of each Award need not be identical,
and the Board need not treat Participants uniformly.
12.7 Settlement of Awards. No Shares shall be delivered pursuant to
any exercise of an Award until payment in full of the price therefor, if any, is
received by the Company. Such payment may be made in whole or in part in cash or
by certified or bank check or, to the extent permitted by the Board at or after
the Grant Date, by delivery of a note or Shares, including Restricted Stock,
valued at their Fair Market Value on the date of delivery, or such other lawful
consideration or provision for the payment thereof as the Board shall determine.
12.8 Withholding Requirements and Arrangements. The Participant shall
pay to the Company or make provision satisfactory to the Board for payment of
any taxes required by law to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. In the Board's
discretion, such tax obligations may be paid in whole or in part in Shares,
including Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value on the date of delivery. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Participant.
12.9 No Effect on Employment. The Plan shall not give rise to any
right on the part of any Participant to continue in the employ of the Company,
its Parent (if any) or any Subsidiary. The loss of existing or potential profit
in Awards granted under the Plan shall not constitute an element of damages in
the event of termination of the relationship of a Participant even if the
termination is in violation of an obligation of the Company to the Participant
by contract or otherwise.
12.10 No Rights as Shareholder. Subject to the provisions of the Plan
and the applicable Award Agreement, no Participant shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until he
or she becomes the holder thereof.
12.11 Adjustments. Upon the happening of any of the following
described events, a Participant's rights with respect to Awards granted
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the Award Agreement.
12.11.1 Recapitalizations. In the event Shares shall be subdivided or
combined into a greater or smaller number of Shares or if, upon a merger,
consolidation, reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, Shares shall be exchanged for other
securities of the Company or of another entity, each Participant shall be
entitled, subject to the conditions herein stated, to purchase such number of
Shares or amount of other securities of the Company or such other entity as
were exchangeable for the number of Shares which such Participant would have
been entitled to purchase except for such action, and appropriate adjustments
shall be made in the purchase price per Share to reflect such subdivision,
combination, or exchange.
12.11.2 Stock Dividends. In the event the Company shall issue any of
its shares as a stock dividend upon or with respect to the Shares at the time
subject to option hereunder, each Participant upon exercising an Award shall be
entitled to receive (for the purchase price paid upon such exercise) the Shares
as to which he is exercising his Award and, in addition thereto (at no
additional cost), such number of shares of the class or classes in which such
stock dividend or dividends were declared or paid, and such
A-8
<PAGE>
amount of cash in lieu of fractional shares, as he would have received if he had
been the holder of the Shares as to which he is exercising his Award at all
times between the Grant Date of such Award and the date of its exercise.
12.11.3 Restricted Stock. If any person owning Restricted Stock
receives new or additional or different shares or securities ("New Securities")
in connection with a corporate transaction described in Section 12.11.1 or a
stock dividend described in Section 12.11.2 as a result of owning such
Restricted Stock, such New Securities shall be subject to all of the conditions
and restrictions applicable to the Restricted Stock with respect to which such
New Securities were issued.
12.11.4 Board Determination. Notwithstanding the foregoing, any
adjustments made pursuant to this Section 12.11 with respect to ISOs shall be
made only after the Board, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs as that term is defined in Section 424 of the Code, or would cause any
adverse tax consequences for the holders of such ISOs. No adjustments shall be
made for dividends paid in cash or in property other than securities of the
Company.
12.11.5 Fractional Shares. No fractional shares shall be issued under
the Plan. Any fractional shares which, but for this Section, would have been
issued shall be deemed to have been issued and immediately sold to the Company
for their fair market value, and the Participant shall receive from the Company
cash in lieu of such fractional shares.
12.11.6 Other Distributions. The Board may adjust the number of
Shares subject to outstanding Awards and the exercise price and the terms of
outstanding Awards to take into consideration material changes in accounting
practices or principles, extraordinary dividends, consolidations or mergers
(except those described in Section 12.4), acquisitions or dispositions of stock
or property or any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of the Plan,
provided that no such adjustment shall be made in the case of an ISO, without
the consent of the Participant, if it would constitute a modification, extension
or renewal of the option within the meaning of Section 424(h) of the Code.
12.11.7 Further Adjustment. Upon the happening of any of the events
described in Sections 12.11.1 or 12.11.2, the class and aggregate number of
Shares set forth in Sections 5.1 and 5.3 hereof that are subject to Awards which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such Sections. The
Board shall determine the specific adjustments to be made under this Section
12.11.7.
Section 13. Amendment and Termination
13.1 Amendment, Suspension, Termination of the Plan. The Board may
modify, amend, suspend or terminate the Plan in whole or in part at any time;
provided, however, that no modification, amendment, suspension or termination of
the Plan shall be made without shareholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement; provided,
further, that such modification, amendment, suspension or termination shall not,
without a Participant's consent, affect adversely the rights of such Participant
with respect to any Award previously made.
13.2 Amendment, Suspension, Termination of an Award. The Board may
modify, amend, or terminate any outstanding Award, including, without
limitation, substituting therefor another Award of the
A-9
<PAGE>
same or a different type, changing the date of exercise or realization and
converting an ISO to an NQO; provided, however, that the Participant's consent
to such action shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely
affect the Participant.
Section 14. Legal Construction
14.1 Captions. The captions provided herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan or serve as a basis for interpretation or construction of
the Plan.
14.2 Severability. In the event any provision of the Plan shall be
held invalid or illegal for any reason, the illegality or invalidity shall not
affect the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.3 Governing Law. The Plan and all rights hereunder shall be
construed in accordance with and governed by the internal laws of the State of
Delaware.
A-10
LEASE
PARTIES:
THIS LEASE, made the 4th day of November, 1993, by and between C. STEWART
FORBES and GERALD W. BLAKELEY, JR., as TRUSTEES OF NEEDHAM 197 FIRST AVENUE
TRUST under Declaration of Trust dated October 1, 1982, registered with
Norfolk Registry District of the Land Court on Certificate of Title No.
115226 as Document No. 426829, having an office c/o Blakeley Investment Co.,
60 State Street, Boston, MA 02109 (hereinafter, the "Landlord") and THE
MEDIPLEX GROUP, INC., a Massachusetts corporation having an office at 15
Walnut Street Wellesley, MA 02181 (hereinafter, the "Tenant").
W I T N E S S E T H:
PREMISES:
LANDLORD hereby leases to Tenant and Tenant hereby hires and takes from
Landlord all of the gross floor area in the building (the "Building") known
and numbered as 197 First Avenue, Needham, Massachusetts (consisting of
approximately 45,948 rentable square feet), and the land upon which the
Building is located described in Exhibit A annexed hereto, together with the
appurtenances including but not limited to all fixtures and equipment therein
and all common walkways and driveways necessary for access to the Building
and 154 parking spaces located in the open parking area adjacent to the
Building (which spaces shall be for Tenant's exclusive use), and any
replacements thereof (hereinafter, collectively, the "Premises"). The term
"Lot" shall mean all right, title and interest of the Landlord in and to the
land described in Exhibit A plus any
<PAGE>
additions or deletions thereto resulting from the involuntary change of any
abutting street line. The term "Property" shall mean the Building and the
Lot.
USE:
To be used and occupied by Tenant for general business, administrative and
clerical office uses (but not retail sales), and all other uses incidental
and related thereto (the "Permitted Uses"). Tenant shall have access to the
Premises twenty-four (24) hours per day, seven (7) days per week.
TERM:
For a term (the "Term") of seven (7) years, commencing on February 1, 1994
(the "Commencement Date", as it may be extended pursuant to Section 2.2
hereof) and expiring at the close of the day on January 31, 2001, subject to
extension as hereafter provided. In the event that the existing tenant in the
Premises surrenders the Premises earlier than February 1, 1994, Landlord
agrees to allow Tenant to occupy the Premises within ten (10) days after such
surrender, and such date of occupancy by Tenant shall be deemed to be the
Commencement Date for all purposes under this Lease.
As used herein, the term "Lease Year" shall mean the period commencing on
the Commencement Date through and including the close of the day on the
twelve (12) month anniversary of the Commencement Date, and each successive
twelve (12) month period during the Term of this Lease.
Tenant shall have the option to extend the initial Term as to the entire
Premises for one (1) period of five (5) years, upon the same terms and
conditions then in effect with respect to the Premises, except for Annual
Fixed Rent, which shall be determined as provided hereinbelow, provided that
at the time such option to extend is exercised and at the expiration of the
initial Term Tenant shall not be in default under this Lease beyond any
applicable cure period.
The Annual Fixed Rent for such extension period payable with respect to
the Premises shall be the greater of (i) the prevailing fair market rental
rate for the Premises as of the date of commencement of the extension period,
as determined as hereinafter set forth, or (ii) the Annual
-2-
<PAGE>
Fixed Rate payable by Tenant with respect to the Premises for the last Lease
Year during the initial Term.
At any time within the last four (4) months of the sixth Lease Year,
Tenant may request Landlord to inform Tenant of the prevailing fair market
rental rate for the Premises which will be in effect for the extension
period, and in such event Landlord shall within thirty (30) days thereafter
notify Tenant in writing as to the prevailing fair market rental rate for the
extension period as of the commencement of the extension period, as
determined by Landlord.
If Tenant elects to exercise the option to extend the initial Term of this
Lease for the extension period, Tenant shall do so by written notice to
Landlord ("Tenant's Exercise") given not later than twelve (12) months prior
to the expiration of the seventh Lease Year. If Tenant fails to exercise the
extension option within the aforesaid time period, Landlord shall notify
Tenant in writing and if Tenant fails to exercise the extension option within
fifteen (15) days after Tenant's receipt of Landlord's notice Tenant's right
to such extension of the Term of this Lease shall expire. Tenant's Exercise
shall contain a statement from Tenant that it either accepts or rejects
Landlord's determination of the prevailing fair market rental rate for the
Premises. If Tenant rejects Landlord's determination of the prevailing fair
market rental rate for the Premises, then Tenant's Exercise shall also
contain the name of one appraiser. In such event Landlord shall, within
thirty (30) days of Landlord's receipt of Tenant's Exercise, provide Tenant
with written notice of a second appraiser, and these two appraisers shall
name a third within ten (10) days of the appointment of the second appraiser.
It shall then be the duty of the appraisers to ascertain the prevailing fair
market rental rate for the Premises, and if any appraiser shall neglect or
refuse to appear at any meeting appointed by the appraisers, a majority may
act in the absence of such appraiser. The appraisers' determination of the
prevailing fair market rental rate for the Premises shall be conclusive and
shall be binding upon Landlord and Tenant. Landlord and Tenant shall each be
responsible for the costs of their respective appraiser, and Landlord and
Tenant shall each be responsible for fifty percent (50%) of the costs of the
third appraiser. Any determination of far market rental rate of the Premises
shall take into account the then level of finish of the Premises.
-3-
<PAGE>
THIS LEASE is made upon the following additional terms and conditions,
which Landlord and Tenant covenant and agree to keep and perform:
ARTICLE I
RENT
1.1 Tenant shall pay, promptly when due, without notice or demand, the
Annual Fixed Rent calculated as follows:
Lease Year Annual Fixed Rent
1 $483,372.96
2 $490,265.16
3 $497,157.36
4 $504,049.56
5 $510,941.76
6 $517,833.96
7 $524,726.16
Annual Fixed Rent (sometimes hereinafter referred to as "Rent") shall be
paid in equal monthly installments in advance on the first day of each full
calendar month during the Term, and the corresponding fraction of said 1/12
for any period of less than one month at the beginning or end of the Term.
1.2 Additional Rent--Operating Expenses
1.2.1 Tenant shall be responsible for contracting and paying for all
services, including but not limited to utilities, necessary for
the operation of the Building, and Tenant agrees to pay, or
cause to be paid, all Operating Expenses for the Property.
Operating Expenses for the Property shall include, without
limitation, the following: (a) premiums for insurance
-4-
<PAGE>
carried with respect to the Property as set forth in Article XI
hereinbelow, (b) reasonable compensation and fringe benefits,
workmen's compensation insurance premiums and payroll taxes paid
to, or with respect to all persons actually engaged in the
operating, maintaining, or cleaning of the Building or Lot, (c)
steam, water, sewer, electric, gas, oil, and telephone charges,
(d) costs of building and cleaning supplies and equipment, (e)
cost of all maintenance, cleaning and repairs, except as set
forth in Article V below, (f) cost of snow removal and care of
landscaping, (g) payments under service contracts with
independent contractors, and (h) Building management fees, if
any, and all other ordinary and necessary expenses paid or
incurred in connection with the operation, cleaning and
maintenance of the Building and Lot.
1.2.2 If any Operating Expense for the Property shall not have been
paid as required hereinabove, then Landlord, after ten (10) days
written notice thereof to Tenant, may, but shall not be required
to, pay the same, and shall thereupon become entitled to
repayment of the substantiated amount thereof by Tenant as
Additional Rent.
1.2.3 Except as otherwise specifically provided herein, any sum,
amount, item or charge designated or considered as Additional
Rent in this Lease shall be paid by Tenant to Landlord on the
first day of the month following the date on which Landlord
notifies Tenant in writing of the amount payable (or on the
fifteenth day after the giving of such notice, whichever shall
be later). Any such notice shall specify in reasonable detail
the basis of such Additional Rent.
1.3 Tenant will pay the Rent or Additional Rent due to Landlord, or to
such other person as Landlord may from time to time designate in writing.
-5-
<PAGE>
ARTICLE II
CONDITION OF PREMISES:
DELIVERY OF PREMISES TO TENANT
2.1 Subject to the provisions of this Section, the Premises are being
leased in their condition as of the Commencement Date "as is", without
representation or warranty of any kind (except as contained in Section 5.1
hereof). Tenant specifically acknowledges that it has inspected the Building
and Lot and has found same to be satisfactory. The Premises shall be
delivered on the Commencement Date in the same condition as they are in as of
the date of execution of this Lease.
2.2 If Landlord is prevented from delivering possession of the Premises to
Tenant on February 1, 1994 (the "Commencement Date") because of delays caused
by strikes, riots, fire, acts of God, governmental intervention, refusal of
current occupant to vacate, acts or omissions of Tenant, or other causes
which are not within the reasonable control of Landlord (hereinafter,
individually or collectively, "Excusable Delay"), then the Commencement Date
shall be extended by one day for each day of an Excusable Delay.
Notwithstanding the foregoing, in the event such Excusable Delay shall exceed
an aggregate of 75 days, Tenant may, at its option, terminate this Lease by
notice delivered to Landlord not later than twenty (20) days after the
aggregate 75-day period (such right of termination being Tenant's sole and
exclusive remedy at law or in equity against Landlord for Landlord's failure
to so deliver possession of the Premises). Landlord acknowledges that Tenant
may have other rights and remedies against third parties such as any current
occupant, in the event possession cannot be delivered, none of which rights
and remedies are or shall be waived or relinquished by Tenant and are
expressly reserved herby. Landlord represents that the lease of the current
occupant of the Premises expires on January 31, 1994 and Landlord covenants
to use reasonable efforts to enforce the provisions of the lease of the
current tenant of the Premises in order to obtain possession for Tenant
hereunder in a timely manner.
-6-
<PAGE>
ARTICLE III
LANDLORD'S INTEREST AND ASSIGNMENT OF WARRANTIES
3.1 Landlord represents that it holds its interest in the Premises
pursuant to a duly registered deed, and that it has the right to make this
Lease for the Term aforesaid; that the provisions of this Lease do not
conflict with or violate the provisions of existing agreements between
Landlord and third parties.
3.2 Landlord shall assign to Tenant the benefit of any vendor's or
contractor's warranties received by Landlord on the Building or any component
thereof or equipment located or installed therein.
ARTICLE IV
TENANT'S COVENANTS
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
4.1 to pay when due all Annual Fixed Rent and Additional Rent and all
other amounts due hereunder;
4.2 except as otherwise provided in Article V hereof, to keep the Premises
in good order, repair and condition, reasonable wear and tear, damage by fire
and other insured casualty and eminent domain only excepted, and all glass
windows (except glass in exterior walls unless the damage thereto is
attributable to Tenant's negligence or misuse) and doors of the Premises
whole and in good condition with glass of the same quality as that injured or
broken, damage by fire and other insured casualty and eminent domain only
excepted, and at the expiration or termination of this Lease peaceably to
yield up the Premises and all alterations and additions thereto in good
order, repair and condition, reasonable wear and tear, damage by fire,
insured casualty and eminent domain only excepted, first removing all goods
and effects of Tenant and, to the extent specified by Landlord by notice to
Tenant at least thirty (30) days before such expiration or termination, all
alterations and additions made by Tenant or on behalf of Tenant and all
partitions,
-7-
<PAGE>
and repairing any damage caused by such removal and restoring the Premises
and leaving them clean and neat. Tenant will furnish to Landlord, not later
than the termination of this Lease, a report, prepared at Tenant's expense by
an engineering firm qualified to make reports under Massachusetts General
Laws Chapter 21E and reasonably acceptable to Landlord, stating that the
Building and Lot have been examined for oil and hazardous waste contamination
and that no such contamination was found on the Building or Lot (or that such
contamination was found, but cleaned up and disposed of by Tenant and that
the Building and Lot are now free of such substances). Landlord shall present
Tenant with a similar report indicating the status of the Premises prior to
the Commencement Date;
4.3 continuously from the Commencement Date to use and occupy the Premises
for the Permitted Uses, and not to injure or deface the Premises, Building or
Lot, not permit in the Premises any inflammable fluids or chemicals (except
in accordance with law and with prior written notice to Landlord of Tenant's
intention to use same), or nuisance, or the emission from the Premises of any
objectionable noise, or odor, nor use or devote the Premises or any part
thereof for any purpose other than the Permitted Uses, nor any use thereof
which is inconsistent with the maintenance of the Building as an office
building of the first class in the quality of its maintenance, use and
occupancy, or which is improper, offensive, contrary to law or ordinance or
which would invalidate or increase the premiums for any insurance on the
Building or its contents or which would render necessary any alteration or
addition to the Building;
4.4 to comply with all reasonable rules and regulations now or hereafter
made by Landlord of which Tenant has been given advance written notice, for
the care and use of the Building and Lot and their facilities and approaches;
4.5 in its use of the Premises, to comply with the requirements of all
applicable governmental laws, rules and regulations and to keep the Premises
equipped with all safety appliances required by law or ordinance or any other
regulation of any public authority, and to procure all required licenses and
permits and to comply with such licenses and permits. Landlord represents
that the Premises will comply with all applicable governmental laws, rules
and
-8-
<PAGE>
regulations on the Commencement Date (but this representation does not extend
to any permits or approvals that may be required with respect to Tenant's use
of the Premises other than for general office purposes). Without limiting the
generality of the foregoing, Tenant shall be responsible, in connection with
Tenant's use of the Premises, for compliance with the Americans with
Disabilities Act of 1990 (42 U.S.C. S.12101 et seq.) and the regulations and
Accessibility Guidelines for Buildings and Facilities issued pursuant thereto
(collectively, the "ADA Requirements");
4.6 not to place a load upon the Premises exceeding an average rate of 75
pounds of live load per square foot of floor area (partitions shall be
considered as part of the live load); and not to move any safe, vault of
other heavy equipment in, abut or out of the Premises except in such manner
and at such time as Landlord shall in each instance authorize, such
authorization not to be unreasonably withheld or delayed;
4.7 to pay promptly when due all taxes which may be imposed upon personal
property (including, without limitation, fixtures and equipment) in the
Premises to whomever assessed; and,
4.8 to vacate the Premises upon the end of the Term; should Tenant hold
over after the termination of this Lease, by lapse of time or otherwise,
Tenant shall become a daily tenant at sufferance at a rate equal to the then
fair market rental rate of the Premises but in no event less than 1-1/2 times
the Annual Fixed Rate in effect on the expiration or termination date. Tenant
shall also pay Landlord all direct and foreseeable damages (including any
loss of a tenant or rental income), sustained by reason of any such holding
over. Otherwise, such holding over shall be on the terms and conditions set
forth in this Lease as far as applicable.
ARTICLE V
MAINTENANCE AND REPAIRS
5.1 Landlord covenants and agrees that on the Commencement Date, the
Building interior will be reasonably clean, and the Building service systems
will be in good electrical, mechanical and operating condition.
-9-
<PAGE>
5.2 During the Term of this Lease Tenant shall take reasonable care of the
Premises and Landlord's fixtures and appurtenances therein and thereon and
shall perform all maintenance and make all repairs and replacements to the
Premises not specifically imposed upon Landlord by the express provisions
hereof. All repairs and replacements made by Tenant shall be equal in quality
to that in place on the Commencement Date.
5.3 Landlord's obligations under this Article shall consist of making all
structural repairs, replacements and alterations (but excluding general
maintenance and repairs of a non-structural nature) to the exterior and
bearing walls of the Building and support beams, and columns and lateral
support thereto, and to perform all repairs and restoration required by
Article X. Landlord's obligations do not include, without limitation, repairs
to or maintenance or replacement of plumbing or sewer lines, or the repair or
replacement of the roof membrane and deck, the HVAC systems or the primary
distribution electrical service equuipment, all of which shall be Tenant's
responsibility at Tenant's expense during the Term of this Lease or any
extension thereof, provided, however, that Tenant shall only be liable for
any such repairs, maintenance or replacement during the Term and Landlord
shall reimburse Tenant to the extent that the useful life of any such
repairs, maintenance or replacement exceed the Term.
5.4 Landlord reserves the right to stop any service or utility system,
when necessary by reason of accident or emergency, or until necessary repairs
have been completed; provided, however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause thereof.
Except in case of emergency repairs, Landlord will give Tenant reasonable
advance notice of any contemplated stoppage and will use reasonable efforts
to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord shall not be liable to Tenant for any compensation or reduction
of rent by reason of inconvenience or annoyance or for loss of business
arising from the necessity of Landlord or its agents entering the Premises
for any of the purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building however the necessity may occur. In
case Landlord is prevented or delayed from making any repairs, alterations or
improvements, or furnishing any
-10-
<PAGE>
services or performing any other covenant or duty to be performed on
Landlord's part, by reason of any cause reasonably beyond Landlord's control,
Landlord shall not be liable to Tenant therefor, nor, except as expressly
otherwise provided in Section 10.1, shall Tenant be entitled to any abatement
or reduction of rent by reason thereof, nor shall the same give rise to a
claim in Tenant's favor that such failure constitutes actual or constructive,
total or partial, eviction from the Premises.
ARTICLE VI
SERVICES
Landlord shall not be required to furnish any services or utilities to the
Premises during the Term of this Lease, the Tenant hereby assuming full and
sole responsibility for the supply of and payment for such services and
utilities.
ARTICLE VII
IMPROVEMENTS
Subject to compliance with Articles IV and VIII hereof, Tenant may place
partitions, trade or other fixtures (including lighting fixtures), personal
property, machinery, equipment and the like in the Premises (collectively,
hereinafter "FF&E") and may make such improvements and alterations therein
and thereon as it may desire at its own expense. All such things heretofore
or hereafter made or installed by or for Tenant and paid for by Tenant shall
remain the property of Tenant and in case of damage or destruction thereto by
fire or other causes, Tenant shall have the right to recover the value
thereof as its own loss from any insurance company with which it has insured
the same, notwithstanding that any of such things might be considered a part
of the Premises. At the expiration or earlier termination of the Term, Tenant
shall remove all of FF&E and, to the extent specified by Landlord in advance
at the time of installation, all alterations and additions made by Tenant and
all partitions, and shall repair any damage to the Premises caused by such
removal. Any of such things which remain in the Premises after the expiration
or termination of this Lease shall be deemed conclusively to have been
abandoned, and either may be retained by
-11-
<PAGE>
Landlord as its property or may be disposed of in such manner as Landlord may
see fit, at Tenant's sole cost and expense. Notwithstanding the foregoing,
Tenant shall not be required to remove pipes, wires and the like from walls,
ceilings, or floors, provided Tenant properly cuts, disconnects and caps such
pipes and wires and seals them off, if necessary, in a safe and lawful
manner.
ARTICLE VIII
ALTERATIONS
8.1 Non-structural Changes. Tenant shall have the right, without the
consent of Landlord, at Tenant's sole cost and expense, to make
non-structural changes, alterations, additions, or improvements to or upon
the Premises which do not interfere with any heating, air-conditioning,
electrical or plumbing systems or structural element or the exterior of the
Building, provided Landlord is furnished copies of all working drawings
prepared in connection with such changes at least fifteen (15) days prior to
the commencement of such work (except as to changes which involve primarily
the movement of unfixed partitions, the configuration of Tenant space,
painting, flooring, relocation of doors, and replacement of hung ceiling
panels, in which event Landlord need not be furnished with copies of working
drawings). Non-structural changes, alterations, additions and improvements
shall include, without limitation, the installation, removal or relocation of
light fixtures, trade fixtures and partitions that are not bearing walls. If
any such non-structural changes, alterations, additions or improvements are
unusual in nature or not readily adaptable to normal office use at reasonable
expense, Landlord may, by notice delivered within fifteen (15) days of
Landlord's receipt of plans with respect thereto, require Tenant, upon
expiration of the Lease, to restore those portions of the Premises containing
such unusual modifications to the condition existing prior to the making of
such modifications.
8.2 Structural Changes. Tenant shall have the right, at Tenant's sole cost
and expense, to make structural changes, alterations, additions or
improvements to or upon the Premises, provided that Tenant obtains the prior
written consent of Landlord, which consent shall
-12-
<PAGE>
not be unreasonably withheld or delayed. Landlord shall not be deemed
unreasonable for withholding approval of any alterations or additions which
(a) involve or might affect any structural or exterior element of the
Building, or (b) will require unusual expense to re-adapt the Premises to
normal office use upon termination of the Lease or increase the cost of
insurance or taxes on the Building unless Tenant first gives assurance
acceptable to Landlord for payment of such increased cost and that such
re-adaptation will be made prior to such termination without expense to
Landlord.
8.2.1 At least thirty (30) days prior to commencing such work, Tenant
shall furnish Landlord with copies of he plans and
specifications for such work. Landlord agrees to review such
plans and specifications promptly upon receipt thereof, and to
notify Tenant of its approval or any comments within thirty (30)
days for such receipt.
8.2.2 As a condition of its consent, and simultaneously with the grant
thereof, Landlord may, in its reasonable discretion: (i) require
Tenant, at Tenant's sole cost and expense, to perform certain
additional work if such work is necessary to correct impairments
to the structure of the Building or to mechanical systems which
would be caused by the proposed changes; and/or (ii) notify
Tenant that Landlord will require Tenant, upon expiration of the
Lease, to restore portions or all of the Premises to the
condition existing prior to the making of such modifications if
(but only if) such structural changes, alterations, additions or
improvements are unusual in nature or not readily adaptable to
normal office use at a reasonable expense.
8.3 With respect to all work by Tenant pursuant to Section 8.1 or 8.2
hereof, Tenant shall secure all licenses and permits necessary therefor, and,
if requested by Landlord, deliver to Landlord a statement of the names of all
Tenant's contractors and subcontractors and the estimated cost of all labor
and material to be furnished by them. In the course of such work, Tenant
agrees (i) to use labor compatible with that being employed by Landlord for
work in or to the Building or
-13-
<PAGE>
other buildings within the New England Industrial Center owned by Landlord or
its affiliates, and not to employ or permit the use of any labor or otherwise
take any action which might result in a labor dispute involving personnel
providing services in the Building or other properties owned or managed by
Landlord or its affiliates. Tenant's contractors shall (i) carry general
liability insurance with limits of at least $1,000,000/$3,000,000, and
property damage insurance with limits of a least $1,000,000 (all insurance to
be written in companies reasonably approved by Landlord and insuring Landlord
and Tenant as well as the contractors), and deliver to Landlord certificates
of all such insurance, and (ii) in the event that the cost of such work
exceeds $50,000.00, have filed with Landlord lien bonds and the like in form
acceptable to Landlord.
8.4 Tenant agrees to pay promptly when due the entire cost of work to be
done on the Premises by Tenant, its agents, employees, or independent
contractors, and not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises and
immediately to discharge any such liens which may so attach.
8.5 All construction work required or permitted by this Lease shall be
done in a good and workmanlike manner and in compliance with all applicable
laws and ordinances regulations and orders of governmental authority and
insurers of the Building, and shall be coordinated with any work being
performed by Landlord.
ARTICLE IX
INSPECTION
The Landlord shall, upon advance oral notice to Tenant (except in the case
of emergency), have the right at all reasonable times during business hours
to inspect the Premises and show the same to prospective mortgagees,
purchasers and/or tenants, and at all times to make repairs or replacements
as required by this Lease or as may be necessary, provided, however, that
Landlord shall use all reasonable efforts not to disturb Tenant's use and
occupancy of the Premises.
-14-
<PAGE>
ARTICLE X
FIRE, EMINENT DOMAIN, ETC.
10.1 Abatement of Rent. If the Premises shall be damaged by fire or
casualty, Annual Fixed Rent and other charges payable by Tenant shall abate
proportionately for the period in which, by reason of such damage, there is
substantial interference with Tenant's use of the Premises, having regard to
the extent to which Tenant may be required to discontinue Tenant's use of all
or a portion of the Premises, but such abatement or reduction shall end upon
the earlier of (i) thirty (30) days after the date on which Landlord shall
have substantially restored the Premises (excluding any alterations,
additions or improvements made by Tenant) to the condition in which they were
prior to such damage, or (ii) the date on which Tenant moves back into the
affected space. If the Premises or access thereto shall be affected by any
exercise of the power of eminent domain, Annual Fixed Rent and other charges
payable by Tenant shall be justly and equitably abated and reduced according
to the nature and extent of the loss of use thereof suffered by Tenant. In no
event shall Landlord have any liability for damages to Tenant for
inconvenience, annoyance, or interruption of business arising from such fire,
casualty or eminent domain.
10.2 Landlord's Right of Termination. If the Premises are substantially
damaged by fire or casualty (the term "substantially damaged" meaning damage
of such a character that the same cannot, in ordinary course, reasonably be
expected to be repaired within one hundred twenty (120) days from the time
the repair work would commence), or if any part of the Building is taken by
any exercise of the right of eminent domain, then Landlord shall have the
right to terminate this Lease (even if Landlord's entire interest in the
Premises may have been divested) by giving notice of Landlord's election so
to do within 60 days after the occurrence of such casualty or the effective
date of such taking, whereupon this Lease shall terminate thirty (30) days
after the date of such notice with the same force and effect at if such date
were the date originally established as the
-15-
<PAGE>
expiration date hereof. In the event that any such repairs are estimated to
take more than six (6) months to complete, Tenant may terminate this Lease by
giving Landlord written notice not later than fifteen (15) days after
Tenant's receipt of Landlord's estimate of such work period.
10.3 Restoration. If this Lease shall not be terminated pursuant to
Section 10.2, Landlord shall thereafter use due diligence to restore the
Premises (excluding any alterations, additions or improvements made by
Tenant) to proper condition for Tenant's use and occupation, provided that
Landlord's obligation shall be limited to the amount of insurance proceeds or
eminent domain award available therefor. If, for any reason, such restoration
shall not be substantially completed within four months after the expiration
of the 60-day period referred to in Section 10.2 (which four-month period may
be extended for such periods of time as Landlord is prevented from proceeding
with or completing such restoration for any cause beyond Landlord's
reasonable control), Tenant shall have the right to terminate this Lease by
giving notice to Landlord thereof within thirty (30) days after the
expiration of such period (as so extended). Upon the giving of such notice,
this Lease shall cease and come to an end without further liability or
obligation on the part of either party unless, within such 30-day period,
Landlord substantially completes such restoration. Such right of termination
shall be Tenant's sole and exclusively remedy at law or in equity for
Landlord's failure so to complete such restoration.
10.4 Award. Landlord shall have and hereby reserves and excepts, and
Tenant hereby grants and assigns to Landlord, all rights to recover for
damages to the Property and leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking, damage
or destruction, and by way of confirming the foregoing, Tenant hereby grants
and assigns, and covenants with Landlord to grant and assign to Landlord, all
rights to such damages or compensation. Nothing contained herein shall be
construed to prevent Tenant from prosecuting in any condemnation proceedings
a claim for the value of any of Tenant's removable property, leasehold
improvements or FF&E installed in the Premises by Tenant at Tenant's expense
and for relocation expenses, provided that such action shall not affect the
amount of compensation otherwise recoverable by Landlord from the taking
authority.
-16-
<PAGE>
ARTICLE XI
INSURANCE
11.1 Tenant shall, from and after the Commencement Date hereof, maintain
insurance covering the Building against loss, damage or destruction caused by
boiler explosion, fire and the perils specified in the standard extended
coverage endorsement, and by vandalism and malicious mischief, and by
earthquake and flood, and for other risks customarily insured against by
owners of similar buildings in the vicinity of the Building. Coverage shall
equal one hundred percent (100%) of the replacement costs of the Building.
Tenant shall also maintain (i) liability insurance in the amount of at least
$1,000,000/$3,000,000, (ii) property damage insurance in the amount of at
least $3,000,000, or such greater amounts as Landlord shall from time to time
reasonably request, and (iii) if required by Landlord's lender, rent loss
insurance covering at least (12) months of rent. All such policies shall be
in form and substance reasonably acceptable to Landlord and shall name
Landlord (and those in privity of estate with Landlord) and Tenant as a loss
payee, and shall bear the endorsement that such policies shall not be
cancelled until after thirty (30) days written notice to Landlord. Tenant
shall deposit promptly with Landlord certificates evidencing such coverage.
11.2 Notwithstanding anything else to the contrary in this Lease
contained, the parties hereto agree that neither party, nor its agents,
employees, contractors or invitees, shall be liable to the other for loss or
damage caused by any risk covered by any of the insurance coverages herein
described, and in implementation hereof, the parties hereby agree as follows:
(a) If Landlord shall suffer any loss, damage, liability or expense for
which Tenant shall be obligated to pay Landlord, Tenant shall have as an
offset against said obligation the greater of (i) the net proceeds of any
insurance that Landlord receives with respect to such loss, damage, liability
or expense or (ii) the amount of insurance coverage Landlord has agreed to
obtain, regardless of whether Landlord actually has obtained it, if such
loss, damage, liability or expense shall have resulted from a risk or peril
required hereunder to have been covered by such insurance.
-17-
<PAGE>
(b) If Tenant shall suffer any loss, damage, liability or expense for
which Landlord shall be obligated to pay Tenant, Landlord shall have as an
offset against said obligation the greater of (i) the net proceeds of any
insurance that Tenant receives with respect to such loss, damage, liability
or expense or (ii) the amount of insurance coverage Tenant has agreed to
obtain, regardless of whether Tenant actually has obtained it, if such loss,
damage, liability or expense shall have resulted from a risk or peril
required hereunder to have been covered by such insurance.
(c) Notwithstanding the foregoing with respect to the offset in the amount
of insurance proceeds received, the parties acknowledge that such offset
shall not cause the insurer which has paid the proceeds to declare the
governing policy invalid. The parties therefore mutually agree that each
shall obtain a rider to, endorsement on, or clause in, any insurance policy
covering the Premises and the Building and personal property, fixtures and
equipment located therein by which their insurers shall waive subrogation. By
virtue of such rider, endorsement, or clause, the parties hereby agree that
they will not make any claim against or seek to recover from each other for
any loss or damage to their own property or to the property of others by
reason of a risk or peril covered by such insurance.
11.3 Tenant agrees and acknowledges that all of the furnishings, fixtures,
equipment, effects and property of every kind, nature and description of
Tenant and of all persons claiming by, through or under Tenant which, during
the continuance of this Lease or any occupancy of the Premises by Tenant or
anyone claiming under Tenant, may be on the Premises or elsewhere in the
Building or on the Lot, shall be at the sole risk and hazard of Tenant, and
if the whole or any part thereof shall be destroyed or damaged by fire water
or otherwise, or by the leakage or bursting of water pipes, steam pipes, or
other pipes, by theft or from any other cause, no part of said loss or damage
is to be charged to or be borne by Landlord.
11.4 Tenant hereby covenants that in the event of any loss, damage or
destruction of the Building and improvements on the Premises which Landlord
is required by the operation of Article X to repair and restore, the proceeds
which are payable under policies of insurance carried by Tenant, together
with the amount of any deductible limits established by Tenant, shall upon
request
-18-
<PAGE>
of Landlord, first be paid over to Landlord to repair and reconstruct the
Building and improvements on the Premises to the extent required by this
Lease, before such proceeds are applied in any other manner including,
without limitation, the satisfaction of Tenant's debts secured by a mortgage
or other lien instrument, or interest thereon.
ARTICLE XII
TAXES
12.1 (a) For the purposes of this Article, the term "Tax Year" shall mean
the twelve-month period commencing on the July 1 immediately preceding the
Commencement Date and each twelve-month period thereafter commencing during
the Term of this Lease. The term "Taxes" shall mean real estate taxes and
other taxes, levies and assessments imposed upon the Property; charges, fees,
assessments and payments for transit, housing, police, fire or other
governmental services or purported benefits to the Property; and service or
user payments in lieu of taxes. Betterment assessments and interest thereon
shall be apportioned equally over the longest period permitted by law. Taxes
for the years in which this Lease commences and terminates shall be prorated.
(b) Tenant shall pay all Taxes assessed on the Property during the Term of
this Lease on or before the date upon which they are due to be paid without
interest. Promptly after receipt by Landlord of bills for such Taxes,
Landlord shall advise Tenant of the amount thereof (and shall provide Tenant
with a copy of same) and the computation of Tenant's payment on account
thereof. Landlord shall have the same rights and remedies for the non-
payment by Tenant of any payments due on account of Taxes as Landlord has
hereunder for the failure of Tenant to pay Annual Fixed Rent.
12.2 (a) If some method or type of taxation shall replace the current
method of assessment of real estate taxes in whole or in part, or the type
thereof, or if additional types of taxes are imposed upon the Property or
Landlord relating to the Property, Tenant agrees that Tenant shall pay the
same as an additional charge.
-19-
<PAGE>
(b) If a tax (other than Federal or State income tax) is assessed on
account of the rents or other charges payable by Tenant to Landlord under
this Lease, Tenant agrees to pay the same as an additional charge within ten
(10) days after billing therefor, unless applicable law prohibits the payment
of such tax by Tenant.
12.3 Tenant shall have the right, by appropriate proceedings, to protest
or contest any assessment or re-assessment for Taxes, or any special
assessment, or the validity of either, or of any change in assessments or the
tax rate.
12.4 In any such contest or proceedings, Tenant may act in its own name
and/or the name of Landlord and Landlord will, at Tenant's request, cooperate
with Tenant in any way Tenant may reasonably require in connection with such
contest or proceedings. Landlord shall sign such consents or other documents
as Tenant may reasonably request. Any contest or proceedings conducted by
Tenant shall be at Tenant's expense and, in the event any penalties, interest
or late charges become payable with respect to the Taxes as a result of such
contest, Tenant shall pay the same. Landlord shall be solely responsible for
the payment of any penalties, interest or late charges which are imposed
through no fault of Tenant.
12.5 Tenant shall be entitled to receive any tax refunds properly
allocable to the Term of this Lease, as it may be extended, and relating to
Taxes paid by Tenant, as a result of any such contests or proceedings.
ARTICLE XIII
SIGNS
Tenant shall have the exclusive right to place its signs anywhere in, on
and about the Building, the Lot and land, provided the same are in compliance
with law, are first approved by Landlord which approval shall not be
unreasonably withheld or delayed, are purchased and installed at the sole
cost and expense of Tenant and are removed from the Premises at the
expiration or earlier termination of the Term hereof.
-20-
<PAGE>
ARTICLE XIV
DEFAULT
14.1 (a) If at any time subsequent to the date of this Lease any one or
more of the following events (herein referred to as a "Default of Tenant")
shall happen:
(i) Tenant shall fail to pay the Annual Fixed Rent or other
charges hereunder when due and such failure shall continue for
five (5) full business days after written notice to Tenant from
Landlord; or
(ii) Tenant shall neglect or fail to perform or observe any other
covenant herein contained on Tenant's part to be performed or
observed, and Tenant shall fail to remedy the same within thirty
(30) days after written notice to Tenant specifying such neglect
or failure, or if such failure is of such a nature that Tenant
cannot reasonably remedy the same within such thirty (30) day
period, Tenant shall fail to commence promptly to remedy the same
and to prosecute such remedy to completion with diligence and
continuity; or
(iii) Tenant's leasehold interest in the Premises shall be taken
on execution or by other process of law directed against Tenant;
or
(iv) Tenant shall make an assignment for the benefit of creditors
or shall file a voluntary petition in bankruptcy or shall be
adjudicated bankrupt or insolvent, or shall file any petition or
answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for
itself under any present or future Federal, State or other
statute, law or regulation for the relief of debtors, or shall
seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties, or shall admit in writing its
inability to pay its debts generally as they become due; or
(v) A petition shall be filed against Tenant in bankruptcy or
under any other law seeking any reorganization, arrangement,
composition, readjustment, liquidation,
-21-
<PAGE>
dissolution, or similar relief under any present or future
Federal, State or other statute, law or regulation and shall
remain undismissed or unstayed for an aggregate of sixty (60)
days (whether or not consecutive), or if any debtor in possession
(whether or not Tenant) trustee, receiver or liquidator of Tenant
or of all or any substantial part of its properties or of the
Premises shall be appointed without the consent or acquiescence
of Tenant and such appointment shall remain unvacated or unstayed
for an aggregate of sixty (60) days (whether or not consecutive);
then in any such case (1) if such Default of Tenant shall occur prior to
the Commencement Date, this Lease shall ipso facto, and without further act
on the part of Landlord, terminate, and (2) if such Default of Tenant shall
occur after the Commencement Date, Landlord may terminate this Lease by
notice to Tenant, and thereupon this Lease shall come to an end as fully and
completely as if such date were the date herein originally fixed for the
expiration of the Term of this Lease, and Tenant will then quit and surrender
the Premises to Landlord, but Tenant shall remain liable as hereinafter
provided.
(b) If this Lease shall be terminated as provided in this Article, or if
any execution or attachment shall be issued against Tenant or any of Tenant's
property whereupon the Premises shall be taken or occupied by someone other
than Tenant, then Landlord may, without notice, re-enter the Premises, either
by summary proceedings, ejectment or otherwise, and remove and dispossess
Tenant and all other persons and any and all property from the same, as if
this Lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end.
(c) In the event of any termination, Tenant shall pay the Annual Rent and
other sums payable hereunder up to the time of such termination, and
thereafter Tenant, until the end of what would have been the Term of this
Lease in the absence of such termination, and whether or not the Premises
shall have been relet, shall be liable to Landlord for, and shall pay to
Landlord, as liquidated current damages, the Annual Fixed Rent and other sums
which would be payable hereunder if such termination had not occurred, less
the net proceeds, if any, of any reletting of the
-22-
<PAGE>
Premises, after deducting all reasonable expenses in connection with such
reletting, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such reletting.
Tenant shall pay such current damages to Landlord monthly on the days which
the Annual Rent would have been payable hereunder if this Lease had not been
terminated.
(d) At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages and in lieu
of all such current damages beyond the date of such demand, at Landlord's
election Tenant shall pay to Landlord an amount equal to the aggregate of the
Annual Fixed Rent and other charges accrued under the Lease in the twelve
(12) months ended next prior to such termination plus the amount of Annual
Fixed Rent and other charges of any kind accrued and unpaid at the time of
termination.
(e) In the case of any Default of Tenant, re-entry, expiration and
dispossession by summary proceeding or otherwise, Landlord may (i) re-let the
Premises or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord's option be equal to or
less than or exceed the period which would otherwise have constituted the
balance of the Term of this Lease and may grant reasonable concessions or
free rent to the extent that Landlord reasonably considers advisable and
necessary to re-let the same and (ii) may make such reasonable alterations,
repairs and decorations in the Premises as Landlord in its sole judgment
considers advisable and necessary for the purpose of re-letting the Premises;
and the making of such alterations, repairs and decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid.
Landlord shall in no event be liable in any way whatsoever for failure to
re-let the Premises provided that Landlord agrees to use commercially
reasonable efforts to re-let the Premises, or, in the event that the Premises
are re-let, for inability reasonably to collect the rent under such
re-letting. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed, or in the event of Landlord obtaining possession of
the Premises, by reason of the violation by Tenant of any of the covenants
and conditions of this Lease.
-23-
<PAGE>
(f) The specified remedies to which Landlord may resort hereunder are not
intended to be exclusive of any remedies or means of redress to which
Landlord may at any time be entitled to lawfully, and Landlord may invoke any
remedy (including the remedy of specific performance) allowed at law or in
equity as if specific remedies were not herein provided for.
(g) All reasonable costs and expenses incurred by or on behalf of Landlord
(including, without limitation, attorneys' fees and expenses) in enforcing
its rights hereunder or occasioned by any Default of Tenant shall be paid by
Tenant.
14.2 Landlord shall in no event be in default of the performance of any of
Landlord's obligations hereunder unless and until Landlord shall have failed
to perform such obligations within thirty (30) days, or such additional time
as is reasonably required to correct any such default, after notice by Tenant
to Landlord specifying wherein Landlord has failed to perform any such
obligations.
ARTICLE XV
NOTICES
Whenever, by the terms of this Lease, notices, consents or approvals shall
or may by given either to Landlord or to Tenant, such notices, consents or
approvals shall be in writing and shall be sent by registered or certified
mail, postage prepaid, or by a recognized national courier service
("Courier"):
If intended for Landlord, addressed to Landlord at Landlord's address
first set forth above (or to such other address as may from time to time
hereafter be designated by Landlord by like notice), with a copy to
William S. Abbott, Esq., 50 Congress Street, Suite 925, Boston, MA
02109.
If intended for Tenant, addressed to Tenant at Tenant's address first
set forth above until the Commencement Date and thereafter to the
Premises (or to such other address or addresses as may from time to time
hereafter be designated by Tenant by like notice.)
-24-
<PAGE>
All such notices shall be effective when deposited in the United States Mail
within the Continental United States, or the next day if sent by Courier,
provided that the same are received in ordinary course at the address to
which the same were sent.
ARTICLE XVI
ASSIGNMENT AND SUBLETTING
16.1 Tenant may assign this Lease or sublet the Premises or any portion
thereof with the prior written consent of Landlord, which consent may be
withheld at Landlord's sole discretion except as hereinafter expressly
otherwise provided. Landlord agrees not to withhold its consent to any
assignment of this Lease or subletting of all or any portion of the Premises,
provided Tenant requests same in writing ("Tenant's Request"), and provided
(i) at the time thereof Tenant is not in default under this Lease beyond any
applicable cure period; (ii) Landlord, in its discretion reasonably
exercised, determines that the reputation, business, proposed use of the
Premises by, and financial responsibility of, the proposed assignee or
sublessee, as the case may be, are satisfactory to Landlord; (iii) any
assignee or sublessee shall expressly assume all obligations of this Lease on
Tenant's part to be performed; (iv) such consent, if given, shall not release
Tenant of any of its obligations under this Lease (including, without
limitation, its obligation to pay rent) and Tenant's liability after any
assignment or subletting shall be joint and several with the assignee or
sublessee; (v) Tenant shall reimburse Landlord promptly for reasonable legal
and other expenses incurred by Landlord in connection with Tenant's Request;
(vi) Tenant agrees specifically to pay over to Landlord, as additional rent,
fifty percent (50%) of all sums provided to be paid under the terms and
conditions of such assignment or sublease which are in excess of the amounts
otherwise required to be paid pursuant to this Lease; and (vii) a consent to
one assignment or subletting to any other person shall not be deemed to be a
consent to any subsequent assignment or subletting. Any assignment,
subletting or occupancy without Landlord's prior consent shall be void and
shall, at the option of Landlord, constitute a default under this Lease.
Neither this Lease nor any interest
-25-
<PAGE>
therein shall be assignable as to the interest of Tenant by operation of law
without the prior written consent of Landlord, which consent may be
arbitrarily withheld. Tenant agrees that in the event that Landlord withholds
its consent to Tenant's Request contrary to the provisions of this paragraph,
Tenant's sole remedy shall be to seek an injunction in equity to compel
performance by Landlord to give its consent to Tenant's Request, and Tenant
expressly waives any right to damages in the event of such withholding of
consent by Landlord to Tenant's Request.
16.2 The provisions of Section 16.1 shall apply to a transfer (by one or
more transfers) of a majority of the stock or partnership interests, or other
evidences of ownership of Tenant as if such transfer were an assignment of
this Lease; but such provisions shall not apply to transactions with an
entity into or with which Tenant is merged or consolidated or to which
substantially all of Tenant's assets are transferred or to any entity which
controls or is controlled by Tenant or is under common control with Tenant,
provided that in any of such events (i) the successor to Tenant has a net
worth computed in accordance with generally accepted accounting principles at
least equal to the net worth of Tenant immediately prior to such merger,
consolidation or transfer, (ii) proof satisfactory to Landlord of such net
worth shall have been delivered to Landlord at least 10 days prior to the
effective date of any such transaction, and (iii) the assignee agrees
directly with Landlord, by written instrument in form satisfactory to
Landlord, to be bound by all the obligations of Tenant hereunder including,
without limitation, the covenant against further assignment or subletting;
and provided further that this Section 16.2 shall not apply to the transfer
of stock of Tenant so long as the stock of Tenant is publicly traded on a
nationally recognized stock exchange.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 Extra Hazardous Use. Tenant covenants and agrees that Tenant will not
do or permit anything to be done in or upon the Premises, or bring in
anything or keep anything therein, which shall increase the rate of property
or liability insurance on the Premises or of the Building
-26-
<PAGE>
above the standard rate applicable to premises being occupied for Permitted
Uses unless Tenant notifies Landlord in advance of such event and then
promptly pays to Landlord, on demand, any such increase resulting therefrom
which shall be due and payable as an additional charge hereunder, or provides
to Landlord insurance certificates indicating coverage for same at Tenant's
sole expense protecting Landlord and Tenant.
17.2 Waiver. (a) Failure on the part of Landlord or Tenant to complain of
any action or non-action on the part of the other, no matter how long the
same may continue, shall never be a waiver by Tenant or Landlord,
respectively, of any of the other's rights hereunder. Further, no waiver at
any time of any of the provisions hereof by Landlord or Tenant shall be
construed as a waiver of any of the other provisions hereof, and a waiver at
any time of any of the provisions hereof shall not be construed as a waiver
at any subsequent time of the same provisions. The consent or approval of
Landlord or Tenant to or of any action by the other requiring such consent or
approval shall not be construed to waive or render unnecessary Landlord's or
Tenant's consent or approval to or of any subsequent similar act by the
other.
(b) No payment by Tenant, or acceptance by Landlord, of a lesser amount
than shall be due from Tenant to Landlord shall be treated otherwise than as
a payment on account of the earliest installment of any payment due from
Tenant under the provisions hereof. The acceptance by Landlord of a check for
a lesser amount with an endorsement or statement thereon, or upon any letter
accompanying such check, that such lesser amount is payment in full, shall be
given no effect, and Landlord may accept such check without prejudice to any
other rights or remedies which Landlord may have against Tenant.
17.3 Covenant of Quiet Enjoyment. Tenant, subject to the terms and
provisions of this Lease, on payment of the Annual Fixed Rent and all other
charges and observing, keeping and performing all of the other terms and
provisions of this Lease on Tenant's part to be observed, kept and performed,
shall lawfully, peaceably and quietly have, hold, occupy and enjoy the
Premises during the term hereof, without hindrance or ejection by any persons
lawfully claiming under
-27-
<PAGE>
Landlord to have title to the Premises superior to Tenant; the foregoing
covenant of quiet enjoyment is in lieu of any other covenant, express or
implied.
17.4 Landlord's Liability. (a) Tenant specifically agrees to look solely
to Landlord's then equity interest in the Property at the time owned, for
recovery of any judgment from Landlord; it being specifically agreed that
Landlord (original or successor) shall never be personally liable for any
such judgment, or for the payment of any monetary obligation to Tenant. The
provision contained in the foregoing sentence is not intended to, and shall
not, limit any right that Tenant might otherwise have to obtain injunctive
relief against Landlord or Landlord's successors in interest, or to take any
action not involving the personal liability of Landlord (original or
successor) to respond in monetary damages from Landlord's assets other than
Landlord's equity interest in the Property.
(b) With respect to any services to be furnished by Landlord to Tenant,
Landlord shall in no event be liable for failure to furnish the same when
prevented from doing so by strike, lockout, breakdown, accident, order or
regulation of or by any governmental authority, or failure of supply, or
inability by the exercise of reasonable diligence to obtain supplies, parts
or employees necessary to furnish such services, or because of war or other
emergency, or for any cause beyond Landlord's reasonable control, or for any
cause due to any act or neglect of Tenant or Tenant's servants, agents,
employees, licensees or any person claiming by, through or under Tenant.
(c) In no event shall Landlord ever be liable to Tenant for any indirect
or consequential damages suffered by Tenant from whatever cause.
(d) With respect to any repairs or restoration which are required or
permitted to be made by Landlord, the same may be made during normal business
hours and Landlord shall have no liability for damages to Tenant for
inconvenience, annoyance or interruption of business arising therefrom;
provided that Landlord agrees to use reasonable efforts to minimize
interference with Tenant's business.
17.5 Notice to Mortgagee or Ground Lessor. After receiving notice from any
person, firm or other entity that it holds a mortgage or a ground lease which
includes the Premises,
-28-
<PAGE>
no notice from Tenant to Landlord alleging any default by Landlord shall be
effective unless and until a copy of the same is given to such holder or
ground lessor (provided Tenant shall have been furnished with the name and
address of such holder or ground lessor), and the curing of any of Landlord's
defaults by such holder or ground lessor shall be treated as performance by
Landlord.
17.6 Assignment of Rents and Transfer of Title. (a) With reference to any
assignment by Landlord of Landlord's interest in this Lease, or the rents
payable hereunder, conditional in nature or otherwise, which assignment is
made to the holder of a mortgage on property which includes the Premises,
Tenant agrees that the execution thereof by Landlord, and the acceptance
thereof by the holder of such mortgage, shall never be treated as an
assumption by such holder of any of the obligations of Landlord hereunder
unless such holder shall, by notice sent to Tenant, specifically otherwise
elect and that, except as aforesaid, such holder shall be treated as having
assumed Landlord's obligations hereunder only upon foreclosure of such
holder's mortgage and the taking of possession of the Premises.
(b) In no event shall the acquisition of Landlord's interest in the
Property by a purchaser which, simultaneously therewith, leases Landlord's
entire interest in the Property back to the seller thereof be treated as an
assumption by operation of law or otherwise, of Landlord's obligations
hereunder, but Tenant shall look solely to such seller-lessee, and its
successors from time to time in title, for performance of Landlord's
obligations hereunder. In any such event, this Lease shall be subject and
subordinate to the lease to such purchaser. For all purposes, such seller-
lessee, and its successors in title, shall be the Landlord hereunder unless
and until Landlord's position shall have been assumed by such
purchaser-lessor. In the event of a sale or leaseback, the purchaser shall
provide to Tenant a non-disturbance and attornment agreement whereby such
purchaser agrees to recognize the Lease (and Tenant agrees to attorn in such
event) in the event that the seller/lessee defaults.
(c) Except as provided in paragraph (b) of this Section, in the event of
any transfer of title to the Property by Landlord, Landlord shall thereafter
be entirely freed and relieved from the
-29-
<PAGE>
performance and observance of all covenants and obligations hereunder arising
after the date of such transfer.
17.7 Tenant's Indemnity. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to defend, indemnify and save
harmless Landlord from and against all claims, loss, liability, costs and
damages of whatever nature arising from any default by Tenant under this
Lease or from the following: (i) from any accident, injury or damage
whatsoever to any person, or to the property of any person, occurring in or
about the Building or Lot (except those due to Landlord's gross negligence or
willful misconduct); or (ii) in connection with the conduct or management of
the Premises or of any business therein, or any thing or work whatsoever
done, or any condition created (other than by Landlord) in or about the
Premises; and, in any case, occurring after the date of this Lease, until the
end of the Term of this Lease, and thereafter so long as Tenant is in
occupancy of the Premises. This indemnity and hold harmless agreement shall
include indemnity against all reasonable costs, expenses and liabilities
incurred in, or in connection with, any such claim or proceeding brought
thereon, and the defense thereof, including, without limitation, reasonable
attorneys' fees and costs at both the trial and appellate levels.
Landlord agrees to defend, indemnify and save harmless Tenant from and
against all claims, loss, liability, costs and damages of whatever nature
arising from any accident, injury or damage whatsoever to any person, or to
the property of any person, occurring in or about the Building or Lot, where
such accident, injury or damage is due solely to Landlord's gross negligence
or willful misconduct.
17.8 Additional Charges. If Tenant shall fail to pay when due any sums
under this Lease as an additional charge, Landlord shall have the same rights
and remedies as Landlord has hereunder for failure to pay Annual Fixed Rent.
17.9 Invalidity of Particular Provisions. If any term or provision of this
Lease, or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons
-30-
<PAGE>
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
Law.
17.10 Provisions Binding, etc. Except as herein otherwise provided, the
terms hereof shall be binding upon and shall inure to the benefit of the
successors and assigns, respectively, of Landlord and Tenant and, if Tenant
shall be an individual, upon and to his heirs, executors, administrators,
successors and assigns. Each term and each provision of this Lease to be
performed by Tenant or Landlord shall be construed to be both a covenant and
a condition. The reference contained to successors and assigns of Tenant is
not intended to constitute a consent to assignment by Tenant, but has
reference only to those instances in which Landlord may later give consent to
a particular assignment as provided elsewhere in this Lease.
17.11 Recording. Tenant agrees not to record this Lease, but each party
hereto agrees, on the request of the other, to execute a so-called notice of
lease in form recordable and complying with applicable law and reasonably
satisfactory to Landlord's attorneys. In no event shall such document set
forth the rent or other charges payable by Tenant under this Lease; and any
such document shall expressly state that it is executed pursuant to the
provisions contained in this Lease, and is not intended to vary the terms and
conditions of this Lease.
17.12 When Lease Becomes Binding. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall become
effective and binding only upon the execution and delivery hereof by both
Landlord and Tenant. All negotiations, considerations, representations and
understandings between Landlord and Tenant are incorporated herein and this
Lease expressly supersedes any proposals or other written documents relating
hereto. This Lease may be modified or altered only by written agreement
between Landlord and Tenant, and no act or omission of any employee or agent
of Landlord shall alter, change or modify any of the provisions hereof.
-31-
<PAGE>
17.13 Paragraph Headings. The paragraph headings throughout this
instrument are for convenience and reference only, and the words contained
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction, or meaning of the provisions of this Lease.
17.14 Rights of Mortgagee or Ground Lessor. This Lease shall be
subordinate to any mortgage or ground lease from time to time encumbering the
Premises, whether executed and delivered prior to or subsequent to the date
of this Lease, if the holder of such mortgage or ground lease shall so elect
provided that the holder of such mortgage or ground lease shall provide
Tenant with such holder's standard form of subordination, non-disturbance and
attornment agreement (the "Agreement"). With respect to the mortgage in
existence at the date of this Lease, it shall be a condition to Tenant's
obligations under this Lease that Tenant be provided with a subordination,
non-disturbance and attornment agreement, in the form attached hereto as
Exhibit ND, signed by the holder of such mortgage. If this Lease is
subordinate to any mortgage or ground lease and the holder thereof (or
successor) shall succeed to the interest of Landlord, Tenant shall attorn to
such holder (or successor) and this Lease shall continue in full force and
effect between such holder (or successor) and Tenant in accordance with the
Agreement. Tenant agrees to execute such Agreement in confirmation of the
foregoing provisions as such holder may request, and Tenant hereby appoints
such holder (or successor) as Tenant's attorney-in-fact to execute such
Agreement upon default of Tenant in complying with such holder's (or
successor's) request.
17.15 Status Report. Recognizing that both parties may find it necessary
to establish to third parties, such as accountants, banks, mortgagees, ground
lessors, or the like, the then current status of performance hereunder,
either party, on the request of the other made from time to time, will
promptly furnish to the Landlord, or the holder of any mortgage or ground
lease encumbering the Premises, or to Tenant, as the case may be, a statement
of the status of any matter
-32-
<PAGE>
pertaining to this Lease, including, without limitation, acknowledgement that
(or the extent to which) each party is in compliance with its obligations
under the terms of this Lease.
17.16 Remedying Defaults. Landlord shall have the right, but shall not be
required, to pay such sums or to do any act which requires the expenditure of
monies which may be necessary or appropriate by reason of the failure or
neglect of Tenant to perform any of the provisions of this Lease, and in the
event of the exercise of such right by Landlord, Tenant agrees to pay to
Landlord forthwith upon demand all such sums, together with interest thereon
at a rate equal to 4% over the prime rate in effect from time to time at the
First National Bank of Boston as an additional charge. Any payment of Annual
Fixed Rent or other sums payable hereunder not paid when due shall, at the
option of Landlord, bear interest at a rate equal to 4% over the prime rate
in effect from time to time at the First National Bank of Boston from the due
date thereof and shall be payable forthwith on demand by Landlord, as an
additional charge.
17.17 Brokerage. Tenant warrants and represents that Tenant has dealt with
no broker in connection with the consummation of this Lease other than
Whittier Partners (the "Broker"), whose commission Landlord shall pay, and,
in the event of any brokerage claims against Landlord predicated upon prior
dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord
against any such claim (except any claim by the Broker).
Landlord warrants and represents that Landlord has dealt with no broker in
connection with the consummation of this Lease other than the Broker, whose
commission Landlord shall pay, and, in the event of any brokerage claims
against Tenant predicated upon prior dealings with Landlord, Landlord agrees
to defend the same and indemnify Tenant against any such claim.
17.18 Governing Law. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the Commonwealth of Massachusetts, as
the same may from time to time exist.
-33-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed, under seal, by persons hereunto duly authorized, in multiple
copies, each to be considered an original hereof, as of the date first set
forth above.
NEEDHAM 197 FIRST AVENUE TRUST
By: /s/ Gerald W. Blakeley, Jr.
----------------------------------------
Gerald W. Blakeley, Jr., as Trustee but
not individually
By: /s/ C. Stewart Forbes
----------------------------------------
C. Stewart Forbes, as Trustee but not
individually
THE MEDIPLEX GROUP, INC.
By: /s/ David J. Kane
------------------------
Title: Vice Pres, COO
-34-
<PAGE>
EXHIBIT C
TO SUBLEASE
SUBLESSOR'S SERVICES
I. CLEANING
A. Lobby and Common Areas (nightly)
1. Empty all trash receptacles; clean receptacles as needed.
2. Vacuum all floors and carpets.
3. Vacuum all floor mats; wash as required.
4. Clean all entrance doors.
5. Dust all picture frames.
6. Dust all architectural or sculpted works or art.
7. Dust all furniture.
8. Remove stains and fingerprints from walls, doors, light switches, etc.
9. Clean building directory.
10. Clean and disinfect all telephones.
11. Clean and disinfect all water fountains.
12. Clean all baseboards.
13. Vacuum elevator carpets; remove stains as needed.
14. Vacuum and wash all elevator tracks.
15. Clean, wash and shine all doors, walls, and metal work in elevators.
16. Clean all exit signs, and hanging fixtures.
<PAGE>
B. Office Areas (nightly)
17. Remove trash; replace liners as needed.
18. Wash out trash basket as needed.
19. Dust all clothing closets, shelving and coat racks.
20. Clean all glass furniture tops, and display cases.
21. Remove fingerprints from doors, walls, light switches.
22. Vacuum all floors and carpeting.
23. Vacuum all floor mats.
24. Dry mop all tile floors.
25. Remove waste to designated area.
26. Upon completion of work shut off lights and secure doors.
C. Office Areas (weekly)
27. Dust all desk tops, office furniture, picture frames, window sills,
horizontal surfaces.
28. Clean and polish wood flooring.
D. Offices Areas (monthly)
29. Dust all light fixture grids.
E. Lavatories (nightly)
30. Sweep and wash floors using a disinfectant cleaner.
31. Wash and polish all mirrors, shelves, brightwork, and enameled surfaces.
32. Wash and shine all flushometers, piping, and toilet seat hinges.
33. Wash and wipe dry both sides of all toilet seats.
34. Wash and disinfect all basins, bowls, and urinals.
<PAGE>
35. Wipe down all tile walls, partitions, dispensers and receptacles.
36. Dust and clean all powder room fixtures.
37. Empty and clean paper towel and sanitary napkin receptacles.
38. Remove waste paper and refuse from the premises.
39. Refill all toilet paper, paper towel, soap and sanitary napkin
dispensers, materials to be supplied by Sublessor.
II. HEATING, VENTILATING, AND AIR CONDITIONING AND LIGHTING
40. Heating, ventilating, and air conditioning ("HVAC") as required to
provide reasonably comfortable temperatures for normal occupancy to
Premises and Common Areas on Business Days (excepting holidays); Monday
through Friday from 8:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m.
to 1:00 p.m., provided, however, that the hours of such services shall
not be less than the hours provided to any other tenant of the Building.
41. Maintenance of any additional or special air conditioning equipment and
the associated operating cost will be at Sublessee's expense.
42. Sublessor has the general obligation to keep the exterior portion of the
Building properly lighted at all reasonable times.
III. SECURITY
43. Sublessor shall maintain the card-key door security system in proper
working order.
IV. MISCELLANEOUS
44. Sublessor shall provide all other basic services as reasonably requested
by Sublessee.
ASSIGNMENT AGREEMENT
(Tampa, Florida)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
WITNESSETH
WHEREAS, Assignor has entered into that certain Offer to Purchase (the
"Offer"), dated March 28, 1996, relating to a certain parcel of land located in
Tampa, Florida (the "Land"), a copy of which is attached hereto as Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred twenty-five (125) units
(the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Offer to Assignee, and Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Offer, and Assignee
hereby accepts the within assignment and assumes and agrees with
Assignor, to perform and comply with and to be bound by all of the
terms, covenants, agreements, provisions and conditions of the Offer
on the part of Assignor thereunder to be performed on and after the
date hereof, in the same manner and with the same force and effect as
if Assignee had originally executed the Offer.
2. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the
<PAGE>
2
Project pursuant to a management agreement in form and substance
reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Offer on or before the date hereof
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Offer after
the date hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
----------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS INC.
By: /s/ James M. Clary
----------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
[LOGO]
CAREMATRIX
March 28, 1996
37th Street Property Partnership
CIO James T. Burt, Sr., President
JAMES BURT, INC.
238 East Davis Boulevard
Tampa, Florida 33606
Re: OFFER TO PURCHASE PROPERTY LOCATED AT
13800 37th Street, Tampa, Florida
Dear Mr. Burt:
This letter constitutes an offer (the "Offer") by CareMatrix Corporation, a
Delaware corporation, or its nominee (the "Buyer") to purchase from 37th Street
Property Partnership (the "Seller") the property (defined below) on the terms
and conditions contained in this letter.
1. The Buyer will acquire all of the Seller's interest in the following
described property (the "Property"): That property designated on the
attached description sketch (consisting of 2 sheets), containing
approximately 6.0 acres, together with all easements, licenses, permits or
approvals, entitlements, privileges, rights of egress and ingress and all
other appurtenances relating to such land, all more particularly described
on Exhibit "A" hereto. (Subject to notes on Sheets 1 and 2 of Exhibit "A".)
2. The purchase price for the Property will be $1,650,000 to be paid as
follows:
(a) $25,000 (the "Initial Deposit") will be paid (and held in escrow in
accordance with the terms of this letter by the Escrow Agent named below)
upon delivery of a fully executed copy of this Offer to the Buyer;
(b) $25,000 (the "Additional Deposit") will be paid (and also held in
escrow by the Escrow Agent in accordance with the terms of this letter)
upon delivery to the Buyer of a fully executed copy of the Purchase
Agreement (defined below); and
(c) At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
THE CAREMATRIX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
Mr. James T. Burt, Sr.
March 28,1997
Page 2
3. A. The closing (the "Closing") for the Buyer's acquisition of the Property
will be on November 30, 1996, at the office of the Escrow Agent or such
other location as is mutually agreeable to the Buyer and Seller.
B. The Buyer shall have the option to extend the date of the Closing beyond
November 30, 1996, and as late as February 28, 1997, by giving to the
Seller one or more written extension notices at least ten (10) days prior
to the then scheduled date Of Closing. Each such extension notice shall be
accompanied by a payment to the Seller in the amount of $2,500 for each
thirty (30) day period (or fraction thereof) included within the extension
set forth in such notice. All such extension payments shall be
non-refundable if the Closing does not occur (except in the event of the
Seller's default) and shall be credited in full against the Purchase Price
if the Closing does occur, time being of the essence for each and every
date set forth in Section 3.
C. A statutory warranty Deed conveying good and clear record and marketable
title to the property (including, without limitation, free of all liens for
past due but unpaid real estate or personal property taxes or other
municipal charges), shall be delivered by the Seller to the Buyer at
Closing.
4. This Offer will remain open until 5:00 p.m. EST on March 29, 1996, on or
before which time the Seller shall accept this Offer and return a fully
executed copy to the Buyer, otherwise this Offer shall be null and void.
5. The Buyer and the Seller will use their best efforts to prepare and execute
a more comprehensive Purchase and Sale Agreement (the "Purchase Agreement")
to carry out the terms of this Offer on or before 5:00 p.m. EST on June
15, 1996 (the "Commitment Date"). The Purchase Price will incorporate the
terms of this Offer and will contain such other agreements,
representations, warranties or conditions as are customary in transactions
of the nature contemplated by this Offer. If and when the Purchase
Agreement is executed, the Purchase Agreement will constitute the entire
agreement between the Buyer and the Seller. If the Purchase Agreement is
not executed by the Commitment Date, then at the Buyer's election, the
Initial Deposit shall be immediately refunded to the Buyer and this Offer
shall be null and void.
A. Following the execution Of this Offer by the Seller, the Buyer and the
Buyer's agents, representatives, lender(s), architect(s), engineer(s) and
employees shall have access to the property at any time during normal
business hours and from time to time in order
<PAGE>
Mr. James T. Burt, Sr.
March 28,1997
Page 3
to perform such financial analyses, topographical and engineering surveys,
environmental site assessments and other tests, surveys and studies of the
Property, as the Buyer or the Buyer's lender may deem necessary or
appropriate.
B. Further, within five (5) days after the Seller's acceptance of this
Offer, the Seller will furnish to the Buyer, for the Buyer's review,
complete and accurate copies of all information, records and documentation
concerning the ownership and condition of the Property in the possession of
the Seller or the Seller's representatives, as the Buyer may reasonably
request, including, without limitation (but only for informational purposes
and without warranties or representations of any kind regarding accuracy),
plans and surveys, as-built plans and specifications for the building(s) on
the Property, soil tests, service contracts, governmental permits and
approvals, legal opinions regarding zoning or environmental matters
affecting the Property, engineering reports, environmental site
assessments, and title policies or abstracts. The Buyer will hold in strict
confidence all documents, data and information obtained from the Seller,
and if the Closing does not occur, will return the same to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results
of any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the Buyer may
terminate this Offer (or the Purchase Agreement, if signed) by written
notice to the Seller on or before 5:00 p.m. EST on the Commitment Date.
upon such termination, the Initial Deposit (and the Additional Deposit, if
previously paid) shall be immediately returned to the Buyer, and neither
party shall have any further obligations or liabilities under this Offer
(or Purchase Agreement, if signed). If the Buyer has not sent such written
notice to the Seller on or before 5:00 p.m. EST on the Commitment Date,
then the Buyer's right to terminate pursuant to this Paragraph 6.C shall
have been waived in all respects.
6. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional condition to the Buyer's obligation to acquire the
Property:
Prior to the Closing, the Buyer shall review and be satisfied with all
zoning, land use and environmental laws, codes, ordinances and regulations
affecting the Property and shall have obtained all zoning, subdivision and
environmental permits and approvals and any other applicable permit or
approval including building and related permits sufficient to allow the
purchaser to immediately commence construction upon title transfer as may
be necessary for the Buyer's proposed development of a proposed senior
housing development
<PAGE>
Mr. James T. Burt, Sr.
March 28,1997
Page 4
consisting of 125 independent and/or assisted living units on the Property,
including, without limitation, the expiration of any applicable appeal
period(s) without an appeal having been filed; and
If the foregoing condition is not satisfied prior to the Closing, the Buyer
may elect not to purchase the Property. In such case the Initial Deposit
(and the Additional Deposit, if previously paid) shall be refunded to the
Buyer, and neither party shall thereafter have any further obligations or
liabilities under this Offer (or the Purchase Agreement, if signed).
7. In the event of a default by the Buyer under this Offer or under the
Purchase Agreement, any and all sums paid by the Buyer as the Initial
Deposit or the Additional Deposit to the date of such default shall be
retained by the Seller as liquidated damages and shall constitute the
Seller's sole and exclusive remedy with regard to any such default, either
at law or in equity.
8. From and after the date on which this Offer is signed and accepted by the
Seller, and until the obligations of the Buyer and the Seller under this
Offer have terminated, the Seller shall not offer or negotiate another sale
of all or any part of the Property to any third party. Further, the Seller
shall not enter into any new rental, management, maintenance or other
agreement affecting the Property without the prior written consent of the
Buyer and shall operate and maintain the Property in a professional manner.
9. The Escrow Agent ("Escrow Agent") will be Gunster, Yoakley & Stewart P.A.
located in West Palm Beach, Florida. In the event of any dispute regarding
either or both of the Initial or the Additional Deposit (collectively, the
"Deposits"), the Escrow Agent shall have the right to turn the Deposits
over to any party mutually agreeable to the Buyer and the Seller (who shall
hold the same subject to the terms hereof) or, if the Buyer and the Seller
are unable to agree upon such party, pay the Deposits into a federal or
state court and, upon doing either, will have no further liability
regarding its role as Escrow Agent. All Deposits made hereunder shall be
held in an interest bearing account and any interest which accrues on the
Deposits shall be shared equally between the Buyer and the Seller in the
event the Closing occurs and otherwise shall follow the Deposits. The
Seller acknowledges that the Escrow Agent is counsel for the Buyer, and may
continue to act as such counsel notwithstanding any dispute or litigation
arising with respect to its duties as Escrow Agent hereunder.
10. Each of the Buyer and the Seller hereby warrants and represents to the
other that such party has not dealt with any broker in connection with this
transaction, except James Burt, Inc. Further,
<PAGE>
Mr. James T. Burt, Sr.
March 28,1997
Page 5
each of the Buyer and the Seller agrees to indemnify and hold harmless the
other from any loss, cost or expense which such non-indemnifying party may
incur as a result of any inaccuracy in the other party's warranties and
representations as set forth in the prior sentence. All brokerage fees due
in connection with this transaction will be paid by the Seller at the time
of delivery and recording of the deed.
11. The costs of this transaction shall be shared as follows;
A. The Seller shall pay all costs and fees associated with:
(i) all documentary transfer taxes and recording costs associated with
this transaction; and
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with:
(i) fees and other expenses charged by the Buyer's attorney;
(ii) a current survey for the Property meeting ALTA requirements;
(iii) a current environmental site assessment for the Property; and
(iv) the ALTA Owner's Title Insurance Policy insuring the Buyer's title to
the Property.
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located.
12. A. The person executing this Offer as the Seller or on behalf of the Seller
warrants and represents to the Buyer that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Seller.
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Buyer.
BUYER:
CAREMATRIX CORPORATION
By: /s/ Michael Gosman
----------------------------
Name: Michael Gosman
Title: Ex. Vice President
<PAGE>
Mr. James T. Burt, Sr.
March 28,1997
Page 6
The above Offer is hereby accepted in all respects.
Date: March 29, 1996 SELLER:
By: /s/ James T. Burt
--------------------------
Name: James T. Burt
Title: Trustee
cc: Andrew D. Gosman
James M. Clary, Ill, Esq.
George E. Mueller, Jr.
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION SKETCH
(NOT A BOUNDARY SURVEY)
(SHEET No. 1 OF 2 SHEETS)
DESCRIPTION: Part of the Northeast 1/4 of the Southeast 1/4 of Section 5,
Township 28 South, Range 19 East, Hillsborough County, Florida, and being
more particularly described as follows:
From the Southwest corner of the Northeast 1/4 of the Southeast 1/4 of
Section 5, Township 28 South, Range 19 East, Hillsborough County, Florida,
run thence N. 00 (degrees) 39' 20" W, 1000.00 feet along the West boundary
of the said Northeast 1/4 of the Southeast 1/4,-thence S. 89 (degrees)
58'J9" E., 659.31 feet along a line 1,000 feet North of and parallel with
the South boundary of the said Northeast 1/4 of the Southeast 1/4 to the
POINT OF BEGINNING; thence continue S. 89 (degrees) 58' 39" E., 674.60 feet
along a line 1,000 feet North of and parallel with the South boundary of
the said Northeast 1/4 of the Southeast 1/4 to the Westerly right-of-way
line of 37th Street, thence S. 00 (degrees) 03' 55" W., 542.28 feet (being
25.00 feet West of and parallel with the East boundary of the Northeast 1/4
of the Southeast 1/4 of said Section 5) along said Westerly right-of-way;
thence N. 89 (degrees) 58' 39" W., 527.09 feet, thence N. 39 (degrees) 55'
59" W., 440.45 feet, thence N. 46 (degrees) 31' 38" E., 50.00 feet; thence
N. 24 (degrees) 58' 52" E., 97.08 feet; thence N. 35 (degrees) 27' 20" E.,
100.92 feet to the POINT OF BEGINNING.
Containing 8.659 acres, more or less.
Note. Legal description to be revised to reflect reduction in the
"Property" size to approximately 6.0 acres.
NOTE: See Sheet No. 2 for Sketch.
- --------------------------------------------------------------------------------
[SURVEYOR'S CERTIFICATE/LETTERHEAD OF
HEIDT & ASSOCIATES, INC.
CIVIL ENGINEERING
LAND SURVEYING]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION SKETCH
(NOT A BOUNDARY SURVEY)
(SHEET No. 2 OF 2 SHEETS)
[The printed material contained a drawing
representing a description sketch of a property]
- --------------------------------------------------------------------------------
[SURVEYOR'S CERTIFICATE/LETTERHEAD OF
HEIDT & ASSOCIATES, INC.
CIVIL ENGINEERING
LAND SURVEYING]
- --------------------------------------------------------------------------------
ASSIGNMENT AGREEMENT
(Atlanta, Georgia)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
W I T N E S S E T H
WHEREAS, Assignor has entered into that certain Purchase Agreement (the
"Purchase Agreement"), dated June 21, 1996, relating to a certain parcel of land
located in Atlanta, Georgia (the "Land"), a copy of which is attached hereto as
Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted living
facility consisting of a number of units to be determined during the due
diligence period under the Purchase Agreement (the "Project"), and two (2)
medical office buildings;
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Purchase Agreement to Assignee, and Assignee desires to assume such rights and
obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Purchase Agreement, and
Assignee hereby accepts the within assignment and assumes and agrees
with Assignor, to perform and comply with and to be bound by all of
the terms, covenants, agreements, provisions and conditions of the
Purchase Agreement on the part of Assignor thereunder to be performed
on and after the date hereof, in the same manner and with the same
force and effect as if Assignee had originally executed the Purchase
Agreement.
2. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
2
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Purchase Agreement on or before the date hereof
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------------
Name: James M. Clary
Title:
CHANCELLOR OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
REAL ESTATE PURCHASE CONTRACT
CPC of Georgia, Inc., hereinafter called "Seller," hereby agrees to sell and
CareMatrix Corporation, a Delaware corporation, or its nominee, hereinafter
called "Buyer," hereby agrees to purchase the certain land and improvements
thereon that is located in the city of Atlanta at 1975 Cliff Valley Way and 1970
and 1996 Cliff Valley Way, hereinafter called "Property," including all interest
of Seller in vacated streets and alleys adjacent thereto and all easements and
appurtenances thereto, and the following items, if any, owned by Seller and
presently located in the Property: all fixtures, electrical distribution systems
(power panels, buss ducting, conduits, disconnects, and lighting fixtures)
telephone distribution systems (lines, jacks and connections), HVAC systems,
fire safety systems, carpets, and wall coverings. The legal description of the
Property is set forth in Exhibit "A" that is attached hereto and incorporated
herein by this reference.
1. PURCHASE PRICE. The total purchase price which Buyer agrees to pay and
which Seller agrees to accept for the Property is the sum of Three Million Eight
Hundred Thousand ($3,800,000). The purchase price shall be payable as follows:
(A) Cash in the sum of Fifty Thousand Dollars ($50,000.00), which shall be
applied towards and in reduction of the total purchase price, in the form of a
good faith earnest money deposit described in paragraph 2 below; and
(B) The balance of the total purchase price in cash on the Expected Closing
Date (as hereinafter defined).
2. GOOD FAITH DEPOSIT. Within three (3) days of the execution hereof, Buyer
will deposit into an interest bearing First American Title Company escrow trust
account the sum of FIFTY THOUSAND DOLLARS ($50,000).
3. TITLE.
3.1 Seller shall furnish to Buyer, at Seller's expense, a preliminary
title report for the property ("the Prelim") within fifteen (15) days after
execution of this Agreement by both parties.
3.2 The Prelim shall be sent to Buyer for examination. Buyer shall
have until September 2, 1 996 (except for items which are disclosed in any later
title update; for which Seller shall have until the Closing Date to object to)
within which to notify Seller and Escrow Holder, in writing, of its disapproval
of any items in the Prelim. Any item in the Prelim not so disapproved shall be
deemed approved. In the event the Prelim discloses any condition, matter or
thing which is
<PAGE>
disapproved of by Buyer, Seller agrees, at Seller's cost and expense, to use its
best efforts as soon as possible, but no later than thirty (30) days after
receipt of written notification thereof from Buyer, to remove or modify each of
the disapproved title matters in a manner acceptable to Buyer. In the event that
all disapproved title matters are not eliminated or satisfactorily modified by
Seller and notice thereof given to Buyer, Buyer shall have the right to either
(a) terminate the escrow provided for herein and then Escrow Holder shall, at
Buyer's direction, return to Buyer any monies (and all interest thereupon),
heretofore delivered to Escrow Holder, less one-half of the escrow cancellation
fees, or (b) close the escrow and consummate the purchase of the Property,
subject to the terms and conditions hereof. Should Buyer fail to notify Seller
and Escrow Holder, in writing, of its election whether to terminate or proceed
with the escrow, within ten (10) days after expiration of said thirty day
period granted Seller hereunder, then Buyer shall be deemed to have elected to
proceed with the escrow and shall be obligated to purchase the Property, subject
to the terms and conditions hereof, subject to such defects and/or conditions,
without deduction or offset.
3.3 Seller shall use best efforts to deliver to Buyer, within fifteen
(15) days of the execution of this Agreement, true copies of surveys in Seller's
possession pertaining to the Property, and shall disclose to Buyer all
easements, liens, leases or other instruments affecting the Property not shown
by the public records and of which Seller has actual knowledge. Buyer shall have
the right to inspect the Property to determine if any third party has any right
in or to the Property by virtue of its use or occupancy of any part of the
Property that is unacceptable to Buyer, such as an unrecorded easement,
unrecorded lease or encroachment. However, Buyer's inspection must occur prior
to October 16, 1996. Buyer shall have until October 16, 1996, to notify Seller
and Escrow Holder, in writing, of its disapproval of any such unrecorded matters
or third party rights or interest in the Property. Any unrecorded matters or
third party rights or interest not so disapproved shall be deemed approved. In
the event of such disapproval by Buyer, Seller agrees, at Seller's cost and
expense, to use its best efforts as soon as possible, but no later than thirty
(30) days after receipt of written notification thereof from Buyer, to remove or
modify each of the disapproved matters in a manner acceptable to Buyer. In the
event all disapproved title matters are not eliminated or satisfactorily
modified by Seller, Buyer shall have the right to either (a) terminate the
escrow provided for herein and then Escrow Holder shall, at Buyer's direction,
return to Buyer all monies theretofore delivered to Escrow Holder, less one-half
of the escrow cancellation fees, or (b) close the escrow and consummate the
purchase of the Property. Should Buyer fail to notify Seller and Escrow Holder,
in writing, of its election whether to terminate or proceed with the escrow,
within ten (10) days after expiration of said thirty day period granted Seller
hereunder, then Buyer shall be deemed to have elected to proceed with the escrow
and shall be obligated to purchase the Property, subject to such unrecorded
matters and/or third party rights or interest in the Property, without deduction
or offset. Should Buyer terminate the Escrow, all documents provided by the
Seller will be returned
2
<PAGE>
forthwith.
3.4 Seller shall convey fee simple title to the Land and Improvements
to Buyer by warranty deed, in form and substance reasonably satisfactory to
Buyer and Buyer's title company, subject to general real property and special
improvement district taxes and assessments for the year of closing (subject to
adjustment as provided herein), free and clear of all mortgages, liens, charges,
encumbrances, encroachments, and other defects of title, except for covenants,
conditions, restrictions, reservations and rights-of-way of record, distribution
utility easements and all matters of title which (with respect to any of the
foregoing) are approved or deemed approved by Buyer by September 2, 1996, in
accordance with Section 3.2 hereof ("Approved Title Matters"). All rights
relating to the Property will be assigned and conveyed to Buyer by Seller's
grant deed whether or not Seller's deed makes specific reference to the separate
components comprising the Property. Seller shall have the right to impose
restrictions in the deed upon the subsequent uses of the Property that it
believes are reasonably necessary to protect its ongoing interests in the area;
provided that Buyer shall have the right to terminate this Agreement if it
reasonably believes that any such restrictions proposed by Seller are
incompatible with its planned uses or its investment in the property and the
parties are unable to agree upon an acceptable form of deed. The parties shall
use reasonable efforts to agree on the form of deed prior to September 2, 1996.
3.5 Seller shall furnish Buyer, at closing, with a standard owner's
title insurance policy insuring Buyer's title to the Property in accordance with
the terms hereof, showing marketable title (as provided herein) vested in Buyer,
subject to easements, covenants, conditions, reservations and restrictions of
record. Should Buyer wish to purchase an ALTA Owner's Policy of Title Insurance
or to obtain any special endorsements, Buyer shall pay the additional premium
for such policy and/or endorsements. In accordance with Section 3.2 hereof,
Buyer shall have the right to terminate this escrow if the form and substance of
title available to Buyer is not reasonably satisfactory to Buyer and its title
company.
4. REPRESENTATIONS AND WARRANTIES
4A. Representations and warranties of Seller. Seller warrants. and
represents to, and covenants and agrees with, Buyer as of the date hereof (and
on the Closing Date shall reaffirm all such representations, covenants and
warranties as of that date) as follows:
4A.1 Authority. Seller has full power and authority to enter into
this Agreement and to consummate the transactions contemplated herein without
obtaining the consent or approval of any other person, entity or governmental
authority, other than Seller's Board of Directors as set forth in paragraph
10.2, and except as may be required by governmental entities for Buyer's
consummation of
3
<PAGE>
the transactions under this Agreement. The persons whose names are set forth
below hereby represent that they have the authority to sign this Agreement on
behalf of Seller and to cause this Agreement to be a binding obligation of
Seller.
4A.2 To the best of Seller's current officers' actual knowledge,
there are no uncured notices, suits, orders, decrees or judgments relative to
violations of, (A) any easement, restrictive covenant or other matter of record
affecting the Property or any part thereof, or (B) any laws, statutes,
ordinances, codes, regulations, rules, orders, or other requirements of any
local, state or federal authority or any other governmental entity or agency
having jurisdiction over the Property or any part thereof, including, without
limitation, any of the foregoing affecting zoning, subdivision, building,
health, traffic, environmental, hazardous waste or flood control matters (all of
the foregoing, collectively, "Governmental Regulations").
4A.3 Except as otherwise provided in Section 8 hereof dealing with
damage or destruction, Seller shall maintain the Property until the close of
escrow in its present condition, ordinary wear and tear excepted.
4A.4 Seller is not the subject of a bankruptcy, insolvency or probate
hearing.
4A.5 To the best of Seller's current officers' actual knowledge,
there are no other suits, actions or proceedings pending or threatened, against
or affecting the Property or any of the transactions provided for herein before
any court or administrative agency or officer, and to the best of Seller's
current officers' actual knowledge, Seller is not in default with respect to any
judgment, order, writ, injunction, rule or regulation of any court or
governmental agency or office to which Seller is subject in any way affecting
the Property or any of the transactions provided for herein.
4A.6 To the best of Seller's current officers' actual knowledge,
there are not presently pending or threatened with respect to the Property (A)
any special assessments, or (B) any condemnation or eminent domain proceedings.
4A.7 Except for the leases disclosed pursuant to Section 3.3 hereof,
and the lease to be created pursuant to Section 11, there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or oral) which grant any possessory interest in and to any space situated on or
in the Property or that otherwise give rights with regard to the use of the
Property or any portion thereof. Seller has delivered to Buyer true and complete
copies of each of the Leases and the Leases have not been amended or modified
except as disclosed. Seller has no knowledge of any uncured breach or default
under any of the Leases and Seller has no knowledge of any offset, defense,
credit, rent concession, abatement or claim presently available to, or asserted
by, any tenant under any of
4
<PAGE>
the Leases (or any event, with the passage of time and/or the giving of notice
or both, would constitute any of the foregoing). No tenant under any of the
Leases has prepaid any rent other than the rent due for the current month and
the security deposits under the Lease. Seller at the Closing shall have
performed all obligations to be performed by Seller under the Leases and under
any tenancies at will agreements. As of the Closing, no leasing commissions
shall be payable by Seller to any person under any of the Leases. No tenant
under any of the Leases nor any other person has an option to purchase the
Property or any portion thereof.
4A.8 Except for the contracts and other agreements pursuant to
Section 3.3 hereof and the Lease to be created pursuant to Section 11, there are
no agreements or contracts affecting all or any part of the Property or the use
thereof which would be binding upon or otherwise affect Buyer that would not be
terminable at will by Buyer without penalty at the Closing. Seller has delivered
to Buyer true and complete copies of each of the Contracts.
4B. Representations and Warranties of Buyer. Buyer warrants and represents
to, and covenants and agrees with, Seller as follows:
4B.1 Buyer has the legal right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder, and the
execution and delivery of this Agreement and the performance by Buyer of its
obligations hereunder, have been or will be duly authorized by all necessary
corporate action at the Closing Date; and this Agreement and Buyer's performance
hereunder will not conflict with, or result in a breach of, any of the terms,
covenants and provisions of the Articles of Organization or By-Laws of Buyer, as
same may have been amended or, to the best of Buyer's knowledge, or order,
judgment, writ, injunction or decree of any court or any agreement or instrument
to which Buyer is a party or by which it is bound.
4B.2 The officer signing this Agreement on behalf of Buyer is duly
authorized to execute the same on behalf of Buyer and Buyer shall provide a
corporate resolution to such effect at the Closing.
4C. Liability for Warranties and Representations. Seller agrees to
indemnify and hold Buyer harmless from and against any and all claims, losses,
liabilities, damages, expenses and fees, including without limitation,
reasonable attorneys' fees and expenses, incurred by Buyer as the result of the
failure of any of Seller's warranties and representations contained in this
Article 4 or elsewhere in this Agreement. Conversely, Buyer agrees to indemnify
and hold Seller harmless from and against any and all claims, losses,
liabilities damages, expenses and fees, including without limitation, reasonable
attorneys' fees and expenses, incurred by Seller as the result of the failure of
any of Buyer's warranties and representations contained in this Article 4 shall
survive the delivery of the Deed hereunder or the termination of this Agreement.
5
<PAGE>
5. BUYER'S DUE DILIGENCE.
5.1 Buyer and its duly authorized representatives and agents shall
have from the date of execution hereof until, and including, 5:00 PM EST on
October 16, 1996 (hereinafter called the "Due Diligence Period") in which to
survey, inspect and investigate the Property and to perform such financial
analyses, tests and studies as Buyer shall determine, subject to the following
terms and conditions set forth below. Notwithstanding anything to the contrary
set forth herein, Buyer will not have access to the property from July 2 through
September 2, 1996.
(A) Buyer shall not be allowed to conduct any study, test or sampling
of the Property if such studies, testing or sampling result in any material
change in the present character or topography of the Property or cause a
reduction in the marketable value of the Property without Seller's prior written
consent, which shall not be unreasonably withheld.
(B) Buyer shall, at Buyer's sole expense, within ten (10) days after
the expiration of the Due Diligence Period return the Property to the condition
in which it existed immediately prior to such studies, testing or sampling to
the extent changed by Buyer.
(C) Before conducting any physical inspections or tests of the
Property, Buyer shall (a) submit to Seller the name, address and qualifications
of each and every person or company who shall be making any physical
inspections, conducting any tests, or doing any laboratory analysis of test
data; (b) specifically describe the extent, nature and location of the
inspections and/or testing which will be conducted on site; and (c) specify the
date or dates when said physical inspections and/or testing shall be conducted.
(D) Buyer shall, for a period of one (1) year after the closing or the
earlier termination hereof, defend, protect, indemnify and hold Seller and its
partners, agents, employees and affiliates, both past and present, and its
successors and assigns, harmless from and against any and all consequences,
liabilities, claims, demands, damages, including, but not limited to, special,
consequential and punitive damages, judgments, awards, charges, losses, causes
of action and costs, including reasonable attorneys' fees incurred with or
without suit, of every kind, nature or description, resulting from, pertaining
to, relating to, in any way connected with or arising out of, directly or
indirectly, the entry on the Property or any such activities by Buyer, its
agents, contractors or subcontractors, including, without limitation, any
damages due to the death or injury of any person or for the damage, loss or
destruction of any property, including Seller's personal injury or property
damage either to the Property or any personal property located thereon, any and
all mechanic's liens or other encumbrances.
6
<PAGE>
(E) Any survey and all such inspections and tests and any other work
conducted or materials furnished with respect to the Property by or for Buyer
shall be paid for by Buyer as and when due.
(F) Under no circumstances shall Buyer communicate the results of any
inspections or tests to any governmental body, agency or instrumentality having
or asserting jurisdiction over the Property without Seller's prior written
consent.
(G) All information, data and knowledge gained by Buyer as a result of
any survey, tests, inspections, investigations, studies and governmental
inquiries and/or applications shall be kept in strict confidence by Buyer and
shall not be communicated to any other person, firm or entity (other than
Buyer's employees, consultants, etc., except under compulsion of law, without
Seller's prior written consent.
5.2 If the Buyer, in its sole discretion, is dissatisfied with the
results of any tests or inspections, or with the content of any of the
documents, data or information obtained from Seller or in connection with its
review of the Property, then Buyer may terminate this escrow at any time during
the Due Diligence Period established in Section 5.1 and upon such termination,
all monies delivered to Escrow Agent less 1/2 of cancellation fees, shall be
immediately returned to Buyer. If Buyer shall fail by the end of the Due
Diligence Period, to approve or disapprove, in writing, to Escrow Holder, Seller
and the Seller's broker, any item, matter, or document subject to Buyer's
approval under the terms of this Contract, it shall be conclusively presumed
that Buyer has approved of such item, matter or document. Buyer's conditional
approval shall constitute disapproval. Any written notice of objection or
disapproval delivered by Buyer hereunder shall specify, with particularity, the
exact defects or conditions, whether physical, environmental, governmental or
financial, to which Buyer objects, whether this defect is curable, and what
actions, if any, may be taken by Seller to cure such defects and/or conditions,
and in the event that Buyer has requested Seller cure such defect, shall be
accompanied by copies of all data, information and written documents generated
or examined by or on behalf of Buyer as a result of any survey and any and all
tests, inspections, investigations, studies and governmental inquiries and/or
applications made by or on behalf of Buyer with respect to the Property that are
directly or indirectly related to the objection or disapproval item to. the
extent the same are necessary in order to permit Seller to cure such defect. If
Buyer serves timely written notice of disapproval with accompanying documents,
as to any matter as a result of its investigation under this paragraph, Seller
shall have the right within thirty (30) days of its receipt of Buyer's written
notice of disapproval in which to elect to cure the defects and/or conditions
which Buyer has disapproved, if curable, hereinafter called the "Disapproved
Items."
5.3 Unless the parties mutually instruct otherwise, if the time
period
7
<PAGE>
for the satisfaction of contingencies or the time periods for Seller or Buyer to
make the elections specified above would expire on a date after the Expected
Closing Date (as defined below), the Expected Closing Date shall be deemed
extended to coincide with the expiration of three (3) business days following
the expiration of: the applicable contingency period(s).
5.4 If this transaction is terminated due to Seller's inability to
deliver marketable title or for non-satisfaction and non-waiver of a Disapproved
Item, then neither Buyer nor Seller shall thereafter have any liability to the
other under this Agreement, except to the extent of an affirmative covenant or
warranty in this Agreement that may be involved and provided that this Agreement
expressly states that such covenant or warranty is to survive the termination of
this Agreement. In the event of such termination, Buyer shall promptly be
refunded all funds deposited by Buyer with the Escrow Holder together with all
interest thereupon, less only one-half of the title company's charges and escrow
cancellation fees, which shall be Buyer's obligation to pay.
5.5 Buyer shall also have until the expiration of the Section 5.1 Due
Diligence Period in which to validate Buyer's ability to obtain the government
approvals, permits and consents to accommodate the use of the Property for
Buyer's contemplated assisted living facilities project ("Feasibility Study").
Buyer shall by the end of the Due Diligence Period determine if it believes, in
its sole good faith discretion, that it will be able to obtain the government
approvals, permits and consents it requires by the Section 6.1(C) Expected
Closing Date. If not, Buyer shall have the right, on notice to Seller, to
terminate this escrow. Notwithstanding the above, if Buyer determines in good
faith by the Expected Closing Date that it believes it will not be able to
obtain the required government approvals, permits and consents, then Buyer shall
still have the right to terminate this escrow. If Buyer determines, at Buyer's
sole good faith discretion within the time periods set forth above in this
section, that it cannot obtain the government approvals, permits and consents it
requires for its contemplated assisted living facilities project, Buyer shall
have the right to terminate this Agreement and receive a full return of its
Section 2 deposit (together with the interest thereupon).
5.6 Under no circumstances shall Buyer be entitled to activate or
record a change in the zoning or permitted uses of the Property prior to close
of escrow, although Buyer shall have the right to apply for such prior to close
of escrow, and Seller shall cooperate if requested by confirming Buyer's
authority to make such applications.
6. ESCROW.
6.1 Within five (5) days after the execution of this Agreement, Seller and
Buyer shall open an interest bearing escrow at First American Title Insurance
8
<PAGE>
Company ("Escrow Holder"), through which the purchase and sale of the Property
shall be consummated. Executed counterparts of this Agreement shall be deposited
with Escrow Holder to act as escrow instructions to Escrow Holder, and Escrow
Holder is hereby appointed and designated to act as an escrow holder and is
authorized and instructed to deliver, pursuant to the terms of this Agreement,
the documents and monies to be deposited into the escrow, with the following
terms and conditions to apply to such escrow:
(A) Escrow Holder is hereby authorized and instructed to conduct the
escrow in accordance with this Agreement, applicable law, and, to the extent not
in conflict with any of the provisions of this Agreement, in accordance with the
custom and practice in the community. Escrow Holder shall comply with any
reporting requirements of the Internal Revenue Code. Buyer shall employ, at its
sole expense, an attorney admitted to practice in the State of Georgia to
perform those closing functions that a Georgia escrow holder does not
customarily perform and also to perform any title and deed inspection and other
duties that Buyer elects to have its attorney perform. The parties hereby
acknowledge that it may be customary practice in the State of Georgia for the
Buyer's attorney, rather than an escrow holder, to perform such functions as the
preparation of proration and closing statements and various other documents that
are required for the closing and the agree that this Agreement should be
construed to permit Buyer's attorney to perform those functions. Seller may also
elect to employ, at its sole expense, an attorney admitted to practice in the
State of Georgia to perform any duties that Seller elects to have its attorney
perform.
(B) The opening of escrow shall be the date upon which Escrow Holder
receives copies of the Agreement signed by all of the parties hereto.
(C) Escrow shall close on October 31, 1996 (the Expected Closing Date.
(D) Seller and Buyer shall, during the escrow period, execute any and
all documents and perform any. and all acts reasonably necessary or appropriate
to consummate the purchase and sale of the Property pursuant to the terms of the
transaction set forth in this Agreement. In particular, Seller and Buyer shall
execute any amendments hereto or other documents determined to be required by
state or local law or procedures.
(E) Upon satisfaction or waiver of the contingencies specified in
Sections 3.2, 3.3 and 5.1 and the expiration of the applicable periods under
Sections 5.2 and 5.5 without termination of this Agreement by Buyer, Seller
shall deposit into the escrow a fully executed and notarized warranty deed
complying with Section 3.4 and the other provisions hereof. Seller shall do this
not later than October 31, 1996, and shall also by that date deposit into the
escrow:
9
<PAGE>
(1) An Assignment of all of Seller's right, title and interest in
and to the Leases in effect at the Closing, and of all security deposits and
prepaid rents made by the tenants thereunder.
(2) Estoppel certificates, in form and substance satisfactory to
Buyer, and a subordination and non-disturbance agreement, in form and substance
satisfactory to Buyer's lender, from each of the tenants under the Leases.
(3) An Assignment of Seller's entire interest in the Contracts
(except to the extent that Buyer has requested that Seller terminate the same)
and any permits, licenses or approvals affecting the Property (provided,
however, in the absence of an express assignment, delivery of the Deed will
conclusively be deemed to constitute the assignment of all of such permits,
licenses and approvals to Buyer).
(4) An Affidavit certifying that Seller is not a "foreign person"
as of the Closing Date.
(5) A certificate by Seller to the effect that all of the
representations and warranties set forth in Section 4 remain true and correct as
of the Closing Date except to the extent the same may have changed in accordance
with the terms and conditions of this Agreement.
(6) A 1099-B form.
(7) A W-9 form, if applicable, stating that no backup withholding
is necessary to disburse Seller's share, if any, of the interest earned on the
Deposit.
(8) Notices to the tenants under the Leases, if required,
advising them of the conveyance of the Property.
(9) All other documents which may be reasonably required to
consummate the transaction.
(F) Upon satisfaction or waiver of the contingencies specified in
Sections 3.2, 3.3 and 5.1 and the expiration of the applicable periods under
Sections 5.2 and 5.5 without termination of this Agreement by Buyer, Buyer shall
deposit into the escrow the purchase price in the form of cash, plus such
additional sums as are required of Buyer under this Agreement for prorations,
expenses and adjustments. Buyer shall do this not later than October 31, 1 996.
As used herein, the word "cash" means (a) United States currency; (b) a
cashier's check, currently dated, payable to Escrow Holder and honored upon
presentation for payment; or (C) funds wire-transferred or otherwise deposited
into Escrow Agent's general escrow
10
<PAGE>
account(s).
(G) Escrow Holder shall prorate as of the close of escrow all real and
personal property taxes and assessments based upon the most recent tax bill.
Escrow Holder shall prorate as of the close of escrow any royalties, rent
payments, and any other sums reasonably subject to proration, including any sums
due in respect to any minerals, oil, hydrocarbon or other kindred substances,
title to all of which rights to the extent owned by Seller shall be conveyed to
Buyer. Any security deposits held by Seller with respect to leases shall be
credited to Buyer and shall reduce the purchase price for the Property. Any item
to be prorated that is not determined or determinable at the close of escrow
shall be promptly adjusted by the parties by appropriate cash payment outside of
the escrow when the amount due is determined.
(H) Buyer hereby acknowledges that the Property is insured by Seller
under a blanket insurance policy that cannot be assigned or transferred to Buyer
at closing. Accordingly, Buyer shall be responsible, at its sole cost and
expense, for obtaining and having in force, as of the close of escrow, a fire,
casualty and liability insurance policy insuring the Property and all personal
property being acquired under this Agreement.
(I) Seller shall be responsible for any costs incurred in removing the
lien of any deeds of trusts or mortgages encumbering the Property.
(J) Seller and Buyer shall each pay one-half (1/2) of the escrow fees
of Escrow Holder. Seller shall pay all documentary, revenue or other stamps to
be affixed to the warranty deed in favor of Buyer and the costs for recording
the warranty deed.
(K) Seller shall deliver to Escrow Holder a certification duly
executed by Seller under penalty of perjury, setting forth Seller's address and
federal tax identification number, and certifying that Seller is not a "foreign
person" in accordance with and/or for the purpose of the provisions of Section
1445 (as may be amended) of the internal Revenue Code of 1954, as amended, and
any regulation promulgated thereunder.
(L) A document or notice required under this Agreement shall be deemed
delivered when Escrow Holder and the other party to this Agreement receives a
signed fax from the party who is to execute such document or notice. The party
sending such a fax shall, within a reasonable period of time thereafter, send a
copy of the faxed document or notice bearing an original signature to the
recipient, however, failure of the signatory to deliver the originally executed
document or notice to Escrow Holder shall not lessen the legal effect of the
faxed document or notice, other than a document of title that is to be recorded
or filed in1 the public records as part of the chain of title to the subject
property or, as a matter
11
<PAGE>
of law, must otherwise be an executed original in order to complete the
transaction.
(M) To enable Seller to make conveyance as herein provided, at the
time of delivery of the Deed, Seller shall use the Purchase Price or any portion
thereof to clear title to the Property of any or all encumbrances, and all
instruments so procured shall be recorded simultaneously with the delivery of
the Deed, or provisions reasonably satisfactory to Buyer's attorney shall be
made prior to the Closing Date for recording thereof as soon as reasonably
practicable after the Closing Date.
6.2 So as to minimize Seller's loss of market opportunities and the
risk that further increases in interest rates may adversely impact the
marketability of the Property, time shall be deemed strictly of the essence
hereunder. The Closing shall occur by no later than the Expected Closing Date.
In no event shall Buyer be entitled to any other or further extension of the
Closing. The provisions of this Agreement regarding Closing described herein and
specifically the timing of such Closing may only be modified by a written
amendment to this Agreement, signed by both parties and delivered to Escrow
Holder. The provisions of this Agreement will specifically supersede any
provisions in Escrow Holder's "general provisions" which would allow the escrow
to remain open pending cancellation by either party or receipt by Escrow Holder
of mutual cancellation instructions. This provision regarding the Closing will
be effective and binding on the parties even if escrow fails to close on the
Expected Closing Date and Escrow Holder thereafter requests or requires mutual
cancellation instructions in order to technically terminate the escrow created
hereunder.
6.3 Provided there has been no material change that has been rejected
by Buyer in the condition of the Property or in the truth of each and every
representation and warranty of Seller made herein, the escrow shall close on the
date provided in Section 6.1(C). The balance of the purchase price, less
Seller's share of the escrow, title and closing expenses, the brokerage
commissions, and the prorations and adjustments provided for in this Agreement,
shall be disbursed by the Escrow Holder to Seller, by wire transfer, upon the
close of escrow, For purposes of this paragraph, a "material change" shall
include, but not be limited to, a significant change in the use, occupancy,
tenancy or condition of the Property as reasonably expected by the Buyer, that
occurs after the date of execution of this Agreement or such later date by which
Buyer shall have, or be deemed to have, indicated its acceptance of that aspect
of the Property. Buyer shall have ten (10) days after it actually knows of any
material change in which to approve or disapprove of same. Unless notified in
writing by Buyer, Escrow Holder shall assume that no material change and
rejection has occurred. Notwithstanding the above, it shall not be deemed a
material change if one or more of the tenants presently occupying the Property
shall vacate it upon the conclusion of its lease term. Nor shall any event
handled pursuant to Section 8 be deemed a material change.
12
<PAGE>
6.4 Seller agrees to execute any documents prepared and presented by
Buyer that Buyer reasonably deems necessary in order to effect the assignment or
transfer of any teases, licenses, permits and certificates or of any other
rights or assets included in this sale.
6.5 Buyer shall have the election, at the time for Closing, to accept
such title to, and possession of, the Property as Seller can deliver in its then
condition and to thereupon pay the Purchase Price without any deductions, except
such amount necessary to remove all mortgages, liens or encumbrances which
secure the payment of money and such adjustments computed in accordance with
Section 2(b) above, in which case Seller shall convey such title.
6.6 Buyer's Default. If Buyer shall fail to fulfill its agreements
herein on the Closing Date, Seller's sole and exclusive remedy shall be to
retain the Deposit and any interest thereon as full and complete liquidated
damages, both at law and in equity, whereupon this Agreement shall terminate
without further recourse to either party. In addition, nothing contained herein
shall be construed to as to present Seller from negotiating and/or accepting
another offer to sell and/or lease all or any part of the Property to any third
party, after Buyer's default under this Agreement. Any such other offer, if
obtained prior to Buyer's default, shall contain an express acknowledgment from
the party making such offer of the existence of this Agreement.
7. POSSESSION Possession of the Property in substantially the same
condition as now shall be delivered to Buyer at Closing. Buyer shall assume and
accept and attorn to the leases of any tenants in possession who were in
possession as of the conclusion of the Section 5.1 Due Diligence Period.
8. DAMAGE OR DESTRUCTION
8.1 Should the Property be damaged or destroyed, in whole or in part,
by any cause whatsoever, at any time between the execution of this Agreement and
the actual closing date, and the cost of reconstruction or repair of the
Property is Two Hundred and Fifty Thousand Dollars ($250,000.00) or less, Seller
shall repair such damage prior to the close of escrow. Notwithstanding any
provision above, the close of escrow will be delayed for a reasonable period of
time if necessary to permit completion of such work prior to close.
8.2 If the cost of reconstruction or repair exceeds Two Hundred and
Fifty Thousand Dollars ($250,000.00), then Seller shall have the option, within
ten (10) days after the cost of reconstruction is determined, to terminate this
Agreement rather than to repair the damage as provided in Section 8.1. If Seller
does not elect to terminate this Agreement by no later than the expiration of
that ten (10) day period by written notice to Buyer, then Buyer shall have the
option, within ten (10) days after receipt of a written notice of a loss that
exceeds Two Hundred and Fifty Thousand Dollars ($250,000.00) from Seller,
to either terminate
13
<PAGE>
this Agreement or to purchase the Property notwithstanding such unrepaired loss,
and without deduction or offset against the purchase price. If, in such
circumstances, Buyer elects to proceed with the sale of the Property, Buyer
shall be entitled to any insurance proceeds payable to Seller on account of such
loss.
8.3 Within ten (10) business days after the occurrence or happening of
any such damage or destruction, Seller shall solicit and obtain a written
estimate from a general contractor as to the cost of repairing or curing such
damage and the amount of said estimate shall be conclusively binding upon Seller
and Buyer hereunder for the purpose of establishing whether the cost of
reconstruction or repair is deemed to be equal to, more or less than Two Hundred
and Fifty Thousand Dollars ($250,000).
8.4 Escrow Holder shall assume that no destruction or damage or loss
that exceeds Two Hundred and Fifty Thousand Dollars ($250,000.00) to cure has
occurred unless otherwise notified in writing prior to the Expected Closing
Date.
9. BROKERAGE COMMISSION
9.1 Buyer and Seller each represent that they have not dealt with any
broker or real estate agent in connection with this transaction other than
Richard Bowers and Co ("Bowers") and/or, Barnes, Morris, Pardoe & Foster, Inc.
("BMPF"), whose aggregate commission, in the amount of six percent (6%) of the
purchase price shall be deemed to be earned only upon Closing and shall be paid
by Seller only if and when Closing occurs. Each party agrees to defend,
indemnify and hold harmless the other against any additional claims for agency
commissions.
It is understood and agreed that any right that Bowers and BMPF have
to receive all or any portion of the real estate commission payable on account
of this transaction is a matter of contract between Bowers and BMPF, and that
neither Buyer nor Seller are to be concerned therewith, or to be responsible for
the allocation of the real estate commission between Bowers and BMPF, nor shall
Seller be obligated to pay a real estate commission in excess of that specified
in the listing agreement between Seller and BMPF. This provision shall survive
and remain still in effect after the closing.
10. MISCELLANEOUS PROVISIONS
10.1. Buyer hereby acknowledges that, except as otherwise set forth in
this Agreement, Seller has not made and is not making any written or oral
promises, inducements, assurances, warranties or representations whatsoever to
Buyer as to the physical condition of the Property, the zoning, habitability,
permissible uses, fitness for any particular purpose, any aspect of the
Occupational Safety and Health Act or as to the non-existence of hazardous or
toxic substances
14
<PAGE>
in, on or under the Property, or of any other kind, nature or description
whatsoever, and Buyer shall rely on its own investigation, knowledge and
judgment in its decision to purchase the Property, and Buyer further
acknowledges that the purchase price reflects the fact that he is purchasing the
Property in its strictly "as is" condition without any such warranties or
representations except as set forth herein.
10.2 Notwithstanding anything contained herein to the contrary,
Seller's obligation to sell the Property to Buyer is contingent upon the
approval of this transaction by the Board of Directors of Seller within fifteen
(15) days of the date of execution of this Agreement. Seller covenants and
agrees to seek such approval at the earliest possible date.
10.3 Any written notice of objection or disapproval delivered by Buyer
hereunder shall specify, with particularity, the exact defects or conditions,
whether physical, environmental, governmental or financial, to which Buyer
objects and what actions, if any, may be taken by Seller to cure such defects
and/or conditions.
10.4 This Contract shall constitute escrow instructions and a copy
hereof shall be deposited with the Escrow Holder for this purpose. Buyer and
Seller shall execute Escrow Holder's standard instructions if any; provided,
however, in the event of any inconsistency between the terms of such additional
instructions and the terms of this Agreement, the terms of this Agreement shall
prevail.
10.5 In the event of any action arising out of or in any way connected
with any controversy, claim or dispute relating to this instrument, or the
interpretation thereof, the prevailing party shall be entitled to recover its
reasonable attorney's fees and costs, whether incurred with or without the
filing of such lawsuit.
10.6 Where the context so requires, the singular number shall include
the plural number and visa versa and the use of any gender shall include any or
all other genders.
10.7 All the terms and conditions of this Agreement shall be binding
upon and enure to the benefit of each of the parties hereto and their respective
heirs, representatives successors and assigns;
10.8 This instrument shall be interpreted and enforced under and
pursuant to the laws of the State of Georgia.
10.9 All notices, requests and demands to be made hereunder shall be
in writing at the address set forth below by any of the following means: (a)
personal delivery (including delivery by overnight courier service with written
15
<PAGE>
confirmation of receipt); (b) electronic communication, whether by telex,
telegram, telecopying or internet e-mail (if receipt in the case of any such
electronic communication is confirmed in writing); or (c) certified first class
mail return receipt requested. Such addresses may be changed by notice to the
other parties given in the same manner provided above. Any notice, request or
demand sent pursuant to either subsection (a) or (b) hereof shall be deemed
received upon such personal service or upon dispatch by electronic means, and if
sent pursuant to subsection (c) shall be deemed received five (5) days following
deposit in the mail. If the party so to be served is Seller, address Seller at
5110 West Sahara Avenue, Las Vegas, NV 8910, attention both to Julia Kopta (fax:
702-257-6067) and to W. Fillmore Wood, Jr. (fax: 702-257-6064). If the party so
to be served is Buyer, address Buyer at 197 First Avenue, Needham, MA 02194,
attention both to Kevin J. Maley and to Richard P. Zermani (fax: 617-433-1191).
The parties may, at any time hereafter, change the address and designated
recipients for service of notice by ten (10) days' prior written notice to the
other party and to Escrow Holder.
10.10 The titles and headings of the various paragraphs hereof are
intended solely for convenience of reference and are not intended for any
purpose whatsoever to explain, modify or place any construction upon or on any
of the provisions of this Agreement.
10.11 This document contains the whole of the understanding between
the parties relative to the sale of the Property by Seller to Buyer and merges
within it any and all prior and/or contemporaneous negotiations, understandings,
agreements and representations, whether oral or written. No prior agreement or
understanding pertaining to the sale of the Property or this transaction,
whether written or oral, express or implied, shall be effective. This Agreement
may be modified in writing only, signed by the parties in interest at the time
of the modification.
10.12 In the event any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been set forth
herein and the same shall be enforceable to the fullest extent permitted by law.
10.13 Each party shall at his own cost and expense, from time to time,
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and such other actions as may be reasonably required
for the purpose of carrying out the intent and purposes of this Agreement.
10.14 Each party hereto acknowledges receipt of a copy of this
Agreement, that he has carefully read and fully understands all of the
provisions of
16
<PAGE>
this Agreement, that he has been instructed not to sign this Agreement unless he
has read and understands this Agreement, and has voluntarily executed it.
10.15 Each party hereto acknowledges receipt of a copy of this
Agreement, that he has had an opportunity to discuss this document with his own
attorney, including the legal and income tax effects of this Agreement, that he
has carefully read and fully understands all of the provisions of this
Agreement, and has voluntarily executed same based on his own independent
judgment as to the prudence of doing so, and not in reliance on any
representations, promises or warranties made by any other person, except those
set forth herein.
10.16 Notwithstanding anything contained herein to the contrary, the
parties intend that this Agreement shall be deemed effective, executed and
delivered for all purposes under this Agreement, and for the calculation of any
time periods based on the date an agreement between parties is effective,
executed and/or delivered, as of the last date of execution by a party hereto.
10.17 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute one
instrument, and shall become effective when such separate counterparts have been
exchanged between the parties hereto, provided, however, that provisions
inserted herein or affixed hereto shall not be valid unless appearing in the
duplicate original hereof held by Seller. In the event of any variation or
discrepancy, Seller's duplicate shall control.
10.18 The risk of any loss or damage to the Property by condemnation
before the Closing is assumed by Seller. In the event any condemnation
proceeding is commenced or threatened, Seller shall promptly give Buyer written
notice thereof, together with such reasonable details with respect thereto as to
which Seller may have knowledge. As soon thereafter as the portion or portions
of the Property to be taken is (are) reasonably determinable, Seller shall give
Buyer written notice thereof ("Seller's Notice") together with Seller's estimate
of the value of the portion or portions of the Property to be so taken. Buyer,
by written notice to Seller at any time thereafter, shall have the option to
terminate this Agreement, in which event this Agreement shall terminate and be
of no further force and effect and neither party shall have any liability to the
other hereunder, except that Seller shall be obligated to return to Buyer the
Deposit and all accrued interest thereon. If Buyer shall not so elect to cancel
this Agreement, then the sale of the Property shall be consummated as herein
provided at the Purchase Price provided for herein (without abatement) and
Seller shall assign to Buyer at the Closing all of Seller's right, title and
interest in and to all awards made in respect of such condemnation and shall pay
over to Buyer all amounts theretofore received by Seller in connection with such
taking. Buyer shall be entitled to participate in any such condemnation
proceeding, and Seller shall cooperate with Buyer in such respect.
17
<PAGE>
11. The parties agree that it shall be an additional contingency of this
Agreement and escrow that they shall have reached agreement prior to September
2, 1996 on the terms of a lease between Buyer and Seller, or one of Seller's
Transitional Hospitals Corporation subsidiaries or affiliates ("THC"), for the
continued occupation by THC of a portion of the Property following close of
escrow. Buyer acknowledges it is aware that THC presently occupies a portion of
the Property, and that it wishes to remain in possession of this space. The
parties agree to negotiate in good faith towards the creation of such a lease.
Notwithstanding the above, however, either party shall have the right to
terminate this Agreement if a mutually satisfactory lease cannot be finalized by
September 2, 1996.
12. The parties agree that it shall be a further contingency of this
Agreement and escrow that they shall have reached agreement prior to September
2, 1996 on the terms of an allocation of the purchase price between assets
subject to Medicare loss recoupment by Seller and assets not so subject. Buyer
acknowledges its awareness that this allocation is financially critical to
Seller. Seller agrees to provide an expert's report in support of its proposed
allocation, and the parties agree thereafter to negotiate in good faith any
disagreements they may have with the results of this appraisal. Notwithstanding
the above, however, either party shall have the right to terminate this
Agreement if a mutually satisfactory allocation cannot be finalized by September
2, 1996.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates hereinafter indicated.
SELLER:
CPC of Georgia, Inc.
Dated:__________ By:_____________________
BUYER:
CareMatrix Corporation
Dated:__________ By:____________________________
BROKER:
Barnes, Morris, Pardoe & Foster, Inc.
By: __________________________
18
<PAGE>
BROKER:
Richard Bowers and Co.
By: ____________________________
FOR SELLER
By: ____________________________
FOR BUYER
19
<PAGE>
Consent of Escrow Holder
The undersigned hereby agrees to (a) accept the foregoing Real Estate Purchase
Contract (the Agreement") as the escrow instructions in this transaction; (b)
act as the Escrow Holder; provided, however, that the undersigned shall have no
obligation, liability or responsibility under any amendment to the Agreement
unless and until the same shall be accepted by the undersigned in writing.
FIRST AMERICAN TITLE INSURANCE
COMPANY
Dated: _____________ By:____________________________
20
EXHIBIT 10.107
ASSIGNMENT AGREEMENT
(Boynton Beach, Florida)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
W I T N E S S E T H
WHEREAS, Assignor is negotiating a Purchase Agreement (the "Purchase
Agreement") relating to a certain parcel of land located in Boynton Beach,
Florida (the "Land"), a copy of the most recent draft of which is attached
hereto as Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred forty-eight (148)
units (the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, upon execution of the Purchase Agreement, Assignor desires to
assign its rights and obligations under the Purchase Agreement to Assignee,
and Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Upon execution of the Purchase Agreement, Assignor hereby agrees to
assign, set over and transfer unto Assignee to have and to hold from
and after such date, all of the right, title and interest of Assignor
in, to and under the Purchase Agreement, and Assignee agrees to accept
such assignment and to assume and agree with Assignor, to perform and
comply with and to be bound by all of the terms, covenants, agreements,
provisions and conditions of the Purchase Agreement on the part of
Assignor thereunder to be performed on and after such assignment, in
the same manner and with the same force and effect as if Assignee had
originally executed the Purchase Agreement.
2. Assignor and Assignee agree that Assignor shall act as developer of the
Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Purchase Agreement on or before the date of such
assignment.
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date of such assignment.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, losses, injuries, liabilities
and expenses (including, without limitation, reasonable legal fees and
expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts, and
(iii) may not be modified orally, but only by a writing signed by both
parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/
---------------------
Name:
Title:
ASSIGNEE:
CHANCELLOR OF MASSACHUSETTS, INC.
By: /s/
----------------------
Name:
Title:
<PAGE>
REAL ESTATE
PURCHASE AGREEMENT
THIS REAL ESTATE PURCHASE AGREEMENT ("Agreement") is made and entered into
as of this ---- day of June, 1996 by DASCO DEVELOPMENT CORPORATION, a Florida
corporation, having an office at 1200 Corporate Center Way, Suite 100,
Wellington, Florida 33414 (hereinafter called "Seller"), and CAREMATRIX
CORPORATION, a Delaware corporation, or its nominee, having an office at 197
First Avenue, Needham, Massachusetts 02194 (hereinafter called "Buyer").
W I T N E S S E T H:
WHEREAS, Seller has entered into a certain Real Estate Purchase Agreement
dated as of February 26, 1996 (the "Sunbelt Agreement"), with SUNBELT
PROPERTIES, LTD., an Illinois limited partnership ("Sunbelt"), pursuant to
which Seller has agreed to purchase a certain parcel of real property located
in Palm Beach County, Florida, which real property is legally described on
Exhibit "A" attached hereto (the "Commercial Tract"); and
WHEREAS, Seller is desirous of selling a portion of the Commercial Tract,
consisting of approximately ------------ acres and generally identified on
the proposed site plan attached hereto as Exhibit "B" together with all
easements and rights of way appurtenant thereto (the "Property"), upon the
terms and conditions hereinafter set forth; and
WHEREAS, Buyer is desirous of purchasing the Property upon the terms and
conditions hereinafter set forth; and
WHEREAS, Seller and Buyer have accordingly agreed that, simultaneously
with closing by Seller on the Commercial Tract, Seller shall convey title to
the Property to Buyer, all in accordance with the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of Ten Dollars ($10) and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged by each party, and in consideration of the mutual covenants,
conditions and promises herein contained, the parties hereby agree as
follows:
1. Recitals. The foregoing recitals are true and correct and are
incorporated herein by reference.
2. Sale of Property; Purchase Price.
(a) Seller agrees to sell and convey the property to Buyer, and Buyer
agrees to purchase the Property from Seller, but strictly upon the terms and
conditions hereinafter set forth. Not later than fifteen (15) days prior to
"Closing" (as hereinafter defined), Seller will furnish to Buyer a legal
description and survey of the Property (the "Survey") certified by a surveyor
registered and licensed in the State of Florida, which Survey shall be
subject to approval of Buyer who will not unreasonably withhold its consent).
The Survey shall be certified to Seller and
<PAGE>
Buyer, and must meet or exceed the minimal technical standards of land
surveying set forth by the Florida Board of Land Surveyors pursuant to
Section 21HH-6, Florida Administrative Code. Approval or disapproval of the
Survey shall be communicated in the manner provided for notices in this
Agreement, and disapproval shall be accompanied by specification of the
grounds for disapproval. Buyer's failure to disapprove the Survey within five
(5) days after actual receipt of same shall be deemed to constitute Buyer's
approval thereof. The legal description of the Property as shown on the
approved Survey shall be legal description of the Property for all purposes
of this Agreement. The cost of the Survey shall be paid at Closing by Buyer.
(b) The purchase price for the Property shall be TWO MILLION TWO HUNDRED
THIRTY SIX THOUSAND AND 00/100 DOLLARS ($2,236,000.00) (the "Purchase
Price"). Subject to any prorations required by this Agreement, the Purchase
Price shall be paid by Buyer to Seller in cash equivalent at Closing as
provided herein.
3. Title Insurance and Survey.
(a) Simultaneously with the execution of this Agreement, Seller has
provided to Buyer a copy of the title insurance commitment for the Commercial
Tract provided to Seller by Sunbelt, together with any available copies of
exceptions to title. Buyer shall obtain an owner's marketable title insurance
commitment issued by a recognized title insurance company acceptable to
Buyer. The owner's marketable title policy premium and title search fee shall
be paid by Buyer at the Closing.
(b) If the status of title as shown in the title commitment or the survey
contains any defects to which Buyer objects, Buyer shall advise Seller in
writing, not later than ten (10) days prior to closing (except with respect
to any defects shown in any updates thereafter), of the defects to which
Buyer objects. Seller shall have a reasonable time, not to exceed thirty (30)
days, in which to cure the defects and the Closing shall be extended
accordingly. If, after the expiration of said thirty (30) day cure period,
the title defects have not been cured, then Buyer shall have the option of
(i) accepting title; or (ii) terminating this Agreement by written notice to
Seller, whereupon neither party shall have any further rights or obligations
under this Agreement. Without limiting Buyer's rights hereunder, Seller shall
eliminate at Closing any mortgages, liens or other encumbrances affecting the
Property which may be removed or satisfied by the payment of a liquidated sum
of money.
4. Inspection; Option of Buyer to Terminate.
(a) Following the execution and delivery of this Agreement by both Buyer
and Seller, Seller hereby agrees to provide Buyer with access to the
Property, so that Buyer can conduct such inquiries, tests, measurements or
other investigations as it desires or deems necessary related to the
condition of the Property or the development of the Project (as defined
below), including (without limitation) financial studies and analyses,
surveys, engineering tests, soil borings or tests for the presence of toxic
or hazardous substances, all subject to the terms and conditions of the
Sunbelt Agreement. Further, Buyer and its attorneys, agents and
representatives shall have the right to review and inspect copies of all
permits, plans, surveys, and other such materials in Seller's possession with
respect to the Property. Seller shall deliver copies of the same to Buyer
promptly after the execution hereof.
(b) Buyer shall not damage the Property or the Commercial Tract or any
improvement thereon, and shall indemnify Seller and Sunbelt for any damage
resulting from any such inquiry, test, measurement, or other investigation
for a period of one (1) year following the Closing or earlier termination
hereof. In connection with such activity, Buyer
<PAGE>
shall not permit any mechanic's lien to be filed against the Property or the
Commercial Tract and, if such a mechanic's lien is filed, Buyer shall, upon
receipt of written notice from Seller, promptly cause such lien to be
discharged or transferred to bond, provided Buyer requested the work upon
which the lien is based. Buyer shall maintain, or require that each agent of
Buyer coming on to the Property maintain, liability insurance with respect to
the activities conducted by Buyer pursuant hereto, in amounts, and with
insurers, reasonably acceptable to Seller and Sunbelt, and shall provide
evidence thereof to Seller and Sunbelt upon request.
(c) Notwithstanding the foregoing, Buyer's obligation to close under this
Agreement shall be contingent on final site plan review and the receipt of
all permits, approvals and consents necessary for the development and
construction of a minimum of ---- units of assisted/independent living (the
"Project") including, the expiration of all appeal periods without an appeal
having been filed. If such approval is not obtained on or before the Closing,
Buyer shall have the right to terminate this Agreement by giving written
notice to Seller on or before the Closing, as the same may be extended as
provided below.
5. Closing Date. The Purchase Price shall be paid to Seller, and Seller
shall deliver to Buyer the Deed and other closing papers (the "Closing"), on
a date selected by Buyer, by five (5) days prior notice to Seller, not later
than December 31, 1996, subject to extension by Buyer, by written notice to
Seller on or before the then scheduled date of Closing if the approval
provided for under Section 4(c) above has not been obtained by such date.
Notwithstanding the foregoing, Seller shall in no event be required to close
under this Agreement prior to the date on which Seller closes with Sunbelt on
the Commercial Tract, and if Sunbelt fails or refuses to close on the
Commercial Tract for any reason, Seller shall be under no obligation to
convey the Property to Buyer.
6. Deed/Closing. At Closing, Seller shall deliver to Buyer a special
warranty deed (the "Deed"), conveying good and marketable title to the
Property, subject only to: (i) taxes not yet due and payable for the year of
Closing and subsequent years; (ii) zoning and governmental regulations; (iii)
those other exceptions to title reflected in the title commitment as provided
in Section 3 hereof. The transactions contemplated by this Agreement shall be
closed at the offices of Seller or, in lieu thereof, by correspondence
through the title agent on the date as determined in Section 5 hereof. Seller
shall pay state documentary stamps on the Deed and any surcharges with
respect thereto. Buyer shall pay recording costs of the Deed. Notwithstanding
the foregoing, Seller, at its option, may assign to Buyer the right to
receive a conveyance of the Property directly from Sunbelt simultaneously
with conveyance of the balance of the Commercial Tract from Sunbelt to
Seller, and in such event Buyer agrees to (a) accept a special warranty deed
to the Property from Sunbelt in the form prescribed in the Sunbelt Agreement,
(b) execute a partial assignment and assumption agreement with Seller with
respect to the Sunbelt Agreement, which shall be in form reasonably
acceptable to Seller, Buyer, and Sunbelt, and (c) pay to Sunbelt the portion
of the purchase price for the Commercial Tract allocated by Seller to the
Property (which shall not exceed the Purchase Price), and pay to Seller, as
the price for the partial assignment of the Sunbelt Agreement to Buyer, the
difference between the Purchase Price and the amount so paid by Buyer to
Sunbelt.
7. Taxes. Real estate taxes on the Property shall be prorated between
Seller and Buyer as of the date of Closing, based on the most discounted
current year's taxes, or if unknown, based on the preceding year's taxes. At
the request of either party, taxes shall be reprorated when the actual tax
bills for the year of Closing are available. Assessments that have been
certified or as to which the work has commenced as of the date of Closing
shall be the obligation of Seller, and if the amount thereof is unknown it
shall be estimated at Closing based on available information from
governmental authorities. All maintenance charges or other pass through
expenses imposed on the Property shall be prorated in the same manner as real
estate taxes.
8. Condemnation. In the event that, between the date of this Agreement and
Closing, any condemnation or eminent domain proceedings are initiated or
threatened which result in the taking
<PAGE>
of any portion of the Property, Buyer may elect to (i) terminate this
Agreement, whereupon neither party shall have any further rights or
obligations under this Agreement; or (ii) consummate this transaction with no
reduction in the Purchase Price, in which case Seller shall deliver to Buyer
at Closing a duly executed assignment of Seller's interest in any award made
or to be made with respect to the Property in connection with such
condemnation or eminent domain proceedings.
9. Representations and Warranties. As a material inducement to Buyer to
execute this Agreement and to close the transaction contemplated hereby,
Seller hereby represents and warrants to Buyer as follows:
(a) To the best of Seller's knowledge without investigation, there is no
pending or threatened litigation, investigation or claim which materially
adversely affects, or which might materially adversely affect, the Property.
(b) To the best of Seller's knowledge without investigation, there is no
condemnation or eminent domain proceeding pending with respect to any portion
of the Property, and Seller has received no notice of any pending or
contemplated condemnation or eminent domain proceeding which could affect any
portion of the Property.
(c) To the best of Seller's knowledge without investigation, no assessment
for public improvements or otherwise has been made against the Property,
which assessment remains unpaid if due.
(d) No notice of any violation of any regulation, law, statute or
ordinance with respect to the Property has been received by Seller, nor, to
the best of Seller's knowledge without investigation, has any such notice
been received by Sunbelt.
(e) The Property is included within the concurrency exemption identified
as Case No. 02-06-002-X1.
(f) Seller is not aware that, and has not received any notice to the
effect that, any Hazardous Materials have been spilled, deposited, disposed
of, released or transported in or on the Property or any other property
adjacent or proximate thereto. Further, to the best of Seller's knowledge
without investigation, Sunbelt is not aware that, and has not received any
notice to the effect that, any Hazardous Materials have been spilled,
deposited, disposed of, released or transported in or on the Property or any
other property adjacent or proximate thereto.
10. Offer and Acceptance. Once executed and delivered by Buyer, this
Agreement shall constitute an offer to purchase the Property upon the terms
and conditions set forth herein. This offer must be accepted by Seller's
execution and delivery of this Agreement to Buyer on or before 5:00 P.M. on
June 24, 1996. If not so accepted by such time, this Agreement shall be of no
further force and effect, and neither party shall have any rights or
obligations with respect to the other.
11. Notices. All notices, requests and other communications under this
Agreement shall be in writing and sent by hand delivery, U.S. registered or
certified mail, postage prepaid and return receipt requested, or overnight
courier service addressed as follows:
<PAGE>
If intended for Seller: Dasco Development Corporation
1200 Corporate Center Way, Suite 100
Wellington, Florida 33414
Attn: Executive VP - Operations
With a copy to: Lawrence B. Juran, Esq.
1200 Corporate Center Way, Suite 100
Wellington, Florida 33414
If intended for Buyer: Carematrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Attn: Kevin Maley, Sr. Vice President
With a copy to: James M. Clary, III, Esq.
General Counsel/Executive Vice President
Carematrix Corp.
197 First Avenue
Needham, Massachusetts 02194
Notice shall be deemed received upon actual receipt if by hand delivery,
three (3) days after mailing, or one (1) day after delivery to a
nationally-recognized overnight courier service.
12. Brokers. Seller and Buyer represent and warrant to each other that
they have not dealt with any broker, finder or other intermediary in
connection with the transaction contemplated by this Agreement. Any
commission or other compensation payable to such agent shall be borne solely
by Seller. Each party hereby agrees to indemnify, save and hold harmless the
other party from and against any and all losses, damages, claims, costs and
expenses (including attorney's fees and expenses) in any way resulting from
or connected with any claims or suite for a broker's commission, finder's fee
or other like compensation, made or brought by any other person claiming to
have dealt with the first party.
13. Default. In the event that Buyer or Seller defaults under this
Agreement, the other party shall have, as its sole remedy, the right to
obtain specific performance of this Agreement.
14. Withholding. Seller acknowledges that, unless Seller certifies to
Buyer Seller's non-foreign status as provided under Section 1445 of the
United States Internal Revenue Code of 1986, as amended, Buyer will be
required at Closing to withhold and remit to the Internal Revenue Service a
portion of the Purchase Price. Any such withholding by Buyer in accordance
with law shall in no event be deemed a breach of this Agreement.
15. Assignment. This Agreement may be assigned by Buyer to any
corporation, partnership, trust or other entity in which Buyer Abraham D.
Gosman, Andrew Gosman, Michael Gosman or any shareholder of Buyer directly or
indirectly (or collectively) owns a controlling interest or, with respect to
a trust, is a trustee or any descendant thereof is a beneficiary.
16. Invalidity. In the event any provision contained herein shall for any
reason be held to be inapplicable, invalid, illegal, or unenforceable in any
respect, such inapplicability, invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and this Agreement
shall be construed as if such provision had never been contained herein.
<PAGE>
17. Entire Understanding; Waiver. This Agreement, together with the
exhibits hereto, contains the entire understanding between the parties hereto
and may not be changed or terminated orally. Any waiver by any party of any
provision of this Agreement or breach thereof shall not operate or be
construed as a waiver of any other provision or subsequent breach thereof.
18. Florida Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida without regard to principles
regarding conflicts of law.
19. Captions. The captions of the various paragraphs of this Agreement
have been inserted for the purpose of convenience only; such captions shall
not be deemed in any manner to modify, explain, enlarge or restrict any of
the provisions of this Agreement.
20. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same instrument.
22. Enforcement Costs. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any provisions of
this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorney's fees, court costs and all expenses
even if not taxable as court costs (including, without limitation, all such
fees, costs and expenses incident to appeals), incurred in that action or
proceeding, in addition to any other relief to which such party or parties
may be entitled.
23. Interpretation. The terms of this Agreement have been negotiated by
the parties, and this Agreement shall not be construed or interpreted more
strictly against one party than another on the grounds that the Agreement or
any draft thereof was prepared by a party or its counsel.
24. Relationship. Nothing contained in this Agreement shall constitute or
be construed to be or create a partnership, joint venture or any other
relationship between Seller and Buyer other than the relationship of a buyer
and seller of rights to real property as set forth in this Agreement.
25. Radon. Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
26. Time of Essence. Time is of the essence of each covenant and
obligation of each party to this Agreement.
27. Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this
Agreement occurred or shall occur in Palm Beach County, Florida. Therefore,
each of the parties irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of or relating to this Agreement shall
be brought in the courts of record of the State of Florida in Palm Beach
County; (b) consents to the jurisdiction of such court in any such suit,
action or proceeding; and (c) waives any objection which it may have to the
laying of venue of any such suit, action or proceeding in such court.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hand and seals
as of the date first written above.
WITNESS: SELLER:
DASCO DEVELOPMENT CORPORATION, a
Florida corporation
____________________ By:_________________________
____________________ Its: _________________________
WITNESS: BUYER:
CAREMATRIX CORPORATION, a
Delaware corporation
____________________ By: _________________________
____________________ Its: _________________________
Exhibits:
Exhibit "A" - Legal Description of Commercial Tract
Exhibit "B" - Legal Description of Property
MANAGEMENT AGREEMENT
(CAREMATRIX/DEDHAM, MA)
This MANAGEMENT AGREEMENT (the "Agreement") is dated as of the 25th day of
June, 1996, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business in Needham, Massachusetts
("CareMatrix"), and Continuum Care of Dedham, Inc., a Delaware corporation, with
its principal place of business in Needham, Massachusetts (the "Owner").
WHEREAS, the Owner is the owner and operator of a one hundred forty-two
(142) bed skilled nursing facility located in Dedham, Massachusetts (the
"Facility");
WHEREAS, the Owner has determined that the hiring of a management company
to provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar health care facilities, is knowledgeable as to the state
and federal requirements governing the licensure, operation, accreditation and
reimbursement of health care facilities and that the owners and employees of
Manager are qualified health care professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide high quality care to the patients
at the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services to be provided by the
Manager will augment the services provided by it and the employees of the
Facility so as to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage, supervise and
operate the Facility with the objective of providing quality care to patients of
the Facility and to carry out the general duties with respect to the Facility
under the general supervision and direction of the Owner which include, but are
not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise,
<PAGE>
monitor the performance of, and discipline, promote, terminate or fire
(subject to the rights of the Owner under Section 2.1 of this Agreement to
approve the hiring, disciplining and termination of the Administrator, and
Director of Nursing Services) all personnel involved in the administration and
day-to-day operation of the Facility, including, without limitation, management,
medical, nursing and other health care personnel, custodial, food service,
cleaning, maintenance and other operational personnel, and secretarial or
bookkeeping personnel, each of whom shall be employees of the Owner; provide
centralized accounting, billing, purchasing and bill payment functions for the
Facility; establish systems of accounts and supervise the maintenance of ledgers
and other primary accounting records by the personnel of the Facility; supervise
the financial affairs of the Facility; establish and supervise the
implementation of operating and capital budgets, including those required to
establish reimbursement rates with respect to state or federal entitlement
programs as well as self-pay rates; prepare and maintain true, complete and
accurate records necessary for the preparation of such operating budgets;
determine which items of cost and expense properly relate to patient care;
establish and administer financial controls over the operation of the Facility,
develop and establish financial standards and norms by which the income, costs
and operations of the Facility may be evaluated; serve as advisor and consultant
in connection with policy decisions to be made by the Owner; furnish reports to
the Owner as the Owner may reasonably request and provide the Owner with
economic and statistical data in connection with or relative to the operations
of the Facility; represent the Facility in its day-to-day dealings with
regulatory and rate-setting authorities (including preparation and submission of
reports for reimbursement), creditors, patients, personnel, agents for
collection, and insurers; act as agent for the Owner in disbursing or collecting
the funds of the Facility and in paying the debts and fulfilling the obligations
of the Facility; coordinate and supervise a marketing plan for the Facility to
insure that the Facility obtains full occupancy as soon as possible and, after
the Facility has achieved full occupancy, assist in the development of an annual
marketing plan and budget to maintain the patient census at a proper level; and
do all other things necessary or proper for the daily operation and management
of the Facility, including everything necessary to ensure compliance with the
rules and regulations all applicable governmental agencies, with Medicare and
Medicaid requirements applicable to nursing homes, and with any other local,
state, federal or JCAHO requirements governing or applicable to nursing
facilities. In addition, in order to plan for future operations and to establish
long range policies and goals for the Facility, the Manager will, under the
general supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Administrator to review financial and operational
statistics of the Facility. The Administrator also will attend monthly regional
administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws, subject to the responsibilities of the Owner as the
licensee of the Facility;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
2
<PAGE>
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
1.1 Opinion of Counsel. The Manager shall have the duty to consult with
counsel for the Owner whenever questions arise as to the meaning and
interpretation of the phrase "relating to patient care" as such phrase is used
above with reference to the submission of expenses for reimbursement pursuant to
applicable state or federal statutes or regulations relating to entitlement
programs. The Manager shall be entitled to rely upon any such opinion when
rendered by counsel.
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and hire, on
behalf of the Owner, a qualified and properly licensed Administrator who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all on-site medical,
nursing, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Administrator and all such other personnel shall be employees of the Owner, and
the Owner shall retain full responsibility for payment of their wages, salaries
and other compensation and benefits. The Manager shall, subject to approval by
the Owner, establish necessary and desirable personnel policies and procedures,
wage structures and staff schedules. The Manager, subject to approval by Owner,
shall have authority to hire, discipline, promote and discharge employees of the
Owner who participate in the day-to-day operation and administration of the
Facility. Both the Manager and the Owner must approve the hiring and/or firing
of the Administrator, the Executive Director and the Director of Nursing
Services, which approval shall not be unreasonably withheld or delayed. The
Manager shall: (i) maintain payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager, which policy or
procedure is substantially determined to be incorrect. The Manager shall provide
the Owner with monthly reports of all hiring, disciplinary actions, promotions
and firings at the Facility for the month.
2.2 Purchasing. The Manager shall purchase, for the account of the Owner,
all necessary foodstuffs, supplies, materials, appliances, tools and equipment
necessary for the
3
<PAGE>
operation of the Facility. The Manager shall arrange contracts on behalf of
the Owner for electricity, gas, telephone, cable television and any other
utility or service necessary for the operation of the Facility. The Manager
shall, on behalf of the Owner, contract for and supervise the making of any
necessary repairs, alterations, and improvements to the Facility; provided that
in the case of any capital expenditure, alteration or improvement, the cost of
which exceeds Three Thousand ($3,000) Dollars, the Manager shall obtain the
prior written approval of the Owner; and provided further, that no such prior
written approval shall be required if the expenditure is made under
circumstances reasonably requiring emergency action (so long as the Manager
attempts to notify the Owner on a concurrent basis). The Manager shall prepare
and submit to the Owner any certificates of purchasing expenses incurred for the
Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall prepare and submit bills and
collect for the account of the Owner any and all moneys owing to the Owner,
whether from patients or third party payors such as Medicare or Medicaid.
2.4 Bookkeeping. The Manager shall establish and maintain a record and
bookkeeping system for the operation and conduct of business of the Facility in
accordance with generally accepted accounting principles consistently applied
and in accordance with all requirements of Medicare and Medicaid or other third
party payors. Books and records at the Facility may be maintained by an employee
of the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times be open for inspection by representatives of the Owner. The Manager shall
be responsible for filing all local, state and federal tax returns relating to
the operation of the Facility, with the exception of corporate income tax and
pension returns, and shall be responsible for penalties, interest, and audit
costs arising out of late, inaccurate, or incomplete filings or the Manager's
failure to file such tax returns provided, however, that the Owner makes
available sufficient funds for payment of any taxes due).
2.5 Financial Reports. The Manager shall furnish to the Owner the following
financial reports:
(a) as soon as possible and not later than thirty (30) days after the close
of each calendar month, a balance sheet as of the end of the month and a
statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner.
(b) as soon as possible, and not later than sixty (60) days after the close
of each fiscal year, a year-end compilation report, including a balance sheet as
of the end of such year and a statement of income and retained earnings;
(c) as soon as possible after the close of the year for rate-setting
purposes and not later than the applicable deadline, a year-end cost report
showing cost and expenditures relating to
4
<PAGE>
patient care; such report shall be, in all respects, in compliance with the
requirements of Medicare, Medicaid or any other third party payor to whom the
Owner may be obligated to furnish reports and in a form suitable for submission
to the state or such third party payor;
(d) such other and further reports or calculations as may be required under
any financing terms in accordance with the deadlines set forth in any financing
agreements encumbering the Facility (any such financing agreement or agreements
are collectively referred to herein as a "Financing Agreement").
2.6 Patients. In accordance with the provisions of all applicable state and
federal statutes, as amended from time to time, the Manager shall use its best
efforts to maintain the patient census at the Facility in such numbers and in
such a manner as, in the Manager's judgment, will tend to maintain the financial
stability of the Facility and will comply with the covenants in any Financing
Agreement. The Manager shall recommend to the Owner programs for implementation
with third party payors, such as insurers, federal agencies and state and local
agencies, for care of patients with special medical, care, or rehabilitation
needs on a contract basis, all for the purpose of, in the opinion of the
Manager, improving the financial stability of the Facility; provided, however,
that any such agreement providing for any discount of the Facility's standard
rate shall require the Owner's prior written approval. However, the Manager
shall not introduce any additional function or service into the Facility's
program of health care without first obtaining the consent of the Owner and any
regulatory approvals required by law.
2.7 Budgets. The Manager shall prepare and submit for approval by the Owner
the following: (a) as soon as possible and not later than thirty (30) days
before the close of each fiscal year, or on such earlier date as may be required
under any Financing Agreement, a detailed written capital and operating budget
for the next succeeding fiscal year, broken down by month and showing projected
expenditures and projected revenues for such budget period; and (b) such other
budgets as may be reasonably required of the Owner under any Financing Agreement
or by regulatory authorities showing, inter alia, projected ordinary and
extraordinary expenditures and protected revenues for such budget period.
2.8 Certification, Licenses and Accreditation. The Manager shall prepare on
behalf of the Owner all reports and materials, and follow all procedures
necessary, to obtain and/or maintain all federal and state certificates,
licenses and accreditation necessary to maintain the Facility as a long-term
facility and nursing home.
2.9 Liaison with Agencies. To the extent desired by the Owner, the Manager
shall represent the Owner in all formal or informal proceeding before all state
and federal agencies engaged in the regulation, payment, rate-setting, and/or
licensing of long-term care facilities and nursing homes. The Owner reserves the
right to approve all settlements prior to their finalization.
2.10 Insurance. The Manager shall obtain, at the Owner's expense, on behalf
of the Owner and with the Owner's prior approval, all necessary liability, fire
and extended coverage, workers' compensation, and malpractice insurance covering
the Facility, its equipment, the employees of the Owner, and the employees of
Manager, if any, who relate to the operations of
5
<PAGE>
the Facility, which policies of insurance shall name the Owner and the
Manager as coinsured and which policies shall comply with the terms of any
Financing Agreement. The Owner shall bear the expense of the above with respect
to the Owner's employees, equipment and the Facility. The Manager shall bear the
expense of the above with respect to the Manager's employees, if any. Such
insurance shall be written by a responsible insurance company or companies
reasonably satisfactory to the Owner in kinds and amounts and a certificate of
insurance shall be provided to the Owner. The Owner shall retain the right to
designate any insurance agent or agency of its choice through which such
insurance shall be obtained.
2.11 Technical and Professional Services. The Manager may, with the prior
approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.12 Marketing. The Manager shall agree to coordinate and supervise the
agreed upon marketing plan for the Facility during the fill-up phase (the
"Marketing Plan"). Monthly statistical census analysis reports will be generated
by the Manager and delivered to the Owner. The Manager will recommend
adjustments in the Marketing Plan as needed to achieve full occupancy. For
purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its licensed beds have been occupied
for a continuous thirty (30) day period. The Manager will assist the management
staff in the continued development and coordination of advertising and
promotional materials, internal and external public relations programs, sales
and staff development programs, and customer satisfaction programs. The Manager
shall assist the Facility's management staff to develop a yearly Marketing Plan
and budget based upon the Facility's yearly census program and image.
2.13 Administrative. The Manager shall:
(i) recommend the establishment of, and implement and supervise procedures
to provide staff review of all operational areas, which status shall be reviewed
in regularly scheduled quarterly meetings and at other meetings as may be deemed
necessary or desirable by the Owner or the Administrator; and
(ii) provide on-going review and monitoring of all of the Facility's
compliance with applicable regulatory requirements for licensure reimbursement,
which status shall be reviewed in regularly scheduled quarterly meetings and at
other meetings as may be deemed necessary or desirable by the Owner.
2.14 Plant and Maintenance
(i) attention shall be given to preventive maintenance (this item may be
provided by outside parties if economically feasible) and, to the extent deemed
feasible by the Manager and the Owner, the services of regular maintenance
employees shall be used; and
6
<PAGE>
(ii) The Manager shall make recommendations to the Owner regarding entering
into contracts with qualified independent contractors for the maintenance and
repair of air conditioning systems and laundry equipment and for extraordinary
repairs beyond the capability of regular maintenance employees.
3. Management Fee.
As compensation for the services to be rendered by the Manager during the
term of this Agreement, the Manger shall pay itself, at its principal office
given below (or at such other place as the Manager may from time to time
designate in writing), and at the times hereinafter specified, a monthly
management fee (the "Management Fee") during the terms of this Agreement equal
to five (5%) percent of Net Revenues (as defined below). The Management Fee will
be paid in equal monthly installments in arrears and shall be due and payable on
or before the fifteenth (15th) day of each month following the month in which
services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less all contractual adjustments for Medicaid and Medicare thereto.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of patients directly or indirectly
connected with the Facility or the provision of all such goods and services, and
will include, without limitation, such billings to all governmental payors,
including Medicare and Medicaid, such billings to self-paying patients, and such
billings to all other third-party insurance carriers and the gross dollar amount
billed from non-patient care activity but nevertheless arising from the
operation of the Facility including, but not limited to, all revenues received
or receivable by reason of all rooms, beds and other facilities subleased or
goods sold at the Facility, including, without limitation, all revenues received
from any subletting, licensing or other arrangements with third parties relating
to the possession or use of any part of the Facility.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following expenses
incurred by it in the management of the business and properties of the Facility:
(a) Salary and expenses (including, without limitation, payroll taxes,
costs of employee benefit plans, travel, insurance, and fidelity bonds) all of
personnel employed by the Manager to carry out all responsibilities detailed
above.
(b) Salary and expenses (including, without limitation, payroll taxes, cost
of employee benefit plans, travel, insurance, and fidelity bonds) of financial
and accounting personnel employed by the Manager to maintain accounting books
and records of the Facility, except as provided below.
7
<PAGE>
4.2 Owner Expenses. Except as otherwise expressly provided herein, the
Owner shall bear all of the expenses of operating the Facility and rendering
patient care not assumed by the Manager, and without limiting the generality of
the foregoing, it is specifically agreed that the following expenses of the
Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons expressly
retained by the Owner, or retained by the Manager for the account of the Owner
with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of administrative, medical, nursing and
other health care personnel; custodial, food service, cleaning, maintenance,
operational, secretarial and bookkeeping personnel employed to administer the
day-to-day operations of the Facility and to perform health care and related
services in the day-to-day operations of the Facility's business.
(b) Interest and discounts on indebtedness incurred or assumed by the
Owner.
(c) Taxes, imposts, levies or other charges on the existence, operation,
receipts, income or property of the Owner, provided, however, that all interest
and penalties incurred as a result of the Manager's failure to timely file all
returns which the Manager is required to file pursuant to this Agreement, or to
make timely payment of all taxes, levies, imposts, or other charges, to the
extent that sufficient funds were available to the Manager as of the date such
payments were due, shall be the responsibility of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen and food service
equipment, linens, beds, furniture, clothing and all other supplies and
equipment used in supplying nursing home care and services to patients.
(e) Expenses connected directly or indirectly with the design, acquisition,
disposition or ownership of real and personal property devoted, used, or
consumed in the business of the Facility, including, without limitation,
purchase and/or construction of the land and buildings used for such purpose,
maintenance, repair and improvement of property, all real estate and personal
property taxes assessed, premiums for property and liability insurance on
property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the acquisition, sale,
mortgaging or leasing of property, litigation and proceedings relating to rates
and charges at the Facility, any other litigation or proceedings to which the
Owner is a party. However, such fees shall not include those fees resulting from
or arising out of negligence by the Manager.
In the event that there are insufficient funds available to the Manager to
pay expenses which the Manager is authorized to incur and pay hereunder,
including, without limitation, any taxes to be
8
<PAGE>
paid on behalf of the Owner by the Manager, the Manager shall promptly
notify the Owner of the amount necessary to cure and the reason for such
deficit.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall rate structure
of the Facility and shall supervise the issuance of bills and the collection of
accounts as the true and lawful attorney-in-fact for the Owner. The Manager
shall take possession of and endorse the name of the Owner on all notes, checks,
money orders, insurance payments, and any other instruments received in payment
of accounts described below.
(ii) The Manager shall establish such accounts for the Facility in the
Manager's name, separate from all other accounts and funds of the Manager, with
a bank or banks whose deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") or with a savings and loan institution or institutions
whose deposits are insured by the Federal Savings and Loan Insurance Corporation
("FSLIC") as it deems necessary or desirable. The Manager, on behalf of the
Owner, shall use reasonable efforts to collect (using legal counsel approved by
the Owner, if necessary) all sums due and owing to the Owner in connection with
the operation of the Facility, whether from patients, third party payors or
others. The Manager and the Owner shall deposit into such accounts all monies
furnished by the Owner as working funds and all receipts and monies arising form
the operation of the Facility or otherwise received by the Owner or by the
Manager for or on behalf of the Owner.
(iii) Draws on such accounts may be made by the sole signature of an
authorized representative of the Manager (or by wiring instructions from such
authorized representative of the Manager) and shall be paid to the Manager to
reimburse the Manager for payments made pursuant to this Agreement by the
Manager from its own accounts. The Owner hereby appoints the Manager, for the
term of this Agreement, as the Owner's true and lawful attorney-in-fact to
withdraw, by writing checks against such accounts, funds for reimbursement of
all amounts payable pursuant to this Agreement in connection with the operation
of the Facility. The Owner agrees to execute from time to time any additional
documents required by any bank wherein such documents are held to effectuate all
powers of attorney referred to herein. The Manager shall make disbursements and
payments from such accounts, on behalf and in the name of the Owner, in such
amounts and at such times as are deemed by the Manager to be appropriate or
required in connection with, first, payments required by any Financing
Agreement, and second, payments of ownership, maintenance and operating expenses
of the Facility and the other costs, expenses and expenditures provided for in
this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners
9
<PAGE>
or joint venturers or impose on any of them any liability as partners or
joint venturers. All dealings between the Owner and the Manager are at arms
length as between non-related parties.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue for an initial term
of ten (10) years commencing on July 1, 1996 (the "Commencement Date"), and
ending on June 30, 2001. Thereafter, this Agreement shall be renewed
automatically for three (3) additional five (5) year terms unless the Owner
sends the Manager written notice no less than ninety (90) days prior to the then
applicable Expiration Date that it does not wish to have the Agreement renew
beyond the then applicable Expiration Date. As used herein the term "Expiration
Date" shall mean the later of June 30, 2001, or the date to which this Agreement
has been extended as provided in this Section 7.1.
7.2 Termination for Cause. Either party may terminate this Agreement for
"cause" by delivering thirty (30) days written notice to the other. "Cause"
shall include, but not be limited to, each of the following:
(i) the violation by either party of any material provision in, or
obligation imposed by, this Agreement which violation shall not have been cured
to the reasonable satisfaction of the other party within thirty (30) days
following the date on which written notice of termination has been received by
the party who has violated a material provision or obligation imposed by this
Agreement;
(ii) any illegal or improper act engaged in by either party in the
operation of the Facility;
(iii) if either party files or has a petition or complaint in receivership
or bankruptcy filed against it which has not been dismissed within ninety (90)
days of such filing; or
(iv) if the Owner is required, pursuant to the terms and conditions of any
Financing Agreement, to retain new management for the Facility.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In addition to
the provisions of Section 7.2 above, the Manager may terminate this Agreement
upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within thirty
(30) days after receiving written notice from the Manager.
7.4 Termination Arising from Unresolved Dispute. In the event that a
dispute arises between the parties regarding the interpretation of a material
provision of this Agreement or the performance by one of the parties of an
obligation hereunder, and the parties are unable to reach a mutual agreement
regarding the dispute within thirty (30) days of written notice of an unresolved
dispute given by one of the parties to the other, which notice shall describe
the nature of the dispute, any party may elect to terminate this Agreement by
giving one hundred twenty (120) days written notice to the other of its intent
to terminate. Unless the parties reach mutual
10
<PAGE>
agreement regarding the matter in dispute within such one hundred twenty
(120) day period, this Agreement shall terminate on midnight of the one hundred
twentieth (120th) day following the other parties receipt of notice of
termination and all obligations due and owing hereunder shall forever cease,
except to the extent that a right or obligation has accrued prior to the
termination date. The right of a party to terminate this Agreement pursuant to
this section shall be in addition to, and not to the exclusion of, any other
remedies, whether at law or in equity, of the parties hereunder.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to submit proper reports to the
appropriate regulatory agencies, to keep true, accurate and complete records or
to obtain any necessary opinion of counsel as required by Section 1.1 of this
Agreement. The Manager shall indemnify the Owner and hold it harmless of, from
and against all Costs incurred or suffered by the Owner as a result of any of
the Manager's fraud, willful misconduct, or negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies, to keep true, accurate and complete records or to obtain any necessary
opinion of counsel as required by Section 1.1 of this Agreement.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v)(l)(i) of the Social Security Act (the "Act"), the Manager shall,
upon written request and in accordance with the above-mentioned section of the
Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provision of this Section 9 shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to be
covered by the Owner.
11. Amendments. This Agreement shall not be changed, modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the
11
<PAGE>
Manager, their respective successors or assigns, or otherwise as provided
herein. The Manager agrees to make any reasonable modifications to the Agreement
as may be required by the holder of any Financing Agreement. Such modifications
shall be in writing and signed by the Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
13. Assignment. Neither the Owner nor the Manager will assign its interests
in this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld, delayed or conditioned.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Owner: Continuum Care of Dedham, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: President
cc: CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esquire
12
<PAGE>
Any party shall have the right to change the place to which such Notice
shall be sent or delivered by similar notice sent in like manner to all other
parties hereto. All notices sent by certified mail shall be deemed received
three (3) days after the date postmarked. All notices that are hand delivered
shall be deemed received upon delivery to the office or address of the
addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for the Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, and financial accounting packages are and will remain the property of the
Manager. Upon termination of this Agreement, the Owner shall have the option to
purchase operational material belonging to the Manager, except for the financial
accounting packages, at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
19. Delivery of Management Services. Notwithstanding anything contained in
this Agreement to the contrary, with the prior written consent of the Owner
(which consent shall not be unreasonably withheld, delayed or conditioned) the
Manager shall have the right to engage another management company which provides
management services to similar skilled nursing facilities to perform all or a
portion of the Manager's duties and obligations under this Agreement. The Owner
acknowledges and agrees that Vanguard Health Services, Inc. would be an
acceptable management company to provide all or a portion of the services to be
provided by the Manager under this Agreement.
20. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement containing mutually agreeable terms and conditions
(the "Lease"), which shall include, without limitation, a ten (10) year initial
term (with three (3) 5-year renewal terms) and rental payments equal to the fair
market value as determined immediately prior to the initial term of the Lease
and immediately prior to any renewal terms.
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF
MASSACHUSETTS, INC.
/s/ Elizabeth Derrico By: /s/ J M Clary
- ---------------------------- -------------------------------------
Name: Name:
Title:
WITNESS: CONTINUUM CARE OF
DEDHAM, INC.
/s/ Elizabeth Derrico By: /s/ J M Clary
- ---------------------------- -------------------------------------
Name: Name:
Title:
14
MANAGEMENT AGREEMENT
(CAREMATRIX/NEEDHAM, MA)
This MANAGEMENT AGREEMENT (the "Agreement") is dated as of the day of
June, 1996, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business in Needham, Massachusetts
("CareMatrix"), and Continuum Care of Needham, Inc., a Delaware corporation,
with its principal place of business in Needham, Massachusetts (the "Owner").
WHEREAS, the Owner is the owner and operator of a one hundred forty-two
(142) bed skilled nursing facility located in Needham, Massachusetts (the
"Facility");
WHEREAS, the Owner has determined that the hiring of a management company
to provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar health care facilities, is knowledgeable as to the state
and federal requirements governing the licensure, operation, accreditation and
reimbursement of health care facilities and that the owners and employees of
Manager are qualified health care professionals;
WHEREAS, based upon the Manager's representatives set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide high quality care to the patients
at the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services to be provided by the
Manager will augment the services provided by it and the employees of the
Facility so as to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage, supervise and
operate the Facility with the objective of providing quality care to patients of
the Facility and to carry out the general duties with respect to the Facility
under the general supervision and direction of the Owner which include, but are
not limited to, the following:
<PAGE>
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise monitor the performance of,
and discipline, promote, terminate or fire (subject to the rights of the Owner
under Section 2.1 of this Agreement to approve the hiring, disciplining and
determination of the Administrator, and Director of Nursing Services) all
personnel involved in the administration and day-to-day operation of the
Facility, including, without limitation, management, medical, nursing and other
health care personnel, custodial, food service, cleaning, maintenance and other
operational personnel, and secretarial or bookkeeping personnel, each of whom
shall be employees of the Owner; provided centralized accounting, billing,
purchasing and bill payment functions for the Facility; establish systems of
accounts and supervise the maintenance of ledgers and other primary accounting
records by the personnel of the Facility; supervise the financial affairs of the
Facility; establish and supervise the implementation of operating and capital
budgets, including those required to establish reimbursement rates with respect
to state or federal entitlement programs as well as self-pay rates; prepare and
maintain true, complete and accurate records necessary for the preparation of
such operating budgets; determine which items of cost and expense properly
relate to patient care; establish and administer financial controls over the
operation of the Facility, develop and establish financial standards and norms
by which the income, costs and operations of the Facility may be evaluated;
serve as advisor and consultant in connection with policy decisions to be made
by the Owner; furnish reports to the Owner as the Owner may reasonably request
and provide the Owner with economic and statistical data in connection with or
relative to the operations of the Facility; represent the Facility in its
day-to-day dealings with regulatory and rate-setting authorities (including
preparation and submission of reports for reimbursement), creditors, patients,
personnel, agents for collection, and insurers; act as agent for the Owner in
disbursing or collecting the funds of the Facility and in paying the debts and
fulfilling the obligations of the Facility; coordinate and supervise a marketing
plan for the Facility to insure that the Facility obtains full occupancy as soon
as possible and, after the Facility has achieved full occupancy, assist in the
development of an annual marketing plan and budget to maintain the patient
census at a proper level; and to all other things necessary or proper for the
daily operation and management of the Facility, including everything necessary
to ensure compliance with the rules and regulations all applicable governmental
agencies, with Medicare and Medicaid requirements applicable to nursing homes,
and with any other local, state, federal or JCAHO requirements governing or
applicable to nursing facilities. In addition, in order to plan for future
operations and to establish long range policies and goals for the Facility, the
Manager will, under the general supervision of the Owner, meet on at least a
monthly basis with Owner's representatives and the Administrator to review
financial and operational statistics of the Facility. The Administrator also
will attend monthly regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws, subject to the responsibilities of the Owner as the
licensee of the Facility;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the
2
<PAGE>
Facility, the location of the Facility, the restrictions of applicable laws,
and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
1.1 Opinion of Counsel. The Manager shall have the duty to consult with
counsel for the Owner whenever questions arise as to the meaning and
interpretation of the phrase "relating to patient care" as such phrase is used
above with reference to the submission of expenses for reimbursement pursuant to
applicable state or federal statutes or regulations relating to entitlement
programs. The Manager shall be entitled to rely upon any such opinion when
rendered by counsel.
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and hire,
on behalf of the Owner, a qualified and properly licensed Administrator who
shall be responsible for the functional operation of the Facility and
supervision of personnel at the Facility on a day-to-day basis, as well as
all on-site medical, nursing, custodial, food service, cleaning,
maintenance, secretarial and bookkeeping personnel for the day-to-day
operations of the Facility. The Administrator and all such other personnel
shall be employees of the Owner, and the Owner shall retain full
responsibility for payment of their wages, salaries and other compensation
and benefits. The Manager shall, subject to approval by the Owner,
establish necessary and desirable personnel policies and procedures, wage
structures and staff schedules. The Manager, subject to approval by Owner,
shall have authority to hire, discipline, promote and discharge employees
of the Owner who participate in the day-to-day operation and administration
of the Facility. Both the Manager and the Owner must approve the hiring
and/or firing of the Administrator, the Executive Director and the Director
of Nursing Services, which approval shall not be unreasonably withheld or
delayed. The Manager shall: (i) maintain payroll records and prepare weekly
and monthly payrolls, withholding taxes and Social Security taxes; (ii)
prepare and submit all required state and federal tax or benefit returns
required with respect to employees, including, without limitation, the
returns required by FICA, FUTA and all applicable unemployment compensation
laws; (iii) maintain in force all required levels of workers' compensation
insurance; and (iv) prepare and submit to the Owner any certificates of
payroll expenses as may be reasonably requested. The Manager shall not be
liable to any employee of the Facility for wages, salaries and other
compensation and benefits, or to the Owner, unless the Manager was
specifically required to obtain the approval of the Owner before committing
to a salary or benefit and such approval was not obtained. The Manager
shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee
was acting under the express direction of the Manager or unless such
employee was following an express policy or procedure of the Manager, which
policy or procedure is subsequently determined to be incorrect. The Manager
shall provide the Owner with monthly reports of all hiring, disciplinary
actions, promotions and firings at the Facility for the month.
3
<PAGE>
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall
arrange contacts on behalf of the Owner for electricity, gas, telephone,
cable television and any other utility or service necessary for the
operation of the Facility. The Manager shall, on behalf of the Owner,
contract for and supervise the making of any necessary repairs,
alterations, and improvements to the Facility; provided that in the case of
any capital expenditure, alteration or improvement, the cost of which
exceeds Three Thousand ($3,000) Dollars, the Manager shall obtain the prior
written approval of the Owner; and provided further, that no such prior
written approval shall be required if the expenditure is made under
circumstances reasonably requiring emergency action (so long as the Manager
attempts to notify the Owner on a concurrent basis). The Manager shall
prepare and submit to the Owner any certificates of purchasing expenses
incurred for the Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall prepare and submit bills
and collect for the account of the Owner any and all moneys owing to the
Owner, whether from patients or third party payors such as Medicare or
Medicaid.
2.4 Bookkeeping. The Manager shall establish and maintain a record and
bookkeeping system for the operation and conduct of business of the
Facility in accordance with generally accepted accounting principles
consistently applied and in accordance with all requirements of Medicare
and Medicaid or other third party payors. Books and records at the Facility
may be maintained by an employee of the Owner under the supervision of the
Manager. Full books of account with entries of all receipts and
expenditures related to the operation of the Facility shall be maintained
at the offices of the Manager and shall at all times be open for inspection
by representatives of the Owner. The Manager shall be responsible for
filing all local, state and federal tax returns relating to the operation
of the Facility, with the exception of corporate income tax and pension
returns, and shall be responsible for penalties, interest, and audit costs
arising out of late, inaccurate, or incomplete filings or the Manager's
failure to file such tax returns provided, however, that the Owner makes
available sufficient funds for payment of any taxes due).
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after the
close of each calendar month, a balance sheet as of the end of the month
and a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed
statement of receipts, disbursements, accounts payable and accounts
receivable as of the end of such monthly period; provided, however, that
the computer services charges connected with the preparation of such
information shall not be an expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after the
close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and
retained earnings;
4
<PAGE>
(c) as soon as possible after the close of the year for rate-setting
purposes and not later than the applicable deadline, a year-end cost report
showing cost and expenditures relating to patient care; such report shall
be, in all respects, in compliance with the requirements of Medicare,
Medicaid or any other third party payor to whom the Owner may be obligated
to furnish reports and in a form suitable for submission to the state of
such third party payor;
(d) such other and further reports or calculations as may be required
under any financing terms in accordance with the deadlines set forth in any
financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing
Agreement").
2.6 Patients. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall
use its best efforts to maintain the patient census at the Facility in such
numbers and in such a manner as, in the Manager's judgment, will tend to
maintain the financial stability of the Facility and will comply with the
covenants in any Financing Agreement. The Manager shall recommend to the
Owner programs for implementation with third party payors, such as
insurers, federal agencies and state and local agencies, for care of
patients with special medical, care, or rehabilitation needs on a contract
basis, all for the purposes of, in the opinion of the Manager, improving
the financial stability of the Facility; provided, however, that any such
agreement providing for any discount of the Facility's standard rate shall
require the Owner's prior written approval. However, the Manager shall not
introduce any additional function or service into the Facility's program of
health care without first obtaining the consent of the Owner and any
regulatory required by law.
2.7 Budgets. The Manager shall prepare and submit for approval by the
Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may
be required under any Financing Agreement, a detailed written capital and
operating budget for the next succeeding fiscal year, broken down by month
and showing projected expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required of the
Owner under any Financing Agreement or by regulatory authorities showing,
inter alia, project ordinary and extraordinary expenditures and protected
revenues for such budget period.
2.8 Certification, Licenses and Accreditation. The Manager shall
prepare on behalf of the Owner all reports and materials, and follow all
procedures necessary, to obtain and/or maintain all federal and state
certificates, licenses and accreditation necessary to maintain the Facility
as a long-term facility and nursing home.
2.9 Liaison with Agencies. To the extent desired by the Owner, the
Manager shall represent the Owner in all formal or informal proceedings
before all state and federal agencies engaged in the regulation, payment,
rate-setting, and/or licensing of long-term care facilities and nursing
homes. The Owner reserves the right to approve all settlements prior to
their finalization.
2.10 Insurance. The Manager shall obtain, at the Owner's expense, on
behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage,
5
<PAGE>
workers' compensation, and malpractice insurance covering the Facility, its
equipment, the employees of the Owner, and the employees of Manager, if
any, who relate to the operations of the Facility, which policies shall
comply with the terms of any Financing Agreement. The Owner shall bear the
expense of the above with respect to the Owner's employees, equipment and
Facility. The Manager shall bear the expense of the above with respect to
the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the
Owner in kinds and amounts and a certificate of insurance shall be provided
to the Owner. The Owner shall retain the right to designate any insurance
agent or agency of its choice through which such insurance shall be
obtained.
2.11 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such
engineering, legal, and other specialized technical and professional
services as may be necessary to advise or represent the Owner in connection
with any matter involving or arising out of the ownership and operation of
the Facility or the conduct of affairs of the Facility.
2.12 Marketing. The Manager shall agree to coordinate and supervise
the agreed upon marketing plan for the Facility during the fill-up phase
(the "Marketing Plan"). Monthly statistical census analysis reports will be
generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full
occupancy. For purposes of this Agreement, the Facility will be considered
to have achieved full occupancy when ninety percent (90%) of its licensed
beds have been occupied for a continuous thirty (30) day period. The
Manager will assist the management staff if the continued development and
coordination of advertising and promotional materials, internal and
external public relations programs, sales and staff development programs,
and customer satisfaction programs. The Manager shall assist the Facility's
management staff to develop a yearly Marketing Plan and budget based upon
the Facility's yearly census program and image.
2.13 Administrative. The Manager shall:
(i) recommend the establishment of, and implement and supervise
procedures to provide staff review of all operational areas, which status
shall be reviewed in regularly scheduled quarterly meetings and at other
meetings as may be deemed necessary or desirable by the Owner or the
Administrator; and
(ii) provide on-going review and monitoring of all of the Facility's
compliance with applicable regulatory requirements for licensure
reimbursement, which status shall be reviewed in regularly quarterly
meetings and at other meetings as may be deemed necessary or desirable by
the Owner.
6
<PAGE>
2.14 Plant and Maintenance.
(i) attention shall be given to preventive maintenance (this item may
be provided by outside parties if economically feasible) and, to the extent
deemed feasible by the Manager and the Owner, the services of regular
maintenance employees shall be used; and
(ii) The Manager shall make recommendations to the Owner regarding
entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment
and for extraordinary repairs beyond the capability of regular maintenance
employees.
3. Management Fee
As compensation for the services to be rendered by the Manager during the
term of this Agreement, the Manager shall pay itself, at its principal office
given below (or at such other place as the Manager may from time to time
designate in writing), and at the times hereinafter specified, a monthly
management fee (the "Management Fee") during the terms of this Agreement equal
to five (5%) percent of Net Revenues (as defined below). The Management Fee will
be paid in equal monthly installments in arrears and shall be due and payable on
or before the fifteenth (15th) day of each month following the month in which
services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less all contractual adjustments for Medicaid and Medicare thereto.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of patients directly or indirectly
connected with the Facility or the provision of all such goods and services, and
will include, without limitation, such billings to all governmental payors,
including Medicare and Medicaid, such billings to self-paying patients, and such
billings to all other third-party insurance carriers and the gross dollar amount
billed from non-patient care activity but nevertheless arising from the
operation of the Facility including, but not limited to, all revenues received
or receivable by reason of all rooms, beds and other facilities subleased or
goods sold at the Facility, including, without limitation, all revenues received
from any subletting, licensing or other arrangements with third parties relating
to the possession or use of any part of the Facility.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following expenses
incurred by it in the management of the business and properties of the
Facility:
7
<PAGE>
(a) Salary and expenses (including, without limitation, payroll taxes,
costs of employee benefit plans, travel, insurance, and fidelity bonds) all
of personnel employed by the Manager to carry out all responsibilities
detailed above.
(b) Salary and expenses (including, without limitation, payroll taxes,
cost of employee benefit plans, travel, insurance, and fidelity bonds) of
financial and accounting personnel employed by the Manager to maintain
accounting books and records of the Facility, except as provided below.
4.2 Owner Expenses. Except as otherwise expressly provided herein, the
Owner shall bear all of the expenses of operating the Facility and rendering
patient care not assumed by the Manager, and without limiting the generality of
the foregoing, it is specifically agreed that the following expenses of the
Facility shall not be borne by the Manager.
(a) Fees and expenses of independent professional persons expressly
retained by the Owner, or retained by the Manager for the account of the
Owner with the prior permission of the Owner, for any purpose, salary,
other compensation or benefits and expenses of administrative, medical,
nursing and other health care personnel; custodial, food service, cleaning,
maintenance, operational, secretarial and bookkeeping personnel employed to
administer the day-to-day operations of the Facility and to perform health
care and related services in the day-to-day operations of the Facility's
business.
(b) Interest and discounts on indebtedness incurred or assumed by the
Owner.
(c) Taxes, imposts, levies or other charges on the existence,
operation, receipts, income or property of the Owner, provided, however,
that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were
available to the Manager as of the date such payments were due, shall be
the responsibility of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen and food
service equipment, linens, beds, furniture, clothing and all other supplies
and equipment used in supplying nursing home care and services to patients.
(e) Expenses connected directly or indirectly with the design,
acquisition, disposition or ownership of real and personal property
devoted, used or consumed in the business of the Facility, including,
without limitation, purchase and/or construction of the land and buildings
used for such purpose, maintenance, repair and improvement of property, all
real estate and personal property taxes assessed, premiums for property and
liability insurance on property owned by the Owner, brokerage commissions,
and fees and expenses of consultants, managers, or agents retained directly
by the Owner.
(f) The Management Fee.
8
<PAGE>
(g) Legal fees and related expenses pertaining to the acquisition,
sale, mortgaging or leasing of property, litigation and proceedings
relating to rates and charges at the Facility, any other litigation or
proceedings to which the Owner is a party. However, such fees shall not
include those fees resulting from or arising out of negligence by the
Manager.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be paid on behalf of the Owner by the Manager,
the Manager shall promptly notify the Owner of the amount necessary to cure and
the reason for such deficit.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall rate
structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the
Owner. The Manager shall take possession of and endorse the name of the
Owner on all notes, checks, money orders, insurance payments, and any other
instruments received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the Facility in the
Manager's name, separate from all other accounts and funds of the Manager,
with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The
Manager, on behalf of the Owner, shall use reasonable efforts to collect
(using legal counsel approved by the Owner, if necessary) all sums due and
owing to the Owner in connection with the operation of the Facility,
whether from patients, third party payors or others. The Manager and the
Owner shall deposit into such accounts all monies furnished by the Owner as
working funds and all receipts and monies arising from the operations of
the Facility or otherwise received by the Owner or by the Manager for or on
behalf of the Owner.
(iii) Draws on such accounts may be made by the sole signature of an
authorized representative of the Manager (or by wiring instructions from
such authorized representative of the Manager) and shall be paid to the
Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints
the Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts,
funds for reimbursement of all amounts payable pursuant to this Agreement
in connection with the operation of the Facility. The Owner agrees to
execute from time to time any additional documents required by any bank
wherein such documents are held to effectuate all powers of attorney
referred to herein. The Manager shall make disbursements and payments from
such accounts, on behalf and in the name of the Owner, in such amounts and
at such times as are deemed by the Manager to be appropriate or required in
connection with, first, payments required by any Financing Agreement, and
second, payments of ownership, maintenance and operating expenses of the
Facility and the other costs, expenses and expenditures provided for in
this Agreement including the Management Fee.
9
<PAGE>
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers. All dealings between the
Owner and the Manager are at arms length as between non-related parties.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue for an initial
term of twenty (20) years commencing on July 1, 1996 (the "Commencement
Date"), and ending on June 30, 2016. Thereafter, this Agreement shall be
renewed automatically for three (3) additional five (5) year terms unless
the Owner sends the Manager written notice no less than ninety (90) days
prior to the then applicable Expiration Date that it does not wish to have
the Agreement renew beyond the then applicable Expiration Date. As used
herein the term "Expiration Date" shall mean the later of June 30, 2001, or
the date to which this Agreement has been extended as provided in this
Section 7.1.
7.2 Termination for Cause. Either party may terminate this Agreement for
"cause" by delivering thirty (30) days written notice to the other. "Cause"
shall include, but not be limited to, each of the following:
(i) the violation by either party of any material provision in, or
obligation imposed by, this Agreement which violation shall not have been
cured to the reasonable satisfaction of the other party within thirty (30)
days following the date on which written notice of termination has been
received by the party who has violated a material provision or obligation
imposed by this Agreement;
(ii) any illegal or improper act engaged in by either party in the
operation of the Facility;
(iii) if either party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed
within ninety (90) days of such filing; or
(iv) if the Owner is required, pursuant to the terms and conditions of
any Financing Agreement, to retain new management for the Facility.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In addition to
the provisions of Section 7.2 above, the Manager may terminate this Agreement
upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within thirty
(30) days after receiving written notice from the Manager.
10
<PAGE>
7.4 Termination Arising from Unresolved Dispute. In the event that a
dispute arises between the parties regarding the interpretation of a material
provision of this Agreement or the performance by one of the parties of an
obligation hereunder, and the parties are unable to reach a mutual agreement
regarding the dispute within thirty (30) days written notice of any unresolved
dispute given by one of the parties to the other, which notice shall describe
the nature of the dispute, any party may elect to terminate this Agreement by
giving one hundred twenty (120) days written notice to the other of its intent
to terminate. Unless the parties reach mutual agreement regarding the matter in
dispute within such one hundred twenty (120) day period, this Agreement shall
terminate on midnight of the one hundred twentieth (120th) day following the
other parties receipt of notice of termination and all obligations due and owing
hereunder shall forever cease, except to the extent that a right or obligation
has accrued prior to the termination date. The right of a party to terminate
this Agreement pursuant to this section shall be in addition to, and not to the
exclusion of, any other remedies, whether at law or in equity, of the parties
hereunder.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to submit proper reports to the
appropriate regulatory agencies, to keep true, accurate and complete records or
to obtain any necessary opinion of counsel as required by Section 1.1 of this
Agreement. The Manager shall indemnify the Owner and hold it harmless of, from
and against all Costs incurred or suffered by the Owner as a result of any of
the Manager's fraud, willful misconduct, or negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies, to keep true, accurate and complete records or to obtain any necessary
opinion of counsel as required by Section 1.1 of this Agreement.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v)(1)(i) of the Social Security Act (the "Act"), the Manager shall,
upon written request and in accordance with the above-mentioned section of the
Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provision of this Section 9 shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
11
<PAGE>
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to or
covered by the Owner.
11. Amendments. This Agreement shall not be changed, modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. The Manager agrees to make any reasonable modifications to
the Agreement as may be required by the holder of any Financing Agreement. Such
modifications shall be in writing and signed by the Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
13. Assignment. Neither the Owner nor the Manager will assign its interests
in this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld, delayed or conditioned.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Owner: Continuum Care of Needham, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
12
<PAGE>
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: President
cc: CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esquire
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail shall be deemed received three (3)
days after the date postmarked. All notices that are hand delivered shall be
deemed received upon delivery to the office or address of the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for the Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, and financial accounting packages are and will remain the property of the
Manager. Upon termination of this Agreement, the Owner shall have the option to
purchase operational material belonging to the Manager, except for the financial
accounting packages, at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
19. Delivery of Management Services. Notwithstanding anything contained in
this Agreement to the contrary, with the prior written consent of the Owner
(which consent shall not be unreasonably withheld, delayed or conditioned) the
Manager shall have the right to engage another management company which provides
management services to similar skilled nursing facilities to perform all or a
portion of the Manager's duties and obligations under this Agreement. The Owner
acknowledges and agrees that Vanguard Health Services, Inc. would be an
acceptable management company to provide all or a portion of the services to be
provided by the Manager under this Agreement.
20. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election.
13
<PAGE>
Within thirty (30) days after the receipt of the Manager's notice to lease, the
parties shall enter into a lease agreement containing mutually agreeable terms
and conditions (the "Lease"), which shall include, without limitation, a ten
(10) year initial term (with three (3) 5-year renewal terms) and rental payments
equal to the fair market value as determined immediately prior to the initial
term of the Lease and immediately prior to any renewal terms.
21. Additional Consideration to Owner. In consideration for the Owner
entering into this Agreement, the Manager shall pay to the Owner Two Million
Eight Hundred Thousand ($2,800,0000) Dollars in cash simultaneously with the
execution and delivery of this Agreement by the parties.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
/s/ /s/ James M. Clary
________________________________ By: ______________________________
Name: Name:
Title:
WITNESS: CONTINUUM CARE OF NEEDHAM, INC.
/s/ /s/ James M. Clary
________________________________ By: ______________________________
Name: Name:
Title:
14
ASSIGNMENT AGREEMENT
(West Bridgewater, Massachusetts)
THIS ASSIGNMENT AGREEMENT (the "Agreement") is entered into as of the ___
day of June, 1996, by and between Continuum Care of Massachusetts, Inc.
("Assignor") and CareMatrix of Massachusetts. Inc. ("Assignee").
WITNESSETH:
WHEREAS, pursuant to that certain Assignment and Assumption Agreement of
even date by and between Continuum Care of West Bridgewater and Assignor.
Continuum Care of West Bridgewater assigned all of its right, title and interest
under a certain Turnkey Construction Contract dated as of April 20, 1995 for the
construction of a one hundred forty-two (142) bed (which may be increased to one
hundred fifty (150) beds) long term care facility to be located on West Center
Street in West Bridgewater, Massachusetts (the "Turnkey Construction
Agreement"), a copy of which is attached hereto as Exhibit A.
WHEREAS, Assignor desires to assign its rights and obligations under the
Turnkey Construction Agreement to Assignee and Assignee desires to assume such
rights and obligations.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants, bargains, sells, assigns and transfers to
Assignee all of Assignor's right, title and interest in, and all contractual and
other rights under the Turnkey Construction Agreement.
2. Assignee hereby accepts this assignment and hereby agrees to assume all
of Assignor's rights, title, interest, duties and obligations under the Turnkey
Construction Agreement.
3. This Agreement may be executed by facsimile and in counterparts, each of
which shall constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ASSIGNOR:
CONTINUUM CARE OF
MASSACHUSETTS. INC.
By: /s/ James M. Clary
---------------------------------
Name: James M. Clary
Title:
ASSIGNEE
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
---------------------------------
Name: James M. Clary
Title:
<PAGE>
TURNKEY CONSTRUCTION CONTRACT
Between
CONTINUUM CARE OF WEST BRIDGEWATER, INC.
AND
WEST BRIDGEWATER MEDICAL INVESTORS LIMITED PARTNERSHIP
<PAGE>
Table of Contents
For
Turnkey Construction Contract
Between
CONTINUUM CARE OF WEST BRIDGEWATER, INC.
AND
WEST BRIDGEWATER MEDICAL INVESTORS LIMITED PARTNERSHIP
ARTICLE I - Status of Facility
Section 1.1 - Title to Premises
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Representations of Contractor
Section 1.6 - Representations of Owner
Section 1.7 - Other Agreements
Section 1.8 - Opinions of Counsel
ARTICLE II - Construction of the Facility
Section 2.1 - Architect
Section 2.2 - Other Professionals
Section 2.3 - Failure to Approve Final Plans
Section 2.4 - Construction
Section 2.5 - Personal Property
Section 2.6 - Changes
Section 2.7 - Commencement of Construction
Section 2.8 - Continuity of Construction
Section 2.9 - Completion of Construction
Section 2.10 - Punch-List
Section 2.11 - Work and Warranties
Section 2.12 - Subcontractors
Section 2.13 - Right of Owner to Cure
Section 2.14 - Termination by Owner
ARTICLE III - Financing
Section 3.1 - Construction/Permanent Financing
Section 3.2 - Price Increase Loan
ARTICLE IV - Closing
Section 4.1 - Date of Closing
Section 4.2 - Contract Price
Section 4.3 - Payment of Contract Price
Section 4.4 - Documents to be delivered by Contractor at
Closing
Section 4.5 - Documents to be delivered by Owner at Closing
-i-
<PAGE>
ARTICLE V - Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities
Section 5.2 - Owner's Responsibilities
Section 5.3 - Indemnification
ARTICLE VI Contingencies
Section 6.1 - Required Occurrences
Section 6.2 - Failure of Contingencies
Section 6.3 - Default
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - No Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10 - Successors
Section 7.11 - Counterparts
Section 7.12 - Severability
Section 7.13 - Effective Date
Section 7.14 - No Offer
Section 7.15 - Governing Law
Section 7.16 - Survival
Section 7.17 - Compliance with Loan Documents
EXHIBITS LIST
Exhibit "A" - Description of Premises
Exhibit "B" - Survey
Exhibit "C" - Title Commitment
Exhibit "D" - Determination of Need and DPH Plan Approval
Exhibit "E" - Final Plans
Exhibit "F" - Group III Items
Exhibit "G" - FFE
Exhibit "H" - Form of Assignment of Lender Deposit Pledge
Exhibit "I" - MCE Line Items
Exhibit "J" - Contractor-Indemnification
-ii-
<PAGE>
TURNKEY CONSTRUCTION CONTRACT
This Turnkey Construction Contract ("Agreement") is between CONTINUUM CARE
OF WEST BRIDGEWATER INC., a [Delaware] corporation (the "Contractor") with an
office at 197 First Avenue, Needham, Massachusetts 02194 and WEST BRIDGEWATER
MEDICAL INVESTORS LIMITED PARTNERSHIP, a Tennessee limited partnership (the
"Owner") with an office at 3580 Keith Street, N.W., Cleveland, Tennessee
37320-3480 and is entered into for the purpose of reducing to a formal writing
all of their understandings with respect to the construction, financing and
ownership of a one hundred forty-two (142) bed (which may be increased to one
hundred fifty (150) beds) long term care facility (the "Facility") to be located
on certain property located on West Center Street in West Bridgewater,
Massachusetts and more particularly described on attached Exhibit "A" (the
"Premises")
In consideration of the undertakings of each of the parties to the other,
IT IS AGREED:
ARTICLE I
Status of Facility
Section 1.1 - Title to Premises. The Contractor, or its affiliate
("Premises Owner"), has entered into a contract to purchase fee simple title to
the Premises described in Exhibit "A" subject to the Existing Encumbrances (as
hereinafter defined). Subject to the satisfaction of the contingencies set forth
in such contract to purchase, the Premises Owner shall purchase the Premises.
Exhibit "A" and each of the other Exhibits referred to in this Agreement shall
be incorporated into this Agreement by such reference as if fully set forth in
this Agreement. At the Closing, upon the satisfaction of the contingencies set
forth in Article VI and elsewhere in this Agreement, the Contractor shall convey
or cause the Premises Owner to convey fee simple title to the Premises,
reasonably satisfactory to the Owner and Owner's Lender ("Lender"), to the Owner
subject to the Existing Encumbrances, the physical conditions with respect to
utilities, rights of way, easements, landscaping and improvements which are
disclosed by the survey of the Premises, a copy of which is attached hereto as
Exhibit "B" ("Survey"), as such conditions may change during the course of
construction as permitted or contemplated by this Agreement and the Final Plans
(as defined herein). Owner acknowledges that it has reviewed, inspected and
approved the location and general characteristics of the Premises.
Section 1.2 - Encumbrances. The Contractor has been provided with a
commitment for policy of title insurance from First
- 1 -
<PAGE>
American Title Insurance Company (commitment number 94002215) to insure title to
the Premises, a copy of which is attached hereto as Exhibit "C". The
encumbrances set forth as items 1 through 7, inclusive, in Schedule B of such
commitment are collectively referred to herein as the "Existing Encumbrances".
At the Closing, upon the satisfaction of the contingencies set forth in Article
VI and elsewhere in this Agreement, the Owner shall purchase the Premises from
the Contractor subject to the Existing Encumbrances, the physical conditions
with respect to utilities, rights of way, easements, landscaping and
improvements which are disclosed by the Survey of the Premises, as such
conditions may change during the course of construction as permitted or
contemplated by this Agreement and the Final Plans.
Section 1.3 - Permits and Approvals.
(a) If it has not already, Contractor shall make application for and use
its reasonable best efforts to obtain, on behalf of Owner, all necessary zoning,
land use, environmental and building permits, consents and approvals from the
appropriate state and local government agencies ("Land Use Approvals") which
will permit the construction and operation of the Facility on the Premises. All
of such Land Use Approvals shall be assigned to the Owner at the Closing (to the
extent assignable) and the Owner shall grant to the Contractor, at the Closing,
a license under the Land Use Approvals so that Contractor may perform its
obligations hereunder. Owner's obligations with respect to obtaining federal,
state and local government permits, consents and approvals for the Facility
shall be limited to promptly cooperating with the Contractor in every respect in
obtaining such permits, consents and approvals. Prior to Physical Completion,
the Contractor shall perform or cause to be performed all of the obligations
required of the owner of the Premises under the Land Use Approvals. Prior to
Physical Completion all indemnifications set forth in the Land Use Approvals and
all amounts due and payable under the Land Use Approvals as fees or charges
relating to the construction (as opposed to the operation) of the Facility, and
not as taxes or assessments, including, without limitation, all amounts
deposited or to be deposited into escrow with the issuer of any such Land Use
Approval shall be the obligation of the Contractor. The Contractor hereby
indemnifies the Owner for any loss incurred by the Owner because of the
Contractor's breach of the preceding sentence.
(b) John C. Chakalos ("Chakalos") has applied to the Department of Public
Health of the Commonwealth of Massachusetts ("DPH") and has received approval of
the transfer of the Determination of Need for the Facility, No. 5-1207, a copy
of which is attached hereto as Exhibit "D" ("DON") to the Owner. Contractor has
applied to the DPH for the transfer of the site of the facility approved under
the DON to the Premises.
- 2 -
<PAGE>
(c) Contractor shall have the right, in its sole discretion, to increase
the number of beds in the Facility from one hundred forty-two (142) to one
hundred fifty (150) (the "Bed Increase"), which shall increase the Contract
Price by Five Hundred Thirty-nine Thousand Two Hundred Ten Dollars ($539,210),
subject to increase or decrease as finally determined by the DPH, subject to the
conditions set forth in this subparagraph. In the event that any expenses
incurred in such Bed Increase are not included in the computation of Owner's
reimbursable capital costs for the purpose of determining the Owner's per diem
rates for the Facility ("Non-Reimbursable Expenses"), the Contract Price will be
reduced by the amount of such Non-Reimbursable Expenses. In the event that the
Bed Increase does not occur, for any reason, no consequence shall result to the
Contractor and the Contract Price shall not be increased as a result.
Section 1.4 - Documentation.
(a) The Owner covenants that it will provide fully and in a timely fashion
all reasonable documentation required by Contractor, any governmental bodies or
any lenders, supporting Owner's representations, warranties and covenants
hereunder, supporting all applications for any necessary governmental permits,
consents and approvals, and supporting any application& for construction or
permanent financing. Such documentation may include, but not be limited to,
financial statements of the Owner or its affiliate, as required by Contractor,
any governmental bodies or any lender, Owner's certificate of limited
partnership; all authorizations for the transactions contemplated by this
Agreement; and other information relevant to any such applications or requested
by any lender. The Contractor covenants that it will provide fully and in a
timely fashion all reasonable documentation requested by Lender and all
reasonable documentation of Owner's costs required by governmental bodies in
connection with the development or construction of the Facility, including
without limitation, reasonable documentation of Owner's costs which may be
required by governmental bodies auditing the Facility.
(b) As used herein the term "Loan Documents" shall mean a Construction Loan
Agreement ("Loan Agreement"), a Mortgage and Security Agreement, a Collateral
Assignment of Permits, Licenses, Approvals and Contracts, a Collateral
Assignment of this Agreement, and a Deposit Pledge Agreement, all dated as of
the Closing Date, and each of which is by and between Owner and Lender.
Section 1.5 - Representations of Contractor. Contractor represents that it
is duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Contractor represents that it is empowered and authorized to
execute, deliver, and perform its obligations under this Agreement, and,
- 3 -
<PAGE>
upon such execution and delivery of this Agreement, this Agreement shall be a
valid, binding, and legal obligation of the Contractor, enforceable in
accordance with its terms and duly authorized by a vote of its Board of
Directors in compliance with its certificate of incorporation and bylaws and all
applicable laws of the Commonwealth of Massachusetts.
Section 1.6 - Representations of Owner. Owner represents that it is
duly organized and validly existing under the laws of the State of Tennessee and
duly authorized to do business in Massachusetts. Owner represents that it is
empowered and authorized to execute, deliver, and perform its obligations under
this Agreement, and, upon such execution and delivery, this Agreement shall be a
valid, binding, and legal obligation of the Owner, enforceable in accordance
with its terms, in compliance with its certificate of limited partnership and
partnership agreement and all applicable laws of the State of Tennessee.
Section 1.7 - Other Agreements. The Contractor and Owner each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which it may be bound.
Section 1.8 - Opinions of Counsel. Contemporaneously with the execution of
this Agreement, Owner shall deliver to Contractor an opinion of Owner's in-house
counsel, with respect to the due organization, valid existence and good standing
of Owner, the power of the Owner to enter into this Agreement and perform its
obligations hereunder and the Owner shall deliver to the Contractor an opinion
of Hinckley, Allen, et al. as to the enforceability of this Agreement, and a
partnership resolution of the Owner authorizing the transactions set forth
herein, each in form and substance reasonably satisfactory to Contractor.
Contemporaneously with the execution of this Agreement, Contractor shall deliver
to Owner an opinion of Contractor's in-house counsel, Richard S. Mann, Esq.,
with respect to the due organization, valid existence and good standing of
Contractor, the power of Contractor to enter into this Agreement and perform its
obligations hereunder and the enforceability of this Agreement, and a corporate
resolution of the Contractor authorizing the transactions set forth herein, each
in form and substance reasonably satisfactory to Owner.
- 4 -
<PAGE>
ARTICLE II
Construction of the Facility
Section 2.1 - Architect.
(a) Contractor has engaged John Eberle, architect, of Windsor, Connecticut
as the architect for the Facility ("Architect"). Contractor will also engage
engineers which Contractor selects, in its sole discretion. The Architect has
prepared final plans and specifications for the Facility. Such final plans and
specifications are listed on Exhibit "E" ("Final Plans").
(b) Upon the payment of the Contractor's requisition for the Architect's
preparation of the Final Plans, the Owner shall have the exclusive right to use
the Final Plans, provided however, that in the event a transfer of the DON to
the Contractor is made pursuant to Section 2.8, upon reconveyance of the
Premises to Contractor, the Contractor shall have the exclusive right to use the
Final Plans, subject, however, to whatever rights Lender has to such Final
Plans, if any.
(c) The Final Plans have not yet been approved by DPH. Within two (2) weeks
after the execution of this Agreement, the parties will meet to review and
approve the same, revising them if required. The Owner agrees that it will not
unreasonably withhold its approval of the Final Plans if they conform in
material respects to the preliminary plans which have been approved by the Owner
("Preliminary Plans"). The parties agree to use their best efforts to reach a
prompt and reasonable conclusion. The parties shall initial the Final Plans as
an indication of their approval of the same.
Section 2.2 - Other Professionals. Except as otherwise set forth in Section
2.14, the Owner represents that it shall not engage any architects nor any
engineers, lawyers, consultants, accountants nor other professionals with
respect to the Facility which Contractor will be obligated to pay, other than as
requested by Contractor. Contractor shall have complete discretion to approve
and retain all professionals, contractors and subcontractors who will be
involved in the design, development and construction of the Facility.
Section 2.3 - Failure to Approve Final Plans. If Owner fails to approve the
Final Plans and that failure is a result of Owner's good faith belief that the
Final Plans do not substantially conform to the Preliminary Plans, Owner shall
give Contractor written notice specifying the areas of the alleged nonconformity
with the Preliminary Plans. Contractor may, at Contractor's cost and expense,
cause the Architect to revise the Final Plans or Contractor may submit the issue
of conformity with
- 5 -
<PAGE>
the Preliminary Plans to arbitration in accordance with this Section. Contractor
shall give Owner written notice of Contractor's election within twenty (20) days
of Contractor's receipt of Owner's notice of nonconformity if Contractor
determines to seek arbitration. Owner and Contractor shall, within fifteen (15)
days of the date of Contractor's notice, each select an architect, and the two
architects shall, within ten (10) days of their selection, select a third
architect, all of whom shall be licensed to practice in the Commonwealth of
Massachusetts and shall have substantial experience in health care design. The
Architect shall not be a member of such panel. The architects so selected shall
review the Preliminary Plans and the Final Plans and shall, acting by a
majority, render a written decision as to whether the Final Plans are in
substantial conformity with the Preliminary Plans and, if not so, shall state
any such deficiency. Such decision shall be rendered within thirty (30) days of
the selection of the third architect, shall set forth in reasonable detail the
reasons for the arbitrators' decision, and shall be binding upon the parties. If
the arbitrators determine that the Final Plans do substantially conform to the
Preliminary Plans, then Owner shall be obligated to reimburse Contractor for the
expenses incurred by the Contractor for the arbitration proceedings. If the
arbitrators determine that the Final Plans do not substantially conform to the
Preliminary Plans, Contractor shall reimburse Owner for all costs and expenses
incurred by Purchaser in connection with the arbitration proceeding and
Contractor shall, at its sole cost and expense, cause the Architect to revise
the Final Plans in accordance with the arbitrators' written decision.
Section 2.4 - Construction. The Contractor shall perform the work
substantially in accordance with the Final Plans subject to field changes, minor
design changes, and other immaterial changes which Contractor deems appropriate
during the course of construction, provided, however, that any change deemed
material by the Owner and the Contractor, or, if the Owner and the Contractor
cannot agree within seven (7) business days, then in the opinion of an architect
jointly chosen by the Owner and the Contractor ("Second Architect"), shall
require the Owner's written approval, which approval shall not be unreasonably
withheld or delayed. The Owner's granting of such approval shall not cause any
such change to be deemed an Owner Change as defined in Section 2.6. All work
shall be done in a good and workmanlike manner in accordance with applicable
federal and state statutes and regulations, and municipal building codes and
zoning ordinances, and in accordance with the DON and Land Use Approvals, if
required. The construction shall be performed in conformity with requirements of
applicable federal, state and local governmental agencies having jurisdiction of
the Facility, including Life Safety Code requirements imposed by the Federal
Department of Health and Human Services. The Contractor, on
- 6 -
<PAGE>
behalf of the Owner, shall obtain all local, state or federal governmental
approvals, if any, of the Final Plans.
Section 2.5 - Personal Property.
(a) Contractor and Owner acknowledge that, incorporated into the Contract
Price (as defined herein) is an allowance of One Hundred Thousand Dollars
($100,000) for certain furniture, fixtures and equipment ("Group III Items")
more specifically set forth on Exhibit "F". The choice of the vendor for the
Group III Items and the nature, makes, models and quantities of the Group III
Items shall be in the sole discretion of the Owner. The Owner agrees to choose
the vendors for the Group III Items and the makes, models and quantities of the
Group III Items promptly after notice from the Contractor so that the Facility
is equipped in a timely fashion in preparation for its inspection by any state
or local fire marshall, representative of DPH, building inspector, or other
governmental representative having jurisdiction over the Facility. Contractor
will provide all other furniture, fixtures and equipment other than the Group
III Items consistent with the Final Plans and the furnishings list which is
included hereto as Exhibit "G" ("FFE"). The FFE listed on Exhibit "G" hereto
shall be of substantially the same pro-rata quantity (on a per bed basis) and
quality as the furnishings, fixtures and equipment in a certain 150 bed skilled
nursing facility owned and operated by an affiliate of Owner in Plymouth,
Massachusetts ("Plymouth Facility"). All furniture, fixtures and equipment of a
quality or pro-rata quantity (on a per bed basis) exceeding that of the
furnishings, fixtures and equipment of the Plymouth Facility shall be paid for
by the Owner for a price not included in the Contract Price.
(b) Owner and Contractor agree that the interior design for the Facility
(i.e., wallpaper, carpet, trim and molding, light fixtures, ceiling finishes,
window treatments, cubicle curtains, etc.) shall be substantially the same as or
substantially consistent with the design of the Plymouth Facility.
Section 2.6 - Changes.
(a) Owner agrees that Contractor shall have the right to make changes in
the Final Plans if required by any federal, state or local governmental
authority or official or if required due to the unavailability of any
construction material. Any such change shall not be deemed an Owner Change (as
defined below) unless it arises out of a change to the Final Plans requested by
Owner. Owner shall be consulted with respect to any such changes or
substitutions but Contractor shall have final authority to make all decisions
with respect to such changes as long as such changes result in construction,
space, equipment, interior design and exterior design substantially equivalent
in quality and quantity to that shown on the Final Plans provided, however, that
- 7 -
<PAGE>
any change deemed material by the Owner and the Contractor, or alternatively by
the Second Architect, shall require the Owner's written approval, which approval
shall not be unreasonably withheld or delayed. Any changes in the Final Plans,
made either at the request of the Owner or required by modifications made by the
Owner ("Owner Changes"), which have the effect of increasing the cost of the
work shall result in an addition to the Contract Price in an amount equal to the
actual net cost thereof for the first $100,000 of such Owner Changes and
thereafter shall result in an addition to the Contract Price in an amount equal
to the net cost thereof plus ten percent (10%). Owner shall pay for any net
increase to the Contract Price caused by any Owner Changes at the time of the
payment of the requisition for any such change order. All change orders must be
in writing and signed by both Owner and Contractor.
(b) All work performed and equipment utilized in providing the Facility
with piped medical gases shall be deemed to be an addition requiring a change
order and shall result in a payment to Contractor of Seventy Thousand Dollars
($70,000) in addition to the Contract Price.
Section 2.7 - Commencement of Construction. The parties agree that
construction of the Facility will begin no later than April 13, 1995 ("Start
Date").
Section 2.8 - Continuity of Construction. Construction, once undertaken,
shall proceed in a continuous and expeditious manner until Physical Completion,
as such term is defined in Section 2.9, is achieved. Physical Completion shall
take place no later than fourteen (14) months from the Start Date (the
"Completion Date"). Any delays caused by acts of God, fire, accident, casualty,
labor strikes or job actions, or any other cause not attributable to the failure
of the Contractor to use reasonable care and due diligence ("Force Majeure"),
however, shall be excused by the Owner, provided that Contractor shall use its
best efforts to minimize any such delays and shall resume construction at the
earliest possible time. Notwithstanding the foregoing, in the event of any delay
caused by a Force Majeure which extends the date of Physical Completion beyond
the Completion Date, the Contractor shall be obligated to pay to the Lender any
additional interest, attorneys', inspection and consulting fees and all other
expenses under the Lender Loan payable as a direct and proximate result of any
such delay (the "Lender Direct Costs") beyond the Completion Date which shall be
the Owner's sole and exclusive remedy as a result of such delay. In the event
that any delay as a result of a Force Majeure extends the date of Physical
Completion beyond the Completion Date by a period of twelve (12) months or more,
the Owner shall within three (3) days after receipt of notice from the
Contractor, deliver to the Contractor a completed and signed application to
transfer the ownership of the DON to the
- 8 -
<PAGE>
Contractor or its designee. In such event, the Owner agrees to use its
reasonable best efforts to obtain DPH approval for such transfer which shall
include, without limitation, timely and accurate responses to questions or
requests for information from DPH whether such questions or requests shall be
written or oral, the timely completion and submission of any applications
requested by DPH and attendance at any hearings held by DPH at which the Owner's
attendance is requested, mandated or otherwise necessary. Upon the approval by
DPH of a transfer of the DON back to the Contractor or its designee, the Owner
shall within thirty (30) days of the date of Owner's receipt of the Contractor's
notice thereof, reconvey all right, title and interest in and to the Premises
and the Facility and all rights related thereto and the Contractor shall assume
all of the obligations of the Owner under the Lender Loan, subject to the
consent of Lender, and whether or not Lender consents to such an assumption
shall indemnify the Owner for all obligations arising under the Lender Loan from
and after the date such transfer occurs pursuant to the terms of the Contractor
Indemnification.
Section 2.9 - Completion of Construction. For the purposes of this
Agreement, the terms "Physical Completion" or "Physically Completed" shall be
deemed to occur on the date on which the building and improvements described and
set forth in the Final Plans: (i) have been completed in accordance with the
Final Plans, as the same may have been modified in accordance with the terms of
this Agreement; (ii) have been approved for occupancy by the local building
inspector (and by the local Fire Marshall in the event his approval is required)
as evidenced by the issuance of a temporary certificate of occupancy provided
that such temporary certificate of occupancy does not affect actual occupancy of
the Facility by patients or the licensing of the Facility by the DPH; (iii) have
passed the so-called physical plant inspection by the DPH in a manner which does
not prevent the licensing inspection of the Facility; and (iv) the FFE has been
furnished such that the Facility may be licensed and such that with respect to
other than patient rooms, the Facility is fully operational, provided, however
that in the event of delays in the furnishing of the FFE occasioned by the
action or inaction of the Owner in choosing or ordering any items of FFE, this
subparagraph (iv) shall not be a condition in determining whether Physical
Completion has occurred. Physical Completion shall be deemed to have been
achieved notwithstanding that any of such officials or agencies have issue a
Punch-List listing items requiring completion or correction. Physical Completion
shall also be deemed to have been achieved notwithstanding that the Owner may
not yet have satisfied the requirements of the DPH with respect to the
administration of the Facility, medical supplies, medical records, nursing
service and staff, dietary requirements, and other general conditions necessary
to obtain a license for the rendering of nursing services.
- 9 -
<PAGE>
Section 2.10 - Punch-List. If, at the time the Facility has been Physically
Completed, there exist any items requiring completion or correction, then the
Contractor agrees to use all reasonable diligence to complete or correct the
items so that each conforms to the Final Plans. The parties shall make a
Punch-List of the items requiring completion or correction. Each item on the
Punch-List shall be assigned a reasonable value based upon the Contractor's and
Owner's good faith estimate of the cost of completion or correction of the same.
Contractor shall deduct one hundred and fifty percent (150%) of such total cost
(the "Punch-List Amount") from the balance of the Contract Price (as defined in
Section 4.1). Owner and the Contractor shall execute and deliver an agreement
concurrently with the approval of the Punch-List, under the terms of which the
Owner shall agree to promptly pay to the Contractor an amount equal to 150% of
the estimated cost of completion or correction of each item in the Punch-List
upon its completion or correction. If any item is not completed or corrected
within a period of ninety (90) days, at the Owner's option an amount equal to
the cost of completion or correction of the item may be offset against the
Punch-List Amount and Contractor shall have no further obligation with respect
to such item. If the Owner elects not to offset against the Punch List Amount,
the Contractor shall continue to be obligated to correct such items. After all
appropriate offsets, the Owner shall promptly pay the balance of the Punch-List
Amount, if any, to the Contractor.
Section 2.11 - Work and Warranties. At the Closing, Contractor will assign
to Owner, in addition to any warranties created by law, all warranties and
guarantees received from subcontractors and suppliers of equipment and
furnishings, to the extent assignable. Contractor will agree to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of Physical Completion.
Section 2.12 - Subcontractors. The Contractor shall furnish the names of
all subcontractors who supplied equipment, labor or materials having a value in
excess of Fifty Thousand Dollars ($50,000) in connection with the construction
of the improvements on the Premises, after the hiring of such subcontractors.
All of such subcontractors shall contract with the Contractor for the provisions
of equipment, labor and/or materials for the Facility and not with the Owner.
Contractor hereby indemnifies and saves Owner harmless from claims for payment
by any subcontractor of Contractor who furnishes equipment, materials or
supplies or performs labor or services in the prosecution of the work, other
than any supplier of the Group III Items or person performing work in connection
with any Group III Items in excess of the allowance therefor, or otherwise
contracting directly with Owner.
- 10 -
<PAGE>
Section 2.13 - Right of Owner to Cure. If the Contractor defaults or
neglects to carry out its obligations under the terms of this Agreement in
accordance with the terms of this Agreement and fails within thirty (30) days
after receipt of written notice from the Owner to commence and continue
correction of such default or neglect with diligence and promptness, the Owner
may, if such default remains uncured after such thirty (30) day period and
without prejudice to other remedies the Owner may have, correct such
deficiencies. In such case an appropriate change order shall be issued deducting
from payment then or thereafter due the Contractor, the reasonable costs of
correcting such deficiencies. If the payments then or thereafter due the
Contractor are not sufficient to cover the amount of the deduction, the
Contractor shall pay the difference to the Owner.
Section 2.14 - Termination by the Owner.
(a) This Agreement may be terminated by the Owner upon fifteen (15)
business days written notice to the Contractor in the event that Contractor
stops all work on the Facility for a period of fifteen (15) consecutive business
days (and the Lender's construction inspector or alternatively, a mutually
agreeable Second Architect issues a certificate to such effect) and abandons the
Facility, other than as a result of a Force Majeure or a breach by Owner
hereunder; unless Contractor shall have recommenced Work on the Facility
continuously and diligently during the second fifteen (15) business day notice
period.
(b) If the Contractor materially defaults under this Agreement or
persistently fails or neglects to carry out the material terms of this Agreement
or materially fails to perform the provisions of this Agreement in a manner that
has a material adverse effect upon the construction or the progress of
construction (as certified by the Architect), the Owner may give written notice
to Contractor that the Owner intends to terminate this Agreement. If the
Contractor fails to correct the material defaults, failure or neglect within
fifteen (15) business days after being given notice, the Owner may then give a
second written notice and, after an additional fifteen (15) business days if
such default remains uncured after such second fifteen (15) business day cure
period or such longer period as may reasonably be required to effect a cure,
provided that the Contractor commences and diligently prosecutes a cure, the
Owner may at the Owner's option, terminate this Agreement.
(c) In the event of any termination under clause (a) or (b) above, the
Owner shall pay the Contractor for work completed and for proven loss sustained
upon materials, equipment and applicable damages, and, upon Physical Completion,
reasonable profit and overhead. Such reasonable profit and overhead shall
include, without limitation, a sum equal to the percent complete of the hard
construction cost of the Facility as indicated on a
- 11 -
<PAGE>
draw request, multiplied by the principal amount of the Price Increase Loan and
the Cash Collateral Holdback, offset by the Owner's actual reasonable costs
incurred directly by Owner and certified by the Architect, in excess of the
balance of the Contract Price related to promptly achieving Physical Completion
of the Facility after such termination proceeding in a reasonable manner. Upon
any such payment, all debts and obligations of each party to the other on
account of such termination and this Agreement (except for those
representations, warranties, covenant and indemnities which survive this
Agreement) shall be deemed discharged, terminated and released.
ARTICLE III
FINANCING
Section 3.1 - Construction/Permanent Financing.
(a) Owner has obtained construction and permanent financing (collectively,
the "Financing") for the Facility from Lender upon terms and conditions
reasonably acceptable to Owner ("Lender Loan"). Owner represents and warrants
to the Contractor that the Lender Loan is of an adequate principal amount to
provide for progress payments to the Contractor in the amount of $11,258,698.
Owner shall be solely responsible for paying the financing costs, legal fees,
title insurance and other so-called "soft costs" associated with the Financing
as described below. Owner shall receive a credit against the Contract Price,
pursuant to Section 4.2(vi), to the extent of such soft costs paid by the Owner,
up to the allowance for such soft costs set forth in the DON as finally
determined by the DPH.
(b) The Contractor and Owner also contemplate that the Premises and
Facility may serve as security for the payment obligations under the Lender Loan
and that the Owner will be the obligor for the repayment of all financial
obligations thereunder. Owner agrees to promptly execute and deliver all
commitments, mortgages, collateral assignments, promissory notes, guaranties,
agreements, documents, certificates, affidavits, and other writings required to
be executed by Lender in connection with the Lender Loan.
(c) The cost of securing financing in an amount equal to the allowance for
such items under the final DPH approved DON and interest which accrues on all
financing prior to the date of Physical Completion in an amount equal to the
allowance for such item under the final DPH approved DON are included in the
Contract Price, provided, however, that the Owner shall pay loan fees interest
and attorneys' fees in excess of such amounts incurred in connection with the
Lender Loan. In the event loan fees are assessed or interest accrues beyond the
amount in the maximum capital allowance under the DON as a result of delays in
construction which are the Owner's fault, then the Owner shall
- 12 -
<PAGE>
pay such additional loan fees or interest. In the event that the Contractor is
solely or in part responsible for delays in construction beyond the Completion
Date, or in the event of a Force Majeure pursuant to Section 2.8, the Contractor
shall be responsible to the Owner for the increased interest costs or any other
Lender Direct Costs that Owner incurred for the period of such delay which are
attributable to the Contractor or such Force Majeure. However, in no event shall
the Contractor be responsible for any delays in construction so long as the
Facility is completed by the Completion Date. In any event of an increase in
such fees or interest the Contractor will assist the Owner in attempting to
obtain an increase in the maximum expenditure under the DON to cover such
increase.
Section 3.2 - Price Increase Loan.
(a) At the Closing, subject to the contingencies set forth in Article VI
and elsewhere in this Agreement, in the event that the Contractor chooses, in
its sole discretion, to increase the number of licensed beds at the Facility as
set forth in Section 1.3, the Contractor shall provide to the Owner additional
financing in an amount equal to the resulting increase in the Contract Price
("Price Increase Loan"), in accordance with Section 1.3 until such increase is
funded to the Owner under the Lender Loan.
(b) The Price Increase Loan shall bear no interest and shall be due and
payable only: (i) upon the Facility's census reaching one hundred ten (110)
patients; and (ii) the Lender's release of loan proceeds sufficient to pay the
Price Increase Loan, unless Lender refuses to release such loan proceeds as a
result of the matters set forth in clauses (i), (ii) or (iii) of Section 7.17
hereof. The Price Increase Loan may be prepaid without penalty. The Price
Increase Loan shall be due and payable, at the option of the Contractor, if
after Physical Completion the Owner shall:
1) admit in writing its inability to pay its debts as they become
due;
2) file a petition in bankruptcy or a petition to take advantage of
any insolvency act;
3) make an assignment for the benefit of its creditors;
4) consent to the appointment of a receiver for itself or the whole
or substantially all of its property;
- 13 -
<PAGE>
5) as a result of a petition in bankruptcy filed against it without
such petition being dismissed within 120 days after the date of
such filing;
6) file a petition or answer seeking reorganization or arrangement
or other aid or relief under any bankruptcy or insolvency laws or
any other lawful relief of debtors; or
7) transfer any interest in the Facility, either directly or
indirectly except for a bequest or intestate succession arising
out of the death of Forrest L. Preston and except for transfers
to affiliates of the Owner without the prior written consent of
Contractor.
ARTICLE IV
Closing
Section 4.1 - Date of Closing. The conveyance of title to the Premises and
the payment to Contractor of the Contractor's initial requisition to the extent
approved by Owner and Lender, which shall include, all out of pocket expenses
incurred by Contractor and its affiliates through the closing date with respect
to the Facility, including without limitation, for architects, engineers,
attorneys and consultants; the amount, if any, expended by Contractor in
connection with the acquisition of the Premises; and the amount expended by the
Contractor in the development and construction of the Premises, shall take place
simultaneously with the consummation of the Lender Loan (the "Closing") which
shall take place on or before eleven (11) months after the Start Date. Said
payment to the Contractor at Closing shall be limited to the maximum amount
funded by Lender and shall be credited against the Contract Price; provided,
however, that nothing herein shall abrogate the obligation of the Owner to pay
the Contract Price in accordance with Section 4.3.
Section 4.2 - Contract Price. The price to be paid by the Owner for all of
the materials and services to be provided by Contractor hereunder ("Contract
Price") shall be equal to the sum of: (i) the final maximum capital expenditure
("MCE") amount allowed under the DON, as determined by the DPH based upon the
Contractor's submission pursuant to 105 C.M.R. 100.551(I)(l)-(5), which
submission is to be made within 180 days after Final Plan approval; plus (ii)
$500,000; plus (iii) the cost of any additional furniture, fixtures and
equipment if not previously paid by the Owner (as described in Section 2.5);
plus (iv) any Owner Changes (as described in Section 2.6); plus (v) $539,210;
subject to increase or decrease as finally determined by the DPH, in the event
of the Bed Increase to the extent such amount is not included in the MCE in
accordance with subparagraph (i) above,
- 14 -
<PAGE>
minus any Non-Reimbursable Expenses; minus (vi) any costs or expenses, if any,
allowed in the MCE up to the amount of the line item in the MCE for each such
item which has been paid directly by Owner after obtaining the approval of the
Contractor.
Section 4.3 - Payment of the Contract Price. The Owner shall pay the
Contract Price at the following times and in the following manner:
(a) The expenses to be reimbursed at the Closing in accordance with Section
4.1 will be paid at Closing. Prior to the Closing, the Contractor and the Owner
shall develop and agree upon a schedule of values for the Facility based upon
the line items in the MCE, a copy of which is attached hereto as Exhibit "I"
which shall be initialled by the Contractor and the Owner to evidence their
agreement and be approved by Lender ("Schedule of Values"). Based upon
applications for payment submitted to the Architect by the Contractor and
verified by Owner, and Certificates for Payment issued by the Architect, the
general contractor, and the Contractor, the Owner shall submit applications for
payment requesting Lender to make progress payments on account of certain items
on the Schedule of Values based upon a percent complete basis as certified by
the Architect to the Contractor. Certain other items on the Schedule of Values
will be paid as incurred. The Cash Collateral Holdback (as hereinafter defined)
shall be paid as set forth in Section 4.3(c) and the Price Increase Loan shall
be paid as set forth in Section 4.3(b). The period covered by each Application
for Payment shall be one calendar month ending on the last day of the month.
Each Application for Payment shall be based upon the most recent Schedule of
Values submitted by the Contractor and approved by Owner and Lender, which
approval shall not be unreasonably withheld or delayed. Applications for Payment
shall show the amount due for each item shown on said Schedule of Values as of
the end of the period covered by the Application for Payment. The amount of each
such progress payment which is to be paid based on a percent complete basis
shall be the sum of (i) the product of multiplying that portion of such item
properly allocable to completed work for such item by the percentage of
completion of that item, and (ii) the portion of such item properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the work or suitably stored off the. site, minus the aggregate
of previous payments made by the Owner for such item and minus such retainage as
is typically required in other construction loans obtained by Owner's
affiliates. Notwithstanding anything set forth in this paragraph to the
contrary, the terms and expense of progress payments on account of the Contract
Price made from the Owner to the Contractor shall be subject to the terms and
conditions of the Lender Loan as they relate to the Contractor's obligations.
Owner shall use its best efforts to have the Certificates for Payment approved
by and paid by Lender. In the
- 15 -
<PAGE>
event that Owner does not approve an application for payment, the Owner will
within two (2) business days notify Contractor, in writing, of the reasons for
the withholding of such approval. If Contractor and Owner cannot agree on a
revised amount the Owner will promptly execute an application for payment for
the amount for which Owner feels is due and paying in accordance with the terms
of this Agreement. If the Owner does not issue an application for payment or a
written notification to Contractor of its reason for withholding an application
for payment in accordance with this Agreement, through no fault of Contractor,
within five business days after the receipt of an application for payment or if
Owner does not request that Lender pay Contractor within five days after the
receipt by Owner of an application for payment, then Contractor, may upon seven
additional business days after written notice to Owner and Lender, stop the work
under this Agreement until payment of the amount owing has been received. Any
such period of stoppage shall be added to the period of time during which the
Contractor is to achieve Physical Completion as set forth in Section 2.8.
(b) That portion of the Contract Price relating to the Price Increase Loan
shall be payable in accordance with the terms of Section 3.2.
(c) That portion of the Contract Price in the amount of Five Hundred
Thousand Dollars ($500,000) (the "Cash Collateral Holdback") shall be due upon
Physical Completion but shall not be payable until the Owner's achievement of a
debt service coverage ratio at the Facility of 1.2 to 1 as determined by Lender,
and the Lender's release of the Cash Collateral Holdback; provided, however,
that the Cash Collateral Holdback shall be payable by the Owner in any event
upon the Facility achieving a debt service coverage ratio of 1.2 to 1 if Lender
refuses to release the Owner's cash collateral held by Lender as a result of any
default of Owner, or any of its affiliates, under any agreement between Owner,
or any of its affiliates, and Lender not attributable to any action or inaction
of or by the Contractor. The Cash Collateral Holdback shall bear interest from
the date of Physical Completion at the rate of the base rate then in effect at
the Bank of Boston, plus three percent (3%) per annum until paid. Owner shall
assign its rights to the first $500,000 of such collateral plus interest thereon
to Contractor pursuant to a collateral assignment thereof in the form attached
as Exhibit "H" which the Owner hereby agrees to execute and deliver to the
Contractor upon Physical Completion.
(d) In the event that any of Contractor's approved requisitions, or
payments set forth in subsections (b) or (c) above, are not paid when due,
solely due to delays incurred through the fault of or through circumstances
under the control of the Owner or its affiliates, the Owner shall pay interest
to the Contractor, monthly in arrears on any such outstanding
- 16 -
<PAGE>
amount. Such monthly interest shall be computed at a rate equal to the base rate
then in effect at the Bank of Boston, plus three percent (3%) per annum.
(e) Owner's obligation to pay the Price Increase Loan and Owner's
obligation to pay the Cash Collateral Holdback may be offset by proven losses
sustained upon materials and equipment caused by the Contractor's material
breach of this Agreement which is not cured within the applicable time period
therefor. In the event that the Owner chooses to exercise its right of offset
under this Section 4.3(e), it shall first provide the Contractor with written
notice of such intent, to offset, setting forth the reasons therefor. Contractor
shall have a period of seven days from its receipt of the Owner's notice within
which to notify the Owner of the Contractor's desire to contest such offset. In
the event that the Owner and the Contractor cannot agree within seven (7) days
from the date of the Contractor's notice whether such offset is appropriate, the
parties agree to submit such issue to binding arbitration before the American
Arbitration Association in Boston, and agree to be bound by the decision
rendered in any such arbitration.
Section 4.4 - Documents to be Delivered by Contractor at Closing. At the
Closing, the Contractor shall deliver, or shall cause to be delivered, the
following to the Owner:
(a) A quitclaim deed with covenants against grantor's acts;
(b) A bill of sale;
(c) The assignment of Land Use Approvals set forth in Section 1.3;
(d) The survey described in Section 1.2;
(e) A hazardous waste affidavit;
(f) The insurance certificates described in Section 5.1(b);
(g) The affidavits and waivers described in Section 5.1(c);
(h) The Contractor's initial requisition and supporting information
relating thereto; and
(i) Final approval of the transfer of the DON and an assignment thereof.
Section 4.5 - Documents to be Delivered by the Owner at Closing. At the
Closing the Owner shall deliver the following to the Contractor:
(a) The payment set forth in Section 4.1; and
- 17 -
<PAGE>
(b) The license to Contractor set forth in Section 1.3(a).
ARTICLE V
Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Contractor shall have the following
responsibilities:
(a) To obtain and pay for the Certificate of Occupancy;
(b) The Contractor shall at all times, commencing with the date upon which
construction begins, carry or cause to be carried the following types of
insurance with an insurance carrier or carriers reasonably acceptable to Lender:
(i) Worker's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000
for any one accident or disaster; and property damage coverage
limits of not less than $100,000; all of which insurance shall
name the Owner and Lender, if any, as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief, covering all improvements to be erected hereunder and
all materials for the same which are on or about the Premises, in
an amount equal to the full insurable value of such improvements
and materials; such insurance, to be payable to Owner, Contractor
and Lender, if any, as their interests may appear, with, standard
mortgage endorsement to Lender or its assigns as mortgagee.
(iv) Comprehensive general liability under a primary policy and
umbrella policy with limits not less than $5,000,000.00 which
will include the following:
a) Contractor's Liability;
b) Contractual Liability;
c) Owners and Contractors Protective Liability;
d) Completed Operations Liability;
e) Products Liability; and
f) Personal Injury
- 18 -
<PAGE>
(v) Any other insurance required of the Contractor by Lender.
The Contractor shall furnish to the Owner and Lender, if any, duplicate
policies of insurance as set forth in Subparagraphs (i), (ii), (iii) and
(iv) hereof. The coverages described above may be carried by the Contractor
under an Owner's Protective Liability Policy with the same limits of
coverage, naming Owner, which policy shall be subject to the Owner's
reasonable approval. The Owner shall be named as an additional insured on
such policies as my be appropriate. Each of such policies shall contain, to
the extent customarily obtainable in Massachusetts, a provision to the
effect that they may not be canceled except upon ten days' prior written
notice to the Owner and Lender.
(c) At the time of Closing, and with each requisition, Contractor shall
deliver to Owner the following:
(i) a duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials for the
construction of the Facility;
(ii) an affidavit to the title insurance company enabling Owner to
obtain title insurance coverage insuring the Owner and Lender, if
any, against collection as enforcement of mechanics liens against
the Premises;
(iii) Such other documents or instruments as Owner may reasonably
require or as Lender may require of Contractor.
Section 5.2 - Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities:
(a) To cause Owner's counsel to render legal opinions to Lender with
respect to the Owner's obligations, warranties, and representations set forth
herein (as they pertain to legal matters) and with respect to other legal
opinions (pertaining to the Owner, the Facility and the Premises) as any Lender
may require.
(b) Owner is solely responsible for obtaining financing as set forth in
Section 3.1(a). Owner will use its best efforts to consummate financing for the
contemplated construction, including the furnishing of financial statements,
providing an appraisal of the Premises and Facility and by execution of
applications, notes, guaranties, mortgages, assumption agreements and other
documents reasonably necessary to effectuate such financing, and Owner shall pay
all costs associated with such financing (which
- 19 -
<PAGE>
costs shall be deducted from the Contract Price) in accordance with Section
3.1(d).
(c) To keep the DON in full force and effect as the holder thereof,
subsequent to the transfer of the DON to the Owner.
Section 5.3 - Indemnification. The Contractor hereby agrees to indemnify
and hold the Owner harmless from all liabilities, claims, and demands for
personal injury or property damage arising out of or caused by any act or
omission of Contractor, its subcontractors, agents, or employees, or, to the
extent not caused by any action or inaction of Owner, its agents or employees,
arising in or about the Premises for the period from the date of this Agreement
until Physical Completion. The Contractor further covenants to use proper care
and caution in the performance of its work hereunder so as not to cause damage
to any adjoining or adjacent property.
ARTICLE VI
Contingencies
Section 6.1 - Required Occurrences. At the time of Closing if not otherwise
specified below, unless such period is extended by written notice of the Owner,
this Agreement and the undertakings of Contractor or the Owner shall, at the
election of Contractor (as to subparagraph (g) below only) or the Owner (as to
subparagraphs (a) through (g) below), as the case may be, be contingent upon the
occurrence of each of the following contingencies:
(a) Purchase of Premises. The Premises Owner shall purchase the Premises.
(b) Additional Approvals, Licenses, Permits, Easements and Premises. All of
the zoning approvals, additional licenses, and additional easements, if any,
needed for the construction of the Facility shall have been obtained in form
reasonably satisfactory to Owner, Contractor and Lender, with no limitations or
conditions which are reasonably unacceptable to Contractor, Owner and Lender,
and no appeals of said additional licenses shall have been taken during the
applicable appeal periods by Closing.
(c) Utility Letters. Letters in form reasonably satisfactory to Contractor,
Owner and Lender confirming the availability of all utility services shall be
obtained by Contractor by Closing.
(d) Environmental Report. Receipt by Closing of an environmental report
reasonably satisfactory to Owner and Lender
- 20 -
<PAGE>
indicating that the Premises are free of any material environmental
contamination.
(e) Title and Survey. Owner shall have received by Closing evidence
reasonably satisfactory to it and Lender that the title to the Premises is good,
clear record and marketable title free of encumbrances except for the Existing
Encumbrances, those other encumbrances permitted by Section 1.2 and those which
will not materially and adversely effect the construction and use of the
Facility thereon and a survey of the Premises reasonably acceptable to Owner and
Lender.
(f) Contractor Indemnification. An indemnification reasonably satisfactory
in form and in substance to Owner, Forrest L. Preston and Life Care Centers of
America, Inc., by the Contractor against costs and expenses incurred under the
Lender Loan in the event that the transfer of the DON back to the Contractor is
made pursuant to Section 2.8 ("Contractor Indemnification") so long as the Owner
transfers the Facility and the Premises back to the Contractor's nominee, a copy
of which is attached hereto as Exhibit "J".
(g) The continued accuracy of all of the representations and warranties of
each party, as of the Closing.
(h) The site of DON shall have been transferred to the Premises and is in
full force and effect.
Section 6.2 - Failure of Contingencies. In the event that any one or more
of the contingencies set forth in this Article is not satisfied or waived by the
Owner, or the Contractor in the case of a failure of the contingency in
subparagraph 6.1(g) caused by Owner ("Owner's Default"), in writing at the time
of Closing or within such other period of time set forth above applicable to
such contingency, then, upon notice to the Contractor (or the Owner, in the case
of Owner's Default) and a fifteen (15) day period during which Contractor (or
the Owner, in the case of Owner's Default) may cause such contingency to be
satisfied, the Owners (or the Contractor, in the case of Owner's Default) may
terminate this Agreement. In such event, neither party shall have further
responsibility or liability to the other except for Contractor's indemnification
of the Owner pursuant to Section 5.3, which shall survive the Closing or the
termination of this Agreement.
Section 6.3 - Default.
(a) In the event that the Owner defaults in any of its obligations under
Section 4.3 hereof after fifteen (15) business days written notice and such
default remains uncured fifteen (15) business days after the expiration of the
first fifteen (15) business day period ("Event of Default"), the Owner shall
within
- 21 -
<PAGE>
three (3) days after receipt of notice from the Contractor, deliver to the
Contractor a completed and signed application to transfer the ownership of the
DON to the Contractor or its designee. In such event, the Owner agrees to use
its reasonable best efforts to obtain DPH approval for such transfer which shall
include, without limitation, timely and accurate responses to questions or
requests for information from DPH whether such questions or requests shall be
written or oral, the timely completion and submission of any applications
requested by DPH and attendance at any hearings held by DPH at which the Owner's
attendance is requested, mandated or otherwise necessary. In the event of such a
default by the Owner in its obligations under this Agreement, and the approval
of the retransfer of the DON to the Contractor is approved by DPH, the Owner
agrees that certain of the damages suffered by the Contractor are not readily
susceptible to calculation. Therefore, in such event, the Owner agrees to pay
the Contractor the sum of Five Hundred Thousand Dollars ($500,000) as liquidated
damages and not as penalty, within seven (7) days after receipt of notice of the
approval by DPH of the retransfer of the DON, the Premises, and the Facility to
the Contractor. In the case of an Event of Default, the foregoing shall be the
Contractor's exclusive remedy. If an Event of Default occurs and, for whatever
reason, the DON, the Premises or the Facility are not retransferred to the
Contractor, the Owner shall pay to the Contractor all damages to which the
Contractor shall be entitled at law or in equity within seven (7) days after the
receipt by the Owner of notice from the Contractor of such Event of Default and
the failure of the Owner to retransfer the DON, the Premises and the Facility to
the Contractor with the approval of the DPH. Upon the approval by DPH of a
transfer of the DON back to the Contractor or its designee, the Owner shall
within ten (10) days of the date of Owner's receipt of the Contractor's notice,
reconvey to the Contractor or its nominee all right, title and interest in and
to the Premises and the Facility and all rights related thereto.
(b) In the event the Owner defaults under any of its obligations under this
Agreement other than those set forth in Section 4.3 after fifteen (15) business
days written notice from the Contractor to the Owner and an additional fifteen
(15) business days within which to cure, the Contractor may seek whatever
damages and use whatever remedies it may have at law or in equity.
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent
and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits
- 22 -
<PAGE>
hereto), which alone fully and completely expresses their understanding with
respect to its subject matters.
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
mare severely against one of the parties than the other.
Section 7.5 - No Brokers. Contractor and Owner each represent and warrant
to the other that no broker or finder has acted on its behalf in connection with
this Agreement, or the transactions contemplated hereby or referred to herein.
Contractor and Owner each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
other broker, finder or similar agent claiming to have been employed by or on
behalf of such party.
Section 7.6 - Assignment. Neither Owner nor Contractor shall have the right
to assign its rights and delegate its obligations under this Agreement to
another entity or person without the prior written consent of the other parties
hereto.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by any nationally recognized
overnight carrier and postage prepaid as follows:
(a) In the event that notice is directed to Owner, it shall be sent to West
Bridgewater Medical Investors Limited Partnership, 3580 Keith Street, N.W.,
Cleveland, Tennessee 37320-3480, Attention: Corporate Counsel, or at such other
address or addresses Owner shall from time to time designate by notice to
Contractor.
(b) In the event that notice is directed to Contractor, it sha11 be sent to
Attention: President, Continuum Care West Bridgewater, Inc., 197 First Avenue,
Needham, MA 02194, and a copy thereof mailed to Corporate Counsel, at the same
address or at such other address or addresses as Contractor shall from time to
time designate by notice to Owner with a copy to: Joseph A. Vitale, Esq., Levy &
Droney, 74 Batterson Park Road, Farmington, Connecticut 06034. The effective
date of any such
- 23 -
<PAGE>
notice shall be the earlier of actual receipt by the addressee or three (3) days
after such notice is properly deposited for mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provision of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Facility or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, Sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date of the execution of this Agreement.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
Section 7.16 - Survival. Each of the representations, warranties and
indemnifications of the parties hereto shall survive the Closing or the
termination of this Agreement; provided, however, that the monetary obligations
of the parties will be paid in accordance with Section 2.14(c) in the event of a
termination of this Agreement by the Owner pursuant thereto.
- 24 -
<PAGE>
Section 7.17 - Compliance with Loan Documents. Notwithstanding anything set
forth herein to the contrary, in the event that any of the terms or conditions
of this Agreement are inconsistent with the terms or conditions of the Lender's
Loan Documents, the terms and conditions of the Lender's Loan Documents shall
control, provided1 however, that in the event of a default under any of the Loan
Documents either (i) attributable to any action or inaction of the Owner which
is not attributable to any action or inaction by or of the Contractor or (ii) as
a result of any cross-default with any other loan between the Owner, or any of
its affiliates, and the Lender, or any of its affiliates or (iii) not
attributable to the Contractor, then the obligations of the Owner to the
Contractor hereunder shall remain unaffected and the provisions of this
Agreement shall control; provided, however, that Owner shall not consent to any
material amendment of any of the Loan Documents without the prior written
consent of the Contractor. Any material amendment to the Lender Loan Documents
made without the prior written consent of the Contractor shall not be binding on
the Contractor. The Owner covenants to cause the Lender to provide to the
Contractor true, accurate and complete copies of all of the Loan Documents.
Dated as of this 20 day of April, 1995.
Witness: WEST BRIDGEWATER MEDICAL INVESTORS
LIMITED PARTNERSHIP
By: Developers Investment Company, Inc.
Its Corporate General Partner
/s/ Cindy Cross By /s/ John P. O'Brien, Jr.
- ----------------------------- ---------------------------------
John P. O'Brien, Jr.
Its Vice President
/s/ Ann L. Haynes Duly Authorized
- -----------------------------
CONTINUUM CARE OF WEST BRIDGEWATER, INC.
/s/ [Illegible] By /s/ Craig Wilkos 4/20/95
- ----------------------------- ---------------------------------
Craig Wilkos
Its Vice President
/s/ [Illegible] Duly Authorized
- -----------------------------
- 25 -
<PAGE>
STATE OF TENNESSEE )
) ss:
COUNTY OF BRADLEY )
The foregoing instrument was acknowledged before me this 24th day March,
1995, by John P. O'Brien, Jr., Vice President of Developers Investment Company
Inc., a corporate general partner of West Bridgewater Medical Investors
Investors Limited Partnership, a Tennessee limited partnership on behalf of the
limited partnership.
[SEAL] /s/ Michelle Wolfe
-----------------------------------
Notary Public My Commission Expires
11-24-97
STATE OF MASSACHUSETTS )
) ss:
COUNTY OF NORFOLK )
The foregoing instrument was acknowledged before me this 20 day of April,
l995, by Craig J. Wilkos, Vice President, of Continuum Care of West Bridgewater,
Inc., a [Delaware] corporation, on behalf of the corporation.
/s/ Carol A. Blanchard
-----------------------------------
Notary Public
My Commission Expires 4-30-2000
GUARANTY
The obligations of the Owner hereunder are hereby irrevocably and
unconditionally guarantied by Forrest L. Preston.
WITNESSES:
_________________________________ ____________________________________
Forrest L. Preston
_________________________________
- 26 -
ASSIGNMENT AGREEMENT
(Auburn, Massachusetts)
THIS ASSIGNMENT AGREEMENT (the "Agreement") is entered into as of the 6th
day of June, 1996, by and between Continuum Care of Massachusetts, Inc.
("Assignor") and CareMatrix of Massachusetts, Inc. ("Assignee").
WITNESSETH:
WHEREAS, Continuum Care Corporation (predecessor in interest to Assignor)
and Auburn Medical Investors Limited Partnership entered into a certain Turnkey
Construction Contract dated as of March 3, 1994 for the construction of a one
hundred forty-two (142) bed (which may be increased to one hundred fifty-four
(154) beds) long term care facility to be located on Southbridge Street in
Auburn, Massachusetts (the "Turnkey Construction Agreement"), a copy of which is
attached hereto as Exhibit A.
WHEREAS, Assignor desires to assign its rights and obligations under the
Turnkey Construction Agreement to Assignee and Assignee desires to assume such
rights and obligations.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants, bargains, sells, assigns and transfers to
Assignee all of Assignor's right, title and interest in, and all contractual and
other rights under the Turnkey Construction Agreement.
2. Assignee hereby accepts this assignment and hereby agrees to assume all
of Assignor's right, title, interest, duties and obligations under the Turnkey
Construction Agreement.
3. This Agreement may be executed by facsimile and in counterparts, each of
which shall constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ASSIGNOR:
CONTINUUM CARL OF
MASSACHUSETTS, INC.
By: James M. Clary
------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CAREMATRIX OF
MASSACHUSETTS INC.
By: James M. Clary
------------------------------
Name: James M. Clary
Title:
<PAGE>
TURNKEY CONSTRUCTION CONTRACT
Between
CONTINUUM CARE CORPORATION
And
AUBURN MEDICAL INVESTORS LIMITED PARTNERSHIP
<PAGE>
Table of Contents
For
Turnkey Construction Contract
Between
CONTINUUM CARE CORPORATION
And
AUBURN MEDICAL INVESTORS LIMITED PARTNERSHIP
ARTICLE I - Status of Facility
Section 1.1 - Title to premises
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Representations of Contractor
Section 1.6 - Representations of Owner
Section 1.7 - Other Agreements
Section 1.8 - opinions of Counsel
ARTICLE II - Construction of the Facility
Section 2.1 - Architect
Section 2.2 - Other Professionals
Section 2.3 - Failure to Approve Final Plans
Section 2.4 - construction
Section 2.5 - Personal Property
Section 2.6 - Changes
Section 2.7 - Commencement of Construction
Section 2.8 - Continuity of Construction
Section 2.9 - Completion of Construction
Section 2.10- Punch-List
Section 2.11- Work and warranties
Section 2.12- Subcontractors
Section 2.13- Right of Owner to Cure
Section 2.14- Termination by Owner
ARTICLE III - Financing
Section 3.1 - Construction/Permanent Financing
Section 3.2 - Price Increase Loan
ARTICLE IV - Closing
Section 4.1 - Date of Closing
Section 4.2 - Contract Price
Section 4.3 - Payment of Contract Price
Section 4.4 - Documents to be delivered by Contractor at
Closing
Section 4.5 Documents to be delivered by Owner at Closing
- i -
<PAGE>
ARTICLE V - Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities
Section 5.2 - Owner's Responsibilities
Section 5.3 - Indemnification
ARTICLE VI - Contingencies
Section 6.1 - Required Occurrences
Section 6.2 - Failure of Contingencies
Section 6.3 - Default
ARTICLE VII - Concluding provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - No Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10- Successors
Section 7.11- Counterparts
Section 7.12- Severability
Section 7.13- Effective Date
Section 7.14- No Offer
Section 7.15- Governing Law
Section 7.16- Survival
Section 7.17- Compliance with Loan Documents
EXHIBITS LIST
Exhibit "A" - Description of Premises
Exhibit "B" - Survey
Exhibit "C" - Title Commitment
Exhibit "D" - Determination of Need, Approval of Transfer
and DPH Plan Approval
Exhibit "E" - Final Plans
Exhibit "F" - Group III Items
Exhibit "G" - FFE
Exhibit "H" - Form of Assignment of Lender Deposit Pledge
Exhibit "I" - MCE Line Items
Exhibit "J" - Contractor Indemnification
- ii -
<PAGE>
TURNKEY CONSTRUCTION CONTRACT
This Turnkey Construction Contract ("Agreement") is between CONTINUUM CARE
CORPORATION, a Delaware corporation (the "Contractor") with an office at River
Place, 57 River Street, Wellesley, Massachusetts 02181 and AUBURN MEDICAL
INVESTORS LIMITED PARTNERSHIP, a Tennessee limited partnership (the "Owner")
with an office at 3580 Keith Street, N.W., Cleveland, Tennessee 37320-3480 and
is entered into for the purpose of reducing to a formal writing all of their
understandings with respect to the construction, financing and ownership of a
one hundred forty-two (142) bed (which may be increased to one hundred
fifty-four (154) beds) long term care facility (the "Facility") to be located on
certain property located on Southbridge Street in Auburn, Massachusetts and more
particularly described on attached Exhibit "A" (the "Premises").
In consideration of the undertakings of each of the parties to the other,
IT IS AGREED:
ARTICLE I
Status of Facility
Section 1.1 - Title to Premises. The Contractor, or its affiliate
("Premises Owner"), holds fee simple title to the Premises described in Exhibit
"A" subject to the Existing Encumbrances (as hereinafter defined). Exhibit "A"
and each of the other Exhibits referred to in this Agreement shall be
incorporated into this Agreement by such reference as if fully set forth in this
Agreement. At the Closing, upon the satisfaction of the contingencies set forth
in Article VI and elsewhere in this Agreement, the Contractor shall convey or
cause the Premises Owner to convey fee simple title to the Premises, reasonably
satisfactory to the Owner and Owner's Lender ("Lender"), to the Owner subject to
the Existing Encumbrances, the physical conditions with respect to utilities,
rights of way, easements, landscaping and improvements which are disclosed by
the survey of the Premises, a copy of which is attached hereto as Exhibit "B"
("Survey"), as such conditions may change during the course of construction as
permitted or contemplated by this Agreement and the Final Plans (as defined
herein). Owner acknowledges that it has reviewed, inspected and approved the
location and general characteristics of the Premises.
Section 1.2 - Encumbrances. The Contractor has been provided with a
commitment for policy of title insurance from First American Title Insurance
Company (commitment number 50364686/20196538) to insure title to the premises, a
copy of which is attached hereto as Exhibit "C". The encumbrances set forth as
- 1 -
<PAGE>
items 1 through 9, inclusive, in Schedule B of such commitment are collectively
referred to herein as the "Existing Encumbrances". At the Closing, upon the
satisfaction of the contingencies set forth in Article VI and elsewhere in this
Agreement, the Owner shall purchase the Premises from the Contractor subject to
the Existing Encumbrances, the physical conditions with respect to utilities,
rights of way, easements, landscaping and improvements which are disclosed by
the Survey of the Premises, as such conditions may change during the course of
construction as permitted or contemplated by this Agreement and the Final Plans.
Section 1.3 - Permits and Approvals.
(a) If it has not already, Contractor shall make application for and use
its reasonable best efforts to obtain, on behalf of Owner, all necessary zoning,
land use, environmental and building permits, consents and approvals from the
appropriate state and local government agencies ("Land Use Approvals") which
will permit the construction and operation of the Facility on the Premises. All
of such Land Use Approvals shall be assigned to the Owner at the Closing (to the
extent assignable) and the Owner shall grant to the Contractor, at the Closing,
a license under the Land Use Approvals so that Contractor may perform its
obligations hereunder. Owner's obligations with respect to obtaining federal,
state and local government permits, consents and approvals for the Facility
shall be limited to promptly cooperating with the Contractor in every respect in
obtaining such permits, consents and approvals. Prior to Physical Completion,
the Contractor shall perform or cause to be performed all of the obligations
required of the owner of the Premises under the Land Use Approvals. Prior to
Physical Completion all indemnifications set forth in the Land Use Approvals and
all amounts due and payable under the Land Use Approvals as fees or charges
relating to the construction (as opposed to the operation) of the Facility, and
not as taxes or assessments, including, without limitation, all amounts
deposited or to be deposited into escrow with the issuer of any such Land Use
Approval shall be the obligation of the Contractor. The Contractor hereby
indemnifies the Owner for any loss incurred by the Owner because of the
Contractor's breach of the preceding sentence.
(b) Contractor has applied to the Department of Public Health of the
Commonwealth of Massachusetts ("DPH") and has received approval of the transfer
of both the Determination of Need for the Facility, No. 2-1208, a copy of which
is attached hereto as Exhibit "D" ("DON") and the Premises to the Owner.
(c) Contractor shall have the right, in its sole discretion, to increase
the number of beds in the Facility from one hundred forty-two (142) to one
hundred fifty-four (154) (the
- 2 -
<PAGE>
"Bed Increase"), which shall increase the Contract Price by Seven Hundred
Thirty-one Thousand Eight Hundred Ninety-nine Dollars ($731,899), subject to the
conditions set forth in this subparagraph. In the event that any expenses
incurred in such Bed Increase are not included in the computation of Owner's
reimbursable capital costs for the purpose of determining the Owner's per diem
rates for the Facility ("Non-Reimbursable Expenses"), the Contract Price will be
reduced by the amount of such Non-Reimbursable Expenses. In the event that the
Bed Increase does not occur, for any reason, no consequence shall result to the
Contractor and the Contract Price shall not be increased as a result.
Section 1.4 - Documentation.
(a) The Owner covenants that it will provide fully and in a timely fashion
all reasonable documentation required by Contractor, any governmental bodies or
any lenders, supporting Owner's representations, warranties and covenants
hereunder, supporting all applications for any necessary governmental permits,
consents and approvals, and supporting any applications for construction or
permanent financing. Such documentation may include, but not be limited to,
financial statements of the Owner or its affiliate, as required by Contractor,
any governmental bodies or any lender, Owner's certificate of limited
partnership; all authorizations for the transactions contemplated by this
Agreement; and other information relevant to any such applications or requested
by any lender. The Contractor covenants that it will provide fully and in a
timely fashion all reasonable documentation requested by Lender and all
reasonable documentation of Owner's costs required by governmental bodies in
connection with the development or construction of the Facility, including
without limitation, reasonable documentation of Owner's costs which may be
required by governmental bodies auditing the Facility.
(b) As used herein the term "Loan Documents" shall mean a Construction Loan
Agreement ("Loan Agreement"), a Mortgage and Security Agreement, a Collateral
Assignment of permits, Licenses, Approvals and Contracts, a Collateral
Assignment of this Agreement, and a Deposit Pledge Agreement, all dated as of
the Closing Date, and each of which is by and between Owner and Lender.
Section 1.5 - Representations of Contractor. Contractor represents that it
is duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Contractor represents that it is empowered and authorized to
execute, deliver, and perform its obligations under this Agreement, and, upon
such execution and delivery of this Agreement, this Agreement shall be a valid,
binding, and legal obligation of the Contractor, enforceable in accordance with
its terms and duly
- 3 -
<PAGE>
authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation and bylaws and all applicable laws of the
Commonwealth of Massachusetts.
Section 1.6 - Representations of Owner. Owner represents that it is duly
organized and validly existing under the laws of the State of Tennessee and duly
authorized to do business in Massachusetts. Owner represents that it is
empowered and authorized to execute, deliver, and perform its obligations under
this Agreement, and, upon such execution and delivery, this Agreement shall be a
valid, binding, and legal obligation of the Owner, enforceable in accordance
with its terms, in compliance with its certificate of limited partnership and
partnership agreement and all applicable laws of the State of Tennessee.
Section 1.7 - Other Agreements. The Contractor and Owner each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which it may be bound.
Section 1.8 - Opinions of Counsel. Contemporaneously with the execution of
this Agreement, Owner shall deliver to Contractor an opinion of Owner's in-house
counsel, H. Henry Day, Jr., Esq. with respect to the due organization, valid
existence and good standing of Owner, the power of the Owner to enter into this
Agreement and perform its obligations hereunder and the Owner shall deliver to
the Contractor an opinion of Hinckley, Allen, et al. as to the enforceability of
this Agreement, and a partnership resolution of the Owner authorizing the
transactions set forth herein, each in form and substance reasonably
satisfactory to Contractor. contemporaneously with the execution of this
Agreement, Contractor shall deliver to Owner an opinion of Contractor's in-house
counsel, Richard S. Mann, Esq. or Robert D. Eustis, Esq., with respect to the
due organization, valid existence and good standing of Contractor, the power of
Contractor to enter into this Agreement and perform its obligations hereunder
and the enforceability of this Agreement, and a corporate resolution of the
Contractor authorizing the transactions set forth herein, each in form and
substance reasonably satisfactory to Owner.
ARTICLE II
Construction of the Facility
Section 2.1 - Architect.
(a) Contractor has engaged John Eberle, architect, of Windsor, Connecticut
as the architect for the Facility ("Architect"). Contractor will also engage
engineers which Contractor selects, in its sole discretion. The Architect has
- 4 -
<PAGE>
prepared final plans and specifications for the Facility. Such final plan. and
specifications are listed on Exhibit "E" ("Final Plans").
(b) Upon the payment of the Contractor's requisition for the Architect's
preparation of the Final Plans, the Owner shall have the exclusive right to use
the Final Plans, provided however, that in the event a transfer of the DON to
the Contractor is made pursuant to Section 2.8, upon reconveyance of the
Premises to Contractor, the Contractor shall have the exclusive right to use the
Final Plans, subject, however, to whatever rights Lender has to such Final
Plans, if any.
(c) The Final Plans have been approved by DPH. Within two (2) weeks after
the execution of this Agreement, the parties will meet to review and approve the
same, revising them if required. The Owner agrees that it will not unreasonably
withhold its approval of the Final Plans if they conform in material respects to
the preliminary plans which have been approved by the Owner ("Preliminary
Plans"). The parties agree to use their best efforts to reach a prompt and
reasonable conclusion. The parties shall initial the Final Plans as an
indication of their approval of the same.
Section 2.2 - Other professionals. Except as otherwise set forth in Section
2.14, the Owner represents that it shall not engage any architects nor any
engineers, lawyers, consultants, accountants nor other professionals with
respect to the Facility which Contractor will be obligated to pay, other than as
requested by Contractor. Contractor shall have complete discretion to approve
and retain all professionals, contractors and subcontractors who will be
involved in the design, development and construction of the Facility.
Section 2.3 - Failure to Approve Final Plans. If Owner fails to approve the
Final Plans and that failure is a result of Owner's good faith belief that the
Final Plans do not substantially conform to the preliminary plans, Owner shall
give Contractor written notice specifying the areas of the alleged nonconformity
with the Preliminary Plans. Contractor may, at Contractor's cost and expense,
cause the Architect to revise the Final Plans or Contractor may submit the issue
of conformity with the Preliminary Plans to arbitration in accordance with this
Section. Contractor shall give Owner written notice of Contractor's election
within twenty (20) days of Contractor's receipt of Owner's notice of
nonconformity if Contractor determines to seek arbitration. Owner and Contractor
shall, within fifteen (15) days of the date of Contractor's notice, each select
an architect, and the two architects shall, within ten (10) days of their
selection, select a third architect, all of whom shall be licensed to practice
in the Commonwealth of Massachusetts and shall have substantial experience in
health
- 5 -
<PAGE>
care design. The Architect shall not be a member of such panel. The architects
so selected shall review the Preliminary Plan. and the Final Plans and shall,
acting by a majority, render a written decision as to whether the Final Plans
are in substantial conformity with the preliminary Plans and, if not so, shall
state any such deficiency. Such decision shall be rendered within thirty (30)
days of the selection of the third architect, shall set forth in reasonable
detail the reasons for the arbitrators' decision, and shall be binding upon the
parties. If the arbitrators determine that the Final Plans do substantially
conform to the Preliminary Plans, then Owner shall be obligated to reimburse
Contractor for the expenses incurred by the Contractor for the arbitration
proceedings. If the arbitrators determine that the Final Plans do not
substantially conform to the Preliminary Plans, Contractor shall reimburse Owner
for all costs and expenses incurred by Purchaser in connection with the
arbitration proceeding and Contractor shall, at its sole cost and expense, cause
the Architect to revise the Final Plans in accordance with the arbitrators'
written decision.
Section 2.4 - Construction. The Contractor shall perform the work
substantially in accordance with the Final Plans subject to field changes, minor
design changes, and other immaterial changes which Contractor deems appropriate
during the course of construction, provided, however, that any change deemed
material by the Owner and the Contractor, or, if the Owner and the Contractor
cannot agree within seven (7) business days, then in the opinion of an architect
jointly chosen by the Owner and the Contractor ("Second Architect"), shall
require the Owner's written approval, which approval shall not be unreasonably
withheld or delayed. The Owner's granting of such approval shall not cause any
such change to be deemed an Owner Change as defined in Section 2.6. All work
shall be done in a good and workmanlike manner in accordance with applicable
federal and state statutes and regulations, and municipal building codes and
zoning ordinances, and in accordance with the DON and Land Use Approvals, if
required. The construction shall be performed in conformity with requirements of
applicable federal, state and local governmental agencies having jurisdiction of
the Facility, including Life Safety Code requirements imposed by the Federal
Department of Health and Human Services. The Contractor, on behalf of the Owner,
shall obtain all local, state or federal governmental approvals, if any, of the
Final Plans.
Section 2.5 - Personal Property.
(a) Contractor and Owner acknowledge that, incorporated into the Contract
Price (as defined herein) is an allowance of One Hundred Thousand Dollars
($100,000) for certain furniture, fixtures and equipment ("Group III Items")
more specifically set forth on Exhibit "F". The choice of the vendor for the
Group III Items and the nature, makes, models and quantities of the Group
- 6 -
<PAGE>
III Items shall be in the sole discretion of the Owner. The Owner agrees to
choose the vendors for the Group III Items and the makes, models and quantities
of the Group III Items promptly after notice from the Contractor so that the
Facility is equipped in a timely fashion in preparation for its inspection by
any state or local fire marshall, representative of DPH, building inspector, or
other governmental representative having jurisdiction over the Facility.
Contractor will provide all other furniture, fixtures and equipment other than
the Group III Items consistent with the Final Plans and the furnishings list
which is included hereto as Exhibit "G" ("FFE"). The FFE listed on Exhibit "G"
hereto shall be of substantially the same pro-rata quantity (on a per bed basis)
and quality as the furnishings, fixtures and equipment in a certain 123 bed
skilled nursing facility owned and operated by an affiliate of Owner in
Attleboro, Massachusetts ("Attleboro Facility"). All furniture, fixtures and
equipment of a quality or pro-rata quantity (on a per bed basis) exceeding that
of the furnishings, fixtures and equipment of the Attleboro Facility shall be
paid for by the Owner for a price not included in the Contract price.
(b) Reference is made to the 123 bed skilled nursing facility located in
Milford, Massachusetts known as Milford Meadows which is owned and operated by
an affiliate of contractor (the "Milford Facility"). Owner and Contractor agree
that the interior design for the Facility (i.e., wallpaper, carpet, trim and
molding, light fixtures, ceiling finishes, window treatments, cubicle curtains,
etc.) shall be substantially the same as or substantially consistent with the
design of the Milford Facility.
Section 2.6 - Changes.
(a) Owner agrees that Contractor shall have the right to make changes in
the Final Plans if required by any federal, state or local governmental
authority or official or if required due to the unavailability of any
construction material. Any such change shall not be deemed an Owner Change (as
defined below) unless it arises out of a change to the Final Plans requested by
Owner. Owner shall be consulted with respect to any such changes or
substitutions but Contractor shall have final authority to make all decisions
with respect to such changes as long as such changes result in construction,
space, equipment, interior design and exterior design substantially equivalent
in quality and quantity to that shown on the Final Plans provided, however, that
any change deemed material by the Owner and the Contractor, or alternatively by
the Second Architect, shall require the Owner's written approval, which approval
shall not be unreasonably withheld or delayed. Any changes in the Final Plans,
made either at the request of the Owner or required by modifications made by the
Owner ("Owner Changes"), which have the effect of increasing the cost of the
work shall result in an addition to the Contract Price in an amount equal to the
actual net cost thereof for the
- 7 -
<PAGE>
first $100,000 of such Owner Changes and thereafter shall result in an addition
to the Contract Price in an amount equal to the net cost thereof plus ten
percent (l0%). Owner shall pay for any net increase to the Contract Price caused
by any Owner Changes at the time of the payment of the requisition for any such
change order. All change orders Rust be in writing and signed by both Owner and
Contractor.
(b) All work performed and equipment utilized in providing the Facility
with piped medical gases shall be deemed to be an addition requiring a change
order and shall result in a payment to Contractor of Seventy Thousand Dollars
($70,000) in addition to the Contract Price.
Section 2.7 - Commencement of Construction. The parties agree that
construction of the Facility started on August 9, 1993 ("Start Date").
Section 2.8 - Continuity of Construction. Construction, once undertaken,
shall proceed in a continuous and expeditious manner until Physical Completion,
as such term is defined in Section 2.9, is achieved. Physical Completion shall
take place no later than fourteen (14) months from the Start Date (the
"Completion Date"). Any delays caused by acts of God, fire, accident, casualty,
labor strikes or job actions, or any other cause not attributable to the failure
of the Contractor to use reasonable care and due diligence ("Force Majeure"),
however, shall be excused by the Owner, provided that Contractor shall use its
best efforts to minimize any such delays and shall resume construction at the
earliest possible time. Notwithstanding the foregoing, in the event of any delay
caused by a Force Majeure which extends the date of Physical Completion beyond
the Completion Date, the Contractor shall be obligated to pay to the Lender any
additional interest, attorneys', inspection and consulting fees and all other
expenses under the Lender Loan payable as a direct and proximate result of any
such delay (the "Lender Direct Costs") beyond the Completion Date which shall be
the Owner's sole and exclusive remedy am a result of such delay. In the event
that any delay as a result of a Force Majeure extends the date of Physical
Completion beyond the Completion Date by a period of twelve (12) months or more,
the Owner shall within three (3) days after receipt of notice from the
Contractor, deliver to the Contractor a completed and signed application to
transfer the ownership of the DON to the Contractor or its designee. In such
event, the Owner agrees to use its reasonable best efforts to obtain DPH
approval for such transfer which shall include, without limitation, timely and
accurate responses to questions or requests for information from DPH whether
such questions or requests shall be written or oral, the timely completion and
submission of any applications requested by DPH and attendance at any hearings
held by DPH at which the Owner's attendance is requested, mandated or otherwise
- 8 -
<PAGE>
necessary. Upon the approval by DPH of a transfer of the DON back to the
Contractor or its designee, the Owner shall within thirty (30) days of the date
of Owner's receipt of the Contractor's notice thereof, reconvey all right, title
and interest in and to the Premises and the Facility and all rights related
thereto and the Contractor shall assume all of the obligations of the Owner
under the Lender Loan, subject to the consent of Lender, and whether or not
Lender consents to such an assumption shall indemnify the Owner for all
obligations arising under the Lender Loan from and after the date such transfer
occurs pursuant to the terms of the Contractor Indemnification.
Section 2.9 - Completion of Construction. For the purposes of this
Agreement, the terms "physical Completion" or "Physically Completed" shall be
deemed to occur on the date on which the building and improvements described and
set forth in the Final Plans: (i) have been completed in accordance with the
Final Plans, as the same may have been modified in accordance with the terms of
this Agreement; (ii) have been approved for occupancy by the local building
inspector (and by the local Fire Marshall in the event his approval is required)
as evidenced by the issuance of a temporary certificate of occupancy provided
that such temporary certificate of occupancy does not affect actual occupancy of
the Facility by patients or the licensing of the Facility by the DPH; (iii) have
passed the so-called physical plant inspection by the DPH in a manner which does
not prevent the licensing inspection of the facility; and (iv) the FEE has been
furnished such that the Facility may be licensed and such that with respect to
other than patient rooms, the Facility is fully operational, provided, however
that in the event of delays in the furnishing of the FFE occasioned by the
action or inaction of the Owner in choosing or ordering any items of FFE, this
subparagraph (iv) shall not be a condition in determining whether Physical
Completion has occurred. Physical completion shall be deemed to have been
achieved notwithstanding that any of such officials or agencies have issued a
Punch-List listing items requiring completion or correction. Physical completion
shall also be deemed to have been achieved notwithstanding that the Owner may
not yet have satisfied the requirements of the DPH with respect to the
administration of the Facility, medical supplies, medical records, nursing
service and staff, dietary requirements, and other general conditions necessary
to obtain a license for the rendering of nursing services.
Section 2.10 - Punch-List. If, at the time the Facility has been Physically
Completed, there exist any items requiring completion or correction, then the
Contractor agrees to use all reasonable diligence to complete or correct the
items so that each conforms to the Final Plans. The parties shall make a
punch-List of the items requiring completion or correction. Each item on the
Punch-List shall be assigned a reasonable value based upon the Contractor's and
Owner's good faith estimate of the cost
- 9 -
<PAGE>
of completion or correction of the same. Contractor shall deduct one hundred and
fifty percent (150%) of such total cost (the "Punch-List Amount") from the
balance of the Contract Price (as defined in Section 4.1). Owner and the
Contractor shall execute and deliver an agreement concurrently with the approval
of the Punch-List, under the terms of which the Owner shall agree to promptly
pay to the Contractor an amount equal to 150% of the estimated cost of
completion or correction of each item in the Punch-List upon its completion or
correction. If any item is not completed or corrected within a period of ninety
(90) days, at the Owner's option an amount equal to the cost of completion or
correction of the item may be offset against the Punch-List Amount and
Contractor shall have no further obligation with respect to such item. If the
Owner elects not to offset against the Punch List Amount, the Contractor shall
continue to be obligated to correct such items. After all appropriate offsets,
the Owner shall promptly pay the balance of the Punch-List Amount, if any, to
the Contractor.
Section 2.11 - Work and Warranties. At the Closing, Contractor will assign
to Owner, in addition to any warranties created by law, all warranties and
guarantees received from subcontractors and suppliers of equipment and
furnishings, to the extent assignable. Contractor will agree to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of Physical Completion.
Section 2.12 - Subcontractors. The Contractor shall furnish the names of
all subcontractors who supplied equipment, labor or materials having a value in
excess of Fifty Thousand Dollars ($50,000) in connection with the construction
of the improvements on the Premises, after the hiring of such subcontractors.
All of such subcontractors shall contract with the Contractor for the provisions
of equipment, labor and/or materials for the Facility and not with the Owner.
Contractor hereby indemnifies and saves Owner harmless from claims for payment
by any subcontractor of Contractor who furnishes equipment, materials or
supplies or performs labor or services in the prosecution of the work, other
than any supplier of the Group III Items or person performing work in connection
with any Group III Items in excess of the allowance therefor, or otherwise
contracting directly with Owner.
Section 2.13 - Right of Owner to Cure. If the Contractor defaults or
neglects to carry out its obligations under the terms of this Agreement in
accordance with the terms of this Agreement and fails within thirty (30) days
after receipt of written notice from the Owner to commence and continue
correction of such default or neglect with diligence and promptness, the Owner
may, if such default remains uncured after such thirty (30) day period and
without prejudice to other remedies the Owner may have, correct such
deficiencies. In such case an appropriate change
- 10 -
<PAGE>
order shall be issued deducting from payment then or thereafter due the
Contractor, the reasonable costs of correcting such deficiencies. If the
payments then or thereafter due the Contractor are not sufficient to cover the
amount of the deduction, the Contractor shall pay the difference to the Owner.
Section 2.14 - Termination by the Owner.
(a) This Agreement may be terminated by the Owner upon fifteen (15)
business days written notice to the Contractor in the event that
Contractor stops all work on the Facility for a period of fifteen (15)
consecutive business days (and the Lender's construction inspector or
alternatively, a mutually agreeable Second Architect issues a
certificate to such effect) and abandons the Facility, other than as a
result of a Force Majeure or a breach by Owner hereunder; unless
Contractor shall have recommenced Work on the Facility continuously
and diligently during the second fifteen (15) business day notice
period.
(b) If the Contractor materially defaults under this Agreement or
persistently fails or neglects to carry out the material terms of this
Agreement or materially fails to perform the provisions of this
Agreement in a manner that has a material adverse effect upon the
construction or the progress of construction (as certified by the
Architect), the Owner may give written notice to Contractor that the
Owner intends to terminate this Agreement. If the Contractor fails to
correct the material defaults, failure or neglect within fifteen (15)
business days after being given notice, the Owner may then give a
second written notice and, after an additional fifteen (15) business
days if such default remains uncured after such second fifteen (15)
business day cure period or such longer period as may reasonably be
required to effect a cure, provided that the Contractor commences and
diligently prosecutes a cure, the Owner may at the Owner's option,
terminate this Agreement.
(c) In the event of any termination under clause (a) or (b) above, the
Owner shall pay the Contractor for work completed and for proven loss
sustained upon materials, equipment and applicable damages, and, upon
Physical Completion, reasonable profit and overhead. Such reasonable
profit and overhead shall include, without limitation, a sum equal to
the percent complete of the hard construction cost of the Facility as
indicated on a draw request, multiplied by the principal amount of the
price Increase Loan and the Cash Collateral Holdback, offset by the
Owner's actual reasonable costs incurred directly by Owner and
certified by the
- 11 -
<PAGE>
Architect, in excess of the balance of the Contract Price related to
promptly achieving Physical Completion of the Facility after such
termination proceeding in a reasonable manner. Upon any such payment,
all debts and obligations of each party to the other on account of
such termination and this Agreement (except for those representations,
warranties, covenant and indemnities which survive this Agreement)
shall be deemed discharges, terminated and released.
ARTICLE III
FINANCING
Section 3.1 - Construction/Permanent Financing.
(a) Owner has obtained construction and permanent financing (collectively,
the "Financing"), for the Facility from Lender upon terms and conditions
reasonably acceptable to Owner ("Lender Loan"). Owner represents and warrants to
the Contractor that the Lender Loan is of an adequate principal amount to
provide for progress payments to the Contractor in the amount of $9,422,550.
Owner shall be solely responsible for paying the financing costs, legal fees,
title insurance and other so-called "soft costs" associated with the Financing
as described below. Owner shall receive a credit against the Contract Price,
pursuant to Section 4.2(vi), to the extent of such soft costs paid by the
Owner, up to the allowance for such soft costs set forth in the DON as finally
determined by the DPH.
(b) The Contractor and Owner also contemplate that the Premises and
Facility may serve as security for the payment obligations under the Lender Loan
and that the Owner will be the obligor for the repayment of all financial
obligations thereunder. Owner agrees to promptly execute and deliver all
commitments, mortgages, collateral assignments, promissory notes, guaranties,
agreements, documents, certificates, affidavits, and other writings required to
be executed by Lender in connection with the Lender Loan.
(c) The cost of securing financing in an amount equal to the allowance for
such items under the final DPH approved DON and interest which accrues on all
financing prior to the date of Physical Completion in an amount equal to the
allowance for such item under the final DPH approved DON are included in the
Contract Price, provided, however, that the Owner shall pay loan fees interest
and attorneys' fees in excess of such amounts incurred in connection with the
Lender Loan. In the event loan fees are assessed or interest accrues beyond the
amount in the maximum capital allowance under the DON as a result of delays in
construction which are the Owner's fault, then the Owner shall pay such
additional loan fees or interest. In the event that the
-12-
<PAGE>
Contractor is solely or in part responsible for delays in construction beyond
the Completion Date, or in the event of a Force Majeure pursuant to Section 2.8,
the Contractor shall be responsible to the Owner for the increased interest
costs or any other Lender Direct Costs that Owner incurred for the period of
such delay which are attributable to the Contractor or such Force Majeure.
However, in no event shall the Contractor be responsible for any delays in
construction so long as the Facility is completed by the Completion Date. In any
event of an increase in such fees or interest the Contractor will assist the
Owner in attempting to obtain an increase in the maximum expenditure under the
DON to cover such increase.
Section 3.2 - Price Increase Loan.
(a) At the Closing, subject to the contingencies set forth in Article VI
and elsewhere in this Agreement, in the event that the Contractor chooses, in
its sole discretion, to increase the number of licensed beds at the Facility as
set forth in Section 1.3, the Contractor shall provide to the Owner additional
financing in an amount equal to the resulting increase in the Contract Price
("Price Increase Loan"), in accordance with Section 1.3 until such increase is
funded to the Owner under the Lender Loan.
(b) The Price Increase Loan shall bear no interest and shall be due and
payable only: (i) upon the Facility's census reaching one hundred twelve (112)
patients; and (ii) the Lender's release of loan proceeds sufficient to pay the
Price Increase Loan, unless Lender refuses to release such loan proceeds as a
result of the matters set forth in clauses (i), (ii) or (iii) of Section 7.17
hereof. The Price Increase Loan may be prepaid without penalty. The Price
Increase Loan shall be due and payable, at the option of the Contractor, if
after Physical Completion the Owner shall:
1) admit in writing its inability to pay its debts as they become
due;
2) file a petition in bankruptcy or a petition to take advantage of
any insolvency act;
3) make an assignment for the benefit of its creditors;
4) consent to the appointment of a receiver for itself or the whole
or substantially all of its property;
5) as a result of a petition in bankruptcy filed against it without
such petition being dismissed within 120 days after the date of
such filing;
- 13 -
<PAGE>
6) file a petition or answer seeking reorganization or arrangement
or other aid or relief under any bankruptcy or insolvency laws or
any other lawful relief of debtors; or
7) transfer any interest in the Facility, either directly or
indirectly except for a bequest or intestate succession arising
out of the death of Forrest L. Preston and except for transfers
to affiliates of the Owner without the prior written consent of
Contractor.
ARTICLE IV
Closing
Section 4.1 - Date of Closing. The conveyance of title to the Premises and
the payment to Contractor of the Contractor's initial requisition to the extent
approved by Owner and Lender, which shall include, all out of pocket expenses
incurred by Contractor and its affiliates through the closing date with respect
to the Facility, including without limitation, for architects, engineers,
attorneys and consultants; the amount, if any, expended by Contractor in
connection with the acquisition of the Premises; and the amount expended by the
Contractor in the development and construction of the Premises, shall take place
simultaneously with the consummation of the Lender Loan (the "Closing") which
shall take place on or before June 30, 1994. Said payment to the Contractor at
Closing shall be limited to the maximum amount funded by Lender and shall be
credited against the Contract Price; provided, however, that nothing herein
shall abrogate the obligation of the Owner to pay the Contract Price in
accordance with Section 4.3.
Section 4.2 - Contract Price. The price to be paid by the Owner for all of
the materials and services to be provided by Contractor hereunder ("Contract
Price") shall be equal to the sum of: (i) the final maximum capital expenditure
("MCE") amount allowed under the DON, as determined by the DPH based upon the
Contractor's submission pursuant to 105 C.M.R. l00.551(I)(l)-(5), which
submission is to be made within 180 days after Final Plan approval; plus (ii)
$500,000; plus (iii) the cost of any additional furniture, fixtures and
equipment if not previously paid by the Owner (as described in Section 2.5);
plus (iv) any Owner Changes (as described in Section 2.6); plus (v) $731,899 in
the event of the Bed Increase to the extent such amount is not included in the
MCE in accordance with subparagraph (i) above, minus any Non-Reimbursable
Expenses; minus (vi) any costs or expenses, if any, allowed in the MCE up to the
amount of the line item in the MCE for each such item which has been paid
directly by Owner after obtaining the approval of the Contractor.
- 14 -
<PAGE>
Section 4.3 - Payment of the Contract Price. The Owner shall pay the
Contract Price at the following times and in the following manner:
(a) The expenses to be reimbursed at the Closing in accordance with Section
4.1 will be paid at Closing. Prior to the Closing, the Contractor and the Owner
shall develop and agree upon a schedule of values for the Facility based upon
the line items in the MCE, a copy of which is attached hereto as Exhibit "I"
which shall be initialled by the Contractor and the Owner to evidence their
agreement and be approved by Lender ("Schedule of Values"). Based upon
applications for payment submitted to the Architect by the Contractor and
verified by Owner, and Certificates for Payment issued by the Architect, the
general contractor, and the Contractor, the Owner shall submit applications for
payment requesting Lender to make progress payments on account of certain items
on the Schedule of Values based upon a percent complete basis as certified by
the Architect to the Contractor. Certain other items on the Schedule of Values
will be paid as incurred. The Cash Collateral Holdback (as hereinafter defined)
shall be paid as set forth in Section 4.3(c) and the Price Increase Loan shall
be paid as set forth in Section 4.3(b). The period covered by each Application
for Payment shall be one calendar month ending on the last day of the month.
Each Application for Payment shall be based upon the most recent Schedule of
Values submitted by the Contractor and approved by Owner and Lender, which
approval shall not be unreasonably withheld or delayed. Applications for Payment
shall show the amount due for each item shown on said Schedule of Values as of
the end of the period covered by the Application for Payment. The amount of each
such progress payment which is to be paid based on a percent complete basis
shall be the sum of (i) the product of multiplying that portion of such item
properly allocable to completed work for such item by the percentage of
completion of that item, and (ii) the portion of such item properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the work or suitably stored off the site, minus the aggregate
of previous payments made by the Owner for such item and minus such retainage as
is typically required in other construction loans obtained by Owner's
affiliates. Notwithstanding anything set forth in this paragraph to the
contrary, the terms and expense of progress payments on account of the Contract
Price made from the Owner to the Contractor shall be subject to the terms and
conditions of the Lender Loan as they relate to the Contractor's obligations.
Owner shall use its best efforts to have the Certificates for Payment approved
by and paid by Lender. In the event that Owner does not approve an application
for payment, the Owner will within two (2) business days notify Contractor, in
writing, of the reasons for the withholding of such approval. If Contractor and
Owner cannot agree on a revised amount the Owner will promptly execute an
application for payment for the amount
- 15 -
<PAGE>
for which Owner feels is due and paying in accordance with the terms of this
Agreement. If the Owner does not issue an application for payment or a written
notification to Contractor of its reason for withholding an application for
payment in accordance with this Agreement, through no fault of Contractor,
within five business days after the receipt of an application for payment or if
Owner does not request that Lender pay Contractor within five days after the
receipt by Owner of an application for payment, then Contractor1 may upon seven
additional business days after written notice to Owner and Lender, stop the work
under this Agreement until payment of the amount owing has been received. Any
such period of stoppage shall be added to the period of time during which the
Contractor is to achieve Physical Completion as set forth in Section 2.8.
(b) That portion of the Contract Price relating to the Price Increase Loan
shall be payable in accordance with the terms of Section 3.2.
(c) That portion of the Contract Price in the amount of Five Hundred
Thousand Dollars ($500,000) (the "Cash Collateral Holdback") shall be due upon
Physical Completion but shall not be payable until the Owner's achievement of a
debt service coverage ratio at the Facility of 1.2 to 1 as determined by Lender,
and the Lender's release of the Cash Collateral Holdback; provided, however,
that the Cash Collateral Holdback shall be payable by the Owner in any event
upon the Facility achieving a debt service coverage ratio of 1.2 to 1 if Lender
refuses to release the Owner's cash collateral held by Lender as a result of any
default of Owner, or any of its affiliates, under any agreement between Owner,
or any of its affiliates, and Lender not attributable to any action or inaction
of or by the Contractor. The Cash Collateral Holdback shall bear interest from
the date of Physical Completion at the rate of the base rate then in effect at
the Bank of Boston, plus three percent (3%) per annum until paid. Owner shall
assign its rights to the first $500,000 of such collateral plus interest thereon
to Contractor pursuant to a collateral assignment thereof in the form attached
as Exhibit "H" which the Owner hereby agrees to execute and deliver to the
Contractor upon Physical Completion.
(d) In the event that any of Contractor's approved requisitions, or
payments set forth in subsections (b) or (c) above, are not paid when due,
solely due to delays incurred through the fault of or through circumstances
under the control of the Owner or its affiliates, the Owner shall pay interest
to the Contractor, monthly in arrears on any such outstanding amount. Such
monthly interest shall be computed at a rate equal to the base rate then in
effect at the Bank of Boston, plus three percent (3%) per annum.
- 16 -
<PAGE>
(e) Owner's obligation to pay the Price Increase Loan and Owner's
obligation to pay the Cash Collateral Holdback may be offset by proven losses
sustained upon materials and equipment caused by the Contractor's material
breach of this Agreement which is not cured within the applicable time period
therefor. In the event that the Owner chooses to exercise its right of offset
under this Section 4.3(e), it shall first provide the Contractor with written
notice of such intent, to offset, setting forth the reasons therefor. Contractor
shall have a period of seven days from its receipt of the Owner's notice within
which to notify the Owner of the Contractor's desire to contest such offset. In
the event that the Owner and the Contractor cannot agree within seven (7) days
from the date of the Contractor's notice whether such offset is appropriate, the
parties agree to submit such issue to binding arbitration before the American
Arbitration Association in Boston, and agree to be bound by the decision
rendered in any such arbitration.
Section 4.4 - Documents to be Delivered by Contractor at Closing. At the
Closing, the Contractor shall deliver, or shall cause to be delivered, the
following to the Owner:
(a) A quitclaim deed with covenants against grantor's acts;
(b) A bill of sale;
(c) The assignment of Land Use Approvals set forth in Section 1.3;
(d) The survey described in Section 1.2;
(e) A hazardous waste affidavit;
(f) The insurance certificates described in Section 5.1(b);
(g) The affidavits and waivers described in Section 5.1(c);
(h) The Contractor's initial requisition and supporting information
relating thereto; and
(i) Final approval of the transfer of the DON and an assignment thereof.
Section 4.5 - Documents to be Delivered by the Owner at Closing. At the
Closing the Owner shall deliver the following to the Contractor:
(a) The payment set forth in Section 4.1; and
(b) The license to Contractor set forth in Section 1.3(a).
- 17 -
<PAGE>
ARTICLE V
Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Contractor shall have the following
responsibilities:
(a) To obtain and pay for the Certificate of occupancy;
(b) The Contractor shall at all times, commencing with the date upon which
construction begins, carry or cause to be carried the following types of
insurance with an insurance carrier or carriers reasonably acceptable to Lender:
(i) Worker's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000
for any one accident or disaster; and property damage coverage
limits of not less than $100,000; all of which insurance shall
name the Owner and Lender, if any, as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief, covering all improvements to be erected hereunder and
all materials for the same which are on or about the Premises, in
an amount equal to the full insurable value of such improvements
and materials; such insurance, to be payable to Owner, Contractor
and Lender, if any, as their interests may appear, with, standard
mortgage endorsement to Lender or its assigns as mortgagee.
(iv) Comprehensive general liability under a primary policy and
umbrella policy with limits not less than $5,000,000.00 which
will include the following:
(a) Contractor's Liability;
(b) Contractual Liability;
(c) Owners and Contractors protective Liability;
(d) Completed Operations Liability;
(e) Products Liability; and
(f) Personal Injury
- 18 -
<PAGE>
(v) Any other insurance required of the Contractor by Lender.
The Contractor shall furnish to the Owner and Lender, if any,
duplicate policies of insurance as set forth in Subparagraphs (i),
(ii), (iii) and (iv) hereof. The coverages described above may be
carried by the Contractor under an Owner's Protective Liability Policy
with the same limits of coverage, naming Owner, which policy shall be
subject to the Owner's reasonable approval. The Owner shall be named
as an additional insured on such policies as my be appropriate. Each
of such policies shall contain, to the extent customarily obtainable
in Massachusetts, a provision to the effect that they may not be
canceled except upon ten days' prior written notice to the Owner and
Lender.
(c) At the time of Closing, and with each requisition, Contractor shall
deliver to Owner the following:
(i) a duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials for the
construction of the Facility;
(ii) an affidavit to the title insurance company enabling Owner
to obtain title insurance coverage insuring the Owner and
Lender, if any, against collection as enforcement of
mechanics liens against the Premises;
(iii) Such other documents or instruments as Owner may reasonably
require or as Lender may require of Contractor.
Section 5.2 - Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities:
(a) To cause Owner's counsel to render legal opinions to Lender with
respect to the Owner's obligations, warranties, and representations set forth
herein (as they pertain to legal matters) and with respect to other legal
opinions (pertaining to the Owner, the Facility and the Premises) as any Lender
may require.
(b) Owner is solely responsible for obtaining financing as set forth in
Section 3.1(a). Owner will use its best efforts to consummate financing for the
contemplated construction, including the furnishing of financial statements,
providing an appraisal of the Premises and Facility and by execution of
applications, notes, guaranties, mortgages, assumption agreements and other
documents reasonably necessary to effectuate such financing, and Owner shall pay
all costs associated with such financing (which
- 19 -
<PAGE>
costs shall be deducted from the Contract Price) in accordance with Section
3.1(d).
(c) To keep the DON in full force and effect as the holder thereof,
subsequent to the transfer of the DON to the Owner.
Section 5.3 - Indemnification. The Contractor hereby agrees to indemnify
and hold the Owner harmless from all liabilities, claims, and demands for
personal injury or property damage arising out of or caused by any act or
omission of Contractor, its subcontractors, agents, or employees, or, to the
extent not caused by any action or inaction of Owner, its agents or employees,
arising in or about the Premises for the period from the date of this Agreement
until Physical Completion. The Contractor further covenants to use proper care
and caution in the performance of its work hereunder so as not to cause damage
to any adjoining or adjacent property.
ARTICLE VI
Contingencies
Section 6.1 - Required Occurrences. At the time of Closing if not otherwise
specified below, unless such period is extended by written notice of the Owner,
this Agreement and the undertakings of Contractor or the Owner shall, at the
election of Contractor (as to subparagraph (f) below only) or the Owner (as to
subparagraphs (a) through (f) below), as the case may be, be contingent upon the
occurrence of each of the following contingencies:
(a) Additional Approvals, Licenses, Permits, Easements and Premises. All of
the zoning approvals, additional licenses, and additional easements, if any,
needed for the construction of the Facility shall have been obtained in form
reasonably satisfactory to Owner, Contractor and Lender, with no limitations or
conditions which are reasonably unacceptable to Contractor, Owner and Lender,
and no appeals of said additional licenses shall have been taken during the
applicable appeal periods by Closing.
(b) Utility Letters. Letters in form reasonably satisfactory to Contractor,
Owner and Lender confirming the availability of all utility services shall be
obtained by Contractor by Closing.
(c) Environmental Report. Receipt by Closing of an environmental report
reasonably satisfactory to Owner and Lender indicating that the premises are
free of any material environmental contamination.
- 20 -
<PAGE>
(d) Title and Survey. Owner shall have received by Closing evidence
reasonably satisfactory to it and Lender that the title to the premises is good,
clear record and marketable title free of encumbrances except for the Existing
Encumbrances, those other encumbrances permitted by Section 1.2 and those which
will not materially and adversely effect the construction and use of the
Facility thereon and a survey of the Premises reasonably acceptable to Owner and
Lender.
(e) Contractor Indemnification. An indemnification reasonably satisfactory
in form and in substance to Owner, Forrest L. Preston and Life Care Centers of
America, Inc., by the Contractor against costs and expenses incurred under the
Lender Loan in the event that the transfer of the DOW back to the Contractor is
made pursuant to Section 2.8 ("Contractor Indemnification") so long as the Owner
transfers the Facility and the premises back to the Contractor's nominee, a copy
of which is attached hereto as Exhibit "J".
(f) The continued accuracy of all of the representations and warranties of
each party, as of the Closing.
(g) The DON shall have been transferred to the Owner and is in full force
and effect.
Section 6.2 - Failure of Contingencies. In the event that any one or more
of the contingencies set forth in this Article is not satisfied or waived by the
Owner, or the Contractor in the case of a failure of the contingency in
subparagraph (f) caused by Owner ("Owner's Default"), in writing at the time of
Closing or within such other period of time set forth above applicable to such
contingency, then, upon notice to the Contractor (or the Owner, in the case of
Owner's Default) and a fifteen (15) day period during which Contractor (or the
Owner, in the case of Owner's Default) may cause such contingency to be
satisfied, the Owners (or the Contractor, in the case of Owner's Default) may
terminate this Agreement. In such event, neither party shall have further
responsibility or liability to the other except for Contractor' 5
indemnification of the Owner pursuant to Section 5.3, which shall survive the
Closing or the termination of this Agreement.
Section 6.3 - Default. (a) In the event that the Owner defaults in any of
its obligations under Section 4.3 hereof after fifteen (15) business days
written notice and such default remains uncured fifteen (15) business days after
the expiration of the first fifteen (l5) business day period ("Event of
Default"), the Owner shall within three (3) days after receipt of notice from
the Contractor, deliver to the Contractor a completed and signed application. to
transfer the ownership of the DOW to the Contractor or its designee. In such
event, the Owner agrees to use its reasonable best efforts to obtain DPH
approval for
- 21 -
<PAGE>
such transfer which shall include, without limitation, timely and accurate
responses to questions or requests for information from DPH whether such
questions or requests shall be written or oral, the timely completion and
submission of any applications requested by DPH and attendance at any hearings
held by DPH at which the Owner's attendance is requested, mandated or otherwise
necessary. In the event of such a default by the Owner in its obligations under
this Agreement, and the approval of the retransfer of the DON to the Contractor
is approved by DPH, the Owner agrees that certain of the damages suffered by the
Contractor are not readily susceptible to calculation. Therefore, in such event,
the Owner agrees to pay the Contractor the sum of Five Hundred Thousand Dollars
($500,000) as liquidated damages and not as penalty, within seven (7) days after
receipt of notice of the approval by DPH of the retransfer of the DON, the
Premises, and the Facility to the Contractor. In the case of an Event of
Default, the foregoing shall be the Contractor's exclusive remedy. If an Event
of Default occurs and, for whatever reason, the DON, the Premises or the
Facility are not retransferred to the Contractor, the Owner shall pay to the
Contractor all damages to which the Contractor shall be entitled at law or in
equity within seven (7) days after the receipt by the Owner of notice from the
Contractor of such Event of Default and the failure of the Owner to retransfer
the DON, the Premises and the Facility to the Contractor with the approval of
the DPH. Upon the approval by DPH of a transfer of the DON back to the
Contractor or its designee, the Owner shall within ten (10) days of the date of
Owner's receipt of the Contractor's notice, reconvey to the Contractor or its
nominee all right, title and interest in and to the Premises and the Facility
and all rights related thereto.
(b) In the event the Owner defaults under any of its obligations under this
Agreement other than those set forth in Section 4.3 after fifteen (15) business
days written notice from the Contractor to the Owner and an additional fifteen
(15) business days within which to cure, the Contractor may seek whatever
damages and use whatever remedies it may have at law or in equity.
ARTICLE VII
Concluding provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent
and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto), which alone fully and completely
expresses their understanding with respect to its subject matters.
- 22 -
<PAGE>
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
Section 7.5 - No Brokers. Contractor and Owner each represent and warrant
to the other that no broker or finder has acted on its behalf in connection with
this Agreement, or the transactions contemplated hereby or referred to herein.
Contractor and Owner each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
other broker, finder or similar agent claiming to have been employed by or on
behalf of such party.
Section 7.6 - Assignment. Neither Owner nor Contractor shall have the right
to assign its rights and delegate its obligations under this Agreement to
another entity or person without the prior written consent of the other parties
hereto.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by any nationally recognized
overnight carrier and postage prepaid as follows:
(a) In the event that notice is directed to Owner, it shall be sent to
Auburn Medical Investors Limited partnership, 3580 Keith Street, N.W.,
Cleveland, Tennessee 37320-3480, Attention: Corporate Counsel, or at such other
address or addresses Owner shall from time to time designate by notice to
Contractor.
(b) In the event that notice is directed to Contractor, it shall be sent to
Attention: president, Continuum Care Corporation, River Place, 57 River Street,
Wellesley, MA 02181, and a copy thereof mailed to' Corporate Counsel, at 15
Walnut Street, Wellesley, MA 02181; or at such other address or addresses as
Contractor shall from time to time designate by notice to Owner with a copy to:
Joseph A. Vitale, Esq., Levy & Droney, 74 Batterson Park Road, Farmington,
Connecticut 06034. The effective date of any such notice shall be the earlier of
actual receipt by the addressee or three (3) days after such notice is properly
deposited for mailing.
- 23 -
<PAGE>
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provision of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Facility or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, Sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date of the execution of this Agreement.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
Section 7.16 - Survival. Each of the representations, warranties and
indemnifications of the parties hereto shall survive the Closing or the
termination of this Agreement; provided, however, that the monetary obligations
of the parties will be paid in accordance with Section 2.14(c) in the event of a
termination of this Agreement by the Owner pursuant thereto.
Section 7.17 - Compliance with Loan Documents. Notwithstanding anything set
forth herein to the contrary, in the event that any of the terms or conditions
of this Agreement are inconsistent with the terms or conditions of the Lender's
Loan Documents, the terms and conditions of the Lender's Loan
- 24 -
<PAGE>
Documents shall control, provided, however, that in the event of a default under
any of the Loan Documents either (i) attributable to any action or inaction of
the Owner which is not attributable to any action or inaction by or of the
Contractor or (ii) as a result of any cross-default with any other loan between
the Owner, or any of its affiliates, and the Lender, or any of its affiliates or
(iii) not attributable to the Contractor, then the obligations of the Owner to
the Contractor hereunder shall remain unaffected and the provisions of this
Agreement shall control; provided, however, that Owner shall not consent to any
material amendment of any of the Loan Documents without the prior written
consent of the Contractor. Any material amendment to the Lender Loan Documents
made without the prior written consent of the Contractor shall not be binding on
the Contractor. The Owner covenants to cause the Lender to provide to the
Contractor true, accurate and complete copies of all of the Loan Documents.
Dated as of this 3rd day of March, 1994.
Witness: AUBURN MEDICAL INVESTORS LIMITED
PARTNERSHIP
By: Developers Investment Company, Inc.
Corp. GP
/s/ [ILLEGIBLE] By: /s/ John P. O'Brien Jr.
- ------------------------------- --------------------------------------
Its
/s/ [ILLEGIBLE] Duly Authorized Vice-President
- ------------------------------- --------------------------------------
CONTINUUM CARE CORPORATION
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ------------------------------- --------------------------------------
Its Vice-President
/s/ [ILLEGIBLE] Duly-Authorized
- -------------------------------
State of Tennessee )
)
County of Bradley )
The foregoing instrument was acknowledged before me this 3rd day of March,
1994, by John P. O'Brien, Vice President, Developers Investment Company, Inc., a
corporate general partner of Auburn Medical Investors Limited Partnership, a
Tennessee limited partnership on behalf of the limited partnership.
/s/ Cindy Cross
[SEAL] --------------------------------
Notary Public
-25-
<PAGE>
State of Massachusetts )
) ss:
County of Norfolk )
The foregoing was acknowledged before me this 17 day of March, 1994, by
Craig J. Wilkes, Vice President of Continuum Care Corporation, a Delaware
corporation on behalf of the corporation.
/s/ Carol A. Blanchard
---------------------------------
Notary Public
My Commission Expires June 30, 2000
GUARANTY
The obligations of the Owner hereunder are herby irrevocably and
unconditionally guarantied by Forrest L. Preston.
WITNESSES:
/s/ [ILLEGIBLE] /s/ Forrest L. Preston
- ------------------------------- --------------------------------------
/s/ [ILLEGIBLE]
- -------------------------------
-26-
<PAGE>
CONTINUUM CARE CORPORATION
57 River Street
Wellesly, MA 02181
March 3, 1994
Auburn Medical Investors Limited Partnership
c/o Life Care Centers of America, Inc.
3570 Keith Street Northwest
Cleveland, TN 37312
Attention: Forrest L. Preston
Re: Turnkey Construction Contract between Continuum Care Corporation and
Auburn Medical Investors Limited Partnership ("Agreement")
Gentlemen:
This letter agreement is to clarify and supplement the referenced
Agreement.
Capitalized words or phrases not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
The Contractor and the Owner agree that:
a. The Schedule of Values for the Facility referred to in Section 4.3 of
the Agreement is attached hereto as Exhibit "A" and is approved in its
entirety.
b. The Contractor's first application for payment, a copy of which is
attached hereto as Exhibit "B" is approved and shall be submitted by
the Owner to the Lender in the form set forth on Exhibit "B" at such
time as Contractor directs Owner to do so either at or after the
Closing. In the event that the first application fee payment is
submitted after the Closing, it will include the amounts set forth on
Exhibit "B" and such additional amounts as are due to Contractor in
accordance with the Agreement.
c. The Agreement is in full force and effect and, except as set forth
herein, remains unmodified.
Very truly yours,
CONTINUUM CARE CORPORATION
By /s/ [ILLEGIBLE]
--------------------------------
Its President
AGREED:
AUBURN MEDICAL INVESTORS LIMITED PARTNERSHIP
By: Developers Investment Company, Inc.,
its General Partner
By: /s/ John P. O'Brien Jr.
----------------------------------
John P. O'Brien, Jr.,
Vice President
<PAGE>
[Letterhead of Life Care Centers of America]
March 18, 1994
Mr. Bernie Plante
Continuum Care Corporation
River Place, 57 River Street
Wellesley, Massachusetts 02181
Dear Bernie:
Please find attached a revised "Schedule A" for Auburn Medical Investors to
replace the one provided to you on March 17, 1994. This schedule has been
adjusted to include a project contingency line item. The total budget has not
changed, only the "non-turnkey" categories have been adjusted.
Sincerely,
/s/ John P. O'Brien Jr.
- -----------------------------
For: Auburn Medical Investors
By: Developers Investment Company, Inc.
Its General Partner
John P. O'Brien, Jr., Vice President
ddm
Attachment
pc: Henry Day
<PAGE>
EXHIBIT A
SCHEDULE OF VALUES
AUBURN MEDICAL INVESTORS
Total
Budget
Land Acquisition $ 450,000.00
Site Development $ 716,007.00
Construction $ 6,189,804.00
Bed Addition $ 731,900.00
Furniture, Fixtures & Equipment $ 482,363.00
Pre & Post Filing $ 53,230.00
Financing Fees $ 213,068.00
Construction Interest $ 556,344.00
Development/Collateral Rsrv $ 509,250.00
Contingency $ 29,934.00
Operating Reserve $ 500,000.00
--------------
GROSS $10,431,900.00
==============
<PAGE>
EXHIBIT TO SIDE LETTER
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
CONTINUUM CARE CORPORATION PROJECT APPLICATION AND PROJECT CERTIFICATION FOR PAYMENT
- --------------------------------------------------------------------------------------------------------------------------
PAGE 1 OF 3 PAGES
TO (OWNER) AUBURN MEDICAL INVESTORS PROJECT: AUBURN - "LIFE CARE" APPLICATION NO: 1-R
LIMITED PARTNERSHIP DATE: 3/2/94
3520 KEITH STREET, N.W. CONSTRUCTION MANAGER: PERIOD FROM: 8/9/93
CLEVELAND, TN 37320-3480 CONTINUUM CARE CORPORATION PERIOD TO: 1/31/94
PROJECT NO: 911
ATTENTION: MR. DAVID GOOCH CONTRACT DATE: 8/9/93
- --------------------------------------------------------------------------------------------------------------------------
PROJECT APPLICATION FOR PAYMENT
The undersigned Construction Manager certifies that to the best of the
Construction Manager's knowledge, information and belief Work covered by this
Project Application for Payment has been completed in accordance with the
Contract Documents, that all the amounts have been paid by the Contractors for
Work for which previous Project Certificates for Payments were issued and
payments received from the Owner, and that current payment shown herein is now
due.
-------------
CONTINUUM CARE CORPORATION Current Payment Due $2,800,681.00
CONSTRUCTION MANAGER -------------
Total of Amounts Certified $2,800.681.00
-------------
By:______________________________ Date:______________
John Paul Grunz
Vice President of Construction
NOTARY: AUTHORIZED OWNER: AUBURN MEDICAL INVESTORS
The Commonwealth of MASSACHUSETTS, County of NORFOLK LIMITED PARTNERSHIP
3520 KEITH STREET, N.W.
Subscribed and sworn to before me this ____ day of ________, 1994 CLEVELAND, TN 37320-3480
Notary Public:___________________________________________________ By:__________________________________ Date:_________
MR. DAVID GOOCH
My Commission expires:___________________________________________
OR
By:__________________________________ Date:_________
MR. RICHARD STERN
</TABLE>
EXHIBIT "B"
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
CONTINUUM CARE CORPORATION PROJECT APPLICATION AND PROJECT CERTIFICATION FOR PAYMENT
- --------------------------------------------------------------------------------------------------------------------------
PAGE 2 OF 3 PAGES
TO (OWNER) AUBURN MEDICAL INVESTORS PROJECT: AUBURN - "LIFE CARE" APPLICATION NO: 1-R
LIMITED PARTNERSHIP DATE: 3/2/94
3520 KEITH STREET, N.W. CONSTRUCTION MANAGER: PERIOD FROM: 8/9/93
CLEVELAND, TN 37320-3480 CONTINUUM CARE CORPORATION PERIOD TO: 1/31/94
PROJECT NO: 911
ATTENTION: MR. DAVID GOOCH CONTRACT DATE: 8/9/93
- --------------------------------------------------------------------------------------------------------------------------
PROJECT APPLICATION FOR PAYMENT
Application is made for Payment, as shown below, in connection with the Project.
Project Appication Summary, is attached.
-------------
TOTAL CONTRACT SUMS (Item A Totals) 9,892,716.00
-------------
-------------
Total Net Changes by Change Orders 0.00
-------------
-------------
TOTAL CONTRACT SUM TO DATE (Item C Totals) 10,431,800.00
-------------
-------------
TOTAL COMPLETED & STORED TO DATE 2,956,957.00
(Item G Totals on Page 3) -------------
RETAINAGE (Item I Totals on Page 3) (156,276.00)
-------------
-------------
GENERAL CONTRACTOR DRAW REDUCTION 0.00
-------------
-------------
LESS PREVIOUS TOTAL PAYMENTS 0.00
-------------
-------------
CURRENT PAYMENT DUE 2,800,681.00
-------------
-------------
TOTAL OF AMOUNTS CERTIFIED 2,800,681.00
-------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CONTINUUM CARE CORPORATION PROJECT APPLICATION AND PROJECT CERTIFICATION FOR PAYMENT
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 3 OF 3 PAGES
Contractor's signed Certification is attached. PROJECT: AUBURN - "LIFE CARE" APPLICATION NO: 1-R
Use Column I on Contracts where variable DATE: 3/2/94
retainage for line items may apply. CONSTRUCTION MANAGER: PERIOD FROM: 8/9/93
CONTINUUM CARE CORPORATION PERIOD TO: 1/31/94
PROJECT NO: 911
CONTRACT DATE: 8/9/93
- ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F G H I
- ------------------------------------------------------------------------------------------------------------------------------------
Item Description of Work Scheduled Work Completed Materials Total % Balance Retainage
No. Value ------------------------- Presently Completed (G/C) To Finish
Previous This Period Stored And Stored (C-G)
Application Not in To Date
D or E (D+E+F)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1. DELETED 0 0 0 ERR 0 0
2. LAND ACQUISITION 450,000 450,000 450,000 100% 0 0
3. LAND USE PERMITTING 515,000 500,000 500,000 97% 15,000 0
4. ARCHITECT/MEP/STRUCT DESIGN 85,000 50,000 50,000 59% 35,000 0
5. KITCHEN DESIGN 4,000 4,000 4,000 100% 0 0
6. CIVIL ENGINEERING TESTING 40,000 4,000 4,000 10% 36,000 0
7. TAXES AND INSURANCE 20,000 10,000 10,000 50% 10,000 0
8. DEVELOPMENT & CONSTR. MANAGEMENT 216,771 67,200 67,200 31% 149,571 0
9. MEDISTRUST DUE DILIGENCE 15,000 15,000 15,000 100% 0 0
10. MEDITRUST LEGAL/LOAN CLOSING 40,000 40,000 40,000 100% 0 0
11. CONSTRUCTION COMMITTMENT FEE 194,000 194,000 194,000 100% 0 0
12. PERMENT LOAN COMMITTMENT FEE 208,640 0 0% 208,640 0
13. CONSTR. PERIOD INTEREST RESERVE 416,700 0 0% 416,700 0
14. CCC/LIFE CARE TITLE/LOAN CLOSING 60,000 60,000 60,000 100% 0 0
15. EARTHWORK 539,900 399,299 399,299 74% 140,601 39,930
16. LANDSCAPING/LIGHTING 75,000 0 0% 75,000 0
17. UTILITY CONNECTIONS 40,000 0 0% 40,000 0
18. LEDGE WATER CONDITIONS 50,000 0 0% 50,000 0
19. BUILDING SHELL 4,515,000 1,163,458 1,163,458 26% 3,351,542 116,346
20. FF & E/CARPET/WALLPAPER 670,000 0 0% 670,000 0
21. KITCHEN EQUIPMENT 118,000 0 0% 118,000 0
22. LAUNDRY EQUIPMENT 22,000 0 0% 22,000 0
23. GROUP 111 ALLOWANCE 100,000 0 0% 100,000 0
24. CONTINGENCY 295,639 0 0% 295,639 0
25. WORKING CAPITAL 500,000 0 0% 500,000 0
26. 8/12 BED ADDITIONS 731,900 0 0% 731,900 0
27. CREDIT ENHANCEMENT 509,250
- ------------------------------------------------------------------------------------------------------------------------------------
10,431,800 0 2,956,957 0 2,956,957 28% 6,965,593 156,276
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[Letterhead of Continuum Care Corporation]
VIA FEDERAL EXPRESS
March 21, 1994
Mr. Richard Stern
Life Care Centers of America, Inc.
3520 Keith Street, N.W.
Cleveland, TN 37320
Dear Rick:
Attached are copies of the countersigned side letters relating to the
turnkey agreements, which, as you will note were delivered to Kevin Maley at
Meditrust.
Sincerely,
/s/ Bernard N. Plante
- ------------------------
Bernard N. Plante
BNP:gp
bp1128
Enclosures
<PAGE>
[Letterhead of Continuum Care]
VIA FACSIMILE
March 18, 1994
Mr. Kevin Maley
Meditrust
128 Technology Center
Waltham, MA 02154
RE: First Requisition
Raynham, Auburn and Plymouth, MA
Dear Kevin:
Attached please find a Schedule of Values and first requisition in the amount of
$1,791,091 for Plymouth, MA; $2,937,257 for Raynham, MA; and, $2,956,957 for
Auburn, MA.
Rick Stern and I must further refine the requisition format in an attempt to
bring it into conformance with DPH line items.
As I have not yet received a return call from my several messages left at your
offices today, Geoff Heald has been instructed to alert Andy Urban and First
American Title to hold their Continuum Care Corporation payments and not record
any documents until CCC receives word that Don Thompson's inspections and
Meditrust's review of the first requisition are satisfactory.
Sincerely,
/s/ Bernard N. Plante
- --------------------------
Bernard N. Plante
BNP: gp
bp1122
Enclosures
cc: Rob Eustis
Geoffrey Hargreaves-Heald
Andrew Urban
Joseph Sarno
ASSIGNMENT AGREEMENT
(Plymouth, Massachusetts)
THIS ASSIGNMENT AGREEMENT (the "Agreement") is entered into as of the 6th
day of June, 1996, by and between Continuum Care of Massachusetts, Inc.
("Assignor") and CareMatrix of Massachusetts, Inc. ("Assignee").
WITNESSETH:
WHEREAS, Continuum Care Corporation (predecessor in interest to the
Assignor) and Plymouth Medical Investors Limited Partnership entered into a
certain Turnkey Construction Contract dated as of March 3, 1994 for the
construction of a one hundred forty-two (142) bed (which may be increased to one
hundred fifty (150) beds) long term care facility to be located on Obery Street
in Plymouth, Massachusetts (the "Turnkey Construction Agreement"), a copy of
which is attached hereto as Exhibit A.
WHEREAS, Assignor desires to assign its rights and obligations under the
Turnkey Construction Agreement to Assignee and Assignee desires to assume such
rights and obligations.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants, bargains, sells, assigns and transfers to
Assignee all of Assignor's right, title and interest in, and all contractual and
other rights under the Turnkey Construction Agreement.
2. Assignee hereby accepts this assignment and hereby agrees to assume all
of Assignor's right, title, interest, duties and obligations under the Turnkey
Construction Agreement.
3. This Agreement may be executed by facsimile and in counterparts, each of
which shall constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ASSIGNOR:
CONTINUUM CARE OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------
Name: James M. Clary
Title:
<PAGE>
EXHIBIT A
TURNKEY CONSTRUCTION CONTRACT
Between
CONTINUUM CARE CORPORATION
AND
PLYMOUTH MEDICAL INVESTORS LIMITED PARTNERSHIP
<PAGE>
Table of Contents
For
Turnkey Construction Contract
Between
CONTINUUM CARE CORPORATION
And
PLYMOUTH MEDICAL INVESTORS LIMITED PARTNERSHIP
ARTICLE I - Status of Facility
Section 1.1 - Title to Premises
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Representations of Contractor
Section 1.6 - Representations of Owner
Section 1.7 - Other Agreements
Section 1.8 - Opinion of Counsel
ARTICLE II - Construction of the Facility
Section 2.1 - Architect
Section 2.2 - Other Professionals
Section 2.3 - Failure to Approve Final Plans
Section 2.4 - Construction
Section 2.5 - Personal Property
Section 2.6 - Changes
Section 2.7 - Commencement of Construction
Section 2.8 - Continuity of Construction
Section 2.9 - Completion of Construction
Section 2.10- Punch-List
Section 2.11- Work and Warranties
Section 2.12- Subcontractors
Section 2.13- Right of Owner to Cure
Section 2.14- Termination by Owner
ARTICLE III - Financing
Section 3.1 - Construction/Permanent Financing
Section 3.2 - Price Increase Loan
ARTICLE IV - Closing
Section 4.1 - Date of Closing
Section 4.2 - Contract Price
Section 4.3 - Payment of Contract Price
Section 4.4 - Documents to be delivered by Contractor at Closing
Section 4.5 - Documents to be delivered by Owner at Closing
-i-
<PAGE>
ARTICLE V - Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities
Section 5.2 - Owner's Responsibilities
Section 5.3 - Indemnification
ARTICLE VI - Contingencies
Section 6.1 - Required Occurrences
Section 6.2 - Failure of Contingencies
Section 6.3 - Default
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - No Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10- Successors
Section 7.11- Counterparts
Section 7.12- Severability
Section 7.13- Effective Date
Section 7.14- No Offer
Section 7.15- Governing Law
Section 7.16- Survival
Section 7.17- Compliance with Loan Documents
EXHIBITS LIST
Exhibit "A" - Description of Premises
Exhibit "B" - Survey
Exhibit "C" - Title Commitment
Exhibit "D" - Determination of Need, Approval of Transfer
and DPH Plan Approval
Exhibit "E" - Final Plans
Exhibit "F" - Group III Items
Exhibit "G" - FFE
Exhibit "H" - Form of Assignment of Lender Deposit Pledge
Exhibit "I" - MCE Line items
Exhibit "J" - Contractor Indemnification
-ii-
<PAGE>
TURNKEY CONSTRUCTION CONTRACT
This Turnkey Construction Contract ("Agreement") is between CONTINUUM CARE
CORPORATION, a Delaware corporation (the "Contractor") with an office at River
Place, 57 River Street, Wellesley, Massachusetts 02181 and PLYMOUTH MEDICAL
INVESTORS LIMITED PARTNERSHIP, a Tennessee limited partnership (the "Owner")
with an office at 3580 Keith Street, NW, Cleveland, Tennessee 37320-3480 and is
entered into for the purpose of reducing to formal writing all of their
understandings with respect to the construction, financing and ownership of a
one hundred forty-two (142) bed (which may be increased to one hundred fifty
(150) beds) long term care facility (the "Facility") to be located on certain
property located on Obery Street in Plymouth, Massachusetts and more
particularly described on attached Exhibit "A" (the "Premises").
In consideration of the undertaking of each of the parties to the other,
IT IS AGREED:
ARTICLE I
Status of Facility
Section 1.1 - Title to Premises. The Contractor, or its affiliates
("Premises Owner"), holds fee simple title to the Premises described in Exhibit
"A" subject to the Existing Encumbrances (as hereinafter defined). Exhibit "A"
and each of the other Exhibits referred to in this Agreement shall be
incorporated into this Agreement by such references as if fully set forth in
this Agreement. At the Closing, upon the satisfaction of the contingencies set
forth in Article VI and elsewhere in this Agreement, the Contractor shall convey
or cause the Premises owner to convey fee simple title to the Premises,
reasonably satisfactory to the Owner and Owner's Lender ("Lender"), to the Owner
subject to the Existing Encumbrances, the physical conditions with respect to
utilities, rights of way, easements, landscaping and improvements which are
disclosed by the survey of the Premises, a copy of which is attached hereto as
Exhibit "B" ("Survey"), as such conditions may change during the course of
construction as permitted or contemplated by this Agreement and the Final Plans
(as defined herein). Owner acknowledges that it has reviewed, inspected and
approved the location and general characteristics of the Premises.
Section 1.2 - Encumbrances. The Contractor has been provided with a
commitment for policy of title insurance from First American title Insurance
Company (Commitment Number 50339708/20176612) to insure title to the Premises, a
copy of which is attached hereto as Exhibit "C". The encumbrances set forth as
<PAGE>
items 1 through 10, inclusive, in Schedule B of such commitment are collectively
referred to herein as the "Existing Encumbrances". At the Closing, upon the
satisfaction of the contingencies set forth in Article VI and elsewhere in this
Agreement, the Owner shall purchase the Premises from the Contractor subject to
the Existing Encumbrances, the physical conditions with respect to utilities,
rights of way, easements, landscaping and improvements which are disclosed by
the Survey of the Premises, as such conditions may change during the course of
construction as permitted or contemplated by this Agreement and the Final Plans.
Section 1.3 - Permits and Approvals.
(a) If it has not already, Contractor shall make application for and use
its reasonable best efforts to obtain, on behalf of Owner, all necessary Zoning,
land use, environmental and building permits, consents and approvals from the
appropriate state and local government agencies ("Land Use Approvals") which
will permit the construction and operation of the Facility on the Premises. All
of such Land Use Approvals shall be assigned to the Owner at the Closing (to the
extent assignable) and the Owner shall grant to the Contractor, at the Closing,
a license under the Land Use Approvals so that Contractor may perform its
obligations hereunder. Owner's obligations with respect to obtaining federal,
state and local government permits, consents and approvals for the Facility
shall be limited promptly cooperating with the Contractor in every respect in
obtaining such permits, consents and approvals. Prior to Physical Completion all
indemnifications set forth in the Land Use Approvals and all amounts due and
payable under the Land Use Approvals as fees or charges relating to the
construction (as opposed to the operation) of the Facility, and not as taxes or
assessments, including, without limitation, all amounts deposited or to be
deposited into escrow with the issuer of any such Land Use Approval shall be the
obligation of the Contractor. The Contractor hereby indemnifies the Owner for
any loss incurred by the Owner because of the Contractor's breach of the
preceding sentence.
(b) Contractor has applied to the Department of Public Health of the
Commonwealth of Massachusetts ("DPH") and has received approval of the transfer
of both the Determination of Need for the Facility, NO. 5-1087, a copy of which
is attached hereto as Exhibit "D" ("DON") and the Premises to the Owner.
(c) Contractor shall have the right, in its sole discretion, to increase
the number of beds in the Facility from one hundred forty-two (142) to one
hundred fifty (150) (the "Bed
-2-
<PAGE>
Increase"), which shall increase the Contract Price by Five Hundred Twenty-Four
Thousand, Five Hundred Eighty-five dollars ($524,585.00), subject to the
conditions set forth in this subparagraph. In the event that any expenses
incurred in such Bed Increase are not included in the computation of Owner's
reimbursable capital costs for the purpose of determining the Owner's
reimbursable capital costs for the purpose of determining the Owner's per diem
rates for the Facility ("Non-Reimbursable Expenses"), the Contract Price will be
reduced by the amount of such Non-Reimbursable Expenses. In the event that the
Bed Increase does not occur, for any reason, no consequence shall result to the
Contractor and the Contract Price shall not be increased as a result.
Section 1.4 - Documentation.
(a) The Owner covenants that it will provide fully and in a timely fashion
all reasonable documentation required by Contractor, any governmental bodies or
any lenders, supporting Owner's representations, warranties and covenants
hereunder, supporting all applications for any necessary governmental permits,
consents and approvals, and supporting any applications for construction or
permanent financing. Such documentation may include, but not be limited to,
financial statements of the Owner or its affiliate, as required by Contractor,
any governmental bodies or any lender, Owner's certificate of limited
partnership; all authorizations for the transactions contemplated by this
Agreement; and other information relevant to any such applications or requested
by any lender. The Contractor covenants that it will provide fully and in a
timely fashion all reasonable documentation requested by Lender and all
reasonable documentation of Owner's costs required by governmental bodies in
connection with the development or construction of the Facility, including
without limitation, reasonable documentation of Owner's costs which may be
required by governmental bodies auditing the Facility.
(b) As used herein the term "Loan Documents" shall mean a Construction Loan
Agreement ("Loan Agreement"), a Mortgage and Security Agreement, a Collateral
assignment of this Agreement, and a Deposit Pledge Agreement, all dated as of
the Closing Date, and each of which is by and between Owner and Lender.
Section 1.5 - Representations of Contractor. Contractor represents that it
is duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Contractor represents that it is empowered and authorized to
execute, deliver, and perform its obligations under this Agreement, and, upon
such execution and delivery of this Agreement, this Agreement shall be a valid,
binding, and legal obligation of the Contractor, enforceable in accordance with
its terms and duly
-3-
<PAGE>
authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation and bylaws and all applicable laws of the
Commonwealth of Massachusetts.
Section 1.6 - Representations of Owner. Owner represents that it is duly
organized and validly existing under the laws of the State of Tennessee and duly
authorized to do business in Massachusetts. Owner represents that it is
empowered and authorized to execute, deliver, and perform its obligations under
this Agreement, and, upon such execution and delivery, this Agreement shall be a
valid, binding, and legal obligation of the Owner, enforceable in accordance
with its terms, in compliance with its certificate of limited partnership and
partnership agreement and all applicable laws of the State of Tennessee.
Section 1.7 - Other Agreements. The Contractor and Owner each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which it may be bound.
Section 1.8 - Opinions of Counsel. Contemporaneously with the execution of
this Agreement, Owner shall deliver to Contractor an opinion of Owner's in-house
counsel, M. Henry Day, Jr., Esq. with respect to the due organization, valid
existence and good standing of Owner, the power of the Owner to enter into this
Agreement and perform its obligations hereunder and the Owner shall deliver to
the Contractor an opinion of Hinkley, Allen, et al. as to the enforceability of
this Agreement, and a partnership resolution of the Owner authorizing the
transactions set forth herein, each in form and substance reasonably
satisfactory to Contractor. Contemporaneously with the execution of this
Agreement, Contractor shall deliver to Owner an opinion of Contractor's in-house
counsel, Richard S. Mann, Esq. or Robert D. Eustis, Esq., with respect to the
due organization, valid existence and good standing of Contractor, the power of
Contractor to enter into this Agreement and perform its obligations hereunder
and the enforceability of this Agreement, and a corporate resolution of the
Contractor authorizing the transactions set forth herein, each in form and
substance reasonably satisfactory to Owner.
ARTICLE II
Construction of the Facility
Section 2.1 - Architect.
(a) Contractor has engaged John M. Sheskey, AIA, of Quincy, Massachusetts
as the architect for the Facility ("Architect"). Contractors will also engage
engineers which Contractor selects, in its sole discretion. The Architect has
prepared final plans
-4-
<PAGE>
and specifications for the Facility. Such final plans and specifications are
listed on Exhibit "E" ("Final Plans").
(b) Upon the payment of the Contractor's requisition for the Architect's
preparation of the Final Plans, the Owner shall have the exclusive right to use
the Final Plans, provided however, that in the event a transfer of the DON to
the Contractor is made pursuant to Section 2.8, upon reconveyance of the
Premises to Contractor, the Contractor shall have the exclusive right to use the
Final Plans, subject, however, to whatever rights Lender has to such Final
Plans, if any.
(c) The Final Plans have been approved by DPH. Within two (2) weeks after
the execution of this Agreement, the parties will meet to review and approve the
same, revising them if required. The Owner agrees that it will not unreasonably
withhold its approval of the Final Plans if they conform in material respects to
the preliminary plans which have been approved by the Owner ("Preliminary
Plans"). The parties agree to use their best efforts to reach a prompt and
reasonable conclusion. The parties shall initial the Final Plans as an
indication of their approval of the same.
Section 2.2 - Other Professionals. Except as otherwise set forth in Section
2.14, the Owner represents that it shall not engage any architects nor any
engineers, lawyers, consultants, accountants nor other professionals with
respect to the Facility which Contractor will be obligated to pay, other than as
requested by Contractor. Contractor shall have complete discretion to approve
and retain all professionals, Contractors and subcontractors who will be
involved in the design, development and construction of the Facility.
Section 2.3 - Failure to Approve Final Plans. If Owner fails to approve the
Final Plans and that failure is a result of Owner's good faith belief that the
final Plans do not substantially conform to the Preliminary Plans, Owner shall
give Contractor written notice specifying the areas of the alleged nonconformity
with the Preliminary Plans. Contractor may, at Contractor's cost and expense,
cause the Architect to revise the Final Plans or Contractor may submit the issue
of conformity with the Preliminary Plans to arbitration in accordance with this
Section. Contractors shall give Owner written notice of Contractor's election
within twenty (20) days of Contractor's receipt of Owner's notice of
nonconformity if Contractor determines to seek arbitration. Owner and Contractor
shall, within fifteen (15) days of the date of Contractor's notice, each select
an architect, and the two architects shall, within ten (10) days of their
selection, select a third architect, all of whom shall be licensed to practice
in the Commonwealth of Massachusetts and shall have substantial experience in
health care design. The Architect shall not be a member of such panel.
-5-
<PAGE>
The architects so selected shall review the Preliminary Plans and the Final
Plans and shall, acting by a majority, render a written decision as to whether
the Final Plans are in substantial conformity with the Preliminary Plans and, if
not so, shall state any such deficiency. Such decision shall be rendered within
thirty (30) days of the selection of the third architect, shall set forth in
reasonable detail the reasons for the arbitrators' decision, and shall be
binding upon the parties. If the arbitrators determine that the Final Plans do
substantially conform to the Preliminary Plans, then Owner shall be obligated to
reimburse Contractor for the expenses incurred by the Contractor for the
arbitration proceedings. If the arbitrators determine that the Final Plans do
not substantially conform to the Preliminary Plans, Contractor shall reimburse
Owner for all costs and expenses incurred by Purchaser in connection with the
arbitration proceeding and Contractor shall, at its sole cost and expense, cause
the Architect to revise the Final Plans in accordance with the arbitrators'
written decision.
Section 2.4 - Construction. The Contractor shall perform the work
substantially in accordance with the Final Plans subject to field changes, minor
design changes, and other immaterial changes which Contractor deems appropriate
during the course of construction, provided, however, that any change deemed
material by the Owner and the Contractor, or, if the Owner and the Contractor
cannot agree within seven (7) business days, then in the opinion of an architect
jointly chosen by the Owner and the Contractor ("Second Architect"), shall
require the Owner's written approval, which approval shall not be unreasonably
withheld or delayed. The Owner's granting of such approval shall not cause any
such change to be deemed an Owner Change as defined in Section 2.6. All work
shall be done in a good and workmanlike manner in accordance with applicable
federal and state statutes and regulations, and municipal building codes and
zoning ordinances, and in accordance with the DON and Land Use Approvals, if
required. The construction shall be performed in conformity with requirements of
applicable federal, state and local governmental agencies having jurisdiction of
the Facility, including Life Safety Code requirements imposed by the Federal
Department of Health and Human Services. The Contractor, on behalf of the Owner,
shall obtain all local, state or federal governmental approvals, if any, of the
Final Plans.
Section 2.5 - Personal Property.
(a) Contractor and Owner acknowledge that, incorporated into the contract
Price (as defined herein) is an allowance of One Hundred Thousand Dollars
($100,000) for certain furniture, fixtures and equipment ("Group III Items")
more specifically set forth on Exhibit "F". The choice of the vendor for the
Group III Items and the nature, makes, models and quantities of the Group III
Items shall be in the sole discretion of the Owner. The
-6-
<PAGE>
Owner agrees to choose the vendors for the Group III Items and the makes, models
and quantities of the group III Items promptly after notice from the Contractor
so that the Facility is equipped in a timely fashion in preparation for its
inspection by any state or local fire marshall, representative of DPH, building
inspector, or other governmental representative having jurisdiction over the
Facility. Contractor will provide all other furniture, fixtures and equipment
other than the Group III Items consistent with the Final Plans and the
furnishings list which is included hereto as Exhibit "G" ("FFE"). The FFE listed
on Exhibit "G" hereto shall be of substantially the same pro-rata quantity (on a
per bed basis) and quality as the furnishings, fixtures and equipment in a
certain 123 bed skilled nursing facility owned and operated by an affiliate of
Owner in Attleboro, Massachusetts ("Attleboro Facility"). All furniture,
fixtures and equipment of a quality or pro-rata quantity (on a per bed basis)
exceeding that of the furnishings, fixtures and equipment of the Attleboro
Facility shall be paid for by the Owner for a price not included in the Contract
Price.
(b) Reference is made to the 123 bed skilled nursing facility located in
Milford, Massachusetts known as Milford Meadows which is owned and operated by
an affiliate of Contractor (the "Milford Facility"). Owner and Contractor agree
that the interior design for the Facility (i.e., wallpaper, carpet, trim and
molding, light fixtures, ceiling finishes, window treatments, cubicle curtains,
etc.) shall be substantially the same as or substantially consistent with the
design of the Milford Facility.
Section 2.6 - Changes.
(a) Owner agrees that Contractor shall have the right to make changes in
the Final Plans if required by any federal, state or local governmental
authority or official or if required due to the unavailability of any
construction material. Any such change shall not be deemed an Owner Change (as
defined below) unless it arises out of a change to the Final Plans requested by
Owner. Owner shall be consulted with respect to any such change or substitutions
but Contractor shall have final authority to make all decisions with respect to
any such changes or substitutions but Contractor shall have final authority to
make all decisions with respect to such changes as long as such changes result
in construction, space, equipment, interior design and exterior design
substantially equivalent in quality and quantity to that shown on the Final
Plans provided, however, that any change deemed material by the Owner and the
Contractor, or alternatively by the Second Architect, shall require the Owner's
written approval, which approval shall not be unreasonably withheld or delayed.
Any changes in the Final Plans, made either at the request of the Owner or
required by modifications made by the Owner ("Owner Changes"), which have the
effect of increasing the cost of the work shall result in an addition to the
Contract Price in an amount equal to the actual net cost thereof for the first
$100,000 of such Owner Changes and thereafter shall result
-7-
<PAGE>
in an addition to the Contract Price in an amount equal to the net cost thereof
plus ten percent (10%). Owner shall pay for any net increase to the Contract
Price caused by any Owner changes at the time of the payment of the requisition
for any such change order. All change orders must be in writing and signed by
both Owner and Contractor.
(b) All work performed and equipment utilized in providing the Facility
with piped medical gases shall be deemed to be an addition requiring a change
order and shall result in a payment to Contractor of Seventy Thousand Dollars
($70,000) in addition to the Contract Price.
Section 2.7 - Commencement of Construction. The Parties agree that
construction of the Facility started on January 10, 1994 ("Start Date").
Section 2.8 - Continuity of Construction. Construction, once undertaken,
shall proceed in a continuous and expeditious manner until Physical Completion,
as such term is defined in Section 2.9, is achieved. Physical Completion shall
take place no later than fourteen (14) months from the Start Date (the
"Completion Date"). Any delays caused by acts of God, fire, accident, casualty,
labor strikes or job actions, or any other cause not attributable to the failure
of the Contractor to use reasonable care and due diligence ("Force Majeure"),
however, shall be excused by the Owner, provided that Contractor shall use its
best efforts to minimize any such delays and shall resume construction at the
earliest possible time. Notwithstanding the foregoing, in the event of any delay
caused by a Force Majeure which extends the date of Physical Completion beyond
the Completion Date, the Contractor shall be obligated to pay to the Lender any
additional interest, attorneys, inspection and consulting fees and all other
expenses under the Lender Loan payable as a direct and proximate result of any
such delay (the "Lender Direct Costs") beyond the Completion Date which shall be
the Owner's sole and exclusive remedy as a result of such delay. In the event
that any delay as a result of a Force Majeure extends the date of Physical
Completion beyond the Completion Date by a period of twelve (12 months or more,
the Owner shall within three (3) days after receipt of notice from the
Contractor, deliver to the Contractor a completed and signed application to
transfer the ownership of the DON to the Contractor or its designee. In such
event, the Owner agrees to use its reasonable best efforts to obtain DPH
approval for such transfer which shall include, without limitation, timely and
accurate responses to questions or requests for information from DPH whether
such questions or requests shall be written or oral, the timely completion and
submission of any applications requested by DPH and attendance at any hearings
held by DPH at which the Owner's attendance is requested, mandated or otherwise
necessary. Upon the approval by DPH of a transfer of the DON
-8-
<PAGE>
back to the Contractor or its designee, the Owner shall within thirty (30) days
of the date of Owner's receipt of the Contractor's notice thereof, reconvey all
right, title and interest in and to the Premises and the Facility and all rights
related thereto and the Contractor shall assume all of the obligations of the
Owner under the Lender Loan, subject to the consent of Lender, and whether or
not Lender consents to such an assumption shall indemnify the Owner for all
obligations arising under the Lender Loan from and after the date such transfer
occurs pursuant to the terms of the Contractor Indemnification.
Section 2.9 - Completion of Construction. For the purposes of this
Agreement, the terms "Physical Completion" or "Physically Completed" shall be
deemed to occur on the date on which the building and improvements described and
set forth in the Final Plans: (i) have been completed in accordance with the
Final Plans, as the same may have been modified in accordance with the terms of
this Agreement; (ii) have been approved for occupancy by the local building
inspector (and by the local Fire Marshall in the event his approval is required)
as evidence by the issuance of a temporary certificate of occupancy provided
that such temporary certificate of occupancy does not affect actual occupancy of
the Facility by patients or the licensing of the Facility by the DPH; (iii) have
passed the so-called physical plant inspection by the DPH in a manner which does
not prevent the licensing inspection of the facility; and (iv) the FFE has been
furnished such that the Facility may be licensed and such that with respect to
other than patient rooms, the Facility is fully operational, provided, however
that in the event of delays in the furnishing of the FFE occasioned by the
action or inaction of the Owner in choosing or ordering any items of FFE, this
subparagraph (iv) shall not be a condition in determining whether Physical
Completion has occurred. Physical Completion shall be deemed to have been
achieved notwithstanding that any of such officials or agencies have issued a
Punch-List listing items requiring completion or correction. Physical Completion
shall also be deemed to have been achieved notwithstanding that the Owner may
not yet have satisfied the requirements of the DPH with respect to the
administration of the Facility, medical supplies, medical records, nursing
service and staff, dietary requirements, and other general conditions necessary
to obtain a license for the rendering of nursing services.
Section 2.10 - Punch-List. If, at the time the Facility has been Physically
Completed, there exist any items requiring completion or correction, then the
Contract agrees to use all reasonable diligence to complete or correct the items
so that each conforms to the Final Plans. The parties shall make a Punch-List of
the items requiring completion or correction. Each item on the Punch-List shall
be assigned a reasonable value based upon the Contractor's and Owner's good
faith estimate of the cost of completion or correction of the same. Contractor
shall deduct
-9-
<PAGE>
one hundred and fifty percent (150%) of such total cost (the "Punch-List
Amount") from the balance of the Contract Price (as defined in Section 4.1).
Owner and the Contractor shall execute and deliver an agreement concurrently
with the approval of the "Punch-List, under the terms of which the Owner shall
agree to promptly pay to the Contract or an amount equal to 150% of the
estimated cost of completion or correction of each item in the Punch-List upon
its completion or correction. If any item is not completed or corrected within a
period of ninety (90) days, at the Owner's option an amount equal to the cost of
completion or correction of the item may be offset against the Punch-List Amount
and Contractor shall have no further obligation with respect to such item. If
the Owner elects not to offset against the Punch List Amount, the Contractor
shall continue to be obligated to correct such items. After all appropriate
offsets, the Owner shall promptly pay the balance of the Punch-List Amount, if
any, to the Contractor.
Section 2.11 - Work and Warranties. At the Closing, Contractor will assign
to Owner, in addition to any warranties and guarantees received from
subcontractors and suppliers of equipment and furnishings, to the extent
assignable. Contractor will agree to remedy any defect in construction caused by
poor workmanship or materials which are brought to its attention by written
notice within a period of one (1) year from date of Physical Completion.
Section 2.12 - Subcontractors. The Contractor shall furnish the names of
all subcontractors who supplied equipment, labor or materials having a value in
excess of Fifty Thousand Dollars ($50,000) in connection with the construction
of the improvements on the Premises, after the hiring of such subcontractors.
All of such subcontractors shall contract with the Contractor for the provisions
of equipment, labor and/or materials for the Facility and not with the Owner.
Contractor hereby indemnifies and saves Owner harmless from claims for payment
by any subcontractor of Contractor who furnishes equipment, materials or
supplies or performs labor or services in the prosecution of the work, other
than any supplier of the Group III items or person performing work in connection
with any Group III Items in excess of the allowance therefor, or otherwise
contracting directly with Owner.
Section 2.13 - Right of Owner to Cure. If the Contractor defaults or
neglects to carry out its obligations under the terms of this Agreement in
accordance with the terms of this Agreement and fails within thirty (30) days
after receipt of written notice from the Owner to commence and continue
correction of such default or neglect with diligence and promptness, the Owner
may, if such default remains uncured after such thirty (30) day period and
without prejudice to other remedies the Owner may have, correct such
deficiencies. In such case an appropriate change order shall be issued deducting
from payment then or thereafter
-10-
<PAGE>
due the Contractor, the reasonable costs of correcting such deficiencies. If the
payments then or thereafter due the Contractor are not sufficient to cover the
amount of the deduction, the Contractor shall pay the difference to the Owner.
Section 2.14 - Termination by the Owner.
(a) This Agreement may be terminated by the Owner upon fifteen (15)
business days written notice to the Contractor in the event that
Contractor stops all work on the Facility for a period of fifteen (15)
consecutive business days (and the Lender's construction inspector or
alternatively, a mutually agreeable Second Architect issues a
certificate to such effect) and abandons the Facility, other than as a
result of a Force Majeure or a breach by Owner hereunder; unless
Contractor shall have recommenced Work on the Facility continuously
and diligently during the second fifteen (15) business day notice
period.
(b) If the Contractor materially defaults under this Agreement or
persistently fails or neglects to carry out the material terms of this
Agreement or materially fails to perform the provisions of this
Agreement in a manner that has a material adverse effect upon the
construction or the progress of construction (as certified by the
Architect), the Owner may give written notice to Contractor that the
Owner intends to terminate this Agreement. If the Contractor fails to
correct the material defaults, failure or neglect within fifteen (15)
business days after being given notice, the Owner may then give a
second written notice and, after an additional fifteen (15) business
days if such default remains uncured after such second fifteen (15)
business day cure period or such longer period as may reasonably be
required to effect a cure, provided that the Contractor commences and
diligently prosecutes a cure, the Owner may at the Owner's option,
terminate this Agreement.
(c) In the event of any termination under clause (a) or (b) above, the
Owner shall pay the Contractor for work completed and for proven loss
sustained upon materials, equipment and applicable damages, and, upon
Physical Completion, reasonable profit and overhead. Such reasonable
profit and overhead shall include, without limitation, a sum equal to
the percent complete of the hard construction cost of the Facility as
indicated on a draw request, multiplied by the principal amount of the
Price Increase Loan and the Cash Collateral Holdback, offset by the
Owner's actual reasonable costs incurred directly by Owner and
certified by the
-11-
<PAGE>
Architect, in excess of the balance of the Contract Price related to
promptly achieving Physical Completion of the Facility after such
termination proceeding in a reasonable manner. Upon any such payment,
all debts and obligations of each party to the other on account of
such termination and this Agreement (except for those representations,
warranties, covenant and indemnities which survive this Agreement)
shall be deemed discharged, terminated and released.
ARTICLE III
FINANCING
Section 3.1 - Construction/Permanent Financing.
(a) Owner has obtained construction and permanent financing (collectively,
the "Financing") for the Facility from Lender upon terms and conditions
reasonably acceptable to Owner ("Lender Loan"). Owner represents and warrants to
the Contractor that the Lender Loan is of an adequate principal amount to
provide for progress payments to the Contractor in the amount of $9,905,823.00.
Owner shall be solely responsible for paying the financing costs, legal fees,
title insurance and other so-called "soft costs" associated with the Financing
as described below. Owner shall receive a credit against the Contract Price,
pursuant to Section 4.2(vi), to the extent of such soft costs paid by the Owner,
up to the allowance for such soft costs set forth in the DON as finally
determined by the DPH.
(b) The Contractor and Owner also contemplate that the Premises and
Facility may serve as security for the payment obligations under the Lender Loan
and that the Owner will be the obligor for the repayment of all financial
obligations thereunder. Owner agrees to promptly execute and deliver all
commitments, mortgages, collateral assignments, promissory notes, guarantees,
agreements, documents, certificates, affidavits, and other writings required to
be executed by Lender in connection with the Lender Loan.
(c) The cost of securing financing in an amount equal to the allowance for
such items under the final DPH approved DON and interest which accrues on all
financing prior to the date of Physical Completion in an amount equal to the
allowances for such item under the final DPH approved DON are included in the
Contract Price, provided, however, that the Owner shall pay loan fees are
assessed or interest accrues beyond the amount in the maximum capital allowance
under the DON as a result of delays in construction which are the Owner's fault,
then the Owner shall pay such additional loan fees or interest. In the event
that the
-12-
<PAGE>
Contractor is solely or in part responsible for delays in construction beyond
the Completion Date, or in the event of a Force Majeure pursuant to Section 2.8,
the Contractor shall be responsible to the Owner for the increased interest
cost or any other Lender Direct costs that Owner incurred for the period of
such delay which are attributable to the Contractor or such Force Majeure.
However, in no event shall the Contractor be responsible for any delays in
construction so long as the Facility is completed by the Completion Date. In any
event of an increase in such fees or interest the Contractor will assist the
Owner in attempting to obtain an increase in the maximum expenditure under the
DON to cover such increase.
Section 3.2 - Price Increase Loan.
(a) At the Closing, subject to the contingencies set forth in Article VI
and elsewhere in this Agreement, in the event that the Contractor chooses, in
its sole discretion, to increase the number of licensed beds at the Facility as
set forth in Section 1.3, the Contractor shall provide to the Owner additional
financing in an amount equal to the resulting increase in the Contract Price
("Price Increase Loan"), in accordance with Section 1.3 until such increase is
funded to the Owner under the Lender Loan.
(b) The Price Increase Loan shall bear no interest and shall be due and
payable only: (i) upon the Facility's census reaching one hundred twelve (112)
patients; and (ii) the Lender's release of loan process sufficient to pay the
Price Increase Loan, unless Lender refuses to release such loan proceeds as a
result of the matters set forth in clauses (i), (ii) or (iii) of Section 7.17
hereof. The Price Increase Loan may be prepaid without penalty. The Price
Increase Loan shall be due and payable, at the option of the Contractor, if
after Physical Completion the Owner shall:
1) admit in writing its inability to pay its debts as they become
due;
2) file a petition in bankruptcy or a petition to take advantage of
any insolvency act;
3) make an assignment for the benefit of its creditors;
4) consent to the appointment of a receiver for itself or the whole
or substantially all of its property;
5) as a result of a petition in bankruptcy filed against it without
such petition being dismissed within 120 days after the date of
such filing;
-13-
<PAGE>
6) file a petition or answer seeking reorganization or arrangement
or other aid or relief under any bankruptcy or insolvency laws or
any other lawful relief of debtors; or
7) transfer any interest in the Facility, either directly or
indirectly except for a bequest or intestate succession arising
out of the death of Forrest L. Preston and except for transfers
to affiliates of the Owner without the prior written consent of
Contractor.
ARTICLE IV
Closing
Section 4.1 - Date of Closing. The conveyance of title to the Premises and
the payment to Contractor of the Contractor's initial requisition to the extent
approved by Owner and Lender, which shall include, all out of pocket expenses
incurred by Contractor and its affiliates through the closing date with respect
to the Facility, including without limitation, for architects, engineers,
attorneys and consultants; the amount, if any, expended by Contractor in
connection with the acquisition of the Premises; and the amount expended by the
Contractor in the development and construction of the Premises, shall take place
simultaneously with the consummation of the Lender Loan (the "Closing") which
shall take place on or before June 30, 1994. Said payment to the Contractor at
Closing shall be limited to the maximum amount funded by Lender and shall be
credited against the Contract Price; provided, however, that nothing herein
shall abrogate the obligation of the Owner to pay the Contract Price in
accordance with Section 4.3.
Section 4.2 - Contract Price. The price to be paid by the Owner for all of
the materials and services to be provided by Contractor hereunder ("Contract
Price") shall be equal to the sum of: (i) the final maximum capital expenditure
("MCE") amount allowed under the DON, as determined by the DPH based upon the
Contractor's submission pursuant to 105 C.M.R. 100.551(I)(1)-(5), which
submission is to be made within 180 days after Final Plan approval; plus (ii)
$500,000; plus (iii) the cost of any additional furniture, fixtures and
equipment if not previously paid by the Owner (as described in Section 2.5);
plus (iv) any Owner Changes (as described in Section 2.6); plus (v) $524,585.00
in the event of the Bed Increase to the extent such amount is not included in
the MCE in accordance with subparagraph (i) above, minus any Non-Reimbursable
Expenses; minus (vi) any costs or expenses, if any, allowed in the MCE up to the
amount of the line item in the MCE for each such item which has been paid
directly by Owner after obtaining the approval of the Contractor.
-14-
<PAGE>
Section 4.3 - Payment of the Contract Price. The Owner shall pay the
Contract Price at the following times and in the following manner:
(a) The expenses to be reimbursed at the Closing in accordance with Section
4.1 will be paid at Closing. Prior to the Closing, the Contractor and the Owner
shall develop and agree upon a schedule of values for the Facility based upon
the line items in the MCE, a copy of which is attached hereto as Exhibit "I"
which shall be initialled by the Contractor and the Owner to evidence their
agreement and be approved by Lender ("Schedule of Values"). Based upon
applications for payment submitted to the Architect by the Contractor and
verified by Owner, and Certificates for Payment issued by the Architect, the
general contractor, and the Contractor, the Owner shall submit applications for
payment requesting Lender to make progress payments on account of certain items
on the Schedule of Values based upon a percent complete basis as certified by
the Architect to the Contractor. Certain other items on the Schedule of Values
will be paid as incurred. The Cash Collateral Holdback (as hereinafter defined)
shall be paid as set forth in Section 4.3(c) and the Price Increase Loan shall
be paid as set forth in Section 4.3(b). The period covered by each Application
for Payment shall be one calendar month ending on the last day of the month.
Each Application for Payment shall be based upon the most recent Schedule of
Values submitted by the Contractor and approved by Owner and Lender, which
approval shall not be unreasonably withheld or delayed. Applications for Payment
shall show the amount due for each item shown on said Schedule of Values as of
the end of the period covered by the Application for Payment. The amount of each
such progress payment which is to be paid based on a percent complete basis
shall be the sum of (i) the product of multiplying that portion of such item
properly allocable to completed work for such item by the percentage of
completion of that item, and (ii) the portion of such item properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the work or suitably stored off the site, minus the aggregate
of previous payments made by the Owner for such item and minus such retainage as
is typically required in other construction loans obtained by Owner's
affiliates. Notwithstanding anything set forth in this paragraph to the
contrary, the terms and expense of progress payments on account of the Contract
Price made from the Owner to the Contractor shall be subject to the terms and
conditions of the Lender Loan as they relate to the Contractor's obligations.
Owner shall use its best efforts to have the Certificates for Payment approved
by and paid by Lender. In the event that Owner does not approve an application
for payment, the Owner will within two (2) business days notify Contractor, in
writing, of the reasons for the withholding of such approval. If Contractor and
Owner cannot agree on a revised amount the Owner will promptly execute an
application for payment for the amount
-15-
<PAGE>
for which Owner feels is due and paying in accordance with the terms of this
Agreement. If the Owner does not issue an application for payment or a written
notification to Contractor of its reason for withholding an application for
payment in accordance with this Agreement, through no fault of Contractor within
five business days after the receipt of an application for payment or if Owner
does not request that Lender pay Contractor within five days after the receipt
by Owner of an application for payment, then Contractor, may upon seven
additional business days after written notice to Owner and Lender, stop the work
under this Agreement until payment of the amount owing has been received. Any
such period of stoppage shall be added to the period of time during which the
Contractor is to achieve Physical Completion as set forth in Section 2.8.
(b) That portion of the Contract Price relating to the Price Increase Loan
shall be payable in accordance with the terms of Section 3.2.
(c) That portion of the Contract Price in the amount of five Hundred
Thousand Dollars ($500,000) (the "Cash Collateral Holdback") shall be due upon
Physical Completion but shall not be payable until the Owner's achievement of a
debt service coverage ratio at the Facility of 1.2 to 1 as determined by Lender,
and the Lender's release of the Cash Collateral Holdback; provided, however,
that the Cash Collateral Holdback shall be payable by the Owner in any event
upon the Facility achieving a debt service coverage ratio of 1.2 to 1 if Lender
refuses to release the Owner's cash collateral held by Lender as a result of any
default of Owner, or any of its affiliates, under any agreement between Owner,
or any of its affiliates, and Lender not attributable to any action or inaction
of or by the Contractor. The Cash collateral Holdback shall bear interest from
the date of Physical Completion at the rate of the base rate then in effect at
the Bank of Boston, plus three percent (3%) per annum until paid. Owner shall
assign its rights to the first $500,000 of such collateral plus interest thereon
to Contractor pursuant to a collateral assignment thereof in the form attached
as Exhibit "H" which the Owner hereby agrees to execute and deliver to the
Contractor upon Physical Completion.
(d) In the event that any of Contractor's approved requisitions, or
payments set forth in subsections (b) or (c) above, are not paid when due,
solely due to delays incurred through the fault of or through circumstances
under the control of the Owner or its affiliates, the Owner shall pay interest
to the Contractor, monthly in arrears on any such outstanding amount. Such
monthly interest shall be computed at a rate equal to the base rate then in
effect at the Bank of Boston, plus three percent (3%) per annum.
-16-
<PAGE>
(e) Owner's obligation to pay the Price Increase Loan and Owner's
obligation to pay the Cash Collateral Holdback may be offset by proven losses
sustained upon materials and equipment caused by the Contractor's material
breach of this Agreement which is not cured within the applicable time period
therefor. In the event that the Owner chooses to exercise its right of offset
under this Section 4.3(e), it shall first provide the Contractor written notice
of such intent, to offset, setting forth the reasons therefor. Contractor shall
have a period of seven days from its receipt of the Owner's notice within which
to notify the Owner of the Contractor's desire to contest such offset. In the
event that the Owner and the Contractor cannot agree within seven (7) days from
the date of the Contractor's notice whether such offset is appropriate, the
parties agree to submit such issue to binding arbitration before the American
Arbitration Association in Boston, and agree to be bound by the decision
rendered in any such arbitration.
Section 4.4 - Documents to be Delivered by Contractor at Closing. At the
closing, the Contractor shall deliver, or shall cause to be delivered, the
following to the Owner:
(a) A quitclaim deed with covenants against grantor's acts;
(b) A bill of sale;
(c) The assignment of Land Use Approvals set forth in Section 1.3;
(d) The survey described in Section 1.2;
(e) A hazardous waste affidavit;
(f) The insurance certificates described in Section 5.1(b);
(g) The affidavits and waivers described in Section 5.1(c)
(h) The Contractor's initial requisition and supporting information
relating thereto; and
(i) Final approval of the transfer of the DON and an assignment thereof.
Section 4.5 - Documents to be Delivered by the Owner at Closing. At the
Closing the Owner shall deliver the following to the Contractor:
(a) The payment set forth in Section 4.1; and
(b) The license to Contractor set forth in Section 1.3(a).
-17-
<PAGE>
ARTICLE V
Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Contractor shall have the following
responsibilities:
(a) To obtain and pay for the Certificate of Occupancy;
(b) The Contractor shall at all times, commencing with the date upon which
construction begins, carry or cause to be carried the following types of
insurance with an insurance carrier or carriers reasonably acceptable to Lender:
(i) Worker's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000
for any one accident or disaster; and property damage coverage
limits of not less than $100,000; all of which insurance shall
name the Owner and Lender, if any, as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief, covering all improvements to be erected hereunder and
all materials in an amount equal to the full insurable value of
such improvements and materials; such insurance, to be payable to
Owner, Contractor and Lender, if any, as their interests may
appear, with, standard mortgage endorsement to Lender or its
assigns as mortgagee.
(iv) Comprehensive general liability under a primary policy and
umbrella policy with limits not less than $5,000,000.00 which
will include the following:
(a) Contractor's Liability;
(b) Contractual Liability;
(c) Owners and Contractors Protective liability;
(d) Completed Operations Liability;
(e) Products Liability; and
(f) Personal Injury
-18-
<PAGE>
(v) Any other insurance required of the Contractor by Lender.
The Contractor shall furnish to the Owner and Lender, if any, duplicate
policies of insurance as set forth in Subparagraphs (i), (ii), (iii) and
(iv) hereof. The coverages described above may be carried by the
Contractor under an Owner's Protective Liability Policy with the same
limits of coverage, naming Owner, which policy shall be subject to the
Owner's reasonable approval. The Owner shall be named as an additional
insured on such policies as may be appropriate. Each of such policies shall
contain, to the extent customarily obtainable in Massachusetts, a provision
to the effect that they may not be canceled except upon ten days' prior
written notice to the Owner and Lender.
(c) At the time of Closing, and with each requisition, Contractor shall
deliver to Owner the following:
(i) a duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials for the
construction of the Facility;
(ii) an affidavit to the title insurance company enabling Owner to
obtain title insurance coverage insuring the Owner and Lender, if
any, against collection as enforcement of mechanics liens against
the Premises;
(iii) Such other documents or instruments as Owner may reasonably
require or as Lender may require of Contractor.
Section 5.2 - Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities:
(a) To cause Owner's counsel to render legal opinions to Lender with
respect to the Owner's obligations, warranties, and representations set forth
herein (as they pertain to legal matters) and with respect to other legal
opinions (pertaining to the Owner, the Facility and the Premises) as any lender
may require.
(b) Owner is solely responsible for obtaining financing as set forth in
Section 3.1(a). Owner will use its best efforts to consummate financing for the
contemplated construction, including the furnishing of financial statements,
providing an appraisal of the Premises and Facility and by execution of
applications, notes, guaranties, mortgages, assumption agreements and other
documents reasonably necessary to effectuate such financing, and Owner shall pay
all costs associated with such financing (which
-19-
<PAGE>
costs shall be deducted from the Contract Price) in accordance with Section
3.1(d).
(c) To keep the DON in full force and effect as the holder thereof,
subsequent to the transfer of the DON to the Owner.
Section 5.3 - Indemnification. The Contractor hereby agrees to indemnify and
hold the Owner harmless from all liabilities, claims, and demands for personal
injury or property damage arising out of or caused by any act or omission of
Contractor, its subcontractors, agents, or employees, or, to the extent not
caused by action or inaction of Owner, its agents or employees, arising in or
about the Premises for the period from the date of this Agreement until Physical
Completion. The Contractor further covenants to use proper care and caution in
the performance of its work hereunder so as not to cause damage to any adjoining
or adjacent property.
ARTICLE VI
Contingencies
Section 6.1 - Required Occurrences. At the time of Closing if not otherwise
specified below, unless such period is extended by written notice of the Owner,
this Agreement and the undertakings of Contractor or the Owner shall, at the
election of Contractor (as to subparagraph (f) below only) or the Owner (as to
subparagraphs (a) through (f) below), as the case may be, be contingent upon the
occurrence of each of the following contingencies:
(a) Additional Approvals, Licenses, Permits Easements and Premises. All of
the zoning approvals, additional licenses, and additional easements, if any,
needed for the construction of the Facility shall have been obtained in form
reasonably satisfactory to Owner, Contractor and Lender, with no limitations or
conditions which are reasonably unacceptable to Contractor, Owner and Lender,
and no appeals of said additional licenses shall have been taken during the
applicable appeal periods by Closing.
(b) Utility Letters. Letters in form reasonably satisfactory to Contractor,
Owner and Lender confirming the availability of all utility services shall be
obtained by Contractor by Closing.
(c) Environmental Report receipt by Closing of an environmental report
reasonably satisfactory to Owner and Lender indicating that the Premises are
free of any material environmental contamination.
-20-
<PAGE>
(d) Title and Survey. Owner shall have received by Closing evidence
reasonably satisfactory to it and Lender that the title to the Premises is good,
clear record and marketable title free of encumbrances except for the Existing
Encumbrances, those other encumbrances permitted by Section 1.2 and those which
will not materially and adversely effect the construction and use of the
Facility thereon and a survey of the Premises reasonably acceptable to Owner and
Lender.
(e) Contractor Indemnification. An indemnification reasonably satisfactory
in form and in substance to Owner, Forrest L. Preston and Life Care Centers of
America, Inc., by the Contractor against costs and expenses incurred under the
Lender Loan in the event that the transfer of the DON back to the Contractor is
made pursuant to Section 2.8 ("Contractor Indemnification") so long as the Owner
transfers the Facility and the Premises back to the Contractor's nominee, a copy
of which is attached hereto as "Exhibit "J".
(f) The continued accuracy of all of the representations and warranties of
each party, as of the Closing.
(g) The DON shall have been transferred to the Owner and is in full force
and effect.
Section 6.2 - Failure of Contingencies. In the event that any one or more
of the contingencies set forth in this Article is not satisfied or waived by the
Owner, or the Contractor in the case of a failure of the contingency in
subparagraph (f) caused by Owner ("Owner's Default"), in writing at the time of
Closing or within such other period of time set forth above applicable to such
contingency, then, upon notice to the Contractor (or the Owner, in the case of
Owner's Default) and a fifteen (15) day period during which Contractor (or the
Owner, in the case of Owner's Default) may cause such contingency to be
satisfied, the Owners (or the Contractor, in the case of Owner's Default) may
terminate this Agreement. In such event, neither party shall have further
responsibility or liability to the other except for Contractor's indemnification
of the Owner pursuant to Section 5.3, which shall survive the Closing or the
termination of this Agreement.
Section 6.3 - Default. (a) In the event that the Owner defaults in any of
its obligations under Section 4.3 hereof after fifteen (15) business days
written notice and such default remains uncured fifteen (15) business days after
the expiration of the first fifteen (15) business day period ("Event of
Default"), the Owner shall within three (3) days after receipt of notice from
the Contractor, deliver to the Contractor a completed and signed application to
transfer the ownership of the DON to the Contractor or its designee. In such
event, the Owner agrees to use its reasonable best efforts to obtain DPH
approval for
-21-
<PAGE>
such transfer which shall include, without limitation, timely and accurate
responses to questions or requests for information from DPH whether such
questions or requests shall be written or oral, the timely completion and
submission of any applications requested by DPH and attendance at any hearings
held by DPH at which the Owner's attendance is requested, mandated or otherwise
necessary. In the event of such a default by the Owner in its obligations under
this Agreement, and the approval of the retransfer of the DON to the Contractor
is approved by DPH, the Owner agrees that certain of the damages suffered by the
Contractor are not readily susceptible to calculation. Therefore, in such event,
the Owner agrees to pay the Contractor the sum of Five hundred Thousand dollars
($500,000) as liquidated damages and not as penalty, within seven (7) days after
receipt of notice of the approval by DPH of the retransfer of the DON, the
Premises, and the Facility to the Contractor. In the case of an Event of
Default, the foregoing shall be the Contractor's exclusive remedy. If an Event
of Default occurs and, for whatever reason, the DON, the Premises or the
Facility are not retransferred to the Contractor, the Owner shall pay to the
Contractor all damages to which the Contractor shall be entitled at law or in
equity within seven (7) days after the receipt by the Owner of notice from the
Contractor of such Event of Default and the failure of the Owner to retransfer
the DON, the Premises and the Facility to the Contractor with the approval of
the DPH. Upon the approval by DPH of a transfer of the DON back to the
Contractor or its designee, the Owner shall within ten (10) days of the date of
Owner's receipt of the Contractor's notice, reconvey to the Contractor of its
nominee all right, title and interest in and to the Premises and the Facility
and all rights related thereto.
(b) In the event the Owner defaults under any of its obligations under this
Agreement other than those set forth in Section 4.3 after fifteen (15) business
days written notice from the Contractor to the Owner and an additional fifteen
(15) business days within which to cure, the Contractor may seek whatever
damages and use whatever remedies it may have at law or in equity.
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent
and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto), which alone fully and completely
expresses their understanding with respect to its subject matters.
-22-
<PAGE>
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
Section 7.5 - No Brokers. Contractor and Owner each represent and warrant
to the other that no broker or finder has acted on its behalf in connection with
this Agreement, or the transactions contemplated hereby or referred to herein.
Contractor and Owner each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
other broker, finder or similar agent claiming to have been employed by or on
behalf of such party.
Section 7.6 - Assignment. Neither Owner nor Contractor shall have the right
to assign its rights and delegate its obligations under this Agreement to
another entity or person without the prior written consent of the other parties
hereto.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by any nationally recognized
overnight carrier and postage prepaid as follows:
(a) In the event that notice is directed to Owner, it shall be sent to
Raynham Medical Investors Limited Partnership, 3580 Keith Street, N.W.,
Cleveland, Tennessee 37320-3480, Attention: Corporate Counsel, or at such other
address or addresses Owner shall from time to time designate by notice to
Contractor.
(b) In the event that notice is directed to Contractor, it shall be sent to
Attention: President, Continuum Care Corporation, River Place, 57 River Street,
Wellesley, MA 02181, and a copy thereof mailed to Corporate Counsel, at 15
Walnut Street, Wellesley, MA 02181; or at such other address or addresses as
Contractor shall from time to time designate by notice to Owner with a copy to:
Joseph A. Vitale, Esq., Levy & Droney, 74 Batterson Park Road, Farmington,
Connecticut 06034. The effective date of any such notice shall be the earlier of
actual receipt by the addressee or three (3) days after such notice is properly
deposited for mailing.
-23-
<PAGE>
Section 7.8. - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provision of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Facility or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, Sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date of the execution of this Agreement.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
Section 7.15 - Governing law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
Section 7.16 - Survival. Each of the representations, warranties and
indemnifications of the parties hereto shall survive the Closing or the
termination of this Agreement; provided, however, that the monetary obligations
of the parties will be paid in accordance with Section 2.14(c) in the event of a
termination of this Agreement by the Owner pursuant thereto.
Section 7.17 Compliance with Loan Documents. Notwithstanding anything set
forth herein to the contrary, in the event that any of the terms or conditions
of this Agreement are inconsistent with the terms or conditions of the Lender's
Loan
-24-
<PAGE>
Documents, the terms and conditions of the Lender's Loan Documents shall
control, provided, however, that in the event of a default under any of the Loan
Documents either (i) attributable to any action or inaction of the Owner which
is not attributable to any action or inaction by or of the Contractor or (ii) as
a result of any cross-default with any other loan between the Owner, or any of
its affiliates, and the Lender, or any of its affiliates or (iii) not
attributable to the Contractor, then the obligations of the Owner to the
Contractor hereunder shall remain unaffected and the provisions of this
Agreement shall control; provided, however that Owner shall not consent to any
material amendment of any of the Loan Documents without the prior written
consent of the Contractor. Any material amendment to the Lender Loan Documents
made without the prior written consent of the Contractor shall not be binding on
the Contractor. The Owner covenants to cause the Lender to provide to the
Contractor true, accurate and complete copies of all of the Loan Documents.
Dated as of this 3rd day of March, 1994.
Witness: PLYMOUTH MEDICAL INVESTORS LIMITED
PARTNERSHIP
By: Developers Investment Company, Inc.
Corporate General Partner
/s/ [Illegible] By: /s/ John P. O'Brien, Jr.
- --------------------------- ---------------------------------
Its
/s/ [Illegible] Duly Authorized Vice-President
- ---------------------------
CONTINUUM CARE CORPORATION
/s/ [Illegible] By: /s/ C.J. Wilkos
- --------------------------- ---------------------------------
Its Vice President
/s/ [Illegible] Duly Authorized
- ---------------------------
STATE OF Tennessee )
) ss:
COUNTY OF Bradley )
The foregoing instrument was acknowledged before me this 3rd day of March,
1994, by John P. O'Brien, Vice-President of Developers Investment Company, Inc.,
a corporate general partner of Plymouth Medical Investors Limited Partnership, a
Tennessee limited partnership on behalf of the limited partnership.
/s/ Cindy Cross
[Notary Public's Seal] ---------------------------
Notary Public
-25-
<PAGE>
STATE OF Massachusetts )
) ss:
COUNTY OF Norfolk )
The foregoing instrument was acknowledged before me this 17 day of March,
1994, by Craig J. Wilkos, Vice President of Continuum Care Corporation, a
Delaware corporation, on behalf of the corporation.
/s/ Carol A. Blanchard
----------------------------------
Notary Public
My Commission Expires June 30, 2000
GUARANTY
The obligations of the Owner hereunder are hereby irrevocably and
unconditionally guarantied by Forrest L. Preston.
WITNESSES:
/s/ [Illegible] /s/ Forrest L. Preston
- ---------------------------- -----------------------------
Forrest L. Preston
/s/ [Illegible]
- ----------------------------
-26-
ASSIGNMENT AGREEMENT
(Raynham, Massachusetts)
THIS ASSIGNMENT AGREEMENT (the "Agreement") is entered into as of the 6th
day of June, 1996, by and between Continuum Care of Massachusetts, Inc.
("Assignor") and CareMatrix of Massachusetts, Inc. ("Assignee").
WITNESSETH:
WHEREAS, Continuum Care Corporation (predecessor in interest to Assignor)
and Raynham Medical Investors Limited Partnership entered into a certain Turnkey
Construction Contract dated as of March 3, 1994 for the construction of a one
hundred forty-two (142) bed (which may be increased to one hundred fifty-four
(154) beds) long term care facility to be located on South Street, East, in
Raynham, Massachusetts (the "Turnkey Construction Agreement"), a copy of which
is attached hereto as Exhibit A.
WHEREAS, Assignor desires to assign its rights and obligations under the
Turnkey Construction Agreement to Assignee and Assignee desires to assume such
rights and obligations.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants, bargains, sells, assigns and transfers to
Assignee all of Assignor's right, title and interest in and all contractual and
other rights under the Turnkey Construction Agreement.
2. Assignee hereby accepts this assignment and hereby agrees to assume all
of Assignor's right, title, interest, duties and obligations under the Turnkey
Construction Agreement.
3. This Agreement may be executed by facsimile and in counterparts, each of
which shall constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ASSIGNOR:
CONTINUUM CARE OF
MASSACHUSETTS INC.
By: /s/ James M. Clary
-------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------
Name: James M. Clary
Title:
<PAGE>
EXHIBIT A
TURNKEY CONSTRUCTION CONTRACT
Between
CONTINUUM CARE CORPORATION
And
RAYNHAM MEDICAL INVESTORS LIMITED PARTNERSHIP
<PAGE>
Table of Contents
For
Turnkey Construction Contract
Between
CONTINUUM CARE CORPORATION
And
RAYNHAM MEDICAL INVESTORS LIMITED PARTNERSHIP
ARTICLE I - Status of Facility
Section 1.1 - Title to Premises
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Representations of Contractor
Section 1.6 - Representations of Owner
Section 1.7 - Other Agreements
Section 1.8 - Opinions of Counsel
ARTICLE II - Construction of the Facility
Section 2.1 - Architect
Section 2.2 - Other Professionals
Section 2.3 - Failure to Approve Final Plans
Section 2.4 - Construction
Section 2.5 - Personal Property
Section 2.6 - Changes
Section 2.7 - Commencement of Construction
Section 2.8 - Continuity of Construction
Section 2.9 - Completion of Construction
Section 2.10 - Punch-List
Section 2.11 - Work and Warranties
Section 2.12 - Subcontractors
Section 2.13 - Right of Owner to Cure
Section 2.14 - Termination by Owner
ARTICLE III - Financial
Section 3.1 - Construction/Permanent Financing
Section 3.2 - Price Increase Loan
ARTICLE IV - Closing
Section 4.1 - Date of Closing
Section 4.2 - Contract Price
Section 4.3 - Payment of Contract Price
Section 4.4 - Documents to be delivered by Contractor at Closing
Section 4.5 - Documents to be delivered by Owner at Closing
-i-
<PAGE>
ARTICLE V - Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities
Section 5.2 - Owner's Responsibilities
Section 5.3 - Indemnification
ARTICLE VI - Contingencies
Section 6.1 - Required Occurrences
Section 6.2 - Fai1ure of Contingencies
Section 6.3 - Default
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.3 - No Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10 - Successors
Section 7.11 - Counterparts
Section 7.12 - Severability
Section 7.13 - Effective Date
Section 7.14 - No offer
Section 7.15 - Governing Law
Section 7.16 - Survival
Section 7.17 - Compliance with Loan Documents
EXHIBIT LIST
Exhibit "A" - Description of Premises
Exhibit "B" - Survey
Exhibit "C" - Title Commitment
Exhibit "D" - Determination of Need, Approval of
Transfer and DPH Plan Approval
Exhibit "E" - Final Plans
Exhibit "F" - Group III Items
Exhibit "G" - FFE
Exhibit "H" - Form of Assignment of Lender Deposit Pledge
Exhibit "I" - MCE Line Items
Exhibit "J" - Contractor Indemnification
-ii-
<PAGE>
TURNKEY CONSTRUCTION CONTRACT
This Turnkey Construction Contract ("Agreement") is between CONTINUUM CARE
CORPORATION, a Delaware corporation (the "Contractor") with an office at River
Place, 57 River Street, Wellesley, Massachusetts 02181 and RAYNHAM MEDICAL
INVESTORS LIMITED PARTNERSHIP, a Tennessee limited partnership (the "Owner")
with an office at 3580 Keith Street, N.W., Cleveland, Tennessee 37320-3480 and
is entered into for the purpose of reducing to a formal writing all of their
understandings with respect to the construction, financing and ownership of a
one hundred forty-two (142) bed (which may be increased to one hundred
fifty-four (154) beds) long term care facility (the "Facility") to be located on
certain property located on South Street East in Raynham, Massachusetts and more
particularly described on attached Exhibit "A" (the "Premises").
In consideration of the undertakings of each of the parties to the other,
IT IS AGREED:
ARTICLE I
Status of Facility
Section 1.1 - Title to Premises. The Contractor, or its affiliate
("Premises Owner"), holds fee simple title to the Premises described in Exhibit
"A" subject to the Existing Encumbrances (as hereinafter defined). Exhibit "A"
and each of the other Exhibits referred to in this Agreement shall be
incorporated into this Agreement by such reference as if fully set forth in this
Agreement. At the Closing, upon the satisfaction of the contingencies set forth
in Article VI and elsewhere in this Agreement, the Contractor shall convey or
cause the Premises Owner to convey fee simple title to the Premises, reasonably
satisfactory to the Owner and Owner's Lender ("Lender"), to the Owner subject to
the Existing Encumbrances, the physical conditions with respect to utilities,
rights of way, easements, landscaping and improvements which are disclosed by
the survey of the Premises, a copy of which is attached hereto as Exhibit "B"
("Survey"), as such conditions may change during the course of construction as
permitted or contemplated by this Agreement and the Final Plans (as defined
herein). Owner acknowledges that it has reviewed, inspected and approved the
location and general characteristics of the Premises.
Section 1.2 - Encumbrances. The Contractor has been provided with a
commitment for policy of title insurance from First American Title Insurance
Company (commitment number 50369113/20177249) to insure title to the Premises, a
copy of which is attached hereto as Exhibit "C". The encumbrances set forth as
-1-
<PAGE>
items 1 through 1l,inclusive, in Schedule B of such commitment are collectively
referred to herein as the "Existing Encumbrances". At the Closing, upon the
satisfaction of the contingencies set forth in Article VI and elsewhere in this
Agreement, the Owner shall purchase the Premises from the Contractor subject to
the Existing Encumbrances, the physical conditions with respect to utilities,
rights of way, easements, landscaping and improvements which are disclosed by
the Survey of the Premises, as such conditions may change during the course of
construction as permitted or contemplated by this Agreement and the Final Plans.
Section 1.3 - Permits and Approvals.
(a) If it has not already, Contractor shall make application for and use
its reasonable best efforts to obtain, on behalf of Owner, all necessary zoning,
land use, environmental and building permits, consents and approvals from the
appropriate state and local government agencies ("Land Use Approvals") which
will permit the construction and operation of the Facility on the Premises. All
of such Land Use Approvals shall be assigned to the Owner at the Closing (to the
extent assignable) and the Owner shall grant to the Contractor, at the Closing,
a license under the Land Use Approvals so that Contractor may perform its
obligations hereunder. Owner's obligations with respect to obtaining federal,
state and local government permits, consents and approvals for the Facility
shall be limited to promptly cooperating with the Contractor in every respect in
obtaining such permits, consents and approvals. Prior to Physical Completion,
the Contractor shall perform or cause to be performed all of the obligations
required of the owner of the Premises under the Land Use Approvals. Prior to
Physical Completion all indemnifications set forth in the Land Use Approvals and
all amounts due and payable under the Land Use Approvals as fees or charges
relating to the construction (as opposed to the operation) of the Facility, and
not as taxes or assessments, including, without limitation, all amounts
deposited or to be deposited into escrow with the issuer of any such Land Use
Approval shall be the obligation of the Contractor. The Contractor hereby
indemnifies the Owner for any loss incurred by the Owner because of the
Contractor's breach of the preceding sentence.
(b) Contractor has applied to the Department of Public Health of the
Commonwealth of Massachusetts ("DPH") and has received approval of the transfer
of both the Determination of Need for the Facility, No. 5-1162, a copy of which
is attached hereto as Exhibit "D" ("DON") and the Premises to the Owner.
(c) Contractor shall have the right, in its sole discretion, to increase
the number of beds in the Facility from one hundred forty-two (142) to one
hundred fifty-four (154) (the
-2-
<PAGE>
"Bed Increase"), which shall increase the Contract price by Eight Hundred
Thirty-five Thousand Eight Hundred Twenty-three Dollars ($835,823.00), subject
to the conditions set forth in this subparagraph. In the event that any expenses
incurred in such Bed Increase are not included in the computation of Owner's
reimbursable capital costs for the purpose of determining the Owner's per diem
rates for the Facility ("Non-Reimbursable Expenses"), the Contract price will be
reduced by the amount of such Non-Reimbursable Expenses. In the event that the
Bed Increase does not occur, for any reason, no consequence shall result to the
Contractor and the Contract price shall not be increased as a result.
Section 1.4 - Documentation.
(a) The Owner covenants that it will provide fully and in a timely fashion
all reasonable documentation required by Contractor, any governmental bodies or
any lenders, supporting Owner's representations, warranties and covenants
hereunder, supporting all applications for any necessary governmental permits,
consents and approvals, and supporting any applications for construction or
permanent financing. Such documentation nay include, but not be limited to,
financial statements of the Owner or its affiliate, as required by Contractor,
any governmental bodies or any lender, Owner's certificate of limited
partnership; all authorizations for the transactions contemplated by this
Agreement; and other information relevant to any such applications or requested
by any lender. The contractor covenants that it will provide fully and in a
timely fashion all reasonable documentation requested by Lender and all
reasonable documentation of Owner's costs required by governmental bodies in
connection with the development or construction of the Facility, including
without limitation, reasonable documentation of Owner's costs which may be
required by governmental bodies auditing the Facility.
(b) As used herein the term "Loan Documents" shall mean a Construction Loan
Agreement ("Loan Agreement"), a Mortgage and Security Agreement, a Collateral
Assignment of Permits, Licenses, Approvals and Contracts, a Collateral
Assignment of this Agreement, and a Deposit Pledge Agreement, all dated as of
the Closing Date, and each of which is by and between Owner and Lender.
Section 1.5 - Representations of Contractor. Contractor represents that it
is duly organized1 validly existing, and in good standing under the laws of the
State of Delaware. Contractor represents that it is empowered and authorized to
execute, deliver, and perform its obligations under this Agreement, and, upon
such execution and delivery of this Agreement, this Agreement shall be a valid,
binding, and legal obligation of the contractor, enforceable in accordance with
its terms and duly
-3-
<PAGE>
authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation and bylaws and all applicable laws of the
Commonwealth of Massachusetts.
Section 1.6 - Representations of Owner. Owner represents that it is duly
organized and validly existing under the laws of the State Of Tennessee and duly
authorized to do business in Massachusetts. Owner represents that it is
empowered and authorized to execute, deliver, and perform its obligations under
this Agreement, and, upon such execution and delivery, this Agreement shall be a
valid, binding, and legal obligation of the Owner, enforceable in accordance
with its terms, in compliance with its certificate of limited partnership and
partnership agreement and all applicable laws of the State of Tennessee.
Section 1.7 - Other Agreements. The Contractor and Owner each represents
to the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which it may be bound.
Section 1.8 - Opinions of Counse1. Contemporaneously with the execution of
this Agreement, Owner shall deliver to contractor an opinion of Owner's in-house
counsel, M. Henry Day, Jr., Esq. with respect to the due organization, valid
existence and good standing of Owner, the power of the Owner to enter into this
Agreement and perform its obligations hereunder and the Owner shall deliver to
the Contractor an opinion of Hinckley1 Allen, et al. as to the enforceability
of this Agreement, and a partnership resolution of the Owner authorizing the
transactions set forth herein, each in form and substance reasonably
satisfactory to Contractor. Contemporaneously with the execution of this
Agreement, Contractor shall deliver to Owner an opinion of Contractor's in-house
Counsel, Richard S. Mann, Esq. or Robert D. Eustis, Esq., with respect to the
due organization, valid existence and good standing of Contractor, the power of
Contractor to enter into this Agreement and perform its obligations hereunder
and the enforceability of this Agreement, and a corporate resolution of the
Contractor authorizing the transactions set forth herein, each in form and
substance reasonably satisfactory to Owner.
ARTICLE II
Construction of the Facility
Section 2.1 - Architect.
(a) Contractor has engaged John M. Sheskey, AIA, of Quincy, Massachusetts
as the architect for the Facility ("Architect"). Contractor will also engage
engineers which Contractor selects, in its sole discretion. The Architect has
prepared final plans
-4-
<PAGE>
and specifications for the Facility. Such final plans and specifications are
listed on Exhibit "E" ("Final Plans")
(b) Upon the payment of the Contractor's requisition for the Architect's
preparation of the Final Plans, the Owner shall have the exclusive right to use
the Final Plans, provided however, that in the event a transfer of the DON to
the Contractor is made pursuant to Section 2.8, upon reconveyance of the
Premises to Contractor, the Contractor shall have the exclusive right to use the
Final Plans, subject, however, to whatever rights Lender has to such Final
Plans, if any.
(c) The Final Plans have been approved by DPH. Within two (2) weeks after
the execution of this Agreement, the parties will meet to review and approve the
same, revising them if required. Owner agrees that it will not unreasonably
withhold its approval of the Final Plans if they conform in material respects to
the preliminary plans which have been approved by the Owner ("Preliminary
Plans"). The parties agree to use their best efforts to reach a prompt and
reasonable conclusion. The parties shall initial the Final Plans as an
indication of their approval of the same.
Section 2.2 - Other Professionals. Except as otherwise set forth in Section
2.14, the Owner represents that it shall not engage any architects nor any
engineers, lawyers, consultants, accountants nor other professionals with
respect to the Facility which Contractor viii be obligated to pay, Other than as
requested by Contractor. Contractor shall have complete discretion to approve
and retain all professionals, contractors and subcontractors who will be
involved in the design, development and construction of the Facility.
Section 2.3 - Failure to Approve Final Plans. If Owner fails to approve the
Final Plans and that failure is a result of Owner's good faith belief that the
Final Plans do not substantially conform to the Preliminary Plans, Owner shall
give Contractor written notice specifying the areas of the alleged nonconformity
with the Preliminary Plans. Contractor may, at contractor's cost and expense,
cause the Architect to revise the Final Plans or Contractor may submit the issue
of conformity with the Preliminary Plans to arbitration in accordance with this
Section. Contractor shall give Owner written notice of Contractor's election
within twenty (20) days of Contractor's receipt of Owner's notice of
nonconformity if Contractor determines to seek arbitration. Owner and Contractor
shall, within fifteen (15) days of the date of Contractor's notice, each select
an architect, and the two architects shall within ten (10) days of their
selection, select a third architect, all of whom shall be licensed to practice
in the Commonwealth of Massachusetts and shall have substantial experience in
health care design. The Architect shall not be a member of such panel.
-5-
<PAGE>
The architects so selected shall review the Preliminary Plans and the Final
Plans and shall, acting by a majority, render a written decision as to whether
the Final Plans are in substantial conformity with the Preliminary Plans and, if
not so, shall state such deficiency. Such decision shall be rendered within
thirty (30) days of the selection of the third architect, shall set forth in
reasonable detail the reasons for the arbitrators' decision, and shall be
binding upon the parties. If the arbitrators determine that the Final Plans do
substantially conform to the Preliminary Plans, then Owner shell be obligated to
reimburse Contractor for the expenses incurred by the Contractor for the
arbitration proceedings. If the arbitrators determine that the Final Plans do
not substantially conform to the Preliminary Plans, Contractor shall reimburse
Owner for all costs and expenses incurred by Purchaser in connection with the
arbitration proceeding and Contractor shall at its sole cost and expense, cause
the Architect to revise the Final Plans in accordance with the arbitrators'
written decision.
Section 2.4 - Construction. The Contractor shall perform the work
substantially in accordance with the Final Plans subject to field changes, minor
design changes, and other immaterial changes which Contractor deems appropriate
during the course of construction, provided, however, that any change deemed
material by the Owner and the Contractor, or, if the Owner and the Contractor
cannot agree within seven (7) business days, then in the opinion of an architect
jointly chosen by the Owner and the Contractor ("Second Architect"), shall
require the Owner's written approval, which approval shall not be unreasonably
withheld or delayed. The Owner's granting of such approval shall not cause any
such change to be deemed all Owner Change as defined in Section 2.6. All work
shall be done in a good and workmanlike manner in accordance with applicable
federal and state statutes and regulations, and municipal building codes and
zoning ordinances, and in accordance with the DON and Land Use Approvals, if
required. The construction shall be performed in conformity with requirements of
applicable federal, state and local governmental agencies having jurisdiction of
the Facility, including Life Safety Code requirements imposed by the Federal
Department of Health and Human Services. The Contractor, on behalf of the Owner,
shall obtain all local, state or federal governmental approvals, if any, of the
Final Plans.
Section 2.5 - Personal Property.
(a) Contractor and Owner acknowledge that, incorporated into the Contract
Price (as defined herein) is an allowance of One Hundred Thousand Dollars
($100,000) for certain furniture, fixtures and equipment ("Group III Items")
more specifically set forth on Exhibit "F". The choice of the vendor for the
Group III Items and the nature. makes, models and quantities of the Group III
Items shall be in the sole discretion of the Owner. The
-6-
<PAGE>
Owner agrees to choose the vendors for the Group III Items and the makes, models
and quantities of the Group III Items promptly after notice from the Contractor
so that the Facility is equipped in a timely fashion in preparation for its
inspection by any state or local fire marshall, representative of DPH, building
inspector, or other governmental representative having jurisdiction over the
Facility. Contractor will provide all other furniture, fixtures and equipment
other than the Group III Items consistent with the Final Plans and the
furnishings list which is included hereto as Exhibit "G" ("FFE"). The FFE listed
on Exhibit "G" hereto shall be of substantially the same pro-rata quantity (on a
per bed basis) and quality as the furnishings, fixtures and equipment in certain
123 bed skilled nursing facility owned and operated by an affiliate of Owner in
Attleboro, Massachusetts ("Attleboro Facility"). All furniture, fixtures and
equipment of a quality or pro-rata quantity (on a per bed basis) exceeding that
of the furnishings, fixtures and equipment of the Attleboro Facility shall be
paid for by the Owner for a price not included in the Contract Price.
(b) Reference is made to the 123 bed skilled nursing facility located in
Milford, Massachusetts known as Milford Meadows which is owned and operated by
an affiliate of Contractor (the "Milford Facility"). Owner and Contractor agree
that the interior design for the Facility (i.e., wallpaper, carpet, trim and
molding, light fixtures, ceiling finishes, window treatments, cubicle curtains,
etc.) shall be substantially the same as or substantially consistent with the
design of the Milford Facility.
Section 2.6 - Changes.
(a) Owner agrees that Contractor shall have the right to make changes in
the Final Plans if required by any federal, state or local governmental
authority or official or if required due to the unavailability of any
construction material. Any such change shall not be deemed an Owner Change (as
defined below) unless it arises out of a change to the Final Plans requested by
Owner. Owner shall be consulted with respect to any such changes or
substitutions but Contractor shall have final authority to make all decisions
with respect to such changes as long as such changes result in construction,
space, equipment. interior design. and exterior design substantially equivalent
in quality and quantity to that shown on the Final Plans provided, however, that
any change deemed material by the Owner and the Contractor, or alternatively by
the Second Architect, shall require the Owner's written approval, which approval
shall not be unreasonably withheld or delayed. Any changes in the Final Plans,
made either at the request of the Owner or required by modifications made by the
Owner ("Owner Changes"), which have the effect of increasing the cost of the
work shall result in an addition to the Contract price in an amount equal to the
actual net cost thereof for the first $100,000 of such Owner Changes and
thereafter shall result
-7-
<PAGE>
in an addition to the Contract Price in an amount equal to the net cost thereof
plus ten percent (10%). Owner shall pay for any net increase to the Contract
Price caused by any Owner Changes at the time of the payment or the requisition
for any such change order. All change orders must be in writing and signed by
both Owner and Contractor.
(b) All work performed and equipment utilized in providing; the Facility
with piped medical gases shall be deemed to be an addition requiring a change
order and snail result in a payment to contractor of Seventy Thousand Dollars
($70,000) in addition to the Contract Price.
Section 2.7 - Commencement of Construction. The parties agree that
construction of the Facility started on August 13, 1993 ("Start Date").
Section 2.8 - Continuity of Construction. Construction, once undertaken,
shall proceed in a continuous and expeditious manner until Physical Completion,
as such term is defined in Section 2.9, is achieved. Physical Completion shall
take place no later than fourteen (14) months from the Start Date (the
"Completion Date"). Any delays caused by acts of God, fire, accident, casualty,
labor strikes or job actions, or any other cause not attributable to the failure
of the Contractor to use reasonable care and due diligence ("Force Majeure"),
however, shall be excused by the Owner, provided that Contractor shall use its
best efforts to minimize any such delays and shall resume construction at the
earliest possible time. Notwithstanding the foregoing, in the event of any delay
caused by a Force Majeure which extends the date of Physical Completion beyond
the Completion Date, the Contractor shall be Obligated to pay to the Lender any
additional interest, attorneys', inspection and consulting fees and all other
expenses under the Lender Loan payable as a direct and proximate result of any
such delay (the "Lender Direct Costs") beyond the Completion Date which shall be
the Owner's sole and exclusive remedy as a result of such delay. In the event
that any delay as a result of a Force Majeure extends the date of Physical
Completion beyond the Completion Date by a period of twelve (12) months or more,
the Owner shall within three (3) days after receipt of notice from the
Contractor, deliver to the Contractor a completed and signed application to
transfer the ownership of the DON to the Contractor or its designee. In such
event, the Owner agrees to use its reasonable best efforts to obtain DPH
approval for such transfer which shall include, without limitation, timely and
accurate responses to questions or requests for information from DPH whether
such questions or requests shall be written or oral, the timely completion and
submission of any applications requested by DPH and attendance at any hearings
held by DPH at such the Owner's attendance is requested, mandated or otherwise
necessary. Upon the approval by DPH of a transfer of the DON
-8-
<PAGE>
back to the Contractor or its designee, the Owner shall within thirty (30) days
of the date of Owner's receipt of the Contractor's notice thereof, reconvey all
right, title and interest in and to the Premises and the Facility and all rights
related thereto and the Contractor shall assume all of the obligations of the
Owner under the Lender Loan, subject to the consent of Lender, and whether or
not Lender consents to such an assumption shall indemnify the Owner for all
obligations arising under the Lender Loan from and after the date such transfer
occurs pursuant to the terms of the Contractor Indemnification.
Section 2.9 - Completion of Construction. For the of this Agreement, the
terms "Physical Completion" or "Physically Completed" shall be deemed to occur
on the date on which the building and improvements described and set forth in
the Final Plans: (i) have been completed in accordance with the Final Plans, as
the same may have been modified in accordance with the terms of this Agreement;
(ii) have been approved for occupancy by the local building inspector (and by
the local Fire Marshall in the event his approval is required) as evidenced by
the issuance of a temporary certificate of occupancy provided that such
temporary certificate of occupancy does not affect actual occupancy of the
Facility by patients or the licensing of the Facility by the DPH; (iii) have
passed the so-called physical plant inspection by the DPH in a manner which does
not prevent the licensing inspection of the Facility; and (iv) the FFE has been
furnished such that the Facility may be licensed and such that with respect to
other than patient rooms, the Facility is fully operational, provided, however
that in the event of delays in the furnishing of the FFE occasioned by the
action or inaction of the Owner in choosing or ordering any it items of FFE,
this subparagraph (iv) shall not be a condition in determining whether Physical
Completion has occurred. Physical Completion shall be deemed to have been
achieved notwithstanding that any of such officials or agencies have issued a
Punch-List listing items requiring completion or correction. Physical Completion
shall also be deemed to have been achieved notwithstanding that the Owner may
not yet have satisfied the requirements of the DPH with respect to the
administration of the Facility, medical supplies, medical records, nursing
service and staff, dietary requirements, and other general conditions necessary
to obtain a license for the rendering of nursing services.
Section 2.10 - Punch-List If, at the time the Facility has Physically
Completed, there exist any items requiring completion or correction, then the
Contractor agrees to use all reasonable diligence to complete or correct the
items so that each conforms to the Final Plans. The parties shall make a
Punch-List of the items requiring completion or correction. Each item on the
Punch-List shall be assigned a reasonable value based upon the Contractor's and
Owner's good faith estimate of the cost or completion or correction of the same.
Contractor shall deduct
-9-
<PAGE>
one hundred and fifty percent (l50%) of such total cost (the "Punch-List Amount"
from the balance of the Contract Price (as defined in Section 4.1). Owner and
the Contractor shall execute and deliver an agreement concurrently with the
approval of the Punch-List, under the terms of which the Owner shall agree to
promptly pay to the Contractor an amount equal to 150% of the estimated cost of
completion or correction of each item in the Punch-List upon its completion or
correction. If any item is not completed or corrected within a period of ninety
(90) days, at the Owner's option an amount equal to the cost of completion or
correction of the item say be offset against the Punch List Amount, and
Contractor shall have no further obligation with respect to such item. If the
Owner elects not to offset against the Punch List Amount, the Contractor shall
continue to be obligated to correct such items. After all appropriate offsets,
the Owner .shall promptly pay the balance of the Punch-List Amount, if any, to
the Contractor.
Section 2.11 - Work and Warranties. At the Closing. Contractor will assign
to Owner. in addition to any warranties created by law, all warranties and
guarantees received from subcontractors and suppliers of equipment and
furnishings1 to the extent assignable. Contractor will agree to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of Physical Completion.
Section 2.12 - Subcontractors. The Contractor shall furnish the names of
all subcontractors who supplied equipment. labor or materials having a value in
excess of Fifty Thousand Dollars ($50,000) in connection with the construction
of the improvements on the Premises, after the hiring of subcontractors. All of
such subcontractors shall contract with the Contractor for the provisions of
equipment, labor or materials for the Facility and not with the Owner.
Contractor hereby indemnifies and saves Owner harmless from claim for payment by
any subcontractor of Contractor who furnishes equipment, materials or supplies
or performs labor or services in the prosecution of the work, other than any
supplier of the Group III Items or person performing work in connection with any
Group II Items in excess of the allowance therefor, or otherwise contracting
directly with Owner.
Section 2.13 - Right of Owner to Cure. If the Contractor defaults or
neglects to carry out its obligations under the terms of this Agreement in
accordance with the term of this Agreement and fails within thirty (30) days
after receipt of written notice from the Owner to commence and continue
correction of such default or neglect with diligence and promptness, the Owner
may, if such default remains uncured after such thirty (30) day period and
without prejudice to other remedies the Owner may have, correct such
deficiencies. In such case an appropriate change order shall be issued deducting
from payment then or thereafter
-10-
<PAGE>
due the Contractor, the reasonable costs of correcting such deficiencies. If the
payments then or thereafter due the Contractor are not sufficient, the
Contractor shall pay the difference to the Owner.
Section 2.14 - Termination by the Owner.
(a) This Agreement may be terminated by the Owner upon fifteen (15)
business days written notice to the Contractor in the event that
Contractor stops all work on the facility construction inspector or
alternatively, a mutually agreeable Second Architect issues a
certificate to such effect) and abandons the Facility, other than as a
result of a Force Majeure or a breach by Owner hereunder; unless
Contractor shall have recommenced Work on the Facility continuously
and diligently during the second fifteen (15) business day notice
period.
(b) If the Contractor materially defaults under this Agreement or
persistently fails or neglects to carry out the material terms of this
Agreement or materially fails to perform the provisions of this
Agreement in a manner that has a material adverse effect upon the
construction or the progress of construction (as certified by the
Architect), the Owner my give written notice to Contractor that the
Owner intends to terminate this Agreement. If the Contractor fails to
correct the material defaults, failure or neglect within fifteen (15)
business days after being given notice, the Owner my then give a
second written notice and, after an additional fifteen (l5) business
days if such default remains uncured after such second fifteen
(15)business day cure period or such longer period as my reasonably be
required to effect a cure, provided that the Contractor commences and
diligently prosecutes a cure, the Owner my at the Owner's option,
terminate this Agreement.
(c) In the event of any termination under clause (a) or (b) above, the
Owner shall pay the Contractor for work completed and for proven loss
sustained upon materials, equipment and applicable damages, and, upon
Physical Completion, reasonable profit and overhead. Such reasonable
profit and overhead shall include, without limitation, a sum equal to
the percent complete of the hard construction cost of the Facility as
indicated on a draw request multiplied by the principal amount of the
Price Increase Loan and the Cash Collateral Holdback, offset by the
Owner's actual reasonable costs incurred directly by Owner and
certified by the
-11-
<PAGE>
Architect, in excess of the balance of the Contract Price related to
promptly achieving Physical Completion of the Facility after such
termination proceeding in a reasonable manner. Upon any such payment,
all debts and obligations of each party to the other on account of
such termination and this Agreement (except for those representations
and warranties, covenant and indemnities which survive this Agreement)
shall be deemed discharged, terminated and released.
ARTICLE III
FINANCING
Section 3.1 - Construction/Permanent Financing.
(a) Owner has obtained construction and permanent financing (collectively,
the "Financing") for the Facility from Lender upon terms and conditions
reasonably acceptable to Owner ("Lender Loan"). Owner represents and warrants to
the Contractor that the Lender Loan is of an adequate principal amount to
provide for progress payments to the Contractor in the amount of $10,831,689.00.
Owner shall be solely responsible for paying the financing costs, legal fees,
title insurance and other so-called "soft costs" associated with the Financing
as described below. Owner shall receive a credit against the Contract Price,
pursuant to Section 4.2(vi), to the extent of such soft costs paid by the Owner,
up to the allowance for such soft costs set forth in the DON as finally
determined by the DPH.
(b) The Contractor and Owner also contemplate that the Premises and
Facility may serve as security for the payment obligations under the Lender Loan
and that the Owner will be the obligor for the repayment of all financial
obligations thereunder. Owner agrees to promptly execute and deliver all
commitments, mortgages, collateral assignments, promissory notes, guaranties,
agreements, documents, certificates, affidavits, and other writings required to
be executed by Lender in connection with the Lender Loan.
(c) The cost of securing financing in an amount equal to the allowance for
such items under the final DPH approved DON and interest which accrues on all
financing prior to the date of Physical Completion in an amount equal to the
allowance for such item under the final DPH approved DON are included in the
Contract Price, provided, however, that the Owner shall Pay loan fees interest
and attorneys fees in excess of such amounts incurred in connection with the
Lender Loan. In the event loan fees are assessed or interest accrues beyond the
amount in the maximum capital allowance under the DON as a result of delays in
construction which are the Owner's fault, then the Owner shall pay such
additional loan fees or interest. In the event that the
-12-
<PAGE>
Contractor is solely or in part responsible for delays in construction beyond
the Completion Date, or in the event of a Force Majeure pursuant to Section 2.8,
the Contractor shall be responsible to the Owner for the increased interest
coats or any other Lender Direct Costs that Owner incurred for the period of
such delay which are attributable to the Contractor or such Force Majeure.
However, in no event shall the Contractor be responsible for any delays in
construction so long as the Facility is completed by the Completion Date. In any
event of an increase in such fees or interest the Contractor will assist the
Owner in attempting to obtain an increase in the maximum expenditure under the
DON to cover such increase.
Section 3.2 Price Increase Loan.
(a) At the Closing, subject to the contingencies set forth in Article VI
and elsewhere in this Agreement, in the event that the Contractor chooses, in
its sole discretion, to increase the number of licensed beds at the Facility as
set forth in Section 1.3, the Contractor shall provide to the Owner additional
financing in an amount equal to the resulting increase in the Contract Price
("Price Increase Loan"), in accordance with Section 1.3 until such increase is
funded to the Owner under the Lender Loan.
(b) The Price Increase Loan shall bear no interest and shall be due and
payable only: (i) upon the Facility's census reaching one hundred twelve (112)
patients; and (ii) the Lender's release of loan proceeds sufficient to pay the
Price Increase Loan, unless Lender refuses to release such loan proceeds as a
result of the matters set forth in clauses (i), (ii) or (iii) of Section 7.17
hereof. The Price Increase Loan may be prepaid without penalty. The Price
Increase Loan shall be due and payable, at the option of the Contractor, if
after Physical Completion the Owner shall:
1) admit in writing its inability to pay its debt as they become
due;
2) file a petition in bankruptcy or a petition to take advantage of
any insolvency act;
3) make an assignment for the benefit of its creditors;
4) consent to the appointment of a receiver for itself or the whole
or substantially all of its property;
5) as a result of a petition in bankruptcy filed against it without
such petition being dismissed within 120 days after the date of
such filing;
-13-
<PAGE>
6) file a petition or answer seeking reorganization or arrangement
or other aid or relief under any bankruptcy or insolvency laws or
any other lawful relief of debtors; or
7) transfer any interest in the Facility, either directly or
indirectly except for a bequest or intestate succession arising
out of the death of Forrest L. Preston and except for transfers
to affiliates of the Owner without the prior written consent of
Contractor.
ARTICLE IV
Closing
Section 4.1 - Date of Closing. The conveyance of title to the Premises and
the payment to Contractor of the Contractor's initial requisition to the extent
approved by Owner and Lender, which shall include, all out of pocket expenses
incurred by Contractor and its affiliates through the closing date with respect
to the Facility, including without limitation, for architects, engineers,
attorneys and consultants; the amount, if any, expended by Contractor in
connection with the acquisition of the Premises; and the amount expended by the
Contractor in the development and construction of the Premises, shall take place
simultaneously with the consummation of the Lender Loan (the "Closing") which
shall take place on or before June 30, 1994. Said payment to the Contractor at
Closing shall be limited to the maximum amount funded by Lender and shall be
credited against the Contract Price; provided, however, that nothing herein
shall abrogate the obligation of the Owner to pay the Contract Price in
accordance with Section 4.3.
Section 4.2 - Contract Price. The price to be paid by the Owner for all of
the materials and services to be provided by Contractor hereunder ("Contract
Price") shall be equal to the sum of: (i) the final maximum capital expenditure
("MCE") amount allowed under the DON, as determined by the DPH based upon the
Contractor's submission pursuant to 105 C.X.R. l00.551(I)(l)-(5), which
submission is to be made within 180 days after Final Plan approval; plus (ii)
$500,000; plus (iii) the cost of any additional furniture, fixtures and
equipment if not previously paid by the Owner (as described in Section 2.5);
plus (iv) any Owner Changes (as described in Section 2.6); plus (v) $835,823.00
in the event of the Bed Increase to the extent such amount is not included in
the MCE in accordance with subparagraph (i) above, minus any Non-Reimbursable
Expenses; minus (vi) any costs or expenses, if any, allowed in the MCE up to the
amount of the line item in the MCE for each such item which has been paid
directly by Owner after obtaining the approval of the Contractor.
-14-
<PAGE>
Section 4.3 - Payment of the Contract Price. The Owner shall pay the
Contract Price at the following times and in the following manner:
(a) The expenses to be reimbursed at the Closing in accordance with Section
4.1 will be paid at Closing. Prior to the Closing, the Contractor and the Owner
shall develop and agree upon a schedule of values for the Facility based upon
the line items in the MCE, a copy of which is attached hereto as Exhibit "I"
which shall be initialled by the Contractor and the Owner to evidence their
agreement and be approved by Lender ("Schedule of Values"). Based upon
applications for payment submitted to the Architect by the Contractor and
verified by Owner, and Certificates for Payment issued by the Architect, the
general contractor, and the Contractor, the Owner shall submit applications for
payment requesting Lender to make progress payments on account of certain items
on the Schedule of Values based upon a percent complete basis as certified by
the Architect to the Contractor. Certain other items on the Schedule of Values
will be paid as incurred. The Cash Collateral Holdback (as hereinafter defined)
shall be paid as set forth in Section 4.3(c) and the Price Increase Loan shall
be paid as set forth in Section 4.3(b). The period covered by each Application
for Payment shall be one calendar month ending on the last day of the month.
Each Application for Payment shall be based upon the most recent Schedule of
Values submitted by the Contractor and approved by Owner and Lender, which
approval shall not be unreasonably withheld or delayed. Applications for Payment
shall show the amount due for each item shown on said Schedule of Values as of
the end of the period covered by the Application for Payment. The amount of each
such progress payment which is to be paid based on a percent complete basis
shall be the Sum of (i) the product of multiplying that portion of such item
properly allocable to completed work for such item by the percentage of
completion of that item, and (ii) the portion of such item properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the work or suitably stored off the site, minus the aggregate
of previous payments made by the Owner for such item and minus such retainage as
is typically required in other construction loans obtained by Owner's
affiliates. Notwithstanding anything set forth in this paragraph to the
contrary, the terms and expense of progress payments on account of the Contract
Price made from the Owner to the Contractor shall be subject to the terms and
conditions of the Lender Loan as they relate to the Contractor's obligations.
Owner shall use its best efforts to have the Certificates for Payment approved
by and paid by lender. In the event that Owner does not approve an application
for payment, the Owner will within two (2) business days notify Contractor, in
writing, of the reasons for the withholding of such approval. If Contractor and
Owner cannot agree on a revised amount the Owner will promptly execute an
application for payment for the amount
-15-
<PAGE>
for which Owner feels is due and paying in accordance with the terms of this
Agreement. If the Owner does not issue an application for payment or a written
notification to Contractor of its reason for withholding an application for
payment in accordance with this Agreement, through no fault of Contractor,
within five business days after the receipt of an application for payment or if
Owner does not request that Lender pay Contractor within five days after the
receipt by Owner of an application for payment, then Contractor, may upon seven
additiona1 business days after written notice to Owner and Lender, stop the work
order this Agreement until payment of the amount owing has been received. Any
such period of stoppage shall be added to the period of time during which the
Contractor is to achieve Physical Completion as set forth in Section 2.8.
(b) That portion of the Contract Price relating to the Price Increase Loan
shall be payable in accordance with the terms of Section 3.2.
(c) That portion of the contract Price in the amount of Five Hundred
Thousand Dollars ($500,000) (the "Loan Collateral Holdback") shall be due upon
Physical Completion but shall not be payable until the Owner's achievement of a
debt service coverage ratio at the Facility of 1.2 to 1 as determined by Lender,
and the Lender's release of the Cash Collateral Holdback; provided, however,
that the Cash Collateral Holdback shall be payable by the Owner in any event
upon the Facility achieving a debt service coverage ratio of 1.2 to 1 if Lender
refuses to release the cash collateral held by the Lender as a result of any
default of Owner, or any of its affiliates, under any agreement between Owner.
or any of its affiliates, and Lender not attributable to any action or inaction
of or by the Contractor. The Cash Collateral Holdback shall bear interest from
the date of Physical Completion at the rate of the base rate then in effect at
the Bank of Boston, plus three percent (3%) per annum until paid. Owner shall
assign its rights to the first $500,000 of such collateral plus interest thereon
to Contractor pursuant to a collateral assignment thereof in the form attached
as Exhibit "H" which the Owner hereby agrees to execute and deliver to the
Contractor upon Physical Completion.
(d) In the event that any of Contractor's approved requisitions, or
payments set forth in subsections (b) or (c) above, are not paid when due,
solely due to delays incurred through the fault of or through circumstances
under the control of the Owner or its affiliates, the Owner shall pay interest
to the Contractor, monthly in arrears on any such outstanding amount. Such
monthly interest shall be computed at a rate equal to the base rate then in
effect at the Bank of Boston, plus three percent (3%) per annum.
-16-
<PAGE>
(e) Owner's obligation to pay the Price Increase Loan and Owner's
obligation to pay the Cash Collateral Holdback may be offset by proven losses
sustained upon materials and equipment caused by the Contractor's material
breach of this Agreement which is not cured within the applicable time period
therefor. In the event that the Owner chooses to exercise its right of offset
under this Section 4.3(e), it shall first provide the Contractor with written
notice of such intent, to offset, setting forth the reasons therefor. Contractor
shall have a period of seven days from its receipt of the Owner's notice within
which to notify the Owner of the Contractor's desire to contest such offset. In
the event that the Owner and the Contractor cannot agree within seven (7) days
from the date of the Contractor's notice whether such offset is appropriate, the
parties agree to submit such issue to binding arbitration before the American
Arbitration Association in Boston, and agree to be bound by the decision
rendered in any such arbitration.
Section 4.4 - Documents to be Delivered by Contractor at Closing. At the
Closing, the Contractor shall deliver, or shall cause to be delivered, the
following to the Owner:
(a) A quitclaim deed with covenants against grantor's acts;
(b) A bill of sale;
(c) The assignment of Land Use Approvals set forth in Section 1.3;
(d) The survey described in Section 1.2;
(e) A hazardous waste affidavit;
(f) The insurance certificates described in Section 5.1(b);
(g) The affidavits and waivers described in Section 5.1(c);
(h) The Contractor's initial requisition and supporting information
relating thereto; and
(i) Final approval of the transfer of the DON and an assignment thereof.
Section 4.5 - Documents to be Delivered by the Owner at Closing. At the
Closing the Owner shall deliver the following to the Contractor:
(a) The payment set forth in Section 4.1; and
(b) The license to Contractor set forth in Section 1.3(a).
-17-
<PAGE>
ARTICLE V
Additional Responsibilities of Parties
Section 5.1 - Contractor's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Contractor shall have the following
responsibilities:
(a) To obtain and pay for the Certificate of Occupancy;
(b) The Contractor shall at all times, commencing with the date upon which
construction begins, carry or cause to be carried the following types of
insurance with an insurance carrier or carriers reasonably acceptable to Lender:
(i) Worker's compensation insurance covering all persons engaged in
the performance of this Agreement in accordance with applicable
law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000
for any one accident or disaster; and property damage coverage
limits of not less. than $100,000; all of which insurance shall
name the Owner and Lender if any, as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief, covering all improvements to be erected hereunder and
all materials for the same which are on or about the Premises, in
an amount equal to the full insurable value of such improvements
and materials; such insurance, to be payable to Owner, Contractor
and Lender, if any, as their interests may appear, with, standard
mortgage endorsement to Lender or its assigns as mortgagee.
(iv) Comprehensive general liability under a primary policy and
umbrella policy with limits not less than $5,000,000.00 which
will include the following:
(a) Contractor's Liability;
(b) Contractual Liability;
(c) Owners and Contractors Protective Liability;
(d) Completed Operations Liability;
(e) Products Liability; and
(f) Personal Injury
-18-
<PAGE>
(v) Any other insurance required of the Contractor by Lender.
The Contractor shall furnish to the Owner and Lender, if any, duplicate
policies of insurance as set forth in Subparagraphs (i), (ii), (iii) and
(iv) hereof. The coverages described above may be carried by the Contractor
under an Owner's Protective Liability Policy with the same limits of
coverage, naming Owner, which policy shall be subject to the Owner's
reasonable approval. The Owner shall be named as an additional insured on
such policies as may be appropriate. Each of such policies shall contain,
to the extent customarily obtainable in Massachusetts, a provision to the
effect that they may not be canceled except upon ten days' prior written
notice to the Owner and Lender.
(c) At the time of Closing, and with each requisition, Contractor shall
deliver to Owner the following:
(i) a duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials for the
construction of the Facility;
(ii) an affidavit to the title insurance company enabling Owner to
obtain title insurance coverage insuring the Owner and Lender, if
any, against collection as enforcement of mechanic's liens
against the Premises;
(iii) Such other documents or instruments as Owner may reasonably
require or as Lender may require of Contractor.
Section 5.2 - Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities:
(a) To cause Owner's counsel to render legal opinion to Lender with respect
to the Owner's obligations, warranties, and representations set forth herein (as
they pertain to legal matters) and with respect to other legal opinions
(pertaining to the Owner, the Facility and the Premises) as any Lender may
require.
(b) Owner is solely responsible for obtaining financing as set forth in
Section 3.1(a). Owner will use its best efforts to consummate financing for the
contemplated construction, including the furnishing of financial statements,
providing an appraisal of the Premises and Facility and by notes, guarantees,
mortgages, assumption agreements and other documents reasonably necessary to
effectuate such financing, and Owner shall pay all costs associated with such
financing (which
-19-
<PAGE>
costs shall be deducted from the Contract Price) in accordance with Section
3.1(d).
(c) To keep the DON in full force and effect as the holder thereof,
subsequent to the transfer of the DON to the Owner.
Section 5.3 - Indemnification. The Contractor hereby agrees to indemnify
and hold the Owner harmless from all liabilities, claims, and demands for
personal injury or property damage arising out of or caused by any act or
omission of Contractor, its subcontractors, agents, or employees, or, to the
extent not caused by any action or inaction of Owner, its agents or employees,
arising in or about the Premises for the period from the date of this Agreement
until Physical Completion. The Contractor further covenants to use proper care
and caution in the performance of its work hereunder so as not to cause damage
to any adjoining or adjacent property.
ARTICLE VI
Contingencies
Section 6.1 - Required Occurrences. At the time of closing if not otherwise
specified below, unless such period is extended by written notice of the Owner,
this Agreement and the undertakings of Contractor or the Owner shall, at the
election of Contractor (as to subparagraph (f) below only) or the Owner (as to
subparagraphs (a) through (f) below), as the case may be, be contingent upon the
occurrence of each of the following contingencies:
(a) Additional Approvals. Licenses. Permits, Easements and Premises All of
the zoning approvals, additional licenses, and additional easements, if any,
needed for the construction of the Facility shall have been obtained in form
reasonably satisfactory to Owner, Contractor and Lender, with no limitations or
conditions which are reasonably unacceptable to Contractor, Owner and Lender,
and no appeals of said additional licenses shall have been taken during the
applicable appeal periods by Closing.
(b) Utility Letters. Letters in form reasonably satisfactory to Contractor,
Owner and Lender confirming the availability of all utility services shall be
obtained by Contractor by Closing.
(c) Environmental Receipt by Closing of an environmental report reasonably
satisfactory to Owner and Lender indicating that the premises are free of any
material environmental contamination.
-20-
<PAGE>
(d) Title and Survey. Owner shall have received by Closing evidence
reasonably satisfactory to it and Lender that the title to the Premises is good,
clear record and marketable title free of encumbrances except for Existing
Encumbrances, those other encumbrances permitted by Section 1.2 and those which
will not materially and adversely effect the construction and use of the
Facility thereon and a survey of the Premises reasonably acceptable to Owner and
Lender.
(e) Contractor Indemnification. An indemnification reasonably satisfactory
in form and in substance to Owner, Forrest L. Preston and Life Care Centers of
America, Inc., by the Contractor against costs and expenses incurred under the
Lender Loan in the event that the transfer of the DON back to the Contractor is
made pursuant to Section 2.8 ("Contractor Indemnification") so long as the Owner
transfers the Facility and the Premises back to the Contractor's nominee, a copy
of which is attached hereto as Exhibit "J".
(f) The continued accuracy of all of the representations and warranties of
each party. as of the Closing.
(g) The DON shall have been transferred to the Owner and is in full force
and effect.
Section 6.2 - Failure of Contingencies. In the event that any one or more
of the contingencies set forth in this Article is not satisfied or waived by the
Owner, or the Contractor in the case of a failure of the contingency in
subparagraph (f) caused by Owner ("Owner's Default"), in writing at the time of
Closing or within such other period of time set forth above applicable to such
contingency, then, upon notice to the Contractor (or the Owner, in the case of
Owner's Default) and a fifteen (15) day period during which Contractor (or the
Owner, in the case of Owner's Default) may cause such contingency to be
satisfied. the Owners (or the Contractor, in the case of Owner's Default) may
terminate this Agreement. In such event, neither party shall have further
responsibility or liability to the other except for Contractor's indemnification
of the Owner pursuant to Section 5.3, which shall survive the closing or the
termination of this Agreement.
Section 6.2 - Default. (a) In the event that the Owner defaults in any of
its obligations under Section 4.3 hereof after fifteen (15) business days
written notice and such default remains uncured fifteen (15) business days after
the expiration of the first fifteen (15) business day period ("Event of
Default"), the Owner shall within three (3) days after receipt of notice from
the Contractor, deliver to the Contractor a completed and signed application to
transfer the ownership of the DON to the Contractor or its designee. In such
event, the Owner agrees to use its reasonable best efforts to obtain DPH
approval for
-21-
<PAGE>
such transfer which shall include, without limitation, timely and accurate
responses to questions or requests for information from DPH whether such
questions or requests shall be written or oral, the timely completion and
submission of any applications requested by DPH and attendance at any hearings
held by DPH at which the Owner's attendance is requested, mandated or otherwise
necessary. In the event of such a default by the Owner in its obligations under
this Agreement, and the approval of the retransfer of the DON to the Contractor
is approved by DPH, the Owner agrees that certain of the damages suffered by the
Contractor are not readily susceptible to calculation. Therefore, in such event,
the Owner agrees to pay the Contractor the sum of Five Hundred Thousand Dollars
($500,000) as liquidated damages and not as penalty, within seven (7) days after
receipt of notice of the approval by DPH of the retransfer of the DON, the
premises, and the Facility to the Contractor. In the case of an Event of
Default, the foregoing shall be the Contractor's exclusive remedy. If an Event
of Default occurs and, for whatever reason, the DON, the Premises or the
Facility are not retransferred to the Contractor, the Owner shall pay to the
Contractor all damages to which the Contractor shall be entitled at law or in
equity within seven (7) days after the receipt by the Owner of notice from the
Contractor of such Event of Default and the failure of the Owner to retransfer
the DON, the Premises and the Facility to the Contractor with the approval of
the DPH. upon the approval by DPH of a transfer of the DON back to the
Contractor or it. designee, the Owner shall within ten (10) days of the date of
Owner's receipt of the Contractor's notice, reconvey to the Contractor or its
nominee all right, title and interest in and to the Premises and the Facility
and all rights related thereto.
(b) In the event the Owner defaults under any of its obligations under this
Agreement other than those set forth in Section 4.3 after fifteen (15) business
days written notice from the Contractor to the Owner and an additional fifteen
(15) business days within which to cure, the Contractor may seek whatever
damages and use whatever remedies it may have at law or in equity.
ARTICLE VII
Concluding Provisions
Section 7-1 - Entire Agreement. All prior understandings, letters of intent
and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto), which alone fully and completely
expresses their understanding with respect to its subject matters.
-22-
<PAGE>
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations or agreements except as herein expressly set forth.
Section 7.3 - Amendments This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
Section 7.5 - No Brokers. Contractor and Owner each represent and warrant
to the other that no broker or finder has acted on its behalf in connection with
this Agreement, or the transactions contemplated hereby or referred to herein.
Contractor and Owner each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
other broker, finder or similar agent.
Section 7.6 - Assignment. Neither Owner nor Contractor shall have the right
to assign its rights and delegate its obligations under this Agreement to
another entity or person without the prior written consent of the other parties
hereto.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by any nationally recognized
overnight carrier and postage prepaid as follows:
(a) In the event that notice is directed to Owner, it shall be sent to
Raynham Medical Investors Limited Partnership, 3580 Keith Street, N.W.,
Cleveland, Tennessee 37320-3480, Attention: Corporate Counsel, or at such other
address or addresses Owner shall from time to time designate by notice to
Contractor.
(b) In the event that notice is directed to contractor, it shall be sent to
Attention: President, Continuum Care Corporation, River Place. 57 River Street,
Wellesley, MA 02181, and a copy thereof mailed to Corporate Counsel, at 13
Walnut Street, Wellesley, MA 02181; or at such other address or addresses as
Contractor shall from time to time designate by notice to Owner with a copy to:
Joseph A. Vitale, Esq., Levy & Droney, 74 Batterson Park Road, Farmington,
Connecticut 06034. The effective date of any such notice shall be the earlier of
actual receipt by the addressee or three (3) days after such notice is properly
deposited for mailing.
-23-
<PAGE>
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provision of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Facility or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9. - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors and
assigns.
Section 7.11 - Counterparts. This Agreement maybe executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, Sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions so long as the material purposes of this can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date of the execution of this Agreement.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
Section 7.16 - Survival. Each of the representations. warranties and
indemnifications of the parties hereto shall survive the Closing or the
termination of this Agreement provided, however, that the monetary obligations
of the parties will be paid in accordance with Section 2.14(a) in the event of a
termination of this Agreement by the Owner pursuant thereto.
Section 7.17 - Compliance with Loan Documents. Notwithstanding anything set
forth herein to the contrary, in the event that any of the terms or conditions
of this Agreement are inconsistent with the terms or conditions of the Lender's
Loan Documents, the terms and conditions of the Lender's Loan
-24-
<PAGE>
Documents shall control, provided, however, that in the event of a default under
any of the Loan Documents either (i) attributable to any action or inaction of
the Owner which is not attributable to any action or inaction by or of the
Contractor or (ii) as a result of any cross-default with any other loan between
the Owner, or any of its affiliates, and the Lender, or any of its affiliates or
(iii) not attributab1e to the Contractor, then the obligation of the Owner to
the Contractor hereunder shall remain unaffected and the provisions of this
Agreement shall control; provided however, that Owner shall not consent to any
material amendment of any of the Lender Loan Documents without the prior written
consent of the Contractor. Any material amendment to the Lender Loan Documents
without the prior written consent of the Contractor shall not be binding on the
Contractor. The Owner covenants to cause the Lender to provide to the contractor
true1 accurate and complete copies of all of the Loan Documents.
Dated as of this 3rd day of March. 1994.
Witness: RAYNHAM MEDICAL INVESTORS LIMITED
PARTNERSHIP
By: Developers Investment Company, Inc.
Corporate General Partner
/s/ [Illegible] By: /s/ John P. O'Brien
- ----------------------------- -------------------------------
/s/ [Illegible] Its
- ----------------------------- Duly Authorized Vice-President
CONTINUUM CARE CORPORATION
/s/ [Illegible] By: /s/ C.J. Wilkos
- ----------------------------- -------------------------------
/s/ [Illegible] Its Vice President
- ----------------------------- Duly Authorized
STATE OF TENNESSEE)
) ss:
COUNTY OF BRADLEY )
The foregoing instrument was acknowledged before me this 3rd day of March,
1994, by John P. O'Brian, Vice President of Developers Investment Company, Inc.,
a corporate general partner of Raynham Medical Investors Limited Partnership, a
Tennessee limited partnership on behalf of the limited partnership.
/s/ Cindy Cross
-------------------------------
Notary Public
[Notary Public Seal]
-25-
<PAGE>
STATE OF MASSACHUSETTS)
) ss:
COUNTY OF NORFOLK )
The foregoing instrument was acknowledged before me this 17th day of March,
1994, by Craig J. Wilkos, Vice President of Continuum Care Corporation, a
Delaware corporation, on behalf of the corporation.
/s/ Carol A. Blanchard
-------------------------------
Notary Public
My Commission Expires June 30, 2000
GUARANTY
The obligations of the Owner hereunder are hereby irrevocably and
unconditionally guarantied by Forrest L. Preston.
WITNESSES:
/s/ [Illegible] /s/ Forrest L. Preston
- ----------------------------- -------------------------------
Forrest L. Preston
/s/ [Illegible]
- -----------------------------
-26-
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF CYPRESS STATION, INC.
And
CHANCELLOR OF HOUSTON, INC.
<PAGE>
Table of Contents
ARTICLE I - Representations
Section 1.1 - Title to Property
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Other Agreements
Section 1.6 - Utility Services
Section 1.7 - Good Standing of Developer
Section 1.8 - Good Standing of The Owner
ARTICLE II - Construction of the Project
Section 2.1 - Control of Construction
Section 2.2 - Architectural and Engineering Services
Section 2.3 - Other Professionals and General Assumed Obligations
Section 2.4 - Plans and Specifications
Section 2.5 - Construction
Section 2.6 - Personal Property
Section 2.7 - Changes
Section 2.8 - Commencement of Construction
Section 2.9 - Continuity of Construction
Section 2.10 - Completion of Construction
Section 2.11 - The Owner's Noninvolvement
Section 2.12 - Punch-List
Section 2.13 - Work and Warranties
Section 2.14 - Subcontractors
Section 2.15 - Financing Arrangements
ARTICLE III - Closing
Section 3.1 - Date of Closing
Section 3.2 - Total Contract Price
Section 3.3 - Payment of Contract Price
Section 3.4 - Form of Conveyance
ARTICLE IV - Additional Responsibilities of Parties
Section 4.1 - Developer's Responsibilities
Section 4.2 - The Owner's Responsibilities
Section 4.3 - Indemnification
<PAGE>
ARTICLE V - Contingencies
Section 5.1 - Required Occurrences
Section 5.2 - Failure of Contingencies
ARTICLE VI - Additional Covenants of The Owner
Section 6.1 - Indemnification by The Owner
Section 6.2 - Confidentiality
Section 6.3 - Provision of Further Information
Section 6.4 - Management Agreement
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10 - Successors
Section 7.11 - Counterparts
Section 7.12 - Severability
Section 7.13 - Effective Date
Section 7.14 - No Offer
EXHIBITS LIST
Exhibit A - Property
Exhibit B - Encumbrances
Exhibit C - Environmental Report
Exhibit C-2 - Licenses and Permits
Exhibit D - Condition of Property
Exhibit E - Developer's Approvals
Exhibit F - The Owner's Approvals
Exhibit G - Utility Services Letters
Exhibit H - Architectural Contract
Exhibit I - Furniture, Furnishings & Equipment
Exhibit J - Management Agreement
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Cypress Station, Inc., a Delaware corporation, with an office at 197 First
Avenue, Needham, Massachusetts 02194 (the "Developer"), and Chancellor of
Houston, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of a proposed assisted/independent living
project to be comprised of 148 units (the "Project") to be located in Cypress
Station, Texas described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have good, record and
marketable title in fee simple to the Property consisting of approximately nine
(9) acres of land as more fully described in Exhibit "A". Exhibit "A" and each
of the other Exhibits referred to in this Agreement shall be incorporated into
this Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth on
Exhibit "B" (the "Existing Encumbrances"), to physical conditions disclosed
by a boundary survey to be prepared by Don Norman Surveying entitled
"Boundary Survey of 9.0000 Acres of Land in the Daniel Harmon Survey,
A-315 and the Manuel Tarin Survey, A-778 in Harris County, Texas", dated
October 16, 1995, (Map No. 4311) for the Property, and will be subject to
those easements, conditions, contracts, rights, licenses, encroachments,
restrictions and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each represents to
the other that it has reviewed or shall review the boundary survey and the
1
<PAGE>
topographical survey of the Property and has made a physical inspection of
the Property and is satisfied with as to the site characteristics and
attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and any
other plans, studies and surveys, title reports, environmental assessments,
appraisals and other information regarding the Property or the Project
which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the Property
has only the apparent site and off-site conditions, if any, as set forth on
Exhibit "D" which require the implementation of the measures, if any, as
set forth on Exhibit "D".
(d) Commencing on the date the Developer elects to commence construction in
accordance with this Agreement, the Owner shall provide the Developer with
full possession and complete control of the Property for purposes of
performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to obtain,
prior to the date of the Closing (as defined in Article III hereof), all
state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and opening of the Project on the Property as set
forth on Exhibit "E" (the "Developer's Approvals"). The Developer covenants
to diligently use its best efforts to obtain all of the Approvals in an
expeditious manner. In the event that the Developer is unable to obtain the
Approvals, the Developer shall have no liability whatsoever to the Owner,
or any other party and at the Owner's or the Developer's option, this
Agreement shall be terminated without recourse to either party hereto at
law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of the Closing (as defined in Article III hereof), all
state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and operation of the Project on the Property as
set forth on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Approvals in an
expeditious manner. In the event that the Owner is unable to obtain the
Approvals, the Owner shall have no liability whatsoever to the Developer,
or any other party and at the Owner's or the Developer's option, this
Agreement shall be terminated without recourse to either party hereto at
law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by the
Developer in order that the
2
<PAGE>
purpose of this Agreement be effectuated, the rights under the Approvals
and any other grants of rights, permits, approvals, or licenses, which may
be necessary to complete the performance of the Developer's obligations
hereunder; provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
Section 1.4 - Documentation. The Owner shall provide or obtain construction and
permanent financing for the Property, the Project, the Personal Property (as
defined herein) and related development costs (collectively, the "Project Loan")
which shall be sufficient, together with the Owner's equity contributions, if
necessary (which shall in no event exceed ten percent (10%) of the Contract
Price), to pay the full amount of the Contract Price (as defined herein). The
Owner covenants that it will provide fully and in a timely fashion all
reasonable documentation required by the Owner's lender in connection with the
Project Loan. Such documentation shall include, but is not limited to, all
zoning and plan approvals, all utility letters indicating positive availability
of service, inventory of concessions made to and agreements with any or all
municipal bodies, site plans, title policies, and all other regulatory body
approvals. The Owner also covenants that it will, in a timely manner, provide
whatever financial or other information the Owner's lender might reasonably
require in connection with the Developer's applications for financing for the
construction of the Project and as required by such lender in connection with
the Project Loan. The Owner will use its best efforts to pursue its application
for construction and permanent financing for the Project.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of The Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and,
duly authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation and bylaws and all applicable laws of the state of
its incorporation.
3
<PAGE>
Section 1.8 - Good Standing of The Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
duly authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
ARTICLE II
Construction of the Project
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Developer shall
have sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein, so long as the same are in compliance with
Approvals, the Final Plans (as defined below) and all applicable laws.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that DiGiorgio Associates, Inc. and their consulting engineers (the "Architect
and Engineers") have or will be retained by the Developer. The Developer will be
responsible for payment of the architectural fees due to the Architect, pursuant
to the contract with respect to the Project dated (said contracts herein
collectively, the "Architectural Contract"). The Owner represents and warrants
to the Developer that a true, accurate and complete copy of the Architectural
Contract is attached hereto as Exhibit "H". The Developer shall not be
responsible to the Owner, or any other party for any errors, omissions, breaches
or failures thereof, or any damages resulting from the acts or omissions of the
Architect. At the Developer's option, the Owner shall assign to the Developer
all of its right, title and interest in the Architectural Contract and any and
all architectural, engineering and other contracts with respect to the Project
free of any claims other than outstanding amounts owed under the Architectural
Contract. In no event shall the Developer be obligated to assume any of said
contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project other than
payments due to the Architect under the Architectural Contract.
4
<PAGE>
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Developer shall, under the
direction of the Developer and after consultation with the Owner, prepare
basic design plans (the "Basic Plans"). As a part of this process, the
Developer may engage engineers, including the site engineers, to perform
test borings and other soil testing at the Property for purposes of
properly locating the Property on the Project. The Developer, the
Architects and the Engineers shall consult with the Owner during the
process of preparing the Basic Plans. The Developer, Architect and the
Engineers shall have access to the Project for all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion of the Basic Plans and delivery to the Owner, and the
Developer, the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate their
approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and the Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based upon
the Basic Plans. Within two (2) weeks after the completion of the Final
Plans and their delivery to the Owner, the parties will meet to review and
approve the same, and make any necessary revisions. The Owner agrees that
it will not unreasonably withhold its approval of the Final Plans if they
conform in all material respects to the Basic Plans. The parties agree to
use their best efforts to reach a prompt and reasonable conclusion
concerning the acceptability of the Final Plans (and Personal Property, see
Section 2.6). The parties shall initial the Final Plans as an indication
of their approval of the same.
Section 2.5 - Construction. The Developer shall construct the Project in a good
and workmanlike manner and in accordance with the Final Plans, the Approvals,
and all applicable laws subject to field changes and minor design changes. The
Project is to be licensed for the unit complement described above and shall be
constructed in accordance with the requirements in effect on the date of this
Agreement as set forth by all federal, state and local governmental agencies
having jurisdiction of the Project, including Life Safety Code requirements
imposed by the Federal Department of Health and Human Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or "F F
& E") required for the Project within the allowance (defined below). The
allowance for the "F F & E" is Seven Hundred Ninety Nine Thousand Two
Hundred Sixty-Two Dollars ($799,262) (the "F F & E Allowance"), which F F &
E Allowance shall be included in the Contract Price (as defined below).
5
<PAGE>
(b) In the event that the cost of the F F & E furnished pursuant to
subsection 2.6 (a) above shall exceed the F F & E Allowance, any such
excess shall be an increase to the Contract Price.
(c) In order to reduce the risk that the F F & E will be delivered prior to
the Closing contemplated herein, the Owner covenants that it shall approve
such F F & E as soon as practicable but not later than approximately six
(6) months prior to the estimated date of Physical Completion (defined
below).
(d) F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or Personal Property. The Owner shall be notified of any
such changes or substitutions in the Personal Property, however, the Developer
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start on or prior to the date which is thirty (30) days after the satisfaction
of the last of the conditions set forth in Section 5.1 to be satisfied, or as
soon thereafter as weather and ground conditions permit but not later than
October 15, 1996.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion (as such term is defined in Section 2.10) is achieved, which shall
not occur later than eighteen (18) months after the completion of the foundation
for the Project. Any delays caused by acts of God, fire, accident, casualty,
cessation of activity due to refusal to work by labor, or any other cause not
attributable to the failure of the Developer to use reasonable care and due
diligence, however, shall be excused by the Owner, provided that the Developer
shall use its best efforts to minimize any such delays and shall resume
construction at the earliest possible time.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion" or
"Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been completed
and the Project shall have been approved for and received a certificate for
temporary or permanent occupancy by the local building inspector, and by
the State Fire Marshall in the event his or her approval is required (the
"Certificate of Occupancy"). Physical Completion shall be deemed to have
been achieved
6
<PAGE>
notwithstanding that any of such officials or agencies have issued a
Certificate of Occupancy with conditions or a Punch-List listing items
requiring completion or correction, so long as such conditions or
Punch-List items do not prevent or prohibit occupancy as determined by the
Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the Owner
at least ninety (90) days prior to the time that the Developer estimates
that the Project will be Physically Completed, whereupon the Owner will
diligently proceed to fulfill all other conditions necessary for licensure
and the Owner will apply in a timely manner for all licenses and permits
necessary to commence operation of the Project as set forth on Exhibit
"C-2". After such notice from the Developer, the Owner, to the extent
necessary to perform administrative activities may, so long as it does not
interfere with completion of construction, enter upon the Property in an
effort to coordinate initial licensure.
Section 2.11 - The Owner's Noninvolvement. The Owner shall have access to the
construction site while construction is in progress, but it shall not be
empowered to interfere or become involved with construction or require changes
thereto, provided, however that the Owner's agents shall have the right to view
the construction in progress and shall have access to the site for the purpose
of equipping the Project and preparing the Project for operation.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties) after transfer of title, further
agreeing to permit the Owner to complete any such items, at the Developer's
expense, if the Developer has failed to complete the same within the forty-five
(45) day time period.
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of Personal Property, the Developer will assign to the Owner,
in addition to any warranties created by law, all warranties and guarantees
received from designers, the Architect, the general contractor and suppliers of
equipment and furnishings, to the extent assignable. The Developer will agree to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, the Owner hereby waives and the Developer hereby disclaims all other
express and implied warranties of every kind or nature with respect to the
Project and the Personal Property, including, without limitation, waiving all
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7
<PAGE>
Section 2.14 - Subcontractors. The Developer agrees to indemnify and save the
Owner harmless from claims for payment by any subcontractor who furnishes
materials or supplies or performs labor or services in the prosecution of the
work pursuant to this Agreement. The Developer reserves absolute discretion on
the selection of subcontractors.
Section 2.15 - Financial Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount of
the Contract Price. This Agreement may be terminated by either the
Developer or the Owner without further recourse to either party (except for
reimbursement of Project related expenses) in the event that the closing
and funding of the construction loan financing with respect to the Project
pursuant to the Project Loan (with all conditions precedent to such closing
either satisfied or irrevocably waived by the lender) shall not have
occurred by December 31, 1996.
The Owner and the Developer also contemplate that the Property and Project,
together with all fixtures, furnishing, equipment, and articles of personal
property now owned or hereafter acquired by the Owner which are or may be
attached to or used in connection with the Property or Project, together
with any and all replacements thereto and substitutions therefor, and all
proceeds thereof; and all present and future rents, issues, leases, and
profits of the Property and Project will serve as security for the payment
obligations to any lenders relating to the Project Loan or otherwise, and
that the Owner will be the principal obligor for the repayment of all
financial obligations thereunder after the transfer of title to the Owner.
The Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by any
lender in connection with such financing.
ARTICLE III
Closing
Section 3.1 - Date of Closing. The delivery of possession of the Property and
Project to the Owner and payment of the Contract Price, less one hundred fifty
percent (150%) of the value of the Punch List, shall take place
contemporaneously within three (3) working days after Physical Completion of the
Project but in no event later than the date established in Section 2.9;
provided, however, that the Developer has completed its obligations as set forth
in this Agreement, including, but not limited to, Sections 2.10 and 2.13.
Section 3.2 - Contract Price.
(a) The price to be paid by the Owner to the Developer for the development,
construction and furnishing of the Project and for the Property shall be
Eleven Million Four Hundred Twenty Nine Thousand Six Hundred Forty Five
Dollars ($11,429,645) plus the
8
<PAGE>
costs incurred as the result of any unforeseen site conditions and cost of
F F & E in excess of the F F & E Allowance (the "Contract Price").
(b) In addition to the Contract Price, if the Closing does not take place
within three (3) business days after Physical Completion due to delays
incurred through the fault of or through circumstances under the control of
the Owner, the Owner shall pay to the Developer interest, payable monthly
in arrears, on the Contract Price accruing from the date which is three (3)
days after Physical Completion to the date of which is three (3) days after
delivery of possession of the Project pursuant to Section 3.1; such
monthly interest shall be computed at a rate equal to the Prime Rate as
announced by Fleet Bank, N.A. from time to time plus two percent (2%) per
annum.
Section 3.3 - Payment of Contract Price. At the time of transfer of title, the
balance of the Contract Price not paid through the Developer's requisitions
under the construction financing for the Project shall be paid by the Owner to
the Developer by wire transfer, certified check or other mutually acceptable
means less any Punch-List Amount or retainage required by the Owner's lender.
Section 3.4 - Form of Conveyance and Status of Title. The Project and Personal
Property shall be conveyed by warranty bill of sale. The Project and Personal
Property may be subject to the mortgages and security interests described in
Section 2.15.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer shall have the following
responsibilities:
(a) To obtain and pay for necessary building permits and the Certificate of
Occupancy;
(b) To pay for all labor and material required to develop, construct and
furnish the Project in accordance with the Final Plans (except as otherwise
expressly set forth herein) and to pay for the Personal Property to be
provided;
(c) The Developer shall at all times, commencing with the date upon which
construction begins, carry the following types of insurance with an
insurance carrier or carriers acceptable to the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with applicable
law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000 for any one
accident or disaster; and property
9
<PAGE>
damage coverage limits of not less than $100,000; all of which
insurance shall name the Owner's lender as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious mischief,
covering all improvements to be erected hereunder and all materials for the
same which are on or about the Property, in an amount equal to the full
insurable value of such improvements and materials; such insurance to be
payable to the Owner, the Developer and the Owner's lender as their
interests may appear, with a standard mortgagee endorsement to the Owner's
lender or its assigns as mortgagee.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth in
subparagraphs (i), (ii), and (iii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect that
they may not be canceled except upon ten (10) days prior written notice to
the Owner and the Owner's lender.
(d) At Closing, the Developer shall deliver to the Owner, at the Owner's
option:
(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the Project; or
(ii) reasonable proof of payment or proof of a provision for payment
to such subcontractors; or
(iii) an indemnification to the Owner with respect to same.
Section 4.2 - The Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities:
(a) To expeditiously pursue obtaining commitments for financing the
contemplated construction, including the furnishing of financial
statements, providing an appraisal of the Property and Project and by
execution of applications, notes, mortgages, assumption agreements and
other documents reasonably necessary to effectuate such financing or the
financing of the Personal Property.
(b) To pay for all professional and other staff personnel required for the
pre-opening and operation of the Project in sufficient time to permit
licensure by the Department at the date of physical completion.
(c) To pay to the Developer, in addition to the Contract Price, the costs
for correcting unusual site conditions. Such payment shall be made on the
basis of the actual costs of the Owner in correcting the same plus fifteen
percent (15%) of such costs to cover the
10
<PAGE>
Developer's overhead expenses and shall be due and payable upon the
transfer of title to the Owner. For the purpose of this Agreement, the term
unusual site conditions shall include, without limitation, any of the
following which have not been noted in the Final Plans or otherwise
disclosed in the due diligence materials:
(i) unusual soil or water conditions requiring extraordinary
preparation, i.e., piles, curtain drains, retaining walls, blasting or
rip-rap;
(ii) tying in of water, sewer or other utility services beyond the
locations as shown in the Final Plans;
(iii) holding tanks and pumps for the water system or the sprinkler
system;
(iv) water purification or filter system;
(v) leaching field; and
(vi) any requirement imposed upon the Developer by governmental
agencies having jurisdiction, if not provided for in the Final Plans,
because of reasons other than errors or omissions in such Final Plans,
such as requirements imposed as conditions for the granting of any of
the Approvals.
(d) The Owner shall be solely responsible for the removal of any hazardous
wastes and materials, if any, from the Property, at the Owner's sole cost
and expense, and not as part of the Contract Price.
Section 4.3 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until transfer of title.
The Developer further covenants to use proper care and caution in the
performance of its work hereunder so as not to cause damage to any adjoining or
adjacent property, and the Developer shall indemnify and hold the Owner harmless
from any liabilities, claims, or demands for damage to such adjoining or
adjacent property.
ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals and current utility availability
letters shall have been obtained by October 15, 1996.
11
<PAGE>
(b) Title. An the Owner's title insurance policy commitment and Class A-2
ALTA survey, satisfactory to the Developer, in its sole discretion, shall
have been obtained by the Owner which confirms that there are no exceptions
or conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual course
of its business.
(c) Additional Due Diligence Regarding the Property. The Developer shall
have received due diligence information concerning the Property,
satisfactory to the Developer, in its sole discretion, including, without
limitation, soil tests and utility service confirmations to the extent not
currently available. On or before June 1, 1996, the Developer shall notify
the Owner of any issues.
(d) Purchase of the Property. The Owner shall have purchased good record,
marketable fee simple title to the Property as set forth in Section 1.1 by
June 1, 1996.
(e) Construction Financing. The Owner shall have received construction
financing in the full amount of the Contract Price by October 15, 1996.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
Notice, either party may terminate this Agreement. In such event, neither party
shall have any further responsibility or liability to the other. The Developer
reserves the right, at its option, to waive or defer any one or more of the
conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
Section 6.1 - Indemnification by The Owner. The Owner hereby indemnifies and
defends the Developer against any claims for unpaid fees or costs associated
with the Property or the Project incurred by or on behalf of the Owner or the
Developer as a result of any claim by any broker. The parties acknowledge that
no broker was responsible for procuring the transactions set forth in this
Agreement, nor any part hereof, and each party will indemnify and defend the
other from any and all claims, actual or threatened, for a commission or other
compensation by any third person with whom such party has had dealings.
Section 6.2 - Confidentiality. The Owner, its partners, affiliates, agents,
servants and employees hereby agree:
(a) To maintain in the strictest confidence the identity of the Developer;
the contents of this Agreement; the negotiations between the parties on the
terms of this Agreement; and any of
12
<PAGE>
the Developer's proprietary information, including, without limitation,
financial information, projects, copies of leases, real estate appraisals,
and other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions contemplated
hereby (the "Confidential Information");
(b) Not to disclose, without the Developer's prior written consent (except
to the extent disclosure is required by applicable law or regulation), any
Confidential Information except to such parties' own agents, servants and
employees, bankers, consultants and other advisors to whom disclosure is
necessary in order to effectuate the transactions contemplated hereby; and
(c) To comply therewith for a period of two (2) years commencing on the
date of this Agreement.
Section 6.3 - Provision of Further Information. The Developer agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.4 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
13
<PAGE>
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent to
it at the address set forth above and a copy therefore sent to Chancellor
of Houston, Inc., 197 First Avenue, Needham, MA 02194, Attention: James M.
Clary, III, Esq., or at such other address or addresses the Owner shall
from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be sent
to CareMatrix of Cypress Station, Inc., 197 First Avenue, Needham, MA
02194, Attention: Harold E. Nash, III, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
14
<PAGE>
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.1l - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 1st day of September, 1996 and executed under seal.
Witness: CHANCELLOR OF HOUSTON, INC.
/s/ James M. Clary By: /s/ Abraham D. Gosman
- --------------------- --------------------------
James M. Clary Name: Abraham D. Gosman
/ Title: President and Treasurer
CAREMATRIX OF CYPRESS STATION, INC.
/s/ Elizabeth Derrico By: /s/ Robert M. Kaufman
- ----------------------- ----------------------------
Elizabeth Derrico Name: Robert M. Kaufman
Title: President
15
<PAGE>
EXHIBITS A- I
Documents in Planning and Zoning Files
16
<PAGE>
EXHIBIT J
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the _____ day
of __________, 1996, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 ("Manager"), and Chancellor of Houston, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 ("Owner").
WHEREAS, the Owner is the owner of a one hundred forty (140) unit senior
housing facility to be located in Cypress Station, Texas (the "Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the rights of the Owner
under Section 2.1 of this Agreement to approve the hiring, disciplining and
termination of the Executive Director, the Assistant Administrator and Director
of Resident Services) all personnel involved in the administration and
day-to-day operation of the Facility,
<PAGE>
including, without limitation, management, resident assistance and other related
personnel, custodial, food service, cleaning, maintenance and other operational
personnel, and secretarial or bookkeeping personnel, each of whom, other than
the Executive Director (as hereinafter described), shall be employees of the
Owner; supervise the accounting, billing, purchasing and bill payment functions
for the Facility; establish systems of accounts and supervise the maintenance of
ledgers and other primary accounting records by the personnel of the Facility;
supervise the financial affairs of the Facility; establish and supervise the
implementation of operating and capital budgets, including those required to
establish reimbursement rates, if any, with respect to state or federal
entitlement programs as well as self-pay rates; prepare and maintain true,
complete and accurate records necessary for the preparation of such operating
budgets; determine which items of cost and expense properly relate to resident
care; establish and administer financial controls over the operation of the
Facility, develop and establish financial standards and norms by which the
income, costs and operations of the Facility may be evaluated; serve as advisor
and consultant in connection with policy decisions to be made by the Owner;
furnish reports to the Owner as the Owner may reasonably request and provide the
Owner with economic and statistical data in connection with or relative to the
operations of the Facility; represent the Facility in its day-to-day dealings
with creditors, residents, personnel, agents for collection, and insurers; act
as agent for the Owner in disbursing or collecting the funds of the Facility and
in paying the debts and fulfilling the obligations of the Facility; coordinate
and supervise a marketing plan for the Facility to insure that the Facility
obtains full occupancy as soon as possible and, after the Facility has achieved
full occupancy, assist in the development of an annual marketing plan and budget
to maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2
<PAGE>
2.1 Employees. The Manager shall recruit, evaluate, select, and hire a
qualified and properly licensed Executive Director (provided, however, that the
wages, salaries and other compensation of the Executive Director shall be the
responsibility of the Owner as set forth in Section 4.2 hereof) who shall be
responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($ 10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager attempts to notify the Owner on a concurrent basis). The
Manager shall prepare and submit to the Owner any certificates of purchasing
expenses incurred for the Facility as may be reasonably requested.
3
<PAGE>
2.3 Collection of Accounts. The Manager shall supervise the Facility
bookkeeping personnel which shall prepare and submit bills and collect for the
account of the Owner any and all moneys owing to the Owner from residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record and
bookkeeping system for the operation and conduct of business of the Facility in
accordance with generally accepted accounting principles consistently applied.
Books and records at the Facility may be maintained by an employee of the Owner
under the supervision of the Manager. Full books of account with entries of all
receipts and expenditures related to the operation of the Facility shall be
maintained at the offices of the Manager and shall at all times during normal
business hours be open for inspection by representatives of the Owner. The
Manager shall be responsible for filing all local, state and federal tax returns
relating to the operation of the Facility, with the exception of corporate
income tax and pension returns, and shall be responsible for penalties,
interest, and audit costs arising out of late, inaccurate, or incomplete filings
or the Manager's failure to file such tax returns provided, however, that the
Owner makes available sufficient funds for payment of any taxes due and any
information needed to complete such returns on a timely basis).
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after the
close of each calendar month, a balance sheet as of the end of the month and a
statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after the
close of each fiscal year, a year-end compilation report, including a balance
sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be required
under any financing terms in accordance with the deadlines set forth in any
financing agreements encumbering the Facility (any such financing agreement or
agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
4
<PAGE>
2.7 Budgets. The Manager shall prepare and submit for approval by the
Owner the following: (a) as soon as possible and not later than thirty (30) days
before the close of each fiscal year, or on such earlier date as may be required
under any Financing Agreement, a detailed written capital and operating budget
for the next succeeding fiscal year, broken down by month and showing projected
expenditures and projected revenues for such budget period; and (b) such other
budgets as may be reasonably required of the Owner under any Financing Agreement
or by regulatory authorities showing, inter alia, projected ordinary and
extraordinary expenditures and protected revenues for such budget period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense, on
behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and supervise
the agreed upon marketing plan for the Facility during the fill-up phase (the
"Marketing Plan"). Monthly statistical census analysis reports will be generated
by the Manager and delivered to the Owner. The Manager will recommend
adjustments in the Marketing Plan as needed to achieve full occupancy. For
purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment of,
and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
2.12 Plant and Maintenance.
5
<PAGE>
(i) attention shall be given to preventive maintenance (this item
may be provided by outside parties if economically feasible) and, to the extent
deemed feasible by the Manager and the Owner, the services of regular Facility
maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee.
Base Management Fee. As compensation for the services to be rendered
by the Manager during the term of this Agreement, the Manager shall pay itself,
at its principal office given below (or at such other place as the Manager may
from time to time designate in writing), and at the times hereinafter specified,
a monthly management fee (the "Management Fee") during the terms of this
Agreement equal to five percent (5%) of Net Revenues. The Management Fee will be
paid in arrears and shall be due and payable on or before the fifteenth (15th)
day of each month following the month in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following expenses
incurred by it in the management of the business and properties of the Facility:
(a) Salary and expenses (including, without limitation, payroll
taxes, costs of employee benefit plans, travel, insurance, and fidelity bonds)
of all personnel employed by the Manager (other than the Executive Director, who
will be paid by the Owner as set forth in Section 4.2 hereof) to carry out all
responsibilities detailed above.
(b) Salary and expenses (including, without limitation, payroll
taxes, cost of employee benefit plans, travel, insurance and fidelity bonds) of
financial and accounting personnel employed by the Manager to maintain
accounting books and records of the Facility, except as provided below.
6
<PAGE>
4.2 Owner Expenses. Except as otherwise expressly provided herein, the
Owner shall bear all of the expenses of operating and financing the Facility and
rendering resident services not assumed by the Manager, and without limiting the
generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness incurred or
assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the existence,
operation, receipts, income or property of the Owner, provided, however, that
all interest and penalties incurred as a result of the Manager's failure to
timely file all returns which the Manager is required to file pursuant to this
Agreement, or to make timely payment of all taxes, levies, imposts, or other
charges, to the extent that sufficient funds were available to the Manager as of
the date such payments were due, shall be the responsibility of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen and food
service equipment, linens, beds, furniture, clothing and all other supplies and
equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the design,
acquisition, disposition or ownership of real and personal property devoted,
used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
acquisition, sale, mortgaging or leasing of property, litigation and proceedings
relating to rates and charges at the Facility, any other litigation or
proceedings to which the Owner is a party. However, such fees shall not include
those fees resulting from or arising out of the gross negligence by the Manager
and the Owner shall provide such necessary funds to the Manager within ten ( 10)
days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be
7
<PAGE>
paid on behalf of the Owner by the Manager, the Manager shall promptly notify
the Owner of the amount necessary to cure and the reason for such deficit and
the Owner shall provide such necessary funds to the Manager within ten (10) days
after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall rate
structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the Facility in the
Owner's name, separate from all other accounts and funds of the Manager, with a
bank or banks whose deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") or with a savings and loan institution or institutions
whose deposits are insured by the Federal Savings and Loan Insurance Corporation
("FSLIC") as it deems necessary or desirable. The Manager, on behalf of the
Owner, shall use reasonable efforts to collect (using legal counsel approved by
the Owner, if necessary) all sums due and owing to Owner in connection with the
operation of the Facility. The Manager and the Owner shall deposit into such
accounts all monies furnished by the Owner as working funds and all receipts and
monies arising from the operation of the Facility or otherwise received by the
Owner or by the Manager for or on the behalf of the Owner.
(iii) Draws on such accounts may be made by the sole signature of an
authorized representative of the Manager (or by wiring instructions from such
authorized representative of the Manager) and shall be paid to the Manager to
reimburse the Manager for payments made pursuant to this Agreement by the
Manager from its own accounts. The Owner hereby appoints the Manager, for the
term of this Agreement, as the Owner's true and lawful attorney-in-fact to
withdraw, by writing checks against such accounts, funds for reimbursement of
all amounts payable pursuant to this Agreement in connection with the operation
of the Facility. The Owner agrees to execute from time to time any additional
documents required by any bank wherein such documents are held to effectuate all
powers of attorney referred to herein. The Manager shall make disbursements and
payments from such accounts, on behalf and in the name of the Owner, in such
amounts and at such times as are deemed by the Manager to be appropriate or
required in connection with, first, payments required by any Financing
Agreement, and second, payments of ownership, maintenance and operating expenses
of the Facility and the other costs, expenses and expenditures provided for in
this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers.
8
<PAGE>
All dealings between the Owner and the Manager are at arms length as between
non-related parties.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue for an initial
term of ten (10) years commencing on the date the Facility is opened for
occupancy, and ending on the last day of the calendar month in which the tenth
(10th) anniversary of such opening date occurs (the "Original Expiration Date").
The Owner and Manager agree to execute a certificate setting forth the date on
which the initial term commences promptly after such opening. Thereafter, this
Agreement shall be renewed automatically for four (4) additional five (5) year
terms unless the Manager sends the Owner written notice no less than ninety (90)
days prior to the then applicable Expiration Date that it does not wish to have
the Agreement renew beyond the then applicable Expiration Date. As used herein
the term "Expiration Date" shall mean the later of the Original Expiration Date,
or the date to which this Agreement has been extended as provided in this
Section 7.1.
7.2 Termination for Cause. Any party may terminate this Agreement for
"cause" be delivering thirty (30) days written notice to the others. "Cause"
shall include, but not be limited to, each of the following:
(i) the violation by any party of any material provision in, or
obligation imposed by, this Agreement which violation shall not have been cured
to the reasonable satisfaction of the other party within thirty (30) days
(except in the event that the same is not susceptible to cure within thirty (30)
days, in which event such cure period shall be extended for a reasonable period
of time provided that the defaulting party is diligently pursuing such cure)
following the date on which written notice of termination has been received by
the party who has violated a material provision or obligation imposed by this
Agreement;
(ii) any illegal act engaged in by any party in the operation of
the Facility, or
(iii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In addition
to the provisions of Section 7.2 above, the Manager may terminate this Agreement
upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross
9
<PAGE>
negligence, or for Costs incurred or suffered by the Manager as a result of the
Manager's failure to keep true, accurate and complete records or to obtain any
necessary opinion of counsel as required by Section 1.1 of this Agreement. The
Manager shall indemnify the Owner and hold it harmless of, from and against all
Costs incurred or suffered by the Owner as a result of any of the Manager's
fraud, willful misconduct, or gross negligence, or as a result of the Manager's
failure to submit proper reports to the appropriate regulatory agencies, to keep
true, accurate and complete records or to obtain any necessary opinion of
counsel as required by Section 1.1 of this Agreement.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v) (1) (i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provision of this Section 9 shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
13. Assignment. Neither the Owner nor the Manager will assign its interests
in this Agreement, other than to an affiliate, without the prior written consent
of the other, which consent shall not be unreasonably withheld, delayed or
conditioned.
10
<PAGE>
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert Kaufman, President
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
As to Owner: Chancellor of Houston, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: James M. Clary, III, Esq.
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail shall be deemed received three (3)
days after the date postmarked. All notices that are hand delivered shall be
deemed received upon delivery to the office or address of the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, financial accounting packages and outcome information
11
<PAGE>
systems are and will remain the property of the Manager. Upon termination of
this Agreement, the Owner shall have the option to purchase operational material
belonging to the Manager, except for the financial accounting packages and
outcome information systems, at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
19. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after the receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement substantially in the form attached hereto as
Exhibit A and incorporated herein by reference (the "Lease"), which Lease shall
include, without limitation, a ten (10) year initial term (with three (3)
5-year renewal terms) and rental payments equal to the fair market value (which
shall be a negotiated percentage of total project costs) as determined
immediately prior to the initial term of the Lease and immediately prior to any
renewal terms.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
___________________________ By: _______________________________
Name: Name:
Title:
WITNESS: CHANCELLOR OF HOUSTON, INC.
___________________________ By: _______________________________
Name: Name:
Title:
12
<PAGE>
FACILITY LEASE AGREEMENT
CHANCELLOR OF HOUSTON, INC.
as
Lessor
AND
CAREMATRIX OF CYPRESS STATION, INC.
as
Lessee
Dated as of __________ __, 1996
For Premises Located At
[----------------------------]
Cypress Station, Texas
1
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 Leased Property
1.2 Term
1.3 Extended Terms
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions
2.2 Rules of Construction
ARTICLE 3 RENT
3.1 Rent for Land, Leased Improvements, Related
Rights and Fixtures
3.2 Intentionally Omitted
3.3 Intentionally Omitted
3.4 Additional Charges
3.5 Intentionally Omitted
3.6 Net Lease
3.7 No Lessee Termination or Offset
3.7.1 No Termination
3.7.2 Waiver
3.7.3 Independent Covenants
3.8 Abatement of Rent Limited
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS
4.1 Payment of Impositions
4.1.1 Lessee To Pay
4.1.2 Installment Elections
4.1.3 Returns and Reports
4.1.4 Refunds
4.1.5 Protest
i
<PAGE>
4.2 Notice of Impositions
4.3 Adjustment of Impositions
4.4 Utility Charges
4.5 Insurance Premiums
4.6 Deposits
4.6.1 Lessor's Option
4.6.2 Use of Deposits
4.6.3 Deficits
4.6.4 Other Properties
4.6.5 Transfers
4.6.6 Security
4.6.7 Return
4.6.8 Receipts
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL
PROPERTY; INSTALLATION, REMOVAL AND REPLACEMENT
OF PERSONAL PROPERTY;
5.1 Ownership of the Leased Property
5.2 Personal Property; Removal and Replacement of
Personal Property
5.2.1 Lessee To Equip Facility
5.2.2 Sufficient Personal Property
5.2.3 Removal and Replacement; Lessor's Option to Purchase
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS
6.1 Security for Lessee's Obligations; Permitted
Prior Security Interests
6.1.1 Security
6.1.2 Purchase-Money Security Interests
Receivables and Equipment Leases
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY; MANAGEMENT
AGREEMENTS
7.1 Condition of the Leased Property
7.2 Use of the Leased Property; Compliance;
Management
ii
<PAGE>
7.2.1 Obligation to Operate
7.2.2 Permitted Uses
7.2.3 Compliance with Insurance Requirements
7.2.4 No Waste
7.2.5 No Impairment
7.2.6 No Liens
7.3 Compliance with Legal Requirements
7.4 Management Agreements
ARTICLE 8 REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair
8.1.1 Lessee's Responsibility
8.1.2 No Lessor Obligation
8.1.3 Lessee May Not Obligate Lessor
8.2 Encroachments; Title Restrictions
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS
9.1 Lessor's Approval
9.2 General Provisions as to Capital Additions and
Certain Material Structural Work
9.2.1 No Liens
9.2.2 Lessee's Proposal Regarding Capital Additions
and Material Structural Work
9.2.3 Lessor's Options Regarding Capital Additions
and Material Structural Work
9.2.4 Lessor May Elect to Finance Capital Additions
or Material Structural Work
9.3 Capital Additions Financed by Lessor
9.3.1 Lessee's Financing Request
9.3.2 Lessor's General Requirements
9.3.3 Payment of Costs
9.4 General Limitations
9.5 Non-Capital Additions
iii
<PAGE>
ARTICLE 10 WARRANTIES AND REPRESENTATIONS
10.1 Representations and Warranties
10.1.1 Existence; Power; Qualification
10.1.2 Valid and Binding
10.1.3 Single Purpose
10.1.4 No Violation
10.1.5 Consents and Approvals
10.1.6 No Liens or Insolvency Proceedings
10.1.7 No Burdensome Agreements
10.1.8 Commercial Acts
10.1.9 Adequate Capital, Not Insolvent
10.1.10 Not Delinquent
10.1.11 No Affiliate Debt
10.1.12 Taxes Current
10.1.13 Financials Complete and Accurate
10.1.14 Pending Actions, Notices and Reports
10.1.15 Compliance with Legal and Other Requirements
10.1.16 No Action By Governmental Authority
10.1.17 Property Matters
10.1.18 Third Party Payor Agreements
10.1.19 Rate Limitations
10.1.20 Free Care
10.1.21 No Proposed Changes
10.1.22 ERISA
10.1.23 No Broker
10.1.24 No Improper Payments
10.1.25 Nothing Omitted
10.1.26 No Margin Security
10.1.27 No Default
10.1.28 Principal Place of Business
10.1.29 Labor Matters
10.1.30 Intellectual Property
10.1.31 Management Agreements
10.2 Continuing Effect of Representations and Warranties
iv
<PAGE>
ARTICLE 11 FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates
11.2 Financial Statements; Reports; Notice and Information
11.2.1 Obligation to Furnish
11.2.2 Responsible Officer
11.2.3 No Material Omission
11.2.4 Confidentiality
11.3 Financial Covenants
11.3.1 No Indebtedness
11.3.2 No Guaranties
11.4 Affirmative Covenants
11.4.1 Maintenance of Existence
11.4.2 Materials
11.4.3 Compliance with Legal Requirements and
Applicable Agreements
11.4.4 Books and Records
11.4.5 Participation in Third Party Payor Programs
11.4.6 Conduct of its Business
11.4.7 Address
11.4.8 Subordination of Affiliate Transactions
11.4.9 Inspection
11.4.10 Additional Property
11.5 Additional Negative Covenants
11.5.1 Restrictions Relating to Lessee
11.5.2 No Liens
11.5.3 Limits on Affiliate Transactions
11.5.4 Intentionally Omitted
11.5.5 No Default
11.5.6 Intentionally Omitted
11.5.7 Intentionally Omitted
11.5.8 ERISA
11.5.9 Forgiveness of Indebtedness
11.5.10 Value of Assets
11.5.11 Changes in Fiscal Year and Accounting Procedures
11.5.12 Changes in Executive Officers
v
<PAGE>
ARTICLE 12 INSURANCE AND INDEMNITY
12.1 General Insurance Requirements
12.1.1 Types and Amounts of Insurance
12.1.2 Insurance Company Requirements
12.1.3 Policy Requirements
12.1.4 Notices; Certificates and Policies
12.1.5 Lessor's Right to Place Insurance
12.1.6 Payment of Proceeds
12.1.7 Irrevocable Power of Attorney
12.1.8 Blanket Policies
12.1.9 No Separate Insurance
12.1.10 Assignment of Unearned Premiums
12.2 Indemnity
12.2.1 Indemnification
12.2.2 Indemnified Parties
12.2.3 Limitation on Lessor Liability
12.2.4 Risk of Loss
ARTICLE 13 FIRE AND CASUALTY
13.1 Restoration Following Fire or Other Casualty
13.1.1 Following Fire or Casualty
13.1.2 Procedures
13.1.3 Disbursement of Insurance Proceeds
13.2 Disposition of Insurance Proceeds
13.2.1 Proceeds To Be Released To Pay For Work
13.2.2 Proceeds Not To Be Released
13.2.3 Lessee Responsible for Short-Fall
13.3 Tangible Personal Property
13.4 Restoration of Certain Improvements and the
Tangible Personal Property
13.5 No Abatement of Rent
13.6 Termination of Certain Rights
13.7 Waiver
13.8 Application of Rent Loss and/or Business Interruption Insurance
13.9 Obligation To Account
vi
<PAGE>
ARTICLE 14 CONDEMNATION
14.1 Parties' Rights and Obligations
14.2 Total Taking
14.3 Partial or Temporary Taking
14.4 Restoration
14.5 Award Distribution
14.6 Control of Proceedings
ARTICLE 15 PERMITTED CONTESTS
15.1 Lessee's Right to Contest
15.2 Lessor's Cooperation
15.3 Lessee's Indemnity
ARTICLE 16 DEFAULT
16.1 Events of Default
16.2 Remedies
16.3 Damages
16.4 Lessee Waivers
16.5 Application of Funds
16.6 Intentionally Omitted
16.7 Lessor's Right to Cure
16.8 No Waiver by Lessor
16.9 Right of Forbearance
16.10 Cumulative Remedies
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE;
HOLDING OVER
17.1 Surrender
17.2 Transfer of Permits and Contracts
17.3 No Acceptance of Surrender
17.4 Holding Over
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY
18.1 Purchase of the Leased Property
18.2 Appraisal
18.2.1 Designation of Appraisers
18.2.2 Appraisal Process
18.2.3 Specific Enforcement and Costs
vii
<PAGE>
ARTICLE 19 SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment
19.2 Attornment
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 No Merger of Title
20.2 Transfers by Lessor
20.3 Lessor May Grant Liens
20.4 Subordination and Non-Disturbance
ARTICLE 21 LESSOR OBLIGATIONS
21.1 Quiet Enjoyment
21.2 Memorandum of Lease
21.3 Default by Lessor
ARTICLE 22 NOTICES
ARTICLE 23 INTENTIONALLY OMITTED
ARTICLE 24 MISCELLANEOUS PROVISIONS
24.1 Broker's Fee Indemnification
24.2 No Joint Venture or Partnership
24.3 Amendments, Waivers and Modifications
24.4 Captions and Headings
24.5 Time is of the Essence
24.6 Counterparts
24.7 Entire Agreement
24.8 WAIVER OF JURY TRIAL
24.9 Successors and Assigns
24.10 No Third Party Beneficiaries
24.11 Governing Law
24.12 General
viii
<PAGE>
EXHIBIT A LEGAL DESCRIPTION OF THE LAND
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
EXHIBIT D OPEN COST REPORTS
EXHIBIT E RATE LIMITATIONS
EXHIBIT F FREE CARE REQUIREMENTS
EXHIBIT G CURRENT RATES
ix
<PAGE>
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the _____ day of
__________, 19_ and is between Chancellor of Houston, Inc. ("Lessor"), a
Delaware corporation, having its principal office at 197 First Avenue, Needham
Heights, Massachusetts 02194, and CareMatrix of Cypress Station, Inc.
("Lessee"), a Delaware corporation, having its principal office at 197 First
Avenue, Needham, Massachusetts 02194.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A attached hereto (the
Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines, and parking
areas and roadways appurtenant to such buildings and structures presently or
hereafter situated upon the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefiting any or all of the Land
and the Leased Improvements; and
(d) all equipment, machinery, building fixtures, and other items of
property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to the greatest
extent permitted by law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto, but specifically excluding all items included within the
category of Tangible Personal Property (as hereinafter defined) which are not
permanently affixed to or incorporated in the Leased Property (collectively, the
"Fixtures");
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by the Lessor and
subject to: (i) the rights of parties
1
<PAGE>
in possession; (ii) the existing state of title including all covenants,
conditions, Liens (as hereinafter defined) and other matters of record
(including, without limitation, the matters set forth in EXHIBIT B); (iii) all
applicable laws and (iv) all matters, whether or not of a similar nature, which
would be disclosed by an inspection of the Leased Property or by an accurate
survey thereof.
1.2 Term. The term of this Lease shall consist of: the "Initial Term",
which shall commence on __________ __, ____ (the "Commencement Date") and end on
(the "Expiration Date"); provided, however, that this Lease may be sooner
terminated as hereinafter provided. In addition, the Lessee shall have the
option(s) to extend the Term (as hereinafter defined) as provided for in Section
1.3.
1.3 Extended Terms. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, the
Lessee is hereby granted the option to extend the Initial Term of this Lease for
three (3) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on __________ __, ____ (collectively, the
"Extended Term"). The Lessee's extension options shall be exercised by the
Lessee by giving written notice to the Lessor of each such extension at least
one hundred eighty (180) days, but not more than three hundred sixty (360) days,
prior to the termination of the Initial Term or the then current Extended Term,
as the case may be. The Lessee may not exercise its option for more than one
Extended Term at a time. During each effective Extended Term, all of the terms
and conditions of this Lease shall continue in full force and effect, except
that the Base Rent (as hereinafter defined) for each such Extended Term shall be
adjusted as set forth in Section 3.1.1(b).
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
Accounts: As defined in the UCC.
Accreditation Body: Persons having or claiming jurisdiction over the
accreditation, certification, evaluation or operation of the Facility, if any.
2
<PAGE>
Additional Charges: As defined in Article 3.
Additional Land: As defined in Section 9.3.
Affiliate: With respect to any Person (i) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person, (ii) any other Person that owns, beneficially, directly or indirectly,
five percent (5%) or more of the outstanding capital stock, shares or equity
interests of such Person or (iii) any officer, director, employee, general
partner or trustee of such Person, or any other Person controlling, controlled
by, or under common control with, such Person (excluding trustees and Persons
serving in a fiduciary or similar capacity who are not otherwise an Affiliate of
such Person). For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests.
Appurtenant Agreements: Collectively, all instruments, documents and other
agreements that now or hereafter create any utility, access or other rights or
appurtenances benefiting or relating to the Leased Property.
Award: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
Bankruptcy Code: Subsection 365(h) of the United States Bankruptcy Code, 11
U.S.C. [s]365(h), as the same may hereafter be amended and including any
successor provision thereto.
Base Rent: As defined in Section 3.1.
Business Day: Any day which is not a Saturday or Sunday or a public holiday
under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property in order to provide a functionally new
facility that is needed or used to provide services not previously offered and
any expansion, construction, renovation or conversion or in order to (i)
increase the unit capacity of a Facility, (ii) change the purpose for which such
beds are utilized and/or (iii) change the utilization of any material portion of
any of the Leased Improvements.
3
<PAGE>
Capital Addition Cost: The cost of any Capital Addition made by the Lessee
whether paid for by the Lessee or the Lessor. Such cost shall include all costs
and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
Casualty: As defined in Section 13.1.
Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Condemnation: With respect to the Leased Property or any interest therein
or right accruing thereto or use thereof (i) the exercise of any Governmental
Authority, whether by legal proceedings or otherwise, by a Condemnor or (ii) a
voluntary sale or transfer by the Lessor to any Condemnor, either under threat
of Condemnation or Taking or while legal proceedings for Condemnation or Taking
are pending.
Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of condemnation.
Consolidated and Consolidating: The consolidated and consolidating accounts
of the relevant Person and its Subsidiaries consolidated in accordance with
GAAP.
Consolidated Financials: For any fiscal year or other accounting period for
any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
Consultants: Collectively, the architects, engineers, inspectors, surveyors
and other consultants that are engaged from time to time by the Lessor to
perform services for the Lessor in connection with this Lease.
Contracts: All agreements (including, without limitation, Provider
Agreements and Patient Admission Agreements), contracts, (including without
limitation, construction contracts, subcontracts, and architects' contracts,)
contract rights, warranties and representations, franchises, and records and
books of account benefiting, relating to or affecting the Leased Property or the
ownership, construction, development, maintenance,
4
<PAGE>
management, repair, use, occupancy, possession, or operation thereof, or the
operation of any programs or services in conjunction with the Leased Property
and all renewals, replacement and substitutions therefor, now or hereafter
issued by or entered into with any Governmental Authority, Accreditation Body or
Third Party Payor or maintained or used by any member of the Leasing Group or
entered into by any member of the Leasing Group with any third Person.
Date of Taking: The date the Condemnor has the right to possession of the
property being condemned.
Documents: As defined in the UCC.
Encumbrance: As defined in Section 20.3.
Environmental Laws: Collectively, all Legal Requirements applicable to (i)
environmental conditions on, under or emanating from the Leased Property and
(ii) the generation, storage, transportation, utilization, disposal, management
or release (whether or not on, under or from the Leased Property) of Hazardous
Substances by the Lessee.
ERISA: The Employment Retirement Income Security Act of 1974, as amended.
Event of Default: As defined in Article 16.
Expiration Date: As defined in Section 1.2.
Extended Terms: As defined in Section 1.3.
Facility: The unit [INSERT DESCRIPTION OF FACILITY] facility known as
[INSERT NAME] on the Land (together with related parking and other amenities).
Failure to Operate: As defined in Article 16.
Failure to Perform: As defined Article 16.
Fair Market Added Value: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by the Lessee had been
constructed.
Fair Market Value of the Capital Addition: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
Fair Market Value of the Leased Property: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the
5
<PAGE>
Leased Property, and (a) assuming the same is unencumbered by this Lease, (b)
determined in accordance with the appraisal procedures set forth in Section 18.2
(or as a negotiated percentage of total project costs) or in such other manner
as shall be mutually acceptable to the Lessor and the Lessee and (c) not taking
into account any reduction in value resulting from any Lien to which the Leased
Property is subject and which Lien the Lessee or the Lessor is otherwise
required to remove at or prior to closing of the transaction. However, the
positive or negative effect on the value of the Leased Property attributable to
the interest rate, amortization schedule, maturity date, prepayment provisions
and other terms and conditions of any Lien on the Leased Property which is not
so required or agreed to be removed shall be taken into account in determining
the Fair Market Value of the Leased Property. The Pair Market Value shall be
determined as the overall value based on due consideration of the "income"
approach, the "comparable sales" approach, and the "replacement cost" approach.
Fair Market Value of the Material Structural Work: The amount by which the
Fair Market Value of the Leased Property upon the completion of any particular
Material Structural Work exceeds the Fair Market Value of the Leased Property
just prior to the construction of the applicable Material Structural Work.
Fee Mortgage: As defined in Section 20.3.
Fee Mortgagee: As defined in Section 20.3.
Financing Party: Any Person who is or may be participating with the Lessor
in any way in connection with the financing of any Capital Addition.
Fiscal Quarter: Each of the three (3) month periods commencing on January
1st, April 1st, July 1st and October 1st.
Fiscal Year: The twelve (12) month period from January 1st to December
31st.
Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
General Intangibles: As defined in the UCC.
Governmental Authorities: Collectively, all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures, and offices of any
nature whatsoever of any government, quasi-government unit or political
subdivision, whether with a federal, state, county, district, municipal, city or
otherwise and whether now or hereinafter in existence.
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly
6
<PAGE>
received or to be received by the Lessee, including, without limitation, all
resident revenues received or receivable for the use of, or otherwise by reason
of, all rooms, units and other facilities provided, meals served, services
performed, space or facilities subleased or goods sold on or from the Leased
Property and further including, without limitation, except as otherwise
specifically provided below, any consideration received under any subletting,
licensing, or other arrangements with any Person relating to the possession or
use of the Leased Property and all revenues from all ancillary services provided
at or relating to the Leased Property; provided, however, that Gross Revenues
shall not include non-operating revenues such as interest income or gain from
the sale of assets not sold in the ordinary course of business; and provided,
further, that there shall be excluded or deducted (as the case may be) from such
revenues:
(i) contractual allowances (relating to any period during the Term of this
Lease and thereafter until the Rent hereunder is paid in full) for billings not
paid by or received from the appropriate Governmental Agencies or Third Party
Payors,
(ii) allowances according to GAAP for uncollectible accounts,
(iii) all proper resident billing credits and adjustments according to GAAP
relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and excise taxes
and any tax based upon or measured by said Gross Revenues which is added to or
made a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately,
(v) provider discounts for hospital or other medical facility utilization
contracts;
(vi) the cost of any federal, state or local governmental program imposed
specially to provide or finance indigent patient care (other than Medicare,
Medicaid and the like); and
(vii) deposits refundable to residents of the Facility.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee, Gross Revenues calculated for all purposes of this
Lease shall include the Gross Revenues of such Sublessee with respect to the
premises demised under the applicable Sublease (i.e., the Gross Revenues
generated from the operations conducted on such subleased portion of the Leased
Property) and the rent received or receivable from such Sublessee pursuant to
such Subleases shall be excluded from Gross Revenues for all such purposes. As
to any Sublease between the Lessee and a non-Affiliate of the Lessee, only the
rental actually received by the Lessee from such non-Affiliate shall be included
in Gross Revenues.
Hazardous Substances: Collectively, (i) any "hazardous material,"
"hazardous substance," "hazardous waste," "oil," "regulated substance," "toxic
substance," "restricted
7
<PAGE>
hazardous waste", "special waste" or words of similar import as defined under
any of the Environmental Laws; (ii) asbestos in any form; (iii) urea
formaldehyde foam insulation; (iv) polychlorinated biphenyl (v) radon gas; (vi)
flammable explosives; (vii) radioactive materials; (viii) any chemical,
containment, solvent, material, pollutant or substance that may be dangerous or
detrimental to the Leased Property, the environment, or the health and safety of
the residents and other occupants of the Leased Property or of the owners or
occupants of any other real property nearby the Leased Property and (iv) any
substance, the generation, storage, transportation, utilization, disposal,
management, release or location of which, on, under or from the Leased Property
is prohibited or otherwise regulated pursuant to any of the Environmental Laws.
Impositions: Collectively, all taxes (including, without limitation, all
capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), ground
rents, water and sewer rents, water charges or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), transfer taxes and recordation taxes imposed as
a result of this Lease or any extensions hereof, and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of either or both of the
Leased Property and the Rent (including all interest and penalties thereon due
to any failure in payment by the Lessee), which at any time prior to, during or
in respect of the Term hereof and thereafter until the Leased Property is
surrendered to the Lessor as required by the terms of this Lease, may be
assessed or imposed on or in respect of or be a Lien upon (a) the Lessor or the
Lessor's interest in the Leased Property, (1 ) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease shall
be construed to require the Lessee to pay (1) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed on
the Lessor or any other Person, except the Lessee or its successors, (2) any net
revenue tax of the Lessor or any other Person, except the Lessee and its
successors, (3) any tax imposed with respect to the sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, or (4)
except as expressly provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property; provided, however, the provisos set
forth in clauses (1) and (2) of this sentence shall not be applicable to the
extent that any tax, assessment, tax levy or charge which the Lessee is
obligated to pay pursuant to the first sentence of this definition and which is
in effect at any time during the Term hereof is totally or partially repealed,
and a tax, assessment, tax levy or charge set forth in clause (1) or (2) is
levied, assessed or imposed expressly in lieu thereof. In computing the amount
of any franchise tax or capital stock tax which may be or become an Imposition,
the amount payable by the Lessee shall be equitably apportioned based upon all
properties owned by the Lessor that are located within the particular
jurisdiction subject to any such tax.
8
<PAGE>
Indebtedness: The total of all obligations of a Person, whether current or
long-term, which in accordance with GAAP would be included as liabilities upon
such Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include (i) all capital lease obligations and (ii)
all guarantees, endorsements (other than for collection of instruments in the
ordinary course of business), or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement contingent
or otherwise to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
Indemnified Parties: As defined in Section 12.2.
Index: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of five (5) years as calculated by the Federal Reserve Board.
Initial Term: As defined in Section 1.2.
Instruments: As defined in the UCC.
Insurance Requirements: All terms of any insurance policy required by this
Lease, all requirements of the issuer of any such policy with respect to the
Leased Property and the activities conducted thereon and the requirements of any
insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
Land: As defined in Article 1.
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
Lease Documents: Collectively, this Lease, and any and all other
instruments, documents, certificates or agreements now or hereafter (i) executed
or furnished by any member of the Leasing Group in connection with the
transactions evidenced by this Lease and/or any of the foregoing documents
and/or (ii) evidencing or securing any of the Lessee's obligations relating to
the Leased Property, including, without limitation, the Lessee's obligations
hereunder.
Lease Obligations: Collectively, all indebtedness, covenants, liabilities,
obligations, agreements and undertakings (other than the Lessor's obligations)
under this Lease and the other Lease Documents.
9
<PAGE>
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Group: Collectively, the Lessee, any Sublessee and any Manager.
Legal Requirements: Collectively, all statutes, ordinances, by-laws, codes,
rules, regulations, restrictions, orders, judgments, decrees and injunctions
(including, without limitation, all applicable building, health code, zoning,
subdivision, and other land use and health-care licensing statutes, ordinances,
by-laws, codes, rules and regulations), whether now or hereafter enacted,
promulgated or issued by any Governmental Authority, Accreditation Body or Third
Party Payor affecting the Lessor, any member of the Leasing Group or the Leased
Property or the ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof or the operation of any
programs or services in connection with the Leased Property, including, without
limitation, any of the foregoing which may (i) require repairs, modifications or
alterations in or to the Leased Property, (ii) in any way affect (adversely or
otherwise) the use and enjoyment of the Leased Property or (iii) require the
assessment, monitoring, clean-up, containment, removal, remediation or other
treatment of any Hazardous Substances on, under or from the Leased Property.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and shall also include all Permits and Contracts issued or
entered into by any Governmental Authority, any Accreditation Body and/or any
Third Party Payor and all Permitted Encumbrances.
Lessee: As defined in the preamble of this Lease and its successors and
assigns.
Lessee's Election Notice: As defined in Section 14.3.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Lessor's Investment: The sum of (i) __________ plus (ii) the aggregate
amount of all Subsequent Investments.
Lien: With respect to any real or personal property, any mortgage,
easement, restriction, lien, pledge, collateral assignment, hypothecation,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
Limited Parties: As defined in Section 11.5; provided, however, in no event
shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
10
<PAGE>
Managed Care Plans: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
Management Agreement: Any agreement, whether written or oral, between the
Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility.
Manager: Any Person who has entered into a Management Agreement with the
Lessee or any Sublessee.
Material Structural Work: Any (i) structural alteration, (ii) structural
repair or (iii) structural renovation to the Leased Property that would require
(a) the design and/or involvement of a structural engineer and/or architect
and/or (b) the issuance of a Permit.
Medicaid: The medical assistance program established by Title XIX of the
Social Security Act (42 USC [s][s] 1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC [s][s] 1395 et
seq.) and any statute succeeding thereto.
Monthly Deposit Date: As defined in Section 4.6.
Net Income (or Net Loss): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
Obligations: Collectively, the Lease Obligations and the Related Party
Obligations.
Officer's Certificate: A certificate of the Lessee signed on behalf of the
Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
Overdue Rate: On any date, a rate of interest per annum equal to the
greater of: (i) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (ii) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
PBGC: Pension Benefit Guaranty Corporation.
11
<PAGE>
Permits: Collectively, all permits, licenses, approvals, qualifications,
rights, variances, permissive uses, accreditations, certificates,
certifications, consents, agreements, contracts, contract rights, franchises,
interim licenses, permits and other authorizations of every nature whatsoever
required by, or issued under, applicable Legal Requirements benefiting, relating
or affecting the Leased Property or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacements
and substitutions therefor, now or hereafter required or issued by any
Governmental Authority, Accreditation Body or Third Party Payor to any member of
the Leasing Group, or maintained or used by any member of the Leasing Group, or
entered into by any member of the Leasing Group with any third Person.
Permitted Encumbrances: As defined in Section 10.1.
Permitted Prior Security Interests: As defined in Section 6.1.
Person: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
Plans and Specifications: As defined in Section 13.1.
Primary Intended Use: The use of the Facility as a [ ] with _ ( ) units as
may hereafter be permitted under this Lease, and such ancillary uses as are
permitted by law and may be necessary in connection therewith or incidental
thereto.
Prime Rate: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
Principal Place of Business: As defined in Section 10.1.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
Lessee or any Sublessee in connection with the operation of the Facility
relating to any right of payment or other claim arising out of or in connection
with the Lessee's or such Sublessee's participation in any Third Party Payor
Program.
12
<PAGE>
Purchaser: As defined in Section 11.5.
Receivables: Collectively, all (i) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (ii) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party,
whether now in existence or arising from time to time hereafter and whether or
not yet earned by performance, including, without limitation, obligations
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness.
Reference Bank: [_____________________]
Rent: Collectively, the Base Rent, the Additional Charges and all other
sums payable under this Lease and the other Lease Documents.
Rent Adjustment Date: Each anniversary of the Commencement Date during the
Term of the Lease, including, without limitation, any Extended Terms.
Rent Insurance Proceeds: As defined in Section 13.8.
Residence Agreements: All contracts, agreements and consents executed by or
on behalf of any resident or other Person seeking services at the Facility,
including, without limitation, assignments of benefits and guarantees.
Retainage: As defined in Section 13.1.
State: The state or commonwealth in which the Leased Property is located.
Sublease: Collectively, all subleases, licenses, use agreements, concession
agreements, tenancy at will agreements, room rentals, rentals of other
facilities of the Leased Property and all other occupancy agreements of every
kind and nature, whether oral or in writing, now in existence or subsequently
entered into by the Lessee, encumbering or affecting the Leased Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but, excluding any resident of the Facility
under any Resident Agreement.
Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by the Lessor in connection with Capital Additions.
Subsidiary or Subsidiaries: With respect to any Person, any corporation or
other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
13
<PAGE>
Taking: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
Tangible Net Worth: An amount determined in accordance with GAAP equal to
the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
Tangible Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by the Lessee and used in connection with the operation of the
Leased Property.
Term: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
Third Party Payor Programs: Collectively, all third party payor programs in
which the Lessee or any Sublessee presently or in the future may participate,
including without limitation, Medicare, Medicaid, Champus, Blue Cross and/or
Blue Shield, Managed Care Plans, other private insurance plans and employee
assistance programs.
Third Party Payors: Collectively, Medicare, Medicaid, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.
UCC: The Uniform Commercial Code as in effect from time to time in the
State of Texas.
Unavoidable Delays: Delays due to strikes, lockouts, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto.
United States Treasury Securities: The uninsured treasury securities issued
by the United States Federal Reserve Bank.
14
<PAGE>
Unsuitable For Its Primary Intended Use: As used anywhere in this Lease,
the term "Unsuitable For Its Primary Intended Use" shall mean that, by reason of
Casualty, or a partial or temporary Taking by Condemnation, in the good faith
judgment of the Lessor, the Facility cannot be operated on a commercially
practicable basis for the Primary Intended Use, taking into account, among other
relevant factors, the number of usable units affected by such Casualty or
partial or temporary Taking.
Work: As defined in Section 13.1.
Work Certificates: As defined in Section 13.1.
2.2 Rules of Construction. The following rules of construction shall apply
to the Lease and each of the other Lease Documents: (a) references to "herein",
"hereof" and "hereunder" shall be deemed to refer to this Lease or the other
applicable Lease Document, and shall not be limited to the particular text or
section or subsection in which such words appear; (b) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (c) references to the Lessor's attorneys
shall be deemed to include, without limitation, special counsel and local
counsel for the Lessor; (d) reference to attorneys' fees and expenses shall be
deemed to include all costs for administrative, paralegal and other support
staff; (e) references to Leased Property shall be deemed to include references
to all of the Leased Property and references to any portion thereof; (f)
references to the Lease Obligations shall be deemed to include references to all
of the Lease Obligations and references to any portion thereof; (g) references
to the Obligations shall be deemed to include references to all of the
Obligations and references to any portion thereof; (h) the term "including",
when following any general statement, will not be construed to limit such
statement to the specific items or matters as provided immediately following the
term "including" (whether or not non-limiting language such as "without
limitation" or "but not limited to" or words of similar import are also used),
but rather will be deemed to refer to all of the items or matters that could
reasonably fall within the broadest scope of the general statement; (i) any
requirement that financial statements be Consolidated in form shall apply only
to such financial statements as relate to a period during any portion of which
the relevant Person has one or more Subsidiaries; (j) all accounting terms not
specifically defined in the Lease Documents shall be construed in accordance
with GAAP and (k) all exhibits annexed to any of the Lease Documents as
referenced therein shall be deemed incorporated in such Lease Document by such
annexation and/or reference.
ARTICLE 3
RENT
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures. The
Lessee will pay to the Lessor, in lawful money of the United States of America,
at the Lessor's address set forth herein or at such other place or to such other
Person as the Lessor from time to time may designate in writing, rent for the
Leased Property, as follows:
15
<PAGE>
The Lessee shall pay to the Lessor a base rent (the "Base Rent") per annum
that is equal to [INSERT AMOUNT DOLLARS ($ )] and that is payable in advance in
equal, consecutive monthly installments due on the first day of each calendar
month, commencing on __________; provided, however, that on each Rent Adjustment
Date, the Base Rent shall be adjusted to equal the Base Rent then in effect
multiplied by __________.
3.2 Intentionally Omitted.
3.3 Intentionally Omitted.
3.4 Additional Charges. Subject to the rights to contest as set forth in
Article 15, in addition to the Base Rent, (a) the Lessee will also pay and
discharge as and when due and payable all Impositions, all amounts, liabilities
and obligations under the Appurtenant Agreements due from or payable by the
owner of the Leased Property, all amounts, liabilities and obligations under the
Permitted Encumbrances due from or payable by the owner of the Leased Property
and all other amounts, liabilities and obligations which the Lessee assumes or
agrees to pay under this Lease, and (b) in the event of any failure on the part
of the Lessee to pay any of those items referred to in clause (a) above, the
Lessee will also promptly pay and discharge every fine, penalty, interest and
cost which may be added for non-payment or late payment of such items (the items
referred to in clauses (a) and (b) above being referred to herein collectively
as the "Additional Charges"), and the Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided in this Lease, by statute or
otherwise, in the case of non-payment of the Additional Charges, as well as the
Base Rent. To the extent that the Lessee pays any Additional Charges to the
Lessor pursuant to any requirement of this Lease, the Lessee shall be relieved
of its obligation to pay such Additional Charges to any other Person to which
such Additional Charges would otherwise be due.
3.5 Intentionally Omitted.
3.6 Net Lease. The Rent shall be paid absolutely net to the Lessor, so that
this Lease shall yield to the Lessor the full amount of the installments of Base
Rent and Additional Charges throughout the Term.
3.7 No Lessee Termination or Offset.
3.7.1 No Termination. Except as may be otherwise specifically and expressly
provided in this Lease, the Lessee, to the extent not prohibited by applicable
law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of the Lessor to modify, surrender
or terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent, nor shall the
respective obligations of the Lessor and the Lessee be otherwise affected by
reason of (a) any Casualty or any Taking of the Leased Property, (b) the lawful
or unlawful prohibition of, or restriction upon, the Lessee's use of the Leased
Property or the interference with such use by any Person (other than the Lessor,
except to the extent permitted hereunder) or by reason of
16
<PAGE>
eviction by paramount title; (c) any claim that the Lessee has or might have
against the Lessor, (d) any default or breach of any warranty by the Lessor
under this Lease or any other Lease Document, (e) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting the Lessor or any assignee or transferee of the
Lessor or (f) any other cause whether similar or dissimilar to any of the
foregoing, other than a discharge of the Lessee from any of the Lease
Obligations as a matter of law.
3.7.2 Waiver. The Lessee to the fullest extent not prohibited by applicable
law, hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to (a)
modify, surrender or terminate this Lease or quit or surrender the Leased
Property or (b) entitle the Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by the Lessee hereunder, except as
otherwise specifically and expressly provided in this Lease.
3.7.3 Independent Covenants. The obligations of the Lessor and the Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by the Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those instances
where the obligation to pay expressly survives the termination of this Lease) by
termination of this Lease other than by reason of an Event of Default.
3.8 Abatement of Rent Limited. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3, the Base Rent
shall be abated as follows: (a) in the case of such a partial Taking, Base Rent
then due during the Lease Year in which such Taking occurs shall be reduced to
equal the product of (i) the then current Base Rent multiplied by (ii) the
difference between one minus a fraction the numerator of which is the Award, the
denominator of which is the fair Market Value of the Leased Property, and (b) in
the case of such a temporary Taking, by reducing the Base Rent for the period of
such a temporary Taking, by the net amount of the Award received by the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award received
by the Lessor" shall mean the Award paid to the Lessor on account of such
Taking, minus all costs and expenses incurred by the Lessor in connection
therewith, and minus any amounts paid to or for the account of the Lessee to
reimburse for the costs and expenses of reconstructing the Facility following
such Taking in order to create a viable and functional Facility under all of the
circumstances.
17
<PAGE>
ARTICLE 4
IMPOSITIONS; TAXES: UTILITIES:
INSURANCE PAYMENTS
4.1 Payment of Impositions.
4.1.1 Lessee To Pay. Subject to the provisions of Section 4.1.2 and Article
15, the Lessee will pay or cause to be paid all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing authority where feasible, and the Lessee will promptly
furnish the Lessor copies of official receipts or other satisfactory proof
evidencing payment not later than the last day on which the same may be paid
without penalty or interest.
4.1.2 Installment Elections. If any such Imposition may, at the option of
the taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), the Lessee may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such installments
during the Term hereof (subject to the Lessee's right to contest pursuant to the
provisions of Section 4.1.5 below) as the same respectively become due and
before any fine, penalty, premium, further interest or cost may be added
thereto.
4.1.3 Returns and Reports. The Lessor, at its expense, shall, to the extent
permitted by applicable law, prepare and file all tax returns and reports as may
be required by Governmental Authorities in respect of the Lessor's net income,
gross receipts, franchise taxes and taxes on its capital stock, and the Lessee,
at its expense, shall, to the extent permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by Governmental Authorities. The Lessor and
the Lessee shall, upon request of the other, provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports. In the event that
any Governmental Authority classifies any property covered by this Lease as
personal property, the Lessee shall file all personal property tax returns in
such jurisdictions where it may legally so file. The Lessor, to the extent it
possesses the same, and the Lessee, to the extent it possesses the same, will
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any portion of Leased Property so classified as
personal property. Where the Lessor is legally required to file personal
property tax returns, if the Lessee notifies the Lessor of the obligation to do
so in each year at least thirty (30) days prior to the date any protest must be
filed, the Lessee will be provided with copies of assessment notices so as to
enable the Lessee to file a protest.
4.1.4 Refunds. If no Lease Default shall have occurred and be continuing,
any refund due from any taxing authority in respect of any Imposition paid by
the Lessee shall be paid
18
<PAGE>
over to or retained by the Lessee. If a Lease Default shall have occurred and be
continuing, at the Lessor's option, such funds shall be paid over to the Lessor
and/or retained by the Lessor and applied toward the Obligations in accordance
with the Lease Documents and/or the Related Party Agreements.
4.1.5 Protest. Upon giving notice to the Lessor, at the Lessee's option and
sole cost and expense, and subject to compliance with the provisions of Article
15, the Lessee may contest, protest, appeal, or institute such other proceedings
as the Lessee may deem appropriate to effect a reduction of any Imposition and
the Lessor, at the Lessee's cost and expense as aforesaid, shall fully cooperate
in a reasonable manner with the Lessee in connection with such protest, appeal
or other action.
4.2 Notice of Impositions. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but the Lessor's failure to give any such notice shall
in no way diminish the Lessee's obligations hereunder to pay such Impositions.
4.3 Adjustment of Impositions. Impositions imposed in respect of the period
during which the expiration or earlier termination of the Term occurs shall be
adjusted and prorated between the Lessor and the Lessee, whether or not such
Impositions are imposed before or after such expiration or termination, and the
Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
4.4 Utility Charges. The Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, telephone and other utilities used in
the Leased Property during the Term and thereafter until the Lessee surrenders
the Leased Property in the manner required by this Lease.
4.5 Insurance Premiums. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee shall furnish the Lessor with evidence
satisfactory to the Lessor that all such premiums have been so paid prior to the
commencement of the Term and thereafter at least thirty (30) days prior to the
due date of each premium which thereafter becomes due. Notwithstanding the
foregoing, the Lessee may pay such insurance premiums to the insurer in monthly
installments so long as the applicable insurer is contractually obligated to
give the Lessor not less than a sixty (60) days notice of non-payment and so
long as no Lease Default has occurred and is continuing. In the event of the
failure of the Lessee either to comply with the insurance requirements in
Article 12, or to pay the premiums for such insurance, or to deliver such
policies or certificates thereof to the Lessor at the times required hereunder,
the Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, which premiums shall be a demand
obligation of the Lessee to the Lessor.
19
<PAGE>
4.6 Deposits.
4.6.1 Lessor's Option. At the option of the Lessor, which may be exercised
at any time, the Lessee shall, upon written request of the Lessor, on the first
day on the calendar month immediately following such request, and on the first
day of each calendar month thereafter during the Term (each of which dates is
referred to as a "Monthly Deposit Date"), pay to and deposit with the Lessor a
sum equal to one-twelfth (1/12th) of the Impositions to be levied, charged,
filed, assessed or imposed upon or against the Leased Property within one (1)
year after said Monthly Deposit Date and a sum equal to one-twelfth (1/12th) of
the premiums for the insurance policies required pursuant to Article 12 which
are payable within one (1) year after said Monthly Deposit Date. If the amount
of the Impositions to be levied, charged, assessed or imposed or insurance
premiums to be paid within the ensuing one (1) year period shall not be fixed
upon any Monthly Deposit Date, such amount for the purpose of computing the
deposit to be made by the Lessee hereunder shall be estimated by the Lessor with
an appropriate adjustment to be promptly made between the Lessor and the Lessee
as soon as such amount becomes determinable. In addition, the Lessor may, at its
option, from time to time require that any particular deposit be greater than
one-twelfth (1/12th) of the estimated amount payable within one (1) year after
said Monthly Deposit Date, if such additional deposit is required in order to
provide to the Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment thereof, or to
make payment of any required insurance premiums not later than the due date
thereof.
4.6.2 Use of Deposits. The sums deposited by the Lessee under this Section
4.6 shall be held by the Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of the Lessor, and shall be
deposited by the Lessor at such bank as the Lessor may, from time to time
select, and the Lessor shall not be liable to the Lessee or any other Person (a)
based on the Lessor's (or such bank's) choice of investment vehicles, (b) for
any consequent loss of principal or interest or (c) for any unavailability of
funds based on such choice of investment. Furthermore, the Lessor shall bear no
responsibility for the financial condition of, nor any act or omission by, the
Lessor's depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as no Lease
Default has occurred and is then continuing, and as long as no fact or
circumstance exists which, with the giving of notice and/or the passage of time,
would constitute a Lease Default. The Lessee shall give not less than ten (10)
days prior written notice to the Lessor in each instance when an Imposition or
insurance premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which the same may
be paid in order to comply with the requirements of this Lease. If the Lessor,
in violation of its obligations under this Lease, does not pay any Imposition or
insurance premium when due, for which a sufficient deposit exists, the Lessee
shall not be in default hereunder by virtue of the failure of the Lessor to pay
such Imposition or such insurance premium and the Lessor shall pay any interest
or fine assessed by virtue of the Lessor's failure to pay such Imposition or
insurance premium.
20
<PAGE>
4.6.3 Deficits. If for any reason any deposit held by the Lessor under this
Section 4.6 shall not be sufficient to pay an Imposition or insurance premium
within the time specified therefor in this Lease, then, within ten (10) days
after demand by the Lessor, the Lessee shall deposit an additional amount with
the Lessor, increasing the deposit held by the Lessor so that the Lessor holds
sufficient funds to pay such Imposition or premium in full (or in installments
as otherwise provided for herein), together with any penalty or interest due
thereon. The Lessor may change its estimate of any Imposition or insurance
premium for any period on the basis of a change in an assessment or tax rate or
on the basis of a prior miscalculation or for any other good faith reason; in
which event, within ten (10) days after demand by the Lessor, the Lessee shall
deposit with the Lessor the amount in excess of the sums previously deposited
with the Lessor for the applicable period which would theretofore have been
payable under the revised estimate.
4.6.4 Other Properties. If any Imposition shall be levied, charged, filed,
assessed, or imposed upon or against the Leased Property, and if such Imposition
shall also be a levy, charge, assessment, or imposition upon or for any other
real or personal property that does not constitute a part of the Leased
Property, then the computation of the amounts to be deposited under this Section
4.6 shall be based upon the entire amount of such Imposition and the Lessee
shall not have the right to apportion any deposit with respect to such
Imposition.
4.6.5 Transfers. In connection with any assignment of the Lessor's interest
under this Lease, the original the Lessor named herein and each successor in
interest shall have the right to transfer all amounts deposited pursuant to the
provisions of this Section 4.6 then in its possession to such assignee (as the
subsequent holder of the Lessor's interest in this Lease) and upon such
transfer, the original the Lessor named herein or the applicable successor in
interest transferring the deposits shall thereupon be completely released from
all liability with respect to such deposits so transferred and the Lessee shall
look solely to said assignee, as the subsequent holder of the Lessor's interest
under this Lease, in reference thereto. The original the Lessor named herein or
the applicable successor in interest transferring the deposits shall provide
written notice to the Lessee of such transfer.
4.6.6 Security. All amounts deposited with the Lessor pursuant to the
provisions of this Section 4.6 shall be held by the Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, the Lessor may, in its sole and absolute
discretion, apply said amounts towards payment or performance of such
Obligations.
4.6.7 Return. Upon the expiration or earlier termination of this Lease,
provided, that, all of the Lease Obligations have been fully paid and performed,
any sums then held by the Lessor under this Section 4.6 shall be refunded to the
Lessee
4.6.8 Receipts. The Lessee shall deliver to the Lessor copies of all
notices, demands, claims, bills and receipts in relation to the Impositions and
insurance premiums immediately upon receipt thereof by the Lessee.
21
<PAGE>
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY
5.1 Ownership of the Leased Property. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that the Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease.
5.2 Personal Property; Removal and Replacement of Personal Property.
5.2.1 Lessee To Equip Facility. The Lessee, at its sole cost and expense,
shall install, affix or assemble or place on the Leased Property, sufficient
items of Tangible Personal Property, to enable the Leased Property to be
operated, in accordance with the requirements of this Lease for the Primary
Intended Use, and such Tangible Personal Property and replacements thereof,
shall be at all times the property of the Lessee.
5.2.2 Sufficient Personal Property. The Lessee shall maintain, during the
entire Term, the Tangible Personal Property in good order and repair and shall
provide at its expense all necessary replacements thereof, as may be necessary
in order to operate the Leased Property in compliance with all applicable Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Primary Intended Use. In addition,
the Lessee shall (a) furnish all necessary replacements of obsolete items of the
Tangible Personal Property during the Term, unless the Lessee provides the
Lessor with an explanation (reasonably acceptable to the Lessor) as to why such
Tangible Personal Property is no longer required in connection with the
operation of the Leased Property and (b) at least once a year, and more
frequently if requested by the Lessor, deliver to the Lessor, a detailed
inventory of all such Tangible Personal Property.
5.2.3 Removal and Replacement; Lessor's Option to Purchase. The Lessee
shall not remove from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the fair market
value of which exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually or
ONE HUNDRED THOUSAND DOLLARS ($100,000.00) collectively, except if such Tangible
Personal Property is simultaneously suitably replaced or the Lessee provides the
Lessor with an explanation (reasonably satisfactory to the Lessor) as to why
such Tangible Personal Property is no longer required in connection with the
operation of the Leased Property. At its sole cost and expense, the Lessee shall
restore the Leased Property to the condition required by Article 8, including
repair of all damage to the Leased Property caused by the removal of the
Tangible Personal Property, whether effected by the Lessee or the Lessor. Upon
the expiration or earlier termination of this Lease, the Lessor shall have the
option, which may be exercised
22
<PAGE>
prior to or within sixty (60) days following such expiration or termination, of
(a) acquiring the Tangible Personal Property (pursuant to a bill of sale and
assignments of any equipment leases, all in such forms as are reasonably
satisfactory to the Lessor) upon payment of its book value (the Lessee's cost,
minus depreciation), but not in excess of its fair market value or (b) requiring
the Lessee to remove the Tangible Personal Property. If the Lessor exercises its
option to purchase the Tangible Personal Property, the price to be paid by the
Lessor shall be (i) reduced by the amount of all payments due on any equipment
leases or any other Permitted Prior Security Interests assumed by the Lessor and
(ii) applied to the Lease Obligations before any payment to the Lessee. If the
Lessor requires the removal of the Tangible Personal Property, then all of the
Tangible Personal Property that is not removed by the Lessee within ten (10)
days following such request shall be considered abandoned by the Lessee and may
be appropriated, sold, destroyed or otherwise disposed of by the Lessor without
first giving notice thereof to the Lessee, without any payment to the Lessee and
without any obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 Security for Lessee's Obligations.
6.1.1 Security. Notwithstanding anything to the contrary set forth herein,
in no event shall the Lessee be required to grant to the Lessor any security
interest in Receivables; provided, however, upon any Lease Default or the
expiration or earlier termination of this Lease, the Lessee shall provide the
Lessor with copies of its books and records relating to Receivables, even if
excluded from the security granted to the Lessor, so as to facilitate continuity
of patient care and billing.
6.1.2 Purchase-Money Security Interests, Receivables and Equipment Leases.
Notwithstanding any other provision hereof regarding the creation of Liens, but
subject to Section 11.3.1, the Lessee may (a) grant priority purchase money
security interests in items of Tangible Personal Property, (b) lease Tangible
Personal Property from equipment lessors and (c) grant a prior security interest
in Receivables to an institutional lender which is providing a working capital
line of credit to the Lessee for the exclusive use of the Facility. Security
interests granted by the Lessee in full compliance with the provisions of this
Section 6.1.2 are referred to as "Permitted Prior Security Interests."
23
<PAGE>
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property. The Lessee acknowledges receipt and
delivery of possession of the Leased Property and that the Lessee has examined
and otherwise has acquired knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder. The Lessee
is leasing the Leased Property "AS-IS" in its present condition. The Lessee
waives any claim or action against the Lessor in respect of the condition of the
Leased Property. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER AS TO ITS FITNESS FOR ANY
PARTICULAR PURPOSE OR USE, ITS DESIGN OR CONDITION OR OTHERWISE, OR AS TO
DEFECTS IN THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT;
IT BEING AGREED THAT ALL RISKS RELATING TO THE DESIGN, CONDITION AND/OR USE OF
THE LEASED PROPERTY ARE TO BE BORNE BY THE LESSEE. THE LESSEE HEREBY ASSUMES ALL
RISK OF THE PHYSICAL CONDITION OF THE LEASED PROPERTY, THE SUITABILITY OF THE
LEASED PROPERTY FOR THE LESSEE'S PURPOSES, AND THE COMPLIANCE OR NONCOMPLIANCE
OF THE LEASED PROPERTY WITH ALL APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT
NOT LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor, at any time and from time to time during
the Term, the Lessee shall engage one (1) or more independent professional
consultants, engineers and inspectors, qualified to do business in the State and
acceptable to the Lessor to perform any environmental and/or structural
investigations and/or other inspections of the Leased Property and the Facility
as the Lessor may reasonably request in order to detect (a) any structural
deficiencies in the Leased Improvements or the utilities servicing the Leased
Property or (b) the presence of any condition that (i) may be harmful or present
a health hazard to the residents and other occupants of the Leased Property or
(ii) constitutes a breach or violation of any of the Lease Documents. In the
event that the Lessor reasonably determines that the results of such testing or
inspections are unsatisfactory, within thirty (30) days of notice from the
Lessor, the Lessee shall commence such appropriate remedial actions as may be
reasonably requested by the Lessor to correct such unsatisfactory conditions
and, thereafter, shall diligently and continuously prosecute such remedial
actions to completion within the time limits prescribed in this Lease or the
other Lease Documents.
7.2 Use of the Leased Property; Compliance; Management.
24
<PAGE>
7.2.1 Obligation to Operate. The Lessee shall continuously operate the
Leased Property in accordance with the Primary Intended Use and maintain its
qualifications for licensure and accreditation as required by all applicable
Legal Requirements and Insurance Requirements.
7.2.2 Permitted Uses. During the entire Term, the Lessee shall use the
Leased Property, or permit the Leased Property to be used, only for the Primary
Intended Use. The Lessee shall not use the Leased Property or permit the Leased
Property to be used for any other use without the prior written consent of the
Lessor, which consent may be withheld in the Lessor's sole and absolute
discretion.
7.2.3 Compliance With Insurance Requirements. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done which will
cause the cancellation of any insurance policy covering the Leased Property, nor
shall the Lessee, any Manager or any other Person sell or otherwise provide to
any residents, other occupants or invitees therein, or permit to be kept, used
or sold in or about the Leased Property, any article which may be prohibited by
any Legal Requirement or by any of the Insurance Requirements. Furthermore, the
Lessee shall, at its sole cost and expense, take whatever other actions that may
be necessary to comply with and to insure that the Leased Property complies with
all Insurance Requirements.
7.2.4 No Waste. The Lessee shall not commit or suffer to be committed any
waste on, in or under the Leased Property, nor shall the Lessee cause or permit
any nuisance thereon.
7.2.5 No Impairment. The Lessee shall neither suffer nor permit the Leased
Property to be used in such a manner as (a) might reasonably tend to impair the
Lessor's title thereto or (b) may reasonably make possible a claim or claims of
adverse usage or adverse possession by the public or of implied dedication of
the Leased Property.
7.2.6 No Liens. Except as permitted pursuant to Section 6.1.2, the Lessee
shall not permit or suffer any Lien to exist on the Tangible Personal Property
and shall in no event cause, permit or suffer any Lien to exist with respect to
the Leased Property other than as set forth in Section 11.5.2.
7.3 Compliance with Legal Requirements. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee, at its sole cost and expense, will promptly (a) comply with, and shall
cause every other member of the Leasing Group to comply with, all Legal
Requirements relating to the use, operation, maintenance, repair and restoration
of the Leased Property, whether or not compliance therewith shall require
structural change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply with (in
all material respects), and shall cause every other member of the Leasing Group
to procure, maintain and comply with (in all material respects), all Contracts
and Permits necessary or
25
<PAGE>
desirable in order to operate the Leased Property for the Primary Intended Use,
and for compliance with all of the terms and conditions of this Lease. Unless a
Lease Default has occurred or any event has occurred which, with the passage of
time and/or the giving of notice would constitute a Lease Default, the Lessee
may, upon prior written notice to the Lessor, contest any Legal Requirement to
the extent permitted by, and in accordance with, Article 15.
7.4 Management Agreements. From and after the Commencement Date, the Lessee
shall not enter into any Management Agreement without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld. The Lessee shall not, without the prior written approval of the
Lessor, in each instance, which approval shall not be unreasonably withheld,
agree to or allow: (a) any change in the Manager or change in the ownership or
control of the Manager, (b) any change in the Management Agreement, (c) the
termination of any Management Agreement (other than in connection with the
exercise by the Lessee of any of its remedies under the Management Agreement as
a result of any default by the Manager thereunder), (d) any assignment by the
Manager of its interest under the Management Agreement or (e) any material
amendment of the Management Agreement. In addition, the Lessee shall, at its
sole cost and expense, promptly and fully perform or cause to be performed every
covenant, condition, promise and obligation of the licensed operator of the
Leased Property under any Management Agreement.
Each Management Agreement shall provide that the Lessor shall be provided
notice of any defaults thereunder and, at the Lessor's option, an opportunity to
cure such default. The Lessee shall furnish to the Lessor, within three (3) days
after receipt thereof, or after the mailing or service thereof by the Lessee, as
the case may be, a copy of each notice of default which the Lessee shall give
to, or receive from any Person, based upon the occurrence, or alleged
occurrence, of any default in the performance of any covenant, condition,
promise or obligation under any Management Agreement.
Whenever and as often as the Lessee shall fail to perform, promptly and
fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under and
pursuant to any Management Agreement, the Lessor, or a lawfully appointed
receiver of the Leased Property, may, at their respective options (and without
any obligation to do so), after five (5) days' prior notice to the Lessee
(except in the case of an emergency) enter upon the Leased Property and perform,
or cause to be performed, such work, labor, services, acts or things, and take
such other steps and do such other acts as they may deem advisable, to cure such
defaulted covenant, condition, promise or obligation, and any amount so paid or
advanced by the Lessor or such receiver and all costs and expenses reasonably
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses and court costs), shall be a demand obligation of the Lessee to the
Lessor or such receiver, and, the Lessor shall have the same rights and remedies
for failure to pay such costs on demand as for the Lessee's failure to pay any
other sums due hereunder.
26
<PAGE>
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. The Lessee, at its sole cost and expense,
shall keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto which are under the Lessee's control in good order and
repair (whether or not the need for such repairs occurs as a result of the
Lessee's use, any prior use, the elements or the age of the Leased Property or
such private roadways, sidewalks and curbs or any other cause whatsoever) and,
subject to Articles 9, 13 and 14, the Lessee shall promptly, with the exercise
of all reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement of, or during, the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. In
addition, the Lessee, at its sole cost and expense, shall make all repairs,
modifications, replacements, renovations and alterations of the Leased Property
(and such private roadways, sidewalks and curbs) that are necessary to comply
with all applicable Legal Requirements and Insurance Requirements so that the
Leased Property can be legally operated for the Primary Intended Use. All
repairs, replacements, renovations, alterations, and modifications required by
the terms of this Section 8.1 shall be (a) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance Requirements and the
requirements of Article 9 hereof, using new materials well suited for their
intended purpose and (b) consistent with the operation of the Leased Property in
a first class manner. The Lessee will not take or omit to take any action the
taking or omission of which might materially impair the value or the usefulness
of the Leased Property for the Primary Intended Use. To the extent that any of
the repairs, replacements, renovations, alterations or modifications required by
the terms of this Section 8.1 constitute Material Structural Work, the Lessee
shall obtain the Lessor's prior written approval (which approval shall not be
unreasonably withheld) of the specific repairs, replacements, renovations,
alterations and modifications to be performed by or on behalf of the Lessee in
connection with such Material Structural Work. Notwithstanding the foregoing, in
the event of a bona fide emergency during which the Lessee is unable to contact
the appropriate representatives of the Lessor, the Lessee may commence such
Material Structural Work as may be necessary in order to address such emergency
without the Lessor's prior approval, provided, however, that the Lessee shall
immediately thereafter advise the Lessor of such emergency and the nature and
scope of the Material Structural Work commenced and shall obtain the Lessor's
approval of the remaining Material Structural Work to be completed.
8.1.2 No Lessor Obligation. The Lessor shall not, under any circumstances,
be required to build or rebuild any improvements on the Leased Property (or any
private
27
<PAGE>
roadways, sidewalks or curbs appurtenant thereto), or to make any repairs,
replacements, renovations, alterations, restorations, modifications, or renewals
of any nature or description to the Leased Property (or any private roadways,
sidewalks or curbs appurtenant thereto), whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto in connection with this Lease, or to maintain
the Leased Property (or any private roadways, sidewalks or curbs appurtenant
thereto) in any way.
8.1.3 Lessee May Not Obligate Lessor. Nothing contained herein nor any
action or inaction by the Lessor shall be construed as (a) constituting the
consent or request of the Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) giving the Lessee any right,
power or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion as
would permit the making of any claim against the Lessor for the payment thereof
or to make any agreement that may create, or in any way be the basis for, any
right, title or interest in, or Lien or claim against, the estate of the Lessor
in the Leased Property. Without limiting the generality of the foregoing, the
right title and interest of the Lessor in and to the Leased Property shall not
be subject to liens or encumbrances for the performance of any labor or services
or the furnishing of any materials or other property furnished to the Leased
Property at or by the request of the Lessee or any other Person other than the
Lessor. The Lessee shall notify any contractor, subcontractor, laborer,
materialman or vendor providing any labor, services or materials to the Leased
Property of this provision.
8.2 Encroachments; Title Restrictions. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other Lien now or hereafter affecting the
Leased Property, or shall impair the rights of others under any easement,
right-of-way or other Lien to which the Leased Property is now or hereafter
subject, then promptly upon the request of the Lessor, the Lessee shall, at its
sole cost and expense, subject to the Lessee's right to contest the existence of
any encroachment, violation or impairment as set forth in Article 15, (a) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment or (b)
make such alterations to the Leased Improvements, and take such other actions,
as the Lessee in the good faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, or to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements. Notwithstanding the foregoing, the Lessee shall, in any event,
take all such actions as may be reasonably necessary in order to be able to
continue the operation of the Leased Improvements for the Primary Intended Use
substantially in the manner and to the extent that the Leased Improvements were
operated prior to the assertion of such encroachment, violation or impairment
and nothing contained herein shall limit the Lessee's obligations to operate the
Leased Property in accordance with its Primary Intended Use. Any such alteration
made
28
<PAGE>
pursuant to the terms of this Section 8.2 shall be completed in conformity with
the applicable requirements of Section 8.1 and Article 9. The Lessee's
obligations under this Section 8.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 Lessor's Approval. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without limitation, any change in the
size or unit capacity of the Facility), except as may be otherwise expressly
required pursuant to Article 8.
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
9.2.1 No Liens. The Lessee shall not be permitted to create any Lien on the
Leased Property in connection with any Capital Addition or Material Structural
Work.
9.2.2 Lessee's Proposal Regarding Capital Additions and Material Structural
Work. If the Lessee desires to undertake any Capital Addition or Material
Structural Work, the Lessee shall submit to the Lessor in writing a proposal
setting forth in reasonable detail any proposed Capital Addition or Material
Structural Work and shall provide to the Lessor copies of, or information
regarding, the applicable plans and specifications, Permits, Contracts and any
other materials concerning the proposed Capital Addition or Material Structural
Work, as the case may be, as the Lessor may reasonably request. Without limiting
the generality of the foregoing, each such proposal pertaining to any Capital
Addition shall indicate the approximate projected cost of constructing such
Capital Addition, the use or uses to which it will be put and a good faith
estimate of the change, if any, in the Gross Revenues that the Lessee
anticipates will result from the construction of such Capital Addition.
9.2.3 Lessor's Options Regarding Capital Additions and Material Structural
Work. The Lessor shall have the options of: (a) denying permission for the
construction of the applicable Capital Addition or Material Structural Work, (b)
offering to finance the construction of the Capital Addition or Material
Structural Work pursuant to Section 9.3, (c) allowing the Lessee to pay for or
separately finance the construction of the Capital Addition or
29
<PAGE>
Material Structural Work, subject to compliance with the terms and conditions of
Section 9.2.1, Section 9.4, Section 13.1, all Legal Requirements and all other
requirements of this Lease and to such other terms and conditions as the Lessor
may in its discretion impose or (d) any combination of the foregoing. Unless the
Lessor notifies the Lessee in writing of a contrary election within forty-five
(45) days of the Lessee's request, the Lessor shall be deemed to have denied the
request for the Capital Addition or Material Structural Work.
9.2.4 Lessor May Elect to Finance Capital Additions or Material Structural
Work. If the Lessor elects to offer financing for the proposed Capital Addition
or Material Structural Work, the provisions of Section 9.3 shall apply.
9.3 Capital Additions and Material Structural Work Financed by Lessor.
9.3.1 Lessee's Financing Request. The Lessee may request that the Lessor
provide or arrange financing for a Capital Addition or Material Structural Work
by providing to the Lessor such information about the Capital Addition or
Material Structural Work as he Lessor may reasonably request, including, without
limitation, all information referred to in Section 9.2 above. The Lessee
understands, however, that the Lessor shall be under no obligation to agree to
such request. Nevertheless, the Lessor shall use reasonable efforts to notify
the Lessee, within forty-five (45) days of receipt of such information, as to
whether the Lessor will finance the proposed Capital Addition or Material
Structural Work and, if so, the terms and conditions upon which it would do so,
including the terms of any amendment to this Lease (including, without
limitation, an increase in Base Rent based on the Lessor's then existing terms
and prevailing conditions to compensate the Lessor for the additional funds
advanced by it). The Lessee may withdraw its request by notice to the Lessor at
any time before such time as the Lessee accepts the Lessor's terms and
conditions. All advances of funds for any such financing shall be made in
accordance with the Lessor's then standard construction loan requirements and
procedures, which may include, without limitation, the requirements and
procedures applicable to Work under Section 13.1.
9.3.2 Lessor's General Requirements. If the Lessor agrees to finance the
proposed Capital Addition or Material Structural Work and the Lessee accepts the
Lessor's proposal therefor, in addition to all other items which the Lessor or
any applicable Financing Party may reasonably require, the Lessee shall provide
to the Lessor the following:
(a) prior to any advance of funds, (i) any information, opinions,
certificates, Permits or documents reasonably requested by the Lessor or any
applicable Financing Party which are necessary to confirm that the Lessee will
be able to use the Capital Addition upon the completion thereof or the
applicable portion of the Facility upon the completion of the Material
Structural Work in accordance with the Primary Intended Use and (ii) evidence
satisfactory to the Lessor and any applicable Financing Party that all Permits
required for the construction and use of the Capital Addition or the applicable
portion of the Facility have been obtained, are in full force and effect and are
not subject to appeal, except only for those Permits which cannot in the normal
course be obtained prior to commencement or completion of the
30
<PAGE>
construction; provided, that the Lessor and any applicable Financing Party are
furnished with reasonable evidence that the same will be available in the normal
course of business without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate and, if
requested, a certificate from the Lessee's architect, setting forth in
reasonable detail the projected (or actual, if available) Capital Addition Cost
or the cost of the Material Structural Work;
(c) bills of sale, instruments of transfer and other documents required by
the Lessor so as to vest title to the Capital Addition or the applicable
Material Structural Work in the Lessor free and clear of all Liens, and
amendments to this Lease and any recorded notice or memorandum thereof, duly
executed and acknowledged, in form and substance reasonably satisfactory to the
Lessor, providing for any changes required by the Lessor including, without
limitation, changes in the Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to the Lessor title to any land
acquired for the purpose of constructing the Capital Addition or the applicable
Material Structural Work ("Additional Land") free and clear of any Liens except
those approved by the Lessor;
(e) upon completion of the Capital Addition or the Material Structural
Work, a final as-built survey thereof reasonably satisfactory to the Lessor, if
required by the Lessor;
(f) during and following the advance of funds and the completion of the
Capital Addition or the Material Structural Work, endorsements to any
outstanding policy of title insurance covering the Leased Property satisfactory
in form and substance to the Lessor and any Financing Party (i) updating the
same without any additional exception except as may be reasonably permitted by
the Lessor, (ii) if applicable, including the Additional Land and in the
premises covered by such title insurance policy and (iii) increasing the
coverage thereof by an amount equal to any amount paid by the Lessor for the
Additional Land plus the Fair Market Value of the Capital Addition or the Fair
Market Value of the Material Structural Work (except to the extent covered by
the owner's policy of title insurance referred to in subparagraph (g) below);
(g) simultaneous with the initial advance of funds, if appropriate, (i) an
owner's policy of title insurance insuring fee simple title to any Additional
Land conveyed to the Lessor pursuant to subparagraph (d) free and clear of all
Liens except those approved by the Lessor and (ii) a lender's policy of title
insurance reasonably satisfactory in form and substance to any applicable
Financing Party;
(h) following the completion of the Capital Addition or the Material
Structural Work, if reasonably deemed necessary by the Lessor, an appraisal of
the Leased Property by an M.A.I. appraiser acceptable to the Lessor, which
states that the Fair Market Value of the Leased Property upon completion of the
Capital Addition or the Material Structural Work exceeds the Fair Market Value
of the Leased Property prior to the commencement of the
31
<PAGE>
construction of such Capital Addition or Material Structural Work by an amount
not less than one hundred twenty-five percent (125%) of the Capital Addition
Cost or the cost of the Material Structural Work; and
(i) during or following the advancement of funds, prints of architectural
and engineering drawings relating to the Capital Addition or the Material
Structural Work and such other materials, including, without limitation,
endorsements to the title insurance policies (insuring the Lessor and any
applicable Financing Party with respect to the Leased Property) contemplated by
subsection (f) above, opinions of counsel, appraisals, surveys, certified copies
of duly adopted resolutions of the board of directors of the Lessee authorizing
the execution and delivery of the lease amendment and any other documents and
instruments as may be reasonably required by the Lessor and any applicable
Financing Party.
9.3.3 Payment of Costs. By virtue of making a request to finance a Capital
Addition or any Material Structural Work, whether or not such financing is
actually consummated, the Lessee shall be deemed to have agreed to pay, upon
demand, all costs and expenses reasonably incurred by the Lessor and any Person
participating with the Lessor in any way in the financing of the Capital
Addition or Material Structural Work, including, but not limited to (a) fees and
expenses of their respective attorneys, (b) all photocopying expenses, if any,
(c) the amount of any filing, registration and recording taxes and fees, (d)
documentary stamp taxes and intangible taxes and (e) title insurance charges and
appraisal fees.
9.4 General Limitations. Without in any way limiting the Lessor's options
with respect to proposed Capital Additions or Material Structural Work: (a) no
Capital Addition or Material Structural Work shall be completed that could, upon
completion, significantly alter the character or purpose or detract from the
value or operating efficiency of the Leased Property, or significantly impair
the revenue-producing capability of the Leased Property, or adversely affect the
ability of the Lessee to comply with the terms of this Lease, (b) no Capital
Addition or Material Structural Work shall be completed which would tie in or
connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless the Lessee shall have obtained the
prior written approval of the Lessor, which approval may be withheld in the
Lessor's sole and absolute discretion and (c) all proposed Capital Additions and
Material Structural Work shall be architecturally integrated and consistent with
the Leased Property.
9.5 Non-Capital Additions. The Lessee shall have the obligation and right
to make repairs, replacements and alterations which are not Capital Additions as
required by the other Sections of this Lease, but in so doing, the Lessee shall
always comply with and satisfy the conditions of Section 9.4, mutatis, mutandis.
The Lessee shall have the right, from time to time, to make additions,
modifications or improvements to the Leased Property which do not constitute
Capital Additions or Material Structural Work as it may deem to be desirable or
necessary for its uses and purposes, subject to the same limits and conditions
imposed under Section 9.4. The cost of any such repair, replacement, alteration,
addition, modification or
32
<PAGE>
improvement shall be paid by the Lessee and the results thereof shall be
included under the terms of this Lease and become a part of the Leased Property,
without payment therefor by the Lessor at any time. Notwithstanding the
foregoing, all such additions, modifications and improvements which affect the
structure of any of the Leased Improvements, or which involve the expenditure of
more than TWENTY-FIVE THOUSAND DOLLARS ($25,000.00), shall be undertaken only
upon compliance with the provisions of Section 13.1, all Legal Requirements and
all other applicable requirements of this Lease; provided, however, that in the
event of a bona fide emergency during which the Lessee is unable to contact the
appropriate representatives of the Lessor, the Lessee may commence such
additions, modifications and improvements as may be necessary in order to
address such emergency without the Lessor's prior approval, as long as the
Lessee immediately thereafter advises the Lessor of such emergency and the
nature and scope of the additions, modifications and improvements performed and
obtains the Lessor's approval of the remaining work to be completed.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 Representations and Warranties. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 Existence; Power; Qualification. The Lessee is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. The
Lessee has all requisite corporate power to own and operate its properties and
to carry on its business as now conducted and as proposed to be conducted and is
duly qualified to transact business and is in good standing in each jurisdiction
where such qualification is necessary or desirable in order to carry out its
business as presently conducted and as proposed to be conducted;
10.1.2 Valid and Binding. The Lessee is duly authorized to make and enter
into all of the Lease Documents to which the Lessee is a party and to carry out
the transactions contemplated therein. All of the Lease Documents to which the
Lessee is a party have been duly executed and delivered by the Lessee, and each
is a legal, valid and binding obligation of the Lessee, enforceable in
accordance with its terms.
10.1.3 Single Purpose. The Lessee is, and during the entire time that this
Lease remains in force and effect shall be, engaged in no business, trade or
activity other than the operation of the Leased Property for the Primary
Intended Use.
10.1.4 No Violation. The execution, delivery and performance of the Lease
Documents and the consummation of the transactions thereby contemplated shall
not result in any breach of, or constitute a default under, or result in the
acceleration of, or constitute an event which, with the giving of notice or the
passage of time, or both, could result in default or acceleration of any
obligation of any member of the Leasing Group under any of the Permits or
33
<PAGE>
Contracts or any other contract, mortgage, lien, lease, agreement, instrument,
franchise, arbitration award, judgment, decree, bank loan or credit agreement,
trust indenture or other instrument to which any member of the Leasing Group is
a party or by which any member of the Leasing Group or the Leased Property may
be bound or affected and do not violate or contravene any Legal Requirement.
10.1.5 Consents and Approvals. Except as already obtained or filed, as the
case may be, no consent or approval or other authorization of, or exemption by,
or declaration or filing with, any Person and no waiver of any right by any
Person is required to authorize or permit, or is otherwise required as a
condition of the execution and delivery of any of the Lease Documents by any
member of the Leasing Group and the performance of such member's obligations
thereunder or as a condition to the validity (assuming the due authorization,
execution and delivery by the Lessor of the Lease Documents to which it is a
party).
10.1.6 No Liens or Insolvency Proceedings. Each member of the Leasing Group
is financially solvent and there are no actions, suits, investigations or
proceedings including, without limitation, outstanding federal or state tax
liens, garnishments or insolvency or bankruptcy proceedings, pending or, to the
best of the Lessee's knowledge and belief, threatened:
(a) against or affecting any member of the Leasing Group, which if
adversely resolved to such member of the Leasing Group, would materially
adversely affect the ability of any of the foregoing to perform their respective
obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use, occupancy,
possession or operation thereof; or
(c) which may involve or affect the validity, priority or enforceability of
any of the Lease Documents, at law or in equity, or before or by any arbitrator
or Governmental Authority.
10.1.7 No Burdensome Agreements. The Lessee is a party to any agreement the
terms of which now have, or, as far as can be reasonably foreseen, may have, a
material adverse affect on its respective financial condition or business or on
the operation of the Leased Property.
10.1.8 Commercial Acts. The Lessee's performance of and compliance with the
obligations and conditions set forth herein and in the other Lease Documents
will constitute commercial acts done and performed for commercial purposes.
10.1.9 Adequate Capital, Not Insolvent. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
member of the Leasing Group:
34
<PAGE>
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds and capital to carry on its business as now
conducted or as contemplated to be conducted (in accordance with the terms of
the Lease Documents);
(c) will own property having a value both at fair valuation and at present
fair saleable value greater than the amount required to pay its debts as they
become due; and
(d) will not be rendered insolvent as determined by applicable law.
10.1.10 Not Delinquent. No member of the Leasing Group is delinquent or
claimed to be delinquent under any obligation for the payment of borrowed money.
10.1.11 No Affiliate Debt. The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether direct
or contingent) for borrowed money from any Affiliate of the Lessee that is not
fully subordinated to the Lease Obligations pursuant to a written agreement in
form and substance acceptable to the Lessor.
10.1.12 Taxes Current. Each member of the Leasing Group has filed all
federal, state and local tax returns which are required to be filed as to which
extensions are not currently in effect and have paid all taxes, assessments,
impositions, fees and other governmental charges (including interest and
penalties) which have become due pursuant to such returns or pursuant to any
assessment or notice of tax claim or deficiency received by each such member of
the Leasing Group. No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal, state or
local taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in excess of
those already paid.
10.1.13 Financials Complete and Accurate. The financial statements of each
member of the Leasing Group given to the Lessor in connection with the execution
and delivery of the Lease Documents were true, complete and accurate, in all
material respects, and fairly presented the financial condition of each such
member of the Leasing Group as of the date thereof and for the periods covered
thereby, having been prepared in accordance with GAAP and such financial
statements disclosed all liabilities, including, without limitation, contingent
liabilities, of each such member of the Leasing Group. There has been no
material adverse change since such date with respect to the Tangible Net Worth
of any member of the Leasing Group or with respect to any other matters
contained in such financial statements, nor have any additional material
liabilities, including, without limitation, contingent liabilities, of any
member of the Leasing Group arisen or been incurred or asserted since such date.
The projections heretofore delivered to the Lessor continue to be reasonable
(with respect to the material assumptions upon which such projections are based)
and the Lessee reasonably anticipates the results projected therein will be
achieved, there having been (a) no material adverse change in the business,
assets or condition, financial or otherwise of any member of
35
<PAGE>
the Leasing Group or the Leased Property and (b) no material depletion of the
cash or decrease in working capital of any member of the Leasing Group.
10.1.14 Pending Actions, Notices and Reports.
(a) There is no action or investigation pending or, to the best knowledge
and belief of the Lessee, threatened, anticipated or contemplated (nor, to the
knowledge of the Lessee, is there any reasonable basis therefor) against or
affecting the Leased Property or any member of the Leasing Group (or any
Affiliate thereof) before any Governmental Authority, Accreditation Body or
Third Party Payor which could prevent or hinder the consummation of the
transactions contemplated hereby or call into question the validity of any of
the Lease Documents or any action taken or to be taken in connection with the
transactions contemplated thereunder or which in any single case or in the
aggregate might result in any material adverse change in the business,
prospects, condition, affairs or operations of any member of the Leasing Group
or the Leased Property (including, without limitation, any action to revoke,
withdraw or suspend any Permit necessary or desirable for the operation of the
Leased Property in accordance with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location other than the Leased
Property) or any material impairment of the right or ability of any member of
the Leasing Group to carry on its operations as presently conducted or proposed
to be conducted or which may materially adversely impact reimbursement to any
member of the Leasing Group for services rendered to beneficiaries of Third
Party Payor Programs.
(b) Neither the Facility nor any member of the Leasing Group has received
any notice of any claim, requirement or demand of any Governmental Authority,
Accreditation Body, Third Party Payor or any insurance body having or claiming
any licensing, certifying, supervising, evaluating or accrediting authority over
the Leased Property to rework or redesign the Leased Property, its professional
staff or its professional services, procedures or practices in any material
respect or to provide additional furniture, fixtures, equipment or inventory or
to otherwise take action so as to make the Leased Property conform to or comply
with any Legal Requirement;
(c) The most recent utilization reviews relating to the Leased Property by
all applicable Third Party Payors, Accreditation Bodies and Governmental
Authorities and reviews or scrutiny by any managed care or utilization review
companies have not had a material adverse impact on the utilization of units or
programs at any of the Leased Property. No claims or assertions have been made
in any utilization review that any of the practices or procedures used at the
Leased Property are improper or inappropriate other than such claims or
assertions which singly and in the aggregate will not have a material adverse
impact on the Leased Property; and
(d) The Lessee has delivered or caused to be delivered to the Lessor true
and correct copies of all licenses, inspection surveys and accreditation reviews
relating to the Leased Property, issued by any Governmental Authority or
Accreditation Body during the most recent licensing period, together with all
plans of correction relating thereto.
36
<PAGE>
10.1.15 Compliance with Legal and Other Requirements.
(a) The Lessee and the Leased Property and the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements and there is no
claim of any violation thereof known to the Lessee. Without limiting the
foregoing, the Lessee has obtained all Permits that are necessary or desirable
to operate the Leased Property in accordance with its Primary Intended Use and
all such Permits are in full force and effect.
(b) Except as previously delivered to the Lessor pursuant to Section
10.1.14(d) hereof, there are no outstanding notices of deficiencies, notices of
proposed action or orders of any kind relating to the Leased Property issued by
any Governmental Authority, Accreditation Body or Third Party Payor requiring
conformity to any of the Legal Requirements.
10.1.16 No Action By Governmental Authority. There is no action pending or,
to the best knowledge and belief of the Lessee, recommended, by any Governmental
Authority or Accreditation Body to revoke, repeal, cancel, modify, withdraw or
suspend any Permit or Contract or to take any other action of any other type
which could have a material adverse effect on the Leased Property.
10.1.17 Property Matters.
(a) The Leased Property is free and clear of agreements, covenants and
Liens, except those agreements, covenants and Liens to which this Lease is
expressly subject, whether presently existing, as are listed on EXHIBIT B or
were listed on the UCC lien search results delivered to the Lessor at or prior
to the execution and delivery of this Lease (and were not required to be
terminated as a condition of the execution and delivery of this Lease), or which
may hereafter be created in accordance with the terms hereof (collectively
referred to herein as the "Permitted Encumbrances"); and the Lessee shall
warrant and defend the Lessor's title to the Leased Property against any and all
claims and demands of every kind and nature whatsoever;
(b) There is no Condemnation or similar proceeding pending with respect to
or affecting the Leased Property, and the Lessee is not aware, to the best of
the Lessee's knowledge and belief, that any such proceeding is contemplated;
(c) No part of the Leased Property has been damaged by any fire or other
casualty. The Leased Improvements are in good operating condition and repair,
ordinary wear and tear excepted, free from known defects in construction or
design;
(d) None of the Permitted Encumbrances has or is likely to have a material
adverse impact upon, nor interfere with or impede, in any material respect, the
operation of the Leased Property in accordance with the Primary Intended Use;
37
<PAGE>
(e) All buildings, facilities and other improvements necessary, both
legally and practically, for the proper and efficient operation of the Facility
are located upon the Leased Property and all real property and personal property
currently utilized by the Lessee is included within the definition of the Leased
Property;
(f) The Leased Property abuts on and has direct vehicular access to a
public road or access to a public road via permanent, irrevocable, appurtenant
easements;
(g) The Leased Property constitutes a separate parcel for real estate tax
purposes and no portion of any real property that does not constitute a portion
of the Leased Property is part of the same tax parcel as any part of the Leased
Property;
(h) All utilities necessary for the use and operation of the Facility are
available to the lot lines of the Leased Property:
(i) in sufficient supply and capacity;
(ii) through validly created and existing easements of record appurtenant
to or encumbering the Leased Property (which easements shall not impede or
restrict the operation of the Facility); and
(iii) without need for any Permits and/or Contracts to be issued by or
entered into with any Governmental Authority, except as already obtained or
executed, as the case may be, or as otherwise shown to the satisfaction of the
Lessor to be readily obtainable; and
(i) The Lessee has made no structural alterations or improvements to any of
the Leased Improvements that changed the foot-print of any of the Leased
Improvements, added an additional story to any of the Leased Improvements,
decreased the amount of parking available on the Leased Property or otherwise
involved any alteration which would be regulated by applicable zoning
requirements and the Lessee has no actual knowledge of any such structural
alteration or improvement made to any of the Leased Improvements during the last
ten (10) years and has no knowledge of any such structural alteration or
renovation made to any of the Leased Improvements or any such decrease in
parking during such period.
38
<PAGE>
10.1.18 Third Party Payor Agreements.
(a) The Lessee or the Facility is fully qualified as a provider of services
under and participates in all Third Party Payor Programs and referral programs
as is necessary for the prudent operation of the Facility in the good faith
exercise of commercially reasonable business judgment.
(b) Attached hereto as EXHIBIT C is a list of national accounts and local
discount agreements, which constitute all of the agreements between the Lessee
or the Facility, on the one hand, and Third Party Payors on the other hand,
pursuant to which the Lessee or the Facility agrees to provide services based on
a discount factor from the rates regularly charged for services rendered by the
Lessee or the Facility.
(c) No member of the Leasing Group, nor the Facility has any rate appeal
currently pending before any Governmental Authority or any administrator of any
Third Party Payor Program or any other referral source other than such appeals
which, if determined adversely to any member of the Leasing Group or the
Facility would not have a materially adverse effect, either singly or in the
aggregate, on the financial condition of any member of the Leasing Group or the
Facility.
(d) All cost reports and financial reports submitted to any Third Party
Payor with respect to the Facility by any member of the Leasing Group have been
materially accurate and complete and have not been misleading in any material
respect. As a result of any audits by any Third Party Payor, there are no
related recoupment claims made or contests pending or threatened other than such
recoupment claims or contests which, if determined adversely to any member of
the Leasing Group or the Facility, would not have a materially adverse effect,
either singly or in the aggregate, on the financial condition of any member of
the Leasing Group or the Facility. As of the date hereof, no cost reports for
the Facility remain open or unsettled other than those listed on EXHIBIT D.
10.1.19 Rate Limitations. Except as disclosed on EXHIBIT E, the State
currently imposes no restrictions or limitations on rates which may be charged
to private pay residents receiving services at the Facility.
10.1.20 Free Care. Except as disclosed on EXHIBIT F, there are no
Contracts, Permits or Legal Requirements which require that a percentage of beds
or slots in any program at the Facility be reserved for Medicaid or Medicare
eligible residents or that the Facility provide a certain amount of welfare,
free or charity care or discounted or government assisted patient care.
10.1.21 No Proposed Changes. The Lessee has no actual knowledge of any
Legal Requirements which have been enacted, promulgated or issued within the
eighteen (18) months preceding the date of this Lease or any proposed Legal
Requirements currently pending in the State which may materially adversely
affect rates at the Facility (or any program
39
<PAGE>
operated in conjunction with the Facility) or may result in the likelihood of
increased competition at the Facility or the imposition of Medicaid, Medicare,
charity, free care, welfare or other discounted or government assisted residents
at the Facility or require that the Lessee or the Facility obtain a certificate
of need, Section 1122 approval or the equivalent, which the Lessee or the
Facility does not currently possess.
10.1.22 ERISA. No employee pension benefit plan maintained by any member of
the Leasing Group has any accumulated funding deficiency within the meaning of
the ERISA, nor does any member of the Leasing Group have any material liability
to the PBGC established under ERISA (or any successor thereto) in connection
with any employee pension benefit plan (or other class of benefit which the PBGC
has elected to insure), and there have been no "reportable events" (not waived)
or "prohibited transactions" with respect to any such plan, as those terms are
defined in Section 4043 of ERISA and Section 4975 of the Internal Revenue Code
of 1986, as now or hereafter amended, respectively.
10.1.23 No Broker. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by the Lease Documents.
10.1.24 No Improper Payments. No member of the Leasing Group nor any of
their respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or property to
or for the private use of any government official, employee, agent or other
Person where either the payment or the purpose of such contribution, payment or
gifts is illegal under the laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any purpose
or has made any false or artificial entries on any of its books or records for
any reason;
(c) made any payments to any Person with the intention or understanding
that any part of such payment was to be used for any other purpose other than
that described in the documents supporting the payment; or
(d) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state or local, where such contribution would be in violation of
applicable law.
10.1.25 Nothing Omitted. Neither this Lease, nor any of the other Lease
Documents, nor any certificate, agreement, statement or other document,
including, without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be furnished to
the Lessor or its attorneys in connection with the transactions contemplated by
the Lease Documents, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to
40
<PAGE>
prevent all statements contained herein and therein from being misleading. There
is no fact within the special knowledge of the Lessee which has not been
disclosed herein or in writing to the Lessor that materially adversely affects,
or in the future, insofar as the Lessee can reasonably foresee, may materially
adversely affect the business, properties, assets or condition, financial or
otherwise, of any member of the Leasing Group or the Leased Property.
10.1.26 No Margin Security. The Lessee is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Lessor's Investment will be used to
purchase or carry any margin security or to extend credit to others for the
purpose of purchasing or carrying any margin security or in any other manner
which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System. The Lessee is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
10.1.27 No Default. No event or state of facts which constitutes, or which,
with notice or lapse of time, or both, could constitute, a Lease Default has
occurred and is continuing.
10.1.28 Principal Place of Business. The principal place of business and
chief executive office of the Lessee is located at 197 First Avenue, Needham,
Massachusetts 02194 (the "Principal Place of Business").
10.1.29 Labor Matters. There are no proceedings now pending, nor, to the
best of the Lessee's knowledge, threatened with respect to the operation of the
Facility before the National Labor Relations Board, State Commission on Human
Rights and Opportunities, State Department of Labor, U.S. Department of Labor or
any other Governmental Authority having jurisdiction of employee rights with
respect to hiring, tenure and conditions of employment, and no member of the
Leasing Group has experienced any material controversy with any Facility
administrator or other employee of similar stature or with any labor
organization.
10.1.30 Intellectual Property. The Lessee is duly licensed or authorized to
use all (if any) copyrights, rights of reproduction, trademarks, trade-names,
trademark applications, service marks, patent applications, patents and patent
license rights, (all whether registered or unregistered, U.S. or foreign),
inventions, franchises, discoveries, ideas, research, engineering, methods,
practices, processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used in or
necessary for the operation of the Facility in accordance with its Primary
Intended Use, without conflict with or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in others.
10.1.31 Management Agreements. There is no Management Agreement in force
and effect as of the date hereof.
41
<PAGE>
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of the Lessee, the representations and warranties contained in Sections
10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c), 10.1.18(b),
10.1.18(c), 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.28, 10.1.29, in the second
sentence of Section 10.1.12, in the second and third sentences of Section
10.1.13, and in the second and third sentences of Section 10.1.18(d) shall not
constitute continuing representations and warranties throughout the Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates. At any time, and from time to time, upon request
from the Lessor, the Lessee shall furnish to the Lessor, within ten (10)
Business Days' after receipt of such request, an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the Lessor and any such prospective purchaser
or mortgagee of the Leased Property.
11.2 Financial Statements; Reports; Notice and Information.
11.2.1 Obligation To Furnish. The Lessee will furnish and shall cause to be
furnished to the Lessor the following statements, information and other
materials:
(a) Annual Statements. Within ninety (90) days after the end of each of
their respective fiscal years, (i) a copy of the Consolidated Financials for
each of (x) the Lessee and (y) any Sublessee for the preceding fiscal year,
certified and audited by, and with the unqualified opinion of, independent
certified public accountants acceptable to the Lessor and certified as true and
correct by the Lessee or the applicable Sublessee, as the case may be (and,
without limiting anything else contained herein, the Consolidated Financials for
the Lessee and for each Sublessee shall include a detailed balance sheet for
Leased Property as of the last day of such fiscal year and a statement of
earnings from the Leased Property for such fiscal year showing, among other
things, all rents and other income therefrom and all expenses paid or incurred
in connection with the operation of the Leased Property); (ii) separate
statements, certified as true and correct by the Lessee and each Sublessee,
stating whether, to the best of the signer's knowledge and belief after making
due inquiry, the Lessee or such Sublessee, as
42
<PAGE>
the case may be, is in default in the performance or observance of any of the
terms of this Lease or any of the other Lease Documents and, if so, specifying
all such defaults, the nature thereof and the steps being taken to immediately
remedy the same; (iii) a copy of all letters from the independent certified
accountants engaged to perform the annual audits referred to above, directed to
the management of the Lessee or the applicable Sublessee, as the case may be,
regarding the existence of any reportable conditions or material weaknesses and
(iv) a statement certified as true and correct by the Lessee setting forth all
Subleases as of the last day of such fiscal year, the respective areas demised
thereunder, the names of the Sublessees thereunder, the respective expiration
dates of such Subleases, the respective rentals provided for therein, and such
other information pertaining to such Subleases as may be reasonably requested by
the Lessor.
(b) Permits and Contracts. Promptly after the issuance or the execution
thereof, as the case may be, true and complete copies of (i) all Permits which
constitute operating licenses for the Facility issued by any Governmental
Authority having jurisdiction over assisted living matters and (ii) Contracts
(involving payments in the aggregate in excess of $100,000 per annum),
including, without limitation, all Provider Agreements.
(c) Contract Notices. Promptly after the receipt thereof, true and complete
copies of any notices, consents, terminations or statements of any kind or
nature relating to any of the Contracts (involving payments in the aggregate in
excess of $100,000 per annum) other than those issued in the ordinary course of
business.
(d) Permit or Contract Defaults. Promptly after the receipt thereof, true
and complete copies of all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in the ordinary course
of business), terminations and notices of any kind (other than those notices
that are furnished in the ordinary course of business) issued or provided to the
Lessee or any Sublessee by any Governmental Authority, Accreditation Body or any
Third Party Payor, including, without limitation, any notices pertaining to any
delinquency in, or proposed revision of, the Lessee's or any Sublessee's
obligations under the terms and conditions of any Permits or Contracts now or
hereafter issued by or entered into with any Governmental Authority,
Accreditation Body or Third Party Payor and the response(s) thereto made by or
on behalf of the Lessee or any Sublessee.
(e) Official Reports. Upon completion or filing thereof, complete copies of
all applications (other than those that are furnished in the ordinary course of
business), notices (other than those that are furnished in the ordinary course
of business), statements, annual reports, cost reports and other reports or
filings of any kind (other than those that are furnished in the ordinary course
of business) provided by the Lessee or any Sublessee to any Governmental
Authority, Accreditation Body or any Third Party Payor with respect to the
Leased Property.
43
<PAGE>
(f) Other Information. With reasonable promptness, such other information
as the Lessor may from time to time reasonably request respecting (i) the
financial condition and affairs of each member of the Leasing Group and the
Leased Property and (ii) the licensing and operation of the Leased Property;
including, without limitation, audited financial statements, certificates and
consents from accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental Authority.
(g) Default Conditions. As soon as possible, and in any event within five
(5) days after the occurrence of any Lease Default, or any event or circumstance
which, with the giving of notice or the passage of time, or both, could
constitute a Lease Default, a written statement of the Lessee setting forth the
details of such Lease Default, event or circumstance and the action which the
Lessee proposes to take with respect thereto.
(h) Official Actions. Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any Governmental Authority or
Accreditation Body which could have a material adverse effect on (i) any member
of the Leasing Group to perform any of its obligations under any of the Lease
Documents or (ii) the Leased Property.
(i) Audit Reports. Promptly after receipt, a copy of all audits or reports
submitted to any member of the Leasing Group by any independent public
accountant in connection with any annual, special or interim audits of the books
of any such member of the Leasing Group and, if requested by the Lessor, any
letter of comments directed by such accountant to the management of any such
member of the Leasing Group.
(j) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit or Provider Agreement
necessary for the operation of the Leased Property;
(ii) any loss, damage or destruction to or of the Leased Property in
excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000) (regardless of whether the same
is covered by insurance);
(iii) any material controversy involving the Lessee or any Sublessee
and (x) Facility administrator or Facility employee of similar stature or (y)
any labor organization;
(iv) any controversy that calls into question the eligibility of the
Lessee or the Facility for the participation in any Medicaid, Medicare or other
Third Party Payor Program;
(v) any refusal of reimbursement by any Third Party Payor which,
singularly or together with all other such refusals by any Third Party Payors,
could have a material adverse effect on the financial condition of the Lessee or
any Sublessee; and
44
<PAGE>
(vi) any fact within the special knowledge of any member of the
Leasing Group, or any other development in the business or affairs of any member
of the Leasing Group, which may be materially adverse to the business,
properties, assets or condition, financial or otherwise, of any member of the
Leasing Group or the Leased Property.
(k) Responses To Inspection Reports. Within thirty (30) days after receipt
of an inspection report relating to the Leased Property from the Lessor, a
written response describing in detail prepared plans to address concerns raised
by the inspection report.
(1) Public Information. Upon the completion or filing, mailing or other
delivery thereof, complete copies of all financial statements, reports, notices
and proxy statements, if any, sent by any member of the Leasing Group (which is
a publicly held corporation) to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a publicly held corporation)
with any securities exchange or with the Securities Exchange Commission.
(m) Annual Budgets. At least thirty (30) days prior to the end of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall submit to the
Lessor a preliminary annual financial budget for the Facility for the next
Fiscal Year, a preliminary capital expenditures budget for the Facility for the
next Fiscal Year and a report detailing the capital expenditures made in the
then current Fiscal Year and on or before the end of the first month of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall submit to the
Lessor revised finalized versions of such budgets and report.
11.2.2 Responsible Officer. Any certificate, instrument, notice, or other
document to be provided to the Lessor hereunder by any member of the Leasing
Group shall be signed by an executive officer of such member (in the event that
any of the foregoing is not an individual), having a position of Vice President
or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief financial
officer of such member.
11.2.3 No Material Omission. No certificate, instrument, notice or other
document, including without limitation, any financial statements furnished or to
be furnished to the Lessor pursuant to the terms hereof or of any of the other
Lease Documents shall contain any untrue statement of a material fact or shall
omit to state any material fact necessary in order to prevent all statements
contained therein from being misleading.
11.2.4 Confidentiality. The Lessor shall afford any information received
pursuant to the provisions of the Lease Documents the same degree of
confidentiality that the Lessor affords similar information proprietary to the
Lessor; provided, however, that the Lessor does not in any way warrant or
represent that such information received from any member of the Leasing Group
shall remain confidential (and shall not be liable in any way for any subsequent
disclosure of such information by any Person that the Lessor has provided such
information in accordance with the terms hereof) and provided, further, that the
Lessor shall have the
45
<PAGE>
unconditional right to (a) disclose any such information as the Lessor deems
necessary or appropriate in connection with any sale, transfer, conveyance,
participation or assignment of the Leased Property or any of the Lease Documents
or any interest therein and (b) use such information in any litigation or
arbitration proceeding between the Lessor and any member of the Leasing Group.
Without limiting the foregoing, the Lessor may also utilize any information
furnished to it hereunder as and to the extent (i) counsel to the Lessor
determines that such utilization is necessary pursuant to 15 U.S.C. 77a-77aa or
15 U.S.C. 78a-78jj and the rules and regulations promulgated thereunder, (ii)
the Lessor is required or requested by any Governmental Authority to disclose
any such information and/or (iii) the Lessor is requested to disclose any such
information by any of its lenders or potential lenders. The Lessor shall not be
liable in any way for any subsequent disclosure of such information by any
Person to whom the Lessor provided such information in accordance with the terms
hereof. Nevertheless, in connection with any such disclosure, the Lessor shall
inform the recipient of any such information of the confidential nature thereof.
The Lessor shall observe any prohibitions or limitations on the disclosure of
any such information under applicable confidentiality law or regulations, to the
extent that the same are applicable to such information, including, without
limitation, any duly enacted "Patients' Bill of Rights" or similar legislation,
including such limitations as may be necessary to preserve the confidentiality
of the facility-patient relationship and the physician-patient privilege.
11.3 Financial Covenants. The Lessee covenants and agrees that, throughout
the Term and as long as the Lessee is in possession of the Leased Property:
11.3.1 No Indebtedness. The Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to the
Lessor under the Lease Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business, (iv) Indebtedness created in
connection with any financing of any Capital Addition, provided, that each such
financing has been approved by the Lessor in accordance with the terms of
Article 9 hereof, (v) Indebtedness to any Affiliate, provided, that, such
Indebtedness is fully subordinated to this Lease pursuant to a written agreement
in form and substance acceptable to the Lessor, and (vi) other Indebtedness of
the Lessee in the aggregate amount not to exceed __________ incurred, for the
exclusive use of the Leased Property, on account of purchase money indebtedness
or finance lease arrangements, each of which shall not exceed the fair market
value of the assets or property acquired or leased and shall not extend to any
assets or property other than those purchased or leased and purchase money
security interests in equipment and equipment leases which comply with the
provisions of Section 6.1.2.
11.3.2 No Guaranties. The Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
46
<PAGE>
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
11.4 Affirmative Covenants. The Lessee covenants and agrees that throughout
the Term and any periods thereafter that the Lessee remains in possession of the
Leased Property:
11.4.1 Maintenance of Existence. If the Lessee is a corporation, trust or
partnership, during the entire time that this Lease remains in full force and
effect, the Lessee shall keep in effect its existence and rights as a
corporation, trust or partnership under the laws of the state of its
incorporation or formation and its right to own property and transact business
in the State.
11.4.2 Materials. Except as provided in Section 6.1.2, the Lessee shall not
suffer the use in connection with any renovations or other construction relating
to the Leased Property of any materials, fixtures or equipment intended to
become part of the Leased Property which are purchased upon lease or conditional
bill of sale or to which the Lessee does not have absolute and unencumbered
title, and the Lessee covenants to cause to be paid punctually all sums becoming
due for labor, materials, fixtures or equipment used or purchased in connection
with any such renovations or construction, subject to the Lessee's right to
contest to the extent provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable Agreements. The
Lessee and the Leased Property and all uses thereof shall comply with (i) all
Legal Requirements, (ii) all Permits and Contracts, (iii) all Insurance
Requirements, (iv) the Lease Documents, (v) the Permitted Encumbrances and (vi)
the Appurtenant Agreements.
11.4.4 Books And Records. The Lessee shall cause to be kept and maintained,
and shall permit the Lessor and its representatives to inspect at all reasonable
times, accurate books of accounts in which complete entries will be made in
accordance with GAAP reflecting all financial transactions of the Lessee
(showing, without limitation, all materials ordered and received and all
disbursements, accounts payable and accounts receivable in connection with the
operation of the Leased Property).
11.4.5 Participation in Third Party Payor Programs. The Lessee and each
Sublessee shall participate in all Third Party Payor Programs (which would be
participated in by a prudent operator in the good faith exercise of commercially
reasonable business judgment), in accordance with all requirements thereof
(including, without limitation, all applicable Provider Agreements), and shall
remain eligible to participate in such Third Party Payor Programs, all as shall
be necessary for the prudent operation of the Facility in the good faith
exercise of commercially reasonable business judgment.
11.4.6 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager to maintain, experienced and competent professional
management with respect to its business and with respect to the Leased Property.
The Lessee, any Sublessee and
47
<PAGE>
any Manager shall conduct, in the ordinary course, the operation of the
Facility, and the Lessee and any Sublessee shall not enter into any other
business or venture during the Term or such time as the Lessee or any Sublessee
is in possession of the Leased Property.
11.4.7 Address. The Lessee shall provide the Lessor thirty (30) days' prior
written notice of any change of its Principal Place of Business from its current
Principal Place of Business. The Lessee shall maintain all books and records
relating to its business, solely at its Principal Place of Business and at the
Leased Property. The Lessee shall not (a) remove any books or records relating
to the Lessee's business from either the Leased Property or the Lessee's
Principal Place of Business or (b) relocate its Principal Place of Business
until after receipt of a certificate from the Lessor, signed by an officer
thereof, stating that the Lessor has, to its satisfaction, obtained all
documentation that it deems necessary or desirable to obtain, maintain, perfect
and confirm the first priority security interests granted in the Lease
Documents.
11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease, any payments to be made by the
Lessee to (a) any member of the Leasing Group (or any Affiliate of any member of
the Leasing Group) or (b) any Affiliate of the Lessee, in connection with any
transaction between the Lessee and such Person, including, without limitation,
the purchase, sale or exchange of any property, the rendering of any service to
or with any such Person (including, without limitation, all allocations of any
so-called corporate or central office costs, expenses and charges of any kind or
nature) or the making of any loan or other extension of credit or the making of
any equity investment, shall be subordinate to the complete payment and
performance of the Lease Obligations; provided, however, that all such
subordinated payments may be paid at any time unless: (x) after giving effect to
such payment, the Lessee shall be unable to comply with any of its obligations
under any of the Lease Documents or (y) a Lease Default has occurred and is
continuing and has not been expressly waived in writing by the Lessor or an
event or state of facts exists, which, with the giving of notice or the passage
of time, or both, would constitute a Lease Default.
11.4.9 Inspection. At reasonable times and upon reasonable notice, the
Lessee shall permit the Lessor and its authorized representatives (including,
without limitation, the Consultants) to inspect the Leased Property as provided
in Section 7.1 above.
11.4.10 Additional Property. In the event that at any time during the Term,
the Lessee holds the fee title to or a leasehold interest in any real property
and/or personal property which is used as an integral part of the operation of
the Leased Property (but is not subject to this Lease), the Lessee shall (i)
provide the Lessor with prior notice of such acquisition and (ii) shall take
such actions and enter into such agreements as the Lessor shall reasonably
request in order to grant the Lessor a first priority mortgage or other security
interest in such real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably acceptable to the Lessor.
48
<PAGE>
11.5 Additional Negative Covenants. The Lessee covenants and agrees that,
throughout the Term and such time as the Lessee remains in possession of the
Leased Property:
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in Section 19.4 or in any of the other Lease Documents, the
Lessee shall not, without the prior written consent of the Lessor, in each
instance, which consent may be withheld in the sole and absolute discretion of
the Lessor:
(a) convey, assign, hypothecate, transfer, dispose of or encumber, or
permit the conveyance, assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial interest in this
Lease, its other assets or the Leased Property; provided, however, that this
restriction shall not apply to (i) the Permitted Encumbrances that may be
created after the date hereof pursuant to the Lease Documents; (ii) Liens
created in accordance with Section 6.1.2 against Tangible Personal Property
securing Indebtedness permitted under Section 11.3.1(vi) relating to equipment
leasing or financing for the exclusive use of the Leased Property; (iii) the
sale, conveyance, assignment, hypothecation, lease or other transfer of any
material asset or assets (whether now owned or hereafter acquired), the fair
market value of which equals or is less than TWENTY-FIVE THOUSAND DOLLARS
($25,000), individually, or ONE HUNDRED THOUSAND DOLLARS ($100,000)
collectively; (iv) without limitation as to amount, the disposition in the
ordinary course of business of any obsolete, worn out or defective fixtures,
furnishings or equipment used in the operation of the Leased Property provided
that the same are replaced with fixtures, furnishings or equipment of equal or
greater utility or value or the Lessee provides the Lessor with an explanation
(reasonably satisfactory to the Lessor) as to why such fixtures, furnishings or
equipment is no longer required in connection with the operation of the Leased
Property; (v) without limitation as to amount, any sale of inventory by the
Lessee in the ordinary course of business; and (vi) subject to the terms of the
Pledge Agreement and the Affiliated Party Subordination Agreement, distributions
to the shareholders of the Lessee;
(b) permit the use of the Facility for any purpose other than the Primary
Intended Use; or
(c) liquidate, dissolve or merge or consolidate with any other Person.
11.5.2 No Liens. The Lessee will not directly or indirectly create or allow
to remain and will promptly discharge at its expense any Lien, title retention
agreement or claim upon or against the Leased Property (including the Lessee's
interest therein) or the Lessee's interest in this Lease or any of the other
Lease Documents, or in respect of the Rent, excluding (a) this Lease and any
permitted Subleases, (b) the Permitted Encumbrances, (c) Liens which are
consented to in writing by the Lessor, (d) Liens for those taxes of the Lessor
which the Lessee is not required to pay hereunder, (e) Liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either not yet due or being
contested in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of the Lessor pursuant to
49
<PAGE>
the provisions of Article 20, (g) Liens for Impositions which are either not yet
due and payable or which are in the process of being contested in strict
compliance with the terms and conditions of Article 15 and (h) involuntary Liens
caused by the actions or omissions of the Lessor.
11.5.3 Limits on Affiliate Transactions. The Lessee shall not enter into
any transaction with any Affiliate, including, without limitation, the purchase,
sale or exchange of any property, the rendering of any service to or with any
Affiliate and the making of any loan or other extension of credit, except in the
ordinary course of, and pursuant to the reasonable requirements of, the Lessee's
business and upon fair and reasonable terms no less favorable to the Lessee than
would be obtained in a comparable arms'-length transaction with any Person that
is not an Affiliate.
11.5.4 Intentionally Omitted.
11.5.5 No Default. The Lessee shall not commit any default or breach under
any of the Lease Documents.
11.5.6 Intentionally Omitted.
11.5.7 Intentionally Omitted.
11.5.8 ERISA. The Lessee shall not establish or permit any Sublessee to
establish any new pension or defined benefit plan or modify any such existing
plan for employees subject to ERISA, which plan provides any benefits based on
past service without the advance consent of the Lessor to the amount of the
aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. The Lessee will not waive, or permit
any sublessee or Manager which is an Affiliate to waive any debt or claim,
except in the ordinary course of its business.
11.5.10 Value of Assets. Except as disclosed in the financial statements
provided to the Lessor as of the date hereof, the Lessee will not write up (by
creating an appraisal surplus or otherwise) the value of any assets of the
Lessee above their cost to the Lessee, less the depreciation regularly allowable
thereon.
11.5.11 Changes in Fiscal Year and Accounting Procedures. The Lessee shall
not, without the prior written consent of the Lessor, in each instance, which
consent may be withheld in the Lessor's reasonable discretion (a) change its
fiscal year or capital structure or (b) change, alter, amend or in any manner
modify, except in accordance with GAAP, any of its current accounting procedures
related to the method of revenue recognition, billing procedures or
determinations of doubtful accounts or bad debt expenses nor will the Lessee
permit any of its Subsidiaries to change its fiscal year or suffer or permit any
circumstance to exist in which any Subsidiary is not wholly-owned, directly or
indirectly, by the Lessee.
50
<PAGE>
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 General Insurance Requirements. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall at its sole cost and expense keep the
Leased Property and the Tangible Personal Property located thereon and the
business operations conducted on the Leased Property insured as set forth below.
12.1.1 Types and Amounts of Insurance. The Lessee's insurance shall include
the following:
(a) property loss and physical damage insurance on an all-risk basis (with
only such exceptions as the Lessor may in its reasonable discretion approve)
covering the Leased Property (exclusive of Land) for its full replacement cost,
which cost shall be reset once a year at the Lessor's option, with an
agreed-amount endorsement and a deductible not in excess of TEN THOUSAND DOLLARS
($10,000.00). Such insurance shall include, without limitation, the following
coverages: (i) increased cost of construction, (ii) cost of demolition, (iii)
the value of the undamaged portion of the Facility and (iv) contingent liability
from the operation of building laws, less exclusions provided in the normal "All
Risk" insurance policy. During any period of construction, such insurance shall
be on a builder's-risk, completed value, non-reporting form with permission to
occupy;
(b) flood insurance (if the Leased Property or any portion thereof is
situated in an area which is considered a flood risk area by the U.S. Department
of Housing and Urban Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in limits acceptable to
the Lessor;
(c) boiler and machinery insurance (including related electrical apparatus
and components) under a standard comprehensive form, providing coverage against
loss or damage caused by explosion of steam boilers, pressure vessels or similar
vessels, now or hereafter installed on the Leased Property, in limits acceptable
to the Lessor;
(d) earthquake insurance (if deemed necessary by the Lessor) in limits and
with deductibles acceptable to the Lessor;
(e) environmental impairment liability insurance (if available) in limits
and with deductibles acceptable to the Lessor;
51
<PAGE>
(f) business interruption and/or rent loss insurance in an amount equal to
the annual Base Rent due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one year;
(g) comprehensive general public liability insurance including coverages
commonly found in the Broad Form Commercial Liability Endorsements with amounts
not less than [FIVE MILLION DOLLARS ($5,000,000)] per occurrence with respect to
bodily injury and death and [THREE MILLION DOLLARS ($3,000,000)] for property
damage and with all limits based solely upon occurrences at the Leased Property
without any other impairment;
(h) professional liability insurance in an amount not less than [TEN
MILLION DOLLARS ($10,000,000)] for each medical incident;
(i) physical damage insurance on an all-risk basis (with only such
exceptions as the Lessor in its reasonable discretion shall approve) covering
the Tangible Personal Property for the full replacement cost thereof and with a
deductible not in excess of one percent (1%) of the full replacement cost
thereof;
(j) Workers' Compensation and Employers' Liability Insurance providing
protection against all claims arising out of injuries to all employees of the
Lessee or of any Sublessee (employed on the Leased Property or any portion
thereof) in amounts equal for Workers' Compensation, to the statutory benefits
payable to employees in the State and for Employers' Liability, to limits of not
less than ONE HUNDRED THOUSAND DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per employee for disease and FIVE HUNDRED
THOUSAND DOLLARS ($500,000) disease policy limit;
(k) subsidence insurance (if deemed necessary by the Lessor) in limits
acceptable to the Lessor; and
(1) such other insurance as the Lessor from time to time may reasonably
require and also, as may from time to time be required by applicable Legal
Requirements and/or by any Fee Mortgagee.
12.1.2 Insurance Company Requirements. All such insurance required by this
Lease or the other Lease Documents shall be issued and underwritten by insurance
companies licensed to do insurance business by, and in good standing under the
laws of, the State and which companies have and maintain a rating of A:X or
better by A.M. Best Co.
12.1.3 Policy Requirements. Every policy of insurance from time to time
required under this Lease or any of the other Lease Documents (other than
worker's compensation) shall name the Lessor as owner, loss payee, secured party
(to the extent applicable) and additional named insured as its interests may
appear. If an insurance policy covers properties other than the Leased Property,
then the Lessor shall be so named with respect only to the Leased Property. Each
such policy, where applicable or appropriate, shall:
52
<PAGE>
(a) include an agreed amount endorsement and loss payee, additional named
insured and secured party endorsements, in forms acceptable to the Lessor in its
sole and absolute discretion;
(b) include mortgagee, secured party, loss payable and additional named
insured endorsements reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be canceled or materially modified
except upon thirty (30) days' prior written notice to the Lessor and any Fee
Mortgagee;
(d) be payable to the Lessor and any Fee Mortgagee notwithstanding any
defense or claim that the insurer may have to the payment of the same against
any other Person holding any other interest in the Leased Property;
(e) be endorsed with standard noncontributory clauses in favor of and in
form reasonably acceptable to the Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part of the insurer
against the Lessor, any Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be reasonably acceptable to the
Lessor.
12.1.4 Notices; Certificates and Policies. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the expiration of any insurance
policy required hereunder, the Lessee shall deliver to the Lessor certificates
and evidence of insurance relating to all renewals and replacements thereof,
together with evidence, satisfactory to the Lessor, of payment of the premiums
thereon. The Lessee shall deliver to the Lessor original counterparts or copies
certified by the insurance company to be true and complete copies, of all
insurance policies required hereunder not later than the earlier to occur of (a)
ninety (90) days after the effective date of each such policy and (b) ten (10)
days after receipt thereof by the Lessee.
12.1.5 Lessor's Right to Place Insurance. If the Lessee shall fail to
obtain any insurance policy required hereunder by the Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such policy to
the Lessor, or if any insurance policy required hereunder (or any part thereof)
shall expire or be canceled or become void or voidable by reason of any breach
of any condition thereof, or if the Lessor determines that such insurance
coverage is unsatisfactory by reason of the failure or impairment of the capital
of any insurance company which wrote any such policy, upon demand by the Lessor,
the Lessee shall promptly obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured by the provisions
hereof, satisfactory to the Lessor, and, at its option, the Lessor may obtain
such insurance and pay the premium or premiums therefor; in
53
<PAGE>
which event, any amount so paid or advanced by the Lessor and all costs and
expenses incurred in connection therewith (including, without limitation,
attorneys' fees and expenses and court costs), shall be a demand obligation of
the Lessee to the Lessor, payable as an Additional Charge.
12.1.6 Payment of Proceeds. All insurance policies required hereunder
(except for general public liability, professional liability and workers'
compensation and employers liability insurance) shall provide that in the event
of loss, injury or damage, subject to the rights of any Fee Mortgagee, all
proceeds shall be paid to the Lessor alone (rather than jointly to the Lessee
and the Lessor). The Lessor is hereby authorized to adjust and compromise any
such loss with the consent of the Lessee or, following any Lease Default,
whether or not cured, without the consent of the Lessee, and to collect and
receive such proceeds in the name of the Lessor and the Lessee, and the Lessee
appoints the Lessor (or any agent designated by the Lessor) as the Lessee's
attorney-in-fact with full power of substitution, to endorse the Lessee's name
upon any check in payment thereof. Subject to the provisions of Article 13, such
insurance proceeds shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by the Lessor in collecting said insurance
proceeds, then toward payment of the Lease Obligations or any portion thereof,
then due and payable, in such order as the Lessor determines, and then in whole
or in part toward restoration, repair or reconstruction of the Leased Property
for which such insurance proceeds shall have been paid.
12.1.7 Irrevocable Power of Attorney. The power of attorney conferred on
the Lessor pursuant to the provisions of this Section 12.1, being coupled with
an interest, shall be irrevocable for as long as this Lease is in effect or any
Lease Obligations are outstanding, shall not be affected by any disability or
incapacity which the Lessee may suffer and shall survive the same. Such power of
attorney, is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power, and neither the
Lessor nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or willful misconduct.
12.1.8 Blanket Policies. Notwithstanding anything to the contrary contained
herein, the Lessee's obligations to carry the insurance provided for herein may
be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by the Lessee and its Affiliates; provided,
however, that the coverage afforded to the Lessor shall not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 No Separate Insurance. The Lessee shall not, on the Lessee's own
initiative or pursuant to the request or requirement of any other Person, take
out separate insurance concurrent in form or contributing in the event of loss
with the insurance required hereunder to be furnished by the Lessee, or increase
the amounts of any then existing insurance by securing an additional policy or
additional policies, unless (a) all parties having an insurable interest in
54
<PAGE>
the subject matter of the insurance, including the Lessor, are included therein
as additional insureds and (b) losses are payable under said insurance in the
same manner as losses are required to be payable under this Lease. The Lessee
shall immediately notify the Lessor of the taking out of any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance by securing an additional insurance policy or policies.
12.1.10 Assignment of Unearned Premiums. The Lessee hereby assigns to the
Lessor all rights of the Lessee in and to any unearned premiums allocable to the
Leased Property on any insurance policy required hereunder to be furnished by
the Lessee which may become payable or are refundable after the occurrence of an
Event of Default hereunder. In the event that this Lease is terminated for any
reason (other than the purchase of the Leased Property by the Lessee), the
insurance policies required to be maintained hereunder, including all right,
title and interest of the Lessee thereunder, shall become the absolute property
of the Lessor.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence or
willful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Lessee hereby agrees to defend with counsel
acceptable to the Lessor, indemnify and hold harmless the Lessor and each of the
other Indemnified Parties from and against all damages, losses, claims,
liabilities, obligations, penalties, causes of action, costs and expenses
(including, without limitation, attorneys' fees, court costs and other expenses
of litigation) suffered by, or claimed or asserted against, the Lessor or any of
the other Indemnified Parties, directly or indirectly, based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property or any
business conducted therein, (b) any act, fault, omission to act or misconduct by
(i) any member of the Leasing Group, (ii) any Affiliate of the Lessee or (iii)
any employee, agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing parties, relating to, directly or indirectly,
the Leased Property, (c) any accident, injury or damage whatsoever caused to any
Person, including, without limitation, any claim of malpractice, or to the
property of any Person in or about the Leased Property or outside of the Leased
Property where such accident, injury or damage results or is claimed to have
resulted from any act, fault, omission to act or misconduct by any member of the
Leasing Group or any Affiliate of the Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any Lease Default,
(e) any claim brought or threatened against any of the Indemnified Parties by
any member of the Leasing Group or by any other Person on account of (i) the
Lessor's relationship with any member of the Leasing Group pertaining in any way
to the Leased Property and/or the transaction evidenced by the Lease Documents
and/or (ii) the Lessor's negotiation of, entering into and/or performing any of
its obligations and/or exercising any of its right and remedies under any of the
Lease Documents, (f) any attempt by any member of the Leasing Group or any
Affiliate of the Lessee to transfer or relocate any of the Permits to any
location other than the Leased Property and/or (g) the enforcement of this
indemnity. Any amounts which become payable by the Lessee under this Section
12.2.1 shall
55
<PAGE>
be a demand obligation of the Lessee to the Lessor, payable as an Additional
Charge. The indemnity provided for in this Section 12.2.1 shall survive any
termination of this Lease.
12.2.2 Indemnified Parties. As used in this Lease the term "Indemnified
Parties" shall mean Lessor, any Fee Mortgagee and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
12.2.3 Limitation on Lessor Liability. Neither the Lessor nor any Affiliate
of the Lessor shall be liable to any member of the Leasing Group or any
Affiliate of any member of the Leasing Group, or to any other Person whatsoever
for any damage, injury, loss, compensation, or claim (including, but not limited
to, any claim for the interruption of or loss to any business conducted on the
Leased Property) based on, arising out of or resulting from any cause
whatsoever, including, but not limited to, the following: (a) repairs to the
Leased Property, (b) interruption in use of the Leased Property; (c) any
accident or damage resulting from the use or operation of the Leased Property or
any business conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or crime, (f)
the actions, omissions or misconduct of any other Person, (g) damage to any
property, or (h) any damage from the flow or leaking of water, rain or snow. All
Tangible Personal Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of the Lessee and the Lessor shall not
in any manner be held responsible therefor. Notwithstanding the foregoing, the
Lessor shall not be released from liability for any injury, loss, damage or
liability suffered directly by the Lessee to the extent caused directly by the
gross negligence or willful misconduct of the Lessor, its servants, employees or
agents acting within the scope of their authority on or about the Leased
Property or in regards to the Lease; provided, however, that in no event shall
the Lessor, its servants, employees or agents have any liability based on any
loss with respect to or interruption in the operation of any business at the
Leased Property or for any indirect or consequential damages.
12.2.4 Risk of Loss. During the Term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of any damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by the Lessor in
accordance with the provisions of Article 20) is assumed by the Lessee and, in
the absence of the gross negligence or willful misconduct as set forth in
Section 12.2.3, the Lessor shall in no event be answerable or accountable
therefor (except for the obligation to account for insurance proceeds and Awards
to the extent provided for in Articles 13 and 14) nor shall any of the events
mentioned in this Section entitle the Lessee to any abatement of Rent (except
for an abatement, if any, as specifically provided for in Section 3.8).
56
<PAGE>
ARTICLE 13
FIRE AND CASUALTY
13.1 Restoration Following Fire or Other Casualty.
13.1.1 Following Fire or Casualty. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or casualty
(a "Casualty"), the Lessee shall give immediate written notice thereof to the
Lessor and, subject to the terms of this Article 13, the Lessee shall proceed
with reasonable diligence, in full compliance with all applicable Legal
Requirements, to perform such repairs, replacement and reconstruction work
(referred to herein as the "Work") to restore the Leased Property to the
condition it was in immediately prior to such damage or destruction and to a
condition adequate to operate the Facility for the Primary Intended Use and in
compliance with Legal Requirements. All Work shall be performed and completed in
accordance with all Legal Requirements and the other requirements of this Lease
within one hundred and twenty (120) days following the occurrence of the damage
or destruction plus a reasonable time to compensate for Unavoidable Delays
(including for the purposes of this Section, delays in obtaining Permits and in
adjusting insurance losses), but in no event beyond two-hundred and seventy
(270) days following the occurrence of the Casualty.
13.1.2 Procedures. In the event that any Casualty results in non-structural
damage to the Leased Property in excess of TWENTY-FIVE THOUSAND DOLLARS
($25,000) or in any structural damage to the Leased Property, regardless of the
extent of such structural damage, prior to commencing the Work, the Lessee shall
comply with the following requirements:
(a) The Lessee shall furnish to the Lessor complete plans and
specifications for the Work (collectively, the "Plans and Specifications"), for
the Lessor's approval, in each instance, which approval shall not be
unreasonably withheld. The Plans and Specifications shall bear the signed
approval thereof by an architect, licensed to do business in the State,
reasonably satisfactory to the Lessor and shall be accompanied by a written
estimate from the architect, bearing the architect's seal, of the entire cost of
completing the Work, and to the extent feasible, the Plans and Specifications
shall provide for Work of such nature, quality and extent, that, upon the
completion thereof, the Leased Property shall be at least equal in value and
general utility to its value and general utility prior to the Casualty and shall
be adequate to operate the Leased Property for the Primary Intended Use;
(b) The Lessee shall furnish to the Lessor certified or photostatic copies
of all Permits and Contracts required by all applicable Legal Requirements in
connection with the commencement and conduct of the Work;
57
<PAGE>
(c) The Lessee shall furnish to the Lessor a cash deposit or a payment and
performance bond sufficient to pay for completion of and payment for the Work in
an amount not less than the architect's estimate of the entire cost of
completing the Work, less the amount of property insurance proceeds, if any,
then held by the Lessor and which the Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section 13.2;
(d) The Lessee shall furnish to the Lessor such insurance with respect to
the Work (in addition to the insurance required under Section 12.1 hereof) in
such amounts and in such forms as is reasonably required by the Lessee; and
(e) The Lessee shall not commence any of the Work until the Lessee shall
have complied with the requirements set forth in clauses (a) through (d)
immediately above, as applicable, and, thereafter, the Lessee shall perform the
Work diligently, in a good and workmanlike fashion and in good faith in
accordance with (i) the Plans and Specifications referred to in clause (a)
immediately above, (ii) the Permits and Contracts referred to in clause (b)
immediately above and (iii) all applicable Legal Requirements and other
requirements of this Lease; provided, however, that in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Work as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor of
such emergency and the nature and scope of the Work performed and obtains the
Lessor's approval of the remaining Work to be completed.
13.1.3 Disbursement of Insurance Proceeds. If, as provided in Section 13.2,
the Lessor is required to apply any property insurance proceeds toward repair or
restoration of the Leased Property, then as long as the Work is being diligently
performed by the Lessee in accordance with the terms and conditions of this
Lease, the Lessor shall disburse such insurance proceeds from time to time
during the course of the Work in accordance with and subject to satisfaction of
the following provisions and conditions. The Lessor shall not be required to
make disbursements more often than at thirty (30) day intervals. The Lessee
shall submit a written request for each disbursement at least ten (10) Business
Days in advance and shall comply with the following requirements in connection
with each disbursement:
(a) Prior to the commencement of any Work, the Lessee shall have received
the Lessor's written approval of the Plans and Specifications (which approval
shall not be unreasonably withheld) and the Work shall be supervised by an
experienced construction manager with the consultation of an architect or
engineer qualified and licensed to do business in the State.
(b) Each request for payment shall be accompanied by (x) a certificate of
the architect or engineer, bearing the architect's or engineer's seal, and (y) a
certificate of the general contractor, qualified and licensed to do business in
the State, that is performing the Work (collectively, the "Work Certificates"),
each dated not more than ten (10) days prior to the application for withdrawal
of funds, and each stating:
58
<PAGE>
(i) that all of the Work performed as of the date of the certificates has
been completed in compliance with the approved Plans and Specifications,
applicable Contracts and all applicable Legal Requirements;
(ii) that the sum then requested to be withdrawn has been paid by the
Lessee or is justly due to contractors, subcontractors, materialmen, engineers,
architects or other Persons, whose names and addresses shall be stated therein,
who have rendered or furnished certain services or materials for the Work, and
the certificate shall also include a brief description of such services and
materials and the principal subdivisions or categories thereof and the
respective amounts so paid or due to each of said Persons in respect thereof and
stating the progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all sums previously
withdrawn, does not exceed the cost of the Work insofar as actually accomplished
up to the date of such certificate;
(iv) that the remainder of the funds held by the Lessor will be sufficient
to pay for the full completion of the Work in accordance with the Plans and
Specifications;
(v) that no part of the cost of the services and materials described in the
applicable Work Certificate has been or is being made the basis of the
withdrawal of any funds in any previous or then pending application; and
(vi) that, except for the amounts, if any, specified in the applicable Work
Certificate to be due for services and materials, there is no outstanding
indebtedness known, after due inquiry, which is then due and payable for work,
labor, services or materials in connection with the Work which, if unpaid, might
become the basis of a vendor's, mechanic's, laborer's or materialman's statutory
or other similar Lien upon the Leased Property.
(c) The Lessee shall deliver to the Lessor satisfactory evidence that the
Leased Property and all materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if any, securing
indebtedness due to Persons (whose names and addresses and the several amounts
due them shall be stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the funds then being
requested, (ii) any Fee Mortgage and (iii) the Permitted Encumbrances. The
Lessor shall accept as satisfactory evidence of the foregoing lien waivers in
customary form from the general contractor and all subcontractors performing the
Work, together with an endorsement of its title insurance policy (relating to
the Leased Property) in form acceptable to the Lessor, dated as of the date of
the making of the then current disbursement, confirming the foregoing.
(d) If the Work involves alteration or restoration of the exterior of any
Leased Improvement that changes the footprint of any Leased Improvement, the
Lessee shall deliver to the Lessor, upon the request of the Lessor, an
"as-built" survey of the Leased Property dated
59
<PAGE>
as of a date within ten (10) days prior to the making of the first and final
advances (or revised to a date within ten (10) days prior to each such advance)
showing no encroachments other than such encroachments, if any, by the Leased
Improvements upon or over the Permitted Encumbrances as are in existence as of
the date hereof.
(e) The Lessee shall deliver to the Lessor (i) an opinion of counsel
(satisfactory to the Lessor both as to counsel and as to the form of opinion)
prior to the first advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased Property have been obtained and
that the Leased Property, if repaired, replaced or rebuilt in accordance, in all
material respects, with the approved Plans and Specifications and such Permits,
shall comply with all applicable Legal Requirements and (ii) an architect's
certificate (satisfactory to the Lessor both as to the architect and as to the
form of the certificate) prior to the final advance, certifying that the Leased
Property was repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and complies with all
applicable Legal Requirements, including, without limitation, all Permits
referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any state of facts or circumstance
existing which, with the giving of notice and/or the passage of time, would
constitute any Lease Default.
The Lessor, at its option, may waive any of the foregoing requirements in whole
or in part in any instance. Upon compliance by the Lessee with the foregoing
requirements (except for such requirements, if any, as the Lessor may have
expressly elected to waive), and to the extent of (x) the insurance proceeds, if
any, which the Lessor may be required to apply to restoration of the Leased
Property pursuant to the provisions of this Lease and (y) all other cash
deposits made by the Lessee, the Lessor shall make available for payment to the
Persons named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%) as to all
hard costs of the Work (the "Retainage"). It is understood that the Retainage is
intended to provide a contingency fund to assure the Lessor that the Work shall
be fully completed in accordance with the Plans and Specifications and the
requirements of the Lessor. Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the Retainage shall be made
available for payment to those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any further
advance, in addition to the requirements set forth above, the Lessee shall
promptly deliver to the Lessor:
(i) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor, certifying that the
Work has been fully completed in a good and workmanlike manner in material
compliance with the Plans and Specifications and all Legal Requirements;
60
<PAGE>
(ii) an endorsement of its title insurance policy (relating to the Leased
Property) in form reasonably acceptable to the Lessor insuring the Leased
Property against all mechanic's and materialman's liens accompanied by the final
lien waivers from the general contractor and all subcontractors;
(iii) a certificate by the Lessee in form and substance reasonably
satisfactory to the Lessor, listing all costs and expenses in connection with
the completion of the Work and the amount paid by the Lessee with respect to the
Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all other
applicable Permits and Contracts (that have not previously been delivered to the
Lessor) issued by or entered into with any Governmental Authority with respect
to the Leased Property and the Primary Intended Use and by the appropriate Board
of Fire Underwriters or other similar bodies acting in and for the locality in
which the Leased Property is situated; provided, that within thirty (30) days
after completion of the Work, the Lessee shall obtain and deliver to the Lessor
a permanent certificate of occupancy for the Leased Property.
Upon completion of the Work and delivery of the documents required pursuant
to the provisions of this Section 13.1, the Lessor shall pay the Retainage to
the Lessee or to those Persons entitled thereto and if there shall be insurance
proceeds or cash deposits, other than the Retainage, held by the Lessor in
excess of the amounts disbursed pursuant to the foregoing provisions, then
provided that no Lease Default has occurred and is continuing, nor any state of
facts or circumstances which, with the giving of notice and/or the passage of
time would constitute a Lease Default, the Lessor shall pay over such proceeds
or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after construction
shall constitute a warranty or representation by the Lessor, or any of its
agents or Consultants, as to the technical sufficiency, adequacy or safety of
any structure or any of its component parts, including, without limitation, any
fixtures, equipment or furnishings, or as to the subsoil conditions or any other
physical condition or feature pertaining to the Leased Property. All acts,
including any failure to act, relating to the Lessor are performed solely for
the benefit of the Lessor to assure the payment and performance of the Lease
Obligations and are not for the benefit of the Lessee or the benefit of any
other Person.
13.2 Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pay For Work. In the event of any
Casualty, except as provided for in Section 13.2.2, the Lessor shall release
proceeds of property insurance held by it to pay for the Work in accordance with
the provisions and procedures set forth in this Article 13, only if:
(a) all of the terms, conditions and provisions of Sections 13.1 and 13.2.1
are satisfied;
61
<PAGE>
(b) there does not then exist any Lease Default or any state of facts or
circumstance which, with the giving of notice and/or the passage of time, would
constitute such a Lease Default;
(c) The Lessee demonstrates to the Lessor's satisfaction that the Lessee
has the financial ability to satisfy the Lease Obligations during such repair or
restoration; and
(d) no Sublease (excluding Resident Agreements) material to the operation
of the Facility immediately prior to such damage or taking shall have been
canceled or terminated, nor contain any still exercisable right to cancel or
terminate, due to such Casualty if and to the extent that the income from such
Sublease is necessary in order to avoid the violation of any of the financial
covenants set forth in this Lease or otherwise to avoid the creation of an Event
of Default.
13.2.2 Proceeds Not To Be Released. If, as the result of any Casualty, the
Leased Property is damaged to the extent it is rendered Unsuitable For Its
Primary Intended Use and if either: (a) the Lessee, after exercise of diligent
efforts, cannot within a reasonable time (not in excess of ninety (90) days)
obtain all necessary Permits in order to be able to perform all required Work
and to again operate the Facility for its Primary Intended Use within two
hundred and seventy (270) days from the occurrence of the damage or destruction
in substantially the manner as immediately prior to such damage or destruction
or (b) such Casualty occurs during the last twenty-four (24) months of the Term
and would reasonably require more than nine (9) months to obtain all Permits and
complete the Work, then the Lessee may either (i) acquire the Leased Property
from the Lessor for a purchase price equal to the greater of (x) the Lessor's
Investment or (y) the Fair Market Value of the Leased Property minus the Fair
Market Added Value, with the Fair Market Value and the Fair Market Added Value
to be determined as of the day immediately prior to such Casualty and prior to
any other Casualty which has not been fully repaired, restored or replaced, in
which event, the Lessee shall be entitled upon payment of the full purchase
price to receive all property insurance proceeds (less any costs and expenses
incurred by the Lessor in collecting the same), or (ii) terminate this Lease, in
which event (subject to the provisions of the last sentence of this Section
13.2.2) the Lessor shall be entitled to receive and retain the insurance
proceeds; provided, however, that the Lessee shall only have such right of
termination effective upon payment to the Lessor of all Rent and other sums due
under this Lease and the other Lease Documents through the date of termination
plus an amount, which when added to the sum of (1) the Fair Market Value of the
Leased Property as affected by all unrepaired or unrestored damage due to any
Casualty (and giving due regard for delays, costs and expenses incident to
completing all repair or restoration required to fully repair or restore the
same) plus (2) the amount of insurance proceeds actually received by the Lessor
(net of costs and expenses incurred by the Lessor in collecting the same) equals
(3) the greater of the Lessor's Investment or the Fair Market Value of the
Leased Property minus the Fair Market Added Value, with the Fair Market Value
and the Fair Market Added Value to be determined as of the day immediately prior
to such Casualty and prior to any other Casualty which has not been fully
62
<PAGE>
repaired. Any acquisition of the Leased Property pursuant to the terms of this
Section 13.2.2 shall be consummated in accordance with the provisions of Article
18, mutatis, mutandis. If such termination becomes effective, the Lessor shall
assign to the Lessee any outstanding insurance claims.
13.2.3 Lessee Responsible for Short-Fall. If the cost of the Work exceeds
the amount of proceeds received by the Lessor from the property insurance
required under Article 12 (net of costs and expenses incurred by the Lessor in
collecting the same), the Lessee shall be obligated to contribute any excess
amount needed to repair or restore the Leased Property and pay for the Work.
Such amount shall be paid by the Lessee to the Lessor together with any other
property insurance proceeds for application to the cost of the Work.
13.3 Tangible Personal Property. All insurance proceeds payable by reason
of any loss of or damage to any of the Tangible Personal Property shall be paid
to the Lessor as secured party, subject to the rights of the holders of any
Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutandis.
13.4 Restoration of Certain Improvements and the Tangible Personal
Property. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (a) restore (i) all alterations and improvements to the
Leased Property made by the Lessee and (ii) the Tangible Personal Property or
(b) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 No Abatement of Rent. In no event shall any Rent abate as a result of
any Casualty.
13.6 Termination of Certain Rights. Any termination of this Lease pursuant
to this Article 13 shall cause any right of the Lessee to extend the Term of
this Lease, granted to the Lessee herein and any right of the Lessee to purchase
the Leased Property contained in this Lease to be terminated and to be without
further force or effect.
13.7 Waiver. The Lessee hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction to the Leased Property
due to any Casualty which the Lessee is obligated to restore or may restore
under any of the provisions of this Lease.
63
<PAGE>
13.8 Application of Rent Loss and/or Business Interruption Insurance. All
proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(a) if the Work has been promptly and diligently commenced by the Lessee
and is in the process of being completed in accordance with this Lease and no
fact or condition exists which constitutes, or which with the giving of notice
and/or the passage of time would constitute, a Lease Default, the Lessor shall
each month pay to the Lessee out of the Rent Insurance Proceeds a sum equal to
that amount, if any, of the Rent Insurance Proceeds paid by the insurer which is
allocable to the rental loss and/or business interruption for the preceding
month minus an amount equal to the sum of the Rent due hereunder for such month
plus any Impositions relating to the Leased Property then due and payable;
(b) if the Work has not been promptly and diligently commenced by the
Lessee or is not in the process of being completed in accordance with this
Lease, the Rent Insurance Proceeds shall be applied to any Rent then due, and,
to the extent sufficient therefor, an amount equal to Base Rent, Impositions and
insurance premiums payable for the next twelve (12) months, as reasonably
projected by the Lessor, shall be held by the Lessor as security for the Lease
Obligations and applied to the payment of Rent as it becomes due; and
(c) if such Rent Insurance Proceeds received by the Lessor (net of costs
and expenses incurred by the Lessor in collecting the same) exceed the amounts
required under clauses (a) and (b) above, the excess shall be paid to the
Lessee, provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release
the Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists,
the Lessor may apply all such insurance proceeds towards the Lease Obligations
or hold such proceeds as security therefor.
13.9 Obligation To Account. Upon the Lessee's written request, which may
not be made not more than once in any three (3) month period, the Lessor shall
provide the Lessee with a written accounting of the application of all insurance
proceeds received by the Lessor.
ARTICLE 14
CONDEMNATION
14.1 Parties' Rights and Obligations. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
64
<PAGE>
14.2 Total Taking. If there is a permanent Taking of all or substantially
all of the Leased Property, this Lease shall terminate on the Date of Taking.
14.3 Partial or Temporary Taking. If there is a Permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use for a period
not likely to, or which does not, exceed two hundred and seventy (270) days. If,
however, the Leased Property is thereby so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (a) the Lessee shall have the right to
restore the Leased Property, at its own expense, (subject to the right under
certain circumstances as provided for in Section 14.5 to receive the net
proceeds of an Award for reimbursement) to the extent possible, to substantially
the same condition as existed immediately before the partial or temporary Taking
or (b) the Lessee shall have the right to acquire the Leased Property from the
Lessor (i) upon payment of all Rent due through the date that the purchase price
is paid, for a purchase price equal to the greater of (x) the Lessor's
Investment or (y) the Fair Market Value of the Leased Property minus the Fair
Market Added Value, with the Fair Market Value of the Leased Property and the
Fair Market Added Value to be determined as of the day immediately prior to such
partial or temporary Taking and (ii) in accordance with the terms and conditions
set forth in Article 18; in which event, this Lease shall terminate upon payment
of such purchase price and the consummation of such acquisition. Notwithstanding
the foregoing, the Lessor may overrule the Lessee's election under clause (a) or
(b) and instead either (1) terminate this Lease as of the date when the Lessee
is required to surrender possession of the portion of the Leased Property so
taken or (2) compel the Lessee to keep the Lease in full force and effect and to
restore the Leased Property as provided in clause (a) above, but only if the
Leased Property may be operated for at least eighty percent (80%) of the unit
capacity of the Facility if operated in accordance with its Primary Intended
Use. The Lessee shall exercise its election under this Section 14.3 by giving
the Lessor notice thereof ("Lessee's Election Notice") within sixty (60) days
after the Lessee receives notice of the Taking. The Lessor shall exercise its
option to overrule the Lessee's election under this Section 14.3 by giving the
Lessee notice of the Lessor's exercise of its rights under Section 14.3 within
thirty (30) days after the Lessor receives the Lessee's Election Notice. If, as
the result of any such partial or temporary Taking, this Lease is not terminated
as provided above, the Lessee shall be entitled to an abatement of Rent, but
only to the extent, if any, provided for in Section 3.7, effective as of the
date upon which the Leased Property is rendered Unsuitable For Its Primary
Intended Use.
14.4 Restoration. If there is a partial or temporary Taking of the Leased
Property and this Lease remains in full force and effect pursuant to Section
14.3, the Lessee shall accomplish all necessary restoration and the Lessor shall
release the net proceeds of such Award to reimburse the Lessee for the actual
reasonable costs and expenses thereof, subject to all of the conditions and
provisions set forth in Article 13 as though the Taking was a Casualty and the
Award was insurance proceeds. If the cost of the restoration exceeds the amount
of the Award (net of costs and expenses incurred in obtaining the Award), the
Lessee shall be
65
<PAGE>
obligated to contribute any excess amount needed to restore the Facility or pay
for such costs and expenses. To the extent that the cost of restoration is less
than the amount of the Award (net of cost and expenses incurred in obtaining the
Award), the remainder of the Award shall be retained by the Lessor and Rent
shall be abated as set forth in Section 3.7.
14.5 Award Distribution. In the event the Lessee completes the purchase of
the Leased Property, as described in Section 14.3, the entire Award shall, upon
payment of the purchase price and all Rent and other sums due under this Lease
and the other Lease Documents, belong to the Lessee and the Lessor agrees to
assign to the Lessee all of the Lessor's rights thereto. In any other event, the
entire Award shall belong to and be paid to the Lessor.
14.6 Control of Proceedings. Subject to the rights of any Fee Mortgagee,
unless and until the Lessee completes the purchase of the Leased Property as
provided in Section 14.3, all proceedings involving any Taking and the
prosecution of claims arising out of any Taking against the Condemnor shall be
conducted, prosecuted and settled by the Lessor; provided, however, that the
Lessor shall keep the Lessee apprised of the progress of all such proceedings
and shall solicit the Lessee's advice with respect thereto and shall give due
consideration to any such advice. In addition, the Lessee shall reimburse the
Lessor (as an Additional Charge) for all costs and expenses, including
reasonable attorneys' fees, appraisal fees, fees of expert witnesses and costs
of litigation or dispute resolution, in relation to any Taking, whether or not
this Lease is terminated; provided, however, if this Lease is terminated as a
result of a Taking, the Lessee's obligation to so reimburse the Lessor shall be
diminished by the amount of the Award, if any, received by the Lessor which is
in excess of the Lessor's Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1 Lessee's Right to Contest. To the extent of the express references
made to this Article 15 in other Sections of this Lease, the Lessee, any
Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use or
any Lien or claim relating to the Leased Property not otherwise permitted by
this Agreement; provided, that (a) prior written notice of such contest is given
to the Lessor, (b) in the case of an unpaid Imposition, Lien or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from the Lessor and/or compliance by any applicable member of the
Leasing Group with the contested Legal Requirement or other matter may be
legally delayed pending the prosecution of any such proceeding without the
occurrence or creation of any Lien, charge or liability of any kind against the
Leased Property, (c) neither the Leased Property nor any
66
<PAGE>
rent therefrom would be in any immediate danger of being sold, forfeited,
attached or lost as a result of such proceeding, (d) in the case of a Legal
Requirement, neither the Lessor nor any member of the Leasing Group would be in
any immediate danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings, (e) in the event that any
such contest shall involve a sum of money or potential loss in excess of TEN
THOUSAND DOLLARS ($10,000), the Lessee shall deliver to the Lessor an Officer's
Certificate and opinion of counsel, if the Lessor deems the delivery of an
opinion to be appropriate, certifying or opining, as the case may be, as to the
validity of the statements set forth to the effect set forth in clauses (b), (c)
and (d), to the extent applicable, (f) the Lessee shall give such cash security
as may be demanded in good faith by the Lessor to insure ultimate payment of any
fine, penalty, interest or cost and to prevent any sale or forfeiture of the
affected portion of the Leased Property by reason of such non-payment or
non-compliance, (g) if such contest is finally resolved against the Lessor or
any member of the Leasing Group, the Lessee shall promptly pay, as Additional
Charges due hereunder, the amount required to be paid, together with all
interest and penalties accrued thereon and/or comply (and cause any Sublessee
and any Manager to comply) with the applicable Legal Requirement, and (h) no
state of facts or circumstance exists which constitutes, or with the passage of
time and/or the giving of notice, could constitute a Lease Default; provided,
however, the provisions of this Article 15 shall not be construed to permit the
Lessee to contest the payment of Rent or any other sums payable by the Lessee to
the Lessor under any of the Lease Documents.
15.2 Lessor's Cooperation. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor to any civil or criminal liability, and, if
reasonably requested by the Lessee or if the Lessor so desires, the Lessor shall
join as a party therein.
15.3 Lessee's Indemnity. The Lessee, as more particularly provided for in
Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 Events of Default. Each of the following shall constitute an "Event of
Default" hereunder and shall entitle the Lessor to exercise its remedies
hereunder and under any of the other Lease Documents:
(a) any failure of the Lessee to pay any amount due hereunder or under any
of the other Lease Documents within ten (10) days following the date when such
payment was due;
67
<PAGE>
(b) any failure in the observance or performance of any other covenant,
term, condition or warranty provided in this Lease or any of the other Lease
Documents, other than the payment of any monetary obligation and other than as
specified in subsections (c) through (v) below (a "Failure to Perform"),
continuing for thirty (30) days after the giving of notice by the Lessor to the
Lessee specifying the nature of the Failure to Perform; except as to matters not
susceptible to cure within thirty (30) days, provided that with respect to such
matters, (i) the Lessee commences the cure thereof within thirty (30) days after
the giving of such notice by the Lessor to the Lessee, (ii) the Lessee
continuously prosecutes such cure to completion, (iii) such cure is completed
within ninety (90) days after the giving of such notice by the Lessor to the
Lessee and (iv) such Failure to Perform does not impair the value of, or the
Lessor's rights with respect to, the Leased Property;
(c) the occurrence of any default or breach of condition continuing beyond
the expiration of the applicable notice and grace periods, if any, under any of
the other Lease Documents;
(d) if any representation, warranty or statement contained herein or in any
of the other Lease Documents proves to be untrue in any material respect as of
the date when made or at any time during the Term if such representation or
warranty is a continuing representation or warranty pursuant to Section 10.2;
(e) if any member of the Leasing Group shall (i) voluntarily be adjudicated
a bankrupt or insolvent, (ii) seek or consent to the appointment of a receiver
or trustee for itself or for the Leased Property, (iii) file a petition seeking
relief under the bankruptcy or other similar laws of the United States, any
state or any jurisdiction, (iv) make a general assignment for the benefit of
creditors, (v) make or offer a composition of its debts with its creditors or
(vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree appointing,
without the consent of any member of the Leasing Group, a receiver or trustee
for such member or for any of its property and such order, judgment or decree
shall remain in force, undischarged or unstayed, sixty (60) days after it is
entered;
(g) if a petition is filed against any member of the Leasing Group which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any other jurisdiction, and such petition is not dismissed within
sixty (60) days after it is filed;
(h) in the event that, without the prior written consent of the Lessor, in
each instance, which consent may be withheld by the Lessor in its sole and
absolute discretion:
i. there shall be a change in the Person or Persons presently in control of any
member of the Leasing Group (whether by operation of law or otherwise);
68
<PAGE>
ii. all or any portion of the interest of any partner or member of any member of
the Leasing Group shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise transferred (whether by
operation of law or otherwise), if such member of the Leasing Group shall be a
partnership, joint venture, syndicate or other group;
iii. more than [ percent ( %)], in the aggregate, of the shares of the issued
and outstanding capital stock of any member of the Leasing Group shall be, on
any one or more occasions, directly or indirectly, sold, assigned, hypothecated
or otherwise transferred (whether by operation of law or otherwise), if such
member of the Leasing Group shall be a corporation; or
iv. all or any portion of the beneficial interest in any member of the Leasing
Group shall be, directly or indirectly, sold or otherwise transferred (whether
by operation of law or otherwise), if such member of the Leasing Group shall be
a trust;
(i) the death, incapacity, liquidation, dissolution or termination of
existence of the any member of the Leasing Group or the merger or consolidation
of any member of the Leasing Group with any other Person;
(j) if, without the prior written consent of the Lessor, in each instance,
which consent may be withheld by the Lessor in its sole and absolute discretion,
the Lessee's or any Sublessee's interest in the Leased Property shall be,
directly or indirectly, mortgaged, encumbered (by any voluntary or involuntary
Lien other than the Permitted Encumbrances), subleased, sold, assigned,
hypothecated or otherwise transferred (whether by operation of law or
otherwise);
(k) the occurrence of a default or breach of condition continuing beyond
the expiration of the applicable notice and grace periods, if any, in connection
with the payment or performance of any other material obligation of the Lessee
or any Sublessee, whether or not the applicable creditor or obligee elects to
declare the obligations of the Lessee or the applicable Sublessee under the
applicable agreement due and payable or to exercise any other right or remedy
available to such creditor or obligee, if such creditor's or obligee's rights
and remedies may involve or result in (i) the taking of possession of the Leased
Property or (ii) the assertion of any other right or remedy that, in the
Lessor's reasonable opinion, may impair the Lessee's ability punctually to
perform all of its obligations under this Lease and the other Lease Documents,
may impair such Sublessee's ability punctually to perform all of its obligations
under its Sublease or may materially impair the Lessor's security for the Lease
Obligations; provided, however, that in any event, the election by the
applicable creditor or obligee to declare the obligations of the Lessee under
the applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee shall be an Event of Default
hereunder only if such obligations, individually or in the aggregate, are in
excess of ONE HUNDRED THOUSAND DOLLARS ($100,000);
(1) intentionally omitted;
69
<PAGE>
(m) the occurrence of any default or breach of condition continuing beyond
the expiration of the applicable notice and grace periods, if any, under any
credit agreement, loan agreement or other agreement establishing a major line of
credit (or any documents executed in connection with such lines of credit) on
behalf of any member of the Leasing Group whether or not the applicable creditor
has elected to declare the indebtedness due and payable under such line of
credit or to exercise any other right or remedy available to it. For the
purposes of this provision, a major line of credit shall mean and include any
line of credit established in an amount equal to or greater than FIVE HUNDRED
THOUSAND DOLLARS ($500,000);
(n) except as a result of Casualty or a partial or complete Condemnation,
if the Lessee or any Sublessee ceases operation of the Facility for a period in
excess of thirty (30) days (a "Failure to Operate");
(o) if one or more judgments against the Lessee or any Sublessee or
attachments against the Lessee's interest or any Sublessee's interest in the
Leased Property, which in the aggregate exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) or which may materially and adversely interfere with the operation of
the Facility, remain unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of thirty (30) days;
(p) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED THOUSAND
DOLLARS ($500,000) shall be rendered against any member of the Leasing Group
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such award or judgment or (ii) such award or judgment shall continue
unsatisfied and in effect for a period of ten (10) consecutive days without an
insurance company satisfactory to the Lessor (in its sole and absolute
discretion) having agreed to fund such award or judgment in a manner
satisfactory to the Lessor (in its sole and absolute discretion) and in either
case such award or judgment shall, in the reasonable opinion of the Lessor, have
a material adverse affect on the ability of any member of the Leasing Group to
operate the Facility;
(q) if any Provider Agreement material to the operation or financial
condition of any member of the Leasing Group shall be terminated prior to the
expiration of the term thereof or, without the prior written consent of the
Lessor, in each instance, which consent may be withheld in the Lessor's
reasonable discretion, shall not be renewed or extended upon the expiration of
the stated term thereof;
(r) if, after the Lessee or any Sublessee has obtained approval for
participation in the Medicare and/or Medicaid programs with regard to the
operation of the Facility, a final unappealable determination is made by the
applicable Governmental Authority that the Lessee or any Sublessee shall have
failed to comply with applicable Medicare and/or Medicaid regulations in the
operation of the Facility, as a result of which failure the Lessee or such
Sublessee is declared ineligible to continue its participation in the Medicare
and/or Medicaid programs;
70
<PAGE>
(s) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful construction or operation of
the Facility in accordance with the Primary Intended Use or the loss of any
Permit under any other circumstances under which any member of the Leasing Group
is required to cease the operation of the Facility in accordance with the
Primary Intended Use; and
(t) any failure to maintain the insurance required pursuant to Section 12
of this Lease in force and effect at all times until the Lease Obligations are
fully paid and performed;
(u) the appointment of a temporary manager (or operator) for the Leased
Property by any Governmental Authority; or
(v) the entry of an order by a court with jurisdiction over the Leased
Property to close the Facility, to transfer one or more residents from the
Facility as a result of an allegation of abuse or neglect or to take any action
to eliminate an emergency situation then existing at the Facility.
16.2 Remedies.
(a) If any Lease Default shall have occurred, the Lessor may at its option
terminate this Lease by giving the Lessee not less than ten (10) days' notice of
such termination, or exercise any one or more of its rights and remedies under
this Lease or any of the other Lease Documents, or as available at law or in
equity and upon the expiration of the time fixed in such notice, the Term shall
terminate (but only if the Lessor shall have specifically elected by a written
notice to so terminate the Lease) and all rights of the Lessee under this
Lease shall cease. Notwithstanding the foregoing, in the event of the Lessee's
failure to pay Rent, if such Rent remains unpaid beyond ten (10) days from the
due date thereof, the Lessor shall not be obligated to give ten (10) days notice
of such termination or exercise of any of its other rights and remedies under
this Lease, or the other Lease Documents, or otherwise available at law or in
equity, and the Lessor shall be at liberty to pursue any one or more of such
rights or remedies without further notice. No taking of possession of the Leased
Property by or on behalf of the Lessor, and no other act done by or on behalf of
the Lessor, shall constitute an acceptance of surrender of the Leased Property
by the Lessee or reduce the Lessee's obligations under this Lease or the other
Lease Documents, unless otherwise expressly agreed to in a written document
signed by an authorized officer or agent of the Lessor.
(b) To the extent permitted under applicable law, the Lessee shall pay as
Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not this Lease has
been terminated pursuant to Paragraph (a) of this Section, the Lessee shall, to
the extent permitted
71
<PAGE>
under applicable law, if required by the Lessor so to do, upon not less than ten
(10) days' prior notice from the Lessor, immediately surrender to the Lessor the
Leased Property pursuant to the provisions of Paragraph (a) of this Section and
quit the same, and the Lessor may enter upon and repossess the Leased Property
by reasonable force, summary proceedings, ejectment or otherwise, and may remove
the Lessee and all other Persons and any and all of the Tangible Personal
Property from the Leased Property, subject to the rights of any residents or
residents of the Facility and any Sublessees who are not Affiliates of any
member of the Leasing Group and to any requirements of applicable law, or the
Lessor may claim ownership of the Tangible Personal Property as set forth in
Section 5.2.3 hereof or the Lessor may exercise its rights as secured party
under the Security Agreement. The Lessor shall use reasonable, good faith
efforts to relet the Leased Property or otherwise mitigate damages suffered by
the Lessor as a result of the Lessee's breach of this Lease.
(d) In addition to all of the rights and remedies of the Lessor set forth
in this Lease and the other Lease Documents, if the Lessee shall fail to pay any
rental or other charge due hereunder (whether denominated as Base Rent,
Additional Charges or otherwise) within ten (10) days after same shall have
become due and payable, then and in such event the Lessee shall also pay to the
Lessor (i) a late payment service charge (in order to partially defray the
Lessor's administrative and other overhead expenses) equal to two hundred-fifty
($250) dollars and (ii) to the extent permitted by applicable law, interest on
such unpaid sum at the Overdue Rate; it being understood, however, that nothing
herein shall be deemed to extend the due date for payment of any sums required
to be paid by the Lessee hereunder or to relieve the Lessee of its obligation to
pay such sums at the time or times required by this Lease.
16.3 Damages. None of (a) the termination of this Lease pursuant to Section
16.2, (b) the eviction of the Lessee or the repossession of the Leased Property,
(c) the failure or inability of the Lessor, notwithstanding reasonable good
faith efforts, to relet the Leased Property, (d) the reletting of the Leased
Property or (e) the failure of the Lessor to collect or receive any rentals due
upon any such reletting, shall relieve the Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, the Lessee shall forthwith pay to
the Lessor all Rent due and payable with respect to the Leased Property to and
including the date of such termination, repossession or eviction. Thereafter,
the Lessee shall forthwith pay to the Lessor, at the Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to occur of
termination, repossession or eviction, together with interest thereon at the
Overdue Rate to the date of payment, plus (y) the worth (calculated in the
manner stated below) of the amount by which the unpaid Rent for the balance of
the Term after the later to occur of the termination, repossession or eviction
exceeds the fair market rental value of the Leased Property for the balance of
the Term, plus (z) any other amount necessary to compensate the Lessor for all
damage proximately caused by the Lessee's failure to perform the Lease
Obligations or which in the ordinary course would be likely to result therefrom;
or
72
<PAGE>
(ii) each payment of Rent as the same would have become due and payable if
the Lessee's right of possession or other rights under this Lease had not been
terminated, or if the Lessee had not been evicted, or if the Leased Property had
not been repossessed which Rent, to the extent permitted by law, shall bear
interest at the Overdue Rate from the date when due until the date paid, and the
Lessor may enforce, by action or otherwise, any other term or covenant of this
Lease. There shall be credited against the Lessee's obligation under this Clause
(ii) amounts actually collected by the Lessor from another tenant to whom the
Leased Property may have actually been leased or, if the Lessor is operating the
Leased Property for its own account, the actual net cash flow of the Leased
Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 Lessee Waivers. If this Lease is terminated pursuant to Section 16.2,
the Lessee waives, to the extent not prohibited by applicable law, (a) any right
of redemption, re-entry or repossession, (b) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
16, and (c) the benefit of any laws now or hereafter in force exempting property
from liability for rent or for debt.
16.5 Application of Funds. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 Intentionally Omitted.
16.7 Lessor's Right to Cure. If the Lessee shall fail to make any payment,
or to perform any act required to be made or performed under this Lease and to
cure the same within the relevant time periods provided in Section 16.1, the
Lessor, after five (5) Business Days' prior notice to the Lessee (except in an
emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee, and may, to the extent permitted by law, enter upon the Leased Property
for such purpose and take all such action thereon as, in the Lessor's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of the Lessee. All sums so paid by the Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by the Lessee to the Lessor on demand as an Additional Charge. The
obligations of the Lessee and rights of the Lessor contained in this Article
shall survive the expiration or earlier termination of this Lease.
73
<PAGE>
16.8 No Waiver By Lessor. The Lessor shall not by any act, delay, omission
or otherwise (including, without limitation, the exercise of any right or remedy
hereunder) be deemed to have waived any of its right or remedies hereunder or
under any of the other Lease Documents unless such waiver is in writing and
signed by the Lessor, and then, only to the extent specifically set forth
therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant, representation or warranty of any of the Lease
Documents, nor shall such a waiver in any one instance or circumstances be
construed as a waiver of the same term, condition, covenant, representation or
warranty in any subsequent instance or circumstance. No such failure, delay or
waiver shall be construed as creating a requirement that the Lessor must
thereafter, as a result of such failure, delay or waiver, give notice to the
Lessee or any other Person that the Lessor does not intend to, or may not, give
a further waiver or to refrain from insisting upon the strict performance of the
terms, conditions, covenants, representations and warranties set forth in the
Lease Documents before the Lessor can exercise any of its rights or remedies
under any of the Lease Documents or before any Lease Default can occur, or as
establishing a course of dealing for interpreting the conduct of and agreements
between the Lessor and the Lessee or any other Person.
The acceptance by the Lessor of any payment that is less than payment in
full of all amounts then due under any of the Lease Documents at the time of the
making of such payment shall not: (a) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(b) constitute an accord and satisfaction or (c) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (i) as a novation of this Lease or any of the other Lease Documents,
(ii) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(iii) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable law; and to the maximum extent not
prohibited by applicable law, the Lessor hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 Right of Forbearance. Whether or not for consideration paid or payable
to the Lessor and, except as may be otherwise specifically agreed to by the
Lessor in writing, no forbearance on the part of the Lessor, no extension of the
time for the payment of the whole or any part of the Obligations, and no other
indulgence given by the Lessor to the Lessee or any other Person, shall operate
to release or in any manner affect the original liability of the Lessee or such
other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension,
74
<PAGE>
forbearance or indulgence being hereby waived by the Lessee and all those
claiming by, through or under the Lessee.
16.10 Cumulative Remedies. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of the
Lessor under each of the Lease Documents shall be separate and cumulative and
may be exercised concurrently or successively in the Lessor's sole and absolute
discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 Surrender. The Lessee shall, upon the expiration or prior termination
of the Term (unless the Lessee has concurrently purchased the Leased Property in
accordance with the terms hereof), vacate and surrender the Leased Property to
the Lessor in good repair and condition, in compliance with all Legal
Requirements, all Insurance Requirements, and in compliance with the provisions
of Article 8, except for: (a) ordinary wear and tear (subject to the obligation
of the Lessee to maintain the Leased Property in good order and repair during
the entire Term of the Lease), (b) damage caused by the gross negligence or
willful acts of the Lessor, and (c) any damage or destruction resulting from a
Casualty or Taking that the Lessee is not required by the terms of this Lease to
repair or restore.
17.2 Transfer of Permits and Contracts. In connection with the expiration
or any earlier termination of this Lease (unless the Lessee has concurrently
purchased the Leased Property in accordance with the terms hereof), upon any
request made from time to time by the Lessor, the Lessee shall (a) promptly and
diligently use its best efforts to (i) transfer and assign all Permits and
Contracts necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Lease to the Lessor or its designee and/or
(ii) arrange for the transfer or assignment of such Permits and Contracts to the
Lessor or its designee, all to the extent the same may be transferred or
assigned under applicable law and (b) cooperate in every respect (and to the
fullest extent possible) and assist the Lessor or its designee in obtaining such
Permits and Contracts (whether by transfer, assignment or otherwise). Such
efforts and cooperation on the part of the Lessee shall include, without
limitation, the execution, delivery and filing with appropriate Governmental
Authorities and Third Party Payors of any applications, petitions, statements,
notices, requests, assignments and other documents or instruments requested by
the Lessor. Furthermore, the Lessee shall not take any action or refrain from
taking any action which would defer, delay or jeopardize the process of the
Lessor or its designee obtaining said Permits and Contracts (whether by
transfer, assignment or otherwise). Without limiting the foregoing, the Lessee
shall not seek to transfer or relocate any of said Permits or Contracts to any
location other than the Leased Property.
75
<PAGE>
The provisions of this Section 17.2 shall survive the expiration or earlier
termination of this Lease.
The Lessee hereby appoints the Lessor as its attorney-in-fact, with full
power of substitution to take such actions, in the event that the Lessee fails
to comply with any request made by the Lessor hereunder, as the Lessor (in its
sole absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on the Lessor by
the provisions of this Section 17.2, being coupled with an interest, shall be
irrevocable until the Obligations are fully paid and performed and shall not be
affected by any disability or incapacity which the Lessee may suffer and shall
survive the same. Such power of attorney is provided solely to protect the
interests of the Lessor and shall not impose any duty on the Lessor to exercise
any such power and neither the Lessor nor such attorney-in-fact shall be liable
for any act, omission, error in judgment or mistake of law, except as the same
may result from its gross negligence or willful misconduct.
17.3 No Acceptance of Surrender. Except at the expiration of the Term in
the ordinary course, no surrender to the Lessor of this Lease or of the Leased
Property or any interest therein shall be valid or effective unless agreed to
and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 Holding Over. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent payable at the
time of such expiration or earlier termination of the Term; (ii) all Additional
Charges accruing during the month and (iii) all other sums, if any, payable by
the Lessee pursuant to the provisions of this Lease with respect to the Leased
Property. During such period of tenancy, the Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenants at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of the Lessor to the holding over of the Lessee after the expiration or
earlier termination of this Lease.
ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 Purchase of the Leased Property. If this Lease is in full force and
effect and there exists no Event of Default which has not been cured within the
applicable grace period, then the Lessee shall have the option exercisable on
not less than six (6) months nor more than twenty-four (24) months notice to
purchase the Leased Property beginning on the ______ (___)
76
<PAGE>
anniversary of the Commencement Date at a purchase price equal to the Fair
Market Value of the Leased Property. In the event the Lessee purchases the
Leased Property from the Lessor pursuant to any of the terms of this Lease, the
Lessor shall, upon receipt from the Lessee of the applicable purchase price,
together with full payment of any unpaid Rent due and payable with respect to
any period ending on or before the date of the purchase, deliver to the Lessee a
deed with covenants only against acts of the Lessor conveying the entire
interest of the Lessor in and to the Leased Property to the Lessee subject to
all Legal Requirements, all of the matters described in clauses (a), (b), (e)
and (g) of Section 11.5.2, Impositions, any Liens created by the Lessee, any
Liens created in accordance with the terms of this Lease or consented to by the
Lessee, the claims of all Persons claiming by through or under the Lessee, any
other matters assented to by the Lessee and all matters for which the Lessee has
responsibility under any of the Lease Documents, but otherwise not subject to
any other Lien created by the Lessor from and after the Commencement Date (other
than an Encumbrance permitted under Article 20 which the Lessee elects to
assume). The applicable purchase price shall be paid in cash to the Lessor, or
as the Lessor may direct, in federal or other immediately available funds except
as otherwise mutually agreed by the Lessor and the Lessee. All expenses of such
conveyance, including, without limitation, title examination costs, standard
(and extended) coverage title insurance premiums, attorneys' fees incurred by
the Lessor in connection with such conveyance, recording and transfer taxes and
recording fees and other similar charges shall be paid by the Lessee.
18.2 Appraisal.
18.2.1 Designation of Appraisers. In the event that it becomes necessary to
determine the Fair Market Value of the Leased Property for any purpose of this
Lease, the party required or permitted to give notice of such required
determination shall include in the notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after receipt of any such
notice, the Lessor (or the Lessee, as the case may be) shall by notice to the
Lessee (or the Lessor, as the case may be) appoint a second Person as appraiser
on its behalf.
18.2.2 Appraisal Process. The appraisers thus appointed, each of whom must
be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto), shall, within forty-five (45) days after the
date of the notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value of the Leased Property as of
the relevant date (giving effect to the impact, if any, of inflation from the
date of their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall have been
so appointed but only one such appraiser shall have made such determination
within fifty (50) days after the making of the Lessee's or the Lessor's request,
then the determination of such appraiser shall be final and binding upon the
parties. If two appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten per cent
(10%) of the lesser of such amounts, then the Fair Market Value of the Leased
Property shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the amounts
77
<PAGE>
so determined shall exceed ten percent (10%) of the lesser of such amounts, then
such two appraisers shall have twenty (20) days to appoint a third appraiser,
but if such appraisers fail to do so, then either party may request the American
Arbitration Association or any successor organization thereto to appoint an
appraiser within twenty (20) days of such request, and both parties shall be
bound by any appointment so made within such twenty (20) day period. If no such
appraiser shall have been appointed within such twenty (20) days or within
ninety (90) days of the original request for a determination of Fair Market
Value of the Leased Property, whichever is earlier, either the Lessor or the
Lessee may apply to any court having jurisdiction to have such appointment made
by such court. Any appraiser appointed by the original appraisers, by the
American Arbitration Association or by such court shall be instructed to
determine the Fair Market Value of the Leased Property within thirty (30) days
after appointment of such Appraiser. The determination of the appraiser which
differs most in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two determinations shall be final and binding upon the Lessor and the
Lessee as the Fair Market Value of the Leased Property.
18.2.3 Specific Enforcement and Costs. This provision for determination by
appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law. The
Lessor and the Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment. Except as set forth in Section 19.2, the
Lessee may not, without the prior written consent of the Lessor, which consent
may be withheld in the Lessor's sole and absolute discretion, assign or pledge
all or any portion of its interest in this Lease or any of the other Lease
Documents (whether by operation of law or otherwise) or sublet all or any part
of the Leased Property. For purposes of this Section 19.1, the term "assign"
shall be deemed to include, but not be limited to, any one or more sales,
pledges, hypothecations or other transfers (including, without limitation, any
transfer by operation of law) of any of the capital stock of or partnership
interest in the Lessee or sales, pledges, hypothecations or other transfers
(including, without limitation, any transfer by operation of law) of the capital
or the assets of the Lessee. Any such assignment, pledge, sale, hypothecation or
other transfer made without the Lessor's consent shall be void and of no force
and effect.
19.2 Permitted Sublease: Notwithstanding the foregoing, the Lessee shall
have the right to enter into Resident Agreements without the prior consent of
the Lessor.
78
<PAGE>
19.3 Attornment. The Lessee shall insert in each Sublease approved by the
Lessor, provisions to the effect that (a) such Sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of the Lessor hereunder, (b) in the event this Lease shall terminate before the
expiration of such Sublease, the Sublessee thereunder will, at the Lessor's
option, attorn to the Lessor and waive any right the Sublessee may have to
terminate the Sublease or to surrender possession thereunder, as a result of the
termination of this Lease and (c) in the event the Sublessee receives a written
notice from the Lessor stating that the Lessee is in default under this Lease,
the Sublessee shall thereafter be obligated to pay all rentals accruing under
said Sublease directly to the Lessor or as the Lessor may direct. All rentals
received from the Sublessee by the Lessor shall be credited against the amounts
owing by the Lessee under this Lease.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby with the fee estate in the Leased Property by
reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate in the Leased
Property.
20.2 Transfers By Lessor. If the original the Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of the Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original the Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 Lessor May Grant Liens. Without the consent of the Lessee, but subject
to the terms and conditions set forth below in this Section 20.3, the Lessor
may, from time to time, directly or indirectly, create or otherwise cause to
exist any lien, encumbrance or title retention agreement upon the Leased
Property or any interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing, provided that the Lessee
shall have no obligation to make payments under such Encumbrances. The Lessee
shall subordinate this Lease to the lien of any such Encumbrance, on the
condition that the beneficiary or holder of such Encumbrance executes a
non-disturbance agreement in conformity with the provisions of Section 20.4. To
the extent that any such Encumbrance consists of a mortgage or deed of trust on
the Lessor's interest in the Leased Property the same
79
<PAGE>
shall be referred to herein as a "Fee Mortgage" and the holder thereof shall be
referred to herein as a "Fee Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with the execution and
delivery of any Fee Mortgage entered into after the date hereof, provided that
the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (a) the
applicable Fee Mortgagee consents to this Lease and (b) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry
or other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (i) the Lessee shall not be disturbed in peaceful enjoyment
of the Leased Property nor shall this Lease be terminated or canceled at any
time, except in the event that the Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein, (ii) the
Lessee's option to purchase the Leased Property shall remain in force and effect
pursuant to the terms hereof and (iii) in the event that the Lessee elects its
option to purchase the Leased Property and performs all of its obligations
hereunder in connection with any such election, the holder of the Fee Mortgage
shall release its Fee Mortgage upon payment by the Lessee of the purchase price
required hereunder, provided, that (1) such purchase price is paid to the holder
of the Fee Mortgage, in the event that the Indebtedness secured by the
applicable Fee Mortgage is equal to or greater than the purchase price or (2) in
the event that the purchase price is greater than the Indebtedness secured by
the Fee Mortgage, a portion of the purchase price equal to the Indebtedness
secured by the Fee Mortgage is paid to the Fee Mortgagee and the remainder of
the purchase price is paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall (a)
subordinate this Lease and all of the Lessee's rights and estate hereunder to
the Fee Mortgage held by such Fee Mortgagee and (b) agree that the Lessee will
attorn to and recognize such Fee Mortgagee or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such Fee Mortgage as the
Lessor under this Lease for the balance of the Term then remaining. To effect
the intent and purpose of the immediately preceding sentence, the Lessee agrees
to execute and deliver such instruments in recordable from as are reasonably
requested by the Lessor or the applicable Fee Mortgagee; provided, however, that
such Fee Mortgagee simultaneously executes, delivers and records a written
agreement of the type described in the preceding paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 Quiet Enjoyment. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations
80
<PAGE>
thereunder, the Lessee shall peaceably and quietly have, hold and enjoy the
Leased Property throughout the Term, free of any claim or other action by the
Lessor or anyone claiming by, through or under the Lessor, but subject to the
Permitted Encumbrances and such Liens as may hereafter be consented to by the
Lessee. No failure by the Lessor to comply with the foregoing covenant shall
give the Lessee any right to cancel or terminate this Lease, or to fail to
perform any other sum payable under this Lease, or to fail to perform any other
obligation of the Lessee hereunder. Notwithstanding the foregoing, the Lessee
shall have the right by separate and independent action to pursue any claim it
may have against the Lessor as a result of a breach by the Lessor of the
covenant of quiet enjoyment contained in this Article 21.
21.2 Memorandum of Lease. The Lessor and the Lessee shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease and all options contained herein shall be made. The Lessee shall pay all
recording costs and taxes associated therewith.
21.3 Default by Lessor. The Lessor shall be in default of its obligations
under this Lease only if the Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such failure
shall continue for a period of thirty (30) days after notice thereof from the
Lessee (or such shorter time as may be necessary in order to protect the health
or welfare of any residents of the Facility or to insure the continuing
compliance of the Facility with the applicable Legal Requirements), unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed to continue if the Lessor, within
said thirty (30) day period, proceeds promptly and with due diligence to cure
the failure and diligently completes the curing thereof. The time within which
the Lessor shall be obligated to cure any such failure shall also be subject to
extension of time due to the occurrence of any Unavoidable Delay.
ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or under
any of the other Lease Documents shall be in writing and shall be deemed duly
given if personally delivered, sent by certified mail, return receipt requested,
or sent by a nationally recognized commercial overnight delivery service with
provision for a receipt, postage or delivery charges prepaid, and shall be
deemed given when so personally delivered or postmarked or placed in the
possession of such mail or delivery service and addressed as follows:
If to the Lessee: CareMatrix of Cypress Station, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attn: President
81
<PAGE>
With a copy to: _____________________________________
_____________________________________
_____________________________________
_____________________________________
If to the Lessor: Chancellor of Houston, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
or such other address as the Lessor or the Lessee shall hereinafter from time to
time designate by a written notice to the others given in such manner. Any
notice given to the Lessee by the Lessor at any time shall not imply that such
notice or any further or similar notice was or is required.
ARTICLE 23
INTENTIONALLY OMITTED
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 Broker's Fee Indemnification. The Lessee shall and hereby agrees to
indemnify, defend (with counsel acceptable to the Lessor) and hold the Lessor
harmless from and against any and all claims for premiums or other charges,
finder's fees, taxes, brokerage fees or commissions and other similar
compensation due in connection with any of the transactions contemplated by the
Lease Documents. Notwithstanding the foregoing, the Lessor shall have the option
of conducting its own defense against any such claims with counsel of the
Lessor's choice, but at the expense of the Lessee, as aforesaid. This
indemnification shall include all attorneys' fees and expenses and court costs
reasonably incurred by the Lessor in connection with the defense against any
such claims and the enforcement of this indemnification agreement and shall
survive the termination of this Lease.
24.2 No Joint Venture or Partnership. Neither anything contained in any of
the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
82
<PAGE>
24.3 Amendments, Waivers and Modifications. Except as otherwise expressly
provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (a) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (b) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the
Permits and/or the Contracts. References herein and in the other Lease Documents
to any of the Lease Documents, the Management Agreements, the Permits and/or the
Contracts shall be deemed to include any renewals, replacements, amendments,
extensions, substitutions, revisions, consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the Lease
Documents, whether express or implied, to any renewal, replacement, amendment,
extension, substitution, revisions, consolidation or modification of any of the
Lease Documents or any Management Agreement, Permit and/or the Contract is not
intended to constitute an agreement or consent by the Lessor to any such
renewal, replacement, amendment, substitution, revision, consolidation or
modification; but, rather as a reference only to those instances where the
Lessor may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification as the same may
be required pursuant to the terms, covenants and conditions of any of the Lease
Documents.
24.4 Captions and Headings. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 Time is of the Essence. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 Counterparts. This Lease may be executed in one or more counterparts,
each of which taken together shall constitute an original and all of which shall
constitute one and the same instrument.
24.7 Entire Agreement. This Lease and the other Lease Documents set forth
the entire agreement of the parties with respect to the subject matter.
83
<PAGE>
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, THE LESSOR AND THE LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The Lessee hereby
certifies that neither the Lessor nor any of the Lessor's representatives,
agents or counsel has represented expressly or otherwise that the Lessor would
not, in the event of any such suit, action or proceeding seek to enforce this
waiver to the right of trial by jury and acknowledges that the Lessor has been
induced by this waiver (among other things) to enter into the transactions
evidenced by this Lease and the other Lease Documents and further acknowledges
that the Lessee (a) has read the provisions of this Lease, and in particular,
the paragraph containing this waiver, (b) has consulted legal counsel, (c)
understands the rights that it is granting in this Lease and the rights that it
waiving in this paragraph in particular and (d) makes the waivers set forth
herein knowingly, voluntarily and intentionally.
24.9 Successors and Assigns. This Lease and the other Lease Documents shall
be binding and inure to the benefit of (a) upon the Lessee and the Lessee's
legal representatives and permitted successors and assigns and (b) the Lessor
and any other Person who may now or hereafter hold the interest of the Lessor
under this Lease and their respective successors and assigns. Notwithstanding
the foregoing, the Lessee shall not assign any of its rights or obligations
hereunder or under any of the other Lease Documents without the prior written
consent of the Lessor, in each instance, which consent may be withheld in the
Lessor's sole and absolute discretion.
24.10 No Third Party Beneficiaries. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Indemnified Parties, the Lessee, the other members of
the Leasing Group and their respective permitted successors and assigns, and,
except as otherwise expressly set forth in any of the Lease Documents, nothing
contained therein shall confer upon any Person other than such parties any right
to insist upon or to enforce the performance or observance of any of the
obligations contained therein. All conditions to the obligations of the Lessor
to advance or make available proceeds of insurance or Awards, or to release any
deposits held for Impositions or insurance premiums are imposed solely and
exclusively for the benefit of the Lessor, its successors and assigns. No other
Person shall have standing to require satisfaction of such conditions in
accordance with their terms, and no other Person shall, under any circumstances,
be a beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by the Lessor at any time, if, in the Lessor's sole and
absolute discretion, the Lessor deems it advisable or desirable to do so.
24.11 Governing Law. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
84
<PAGE>
The Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to any of the Lease
Documents, the negotiation and/or consummation of the transactions evidenced by
the Lease Documents, the Lessor's relationship of any member of the Leasing
Group in connection with the transactions evidenced by the Lease Documents
and/or the performance of any obligation or the exercise of any remedy under any
of the Lease Documents and expressly waives any and all objections the Lessee
may have as to venue in any of such courts.
24.12 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents or any
application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any of
the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE:
CAREMATRIX OF CYPRESS
STATION, INC.
__________________________ By: _______________________________
Name: Name:
Title:
85
<PAGE>
WITNESS: LESSOR:
CHANCELLOR OF HOUSTON, INC.
___________________________ By: ________________________________
Name: Name:
Title:
86
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
87
<PAGE>
EXHIBIT B
PERMITTED ENCUMBRANCES
88
<PAGE>
EXHIBIT C
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
89
<PAGE>
EXHIBIT D
OPEN COST REPORTS
90
<PAGE>
EXHIBIT E
RATE LIMITATIONS
91
<PAGE>
EXHIBIT F
FREE CARE REQUIREMENTS
92
<PAGE>
EXHIBIT G
CURRENT RATES
93
ASSIGNMENT AGREEMENT
(Peoria, Arizona)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and among AMA
Funding Corporation ("AMA"), CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix
Corporation), a Delaware corporation ("Assignor"), and Chancellor of
Massachusetts, Inc., a Delaware corporation ("Assignee").
WITNESSETH
WHEREAS, AMA has entered into that certain Letter of Intent (the "Letter of
Intent"), dated December 18, 1995, relating to a certain parcel of land located
in Peoria, Arizona (the "Land"), a copy of which is attached hereto as Exhibit
A;
WHEREAS, Assignor, an affiliate of AMA, intends to co-develop the Land for
an assisted/independent living facility consisting of approximately one hundred
twenty (120) units (the "Project");
WHEREAS, (a) AMA desires to assign its rights and obligations under the
Letter of Intent to Assignor, and (b) Assignor desires to simultaneously
therewith assign certain of its rights and obligations under the Letter of
Intent to Assignee, and (c) Assignee desires to assume such rights and
obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1 AMA hereby assigns, sets over and transfers unto Assignor to have
and to hold from and after the date hereof, all of the right, title
and interest of AMA in, to and under the Letter of Intent, and
Assignor hereby accepts the within assignment and assumes and agrees
with AMA, to perform and comply with and to be bound by all of the
terms, covenants, agreements, provisions and conditions of the Letter
of Intent on the part of AMA thereunder to be performed on and after
the date hereof, in the same manner and with the same force and effect
as if Assignor had originally executed the Letter of Intent.
2. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Letter of Intent other
than Assignor's rights and obligations with respect to the development
of the Project, and Assignee hereby accepts the within assignment and
assumes and agrees with Assignor, to perform and comply with and to be
bound by all of the terms, covenants,
<PAGE>
2
agreements, provisions and conditions of the Letter of Intent on the
part of Assignor thereunder to be performed on and after the date
hereof, in the same manner and with the same force and effect as if
Assignee had originally executed the Letter of Intent.
3. Assignor agrees to identify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 5 hereof) accruing
or arising under the Letter of Intent on or before the date hereof.
4. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Letter of
Intent after the date hereof.
5. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
6. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written
AMA FUNDING CORPORATION
By: /s/ Andrew D. Gosman
______________________
Name: Andrew D. Gosman
Title:
ASSIGNOR:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
______________________
Name: James M. Clary
Title:
<PAGE>
3
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By:______________________
Name:
Title:
<PAGE>
Exhibit A
[LOGO]
CAREPLEX
December 18, 1995
Ms. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard, Suite 211
Tucson, AZ 85719
RE: Amethyst Expansion - Peoria, AZ; Letter of Intent
Dear Prill:
The purpose of this letter is to set forth the basic terms of a proposed Joint
Venture with Netwest Development Corporation or its nominee ("Netwest") and AMA
Funding Corporation or its nominee ("AMA"), for the development, financing,
ownership and management of a senlor housing project consisting of approximately
120 independent and assisted living units (the "Project") on an approximately
8.25-acre site in Peoria, Arizona (the "Property"), as more particularly
described in Exhibit A attached hereto. Subject to the preparation, execution,
and performance of definitive written agreements (collectively, the "Joint
Venture Agreement") containing the mutual covenants and agreements of the
parties, intend to undertake the following:
1. Joint Venture Agreement: On or before December 31, 1995 (the "Joint Venture
Period"), or an extension for up to a period of not to exceed sixty (60)
days thereafter at the request of either party for reasonable cause or
unless extended by mutual agreement by both parties, AMA and Netwest will
enter into the Joint Venture Agreement relating to the Project (the "Joint
Venture"), which Joint Venture Agreement shall provide, among other things,
that AMA and its principals and colleagues, including, without limitation,
Fred McCall-Perez, will obtain an eighty-five (85%) percent interest in the
Project and the Property, and Netwest and its principals and colleagues
will obtain a fifteen (15%) percent interest in the Project and the
Property.
2. Development Agreement: The Joint Venture will enter into a development
agreement (the "Development Agreement") with The CarePlex Group, Inc. or
its nominee ("CarePlex") and Netwest (collectively, the "Developers") upon
terms to be mutually agreed upon by the parties. Netwest and CarePlex shall
be listed together on all documents, announcements, submissions or any
other materials as the Developers. The Developers shall work together to
manage the design, planning and construction phases of the Project.
CarePlex and Netwest will work together as a team In good faith to resolve
all issues pertaining to the Project. The Development Agreement will take
into account the expertise and experience of the Developers, who will
secure the necessary zoning, subdivision, environmental, permits and
approvals and any other
THE CAREPLEX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
applicable permit or approval as may be required for the development of the
Project. The Developers will also enter on behalf of the Joint Venture into
such contracts with an architectural/engineering firm, general contractor,
and all other consultants as are necessary for the development and
construction of the Project. Pending further financial analysis, and prior
to the execution of the Joint Venture Agreement, a development fee to be
paid to the Developers (the "Development Fee") and a schedule for payment
thereof, will be mutually agreed upon by the parties.
3. Management Agreement: Simultaneously with the execution of the Development
Agreement, the Joint Venture shall enter into a management agreement (the
"Management Agreement") pursuant to which Netwest or its nominee shall have
the right to manage the Project upon completion. Pending further financial
analysis, and prior to the execution of the Joint Venture Agreement, the
terms and conditions of the Management Agreement will be mutually agreed
upon by the parties.
4. Financing: AMA will obtain both construction and permanent financing for
the Project (the "Project Loan"). The Joint Venture shall execute any and
all documents in connection with the Project Loan, provided, however, that
the Project Loan will be non-recourse or substantially non-recourse to the
Joint Venture. Pending further financial analysis and prior to the
execution of the Joint Venture Agreement or a date specified therein, the
construction and permanent financing amounts and other terms and conditions
will be mutually agreed upon by the parties.
5. Working Capital: Pending further financial analysis, and prior to the
execution of the Joint Venture Agreement, the estimated working capital
requirements, schedule for disbursement and repayment obligation will be
mutually agreed upon by the parties. It is understood that AMA and Netwest
will contribute eighty-five (85%) percent and fifteen (15%) percent,
respectively, of the working capital requirements for the Project.
6. Decision Making: Prior to the execution of the Joint Venture Agreement, AMA
and Netwest will work together in good faith to resolve all issues
pertaining to the Project. If unable to do so, either party may give notice
to the other of termination of its undertakings under this letter and all
obligations hereunder shall cease and be of no other force or effect.
7. Plans and Specifications: Simultaneously, with the execution of the Joint
Venture Agreement, Netwest shall assign, if any, all of its rights, title
and interest in any and all architectural, engineering and other contracts
with respect to the Project to the Joint Venture or the Developers free of
any claims or encumbrances. The Joint Venture is not obligated to assume
any of said contracts, however, appropriate consideration will be given to
existing relationships, and provided, however, that the architect for the
Project will be Bruker Brown Architects, P.C., and that first consideration
for the topographical, on-site and off-site drainage impacts, and civil
engineering site development contract be given to Simons Li and Associates.
In the event that Netwest and AMA mutually decide to terminate the Joint
Venture Agreement, all architectural engineering, zoning, and other plans
and designs that relate specifically to the Project will be retained by
Netwest for their continued use.
2
<PAGE>
8. Access and Due Diligence: Following the execution of this letter by both
parties, AMA, its agents, representatives, lender(s), architect(s),
engineer(s), and employees shall, after notification to Netwest, have
access to the Property and the Project at any time during normal business
hours and from time to time, at CarePlex's sole cost and expense, in order
to perform such financial analyses, topographical and engineering surveys,
environmental site assessments and other tests, surveys and studies of the
Property and the Project as AMA may deem necessary or appropriate. AMA
and/or CarePlex shall provide Netwest, upon reasonable request, with access
or copies of all information, materials, records or other documents in
connection with the Property or the Project. If AMA, in its sole
discretion, is dissatisfied with the results of any such tests or
inspections, or with the content of any of the documents, data or
information obtained from Netwest, then AMA may terminate this letter by
written notice to Netwest on or before 5:00 p.m. (Boston) on December 31,
1995 or such other date specified in the Joint Venture Agreement.
9. Miscellaneous: (a) Neither Netwest nor AMA will release information to the
public concerning this letter, the Joint Venture Agreement, and the
transactions contemplated hereby or thereby without the prior written
consent of the other parties, and each party shall consult with the other
as to the form and substance of any press release or other public
disclosure; provided that nothing contained herein shall prevent any party
from disclosing any information required to be disclosed in accordance with
any law, regulation, or order of a court or regulatory agency of competent
jurisdiction; and (b) all information furnished shed by Netwest to AMA or
AMA to Netwest under this letter shall be treated as confidential and
Netwest and AMA shall take normal and reasonable precaution to preserve the
confidentiality of such information until the Closing and, if this letter
or the Joint Venture Agreement are terminated, whichever shall first occur,
AMA and Netwest shall return to each other all documents and other
materials containing, reflecting, and referring to such information and AMA
and Netwest shall take normal and reasonable precautions to preserve the
confidentiality of such information. AMA's and Netwest's obligations
hereunder shall not apply to any information which: (i) was already in its
possession prior to the disclosure thereof by AMA or Netwest, (ii) was then
generally known to the public, (iii) became known to the public through no
fault of AMA or Netwest or any of their respective agents or
representatives, or (iv) was disclosed to AMA or Netwest by a third party
unaffiliated with AMA or Netwest who to the best of AMA's or Netwest's
knowledge was not bound by an obligation of confidentiality to AMA or
Netwest.
10. Land Purchase: AMA will loan to Netwest eighty-five (85%) percent of the
acquisition cost of the Property which loan will be evidenced by a
Promissory Note (the "Note") payable to the order of AMA with an interest
rate equal to the prime rate announced by Fleet Bank, N.A. from time to
time and a repayment obligation upon the earlier of: (i) the expiration of
the Joint Venture Period, or (ii) nine (9) months from the execution date
of the Note or such other date as mutually agreed upon by the parties in
writing (the "Maturity Date"). The Note will be secured by a Deed of Trust,
in form and substance satisfactory to AMA in its reasonable discretion, and
joint and several personal guarantees from the principals of Netwest, which
guarantees shall be satisfactory to AMA in its sole discretion. Upon
obtaining all necessary permits and approvals to develop the Project
(including the expiration of all applicable appeal periods), Netwest will
transfer the Property to the Joint Venture in accordance with the terms
thereof All costs of such transfer shall be borne by the Joint Venture. The
parties shall use their best efforts to structure such transfer in the
least costly manner to the Joint Venture. Notwithstanding the
3
<PAGE>
foregoing, in the event the Developers fail to obtain all such necessary
permits and approvals to develop the Project prior to the Maturity Date,
AMA shall have the right to terminate the Joint Venture Agreement upon ten
(10) days notice to Netwest.
11. Termination of this Letter: Unless otherwise mutually agreed upon by the
parties in writing, this letter shall terminate the earlier of (i) the
execution of the Joint Venture Agreement, or (ii) December 31, 1995.
12. Non-Binding Letter of Intent: This letter is not intended as a contract,
but merely as a statement of the intentions and undertaking of the parties
except as set forth in Paragraph 9, the terms hereof and the transaction
will be binding upon the parties only in accordance with the terms
contained in the Joint Venture Agreement, if as, and when such Joint
Venture Agreement has been duly authorized and executed by the parties.
If the foregoing terms are acceptable to you, please so indicate by signing and
dating the enclosed copy of this letter and return it to the undersigned.
Very truly yours,
AMA FUNDING CORPORATION
By: /s/ Andrew Gosman
-------------------------
Name: Andrew Gosman
Title: V.P.
THE CAREPLEX GROUP, INC.
By: /s/ Andrew Gosman
-------------------------
Name: Andrew Gosman
Title: COO
AGREED:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-------------------------
Name: Priscilla S. Kuhn
Title: President
Date: Dec. 19, 1995
-----------------------
4
<PAGE>
[LOGO]
January 22, 1996 CAREPLEX VIA FACSIMILE
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
Re: Amethyst Expansion - Peoria, AZ
Dear Prill:
Reference is hereby made to that certain Letter of Intent (the "LOI") dated
December 18, 1995 by and between Netwest Development Corporation ("Netwest") and
AMA Funding Corporation ("AMA") and as amended in accordance with a letter dated
December 28, 1995, related to the above-referenced project. Reference is further
made to Paragraph 1 of the LOI with respect to the Joint Venture Agreement. This
letter shall confirm that the Joint Venture Agreement Date has been extended
from January 26, 1996 to February 23, 1996. In addition, reference is further
made to Paragraph 8 of the LOI with respect to Access and Due Diligence. This
letter shall confirm that the Access and Due Diligence Date, is hereby extended
from January 26, 1996 to February 23, 1996.
If the foregoing is acceptable to you, please acknowledge your acceptance
by signing below and returning a copy to me. Except as modified hereby, all of
the other terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
With best regards,
/s/ Kevin J. Maley
- ---------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-------------------------
Name: Priscilla S. Kuhn
Title: President
pc: Andrew Gosman
James M. Clary, III, Esq.
THE CAREPLEX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
[LOGO]
CAREMATRIX
VIA FEDERAL EXPRESS
March 20, 1996
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: CarePlex/Amethyst Arbor - Peoria, Arizona
Dear Prill:
Reference is hereby made to that certain Letter of Intent dated December
18, 1995 by and between Netwest Development Corporation ("Netwest") and AMA
Funding Corporation ("AMA") related to the above-referenced project, as amended
(the "LOI"). Reference is further made to Paragraph 1 of the LOI with respect to
the Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended to April 30, 1996. In addition, reference is
further made to Paragraph 8 of the LOI with respect to Access and Due Diligence.
This letter shall confirm that the Access and Due Diligence Date is hereby
extended to April 30, 1996.
This letter shall also confirm that CarePlex has agreed to commit $75,000 to
cover the initial architectural/engineering and due diligence related expenses
for the project. CarePlex and Netwest shall agree to a mutually acceptable
preliminary development budget and pre-construction drawn down schedule for
future disbursements by April 15, 1996.
THE CAREMATRIX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
Letter to Ms. Kuhn
March 20, 1996
Page 2
If the foregoing change is acceptable to you, please acknowledge your
acceptance by signing below and returning a copy to me. Except as modified
hereby, all other terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
Very truly yours,
/s/ Andrew D. Gosman
---------------------
Andrew D. Gosman
President
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-------------------------
Name: Priscilla S. Kuhn
Title: President
3/20/96
<PAGE>
[LOGO]
CAREMATRIX
VIA FEDERAL EXPRESS
April 30, 1996
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: CareMatrix/Amethyst Arbor - Peoria, Arizona
Dear Prill:
Reference is hereby made to that certain Letter of Intent dated December
18, 1995 by and between Netwest Development Corporation ("Netwest") and AMA
Funding Corporation ("AMA") related to the above-referenced project, as amended
(the "LOI"). Reference is further made to Paragraph 1 of the LOI with respect to
the Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended to May 31, 1996. In addition, reference is
further made to Paragraph 8 of the LOI with respect to Access and Due Diligence.
This letter shall confirm that the Access and Due Diligence Date is hereby
extended to May 31, 1996.
This letter shall also confirm that CareMatrix has funded $68,956.00 to cover
the initial architectural/engineering and due diligence related expenses for the
project. Prior to additional funding and prior to the execution of the Joint
Venture Agreements CareMatrix and Netwest shall agree to a mutually acceptable
preliminary development budget and pre-construction drawn down schedule for
future disbursements by May 31, 1996.
CAREMATRIX CORPORATION
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
Letter to Ms. Kuhn
April 30, 1996
Page 2
If the foregoing change is acceptable to you, please acknowledge your
acceptance by signing below and returning a copy to me. Except as modified
hereby, all other terms and provisions of the LOI shall remain unchanged by this
letter.
Thank you for your attention to this matter.
Very truly yours,
/s/ Kevin J. Maley
-------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-------------------------
Name: Priscilla S. Kuhn
Title: President
<PAGE>
[LOGO]
CAREPLEX
February 22, 1996 Via Facsimile
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard, Suite 211
Tucson, AZ 85719
RE: Amethyst Expansion - Peoria, AZ
Dear Prill:
Reference is hereby made to that certain Letter of Intent (the "LOI") dated
December 18, 1995 by and between Netwest Development Corporation ("Netwest")
and AMA Funding Corporation ("AMA") and as amended in accordance with letters
dated December 28, 1995 and January 22, 1996, related to the above-referenced
project. Reference is further made to Paragraph 1 of the LOI with respect to the
Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended from February 23, 1996 to March 1, 1996. In
addition, reference is further made to Paragraph 8 of the LOI with respect to
Access and Due Diligence. This letter shall confirm that the Access and Due
Diligence Date is hereby extended from February 23, 1996 to March 1, 1996.
If the foregoing is acceptable to you, please acknowledge your acceptance by
signing below and returning a copy to me. Except as modified hereby, all fo the
other terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
With best regards,
/s/ Kevin J. Maley
- -------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-------------------------
Name: Priscilla S. Kuhn
Title: President
2=22-96
KM: clb
pc: Andrew Gosman
James M. Clary, III, Esq.
THE CAREPLEX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
[LOGO]
CAREPLEX
January 22, 1996 VIA FACSIMILE
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: Amethyst Expansion - Peoria, AZ
Dear Prill:
Reference is hereby made to that certain Letter of Intent (the "LOI") dated
December 18, 1995 by and between Netwest Development Corporation ("Netwest")
and AMA Funding Corporation ("AMA") and as amended in accordance with a letter
dated December 28, 1995, related to the above-referenced project. Reference is
further made to Paragraph 1 of the LOI with respect to the Joint Venture
Agreement. This letter shall confirm that the Joint Venture Agreement Date has
been extended from January 26, 1996 to February 23, 1996. In addition, reference
is further made to Paragraph 8 of the LOI with respect to Access and Due
Diligence. This letter shall confirm that the Access and Due Diligence Date, is
hereby extended from January 26, 1996 to February 23, 1996.
If the foregoing is acceptable to you, please acknowledge your acceptance
by signing below and returning a copy to me. Except as modified hereby, all of
the other terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
With best regards,
/s/ Kevin J. Maley
- --------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn, President 1-26-96
---------------------------------
Name: Priscilla S. Kuhn
Title: President
pc: Andrew Gosman
James M. Clary, III, Esq.
THE CAREPLEX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
[LOGO]
CAREPLEX
VIA AIRBORNE
May 30, 1996
Ms. Priscilla S. Kuhn
President
Netwest Development CorporatIon
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: Care/Matrix/Amethyst Arbor - Peoria, Arizona
Dear Prill:
Reference is hereby made to that certain Letter of Intent dated December
18, 1996 by and between Netwest Development Corporation ('Netwest") and AMA
Funding Corporation ("AMA") related to the above-referenced project, as amended
(the "LOI"). Reference is further made to Paragraph 1 of the LOI with respect to
the Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended to August 30, 1996. In addition, reference is
further made to Paragraph 8 of the LOI with respect to Access and due Diligence.
This letter shall confirm that the Access and Due Diligence Date is hereby
extended to August 30, 1996.
This letter shall also confirm that Care Matrix has funded $68,956.00 to cover
the initial architectural/engineering and due diligence related expenses for the
project. Prior to additional funding and prior to the execution of the Joint
Venture Agreements Care Matrix and Netwest shall agree to a mutually acceptable
preliminary development budget and pre-construction drawn down schedule for
future disbursements by July 31, 1996.
If the foregoing change is acceptable to you, please acknowledge your acceptance
by signing below and returning a copy to me. Except as modified hereby, all
other terms and provisions of the LOI shall remain unchanged by this letter.
THE CAREPLEX GROUP, INC.
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
Letter Ms. Kuhn
May 30,1996
Page 2
Thank you for your attention to this matter.
Very truly yours,
/s/ Kevin J. Maley
------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
---------------------------------
Name: Priscilla S. Kuhn
Title: President
TURNKEY CONSTRUCTION AGREEMENT
THIS TURNKEY CONSTRUCTION AGREEMENT is by and among CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 ("CareMatrix"), Atlantic on the Hudson, LLC
("Atlantic"), a New York limited liability company, with an office at Two Penn
Plaza, New York, New York 10121 (collectively, the "Contractor"), and Cambridge
House Associates General Partnership, a New York general partnership, with an
office at c/o Chancellor of Ossining, 197 First Avenue, Needham, Massachusetts
02194 (the "Owner"), and is entered into for the purpose of reducing to a formal
writing all of their understandings with respect to the development and
construction of a proposed senior housing facility to be comprised of 122 units
(the "Facility") to be located in Ossining, New York (the "Premises").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Premises. The Owner (or its nominee) shall own good,
record and marketable title in fee simple to the Premises consisting of
approximately 10.33 acres of land as more fully described in Exhibit "A".
Exhibit "A" and each of the other Exhibits referred to in this Agreement shall
be incorporated into this Agreement by such reference as if fully set forth in
this Agreement. The Premises shall be free and clear of any and all encumbrances
which would impair the construction or operation of the Facility except the
Existing Encumbrance (as defined below).
Section 1.2 - Encumbrances.
(a) The Owner and the Contractor acknowledge and agree that the
Premises may be subject to easements, assessments, conditions,
contracts, rights, claims, encroachments, restrictions and other
encumbrances as would be disclosed on a title report (the "Existing
Encumbrances"), to physical conditions which would be disclosed by a
survey of the Premises and to those easements, conditions, contracts,
rights, licenses,
1
<PAGE>
encroachments, restrictions and other encumbrances resulting from the
Contractor securing regulatory, development and construction approvals
for the Facility and attendant site improvements. The Owner and the
Contractor each warrant and represent to the other that it has
reviewed or shall review prior to its purchase of the Premises the
boundary survey and the topographical survey of the Premises and has
made, or shall make prior to its purchase of the Premises a careful
physical inspection of the Premises to satisfy it as to the site
characteristics and attributes in all respects. The Owner agrees to
accept the Facility subject to the Existing Encumbrances, the
mortgages described herein, to the physical conditions which exist and
as such conditions may change during the course of construction and to
those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Owner securing regulatory, development and construction approvals for
the Facility and attendant site improvements, provided that the same
do not interfere with the Owner's operation of the Facility.
(a) Concurrently with the execution of this Agreement, the Owner shall
provide the Contractor with copies of all engineering, architectural
and any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Premises
or the Facility which are in the Owner's possession, custody or
control.
(b) Commencing on the date the Contractor elects to commence
construction in accordance with this Agreement, the Owner shall
provide the Contractor with full possession and complete control of
the Premises for purposes of performing the Contractor's obligations
hereunder.
Section 1.3 - Permits and Approvals.
(a) The Contractor represents that it shall use its reasonable best
efforts to obtain, prior to the date of the Closing (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and sewer agreements which may be
needed in order to permit the construction and operation of the
Facility on the Premises (the "Approvals"). The Contractor covenants
to diligently use its reasonable best efforts to obtain all of the
Approvals in an expeditious manner. In the event the Contractor is
unable to obtain the Approvals, the Contractor shall have no liability
whatsoever to the Owner, or any other party and at the Owner's or the
Contractor's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
2
<PAGE>
(b) For the sole purpose of permitting the Contractor to construct the
Facility, the Owner grants to the Contractor, to the extent required
by the Contractor in order that the purpose of this Agreement be
effectuated, the rights under the Approvals and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Contractor's obligations hereunder;
provided, however, that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms thereof.
Section 1.4 - Documentation. The Owner shall provide or obtain construction
and permanent financing for the Premises, the Facility and the Personal Property
(as defined herein) (the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if any, to pay the full amount necessary
for the development of the Project. The Contractor covenants that it will
provide fully and in a timely fashion all reasonable documentation required by
the Owner's lender in connection with the Project Loan. Such documentation shall
include, but not be limited to, all zoning and plan approvals; all utility
letters indicating availability of service; inventory of concessions made to any
or all municipal bodies; site plans; title commitments or binders, and all other
regulatory body approvals. The Contractor also covenants that it will, in a
timely manner, provide whatever financial or other information the Owner's
lender might reasonably require in connection with the Owner's applications for
financing for the construction of the Facility and as required by such lender in
connection with the Project Loan. The Owner will use its reasonable best efforts
to pursue its application for construction and permanent financing for the
Facility.
Section 1.5 - Other Agreements. The Owner and the Contractor each
represents to the other that neither entering into this Agreement nor performing
its respective obligations hereunder will violate any other agreements or
documents by which it may be bound. The Contractor shall cause the definitive
construction agreements to include and incorporate the Contractor's obligations
under Sections 2.13, 2.14 and 4.1 hereunder. The foregoing does not release the
Contractor of any of its obligations hereunder.
Section 1.6 - Good Standing of the Contractor. CareMatrix represents that
it is duly organized, validly existing and in good standing under the laws of
the State of Delaware. Atlantic represents that it is duly organized, validly
existing and in good standing under the laws of the State of New York. The
Contractor represents that it is empowered and authorized to execute, deliver
and perform its obligations under this Agreement, and, upon such execution and
delivery and subject to the conditions subsequent set forth in Section 5.1, this
Agreement shall be the valid, binding and legal
3
<PAGE>
obligation of the Contractor, enforceable in accordance with its terms and duly
authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation, bylaws, and operating agreement, as the case may
be, and all applicable laws of the State of Delaware and New York, respectively.
Section 1.7 - Good Standing of the Owner. The Owner represents that it is
duly organized and validly existing under the laws of the State of New York. The
Owner further represents that it is empowered and authorized to execute, deliver
and perform its obligations under this Agreement, and, upon such execution and
delivery and subject to the satisfaction of the conditions subsequent set forth
in Section 5.1, this Agreement shall be valid, binding and legal obligation of
the Owner, enforceable in accordance with its terms and duly authorized by a
vote of its partners in compliance with its partnership agreement and all
applicable laws of the State of New York.
ARTICLE II
Construction of the Facility
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of this Agreement that CareMatrix shall
have sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Facility, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein so long as the same are in compliance with the
Approvals and all applicable laws.
Section 2.2 - Architectural Services. As a condition precedent to this
Agreement, the Contractor shall have reviewed, approved and adopted all drawings
and plans for the Facility prepared by Meltzer/Mandl Architects, P.C. (the
"Architect") (the "Basic Plans"). The Owner will be responsible for payment of
the architectural fees due to the Architect, pursuant to the contract with
respect to the Facility dated July 12, 1996 (the "Architectural Contract"). The
Owner represents and warrants to the Contractor that a true, accurate and
complete copy of the Architectural Contract is attached hereto as Exhibit "B".
The Contractor shall not be responsible to the Owner, or any other party for any
errors, omissions, breaches or failures thereof, or any damages resulting from
the acts or omissions of the Architect.
Section 2.3 - Other Professionals and Limited Assumed Obligations. The
Owner represents that it has not engaged any architects or any engineers,
lawyers, consultants,
4
<PAGE>
accountants, or other professionals with respect to the Facility other than the
Architect which the Owner shall be obligated to pay. The Contractor neither
assumes nor shall be obliged for any debts, liabilities or obligations of the
Owner or related to the Premises or the Facility other than payments due to the
Architect under the Architectural Contract.
Section 2.4 - Plans and Specifications. The Contractor shall direct the
Architect to prepare as promptly as possible, but, in any event, within thirty
(30) days after the execution of this Agreement, final plans, specifications and
a site plan (the "Final Plans") based on the Basic Plans.
Section 2.5 - Construction. The Contractor shall construct the Facility
substantially in accordance with the Final Plans, subject to field changes and
minor design changes approved by the Owner. All work shall be done in a good and
workmanlike manner and in accordance with the Approvals, if any, and all
applicable laws. The structure shall be designed as a senior housing facility to
be constructed in accordance with the requirements in effect on the date of this
Agreement of federal, state and local governmental agencies having jurisdiction
of the Facility, including Life Safety Code requirements imposed by the Federal
Department of Health and Human Services.
Section 2.6 - Personal Property. Exhibit "C" contains a representative list
of the kinds of personal property needed for the Facility (the "Personal
Property"). In order to reduce the risk that the Personal Property will be
delivered prior to the Closing (as hereinafter defined), the Owner covenants
that it shall select such Personal Property as soon as practicable but not later
than approximately six (6) months prior to the estimated date of Physical
Completion.
Section 2.7 - Changes. The Owner agrees that the Contractor shall also have
the right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction or if required due to the unavailability of any construction
material or Personal Property. The Owner shall be notified of any such changes
or substitutions in the Personal Property but the Contractor shall have final
authority to make all decisions with respect to such changes; provided, that
such changes result in construction, space, design, personal property, equipment
and interior and exterior design comparable in overall design and quality to
that shown on the Final Plans.
Section 2.8 - Commencement of Construction. Construction of the Facility
will start on or prior to the date which is thirty (30) days after the
satisfaction of the last of the conditions set forth in Section 5.1 to be
satisfied, or as soon thereafter as weather and ground conditions permit but not
later than October 1, 1996.
5
<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken,
shall proceed in a continuous and reasonably expeditious manner until Physical
Completion, as such term is defined in Section 2.10, is achieved, which shall
not occur later than ten (10) months after the completion of the foundation for
the Facility. Any delays caused by acts of God, fire, accident, casualty,
cessation of activity due to refusal to work by labor, or any other cause not
attributable to the failure of the Contractor to use reasonable care and due
diligence, however, shall be excused by the Owner, provided that the Contractor
shall use its reasonable best efforts to minimize any such delays and shall
resume construction at the earliest possible time.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical
Completion" or "Physically Completed" shall mean the date on which the
building and improvements described and set forth in the Final Plans
have been completed and the Facility shall have been approved for
temporary or permanent occupancy by the local building inspector, and
by the State Fire Marshall in the event his approval is required.
Physical Completion shall be deemed to have been achieved
notwithstanding that any of such officials or agencies have issued a
Punch-List listing items requiring completion or correction, so long
as such Punch-List does not prevent or prohibit occupancy.
(b) The Contractor will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time the Owner estimates
that the Facility will be Physically Completed, whereupon the Owner
will diligently proceed to fulfill all other conditions necessary for
licensure and the Owner will apply in a timely manner for all licenses
and permits necessary to commence operation of the Facility. After
such notice from the Contractor, the Owner, to the extent necessary to
perform necessary administrative activities may, so long as it does
not interfere with completion of construction, enter upon the Premises
in an effort to coordinate initial licensure with Physical Completion.
Section 2.11 - The Owner's Noninvolvement. The Owner shall have access to
the construction site while construction is in progress, but it shall have no
authority over the Contractor, and shall not be empowered to interfere or become
involved with construction or require changes thereto; provided, however, that
the Owner's management agent shall have the right to view the construction in
progress and shall have access to the site for the purpose of equipping the
Facility and preparing the Facility for operation.
6
<PAGE>
Section 2.12 - Punch-List. If, at any time after the Facility has been
Physically Completed, there exist any items requiring completion or correction,
then the Contractor agrees to use all reasonable diligence to complete or
correct the items so that each conforms to the Final Plans. The parties shall
make a Punch-List of the items requiring completion or correction. Each item on
the Punch List shall be assigned a reasonable value based upon the reasonable
cost of completion or correction of the same or such other value as may be
required by the Owner's lender ("Punch-list Amount"). The Contractor shall give
its written undertaking to complete each such item within ninety (90) days after
transfer of title, further agreeing to permit the Owner to complete any such
items at the Contractor's expense if the Contractor has failed to complete the
same within the ninety (90) day time period.
Section 2.13 - Work and Warranties. Upon completion of construction,
landscaping and installation of Personal Property, the Contractor will assign to
the Owner, in addition to any warranties created by law, all warranties and
guarantees received from designers, the Architect, subcontractors and suppliers
of equipment and furnishings, to the extent assignable. The Contractor will
agree to remedy any defect in construction caused by poor workmanship or
materials which are brought to its attention by written notice within a period
of one (1) year from the date of the issuance of the Certificate of Occupancy.
Aside from the foregoing, the Owner hereby waives and the Contractor hereby
disclaims all other express and implied warranties of every kind or nature with
respect to the Facility and the Personal Property, including, without
limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
Section 2.14 - Subcontractors. The Contractor agrees to indemnify and save
the Owner harmless from claims for payment by any subcontractor who furnishes
materials or supplies or performs labor or services in the prosecution of the
work pursuant to this Agreement. The Contractor reserves absolute discretion on
the selection of subcontractors.
Section 2.15 - Financing Arrangements.
(a) The Owner will obtain a commitment for the Project Loan for
construction and permanent financing for the Facility which shall be
sufficient, together with the Owner's equity contributions, to pay the
full amount of the Contract Price. This Agreement may be terminated by
the Contractor or the Owner, in its sole and absolute discretion and
without further recourse to any party, in the event that the closing
and funding of the construction loan financing with respect to the
Facility pursuant to the Project Loan (with all conditions precedent
to such closing either satisfied
7
<PAGE>
or irrevocably waived by the lender) shall not have occurred by
November 15, 1996.
(b) The Owner and the Contractor also contemplate that the Premises
and the Facility, together with all fixtures, furnishing, equipment,
and articles of personal property now owned or hereafter acquired by
the Owner which are or may be attached to or used in connection with
the Premises or the Facility, together with any and all replacements
thereto and substitutions therefor, and all proceeds thereof; and all
present and future rents, issues, leases, and profits of the Premises
and the Facility will serve as security for the payment obligations to
any lenders relating to the Project Loan or otherwise, and that the
Owner will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, guaranties and
all other instruments, agreements, documents, certificates,
affidavits, and other writings required to be executed by any lender
in connection with such financing.
ARTICLE III
Closing
Section 3.1 - Date of Closing. The delivery of possession of the Premises
and the Facility to the Owner and payment of the Contract Price shall take place
contemporaneously within three (3) business days after Physical Completion of
the Facility but in no event later than the date established in Section 2.9 (the
"Closing").
Section 3.2 - Contract Price.
(a) CareMatrix and Atlantic shall each be entitled to a development
fee in the amount of Two Hundred Thousand Dollars ($200,000). Such fee
shall be paid by Owner at the closing of the Project Loan, to the
extent that there exists funds for the same out of the Project Loan.
In the event that such development fee is not paid in full at the
closing of the Project Loan, the portion of the development fee paid,
if any, shall be payable as follows: (I) the first One Hundred Fifty
Thousand Dollars ($150,000) to Atlantic; and (ii) the next Two
Hundred Fifty Thousand Dollars ($250,000), eighty percent (80%) to
CareMatrix and twenty percent (20%) to Atlantic. The remainder shall
be paid (based on the formula set forth in the immediately preceding
sentence) from cash flow from operations at the Project (after
8
<PAGE>
debt service, guaranty fees, and all expenses at the Project,
including management fees).
(b) Each of CareMatrix and Atlantic shall be entitled to a
construction supervision fee in the amount of Five Thousand Dollars
($5,000) per month during the course of construction of the Project,
provided that such fee shall only be payable to the extent that there
exists funds for the same out of the Project Loan. In the event that
such construction supervision fee is not paid in full during the
course of construction, the portion of the construction supervision
fee paid, if any, shall be payable in equal monthly installments
during the course of construction, fifty percent (50%) to Atlantic and
fifty percent (50%) to CareMatrix. The remainder shall be paid (based
on the formula set forth in the immediately preceding sentence) from
cash flow from operations at the Project (after debt service, guaranty
fees, all expenses at the Project, including management fees, and the
development fees set forth in subsection (b) above).
Section 3.3 - Form of Conveyance and Status of Title. The Facility and
Personal Property shall be conveyed by warranty bill of sale. The Facility and
Personal Property may be subject to the mortgages and security interests
described in Section 2.15.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - The Contractor's Responsibilities. In addition to its
obligations elsewhere expressed in this Agreement, the Contractor shall have the
following responsibilities:
(a) To obtain and pay for necessary building permits and the
Certificate of Occupancy;
(b) The Contractor shall at all times, commencing with the date upon
which construction begins, carry the following types of insurance with
an insurance carrier or carriers acceptable to the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
9
<PAGE>
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $1,000,000 for one person and
$1,000,000 for any one accident or disaster; and property damage
coverage limits of not less than $1,000,000; all of which
insurance shall name the Owner as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by
fire and full extended coverage, including vandalism and
malicious mischief, covering all improvements to be erected
hereunder and all materials for the same which are on or about
the Premises, in an amount equal to the full insurable value of
such improvements and materials; such insurance to be payable to
the Owner, the Contractor and the Owner's lender as their
interests may appear, with a standard mortgagee endorsement to
the Owner's lender or its assigns as mortgagee.
The Contractor shall furnish to the Owner and the Owner's lender
if required by such lender, duplicate policies of insurance as
set forth in subparagraphs (i), (ii), and (iii) hereof. Each of
such policies shall, if the insurance carriers so permit, contain
a provision to the effect that they may not be canceled except
upon ten (10) days prior written notice to the Owner and the
Owner's lender.
(c) At Closing, the Contractor shall deliver to the Owner, at the
Owner's option:
(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the project;
or
(ii) reasonable proof of payment or proof of a provision for
payment to such contractors; or
(iii) an indemnification to the Owner with respect to same.
Section 4.2 - The Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities: To obtain commitments for financing the contemplated
construction, including the furnishing of financial statements, providing an
appraisal of the Premises and the Facility and by execution of applications,
notes, mortgages, assumption agreements and other documents reasonably necessary
to effectuate such financing or the financing of the Personal Property.
10
<PAGE>
Section 4.3 - Indemnification. The Contractor hereby agrees to indemnify
and hold the Owner harmless from all liabilities, claims, and demands for
personal injury or property damage arising out of or caused by any act or
omission of the Contractor, its subcontractors, agents, or employees, or arising
in or about the Premises at any time from the date of this Agreement until the
transfer of title. The Contractor further covenants to use proper care and
caution in the performance of its work hereunder so as not to cause damage to
any adjoining or adjacent property, and the Contractor shall indemnify and hold
the Owner harmless from any liabilities, claims, or demands for damage to such
adjoining or adjacent property.
ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the undertakings of
the Contractor shall, at the election of the Owner, be contingent upon the
occurrence of each of the following:
(a) Title. An owner's title insurance policy commitment and Class A-2
survey, satisfactory to the Contractor in its sole discretion, shall
have been obtained by the Owner which confirms that there are no
exceptions or conditions which would render title to the Premises
unmarketable or which will prohibit or restrict the construction or
operation of the Facility or which would prevent an institutional
lender from closing a construction or permanent mortgage loan for the
Facility in the usual course of its business.
(b) Additional Due Diligence Regarding the Premises. The Contractor
shall have received due diligence information concerning the Premises,
satisfactory to the Contractor in its sole discretion, including,
without limitation, soil tests and utility service confirmations to
the extent not currently available.
Section 5.2 - Failure of Contingencies. In the event that any one or more
of the contingencies set forth in this Article is not satisfied, waived or
deferred by the parties in writing, within the period of time set forth above,
then, upon Notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Contractor reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
11
<PAGE>
ARTICLE VI
Additional Covenants of the Owner
Section 6.1 - Indemnification by the Owner. The Owner hereby indemnifies
and defends the Contractor against any claims for unpaid fees or costs
associated with the Premises or the Facility incurred by or on behalf of the
Owner or the Contractor as a result of any claim by any broker. The parties
acknowledge that no broker was responsible for procuring the transactions set
forth in this Agreement, nor any part thereof, and each party will indemnify and
defend the other from any and all claims, actual or threatened, for a commission
or other compensation by any third person with whom such party has had dealings.
Section 6.2 - Confidentiality. The Owner, its partners, affiliates, agents,
servants and employees (including outside counsel) hereby agree:
(a) To maintain in the strictest confidence the identity of the
Contractor; the contents of this Agreement; the negotiations between
the parties on the terms of this Agreement; and any of the
Contractor's proprietary information, including, without limitation,
financial information, projects, copies of leases, real estate
appraisals, and other information regarding the Facility and the
business affairs and operations of the Contractor which any of said
parties obtain from the Contractor in the course of negotiations for
the transactions contemplated hereby (the "Confidential Information");
(b) Not to disclose, without the Contractor's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees (including outside counsel), bankers,
consultants and other advisors to whom disclosure is necessary in
order to effectuate the transactions contemplated hereby; and
(c) To comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.3 - Provision of Further Information. The Contractor agrees to
supply complete financial information and any other data required in connection
with the construction or permanent financing for the Facility and to execute,
and cause to execute, any and all documents which are required by the terms
thereof.
12
<PAGE>
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of
intent, and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Contractor represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and agrees to indemnify and hold and save the other harmless
from any claim or demand for commission or other compensation by any broker,
finder or similar agent claiming to have been employed by or on behalf of such
party.
Section 7.6 - Assignment. The Contractor shall have no right to assign its
rights nor delegate its obligations under this Agreement to another entity or
person without the prior written consent of the Owner except that the Contractor
shall have the right to assign this Agreement to, merge with or consolidate with
an "Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent to
Cambridge House Associates General Partnership, c/o Chancellor of
Ossining, Inc., 197 First Avenue, Needham, MA 02194, Attention:
President, with a copy to James M. Clary, III, Esq. at the same
address, or at
13
<PAGE>
such other address or addresses the Owner shall from time to time
designate by notice to the Contractor.
(b) In the event that notice is directed to the Contractor, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; and to Atlantic on the Hudson, LLC, Two Penn
Plaza, 4th Floor, New York, NY 10121, Attn: Peter Fine, Marc Altheim,
or at such other address or addresses as the Contractor shall from
time to time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed the Facility or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, Sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
14
<PAGE>
Section 7.15 - Governing Law. This Agreement shall be governed by the laws
of the Commonwealth of Massachusetts.
EXECUTED under seal this l4th day of August, 1996.
WITNESS: CAMBRIDGE HOUSE ASSOCIATES
GENERAL PARTNERSHIP
BY: CHANCELLOR OF OSSINING, INC.
/s/ By: /s/James M. Clary, III
- -------------------------- -----------------------------------
Name: Name: James M. Clary, III
Title: Vice President
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
/s/ By: /s/Andrew Gosman
- -------------------------- -----------------------------------
Name: Name: Andrew Gosman
Title: Vice Chairman
WITNESS: ATLANTIC ON THE HUDSON, LLC
/s/Barry Manson By: /s/Marc Altheim
- ------------------------- -----------------------------------
Name: Barry Manson Name: Marc Altheim
Title: Vice President/Secretary
15
<PAGE>
EXHIBIT A
to
Turnkey Construction Agreement
Description of the Premises
<PAGE>
Title No. LTW95-5127
SCHEDULE A
PAGE TWO
The land referred to in this commitment is described as follows:
AMENDED
ALL that certain plot, piece or parcel off land, situate, lying and being in the
Village and Town of Ossining, County of Westchester and State of New York,
bounded and described as follows:
BEGINNING at a point on the westerly side off Albany Post Road (Route 9), said
point being distant 173.02 feet from the intersection of the dividing line
between lands formerly of Piping Rock Development Corp., now or formerly of
Eagle Bay Condominiums Home Owners Association and lands now or formerly of the
Dominican Sisters of the Sick and Poor with the said westerly line of A1bany
Post Road (Route 9); and
RUNNING THENCE along said lands formerly Piping Rock Development Corp., now or
formerly of Eagle Bay Condominiums Home Owners Association the following courses
and distances:
South 75 degrees 08 minutes 46 seconds West, 531.86 feet;
South 86 degrees 54 minutes 21 seconds West, 111.16 feet;
North 03 degrees 27 minutes 37 seconds West, 215.39 feet;
South 86 degrees 45 minutes 37 seconds West, 218.51 feet;
Due North 279.53 feet (to the northwesterly corner of the herein described
parcel);
North 61 degrees 04 minutes 11 seconds East, 130.61 feet; and
North 78 degrees 18 minutes 10 seconds East (along said Eagle Bay
Condominiums Homeowners Association, 457.35 feet and lands flow or formerly at
Hoye Textile Corporation 157.85 feet) 615.20 feet;
THENCE still along said lands now or formerly Hoye Textile Corporation, South 70
degrees 17 minutes 08 seconds East, 259.03 feet;
THENCE along the said westerly line of Albany Post Road (Route 9) the following
courses and distances:
South 19 degrees 40 minutes 20 seconds West, 175.00 feet;
South 22 degrees 31 minutes 10 seconds West, 52.83 feet;
South 24 degrees 12 minutes 20 seconds West, 49.90 feet;
South 05 degrees 29 minutes 50 seconds West, 23.87 feet; and
South 04 degrees 24 minutes 10 seconds West, 154.61 feet to the point or
place of BEGINNING.
<PAGE>
Title No. LTW95-5127
April 10, 1996
Schedule A, the Legal Description, has hereby been amended.
Schedule B, Exceptions Nos. 6, 7, 8, 9, 10, 11 and 15, have hereby been omitted.
Schedule B, Exceptions Nos. 5, 12, 13 and 14, have hereby been amended, as
follows:
5. A) Curbs extend into Route 9.
B) Fence encroaches as much as l8.2 feet on premises adjoining on
the north.
C) Easement for ingress and egress of premises adjoining on the
southerly and west crosses southwesterly portion at premises.
D) Variations between fences and parts of westerly and southerly
lines.
E) 12 foot wide sewer easement crosses easterly portion of premises.
F) New York Telephone buried cable marker on easterly portion of
premises. Policy excepts rights and easements of others by reason
thereof but affirmatively insures that same will not interfere
with the building and improvements as presently located.
G) Fence encroaches as much as 14.9 feet on premises adjoining on
the south.
As shown on survey by Peter R. Hustis dated 5/10/95, revised 5/23/95.
Subject to any changes an accurate survey might show since said date.
12. Sewer Line Easement recorded in Liber 7710 cp 757. This policy
affirmatively insure: that said easement does not, and the exercise 0r
any rights thereunder will not, adversely interfere with the use of
all or any portion of the insured premises, including, without
limitation, the buildings and other improvements as currently
constructed thereon.
13. Easement for ingress and egress recorded in Liber 7712 cp 76l. This
policy affirmatively insures that said easement does not, and the
exercise of any rights thereunder will not, adversely interfere with
the use of all or any portion of the insured premises, including,
without limitation, the buildings and other improvements as currently
constructed thereon.
(Continued)
<PAGE>
Title No. LTW95-5127
14. Notes and easements as shown on Map No. 19447. This policy insures
said easements do not, and the exercise of any rights thereunder will
not, adversely interfere with the use of all or any portion of the
insured premises, including, without limitation, the buildings and on
improvements as currently constructed thereon, and also affirmatively
insures that none of the restrictions, covenants or conditions set
forth in said notes have been violated and no future violation of any
of the same will result in (i) a forfeiture or reversion of title,
(ii) the forced removal or relocation of any building, structure or
improvement located on the premises, or (iii) the lien of the insured
mortgage divested or subordinated or its validity, priority or
enforceability otherwise being impaired.
<PAGE>
EXHIBIT B
to
Turnkey Construction Agreement
Architectural Contract
<PAGE>
THE AMERICAN INSTITUTE OF ARCHITECTS
[LOGO]
- --------------------------------------------------------------------------------
AIA Document B141
Standard Form of Agreement Between
Owner and Architect
1987 Edition
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH
AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the 12th day of July in the year of Nineteen Hundred and 96
BETWEEN the Owner:
(Name and Address)
Atlantic Development Group, LLC and CareMatrix of Massachusetts, Inc
[Collectively referred to as "Owner"] [Collectively referred to as "Owner"]
Two Penn Plaza 197 First Avenue
New York, New York 10121 Needham, Massachusetts 02194
and the Architect:
(Name and Address)
Meltzer/Mandl Architects, P.C. ["Architect"]
215 Park Avenue South
New York, NY 10003
For the following Project: Cambridge House-on-the-Hudson, Ossining, New York
["Project"].
(Include detailed description of Project, location, address and scope.)
The Owner and Architect agree as set forth below.
- --------------------------------------------------------------------------------
Copyright 1917, 1926, 1948, 1951, 1953, 1958, 1961, 1966, 1967, 1970, 1974,
1977. (C)1987 by The American Institute of Architects, 1735 New York Avenue,
N.W., Washington, D.C. 20006. Reproduction of the material herein or substantial
quotation of its provisions without written permission of the AIA violates the
copyright laws of the United States and will be subject to legal prosecution.
- --------------------------------------------------------------------------------
B141-1987 1
<PAGE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF AGREEMENT BETWEEN OWNER AND ARCHITECT
- --------------------------------------------------------------------------------
ARTICLE 1
ARCHITECT'S RESPONSIBILITIES
1.1 ARCHITECT'S SERVICES
1.1.1 The Architect's services consist of those services performed by the
Architect, Architect's employees, and Architect's consultants as enumerated in
Articles 2 and 3 of this Agreement and any other services included in Article
12.
1.1.2 The Architect's services shall be performed as expeditiously as is
consistent with professional skill and care and the orderly progress of the
Work. Upon request of the Owner, the Architect shall submit for the Owner's
approval a schedule for the performance of the Architect's services which may be
adjusted as the Project proceeds, and shall include allowances for periods of
time required for the Owner's review and for approval of submissions by
authorities having jurisdiction over the Project. Time limits established by
this schedule approved by the Owner shall not, except for reasonable cause, be
exceeded by the Architect or Owner.
ARTICLE 2
SCOPE OF ARCHITECT'S BASIC SERVICES
2.1 DEFINITION
2.1.1 The Architect's Basic Services consist of those described in Paragraphs
2.2 through 2.6 and any other services identified in Article 12 as part of Basic
Services, and include normal structural, mechanical and electrical engineering
services.
2.2 SCHEMATIC DESIGN PHASE
2.2.1 The Architect shall review the program furnished by the Owner to ascertain
the requirements of the Project and shall arrive at a mutual understanding of
such requirements with the Owner.
2.2.4 Based on the mutually agreed-upon program, schedule and construction
budget requirements, the Architect shall prepare, for approval by the Owner,
Schematic Design Documents consisting of drawings and other documents
illustrating the scale and relationship of Project components.
2.3 DESIGN DEVELOPMENT PHASE
2.3.1 Based on the approved Schematic Design Documents and any adjustments
authorized by the Owner in the program, schedule or construction budget, the
Architect shall prepare, for approval by the Owner, Design Development Documents
consisting of drawings and other documents to fix and describe the size and
character of the Project as to architectural, structural, mechanical and
electrical systems, materials and such other elements as may be appropriate.
2.4 CONSTRUCTION DOCUMENTS PHASE
2.4.1 Based on the approved Design Development Documents and any further
adjustments in the scope or quality of the Project or in the construction budget
authorized by the Owner, the Architect shall prepare, for approval by the Owner,
Construction Documents consisting of Drawings and Specifications setting forth
in detail the requirements for the construction of the Project.
2.4.2 The Architect shall assist the Owner in the preparation of the necessary
bidding information, bidding forms, the Conditions of the Contract, and the form
of Agreement between the Owner and Contractor.
2.4.4 The Architect shall assist the Owner in connection with the Owner's
responsibility for filing documents required for the approval of governmental
authorities having jurisdiction over the Project.
2.5 BIDDING OR NEGOTIATION PHASE
2.5.1 The Architect, following the Owner's approval of the Construction
Documents and of the latest preliminary estimate of Construction Cost, shall
assist the Owner in obtaining bids or negotiated proposals and assist in
awarding and preparing contracts for construction.
2.6 CONSTRUCTION PHASE--ADMINISTRATION OF THE CONSTRUCTION CONTRACT
2.6.1 The Architect's responsibility to provide Basic Services for the
Construction Phase under this Agreement commences with the award of the Contract
for Construction and terminates at the earlier of the issuance to the Owner of
the final Certificate for Payment or 60 days after the date of Substantial
Completion of the Work, unless extended under the terms of Subparagraph 10.3.3.
2.6.2 The Architect shall provide administration of the Contract for
Construction as set forth below, unless otherwise provided in this Agreement.
2.6.3 Duties, responsibilities and limitations of authority of the Architect
shall not be restricted, modified or extended without written agreement of the
Owner and Architect.
- --------------------------------------------------------------------------------
B141-1987 2
<PAGE>
2.6.4 The Architect shall be a representative of and shall advise and consult
with the Owner (1) during construction until final payment to the Contractor is
due, and (2) as an Additional Service at the Owner's direction from time to time
during the correction period described in the Contract for Construction. The
Architect shall have authority to act on behalf of the Owner only to the extent
provided in this Agreement unless otherwise modified by written instrument.
2.6.5 The Architect shall visit the site at intervals appropriate to the stage
of construction to become generally familiar with the progress and quality of
the Work completed and to determine in general if the Work is being performed in
a manner indicating that the Work when completed will be in accordance with the
Contract Documents. However, the Architect shall not be required to make
exhaustive or continuous on-site inspections to check the quality or quantity of
the Work. On the basis of on-site observations as an architect, the Architect
shall keep the Owner informed of the progress and quality of the Work, and shall
endeavor to guard the Owner against defects and deficiencies in the Work. (More
extensive site representation may be agreed to as an Additional Service, as
described in Paragraph 3.2.) See Article 12.1
2.6.6 The Architect shall not have control over or charge of and shall not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are solely the Contractor's responsibility under the Contract for
Construction. The Architect shall not be responsible for the Contractor's
schedules or failure to carry out the Work in accordance with the Contract
Documents. The Architect shall not have control over or charge of acts or
omissions of the Contractor, Subcontractors, or their agents or employees, or of
any other persons performing portions of the Work.
2.6.7 The Architect shall at all times have access to the Work wherever it is in
preparation or progress.
2.6.8 Except as may otherwise be provided in the Contract Documents or when
direct communications have been specifically authorized, the Owner and
Contractor shall communicate through the Architect. Communications by and with
the Architect's consultants shall be through the Architect.
2.6.9 Based on the Architect's observations and evaluations of the Contractor's
Applications for Payment, the Architect shall review and certify the amounts due
the Contractor.
2.6.10 The Architect's certification for payment shall constitute a
representation to the Owner, based on the Architect's observations at the site
as provided in Subparagraph 2.6.5 and on the data comprising the Contractor's
Application for Payment, that the Work has progressed to the point indicated and
that, to the best of the Architect's knowledge, information and belief, quality
of the Work is in accordance with the Contract Documents. The foregoing
representations are subject to an evaluation of the Work for conformance with
the Contract Documents upon Substantial Completion, to results of subsequent
tests and inspections, to minor deviations from the Contract Documents
correctable prior to completion and to specific qualifications expressed by the
Architect. The issuance of a Certificate for Payment shall further constitute a
representation that the Contractor is entitled to payment in the amount
certified. However, the issuance of a Certificate for Payment shall not be a
representation that the Architect has (1) made exhaustive or continuous on-site
inspections to check the quality or quantity of the Work, (2) reviewed
construction means, methods, techniques, sequences or procedures, (3) reviewed
copies of requisitions received from Subcontractors and material suppliers and
other data requested by the Owner to substantiate the Contractor's right to
payment or (4) ascertained how or for what purpose the Contractor has used money
previously paid on account of the Contract Sum.
2.6.11 The Architect shall have authority to reject Work which does not conform
to the Contract Documents. Whenever the Architect considers it necessary or
advisable for implementation of the intent of the Contract Documents, the
Architect will have authority to require additional inspection or testing of the
Work in accordance with the provisions of the Contract Documents, whether or not
such Work is fabricated, installed or completed. However, neither this authority
of the Architect nor a decision made in good faith either to exercise or not to
exercise such authority shall give rise to a duty or responsibility of the
Architect to the Contractor, Subcontractors, material and equipment suppliers,
their agents or employees or other persons performing portions of the Work.
2.6.12 The Architect shall review and approve or take other appropriate action
upon Contractor's submittals such as Shop Drawings, Product Data and Samples,
but only for the limited purpose of checking for conformance with information
given and the design concept expressed in the Contract Documents. The
Architect's action shall be taken with such reasonable promptness as to cause no
delay in the Work or in the construction of the Owner or of separate
contractors, while allowing sufficient time in the Architect's professional
judgment to permit adequate review. Review of such submittals is not conducted
for the purpose of determining the accuracy and completeness of other details
such as dimensions and quantities or for substantiating instructions for
installation or performance of equipment or systems designed by the Contractor,
all of which remain the responsibility of the Contractor to the extent required
by the Contract Documents. The Architect's review shall not constitute approval
of safety precautions or, unless otherwise specifically stated by the Architect,
of construction means, methods, techniques, sequences or procedures. The
Architect's approval of a specific item shall not indicate approval of an
assembly of which the item is a component. When professional certification of
performance characteristics of materials, systems or equipment is required by
the Contract Documents, the Architect shall be entitled to rely upon such
certification to establish that the materials, systems or equipment will meet
the performance criteria required by the Contract Documents.
2.6.13 The Architect shall prepare Change Orders and Construction Change
Directives, with supporting documentation and data if deemed necessary by the
Architect as provided in Subparagraphs 3.1.1 and 3.3.3, for the Owner's approval
and execution in accordance with the Contract Documents, and may authorize minor
changes in the Work not involving an adjustment in the Contract Sum or an
extension of the Contract Time which are not inconsistent with the intent of the
Contract Documents.
2.6.14 The Architect shall conduct inspections to determine the date or dates of
Substantial Completion and the date of final completion, shall receive and
forward to the Owner for the Owner's review and records written warranties and
related documents required by the Contract Documents and assembled by the
Contractor, and shall issue a final Certificate for Payment upon compliance with
the requirements of the Contract Documents.
- --------------------------------------------------------------------------------
3 B141-1987
<PAGE>
2.6.15 The Architect shall interpret and decide matters concerning performance
of the Owner and Contractor under the requirements of the Contract Documents on
written request of either the Owner or Contractor. The Architect's response to
such requests shall be made with reasonable promptness and within any time
limits agreed upon.
2.6.16 Interpretations and decisions of the Architect shall be consistent with
the intent of and reasonably inferable from the Contract Documents and shall be
in writing or in the form of drawings. When making such interpretations and
initial decisions, the Architect shall endeavor to secure faithful performance
by both Owner and Contractor, shall not show partiality to either, and shall not
be liable for results of interpretations or decisions so rendered in good faith.
2.6.17 The Architect's decisions on matters relating to aesthetic effect shall
be final if consistent with the intent expressed in the Contract Documents.
2.6.18 The Architect shall render written decisions within a reasonable time on
all claims, disputes or other matters in question between the Owner and
Contractor relating to the execution or progress of the Work as provided in the
Contract Documents.
ARTICLE 3
ADDITIONAL SERVICES
3.1 GENERAL
3.1.1 The services described in this Article 3 are not included in Basic
Services unless so identified in Article 12, and they shall be paid for by the
Owner as provided in this Agreement, in addition to the compensation for Basic
Services. The services described under Paragraphs 3.2 and 3.4 shall only be
provided if authorized or confirmed in writing by the Owner. If services
described under Contingent Additional Services in Paragraph 3.3 are required due
to circumstances beyond the Architect's control, the Architect shall notify the
Owner prior to commencing such services. If the Owner deems that such services
described under Paragraph 3.3 are not required, the Owner shall give prompt
written notice to the Architect. If the Owner indicates in writing that all or
part of such Contingent Additional Services are not required, the Architect
shall have no obligation to provide those services.
3.2 PROJECT REPRESENTATION BEYOND BASIC SERVICES
3.2.1 If more extensive representation at the site than is described in
Subparagraph 2.6.5 is required, the Architect shall provide one or more Project
Representatives to assist in carrying out such additional on-site
responsibilities.
3.2.2 Project Representatives shall be selected, employed and directed by the
Architect, and the Architect shall be compensated therefor as agreed by the
Owner and Architect. The duties, responsibilities and limitations of authority
of Project Representatives shall be as described in the edition of AIA Document
B352 current as of the date of this Agreement, unless otherwise agreed.
3.2.3 Through the observations by such Project Representations, the Architect
shall endeavor to provide further protection for the Owner against defects and
deficiencies in the Work, but the furnishing of such project representation
shall not modify the rights, responsibilities or obligations of the Architect as
described elsewhere in this Agreement.
3.3 CONTINGENT ADDITIONAL SERVICES
3.3.1 Making revisions in Drawings, Specifications or other documents when such
revisions are:
.1 inconsistent with approvals or instructions previously given by the
Owner, including revisions made necessary by adjustments in the
Owner's program or Project budget:
.2 required by the enactment or revision of codes, laws or regulations
subsequent to the preparation of such documents; or
.3 due to changes required as a result of the Owner's failure to render
decisions in a timely manner.
3.3.2 Providing services required because of significant changes in the Project
including, but not limited to, size, quality, complexity. the Owner's schedule,
or the method of bidding or negotiating and contracting for construction, except
for services required under Subparagraph 5.2.5.
3.3.3 Preparing Drawings, Specifications and other documentation and supporting
data, evaluating Contractor's proposals, and providing other services in
connection Change Orders and Construction Change Directives.
3.3.4 Providing services in connection with evaluating substitutions proposed by
the Contractor and making subsequent revisions to Drawings, Specifications and
other documentation resulting therefrom.
3.3.5 Providing consultation concerning replacement of Work damaged by fire or
other cause during construction, and furnishing services required in connection
with the replacement of such Work.
3.3.6 Providing services made necessary by the default of the Contractor, by
major defects or deficiencies in the Work of the Contractor, or by failure of
performance of either the Owner or Contractor under the Contract for
Construction.
3.3.7 Providing services in evaluating an extensive number of claims submitted
by the Contractor or others in connection with the Work.
3.3.8 Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding.
3.3.9 Preparing documents for alternate, separate or sequential bids or
providing services in connection with bidding, negotiation or construction prior
to the completion of the Construction Documents Phase.
3.4 OPTIONAL ADDITIONAL SERVICES
3.4.1 Providing analyses of the Owner's needs and programming the requirements
of the Project.
3.4.2 Providing financial feasibility or other special studies.
3.4.3 Providing planning surveys, site evaluations or comparative studies of
prospective sites.
- --------------------------------------------------------------------------------
B141-1987 4
<PAGE>
3.4.4 Providing special surveys, environmental studies and submissions required
for approvals of governmental authorities or others having jurisdiction over the
Project.
3.4.5 Providing services relative to future facilities, systems and equipment.
3.4.6 Providing services to investigate existing conditions or facilities to
make measured drawings thereof.
3.4.7 Providing services to verify the accuracy of drawings or other information
furnished by the Owner.
3.4.8 Providing coordination of construction performed by separate contractors
or by the Owner's own forces and coordination of services required in connection
with construction performed and equipment supplied by the Owner.
3.4.9 Providing services in connection with the work of a construction manager
or separate consultants retained by the Owner.
3.4.10 Providing detailed estimates of Construction Cost.
3.4.11 Providing detailed quantity surveys or inventories of material, equipment
and labor.
3.4.12 Providing analyses of owning and operating costs.
3.4.13 Providing interior design and other similar services required for or in
connection with the selection, procurement or installation of furniture,
furnishings and related equipment.
3.4.14 Providing services for planning tenant or rental spaces.
3.4.15 Making investigations, inventories of materials or equipment, or
valuations and detailed appraisals of existing facilities.
3.4.16 Preparing a set of reproducible record drawings showing significant
changes in the Work made during construction based on marked-up prints, drawings
and other data furnished by the Contractor to the Architect.
3.4.17 Providing assistance in the utilization of equipment or systems such as
testing, adjusting and balancing, preparation of operation and maintenance
manuals, training personnel for operation and maintenance, and consultation
during operation.
3.4.18 Providing services after issuance to the Owner of the final Certificate
for Payment, or in the absence of a final Certificate for Payment, more than 60
days after the date of Substantial Completion of the Work.
3.4.19 Providing services of consultants for other than architectural,
structural, mechanical and electrical engineering portions of the Project
provided as a part of Basic Services.
3.4.20 Providing any other services not otherwise included in this Agreement or
not customarily furnished in accordance with generally accepted architectural
practice.
ARTICLE 4
OWNER'S RESPONSIBILITIES
4.1 The Owner shall provide full information regarding requirements for the
Project, including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems and site
requirements.
4.2 The Owner shall establish and update an overall budget for the Project,
including the Construction Cost, the Owner's other costs and reasonable
contingencies related to all of these costs.
4.3 If requested by the Architect, the Owner shall furnish evidence that
financial arrangements have been made to fulfill the Owner's obligations under
this Agreement.
4.4 The Owner shall designate a representative authorized to act on the Owner's
behalf with respect to the Project. The Owner or such authorized representative
shall render decisions in a timely manner pertaining to documents submitted by
the Architect in order to avoid unreasonable delay in the orderly and sequential
progress of the Architect's services.
4.5 The Owner shall furnish surveys describing physical characteristics, legal
limitations and utility locations for the site of the Project, and a written
legal description of the site. The surveys and legal information shall include,
as applicable, grades and lines of streets, alleys, pavements and adjoining
property and structures; adjacent drainage; rights-of-way, restrictions,
easements, encroachments, zoning, deed restrictions, boundaries and contours of
the site; locations, dimensions and necessary data pertaining to existing
buildings, other improvements and trees; and information concerning available
utility services and lines, both public and private, above and below grade,
including inverts and depths. All the information on the survey shall be
referenced to a project benchmark.
4.6 The Owner shall furnish the services of geotechnical engineers when such
services are reasonably requested by the Architect. Such services may include
but are not limited to test borings, test pits, determinations of soil bearing
values, percolation tests, evaluations of hazardous materials, ground corrosion
and resistivity tests, including necessary operations for anticipating subsoil
conditions, with reports and appropriate professional recommendations.
4.6.1 The Owner shall furnish the services of other consultants when such
services are reasonably required by the scope of the Project and are reasonably
requested by the Architect.
4.7 The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.
4.8 The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including auditing
services the Owner may require to verify the Contractor's Applications for
Payment or to ascertain how or for what purposes the Contractor has used the
money paid by or on behalf of the Owner.
4.9 The services, information, surveys and reports required by Paragraphs 4.5
through 4.8 shall be furnished at the Owner's expense, and the Architect shall
be entitled to rely upon the accuracy and completeness thereof.
4.10 Prompt written notice shall be given by the Owner to the Architect if the
Owner becomes aware of any fault or defect in the Project or nonconformance with
the Contract Documents.
4.11 The proposed language of certificates or certifications requested of the
Architect or Architect's consultants shall be submitted to the Architect for
review and approval at least 14 days prior to execution. The Owner shall not
request certifications that would require knowledge or services beyond the scope
of this Agreement.
- --------------------------------------------------------------------------------
5 B141-1987
<PAGE>
ARTICLE 5
CONSTRUCTION COST
5.1 DEFINITION
5.1.1 The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Architect.
5.1.2 The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable allowance
for the Contractor's overhead and profit. In addition, a reasonable allowance
for contingencies shall be included for market conditions at the time of bidding
and for changes in the Work during construction.
5.1.3 Construction Cost does not include the compensation of the Architect and
Architect's consultants, the costs of the land, rights-of-way, financing or
other costs which are the responsibility of the Owner as provided in Article 4.
5.2 RESPONSIBILITY FOR CONSTRUCTION COST
5.2.1 Evaluations of the Owner's Project budget, preliminary estimates of
Construction Cost and detailed estimates of Construction Cost, if any, prepared
by the Architect, represent the Architect's best judgment as a design
professional familiar with the construction industry. It is recognized, however,
that neither the Architect nor the Owner has control over the cost of labor,
materials or equipment, over the Contractor's methods of determining bid prices,
or over competitive bidding, market or negotiating conditions. Accordingly, the
Architect cannot and does not warrant or represent that bids or negotiated
prices will not vary from the Owner's Project budget or from any estimate of
Construction Cost or evaluation prepared or agreed to by the Architect.
5.2.2 No fixed limit of Construction Cost shall be established as a condition of
this Agreement by the furnishing, proposal or establishment of a Project budget.
ARTICLE 6
USE OF ARCHITECT'S DRAWINGS,
SPECIFICATIONS AND OTHER DOCUMENTS
6.1 The Drawings, Specifications and other documents prepared by the Architect
for this Project are instruments of the Architect's service for use solely with
respect to this Project and, unless otherwise provided, the Architect shall be
deemed the author of these documents and shall retain all common law, statutory
and other reserved rights, including the copyright. The Owner shall be permitted
to retain copies, including reproducible copies, of the Architect's Drawings,
Specifications and other documents for information and reference in connection
with the Owner's use and occupancy of the Project. The Architect's Drawings,
Specifications or other documents shall not be used by the Owner or others on
other projects, for additions to this Project or for completion of this Project
by others, unless the Architect is adjudged to be in default under this
Agreement, except by agreement in writing and with appropriate compensation to
the Architect.
6.2 Submission or distribution of documents to meet official regulatory
requirements or for similar purposes in connection with the Project is not to be
construed as publication in derogation of the Architect's reserved rights.
- --------------------------------------------------------------------------------
B147-1987 6
<PAGE>
ARTICLE 8
TERMINATION, SUSPENSION OR ABANDONMENT
8.1 This Agreement may be terminated by either party upon not less than seven
days' written notice should the other party fail substantially to perform in
accordance with the terms of this Agreement through no fault of the party
initiating the termination.
8.2 If the Project is suspended by the Owner for more than 30 consecutive days,
the Architect shall be compensated for services performed prior to notice of
such suspension. When the Project is resumed, the Architect's compensation shall
be equitably adjusted to provide for expenses incurred in the interruption and
resumption of the Architect's services.
8.3 If the Project is abandoned by the Owner, the Architect may terminate this
Agreement by giving written notice.
8.4 Failure of the Owner to make payments to the Architect in accordance with
this Agreement shall be considered substantial nonperformance and cause for
termination.
8.5 If the Owner fails to make payment when due the Architect for services and
expenses, the Architect may, upon seven days' written notice to the Owner,
suspend performance of services under this Agreement. Unless payment in full is
received by the Architect within seven days of the date of the notice, the
suspension shall take effect without further notice. In the event of a
suspension of services, the Architect shall have no liability to the Owner for
delay or damage caused the Owner because of such suspension of services.
8.6 In the event of termination not the fault of the Architect, the Architect
shall be compensated for services performed prior to termination based on the
percentage of completion of each phase of work set forth in Article 11.2.2
together with Reimbursable Expenses then due.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Unless otherwise provided, this Agreement shall be governed by the law of
the State of New York.
9.2 Terms in this Agreement shall have the same meaning as those in AIA Document
A201, General Conditions of the Contract for Construction, current as of the
date of this Agreement.
9.3 Causes of action between the parties to this Agreement pertaining to acts or
failures to act shall be deemed to have accrued and the applicable statues of
limitations shall commence to run not later than either the date of Substantial
Completion for acts or failures to act occurring prior to Substantial
Completion, or the date of issuance of the final Certificate for Payment for
acts or failures to act occurring after Substantial Completion.
9.4 The Owner and Architect waive all rights against each other and against the
contractors, consultants, agents and employees of the other for damages, but
only to the extent covered by property insurance during construction, except
such rights as they may have to the proceeds of such insurance as set forth in
the edition of AIA Document A201, General Conditions of the Contract for
Construction, current as of the date of this Agreement. The Owner each shall
require similar waivers from their contractors, consultants and agents.
9.5 The Owner and Architect, respectively, bind themselves, their partners,
successors, assigns and legal representatives to the other party to this
Agreement and to the partners, successors, assigns and legal representatives of
such other party with respect to all covenants of this Agreement. Neither Owner
nor Architect shall assign this Agreement without the written consent of the
other.
9.6 This Agreement represents the entire and integrated agreement between the
Owner and Architect and supersedes all prior negotiations, representations or
agreements, either written or oral. This Agreement may be amended only by
written instrument signed by both Owner and Architect.
9.7 Nothing contained in this Agreement shall create a contractual relationship
with or a cause of action in favor of a third party against either the Owner or
Architect.
9.8 Unless otherwise provided in this Agreement, the Architect and Architect's
consultants shall have no responsibility for the discovery, presence, handling,
removal or disposal of or exposure of persons to hazardous materials in any form
at the Project site, including but not limited to asbestos, asbestos products,
polychlorinated biphenyl (PCB) or other toxic substances.
9.9 The Architect shall have the right to include representations of the design
of the Project, including photographs of the exterior and interior, among the
Architect's promotional and professional materials. The Architect's materials
shall not include the Owner's confidential or proprietary information if the
Owner has previously advised the Architect in writing of
- --------------------------------------------------------------------------------
7 B141-1987
<PAGE>
the specific information considered by the Owner to be confidential or
proprietary. The Owner shall provide professional credit for the Architect on
the construction sign and in the promotional materials for the Project.
ARTICLE 10
PAYMENTS TO THE ARCHITECT
10.1 DIRECT PERSONNEL EXPENSE
10.1.1 Direct Personnel Expense is defined as the direct salaries of the
Architect's personnel engaged on the Project and the portion of the cost of
their mandatory and customary contributions and benefits related thereto, such
as employment taxes and other statutory employee benefits, insurance, sick
leave, holidays, vacations, pensions and similar contributions and benefits.
10.2 REIMBURSABLE EXPENSES
10.2.1 Reimbursable Expenses are in addition to compensation for Basic and
Additional Services and include expenses incurred by the Architect and
Architect's employees and consultants in the interest of the Project.
10.2.1.1 Reasonable expense of transportation in connection with the Project;
Reasonable expenses in connection with authorized out-of-town travel; and fees
paid for securing approval of authorities having jurisdiction over the Project.
10.2.1.2 Expense of reproductions, postage and handling of Drawings,
Specifications and other documents.
10.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rates.
10.2.1.4 Expense of renderings, models and mock-ups requested by the Owner.
10.2.1.5 Expense of additional insurance coverage or limits, including
professional liability insurance, requested by the Owner in excess of that
normally carried by the Architect and Architect's consultants.
10.2.1.7 Expense of facsimile, delivery services, meals during project meetings
and computer plotting. [See 12.6]
10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES
10.3.1 An initial payment as set forth in paragraph 11.1 is the minimum payment
under this Agreement.
10.3.2 Subsequent payments for Basic Services shall be made within 30 days of
the date of the invoice monthly and, where applicable, shall be in proportion to
services performed within each phase of service, on the basis set forth in
Subparagraph 11.2.2.
10.3.3 If and to the extent that the time initially established in Subparagraph
11.5.1 of this Agreement is exceeded or extended through no fault of the
Architect, compensation for any services rendered during the additional period
of time shall be computed in the manner set forth in Subparagraph 11.3.2.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES
10.4.1 Payments on account of the Architect's Additional Services and for
Reimbursable Expenses shall be made within 30 days of the date of the invoice.
10.5 PAYMENTS WITHHELD
10.5.1 No deductions shall be made from the Architect's compensation on account
of penalty, liquidated damages or other sums withheld from payments to
contractors, or on account of the cost of changes in the Work other than those
for which the Architect has been found to be liable.
10.6 ARCHITECT'S ACCOUNTING RECORDS
10.6.1 Records of Reimbursable Expenses and expenses pertaining to Additional
Services and services performed on the basis of a multiple of Direct Personnel
Expense shall be available to the Owner or the Owner's authorized representative
at mutually convenient times.
ARTICLE 11
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
11.1 PAYMENT of Forty Thousand Dollars ($48,000.00) shall be made upon execution
of this Agreement and credited to the Owner's account at final payment. This
payment represents the amount due for schematic design, which work is complete
as of the signing of this agreement.
11.2 BASIC COMPENSATION
11.2.1 FOR BASIC SERVICES, as described in Article 2, and any other services
included in Article 12 as part of Basic Services. Basic Compensation shall be
Two Hundred and Forty Thousand ($240,000.00) Dollars, which shall be paid in
accordance with Article 11.2.2.
(Insert basis of compensation, including stipulation of sums, multiples or
percentages and identify phases in which particular methods of compensation
apply, if necessary.)
- --------------------------------------------------------------------------------
B141-1987 8
<PAGE>
11.2.2 Where compensation is based on a stipulated sum or percentage of
Construction Cost, progress payments for Basic Services in each phase shall
total the following percentages of the Basic Compensation payable:
(Insert additional phase as appropriate.)
Schematic Design Phase: percent (20%)
Design Development Phase: percent (20%)
Construction Documents Phase: percent (45%)
Bidding or Negotiation Phase: percent (5%)
Construction Phase: percent (10%)
- ---------------------------------------------------------------------------
Total Basic Compensation: one hundred percent (100%)
11.3 COMPENSATION FOR ADDITIONAL SERVICES
11.3.1 FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as described in
Paragraph 3.2, compensation shall be computed as follows:
For each project representative $400.00 per half day
11.3.2 FOR ADDITOINAL SERVICES OF THE ARCHITECT, as described in Articles 3 and
12, other than (1) Additional Project Representation, as described in Paragraph
3.2, and (2) services included in Article 12 as part of Additional Services, but
excluding services of consultants, compensation shall be computed as follows:
(Insert basis of compensation, including rates and/or multiples of Direct
Personnel Expense for Principals and employees, and identify Principals and
classify employees, if required. Identify specific services in which particular
methods of compensation apply, if necessary.)
Principal $150.00 per hour
Senior Designer $ 90.00 per hour
Intermediate Designer $ 75.00 per hour
Junior Designer $ 60.00 per hour
Expediter $ 60.00 per hour
11.3.3 FOR ADDITIONAL SERVICES OF CONSULTANTS, including additional structural,
mechanical and electrical engineering services and those provided under
Subparagraph 3.4.19 or identified in Article 12 as part of Additional Services,
a multiple of One point one (1.1) times the amounts billed to the Architect for
such services.
(Identify specific types of consultants in Article 12, if required.)
11.4 REIMBURSABLE EXPENSES
11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph 10.2, and any other
items included in Article 12 as Reimbursable Expenses, a multiple of One point
one (1.1) times the expenses incurred by the Architect, the Architect's
employees and consultants in the interest of the Project.
11.5 ADDITIONAL PROVISIONS
11.5.2 Payments are due and payable Thirty (30) days from the date of the
Architect's invoice. Amounts unpaid Thirty (30) days after the invoice date
shall bear interest at the rate entered below. One and One Half (1 1/2) per cent
per month, compound interest.
(Insert rate of interest agreed upon.)
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Architect's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Specific legal advice
should be obtained with respect to deletions or modifications, and also
regarding requirements such as written disclosures or waivers.)
- --------------------------------------------------------------------------------
9 B141-1987
<PAGE>
ARTICLE 12
OTHER CONDITIONS OR SERVICES
(Insert descriptions of other services, identify Additional Services included
within Basic Compensation and modifications to the payment and compensation
terms included in this Agreement.)
12.1 During the construction phase, Architect or its consultant shall visit the
site at least two times per month, up to a maximum of four times per month, not
to exceed 36 visits in total during such phase. Site visits may be performed by
Larry Turk, George Langer or a competent designee of the Architect.
12.2 Architect shall coordinate, as required, with CareMatrix on the finishes
and materials. Owner is solely responsible for any compensation due to
CareMatrix.
12.3 As part of the Basic Services provided under this Agreement, Architect
shall assist the Contractor, as necessary, in obtaining Permits and the
Certificate of Occupancy.
12.4 Any disputes, controversies or claims arising under this Agreement shall be
resolved in a Court of law venued in New York County.
12.5 Notwithstanding anything to the contrary in the Agreement or in the annexed
Addendum, any services performed by the Architect in order to modify, change or
vary the design of the Project in any substantial manner, so as to substantially
reduce the construction cost of the Project shall be paid by the Owner to the
Architect on a time and materials basis in accordance with the rates described
in Articles 11.3.2 - 11.4.
12.6 The maximum amount to be paid to the Architect by the Owner for computer
plots is four thousand ($4,000) dollars.
12.7 The annexed Addendum forms a part of this Agreement between the Architect
and the Owner.
This Agreement entered into as of the day and year first written above.
Atlantic Development Group, LLC/
CareMatrix of Massachusetts, Inc. Metlzer/Mandl Architects, P.C.
OWNER ARCHITECT
/s/ Michael [Illegible] /s/ Marvin Meltzer Vice President
- ----------------------- --------------------------------
(Signature) (Signature)
Marvin Meltzer Vice President
- ----------------------- --------------------------------
(Print name and title)
- --------------------------------------------------------------------------------
B141-1987 10
<PAGE>
ADDENDUM "A" TO STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND ARCHITECT
The Standard Form of Agreement Between Owner and Architect, of the American
Institute of Architects, AIA Document B141, 1987 Edition, shall apply to and
form a part of this Addendum.
The following supplements modify, change, delete from, or add to the Standard
Form of Agreement, AIA Document B141. Where any Article of the Standard Form of
Agreement is modified or any paragraph, subparagraph, or clause thereof is
modified or deleted by these supplements, the unaltered provisions of that
Article, paragraph, subparagraph or clause shall remain in effect. In the event
of any conflict between the terms of the Standard Form of Agreement and the
terms of this Addendum, the terms of this Addendum shall prevail. The changes in
this Addendum shall be construed in reference to and in conjunction with any
changes made directly on the Standard Form of Agreement, AIA Document B141.
DEFINITIONS Add the following new definitions to the Standard Form of Agreement:
1. "Architect's Representative" refers to:
Marvin Meltzer, who shall be responsible for Administration on behalf of
Architect. Architect has represented to Owner that the Architect's
Representatives named in this Addendum shall be assigned to the Project as part
of the Basic Services and shall not be replaced by Architect without Owner's
consent, which consent may be withheld if Owner, in the Owner's sole
determination, determines that such replacement would have a detrimental effect
on the Project. In the event that with respect to any matter Marvin Meltzer is
unavailable for more than 24 hours or cannot be reached for more than 24 hours,
Owner may contact Don Henderson in lieu of Marvin Meltzer and treat Don
Henderson as Architect's Representative for the matter in question. Architect's
Representative shall not be changed without Owner's consent. In the event
Architect's Representative is changed without Owner's consent, it shall be
grounds for termination of this Agreement by Owner if such change persists for
more than ten (10) days after written notice from Owner objecting to Architect's
Representative. In such event such termination shall be considered termination
with cause.
2. "General Contract" refers to: The General Contract for Construction to
be entered into between the Owner and a general contractor to be determined,
together with all modifications, revisions and change orders thereto.
3. "Owner's Representative" refers to: Harry Nash, or such other person as
Owner may name from time to time in its sole discretion. In the event that with
respect to any matter Harry Nash is unavailable for more than 24 hours or cannot
be reached for
1
<PAGE>
more than 24 hours, Architect may contact Ed Vydra in lieu of Harry Nash and
treat Ed Vydra as Owner's Representative for the matter in question.
4. "Substantial Completion" refers to: Simultaneous occurrence of the
following conditions: (i) Certificate of Occupancy has been received for the
building; (ii) the Project has been completed to sufficient stage so that Owner
can occupy the Project for its intended use.
ARTICLE 1 - ARCHITECT'S RESPONSIBILITIES:
1.1 ARCHITECT'S SERVICES
1.1.2 Add the following at the end of subparagraph 1.1.2: If requested by Owner
or Contractor, Architect shall at all times use its best efforts and due
diligence to remain on the reasonable schedule set by the Owner and agreed to by
Architect and to cause the Approved Consultants (as such term is hereinafter
defined) or such other consultants as may be employed by the Architect to do the
same.
Architect shall also assist the Contractor in preparing a Project schedule
using the date specified in the General Contract as the outside date for
Substantial Completion of the Project and occupancy by Owner. Architect agrees
to assist the Contractor to keep to a schedule of the Project that will complete
the Project on or before the date specified in the General Contract.
1.1.4 Add the following new paragraph:
Notwithstanding anything to the contrary contained in this Agreement, Owner
and Architect acknowledge and agree that Owner is entering into this Agreement
in reliance upon Architect's professional abilities with respect to performing
the services. Architect covenants with Owner that it will use it's best efforts,
skill and judgment and abilities to design the Project in accordance with
professional standards and in compliance with all applicable municipal codes,
laws, ordinances and regulations. Completion and delivery of the Construction
Documents to Owner shall be representation and certification by the Architect
that the Construction Documents conform to all applicable governmental
regulations, statutes, ordinances and laws. Architect further represents and
covenants that in entering into this Agreement Architect agrees that there are
no obligations, commitments or impediments of any kind that will limit or
prevent performance by Architect of the services enumerated in this Agreement.
1.1.5 Add the following new subparagraph:
Architect represents, covenants, and agrees that all of the services to be
furnished by Architect under or pursuant to this
2
<PAGE>
Agreement, shall be of the standard and quality which prevail among architects
of professional competence and skill engaged in architectural practice in the
State of New York under the same or similar circumstances involving the design
and construction of a project such as the Project.
1.1.6 Add the following new subparagraph:
Architect agrees that the design of the Project will conform to the planned
use of the Project, as a hotel for senior citizens, and the laws and regulations
of all applicable governmental authorities. The Architect's duties as set forth
herein shall at no time be in any way diminished by reason of any approval by
the Owner of the Construction Documents nor shall the Architect be released from
any liability by reason of such approval by the Owner, it being understood that
the Owner at all times is ultimately relying on the Architect's skill and
knowledge in preparing the Construction Documents; provided, however, that the
foregoing provision shall not be construed as negating any approval given by
Owner pursuant to the provisions of this Agreement.
1.1.7 Add the following new subparagraph:
Architect further represents, covenants, and agrees that it shall, at its
own cost, correct any defects in its services by redesigning the Project, or
portions thereof, as soon as Architect becomes aware of such defects or is
notified of such defects. Upon becoming aware of, or receiving notice from
someone other than Owner of, such defects, Architect shall immediately notify
Owner of such defects. Should Architect refuse or neglect to correct such
defects by redesigning the Project, or portions thereof, within a reasonable
time after receiving notice requesting such remedial work, then Owner shall be
entitled to correct such defective design services at the expense of Architect.
This commitment by Architect is in addition to, and not in substitution for, any
other remedy for defective services which Owner may have at law or in equity.
1.1.8 Add the following new subparagraph:
All Architect's service shall be provided and performed by Architect
directly. No other subcontractor, consultant or any other person or entity shall
be used with respect to the Architect's services without the prior written
consent of Owner. Owner consents to the use of George Langer Associates,
consulting Engineer for electrical and mechanical design services. Architect
shall be responsible for Langer's fees; Owner shall reimburse Architect for
Langer's out of pocket expenses at the same rates at which Owner reimburses
Architects out of pocket expenses. Architect acknowledges and agrees that all
fees, costs and expenses of the Approved Consultants shall be the sole and
exclusive obligation of Architect.
3
<PAGE>
Architect hereby authorizes Owner to contact any subcontractor, consultant
or other person or entity used with respect to the performance of Architect's
services under this Agreement following a default by the Architect of any
material obligations contained in this Agreement, provided such default is not
cured, or commenced to be cured by Architect within 7 days of receipt of a
notice of such default, and authorizes each such person or entity to contact and
deal with the Owner in such circumstance. Architect agrees that upon default by
the Architect of any of its obligations contained in this Agreement or its
agreement with any such subcontractor, consultant or other person or entity
(provided such default is not cured or commenced to be cured by Architect within
7 days of receipt of a notice of such default) all rights under any agreement
with any such other person or entity otherwise exercisable by the Architect may
be exercised by the Owner and Architect hereby authorizes such other persons and
entities to deal directly with the Owner in such event.
ARTICLE 2 - SCOPE OF ARCHITECT'S BASIC SERVICES.
2.4 CONSTRUCTION DOCUMENTS PHASE
Add the following at the end of subparagraph 2.4.1:
Notwithstanding anything contained herein to the contrary, Architect agrees to
complete all Construction Documents within a reasonable time period set forth by
the Owner and agreed to by Architect. The Project Manual shall be delivered with
the Construction Documents. Architect shall design the project and complete
Construction Documents in sufficient detail and with the professional skill and
care such that the Project as represented in the Construction Documents conforms
to all applicable building codes and laws and is reasonably safe and sound for
its intended purpose. However, Architect and Owner acknowledge that the
Architect may issue minor clarifications and amendments to the Construction
Documents during the bidding and Construction Phase that comply with the
foregoing standard. Architect shall assemble a Project Manual for the Project
including bidding requirements, sample forms, and conditions of the contracts
and specifications for delivery to the Contractor.
2.6.2 Add the following at the end of subparagraph 2.6.2
Notwithstanding anything to the contrary contained in this Agreement, Owner and
Architect acknowledge and agree that Owner is entering into this Agreement in
reliance on Architect's professional abilities with respect to performing the
Basic Services, including the contract administration set forth in this
subparagraph. Architect accepts the relationship of trust and confidence as
established between it and Owner by this Agreement.
2.6.5 Add the following at the end of subparagraph 2.6.5:
4
<PAGE>
As part of the Basic Services, Architect shall visit the site as described in
paragraph 12.1 to observe the progress and quality of the Work completed to
determine if the work is being performed in a manner consistent with the General
Contract and Construction Documents, and in accordance with the Project's
Schedule and to attend monthly meetings with the Owner and the Contractor. In
this regard but subject to the foregoing limitation, Architect shall devote his
best efforts in accordance with his knowledge and experience. On the basis of
his limited on-site observations Architect shall keep Owner informed of the
progress and quality of the Work by monthly reports which will include, but not
be limited to, statements of the necessity for certain extras and change orders,
any changes in the construction costs estimates and deviations from the
Project's Schedule, and Architect shall guard Owner against defects and
deficiencies in the Work. Subject to the Architect's limited on-site
responsibilities, Architect shall use its best skill and judgment in providing
contract administration to the Project to complete the Project in the sound and
best manner within the time constraints set forth herein, and consistent with
interests of Owner. Architect also acknowledges that it shall be necessary to
meet with (at Architect's office) or participate in phone calls with the Owner's
Representative and the Contractor at such times as are reasonably requested by
Owner's Representative or the Contractor to respond to questions. Further, at
least once each month, it shall be necessary for Architect to review and approve
Contractor's and subcontractors' applications for payment, and Architect shall
certify to Owner all such payments to the Contractor and subcontractors, as
required by the General Contract.
2.6.6 Add the following at the end of subparagraph 2.6.6:
However, Architect shall be responsible to report to the Owner and the
Contractor any deficiencies or irregularities he observes in the Work or in the
acts of Contractor, any subcontractor or their agents and employees.
2.6.12 Add the following at the end of the first sentence of subparagraph
2.6.12:
", (ii) checking compliance with all applicable laws, codes and regulations and
the Design Criteria and (iii) determining whether or not the Work when completed
will be in compliance with the requirements of the General Contract and the
Construction Documents.
2.6.13 Add the following at the end of subparagraph 2.6.13:
Architect shall review all change orders and shall provide copies to Owner. In
the event a change order involves an aesthetic decision which can only be made
by the Owner, or involves an adjustment in the Contract sum or an extension of
the Contract time, Architect shall provide the change order to Owner for Owner's
5
<PAGE>
approval.
2.6.14 Add the following at the end of subparagraph 2.6.14
Notwithstanding the foregoing, the Architect shall not determine any date to be
the date of "Substantial Completion" unless all the conditions of Substantial
Completion have occurred.
2.7 Add the following new paragraph:
2.7 INSURANCE. Architect agrees to maintain and provide, either directly or
through one or more of the Approved Consultants at the option of the Architect,
evidence to Owner of the types of insurance coverage listed below from the date
of execution of this Agreement until final completion of the Work with at least
the following limits:
Comprehensive General $1,000,000
Liability (including contractual
hold-harmless liability)
Workers Compensation Statutory Limit
Professional Liability $1,000,000
(with errors and omissions
coverage)
If provided directly by the Architect, the professional liability coverage
will specifically provide coverage with respect to portions of the Work
undertaken by the Approved Consultants retained by the Architect. If provided by
one or more of the Approved Consultants, the professional liability coverage
will afford Owner with direct access to such insurance notwithstanding Owner's
lack of privity with such Approved Consultants.
ARTICLE 3 - ADDITIONAL SERVICES:
3.1 Add the following at the beginning of paragraph 3.1:
"Except to the extent included within the definition of Basic Services as
set forth in this Addendum,"
3.3 CONTINGENT ADDITIONAL SERVICES.
The services described -in subparagraphs 3.3.3 and 3.3.4 are part of the
Basic Services and shall be part of the Basic Compensation.
3.4.16 Add the following at the end of subparagraph 3.4.16:
Upon completion of the Project, Architect, as part of the Basic Services
and at no additional charge to the Owner, will
6
<PAGE>
review and approve as-built drawings which are furnished by the General
Contractor.
ARTICLE 4 - OWNER'S RESPONSIBILITIES:
4.10 Delete paragraph 4.10 and substitute the following:
4.10 If Owner's Representative observes or otherwise becomes aware of any fault
or defect in the Project or nonconformance with the General Contract prompt
written notice shall be given by the Owner to the Architect, provided, however,
this paragraph shall only apply to such knowledge of fault or defect as may be
obtained by Owner's Representative and it is specifically understood that Owner
shall have no obligation to investigate for the purpose of becoming aware of
such faults or defects. This paragraph only applies to such faults or defects as
may come to the actual knowledge of such Owner's Representative.
ARTICLE 6 - USE OF DRAWINGS:
6.1 Add at end of paragraph 6.1
It is expressly understood and agreed that all Drawings, Specifications and
other documents prepared by Architect are and shall be licensed for use by
Owner, and Owner shall retain all common law, statutory and other reserved
rights as licensee with respect thereto. Owner shall have the right to utilize
the drawings and specifications solely for this Project.
ARTICLE 7 - Arbitration:
Delete Article 7 in its entirety, and add new Article 7:
Prior to filing any action for enforcement of the provisions hereof or in the
event of a dispute between Owner and Architect regarding their duties and
obligations, Owner and Architect agree to meet in person with their counsel and
attempt to resolve any disputes. Owner and Architect specifically waive
arbitration to resolve any disputes.
ARTICLE 8 - TERMINATION, SUSPENSION OR ABANDONMENT:
8.5 Add the following at the end of paragraph 8.5:
Notwithstanding the foregoing, Owner shall be entitled to contest any payments
requested by Architect, which Owner in good faith believes are not due by
providing written notice to Architect of the amount contested together with
payment of any uncontested amounts within the seven (7) days provided in this
paragraph. During any suspension period, Owner shall not be liable to Architect
for any additional expenses incurred by Architect.
7
<PAGE>
ARTICLE 9 - MISCELLANEOUS PROVISIONS:
9.5 Add the following at the end of paragraph 9.5:
Architect acknowledges that this Agreement constitutes a contract for services
to be performed by Architect on behalf of Owner, and Architect shall have no
right to assign this Agreement without the prior written consent of Owner, which
consent may be arbitrarily withheld by Owner, at Owner's sole and absolute
discretion. Any attempted assignment in violation of this paragraph shall be
null and void. Architect acknowledges that Owner may assign of all its rights,
title and interests under this Agreement to any entity controlled by or
affiliated with the Owner. And upon such assignment shall be automatically
deemed released from all liability hereunder for any work performed by Architect
after receiving notice of the assignment, provided such assignee shall assume
this Agreement in writing. Owner shall remain liable for all amounts due and
Owing up to the date Architect receives notice of the assignment.
Architect acknowledges that Owner may also collaterally assign all of its
rights under this Agreement to any lender providing financing for the
construction of the improvements contemplated hereby and Architect agrees to
execute in favor of any such lender such instruments as such lender may
reasonably require to evidence the Architect's consent to such collateral
assignment and the Architect's agreement to subordinate its lien rights to the
lien of any documents executed in favor of such lender, to certify loan draw
requests, to permit such lender to utilize all work product produced by
Architect under this Agreement, provided Architect has been compensated for
same; to continue to perform its obligations under this Agreement for such
lender notwithstanding any default by Owner hereunder, provided Lender agrees to
pay any outstanding amounts due and to compensate Architect for any work
performed for such lender, to permit such lender to cure any such default by
Owner within such time period as may be reasonably requested by such lender.
ARTICLE 10 - PAYMENTS TO THE ARCHITECT:
10.2 REIMBURSABLE EXPENSES
10.2.1.1 Add to subparagraph 10.2.1.1
Owner or Contractor shall pay any fees of governmental agencies incurred in
securing governmental approvals for the Project.
10.2.1.3 Add the following at the end of subparagraph 10.2.1.3:
"provided, however, that any such overtime expenses required in order to achieve
Substantial Completion and attributable to the
8
<PAGE>
default of the Architect shall not be considered Reimbursable Expenses and shall
be part of the Basic Compensation."
10.2.1.5 Add the following at the end of subparagraph 10.2.1.5:
Architect shall not modify or cancel the required professional liability
insurance and other insurance coverage required by paragraph 2.7 without prior
written notification to Owner.
10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES.
10.3.2 Delete subparagraph 10.3.2 and substitute the following subparagraph:
10.3.2 Payments for Basic Services shall be made monthly based upon the
percentage of the architectural work completed as certified by the Architect.
Prior to the closing of any construction loan obtained by Owner, Architect shall
submit its invoices on the 25th day of each month. Following the closing of any
construction loan obtained by Owner, Architect shall submit its invoices
simultaneous with the General Contractor on the date of each month required by
such lender to allow Owner to process such invoices simultaneously. Upon receipt
of each payment, Architect shall provide a Partial Release of Lien acknowledging
Architect's receipt of such payment and releasing any right to file a lien for
services covered in Architect's requisition. Upon receipt of the final payment,
Architect shall provide a Final Release of Lien acknowledging Architect's
receipt of such final payment and releasing the right to file a lien for any
services performed under this Agreement for which the Architect has been
compensated.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES
10.4.1 Add the following at the end of subparagraph 10.4.1:
"Owner may also require reasonable supporting documentation to establish
the amount of such expenses incurred".
10.5.1 Add the following at the end of subparagraph 10.5.1:
"or as permitted by Section 12.12 of this Addendum."
ARTICLE 12 - OTHER CONDITIONS OR SERVICES:
12.8 Architect hereby represents and warrants to Owner that Architect is duly
licensed and registered in the State of New York bearing License No 10523
[Marvin Meltzer]
12.9 Architects' review, approval and coordination of Shop Drawings and Change
Orders are considered part of the Basic Services under this Agreement, unless A
Change Order results in a material alteration in the scope of the Project.
9
<PAGE>
12.10 Default In the event of default under this Agreement the non defaulting
party shall have all remedies available at law and in equity including
consequential damages and/or specific performance.
12.11 Indemnification 12.11.1 To the fullest extent permitted by law, Architect
shall indemnify, defend and hold harmless the Owner, and its agents or employees
from and against all claims to damages, losses, costs and expenses, included but
not limited to attorney's fees and court costs ("Liabilities") (1) which are
related to any sums owed to the Approved Consultants for work prepared by them
at the request of the Architect provided Owner shall have paid the sum in
question to Architect, or (2) which arise or result from Architect's default
under this Agreement.
12.11.2 Nothing contained in this Section 12.11.2 shall be construed to relieve
Architect from any liability to Owner for any Liability caused in whole or in
part by any negligent act or omission of Architect or anyone directly or
indirectly employed by Architect or anyone for whose acts Architect may be
liable.
12.12 Payment to Architect. Any provision hereof to the contrary
notwithstanding, Owner shall not be obligated to make any payment to Architect
hereunder if any one or more of the following conditions occur or exist:
1. Architect is in default in any of its material obligations hereunder or
otherwise is in material default under this Agreement; and has failed to cure,
or commence to cure such default within 7 days after the receipt of written
notice.
2. Any part of such payment is attributable to the services which are not
performed in accordance with this Agreement, provided, however, such payment
shall be made as to the part thereof attributable to services which are
performed in accordance with this Agreement; or
3. Architect has failed to make payments promptly to consultants or other
third parties retained by the Architect in connection with the services for
which Owner has made payments to Architect.
Owner and Architect have executed this Addendum on July 12, 1996.
OWNER: ARCHITECT:
/s/ [Illegible] /s/ [Illegible]
- ---------------------------------- -----------------------------------
Atlantic Development Group, LLC Meltzer/Mandl Architects, P.C.
/s/ [Illegible]
- ----------------------------------
CareMatrix of Massachusetts, Inc
10
<PAGE>
EXHIBIT C
to
Turnkey Construction Agreement
Personal Property
(to be provided)
Glen Cove
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the ____ day of
October, 1996, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 ("Manager"), and The Mayfair at Glen Cove, LLC, a New York
limited liability company, with its principal places of business at c/o
Chancellor of Glen Cove, Inc., 197 First Avenue, Needham, Massachusetts 02194
and Hassett-Belfer Senior Housing, LLC, 40 Cutter Mill Road, Suite 503, Great
Neck, New York 11021 (the "Owner").
WHEREAS, the Owner is the owner of The Mayfair at Glen Cove, an eighty (80)
unit senior housing facility to be located in Glen Cove, New York (the
"Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost; and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility consistent with the Budget (as hereinafter defined) and under the
general supervision and direction of the Owner which include, but are not
limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the rights of the Owner
under Section 2.1 of this Agreement to approve the hiring, disciplining and
termination of the Executive Director, the Assistant Administrator and Director
of Resident Services) all personnel involved in the administration and
day-to-day operation of the Facility, including, without limitation, management,
resident assistance and other related personnel, custodial, food service,
cleaning, maintenance and other operational personnel, and secretarial or
bookkeeping personnel, each of whom, other than the Executive Director (as
hereinafter defined), shall be employees of the Owner; supervise and perform the
accounting, billing,
<PAGE>
purchasing and bill payment functions for the Facility; establish systems of
accounts and supervise the maintenance of ledgers and other primary accounting
records by the personnel of the Facility; supervise the financial affairs of the
Facility; establish and supervise the implementation of operating and capital
budgets, including those required to establish reimbursement rates, if any, with
respect to state or federal entitlement programs as well as self-pay rates;
prepare and maintain true, complete and accurate records necessary for the
preparation of such operating budgets; determine which items of cost and expense
properly relate to resident care; establish and administer financial controls
over the operation of the Facility, develop and establish financial standards
and norms by which the income, costs and operations of the Facility may be
evaluated; serve as advisor and consultant in connection with policy decisions
to be made by the Owner; furnish reports to the Owner as the Owner may
reasonably request and provide the Owner with economic and statistical data in
connection with or relative to the operations of the Facility; represent the
Facility in its day-to-day dealings with creditors, residents, personnel, agents
for collection, and insurers; act as agent for the Owner in disbursing or
collecting the funds of the Facility and in paying the debts and fulfilling the
obligations of the Facility; coordinate and supervise a marketing plan for the
Facility to insure that the Facility obtains full occupancy as soon as possible
and, after the Facility has achieved full occupancy, assist in the development
of an annual marketing plan and budget to maintain the resident census at a
proper level; and do all other things necessary or proper for the daily
operation and management of the Facility, including everything necessary to
ensure compliance with all applicable local, state and federal laws governing or
applicable to senior housing facilities. In addition, in order to plan for
current and future operations and to establish short-term and long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly (twice each month during
the first twelve (12) months of operation) basis with Owner's representatives
and the Executive Director to review financial and operational statistics of the
Facility. The Executive Director also will attend monthly regional administrator
meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance
with all applicable laws;
(ii) supervise and direct the management and operation of the
Facility, exercising the degree of care used by an experienced management
company, given the financial resources available to the Facility, the location
of the Facility, the restrictions of applicable laws, and other existing
circumstances; and
(iii) obtain the Owner's prior consent (which shall not be
unreasonably withheld) as to all major policy and business matters relating to
the Facility.
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and hire a
qualified Executive Director (provided, however, that the wages, salaries and
other compensation of the
2
<PAGE>
Executive Director shall be the responsibility of the Owner as set forth in
Section 4.2) who shall be responsible for the functional operation of the
Facility and supervision of personnel at the Facility on a day-to-day basis, as
well as all resident assistance, custodial, food service, cleaning, maintenance,
secretarial and bookkeeping personnel for the day-to-day operations of the
Facility. The Executive Director shall be the employee of the Manager and all
such other personnel shall be employees of the Owner, and the Owner shall retain
full responsibility for payment of wages, salaries and other compensation and
benefits for the Executive Director and such other employees. The Manager shall,
subject to approval by the Owner, establish necessary and desirable personnel
policies and procedures, wage structures and staff schedules. The Manager,
subject to approval by Owner, shall have authority to hire, discipline, promote
and discharge employees of the Owner who participate in the day-to-day operation
and administration of the Facility. Both the Manager and the Owner must approve
the hiring and/or firing of the Executive Director, Assistant Administrator and
the Director of Resident Services, which approval shall not be unreasonably
withheld or delayed. The Manager shall: (i) maintain or cause to be maintained
payroll records and prepare weekly and monthly payrolls, withholding taxes and
Social Security taxes; (ii) prepare and submit all required state and federal
tax or benefit returns required with respect to employees, including, without
limitation, the returns required by FICA, FUTA and all applicable unemployment
compensation laws; (iii) maintain in force all required levels of workers'
compensation insurance; and (iv) prepare and submit to the Owner any
certificates of payroll expenses as may be reasonably requested. The Manager
shall not be liable to any employee of the Facility for wages, salaries and
other compensation and benefits, or to the Owner, unless the Manager was
specifically required to obtain the approval of the Owner before committing to a
salary or benefit and such approval was not obtained. The Manager shall not be
liable to the Owner or others for any action or omission on the part of any
employee of the Owner of the Facility, unless the employee was acting under the
express direction of the Manager or unless such employee was following an
express policy or procedure of the Manager and such direction, policy or
procedure is subsequently determined to be the result of gross negligence. The
Manager shall provide the Owner with monthly reports of all hiring, disciplinary
actions, promotions and firings at the Facility for the month, no later than
twenty (20) business days following each month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager attempts to notify the Owner on a concurrent basis). The
Manager shall prepare and submit to the Owner any certificates of purchasing
expenses incurred for the Facility as may be reasonably requested. All volume
discounts and savings realized by the Manager relating to the Facility shall be
entirely passed through to the Facility.
3
<PAGE>
2.3 Collection of Accounts. The Manager shall supervise the Facility
bookkeeping personnel which shall prepare and submit bills and collect for the
account of the Owner any and all moneys owing to the Owner from residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record and
bookkeeping system for the operation and conduct of business of the Facility in
accordance with generally accepted accounting principles consistently applied.
Books and records at the Facility may be maintained by an employee of the Owner
under the supervision of the Manager. Full books of account with entries of all
receipts and expenditures related to the operation of the Facility shall be
maintained at the offices of the Manager and shall at all times during normal
business hours be open for inspection by representatives of the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after the
close of each calendar month, a balance sheet as of the end of the month and a
statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after the
close of each fiscal year, a year-end compilation report, including a balance
sheet as of the end of such year and a statement of income and retained
earnings;
(c) within sixty (60) days after the close of each fiscal year, an
annual audit of the Facility's records (by a public accounting firm selected by
the Owner), the cost of which shall be paid for by the Owner; and
(d) such other and further reports or calculations as may be required
under any financing terms in accordance with the deadlines set forth in any
Financing Agreement.
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. At least sixty (60) days prior to each fiscal year that
commences during the term of this Agreement, the Manager shall submit to the
Owner a proposed budget (the "Budget") projecting the revenue to be available
and funds to be required during such fiscal year in order to operate the
Facility and make capital improvements that may be required in order to keep the
Facility's physical plant in good condition and repair. The Budget shall be
based upon data and information then available to the Manager and shall include,
without limitation,
4
<PAGE>
estimated salaries and fringe benefits for all employee groups, projected
staffing patterns for the Facility, estimates of required purchases for
supplies, inventory, food and similar items, and an estimate of the level of
rates and charges sufficient to generate revenue necessary to operate the
Facility and make capital improvements projected in the Budget. The Owner shall,
within fifteen (15) business days following receipt of such Budget, notify the
Manager of either the Owner's approval (which approval shall not be unreasonably
withheld) of the Budget or those items of which Owner approves and those items
of which Owner disapproves. As soon as reasonably practical thereafter, the
Owner and the Manager shall attempt to establish a mutually agreeable Budget of
the Facility. In the event that the Owner does not either approve, or
disapprove, in total or in part, the Budget within such fifteen (15) business
day period, as provided herein, then such Budget as proposed by the Manager
shall be deemed approved by the Owner, and the Manager shall be authorized to
implement such program. If any Budget shall not have been approved by the Owner
by the beginning of the fiscal year, the Manager may act in reliance upon the
Budget for the immediately preceding fiscal year, and may make adjustments to
such Budgets provided that the same will not cause the net operating income for
the Facility to vary from the net operating income for the previous year by more
than five percent (5%). The projected Budget submitted by the Manager to the
Owner shall be an estimate of revenue and costs, and the Owner acknowledges that
the projected revenue may not be actually received, and (ii) projected costs may
be exceeded by actual expenses and capital expenditures incurred in connection
with the operation and maintenance of the Facility. By submitting such a
projected Budget, the Manager will not be providing a guarantee or warranty as
to the projected revenue, expenses, or capital expenditures of the Facility.
However, the Manager will at all times endeavor to operate and maintain the
Facility as efficiently and profitably as possible, consistent with the terms of
this Agreement and the projected Budget.
2.8 Insurance. The Manager shall obtain, at the Owner's expense, on
behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall coordinate, supervise and implement
the agreed upon marketing plan (which plan is subject to the Owner's reasonable
approval) for the
5
<PAGE>
Facility during the fill-up phase (the "Marketing Plan"). Monthly statistical
census analysis reports (except during the first twelve (12) months after the
Facility is open, during which period reports shall be prepared weekly) will be
generated by the Manager and delivered to the Owner. The Manager will recommend
adjustments in the Marketing Plan as needed to achieve full occupancy. For
purposes of this Agreement, the Facility will be considered to have achieved
stabilized occupancy ("Stabilized Occupancy") when ninety-five percent (95%) of
its units have been occupied for a continuous ninety (90) day period. The
Manager will assist the management staff in the continued development and
coordination of advertising and promotional materials, internal and external
public relations programs, sales and staff development programs, and customer
satisfaction programs. The Manager shall assist the Facility's management staff
to develop a yearly Marketing Plan and budget based upon the Facility's yearly
census program and image.
2.11 Administrative. The Manager shall recommend the establishment of,
and implement and supervise procedures, including a policies and procedures
manual, to provide staff review of all operational areas, which status shall be
reviewed in regularly scheduled quarterly meetings and at other meetings as may
be deemed necessary or desirable by the Owner.
2.12 Plant and Maintenance.
(i) the Manager shall supervise the provision of all preventive
maintenance and, to the extent deemed feasible by the Manager and the Owner, the
services of regular Facility maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner regarding
entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
2.13 Access to Facility and Books and Records. Manager shall provide
the Trustee, any Significant Owner and their representatives with access to the
Facility and its books an records upon three (3) Business Days' notice and shall
make available to the foregoing parties its representatives acceptable to a
Majority of Owners to discuss the affairs of the Facility upon reasonable
notice. Manager shall provide to the Owner the information and materials in the
Manager's possession that the Owner is required to furnish under the Financing
Agreement.
2.14 Notice. Manager shall provide the Owner prompt written notice of
any Default or Event of Default under the Financing Agreements of which Manager
has actual knowledge.
3. Management Fee.
3.1 Base Management Fee. As compensation for the services to be
rendered by the Manager during the term of this Agreement, the Manager shall pay
itself, at its principal office given below (or at such other place as the
Manager may from time to time designate in writing), and at the times
hereinafter specified, a monthly management fee (the "Management
6
<PAGE>
Fee") during the terms of this Agreement equal to five percent (5%) of Net
Revenues. The Management Fee will be paid in arrears and shall be due and
payable on or before the fourth (4th) business day prior to the end of each
month following the month in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received (excluding any security deposits and investment earnings on any amounts
invested pursuant to any Financing Agreement) from the operation of the
Facility, including, without limitation, all revenue of the Facility for or on
account of any and all goods provided and services rendered or activities during
the period from the date of this Agreement and thereafter, the gross dollar
amount of all such receipts by the Facility from or on behalf of residents
directly connected with the Facility. For purposes of determining the Manager's
compensation pursuant to this Agreement, Gross Revenues shall not include the
proceeds of insurance (other than business interruption or expense insurance),
extraordinary items or the gains upon disposition of assets.
3.2 Subordination of Management Fee. (a) The Manager acknowledges that
its rights to payment are subject to and are subordinated under the Financing
Agreement. In the event that the Manager's fees and expenses are unable to be
paid because of the restrictions of the Financing Agreement, the Manager agrees
that its sole recourse hereunder shall be to terminate this Agreement but that
it shall not be entitled to damages hereunder other than to recover sums due and
owing to it for services rendered and expenses incurred to the date of
termination. In the event that the Manger does not so elect to terminate this
Agreement, the foregoing shall not be construed to be a waiver by any unpaid
fees and expenses. Furthermore, the Manager agrees that so long as any Bond
remains Outstanding, the Manager shall not, without the prior written consent of
a Majority of Owners, collect or attempt to collect all or any part of its
management fees and expenses whether through commencement of proceeding against
the Owner or otherwise, or join with any creditor in any such proceeding or any
Reorganization proceeding unless such management fees and expenses could be paid
under the terms of the Financing Agreement.
(b) Except as otherwise provided in the Financing Agreement, so long
as there is a payment default outstanding under the Bonds, the Manager shall not
demand or accept from the Owner or any other person any payment or additional
collateral with respect to its unpaid management fees.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following expenses
incurred by it in the management of the business and properties of the Facility:
(a) Salary and expenses (including, without limitation, payroll taxes,
costs of employee benefit plans, travel, insurance, and fidelity bonds) of all
of the Manager's home office personnel and overhead.
7
<PAGE>
(b) Salary and expenses (including, without limitation, payroll taxes,
cost of employee benefit plans, travel, insurance and fidelity bonds) of
financial and accounting personnel employed by the Manager to maintain
accounting books and records of the Facility, except as provided below.
4.2 Owner Expenses. Except as otherwise expressly provided herein, the
Owner shall bear all of the expenses of operating and financing the Facility,
and without limiting the generality of the foregoing, it is specifically agreed
that the following expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons expressly
retained by the Owner, or retained by the Manager for the account of the Owner
with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed by the Facility and
the Executive Director.
(b) Principal, interest and discounts on indebtedness incurred or
assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the existence,
operation, receipts, income or property of the Owner, provided, however, that
all interest and penalties incurred as a result of the Manager's failure to
timely file all returns which the Manager is required to file pursuant to this
Agreement, or to make timely payment of all taxes, levies, imposts, or other
charges, to the extent that sufficient funds were available to the Manager as of
the date such payments were due, shall be the responsibility of the Manager.
(d) Supplies and equipment, food, fuel, kitchen and food service
equipment, linens, beds, furniture, clothing and all other supplies and
equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the ownership of
real and personal property devoted, used, or consumed in the business of the
Facility, including, without limitation, purchase and/or construction of the
land and buildings used for such purpose, maintenance, repair and improvement of
property, all real estate and personal property taxes assessed, premiums for
property and liability insurance on property owned by the Owner, brokerage
commissions, and fees and expenses of consultants, managers, or agents retained
directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the Facility, any
other litigation or proceedings to which the Owner is a party. However, such
fees shall not include those fees resulting from or arising out of the
negligence by the Manager. In the event that there are insufficient funds
available to the Manager to pay expenses which the Manager is authorized to
incur and pay hereunder, including, without limitation, any taxes to be paid on
behalf of the Owner by the Manager, the Manager shall promptly notify the Owner
of the
8
<PAGE>
amount necessary to cure and the reason for such deficit and the Owner shall
provide such necessary funds to the Manager within ten (10) days after receipt
of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall rate
structure of the Facility and shall supervise the issuance of bills and the
collection of accounts for the Owner provided that the same do not fall below
the projections in the Budget by more than ten percent (10%), in which event the
Manager shall obtain the approval of the Owner. The Manager shall take
possession of and endorse the name of the Owner on all notes, checks, money
orders, insurance payments, and any other instruments received in payment of
accounts described below. The Manager shall not expend any monies for expenses
which exceed by more than ten percent (10%) the amount budgeted for such
expenses in the Budget, without the approval of the Owner.
(ii) Subject to the terms of the Financing Agreement, the Manager
shall establish such accounts for the Facility in the Owner's name, separate
from all other accounts and funds of the Manager, with a bank or banks whose
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") as it
deems necessary or desirable. The Manager, on behalf of the Owner, shall use
reasonable efforts to collect (using legal counsel approved by the Owner, if
necessary) all sums due and owing to Owner in connection with the operation of
the Facility. The Manager and the Owner shall deposit into such accounts all
monies furnished by the Owner as working funds and all receipts and monies
arising from the operation of the Facility or otherwise received by the Owner or
by the Manager for or on the behalf of the Owner.
(iii) Draws on such accounts may be made by the sole signature of an
authorized representative of the Manager or the Owner (or by wiring instructions
from such authorized representative of the Manager or the Owner) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Manager, for the term of
this Agreement may withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Manager shall make disbursements and
payments from such accounts consistent with the Budget, on behalf and in the
name of the Owner, in such amounts and at such times as are required in
connection with, first, payments required by any Financing Agreement, and
second, payments of ownership, maintenance and operating expenses of the
Facility and the other costs, expenses and expenditures provided for in this
Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers. Notwithstanding any
affiliation between the Manager and a member of the Owner, the Manager
9
<PAGE>
and the Owner acknowledge that all dealings between the Owner and the Manager
are to be conducted on an arms length basis.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue for an initial term
of fifteen (15) years commencing on the date the Facility is opened for
occupancy, and ending on the last day of the calendar month in which the
fifteenth (15th) anniversary of such opening date occurs (the "Original
Expiration Date"). The Owner and the Manager agree to execute a certificate
setting forth the date on which the initial term commences promptly after such
opening. Thereafter, this Agreement shall be renewed for up to two (2)
additional five (5) year terms only if the Owner sends the Manager written
notice no less than ninety (90) days prior to the then applicable Expiration
Date that it wishes to have the Agreement renew beyond the then applicable
Expiration Date. As used herein the term "Expiration Date" shall mean the later
of the Original Expiration Date, or the date to which this Agreement has been
extended as provided in this Section 7.1.
7.2 Termination for Cause. Either party may terminate this Agreement by
delivering thirty (30) days written notice (a "Termination Notice") to the other
party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the operation of the
Facility;
(ii) if any party files or has a petition or complaint in receivership or
bankruptcy filed against it which has not been dismissed within ninety (90) days
of such filing;
(iii)(A) the failure of the Facility to maintain a Debt Service Coverage
Ratio (as defined below) of at least 1.00 for any twelve (12) consecutive months
after the earlier to occur of (1) the Facility reaching stabilized occupancy
(ninety five percent (95%) of the Facility's units having been occupied for a
continuous ninety (90) day period) and (2) twenty-four (24) months after the
Facility is opened; (B) the failure of the Facility to maintain a debt service
coverage ratio of at least 1.00 for the next succeeding six (6) month period;
and (C) the recommendation from an independent management consultant selected by
the Owner and approved by the Manager that the Manager be terminated;
(iv) the failure of the Facility to maintain a Debt Service Coverage Ratio
of at least 1.00 for any twelve (12) consecutive months (the "Initial Period")
after the occurrence of the events described in subsections (iv)(A) and (iv)(B)
above and (B) the subsequent failure of the Facility to maintain a Debt Service
Coverage Ratio of at least 1.00 for the twelve (12) month period commencing on
the first (1st) day of the seventh (7th) month of the Initial Period; and (C)
the recommendation from an independent management consultant selected by the
Owner and approved by the Manager that the Manager be terminated; and
(v) the breach by any party (the "Breaching Party") of any other material
provision in, or obligation imposed by, this Agreement which violation shall
have not been cured to the reasonable satisfaction of the other party (the
"Claiming Party") within thirty (30) days following
10
<PAGE>
the date on which the Claiming Party delivers notice to the Breaching Party
describing with specificity both the claimed breach and the actions required to
be taken in order to cure the claimed breach; provided that in the event that
the claimed breach is not reasonably susceptible of being cured within thirty
(30) days, the cure period shall be extended for such additional time as may be
reasonably required, provided further that in the event that the Claiming Party
delivers a Termination Notice and the Breaching Party commences legal
proceedings contesting the Termination Notice and the Breaching Party commences
legal proceedings contesting the termination within thirty (30) days following
delivery of the Termination Notice, then this Agreement shall not terminate
unless and until a final judicial resolution of such legal proceedings beyond
the expiration of any appeal period has been issued upholding said termination.
For purposes hereof, Debt Service Coverage Ratio shall mean the ratio of
Cash Available for Debt Service (as defined below) for the applicable period to
the debt service for all long term indebtedness for such period. Cash Available
for Debt Service shall mean, with respect to a particular period, the following
(all determined in accordance with generally accepted accounting principles):
(a) net operating revenues for such period; less (b) all operating expenses for
such period; plus (c) to the extent included in operating expenses, expenses
incurred during such period in respect of (i) the debt service on all long term
indebtedness, (ii) the amortization of financing charges on all long term
indebtedness, (iii) the amortization of acquisition costs attributable to the
acquisition of the Facility, and (iv) depreciation attributable to the Facility
and any other non-cash items.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In addition
to the provisions of Section 7.2 above, the Manager may terminate this Agreement
upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
7.4 Termination Upon Recommendation of Management Consultant. In
addition to the provisions of Section 7.2 hereof, the Owner may terminate this
Agreement in the event that either: (a) such termination is recommended by a
Management Consultant required to be retained pursuant to the Financing
Agreement and any of the conditions of Section 6.20(f) of the Lease Agreement
shall have been satisfied or (b) the Manager fails to implement any
recommendation within a reasonable period of time made in the report of a
Management Consultant required to be retained pursuant to the Financing
Agreement; unless, in any such event, the requirement to so terminate is waived
in writing by the holders of 66 2/3% in aggregate principal amount of Bonds
Outstanding.
7.5 Notice to Holders. In the event that the Owner defaults under
Section 7.2 or 7.3 of this Agreement, simultaneously with the delivery of notice
of any such default to the Owner, and as a condition to the effectiveness
thereof, the Manager shall deliver a copy of such notice to the Holders at the
address set forth in the Lease Agreement. The Holders shall at their option,
have the right to cure any such default within the cure period provided herein.
11
<PAGE>
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, from, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or negligence, or for Costs incurred or suffered by the Manager as a
result of the Manager's failure to keep true, accurate and complete records. The
Manager shall indemnify the Owner and hold it harmless of, from and against all
Costs incurred or suffered by the Owner as a result of any of the Manager's
fraud, willful misconduct, or negligence, or as a result of the Manager's
failure to submit proper reports to the appropriate regulatory agencies, or to
keep true, accurate and complete records.
9. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
10. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
11. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the State of New York.
Any change in any applicable law which has the effect of rendering any part of
this Agreement invalid, illegal, or unenforceable shall not render the remainder
of this Agreement invalid, illegal, or unenforceable, and the parties hereto
agree that in the event that any part of this Agreement is rendered invalid,
illegal, or unenforceable, that they shall negotiate in good faith to amend any
such part of this Agreement so as to comply with any such law, as amended, and
further the respective objectives of the parties hereto.
12. Assignment. The Manager may not assign its interest in this Agreement,
without the prior written consent of the Owner, which consent shall not be
unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing,
the Manager may assign its interest in this Agreement to any entity provided
that (i) such entity shall be wholly-owned (directly or indirectly) by the
Manager's parent corporation immediately after the merger with The Standish Care
Company ("CareMatrix Corporation") and (ii) upon such assignment, CareMatrix
Corporation shall remain liable for the Manager's obligations hereunder. The
Owner shall be permitted to assign its rights hereunder and the Manager hereby
consents to the assignment of this Agreement to the Trustee under the Financing
Documents.
13. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
14. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
12
<PAGE>
15. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, or by facsimile transmission to the other party at the addresses
listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert Kaufman, President
Fax: (617) 433-1190
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
Fax: (617) 433-1073
As to Owner: The Mayfair at Glen Cove, LLC
c/o Chancellor of Glen Cove, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: James M. Clary, III, Esq.
Fax: (617) 433-1073
and The Mayfair at Glen Cove, LLC
c/o Hassett & Belfer Senior Housing, LLC
40 Cutler Road
Suite 503
Great Neck, New York 11021
Attention: Andrew B. Belfer
William D. Hassett
Fax: (516) 482-6921
cc: Jordan E. Yarrett, Esq.
Battle Fowler LLP
Park Avenue Tower
77 East 55th Street
New York, New York 10022
Fax: (212) 856-7816
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail
13
<PAGE>
or hand delivered shall be deemed received upon delivery or when delivery is
refused to the office or address of the addressee.
16. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and management books are
and will remain the property of the Manager. All financial management forms,
documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, financial accounting packages and outcome information systems are and
will remain the property of the Manager. The Manager shall deliver to the Owner
copies of the foregoing documents upon request from the Owner. Upon termination
of this Agreement, the Owner shall have the option to purchase operational
material belonging to the Manager, except for the financial accounting packages
and outcome information systems, at a mutually agreed upon price.
17. Non-Compete Area.
(a) The Manager agrees that it shall not (nor shall any successors,
assigns or Affiliates (as such term is defined in 17 CFR ss. 230.405) engage in
the development, management, ownership or operation of any assisted living or
senior housing facility or project acquisition, in any capacity whatsoever,
without the prior written consent of the Owner, in the area outlined on the map
attached hereto as Exhibit A (the "Designated Area") until the expiration of
this Agreement. Notwithstanding the foregoing, in the event that either member
of the Owner (or any Affiliate of either) identifies any such project within the
Designated Area during the term hereof and the other party does not elect to
participate in the development of such project, then the provisions of this
Section 17 shall not apply to such project.
(b) The Manager agrees that if there shall have occurred and be
continuing an Event of Default under Section 8.01 (a)(1) or 8.02(a)(2) of the
Indenture and an Event of Default under Section 8.01 (A)(5) of the Indenture as
a result of a draw on the Debt Service Reserve Fund, it shall not develop or
operate or participate in the development or operation or oversight of any
assisted living facility within three (3) miles of the Facility other than any
facility with respect to which it has entered into a commitment to purchase the
land on which the facility is to be developed unless the written consent of a
Majority of Owners is obtained. The provisions of this Section 17(b) shall run
to and inure to the benefit of the Trustee.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
l9. Manager to Cooperate with Owner. The Manager covenants that it will
cooperate with the Owner to assist the Owner to meet its obligations under the
Financing Agreement.
14
<PAGE>
20. Third Parties. This Agreement shall be binding upon, and shall inure to
the benefit of the parties successors and assigns. In addition, the Owner and
the Manager acknowledge and agree that the Trustee is an intended third party
beneficiary of the terms and provisions of this Agreement.
21. Definitions.
21.1 Any capitalized terms used and not defined herein shall have the
meaning given such term in the Financing Agreement.
21.2 The following terms as used in this Agreement shall have the meanings
given:
"Financing Agreement" shall mean the Bonds, the Company Lease, the Lease
Agreement, the Mortgage, Assignment and Security Agreement, the Environmental
Compliance Agreement, the Indenture, the Security Agreement, the Tax Compliance
Agreement and the Tax Regulatory Agreement and any other agreement now or
hereafter delivered as security for the Bonds or the Company's obligations under
any Financing Document.
"Reorganization" shall mean (i) any insolvency or bankruptcy proceeding, or
any receivership, liquidation, reorganization or other similar proceeding in
connection therewith, relative to the Owner or its property, or (ii) any
proceedings for voluntary liquidation, dissolution or other winding-up of the
Owner and whether or not involving insolvency or bankruptcy, or (ii) any
assignment or receivership for the benefit or creditors, or (iv) any
distribution, divisions, marshalling or application of any of the properties or
assets of the Owner or the proceeds thereof, to creditors, voluntary or
involuntary, and whether or not involving legal proceedings.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
_____________________________ By: ___________________________________
Name: Name:
Title:
WITNESS: THE MAYFAIR AT GLEN COVE, LLC
BY: HASSETT-BELFER SENIOR
HOUSING, LLC, Member
______________________________ By: ___________________________________
Name: Name:
Title:
BY: CHANCELLOR OF GLEN
COVE, INC., Member
______________________________ By: ___________________________________
Name: Name:
Title:
16
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF EMERALD SPRINGS, INC. / NETWEST OF YUMA, INC.
And
EMERALD SPRINGS ASSOCIATES GENERAL PARINERSHIP
<PAGE>
Table of Contents
ARTICLE I - Representations
Section 1.1 - Title to Property
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Other Agreements
Section 1.6 - Utility Services
Section 1.7 - Good Standing of Developer
Section 1.8 - Good Standing of Owner
ARTICLE II - Construction of the Project
Section 2.1 - Control of Construction
Section 2.2 - Architectural and Engineering Services
Section 2.3 - Other Professionals and General Assumed Obligations
Section 2.4 - Plans and Specifications
Section 2.5 - Construction
Section 2.6 - Personal Property
Section 2.7 - Changes
Section 2.8 - Commencement of Construction
Section 2.9 - Continuity of Construction
Section 2.10 - Completion of Construction
Section 2.11 - Owner's Noninvolvement
Section 2.12 - Punch-List
Section 2.13 - Work and Warranties
Section 2.14 - Subcontractors
Section 2.15 - Financing Arrangements
ARTICLE III - Closing
Section 3.1 - Date of Closing
Section 3.2 - Total Contract Price
Section 3.3 - Payment of Contract Price
Section 3.4 - Form of Conveyance
ARTICLE IV - Additional Responsibilities of Parties
Section 4.1 - Developer's Responsibilities
Section 4.2 - Owner's Responsibilities
Section 4.3 - Indemnification
<PAGE>
ARTICLE V - Contingencies
Section 5.1 - Required Occurrences
Section 5.2 - Failure of Contingencies
ARTICLE VI - Additional Covenants of Owner
Section 6.1 - Indemnification by Owner
Section 6.2 - Confidentiality
Section 6.3 - Provision of Further Information
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10 - Successors
Section 7.11 - Counterparts
Section 7.12 - Severability
Section 7.13 - Effective Date
Section 7.14 - No Offer
EXHIBITS LIST
Exhibit A - Property
Exhibit B - Encumbrances
Exhibit C - Environmental Report
Exhibit D - Condition of Property
Exhibit E - Developer's Approvals
Exhibit F - Owner's Approvals
Exhibit G - Utility Services Letters
Exhibit H - Basic Plans
Exhibit I - Architectural Contract
Exhibit J - Major Moveables
Exhibit K - Minor Moveables
<PAGE>
DEVELOPMENT AGREEMENT
This Development Agreement is by and between CareMatrix of Emerald Springs,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194, and Netwest of Yuma, Inc., an Arizona corporation, with an
office at 2221 East Broadway Boulevard, Suite 211, Tucson, Arizona, 85719
(collectively the "Developer"), and Emerald Springs Associates General
Partnership, an Arizona general partnership, with an office at 197 First Avenue,
Needham, Massachusetts 02197 (the "Owner") and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the construction of a proposed assisted/independent living project to be
comprised of 140 units (the "Project") to be located on an approximately 10-acre
site on 46th Avenue, also known as the 4600th block of West 14th Street in Yuma,
AZ, described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have good, record and
marketable title in fee simple to the Property consisting of approximately 10
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be free and clear of any and all encumbrances which would, in the
Developer's sole discretion, impair the construction or operation of the Project
except as set forth on Exhibit "B", and free of any hazardous wastes or
materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) Owner and Developer acknowledge that the Property will be subject to
the easements, assessments, conditions, contracts, rights, claims,
encroachments, restrictions and other encumbrances as set forth on Exhibit
"B"(the "Existing Encumbrances"), to physical conditions disclosed by a
boundary survey to be prepared by Don Norman Surveying for the Property,
and will be subject to those easements, conditions, contracts, rights,
licenses, encroachments, restrictions and other encumbrances resulting from
Developer securing regulatory, development and construction approvals for
the Project and attendant site improvements. Owner and Developer each
represents to the other that it has reviewed or shall review the boundary
survey and the topographical survey of the Property and has made a physical
inspection of the Property and is satisfied with as to the site
characteristics and attributes in all material respects.
<PAGE>
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and any
other plans, studies and surveys, title reports, environmental assessments,
appraisals and other information regarding the Property or the Project
which are in the Owner's possession, custody or control.
(c) The Owner represents that to the best of its knowledge the Property has
only the apparent site and off-site conditions, if any, as set forth on
Exhibit "D" including the Off-Site Improvement plans prepared by James
Davey and Associates, dated January 22, 1996, which require the
implementation of the measures if any, as set forth on Exhibit "D", and
including the Development Agreement to be executed with the City of Yuma.
(d) Commencing on the date Developer elects to commence construction in
accordance with this Agreement, Owner shall provide Developer with full
possession and complete control of the Property for purposes of performing
Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) Developer represents that it shall use its best efforts to obtain,
prior to the date of the Closing (as defined in Article III hereof), all
state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and opening of the Project on the Property as set
forth on Exhibit "E" (the "Developer's Approvals"). Developer covenants to
diligently use its best efforts to obtain all of the Approvals in an
expeditious manner. In the event Developer is unable to obtain the
Approvals, Developer shall have no liability whatsoever to Owner, or any
other party and at Owner's or Developer's option, this Agreement shall be
terminated without recourse to either party hereto at law or in equity.
(b) Owner represents that it shall use its best efforts to obtain, prior to
the date of the Closing (as defined in Article III hereof), all state,
federal, county and municipal land use approvals and permits, licenses,
easements, and utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth on
Exhibit "F" (the "Owner's Approvals"). Owner covenants to diligently use
its best efforts to obtain all of the Approvals in an expeditious manner.
In the event Owner is unable to obtain the Approvals, Owner shall have no
liability whatsoever to Developer, or any other party and at Owner's or
Developer's option, this Agreement shall be terminated without recourse to
either party hereto at law or in equity.
(c) For the sole purpose of permitting Developer to construct the Project,
Owner grants to Developer, to the extent required by Developer in order
that the purpose of this Agreement be effectuated, the rights under the
Approvals and any other grants of rights, permits, approvals, or licenses,
which may be necessary to complete the performance of Developer's
obligations hereunder; provided, however that no transfer or assignment of
<PAGE>
any of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. Owner shall provide or obtain construction and
permanent financing for the Property, the Project, the Personal Property (as
defined herein) and related development costs (collectively, the "Project Loan")
which shall be sufficient, together with Owner's equity contributions, if
necessary (which shall in no event exceed ten percent (10%) of the Contract
Price), to pay the full amount of the Contract Price (as defined herein). Owner
covenants that it will provide fully and in a timely fashion all reasonable
documentation required by Owner's lender in connection with the Project Loan.
Such documentation shall include, but is not limited to, all zoning and plan
approvals; all utility letters indicating positive availability of service;
inventory of concessions made to and agreements with any or all municipal
bodies; site plans; title policies, and all other regulatory body approvals.
Owner also covenants that it will, in a timely manner, provide whatever
financial or other information Owner's lender might reasonably require in
connection with Developer's applications for financing for the construction of
the Project and as required by such lender in connection with the Project Loan.
Owner will use its best efforts to pursue its application for construction and
permanent financing for the Project.
Section 1.5 - Other Agreements. Owner and Developer each represents to the other
that neither entering into this Agreement nor performing their respective
obligations hereunder will violate any other agreements or documents by which
either may be bound.
Section 1.6 - Utility Services. Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including public water, sewer and electricity) are currently available to the
Property in the capacities required to operate the Project. No work need be
performed by or on behalf of Developer to make such utilities available to the
Property for the construction or operation of the Project, except for the
matters, if any, set forth on Exhibit "D". Copies of letters from the providers
of such utility services confirming such availability are annexed hereto as
Exhibit "G".
Section 1.7 - Good Standing of Developer. Developer represents that it is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Developer represents that it is empowered and authorized to
execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1, this Agreement shall be valid, binding and legal obligation of
the Developer, enforceable in accordance with its terms and, duly authorized by
a vote of its Board of Directors in compliance with its certificate of
incorporation and bylaws and all applicable laws of the state of its
incorporation.
Section 1.8 - Good Standing of Owner. Owner represents that it is duly organized
and validly existing under the laws of the State of Arizona. Owner represents
that it is empowered and authorized to execute, deliver and perform its
obligations under this Agreement, and upon such execution and delivery and
subject to Section 5.1, this Agreement shall be the valid, binding and legal
obligation of the Owner, enforceable in accordance with its terms and duly
authorized by a
<PAGE>
vote of its General Partner in compliance with its General Partnership Agreement
and all applicable laws of the State of Arizona.
ARTICLE II
Construction of the Project
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of this Agreement that Developer shall
have sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein; so long as the same are in compliance with
Approvals, the Final Plans (as defined below) and all applicable laws.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Bruker Brown Architects P.C. the and their consulting engineers (the
"Architect and Engineers") have or will be retained by Developer. Developer will
be responsible for payment of the architectural fees due to the Architect,
pursuant to the contract with respect to the Project dated 2/26/96 (said
contracts herein collectively, the "Architectural Contract"). Owner represents
and warrants to Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "I". The Developer shall
not be responsible to Owner, or any other party for any errors, omissions,
breaches or failures thereof, or any damages resulting from the acts or
omissions of the Architect. At Developer's option, Owner shall assign to
Developer all of its right, title and interest in the Architectural Contract and
any and all architectural, engineering and other contracts with respect to the
Project free of any claims other than outstanding amounts owed under the
Architectural Contract. In no event shall Developer be obligated to assume any
of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project
other than the Architect which Owner shall be obligated to pay. Developer
neither assumes nor shall be obliged for any debts, liabilities or obligations
of Owner or related to the Property or the Project other than payments due to
the Architect under the Architectural Contract.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by Developer shall, under the
direction of Developer and after consultation with Owner, prepare basic
design plans (the "Basic Plans"). As a part of this process, Developer may
engage engineers, including the site engineers, to perform test borings and
other soil testing at the Property for purposes of properly locating the
Property on the Project. Developer, the Architects and the engineers shall
consult with Owner during the process of preparing the Basic Plans.
Developer, Architect and engineers shall have access to the Project for all
such tests and surveys.
<PAGE>
(b) Within two (2) weeks after the date of the Architect's and the
engineer's completion of the Basic Plans and delivery to Owner, the
Developer, the Architect and the engineers shall meet to review and approve
the Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, Developer shall
direct the Architect and the engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based upon
the Basic Plans. Within two (2) weeks after the completion of the Final
Plans and their delivery to Owner, the parties will meet to review and
approve the same, and make any necessary revisions. Owner agrees that it
will not unreasonably withhold its approval of the Final Plans if they
conform in all material respects to the Basic Plans. The parties agree to
use their best efforts to reach a prompt and reasonable conclusion
concerning the acceptability of the Final Plans (and Personal Property, see
Section 2.6). The parties shall initial the Final Plans as an indication
of their approval of the same.
Section 2.5 - Construction. Developer shall construct the Project in a good and
workmanlike manner and in accordance with the Final Plans, Approvals, and all
applicable laws subject to field changes and minor design changes. The Project
is to be licensed for the unit complement described above and shall be
constructed in accordance with the requirements in effect on the date of this
Agreement as set forth by all federal, state and local governmental agencies
having jurisdiction of the Project, including Life Safety Code requirements
imposed by the Federal Department of Health and Human Services.
Section 2.6 - Personal Property.
(a) Developer will furnish the specific items of personal property
contained in Exhibit "J" (the "Major Moveables") required for the Project
within the allowance (defined below). The allowance for the Major Moveables
is Five Hundred Fifty Nine Thousand Seven Hundred Ninety Five ($559,795)
Dollars (the "Major Moveables Allowance"), which Major Moveables Allowance
shall be included in the Contract Price (as defined below).
(b) Developer will furnish the specific items of personal property
contained in Exhibit "K" (the "Minor Moveables") required for the Project
within the allowance (defined below). The allowance for the Minor Moveables
is Twenty Eight Thousand ($28,000) Dollars (the "Minor Moveables
Allowance"), which Minor Moveables Allowance shall be included in the
Contract Price (as defined below).
(c) In the event that the cost of the Personal Property furnished pursuant
to subsection 2.6 (a) and (b) above shall exceed the Major Moveables and/or
the Minor Moveables Allowance, any such excess shall be an increase to the
Contract Price.
<PAGE>
(d) In order to reduce the risk that the Major Moveables and Minor
Moveables will be delivered prior to the Closing contemplated herein, Owner
covenants that it shall approve such Major Moveables and Minor Moveables as
soon as practicable but not later than approximately six (6) months prior
to the estimated date of Physical Completion (defined below).
(e) Major Moveables and Minor Moveables do not include Kitchen and Laundry
Equipment.
Section 2.7 - Changes. Owner agrees that Developer shall also have the right to
make changes in the Final Plans and in the Personal Property if required by any
federal, state or local governmental authority having jurisdiction over the
Project or if required due to the unavailability of any construction materials
or Personal Property. Owner shall be notified of any such changes or
substitutions in the Personal Property, however, Developer shall have final
authority to make all decisions with respect to such changes; provided that such
changes result in construction, space, design, personal property, equipment and
interior and exterior design comparable in overall design and quality to that
shown on the Final Plans. Any change that results in the loss or adjustment of
square footage in the Project will require approval by Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start on or prior to the date which is thirty (30) days after the satisfaction
of the last of the conditions set forth in Section 5.1 to be satisfied, or as
soon thereafter as weather and ground conditions permit but not later than July
15, 1996.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion, as such term is defined in Section 2.10, is achieved, which shall
not occur later than 18 months after the completion of the foundation for the
Project. Any delays caused by acts of God, fire, accident, casualty, cessation
of activity due to refusal to work by labor, or any other cause not attributable
to the failure of Developer to use reasonable care and due diligence, however,
shall be excused by Owner, provided that Developer shall use its best efforts to
minimize any such delays and shall resume construction at the earliest possible
time.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion" or
"Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been completed
and the Project shall have been approved for and received a certificate for
temporary or permanent occupancy by the local building inspector, and by
the State Fire Marshall in the event his or her approval is required (the
"Certificate of Occupancy"). Physical Completion shall be deemed to have
been achieved notwithstanding that any of such officials or agencies have
issued a Certificate of Occupancy with conditions or a Punch-List listing
items requiring completion or correction, so long as such conditions or
Punch-List items do not prevent or prohibit occupancy as determined by
Owner, in its sole discretion.
<PAGE>
(b) Developer will use its reasonable best efforts to notify Owner at least
ninety (90) days prior to the time that Developer estimates that the
Project will be Physically Completed, whereupon Owner will diligently
proceed to fulfill all other conditions necessary for licensure and Owner
will apply in a timely manner for all licenses and permits necessary to
commence operation of the Project as set forth on Exhibit "C-2". After such
notice from Developer, Owner, to the extent necessary to perform
administrative activities may, so long as it does not interfere with
completion of construction, enter upon the Property in an effort to
coordinate initial licensure.
Section 2.11 - Owner's Noninvolvement. Owner shall have access to the
construction site while construction is in progress, but it shall not be
empowered to interfere or become involved with construction or require changes
thereto, provided, however that Owner's agents shall have the right to view the
construction in progress and shall have access to the site for the purpose of
equipping the Project and preparing the Project for operation.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then Developer agrees to use all reasonable diligence to complete or
correct such item or items so that each conforms to the Final Plans. The parties
shall make a Punch-List of the items requiring completion or correction (the
"Punch List"). Each item on the Punch-List shall be assigned a reasonable value
based upon the reasonable cost of completion or correction of the same or such
other value as may be required by Owner's lender ("Punch-List Amount").
Developer shall give its written undertaking to complete each such item within
forty-five (45) days (or such other period of time as is mutually agreed upon by
the parties) after transfer of title, further agreeing to permit Owner to
complete any such items, at Developer's expense, if Developer has failed to
complete the same within the forty-five (45) day time period.
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of Personal Property, Developer will assign to Owner, in
addition to any warranties created by law, all warranties and guarantees
received from designers, the Architect, the general contractor and suppliers of
equipment and furnishings, to the extent assignable. Developer will agree to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, Owner hereby waives and Developer hereby disclaims all other express
and implied warranties of every kind or nature with respect to the Project and
the Personal Property, including, without limitation, waiving all IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Subcontractors. Developer agrees to indemnify and save Owner
harmless from claims for payment by any subcontractor who furnishes materials or
supplies or performs labor or services in the prosecution of the work pursuant
to this Agreement. Developer reserves absolute discretion on the selection of
subcontractors.
<PAGE>
Section 2.15 - Financing Arrangements.
(a) Owner will obtain the Project Loan which shall be sufficient, together
with the Owner's equity contributions, to pay the full amount of the
Contract Price. This Agreement may be terminated by, if any, Developer or
Owner in its sole and absolute discretion and without further recourse to
any party (except for reimbursement of Project related expenses) in the
event that the closing and funding of the construction loan financing with
respect to the Project pursuant to the Project Loan (with all conditions
precedent to such closing either satisfied or irrevocably waived by the
lender) shall not have occurred by July 15, 1996.
Owner and Developer also contemplate that the Property and Project,
together with all fixtures, furnishing, equipment, and articles of personal
property now owned or hereafter acquired by Owner which are or may be
attached to or used in connection with the Property or Project, together
with any and all replacements thereto and substitutions therefor, and all
proceeds thereof; and all present and future rents, issues, leases, and
profits of the Property and Project will serve as security for the payment
obligations to any lenders relating to the Project Loan or otherwise, and
that Owner will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to Owner. Owner
therefore, agrees to execute and deliver all commitments, promissory notes,
mortgages, collateral assignments, documents, certificates, affidavits, and
other writings required to be executed by any lender in connection with
such financing.
ARTICLE III
Closing
Section 3.1 - Date of Closing. The delivery of possession of the Property and
Project to Owner and payment of the Contract Price, less 150% of the value of
the Punch-List, shall take place contemporaneously within three (3) working days
after Physical Completion of the Project but in no event later than the date
established in Section 2.9; provided, however, that Developer has completed its
obligations as set forth in this Agreement, including, but not limited to,
Sections 2.10 and 2.13.
Section 3.2 - Contract Price.
(a) The price to be paid by Owner to Developer for the development,
construction and furnishing of the Project and for the Property shall be
Ten Million Three Hundred Twenty One Thousand Eight Hundred Three Dollars
($10,321,803) plus the costs incurred as the result of any unforeseen site
conditions and cost of Major and Minor Moveables in excess of their
respective Allowances (the "Contract Price").
(b) In addition to the Contract Price, if the Closing does not take place
within three (3) business days after Physical Completion due to delays
incurred through the fault of or through circumstances under the control of
Owner, Owner shall pay to Developer interest,
<PAGE>
payable monthly in arrears, on the Contract Price accruing from the date
which is three (3) days after Physical Completion to the date of which is
three (3) days after delivery of possession of the Project pursuant to
Section 3.1; such monthly interest shall be computed at a rate equal to the
Prime Rate as announced by Fleet Bank, N.A. from time to time plus two
percent (2%) per annum.
Section 3.3 - Payment of Contract Price. At the time of transfer of title, the
balance of the Contract Price not paid through Developer's requisitions under
the construction financing for the Project shall be paid by Owner to Developer
by wire transfer, certified check or other mutually acceptable means less any
Punch-List Amount or retainage required by Owner's lender.
Section 3.4 - Form of Conveyance and Status of Title. The Project and Personal
Property shall be conveyed by warranty bill of sale. The Project and Personal
Property may be subject to the mortgages and security interests described in
Section 2.15.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, Developer shall have the following
responsibilities:
(a) To obtain and pay for necessary building permits and the Certificate of
Occupancy;
(b) To pay for all labor and material required to develop, construct and
furnish the Project in accordance with the Final Plans (except as otherwise
expressly set forth herein) and to pay for the Personal Property to be
provided;
(c) Developer shall at all times, commencing with the date upon which
construction begins, carry the following types of insurance with an
insurance carrier or carriers acceptable to Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000 for any
one accident or disaster; and property damage coverage limits of not
less than $100,000; all of which insurance shall name Owner's lender
as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief, covering all improvements to be erected hereunder and all
materials for the same which are on or about the Property, in an
amount equal to the full insurable value of such improvements and
materials; such insurance to be payable to Owner, Developer
<PAGE>
and Owner's lender as their interests may appear, with a standard
mortgagee endorsement to Owner's lender or its assigns as mortgagee.
Developer shall furnish to Owner and Owner's lender if required by
such lender, duplicate policies of insurance as set forth in
subparagraphs (i), (ii), and (iii) hereof. Each of such policies
shall, if the insurance carriers so permit, contain a provision to the
effect that they may not be canceled except upon ten (10) days prior
written notice to Owner and Owner's lender.
(d) At Closing, Developer shall deliver to Owner, at Owner's option:
(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the Project; or
(ii) reasonable proof of payment or proof of a provision for payment
to such subcontractors; or
(iii) an indemnification to Owner with respect to same.
Section 4.2 - Owner's Responsibilities. In addition to its obligations elsewhere
expressed in this Agreement, Owner shall have the following responsibilities:
(a) To expeditiously pursue obtaining commitments for financing the
contemplated construction, including the furnishing of financial
statements, providing an appraisal of the Property and Project and by
execution of applications, notes, mortgages, assumption agreements and
other documents reasonably necessary to effectuate such financing or the
financing of the Personal Property.
(b) To pay for all professional and other staff personnel required for the
pre-opening and operation of the Project in sufficient time to permit
licensure by the Department at the date of physical completion.
(c) To pay to Developer, in addition to the Contract Price, the costs for
correcting unusual site conditions. Such payment shall be made on the basis
of the actual costs of Owner in correcting the same plus fifteen percent
(15%) of such costs to cover Developer's overhead expenses and shall be due
and payable upon the transfer of title to Owner. For the purpose of this
Agreement, the term unusual site conditions shall include, without
limitation, any of the following which have not been noted in the Final
Plans or otherwise disclosed in the due diligence materials:
(i) unusual soil or water conditions requiring extraordinary
preparation, i.e., piles, curtain drains, retaining walls, blasting or
rip-rap;
(ii) tying in of water, sewer or other utility services beyond the
locations as shown in the Final Plans;
<PAGE>
(iii) holding tanks and pumps for the water system or the sprinkler
system,
(iv) water purification or filter system;
(v) leaching field; and
(vi) any requirement imposed upon Developer by governmental agencies
having jurisdiction, if not provided for in the Final Plans, because
of reasons other than errors or omissions in such Final Plans, such as
requirements imposed as conditions for the granting of any of the
Approvals.
(d) Owner shall be solely responsible for the removal of any hazardous
wastes and materials, if any, from the Property, at Owner's sole cost and
expense, and not as part of the Contract Price.
Section 4.3 - Indemnification. Developer hereby agrees to indemnify and hold
Owner harmless from all liabilities, claims, and demands for personal injury or
property damage arising out of or caused by any act or omission of Developer,
its subcontractors, agents, or employees, or arising in or about the Property at
any time from the date of this Agreement until transfer of title. Developer
further covenants to use proper care and caution in the performance of its work
hereunder so as not to cause damage to any adjoining or adjacent property, and
Developer shall indemnify and hold Owner harmless from any liabilities, claims,
or demands for damage to such adjoining or adjacent property.
ARTICLE V
Contingencies
Section 5.l - Required Occurrences. This Agreement and the undertakings of
Developer shall, at the election of Owner be contingent upon the occurrence of
each of the following:
(a) Approvals. All of the Approvals and current utility availability
letters shall have been obtained by July 15, 1996.
(b) Title. An owner's title insurance policy commitment and Class A-2 ALTA
survey, satisfactory to Developer, in its sole discretion, shall have been
obtained by Owner which confirms that there are no exceptions or conditions
which would render title to the Property unmarketable or which will
prohibit or restrict the construction or operation of the Project or which
would prevent an institutional lender from closing a construction or
permanent mortgage loan for the Project in the usual course of its
business.
(c) Additional Due Diligence Regarding the Property. Developer shall have
received due diligence information concerning the Property, satisfactory to
Developer, in its sole discretion, including, without limitation, soil
tests and utility service confirmations to the
<PAGE>
extent not currently available. On or before July 14, 1996, Developer shall
notify Owner of any issues.
(d) Purchase of the Property. The Owner shall have purchased good record,
marketable fee simple title to the Property as set forth in Section 1.1 by
July 15, 1996.
(e) Construction Financing. The Owner shall have received construction
financing in the full amount of the Contract Price by July 15, 1996.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
Notice, either party may terminate this Agreement. In such event, neither party
shall have any further responsibility or liability to the other. Developer
reserves the right, at its option, to waive or defer any one or more of the
conditions precedent.
ARTICLE VI
Additional Covenants of Owner
Section 6.1 - Indemnification by Owner. Owner hereby indemnifies and defends
Developer against any claims for unpaid fees or costs associated with the
Property or the Project incurred by or on behalf of Owner or Developer as a
result of any claim by any broker. The parties acknowledge that no broker was
responsible for procuring the transactions set forth in this Agreement, nor any
part hereof, and each party will indemnify and defend the other from any and all
claims, actual or threatened, for a commission or other compensation by any
third person with whom such party has had dealings.
Section 6.2 - Confidentiality. Owner, its partners, affiliates, agents, servants
and employees hereby agree:
(a) To maintain in the strictest confidence the identity of Developer; the
contents of this Agreement; the negotiations between the parties on the
terms of this Agreement; and any of Developer's proprietary information,
including, without limitation, financial information, projects, copies of
leases, real estate appraisals, and other information regarding the Project
and the business affairs and operations of Developer which any of said
parties obtain from Developer in the course of negotiations for the
transactions contemplated hereby (the "Confidential Information");
(b) Not to disclose, without Developer's prior written consent (except to
the extent disclosure is required by applicable law or regulation), any
Confidential Information except to such parties' own agents, servants and
employees, bankers, consultants and other advisors to whom disclosure is
necessary in order to effectuate the transactions contemplated hereby; and
<PAGE>
(c) To comply therewith for a period of two (2) years commencing on the
date of this Agreement.
Section 6.3 - Provision of Further Information. Developer agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto), which together with Owner's partnership
agreement and the management agreement between Owner and its management agent
fully and completely expresses their understanding with respect to its subject
matters.
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of Owner and Developer represents and warrants to
the other that no broker or finder has acted on its behalf in connection with
this Agreement or the transactions contemplated hereby or referred to herein;
and agrees to indemnify and hold and save the other harmless from any claim or
demand for commission or other compensation by any broker, finder or similar
agent claiming to have been employed by or on behalf of such party.
Section 7.6 - Assignment. Developer shall have no right to assign his rights nor
delegate its obligations under this Agreement to another entity or person
without the prior written consent of Owner except that Developer shall have the
right to assign this Agreement to, merge with or consolidate with an "Affiliate"
(defined herein as defined in the Securities and Exchange Act of 1934 and the
regulations thereunder) in connection with a public offering.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
<PAGE>
(a) In the event that notice is directed to Owner, it shall be sent to it
at the address set forth above and a copy therefore sent to Emerald Springs
Associates General Partnership, c/o CareMatrix Corporation, 197 First
Avenue, Needham, MA 02194, Attention: Andrew D. Gosman, with a copy to
Netwest Development Corporation, 2221 East Broadway Boulevard, Suite 211,
Tucson, AZ 85719, Attention: Priscilla A. Kuhn, or at such other address or
addresses Owner shall from time to time designate by notice to Developer.
(b) In the event that notice is directed to Developer, it shall be sent to
Netwest Development Corporation, 2221 East Broadway Boulevard, Suite 211,
Tucson, AZ 85719, Attention: Priscilla A. Kuhn with a copy to Dee O'Neill
at the same address and CareMatrix Corporation, 197 First Avenue, Needham,
MA 02194, Attention: Kevin J. Maley, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as
Developer shall from time-to-time designate by notice to Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
<PAGE>
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the State of Arizona.
Dated this 8th day of March, 1996 and executed under seal.
Witness: EMERALD SPRINGS ASSOCIATES
GENERAL PARTNERSHIP
________________________ By: CareMatrix of Yuma, Inc.
Its General Partner
Duly Authorized
________________________ CAREMATRIX OF EMERALD SPRINGS, INC.
By: /s/Michael Gosman
________________________ -----------------------------------
Name: Michael Gosman
Title: Ex. Vice President
NETWEST OF YUMA, INC.
/s/ Carlet Blackwell By: /s/Priscilla S. Kuhn
-----------------------------------
Name: Priscilla S. Kuhn
________________________ Title: President
/s/Alice E. Udall
Chairman
<PAGE>
EXHIBIT A
Property
<PAGE>
EXHIBIT B
Encumbrances
<PAGE>
EXHIBIT C
Environmental Report
<PAGE>
EXHIBIT D
Condition of Property
<PAGE>
EXHIBIT E
Developer's Approvals
<PAGE>
EXHIBIT F
Owner's Approvals
<PAGE>
EXHIBIT G
Utility Services Letters
<PAGE>
EXHIBIT H
Basic Plans
<PAGE>
EXHIBIT I
Architectural Contract
<PAGE>
EXHIBIT J
Major Moveables
<PAGE>
EXHIBIT K
Minor Moveables
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF AMETHYST ARBOR, INC./
NETWEST DEVELOPMENT CORPORATION
And
AMETHYST ARBOR ASSOCIATES
GENERAL PARTNERSHIP
<PAGE>
Table of Contents
ARTICLE I - Representations
Section 1.1 - Title to Property
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Other Agreements
Section 1.6 - Utility Services
Section 1.7 - Good Standing of Developer
Section 1.8 - Good Standing of Owner
ARTICLE II - Construction of the Project
Section 2.1 - Control of Construction
Section 2.2 - Architectural and Engineering Services
Section 2.3 - Other Professionals and General Assumed Obligations
Section 2.4 - Plans and Specifications
Section 2.5 - Construction
Section 2.6 - Personal Property
Section 2.7 - Changes
Section 2.8 - Commencement of Construction
Section 2.9 - Continuity of Construction
Section 2.10 - Completion of Construction
Section 2.11 - Owner's Noninvolvement
Section 2.12 - Punch-List
Section 2.13 - Work and Warranties
Section 2.14 - Subcontractors
Section 2.15 - Financing Arrangements
ARTICLE III - Closing
Section 3.1 - Date of Closing
Section 3.2 - Total Contract Price
Section 3.3 - Payment of Contract Price
Section 3.4 - Form of Conveyance
ARTICLE IV - Additional Responsibilities of Parties
Section 4.1 - Developer's Responsibilities
<PAGE>
Section 4.2 - Owner's Responsibilities
Section 4.3 - Indemnification
ARTICLE V - Contingencies
Section 5.1 - Required Occurrences
Section 5.2 - Failure of Contingencies
ARTICLE VI - Additional Covenants of Owner
Section 6.1 - Indemnification by Owner
Section 6.2 - Confidentiality
Section 6.3 - Provision of Further Information
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10 - Successors
Section 7.11 - Counterparts
Section 7.12 Severability
Section 7.13 - Effective Date
Section 7.14 - No Offer
EXHIBITS LIST
Exhibit A - Property
Exhibit B - Encumbrances
Exhibit C - Environmental Report
Exhibit D - Condition of Property
Exhibit E - Developer's Approvals
Exhibit F - Owner's Approvals
Exhibit G - Utility Services Letters
Exhibit H - Basic Plans
Exhibit I - Architectural Contract
Exhibit J - Major Moveables
Exhibit K - Minor Moveables
<PAGE>
DEVELOPMENT AGREEMENT
This Development Agreement is by and between CareMatrix of Amethyst Arbor, Inc.
("CareMatrix"), a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194, and Netwest Development Corporation ("Netwest"),
an Arizona Corporation, with an office at 2221 East Broadway Boulevard, Suite
211, Tucson, Arizona, 85719 (collectively the "Developer"), and Amethyst Arbor
Associates General Partnership ("Amethyst Arbor"), an Arizona general
partnership, with an office at 197 First Avenue, Needham, Massachusetts 02194
(the "Owner") and is entered into for the purpose of reducing to a formal
writing all of the parties understandings with respect to the construction of a
proposed assisted/independent living project to be comprised of 118 units (the
"Project") to be located in Peoria, AZ, described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have good, record and
marketable title in fee simple to the Property consisting of approximately 8.93
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be free and clear of any and all encumbrances which would, in the
Developer's sole discretion, impair the construction or operation of the Project
except as set forth on Exhibit "B" and free of any hazardous wastes or materials
except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) Owner and Developer acknowledge that the Property will be subject to
the easements, assessments, conditions, contracts, rights, claims,
encroachments, restrictions and other encumbrances as set forth on Exhibit
"B" (the "Existing Encumbrances"), to physical conditions disclosed by a
boundary survey to be prepared by Castro, Fleet, Fisher Engineering, Inc.
for the Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments,
<PAGE>
restrictions and other encumbrances resulting from Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. Owner and Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection of
the Property and is satisfied as to the site characteristics and attributes
in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and any
other plans, studies and surveys, title reports, environmental assessments,
appraisals and other information regarding the Property or the Project
which are in the Owner's possession, custody or control.
(c) The Owner represents that to the best of its knowledge the Property has
only the apparent site and off-site conditions, if any, as set forth on
Exhibit "D" and including the Development Agreement to be executed with the
City of Peoria.
(d) Commencing on the date Developer elects to commence construction in
accordance with this Agreement, Owner shall provide Developer with full
possession and complete control of the Property for purposes of performing
Developer's obligations hereunder.
Section 1.3 - Permits and Approvals
(a) Developer represents that it shall use its best efforts to obtain,
prior to the date of the Closing (as defined in Article III hereof), all
state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and opening of the Project on the Property as set
forth on Exhibit "E" (the "Developer's Approvals"). Developer covenants to
diligently use its best efforts to obtain all of the Approvals in an
expeditious manner. In the event Developer is unable to obtain the
Approvals, Developer shall have no liability whatsoever to Owner, or any
other party and at Owner's or Developer's option, this Agreement shall be
terminated without recourse to either party hereto at law or in equity.
(b) Owner represents that it shall use its best efforts to obtain, prior to
the date of the Closing (as defined in Article III hereof), all state,
federal, county and municipal land use approvals and permits, licenses,
easements, and utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth on
Exhibit "F" (the "Owner's Approvals"). Owner covenants to diligently use
its best efforts to obtain all of the Approvals in an expeditious manner.
In the event Owner is unable to obtain the Approvals, Owner shall have no
liability whatsoever to Developer, or any other party and at Owner's or
Developer's option, this Agreement shall be terminated without recourse to
either party hereto at law or in equity.
<PAGE>
(c) For the sole purpose of permitting Developer to construct the Project,
Owner grants to Developer, to the extent required by Developer in order
that the purpose of this Agreement be effectuated, the rights under the
Approvals and any other grants of rights, permits, approvals, or licenses,
which may be necessary to complete the performance of Developer's
obligations hereunder; provided, however that no transfer or assignment of
any of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. Owner shall provide or obtain construction and
permanent financing for the Property, the Project, the Personal Property (as
defined herein) and related development costs (collectively, the "Project Loan")
which shall be sufficient, together with Owner's equity contributions, if
necessary (which shall in no event exceed ten percent (10%) of the Contract
Price), to pay the full amount of the Contract Price (as defined herein). Owner
covenants that it will provide fully and in a timely fashion all reasonable
documentation required by Owner's lender in connection with the Project Loan.
Such documentation shall include, but is not limited to, all zoning and plan
approvals; all utility letters indicating positive availability of service;
inventory of concessions made to and agreements with any or all municipal
bodies; site plans; title policies, and all other regulatory body approvals.
Owner also covenants that it will, in a timely manner, provide whatever
financial or other information Owner's lender might reasonably require in
connection with Developer's applications for financing for the construction of
the Project and as required by such lender in connection with the Project Loan.
Owner will use its best efforts to pursue its application for construction and
permanent financing for the Project.
Section 1.5 - Other Agreements. Owner and Developer each represents to the other
that neither entering into this Agreement nor performing their respective
obligations hereunder will violate any other agreements or documents by which
either may be bound.
Section 1.6 - Utility Services. Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including public water, sewer and electricity) are currently available to the
Property in the capacities required to operate the Project. No work need be
performed by or on behalf of Developer to make such utilities available to the
Property for the construction or operation of the Project, except for the
matters, if any, set forth on Exhibit "D". Copies of letters from the providers
of such utility services confirming such availability are annexed hereto as
Exhibit "G".
Section 1.7 - Good Standing of Developer. Developer represents that it is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Developer represents that it is empowered and authorized to
execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1, this Agreement shall be the valid, binding and legal obligation
of the Developer, enforceable in accordance
<PAGE>
with its terms and, duly authorized by a vote of its Board of Directors in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of Owner. Owner represents that it is duly organized
and validly existing under the laws of the State of Arizona. Owner represents
that it is empowered and authorized to execute, deliver and perform its
obligations under this Agreement, and upon such execution and delivery and
subject to Section 5.1, this Agreement shall be the valid, binding and legal
obligation of the Owner, enforceable in accordance with its terms and duly
authorized by a vote of its General Partner in compliance with its General
Partnership Agreement and all applicable laws of the State of Arizona.
ARTICLE II
Construction of the Project
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of this Agreement that Developer shall
have sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein; so long as the same are in compliance with
Approvals, the Final Plans (as defined below) and all applicable laws. It is
understood by both parties that on those projects which Netwest brings to
CareMatrix, of which Amethyst Arbor is such a project, Netwest will be the lead
developer, and on those projects which CareMatrix brings to Netwest, CareMatrix
will be lead developer. Both parties will communicate, cooperate and consult
with each other throughout the development process. CareMatrix and Netwest agree
to use their best efforts to resolve any disputes with respect to decisions as
Developers hereunder. Notwithstanding the foregoing, in the event that
CareMatrix and Netwest are unable to agree on any matter hereunder after using
such best efforts, CareMatrix shall have final authority to decide any and all
issues hereunder.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Bruker Brown Architects and their consulting engineers (the "Architect and
Engineers") have or will be retained by Developer. Developer will be responsible
for the payment of the architectural fees due to the Architect, pursuant to the
contract with respect to the Project dated (said contracts herein collectively,
the "Architectural Contract"). Owner represents and warrants to Developer that a
true, accurate and complete copy of the Architectural Contract is attached
hereto as Exhibit "I". The Developer shall not be responsible to Owner, or any
other party for any errors, omissions, breaches or failures thereof, or any
damages resulting from the acts or omissions of the Architects. At Developer's
option, Owner shall assign to Developer all of its right, title and interest in
the Architectural Contract and any and all architectural, engineering and other
contracts with respect to the Project free of an claims other than outstanding
amounts owed under the
<PAGE>
Architectural Contract. In no event shall Developer be obligated to assume any
of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project
other than the Architect which Owner shall be obligated to pay. Developer
neither assumes nor shall be obliged for any debts, liabilities or obligations
of Owner or related to the Property or the Project other than payments due to
the Architect under the Architectural Contract.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by Developer shall, under the
direction of Developer and after consultation with Owner, prepare basic
design plans (the "Basic Plans"). As a part of this process, Developer may
engage engineers, including the site engineers, to perform test borings and
other soil testing at the Property for purposes of properly locating the
Property on the Project. Developer, the Architects and the engineers shall
consult with Owner during the process of preparing the Basic Plans.
Developer, Architect and engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
engineer's completion of the Basic Plans and delivery to Owner, the
Developer, the Architect and the engineers shall meet to review and approve
the Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, Developer shall
direct the Architect and the engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based upon
the Basic Plans. Within two (2) weeks after the completion of the Final
Plans and their delivery to Owner, the parties will meet to review and
approve the same, and make any necessary revisions. Owner agrees that it
will not unreasonably withhold its approval of the Final Plans if they
conform in all material respects to the Basic Plans. The parties agree to
use their best efforts to reach a prompt and reasonable conclusion
concerning the acceptability of the Final Plans (and Personal Property, see
Section 2.6). The parties shall initial the Final Plans as an indication of
their approval of the same.
Section 2.5 - Construction. Developer shall construct the Project in a good and
workmanlike manner and in accordance with the Final Plans, Approvals, and all
applicable laws subject to field changes and minor design changes. The Project
is to be licensed for the unit complement described above and shall be
constructed in accordance with the requirements in effect on the date of this
Agreement as set forth by all federal, state and local governmental agencies
having jurisdiction of the Project, including Life Safety Code requirements
imposed by the Federal Department of Health and Human Services.
<PAGE>
Section 2.6 - Personal Property.
(a) Developer will furnish the specific items of personal property
contained in Exhibit "J" (the "Major Moveables") required for the Project
within the allowance (defined below). The allowance for the Major Moveables
is FOUR HUNDRED SEVENTY-ONE THOUSAND EIGHT HUNDRED EIGHTY-TWO DOLLARS
($471,882), (the "Major Moveables Allowance"), which Major Moveables
Allowance is based on $3,999 per residential unit and shall be included in
the Contract Price (as defined below).
(b) Developer will furnish the specific items of personal property
contained in Exhibit "K" (the "Minor Moveables") required for the Project
within the allowance (defined below). The allowance for the Minor Moveables
is TWENTY-EIGHT THOUSAND DOLLARS ($28,000) the "Minor Moveables
Allowance"), which Minor Moveables Allowance shall be included in the
Contract Price (as defined below).
(c) In the event that the cost of the Personal Property furnished pursuant
to subsection 2.6 (a) and (b) above shall exceed the Major Moveables and/or
the Minor Moveables Allowance, any such excess shall be an increase to the
Contract Price.
(d) In order to reduce the risk that the Major Moveables and Minor
Moveables will be delivered prior to the Closing contemplated herein, Owner
covenants that it shall approve such Major Moveables and Minor Moveables as
soon as practicable but not later than approximately six (6) months prior
to the estimated date of Physical Completion (defined below).
(e) Major Moveables and Minor Moveables do not include Kitchen and Laundry
Equipment.
Section 2.7 - Changes. Owner agrees that Developer shall also have the right to
make changes in the Final Plans and in the Personal Property if required by any
federal, state, or local governmental authority having jurisdiction over the
Project or if required due to the unavailability of any construction materials
or Personal Property. Owner shall be notified of any such changes or
substitutions in the Personal Property, however, Developer shall have final
authority to make all decisions with respect to such changes; provided that such
changes result in construction, space, design, personal property, equipment and
interior and exterior design comparable in overall design and quality to that
shown on the Final Plans. Any change that results in the loss or adjustment of
square footage in the Project will require approval by Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start on or prior to the date which is thirty (30) days after the satisfaction
of the last of the
<PAGE>
conditions set forth in Section 5.1 to be satisfied, or as soon thereafter as
weather and ground conditions permit but not later than October 1, 1997.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion, as such term is defined in Section 2.10, is achieved, which shall
not occur later than 18 months after the completion of the foundation for the
Project. Any delay caused by acts of God, fire, accident, casualty, cessation of
activity due to refusal to work by labor, or any other caused not attributable
to the failure of Developer to use reasonable care and due diligence, however,
shall be excused by Owner, provided that Developer shall use its best efforts to
minimize any such delays and shall resume construction at the earliest possible
time.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion" or
"Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been completed
and the Project shall have been approved for and received a certificate for
temporary or permanent occupancy by the local building inspector, and by
the State Fire Marshall in the event his or her approval is required (the
"Certificate of Occupancy"). Physical Completion shall be deemed to have
been achieved notwithstanding that any of such officials or agencies have
issued a Certificate of Occupancy with conditions or a Punch-List listing
items requiring completion or correction, so long as such conditions or
Punch-List items do not prevent or prohibit occupancy as determined by
Owner in its sole discretion.
(b) Developer will use its reasonable best efforts to notify Owner at least
ninety (90) days prior to the time that Developer estimates that the
Project will be Physically Completed, whereupon Owner will diligently
proceed to fulfill all other conditions necessary for licensure and Owner
will apply in a timely manner for all licenses and permits necessary to
commence operation of the Project as set forth on Exhibit "C-2". After such
notice from Developer, Owner, to the extent necessary to perform
administrative activities may, so long as it does not interfere with
completion of construction, enter upon the Property in an effort to
coordinate initial licensure.
Section 2.11 - Owner's Noninvolvement. Owner shall have access to the
construction site while construction is in progress, but it shall not be
empowered to interfere or become involved with construction or require changes
(other than through a formal change order process) thereto, provided, however
that Owner's agents shall have the right to view the construction in progress
and shall have access to the site for the purpose of equipping the Project and
preparing the Project for Operation.
<PAGE>
Section 2.12 - Punch List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then Developer agrees to use all reasonable diligence to complete or
correct such item or items so that each conforms to the Final Plans. The parties
shall make a Punch-List of the items requiring completion or correction (the
"Punch List"). Each item on the Punch-List shall be assigned a reasonable value
based upon the reasonable cost of completion or correction of the same or such
other value as may be required by Owner's lender ("Punch-List Amount").
Developer shall give its written undertaking to complete each such item within
forty-five (45) days (or such other period of time as is mutually agreed upon by
the parties) after transfer of the title, further agreeing to permit Owner to
complete any such items, at Developer's expense, if Developer has failed to
complete the same within the forty-five (45) day time period.
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of Personal Property, Developer will assign to owner, in
addition to any warranties created by law, all warranties and guarantees
received from designers, the Architect, the general contractor and suppliers of
equipment and furnishings, to the extent assignable. Developer will agree to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, Owner hereby waives and Developer hereby disclaims all other express
and implied warranties of every kind or nature with respect to the Project and
the Personal Property, including, without limitations, waiving all IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Subcontractors. Developer agrees to indemnify and save Owner
harmless from claims for payment by any subcontractor who furnishes materials or
supplies or performs labor or services in the prosecution of the work pursuant
to this Agreement. Developer reserves absolute discretion on the selection of
subcontractors.
Section 2.15 - Financing Arrangements.
(a) Owner will obtain the Project Loan which shall be sufficient, together
with the Owner's equity contributions, to pay the full amount of the
Contract Price. This Agreement may be terminated by, if any, Developer or
Owner in its sole and absolute discretion and without further recourse to
any party (except for reimbursement of Project related expenses) in the
event that the closing and funding of the construction loan financing with
respect to the Project pursuant to the Project Loan (with all conditions
precedent to such closing either satisfied or irrevocably waived by the
lender) shall not have occurred by September 1, 1997.
(b) Owner and Developer also contemplate that the Property and Project,
together with all fixtures, furnishing, equipment, and articles of personal
property now owned or hereafter acquired by Owner which are or may be
attached to or used in connection with the Property or Project, together
with any and all replacements
<PAGE>
thereto and substitutions therefor, and all proceeds thereof; and all
present and future rents, issues, leases, and profits of the Property and
Project will serve as security for the payment obligations to any lenders
relating to the Project Loan or otherwise, and that Owner will be the
principal obligor for the repayment of all financial obligations thereunder
after the transfer of title to Owner. Owner therefore, agrees to execute
and deliver all commitments, promissory notes, mortgages, collateral
assignments, documents, certificates, affidavits, and other writings
required to be executed by any lender in connection with such financing.
ARTICLE III
Closing
Section 3.1 - Date of Closing. The delivery of possession of the Property and
Project to Owner and payment of the Contract Price, less 150% of the value of
the Punch-List, shall take place contemporaneously within three (3) working days
after Physical Completion of the Project but in no event later than the date
established in Section 2.9; provided, however, that Developer has completed its
obligations as set forth in this Agreement, including, but not limited to,
Sections 2.10 and 2.13.
Section 3.2 - Contract Price.
(a) The price to be paid by Owner to Developer for the development,
construction and furnishing of the Project and for the Property shall be
NINE MILLION FIVE HUNDRED TWENTY-SIX THOUSAND ELEVEN DOLLARS ($9,526,011)
the cost incurred as the result of any unforeseen site conditions and cost
of Major and Minor Moveables in excess of their respective Allowances (the
"Contract Price").
(b) In addition to the Contract Price, if the Closing does not take place
within three (3) business days after Physical Completion due to delays
incurred through the fault of or through circumstances under the control of
Owner, Owner shall pay to Developer interest, payable monthly in arrears,
on the Contract Price accruing from the date which is three (3) days after
Physical Completion to the date of which is three (3) days after delivery
of possession of the Project pursuant to Section 3.1; such monthly interest
shall be computed at a rate equal to the Prime Rate as announced by Fleet
Bank, N.A. from time to time plus two percent (2%) per annum.
Section 3.3 - Payment of Contract Price. At the time of transfer of title, the
balance of the Contract Price not paid through Developer's requisitions under
the construction financing for the Project shall be paid by Owner to Developer
by wire transfer, certified check or other mutually acceptable means less any
Punch-List Amount or retainage required by Owner's lender.
<PAGE>
Section 3.4 - Form of Conveyance and Status of Title. The Project and Personal
Property shall be conveyed by warranty bill of sale. The Project and Personal
Property may be subject to the mortgages and security interests described in
Section 2.15.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, Developer shall have the following
responsibilities:
(a) To obtain and pay for necessary building permits and the Certificate of
Occupancy;
(b) To pay for all labor and material required to develop, construct and
furnish the Project in accordance with the Final Plans (except as otherwise
expressly set forth herein) and to pay for the Personal Property to be
provided;
(c) Developer shall at all times, commencing with the date upon which
construction begins, carry the following types of insurance with an
insurance carrier or carriers acceptable to Owner's lender:
(i) Worker's compensation insurance fully covering all persons engaged
in the performance of this Agreement, in accordance with applicable
law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000 for any
one accident or disaster; and property damage coverage limits of not
less than $100,000; all of which insurance shall name Owner's lender
as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief; covering all improvements to be erected hereunder and all
materials for the same which are on or about the Property, in an
amount equal to the full insurable value of such improvements and
materials; such insurance to be payable to Owner, Developer and
Owner's lender as their interests may appear, with a standard
mortgagee endorsement to Owner's lender or its assigns as mortgagee.
Developer shall furnish to Owner and Owner's lender if required by
such lender, duplicate policies of insurance as set forth in
subparagraphs (i), (ii), and (iii) hereof. Each of such policies
shall, if the insurance carriers so permit, contain a provision to the
effect that they may not be canceled
<PAGE>
except upon ten (10) days prior written notice to Owner and Owner's
lender.
(d) At Closing, Developer shall deliver to Owner, at Owner's option:
(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the Project; or
(ii) reasonable proof of payment or proof of a provision for payment
to such subcontractors; or
(iii) an indemnification to Owner with respect to same.
Section 4.2 - Owner's Responsibilities. In addition to its obligations elsewhere
expressed in this Agreement, Owner shall have the following responsibilities:
(a) To expeditiously pursue obtaining commitments for financing the
contemplated construction, including the furnishing of financial
statements, providing an appraisal of the Property and Project and by
execution of applications, notes, mortgages, assumption agreements and
other documents reasonably necessary to effectuate such financing or the
financing of the Personal Property.
(b) To pay for all professional and other staff personnel required for the
preopening and operation of the Project in sufficient time to permit
licensure by the Department at the date of physical completion.
(c) To pay to Developer, in addition to the Contract Price, the costs for
correcting unusual site conditions. Such payment shall be made on the basis
of the actual costs of Owner in correcting the same plus fifteen percent
(15%) of such costs to cover Developer's overhead expenses and shall be due
and payable upon the transfer of title to Owner. For the purpose of this
Agreement, the term unusual site conditions shall include, without
limitations, any of the following which have not been noted in the Final
Plans or otherwise disclosed in the due diligence materials:
(i) unusual soil or water conditions requiring extraordinary
preparation, i.e., piles, curtain drains, retaining wails, blasting or
rip-rap;
(ii) tying in of water, sewer or other utility services beyond the
locations as shown in the Final Plans;
(iii) holding tanks and pumps for the water system or the sprinkler
system;
(iv) water purification or filter system;
<PAGE>
(v) leaching field; and
(vi) any requirement imposed upon Developer by governmental agencies
having jurisdiction, if not provided for in the Final Plans, because
of reasons other than errors or omissions in such Final Plans, such as
requirements imposed as conditions for the granting of any of the
Approvals.
(d) Owner shall be solely responsible for the removal of any hazardous
wastes and materials, if any, from the Property, at Owner's sole cost and
expense, and not as part of the Contract Price.
Section 4.3 - Indemnification. Developer hereby agrees to indemnify and hold
Owner harmless from all liabilities, claims, and demands for personal injury or
property damage arising out of or caused by any act or omission of Developer,
its subcontractors, agents, or employees, or arising in or about the Property at
any time from the date of this Agreement until transfer of title. Developer
further covenants to use proper care and caution in the performance of its work
hereunder so as not to cause damage to any adjoining or adjacent property, and
Developer shall indemnify and hold Owner harmless from any liabilities, claims,
or demands for damage to such adjoining or adjacent property.
ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the undertakings of
Developer shall, at the election of Owner be contingent upon the occurrence of
each of the following:
(a) Approvals. All of the Approvals and current utility availability
letters shall have been obtained by September 1, 1997.
(b) Title. An owner's title insurance policy commitment and Class A-2 ALTA
survey, satisfactory to Developer, in its sole discretion, shall have been
obtained by Owner which confirms that there are no exceptions or conditions
which would render title to the Property unmaketable or which will prohibit
or restrict the construction or operation of the Project or which would
prevent an institutional lender from closing a construction or permanent
mortgage loan for the Project in the usual course of its business.
(c) Additional Due Diligence Regarding the Property. Developer shall have
received due diligence information concerning the Property, satisfactory to
Developer, in its sole discretion, including, without limitation, soil
tests and utility service confirmations to the extent not currently
available. On or before February 1, 1997, developer shall notify Owner of
any issues.
<PAGE>
(d) Purchase of the Property. The Owner shall have purchased good record,
marketable fee simple title to the Property as set forth in Section 1.1 by
not later than the closing of the Project Loan.
(e) Construction Financing. The Owner shall have received construction
financing in the full amount of the Contract Price by October 1, 1997.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
Notice, either party may terminate this Agreement. In such event, neither party
shall have any further responsibility or liability to the other. Developer
reserves the right, at its option, to waive or defer any one or more of the
conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
Section 6.1 - Indemnification by Owner. Owner hereby indemnifies and defends
Developer against any claims for unpaid fees or costs associated with the
Property or the Project incurred by or on behalf of Owner or Developer as a
result of any claim by any broker. The parties acknowledge that no broker was
responsible for procuring the transactions set forth in this Agreement, nor any
part hereof, and each party will indemnify and defend the other from any and all
claims, actual or threatened, for a commission or other compensation by any
third person with whom such party has had dealings.
Section 6.2 - Confidentiality. Owner, its partners, affiliates, agents, servants
and employees hereby agree:
(a) To maintain in the strictest confidence the identity of developer; the
contents of this Agreement; the negotiations between the parties on the
terms of this Agreement; and any of Developer's proprietary information,
including, without limitation, financial information, projects, copies of
leases, real estate appraisals, and other information regarding the Project
and the business affairs and operations of developer which any of said
parties obtain from Developer in the course of negotiations for the
transactions contemplated hereby (the "Confidential Information");
(b) Not to disclose, without Developer's prior written consent (except to
the extent disclosure is required by applicable law or regulation), any
Confidential Information except to such parties' own agents, servants and
employees, bankers, consultants and other advisors to whom disclosure is
necessary in order to effectuate the transactions contemplated hereby; and
<PAGE>
(c) To comply therewith for a period of two (2) years commencing on the
date of this Agreement.
Section 6.3 - Provision of Further Information. Developer agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto), which together with Owner's partnership
agreement and the management agreement between Owner and its management agent
fully and completely expresses their understanding with respect to its subject
matter.
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representation, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and Developer represents and warrants
to the other that no broker or finder has acted on its behalf in connection with
this Agreement or the transactions contemplated hereby or referred to herein;
and agrees to indemnify and hold and save the other harmless from any claim or
demand for commission or other compensation by any broker, finder or similar
agent claiming to have been employed by or on behalf of such party.
Section 7.6 - Assignment. Developer shall have no right to assign his right nor
delegate its obligation under this Agreement to another entity or person without
the prior written consent of Owner except that Developer shall have the right to
assign this Agreement to, merge with or consolidate with an "Affiliate" (defined
herein as defined in the Securities and Exchange Act of 1934 and the regulations
thereunder) in connection with a public offering.
<PAGE>
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to Owner, it shall be sent to it
at the address set forth above and a copy therefore sent to Amethyst Arbor
Associates General Partnership, do CareMatrix Corporation, 197 First
Avenue, Needham, MA 02194, Attention: Andrew D. Gosman, with a copy to
Netwest Development Corporation, 2221 East Broadway Boulevard, Suite 211,
Tucson, AZ 85719, Attention: Priscilla S. Kuhn, or at such other address or
addresses as Owner shall from time to time designate by notice to
Developer.
(b) In the event that notice is directed to Developer, it shall be sent to
Netwest Development Corporation, 2221 East Broadway Boulevard, Suite 211,
Tucson, AZ 85719, Attention: Priscilla S. Kuhn with a copy to Dee O'Neill
at the same address and CareMatrix Corporation, 197 First Avenue, Needham,
MA 02194, Attention: Kevin J. Maley, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as
Developer shall from time-to-time designate by notice to Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of the
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
<PAGE>
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the State of Arizona.
Dated this 28th day of August, 1996 and executed under seal.
OWNER:
Witness AMETHYST ARBOR ASSOCIATES
GENERAL PARTNERSHIP
/s/ Elizabeth Derrico By: CareMatrix of Peoria, Inc
- ------------------------------- Its General Partner/Managing Partner
Elizabeth Derrico
By: /s/ James M. Clary
--------------------------------
Name: James M. Clary
Title: Vice President
/s/ Kay Anderson By: Netwest Development Corporation
- ------------------------------- Its General Partner
Kay Anderson
By: /s/ Priscilla S. Kuhn
--------------------------------
Name: Priscilla S. Kuhn
Title: President
DEVELOPER:
Witness: CAREMATRIX OF AMETHYST ARBOR, INC
/s/ Elizabeth Derrico By: /s/ James M. Clary
- ------------------------------- --------------------------------
Elizabeth Derrico Name: James M. Clary
Title: General Counsel
NETWEST DEVELOPMENT CORPORATION
/s/ Kay Anderson By: /s/ Priscilla S. Kuhn
- ------------------------------- --------------------------------
Kay Anderson Name: Priscilla S. Kuhn
Title: President
ASSIGNMENT AGREEMENT
(Westfield Court, Connecticut)
THIS ASSIGNMENT AGREEMENT (the "Agreement") is entered into as of the 6th
day of June, 1996, by and between CCC of Connecticut, Inc. ("Assignor") and
CareMatrix of Massachusetts, Inc. ("Assignee").
WITNESSETH:
WHEREAS, pursuant to that certain Assignment and Assumption Agreement dated
as of June 23, 1994, by and between Mediplex Management Inc. ("Mediplex") and
Assignor, Mediplex assigned all of its right, title and interest under a certain
Management Agreement dated as of September 12, 1991, by and between B&C
Associates, a Connecticut general partnership and Mediplex (the "Management
Agreement"), a copy of which is attached hereto as Exhibit A, relating to
management services provided at the congregate care residential facility located
at 77 Third Street, Stamford, Connecticut.
WHEREAS, Assignor desires to assign its rights and obligations under the
Management Agreement to Assignee and Assignee desires to assume such rights and
obligations.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants, bargains, sells, assigns and transfers to
Assignee all of Assignor's right, title and interest in, and all contractual and
other rights under the Management Agreement.
2. Assignee hereby accepts this assignment and hereby agrees to assume all
of Assignor's rights, title, interest, duties and obligations under the
Management Agreement.
3. This Agreement may be executed by facsimile and in counterparts, each of
which shall constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ASSIGNOR:
CCC OF CONNECTICUT, INC.
By: /s/ James M. Clary
-----------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------------
Name: James M. Clary
Title:
<PAGE>
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Agreement is made this 23rd day of June, 1994, by and between Mediplex
Management, Inc., a Massachusetts corporation ("Management") and CCC of
Connecticut, Inc. ("CCC").
Reference is made to the Management Agreement dated as of September 12,
1991, by and between B&G Associates, a Connecticut general partnership (the
"Company") and Management (the "Management Agreement"), pursuant to which
Management has agreed to provide management services for a congregate care
residential facility at 77 Third Street, Stamford, Connecticut (the "Facility").
Capitalized terms used herein and not otherwise defined shall have the meaning
ascribed thereto in the Management Agreement.
WHEREAS, the parent company of Management, The Mediplex Group, Inc.
("Mediplex"), has entered into an Agreement and Plan of Merger with Sun
Healthcare Group, Inc. ("Sun"), Sun Acquisition Corporation ("SAC"), Abraham D.
Gosman and Andrew Turner, pursuant to which Mediplex will be merged with Sun's
wholly-owned subsidiary, SAC, with Mediplex as the surviving entity (the "Merger
Transaction"); and
WHEREAS, Sun has acknowledged that the operation of a congregate care
residential facility such as the Facility is not consistent with Sun's business
plan; and
WHEREAS, the Company and Management agree that it is in their mutual best
interest to assign the Management Agreement to CCC upon the consummation of the
Merger Transaction.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration paid and received, the parties agree as follows:
1. Assignment: Effective as of June 23, 1994 (the "Effective Date"),
Management hereby grants, bargains, sells, assigns and transfers to CCC all of
Management's right, title and interest in and to the Management Agreement.
2. Assumption: As of the Effective Date, CCC hereby accepts the assignment
of the Management Agreement and agrees to assume all obligations and liabilities
arising under the Management Agreement from and after the Effective Date.
3. Management Fee: The Management Fee due under the Management Agreement
shall be pro-rated such that Management shall receive the portion of any payment
due which is allocable to the period of time prior to the Effective Date and CCC
shall receive the portion of any payment due which is allocable to the period of
time from and after the Effective Date.
4. Indemnification By Management: Management shall indemnify, defend and
hold CCC harmless from and against:
<PAGE>
-2-
(a) Any and all obligations relating to or arising out of the
Management Agreement which exist as of the Effective Date; and
(b) Any and all actions, suits, proceedings, demands, assessments,
judgments, reasonable costs and other reasonable expenses, including but
not limited to, reasonable attorneys' fees, incident to the foregoing.
For purposes of this section, an obligations shall be deemed to "exist" as
of the Effective Date if it relates to events which occurred prior to the
Effective Date even if it is not asserted until after the Effective Date.
5. Indemnification BY CCC: CCC shall indemnify, defend and hold Management
harmless from and against:
(a) Any and all obligations relating to or arising out of the
Management Agreement which relate to the period from and after the
Effective Date; and
(b) Any and all actions, suits, proceedings, demands, assessments,
judgments, reasonable costs and other reasonable expenses, including but
not limited to, reasonable attorneys' fees, incident to the foregoing.
6. Cooperation: Management agrees to cooperate with CCC from and after the
Effective Date to ensure a smooth transition of the management of the Facility
which cooperation shall include, without limitation, turning over all books,
records and resident accounts to CCC as of the Effective Date. CCC shall
cooperate with Management from and after the Effective Date in providing access
to books and records needed by Management relating to the prior provision of
services by Management under the Management Agreement or to Management's
indemnification obligations hereunder .
EXECUTED to take effect this 23rd day of June, 1994.
WITNESS:
MEDIPLEX MANAGEMENT, INC.
/s/ [Illegible] By /s/ [Illegible]
- ------------------------ --------------------
Its: Assistant Clerk
CCC OF CONNECTICUT, INC.
/s/ [Illegible] By /s/ [Illegible]
- ------------------------ --------------------
Its: Vice Pres.
<PAGE>
-3-
CONSENT AND RELEASE
The undersigned hereby consents to the assignment of the Management
Agreement by Management to CCC and hereby releases and discharges Management of
and from any claim, loss, liability or damage it has or may have against
Management arising under or out of any matters pertaining to the Management
Agreement which relate to the acts or omissions of CCC on or after the Effective
Date.
EXECUTED under seal as of this 23rd day of June, 1994.
WITNESS: B&G ASSOCIATES
By: A.M.A. CONGREGATE
MANAGEMENT CORP.
Its General Partner
/s/ [Illegible] By /s/ [Illegible]
- ------------------------ --------------------
Its: Secretary
By: ET TOWER ASSOCIATES L.P.
Its General Partner
/s/ [Illegible] By /s/ [Illegible]
- ------------------------ --------------------
Its: __________________
<PAGE>
MANAGEMENT AGREEMENT
BETWEEN
B & G ASSOCIATES
AND
MEDIPLEX MANAGEMENT, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I - Appointment and Duties of Management Company
Section 1.1 - Appointment of Management Company
Section 1.2 - General Description of Duties
Section 1.3 - Specific Duties
Section 1.4 - Ultimate Responsibility
Section 1.5 - Access
Section 1.6 - Other Powers
Section 1.7 - Standards of Care
Section 1.8 - Indemnity
Article II - Period of Appointment
Section 2.1 - Term
Section 2.2 - Termination
Section 2.3 - Accounting
ARTICLE III - Compensation
Section 3.1 - Operating Expenses
Section 3.2 - Base Management Fees
Section 3.3 - Payment
Section 3.4 - Gross Revenues
ARTICLE V - Insurance
Section 4.1 - Facility Insurance
ARTICLE V - Concluding Provisions
Section 5.1 - Prior Agreements
Section 5.2 - Amendments
Section 5.3 - Joint Efforts
Section 5.4 - Assignment
Section 5.5 - Notices
Section 5.6 - Captions
Section 5.7 - Governing Law
<PAGE>
MANAGEMENT AGREEMENT
This Agreement ("Agreement") is by and between B&G Associates, a
Connecticut general partnership located at 77 Third Street, Stanford, CT
("Company") and Mediplex Management, Inc., a Massachusetts corporation, with
offices at 15 Walnut Street, Wellesley, Massachusetts, 02181 ("Management").
STATEMENT OF FACTS:
1. Company is the owner of a congregate care residential facility at 77
Third Street, Stanford, Connecticut (the "Facility").
2. Company desires to engage Management to provide employees for the
Facility and to provide advisory, supportive, consultive and administrative
services and expertise in order to increase the efficiency and effectiveness of
the operation of the Facility.
3. Company has carefully reviewed the qualifications of Management and
finds that its assistance in business related functions is beneficial and
necessary for Company to carry out its prime purpose to operate the Facility in
a manner designed to create the most effective, helpful, and appropriate
programs for residents at the Facility and to achieve the most effective and
productive operation of the Facility.
Now, therefore, for good and valuable consideration paid and received, the
parties agree as follows:
ARTICLE I
Appointment and Duties of Management
Section 1.1 - Appointment of Management. The Company hereby appoints
Management to carry out the duties described in this Agreement subject to the
direction of the Company and in accordance with the budgets and policies of the
Company, for that period of time and for such compensation as is more
particularly described below.
Section 1.2 - General Description of Duties.
(a) Management will supervise and oversee the day to day operations of the
Facility and in connection therewith will provide the Company with advisory,
supportive, consultive and administrative services, including services in
connection with the areas of: dietary; plant maintenance; resident care and
quality assurance; administrative; accounting; purchasing; and data processing.
<PAGE>
-2-
(b) Management shall perform all services in compliance with the standards,
rules and regulations, if any of the agencies of the State of Connecticut having
authority and jurisdiction relating to the Facility, and applicable federal
laws.
(c) All employees of the Facility (except for the employees of unrelated
entities providing separate contract services to the Facility and except for the
Executive Director of the Facility) shall be employees of an entity (herein the
"Employer"), which is unrelated to either Management, the Company or any of its
partners, which entity is mutually acceptable to the Company and Management.
Company and Management hereby acknowledge that Apple Management Services
Company, a Connecticut corporation, is acceptable as Employer.
(d) The Executive Director of the Facility shall be an employee of the
Company.
Section 1.3 - Specific Duties. In addition to the general duties set forth
above and the other obligations listed in this Agreement, Management shall have
the following specific responsibilities which shall be carried out in
cooperation with the Company:
(a) Resident Care and Quality Assurance:
(i) To assure adequate response to resident complaints concerning
conditions at the Facility and to assist in the establishment and
development of written policies and procedures to assure
protection, comfort and safety of residents;
(ii) To make recommendations concerning, and assist in the
establishment and maintenance of standards for quality control
relating to the services provided to residents; and
(iii) To develop and implement a plan for staff training and
development and to submit such evaluation reports relating to
staff personnel that may be requested by the Company.
(b) Dietary:
(i) To review menus, practices and procedures; and
(ii) To recommend, develop, inaugurate and carry out practices and
procedures with respect to purchasing and dietary control
consistent with appropriate standards health care, modern
<PAGE>
-3-
business and management techniques, and as required by applicable
City, State and Federal agencies.
(c) Plant Maintenance:
(i) To monitor and review practices and procedures of the
maintenance, engineering, security, housekeeping and related
service and personnel;
(ii) To implement, maintain and supervise Facility inspections
(interior and exterior) and a preventive maintenance program
consistent with appropriate standards of modern business and
management techniques; and
(iii) To submit periodic written reports to Company concerning current
inventories of physical plant, and personal property and supplies
including recommendations for periodic maintenance and schedules
for repair.
(d) Administrative:
(i) To review and make recommendations concerning personnel and
admissions policies;
(ii) To develop effective programs relating to public relations, labor
relations and marketing and advertising;
(iii) Subject to the Company's approval, to establish guidelines for
applications for occupancy of the Facility. Subject to the
guidelines approved by the Company, Management shall be
responsible for the admission of qualified residents to the
Facility, but Company shall have final approval of any admission.
(iv) To make a written report, at least semi-annually, with
recommendations, advising the Company of any new or modified
programs, policies or procedures that should be initiated in
order to best conform to the regulations or policies of any
agency having authority or jurisdiction over the operation of the
Facility or the conduct of its affairs or which Management
recommends as improvements in the overall service being provided
to residents. Management will provide notice to
<PAGE>
-4-
Company of any changes to government regulations within thirty
(30) days of Manager becoming aware of same;
(v) To review utilization of independent contractors who provide
services to the Facility, including without limitation, the
Employer, to examine usage of utilities, supplies and services,
and make pertinent recommendations concerning the same; and
(vi) To assist in the negotiation of employee contracts and to provide
advice in connection with wages and benefits to be offered to
employees.
(e) Accounting:
(i) To prepare monthly financial, financial analyses and statements
and budgets.
(ii) To cooperate with the Company's outside accountants in the
preparation by said accountants of tax returns and related tax
matters, including employee withholdings and FICA withholdings
and annual audited financial statements, all at the Company's
expense. Such outside accountants shall be designated by the
Company and until otherwise designated shall be Panell, Kerr &
Foster;
(iii) Not less than ninety (90) days prior to the commencement of each
fiscal year to prepare a detailed operational budget for the
Facility for the approval of the Company. The budget shall be
prepared in a manner consistent with reports and records which
Company is required to submit to state and federal agencies if
any. It is understood that budgets are only estimates as to
future results and that budget overruns may occur from time to
time. The Company, and not Management, shall be responsible for
any such budget overruns. Management shall use its best efforts
to promptly notify the Company of any variance from a budget item
greater than 10%;
(iv) To prepare and maintain an ongoing comparison between budgeted
and actual income and expenses on both a monthly and
fiscal-year-to-date basis;
<PAGE>
-5-
(v) Consistent with a budget approved by the Company, Management
shall verify, approve for payment and sign checks for any proper
obligations of Company. No check shall be issued unless the
expenditure is consistent with the Facility's budget and the
current projection of monthly expenses. No expenses from capital
improvements not in the current budget or in excess of $50,000
shall be incurred without the prior written approval of the
Company. No check in excess of $2,500 shall be signed by any
Facility staff without consent of Company; and
(v) To maintain, at Company's expense, full books of accounts with
correct entries for all receipts and expenditures. Permanent
books, records, and documents shall be made available for
Company's inspection upon reasonable notice.
(f) Purchasing:
(i) To review the purchasing standards, procedures and policies, and
to develop, implement, and maintain, subject to Company's
approval, an effective purchasing system for medical and food
supplies, equipment, appliances, furnishings, other materials,
and uniforms, and ordering and coordination of service calls
necessary to the proper conduct of the Facility;
(ii) To assist in negotiating contracts for the purchase of items
listed in Section 1.3(f)(i), and service contracts; and
(iii) To review with the appropriate staff personnel, methods of
replacing obsolete equipment.
(g) Data Processing:
(i) To maintain the data processing and payroll processing systems,
and procedures for keeping records for accounts payable and
receivable; and
(ii) To establish and supervise adequate systems for recording the
receipt and disbursement of all funds; and
<PAGE>
-6-
(h) In all areas;
(i) [ILLEGIBLE LINE OF TEXT] policies, purposes and regulations of
state and federal agencies, bodies, programs and concepts;
(ii) To provide a representative of Management at or available to the
Facility during normal business hours; and
(iii) To act consistent with the purposes, powers and philosophy of
Company.
Section 1.4 - Ultimate Responsibility. The Company shall have ultimate
responsibility and authority for the overall operation and management of the
Facility, and to establish and maintain a written statement setting forth its
philosophy and policies. All actions of Management are subject to review by the
Company. Notwithstanding any other provision in this contract, the Company
remains responsible for ensuring that any service provided pursuant to this
contract complies with all pertinent provisions of federal, state and local
statutes, rules and regulations. Management shall not hire or discharge any
employee of Company.
Section 1.5 - Access. Management shall provide all information required by
any governmental agency having jurisdiction over Company and cooperate with such
agency in carrying out inspections and investigations.
Section 1.6 - Other Powers. The powers not specifically provided to
Management in this Agreement or by consent of the Company, shall remain with the
Company.
Section 1.7 - Standard of Care. Management is an independent contractor and
is not to be considered a partner, joint venturer or other type of principal
with respect to ownership of any portion of or interest in the Facility.
Section 1.8 - Indemnity.
(a) The Company shall indemnify Management against, and hold Management
harmless from, any and all claims, actions, suits, proceedings, costs,
expenses, damages, and liabilities, including reasonable attorney's
fees, arising out of or connected with, or resulting from the
performance in good faith by Management of its obligations hereunder,
excluding, however, any liability resulting from the gross negligence
or willful misconduct of Management, its agents or employees.
<PAGE>
-7-
(b) Management shall indemnify the Company and hold the Company harmless
from any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees, arising
out of or in connection with or resulting from the performance in good
faith by the Company of its obligations hereunder, excluding, however,
any liability resulting from the gross negligence or willful
misconduct of the Company.
ARTICLE II
Period of Appointment
Section 2.1 - Term. This Agreement shall commence on September 6, 1991 and
remain in effect until September 30, 1996. Thereafter, it shall renew
automatically for three successive five year periods unless terminated by
written notice by either party given at least 180 days prior to the end of the
term or renewal term or unless terminated pursuant to Section 2.2.
Section 2.2 - Termination. In addition to the foregoing, this Agreement may
be terminated upon the occurrence of any of the following events:
(a) The unanimous written agreement of the Company and Management; and
(b) For cause, by either party upon thirty (30) days' written notice.
"Cause" shall mean if:
(i) Either party files a petition in bankruptcy or a petition to take
advantage of any insolvency act, makes an assignment for the
benefit of its creditors, consents to the appointment of a
receiver or files a petition for reorganization or is adjudicated
a bankrupt or is liquidated or dissolved, or shall begin
proceedings toward a liquidation or dissolution and the
involuntary petition or filing shall not be discharged within
sixty (60) days of the date of such filing; or
(ii) The Company no longer owns the Facility.
(c) In addition to the foregoing, a non-defaulting party may terminate
this Agreement in the event of a breach of this Agreement by the other
party:
<PAGE>
-8-
(i) Upon thirty (30) days written notice to the defaulting party in
the case of a Non-Monetary breach; or
(ii) Upon ten (10) days written notice to the defaulting party in the
case of a Monetary breach.
Section 2.3 - Accounting. One hundred twenty (120) days after the
termination of this Agreement, to the extent not earlier provided, Management
will provide the Company with a complete accounting and report of its activities
during the entire term of this Agreement. Management will cooperate with Company
to assist in an orderly transfer to a successor manager or to some other
representative of Company. Promptly after termination, Management shall return
to the Company all records, cash, accounts, contracts and documents belonging to
the Company and relating to the Facility and in Management's possession.
ARTICLE III
Compensation and Expenses
Section 3.1 - Operating Expenses. The Company will be responsible for
payment of all operating expenses and losses incurred in connection with the
operation of the Facility including without limitation for reimbursing the
Employer for all salaries and fringe benefits relating to employees of the
Facility employed by the Employer. To the extent any such expenses are paid by
Management, the Company shall reimburse Management therefor within 15 days of
receipt of a written invoice from Management.
Section 3.2 - Base management Fees. The base compensation (the "Base
Management Fee") to be paid to Management for the services that it renders shall
be equal to five percent (5%) of Gross Revenues (as defined herein) which shall
be in addition to the payment of the Facility's operating expenses.
Section 3.3 - Payment. The Base Management Fees shall be due and payable in
the arrears every third (3rd) month based on Gross Revenues for the prior three
(3) months ("Quarter"), with the first payment due and payable on or before the
twentieth (20th) day of the fourth (4th) month of the Term of this Agreement
based on Gross Revenues for the first Quarter, and thereafter, on or before the
twentieth (20th) day of each month following the end of each Quarter period.
Section 3.4 - Gross Revenues. For purposes of this Agreement the term
"Gross Revenues" shall mean all income from any source related to the Facility,
including without limitation, income from any tenancy or use and occupancy
<PAGE>
-9-
arrangement with respect to the Facility, entrances fees, endowment fees and
gross sale proceeds from the sale of any unit of the Facility or the Facility or
any portion thereof; provided, however, that Gross Revenues shall not include
security deposits or last month's rent until applied to rent or other
obligations due and payable; and, in the case of entrance fees and endowment
fees which by law or contract must be held in escrow, shall include only the
portion released or releasable from escrow from time to time.
ARTICLE IV
Insurance
Section 4.1 - Facility Insurance. The Company shall procure and maintain in
full force and effect such insurance policies as are reasonably requested by
Management including without limitation (i) an insurance policy or policies
protecting Management and its officers, employees and agents from loss,
liability or expense from personal injury, death and property damage arising out
of the operations of or upon the Facility; (ii) worker's compensation insurance;
and (iii) Fidelity and Dishonesty Bonds; all in such amounts as management may
reasonably require from time to time but in no event less than required pursuant
to the terms of any loan documents with respect to the Company's borrowings. The
Company shall also insure the Facility and its contents with a standard all
risk insurance policy for the full replacement cost thereof. All such policies
shall contain provisions waiving any right of subrogation by the insurer against
Management and shall name Management as an additional insured.
ARTICLE V
Concluding Provisions
Section 5.1 - Prior Agreements. All prior understandings and agreements
between the parties relating to the management of Company's business are merged
into this Agreement, which alone fully and completely expressed their
understanding.
Section 5.2 - Amendments. This Agreement may not be amended, modified,
altered or changed in any respect whatsoever, except by further agreement, in
writing, fully executed by each of the parties.
Section 5.3 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
<PAGE>
-10-
Section 5.4 - Assignment. This Agreement may not be assigned by Management
without the prior written authorization of the Company except to an affiliate of
Abraham D. Gosman.
Section 5.5 - Notices. Notices to be given to any of the parties shall be
in writing and sent by registered or certified mail, return receipt requested
and postage paid or by recognized overnight courier, as follows:
(a) In the event that notice is directed to Company, it shall be sent to
the address appearing in this Agreement or to such other address as it
may in writing direct; and
(b) In the event that notice is directed to Management, it shall be sent
to the address appearing in this Agreement or to such other address as
it may in writing direct.
Section 5.6 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 5.7 - Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the Commonwealth of Massachusetts.
Executed under seal at Wellesley, Massachusetts as of the The 12th DECEMBER
31, day of September, 1991.
WITNESS: B & G ASSOCIATES
ET Tower Associates L.P.,
General Partner
By: Eagle Tower, Inc.
_________________________ By: /s/ [Illegible]
----------------------------
Vice-Pres
AMA Congregate Management
Corp; General Partner
/s/ [Illegible] By: /s/ Abraham D. Gosman
- ------------------------- ----------------------------
President
MEDIPLEX MANAGEMENT, INC.
/s/ [Illegible] By: /s/ Abraham D. Gosman
- ------------------------- ----------------------------
Its President
AGREEMENT
(Houston, Texas)
THIS AGREEMENT (this "Agreement") made this 3rd day of July, 1996, by and
between Chancellor of Houston, Inc., a Delaware corporation ("Chancellor"), and
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("CareMatrix").
WITNESSETH
WHEREAS, Chancellor has purchased a certain parcel of land located in
Houston, Texas, (the "Land"), as evidenced by that certain Deed, dated March 28,
1996, a copy of which is attached hereto as Exhibit A;
WHEREAS, Chancellor desires for CareMatrix to develop the Land for an
assisted/independent living facility consisting of approximately one hundred
forty-eight (148) units (the "Project");
WHEREAS, upon the completion of construction of the Project, Chancellor
desires for CareMatrix to provide operational management services for the
Project; and
WHEREAS, Chancellor desires to demonstrate its intention to enter into a
turnkey development agreement and a management agreement with CareMatrix.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Chancellor and CareMatrix agree that CareMatrix shall act as developer
of the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Chancellor and
CareMatrix.
2 Chancellor and CareMatrix agree that upon completion of construction
of the Project, CareMatrix shall provide operational management
services for the Project pursuant to a management agreement in form
and substance reasonably satisfactory to each of Chancellor and
CareMatrix.
3. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
each of Chancellor and CareMatrix.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
CHANCELLOR OF HOUSTON, INC.
By: /s/ James M. Clary
-----------------------------------
Name: James M. Clary
Title:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
SPECIAL WARRANTY DEED
Date: March 28, 1996
Grantor's Name:
ANNE MAYA CORPORATION, a Texas corporation
Grantor's Mailing Address:
4420 FM 1960 West, Suite 224
Houston, Texas 77068
Grantee's Name:
CAREMATRIX OF HOUSTON, INC., a Delaware corporation
Grantee's Mailing Address:
197 First Avenue
Needham, Massachusetts 02194
Consideration:
Ten Dollars ($10.00) and other good and valuable consideration
Property (including any improvements):
The 9.00 acre tract out of the Daniel Harmon Survey, Abstract No.315 and
the Manuel Tarin Survey, Abstract No. 778, Harris County, Texas, more
particularly described on Exhibit "A" attached hereto and made a part
hereof for all purposes, together with all rights and appurtenances
thereto, including, without limitation, any right, title and interest of
Grantor in and to any and all easements and adjacent waterways, streets,
roads, alleys or rights of way, and any and all buildings, fixtures and
other improvements located on such property.
Reservations from and Exceptions to Conveyance and Warranty:
The permitted exceptions to title set forth on Exhibit "B" attached hereto
and made a part hereof for all purposes.
Grantor, for the consideration and subject to the reservations from and
exceptions to conveyance and warranty, grants, sells and conveys to Grantee the
Property, together with all and singular the rights and appurtenances thereto in
any wise belonging, to Grantor, to have and hold, to Grantee, Grantee's
successors or assigns forever. Grantor binds Grantor
<PAGE>
and Grantor's successors to warrant and forever defend all and singular the
property to Grantee and Grantee's successors and assigns against every person
whomsoever lawfully claiming or to claim the same or any part thereof, by,
through or under Grantor, but not otherwise.
When the context requires, singular nouns and pronouns include the plural.
ANNE MAYA CORPORATION
By: /s/ Chowdary Yalamanchili
----------------------------------
Chowdary Yalamanchili
President
GRANTOR
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on this 28th day of March, 1996,
by Chowdary Yalamanchili, President of Anne Maya Corporation, a Texas
corporation, on behalf of said corporation.
/s/ Candace M. Reece
-----------------------------------
Notary Public in and for
The State of Texas
- -------------------------------------
CANDACE M. REECE
[Seal] Notary Public, State of Texas
My Commission Expires 8/29/97
- -------------------------------------
My Commission Expires:
- ------------------------
-2-
<PAGE>
EXHIBIT A
Legal Descriptions
Being 9.0000 acres (392,040 square feet) of land in the Daniel Harmon Survey,
A-315 and the Manual Tarin Survey, A-778, Harris County, Texas, and being partly
out of that certain 147.358 acre tract described as Tract 4 in Exchange Deed
recorded under Harris County Clerk File No. G-790360 of the Official Public
Records of Real Property of Harris County, Texas, and further being partly out
of that certain 1.096 acre tract conveyed to Cypress/Westfield, Inc. by deeds
filed under Harris County County Clerk File Nos. N-964737, N-964738, N-964739,
and N-964740 of the Official Public Records of Real Property of Harris County,
Texas, said 9.0000 acres being more particularly described by metes and bounds
as follows:
BEGINNING at a point marked by a 5/8 inch iron rod on the Northeast
right-of-way line of Cypress Station Drive as dedicated by Deed filed under
Harris County County Clerk File No. E-087227 of the Official Public Records of
Real Property of Harris County, Texas, said point being the Northwest corner of
Restricted Reserve "A" in Block 1, of Cypress Station Center, Phase II according
to the plat thereof recorded at Film Code No. 359011 of the Map Records of
Harris County, Texas;
THENCE in a Northwesterly direction, with the Northeasterly right-of-way
line of Cypress Station Drive, variable width, with a curve to the left whose
radius is 404.69 feet, central angle is 14 (degrees) 21' 43" and whose chords
bears North 24 (degrees) 26' 34" West, a distance, measured along the arc of
said curve, of 101.44 feet to a point of tangent marked by a 5/8 inch iron rod;
THENCE North 31 (degrees) 37' 25" West, continuing with the Northeasterly
right-of-way line of Cypress Station Drive, variable width, distance of 234.74
feet to a point of curve marked by a 5/8 inch iron rod;
THENCE continuing in a Northwesterly direction, with the Northwesterly
right-of-way line of Cypress Station Drive, variable width, with a curve to the
left whose radius is 2030.00 feet and central angle is 0 (degrees) 15' 18", a
distance of 9.03 feet to an angle point marked by a 5/8 inch iron rod, at the
Southwest end of the transition right-of-way line between Cypress Station Drive
and Lantern Bend Drive, as established by the plat of Cypress Station, Section 4
Street Dedication as recorded in Volume 336, Page 145 of the Map Records of
Harris County, Texas;
THENCE North 12 (degrees) 22' 50" East, with the transition right-of-way
line between Cypress Station Drive and Lantern Bend Drive, a distance of 21.41
feet to an angle point marked by a 5/8 inch iron rod on the Southeasterly
right-of-way line of Lantern Bend Drive, 60 feet wide;
THENCE North 56 (degrees) 51' 05" East, with the Southeasterly right-of-way
line of Lantern Bend Drive, a distance of 538.59 feet to a point of curve marked
by a 5/8 inch iron rod;
<PAGE>
Metes and bonds for 9.000 acres, Cont'd......
THENCE in a Northeasterly direction, with the Southeasterly right-of-way
line of Lantern Bend Drive, with a curve to the right whose radius is 1016.47
feet and central angle is 13 (degrees) 33' 29", a distance of 240.53 feet to a
point for corner marked by a 5/8 inch iron rod;
THENCE South 18 (degrees) 04' 13" East, a distance of 635.80 feet to a
point for corner marked by a 5/8 inch iron rod on the North line said Cypress
Station Center, Phase II;
THENCE South 71 (degrees) 55' 47" West, along the north line or said
Cypress Station Center, Phase II, a distance of 384.51 feet to an angle point
marked by a 5/8 inch iron rod;
THENCE North 89 (degrees) 38' 57" West, continuing along the North line of
said Cypress Station Center, Phase II, a distance of 332.49 feet to the POINT OF
BEGINNING and containing 9,0000 acres (392,040 square feet) of land.
<PAGE>
Exhibit "B"
1. Roadway easement(s) 15 feet in width as set forth and defined in
instrument(s) filed for record under Harris County Clerk's File No(s).
D663473 and D663474.
2. Water line and utility easement 10 feet wide along Lantern Bend Drive as
reflected in Volume 336, Page 145 of the Map Records of Harris County,
Texas.
3. Sanitary sewer access easement along Lantern Bend Drive as reflected in
Volume 336, Page 145 of the Map Records of Harris County, Texas.
4. Utility easement(s) 8 feet in width along the southerly property line as
set forth and defined in instrument(s) filed for record under Harris County
Clerk's File No(s). N964754.
5. One foot reserve dedicated to the public in fee along Lantern Bend Drive as
reflected in Volume 336, Page 145 of the Map Records of Harris County,
Texas.
6. Building set back lines 20 feet wide along Lantern Bend Drive and 30 feet
wide along Cypress Station Drive as shown on the recorded plat of Cypress
Station Center, Phase II recorded in Volume 359, Page 11 of the Map Records
of Harris County, Texas.
7. A 1/16th non-participating royalty interest in all oil, gas and other
minerals, as set forth by instrument(s) recorded in Volume 8349, Page 24,
of the Deed Records of Harris County, Texas.
8. A 1/16th non-participating royalty interest in all oil, gas and other
minerals, as set forth by instrument(s) recorded in Volume 8259, Page 84,
of the Deed Records of Harris County, Texas.
9. All oil, gas and other minerals as set forth by instrument(s) recorded in
Volume 1266, Page 497, of the Deed Records of Harris County, Texas.
(Surface Rights Waived as set forth in instrument(s) filed for record under
Harris County Clerk's File No(s). E073352, E073355, E073356, E073359,
E073361, E152094 and E152100.) (AS TO PORTION OF THE PROPERTY OUT OF THE
6.2 ACRE TRACT DESCRIBED THEREIN)
10. The terms, conditions and stipulations of that certain Mineral Lease dated
November 15, 1939, recorded in Volume 335, Page 28, amended by instrument
recorded in Volume 362, Page 220, included in the Bammel Gas Unit by
instrument recorded in Volume 1925, Page 283 of the Contract Records of
Harris County, Texas.
(Surface Rights Waived as set forth in instrument(s) recorded in Volume
7987, Page 338, of the Deed Records of Harris County, Texas.) (AS TO THE
23.38 ACRES DESCRIBED THEREIN)
<PAGE>
11. All oil, gas and other minerals, as set forth by instrument(s) recorded in
Volume 1311, Page 729, of the Deed Records of Harris County, Texas.
(Surface Rights Waived as set forth in instrument(s) filed for record under
Harris County Clerk's File No.(s) E073352, E073355, E073356, E073359,
E073361, E152094 and E152100.) (AS TO PORTION OF THE PROPERTY OUT OF THE
23.28 ACRE TRACT DESCRIBED THEREIN)
12. All oil, gas and other minerals, as set forth by instrument(s) filed for
record under Harris County Clerk's File No(s), G773564, Title to said
interest not checked subsequent to its date of execution. Said deed
providing that the grantor expressly waives all rights of ingress and
egress onto the surface and into the subsurface of the property to the
depth of 750 feet for the purpose of prospecting for mining, drilling and
developing said property for oil, gas and other minerals. (AS TO A PORTION
OF THE PROPERTY OUT OF THE 4 ACRES DESCRIBED THEREIN)
13. A 1/32nd royalty interest in all oil, gas and other minerals, as set forth
by instrument(s) recorded in Volume 973, Page 97, of the Deed Records of
Harris County Texas. (AS TO PORTION OF THE PROPERTY OUT OF THE PROPERTY
DESCRIBED THEREIN)
14. A 1/32nd royalty interest in all oil, gas and other minerals, as set forth
by instrument(s) recorded in 1031, Page 592, of the Deed Records of Harris
County, Texas. (AS TO PORTION OF THE PROPERTY OUT OF THE PROPERTY DESCRIBED
THEREIN)
15. Annual Maintenance Charge and Special Assessments payable to Cypress
Station Association, as set forth and secured by a Vendor's Lien retained
in instrument(s) filed for record under Harris County Clerk's File No(s)
F258036.
16. Subject property lines within the area designated and zoned by the City of
Houston as the "Jetero Airport Site" and is subject to the restrictions and
regulations imposed by Ordinance of the City of Houston, a certified copy
of which is recorded in Volume 4184, Page 518 and by amendments thereto,
certified copies of which are recorded in Volume 4897, Page 67 and Volume
5448, Page 421, all of the Deed Records of Harris County, Texas, and filed
for record under Harris County Clerk's File No(s) J040960.
17. The property covered herein is subject to the terms, conditions, provisions
and stipulations of Ordinance #85-1878 of the City of Houston enacted
October 23, 1985 pertaining to the platting and replatting of real property
and the establishment of building set back lines within such boundaries. A
Certified Copy of said Ordinance was filed for record on August 1, 1991,
under Harris County Clerk's File No. N253886.
ANY PROVISION HEREIN WHICH RESTRICTS THE SALE, RENTAL, OR
USE OF THE DESCRIBED REAL PROPERTY BECAUSE OF COLOR OR RACE
IS INVALID AND UNENFORCEABLE UNDER FEDERAL LAW
THE STATE OF TEXAS )
COUNTY OF HARRIS )
I hereby certify that this instrument was FILED in File
Number Sequence on the date and at the time stamped hereon
by me; and was duly RECORDED, in the Official Public Records
of Real Property of Harris County, Texas on
APR 1 1996
/s/ Beverly B. Karfman
[Seal of County Court of Harris County Texas] COUNTY CLERK
HARRIS COUNTY TEXAS
RECORDER'S MEMORANDUM
AT THE TIME OF RECORDATION, THIS
INSTRUMENT WAS FOUND TO BE INADEQUATE
FOR THE BEST PHOTOGRAPHIC REPRODUCTION
BECAUSE OF ILLEGIBILITY, CARBON OR
PHOTOCOPY, DISCOLORED PAPER, ETC.
ASSIGNMENT AGREEMENT
(Ridgefield, Connecticut)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and among
Continuum Care of Massachusetts, Inc. ("CCC"), a Delaware corporation,
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
WITNESSETH
WHEREAS, CCC has entered into that certain Purchase and Option Agreement
(the "Purchase Agreement"), dated July 14, 1995, relating to a certain parcel of
land located in Ridgefield, Connecticut (the "Land"), a copy of which is
attached hereto as Exhibit A;
WHEREAS, Assignor, an affiliate of CCC, intends to develop the Land for an
assisted/independent living facility consisting of approximately one hundred ten
(110) units (the "Project");
WHEREAS, (a) CCC desires to assign its rights and obligations under the
Purchase Agreement to Assignor, and (b) Assignor desires to simultaneously
therewith assign certain of its rights and obligations under the Purchase
Agreement to Assignee, and (c) Assignee desires to assume such rights and
obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. CCC hereby assigns, sets over and transfers unto Assignor to have and
to hold from and after the date hereof all of the right, title and
interest of CCC in, to and under the Purchase Agreement, and Assignor
hereby accepts the within assignment and assumes and agrees with CCC,
to perform and comply with and to be bound by all of the terms,
covenants, agreements, provisions and conditions of the Purchase
Agreement on the part of CCC thereunder to be performed on and after
the date hereof, in the same manner and with the same force and effect
as if Assignor had originally executed the Purchase Agreement.
2. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof all of the right, title and
interest of Assignor in, to and under the Purchase Agreement, and
Assignee hereby accepts the within assignment and assumes and agrees
with Assignor, to
<PAGE>
2
perform and comply with and to be bound by all of the terms,
covenants, agreements, provisions and conditions of the Purchase
Agreement on the part of Assignor thereunder to be performed on and
after the date hereof, in the same manner and with the same force and
effect as if Assignee had originally executed the Purchase Agreement.
3. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
5. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 7 hereof) accruing
or arising under the Purchase Agreement on or before the date hereof.
6. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date hereof.
7. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
8. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
CONTINUUM CARE OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------
Name: James M. Clary
Title:
ASSIGNOR:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
PURCHASE AND OPTION AGREEMENT
This Purchase and Option Agreement is made by and between GEORGE L. BAKES,
of the Town of Norwalk, Connecticut ("Seller") and CONTINUUM CARE OF
MASSACHUSETTS, INC., a Delaware corporation having a principal place of business
at 197 First Avenue, Needham, Massachusetts 02194 ("Buyer").
STATEMENT OF FACTS
A. On May 21, 1991, Seller and A.M.A. Development Corp., an affiliate of
Buyer, entered into that certain Option Agreement ("Option Agreement") with
regard to the sale of premises located at the intersection of Connecticut Route
7 and 25 in the Town of Ridgefield, County of Fairfield and State of Connecticut
("Premises") for the development of a three stage project including a nursing
facility, congregate housing and independent living units (collectively, the
"Project").
B. On March 5, 1992, Seller and G-WZ Development Group, Inc., an affiliate
of to Buyer, entered into a certain Amendment to Option Agreement.
C. On September 30, 1992, CCC of Ridgefield, Inc., an affiliate of Buyer,
and Seller concluded the sale of that portion of the Premises described as Phase
I in the Option Agreement, pursuant to the terms of the Option Agreement.
D. Seller and Buyer are desirous of further amending and restating the
terms and conditions of the Option Agreement with respect to the remainder of
the Premises and the development of Phase II and Phase III of the Project.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the sufficiency of which is hereby acknowledged:
IT IS AGREED:
1. Phase I. The parties acknowledge that Phase I of the Project has been
completed. This Purchase and Option Agreement shall replace and supersede all
prior agreements between Seller and Buyer and its affiliates, including without
limitation, the Option Agreement.
2. Grant of Option. The Seller does hereby grant to the Buyer, or its
nominee, the exclusive option to purchase, during the entire term of this
Agreement, upon the terms and conditions hereinafter set forth, so much of the
remaining Premises owned by Seller and situated in Ridgefield, Connecticut, as
more fully described on Exhibit A hereto, being adjacent to the Phase I Premises
and containing the minimum acreage required by local zoning ordinances for the
development of Phase II of the Project, as established pursuant to paragraph 3
below ("Phase II
<PAGE>
Premises"). The term of this Purchase and Option Agreement shall commence on the
date of this Agreement and shall terminate upon termination of the right of
first refusal contained herein relating to Phase III Premises, as hereinafter
defined.
3. Deed Description. The Seller agrees to convey the Phase II Premises
using a description which conforms with a survey in recordable form to be
supplied by the Buyer showing the Phase II Premises. The description of the
Phase II Premises shall be that portion of the parcel of land described on
Exhibit A shown as the Phase II Premises on site plans or subdivision
applications presented to the Town of Ridgefield for approval, and Seller agrees
to convey such parcel of land in accordance with the terms and conditions of
this Agreement. The survey showing the Phase II Premises shall be prepared in
accordance with the standards of a Class A-2 survey as defined in the Code of
Practice for Standards of Accuracy of Surveys and Maps, as adopted by the
Connecticut Association of Land Surveyors, Inc., and shall be certified to the
Seller and Buyer. Excluding the Phase II Premises, the remainder of the Premises
owned by Seller shall be referred to herein as the "Phase III Premises". The
deed of the Phase II Premises shall reserve appropriate access and utility
easements for the benefit of Phase III.
4. Consideration. The purchase price for the Phase II Premises is One
Million Seven Hundred Fifty Thousand and 00/100 ($1,750,000) Dollars ("Purchase
Price"), subject to increase as set forth below, and shall be paid as follows:
(a) by credit of one-half of the amount of any Monthly Payments described
in this paragraph;
(b) the balance shall be paid in cash, bank check, attorney's client fund
check, certified check, wire transfer or other mutually acceptable means at the
Closing.
In the event that the total number of units to be constructed on the Phase
II Premises ("Phase II Units"), as approved by the Town of Ridgefield, exceeds
one hundred and ten (110), the Purchase Price shall be increased by Seventeen
Thousand Five Hundred Dollars ($17,500) for each approved unit in excess of one
hundred and ten (110).
In the event that the closing does not occur on or before March 1, 1996,
Buyer shall pay to Seller the amount of Ten Thousand and 00/100 ($10,000)
Dollars per month (each a "Monthly Payment" and collectively the "Monthly
Payments") commencing March 1, 1996, and on the first day of each month
thereafter, until the date that Buyer exercises its option to purchase
hereunder. One-half of the total amount of such Monthly Payments shall be
applicable to the Purchase Price payable hereunder. If
-2-
<PAGE>
Buyer is in default in payment of any Monthly Payment, and such default is not
cured within ten (10) days after Buyer's receipt of written notice of default
from Seller, this Agreement shall be deemed to be void, all rights and
liabilities of the parties hereunder shall terminate and Seller shall retain all
Monthly Payments made through such date.
5. Approvals.
(A) Buyer's ability to exercise this Option is contingent upon Buyer, or
its nominee or assignee, obtaining, at its own expense, or waiving, in its sole
discretion, all requisite Federal, State and local Final Approvals with respect,
and in order to, develop a congregate care facility comprised of not less than
one hundred ten (110) units nor more than one hundred thirty (130) units and a
planned unit development containing not less than ninety (90) or more than one
hundred ten (110) residential dwellings. All of such Federal, State and Local
approvals shall be hereinafter collectively referred to as the "Approvals". The
Approvals shall not have been deemed to be received unless at least two hundred
five (205) units in the aggregate are approved. The parties acknowledge that the
Approvals shall also be deemed to include obtaining finalization of a water
source sufficient for the development of Phase II and Phase III of the Project.
The term "Final Approvals", as used herein, shall mean that all Approvals have
been obtained and all appeal periods have expired with no appeals having been
filed, or in the event that an appeal has been filed, upon the favorable
disposition of such appeal without the filing of a further appeal. Buyer shall
be solely responsible for all costs incurred in obtaining the Final Approvals.
Notwithstanding the foregoing, the Final Approvals shall be deemed to have been
received if all Final Approvals for the development of Phase II and Phase III
have been obtained.
(B) The parties acknowledge that a zoning amendment permitting use of the
Phase II Premises and Phase III Premises for Buyer's intended development,
subject to issuance of site plan, special permit and other required approvals,
has been approved by the Town of Ridgefield prior to the date of this Agreement.
Immediately after execution of this Purchase and Option Agreement, Buyer shall
undertake and use due diligence to finalize the selection of and all necessary
documentation and approvals for a water source which will supply sufficient
water for the development of Phase II and Phase III of the Project, at an
expense and without conditions unacceptable to Buyer, in its sole discretion
("Water Approvals"). Buyer agrees to commence preparation of a revised site
plan for the Phase II Premises and Phase III Premises ("Preliminary Site Plan")
for submission to Seller for approval on or before September 1, 1995. The
Preliminary Site Plan shall reflect design parameters for Phase
-3-
<PAGE>
II and Phase III of the Project, consistent with the proposed uses for the Phase
II Premises and the Phase III Premises and consistent with Buyer's current
marketing needs. CCC shall use all reasonable efforts to develop a preliminary
site plan showing a nearly equal mix of Phase II Units and Phase III Units. The
Phase II Building footprint shall be smaller and the Plase II loop road shall be
the same or smaller than as set forth on the previously approved site plan for
Phase II as approved by the Town of Ridgefield. Upon completion of the
Preliminary Site Plan, Buyer shall submit the Preliminary Site Plan to Seller
for Seller's approval, which shall not be unreasonably withheld, provided that
it contains the number of units designated in Paragraph 5(A) above. Upon
approval of the Preliminary Site Plan, CCC shall promptly prepare or cause to be
prepared the necessary zoning application to the Town of Ridgefield for site
plan approval for the Phase II units and the Phase III units, and subdivision
approval for the subdivision of the Phase II Premises and the Phase III
Premises. Buyer shall use reasonable efforts to submit such applications to the
Town of Ridgefield on or before November 30, 1995.
Buyer shall work with the Ridgefield Water Supply Company to engineer
design and construct at its cost all necessary water systems to deliver water
from RUSC's off-site well in conjunction with the excess capacity from the Phase
I well to the Phase II Premises in sufficient amounts to supply water to Phase
II and Phase III. Buyer agrees that all other utilities and drainage for Phase
II will be placed, sized and built to accept Phase III utilities and drainage.
6. Exercise of Option. This Option may be exercised by Buyer at any time on
or before the date which is thirty (30) days after the date that all Final
Approvals for the development of the Phase II Premises and the Phase III
Premises have been obtained, by giving written notice of such exercise to Seller
in accordance with the provisions of Section 15 of this Agreement.
7. Closing. If the Buyer exercises its option to purchase the Phase II
Premises, the closing of title of the Phase II Premises ("Closing") shall take
place on the first business day which is forty-five (45) days after the date
that all Final Approvals for the development of Phase II Premises and Phase III
Premises have been obtained. The closing of title shall take place at the law
offices of Levy & Droney, P.C., Attorneys at Law, 74 Batterson Park Road,
Farmington, Connecticut or such other place as may be required by Buyer's lender
or mutually agreed upon by the parties. Buyer shall be entitled to full
possession of the Phase II Premises at the Closing, free and clear of tenants
and all other encumbrances, except those specifically set forth on Exhibit A or
matters not objected to by Seller as required by Paragraph 8. At the Closing,
all adjustments of real estate taxes and other matters shall be made as of the
date of Closing in accordance with the practice of the Fairfield County Bar
Association. Buyer shall be responsible for any conveyance taxes due in
connection with the transfer of title. In the event that the Closing has not
occurred on or before September 1, 1996, Seller shall have the right to
terminate this Agreement upon written notice to Buyer, whereupon all rights and
liabilities of the parties shall termi [ILLEGIBLE LINE OF TEXT] If Buyer elects
to terminate the Agreement, Buyer agrees to provide to Seller, without charge,
copies of all plans, studies, maps, surveys [ILLEGIBLE INSERTION] or other
documentation or data which Buyer has received and/or compiled in connection
with its pursuit of the Approvals, exclusive of any working drawings pertaining
to structures, but inclusive of all landscape plans.
-4-
<PAGE>
8. Title and Conveyance. Seller shall convey the Phase II Premises by
Warranty Deed, subject only to local ordinance, municipal regulation, public or
private law and only those encumbrances and title exceptions listed on Exhibit A
attached hereto and shall be conveyed free and clear of those items listed as
objections to title and number ___ through ___ inclusive on Exhibit A. Seller
acknowledges that he shall pay off any monetary encumbrances affecting the
Premises at the Phase II Closing, except that the sewer assessment shall be
adjusted as follows. Seller shall pay any installments due on the sewer
assessment for the Phase II Premises and the Phase III Premises prior to
closing. As to the final installment of the sewer assessment due in 1996, Buyer
shall pay the sum of $7,000 at closing and Seller shall pay the balance due at
closing if Seller has [ILLEGIBLE REST OF SENTENCE]. Seller shall not further
encumber all or any portion of the Premises in any manner prior to the Closing.
The parties agree that the Buyer shall determine to its sole satisfaction on or
before August 15, 1995 whether Seller's title to the Phase II Premises is good
and marketable; if Buyer shall determine that Seller's title to the Premises is
not to its satisfaction, Buyer shall so notify the Seller in writing whereupon
Seller shall have an opportunity for a period not to exceed thirty (30) days
from the date of such notice to remedy to Buyer's sole satisfaction the alleged
defects or defects claimed. If, after the expiration of said thirty (30) day
period, said defects have not been remedied to Buyer's sole satisfactions,
Buyer, at its option may terminate this Agreement by notice to Seller within ten
(10) days after expiration of said thirty (30) day period in the manner provided
in Section 15 hereinafter, in which event Seller may retain all monies received
by Seller hereunder, and neither Buyer nor Seller shall thereafter have any
further liability or obligation to the other hereunder. In the event that Buyer
fails to notify Seller of Buyer's intent to terminate this Agreement pursuant to
the immediately preceding sentence, and in the event that Buyer thereafter
exercises its option to purchase the Phase II Premises, Buyer shall be deemed to
have elected to accept title to the Phase II Premises on the terms and
conditions set forth in this Agreement, subject to the items listed on Exhibit A
and any other defects which were existing as of the date of Buyer's title search
and not objected to on Exhibit A.
9. Right of Entry. The Buyer shall have the right, during the term of this
Purchase and Option Agreement and at all times prior to Closing, to enter upon
the Phase II Premises and the Phase III Premises for the purpose of examining
and inspecting
-5-
<PAGE>
the same, for making soil tests, borings, thereon1 ascertaining the adequacy of
the water supply available for Buyer's intended use of the Phase II Premises and
the Phase III Premises, making boundary and topographical surveys thereof,
including the right to cut brush and branches, if necessary, and conducting
other tests and studies (including without limitations, studies of utility
services available thereto) as will enable the Buyer to ascertain the
suitability of the Phase II Premises and the Phase III Premises for Buyer's
intended uses. Buyer shall indemnify and hold Seller harmless from any and all
claims, liabilities, actions and demands made by reason of or arising out of
such entries, inspections and/or the conducting of any and all of the
above-mentioned activities and tests on or at the Phase II Premises or the Phase
III Premises.
10. Real Estate Agent. The Seller and the Buyer agree that if any real
estate broker or agent makes a claim for commission in connection with this
transaction, then the party dealing with such real estate broker or agent shall
defend, indemnify and hold the other party harmless against any costs or
expenses, including the cost of defense, resulting from any such claim. The
Seller represents and agrees that he has not granted any listing or other
brokerage agreement to a real estate broker or agent in connection with the
Phase II Premises or the Phase III Premises.
11. Seller's Representations. Seller represents to Buyer that:
a. There are no outstanding written or oral leases or tenancies of any
kind in any way affecting the Phase II Premises or the Phase III Premises.
b. Seller is the sole owner of the Phase II Premises and the Phase III
Premises and has good and marketable fee simple title to the Phase II Premises
and the Phase III Premises and has the sole and unrestricted right and power to
enter into this Agreement and to perform the obligations of Seller as set forth
herein;
c. So long as this Option is in effect, and thereafter until the deeds
have been filed for record, Seller will neither do, commit or suffer to be done
any act or thing that will adversely effect Seller's title to the Phase II
Premises or the Phase III Premises or any part thereof;
d. Seller has not granted to any person, firm or corporation any right
in and to the Phase II Premises or the Phase III Premises that will prevent or
interfere with Buyer taking title to a possession of the Phase II Premise or the
Phase III Premises on or after the closing;
-6-
<PAGE>
e. There is no litigation pending with respect to the Seller or the
Phase II Premises or the Phase III Premises which would effect the ability of
the Seller to conclude the transaction contemplated hereunder.
12. Right of First Refusal. At all times during the term of this Agreement
and for a period of two (2) years thereafter, Seller hereby grants to Buyer or
its nominee or assignee a right of first refusal on the Phase III Premises or
any part thereof on the terms and conditions described in this paragraph. This
right of first refusal shall not apply in the event of a development of the
Phase III Premises by Seller if the Seller elects to proceed without a general
contractor, partner or other unrelated investor or equity participant in the
development. In the event that Seller received a bona fide written offer from an
unrelated third party for the purchase of all or any part of the Phase III
Premises which Seller intends to accept, and upon satisfaction of all conditions
to such offer ("Offer"), Seller shall give prompt written notice of the same to
Buyer or its nominee or assignee ("Seller's Notice"). For purposes of this Right
of First Refusal, any lease or other transfer of ownership or possession of all
or any part of the Phase III Premises for a period equal to or exceeding ten
(10) years shall be deemed an Offer and shall be subject to Buyer's rights
hereunder. Upon receipt of Seller's Notice, Buyer or its nominee or assignee
shall have the right for a period of thirty (30) days following receipt of
Seller's Notice to review the same. If Buyer elects to purchase the Phase III
Premises or so much thereof as shall be subject to the terms of the Offer, Buyer
shall give written notice to Seller of its election to purchase the same, within
thirty (30) days after its receipt of Seller's Notice, upon all of the same
terms and conditions contained in the Offer.
Buyer and Seller agree to use reasonable efforts to reach agreement
regarding an acceptable purchase price for the Phase III Premises. In the event
that Buyer and Seller have not reached agreement regarding such a purchase price
and entered into an agreement for sale of the Phase III Premises on or before
the Closing of the Phase II Premises, Seller shall execute a document in
recordable form granting the Right of First Refusal hereunder to Buyer for
recording on the Ridgefield Land Records.
13. Assignment. Buyer shall not assign this Agreement or any rights
hereunder, without the prior written consent of Seller, which shall not be
unreasonably withheld. Notwithstanding the foregoing, Buyer shall be entitled to
assign this Agreement, without the prior written consent of Seller, to a nominee
of Buyer under Buyer's control, or to any affiliate, subsidiary or other
corporation or entity under the control of Buyer. In the event of an assignment
to a nominee or affiliate of Buyer, Buyer shall guaranty the performance of
Buyer's
-7-
<PAGE>
obligations, if any, under this Agreement as of the date of such assignment.
Seller shall not assign this Agreement or any rights hereunder, without the
prior written consent of Buyer, which shall not be unreasonably withheld, until
the earlier of: (A) the date Buyer exercises its option to purchase Phase II, or
(B) the last date available for Buyer's exercise of its option to purchase Phase
II under the terms of this Agreement. Notwithstanding the foregoing, at any time
during the term of this Agreement, Seller shall be entitled to assign this
Agreement and his rights hereunder to his children, trusts for his children, or
any corporation or partnership of which he is in Control. Notwithstanding any
assignment, Seller agrees that until the all Final Approvals are obtained, he
shall cooperate with Buyer in securing all of the Approvals. Any such assignment
shall be subject to all terms and conditions of this Agreement, and Seller shall
provide Buyer with prompt notice of any such assignment. In the event of any
transfer to a party unrelated to Seller, it is agreed that any such assignee
shall provide Buyer with written notice of any claimed default, and a reasonable
period of time to cure any claimed default, prior to declaring any default
hereunder. Any defaults other than payment defaults which are not susceptible of
cure but which do not affect Buyer's ability to go forward and construct the
Project and fulfill its obligations to Seller hereunder shall not be deemed to
be defaults after the date of any such assignment.
14. Hazardous Waste. Seller agrees to execute at Closing a hazardous waste
affidavit to the satisfaction of Buyer or Buyer's construction and/or permanent
lender or lenders which shall be in a form substantially similar to the
following:
"During the tenure of Bakes' ownership of the property, or any real
property contiguous to the property of which the property was a part during
the last three (3) years (the property and any such contiguous property are
collective referred to in, and for the purposes of, this affidavit as the
"Premises"), Bakes has not used the Premises for, and to the best of Bakes'
knowledge and belief the Premises have not been used for, the generation,
treatment, storage, handling or disposal of any hazardous substances, and
to the best of Bakes' knowledge and belief, the Premises do not contain any
underground storage tanks, or any chemical or other substance that is
prohibited, limited or regulated by law and further, there has been no
discharge, uncontrolled loss, seepage or filtration of oil or products of
hazardous wastes on or from the Premises."
In no event, however, shall Bakes provide an indemnification or shall such
affidavit be construed as an indemnification, of
-8-
<PAGE>
any sort, relevant to losses, liabilities, damages, claims, causes of action,
costs or expenses arising from or in connection with any detection, discovery,
clean-up, removal, or similar protection or remedial action relevant to
hazardous substances in, on or about the Phase II Premises or the Phase III
Premises.
15. Notices. All notices required, contemplated or sent pursuant to this
Agreement, shall be valid only if in writing and hand delivered, delivered via
an express mail or overnight delivery service, or sent postage prepaid by
certified United States mail, return receipt requested, and shall be deemed
received one (1) business day after hand delivery or delivery via an express
mail or overnight delivery service, or five (5) business days after the date of
mailing by certified United States mail, return receipt requested, and if
properly addressed as follows:
to Seller at: Mr. George Bakes
118 Silvermine Avenue
Norwalk, CT 06850
with a copy to: Lawrence Dennin, Esq.
65 East Avenue
P.O.Box 390
Norwalk, CT 06852
and to Buyer at: Mr. Michael Zaccaro
Continuum Care of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
with a copy to: Richard S. Mann, Esq.
Continuum Care of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
and with a copy to: Jomarie T. Andrews, Esq.
Levy & Droney, P.C.
74 Batterson Park Road
P.O. Box 887
Farmington, CT 06034
16. Governing Law. The parties hereto agree that this Agreement shall be
governed by and interpreted under the laws of the State of Connecticut and any
dispute arising out of the Agreement shall be subject to the jurisdiction of the
Courts of the State of Connecticut.
17. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
-9-
<PAGE>
successors, personal representatives and assigns, subject to the limitations set
forth in Section 13.
18. Cooperation. Seller agrees to give his full cooperation to the Buyer
with regard to the Buyer's proposed development of the Phase II Premises and the
Phase III Premises. Seller shall execute such applications, permit requests and
other documents as may be necessary or appropriate. Seller shall deliver to
Buyer promptly after executing this Agreement any surveys, title information, or
other documentation owned by Seller with respect to the development of the Phase
II Premises or the Phase III Premises.
19. Relationship of the Parties. Nothing in this Agreement shall ever be
construed as creating a joint venture between Buyer and Seller, or any
relationship other than that of Buyer and Seller.
20. Notice of Agreement. The parties agree that this Agreement shall not be
recorded on the Ridgefield Land Records. Seller agrees to execute a notice of
this Agreement, including the right of first refusal granted hereunder, for
recording on the Ridgefield Land Records, provided that Buyer shall
simultaneously deliver a release of such notice of agreement to be held in
escrow by Seller's counsel, in accordance with the terms and conditions of a
separate escrow letter.
21. Time of the Essence. Time is of the essence with respect to those
provisions of this Agreement relating to the Closing date, the exercise of
Buyer's option and right of first refusal and the making of all payments.
Nothing in this Section 18 shall be deemed to shorten or eliminate any
applicable notice and cure periods expressly contained herein. All provisions
relating to payments and exercise shall be strictly construed.
Signed as an instrument under seal on this 14th day of July 1995.
/s/ [Illegible] /s/ George L. Bakes
- ------------------------- --------------------------
George L. Bakes
/s/ [Illegible]
- -------------------------
CONTINUUM CARE OF
MASSACHUSETTS, INC.
/s/ [Illegible] By /s/ [Illegible]
- ------------------------- --------------------------
Its Vice President
/s/ [Illegible]
- -------------------------
-10-
<PAGE>
STATE OF CONN. )
) SS. [ILLEGIBLE]
COUNTY OF FAIRFIELD )
The foregoing instrument was acknowledged before me this [ILLEGIBLE] day
of July, 1995, by George L. Bakes.
/s/ [ILLEGIBLE]
---------------------------------
Notary Public
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) SS. [ILLEGIBLE]
COUNTY OF FAIRFIELD )
The foregoing instrument was acknowledged before me this 14th day of July,
1995, by [ILLEGIBLE] Vice President of Continuum Care of Massachusetts, Inc. a
Delaware corporation, on behalf of the corporation.
/s/ [ILLEGIBLE]
---------------------------------
Notary Public
Commissioner of the Superior Court
-11-
ASSIGNMENT AGREEMENT
(Millbury, Massachusetts)
THIS ASSIGNMENT AGREEMENT (the "Agreement") is entered into as of the ___
day of June, 1996, by and between CCC of Florida, Inc. ("Assignor") and
CareMatrix of Massachusetts, Inc. ("Assignee").
WITNESSETH:
WHEREAS, Assignor and Sun Healthcare Group, Inc. entered into a certain
Turnkey Construction and Sales Contract dated as of October 19, 1995 for the
construction of a one hundred fifty-four (154) bed long term care facility to be
located on Millbury Avenue in Millbury, Massachusetts (the "Turnkey Construction
Agreement"), a copy of which is attached hereto as Exhibit A.
WHEREAS, Assignor desires to assign its rights and obligations under the
Turnkey Construction Agreement to Assignee and Assignee desires to assume such
rights and obligations.
NOW THEREFORE, for and in consideration of the sum of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. Assignor hereby grants, bargains, sells, assigns and transfers to
Assignee all of Assignor's right, title and interest in, and all contractual and
other rights under the Turnkey Construction Agreement.
2. Assignee hereby accepts this assignment and hereby agrees to assume all
of Assignor's right, title, interest, duties and obligations under the Turnkey
Construction Agreement.
3. This Agreement may be executed by facsimile and in counterparts, each of
which shall constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ASSIGNOR:
CCC OF FLORIDA, INC
By: /s/ James M. Clary
-----------------------
Name: James M. Clary
Title:
ASSIGNEE:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------
Name: James M. Clary
Title:
<PAGE>
TURNKEY CONSTRUCTION
AND SALES CONTRACT
Between
CCC OF FLORIDA, INC.
and
SUN HEALTHCARE GROUP, INC.
(MILLBURY PROJECT)
<PAGE>
Table of Contents
for
Turnkey Construction and Sales Contract
By and Between
CCC of Florida, Inc.
and
Sun Healthcare Group, Inc.
(Millbury Project)
ARTICLE I - Representations
Section 1.1 - Title to Premises
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Other Agreements
Section 1.6 - Representations of Seller
Section 1.7 - Representations of Purchaser
ARTICLE II - Construction of Health Care Facility
Section 2.1 - Control of Construction
Section 2.2 - Architectural Services
Section 2.3 - Other Professionals and
Limited Assumed Obligations
Section 2.4 - Construction
Section 2.5 - Personal Property and Lobby Upgrade
Section 2.6 - Changes
Section 2.7 - Commencement of Construction
Section 2.8 - Continuity of Construction
Section 2.9 - Completion of Construction
Section 2.10 - Purchaser's Noninvolvement
Section 2.11 - Punch-List
Section 2.12 - Work and Warranties
Section 2.13 - Subcontractors
Section 2.14 - Financing Arrangements
Section 2.15 - Rights to Cure
Section 2.16 - Termination by Purchaser
Section 2.17 - Termination by Seller
-i-
<PAGE>
ARTICLE III - Transfer of Title
Section 3.1 - Date of Sale
Section 3.2 - Purchase Price
Section 3.3 - Payment of Purchase Price
Section 3.4 - Form of Conveyance and Status of Title
Section 3.5 - Certain Purchase Price Additions or
Rebates
ARTICLE IV - Additional Responsibilities of Parties
Section 4.1 - Seller's Responsibilities
Section 4.2 - Purchaser's Responsibilities
Section 4.3 - Indemnification
ARTICLE V - Contingencies
Section 5.1 - Required Occurrences
Section 5.2 - Failure of Contingencies
ARTICLE VI - Concluding Provisions
Section 6.1 - Entire Agreement
Section 6.2 - Representations
Section 6.3 - Amendments
Section 6.4 - Joint Effort
Section 6.5 - Brokers
Section 6.6 - Assignment
Section 6.7 - Notices
Section 6.8 - Arbitration
Section 6.9 - Captions
Section 6.10 - Successors
Section 6.11 - Counterparts
Section 6.12 - Severability
Section 6.13 - Effective Date
Section 6.14 - No Offer
Section 6.15 - Attorney Fees
Section 6.16 - Survival
Section 6.17 - Cooperation with Purchaser's Third
Party Lender
EXHIBITS LIST
Exhibit A - Description of Premises
Exhibit B - Additional Licenses
Exhibit C - Copy of DON
Exhibit D - Preliminary Plans
Exhibit E - Personal Property
Exhibit F - Additional Cost Items
-ii-
<PAGE>
TURNKEY CONSTRUCTION AND SALES CONTRACT
This Agreement is by and between CCC OF FLORIDA, INC., a Delaware
corporation, with an office at 197 First Avenue, Needham, Massachusetts 02194
(the "Seller"), and SUN HEALTHCARE GROUP, INC., a Delaware corporation with an
office at 5131 Masthead Street, N.E., Albuquerque, New Mexico, 87109 (the
"Purchaser") and is entered into for the purpose of reducing to a formal writing
all of their understandings with respect to the construction and sale of a
health care facility on certain property on Millbury Avenue, Millbury,
Massachusetts (the "Premises").
In consideration of the undertakings of each of the parties to the other,
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Premises. Prior to the transfer of title referred to
in Section 3.1, the Purchaser (or its nominee) shall purchase marketable title
in fee simple to the Premises consisting of approximately twenty-three (23)
acres of land described in Exhibit "A". Exhibit "A" and each of the other
Exhibits referred to in this Agreement shall be incorporated into this Agreement
by such reference as if fully set forth in this Agreement. Purchaser shall
receive a credit against the Purchase Price (as defined herein) in an amount
equal to the purchase price of the Premises and all closing and acquisition
costs associated therewith, to the extent included in the MCE (as defined
herein).
Section 1.2 - Encumbrances.
(a) Purchaser acknowledges that the Premises may be subject to easements,
assessments, conditions, contracts, rights, claims, encroachments,
restrictions and other encumbrances as would be disclosed on a title
report (the "Existing Encumbrances"), to physical conditions which
would be disclosed by a survey of the Premises and to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances approved by Purchaser resulting from Seller
securing regulatory, development and construction approvals for a 154
bed skilled nursing facility and attendant site improvements.
-1-
<PAGE>
(b) Purchaser represents that it has reviewed the boundary survey, the
topographical survey, geotechnical report, and hazardous waste report
concerning the Premises and has visited the Premises. On and subject
to the terms and conditions specified herein, the Purchaser agrees to
purchase the Premises and the Facility as hereinafter defined, subject
to the Existing Encumbrances, the mortgages described herein, to the
physical conditions which exist and as such conditions may change
during the course of construction and to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from Seller securing regulatory, development
and construction approvals for a 154 bed skilled nursing facility and
attendant site improvements, provided that the same do not
unreasonably interfere with the Purchaser's ownership or operation of
the Facility.
Section 1.3 - Permits and Approvals.
(a) Seller hereby represents and warrants that the construction and
operation of the Facility on the Premises are permitted uses as a
matter of right in compliance with the Zoning By-Laws of the Town of
Millbury, Massachusetts, provided, however, that the Facility will
require a special permit to allow its construction in accordance with
the Preliminary Plans, which has been issued by the Planning Board of
the Town of Millbury and, provided further that a sign variance will
be required for the Facility's proposed sign; which permits the
construction on the Premises of a health care facility, providing for
a total of up to One Hundred Fifty-Four (154) skilled nursing care
beds (the "Facility") and which is currently in effect and subject to
no conditions other than those set forth in Exhibit "B" and which the
Seller shall take all reasonable steps to preserve in full force and
effect pending completion of construction of the Facility in
accordance with the terms hereof.
(b) Seller represents that it shall make application for and use its
reasonable best efforts to obtain in Purchaser's name or to the extent
that any of the same are issued in the Seller's name, the Seller's
name shall be deemed to be "as agent for Purchaser", prior to the date
of the Closing, all governmental approvals, licenses, easements, sewer
agreements, utility hookups and permits which may be needed in order
to permit the construction and operation of the Facility on the
Premises (the "Development Approvals"), except for the approvals,
licenses, easements, sewer agreements, and permits, if any, set forth
on Exhibit "B" (the "Additional Licenses")
-2-
<PAGE>
provided, however, no documentation shall be signed by Seller on
behalf of Purchaser without Purchaser's prior written consent which
shall not be unreasonably withheld, delayed or conditioned. Seller
covenants to diligently use its reasonable best efforts to obtain in
Purchaser's name, or in the Seller's name as the agent for the
Purchaser, all. of the Additional Licenses (other than the Facility's
operating license for which the Purchaser shall be solely responsible,
subject to the Seller's obligations pursuant to Sections 2.4 and 2.9
to make the Facility "licensable" from the standpoint of construction
and furnishing) in an expeditious manner it being the intent of the
parties that the same shall be issued concurrently with the
substantial completion of the Facility. All of such Development
Approvals and Additional Licenses shall be assigned to the Purchaser
at the Closing (to the extent assignable). Purchaser's obligations
with respect to obtaining federal, state and local government permits,
consents and approvals for the Facility shall be limited to obtaining
the operating license for the Facility from the Department (as defined
below) and any permit or approval relating to the operation of the
Facility and promptly cooperating with Seller in every respect in
obtaining such permits, consents and approvals. Prior to Physical
Completion, Seller shall perform or cause to be performed all of the
obligations required of the owner of the Premises under the
Development Approvals except those which by their terms or nature
relate to post-construction or operational matters. Prior to Physical
Completion all indemnifications set forth in the Development Approvals
and all amounts due and payable under the Development Approvals as
fees or charges relating to the construction (as opposed to the
operation) of the Facility, and not as taxes or assessments,
including, without limitation, all amounts deposited or to be
deposited into escrow with the issuer of any such Development
Approval, shall be paid by Seller out of funds provided by Purchaser,
subject to the limitations set forth in Section 4.1.
(c) Seller represents that John C. Chakalos duly obtained a Determination
of Need, Project Number: 2-1205 (the "DON") from the Determination of
Need Program of the Department of Public Health of the Commonwealth of
Massachusetts (the "Department") permitting construction of the
Facility with an original maximum capital expenditure of Seven Million
Two Hundred Ninety-Five Thousand Four Hundred Twelve Dollars
($7,295,412) (1988). Seller and John C. Chakalos applied for a change
of ownership of the DON to Worcester Nursing Center, Inc. ("WNC"), a
wholly owned subsidiary of The Mediplex Group, Inc. ("Change of
Ownership"). Such change was approved
-3-
<PAGE>
by a vote of the Massachusetts Public Health Council on February 21,
1995 and no action has been taken to appeal or reverse such approval
which is final, non-appealable and currently in full force and effect.
Seller has obtained an extension of the date by which the Facility
must be licensed under the DON to July 1, 2000. The Seller applied for
a change of site for the Facility to the Premises which was approved
by letter of January 6, 1995 and no action has been taken to appeal or
reverse such approval which is final, non-appealable and currently in
full force and effect.
(d) A true and accurate copy of the DON is set forth in Exhibit "C".
(e) For the sole purpose of permitting Seller to construct the Facility,
the Purchaser grants to the Seller, to the extent required by Seller
in order that the purpose of this Agreement be effectuated, the rights
under the Development Approvals and any other grants of rights,
permits, approvals, or licenses, which may be necessary to complete
the performance of the Seller's obligations hereunder; provided,
however that no transfer or assignment of any of the foregoing shall
occur which is, or to the extent, prohibited by applicable law or the
respective terms thereof.
Section 1.4 - Documentation. The Seller covenants that it will provide
fully and in a timely fashion all reasonable documentation required by Purchaser
and Purchaser's lender supporting Purchaser's representations and covenants.
Such documentation may include, but is not limited to, a copy of the DON
approval; all zoning and plan approvals; all utility letters indicating positive
availability of service; inventory of concessions made to any or all municipal
bodies; site plan; title binders, and all other regulatory body approvals.
Seller also covenants that it will, in a timely manner, provide whatever
information concerning the construction of the Facility Purchaser or Purchaser's
lender might reasonably require in connection with Purchaser's applications for
financing for the construction of the Facility or for permanent financing of the
Facility and as required by such lender in such lender's mortgage commitment.
Purchaser will use its reasonable best efforts to pursue Purchaser's application
for construction and permanent financing for the Facility provided, however,
nothing herein shall be construed as imposing any obligation on Purchaser to
finance construction of the Facility through or by a third party lender, it
being understood and agreed that Purchaser may do so from its internal funds.
Section 1.5 - Other Agreements. The Seller and Purchaser each represents to
the other that neither entering into this Agreement nor performing its
respective obligations hereunder will conflict
-4-
<PAGE>
with or violate any other agreements or documents by which it may be bound or to
which it may be a party.
Section 1.6 - Representations of Seller. Seller represents that it is duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Seller represents that it is empowered and authorized to execute,
deliver, and perform its obligations under this Agreement, and, upon such
execution and delivery of this Agreement, this Agreement shall be a valid,
binding, and legal obligation of the Seller, enforceable in accordance with its
terms and duly authorized by a vote of its Board of Directors in compliance with
its certificate of incorporation and bylaws and all applicable laws of the State
of Delaware.
Section 1.7 - Representations of Purchaser. Purchaser represents that it is
duly organized and validly existing under the laws of the State of Delaware and
duly authorized to do business in Massachusetts. Purchaser represents that it is
empowered and authorized to execute, deliver, and perform its obligations under
this Agreement, and, upon such execution and delivery, this Agreement shall be a
valid, binding, and legal obligation of the Purchaser, enforceable in accordance
with its terms, in compliance with its certificate of incorporation and all
applicable laws of the State of Delaware.
ARTICLE II
Construction of Health Care Facility
Section 2.1 - Control of Construction. It is the intention of this
Agreement that Seller shall have sole, complete and absolute authority and
discretion to decide any and all issues pertaining to the construction of the
Facility, including, without limitation, the expenditure of funds, the incurring
of costs and all of the other matters referred to herein; so long as the same
are in compliance with the DON, the Development Approvals, Additional Licenses,
the Final Plans (as defined below) and all applicable laws provided, however,
that except as otherwise specifically provided herein, in no event shall
Purchaser be obligated to pay Seller more than the purchase price specified in
Section 3.2. Nothing hereinbelow shall limit or qualify this authority and
discretion.
Section 2.2 - Architectural Services. Seller and the Purchaser have
approved a set of the necessary plans, specifications and site plan for the
Facility (the "Preliminary Plans") a copy of which is attached hereto as Exhibit
"D". The Seller shall direct its architect ("Architect") to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based on the
Preliminary Plans and the Seller shall furnish the same to the Purchaser for the
Purchaser's approval as set forth
-5-
<PAGE>
below. The Purchaser shall indicate its acceptance of the Final Plans by
initialing a copy of the same. The Purchaser agrees that it shall have no right
to object to the Final Plans as long as the Final Plans substantially conform to
the final plans prepared by John Eberle for the facility owned by Life Care
Centers of America, Inc. in Auburn, Massachusetts subject to such amendments and
modifications thereto as may be reflected in this Agreement or otherwise agreed
upon by Purchaser and Seller (the "Auburn Plans"). Upon the payment of the
Seller's requisition for the Architect's preparation of the Final Plans, the
Purchaser shall have the exclusive right to use the Final Plans. If Purchaser
fails to approve the Final Plans and that failure is a result of Purchaser's
good faith belief that the Final Plans do not substantially conform to the
Preliminary Plans and the Auburn Plans (except for changes in accordance with
Section 2.4 hereof), Purchaser shall give Seller written notice specifying the
areas of the alleged nonconformity. Seller may, at Seller's cost and expense,
cause the Final Plans to be revised to respond to Purchaser's objections or
Seller may submit the issue of such conformity to arbitration in accordance with
this Section. Seller shall give Purchaser written notice of Seller's election
within twenty (20) days of Seller's receipt of Purchaser's notice of such
nonconformity if Seller determines to seek arbitration. Seller and Purchaser
shall, within fifteen (15) days of the date of Seller's notice agree upon an
architect who shall be licensed to practice in the Commonwealth of Massachusetts
and shall have substantial experience in health care facility design. The
architect so selected shall review the Final Plans and shall render a written
decision as to whether the Final Plans substantially conform to the Preliminary
Plans and the Auburn Plans (except for changes in accordance with Section 2.4
hereof) and, if not, shall state any such deficiency. Such decision shall be
rendered within thirty (30) days of the selection of the architect, shall set
forth in reasonable detail the reasons for the arbitrator's decision, and shall
be binding upon the parties. If the arbitrator determines that the Final Plans
do substantially conform to the Preliminary Plans and the Auburn Plans (except
for changes in accordance with Section 2.4 hereof), then Purchaser shall be
obligated to reimburse Seller for the expenses incurred by the Seller for the
arbitration proceedings. If the arbitrator determines that the Final Plans do
not substantially conform to the Preliminary Plans and the Auburn Plans (except
for changes in accordance with Section 2.4 hereof), Seller shall reimburse
Purchaser for all costs and expenses incurred by Purchaser in connection with
the arbitration proceeding and Seller shall, at its sole costs and expense,
cause the Final Plans to be revised in accordance with the arbitrator's written
decision.
Section 2.3 - Other Professionals and Limited Assumed Obligations. The
Purchaser represents that it has not engaged any architects or any engineers,
lawyers, consultants, accountants, or other professionals with respect to the
Facility which either Seller or Purchaser shall be obligated to pay. Except as
otherwise
-6-
<PAGE>
specifically provided herein, the Seller neither assumes nor shall be obliged
for any debts, liabilities or obligations of Purchaser or related to the
Premises or the Facility.
Section 2.4 - Construction. The Seller shall construct the Facility in
accordance with the Final Plans, subject to minor field changes, minor design
changes, and other changes approved by Purchaser which Seller, in its
discretion, deems appropriate during the course of construction and which will
not result in a material and adverse change in the Final Plans, and subject to
such other changes as may be approved by Purchaser, it being acknowledged and
agreed that Purchaser shall have no obligation to approve any changes other than
those requested by Purchaser in accordance with the provisions of Section 2.6.
All work shall be done in a good and workmanlike manner and in accordance with
the Federal Department of Health and Human Services standards, the DON, the
Development Approvals, the Additional Licenses, and all applicable laws. The
structure shall be designed as a long term care facility to be licensed for the
bed complement described above and shall be constructed in accordance with the
requirements in effect on the date of this Agreement of federal, state and local
governmental agencies having jurisdiction of the Facility, including, but not
limited to, Life Safety Code requirements imposed by the Federal Department of
Health and Human Services and the requirements of the Americans with
Disabilities Act. The Purchaser shall have the right to engage an architect at
its own cost to inspect the actual construction to determine that construction
is being performed in accordance with the Final Plans for the Facility, provided
that said architect shall notify the Seller in writing of any claimed
deficiencies within fifteen (15) days of any inspection. In the event the
architect so notifies the Seller, the Seller and the architect shall have a
period of fifteen (15) days either to agree that such a deficiency exists and on
the course of corrective action or to agree to submit their dispute to binding
arbitration by an independent architect selected by the Seller and the
Purchaser. In the event either the Seller or the independent architect, as
applicable, agrees with the Purchaser's architect that a deficiency exists, the
Seller shall reimburse the Purchaser for any fees paid to the Purchaser's
architect in identifying and resolving any deficiency and shall bear the costs
of resolving the deficiency and any fees charged by the independent architect.
In the event that either the Purchaser or the independent architect, as
applicable, agrees with the Seller that a claimed deficiency does not exist, the
fees of the Purchaser's architect and the independent architect, if applicable,
shall be borne by the Purchaser. In all other events, such fees of the
Purchaser's architect and the independent architect shall be allocated between
the Purchaser and the Seller in the same proportion that the aggregate dollar
amount of the disputed items submitted for arbitration that are unsuccessfully
disputed by each (as finally determined by the independent architect) bears to
the total dollar amount of such disputed items so submitted.
-7-
<PAGE>
Section 2.5 - Personal Property and Lobby Upgrade.
(a) Exhibit "E" contains a representative list of the kinds of personal
property needed for the Facility which shall be considered as "Major
Movable Equipment" under the DON (the "Personal Property"). Seller
will order, furnish and install the specific items of Personal
Property which are selected by Purchaser in the manner described in
Section 2.5(c), within the FFE Allowance (as defined below) to equip
the Facility. The allowance for the Personal Property is Four Hundred
Sixty-Two Thousand Dollars ($462,000), (the "FFE Allowance"), which
FFE Allowance shall be included in the Purchase Price (as defined
below).
(b) In the event that the cost of the Personal Property which is selected
by Purchaser exceeds the FFE Allowance the Seller shall use its
reasonable best efforts to notify the Purchaser of the estimated
amount of such excess and, unless the Purchaser notifies the Seller of
any modification to the selected Personal Property which is made in
order to reduce such excess cost within ten (10) days thereafter, any
such excess shall be added to the Purchase Price. The Seller will,
upon request, provide the Purchaser with documentation of the costs
incurred by the Seller for which reimbursement is sought.
(c) In order to reduce the risk that the Personal Property will not be
delivered prior to the transfer of title contemplated herein and/or
will interfere with Physical Completion (as defined below) or
licensure, Purchaser understands that it must select such Personal
Property as soon as practicable after execution of this Agreement but
not later than approximately six (6) months prior to the estimated
date of Physical Completion which date shall be set forth in a written
notice from Seller to Purchaser delivered no less than twenty (20)
days prior thereto.
(d) The Purchase Price includes an allowance of Ten Thousand Dollars
($10,000) ("Lobby Allowance") to upgrade the Facility's lobby from the
Final Plans. The upgrade will be in accordance with plans specified by
Purchaser, which plans are set forth in Exhibit "D".
Section 2.6 - Changes. Purchaser agrees that Seller shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction or if required due to the unavailability of any construction
material or Personal Property. Purchaser shall be consulted with respect to any
such changes or substitutions in the Personal Property but Seller shall have
final authority to make all decisions with respect to such
-8-
<PAGE>
changes; provided that such changes result in construction, space, design,
Personal Property, equipment and interior and exterior design substantially the
same in overall quality to that shown on the Final Plans and provided further
that such changes shall not result in an increase or decrease in the Purchase
Price due pursuant to Section 3.2. Seller shall further have the right to
request changes in any line item within the Schedule of Values (as defined in
Section 3.3) provided that no such change shall result in an increase or
decrease in the Purchase Price due from Purchaser pursuant to Section 3.2.
Section 2.7 - Commencement of Construction. Construction of the Facility
will start on or prior to October 31, 1995 or as soon thereafter as weather and
ground conditions permit; provided that: (i) Seller shall have obtained all of
the Development Approvals; (ii) Seller shall have satisfied all of the other
conditions precedent and contingencies set forth in Section 5.1; (iii) the
Purchaser shall have purchased the Premises; and (iv) neither the Seller nor the
Purchaser shall otherwise be in default hereunder, prior to such date and
failing such this Agreement shall be null and void and of no further force and
effect and neither Seller nor Purchaser shall thereafter have any further rights
or obligations hereunder, except that in such event the Purchaser at the
Seller's sole cost and expense shall promptly apply to the Department for and
shall diligently use its reasonable best efforts to pursue, a change of
ownership of the DON to the Seller or its nominee. Seller shall commence
construction promptly after the satisfaction of the conditions set forth in
clauses (i) through (iv) above.
Section 2.8 - Continuity of Construction. Construction, once undertaken,
shall proceed in a continuous and reasonably expeditious manner until Physical
Completion, as such term is defined in Section 2.9, is achieved, which shall not
occur later that eighteen (18) months after the commencement of the construction
for the Facility. For purposes hereof the phrase "Commencement of Construction"
shall be defined as the later of the date of the issuance of a building permit
for the Facility or the date of the purchase of the Premises by the Purchaser.
To the extent that such date is beyond the time period required by the DON, the
Purchaser shall use its reasonable best efforts to obtain an extension of same,
and Seller shall assist it in such efforts. Any delays caused by acts of God, or
fire, accident, casualty, cessation of activity due to refusal to work by labor,
but only, in the case of the foregoing, if not principally attributable to the
Seller's negligence or willful misconduct, or any other cause not attributable
to the failure of the Seller to use reasonable care and due diligence, however,
shall be excused by the Purchaser, provided that Seller shall use its reasonable
best efforts to minimize any such delays and shall resume construction at the
earliest possible time. In the event that the Seller does not Physically
Complete the Facility within eighteen (18) months from the Commencement of
Construction and such delay is not attributable
-9-
<PAGE>
to a force majeure as set forth above, the Seller shall pay to the Purchaser
liquidated damages of $3200 per day for each day of such delay.
Section 2.9 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion" or
"Physically Completed" shall mean the date on which (i) the building
and improvements described and set forth in the Final Plans have been
completed, (ii) the Facility shall have been approved for occupancy by
the local building inspector, and by the State or local Fire Marshall
in the event his approval is required as evidenced by the issuance of
a certificate of occupancy which, if a temporary certificate of
occupancy shall not affect the actual occupancy of the Facility by
patients or the licensing of the Facility by the Department, (iii) the
Facility shall have passed the so called physical plant inspection by
the Department in a manner which does not prevent the licensing
inspection of the Facility; and (iv) the Personal Property has been
furnished such that the Facility may be licensed and such that with
respect to other than patient rooms, the Facility is fully
operational, provided, however that in the event of delays in the
furnishing of the Personal Property occasioned by the action or
inaction of the Purchaser in ordering any items of Personal Property,
this subparagraph (iv) shall not be a condition in determining whether
Physical Completion has occurred. Physical Completion shall be deemed
to have been achieved notwithstanding that any of such officials or
agencies have issued a Punch-List listing items requiring completion
or correction, so long as such Punch-List does not prevent or prohibit
occupancy.
(b) Physical Completion shall also be deemed to have been achieved
notwithstanding that the Purchaser may not yet have satisfied the
requirements of the Department with respect to the administration of
the Facility, medical supplies, medical records, nursing service and
staff, dietary requirements, and other non-physical plant conditions
necessary to obtain a license for the rendering of Nursing Services,
so long as the Seller has furnished or installed Personal Property
which is required to be furnished or installed by Seller hereunder
(unless any delay in such furnishing or installation of Personal
Property is caused by Purchaser) and the physical structure of the
Facility satisfies the requirements for initial licensure by the
Department.
-10-
<PAGE>
(c) Seller will use its best efforts to notify Purchaser at least ninety
(90) days prior to the time Seller estimates that the Facility will be
Physically Completed, whereupon Purchaser will diligently proceed to
fulfill all other conditions necessary for licensure and Purchaser
will apply in a timely manner for all licenses and permits necessary
to commence operation of the Facility. After such notice from Seller,
Purchaser, to the extent necessary to perform necessary administrative
activities may, so long as it does not interfere with completion of
construction, enter upon the Premises in an effort to coordinate
initial licensure with Physical Completion provided, however, nothing
herein shall be construed as prohibiting Purchaser from entering the
Premises for the purposes stated herein prior to that time with the
prior consent of Seller, which shall not be unreasonably withheld.
(d) Within sixty (60) days after Physical Completion, the Seller shall
deliver the project files, as-built drawings and operation and
maintenance manuals to the Purchaser.
Section 2.10 - Purchaser's Noninvolvement. For the purpose of, and in
consideration for, the Seller's obligations under this Agreement, the Purchaser
hereby grants to the Seller an irrevocable and exclusive right, coupled with an
interest, to possession of the Premises, the Facility and the Personal Property
until such time as the Purchase Price is paid in full. Purchaser shall have
access to the construction site for the sole purposes of inspecting the work and
complying with the Purchaser's obligations hereunder as to licensure of the
Facility, at the Purchaser's own risk while construction is in progress,
provided that the Purchaser is not in default hereunder. Notwithstanding the
foregoing, the Purchaser shall have no authority over Seller, and shall not be
empowered to interfere or become involved with construction or require changes
thereto except such changes as may be required under Section 2.4.
Section 2.11 - Punch-List. If, at any time after the Facility has been
Physically Completed, there exist any items requiring completion or correction,
then the Seller agrees to use all reasonable diligence to complete or correct
the items so that each conforms to the Final Plans. In furtherance but not in
limitation of the foregoing, within thirty (30) days after the Facility has been
Physically Completed, the Seller and the Purchaser shall inspect the Facility
and shall make a Punch-List of items requiring completion or correction. The
execution of this Agreement shall be deemed to be the Seller's written
undertaking to complete or correct to Purchaser's reasonable satisfaction each
such item within ninety (90) days after transfer of title, Seller further
agreeing to permit Purchaser to complete any such items at Seller's expense if
Seller has failed to complete the same within the ninety (90) day time period.
In order to secure Seller's performance
-11-
<PAGE>
hereunder, each item on the Punch-List shall be assigned a reasonable value
based upon the Seller's and Purchaser's good faith estimate of the cost of
completion or correction of the same and Purchaser shall be entitled to withhold
from the Purchase Price 120% thereof (the "Punchlist Holdback") until the later
to occur of the expiration of said 90 day period or the completion of the
Punch-List items by Purchaser, provided, however in the event of the completion
thereof by Purchaser, the Purchaser shall be entitled to retain from the
Punchlist Holdback as reimbursement for the costs incurred, an amount equal to
the lesser of (i) the actual cost to correct or complete any such Punchlist item
or (ii) 120% of the reasonable value assigned by the parties for the correction
or completion of the same.
Section 2.12 - Work and Warranties. Upon completion of construction,
landscaping and installation of Personal Property, Seller will assign to
Purchaser all warranties and guarantees received from subcontractors and
suppliers of equipment and furnishings, to the extent assignable; provided,
however that if the Seller remedies any defect, the Seller shall have the right
to take action against the relevant subcontractors or suppliers of equipment and
furnishings under any warranty assigned. Seller will remedy at its sole cost and
expense any defect in construction or equipment and installation, workmanship or
materials which is brought to its attention by written notice within a period of
one (1) year from the date of the issuance of the Certificate of occupancy.
Aside from the foregoing, Purchaser hereby waives and Seller hereby disclaims
all other express and implied warranties of every kind or nature with respect to
the Facility and the Personal Property, including, without limitation, waiving
all IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE;
provided, however, nothing herein shall be construed as a waiver of any third
party warranty assigned to Purchaser pursuant to the terms hereof. Within sixty
(60) days after Seller's subcontractors have been retained by the Seller, Seller
shall furnish the names of all of such subcontractors who supplied equipment,
labor or materials having a value in excess of Fifty Thousand Dollars ($50,000)
in connection with the construction of the improvements on the Premises, after
the hiring of such subcontractors. All of such subcontractors shall contract
with Seller or with Seller's subcontractors for the provision of equipment,
labor and/or materials for the Facility and not with Purchaser.
Section 2.13 - Subcontractors. Seller agrees to indemnify and save
Purchaser harmless from claims for payment by any subcontractor who furnishes
materials or supplies or performs labor or services in the prosecution of the
work pursuant to this Agreement. Seller reserves absolute discretion in the
selection of subcontractors.
-12-
<PAGE>
Section 2.14 - Financing Arrangements.
(a) It is contemplated by the parties that the Purchaser will provide
and/or obtain construction and permanent mortgage financing from its
internal funds and/or from such lenders as Purchaser deems appropriate
in Purchaser's discretion so as to provide funds to Seller for the
timely payment of all costs and expenses associated with the purchase
of the Premises and construction of the Facility through Physical
Completion. The selection of the lenders and the type of financing
which may be obtained from such lenders or the decision to finance the
construction internally shall be within the control and discretion of
the Purchaser prior to Physical Completion; provided that any such
financing shall, by its terms, allow Purchaser to comply with the
payment terms of this Agreement.
(b) The Seller and Purchaser also contemplate that the Premises and
Facility, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Purchaser which are or may be attached to or used in connection with
the Premises or Facility, together with any and all replacements
thereto and substitutions therefor, and all proceeds thereof and all
present and future rents, issues, leases, and profits of the Premises
and Facility will serve as security for the payment obligations to any
lenders, and that the Purchaser will be the principal obligor for the
repayment of all financial obligations thereunder. Purchaser
therefore, agrees to execute and deliver all commitments, promissory
notes, mortgages, collateral assignments, guaranties and all other
instruments, agreements, documents, certificates, affidavits, and
other writings required to be executed by any lender in connection
with such financing.
(c) Seller agrees to deliver draw requests, lien waivers, construction
status reports, certificates and other documentation in such form and
on such terms as may be reasonably requested by Purchaser's lender(s)
and such other documentation of Seller's costs as may be required by
governmental bodies in connection with the development or construction
of the Facility, including, without limitation, reasonable
documentation of Seller's costs which may be required by governmental
bodies auditing the Facility.
(d) Purchaser shall receive a credit against the Purchase Price in an
amount equal to the financing allowance to the extent included in the
MCE.
-13-
<PAGE>
Section 2.15 - Rights to Cure. If Seller defaults or neglects to carry out
its obligations under the terms of this Agreement in accordance with the terms
of this Agreement and fails within thirty (30) days after receipt of written
notice from Purchaser to commence and continue correction of such default or
neglect with diligence and promptness, or such longer period as may be required
as long as the Seller commences such cure within such thirty (30) day period and
diligently prosecutes the same to completion, Purchaser may, if such default
remains uncured after such thirty (30) day period and without prejudice to other
remedies Purchaser may have, including, but not limited to those set forth in
Section 2.16, give a second written notice to the Seller and, seven (7) days
following the receipt by the Seller of that second written notice, correct such
deficiencies. In such case an appropriate change order shall be issued deducting
from payment then or thereafter due Seller, the reasonable costs of correcting
such deficiencies. If the payments then or thereafter due Seller are not
sufficient to cover the amount of the deduction, Seller shall pay the difference
to the Purchaser. Such Action by the Purchaser shall be subject to arbitration.
Section 2.16 - Termination by Purchaser.
(a) This Agreement may be terminated by Purchaser upon twenty (20)
business days written notice to the Seller in the event that Seller
stops all work on the Facility for a period of twenty (20) consecutive
business days and abandons the Facility, other than as result of a
Force Majeure or any other reason not within the Seller's control or a
breach by Purchaser hereunder; unless Seller shall have recommenced
work on the Facility continuously and diligently during the second
twenty (20) business day notice period.
(b) If Seller materially defaults under this Agreement after notice and an
opportunity to cure as set forth in Section 2.15, or persistently
fails or neglects to carry out the material terms of this Agreement
after notice and an opportunity to cure as set forth in Section 2.15,
or materially fails to perform the provisions of this Agreement in a
manner that has a material adverse effect upon the construction or the
progress of construction (as certified by the Architect), and Seller
fails to correct the same within the cure period specified in Section
2.15, Purchaser may at Purchaser's option, terminate this Agreement.
(c) In the event of any termination under clause (a) or (b) above, the
Purchaser may without prejudice to any other remedy take possession of
the Premises and of all materials, equipment, tools and construction
equipment and machinery thereon owned by the Seller and finish the
-14-
<PAGE>
Work by whatever method the Purchaser may deem expedient. If the
unpaid balance of the contract sum exceeds the expense of finishing
the work and curing any defaults of Seller, the excess shall be paid
to the Seller for work completed to the date of termination (including
a reasonable profit therefor consistent with the terms and intent of
this Agreement), but if the expense exceeds the unpaid balance, the
Seller shall pay the difference to the Purchaser.
Section 2.17 - Termination by Seller. Without prejudice to any other rights
or remedies of the Seller, this Agreement, as well as any other Turnkey
Construction Contract then in effect between Seller, or its affiliates, and
Purchaser, or its affiliates, may be terminated by Seller in the event of a
breach by Purchaser of its obligations hereunder which is not cured within
thirty (30) days after written notice thereof from Seller to Purchaser;
provided, however, in the event said default cannot be cured within thirty (30)
days, Seller shall have no right to terminate this Agreement or any such other
Turnkey Construction Contract provided Purchaser commences the cure within said
thirty (30) day period and diligently prosecutes the same to completion.
ARTICLE III
Transfer of Title
Section 3.1 - Date of Sale. Transfer of possession of the Facility and
title to the Personal Property and payment of the Purchase Price not previously
paid through the Seller's requisitions shall take place contemporaneously within
three (3) working days after Physical Completion (the "Closing").
Section 3.2 - Purchase Price. The price to be paid for the construction and
furnishing of the Facility ("Purchase Price") shall be equal to the final
maximum capital expenditure amount allowed under the DON, as determined by the
Department based upon the Contractor's submission pursuant to 105 C.M.R.
l00.551(I)(l)-(5) ("MCE"), which submission is to be made within 180 days after
Final Plan approval, plus: (i) Five Hundred Thousand Dollars ($500,000); (ii)
the lesser of (x) the MCE divided by 142, multiplied by 12 or (y) $885,952,
which is the threshold number pursuant to the formula established by the
Department to the extent such amount is not included in the MCE in accordance
with subparagraph (i) above; (iii) the actual out of pocket cost to the Seller
of those items set forth on Exhibit "F" hereto with the understanding that the
Seller will work with the Purchaser to obtain the lowest possible cost and,
provided further, that the Seller shall ensure that in no event shall the cost
to Purchaser of items (a) through (e) inclusive exceed a total of $265,000; and
-15-
<PAGE>
(iv) the Electric Company Change Order, if any. The Seller will, upon request,
provide the Purchaser with documentation of the costs incurred by the Seller for
the foregoing items.
Section 3.3 - Payment of Purchase Price. Prior to the purchase of the
Premises by the Purchaser, the Seller and the Purchaser shall develop and agree
with a schedule of values for the Facility based upon the line items in the MCE,
which shall be initialled by the Seller and the Purchaser to evidence their
agreement ("Schedule of Values"). Based upon applications for payment submitted
to the Architect by the Seller and verified by the Purchaser, and Certificates
for Payment issued by the Architect, the Seller shall submit applications for
payment requesting the Purchaser or the Purchaser's lender, as the case may be,
to make progress payments on account of certain items on the Schedule of Values
based upon a percent complete basis as certified by the Architect to the Seller.
Certain other items on the Schedule of Values will be paid as incurred. The
period covered by each Application for Payment shall be one calendar month
ending on the last day of the month. Each Application for Payment shall be based
upon the most recent Schedule of Values submitted by the Seller and approved by
the Purchaser, which approval shall not be unreasonably withheld or delayed.
Applications for Payment shall show the amount due for each item shown on said
Schedule of Values as of the end of the period covered by the Application for
Payment. The amount of each such progress payment which is to be paid based on a
percent complete basis shall be the sum of (i) the product of multiplying that
portion of such item properly allocable to completed work for such item by the
percentage of completion of that item, and (ii) the portion of such item
properly allocable to materials and equipment delivered and suitably stored at
the site for subsequent incorporation in the work or suitably stored off the
site, minus the aggregate of previous payments made by the Purchaser for such
item and minus such retainage as is agreed upon by the Seller and the Purchaser.
Purchaser shall use its best efforts to have the Certificates for Payment
approved by and paid by any lender providing construction financing. The failure
by any such construction lender to approve or pay any such Certificate for
Payment shall not relieve the Purchaser of the obligation to make such payment.
In the event that Purchaser does not approve an Application for Payment, the
Purchaser will within five (5) business days notify the Seller, in writing, of
the reasons for the withholding of such approval. If Seller and Purchaser cannot
agree on a revised amount within five (5) business days after Seller's receipt
of Purchaser's objection the Purchaser will promptly execute an Application for
Payment for the amount for which Purchaser feels is due and pay the same in
accordance with the terms of this Agreement. If the Purchaser does not issue an
Application for Payment or a written notification to Seller of its reason for
withholding an Application for Payment in accordance with this Agreement,
through no fault of Seller, within five (5) business days after the receipt by
Purchaser of an Application for
-16-
<PAGE>
Payment, then Seller may, without prejudice to any of Seller's other rights or
remedies, upon seven additional business days written notice to the Purchaser,
stop the work under this Agreement until payment of the amount owing has been
received. Any such period of stoppage shall be added to the period of time
during which Physical Completion is to occur as set forth in Section 2.8. At the
time of transfer of title, the balance of the Purchase Price shall be paid by
the Purchaser to the Seller by wire transfer, certified check or other mutually
acceptable means.
Section 3.4 - Form of Conveyance and Status of Title. The Personal Property
shall be conveyed by Seller to Purchaser by warranty bill of sale, which shall
be in form and substance acceptable to Seller and Purchaser. The Personal
Property may be subject to the security interests described in Article II.
Seller shall pay all conveyance or transfer taxes payable in connection with
such conveyance under the laws of the Commonwealth of Massachusetts.
Section 3.5 - Certain Purchase Price Additions or Rebates. In the event
that at any time after the execution of the Agreement the Purchaser enters into
an agreement with the provider of electrical utility services to the Facility
("Electric Company") under the terms of which the Electric Company gives the
Purchaser a credit, rebate, offset or payment for contracting with such Electric
Company, then such credit, rebate, offset or payment, shall be an addition to
the Purchase Price ("Electric Company Change Order"), in the event such credit,
rebate, offset or payment to the extent allocable to the Facility is received by
the Purchaser made prior to the Closing, or alternatively, if such credit,
rebate, offset or payment is received by the Purchaser after the Closing, then
the Purchaser shall pay a sum in the amount of such credit rebate, offset or
payment to the extent allocable to the Facility to the Seller ("Electric Company
Payment") within ten (10) days after Purchaser's receipt thereof; provided,
however, that the amount of any Electric Company Change Order or Electric
Company Payment shall not exceed the Seller's cost of bringing electric
utilities from the property line of the Premises to the Facility plus a
reasonable allocation of Seller's overhead thereon. Any amount in excess of such
costs plus overhead shall be retained by the Purchaser.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - Seller's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Seller shall have the following
responsibilities:
(a) To obtain and pay for, as part of the Purchase Price, necessary
building permits and the Certificate of occupancy.
-17-
<PAGE>
(b) To pay for, as part of the Purchase Price, all labor and material set
forth in the Final Plans and to pay, subject to the FFE Allowance
included as part of the Purchase Price, with funds provided by
Purchaser, for the Personal Property to be provided.
(c) The Seller shall at all times, commencing with the date upon which
construction begins, carry, or shall cause a subcontractor of Seller
to carry, the following types of insurance with an insurance carrier
or carriers reasonably acceptable to Purchaser and/or the Purchaser's
lender:
(i) Worker's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $1,000,000
for any one accident or disaster; and property damage coverage
limits of not less than $100,000; all of which insurance shall
name the Purchaser and the Purchaser's lender as additional
insureds
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious
mischief, covering all improvements to be erected hereunder and
all materials for the same which are on or about the Premises, in
an amount equal to the full insurable value of such improvements
and materials; such insurance to be payable to Seller, Purchaser
and Purchaser's lender, if applicable, as their interests may
appear, with standard mortgage endorsement to Purchaser's lender
or its assigns as mortgagee; and such insurance to be paid for as
part of the Purchase Price.
(iv) Comprehensive general liability insurance under a primary policy
and umbrella policy with limits not less than $5,000,000 which
will include the following:
(a) Contractor's Liability;
(b) Contractual Liability;
(c) Owners and Contractors Protective Liability;
(d) Completed Operations Liability;
-18-
<PAGE>
(e) Products Liability; and
(f) Personal Injury.
The Seller shall furnish to the Purchaser and Purchaser's lender
if required by such lender, certificates of insurance or
duplicate policies of insurance as set forth in Subparagraphs
(i), (ii), (iii) and (iv) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the
effect that they may not be canceled except upon ten days prior
written notice to the Purchaser and Purchaser's lender.
(d) At the time of transfer of title, Seller shall deliver to Purchaser:
(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the project;
or
(ii) reasonable proof of payment or proof of a provision for payment
to such contractors; or
(iii) an indemnification to Purchaser with respect to same; and
(iv) an affidavit to the title insurance company enabling Purchaser to
obtain title insurance coverage insuring the Purchaser and its
lender, if any, against collection or enforcement of mechanics
liens against the Premises;
(v) such other documents or instruments as Purchaser or its lender
may reasonably require of Seller.
Section 4.2 - Purchaser's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Purchaser shall have the following
responsibilities:
(a) To finance or obtain commitments for third party financing for the
contemplated construction and equipping of the Facility, including the
furnishing of financial statements, providing an appraisal of the
Premises and Facility and the execution of applications, notes,
mortgages, assumption agreements and other documents reasonably
necessary to effectuate such financing.
(b) To hire all professional and other staff personnel required for the
operation of the Facility in sufficient time to permit initial
licensure by the Department at the date of Physical Completion.
-19-
<PAGE>
(c) To pay to Seller, in addition to the Purchase Price, the costs for
correcting unusual site conditions in excess of the final MCE
allowance, as amended, for site costs as set forth in the DON,
provided such site conditions are not identifiable by the Seller after
the exercise of reasonable due diligence at the time the Premises are
acquired. The Seller will work with the Purchaser to obtain the lowest
possible cost to correct such site conditions and will charge the
Purchaser only for the Seller's actual cost. The Seller will, upon
request, provide the Purchaser with documentation of the additional
site costs incurred by the Seller and for which reimbursement is
sought from the Purchaser. The Seller shall use its best efforts to
increase the MCE by the amount of such costs.
(d) To keep the DON in full force and effect as the holder thereof and to
not assign the DON without the prior written consent of the Seller.
Section 4.3 - Indemnification. The Seller hereby agrees to indemnify,
defend and hold the Purchaser harmless from all costs, expenses, liabilities,
claims, and demands including, but not limited to, reasonable attorneys fees,
for personal injury or property damage arising out of or caused by any act or
omission of Seller, its subcontractors, agents, or employees, or arising in or
about the Premises at any time from the date of this Agreement until transfer of
title, arising out of or caused by any act or omission of Seller, its
subcontractors, agents, or employees. The Seller further covenants to use proper
care and caution in the performance of its work hereunder so as not to cause
damage to any adjoining or adjacent property, and the Seller shall indemnify,
defend and hold the Purchaser harmless from any costs, expenses, liabilities,
claims, or demands for damage to such adjoining or adjacent property arising out
of or caused by any act or omission of Seller, its subcontractors, agents, or
employees.
ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the undertakings of
Seller and Purchaser shall be contingent upon the occurrence of each of the
following:
(a) Additional Approvals. Licenses. Permits. and Easements. All of the
Development Approvals shall have been obtained on or before October
31, 1995.
-20-
<PAGE>
Section 6.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 6.3 - Amendments. This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties.
Section 6.4 - Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
Section 6.5 - Brokers. Each of Seller and Purchaser represents and warrants
to the other that no broker or finder has acted on its behalf in connection with
this Agreement or the transactions contemplated hereby or referred to herein;
and agrees to indemnify and hold and save the other harmless from any claim or
demand for commission or other compensation by any broker, finder or similar
agent claiming to have been employed by or on behalf of such party.
Section 6.6 - Assignment. Purchaser shall have no right to assign its
rights nor delegate its obligations under this Agreement to another entity or
person without the prior written consent of Seller, other than to a wholly owned
subsidiary of Purchaser, provided however that the Purchaser shall, in such
event remain liable for its obligations hereunder.
Section 6.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to Purchaser, it shall be sent to
it at the address set forth above and a copy therefore sent to Randi
Nathanson, Esq. at The Nathanson Group, 1411 Fourth Avenue, Suite 905,
Seattle, WA 98101 or at such other address or addresses Purchaser
shall from time to time designate by notice to Seller.
(b) In the event that notice is directed to Seller, it shall be sent do
Abraham D. Gosman, President, 197 First Avenue, Needham, MA 02194, and
a copy thereof mailed to do Richard S. Mann, Esq., Corporate Counsel,
at the same address; or at such other address or addresses as Seller
shall from time to time designate by notice to Purchaser.
<PAGE>
(b) Title. An owner's title insurance policy commitment and Class A-2
survey which has been obtained by the Seller which confirms in the
reasonable judgment of Purchaser that there are no exceptions or
conditions which would render title to the Premises unmarketable or
which will prohibit or materially restrict the construction or
operation of the Facility or which would prevent an institutional
lender from closing a construction or permanent mortgage loan for the
Facility in the usual course of its business shall be approved by the
Purchaser.
(c) Additional Due Diligence Regarding the Premises. The Seller shall have
received satisfactory additional due diligence information concerning
the Premises, including soil tests and utility service confirmations
to the extent not currently available.
(d) Environmental Conditions. The Seller shall have secured and delivered
to Purchaser a site assessment which confirms, in the reasonable
judgment of Purchaser, that the Premises comply with applicable state
and federal environmental laws.
Section 5.2 - Failure of Contingencies. In the event that any one or more
of the contingencies set forth in this Article is not satisfied, waived or
deferred by Purchaser and Seller in writing, within the applicable period of
time set forth above, then, upon Notice, either party may terminate this
Agreement. In such event, neither party shall have further responsibility or
liability to the other except that the Purchaser shall, at Seller's cost and
expense, promptly apply for, and diligently use its reasonable best efforts to
obtain from the Department, a change of ownership of the DON to the Seller or
its nominee. Seller reserves the right, at its option, to waive or defer any one
or more of the conditions precedent.
ARTICLE VI
Concluding Provisions
Section 6.1 - Entire Agreement. All prior understandings, letters of
intent, and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto), which alone fully and completely.
expresses their understanding with respect to its subject matters.
-21-
-22-
<PAGE>
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 6.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Facility or the furnishing thereof may be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 6.9 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 6.10 - Successors. Subject to the limitations on assignment set
forth in Section 6.6, this Agreement shall be binding upon the parties hereto,
their respective heirs, executors, administrators, successors, and assigns.
Section 6.11 - Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute but one and the same instrument.
Section 6.12 - Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, Sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 6.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date hereof.
Section 6.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
Section 6.15 - Attorney Fees. In the event of a dispute between the parties
with respect to the interpretation or enforcement of the terms hereof, the
prevailing party shall be entitled to collect from the other its reasonable
costs and attorneys fees, including its costs and fees on appeal.
Section 6.16 - Survival. Each of the representations, warranties and
indemnifications of the parties hereto shall survive the Closing or the
termination of this Agreement for a period of one (1) year from the date of the
Closing or such termination, as
-23-
<PAGE>
the case may be; provided, however, that the monetary obligations of the parties
will be paid in accordance with Section 2.16(c) in the event of a termination of
this Agreement by Purchaser pursuant thereto.
Section 6.17 - Cooperation with Purchaser's Third Party Lender.
Notwithstanding anything set forth herein to the contrary, Seller agrees to
comply with the procedural requirements which Purchaser's unrelated third party
lender may impose in connection with the funding of the loan proceeds, provided
that such requirements are reasonable and customary in light of the amount and
nature of the loan and do not materially and adversely affect Seller's rights
hereunder.
Dated this 19th day of October, 1995 and executed under seal.
Witness: SUN HEALTHCARE GROUP, INC.
/s/Lenora K. Stevens By /s/ [Illegible]
------------------------- -------------------------
Its
Duly Authorized
/s/Alicia Lopez
-------------------------
Witness CCC OF FLORIDA, INC.
/s/ [Illegible] By /s/ [Illegible]
------------------------- -------------------------
Its V.P.
Duly Authorized
/s/Mary G. Maressa
-------------------------
-24-
<PAGE>
EXHIBIT A
A certain parcel of land with the buildings thereon situated in Millbury,
Worcester County, Massachusetts on the easterly side of Millbury Avenue a short
distance southerly of the Worcester-Millbury town line, bounded and described as
follows:
BEGINNING at a stone wall on the easterly side of Millbury Avenue at land
of one Peckerstein;
THENCE Northeasterly by a stone wall and land of said Peckerstein about
thirteen hundred fifty-six (1356) feet to land formerly of Philip J. Adams;
THENCE still Northeasterly by Philip J. Adams land five hundred thirty-six
(536) feet to an iron pin;
THENCE Southeasterly by other land formerly of Adams about eight hundred
fifty (850) feet to an iron pin;
THENCE South 19 degrees 04' West four hundred fifty-one and 6/10 (451.6)
feet to a stake near the east end of a stone wall at land now or formerly of
Consolidated Distributors, Inc.;
THENCE South 78 degrees 04' 40" West three hundred nine and 7/10 (309.7)
feet by a stone wall;
THENCE South 77 degrees 09' 30" West five hundred five and 8/10 (505.8)
feet by a stone wall;
THENCE South 53 degrees 38' 30" West one hundred three and 44/100 (103.44)
feet by a stone wall;
THENCE South 21 degrees 32' 30" East ten and 16/100 (10.16) feet to another
stone wall;
THENCE South 64 degrees 26' 20" West four hundred one (401) feet by a stone
wall;
THENCE North 63 degrees 57' 10" West one hundred three and 37/100 (103.37)
feet by a stone wall;
THENCE South 71 degrees 23' West two hundred thirty and 56/100 (230.56)
feet to a brook, said course being by a stone wall;
THENCE South 76 degrees 54' 30" West three hundred three and 97/100
(303.97) feet to an iron pipe;
Exhibit A - Page 1 of 2
<PAGE>
THENCE North 80 degrees 33' 50" West sixty-five and 14/100 (65.14) feet to
an iron pipe;
THENCE South 76 degrees 31' West one hundred thirty-one and 46/100 (131.46)
feet to an iron pipe in the easterly line of Millbury Avenue, three hundred
sixty-two and 87/100 (362.87) feet northerly from a Worcester County highway
bound defining the southerly end of a twelve hundred sixty-six and 80/100
(1266.80) foot radius curve in the easterly line of said Millbury Avenue;
The last ten courses being by land now or formerly of Consolidated
Distributors, Inc.
THENCE Northerly four hundred sixteen (416) feet, more or less, by the
easterly line of Millbury Avenue to the place of beginning.
Excepting and excluding the premises conveyed by Bertis H. Adams to Donald
G. Gover and Julia E. Gover by deed dated August 13, 1965 and recorded at the
Worcester District Registry of Deeds in Book 4591 at Page 395.
Also excepting and excluding the premises conveyed to Laurence St. Martin
by deed of Bertis H. Adams dated May 14, 1951 and recorded at said Registry in
Book 3339 at Page 199.
Also excepting and excluding the premises conveyed by Edith S. Adams to
Donald G. Gover, et ux, by deed covering premises shown on plans recorded at
said Registry in Plan Book 510, Plan 87, said deed being recorded at said Deeds
in Book 7895 at Page 343.
Also excepting and excluding the premises conveyed by Pleasant Realty and
Equipment of Grafton, Inc. to Forrow Builders, Inc. by deed dated October 21,
1983 recorded at said Registry in Book 7962 at Page 206.
Exhibit A - Page 2 of 2
<PAGE>
Exhibit "B"
Additional Licenses
1. Operating License for the Facility from the Department of Health of the
Commonwealth of Massachusetts.
<PAGE>
EXHIBIT C
[Letterhead of The Commonwealth of Massachusetts]
August , 1989
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
John Chakalos NOTICE OF DETERMINATION OF NEED
52 Overlook Drive PROJECT NUMBER 2-1205
Windsor, Conn. 06095 Heritage Manor Nursing Home
(New construction of 142 bed facility)
At their meeting of July 25, 1989, the Commissioner and the Public Health
Council, acting together as the Department, voted pursuant to M.G.L., c.111,
s.25C and the Regulations adopted thereunder to approve in part with conditions
the Heritage Manor Nursing Home's application for Determination of Need. The
application proposes new construction of a 142 bed (82 Level II and 60 Level
III) facility with a 20 slot Adult Day Care Program on Gold Street, Shrewsbury,
MA. This Notice incorporates by reference the Staff Summary and proceedings of
the Public Health Council regarding this project.
The total gross square footage associated with this project is 59,300 which
includes 56,800 gsf for the Nursing Home component and 2,500 gsf for the Adult
Day Care Program. The revised maximum capital expenditure associated with this
project is $7,293,412 (September 1988 dollars) itemized as follows:
Construction Costs:
Land Acquisition and Development $1,380,480
Construction Contract 4,554,240
Site Survey and Soil Investigation 28,800
Architectural and Engineering Costs 129,600
Major Moveable Equipment 381,696
Pre-filing Planning and
Development Costs 50,000
----------
Total Construction Costs $6,524,616
<PAGE>
Heritage Manor Nursing Home -2- Project No. 2-1205
Financial Costs:
Net Interest Expense During Construction 419,676
Cost of Securing Financing 349,920
-----------
Total Financing Costs 768,596
Estimated Total Capital Expenditure $ 7,293,412
Less Equity Contribution (729,341)
-----------
Total Amount to be Financed $ 6,564,071
The estimated impact on the Massachusetts Medicaid budget resulting from
this project is $1,763,430 (September 1988 dollars). The estimated incremental
operating cost projected for this project is $4,726,254 (September 1988 dollars)
itemized as follows;
Salaries and Wages $1,978,480
Fringe Benefits 316,557
Purchased Services 413,864
Supplies 811,442
Depreciation 232,330
Interest 973,581
----------
Total Estimated Operating Costs $4,726,254
These operating expenses are only projections. All operating expenses are
subject to further review by the Rate Setting Commission and third party payors
according to their policies, rules and regulations.
This determination is subject to the following conditions, in addition to
the terms and conditions set forth in DoN Regulation 105 CMR 100.551:
1. The applicant shall accept the approved Maximum Capital Expenditure of
$7,293,412 (September 1988 dollars) as a final cost figure except for
those increases allowed pursuant to 105 CMR 100.751 and 752.
2. The applicant shall contribute 10% in equity of the final approved
Maximum Capital Expenditure.
3. Prior to licensure of the new facility, the applicant shall enter into
an affiliation agreement with the appropriate Home Health Care
Corporation, Department of Mental Retardation and Mental Health, and
the Commission for the Blind. The agreement shall address mutual
referral and non-institutional services for the nursing home residents
and home care clients.
4. Upon licensure of the 142 beds, the Heritage Manor Nursing Home shall
admit a minimum of 60% Massachusetts Medicaid patients to those beds.
<PAGE>
Heritage Manor Nursing Home -3- Project No. 2-1205
One year after the 142 beds are licensed, the Heritage Manor Nursing
Home shall maintain a Massachusetts Medicaid patient occupancy rate in
those beds which is equal to or greater than the regional average as
determined periodically by the Department of Public Welfare. The
condition sets only a minimum level of Massachusetts Medicaid resident
occupancy. Heritage Manor Nursing Home is prohibited from
discriminating in its admissions based upon an individual's source of
payment regardless of whether the minimum level of Medicaid occupancy
is attained. Such discrimination violates both state and federal law
and regulations.
5. The total gross square feet (gsf) for this facility shall be 59,300:
56,800 new construction for Nursing Home component and 2,500 gsf for
the Adult Day Care Program.
6. Heritage Manor shall adhere to the terms of 105 CMR 100.552(B) by
filing a progress report regarding compliance with the above
conditions with the DoN Program Director two years after
implementation of this project. The report shall be filed annually,
thereafter.
The applicant is in agreement with all of the above conditions.
The reasons for this approval in part with conditions are as follows:
1. The Department found that the applicant engaged in an adequate health
planning process.
2. The Department found need for 82 Level II beds and 60 Level III beds
in region II, based upon the 1995 population projections of the
Department and the January 1988 Long Term Care Guide.
3. The Department found the revised MCE of $7,293,412 (September 1988
dollars), incremental operating costs of $4,726,254 September 1988
dollars), and the impact on the Massachusetts Medicaid budget of
$l,763,430(September 1988 dollars) to be reasonable, based on
previously approved projects of similar scope and compliance with
relevant DoN Standards and criteria.
4. The Department found that the project met the standards compliance
factor of the DoN Regulations.
5. The Department found that the project met the operational objectives
factor of the DoN Regulations.
6. The Department found the project financially feasible and within the
financial capability of the applicant.
7. The Department found that the proposal met the relative merit factor
of the DoN Regulations.
<PAGE>
Heritage Manor Nursing Home -4- Project No. 2-1205
8. This is one of four comparable applications which together propose to
add 328 Level II and 202 Level III beds to HSA II. Department found
that all four comparable applications are capable of being approved in
part, in accordance with 105 CMR 100.537, since they satisfy the eight
(8) factors of the DoN Regulations
The Glen McGhee Ten Taxpayer Group (TTG) registered in opposition to this
proposal. A public hearing was held on May 25, 1989, in Shrewsbury, MA at the
request of the TTG. The major comments of the TTG concerned the following:
commercial enterprise in an area zoned for residential buildings; impact of the
project on traffic, parking, safety, property value, town's sewage, water supply
and other services.
In response to these comments, the Department found that zoning and the
Project's impact on the community are not within the purview of the Department,
but are more appropriately addressed by the Town of Shrewsbury.
This Determination is effective twenty (20) days from receipt of this
Notice. The Determination is subject to the conditions set forth in
Determination of Need Regulation 105 CMR 100.551 including motions 100.551 (C)
and (D), which read in part:
(C) ... such determination shall be valid authorization only for the
project for which made and only for the total capital expenditure
approved.
(D) The determination...shall be valid authorization for two (2) years or
such other period as the Department may specify. Such determination
shall expire if not extended by the Department for good cause
shown(105 CMR 100.756)...Within the period of authorization, the
holder shall make substantial and continuing progress toward
completion; however, no construction may begin until the holder has
received final plan approval in writing from the Division of Health
Care Quality. If substantial and continuing progress toward completion
is not made during the authorization period, the authorization shall
be subject to revocation by the Department pursuant to 105 CMR
100.700.
Please note that any party wishing to appeal the Department's action stated
above must file a claim of appeal with the Health Facilities Appeals Board,
Attention: William Kaleva, Administrator, Boston University School of Law, 765
Commonwealth Avenue, Boston, MA 02215, within fourteen (14) days of receipt of
this Notice. Each Appellant must include a statement that the appeal is not
knowingly interposed for delay and must comply with the board's "Rules of
Procedure" available upon request from the Board. A copy of any claim of appeal
filed with the Board must be served upon this Department through its General
Counsel, 150 Tremont Street, Ninth Floor, Boston, MA 02111.
To proceed with licensure of the 82 Level II and 60 Level III beds, please
contact, in writing:
<PAGE>
Heritage Manor Nursing Home -5- Project No. 2-1205
Margery Eramo
Department of Public Health
Division of Health Care Quality
80 Boylston Street, Suite 1100
Boston, MA 02111
FOR THE PUBLIC HEALTH COUNSEL
/s/ Linda M. Travis
------------------------
Linda M. Travis
Secretary to the Council
LT/jw
cc: Susan Flanagan, Rate Setting Commission
Margery Eramo, Division of Health Care Quality
Susan McDonough, Department of Elder Affairs
Shelby Mudarri, Department of Public Welfare
David Cavalier, Program Analyst
Ahmad Sharbatoghlia, Program Analyst
Public File No. 2-1205
Decision Letter File
Comparable applicants: Projects #2-1208, 2-1220, 2-1225
MIS
Ten Taxpayer Groups
<PAGE>
[Letterhead of The Commonwealth of Massachusetts]
September 20, 1991
David T. Hannan, President
Columbian Long-Term Care Associates
73 Columbian Street
Weymouth, Massachusetts 02190
AR-3-92
Determination of Need
Dear Mr. Hannan:
This is in response to your inquiry concerning the reimbursement of
construction and other costs relating to a new facility which exercises its
right to expand by up to twelve additional beds.
You have indicated that you have applied for an exemption from the
Determination of Need process to build a 142 bed facility. You have also
indicated that the project may have to be technically limited to only 130 beds
but could be expanded by up to twelve beds pursuant to both state statute and
Determination of Need regulations. While if successful, you will be granted
approval for 130 beds with a corresponding Maximum Capital Expenditure (MCE)
amount, you have asked, if the expansion is made simultaneous to the
construction. will the Rate Setting Commission reimburse the full cost of up to
142 beds?
The commission considered your request at its meeting on September 19,
1991.
It is the opinion of the Commission that, if approved by the Public Health
Council, you will be reimbursed for the construction of 130 beds up to the
amount of the Maximum Capital Expenditure so established by the Determination of
Need Program. In addition, you would then have the right under chapter 111,
section 25B to expand the facility by up to twelve beds in amounts not to exceed
the lower of a) the cost per bed of the original 130 beds as approved within the
Maximum Capital Expenditure or b) $800,000. This additional amount would also be
reimbursable, notwithstanding the fact that the entire 142 beds were constructed
simultaneously.
<PAGE>
Any expenditures in excess of the sum of that Maximum Capital Expenditure
plus the above referenced incremental allowable costs would, of course, be
disallowed. Consistent with previous advisory rulings, the Commission does not
expect to reimburse for any additions, including equipment, during the first
year of operations.
While your inquiry relates to an applicant who is exempt from the
Determination of Need process for reasons of location in an "urban underbedded
area", it is the opinion of the commission that the same principles would apply
to those who are subject to the Determination of Need process.
In reaching this opinion, the Commission has relied upon the facts as you
have presented them and has not conducted an independent study or review.
Furthermore, the Commission reserves the right to review this advisory opinion,
once. presented with a specific situation.
Sincerely,
/s/ Paula R. Griswold
---------------------
Paula R. Griswold
Chairman
Rate Setting Commission
<PAGE>
[Letterhead of The Commonwealth of Massachusetts]
March 23, 1993
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Mr. Richard T. Fleming NOTICE OF PUBLIC HEALTH
80 Park Street COUNCIL ACTION
Brookline, MA 02146 PREVIOUSLY APPROVED
DoN #2-1205
Heritage Manor Nursing Home
Dear Mr. Fleming:
At their meeting of February 23, 1993, the Commissioner and the Public
Health Council, acting together as the Department voted pursuant to M.G.L.,
c.111, s.25C and the Regulations adopted thereunder to approve with conditions
the extension of the DoN authorization period for Determination of Need Project
#2-1205 referenced above.
The reason for the Public Health Council's action is as follows:
The Department found good cause was shown for granting the extension of the
DoN authorization period for Project #2-1205 pursuant to DoN Regulations 105 CMR
l00.551(E1/2)(1)(a)1. The holder was unable to make substantial and continuing
progress within the period of authorization because of unreasonably excessive
delay on the part of the Department in processing the request.
Written comments submitted by Mountain, Dearborn, & Whiting, Counselors at
Law, representing Shrewsbury Nursing Home, Inc. objected to the request for
extension of the authorization period because the holder did not meet the
requirements for granting of an extension due to failure to make substantial and
continuing progress; and because transfer of site is not good cause for granting
a DoN extension.
The Department determined that the objections were unwarranted as
substantial and continuing progress towards completion is not a prerequisite to
an extension, in fact, an extension would not be needed if a holder were engaged
in such progress. Additionally, the holder alleged in its filing unreasonably
excessive delay on the part of the Department in processing transfer of site
requests.
<PAGE>
Heritage Manor Nursing Home -2- Project #2-1205
The conditions of approval are as follows:
1. All conditions attached to the original and amended approval of this
project shall remain in effect.
2. The DoN authorization period shall be extended from September 24, 1992
to February 23, 1994.
FOR THE PUBLIC HEALTH COUNSEL
/s/ Linda M. Travis
------------------------
Linda M. Travis
Secretary to the Council
LT/bw
cc: Robert Driscoll, Rate Setting Commission
Jean Pontikas, Division of Health Care Quality
Public File #2-1205
Compliance File
Decision Letter File
<PAGE>
John C. Chakalos
52 Overlook Drive
Windsor, CT 06095
October 13, 1993
Ms. Joyce James, Program Director
Determination of Need Program
Massachusetts Department of Public Health
2nd Floor John C. Chakalos
150 Tremont Street Heritage Manor Nursing Home
Boston, MA 02111 Project #2-1205
Dear Ms. James:
This is a Request for a Transfer of Ownership of the approved but not yet
implemented Determination of Need, Project #2-1205, held by John C. Chakalos to
Worcester Nursing Center, Inc. under Determination of Need Regulation 105 CMR
l00.710, as set forth herein.
Thank you very much for your consideration.
Sincerely yours,
/s/ John C. Chakalos
--------------------
John C. Chakalos
Holder
This statement is, to the best of my knowledge and belief, accurate and true.
Signed on the 13th day of October 1993 under the pains and penalties of perjury.
/s/ John C. Chakalos
--------------------
John C. Chakalos
Copies: Rate Setting Commission, 2 Boylston Street, Boston, MA 02116
Department of Elder Affairs, 1 Ashburton Place, Boston, MA 02108
MDPH, Division of Health Care Quality, 10 West Street,
Boston, MA 02111
<PAGE>
- --------------------------------------------------------------------------------
The Mediplex Group, Inc.
15 Walnut Street
Wellesley, MA 02181
(617) 446-6900
November 22, 1993
Ms. Joyce James
Program Director
Determination of Need Office
Department of Public Health
150 Tremont Street
Boston, MA 02111
RE: Determination of Need Project No. 2-1205
Shrewsbury, MA
Dear Ms. James:
This is a request pursuant to 105 CMR 100.756 for an amendment to
Determination of Need Project #2-1205 to extend the authorization period thereof
pursuant to 105 CMR 100.551(D) for good cause in that pursuant to 105 CMR
100.551 (E-1/2(1)(a), the applicant is unable to make substantial and continuing
progress within the period of authorization because of action of general
application by a branch of local government.
The applicant has sought to build this project in conjunction with the
replacement of the beds of Worcester County Hospital in a combined medical
campus to be located in Worcester. The applicant has been unable to proceed
pending the decision of the Worcester County Commissioners regarding the
replacement of the hospital beds. The action of the Worcester County
Commissioners in making a determination concerning the replacement of the
hospital beds, in accordance with laws applicable to county governments, is an
action of general application by a branch of local government.
It is important to note that during this time the applicant has proceeded
to attempt to implement this project by prosecuting diligently to completion all
matters that are prerequisites to making substantial and continuing progress
within the period of authorization.
<PAGE>
Ms. Joyce James
November 22, 1993
Page 2
The applicant respectfully requests that the Department extend the period
of authorization until one year from its action on their request.
Sincerely,
/s/ Joel A. Kanter
Joel A. Kanter, Ph.D.
Senior Vice President/Development
Enclosure
cc: Division of Health Care Quality
<PAGE>
TELEGRAM 7 GAZETTE
November 20, 1993
================================================================================
PUBLIC ANNOUNCEMENT CONCERNING
A HEALTH CARE FACILITY
John C. Chakales, 52 Overlook Drive, Windsor, CT 06095 and 349 Haydenville Road,
Leeds, MA 01045, intends to file with the Massachusetts Department of Public
Health on or about November 23, 1993 an amendment to extend the Determination of
Need authorization period for good cause of the approved but not yet implemented
DoN Project #2-1205. The project consists of a new long term care facility with
142 beds (82 Level II beds and 60 Level III beds) and space for 20 Adult Day
Health Program participants. The project was approved for a site at Parcels 28,
31 and 31-1 on Shrewsbury Assessor's Map Plate 41, Gold Street, Shrewsbury; a
transfer of site amendment from this address is pending before the Department of
Public Health and an amendment to that transfer of site request is planned to be
filed following consultation with the Department. There will be no change in the
Estimated Capital Expenditure as a result of this amendment.
Persons who wish to comment on the proposed amendment must submit written
comments within twenty (20) days of the filing date of the request to the
Department of Public Health, Attention: Program Director, Determination of Need
Program, 150 Tremont Street, Boston, MA 02111. The proposed amendment may be
inspected at such address.
================================================================================
Page A7
- --------------------------------------------------------------------------------
PUBLIC ANNOUNCEMENT CONCERNING
A HEALTH CARE FACILITY
[ILLEGIBLE]
- --------------------------------------------------------------------------------
Legal Notice
- ------------
Page C11
<PAGE>
AFFIDAVIT OF TRUTHFULNESS AND PROPER SUBMISSION
John C. Chakalos
- --------------------------------------------------------------------------------
(Name of Applicant)*
349 Haydenville Road, Leeds, MA 01045 and
52 Overlook Drive, Windsor, CT 06095
- --------------------------------------------------------------------------------
(Address of Applicant)
hereby makes application for a determination of need under Chapter III or IIIB
of the General Laws and the Massachusetts Determination of Need Regulations
for: _____ original licensure
_____ Substantial capital expenditure
_____ Substantial change in service
X Extension of DoN
--- Authroization Period
respecting a: ____ hospital
X long term care facility
----
____ clinic
____ other (specify) ________________________________
for the development of:
Heritage Manor Nursing Home/Project #2-1205
- --------------------------------------------------------------------------------
(Name of facility and/or program)
at the following address: Parcels 28, 31 and 31-1 on Shrewsbury Assessor's Map
Plate 41, Gold Street, Shrewsbury, MA
- ----------------------------------------------------------------------------
(Street and Town)
Type of Ownership:
_________ City __________ State
_________ Country __________ Private Nonprofit Organization
Proprietary:
X Individual __________ Partnership
---------
_________ Corporation
with the following estimated capital expenditure (Section 100.020 of the
Regulations) $ 7,293,412. (in September 1988 dollars)
*All persons participating in Joint Venture DoN applications (e.g., applications
with two or more corporations) should be aware that each person who comprises
the "applicant" will have to be named on the license. In addition, any
subsequent changes in ownership of any person comprising the licensee will
require compliance with the relevant change of ownership procedures.
All joint venture applicants should carefully evaluate the effect these
requirements will have on their future activities.
<PAGE>
AFFIDAVIT OF TRUTHFULNESS (CONTINUED)
I, the undersigned, certify that
1. I have read the Massachusetts Determination of Need Regulations.
2. I have read this application for Determination of Need including all
exhibits and attachments, and the information contained therein is accurate
and true.
3. I have submitted the required copies of this application to the
Determination of Need Program and to all relevant agencies (see below*) as
required.
4. I have caused notice to be published as required by Sections
100.330-100.332 of the Regulations. The notice, true copies of which are
enclosed, was published in the
TELEGRAM & GAZETTE on November 20, 1993
- --------------------------------------- -----------------------------------
(Name of Newspaper) (Date of Publication)
on
- --------------------------------------- -----------------------------------
(Name of Newspaper) (Date of Publication)
5. The applicant is, or will be, the eventual licensee of the facility.
6. All material submitted to the Department by or on behalf of the applicant
respecting the subject matter of this application is, to the best of my
knowledge and belief, accurate and true.
Signed on the 22nd day of November, 1993, under the pains and penalties of
perjury.
/s/ [Illegible]
-----------------------------------
Signature of Authorized Official
Senior Vice President/Development
-----------------------------------
Position of Title
THIS FORM MUST BE NOTARIZED IN THE SPACE PROVIDED BELOW:
/s/ [Illegible]
----------------------------------
Notary Signature 5/2/96
* Copies of this application have been submitted as follows: (Please check.
Agency and number of copies required are listed.
Dept. of Public Health - Rate Setting Commission (2) _____
Regional Health Office (1) _____ HSA IV (If applicable) (1) _____
Dept. of Public Welfare - Dept. of Elder Affairs (2) _____
Medicaid Division (2) _____ Dept. of Mental Health (2) _____
<PAGE>
[LETTERHEAD OF THE COMMONWEALTH OF MASSACHUSETTS]
January 6 , 1995
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
NOTICE OF PUBLIC HEALTH COUNCIL ACTION
Joel A. Kanter, Ph.D.
Senior Vice President PREVIOUSLY APPROVED DoN #2-205
Continuum Care Corporation Heritage Manor Nursing Home
197 First Street Transfer of Site
Needham, MA 02194
Dear Mr. Kanter:
At their meeting of December 20, 1994, the Commissioner and the Public
Health Council, acting together as the Department, voted pursuant to M.G.L.,c.
111, s.25C and the Regulations adopted thereunder to approve with condition the
request by Heritage Manor Nursing Home to transfer the site of the approved but
not yet implemented Determination of Need (DoN) Project #2-1205 from 34 and 38
Gold Street, Shrewsbury, MA to a site on Millbury Avenue (Assessor's Map 9,
parcel 54), Millbury, MA. The approval also decreases the Land Acquisition cost
of the project from $550,000 (September 1988 dollars) to $440,000 (September
1994 dollars).
Written comments objecting to the transfer of site were submitted by
Dennis J. FitzGerald, M.D., President and Chief Executive Officer of St Vincent
Health Care System, Worcester, Ms. Judith O'Connor, Director, Council On Aging,
Mulbury, MA, and the Law Firm of Peters, Barnhill & Rodolakis, acting on behalf
of its client, St. Vincent Health Care System.
Dr. FitzGerald commented that central Massachusetts (HSA II) has an
excess capacity of long term care beds, 388 existing and 265 in the final stages
of construction, and with several assisted living projects as well as innovative
outpatient and home care programs coming on line, the occupancy rates of long
term care facilities will decline so that the siting of an additional facility
in the area will result in excess capacity and increased health care costs. Dr.
FitzGerald also recommended that the project be placed on hold until an
investigation is completed of long term care bed need in central Massachusetts.
<PAGE>
Heritage Manor Nursing Home - 2 - Project No.2-1205
Ms. O'Connor commented that an additional facility is not needed as
the existing five facilities plus the anticipated opening of another facility
within the next few months are meeting the long term care needs in the area.
The law firm of Peters, Barnhill & Rodolakis commented that the
transfer of site would represent a substantial change in service because the
population to be served is somewhat different from that of the originally
approved site. The comments also indicated that the transfer would violate the
objectives of the DoN process since an additional 142 beds to the 400 already
existing long term care beds in the area would result in an over supply of beds,
increased costs and reduced quality of care. The comments cited the repeated
requests by Mr. Chakalos for transfer of site and transfer of ownership, noting
that the recent merger of the Mediplex Group with Sun Healthcare raises concerns
about antitrust implications and need for thorough background examinations. The
comments further argued that with a new owner, wholly different site, and
different population to be served, the project is different from the one
originally approved. The comments noted that there is no need for another
nursing home in central Massachusetts and the DoN should be revoked. The
comments recommended denial of the request for transfer of site.
The Department determined that the objections were unwarranted under
DoN Regulation 105 CMR 100.720(H)(1)(2) and (3) for the following reasons: 1)
there will be no change in the service area, since the service areas for long
term care are based on HSA regions and the new site remains in the same HSA; 2)
there will be no substantial change in services since the level of care, Level
II and Level III beds, will remain the same; and 3) the result of the relocation
would not be more than 25 miles from the original approved site.
The condition accompanying this approval is as follows:
All conditions attached to the original and amended approval of
Determination of Need Project #2-1205 shall remain in effect.
FOR THE PUBLIC HEALTH COUNCIL
/s/ Linda M. Travis
-------------------
Linda M. Travis
LT/JJ/jj Secretary to the Council
cc: Fred Beebe, Rate Setting Commission
Jean Pontikas, Division of Health Care Quality
Public File
Compliance
Decision Letter File
<PAGE>
[LETTERHEAD OF THE COMMONWEALTH OF MASSACHUSETTS]
January 17, 1995
Joel A. Kanter, Ph.D. Re: Approved DoN Project No.2-1205
Senior Vice President Heritage Manor Nursing Home
Continuum Care Corporation Request for Immaterial and
197 First Avenue Minor Changes
Needham, MA 02194
Dear Mr. Kanter:
This is in response to your letter dated September 7, 1994, requesting
immaterial and minor changes to the above referenced DoN Project #2-1205. The
immaterial change is for a one-time addition of 12 DoN exempt beds with 3,364
gross square feet (GSF). The minor change is for deletion of the originally
approved Adult Day Care program and conversion of the 2,500 GSF to space for
physical and occupational therapy, and other patient care areas to meet the
expected increase in patients' acuity.
Please note that the requested increase in the 3,364 GSF for the
12-bed addition is not considered an amendment since it may be added outside the
DoN and may be constructed at the holder's own risk. Also note that DoN is
required if the capital or operating costs of the 12 beds exceed the DoN
expenditure minimums.
Pursuant to DoN regulations 105 CMR 100.751(D) and 105 CMR 100.752(C)
approval Is hereby granted, respectively, for the immaterial and minor changes
as noted based on the following:
The amendments have been filed pursuant to 105 CMR 100.754 and 105 CMR
100.755 of the DoN regulations.
<PAGE>
Heritage Manor Nursing Home - 2 - Project No.2-1205
Please note that all terms and conditions attached to the original and
the amended approval of the DoN No.2-1205 shall remain in effect.
Sincerely,
/s/ Joyce James
---------------
Joyce James
Director
JJ/ajg. Determination of Need Program
cc: Jean Pontikas, DRCQ
Compliance File
Public File
<PAGE>
[LETTERHEAD OF CONTINUUM CARE CORPORATION]
January 18, 1995
FEDERAL EXPRESS
Ms. Joyce James
Program Director
Determination of Need Office
Massachusetts Department of Public Health
150 Tremont Street
Boston, MA 02111
RE: Approved Determination of Need Project #2-1205
Heritage Manor Nursing Home
Immaterial Change Approval
Dear Joyce:
I received today your January 17, 1995 approval of minor and
immaterial changes to the above-referenced DoN. As you quite correctly note "the
requested increase in the 3,364 gross square footage for the twelve-bed addition
is not considered an amendment since it may be added outside of the DoN and may
be constructed at the holder's own risk."
However, your letter goes on to state that the immaterial change,
regarding the twelve-bed addition only and the associated gross square footage,
is approved. As you know, the twelve-bed expansion exemption allows the one-time
addition of twelve beds not to exceed 420 gross square feet per bed, or 5,040
additional square feet.
At the time of our request for the immaterial change, we thought we
would require only the 3,364 gross square feet noted in your letter. Our revised
plans show a need for 5,034 gross square feet associated with the twelve-bed
addition. Since this is consistent with the statutory twelve-bed exemption and
the consistent manner in which the Determination of Need Office has handled such
matters, would you acknowledge with your signature below, the simple fact that
we are entitled, by statute and regulation, to build the additional twelve beds
with associated maximum square footage not to exceed 5,040 square feet.
<PAGE>
Ms. Joyce James
January 18, 1995
Page Two.
For your convenience, I have enclosed a self-addressed stamped
envelope and duplicate signature copies, as well as a copy of your January 17,
1995 letter to me. I am asking for this further confirmation since I do not want
to run into any unnecessary difficulties during the Division of Health Care
Quality's review of architectural plans for this project.
Thank you in advance for your assistance on this.
Best personal regards.
Sincerely,
/s/ Joel A. Kanter
------------------
Joel A. Kanter, Ph.D.
Senior Vice President
JAK/mgm
Attachments
cc: Gerald J. Billow, Esq.
Duly acknowledged:
/s/ Joyce James 1/19/95
- --------------------------
Joyce James Date
Program Director
Determination of Need Office, MDPH
<PAGE>
MEDIPLEX OF MILLBURY
CHANGES TO LOBBY
1. ADDITIONAL WINDOWS
2. MOLDINGS AROUND DOORWAYS
3. MOLDINGS ABOVE CHAIR RAILS
4. MOLDING DETAIL ON RECEPTION DESK
5. REDESIGN AND RELOCATION OF RECEPTION DESK
6. MARBLE ACCENTS ON RECEPTION DESK
7. MARBLE FLOOR ACCENTS
8. REDESIGN OF CEILNG COFFER
TABLE OF CONTENTS
DESCRIPTION SK# REVISION DATE
REDESIGN SK-1 2/1/95
RECEPTION DESK PLAN & ELEVATION 5K-lA 3/16/95
RECEPTION DESK ELEVATION SK-1B 2/1/95
RECEPTION DESK SECTION SK-1C 3/16/95
WALL ELEVATION DETAIL SK-2 2/1/95
WALL ELEVATIONS SK-2A 2/1/95
WALL ELEVATIONS SK-2B 2/6/95
MOLDING DETAILS SK-2C 2/1/95
DOOR CASING SK-2D 2/1/95
DETAILS SK-2E 2/6/95
MARBLE FLOOR DETAIL SK-2F 2/6/95
<PAGE>
Lobby #1
Redesign Diagram
MILLBURY LTC SK-1
<PAGE>
Lobby #1
Reception Desk
Plan & Elevation Diagram
MILLBURY LTC SK-1A
<PAGE>
Lobby #1
Reception Desk
Elevations Diagram
MILLBURY LTC SK-1B
<PAGE>
Lobby #1
Reception Desk
Section Diagram
MILLBURY LTC SK-1C
<PAGE>
Lobby #1
Wall Elevations
Detail Diagram
MILLBURY LTC SK-2
<PAGE>
Lobby #1
Wall Elevations Diagram
MILLBURY LTC SK-2A
<PAGE>
Lobby #1
Wall Elevations Diagram
MILLBURY LTC SK-2B
<PAGE>
Lobby #1
Molding Details Diagram
MILLBURY LTC SK-2C
<PAGE>
Lobby #1
Door Casing Diagram
MILLBURY LTC SK-2D
<PAGE>
Lobby #1 Diagram
MILLBURY LTC SK-2E
<PAGE>
Lobby #1
Marble Detail Diagram
MILLBURY LTC SK-2F
<PAGE>
EXHIBIT "D"
Preliminary Plans and Specifications
The preliminary plans and specifications are as set forth on the following
list of drawings:
CIVIL ENGINEERING--Cullinan Engineering
Drawings 1 through 4
LANDSCAPE DESIGN--The Prentiss Company
Drawings L1 through L2
ARCHITECTURAL--John Eberle
Drawings 1 through 11 dated march 22, 1995
STRUCTURAL--Joseph M. Hallisey, P.E.
Drawings S-1 through S-8 dated March 22, 1995
MECHANICAL--Ginns/Dubin Engineers
Drawings M-1 through M-5 dated March 22, 1995
ELECTRICAL-- Ginns/Dubin Engineers
Drawings E-1 through E-13 dated March 22, 1995
PLUMBING-- Ginns/Dubin Engineers
Drawings P-1 through P-8 dated March 22, 1995
KITCHEN DESIGN--Lynco Restaurant Equipment Drawings K1-1
through K1-3 dated March 8, 1995
The plans and specifications include the project manual entitled "Project
Manual, Mediplex of Millbury, 154 bed nursing home, Millbury Avenue, Millbury,
Massachusetts D.O.N. No. 2-1205 dated March 22, 1995: as modified by Addendum
No. 1 dated May 12, 1995 and the attached lobby upgrades.
<PAGE>
Exhibit E
================================================================================
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
================================================================================
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
MARCH 1, 1995
TABLE OF CONTENTS
FURNITURE
EQUIPMENT
GROUP THREE ITEMS
WALLCOVERING
CARPET
WINDOW TREATMENTS
FABRIC
DECOR ITEMS/SILK PLANTS
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
FURNITURE
PATIENT ROOM 154 EA SINGLE DRESSERS
PATIENT ROOM 131 EA BEDS/MANUAL
PATIENT ROOM 23 EA BEDS AUTOMATIC
PATIENT ROOM 154 EA BEDSIDE CABINETS
PATIENT ROOM 154 EA MATRESSES
PATIENT ROOM 154 EA OVER BED TABLES
PATIENT ROOM 80 EA SIDE CHAIRS
PATIENT ROOM 154 EA MIRRORS
PATIENT ROOM 154 EA PATENT CHAIRS
001 LOBBY 1 EA ANNOUNCEMENT BOARD
001 LOBBY 4 EA CLUB CHAIRS
001 LOBBY 4 EA END TABLE
001 LOBBY 1 EA RECEPTION CHAIR
001 LOBBY 1 EA ACCENT CONSOLE
001 LOBBY 1 EA LOVE SEATS
001 LOBBY 1 EA SWIVEL CHAIR
001 LOBBY 1 EA COFFEE TABLE
002 OFFICE 1 EA 2 DRAWER LATERAL FILE
002 OFFICE 1 EA DESK CHAIR
002 OFFICE 1 EA DESK 30 X 60
002 OFFICE 1 EA SIDE CHAIR
003 ADMINISTRATOR 1 EA BOOK CASE
003 ADMINISTRATOR 1 EA 2 DRAWER LATERAL FILE
003 ADMINISTRATOR 1 EA DESK CHAIR
003 ADMINISTRATOR 1 EA 48" ROUND TABLE
003 ADMINISTRATOR 1 EA CREDENZA
003 ADMINISTRATOR 1 EA EXECUTIVE DESK
003 ADMINISTRATOR 4 EA SIDE CHAIRS
004 CONFERENCE 1 EA END TABLE
004 CONFERENCE 1 EA LOVE SEAT
004 CONFERENCE 12 EA CONFERENCE CHAIRS
004 CONFERENCE 1 EA WALL CLOCK
004 CONFERENCE 1 EA 10' CONFERENCE TABLE
004 CONFERENCE 1 EA VISUAL CABINET
004 CONFERENCE 1 EA WING CHAIR
005 BUSINESS OFFICE 2 EA DESK WITH RETURNS
005 BUSINESS OFFICE 2 EA DESK CHAIRS
005 BUSINESS OFFICE 2 EA BOOK CASE
005 BUSINESS OFFICE 2 EA SIDE CHAIRS
005 BUSINESS OFFICE 2 EA LATERAL FILES
007 THERAPY 3 EA ADJUSTABLE HEIGHT TABLES
007 THERAPY 12 EA STACK CHAIRS
007A THERAPY 1 EA DESK 30 X 60
007A THERAPY 1 EA DESK CHAIR
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
FURNITURE (CONTINUED)
007A THERAPY 1 SIDE CHAIR
007B THERAPY 1 EA SIDE CHAIRS
007B THERAPY 1 EA DESK 30 X 60
007B THERAPY 1 EA DESK CHAIR
009 LIBRARY 4 EA SIDE CHAIR
009 LIBRARY 1 EA LOVE SEAT
009 LIBRARY 3 EA END TABLE
009 LIBRARY 1 EA 42" ROUND TABLE
009 LIBRARY 2 EA WING CHAIR
010 SNACK SHOP 9 EA CAFE CHAIRS
010 SNACK SHOP 3 EA 24" ROUND CAFE TABLES
016 OFFICE 1 EA DESK CHAIR
016 OFFICE 1 EA SIDE CHAIR
016 OFFICE 1 EA DESK 30 X 60
017 SITTING ROOM 1 EA DOOR TREATMENT - STRECH SHEER
017 SITTING ROOM 4 EA DINING CHAIRS
017 SITTING ROOM 2 EA GLIDERS
017 SITTING ROOM 2 EA CLUB CHAIRS
017 SITTING ROOM 2 EA LOVE SEAT
017 SITTING ROOM 1 EA AMOIRE
017 SITTING ROOM 1 EA 42" ROUND TABLE
017 SITTING ROOM 4 EA WINDOW TREATMENTS
017 SITTING ROOM 5 EA END TABLES
017 SITTING ROOM 4 EA WING CHAIRS
019 MEDICAL RECORDS 1 EA DESK 30 X 60
019 MEDICAL RECORDS 1 EA DESK CHAIR
024 OFFICE / NURSING 6 EA SWIVEL CHAIR
025 NURSE STATION 3 EA CHAIR / SWIVEL
031 LAUNDRY 2 EA FOLDING TABLE
032 OFFICE 1 EA SIDE CHAIR
032 OFFICE 1 EA DESK CHAIR
032 OFFICE 1 EA DESK 30 X 60
040 STAFF 4 EA 42" ROUND TABLE
040 STAFF 16 EA STACK CHAIRS
046 DINING 44 EA DINING CHAIRS
046 DINING 1 EA CHINA CABINET
046 DINING 11 EA DINING TABLES
046 DINING 2 EA MIRRORS
048 ACTIVITY 5 EA ADJUSTABLE HEIGHT FOLDING TABLES
048 ACTIVITY 30 EA STACK CHAIRS
051 LOUNGE 1 EA LOVE SEATS
051 LOUNGE 4 EA DINING CHAIRS
051 LOUNGE 2 EA GLIDER
051 LOUNGE 1 EA 36" ROUND TABLE
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
FURNITURE (CONTINUED)
051 LOUNGE 4 EA END TABLES
051 LOUNGE 1 EA AMOIRE
059 SITTING 4 EA WING CHAIRS
059 SITTING 2 EA CLUB CHAIRS
059 SITTING 2 EA LOVE SEATS
059 SITTING 1 EA AMOIRE
059 SITTING 4 EA DINING CHAIRS
059 SITTING 5 EA END TABLES
059 SITTING 1 EA 42" ROUND TABLE
059 SITTING 2 EA GLIDERS
071 OFFICE / NURSING 6 EA SWIVEL CHAIR
072 NURSE STATION 3 EA SWIVEL CHAIRS
074 OFFICE 1 EA DESK 30 X 60
074 OFFICE 1 EA SIDE CHAIR
074 OFFICE 1 EA DESK CHAIR
075A BEAUTY/BARBER 1 EA END TABLE
075A BEAUTY/BARBER 1 EA SHAMPOO CHAIR
075A BEAUTY/BARBER 2 EA DRYER CHAIR
075A BEAUTY/BARBER 2 EA CHAIRS / WAITING
077 PRIVATE DINING 12 EA DINING CHAIRS
077 PRIVATE DINING 1 EA CHINA CABINET
077 PRIVATE DINING 1 EA RECTANGULAR DINING TABLE WITH LEAF
080 ASSISTED DINING 12 EA DINING CHAIRS
080 ASSISTED DINING 6 EA DINING TABLE
080 ASSISTED DINING 1 EA MIRROR
082 DNS 1 EA DESK 36 X 72
082 DNS 1 EA CHAIR / SIDE
082 DNS 1 EA BOOKCASE
082 DNS 1 EA CHAIR / DESK
082 DNS 1 EA 2 DRAWER LATERAL FILE
085 CHAPEL 1 EA LECTURN
085 CHAPEL 10 EA CHAIRS
086 SOC SERV 1 EA DESK 30 X 60
086 SOC SERV 1 EA CHAIR / DESK
086 SOC SERV 1 EA 2 DRAWER LATERAL FILE
086 SOC SERV 2 EA CHAIR / SIDE
086 SOC SERV 1 EA CREDENZA
086A AMISSIONS 1 EA LAMP
086A AMISSIONS 1 EA ROUND CORNER TABLE
086A AMISSIONS 1 EA DESK CHAIR
086A AMISSIONS 2 EA SIDE CHAIR
086A AMISSIONS 1 EA LOVESEAT
086A AMISSIONS 1 EA 2 DRAWER LATERAL FILE
086A AMISSIONS 1 EA DESK 30 X 60
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
FURNITURE (CONTINUED)
086A AMISSIONS 1 EA CREDENZA
086A AMISSIONS 1 EA WING CHAIR
161 ADL 10 EA STACK CHAIRS
161 ADL 2 EA STACK CHAIRS
162 EXAM 1 EA ADJUSTABLE HEIGHT TABLE
162 EXAM 1 EA CHAIR
162 EXAM 1 EA EXAM TABLE
162 EXAM 1 EA EXAM LIGHT
203 OFFICE / NURSING 1 EA EXAM STOOL
205 NURSE STATION 6 EA SWIVEL CHAIR
210 SITTING 3 EA SWIVEL CHAIR
210 SITTING 2 EA LOVE SEATS
210 SITTING 1 EA 42" ROUND TABLE
210 SITTING 1 EA AMOIRE
210 SITTING 4 EA DINING CHAIRS
210 SITTING 4 EA GLIDERS
210 SITTING 4 EA WING CHAIRS
210 SITTING 4 EA END TABLES
210A SITTING AND DINING 2 EA GLIDERS
210A SITTING AND DINING 1 EA WING CHAIR
210A SITTING AND DINING 1 EA DINING TABLE
210A SITTING AND DINING 2 EA END TABLE
210A SITTING AND DINING 1 EA LOVE SEAT
210A SITTING AND DINING 4 EA DINING CHAIRS
213 LOUNGE 4 EA DINING CHAIRS
213 LOUNGE 1 EA AMOIRE
213 LOUNGE 2 EA END TABLES
213 LOUNGE 2 EA GLIDER
213 LOUNGE 1 EA LOVE SEATS
213 LOUNGE 1 EA 36" ROUND TABLE
PATIO PATIO 2 EA UMBRELLA
PATIO PATIO 2 EA BENCHES
PATIO PATIO 8 EA CHAIRS
PATIO PATIO 2 EA TABLES
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
EQUIPMENT
011 TUB ROOM 1 EA SCALE
011 TUB ROOM 1 EA TRANSFER CHAIR WITH SCALE
011 TUB ROOM 1 EA APOLLO BATHING TUB
013 NOURISHMENT 1 EA REFRIGERATOR
013 NOURISHMENT 1 EA MICRO WAVE
013 NOURISHMENT 1 EA ICE MACHINE - UNDER COUNTER UNIT
017 SITTING ROOM 1 EA TELEVISION
022 MEDICINE ROOM 1 EA REFRIGERATOR / HALF
025 NURSE STATION 1 EA CLOCK
048 ACTIVITY 1 EA REFRIGERATOR / FULLSIZE
048 ACTIVITY 1 EA HOOD
048 ACTIVITY 1 EA OVEN
048 ACTIVITY 1 EA COOK TOP
055 NOURISHMENT 1 EA REFRIGERATOR / FULLSIZE
055 NOURISHMENT 1 EA MICROWAVE
055 NOURISHMENT 1 EA ICE MACHINE UNDER COUNTER UNITS
056 BATHING CORE 1 EA PATIENT TRANSFER CHAIR WITH SCALE
056 BATHING CORE 1 EA APOLLO TUB
069 MED ROM 1 EA REFRIGERATOR / HALF
072 NURSE STATION 1 EA CLOCK
075A BEAUTY/BARBER 2 EA DRYER
075A BEAUTY/BARBER 1 EA SHAMPOO SINK
080 ASSISTED DINING 1 EA ICE MAKER / UNDERCOUNTER
080 ASSISTED DINING 1 EA REFRIGERATOR / FULLSIZE
080A SET UP 1 EA REFRIGERATOR / FULLSIZE
080A SET UP 1 EA ICE MAKER / UNDERCOUNTER
161 ADL 1 EA OVEN
161 ADL 1 EA MICROWAVE
161 ADL 1 EA DRYER
161 ADL 1 EA DISH WASHER
161 ADL 1 EA CLOTHES WASHING MACHINE
161 ADL 1 EA SIDE BY SIDE REFRIGERATOR
161 ADL 1 EA COOK TOP
162 EXAM 1 EA PHYSICAN'S SCALE
205 NURSE STATION 1 EA CLOCK
207 MEDICINE ROOM 1 EA HALF SIZE REFRIGERATOR
210 SITTING 1 EA TELEVISION
212 BATHING CORE 1 EA PARKER TUB
212 BATHING CORE 1 EA PARKER TRANSFER CHAIR SCALE
PAT PATIENT ROOMS 142 EA CUBICLE CURTAIN TRACKS
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
GROUP THREE ITEMS
025 NURSE STATION 1 LOT CHART RACK AND BINDER
025 NURSE STATION 1 EA ACTIVITY BOARD
072 NURSE STATION 1 EA ACTIVITY BOARD
072 NURSE STATION 1 LOT CHART RACK AND BINDER
205 NURSE STATION 1 LOT CHART RACK AND BINDERS
PATIENT ROOM 154 EA BULLETIN BOARDS
205 NURSE STATION 1 EA ACTIVITY BOARD
ALL WASTECANS 50 EA WASTE BASKETS
ALL WASTECANS 200 EA STEP ON CANS
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
WALLCOVERING
001 LOBBY 1 LOT WALLCOVERING
002 OFFICE 1 LOT WALLCOVERING
003 ADMINISTRATOR 1 LOT WALLCOVERING
004 CONFERENCE 1 LOT WALLCOVERING
005 BUSINESS OFFICE 1 LOT WALLCOVERING
007 THERAPY 1 LOT WALLCOVERING
007A THERAPY 1 LOT WALLCOVERING
007B THERAPY 1 LOT WALLCOVERING
009 LIBRARY 1 LOT WALLCOVERING
010 SNACK SHOP 1 LOT WALLCOVERING
011 TUB ROOM 1 LOT WALLCOVERING
013 NOURISHMENT 1 LOT WALLCOVERING
013 MEN 1 LOT WALLCOVERING
015A WOMEN 1 LOT WALLCOVERING
016 OFFICE 1 LOT WALLCOVERING
016A BATHING CORE 1 LOT WALLCOVERING
017 SITTING ROOM 1 LOT WALLCOVERING
018 CORRIDOR 1 LOT WALLCOVERING
019 MEDICAL RECORDS 1 LOT WALLCOVERING
020 CLEAN LINEN 1 LOT WALLCOVERING
022 MEDICINE ROOM 1 LOT WALLCOVERING
023 TOILET 1 LOT WALLCOVERING
024 OFFICE / NURSING 1 LOT WALLCOVERING
025 NURSE STATION 1 LOT WALLCOVERING
026 CLEAN UTILITY 1 LOT WALLCOVERING
027 PATIENT STORAGE 1 LOT WALLCOVERING
029 MEN 1 LOT WALLCOVERING
030 WOMEN 1 LOT WALLCOVERING
032 OFFICE 1 LOT WALLCOVERING
033A PATIENT STORAGE 1 LOT WALLCOVERING
040 STAFF 1 LOT WALLCOVERING
042 MEN 1 LOT WALLCOVERING
043 WOMEN 1 LOT WALLCOVERING
044 MEN 1 LOT WALLCOVERING
045 WOMEN 1 LOT WALLCOVERING
046 DINING 1 LOT WALLCOVERING
048 ACTIVITY 1 LOT WALLCOVERING
049 CORRIDOR 1 LOT WALLCOVERING
051 LOUNGE 1 LOT WALLCOVERING
052 OXYGEN 1 LOT WALLCOVERING
055 NOURISHMENT 1 LOT WALLCOVERING
056 BATHING CORE 1 LOT WALLCOVERING
057 SOILED 1 LOT WALLCOVERING
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
WALLCOVERING (CONTINUED)
059 SITTING 1 LOT WALLCOVERING
060 CORRIDOR 1 LOT WALLCOVERING
068 CLEAN 1 LOT WALLCOVERING
069 MED RM 1 LOT WALLCOVERING
070 TOILET 1 LOT WALLCOVERING
071 OFFICE / NURSING 1 LOT WALLCOVERING
072 NURSE STATION 1 LOT WALLCOVERING
073 CLEAN UTILITY 1 LOT WALLCOVERING
074 OFFICE 1 LOT WALLCOVERING
075A BEAUTY/BARBER 1 LOT WALLCOVERING
077 PRIVATE DINING 1 LOT WALLCOVERING
079 WOMEN 1 LOT WALLCOVERING
080 ASSISTED DINING 1 LOT WALLCOVERING
080A SET UP 1 LOT WALLCOVERING
081 MEN 1 LOT WALLCOVERING
082 DNS 1 LOT WALLCOVERING
086 SOC SERV 1 LOT WALLCOVERING
086A AMISSIONS 1 LOT WALLCOVERING
159 PHYSICAL THERAPY 1 LOT WALLCOVERING
160 STAFF 1 LOT WALLCOVERING
161 ADL 1 LOT WALLCOVERING
162 EXAM 1 LOT WALLCOVERING
163 TRAINING TOILET 1 LOT WALLCOVERING
201 CORRIDOR 1 LOT WALLCOVERING
202 PAT STOR 1 LOT WALLCOVERING
203 OFFICE / NURSING 1 LOT WALLCOVERING
204 CLEAN UTILITY 1 LOT WALLCOVERING
205 NURSE STATION 1 LOT WALLCOVERING
206 CLEAN UTILITY 1 LOT WALLCOVERING
207 MEDICINE ROOM 1 LOT WALLCOVERING
208 TOILET 1 LOT WALLCOVERING
209 CORRIDOR 1 LOT WALLCOVERING
210 SITTING 1 LOT WALLCOVERING
212 BATHING CORE 1 LOT WALLCOVERING
213 LOUNGE 1 LOT WALLCOVERING
217 OXYGEN 1 LOT WALLCOVERING
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
CARPET
032 OFFICE 1 LOT CARPET WITH CARPET BASE
077 PRIVATE DINING 1 LOT CARPET WITH CARPET BASE
004 CONFERENCE 1 LOT CARPET WITH CARPET BASE
059 SITTING 1 LOT CARPET WITH CARPET BASE
082 DNS 1 LOT CARPET WITH CARPET BASE
201 CORRIDOR 1 LOT CARPET WITH CARPET BASE
001 LOBBY 1 LOT CARPET WITH CARPET BASE
005 BUSINESS OFFICE 1 LOT CARPET WITH CARPET BASE
016 OFFICE 1 LOT CARPET WITH CARPET BASE
017 SITTING ROOM 1 LOT CARPET WITH CARPET BASE
213 LOUNGE 1 LOT CARPET WITH CARPET BASE
074 OFFICE 1 LOT CARPET WITH CARPET BASE
086 SOC SERV 1 LOT CARPET WITH CARPET BASE
024 OFFICE / NURSING 1 LOT CARPET WITH CARPET BASE
007B THERAPY 1 LOT CARPET WITH CARPET BASE
071 OFFICE / NURSING 1 LOT CARPET WITH CARPET BASE
007A THERAPY 1 LOT CARPET WITH CARPET BASE
002 OFFICE 1 LOT CARPET WITH CARPET BASE
209 CORRIDOR 1 LOT CARPET WITH CARPET BASE
046 DINING 1 LOT CARPET WITH CARPET BASE
086A AMISSIONS 1 LOT CARPET WITH CARPET BASE
018 CORRIDOR 1 LOT CARPET WITH CARPET BASE
009 LIBRARY 1 LOT CARPET WITH CARPET BASE
003 ADMINISTRATOR 1 LOT CARPET WITH CARPET BASE
051 LOUNGE 1 LOT CARPET WITH CARPET BASE
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
WINDOW TREATMENTS
001 LOBBY 6 EA WINDOW TREATMENT
003 ADMINISTRATOR 1 EA WINDOW TREATMENT
004 CONFERENCE 1 EA WINDOW TREATMENT
005 BUSINESS OFFICE 1 EA WINDOW TREATMENT
007 THERAPY 2 EA WINDOW TREATMENT
010 SNACK SHOP 3 EA WINDOW TREATMENT
016 OFFICE 1 EA WINDOW TREATMENT
018 CORRIDOR 2 EA WINDOW TREATMENT
046 DINING 5 EA WINDOW TREATMENT
048 ACTIVITY 7 EA WINDOW TREATMENT
051 LOUNGE 1 EA WINDOW TREATMENT
059 SITTING 4 EA WINDOW TREATMENT
060 CORRIDOR 1 EA WINDOW TREATMENT
071 OFFICE /NURSING 1 EA WINDOW TREATMENT
075A BEAUTY/BARBER 1 EA WINDOW TREATMENT
077 PRIVATE DINING 1 EA WINDOW TREATMENT
080 ASSISTED DINING 2 EA WINDOW TREATMENT
082 DNS 1 EA WINDOW TREATMENT
086 SOC SERV 1 EA WINDOW TREATMENT
086A AMISSIONS 1 EA WINDOW TREATMENT
159 PHYSICAL THERAPY 5 EA WINDOW TREATMENT
160 STAFF 3 EA WINDOW TREATMENT
162 EXAM 1 EA WINDOW TREATMENT
201 CORRIDOR 1 EA WINDOW TREATMENT
209 CORRIDOR 1 EA WINDOW TREATMENT
210 SITTING 3 EA WINDOW TREATMENT
213 LOUNGE 1 EA WINDOW TREATMENT
PAT PATIENT ROOM 82 EA WINDOW TREATMENT
016 OFFICE 2 EA SIDE LIGHTS
082 DNS 1 EA SIDE LIGHTS
086 SOC SERV 1 EA SIDE LIGHTS
001 LOBBY 4 EA SIDE LIGHTS
005 BUSINESS OFFICE 1 EA SIDE LIGHTS
003 STAFF 1 EA SIDE LIGHTS
086A AMISSIONS 1 EA SIDE LIGHTS
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
CARPET
080 ASSISTED DINING 1 LOT FABRIC FOR WALLS
046 DINING 1 LOT FABRIC FOR WALLS
077 PRIVATE DINING 1 LOT FABRIC FOR WALLS
PATIENT ROOM 200 EA BED SPREADS
PATIENT ROOM 142 EA CUBICLE CURTAINS
212 BATHING CORE 5 EA SHOWER CURTAINS
016A BATHING CORE 6 EA SHOWER CURTAINS
056 BATHING CORE 5 EA SHOWER CURTAINS
PATIENT ROOM 11 EA SHOWER CURTAINS
<PAGE>
CCC DESIGN
197 FIRST AVENUE
NEEDHAM, MA
MEDIPLEX OF MILLBURY
REPRESENTATIVE OF PERSONAL PROPERTY
MARCH 1, 1995
RM # ROOM QTY UNIT ITEM
CARPET
213 LOUNGE 2 EA SILK PLANTS
001 LOBBY 2 EA SILK PLANTS
210A SITTING AND DINING 1 EA SILK PLANTS
003 ADMINISTRATOR 1 EA SILK PLANTS
046 DINING 4 EA SILK PLANTS
210 SITTING 2 EA SILK PLANTS
051 LOUNGE 1 EA SILK PLANTS
059 SITTING 3 EA SILK PLANTS
004 CONFERENCE 1 EA SILK PLANTS
017 SITTING ROOM 3 EA SILK PLANTS
S SIGNAGE 1 LOT SIGNAGE
<PAGE>
MEDIPLEX OF MILLBURY
CHANGES TO LOBBY
1. ADDITIONAL WINDOWS
2. MOLDINGS AROUND DOORWAYS
3. MOLDINGS ABOVE CHAIR RAILS
4. MOLDING DETAIL ON RECEPTION DESK
5. REDESIGN AND RELOCATION OF RECEPTION DESK
6. MARBLE ACCENTS ON RECEPTION DESK
7. MARBLE FLOOR ACCENTS
8. REDESIGN OF CEILING COFFER
TABLE OF CONTENTS
DESCRIPTION SK # REVISION DATE
REDESIGN SK-1 2/1/95
RECEPTION DESK PLAN & ELEVATION SK-1A 3/16/95
RECEPTION DESK ELEVATION SK-1B 2/1/95
RECEPTION DESK SECTION SK-1C 3/16/95
WALL ELEVATION DETAIL SK-2 2/1/95
WALL ELEVATIONS SK-2A 2/1/95
WALL ELEVATIONS SK-2B 2/6/95
MOLDING DETAILS SK-2C 2/1/95
DOOR CASING SK-2D 2/1/95
DETAILS SK-2E 2/6/95
MARBLE FLOOR DETAIL SK-2F 2/6/95
<PAGE>
LOBBY #1 REDESIGN DIAGRAM
MILLBURY LTC SK-1
<PAGE>
LOBBY #1 RECEPTION DESK PLAN & ELEVATION
MILLBURY LTC SK-1A
<PAGE>
LOBBY #1 RECEPTION DESK ELEVATIONS DIAGRAM
MILLBURY LTC SK-1B
<PAGE>
LOBBY #1 RECEPTION DESK SECTION DIAGRAM
MILLBURY LTC SK-1C
<PAGE>
LOBBY #1 WALL ELEVATIONS DIAGRAM
MILLBURY LTC SK-2B
<PAGE>
LOBBY #1 WALL ELEVATIONS DIAGRAM
MILLBURY LTC SK-2A
<PAGE>
LOBBY #1 WALL ELEVATIONS DETAIL DIAGRAM
MILLBURY LTC SK-2
<PAGE>
LOBBY #1 MOULDING DETAILS DIAGRAM
MILLBURY LTC SK-2C
<PAGE>
LOBBY #1 DOOR CASING DIAGRAM
MILLBURY LTC SK-2D
<PAGE>
LOBBY #1 DIAGRAM
MILLBURY LTC SK-2E
<PAGE>
LOBBY #1 MARBLE DETAIL DIAGRAM
MILLBURY LTC SK-2F
<PAGE>
Exhibit "F"
Additional Cost Items
(a) Medical gases for 23 beds at the Facility.
(b) Additional 1,476 square feet of storage space.
(c) Provision of a roof deck for the Alzheimer's area.
(d) Provision of an additional 36 automobile parking spaces beyond the
number of spaces set forth on the preliminary plans (the total parking
spaces will equal 166).
(e) Relocation of the OT/PT space.
(f) The cost of items of Personal Property in excess of the FFE Allowance
set forth in Section 2.5, including, without limitation, the costs for
electric beds.
(g) The cost (as described in Section 4.2) of remedying unusual site
conditions pursuant to Section 4.2.
(h) The cost of upgrading the Facility's lobby in excess of the Lobby
Allowance set forth in Section 2.5.
ASSIGNMENT AGREEMENT
(Tucson, Arizona)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and among AMA
Funding Corporation ("AMA"), CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix
Corporation), a Delaware corporation ("Assignor"), and Chancellor of
Massachusetts, Inc., a Delaware corporation ("Assignee").
WITNESSETH
WHEREAS, AMA has entered into that certain Letter of Intent (the "Letter of
Intent"), dated December 18, 1995, relating to a certain parcel of land located
in Peoria, Arizona (the "Land"), a copy of which is attached hereto as Exhibit
A;
WHEREAS, Assignor, an affiliate of AMA, intends to co-develop the Land for
an assisted/independent living facility consisting of approximately one hundred
twenty (120) units (the "Project");
WHEREAS, (a) AMA desires to assign its rights and obligations under the
Letter of Intent to Assignor, and (b) Assignor desires to simultaneously
therewith assign certain of its rights and obligations under the Letter of
Intent to Assignee, and (c) Assignee desires to assume such rights and
obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. AMA hereby assigns, sets over and transfers unto Assignor to have and
to hold from and after the date hereof, all of the right, title and
interest of AMA in, to and under the Letter of Intent, and Assignor
hereby accepts the within assignment and assumes and agrees with AMA,
to perform and comply with and to be bound by all of the terms,
covenants, agreements, provisions and conditions of the Letter of
Intent on the part of AMA thereunder to be performed on and after the
date hereof, in the same manner and with the same force and effect as
if Assignor had originally executed the Letter of Intent.
2. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Letter of Intent other
than Assignor's rights and obligations with respect to the development
of the Project, and Assignee hereby accepts the within assignment and
assumes and agrees with Assignor, to perform and comply with and to be
bound by all of the terms, covenants,
<PAGE>
2
agreements, provisions and conditions of the Letter of Intent on the
part of Assignor thereunder to be performed on and after the date
hereof, in the same manner and with the same force and effect as if
Assignee had originally executed the Letter of Intent.
3. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 5 hereof) accruing
or arising under the Letter of Intent on or before the date hereof.
4. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Letter of
Intent after the date hereof.
5. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
6. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
AMA FUNDING CORPORATION
By: /s/ Andrew D. Gosman
-------------------------------------
Name: Andrew D. Gosman
Title:
ASSIGNOR:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------------
Name: James M. Clary
Title:
<PAGE>
3
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By:
-------------------------------------
Name:
Title:
<PAGE>
Exhibit A
December 11, 1995
Ms. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway boulevard, Suite 211
Tucson, AZ 85719
RE: Amber Lights - Tucson, AZ; Letter of Intent
Dear Prill:
The purpose of this letter is to set forth the basic terms of a proposed Joint
Venture with Netwest Development Corporation or its nominee ("Netwest") and AMA
Funding Corporation or its nominee ("AMA"), for the development, financing,
ownership and management of a senior housing project consisting of approximately
120 independent and assisted living units (the "Project") on a 4.85-acre site in
Tucson, Arizona (the "Property"), as more particularly described in Exhibit A
attached hereto. Subject to the preparation, execution, and performance of
definitive written agreements (collectively, the "Joint Venture Agreement")
containing the mutual covenants and agreements of the parties, intend to
undertake the following:
1. Joint Venture Agreement: On or before December 31, 1995 (the "Joint Venture
Period"), or an extension for up to a period of not to exceed sixty (60)
days thereafter at the request or either party for reasonable cause or
unless extended by mutual agreement by both parties, AMA and Netwest will
enter into the Joint Venture Agreement relating to the Project (the "Joint
Venture"), which Joint Venture Agreement shall provide, among other things,
that AMA and its principals and colleagues, including, without limitation,
Fred McCall-Perez, will obtain an eighty-five (85%) percent interest in the
Project and the property, and Netwest and its principals and colleagues
will obtain a fifteen (15%) percent interest in the Project and the
Property.
2. Development Agreement: The Joint Venture will enter into a development
agreement (the "Development Agreement") with The CarePlex Group, Inc. or
its nominee ("CarePlex") and Netwest (collectively, the "Developers") upon
terms to be mutually agreed upon by the parties. Netwest and CarePlex shall
be listed together on all documents, announcements, submissions or any
other materials as the Developers. The Developers shall work together to
manage the design, planing and construction phases of the Project. CarePlex
and Netwest will work together as a team in good faith to resolve all
issues pertaining to the Project. The Development Agreement will take into
account the expertise and experience of the Developers, who will secure the
necessary zoning, subdivision, environmental, permits and approvals and any
other
<PAGE>
applicable permit or approval as may be required for the development of the
Project. The developers will also enter on behalf of the Joint Venture into
such contracts with an architectural/engineering firm, general contractor,
and all other consultants as are necessary for the development and
construction of the Project. Pending further financial analysis, and prior
to the execution of the Joint Venture Agreement, a development fee to be
paid to the Developers (the "Development Fee") and a schedule for payment
thereof, will be mutually agreed upon by the parties.
3. Management Agreement: Simultaneously with the execution of the Development
Agreement, the Joint venture shall enter into a management agreement (the
"Management Agreement") pursuant to which Netwest or its nominee shall have
the right to manage the Project upon completion. Pending further financial
analysis, and prior to the execution of the Joint Venture Agreement, the
terms and conditions of the Management Agreement will be mutually agreed
upon by the parties.
4. Financing: AMA will obtain both construction and permanent financing for
the Project (the "Project Loan"). The Joint Venture shall execute any and
all documents in connection with the Project loan, provided, however, that
the Project Loan will be non-recourse or substantially non-recourse to the
Joint Venture. Pending further financial analysis and prior to the
execution of the Joint Venture Agreement or a date specified therein, the
construction and permanent financing amounts and other terms and conditions
will be mutually agreed upon by the parties.
5. Working Capital: Pending further financial analysis, and prior to the
execution of the Joint Venture Agreement, the estimated working capital
requirements, schedule for disbursement and repayment obligation will be
mutually agreed upon by the parties. It is understood that AMA and Netwest
will contribute eighty-five (85%) percent and fifteen (15%) percent,
respectively, of the working capital requirements for the Project.
6. Decision Making: Prior to the execution of the Joint Venture Agreement, AMA
and Netwest will work together in good faith to resolve all issues
pertaining to the Project. If unable to do so, either party may give notice
to the other of termination of its undertakings under this letter and all
obligations hereunder shall cease and be of no other force or effect.
7. Plans and Specifications: Simultaneously, with the execution of the Joint
Venture Agreement, Netwest shall assign, if any, all of its rights, title
and interest in any and all architectural, engineering and other contracts
with respect to the Project to the Joint Venture or the Developers free of
any claims or encumbrances. The Joint Venture is not obligated to assume
any of said contracts, however, appropriate consideration will be given to
existing relationships, and provided, however, that the architect for the
Project will be Bruker Brown Architects, P.C. In the event that Netwest and
AMA mutually decide to terminate the Joint Venture Agreement, all
architectural/engineering, zoning, and other plans and designs that relate
specifically to the Project will be retained by Netwest for their continued
use.
2
<PAGE>
8. Access and Due Diligence: Following the execution of this letter by both
parties, AMA, its agents, representatives, lender(s) architect(s),
engineer(s) and employees shall, after notification to Netwest, have access
to the Property and the Project at any time during normal business hours
and from time to time, at CarePlex's sole cost and expense, in order to
perform such financial analyses, topographical and engineering surveys,
environmental site assessments and other tests, surveys and studies of the
Property and the Project as AMA may deem necessary or appropriate. AMA
and/or CarePlex shall provide Netwest, upon reasonable request, with access
or copies of all information, materials, records or other documents in
connection with the Property or the Project. If AMA, in its sole
discretion, is dissatisfied with the status or quality of title, or
environmental condition of the Property, then AMA may terminate this letter
by written notice to Netwest on or before 5:00 p.m. (Boston) on December
31, 1995 or such other date specified in the Joint Venture Agreement.
9. Miscellaneous: (a) Neither Netwest nor AMA will release information to the
public concerning this letter, the Joint Venture Agreement, and the
transactions contemplated hereby or thereby without the prior written
consent of the other parties, and each party shall consult with the other
as to the form and substance of any press release or other public
disclosure; provided that nothing contained herein shall prevent any party
from disclosing any information required to be disclosed in accordance with
any law, regulation, or order of a court or regulatory agency of competent
jurisdiction; and (b) all information furnished by Netwest to AMA or AMA to
Netwest under this letter shall be treated as confidential and Netwest and
AMA shall take normal and reasonable precaution to preserve the
confidentiality of such information until the Closing and, if this letter
or the Joint Venture Agreement are terminated, whichever shall first occur,
AMA and Netwest shall return to each other all documents and other
materials containing, reflecting, and referring to such information and AMA
and Netwest shall take normal and reasonable precautions to preserve the
confidentiality of such information. AMA's and Netwest's obligations
hereunder shall not apply to any information which: (i) was already in its
possession prior to the disclosure thereof by AMA or Netwest, (ii) was then
generally known to the public, (iii) became known to the public through no
fault of AMA or Netwest or any of their respective agents or
representatives, or (iv) was disclosed to AMA or Netwest by a third party
unaffiliated with AMA or Netwest who to the best of AMA's or Netwest's
knowledge was not bound by an obligation of confidentiality to AMA or
Netwest.
10. Land Purchase: Prior to the execution of the Joint Venture Agreement, AMA
will loan Five Hundred Ten Thousand Dollars ($510,000.00) to Netwest for
the purchase of the Property which loan will be evidenced by a Promissory
Note (the "Note") payable to the order of AMA with an interest rate equal
to the prime rate announced by Fleet Bank, N.A. from time to time and a
repayment obligation upon the earlier of: (i) the expiration of the Joint
Venture Period, or (ii) nine (9) months from the execution date of the Note
or such other date as mutually agreed upon by the parties in writing (the
"Maturity Date"). The Note will be secured by a Deed of Trust, in form and
substance satisfactory to AMA in its reasonable discretion, and joint and
several personal guarantees from the principals of Netwest, which
guarantees shall be satisfactory to AMA in its sole discretion. Upon
obtaining all necessary permits and approvals to develop the Project
(including the expiration of al applicable appeal periods), Netwest will
transfer the property to the Joint Venture in accordance with the terms
thereof. All costs of such transfer shall be borne by the Joint Venture.
The parties shall use their best efforts to structure such transfer in the
least costly manner to the Joint Venture. Notwithstanding the
3
<PAGE>
foregoing, in the event the Developers fail to obtain all such necessary
permits and approvals to develop the Project prior to the maturity Date,
AMA shall have the right to terminate the Joint Venture Agreement upon
ten (10) days notice to Netwest.
11. Termination of this Letter: Unless otherwise mutually agreed upon by the
parties in writing, this letter shall terminate the earlier of (i) the
execution of the Joint Venture Agreement, or (ii) December 31, 1995.
12. Non-Binding Letter of Intent: This letter is not intended as a contract,
but merely as a statement of the intentions and undertaking of the parties
except as set forth in Paragraph 9, the terms hereof and the transaction
will be binding upon the parties only in accordance with the terms
contained in the Joint Venture Agreement, if, as, and when such Joint
Venture Agreement has been duly authorized and executed by the parties.
If the foregoing terms are acceptable to you, please so indicate by signing and
dating the enclosed copy of this letter and return it to the undersigned.
Very truly yours,
AMA FUNDING CORPORATION
By: /s/ James M. Clary
----------------------------
Name: James M. Clary
Title: Vice President
THE CAREPLEX GROUP, INC.
By: /s/ James M. Clary
----------------------------
Name: James M. Clary
Title: General Counsel/ Executive VP
AGREED:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
----------------------------
Name: Priscilla S. Kuhn
Title: President
Date: December 11, 1995
4
<PAGE>
[LETTERHEAD OF CAREPLEX]
VIA AIRBORNE
June 30, 1996
Ms. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: Care/Matrix/Amber Lights - Tucson, Arizona
Dear Prill:
Reference is hereby made to that certain Letter of Intent dated December
18, 1996 by and between Netwest Development Corporation ("Netwest") and AMA
Funding Corporation ("AMA") related to the above-referenced project, as amended
(the "LOI"). Reference is further made to Paragraph 1 of the LOI with respect to
the Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended to August 30, 1996. In addition, reference is
further made to Paragraph 8 of the LOI with respect to Access and due Diligence.
This letter shall confirm that the Access and Due Diligence Date is hereby
extended to August 30, 1996.
This letter shall also confirm that Care Matrix has funded $65,894.12 to cover
the initial architectural/engineering and due diligence related expenses for the
project. Prior to additional funding and prior to the execution of the Joint
Venture Agreements Care Matrix and Netwest shall agree to a mutually acceptable
preliminary development budget and pre-construction drawn down schedule for
future disbursements by July 31, 1996.
If the foregoing change is acceptable to you, please acknowledge your acceptance
by signing below and returning a copy to me. Except as modified hereby, all
other terms and provisions of the LOI shall remain unchanged by this letter.
<PAGE>
Letter to Ms. Kuhn
June 30, 1996
Page 2
Thank you for your attention to this matter.
Very truly yours,
/s/ Kevin J. Maley
-----------------------------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-----------------------------
Name: Priscilla S. Kuhn
Title: President
<PAGE>
[LETTERHEAD OF CAREMATRIX]
VIA FEDERAL EXPRESS
April 30, 1996
Ms. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: CareMatrix/Amber Lights - Tucson, Arizona
Dear Prill:
Reference is hereby made to that certain Letter of Intent dated December
18, 1995 by and between Netwest Development Corporation ("Netwest") and AMA
Funding Corporation ("AMA") related to the above-referenced project, as amended
(the "LOI"). Reference is further made to Paragraph 1 of the LOI with respect to
the Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended to June 30, 1996. In addition, reference is
further made to Paragraph 8 of the LOI with respect to Access and Due
Diligence. This letter shall confirm that the Access and Due Diligence Date is
hereby extended to June 30, 1996.
This letter shall also confirm that CareMatrix has funded $65,894.12 to cover
the initial architectural/engineering and due diligence related expenses for the
project. Prior to additional funding and prior to the execution of the Joint
Venture Agreements Carematrix and Netwest shall agree to a mutually acceptable
preliminary development budget and pre-construction drawn down schedule for
future disbursements by June 30, 1996.
<PAGE>
Letter to Ms. Kuhn
April 30, 1996
Page 2
If the foregoing change is acceptable to you, please acknowledge your
acceptance by signing below and returning a copy to me. Except as modified
hereby, all other terms and provisions of the LOI shall remain unchanged by this
letter.
Thank you for your attention to this matter.
Very truly yours,
/s/ Kevin J. Maley
-----------------------------------------
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-----------------------------
Name: Priscilla S. Kuhn
Title: President
<PAGE>
[LETTERHEAD OF CAREMATRIX]
VIA FEDERAL EXPRESS
March 20, 1996
Ms. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
RE: CarePlex/Amber Lights - Tucson, Arizona
Dear Prill:
Reference is hereby made to that certain Letter of Intent dated December
18, 1995 by and between Netwest Corporation ("Netwest") and AMA Funding
Corporation ("AMA") related to the above-referenced project, as amended (the
"LOI"). Reference is further made to Paragraph 1 of the LOI with respect to the
Joint Venture Agreement. This letter shall confirm that the Joint Venture
Agreement Date has been extended to April 30, 1996. In addition, reference is
further made to Paragraph 8 of the LOI with respect to Access and Due Diligence.
This letter shall confirm that the Access and Due diligence Date is hereby
extended to April 30, 1996.
This letter shall also confirm that CarePlex has agreed to commit $75,000
to cover the initial architectural/engineering and due diligence related
expenses for the project. CarePlex and Netwest shall agree to a mutually
acceptable preliminary development budget and pre-construction drawn down
schedule for future disbursements by April 1, 1996.
<PAGE>
Letter to Ms. Kuhn
March 20, 1996
Page 2
If the foregoing change is acceptable to you, please acknowledge your
acceptance by signing below and returning a copy to me. Except as modified
hereby, all other terms and provisions of the LOI shall remain unchanged by this
letter.
Very truly yours,
/s/ Andrew D. Gosman
Andrew D. Gosman
President
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-----------------------------
Name: Priscilla S. Kuhn
Title: President
3/20/96
<PAGE>
[LETTERHEAD OF CAREPLEX]
February 22, 1996 Via Facsimile
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard,
Suite 211
Tucson, AZ 85719
Re: Amber Lights - Tucson, AZ
Dear Prill:
Reference is hereby made to the certain Letter of Intent ("LOI") dated December
11, 1995 by and between Netwest Development Corporation ("Netwest") and AMA
Funding Corporation ("AMA") and as amended in accordance with letters dated
December 28, 1995 and January 22, 1996, related to the above-referenced project.
Reference is further made to Paragraph 1 of the LOI with respect to the Joint
Venture Agreement. This letter shall confirm that the Joint Venture Agreement
Date has been extended from February 23, 1996 to March 1, 1996. In addition,
reference is further made to Paragraph 8 of the LOI with respect to Access and
Due Diligence. This letter shall confirm that the Access and Due Diligence Date,
is hereby extended from February 23, 1996 to March 1, 1996.
If the foregoing is acceptable to you, please acknowledge your acceptance by
signing and returning a copy to me. Except as modified hereby, all of the other
terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
With best regards,
/s/ Kevin J. Maley
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-----------------------------
Name: Priscilla S. Kuhn
Title: President
2/22/96
KJM:clb
pc: Andrew Gosman
James M. Clary, III, Esq.
<PAGE>
[LETTERHEAD OF CAREPLEX]
January 22, 1996 Via Facsimile
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
Re: Amber Lights - Tucson, AZ
Dear Prill:
Reference is hereby made to that certain Letter of Intent (the "LOI") dated
December 11, 1995 by and between Netwest Development Corporation ("Netwest") and
AMA Funding Corporation ("AMA") and as amended in accordance with a letter dated
December 28, 1995, related to the above-referenced project. Reference is further
made to Paragraph 1 of the LOI with respect to the Joint Venture Agreement. This
letter shall confirm that the Joint Venture Agreement Date has been extended
from January 26, 1996 to February 23, 1996. In addition, reference is further
made to Paragraph 8 of the LOI with respect to Access and Due Diligence. This
letter shall confirm that the Access and Due Diligence Date, is hereby extended
from January 26, 1996 to February 23, 1996.
If the foregoing is acceptable to you, please acknowledge your acceptance
by signing below and returning a copy to me. Except as modified hereby, all
other terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
With best regards,
/s/ Kevin J. Maley
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn
-----------------------------
Name: Priscilla S. Kuhn
Title: President
pc: Andrew Gosman
James M. Clary, III, Esq.
<PAGE>
[LETTERHEAD OF CAREPLEX]
January 22, 1996 Via Facsimile
Mrs. Priscilla S. Kuhn
President
Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
Re: Amber Lights - Tucson, AZ
Dear Prill:
Reference is hereby made to that certain letter of Intent (the "LOI") dated
December 11, 1995 by and between Netwest Development Corporation ("Netwest") and
AMA Funding Corporation ("AMA") and as amended in accordance with a letter dated
December 28, 1995, related to the above-referenced project. Reference is further
made to Paragraph 1 of the LOI with respect to the Joint Venture Agreement. This
letter shall confirm that the Joint Venture Agreement Date has been extended
from January 26, 1996 to February 23, 1996. In addition, reference is further
made to Paragraph 8 of the LOI with respect to Access and Due Diligence. This
letter shall confirm that the Access and Due Diligence Date, is hereby extended
from January 26, 1996 to February 23, 1996.
If the foregoing is acceptable to you, please acknowledge your acceptance
by signing below and returning a copy to me. Except as modified hereby, all
other terms and provisions of the LOI shall remain unchanged.
Thank you for your attention to this matter.
With best regards,
/s/ Kevin J. Maley
Kevin J. Maley
Senior Vice President/Development Officer
ACKNOWLEDGED AND AGREED TO:
NETWEST DEVELOPMENT CORPORATION
By: /s/ Priscilla S. Kuhn 1-26-96
-----------------------------
By: Priscilla S. Kuhn
Title: President
pc: Andrew Gosman
James M. Clary, III, Esq.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 14th day of
August, 1996, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 ("Manager"), and Cambridge House Associates General
Partnership, a New York general partnership, with its principal place of
business at c/o Chancellor of Ossining, Inc. 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner").
WHEREAS, the Owner is the owner and operator of Cambridge House on the
Hudson, a one hundred twenty-two (122) unit seniors housing facility to be
located in Ossining, New York (the "Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility was necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar health care facilities, is knowledgeable as to the state
and federal requirements governing the licensure, operation, accreditation and
reimbursement of health care facilities and that the owners and employees of
Manager are qualified health care professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide high quality care to the residents
at the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of
and discipline, promote, terminate or fire (subject to the rights of the Owner
under Section 2.1 of this Agreement to approve the hiring, disciplining and
<PAGE>
termination of the Executive Director, the Assistant Administrator and Director
of Resident Services) all personnel involved in the administration and
day-to-day operation of the Facility, including, without limitation, management,
resident assistance and other related personnel, custodial, food service,
cleaning, maintenance and other operational personnel, and secretarial or
bookkeeping personnel, each of whom, other than the Executive Director (as
hereinafter defined), shall be employees of the Owner; supervise the accounting,
billing, purchasing and bill payment functions for the Facility; establish
systems of accounts and supervise the maintenance of ledgers and other primary
accounting records by the personnel of the Facility; supervise the financial
affairs of the Facility; establish and supervise the implementation of operating
and capital budgets, including those required to establish reimbursement rates,
if any, with respect to state or federal entitlement programs as well as
self-pay rates; prepare and maintain true, complete and accurate records
necessary for the preparation of such operating budgets; determine which items
of cost and expense properly relate to resident care; establish and administer
financial controls over the operation of the Facility, develop and establish
financial standards and norms by which the income, costs and operations of the
Facility may be evaluated; serve as advisor and consultant in connection with
policy decisions to be made by the Owner; furnish reports to the Owner as the
Owner may reasonably request and provide the Owner with economic and statistical
data in connection with or relative to the operations of the Facility; represent
the Facility in its day-to-day dealings with regulatory and rate-setting
authorities (including preparation and submission of reports for reimbursement),
creditors, residents, personnel, agents for collection, and insurers; act as
agent for the Owner in disbursing or collecting the funds of the Facility and in
paying the debts and fulfilling the obligations of the Facility; coordinate and
supervise a marketing plan for the Facility to insure that the Facility obtains
full occupancy as soon as possible and, after the Facility has achieved full
occupancy, assist in the development of an annual marketing plan and budget to
maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
2
<PAGE>
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and hire
a qualified and properly licensed Executive Director who shall be responsible
for the functional operation of the Facility and supervision of personnel at the
Facility on a day-to-day basis, as well as all resident assistance, custodial,
food service, cleaning, maintenance, secretarial and bookkeeping personnel for
the day-to-day operations of the Facility. The Executive Director shall be the
employee of the Manager and all such other personnel shall be employees of the
Owner, and the Owner shall retain full responsibility for payment of wages,
salaries and other compensation and benefits for such other employees (excluding
the Executive Director). The Manager shall, subject to approval by the Owner,
establish necessary and desirable personnel policies and procedures, wage
structures and staff schedules. The Manager, subject to approval by Owner, shall
have authority to hire, discipline, promote and discharge employees of the Owner
who participate in the day-to-day operation and administration of the Facility.
Both the Manager and the Owner must approve the hiring and/or firing of the
Executive Director, Assistant Administrator and the Director of Resident
Services, which approval shall not be unreasonably withheld or delayed. The
Manager shall: (i) maintain or cause to be maintained payroll records and
prepare weekly and monthly payrolls, withholding taxes and Social Security
taxes; (ii) prepare and submit all required state and federal tax or benefit
returns required with respect to employees, including, without limitation, the
returns required by FICA, FUTA and all applicable unemployment compensation
laws; (iii) maintain in force all required levels of workers' compensation
insurance; and (iv) prepare and submit to the Owner any certificates of payroll
expenses as may be reasonably requested. The Manager shall not be liable to any
employee of the Facility for wages, salaries and other compensation and
benefits, or to the Owner, unless the Manager was specifically required to
obtain the approval of the Owner before committing to a salary or benefit and
such approval was not obtained. The Manager shall not be liable to the Owner or
others for any action or omission on the part of any employee of the Owner of
the Facility, unless the employee was acting under the express direction of the
Manager or unless such employee was following an express policy or procedure of
the Manager and such direction, policy or procedure is subsequently determined
to be the result of gross negligence. The Manager shall provide the Owner with
quarterly reports of all hiring, disciplinary actions, promotions and firings at
the Facility for the month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager attempts to notify the Owner on a concurrent basis). The
Manager shall prepare and submit to
3
<PAGE>
the Owner any certificates of purchasing expenses incurred for the Facility as
may be reasonably requested.
2.3 Collection of Accounts. The Manager shall supervise the Facility
bookkeeping personnel which shall prepare and submit bills and collect for the
account of the Owner any and all moneys owing to the Owner from residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner. The Manager shall be responsible for filing all local, state and
federal tax returns relating to the operation of the Facility, with the
exception of corporate income tax and pension returns, and shall be responsible
for penalties, interest, and audit costs arising out of late, inaccurate, or
incomplete filings or the Manager's failure to file such tax returns provided,
however, that the Owner makes available sufficient funds for payment of any
taxes due and any information needed to complete such returns on a timely
basis).
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after the
close of each calendar month, a balance sheet as of the end of the month and a
statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after the
close of each fiscal year, a year-end compilation report, including a balance
sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be required
under any financing terms in accordance with the deadlines set forth in any
financing agreements encumbering the Facility (any such financing agreement or
agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
4
<PAGE>
2.7 Budgets. The Manager shall prepare and submit for approval by the
Owner the following: (a) as soon as possible and not later than thirty (30) days
before the close of each fiscal year, or on such earlier date as may be required
under any Financing Agreement, a detailed written capital and operating budget
for the next succeeding fiscal year, broken down by month and showing projected
expenditures and projected revenues for such budget period; and (b) such other
budgets as may be reasonably required of the Owner under any Financing Agreement
or by regulatory authorities showing, inter alia, projected ordinary and
extraordinary expenditures and protected revenues for such budget period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense, on
behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and supervise
the agreed upon marketing plan for the Facility during the fill-up phase (the
"Marketing Plan"). Monthly statistical census analysis reports will be generated
by the Manager and delivered to the Owner. The Manager will recommend
adjustments in the Marketing Plan as needed to achieve full occupancy. For
purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
5
<PAGE>
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance (this
item may be provided by outside parties if economically feasible) and, to the
extent deemed feasible by the Manager and the Owner, the services of regular
Facility maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee
Base Management Fee. As compensation for the services to be rendered by the
Manager during the term of this Agreement, the Manager shall pay itself, at its
principal office given below (or at such other place as the Manager may from
time to time designate in writing), and at the times hereinafter specified, a
monthly management fee (the "Management Fee") during the terms of this Agreement
equal to five percent (5%) of Net Revenues. The Management Fee will be paid in
arrears and shall be due and payable on or before the fifteenth (15th) day of
each month following the month in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following expenses
incurred by it in the management of the business and properties of the Facility:
(a) Salary and expenses (including, without limitation, payroll
taxes, costs of employee benefit plans, travel, insurance, and fidelity bonds)
of all personnel employed by the Manager (other than the Executive Director) to
carry out all responsibilities detailed above.
(b) Salary and expenses (including, without limitation, payroll
taxes, cost of employee benefit plans, travel, insurance and fidelity bonds) of
financial and accounting personnel employed by the Manager to maintain
accounting books and records of the Facility, except as provided below.
6
<PAGE>
4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of the Executive Director and independent
professional persons expressly retained by the Owner, or retained by the Manager
for the account of the Owner with the prior permission of the Owner, for any
purpose; salary, other compensation or benefits and expenses of administrative,
medical, resident assistance and other health care personnel; custodial, food
service, cleaning, maintenance, operational, secretarial and bookkeeping
personnel employed to administer the day-to-day operations of the Facility and
to perform health care and related services in the day-to-day operations of the
Facility's business.
(b) Principal, interest and discounts on indebtedness incurred
or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the existence,
operation, receipts, income or property of the Owner, provided, however, that
all interest and penalties incurred as a result of the Manager's failure to
timely file all returns which the Manager is required to file pursuant to this
Agreement, or to make timely payment of all taxes, levies, imposts, or other
charges, to the extent that sufficient funds were available to the Manager as of
the date such payments were due, shall be the responsibility of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen and
food service equipment, linens, beds, furniture, clothing and all other supplies
and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the design,
acquisition, disposition or ownership of real and personal property devoted,
used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee and the Consulting Fee (as defined in
the Consulting Agreement to be executed simultaneously herewith).
(g) Legal fees and related expenses pertaining to the
acquisition, sale, mortgaging or leasing of property, litigation and proceedings
relating to rates and charges at the Facility, any other litigation or
proceedings to which the Owner is a party. However, such fees shall not include
those fees resulting from or arising out of the gross negligence by the Manager
and the Owner shall provide such necessary funds to the Manager within ten (10)
days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be
7
<PAGE>
paid on behalf of the Owner by the Manager, the Manager shall promptly notify
the Owner of the amount necessary to cure and the reason for such deficit and
the Owner shall provide such necessary funds to the Manager within ten (10) days
after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall rate
structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the Facility
in the Owner's name, separate from all other accounts and funds of the Manager,
with a bank or banks whose deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") or with a savings and loan institution or institutions
whose deposits are insured by the Federal Savings and Loan Insurance Corporation
("FSLIC") as it deems necessary or desirable. The Manager, on behalf of the
Owner, shall use reasonable efforts to collect (using legal counsel approved by
the Owner, if necessary) all sums due and owing to Owner in connection with the
operation of the Facility. The Manager and the Owner shall deposit into such
accounts all monies furnished by the Owner as working funds and all receipts and
monies arising from the operation of the Facility or otherwise received by the
Owner or by the Manager for or on the behalf of the Owner.
(iii) Draws on such accounts may be made by the sole signature
of an authorized representative of the Manager (or by wiring instructions from
such authorized representative of the Manager) and shall be paid to the Manager
to reimburse the Manager for payments made pursuant to this Agreement by the
Manager from its own accounts. The Owner hereby appoints the Manager, for the
term of this Agreement, as the Owner's true and lawful attorney-in-fact to
withdraw, by writing checks against such accounts, funds for reimbursement of
all amounts payable pursuant to this Agreement in connection with the operation
of the Facility. The Owner agrees to execute from time to time any additional
documents required by any bank wherein such documents are held to effectuate all
powers of attorney referred to herein. The Manager shall make disbursements and
payments from such accounts, on behalf and in the name of the Owner, in such
amounts and at such times as are deemed by the Manager to be appropriate or
required in connection with, first, payments required by any Financing
Agreement, and second, payments of ownership, maintenance and operating expenses
of the Facility and the other costs, expenses and expenditures provided for in
this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers.
8
<PAGE>
All dealings between the Owner and the Manager are at arms length as between
non-related parties.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue for an initial
term often (10) years commencing on the date the Facility is opened for
occupancy, and ending on the last day of the calendar month in which the tenth
(10th) anniversary of such opening date occurs(the "Original Expiration Date").
Thereafter, this Agreement shall be renewed automatically for two (2) additional
five (5) year terms unless the Manager sends the Owner written notice no less
than ninety (90) days prior to the then applicable Expiration Date that it does
not wish to have the Agreement renew beyond the then applicable Expiration Date.
As used herein the term "Expiration Date" shall mean the later of the Original
Expiration Date, or the date to which this Agreement has been extended as
provided in this Section 7.1.
7.2 Termination for Cause. Any party may terminate this Agreement for
"cause" be delivering thirty (30) days written notice to the others. "Cause"
shall include, but not be limited to, each of the following:
(i) the violation by any party of any material provision in, or
obligation imposed by, this Agreement which violation shall not have been cured
to the reasonable satisfaction of the other party within thirty (30) days
following the date on which written notice of termination has been received by
the party who has violated a material provision or obligation imposed by this
Agreement;
(ii) any illegal or improper act engaged in by any party in the
operation of the Facility;
(iii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iv) if the Owner is required, pursuant to the terms and
conditions of any Financing Agreement, to terminate this Agreement or to retain
new management for the Facility.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In addition
to the provisions of Section 7.2 above, the Manager may terminate this Agreement
upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within thirty
(30) days after receiving written notice from the Manager.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or
9
<PAGE>
suffered by the Manager as a result of the Manager's fraud, willful misconduct,
or gross negligence, or for Costs incurred or suffered by the Manager as a
result of the Manager's failure to keep true, accurate and complete records or
to obtain any necessary opinion of counsel as required by Section 1.1 of this
Agreement. The Manager shall indemnify the Owner and hold it harmless of, from
and against all Costs incurred or suffered by the Owner as a result of any of
the Manager's fraud, willful misconduct, or gross negligence, or as a result of
the Manager's failure to submit proper reports to the appropriate regulatory
agencies, to keep true, accurate and complete records or to obtain any necessary
opinion of counsel as required by Section 1.1 of this Agreement.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v)(1)(i) of the Social Security Act (the "Act"), the Manager shall,
upon written request and in accordance with the above-mentioned section of the
Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provision of this Section 9 shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
10
<PAGE>
13. Assignment. Neither the Owner nor the Manager will assign its interests
in this Agreement, other than to an affiliate, without the prior written consent
of the other, which consent shall not be unreasonably withheld, delayed or
conditioned.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: Robert Kaufman, President
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
As to Owner: Cambridge House Associates General Partnership
c/o Chancellor of Ossining, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
cc: Atlantic on the Hudson, LLC
Two Penn Plaza
New York, New York 10121
Attention: Peter Fine; Marc Altheim
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail shall be deemed received three (3)
days after the date postmarked. All notices that are hand delivered shall be
deemed received upon delivery to the office or address of the addressee.
17. Property. Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed
11
<PAGE>
specifically for this Facility are to be considered proprietary and will remain
the property of the Manager. All operational forms and documents including, but
not limited to, policy and procedure manuals, operational forms, level of care
determination Systems, management policy books, inspection control manuals, and
nursing management books are and will remain the property of the Manager. All
financial management forms, documents and software systems including, but not
limited to, bookkeeping manuals, financial forms, financial spreadsheets,
database or word processing forms, financial accounting packages and outcome
information systems are and will remain the property of the Manager. Upon
termination of this Agreement, the Owner shall have the option to purchase
operational material belonging to the Manager, except for the financial
accounting packages and outcome information systems, at a mutually agreed upon
price.
12
<PAGE>
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
/s/ [Illegible] By: /s/ Andrew Gosman
- --------------------- -----------------------------
Name: Andrew Gosman
Title: Vice Chairman
WITNESS: CAMBRIDGE HOUSE ASSOCIATES
GENERAL PARTNERSHIP
BY: CHANCELLOR OF OSSINING, INC.,
General Partner
/s/ [Illegible] By: /s/ James McClary, III
- --------------------- -----------------------------
Name: James McClary, III
Title: Vice President
14
ASSIGNMENT AGREEMENT
(Southington, Connecticut)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CarePlex of Southington, Inc., a Delaware corporation ("Assignor"), and
Chancellor of Massachusetts, Inc., a Delaware corporation ("Assignee").
WITNESSETH
WHEREAS, Assignor is the general partner of The Cragganmore Associates
Limited Partnership (the "Partnership") pursuant to The Cragganmore Associates
Limited Partnership Agreement (the "Partnership Agreement"), dated November 1,
1995, relating to a certain parcel of land located in Southington, Connecticut
(the "Land"), a copy of which is attached hereto as Exhibit A;
WHEREAS, the Partnership intends to develop the Land for an
assisted/independent living facility consisting of approximately ninety-six
(96) units (the "Project");
WHEREAS, Assignor desires to assign its rights and obligations under the
Partnership Agreement to Assignee, and Assignee desires to assume such rights
and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Partnership Agreement,
and Assignee hereby accepts the within assignment and assumes and
agrees with Assignor, to perform and comply with and to be bound by
all of the terms, covenants, agreements, provisions and conditions of
the Partnership Agreement on the part of Assignor thereunder to be
performed on and after the date hereof, in the same manner and with
the same force and effect as if Assignee had originally executed the
Partnership Agreement.
2. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 4 hereof) accruing
or arising under the Partnership Agreement on or before the date
hereof.
<PAGE>
2
3. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Partnership
Agreement after the date hereof.
4. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
5. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CAREPLEX OF
SOUTHINGTON, INC.
By: /s/ James M. Clary
---------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
---------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
THE CRAGGANMORE ASSOCIATES
LIMITED PARTNERSHIP AGREEMENT
<PAGE>
TABLE OF CONTENTS
ARTICLE I - Definitions and Parties
Section 1.1 - Definitions
Section 1.2 - Act
Section 1.3 - Agreement
Section 1.4 - Capital Account
Section 1.5 - Capital Contribution
Section 1.6 - Cash Flow
Section 1.7 - Closing
Section 1.8 - General Partner
Section 1.9 - Income and Loss
Section 1.10 - Internal Revenue Code
Section 1.11 - IRS
Section 1.12 - Limited Partner
Section 1.13 - Notice
Section 1.14 - Offeree
Section 1.15 - Offeror
Section 1.16 - Partner Loans
Section 1.17 - Partners
Section 1.18 - Partnership
Section 1.19 - Partnership Property
Section 1.20 - Premises
Section 1.21 - Prime Rate
Section 1.22 - Project
Section 1.23 - Tax Matters Partner
Section 1.24 - Term
Section 1.25 - Unrecovered Capital Contribution
ARTICLE II - Formation
Section 2.1 - Formation
Section 2.2 - Name
Section 2.3 - Office and Agent for Service
Section 2.4 - Documents to Be Filed
ARTICLE III - Purpose
ARTICLE IV - Term
ARTICLE V - Partnership Capital
Section 5.1 - Capital
Section 5.2 - Interest on Capital Contributions
Section 5.3 - Non-Assessability
Section 5.4 - Return of Capital
Section 5.5 - Partner Loans
-i-
<PAGE>
ARTICLE VI - Allocations of Income and Loss and Distributions
Section 6.1 - Definition of Income and Loss
Section 6.2 - Allocation of Income and Loss
Section 6.3 - Distributions of Cash from Operations
Section 6.4 - Distributions of Cash from Capital
Transactions
ARTICLE VII - Tax Matters Partner
Section 7.1 - Tax Matters Partner
Section 7.2 - Duties and Power of Tax Matters Partner
ARTICLE VIII - Rights, Obligations and Representations of the General Partner
Section 8.1 - Daily Control of Partnership
Section 8.2 - Specific Powers and Duties of General
Partner
Section 8.3 - Actions Requiring Approval of the
Limited Partner
Section 8.4 - Other Activities
ARTICLE IX - Specifically Authorized Agreements
Section 9.1 - Guarantee Fee
Section 9.2 - Management Agreement
Section 9.3 - Consulting Services
Section 9.4 - Turnkey Construction Contract
Section 9.5 - Funding Requirements
Section 9.6 - Assignment of Rights
Section 9.7 - No Additional Fees
Section 9.8 - Reduction of Property Acquisition Costs
ARTICLE X - Rights and Obligations of Limited Partner
Section 10.1 - Authority of Limited Partner
Section 10.2 - Rights of Limited Partner
Section 10.3 - Assignment by Limited Partner and
General Partner
ARTICLE XI - Distribution on Dissolution; Rights of First Refusal
Section 11.1 - Priority of Distribution
Section 11.2 - Period of Dissolution
Section 11.3 - Statement
Section 11.4 - Liability for Capital Contributions
Section 11.5 - Rights of First Refusal
-ii-
<PAGE>
ARTICLE XII - Power of Attorney
Section 12.1 - Power of Attorney
Section 12.2 - Assignment
Section 12.3 - Admission of Limited Partner
Section 12.4 - Irrevocable
Section 12.5 - Amendments by General Partner
ARTICLE XIII - Indemnification
Section 13.1 - Indemnification of General Partner
Section 13.2 - Indemnification of Partnership
ARTICLE XIV - Concluding Provisions
Section 14.1 - Entire Agreement
Section 14.2 - Amendments
Section 14.3 - Successors
Section 14.4 - Joint Effort
Section 14.5 - Captions
Section 14.6 - Notice
Section 14.7 - Effective Date of Notice
Section 14.8 - Counterparts
Section 14.9 - Partial Invalidity
Section 14.10 - Applicable Law
Section 14.11 - Exhibits
Section 14.12 - Confidentiality
Section 14.13 - No Offer/No Waiver
Section 14.14 - Genders
Section 14.15 - Initialling
Section 14.16 - Further Assurances
Section 14.17 - Effective Date
EXHIBITS
Exhibit A - List of Contracts to be Assumed
Exhibit B - Reimbursement Expenses
Exhibit C - Turnkey Contract
Exhibit D - Management Agreement
Exhibit E - Budget
-iii-
<PAGE>
THE CRAGGANMORE ASSOCIATES
LIMITED PARTNERSHIP AGREEMENT
ARTICLE I
Definitions and Parties
Section 1.1 - Definitions. The words, phrases and parties defined in this
Article shall have the meanings indicated. Whenever the words, phrases and
parties defined in this Article, or elsewhere in this Agreement, are intended to
have their defined meanings, the first letter of the word or the first letters
of all substantive words in the phrase shall be capitalized. Otherwise, any
word, phrase or party name that appears in this Agreement shall have the meaning
denoted by its context.
Section 1.2 - Act. Act shall mean the Connecticut Uniform Limited
Partnership Act as the same may be, from time to time, amended.
Section 1.3 - Agreement. Agreement shall mean this document, which is the
Limited Partnership Agreement of The Cragganmore Associates Limited Partnership.
Section 1.4 - Capita1 Account. Capital Account of a Partner shall mean the
capital account of that Partner determined from the inception of the Partnership
strictly in accordance with the rules set forth in Section l.704-l(b)(2)(iv) of
the Treasury Regulations.
Subject to the previous paragraph, Capital Account means:
(a) The sum of:
(i) the Partner's Capital Contribution, plus
(ii) the fair market value of property contributed by the Partner to
the Partnership (net of liabilities secured by the property or to
which the property is subject), plus
(iii) the amount of net profits and gain from capital transactions
allocated to the Partner; and
(b) Decreased by the sum of:
(i) the amount of money distributed to the Partner; plus
-1-
<PAGE>
(ii) the fair market value of property distributed to the Partner by
the Partnership (net of liabilities secured by the property or to
which the property is subject); plus
(iii) the Partner's share of expenditures of the Partnership described
in Section 705(a)(2)(B) of the Code (including, for this purpose,
losses which are nondeductible under Section 267(a)(l) or Section
707(b) of the Code); plus
(iv) the Partner's share of amounts paid or incurred by the
Partnership to organize the partnership or to promote the sale of
(or to sell) an interest in the Partnership (except to the extent
properly amortizable for tax purposes or which otherwise may be
permitted by law or Treasury Regulation or IRS ruling), plus
(v) the amount of net losses and loss from capital transactions
allocated to the Partner.
For this purpose, "income" refers to all items of income (including all
items of gain and including income exempt from tax) as properly determined for
"book" purposes, and "loss" refers to all items of loss (including deductions)
as properly determined for "book" purposes. "Book" income and loss shall be
determined based on the value of the Partnership's assets as set forth in the
books of the partnership in accordance with the principles of Section
l.704-l(b)(2)(iv)(g) of the Treasury Regulations. Otherwise, income and loss
shall be determined strictly in accordance with federal income tax principles
(including rules governing depreciation and amortization), applied
hypothetically based on values of partnership assets as set forth on the
Partnership books.
An assumption of a Partner's unsecured liabilities by the partnership shall
be treated as a distribution of money to the Partner. An individual assumption
of the partnership's unsecured liabilities by a Partner shall be treated as a
cash contribution by the Partner to the partnership. For this purpose, the
assumption of a secured liability in excess of the fair market value of the
security shall be treated as the assumption of any unsecured liability to the
extent of that excess.
In the event that assets of the partnership other than cash are distributed
to a Partner in kind, Capital Accounts shall be adjusted for the hypothetical
"book" gain or loss that would have been realized by the Partnership if the
distributed assets had been sold for their fair market values in a cash sale (in
order to reflect unrealized gain or loss).
-2-
<PAGE>
In the event of the liquidation of a Partner's interest in the partnership
or of the Partnership, Capital Accounts shall be adjusted for the hypothetical
"book" gain or loss that would have been realized by the Partnership if all
Partnership assets had been sold for their fair market values in a cash sale (in
order to reflect unrealized gain or loss).
Capital Accounts also shall be adjusted upon the constructive termination
of the partnership as provided under Section 708 of the Code in accordance with
the method set forth in the immediately preceding paragraph (as required by
Section l.704-l(b)(2)(iv)(l) of the Treasury Regulations).
In the event that a Partner shall be both a General Partner and a Limited
Partner of the Partnership, a single Capital Account shall be maintained for
that Partner.
Section 1.5 - Capital Contribution. Capital Contribution shall mean all
cash or other property contributed to the partnership by a Partner, excluding
any loans made by such partner to the Partnership.
Section 1.6 - Cash Flow. Cash Flow shall mean, with respect to any period,
the amount (if any) by which the cash received from all sources other than:
(i) Capital Contributions (except the amount of any reserve originating
from a Capital Contribution which is used to pay an Operating Cost);
and
(ii) capital transaction;
exceeds Partnership expenses.
a) In determining Cash Flow for any year, there shall be added (1)
depreciation, amortization of prepaid items and deferred costs
and other non-cash charges, (2) payments to the partnership out
of the proceeds of business of rental interruption insurance, (3)
amounts accrued for such year by the partnership and expensed or
deducted for such year in calculating partnership profits and
losses, but payable only from Cash Flow for such year pursuant to
this Agreement and (4) funds released from any escrow account
other than for payments of capital expenditures.
b) In determining Cash Flow for any year, there shall be subtracted
(1) principal payments on partnership indebtedness, (2) payments
to reserve accounts required by any Lender or
-3-
<PAGE>
pursuant to Section 6.3, (3) other reasonable payments to the
Partnership reserve accounts determined by the General Partners,
(4) payments for capital expenditures, unless withdrawn from
partnership reserve accounts, and (5) fees and other cash
expenditures permitted by this Agreement to the extent actually
paid by the Partnership in such year to the extent not expensed
or deducted for such year in calculating Partnership profits and
losses (except far any such payments of items referred to in this
clause (b) made out of (x) Capital Contributions, proceeds of a
Capital Transaction or other sources not included in determining
such profits and losses, or (y) Cash Flaw); and
c) Gain or losses from any sale, exchange, eminent domain taking,
damage or destruction by fire or other casualty (whether or not
insured) or other disposition of all or any part of the Property
(other than the proceeds of any business or rental interruption
insurance), Capital Contributions to the partnership and the
proceeds of any mortgage and loan or refinancing proceeds shall
not be included in such profits and losses in determining Cash
Flow.
(iii) Cash Flow shall be determined separately for each fiscal year and
shall not be cumulative.
Section 1.7 - Closing. Closing shall mean the date on which the Certificate
of Limited partnership is filed with the Office of the Secretary of the State of
Connecticut forming the partnership and admitting the Partners.
Section 1.8 - General Partner. The General Partner of the Partnership shall
be Continuum Care of Southington, Inc., a Delaware corporation.
Section 1.9 - Income and Loss. See Section 6.1.
Section 1.10 - Internal Revenue Code. Internal Revenue Code shall mean the
Internal Revenue Code of 1986, as amended and any successor act.
Section 1.11 - IRS. See Section 7.2.
Section 1.12 - Limited Partner. Limited Partner shall mean Calvin A.
Moffie.
-4-
<PAGE>
Section 1.13 - Management Agreement. See Section 9.2.
Section 1.14 - Notice. See Section 14.6.
Section 1.15 - Offeree. See Section 11.5(c).
Section 1.16 - Offeror. See Section 11.5(c).
Section 1.17 - Partner Loans. See Section 5.5.
Section 1.18 - Partners. Partners shall mean the General Partner and the
Limited Partner.
Section 1.19 - Partnership. Partnership shall mean The Cragganmore
Associates Limited Partnership.
Section 1.20 - Partnership Property. Partnership Property shall mean the
Project and all other assets transferred to, and held by, the Partnership.
Section 1.21 - Premises. Premises shall mean the real property upon which
the Project is located.
Section 1.22 - Prime Rate. Prime Rate shall mean an interest rate equal to
the annual interest rate announced, from time to time, by Fleet Bank, N.A. of
Providence, Rhode Island as its prime rate.
Section 1.23 - Project. Project shall mean an assisted living facility to
be located in Southington, Connecticut to be comprised of between 84 units (92
beds) and 96 units (104) beds.
Section 1.24 - Tax Matters Partner. See Section 7.1.
Section 1.25 - Term. See Section 4.1.
Section 1.26 - Unrecovered Capita1 Contribution. Unrecovered Capital
Contribution shall mean all Capital Contributions made by a Partner less any
distributions of cash to the Partner from the partnership except the preferred
return payable under Section 6.3(d).
ARTICLE II
Formation
Section 2.1 - Formation. The parties hereby form a Connecticut Limited
partnership pursuant to the provisions of the Act upon the terms and conditions
set forth in this Agreement.
Section 2.2 - Name. The partnership shall be conducted under the name of
The Cragganmore Associates Limited partnership.
-5-
<PAGE>
Section 2.3 - Office and Agent for Service. The principal office of the
Partnership shall be located at 197 First Avenue, Needham, Massachusetts 02197
or such place or places as the General Partner may, from time to time, designate
after notice to the Limited Partner. The agent of the Partnership for service of
process in Connecticut shall be Levy & Droney, P.C., 74 Batterson Park Road,
Farmington, Connecticut 06032, or such successor as may, from time to time, be
designated by the General Partner.
Section 2.4 - Documents to Be Filed. In addition to this Agreement, the
Partners, or the General Partner as attorney-in-fact acting for one or more of
the Partners, shall sign and file as required:
(a) A Certificate of Limited Partnership meeting the requirements of the
Act, which shall be filed for record in the Office of the Secretary
of the State of Connecticut. The General Partner shall mail a copy of
the Certificate of Limited Partnership to the Limited Partner when
received from the State of Connecticut.
(b) All other certificates and applications required to be filed in
Connecticut or in any other state or by the federal government.
ARTICLE III
Purpose
Section 3.1 - General. The purpose of the Partnership shall be to
construct, develop, lease, finance, expand, operate, manage, sell, transfer or
otherwise dispose of the Project.
ARTICLE IV
Term
The Partnership shall continue until December 31, 2045 ("Term"), provided,
however, that the Partnership shall be sooner dissolved, and the Term thereby
shortened, upon the happening of any of the following events:
(a) A final disposition by the Partnership of its entire interest in the
Project, and all other Partnership Property, except that, upon the
happening of such event, the General Partner can extend, for a
reasonable period not to exceed five (5) years, the Term upon notice
to the Limited Partner.
-6-
<PAGE>
(b) The bankruptcy, insolvency, death, incompetency, dissolution,
withdrawal or other event, which, under the Act, would result in the
dissolution of the Partnership by, of, or to any General Partner
("Event") except that the Partnership shall not be dissolved if
either:
(i) a remaining General Partner continues the business of the
Partnership; or
(ii) within ninety (90) days following such Event, all Partners
unanimously agree in writing to continue the business of the
Partnership and to the appointment of one or more successor
General Partners.
(c) A decision by the General Partner in the event the Partnership should
be classified as an association for federal income tax purposes.
(d) The failure of the Partnership to acquire the Project by April 30,
1996.
ARTICLE V
Partnership Capital
Section 5.1 - Capital. The capital of the Partnership shall be contributed
and adjusted as follows:
(a) The General Partner shall contribute on the date of the Closing, the
cash described below together with the obligations, commitments, and
undertakings incurred by the General Partner under all agreements
related to the Project on or before this date, in exchange for the
percentage interest indicated:
Percentage
Cash Interest
---- --------
$ 80 80%
In addition, the General Partner shall contribute up to ten percent
(10%) of the amount of the contract price payable under the Turnkey
Contract, which together with the proceeds of certain anticipated
financing, shall be used to pay such Contract Price.
-7-
<PAGE>
(b) The Limited Partner shall contribute on the date of the Closing the
cash described below, in exchange for the percentage interests
indicated.
Percentage
Cash Interest
---- --------
$ 20 20%
(c) The Capital Account of each Partner shall be established and adjusted
in accordance with the definition of Capital Account as set forth in
Section 1.4 and otherwise so as to comply with the requirements of
Internal Revenue Code Sections 704(b) and 704(c) and the Treasury
Regulations promulgated thereunder.
Section 5.2 - Interest on Capital Contributions. No Partner shall be
entitled to interest on funds contributed to the capital of the Partnership.
Partners may, however, be entitled to interest on loans made to the Partnership.
Section 5.3 - Non-Assessability. No Limited Partner shall be obligated to
make any additional contributions to the Partnership except as expressly set
forth in this Agreement. The liability of each Limited Partner to the
Partnership and to the third party creditors of the Partnership shall be limited
to the amount of its capital contribution and the share of undistributed profits
of the Partnership attributed to it and to distributions received by it in
accordance with Connecticut law. No Partner shall be required to restore a
negative balance or deficit in its Capital Account.
Section 5.4 - Return of Capital. No Partner shall be entitled to the return
of funds contributed to the capital of the Partnership or any part of such
funds, except as expressly set forth in this Agreement.
Section 5.5 - Partner Loans. The General Partner shall loan to the
Partnership funds required for the start-up costs of the Project, including
without limitation marketing and operating costs during the fill-up of the
Project to the extent that such costs are not capitalized and included within
the permanent financing for the Project, as such funds are necessary. The
General Partner may, in its sole discretion, structure any such required funding
as a mortgage loan to the Partnership, provided that the Partnership's permanent
lender permits such a junior lien. Such loan shall be amortized over a five (5)
year period commencing upon ninety percent (90%) occupancy of the Project, with
mandatory prepayments to be made thereunder to the extent of available Cash
Flow. Such loan shall bear interest at a rate equal to Prime Rate plus two
percent (2%) per annum.
-8-
<PAGE>
ARTICLE VI
Allocations of Income and Logs and Distributions
Section 6.1 - Definition of Income and Loss. Income and Loss shall be
defined to mean the income or losses of the Partnership from the construction,
operation and management of the business of the Partnership and the lease, sale,
condemnation, casualty loss or other disposition of all or any part of the
Partnership Property, all as determined by generally accepted accounting
practices for federal income tax purposes.
Section 6.2 - Allocation of Income and Loss. Income and Loss shall be
credited or charged to the Capital Accounts of the Partners, in the same
proportion as distributions of Cash Flow or Cash from Capital Transactions are
made to the Partners in accordance with this Agreement.
Section 6.3 - Distributions of Cash from Operations. Subject to the
requirements and covenants of any lender to the Partnership or Project and the
maintaining of a reserve for expenses which the General Partner deems reasonably
necessary to satisfy anticipated obligations, contingent liabilities and capital
reserves, the Cash Flow of the Partnership from the operation of the Project
shall be distributed at such times as deemed appropriate by the General Partner,
but not more than semi-annually, in the following order of priority:
(a) Payment of all operating expenses of the Partnership and the Project
(on a customary and reasonable basis) including, without limitation,
the management fee under the terms of the Management Agreement;
(b) Payment of debt service on construction loan for the Project or
permanent loan for the Project; or
(c) Payment of debt service on any working capital loan for the Project.
(including, without limitation, any loans to the General Partner in
accordance with Section 5.5 hereof) any guarantee fees, and/or subordinated
loans from any lender, including, without limitation, the General Partner
or its affiliates;
(d) Payment of a non-compounding accumulated preferred return on any
Unrecovered Capital Contributions, compensating balances or cash
collateral accounts made or funded by the General Partner, as the case
may be, equal to 15% per annum, less the amount of any interest
received by the General Partner on such compensating balances or cash
collateral accounts;
-9-
<PAGE>
(e) Thereafter, to the Partners in accordance with the percentage
interests set forth in Section 5.1 as such percentages may change from
time to time in accordance with the terms of this Agreement.
Section 6.4 - Distributions of Cash from Capital Transactions. Cash from a
sale, condemnation, casualty loss, settlement of claim, financing, refinancing
or termination and liquidation of the Partnership or any disposition of the
Partnership Property or any part of or interest in the Partnership Property,
which, in accordance with generally accepted accounting principles, is
attributed to capital (as distinguished from the normal business operations of
the Partnership) shall be distributed between the Partners in accordance with
the following order of priority:
(a) first, to liabilities secured by the Project;
(b) second, to pay the outstanding indebtedness of the Partnership;
(c) thereafter, 20% to the Limited Partner and 80% to the General Partner.
ARTICLE VII
Tax Matters Partner
Section 7.1 - Tax Matters Partner. The Partnership hereby designates the
General Partner to act as the Tax Matters Partner in accordance with Internal
Revenue Code Section 6231, as the same may be, from time to time, amended. In
the event that it ceases, for any reason, to be a General Partner, or if the
General Partner shall resign as Tax Matters Partner, the Partners shall, by a
Majority, elect a Successor Tax Matters Partner.
Section 7.2 - Duties and Power of Tax Matters Partner. The Tax Matters
Partner shall have the following authority and powers, to exercise at its sole
discretion:
(a) provide the Internal Revenue Service ("IRS") with the name, address,
profits interest and taxpayer identification number of each person who
was a Partner in the partnership at any time during a taxable year if
the IRS mails notice to the partnership of the beginning of an
administrative proceeding at the Partnership level; and
(b) to the extent and in the manner required by Treasury Regulations, keep
each Partner informed of all administrative and judicial proceedings
for the
-10-
<PAGE>
adjustment at the Partnership level of Partnership items; and
(c) have the power to enter into agreements with the Secretary of the
Treasury to extend the period for assessing any tax attributable to
any Partnership item; and
(d) have the power to handle day-to-day audit negotiations with the IRS;
(e) retain such accountants, attorneys or other advisors on behalf of the
Partnership as it may deem necessary or advisable in connection with
any administrative or judicial proceedings; and
(f) comply with any duly issued summonses to produce records, provided
that the General Partner shall have the right to contest the validity
of enforceability thereof; and
(g) forward to all Partners entitled to receive the same, within sixty
(60) days of receipt, any Final Partnership Administrative Adjustment
received from the IRS; and
(h) have the power to commence litigation in the Tax Court, Court of
Claims or District Court; and
(i) have the power to intervene in any litigation commenced by a Partner
contesting a Final Partnership Administrative Adjustment; and
(j) perform such other duties as are reasonably required of it and
exercise such other rights as are delegated to it under the Internal
Revenue Code of 1954 and the Regulations issued pursuant thereto as
such may be, from time to time, amended.
ARTICLE VIII
Rights, Obligations and
Representations of the General Partner
Section 8.1 - Daily Control of Partnership. The General Partner shall have
full and complete discretion in the day-to-day management and control of the
affairs of the Partnership to carry out the purposes of the Partnership. The
General Partner shall have the right to delegate to any affiliate, employee, or
to its accountants or attorneys any and all of its duties and obligations under
this Agreement other than the duties set forth in Section 5.5 or Article IX. In
the event that the General
-11-
<PAGE>
Partner enters into contracts or otherwise purchases goods and services on
behalf of the Partnership from any Partner or any of its affiliates pursuant to
which the Partnership will be obligated to make payments to such Partner or to
any such affiliate, then, in such event, the payments by the Partnership under
such contracts and purchases shall be on terms no less favorable to the
Partnership than would have been negotiated at arm's length with unaffiliated
third parties.
Section 8.2 - Specific Powers and Duties of General Partner. In addition to
any other duties set forth in this Agreement and without limiting the foregoing,
the General Partner shall specifically have the authority and the power (subject
to any express limitations set forth in this Agreement), at its discretion to:
(a) maintain complete and accurate books of account for the Partnership;
and
(b) within one hundred twenty (120) days after the end of each fiscal
year, provide each Limited Partner with an unaudited financial report
on the Partnership, reviewed by the Partnership's accountant including
a balance sheet and financial statement; and
(c) within ninety (90) days after the end of each fiscal year, furnish a
report to each Limited Partner containing such information as the
General Partner deems necessary for the proper preparation of the
Limited Partner's Federal Income Tax Returns; and
(d) employ such developers, contractors, consultants, accountants,
attorneys and other such agents for services, other than for
management services pursuant to the Management Agreement, as the
General Partner may, in its sole discretion, determine to be in the
best interests of the Partnership, including the employment of
entities which are affiliates of the General Partner; and
(e) mortgage, pledge, encumber, sell, exchange or otherwise dispose of any
or all of the partnership Property; and
(f) consent to the Assignment of a Limited Partner's interest; and
(g) admit Limited Partners as a result of the transfer of limited partner
and/or general partner interests made in accordance with this
Agreement; and
(h) borrow money or refinance the Project; and
-12-
<PAGE>
(i) incur indebtedness in the ordinary course of the Partnership's
business; and
(j) make various elections for federal income tax reporting purposes,
including elections under Section 754 of the Internal Revenue Code;
and
(k) construct, alter, improve, repair, raze, replace, enlarge or rebuild
all or any portion of the Project; and
(1) execute, knowledge and deliver and all documents that the General
Partner may deem necessary or desirable for Partnership purposes; and
(m) perform or cause to be performed all of the Partnership's obligations
and exercise all of its rights under any agreement to which the
Partnership is a party; and
(n) open Partnership bank accounts and sign checks on such accounts; and
(o) perform all acts contemplated by or incidental to the purposes of the
Partnership.
Section 8.3 - Actions Requiring Approval of Limited Partner.
Notwithstanding anything to the contrary set forth elsewhere in this Agreement,
the following actions of the Partnership shall require approval or ratification
by the Limited Partner:
(a) changing the nature of the Partnership business; or
(b) approving an amendment, other than an amendment in accordance with
Section 12.5, to this Agreement;
(c) replacing the General Partner with an entity which is unrelated or
unaffiliated with the General Partner;
(d) dissolution and liquidation of the Partnership; or
(e) the sale, lease, transfer, assignment or mortgaging of all or
substantially all of the Partnership Property.
All other actions shall be within the sole and absolute discretion of the
General Partner.
Section 8.4 - Other Activities. The General Partner shall devote such time
to the Partnership's business as shall be reasonably required. The Limited
Partner acknowledges that the General Partner may be engaged in similar business
ventures
-13-
<PAGE>
exclusively for its own account and neither the Limited Partners nor the
Partnership shall have any rights whatsoever in such other business ventures.
Notwithstanding the foregoing no Partner shall engage in the management,
ownership or operation of an assisted living facility in Southington and its
contiguous towns, either as an owner, operator, partner, consultant or in any
other capacity whatsoever, without the prior written consent of the other
Partner.
ARTICLE IX
Specifically Authorized Agreements
section 9.1 - Guarantee Fee. In the event that the General Partner or it
principals or affiliates are required to provide a guarantee with respect to any
indebtedness associated with the Project, the General Partner, such principal or
such affiliate shall receive an annual guaranty fee equal to 2% of the amount of
such obligation guaranteed.
Section 9.2 - Property Management. The Limited Partner shall provide
management for the Project under the terms of a management agreement to be
executed between the partnership and the Limited Partner or its designee
("Management Agreement") a copy of which is attached hereto as Exhibit D. The
term of the Management Agreement shall be for five (5) years with an option by
the partnership to extend for an additional five (5) years. The Management
Agreement shall also include, without limitation, a provision for a management
fee equal to One Hundred Twenty-five Thousand Dollars ($125,000) during the
first year of the term and four percent (4%) of the net revenues from operations
at the Project annually thereafter. The Management Agent shall provide assisted
living services to the residents at the Project upon market rates and terms in
accordance with the terms of the Management Agreement, and, subject to the
payment of the management fee, all revenues generated in connection therewith
shall inure to the benefit of the Project.
Section 9.3 - Consulting Services. The Limited Partner shall be paid a
consulting fee in the amount of One Hundred Thousand Dollars ($100,000.00)
payable on the earlier of the date of the initial draw under the construction or
permanent financing of the Project or January 15, 1996. In the event that the
proceeds of any financing are unavailable or inadequate to make such payment,
the General Partner shall make a capital contribution to the Partnership
sufficient to make such payment.
Section 9.4 - Construction Contract. On or before the earlier to occur of
(i) October 1, 1995, or (ii) thirty (30) days after receipt of all necessary
zoning permits and approvals for the Project, including the expiration of all
applicable appeals periods without an appeal having been filed, and receipt of
final
-14-
<PAGE>
plans and specifications for the Project, Continuum Care of Massachusetts, Inc.,
or it nominee (the "Developer"), and the Partnership shall enter into a
turnkey development contract (the "Turnkey Contract"), a copy of which is
attached hereto as Exhibit C pursuant to which the Developer shall be
responsible, at its cost and expense, to (i) acquire a site for the Project, and
(ii) obtain, with the assistance of the Limited Partner, all state, federal,
county and municipal land use and health care approvals and permits necessary
for Developer to develop and construct the Project on behalf of the Partnership.
Notwithstanding the foregoing, the Partners hereby acknowledge that the site
located at 58 Mulberry Street, Plantsville, Connecticut is an acceptable
location for the Project. The contract price to be paid by the Partnership to
the Developer for the development of the Project under the Turnkey Contract
shall be a guaranteed maximum price.
Section 9.5 - Funding Requirements. The General Partner will provide and/or
obtain both construction and permanent financing for the Project substantially
in accordance with the budget attached hereto as Exhibit E (the "Project Loan").
The Project Loan will be non-recourse or substantially non-recourse to the
Partnership and paid on a priority basis from the Cash Flow of the Project. Any
recourse requirement in excess of twenty percent (20%) under the Project Loan
shall require the prior written approval of both Partners.
Section 9.6 - Assignment of Rights. Upon the execution of this Agreement,
the Limited Partner shall assign to the Partnership, and the Partnership shall
assume all of the Limited Partner's right, title and interest in any and all
architectural, engineering and other contracts with respect to the Project free
of any claims. A list of such contracts is set forth in Exhibit A. Upon the
proof of payment of Twenty Thousand Dollars ($20,000) to the party having
appealed the zoning decision concerning the Project, a copy of an executed
withdrawal of such action and a representation that the same will be filed with
the court, the Partnership shall reimburse the Limited Partner for those
expenses set forth on Exhibit B. In no event shall the Partnership be obligated
to assume any other contracts. The Limited Partner represents that all work
performed pursuant to any other contracts has been or will be fully paid at the
time of such assignment except as set forth on Exhibit B.
Section 9.7 - No Additional Fees. No Partner shall receive any other fees,
compensation or reimbursement except as expressly set forth in the Agreement.
Section 9.6 - Reduction of Property Acquisition Costs. The Limited Partner
shall use its reasonable best efforts to seek a reduction in the cost of the
Premises to offset excessive site
-15-
<PAGE>
work in the estimated amount of Two Hundred Fifty Thousand Dollars ($250,000).
ARTICLE X
Rights and Obligations of Limited Partner
Section 10.1 - Authority of Limited Partner. Except as set forth in this
Agreement or as permitted by the General Partner at its discretion the Limited
Partner shall not:
(a) take part in the management of the business or transact any business
on behalf of the Partnership; or
(b) have the power to execute instruments or documents on behalf of the
Partnership or bind the Partnership in any manner.
Section 10.2 - Rights of Limited Partner. The Limited Partner shall have
the right:
(a) After reasonable notice to the General Partner, to inspect at the
office of the Partnership during ordinary business hours and to copy
at the requesting Partner's expense:
(i) the list of the names and business addresses of the Partners; and
(ii) the Certificate of Limited Partnership, including amendments, and
powers of attorney utilized in the execution of such documents;
and
(iii) Partnership income tax returns for the three most recent years;
and
(iv) the written Partnership Agreement with all Amendments; and
(v) financial statements of the Partnership for the three most recent
years.
(b) to obtain from the General Partner from time to time (but not more
frequently than quarterly) on reasonable demand just and reasonable
information including the state of the business and financial
condition of the Partnership.
Section 10.3 - Assignment by Limited Partner and General Partner.
Except as expressly set forth herein:
-16-
<PAGE>
(a) no interests in the Partnership shall be issued, assigned, sold,
transferred, pledged or otherwise disposed of by a Partner directly,
or indirectly via an assignment, sale, transfer or pledge of the stock
of any such Partner, without the prior written consent of the other
Partner;
(b) any attempted assignment or transfer of any such interest without
compliance with Section 11.5 to the extent applicable shall be of no
force or effect and void as to the Partnership or the Partners.
(c) Notwithstanding the foregoing, A General Partner may at any time
propose to the Limited Partner a person to serve as its successor or
if at such time there shall be more than one General Partner, to serve
as a successor to one or more of the General Partners desiring to
withdraw. If the Limited Partner has consented thereto, all Partners
hereby agree, subject to the provisions of paragraph (g), that this
Agreement and the Certificate shall be appropriately amended to effect
such withdrawal and admission.
(d) In the event of the retirement of any General Partner, the remaining
General Partners, if any, and any successor General Partner shall have
the obligation to elect to continue the business of the Partnership
employing its assets and name, all as contemplated by the laws of the
State and shall be subject to this Agreement in all respects. The
rights provided for in paragraph (g) may be exercised concurrently
with any such continuance. Within ten (10) days after the occurrence
of such retirement, the remaining General Partners, if any, shall
notify the Limited Partner thereof.
(e) If any retirement shall occur at a time when there is no remaining
General Partner, then the Limited Partner shall have the right to
designate a person to become a successor General Partner upon his
written agreement to be bound by any mortgage and any other documents
required in connection therewith and by the provisions of this
Agreement.
(f) If the Limited Partner elects to reconstitute the Partnership and
admit a successor General Partner pursuant to this Section 10.3, the
relationship of the Partners in the reconstituted Partnership shall be
governed by this Agreement.
-17-
<PAGE>
(g) If an Event of Bankruptcy shall have occurred as to a General Partner,
the Limited Partner may (i) designate a successor general partner (the
"Successor") willing to serve as a General Partner and reallocate to
the Successor (and the bankrupt General Partner hereby assigns to the
Successor in such event) the interest of the bankrupt General Partner
in profits, losses, credits, Cash Flow and net cash proceeds of a
Capital Transaction (provided, however, that in no event shall any
fees which are earned be so reallocated), or (ii) add an additional
General Partner willing to serve as such with such of the powers of
the bankrupt General Partner hereunder and make a similar reallocation
to that contemplated by the foregoing clause (i), which the bankrupt
General Partner hereby ratifies in such event. Upon the selection of
the Successor as aforesaid and his admission as a General Partner, a
bankrupt General Partner shall not have any further rights, powers,
liabilities or obligations under this Agreement and/or in respect of
the Project, provided, however, that the bankrupt General Partner
shall continue to be responsible for (1) any loss caused by the
nonperformance of its obligations under this Agreement and/or in
respect of the Project to be performed prior to the Development
Obligation Date and (2) the furnishing of any funds required to be
furnished by it hereunder, (c) the Partnership shall be solvent and no
significant disruption in the conduct of its business shall have
occurred and be continuing, and (d) the Partnership and the business
thereof shall have been validly continued under this Agreement and the
Uniform Act.
(h) For the purposes of subsection (g) above, "Event of Bankruptcy" shall
occur if the General Partner shall:
(i) admit in writing its inability to pay its debts as they become
due;
(ii) file a petition in bankruptcy or a petition to take advantage of
any insolvency act;
(iii) make an assignment for the benefit of its creditors;
(iv) consent to the appointment of a receiver for itself or for the
whole or substantially all of its property;
(v) as the result of a petition in bankruptcy filed against it, be
adjudicated a bankrupt; or
-18-
<PAGE>
(iv) file a petition or answer seeking reorganization or arrangement
or other aid or relief under any bankruptcy or insolvency laws or
any other law for the relief of debtors.
Assignments of interests in the Partnership or in the Limited Partner
otherwise permitted hereunder may also be subject to compliance with limitations
and requirements under applicable laws, from time to time in effect.
Notwithstanding anything set forth above or elsewhere herein to the
contrary, the General Partner may merge or consolidate with an "Affiliate"
(defined herein as defined in the Securities and Exchange Act of 1934 and the
regulations thereunder) or may assign its partnership interest to an Affiliate,
in connection with a public offering without the consent of the Limited Partner.
ARTICLE XI
Distribution on Dissolution; Rights of First Refusal
Section 11.1 - Priority of Distribution. If the Partnership shall terminate
or dissolve for any reason, the General Partner shall proceed to the liquidation
of the Partnership, and the proceeds of such liquidation shall be applied and
distributed in the following order of priority:
(a) To expenses of liquidation, and to creditors, including Partners who
are creditors, to the extent permitted by law, in satisfaction of
liabilities of the Partnership, all in accordance with the priorities
as set forth in Section 6.3, except for distributions due Partners
under the Act.
(b) To the setting up of any reserves which the General Partner may deem
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership or the General Partner arising out of,
or in connection with, the Partnership. Such reserve shall be paid
over by the General Partner to a commercial bank or an attorney-at-law
of the State of Connecticut, as escrowee, to be held for the purpose
of disbursing such reserves in payment of any of the aforementioned
contingencies, and, at the expiration of such period as the General
Partner shall deem advisable, to distribute the balance thereafter
remaining in the manner hereinafter provided.
-19-
<PAGE>
(c) To Partners and former Partners in satisfaction of liabilities for
distributions under the Act, in accordance with priorities established
under Section 6.3.
(d) Any balance then remaining shall be distributed among all Partners,
pro rata, in accordance with the percentages set forth in Section 5.1,
as such percentages may change from time to time in accordance with
the terms and conditions of this Agreement.
Any Partner who unexpectedly receives an adjustment, allocation, or distribution
described in subparagraphs (4), (5) or (6) of Section l.704-1(b)(2)(ii)(d) of
the Treasury Regulations, which adjustment, allocation or distribution creates
or increases a deficit balance in that Partner's capital account, shall be
allocated items of "book" income and gain in an amount and manner sufficient to
eliminate the deficit balance in that Partner's capital account so created or
increased as quickly as possible.
Allocations under this Section shall be comprised of a pro rata portion of each
item of Partnership income (including gross income) and gain for the year;
however, items of income and gain allocated under Section 6.3 shall be excluded
from the operation of this Section 6.3.
"Book" income and gain shall be determined by reference to values set forth on
the books of the Partnership.
For the purposes of this Section, capital accounts shall be adjusted
hypothetically as provided for in Section 1.704-l(b)(2)(ii)(d) and
l.704-l(b)(4)(iv)(f) of the Treasury Regulations.
The Partners intend that the provisions set forth in this Section will
constitute a "qualified income offset" as described in Section 1.704-1(b) (2)
(ii) (d) of the Treasury Regulations. The regulations shall control in the case
of any conflict between those regulations and this section.
Section 11.2 - Period of Dissolution. A reasonable time shall be allowed
for the orderly liquidation of the Partnership Property and the discharge of
liabilities to creditors so as to enable the General Partner to minimize the
normal losses attendant upon a liquidation.
Section 11.3 - Statement. Each of the Partners shall be furnished with a
statement prepared by the Partnership's then accountants, which shall set forth
the assets and liabilities of the Partnership as of the date of complete
liquidation. Upon the General Partner complying with the foregoing distribution
plan (including payment over to the escrowee if there are sufficient
-20-
<PAGE>
funds therefor), the General Partner shall execute and cause to be filed a
Certificate of Cancellation of the Partnership.
Section 11.4 - Liability for Capital Contributions. The General Partner
shall not be personally liable for the return of the Capital Contribution of the
Limited Partners or any portion of such Capital Contribution. Any such return
shall be made solely from Partnership Property.
Section 11.5 - Rights of First Refusal. A "Selling Partner" may sell all or
any part of its Partnership interest provided the Selling Partner shall first be
required to obtain a bona fide acceptable written offer and then offer to sell
its Partnership interest in the Partnership to the other Partner at the same
price, terms and conditions of the written offer. The procedure shall be as
follows:
(a) a copy of the bona fide written offer (the "Outside Offer") shall be
delivered to the non-selling Partner identifying the outside (third
party) offeror.
(b) the non-selling Partner shall have thirty (30) days to exercise the
purchase of the Selling Partner's interest, by delivering a written
statement of acceptance to the Selling Partner.
(c) within thirty (30) days after exercising its option to purchase, such
non-selling Partner shall purchase the Selling Partner's interest on
the same terms and conditions contained in the Outside Offer.
(d) if the non-selling Partner does not exercise its right to purchase as
defined above, the Selling Partner shall have ninety (90) days (from
the expiration of the non-selling Partner's option period) to close on
its sale to the same person and upon the same terms as contained in
the Outside Offer.
(e) If closing does not occur within said time period, the Outside Offer
shall be deemed voided, and any subsequent action will be deemed a new
offer subject to these rules.
ARTICLE XII
Power of Attorney
Section 12.1 - Power of Attorney. The Limited Partner irrevocably
constitutes and appoints the General Partner, its true and lawful attorney, in
his or its name, place and stead, to make, execute, acknowledge and file:
-21-
<PAGE>
(a) a Certificate of Limited Partnership setting forth the terms of this
Agreement as required by the laws of the State of Connecticut; and
(b) any Certificate or other instrument which may be required to be filed
by the Partnership under the laws of the State of Connecticut or which
the General Partner shall deem it advisable to file; and
(c) any and all amendments or modifications of the Agreement described in
Section 12.5 or otherwise permitted hereunder and any Amended
Certificates of Limited Partnership required as a result of any such
Amendments; and
(d) all documents which may be required to effectuate the formation,
qualification, continuation, dissolution or termination of the
Partnership.
Section 12.2 - Assignment. The foregoing Power of Attorney, as well as all
other such Powers of Attorney contained in this Agreement, shall survive the
delivery of an assignment by any Limited Partner of the whole or any portion of
his or its interest in this Partnership.
Section 12.3 - Admission of Limited Partner. The General Partner shall
require an Assignee of a Limited Partner to execute, among the conditions of his
admission as a Limited Partner, a Power of Attorney satisfying the requirements
of this Article.
Section 12.4 - Irrevocable. The foregoing Power of Attorney is a special
Power of Attorney coupled with an interest, is irrevocable and shall survive the
death, disability, bankruptcy, insolvency or dissolution of each Limited
Partner.
Section 12.5 - Amendments by General Partner. The General Partner, through
use of the Powers of Attorney, shall have the right to amend this Agreement, if
such Amendments are:
(a) of an inconsequential nature and do not affect the rights of the
Limited Partners in any material respect; or
(b) required or contemplated by this Agreement as, for example, upon the
admission of additional Limited Partners; or
-22-
<PAGE>
(c) required or contemplated by any Lender, so long as such amendment is
applied in a manner so as not to discriminate unfairly against a
Partner in a disproportionate manner inconsistent with the substantive
terms of this Agreement; or
(d) in the opinion of counsel to the Partnership, necessary to conform to
the requirements of state or Federal law. Any Amendment so made shall
be deemed effective as of the date of this Agreement.
ARTICLE XIII
Indemnification
Section 13.1 - Indemnification of General Partner. The General Partner
shall not be liable to the Limited Partner due to any actions taken or any
failure to take any action, by the General Partner acting as such or acting as
Tax Matters Partner, or as a result of any taxing authority's disallowance or
addition, any act or omission by the General Partner acting as Tax Matters
Partner, the effect of which may cause or result in loss or damage to the
Partnership or the Limited Partner, if done in good faith and in accordance with
customary business practices and otherwise in accordance with the terms of this
Agreement, shall not subject the General Partner acting as such or acting as Tax
Matters Partner, or any of its successors and assigns to any liability. The
Partnership agrees to indemnify and hold the General Partner acting as such or
acting as Tax Matter Partner, its successors and assigns, harmless from any
claim, loss, expense, liability, action or damage resulting from any such act or
omission, including, administrative reviews and hearings with the IRS or other
government agencies, litigation and appeal (and the reasonable fees and expenses
of attorneys and accountants engaged by the General Partner acting as such or as
Tax Matters Partner, in connection with any such administrative procedure or in
the prosecution or defense of such litigation or appeal), but neither the
General Partner acting as such or acting as Tax Matters Partner, shall be
entitled to be indemnified or held harmless due to, or arising from, its fraud,
bad faith, gross negligence or malfeasance.
Section 13.2 - Indemnification of Partnership.
(a) The Limited Partner shall indemnify and hold the Partnership and the
General Partner harmless from and against any claim, loss, expense,
liability, action or damage including, without limitation, reasonable
costs and expenses of litigation and appeal (and the reasonable fees
and expenses of counsel) due to or arising out of a breach by such
Limited Partner of any
-23-
<PAGE>
of its warranties and representations set forth in this Agreement.
(b) The General Partner shall indemnify and hold the Partnership and the
Limited Partners harmless from and against any claim, loss, expense,
liability, action or damage including, without limitation, reasonable
costs and expenses of litigation and appeal (and the reasonable costs
and expenses of counsel) due to or arising out of a breach by General
Partner of any of its warranties and representations set forth in this
Agreement.
ARTICLE XIV
Concluding Provisions
Section 14.1 - Entire Agreement. This Agreement together with the
Management Agreement and the Turnkey Contract contains the entire understanding
of the Partners. There are no oral understandings, terms or conditions, and no
party has relied upon any representation, express or implied, not contained in
this Agreement or in other written agreements between the Parties executed prior
to or concurrently herewith or referenced herein.
Section 14.2 - Amendments. Unless permitted in accordance with Section
8.3(b) or Section 12.5, this Agreement may not be amended in any respect
whatsoever except by a further agreement, in writing, fully executed by the
Partners.
Section 14.3 - Successors. This Agreement shall be binding upon and inure
to the benefit of the Parties and to their respective heirs, personal
representatives, successors and assigns.
Section 14.4 - Joint Effort. Preparation of this Agreement has been a joint
effort of the Parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 14.5 - Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision contained in this
Agreement.
Section 14.6 - Notice. Any notice, demand, offer or other written
instrument ("Notice") required or permitted to be given shall be in writing
signed by the party giving such Notice and shall be hand delivered or sent,
postage prepaid, by Certified or Registered Mail, Return Receipt Requested, or
by a nationally recognized overnight carrier. Any Notice to be given to the
estate of any deceased person shall be addressed to the personal
-24-
<PAGE>
representative of such deceased person at his address or, if there be no
personal representative, to the estate of the deceased person at his address as
set forth in this Agreement. Any party shall have the right to change the place
to which such Notice shall be sent or delivered by similar notice sent in like
manner to all other parties hereto.
Section 14.7 - Effective Date of Notice. The effective date of any offer,
demand, notice or instrument shall be the date of the addressee's receipt of
such offer, demand, notice or instrument, or, if sooner, three (3) business days
after being properly posted.
Section 14.8 - Counterparts. This Agreement may be executed in one or more
copies, each of which shall be deemed an original.
Section 14.9 - Partial Invalidity. The invalidity of one or more of the
phrases, sentences, clauses, Sections or Articles contained in this Agreement
shall not affect the validity of the remaining portions so long as the material
purposes of this Agreement can be determined and effectuated.
Section 14.10 - Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Connecticut.
Section 14.11 - Exhibits. All exhibits referred to in this Agreement shall
be incorporated into this Agreement by such reference and shall be deemed a part
of this Agreement as if fully set forth in this Agreement.
Section 14.12 - Confidentiality. The Parties hereto agree to keep
confidential, and to require their respective representatives to keep
confidential, all confidential information received by one party from one
another in connection with the Project and the Partnership, and no party will
use or disclose to others, or permit the use or disclosure of any such
confidential information obtained from or revealed by the other parties hereto,
except to their lawyers, accountants and other representatives, to government
agencies which have jurisdiction and have requested such information and to
third parties involved in the transaction, and except as specifically set forth
in this Agreement. Such "confidential information" may include financial
statements, cost and expense data, trade secrets, plans, designs and
specifications, marketing and customer data, and such other information as may
be supplied by the respective parties, but only to the extent same is: (x)
sensitive materials generally known to be confidential; (y) non-public financial
information; or (z) marked "confidential," "sensitive," "personal," or other
similar designation. The term "confidential information" shall not include such
information that is: (a) generally ascertainable from public or published
information or trade
-25-
<PAGE>
sources; (b) previously in the possession of the disclosing party; and (c)
generated by the disclosing party without the benefit of any information
provided by the other party. Notwithstanding the foregoing, disclosure shall be
allowed, if necessary, to comply with any court order or any legal requirement
applicable to the disclosing party. If a Closing does not occur, each party and
their respective representatives shall forthwith deliver to the other (without
retaining copies thereof) any and all documents or other written information
obtained from the other parties in connection with discussions and negotiations
relating to the Project and the Partnership.
Section 14.13 - No Offer/No Waiver. The delivery of an unexecuted copy of
this Agreement shall not be deemed an offer. No rights are to be conferred upon
any Party until this Agreement has been executed and delivered to each Party and
the Effective Date has occurred.
Section 14.14 - Genders. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders, and vice versa, and any
reference to the singular shall include the plural, and vice versa, unless the
context otherwise requires.
Section 14.15 - Initialling. Each page which contains a handwritten or
typewritten change and each exhibit which is not attached to this Agreement
shall be initialled or signed by each party.
Section 14.16 - Further Assurances. The Partners shall execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purpose of this Agreement.
Section 14.17 - Effective Date. This Agreement shall be dated as of the
date signed by the last party to sign.
Dated this 1st day of November, 1995.
GENERAL PARTNER
WITNESS: CONTINUUM CARE OF SOUTHINGTON, INC.
[Illegible] By [Illegible]
- ------------------------------ --------------------------------
[Illegible] Its Vice President
- ------------------------------ Duly Authorized
-26-
<PAGE>
WITNESS: LIMITED PARTNER:
[Illegible] /s/ Calvin A. Moffie
- ------------------------------ --------------------------------
Calvin A. Moffie
______________________________
-27-
<PAGE>
Exhibit A
List of Contracts to be Assumed
1. Purchase Agreement for the Premises
<PAGE>
Exhibit B
Reimbursement Expenses
Michael Herlands $ 26,902.64
Land Vest LLC 14,000.00
Kratzert & Jones 17,533.41
Landscape Architects and Design Associates 4,280.00
Diversified Environmental Services 5,580.15
Attorney Denorfia 10,105.00
Associated Borings and Recon Engineers 2,533.60
Richard Gray (ALSA application) 4,000.00
-----------
TOTAL $84,934.80
ASSIGNMENT AGREEMENT
(Deerfield Beach, Florida)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and among The
CarePlex Group, Inc. ("CAREPLEX"), a Delaware corporation, CareMatrix of
Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware corporation
("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware corporation
("Assignee").
WITNESSETH
WHEREAS, CarePlex has entered into that certain Purchase Agreement (the
"Purchase Agreement"), dated March 5, 1996, relating to a certain parcel of land
located in Deerfield Beach, Florida (the "Land"), a copy of which is attached
hereto as Exhibit A;
WHEREAS, Assignor, an affiliate of Careplex, intends to develop the Land
for an assisted/independent living facility consisting of approximately one
hundred twenty-eight (128) units (the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, (a) CarePlex desires to assign its rights and obligations under
the Purchase Agreement to Assignor, and (b) Assignor desires to simultaneously
therewith assign its rights and obligations under the Purchase Agreement to
Assignee, and (c) Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. CarePlex hereby assigns, sets over and transfers unto Assignor to have
and to hold from and after the date hereof, all of the right, title
and interest of CarePlex in, to and under the Purchase Agreement, and
Assignor hereby accepts the within assignment and assumes and agrees
with CarePlex, to perform and comply with and to be bound by all of
the terms, covenants, agreements, provisions and conditions of the
Purchase Agreement on the part of CarePlex thereunder to be performed
on and after the date hereof, in the same manner and with the same
force and effect as if Assignor had originally executed the Purchase
Agreement.
<PAGE>
2
2. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Purchase Agreement, and
Assignee hereby accepts the within assignment and assumes and agrees
with Assignor, to perform and comply with and to be bound by all of
the terms, covenants, agreements, provisions and conditions of the
Purchase Agreement on the part of Assignor thereunder to be performed
on and after the date hereof, in the same manner and with the same
force and effect as if Assignee had originally executed the Purchase
Agreement.
3. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
5. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 7 hereof) accruing
or arising under the Purchase Agreement on or before the date hereof.
6. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date hereof.
7. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
8. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
THE CAREPLEX GROUP, INC.
By: /s/ James M. Clary
-------------------------------
Name: James M. Clary
Title:
ASSIGNOR:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
PURCHASE-SALE AGREEMENT
THIS PURCHASE-SALE AGREEMENT (the "Agreement") is made as of the 5 day of
March, 1996 (the "Effective Date"), by and between HMH REALTY COMPANY, INC. and
HMC RETIREMENT PROPERTIES, INC. (formerly known as Marriott Retirement
Communities, Inc.) (collectively, the "Seller"), both Delaware corporation
having its principal offices at c/o Host Marriott Corporation, 10400 Fernwood
Road, Bethesda, Maryland 20817, and THE CAREPLEX GROUP, INC. ("Buyer"), a
Delaware corporation having an address at 197 First Avenue, Needham,
Massachusetts 02194, ATTN: Bernard N. Plante, Vice President.
WHEREAS, Seller is the owner of certain real property containing
approximately 4.0754 acres (the "Premises") located at Deer Creek Boulevard and
Hillsboro Boulevard, Deerfield Beach, Florida, and more particularly described
in the text of the first of the forms of deeds attached hereto as Exhibit A and
made a part hereof and as the double cross-hatched area on the exhibit attached
to the second of the forms of Deeds attached hereto as Exhibit A and made a part
hereof), and the owner of the dominant estate in connection with an easement
over the area (the "Easement Area") triple cross hatched area on the HMC
Retirement Properties, Inc. Deed, and including any and all improvements located
on the
<PAGE>
Premises and Easement and appurtenances to the premises and Easement Area. The
"Premises" shall be deemed to include (i) all rights1 title and interest, if
any, of Seller in, to and with respect to any land lying in the bed of any
street, road, avenue or way, open or proposed, in front of or adjoining the
Premises, to the center thereof; and (ii) all easements appurtenant to the
Premises, if any, including, but not limited to, easements over the Easement
Area now or hereafter granted and privileges or rights of way over any property
adjoining the Premises which enure to the benefit of the Premises or the fee
owner thereof and over such streets, lots, avenues and ways, and any and all
other appurtenances, privileges and hereditaments belonging to or in any way
appertaining to the Premises; and
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller the Premises.
NOW, THEREFORE, in consideration of the covenants, conditions, and
agreements contained herein and in consideration of the purchase price to be
paid by Buyer to Seller as hereinafter provided, it is hereby agreed as follows:
-2-
<PAGE>
1. Sale of Premises. Seller hereby agrees to sell to Buyer and Buyer hereby
agrees to purchase from Seller at Closing (defined below) the Premises. At
Closing, Buyer shall assume and be responsible for all the obligations of Seller
which run with the land being hereby conveyed except as properly identified as
provided in Section 2.a. or elsewhere in this Agreement.
2. Conditions Precedent. Buyer's obligation to close under this Agreement
is expressly conditioned upon the satisfaction of the following conditions
precedent (the "Conditions Precedent"), at Buyer's sole cost and expense, which
Buyer shall use all due diligence to satisfy:
a. Title. (1) Buyer has ordered a pro forma title insurance commitment
(marked-up copy attached hereto as Exhibit B-1) (the "Commitment") and a survey
by a licensed surveyor relating to part of the Premises but excluding the
Easement Area. Buyer has made objection to the fact that the easement (the
"Easement") for the Easement Area, in the form attached hereto as Exhibit B, has
not been executed and recorded. It shall be a condition precedent to Buyer's
obligation to close this transaction that Seller have duly recorded a fully
executed Easement. Buyer shall not be
-3-
<PAGE>
entitled to lodge any further objections to the title and survey of the Parcel 1
and Parcel 2 identified on Exhibit B-1. On or before April 1, 1996, Buyer may
order, at Buyer's cost and expense, and upon receipt, shall deliver a copy to
Seller of, an endorsement to the Commitment which (i) adds the Easement to Item
3, Schedule A of the Commitment, as an appurtenance to the Premises, (ii) adds
the legal description of the Easement Area to Item 4, Schedule A of the
Commitment, (iii) adds no further requirements to Schedule B-1 of the Commitment
and (iv) adds exceptions or matters to Schedule B-l as affect the Easement Area
(the "Endorsement") and a survey of the Easement Area by a licensed surveyor
(the "Survey"). On or before April 1, 1996, Buyer (i) shall notify Seller in
writing that Buyer approves of the Endorsement and the Survey; or (ii) Buyer
shall identify to Seller in writing its objections to the Endorsement and the
Survey ("Objections"), which Objections shall be only matters which "render
title unmarketable" (as defined below). A matter shall be deemed to "render
title unmarketable" only if it would have a material adverse effect on Buyer's
construction or use of the Premises for an Adult Congregate Living Facility
("ACLF") with 128 ACLF units with customary appurtenant uses (the "Intended
-4-
<PAGE>
Use"). The presence of the usual printed exceptions contained in the standard
forms of title insurance are not valid Objections; provided, however, that the
foregoing shall not be deemed to restrict or limit Buyer's right to object to
matters which are revealed by the Report or Survey as set forth above. Further,
the existence of any unpaid corporate or franchise taxes of Seller shall not be
deemed valid Objections provided all past reports have been filed by Seller with
the state tax department or other departments where reports are to be filed, and
provided (a) Seller agrees to indemnify and defend Buyer against any loss
(including reasonable attorney's fees) which may result from the existence of
any such unpaid taxes and (b) Buyer's title insurance policy does not take any
exceptions for such matters and/or such matters are insured over by the Title
Company. If Objections are not timely made, Buyer shall be deemed to have
approved the Report and the Survey and the parties shall proceed to Closing.
Within five (5) days of Seller's receipt of any Objections, Seller shall notify
Buyer in writing ("Cure Notice") that (x) the Objections will be cured by Seller
as of Closing or (y) such Objections will not be cured. If the Cure Notice
states Seller will not cure an
-5-
<PAGE>
Objection, Buyer shall notify Seller in writing within three (3) days of receipt
of the Cure Notice whether Buyer shall (a) waive its objections and proceed to
Closing, or (b) terminate this Agreement and receive a prompt return of its
Deposit (defined below), as Buyer's sole and exclusive remedy at law and in
equity. If Buyer fails to respond to said Seller's Cure Notice, Buyer shall be
deemed to have elected to proceed to Closing. Notwithstanding anything contained
herein to the contrary, at Buyer's option, Seller shall be obligated to cure any
Objections which relate to voluntary liens or encumbrances placed upon the
Premises securing the payment of monetary obligations (excluding taxes which
Seller indemnifies and defends Buyer against and insures as aforesaid). Except
as aforesaid, Seller shall have no obligation to cure any Objection unless
Seller's Cure Notice states that such Objection will be cured.
b. Site Development Plan and Approvals Excluding Certificate of Need.
On or before April 25, 1996, Buyer shall apply for (i) the required site
development plan and related conditional use permit and parking variance, and
(ii) delegation request approval ("Delegation") (the items in (i) and (ii)
together,
-6-
<PAGE>
but excluding the CON (defined below), the "Approvals") for development of the
Premises for the Intended Use, provided however, that the Delegation applied for
and obtained by the Buyer shall be delivered to the Title Company to be held by
it in escrow until the Closing at which time it shall be released to Buyer;
provided however that if the Closing does not occur, the Delegation held by the
Title Company will be released to Seller. Buyer agrees to keep Seller informed
of the status of all submissions and applications. Notwithstanding anything in
this Agreement to the contrary, Buyer agrees that obtaining a Certificate of
Need (the "CON") required by the State of Florida for the operation of the
30-bed nursing facility shall not be a condition precedent to Closing and shall
not delay Closing. Seller acknowledges that Buyer is not required to request the
CON, but that if Buyer requests the CON, Seller will cooperate with Buyer in
Buyer's attempts to obtain such CON. The date of submission for application for
the Approvals shall be the "Application Date". On or before November 29, 1996,
Buyer shall have obtained approval for all the Approvals (excluding the CON the
obtaining of which is not a condition precedent to Closing) with all appeal
periods having expired with no appeal having been filed
-7-
<PAGE>
(the Approval Date"). In the event said Approvals have not been so obtained by
the Approval Date and Buyer demonstrates to Seller's reasonable satisfaction
that Buyer has diligently applied for the Approvals and such failure is not
based on any fault or default of Buyer but stems from delays on the part of the
governmental authorities (the "Authorities") having jurisdiction over the
granting of the Approvals, or on the part of other third parties not under the
control of Buyer, Seller shall grant Buyer the amount of time estimated by the
Authorities, or if no such estimate is provided by the Authorities, as
reasonably estimated by Buyer necessary to obtain the Approvals, and for the
expiration of any applicable appeal period; provided, however, the maximum
amount of extension shall not extend past December 16, 1996.
c. Soil. Environmental and Other Site Condition Investigations. On or
before April 1, 1996, Buyer shall obtain, at its sole cost and expense, soil,
geological, physical or other test reports (collectively, the "Investigations")
(i) revealing no site conditions which will materially adversely affect the
development, construction and operation of the buildings, structures, and
improvements to be constructed by Buyer for the Intended Use (the
-8-
<PAGE>
"Improvements"), including, but not limited to, the availability of utilities
adequate to service the Improvements, (ii) Phase I environmental assessment or
test report demonstrating that the Premises, either on its surface or
underground, has not been used for or exposed to the release, storage, or
placement of hazardous or toxic wastes or substances, pollutants, or any other
matter which would represent an environmental risk or hazard to the Premises, or
persons or things coming in contact with the Premises, and (iii) demonstrating
that zoning, comprehensive plan designation and concurrency status for the
Premises allows the Intended Use (excluding any need for the CON).
d. Waiver of Conditions precedent. Buyer may at any time, at its
election, by written notice to Seller waive any or all of the Conditions
Precedent and proceed to Closing without any abatement of or reduction in the
Purchase Price (defined below).
e. Failure of Conditions Precedent. In the event of the failure of any
of the Conditions Precedent, Buyer may, by written notice to Seller within five
(5) days after the outside date specified for satisfaction of the respective
Conditions precedent; terminate this Agreement whereupon this Agreement shall
-9-
<PAGE>
be of no further force or effect, and Buyer shall be entitled to the prompt
return of the Deposit (defined below), as Buyer's sole and exclusive remedy at
law or in equity and neither party shall have any further rights or liabilities
under the terms of this Agreement. If Buyer does not timely exercise its right
to terminate in accordance with the terms of this Agreement, Buyer shall be
deemed to have waived such right and the parties shall proceed to Closing.
3. Purchase Price. The purchase price (the "Purchase Price") to be paid by
Buyer to Seller for the Premises is One Million One Hundred Thousand Dollars
($1,100,000.00), and shall be paid as follows:
a. Deposit. Simultaneous with Buyer's execution of this Agreement,
Buyer shall deposit with the Title Company, Fifty Thousand Dollars ($50,000.00)
(such amount and any interest earned thereon, the "Deposit") by wire transfer or
certified or bank cashier's check to be held in escrow by the Title Company as a
good faith deposit and to be credited toward the purchase Price at Closing. The
Deposit will be placed in an interest bearing account. In the event that Buyer
shall default in its performance
- 10 -
<PAGE>
in accordance with the terms and conditions of this Agreement, Seller may, at
its sole and exclusive option, and as its sole and exclusive remedy, declare
this Agreement null and void, in which case there shall be no further
obligations hereunder on the part of either party and the Deposit shall be
retained by Seller as liquidated damages, as Seller's sole and exclusive remedy
at law and in equity, it being agreed that damages to Seller in such event would
be difficult to ascertain and that the amount of the Deposit represents a fair
estimate of such damages. As noted above, if this Contract is terminated for a
failure of any of the Conditions Precedent without any default, the Deposit
shall be promptly returned to Buyer, as Buyer's sole and exclusive remedy at law
and in equity, in which case there shall be no further obligations hereunder on
the part of either party.
b. Balance of purchase Price. At Closing, Buyer shall pay to Seller
the balance of the Purchase Price by wire transfer of immediately available
funds to an account designated by Seller. There shall be no increase in or
reduction of the purchase Price if the actual acreage of the Premises is other
than as is previously stated. Notwithstanding the foregoing sentence, Seller
confirms
- 11 -
<PAGE>
that pursuant to Section 2.a. hereinabove, Buyer has the opportunity to make
timely objections to the Survey.
4 Deed. At Closing, Seller agrees to convey good, record, marketable and
insurable fee simple title to the Premises by a deed in the form accepted by
Seller when Seller acquired the Premises (the "Deed") in the form attached
hereto as Exhibit A and free and clear of all tenancies, liens, encumbrances,
and encroachments, and subject only to such covenants, conditions, restrictions,
and easements as shall affect the Premises and be of record on the earlier of
(a) the date that title is examined and accepted by Buyer; or (b) the date that
the right to object to Objections expires without such Objections being made, as
the case may be.
5. Closing. Unless this Agreement is terminated as herein provided, the
consummation of the purchase and sale provided herein (the "Closing") shall be
by escrow at the Title Company, on the date (the "Closing Date") which is thirty
(30) days after the Approval Date, as the same may be extended pursuant to
Section 2.b; provided, however, notwithstanding anything to the contrary in this
Agreement, the Closing Date shall occur no later than December 16, 1996. Buyer
shall give Seller at least five (5) days' prior
- 12 -
<PAGE>
written notice of the Closing Date in order that Seller may have such time to
prepare for an orderly transfer of the Premises. Buyer or the Title Company, at
Buyer's direction, shall deliver a preliminary settlement statement to Seller at
least three (3) business days prior to the Closing Date. The parties agree that
time is of the essence in this Agreement.
6. Delivery of Documents and Proceeds at Closing. At Closing, Buyer shall
deliver to Seller sums representing the balance of the Purchase Price, together
with all other instruments required under this Agreement to be so delivered to
Seller by Buyer. At Closing, Seller shall deliver to Buyer the Deed duly
executed and acknowledged by Seller, together with all other instruments
required under this Agreement to be so delivered to Buyer by Seller.
7. Closing Costs. Seller agrees to pay the cost of preparing the Deed, the
Broker's Fee (defined below) and Seller's pro-rata share of real estate taxes as
described in Section 9 below. Buyer agrees to pay the Investigations and all
other costs of settlement, including, but not limited to, title insurance costs
(including preparation of the Report), survey charges, subdivision
- 13 -
<PAGE>
costs, conveyancing costs, escrow fees, transfer taxes, stamps, notary fees,
recording fees, and all other settlement or Closing charges or costs. The
parties will pay their own attorneys' or accountants' fees.
8. Condition of Premises. Buyer accepts the Premises, including the
improvements located thereon, in "AS IS" condition as of the Effective Date,
ordinary wear and tear and normal deterioration between the Effective Date and
the Closing Date excepted, it being hereby expressly understood (i) that Seller
has made no representations or warranties with respect to such Premises and (ii)
that at or before the Closing Date, except as herein or in the Deed otherwise
stated, Buyer will have accepted the Investigations.
9. Prorations. All taxes, assessments and interest, if any, shall be
prorated between Buyer and Seller as of the Closing Date, however, in connection
with this transaction Buyer agrees to pay any and all sales, use, transfer or
other like taxes payable to or legally assessed by any governmental authority
having or asserting jurisdiction thereover; provided, however, that the
foregoing shall not be deemed to obligate Buyer to pay any federal or state
income
- 14 -
<PAGE>
tax on the sale of the Premises which would otherwise be the responsibility of
Seller. Prorations shall be based upon current year 5 taxes and assessments, and
if not available, upon figures for the preceding year, in which event Buyer and
Seller shall readjust the prorations when the current year's taxes and
assessments become available.
10. Commission. Seller represents and warrants that the sole broker for
this transaction is CB Commercial Real Estate Group, Inc. and that at Closing,
Seller shall pay any a brokerage commission to CB Commercial Real Estate Group,
Inc. pursuant to a separate agreement. Buyer and Seller represent and warrant
that this Agreement was brought about without the aid of any other agent or
broker who dealt with the respective parties and that there are no commissions
or finder's fees due to any other person, firm, or corporation as a result of
this Agreement based on dealings with the respective party. Each party agrees to
indemnify and defend the other from and against any claims that may be made
against the other for any type of a real estate commission or finder's fee as a
result of a breach of the foregoing representations and warranties.
- 15 -
<PAGE>
11. Risk of Loss. Subject to the provisions of paragraph 9 hereinabove, the
risk of loss or damage to the Premises by casualty up to the Closing shall be
borne by Seller and any risk of loss or damage to the Premises by casualty after
the Closing shall be borne by Buyer. If at any time prior to Closing all or any
portion of the Premises are damaged or destroyed as a result of fire or other
casualty, Seller shall have the option of (i) repairing the damage prior to
Closing or allowing the Buyer a credit against the Purchase Price for the
mutually agreed cost of repairing the damage and proceeding to Closing, or (ii)
terminating this Agreement, whereupon the Deposit, including any interest
accrued thereon, shall be promptly returned to Buyer, as its sole and exclusive
remedy at law or in equity and neither party shall have any further rights or
liabilities hereunder. Buyer shall have the right to waive any claim it may have
as a result of any damage caused to the Premises by casualty and proceed to
settlement without any abatement of the Purchase Price.
12. Condemnation. In the event condemnation proceedings which would have a
material adverse effect on Buyer's Intended Use of the Premises are instituted
or threatened by the taking
- 16 -
<PAGE>
authority's submission of a firm offer in lieu of condemnation, or otherwise,
prior to Closing, Buyer shall have the option to (i) terminate this Agreement
whereupon this Agreement shall be of no further force or effect, and Buyer shall
be entitled to a return of the Deposit as its sole and exclusive remedy at law
or in equity, and neither party shall have any further rights or liabilities
under this Agreement, or (ii) proceed with the purchase of the Premises in
accordance with the terms hereof without any abatement of the Purchase Price and
receive an assignment from Seller of all of Seller's right, title, and interest
in and to any proceeds or award resulting from such condemnation.
13. Assignment. Buyer may not assign its rights or delegate its obligations
under this Agreement without the prior written consent of Seller; provided,
however, Buyer shall have the right to assign this Agreement to an affiliate of
Buyer controlled by Abraham D. Gosman of Palm Beach, Florida, or any of his
family members, provided that Buyer shall guarantee the performance of such
assignee hereunder and promptly provides notice of such assignment to Seller.
- 17 -
<PAGE>
14. Survival of Representations. Unless the context otherwise requires,
warranties, covenants, agreements, and indemnities set forth in or made pursuant
to this Agreement shall remain operative and shall survive for a period of one
(1) year after the Closing Date and the execution and delivery of the Deed shall
not be merged therein. Notwithstanding the foregoing, there shall be no time
limit on the warranties contained in the Deed.
15. Headings. Headings of the sections hereof are inserted for convenience
only and shall not constitute a part of this Agreement.
16. Waiver. The failure of either party to enforce any condition or
provision of this Agreement at any time shall not be construed as a waiver of
that condition or provision nor shall it operate as a forfeiture of any right to
future enforcement of any such condition or provision.
17. Gender and Number. Words of any gender shall be held to include any
other gender and words in the singular number shall be held to include the
plural and vice versa, as the context may require.
- 18 -
<PAGE>
18. Possession. Possession of the Premises shall be delivered to Buyer at
Closing free and clear of all tenants or occupants, and in all respects in
accordance with the terms of this Agreement
19. Notice. All notices required or permitted to be given hereunder shall
be in writing and delivered personally or sent by United States registered or
certified mail, postage prepaid, return receipt requested, or by express
delivery service which provides for return receipts, addressed to the parties as
follows:
To Seller To Buyer:
--------- ---------
c/o Host Marriott Corporation 197 First Avenue
10400 Fernwood Road Needham, MA 02194
Bethesda, MD 20817
Attn: Rodney Judd ATTN: Bernard N. Plante
Corporate Real Estate Dept. 906 Vice President
with a copy to:
---------------
c/o Host Marriott Corporation 197 First Avenue
10400 Fernwood Road Needham, MA 02194
Bethesda, MD 20817
Attn: Pamela J. Murch, Esq. ATTN: James M. Clary, III, Esq.
Law Dept. 923
- 19 -
<PAGE>
or to such other address as the parties may direct by notice given as
hereinabove provided. Notice shall be deemed given when received as evidenced by
the return receipt or the date such notice is first refused, if that be the
case.
20. Successors and Assigns. The terms, conditions, and covenants contained
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of the respective parties hereto.
21. Right of Entry. Until the Investigations Deadline, Seller shall permit
Buyer access to the Premises at all reasonable times for the purpose of making,
at Buyer's expense, soil and engineering studies of the Premises and the
Investigations, provided that Buyer shall not excavate or alter the grade of the
Premises except as required to perform the Investigations and Buyer shall repair
and restore the Premises to its condition existing prior to Buyer's entry. Buyer
shall indemnify, defend, and hold Seller harmless from and against any and all
liabilities, obligations, claims, damages, demands, penalties, causes of action,
costs, and expenses (including reasonable attorneys' fees), whether arising out
of injury to persons (including death) or damage to the
- 20 -
<PAGE>
Premises or adjoining property or loss of any personal property or otherwise,
arising out of Buyer's entry or activities on the Premises. Buyer shall, if
required by Seller, maintain and deliver to Seller policies of comprehensive
general liability insurance in such amounts, covering such risks and in such
form as may be reasonably requested by Seller.
22. [Intentionally Omitted]
23. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior and contemporaneous
agreements and undertakings of the parties pertaining to the subject matter
hereof. This Agreement may not be modified except by a written instrument duly
executed by the party hereto against whom the modification is sought to be
enforced.
24. Seller Deliveries. The Buyer's obligations hereunder are conditioned
upon the Seller signing and delivering at the Closing such documents as may be
customarily and reasonably requested by the Title Company providing title
insurance to the Buyer and/or the Buyer's lender, including without limitation:
(i) so-called affidavits with respect to mechanic's liens and
parties-inpossession so as to allow Buyer and/or the Buyer's lender to obtain
- 21 -
<PAGE>
title insurance policies free from any exceptions for such matters; (ii) a Form
1099-B which shall be filed with the Internal Revenue Service; and (iii) an
affidavit or certificate in compliance with IRC Section 1445(b) (2) and the
regulations promulgated thereunder.
25. Due Authorization. Each person signing this Agreement on behalf of the
Seller and Buyer represents to the other, the same to be true, as of the date
hereof and as of the date of Closing, that the Seller and Buyer have taken all
steps necessary or desirable to authorize the execution and performance of this
Agreement and that upon the execution hereof by that person on behalf of the
Seller and Buyer, this Agreement shall be binding and enforceable upon the
Seller and Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SELLER:
ATTEST: HMH REALTY COMPANY, INC.
By: /s/ David L. Buckley By: /s/ PJ Murch
--------------------------- -----------------------------
Name: David L. Buckley Name: PJ Murch
------------------------- ---------------------------
Title: Asst Secretary Title: Vice President
------------------------ --------------------------
- 22 -
<PAGE>
ATTEST: HMC RETIREMENT
PROPERTIES, INC.
By: /s/ David L. Buckley By: /s/ PJ Murch
--------------------------- -----------------------------
Name: David L. Buckley Name: PJ Murch
------------------------- ---------------------------
Title: Asst Secretary Title: Vice President
------------------------ --------------------------
BUYER:
ATTEST: THE CAREPLEX GROUP, INC
By: /s/ [Illegible] By: /s/ Andrew Gosman
--------------------------- -----------------------------
Name: [Illegible] Name: Andrew Gosman
------------------------- ---------------------------
Title: Vice President Title: President
------------------------ --------------------------
- 23 -
<PAGE>
EXHIBIT A
FORM OF DEEDS
[ATTACHED)
<PAGE>
Exhibit A
95-306006 T#001
07-19-95 09:22AM
This instrument prepared by $ 7700.00
and Returned to: DOCU. STAMPS-DEED
David L. Buckley, Esquire RECVD.BROWARD CTY
Host Marriott Corporation B. JACK OSTERHOLT
Law Department 72-923
10400 Fernwood Road COUNTY ADMIN.
Bethesda, Maryland 20617-1109
SPECIAL WARRANTY DEED
THIS SPECIAL WARRANTY DEED made and executed the 25th day of March, 1995 by
HMC Retirement Properties, Inc., (successor by name change to Marriott
Retirement Communities, Inc., and wholly-owned subsidiary of Host Marriott
Corporation), a Delaware corporation having its principal place of business at
10400 Fernwood Road, Bethesda, Maryland 20618-1109, hereinafter called grantor,
to
HMH REALTY COMPANY, INC., a Delaware corporation an wholly-owned subsidiary
of Host Marriott Corporation whose address is 10400 Fernwood Road, Bethesda,
Maryland 20817-1109, hereinafter called the grantee:
(Wherever used herein the terms "grantor" and "grantee" include all the
parties to this instrument and their successors and assigns).
WITNESSETH: That the grantor, for no consideration, but as part of a
reallocation of assets among wholly-owned subsidiaries of Host Marriott
Corporation, by these presents does grant, bargain, sell, alien, remise,
release, convey and confirm unto the grantee, all that certain land situate in
Broward County, Florida, viz:
Parcel "A", of THE CENTRE OF DEER CREEK, according to the Plat thereof,
recorded in Plat Book 110, Page 3, of the Public Records of Broward County,
Florida.
TOGETHER with all the tenements, hereditaments and appurtenances thereto
belonging or in any way appertaining.
TO HAVE AND TO HOLD the same in fee simple forever.
AND the grantor hereby covenants with said grantee that the grantor is
lawfully seized of said land in fee simple; that the grantor has good right and
lawful authority to sell and convey said land, and that the grantor hereby fully
warrants the title to said land and will defend the same against the lawful
claims of all persons claiming by, through or under the grantor.
IN WITNESS WHEREOF, grantor has caused these presents to be executed by its
proper officer thereunto duly authorized, and its seal affixed, the day and
year first above written.
Signed, sealed and delivered HMC RETIREMENT PROPERTIES, INC.,
in the presence of: a Delaware corporation.
/s/ Abbi J. Weisman By: /s/ PJ Murch
- ------------------------------- ----------------------------------
Abbi J. Weisman Vice President
Pamela J. Murch
/s/ Carol A. Caruso
- -------------------------------
Carol A. Caruso
Attest:
/s/ Abbi J. Weisman By: /s/ [Illegible]
- ------------------------------- ----------------------------------
Abbi J. Weisman [Illegible]
/s/ Lisa R. Smith
- ------------------------------- (SEAL)
Lisa R. Smith
<PAGE>
GENERAL WARRANTY DEED
THAT, ILSE I. GALE, a single woman, (hereinafter called "Grantor"), with
her address at 900 N.E. 4th Court, Deerfield Beach, Florida 33441, in
consideration of the sum of TEN AND NO/l00 Dollars ($10.00) and other good and
valuable consideration, cash in hand paid by MARRIOTT RETIREMENT COMMUNITIES,
INC., a Delaware corporation, with its address at 10400 Fernwood Road, Bethesda,
Maryland 20058, (hereinafter called "Grantee"), the receipt and sufficiency of
which is hereby acknowledged and confessed, has GRANTED, SOLD AND CONVEYED, and
by these presents does GRANT, SELL and CONVEY unto the said Grantee all that
certain real property together with all improvements situated thereon, located
in Broward County, Florida, to-wit:
SEE EXHIBIT "A" ATTACHED
SUBJECT to any and all valid and subsisting restrictions, easements, right
of ways, mineral and royalty reservations, maintenance charges, zoning law's,
ordinances of municipal
<PAGE>
and/or other governmental authorities, conditions and covenants, if any,
applicable to and enforceable against the above-described property legally and
properly of record in the Office of the County Clerk of Broward County, Florida.
TO HAVE AND TO HOLD the above described premises, together with all and
singular the rights and appurtenances thereto in anywise belonging, unto said
Grantee, its successors and assigns forever; and Grantor does hereby bind
itself, its successors and assigns to WARRANT AND FOREVER DEFEND all and
singular the said premises unto the said Grantee, its successors and assigns,
against every person whomsoever lawfully claiming or to claim the same or any
part thereof.
The use of any pronoun here into refer to Grantor or Grantee shall be
deemed a proper reference even though Grantor and/or Grantee may be an
individual (either male or female), a corporation, a partnership or a group of
two or more individuals, corporations and/or partnerships and when this deed is
executed by or to a corporation, or trustee, the words "heirs, executors and
administrators" or "heirs and assigns" shall, with respect to such corporation,
or trustee, be construed to mean "successors and assigns".
Grantor warrants and represents that all taxes and assessments against said
Premises for prior years have been paid.
<PAGE>
All taxes and assessments incurred, or to be incurred, for the current year
have been prorated to the date hereof and Grantee assumes payment thereof.
EXECUTED this the 21ST day of May, 1990
WITNESSES GRANTOR:
/s/ [Illegible] By: /s/ Ilse I. Gale
- -------------------------------- ------------------------------
Ilse I. Gale
/s/ [Illegible]
- --------------------------------
STATE OF FLORIDA :
COUNTY OF PALM BEACH : ss:
I hereby certify, that on this 21 day of May, 1990, before me Kerry D.
Safier, personally appeared ILSE I. GALE, and acknowledged the foregoing
instrument to be his act and executed the same for the purposes therein
contained.
In witness whereof I hereunto set my hand and official seal.
/s/ Kerry D. Safier
------------------------------------
Notary Public
[SEAL]
Kerry D. Safier
------------------------------------
Printed Name of Notary
My Commission Expires: June 24, 1992
NOTARY PUBLIC STATE OF FLORIDA
MY COMMISSION EXP JUNE 24, 1992
BONDED THRU GENERAL INS. UND.
WHEN RECORDED, RETURN TO: PREPARED BY:
Glenn M. Lee, Esq Jerome J. Kraisinger, Esquire
Stuzin and Camner, P.A. Marriott Corporation
999 Brickell Avenue Law Department 923
4th Floor 10400 Fernwood Road
Miami, Florida 33131 Bethesda, Maryland 20058
<PAGE>
[Sketch and Description of Property]
<PAGE>
EXHIBIT B-1
MARKED-UP TITLE POLICY
[ATTACHED]
- 24 -
<PAGE>
FIRST AMERICAN TITLE INSURANCE COMPANY
Schedule A
Agent's
File No.: 14900.00080/RMG/amw Committment No. FA-CC-05236
Date Issued: December 14, 1995
Date Effective: November 28, 1995 at 5:00 p.m.
2. Policy or Policies to be issued: Amount of Policy: $1,100,000.00
(a) A.L.T.A. Owner's Policy Form (10/17/92) (with Florida Modifications)
Proposed Insured:
(b) A.L.T.A. Loan Policy (10/17/92) Amount of Policy: $
(with Florida Modifications)
Proposed Insured:
3. The estate or interest in the land described or referred to in this
Committment and covered herein is an estate or interest designated as
follows:
Fee Simple
4. Title to the estate or interest in the land described or referred to in
this Committment and covered herein (and designated ad indicated in No. 3
above) is, at the effective date, vested in:
HMH REALTY, INC., a Delaware corporation, as to Parcel 1
HMC RETIRMENT PROPERTIES, INC., a Delaware corporation, as to a portion of
Parcel 2.
5. The land referred to in this Commitment is in the State of Florida, County
of Broward and described as follows:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
GUNSTER, YOAKLEY, VALDES-FAULI
& STEWART
BY:_____________________________
Authorized Signatory
<PAGE>
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B-I
(Requirements)
Agent's
File No.: 14900.00080/RMG/amw Commitment No. FA-CC-05236
The following are the requirements to be complied with:
1. Payment to, or for the account of, the grantors or mortgagors of the full
consideration for the estate or interest to be insured.
2. Payment of all taxes, assessments, levied and assessed against subject
premises, which are due and payable.
3. Satisfactory evidence shall be produced that all improvements and/or
repairs or alterations thereto are completed; that contractor,
subcontractor, labor and materialmen are all paid in full.
4. Instruments in insurable form which must be properly executed, delivered
and duly filed for record;
(a) Warranty Deed from HMH REALTY, INC., a Delaware corporation, as
to Parcel 1, to the Proposed Insured conveying the subject
property.
(b) Warranty Deed from HMC RETIREMENT PROPERTIES, INC., a Delaware
corporation, as to a portion of Parcel 2, to the Proposed Insured
conveying the subject property.
5. Affidavit of Seller.
6. Proof of payment of the 1995 real estate taxes.
7. Certificate of Good Standing of HMH REALTY, INC., a Delaware corporation.
8. Certificate of Good Standing of HMC RETIREMENT PROPERTIES, INC., a Delaware
corporation.
9. Certificate of Good Standing of the Proposed Insured.
10. Corporate Resolutions of HMH REALTY, INC., a Delaware corporation, and HMC
RETIREMENT PROPERTIES, INC., a Delaware corporation, authorizing and
approving the conveyance of their respective properties.
<PAGE>
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B-11
(Exceptions)
Agent's
File No.: 14900.00080/RMG/amw Commitment No. FA-CC-05236
Schedule B of the policy or policies to be issued will contain exceptions to the
following matters unless the same are disposed of to the satisfaction of the
Company.
1. Defacts, liens, encumbrances, adverse claims or other matters, if any,
created, first appearing in the public records or attaching subsequent
to the effective date hereof but prior to the date the proposed
Insured acquires for value of record the estate or interest or
mortgage thereon covered by this Commitment.
2. Rights or claims of parties in possession not shown by the public
records.
3. Easements, or claims of easements, not shown by the public records.
4. Encroachments, overlaps, boundary line disputes, or other matters
which would be disclosed by an accurate or inspection of the premises.
5. Any lien, or right to a lien, for services, labor, or material
heretofore or hereafter furnished, imposed by law and not shown by the
public records.
6. Any adverse claim to any portion of said land which has been created
by artificial means or has accreted to any such portioon so created
and riparian rights, if any. Upon a review of the original government
lot survey showing this property not to be submerged land, this
exception will be deleted.
7. Taxes or special assessments which are not shown as existing liens by
the public records. Upon a review of the records of the county and
local municipality and the payment of any taxes or special
assessments, if any, this exception will be deleted.
8. Taxes for the year 1996 and thereafter.
9. Matter as set forth on the plat of The Centre of Deer Creek, according
to the Plat thereof, recorded in Plat Book 110, Page 3, as amended by
Ordinace No. 1990/006 by the City Commission of the City of Deerfield
Beach, dated February 6, 1990, recorded February, 1990 in Official
Record Book 17159, Page 937, and Resolution recorded in Official
Record Book 17399, Page 383, of the Public Records of Broward County,
Florida.
SEE CONTINUATION SHEET ATTACHED HERETO.
<PAGE>
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B-II continued
(Exceptions)
Agent's
File No.: 14900.00080/RMG/amw Committment No. FA-CC-05236
10. Matter as set forth on the Plat of Brighton Gardens/NA-34, according
to the Plat thereof, recorded in Plat Book 149, Page 18, of the Public
Records of Broward County, Florida.
11. Road Right of Way and Utility Easement to the City of Deerfield Beach
recorded in Official Record Book 17791, Page 1, Public Records of
Broward County, Florida.
12. Temporary Grant of Easement to the City of Deerfield Beach recorded in
Official Record Book 17163, Page 98, Public Records of Broward County,
Florida.
13. Declaration of Road Right of Way and Utility Easement to the City of
Deerfield Beach recorded in Official Record Book 17859, Page 932,
Public Records of Broward County, Florida.
14. Grant of Easement to the City of Deerfield Beach recorded in Official
Record Book 17766, Page 102, Public Records of Broward County,
Florida.
15. Grant of Easement to the City of Deerfield Beach recorded in Officia
Record Book 17766, Page 109, Public Records of Broward County,
Florida.
16. Right-of-Way Easement granted to Southern Bell Telephone and Telegraph
Company, from Ilse I. Gale, dated August 19, 1976, recorded August 23,
1976 in Official Record 6696, Page 969, Public Records of Broward
County, Florida.
17. Ordinance No. 1989/075 by the City Commission of the City of Deerfield
Beach, dated January 9, 1990, recorded January 12, 1990 in Official
Record Book 17080, Page 983, Public Records of Broward County,
Florida.
18. Survey prepared by Maynard H. Thompson of Consul-Tech Engineering,
Inc., dated August 11, 1989, revised May 26, 1990, prepared Marriott
Retirement Communities, Inc., shows the following: Encroachment of a
three foot concrete sidewalk along approximately the Westerly 97.5
feet of the southern boundary of Parcel II.
<PAGE>
EXHIBIT B
EASEMENT AGREEMENT
[ATTACHED]
<PAGE>
GRANT OF EASEMENT
THIS GRANT OF EASEMENT is made this ____ day of ____, 1996, between the
City of Deerfield Beach, a municipal corporation organized under the laws of the
State of Florida, hereinafter referred to as the Grantor, and HMC Retirement
Properties, Inc. (successor by name change to MARRIOTT RETIREMENT COMMUNITIES,
INC.,) a Delaware Corporation, having a mailing address of c/o Host Marriott
Corporation, Department 923, 10400 Fernwood Road, Bethesda, MD 20817-1109,
hereinafter referred to as the Grantee.
WITNESSETH:
Grantor, its heirs and assigns, for and in consideration of the sum of One
($1.00) Dollar and other good and valuable consideration to it in hand paid by
the Grantee, receipt whereof is hereby acknowledged, does, by these presents,
grant, convey and confirm unto the Grantee, its agents, successors and assigns,
an exclusive easement, for the purposes below recited through and across the
premises situated in the City of Deerfield Beach, County of Broward, State of
Florida, as is more particularly described on Exhibit A which is attached hereto
and by reference incorporated herein.
The easement granted herein shall cover the right to enter upon the
premises for ingress, egress, parking and the right
<PAGE>
to install and maintain landscaping and water and sewer utilities upon the
easement property.
FURTHER PROVIDED THAT, if the Grantee enters the property of the Grantor
pursuant to this Grant of Easement, the Grantee shall exercise its rights
hereunder in a manner reasonably designed to minimize interference with the
Grantor's use of the balance of it property.
FURTHER PROVIDED THAT the Grantor shall not build any structure on the
easement granted herein, except that the Grantor shall have the right to
continue the use of such premises as a pumping station site and for a pumping
station and other utility purposes as may be required by Grantor.
FURTHER PROVIDED THAT should the Grantee or its successors ever abandon use
of the easement area, the easement rights granted shall terminate and revert to
the Grantor.
THIS GRANT OF EASEMENT shall be binding upon and inure to the benefit of
the parties and their respective heirs, successors and assigns.
IN WITNESS WHEREOF, the Grantor has hereunto set its hand and seal the day
and year first hereinabove written.
<PAGE>
WITNESSES CITY OF DEERFIELD BEACH
___________________________ By:__________________________
Mayor
___________________________ [Corporate Seal]
ATTEST Approved as to Form
___________________________ __________________________
City Clerk , Esquire
City Attorney
State of Florida )
)SS
County of Broward )
The foregoing was acknowledged before me this ___ day of _____, 1996, by
_________________ and _______________ as Mayor and City Clerk of the City of
Deerfield Beach, a Municipal Corporation organized under the laws of the State
of Florida, on behalf of the Corporation.
___________________________
NOTARY PUBLIC
My Commission expires:
[SEAL]
<PAGE>
"OLD SITE"
LEGAL DESCRIPTION:
LIFT STATION (TO BE VACATED)
A parcel of land lying in Section 3, Township 48 South, Range 42 East, Broward
County, Florida, and being more particularly described as follows:
COMMENCE at the intersection of the Northerly Right-of-way line of Hillsboro
Boulevard (S.R. No. 810), as recorded in the Official Records Book 2647, Pages
417, 427 and 429, also recorded in the Official Records Book 8022, Page 57 of
the Public Records of Broward County, Florida, and the Easterly line of said
Section 3, as shown on the Plat of "The Centre of Deer Creek" as recorded in
Plat Book 110, Page 3 of the Public Records of Broward County, Florida, and
labeled as (P.O.B);
thence South 89 (degrees) 01' 08" West, along the Southerly line of Parcel "A"
and Parcel "B" of said Plat and said Northerly Right-of-way line, a distance of
129.17 feet to the Point of Curvature of a curve concave to the North having a
radius of 5669.58 feet;
thence along the arc of said curve to the right, through a central angle of
00(degrees) 22' 14", a distance of 36.66 feet to the POINT OF BEGINNING;
thence North 01(degrees) 13' 06" West, a distance of 43.82 feet;
thence South 88 (degrees) 41' 59" West, a distance of 50.00 feet;
thence South 01(degrees) 13' 06" East, to the aforesaid Northerly Right-of-way
line, a distance of 43.00 feet to a point on a non-tangent curve concave to the
North, having a radius of 5669.58 feet (radial bearing of North 00(degrees) 06'
19" West);
thence along the arc of said curve to the left, through a central angle of
00(degrees) 30' 19", along said Northerly Right-of-way line, a distance of 50.00
feet to the POINT OF BEGINNING.
Situated, lying and being in the City of Deerfield Beach, Broward County,
Florida.
Containing 2172 square feet or 0.0499 acres more or less.
EXHIBIT "A", Sheet 1 of 2
<PAGE>
[This page is a sketch and description of the survey.]
Exhibit A
DEVELOPMENT AGREEMENT
THIS AGREEMENT made as of this 18 day of April, 1996, by and between
CHESHIRE CARE, LLC, a Connecticut limited liability company, having an office at
88 Notch Hill Road, North Branford, Connecticut 06471 ("Cheshire"), and
CAREMATRIX CORPORATION, a Delaware corporation having an office at 197 First
Avenue, Needham, Massachusetts 02194, formerly known as The CarePlex Group,
which was also located at 197 First Avenue, Needham, Massachusetts, and formerly
known as Continuum Care of Massachusetts, Inc. ("CareMatrix").
WHEREAS, CareMatrix has entered into a Property Purchase Agreement with
Fleet National Bank of Connecticut, as Successor Trustee of Home Bank and Trust
Company, Trustee under Article IV of the Last Will and Testament of Robert A.
Hurley (the "Seller") dated as of ________________, 1996 (the "Purchase
Agreement") relating to the purchase of certain property situated on South Main
Street, Cheshire, Connecticut, containing approximately 9.17 acres, as more
particularly described in the Purchase Agreement (the "Property"); and
WHEREAS, subject to certain terms and conditions, CareMatrix intends to
assign the Purchase Agreement to Cheshire; and
WHEREAS, Cheshire intends to develop the Property as a project of between
90 and 102 "assisted living" elderly residential units, including accessory
on-site parking and customary amenities (the "Project"); and
<PAGE>
WHEREAS, Cheshire wishes to retain certain services of CareMatrix in
connection with the development of the Project, and may wish to retain certain
services of CareMatrix in connection with the construction and management of the
Project, and CareMatrix is willing to provide such services on the terms and
conditions set forth herein;
NOW, THEREFORE, for valuable consideration, it is agreed:
1. Performance of the Purchase Agreement. Upon execution of this Agreement,
CareMatrix shall assign to Cheshire the Purchase Agreement, and Cheshire shall
reimburse CareMatrix for its actual out-of-pocket costs paid to unrelated third
parties in obtaining the Purchase Agreement, including all deposits or option
payments, and up to, but not in excess of, Five Thousand Dollars ($5,000.00)
in the aggregate for other costs, including title examination fees and legal
fees. Subject to the terms and conditions of the Purchase Agreement, including
any conditions or contingencies as to Cheshire's obligations thereunder,
Cheshire agrees to perform the buyer's obligations under the Purchase Agreement,
including the acquisition of the Property. Cheshire shall be responsible for all
costs of acquisition of the Property, including, but not limited to, deposits,
taxes, insurance, recording fees, title examination fees, title insurance
premiums and legal fees.
2. Use of Consultants. The architects for the Project shall be DiGiorgio
Associates (the "Project Architects") and the engineers for the Project shall be
Milone and MacBroom (the
-2-
<PAGE>
"Project Engineers"). All contracts between Woodbridge and the Project
Architects and the Project Engineers shall be subject to the prior approval of
CareMatrix. Neither the Project Architects nor the Project Engineers shall be
changed without the prior approval of Cheshire and CareMatrix. The Project
Architects shall be instructed to prepare and submit design criteria and related
site plans and facility schematics for the Project (the "Preliminary Plans"),
which have been reviewed and approved by Cheshire and CareMatrix. After
Development Approvals (as hereinafter defined) have been obtained, Cheshire
shall instruct the Project Architects and the Project Engineers to prepare final
architectural and engineering plans (the "Final Plans"), which shall be
consistent with the Preliminary Plans unless otherwise agreed by Cheshire and
CareMatrix. All changes, additions or revisions to the Preliminary Plans shall
be subject to the approval of Cheshire and CareMatrix. All changes, additions or
revisions to the Final Plans that are not consistent with the Preliminary Plans
shall be subject to the approval of Cheshire and CareMatrix. Cheshire shall
contract directly with the Project Architects and the Project Engineers and
shall be directly responsible for the payment of all fees and expenses payable
to the Project Architects and the Project Engineers after completion of the
Final Plans. Subject to reimbursement as hereinafter set forth, CareMatrix shall
be responsible for the payment of fees and expenses payable to the Project
Architects and the Project Engineers for invoices issued by them pursuant to
-3-
<PAGE>
their respective contracts with Cheshire through completion of the Final Plans.
3. Development Approvals. Attached hereto as Exhibit A is a time schedule
for applying for and obtaining Development Approvals and Construction Permits
(both as hereinafter defined), which schedule may be modified from time to time
by agreement of Cheshire and CareMatrix (the "Schedule"). CareMatrix shall, as
Owner's agent, and in accordance with the Schedule, apply for and diligently
pursue all required federal, state and local approvals and permits needed for
the Project, including, but not limited to approvals and permits required under
relevant laws relating to zoning, wetlands, parking and curb cuts, highway and
traffic, historic districts, sewer and water or environmental matters (the
"Development Approvals"), but, excluding permits required to commence
construction on the Property; e.g., building permits, foundation permits,
grading permits, clearing permits or other similar construction related permits
(the "Construction Permits"). Cheshire shall cooperate with CareMatrix and
assist CareMatrix in its efforts to obtain the Development Approvals and shall
sign all necessary applications in connection therewith. CareMatrix shall use
reasonable efforts to obtain the Development Approvals in accordance with the
Schedule. If a Development Approval is denied, CareMatrix shall not be obligated
to appeal such denial; and if a Development Approval is granted, but a third
party appeals such approval, CareMatrix shall not be obligated to defend such
appeal. If CareMatrix elects not to
-4-
<PAGE>
appeal a denial or to defend an appeal, as the case may be, as to any
Development Approval other than a necessary zone change, and Cheshire elects to
take such action on its own behalf, the amount otherwise payable to CareMatrix
pursuant to Paragraph 7 shall be reduced by an amount equal to fifty percent
(50%) of the actual out-of-pocket costs incurred by Cheshire in pursuing or
defending such appeal. If Cheshire elects to pursue or defend any appeal
relating to a zone change, such appeal shall be at Cheshire's sole expense.
CareMatrix shall not be liable for delay in obtaining or denial of Development
Approvals unless caused by the negligence, willful act or omission of
CareMatrix. Cheshire acknowledges that any claim of negligence, willful act or
omission of CareMatrix in obtaining the Development Approvals shall constitute a
claim for breach of contract by CareMatrix subject to the default remedies set
forth in Paragraph 12 and not a claim of negligence under tort law. Subject to
the limitations as to expenses of appeals in this Paragraph and subject to
reimbursement as set forth in this Agreement, CareMatrix shall pay all costs,
including attorneys' fees, associated with the Development Approvals.
4. Construction Permits. If all Development Approvals are obtained, and
after all appeal periods relevant thereto have expired without an appeal having
been taken (or, if an appeal has been taken, after such appeal has been
withdrawn, dismissed or adjudicated in favor of Cheshire), CareMatrix shall, as
Owner's agent, and in accordance with the Schedule apply for and
-5-
<PAGE>
diligently pursue all Construction Permits required for the Project. Cheshire
shall cooperate with CareMatrix and assist CareMatrix in its efforts to obtain
the Construction Permits and shall sign all necessary applications in connection
therewith. CareMatrix shall use reasonable efforts to obtain the Construction
Permits in accordance with the Schedule. If a Construction Permit is denied,
CareMatrix shall not be obligated to appeal such denial; and if a Construction
Permit is granted, but a third party appeals issuance of such Construction
Permit, CareMatrix shall not be obligated to defend such appeal. If CareMatrix
does not appeal a denial or defend an appeal, as the case may be, as to any
Construction Permit, and Cheshire elects to take such action on its own behalf,
the amount otherwise payable to CareMatrix pursuant to Paragraph 7 shall be
reduced by an amount equal to fifty percent (50%) of the actual out-of-pocket
costs incurred by Cheshire in pursuing or defending such appeal. CareMatrix
shall not be liable for delay in obtaining or denial of Construction Permits
unless caused by the negligence, willful act or omission of CareMatrix. Cheshire
acknowledges that any claim of negligence, willful act or omission of CareMatrix
in obtaining the Construction Permits shall constitute a claim for breach of
contract by CareMatrix subject to the default remedies set forth in Paragraph 12
and not a claim of negligence under tort law. Subject to the limitations as to
expenses of appeals in this Paragraph and subject to reimbursement as set forth
in this Agreement, CareMatrix shall
-6-
<PAGE>
pay all costs, including attorneys' fees, associated with the Construction
Permits.
5. Appointment of Manager. CareMatrix shall appoint from time to time a
project manager (the "Project Manager"), subject to Cheshire's reasonable
approval, to oversee the development of the Project. Until further notice from
CareMatrix, the Project Manager shall be: Bernard Plante, CareMatrix's Vice
President of Planning and Development or John Netherton, CareMatrix's Project
Manager.
6. Project Financing. If all Development Approvals are obtained, and after
all appeal periods relevant thereto have expired without an appeal having been
taken (or, if an appeal has been taken, after such appeal has been withdrawn,
dismissed or adjudicated in favor of Cheshire), Cheshire shall apply for and
diligently pursue a written commitment (the "Commitment") for construction
financing for the Project in an amount which (when combined with the equity of
Cheshire in the Property and any infusion of capital by Cheshire in the Project
and any committed secondary financing), will be sufficient to pay all
development and construction costs for the Project (the "Project Financing").
Cheshire shall use reasonable efforts to obtain the commitment by that date
which is the later of (a) six (6) months after that date on which the
Development Approvals are received; and (b) three (3) months after that date on
which the Final Plans are completed (the "Project Financing Date"). Cheshire
shall be responsible for payment of all costs associated with the Project
-7-
<PAGE>
Financing. If Cheshire is unable to obtain the Commitment by the Project
Financing Date, or if Cheshire obtains the Commitment by the Project Financing
Date, but fails to close the Project Financing by that date which is the earlier
of (a) sixty (60) days after issuance of the Commitment; or (b) one hundred
twenty (120) days after transfer of title to the Property to Cheshire if
consummated prior to the Project Financing (the "Financing Closing Date"),
Cheshire shall have the right to extend the Financing Closing Date for two (2)
periods of thirty (30) days each, by written notice of each such extension given
to CareMatrix at least two (2) business days before the then relevant Financing
Closing Date, provided that, for each such extension of the Financing Closing
Date, Cheshire shall pay to CareMatrix a sum equal to one percent (1%) of
CareMatrix's Development Costs as defined in Paragraph 7 (the "Extension
Interest Charge") at the time and in the manner specified in Paragraph 7. If
Cheshire fails to close the Project Financing by the Financing Closing Date, as
it may be so extended pursuant to this Paragraph, CareMatrix shall have the
right, but not the obligation, to acquire the Property and to develop the
Project at a total purchase price equal to the purchase price paid or to be paid
under the Purchase Agreement plus an amount equal to Cheshire's legal fees
relating to the preparation, negotiation and consummation of the Purchase
Agreement plus Forty Thousand Dollars ($40,000.00) (the "Buyout Price"). If
Cheshire has not acquired title to the Property at the date upon which
CareMatrix
-8-
<PAGE>
elects to acquire the Property and to develop the Project, the Buyout Price
shall be applied first to amounts due to the Seller under the Purchase Agreement
with any the balance to be paid to Cheshire. If Cheshire has acquired title to
the Property at the date upon which CareMatrix elects to acquire the Property
and to develop the Project, the Buyout Price shall be paid to Cheshire and shall
be allocated in such manner as Cheshire may reasonably request. If CareMatrix
elects to exercise its option to acquire title to the Property and develop the
Project, it shall do so by written notice to Cheshire given within thirty (30)
days after the Project Financing Date or the Financing Closing Date, as it may
be extended pursuant to this Paragraph, whichever is applicable. Within sixty
(60) days after CareMatrix's notice of election to Cheshire, Cheshire shall
transfer title to the Project or assign the Purchase Agreement; assign all
relevant Development Approvals and Construction Permits; if requested to do so
by CareMatrix, assign all architects' contracts, engineers' contracts or other
contracts relating to the Project; and deliver all Preliminary Plans or Final
Plans and all other reports, surveys, studies, or other documentation relating
to the Project (the "Project Documents") to CareMatrix. If Cheshire has acquired
title to the Property, the Property shall be transferred by Cheshire to
CareMatrix by warranty deed free and clear of all encumbrances except those
encumbrances subject to which the Property was conveyed by Seller to Cheshire
non-monetary encumbrances relating to the Development Approvals and/or
-9-
<PAGE>
Construction Permits as long as such non-monetary encumbrances do not interfere
with the development of the Project and as otherwise agreed by Cheshire and
CareMatrix; Cheshire shall pay all applicable conveyance taxes and execute
applicable conveyance tax forms, title affidavits and other customary closing
documents; and customary adjustments shall be made as of transfer of title. If
CareMatrix does not exercise its right to acquire the Property and develop the
Project within the time periods specified herein or, if CareMatrix does exercise
such rights and the transfer of title to the Property and the assignment of the
Project Documents to CareMatrix from Cheshire, or the assignment of the Purchase
Agreement and assignment of the Project Documents to CareMatrix from Cheshire
are consummated, neither CareMatrix nor Cheshire shall have any further
obligation or liability to the other for expenses, reimbursements, costs or
liabilities incurred in connection with the Project.
7. Reimbursement of CareMatrix. Upon closing of the Project Financing,
Cheshire shall reimburse to CareMatrix immediately, but without interest (other
than the Extension Interest Charge, if payable), all actual out-of-pocket
development costs paid to unrelated third parties by CareMatrix in connection
with the Project, including, but not limited to, costs relating to the
Development Approvals, the Construction Permits, the Preliminary Plans, and the
Final Plans, but excluding, without limiting the generality of the foregoing,
CareMatrix's legal fees relating to its agreements with Cheshire
-10-
<PAGE>
(in contrast to legal fees incurred in connection with the Development Approvals
or Construction Permits or otherwise incurred in connection with the development
of the Project itself) and the internal cost of CareMatrix's staff time
(collectively, the "Development Costs"). If any Development Costs have not been
paid by CareMatrix at the time of the closing of the Project Financing,
CareMatrix shall provide to Cheshire at the time of such closing an accounting
of such unpaid Development Costs, if any, and Cheshire shall reimburse
CareMatrix for such Development Costs within ten (10) days after request for
payment. If CareMatrix fails to include any items of Development Costs as to
which Cheshire has entered into contracts directly with third parties and
CarePlex is administering payments for Cheshire, Cheshire shall remain
responsible for all additional payments due and shall indemnify CareMatrix
against all claims for payments due after the accounting at Closing by such
third parties. If CareMatrix fails to include any items of Development Costs as
to which CareMatrix has entered into contracts directly with third parties,
CareMatrix shall be deemed to have waived its rights to reimbursement for those
items not so included. CareMatrix shall provide to Cheshire and/or its lender
such documentation as Cheshire and/or its lender may reasonably require to
support reimbursement of Development Costs.
8. Construction of the Project. Cheshire agrees that CareMatrix shall be
appointed as either the general contractor or the construction manager of the
Project, the selection of which
-11-
<PAGE>
appointment to be in Cheshire's sole and absolute discretion. Within thirty (30)
days after completion and approval of Cheshire and CareMatrix of the Final
Plans, CareMatrix shall deliver to Cheshire a proposed contract for construction
of the Project based upon a Stipulated Sum Contract, AIA Form Al0l (with General
Conditions Form A201), as may be reasonably modified by CareMatrix (the
"Proposed Contract"), which Proposed Contract shall include all construction and
site costs, builder's overhead and profit, and construction management fees, but
shall exclude any pre-existing Development Costs for which CareMatrix is
entitled to reimbursement under this Agreement. The Proposed Contract may
require 100% performance bonds, but shall not obligate CareMatrix to provide
bonds in excess of the Stipulated Sum specified therein less all costs
attributable to furniture, fixtures and equipment. Cheshire may instruct
CareMatrix and/or the Project Architects to make the Preliminary Plans and/or
the Final Plans available to other general contractors to allow the Project to
be competitively bid. Cheshire shall have the right its sole discretion to
select CareMatrix or any other bidder as its general contractor, but shall make
its election and give CareMatrix written notice of its election within thirty
(30) days after receipt of the Proposed Contract. If CareMatrix is selected as
the general contractor of the Project, CareMatrix and Cheshire shall execute the
Proposed Contract with such changes as may be mutually agreed upon by CareMatrix
and Cheshire (the "Construction Contract"), and CareMatrix shall have the right
to
-12-
<PAGE>
assign the Construction Contract to any wholly-owned subsidiary of CareMatrix or
to Suffolk Construction, Inc., provided, however, that following such
assignment, CareMatrix shall remain responsible for the performance of its
duties and obligations under the Construction Contract. If CareMatrix is not
selected as the general contractor of the Project, CareMatrix shall serve as the
construction manager of the Project; shall provide customary construction
management services to Cheshire; and shall be paid a fee for such services at
the rate of seven percent (7.0%) of all construction costs (exclusive of change
orders), site costs, fixed equipment costs, and costs for labor associated with
furnishings and finishes (but not the actual cost of furnishings and finishes).
Such fees shall be in addition to Development Costs incurred by and to be
reimbursed to CareMatrix pursuant to this Agreement. If CareMatrix is to serve
as the construction manager, Cheshire and CareMatrix shall execute an AlA-form
construction management agreement, modified to the extent appropriate to be
consistent with the terms of this Agreement.
9. Term of this Agreement. The term of this Agreement shall expire on the
day prior to the third anniversary of the date hereof (the "Termination Date").
If Cheshire has not acquired the Property under the Purchase Agreement for
reasons other than the failure of Cheshire to perform its obligations thereunder
by the Termination Date, or if Cheshire has been unable to obtain Project
Financing by the time specified in
-13-
<PAGE>
Paragraph 6, but CareMatrix has not exercised its right to acquire the Property
and develop the Project as described in Paragraph 6, this Agreement shall expire
upon the Termination Date and neither party shall have any continued obligation
or liability to the other for expenses, reimbursements, costs or liabilities
hereunder.
10. Covenant Against Competing Development. Cheshire Affiliates and
CareMatrix are in the process of seeking sites and negotiating agreements for
developments similar to the Project. CareMatrix agrees that until the
termination of this Agreement, neither CareMatrix, nor Abraham Gosman, or.
Andrew Gosman or his wife or children and/or Michael Gosman or his wife or
children (collectively, the "Gosmans"), nor any wholly-owned subsidiary of
CareMatrix, nor any entity 50% or more owned by CareMatrix, or any of its
subsidiaries, or by any of the Gosmans, or by one or more of them, directly or
indirectly (collectively, a "CareMatrix Affiliate"), shall not, for its or their
own account or that of any party other than Cheshire or any other corporation,
limited liability company or partnership in which David Reis is the president,
member, principal stockholder, managing partner or general partner
(collectively, a "Cheshire Affiliate"), contract to purchase or develop property
in the Towns of Orange, Ansonia, Seymour, Bethany, Woodbridge, Naugatuck,
Milford, Hamden, Cheshire or New Haven (other than an assisted-living facility
that may be developed in connection with the so-called Lee High School Project
in New Haven) for "assisted-living" elderly
-14-
<PAGE>
residential use except after acquisition of the Property pursuant to Paragraph 6
or Paragraph 12 or acquisition of other properties pursuant to analogous
provisions in any other agreement between CareMatrix and a Cheshire Affiliate.
11. Termination Rights. (a) Cheshire shall have the right, at its sole
option, to terminate this Agreement (the "Cheshire Optional Termination") at any
time prior to the execution of either a construction contract or a construction
management contract as described in Paragraph 8 upon (i) written notice to
CareMatrix and (ii) payment to CareMatrix of a termination fee (the "Termination
Fee") equal to (1) all of CareMatrix's actual out-of-pocket costs paid to
unrelated third parties by CareMatrix in connection with the Project, including
all legal fees incurred in connection with the development of the Project and in
connection with CareMatrix's agreements with Cheshire (the "Termination Costs")
plus (2) a sum equal to the lesser of (y) One Hundred Thousand Dollars
($100,000.00) or (z) One Hundred Percent (100%) of the Termination Costs plus
(3) a sum equal to One Thousand Dollars ($1,000.00) per unit approved for the
Project. The Termination Fee shall be payable at the time and in the manner
Development Costs would be payable pursuant to Paragraph 7. Upon exercise of the
Cheshire Optional Termination, other than the obligation to pay the Termination
Fee as provided herein, this Agreement, including, the provisions of Paragraph
10, shall terminate and, except as provided herein, neither CareMatrix nor
Cheshire shall have any further obligation
-15-
<PAGE>
or liability to the other for expenses, reimbursement, costs or liabilities
incurred in connection with the Project. In the event that Cheshire exercises
its termination right pursuant to this Paragraph at any time during which
Cheshire has alleged a default by CareMatrix and a right to terminate this
Agreement pursuant to Paragraph 12, Cheshire shall pay to CareMatrix the
Termination Fee as provided in this Paragraph and shall pursue a determination
in arbitration of its allegation of default and right to terminate pursuant to
Paragraph 12. If such determination in arbitration is in favor of Cheshire,
CareMatrix shall refund the Termination Fee paid. If. such determination in
arbitration is in favor of CareMatrix, CareMatrix shall be entitled to retain
the Termination Fee. Each party shall pay its own costs, including attorneys'
fees, incurred in such arbitration.
(b) CareMatrix shall have the right, at its sole option, to terminate this
Agreement (the "CareMatrix Optional Termination") at any time prior to the
execution of either a construction contract or a construction management
agreement as described in Paragraph 8 upon written notice to Cheshire. Upon
exercise of CareMatrix of the CareMatrix Optional Termination, Cheshire shall be
entitled to the same rights as it would have if CareMatrix had defaulted
pursuant to Paragraph 12 without reference to or a determination in arbitration
as to the existence of a default or propriety of termination.
-16-
<PAGE>
12. Default. In the event that CareMatrix defaults in its obligations under
this Agreement and/or a CareMatrix Affiliate violates the provisions contained
in Paragraph 10 of this Agreement and such default remains uncured thirty (30)
days after written notice thereof from Cheshire to CareMatrix, Cheshire may
terminate this Agreement after determination in arbitration that CareMatrix or a
CareMatrix Affiliate has so defaulted and that such termination is proper or,
before such determination, in the manner provided in Paragraph 14. Pending such
determination, unless Cheshire exercises the Cheshire Optional Termination, this
Agreement shall remain in effect. Upon such termination by Cheshire after
determination in arbitration that CareMatrix or a CareMatrix Affiliate has
defaulted and that such termination is proper, Cheshire shall not be obligated
to reimburse CareMatrix for any Development Costs not yet paid to CareMatrix;
CareMatrix shall reimburse Cheshire for reasonable legal fees to Cheshire
relating to its agreements with CareMatrix (in contrast to legal fees incurred
in connection with the development of the Project itself); and neither party
shall have any continuing obligation or liability to the other. In the event
that Cheshire defaults in its obligations under this Agreement and such default
remains uncured for thirty (30) days after written notice thereof from
CareMatrix to Cheshire, CareMatrix shall have the right, but not the obligation,
to acquire the Property and to develop the Project at the Buyout Price and
otherwise on the terms and conditions set forth in Paragraph 6, except that if
such default
-17-
<PAGE>
occurs prior to the obtaining of Development Approvals, the transfer of the
Property or assignment of the Purchase Agreement and the payment of the Buyout
Price shall be subject to CareMatrix's ability to obtain the Development
Approvals and shall be payable ninety (90) days after receipt of the Development
Approvals and expiration of all appeal periods without an appeal having been
taken (or, if an appeal has been taken, after such appeal has been withdrawn,
dismissed or adjudicated in favor of CareMatrix or Cheshire). During the
pendency of Development Approvals, Cheshire shall cooperate with CareMatrix in
seeking the Development Approvals and sign all necessary applications in
connection therewith. If after such default and election by CareMatrix to
acquire the Property and develop the Project, Cheshire fails to perform its
obligations relating thereto, CareMatrix shall be entitled to pursue all its
rights and remedies at law or in equity, including specific performance.
13. Mutual Representations. (a) CareMatrix warrants to Cheshire that it is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; that it has the corporate power and authority to
make, execute, deliver and perform this Agreement; that this Agreement has been
duly authorized and approved by all required corporate action on its part
required; and that it is not subject to any charter, by-law, mortgage, lien,
lease, agreement, instrument, order, law, rule, regulation, judgment or decree
or any other
-18-
<PAGE>
restriction of any kind or character, which would prevent consummation of the
transactions contemplated by this Agreement.
(b) Cheshire warrants to CareMatrix that it is a limited liability company
duly organized and validly existing under the laws of the State of Connecticut;
that it has the power and authority to make, execute, deliver and perform this
Agreement; that this Agreement has been duly authorized and approved by all
required action on its part required; and that it is not subject to any charter,
by-law, mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement.
14. Assignment. Neither party shall assign this Agreement without the
other's prior written consent.
15. Notices. All notices, deliveries or tenders given or made in connection
herewith shall be in writing and shall be deemed given when personally delivered
or three (3) days after being deposited with the United States Postal Service by
certified or registered mail, return receipt requested, or on the day after
being deposited with a commercial overnight courier, addressed as follows:
-19-
<PAGE>
To Cheshire:
Cheshire Care, LLC
88 Notch Hill Road
North Branford, Connecticut 06471
Attention: David Reis
With a copy to:
Valerie Seiling, Esquire
Wiggin & Dana
CityPlace I
185 Asylum Street
Hartford, Connecticut 06103
To CareMatrix:
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Attention: Mr. Michael J. Zaccaro
With copies to:
James C. Clary, Esquire
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Barbara A. Sarrantonio, Esquire
Murtha, Cullina, Richter and Pinney
CityPlace I
185 Asylum Street
Hartford, Connecticut 06103
16. Brokers. CareMatrix and Cheshire each represent and warrant to and with
each other that they respectively: (i) have not had any dealings, negotiations
or consultations with any real estate broker, finder or any other party entitled
to a commission in connection with this Agreement (as opposed to any commissions
payable under the Purchase Agreement by the Seller), (ii) have not been induced
to enter into this Agreement by any other real estate broker, finder or other
party entitled to a commission, and (iii) have not incurred and will not incur
any liability for
-20-
<PAGE>
finder's fees, brokerage fees or other commissions payable in connection with
this Agreement. CareMatrix shall indemnify and save Cheshire harmless from and
against any loss or damage arising from CareMatrix's breach of its
representation and warranty contained in this Paragraph and Cheshire shall
indemnify and save CareMatrix harmless from and against any loss or damage
arising from Cheshire's breach of its representation and warranty contained in
this Paragraph.
17. Arbitration. Any dispute under this Agreement shall be resolved by
arbitration conducted in accordance with the rules of the American Arbitration
Association through its office in New Haven, Connecticut. Cheshire and
CareMatrix shall each select one (1) arbitrator and the two (2) arbitrators so
chosen shall select a third arbitrator. The panel of arbitrators shall hold one
or more hearings at which CareMatrix and Cheshire may be represented by counsel.
The determination by the panel of arbitrators shall be final, binding and
conclusive upon CareMatrix and Cheshire and judgment rendered by the panel of
arbitrators may be entered in any court of competent jurisdiction. The costs of
arbitration shall be borne by the losing party.
18. Time of the Essence. Time whenever specified herein for performance by
CareMatrix or Cheshire is hereby made and declared to be of the essence of this
Agreement.
19. Governing Law. This Agreement shall be governed by the laws of the
State of Connecticut.
-21-
<PAGE>
20. Entire Agreement. This Agreement constitutes the entire agreement by
and between Cheshire and CareMatrix and supersedes any and all previous
agreements, oral or written, between the parties which affects the Property. No
modification of this Agreement nor waiver of any term or condition hereof, shall
be of any force or effect, unless the same is in writing, signed by the parties.
21. Effect. This Agreement shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of the parties
hereof. Wherever used herein the singular shall include the plural, the plural
the singular and the use of any gender shall be applicable to all genders.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
this _____ day of _________________, 1996.
WITNESSES: CHESHIRE CARE, LLC
/s/ Donna Reis By /s/ David Reis
- ------------------------------- ---------------------------------
/s/ [Illegible] Its Managing Director
- ------------------------------- Hereunto Duly Authorized
CAREMATRIX CORPORATION
/s/ Donna Reis By /s/ Michael J. Zaccaro
- ------------------------------- ---------------------------------
/s/ [Illegible] Its Sr. Vice President
- ------------------------------- Hereunto Duly Authorized
-22-
<PAGE>
STATE OF CT :
: ss. 4/18, 1996
COUNTY OF NEW HAVEN :
Personally appeared David Reis, Managing Partner of CHESHIRE CARE, LLC, a
Connecticut limited liability company, signer and sealer of the foregoing
instrument and acknowledged the same to be his/her free act and deed as such
member and the free act and deed of said limited liability company, before me.
/s/ [Illegible]
------------------------------------
Notary Public
My Commission Expires: Aug. 31, 1998
STATE OF :
: ss. , 1996
COUNTY OF :
Personally appeared ____________________,_______________ of CAREMATRIX
CORPORATION, a Delaware corporation, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed as such officer
and the free act and deed of said corporation, before me.
------------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires:
-23-
ASSIGNMENT AGREEMENT
(Atlanta, Georgia)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
WHEREAS, Assignor has entered into those four (4) certain Offers to
Purchase three (3) of which are dated January 18, 1996, and one (1) of which is
dated January 18, 1996 (collectively, the "Offer"), relating to four (4) parcels
of land located in Atlanta, Georgia (collectively, the "Land"), copies of which
are attached hereto as Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred (100) units (the
"Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Offer to Assignee, and Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title and
interest of Assignor in, to and under the Offer, and Assignee hereby
accepts the within assignment and assumes and agrees with Assignor, to
perform and comply with and to be bound by all of the terms, covenants,
agreements, provisions and conditions of the Offer on the part of
Assignor thereunder to be performed on and after the date hereof, in the
same manner and with the same force and effect as if Assignee had
originally executed the Offer.
2. Assignor and Assignee agree that Assignor shall act as developer of the
Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
2
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services for
the Project pursuant to a management agreement in form and substance
reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and against
any and all Claims (as defined in paragraph 6 hereof) accruing or
arising under the Offer on or before the date hereof.
5. Assignee agrees to indemnify and hold harmless Assignor from and against
any and all Claims accruing or arising under the Offer after the date
hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, (ii) shall
be governed by the laws of the Commonwealth of Massachusetts, and (iii)
may not be modified orally, but only by a writing signed by both parties
hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
--------------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
--------------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
[LETTERHEAD OF CAREMATRIX]
March 29, 1996
BY TELECOPIER &
FEDERAL EXPRESS
T.L. Hodges, Sr. Trust
c/o Robert P. Hodges, Trustee
5185 Long Island Drive, NW
Atlanta, Georgia 30327
Re: Offer to Purchase Property located on
1480 South Johnson Ferry Road, Atlanta, Georgia
Gentlemen:
This letter constitutes an offer (the "Offer") by CareMatrix Corporation, a
Delaware corporation or its nominee (the "Buyer"), to purchase from T.L. Hodges,
Sr. Trust (the "Seller") the Property (defined below) on the terms and
conditions contained in this letter.
1. The Buyer will acquire all of the Seller1s right, title and interest in the
following described property (the "Property"): the land (and the
improvements thereon) known as and located at 1480 South Johnson Ferry Road
in Atlanta, Georgia, containing approximately one (1) acre of land,
together with all easements, licenses, permits or approvals, entitlements,
privileges, rights of ingress and egress and all other appurtenances
relating to such land (and improvements), all as more particularly
described on Exhibit A attached hereto and made a part hereof.
2. The purchase price for the Property will be Five Hundred Five Thousand
Dollars ($505,000) (the "Purchase Price"), to be paid as follows:
A. $10,000 (the "Initial Deposit") will be paid (and held in escrow in
accordance with the terms of this letter by the Escrow Agent named below)
upon delivery of a fully executed copy of this Offer to the Buyer;
B. $25,000 (the "Additional Deposit") will be paid (and also held in escrow
by the Escrow Agent) upon delivery to the Buyer of a fully executed copy
of the Purchase Agreement (defined below); and
C. At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
3. A. The closing (the "Closing") for the Buyer's acquisition of the Property
will be at 12:00 noon (Boston) on December 1, 1996 at the office of the
Escrow Agent in Atlanta or such other location as is mutually agreeable to
the Buyer and the Seller, or such earlier
<PAGE>
T.L. Hodges, Sr. Trust
c/o Robert P. Hodges, Trustee
March 29, 1996
Page 2
date which is mutually agreeable to the parties, but in no event less than
forty (40) days after the delivery of written notice from the Buyer that
the conditions set forth in Section 7 hereof have been satisfied as set
forth herein.
B. The Buyer shall have the option to extend the date of the Closing beyond
December 1, 1996 to as late as February 3, 1997 by giving to the Seller one
or more written extension notices at least five (5) days prior to the then
scheduled date of Closing. Each such extension notice shall be accompanied
by a payment to the Seller in the amount of $2,500 for each thirty (30) day
period (or fraction thereof) included within the extension set forth in
such notice. All such extension payments shall be non-refundable if the
Closing does not occur (except in the event of the Seller's default), but
shall be credited in full against the Purchase Price if the Closing does
occur. Time being of the essence for each and every date set forth in this
Section 3.
C. A Trustee's Deed conveying good and clear record and marketable title to
the Property (including, without limitation, free of all liens for past due
but unpaid real estate or personal property taxes or other municipal
charges), shall be delivered by the Seller to the Buyer at Closing.
4. This Offer will remain open until 5:00 p.m. (Boston) on April 5, 1996, on
or before which time the Seller shall accept this Offer and return a fully
executed copy to the Buyer, otherwise this Offer shall be null and void.
5. The Buyer and Seller will use their best efforts to prepare and execute a
more comprehensive Purchase and Sale Agreement (the "Purchase Agreement")
to carry out the terms of this Offer on or before 5:00 p.m. (Boston) on May
14, 1996 (the "Commitment Date"). The Purchase Agreement will incorporate
the terms of this Offer and will contain such other agreements,
representations, warranties or conditions as are customary in transactions
of the nature contemplated by this Offer. If and when the Purchase
Agreement is executed, the Purchase Agreement will constitute the entire
agreement between the Buyer and the Seller. If the Purchase Agreement is
not executed by the Commitment Date, then at the Buyer's election, the
Initial Deposit shall be immediately refunded to the Buyer and this Offer
shall be null and void.
6. A. Following the execution of this Offer by the Seller, the Buyer and the
Buyer's agents, representatives, lender(s), architect(s), engineer(s) and
employees shall have access to the Property at any time during normal
business hours and from time to time in order to perform such financial
analyses, topographical and engineering surveys, environmental site
assessments and other tests, surveys and studies of the Property, as the
Buyer or the Buyer's lender may deem necessary or appropriate. The Buyer
agrees that it shall use reasonable efforts to perform such tests, surveys
and studies in a manner so as not to CAN'T READ FAX with the current use
of the Property.
<PAGE>
T.L. Hodges, Sr. Trust
c/o Robert P. Hodges, Trustee
March 29, 1996
Page 3
B. Further, within ten (10) days after the Seller's acceptance of this
Offer, the Seller will furnish to the Buyer, for the Buyer's review,
complete and accurate copies of all information, records and documentation
concerning the ownership and condition of the Property in the possession of
the Seller or the Seller's representatives, as the Buyer may reasonably
request, including, without limitation (but only for informational purposes
and without warranties or representations of any kind regarding accuracy),
plans and surveys, as-built plans and specifications for the building(s) on
the Property, soil tests, service contracts, governmental permits and
approvals, legal opinions regarding zoning or environmental matters
affecting the Property, engineering reports, environmental site
assessments, and title policies or abstracts. The Buyer will hold in strict
confidence all documents, data and information obtained from the Seller,
and if the Closing does not occur, will return the same to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results
of any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the Buyer may
terminate this Offer (or the Purchase Agreement, if signed) by written
notice to the Seller on or before 5:00 p.m. (Boston) on the Commitment
Date. Upon such termination, the Initial Deposit (and the Additional
Deposit, if previously paid) shall be immediately returned to the Buyer,
and neither party shall have any further obligations or liabilities under
this Offer (or the Purchase Agreement, if signed). If the Buyer has not
sent such written notice to the Seller on or before 5:00 p.m. (Boston) on
the Commitment Date, then the Buyer's right to terminate pursuant to this
Paragraph 6.C shall have been waived in all respects.
D. In the event that the buyer does not elect to so terminate this Offer
and the Seller's current tenant of the Property elects not to renew its
existing lease solely as a result of the existence or performance of this
Offer and/or the Purchase Agreement, then the Buyer agrees to pay to the
Seller on July 1, 1996 the sum of Three Thousand Five Hundred Dollars
($3,500), which sum shall be non-refundable except in the event of Seller's
default.
7. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional conditions to the Buyer's obligation to acquire the
Property:
A. Prior to the Closing, the Buyer shall review and be reasonably satisfied
with all zoning, land use and environmental laws, codes, ordinances and
regulations affecting the Property and shall have obtained all zoning,
subdivision and environmental permits and approvals and any other
applicable permit or approval as may be necessary for the Buyer's proposed
development of up to 100 units of senior housing, including, without
limitation, the expiration of any applicable appeal period(s) without an
appeal having been filed.
<PAGE>
T.L. Hodges, Sr. Trust
c/o Robert P. Hodges, Trustee
March 29, 1996
Page4
From and after the Commitment Date, the Buyer agrees to use diligent
efforts to obtain such permits and approvals in a timely manner; and
B. The simultaneous closing (with the Property) by the Buyer of the
acquisition of approximately 4.35 acres of land known as Parcels 1, 2 and
3, as shown on Exhibit B attached hereto now or formerly owned by
Elizabeth S. Stocks, Gayle S. Barron, Joel M. Rappoport, W. Irvin Dutton,
and Edward J. Lad Family Trust, respectively, all as more particularly
described in those certain Offers to Purchase dated January 18, 1996, as
the same be amended after the date hereof.
If any of the foregoing conditions is not satisfied prior to the period(s)
specified above, the Buyer may elect not to purchase the Property. In such
case the Initial Deposit (and the Additional Deposit, if previously paid)
shall be refunded, and neither party shall thereafter have any further
obligations or liabilities under this Offer (or the Purchase Agreement, if
signed), except the payment required or made by paragraph 6D, if
applicable.
8. In the event of a default by the Buyer under this Offer or under the
Purchase Agreement, any and all sums paid by the Buyer as the Initial
Deposit or the Additional Deposit to the date of such default shall be
retained by the Seller as liquidated damages and shall constitute the
Seller's sole and exclusive remedy with regard to any such default, either
at law or in equity.
9. From and after the date on which this Offer is signed and accepted by the
Seller, and until the obligations of the Buyer and the Seller under this
Offer have terminated, the Seller shall not offer or negotiate another sale
of all or any part of the Property to any third party. Further, the Seller
shall not enter into any new rental, management, maintenance or other
agreement affecting the Property without the prior written consent of the
Buyer and shall operate and maintain the Property in a professional manner.
10. The Escrow Agent ("Escrow Agent") will be the Atlanta office of a title
insurance company mutually acceptable to the Buyer and the Seller. In the
event of any dispute regarding either or both of the Initial or the
Additional Deposit (collectively, the "Deposits"), the Escrow Agent shall
have the right to turn the Deposits over to any party mutually agreeable to
the Buyer and the Seller (who shall hold the same subject to the terms
hereof) or, if the Buyer and the Seller are unable to agree upon such
party, pay the Deposits into a federal or state court in Atlanta and, upon
doing either, will have no further liability regarding its role as Escrow
Agent All Deposits made hereunder shall be held in an interest bearing
account and any interest which accrues on the Deposits shall be shared
equally between the Buyer and the Seller in the event the Closing occurs
and otherwise shall follow the Deposits.
<PAGE>
T.L. Hodges, Sr. Trust
c/o Robert P. Hodges, Trustee
March 29, 1996
Page 5
11. Each of the Buyer and the Seller hereby warrants and represents to the
other that such party has not dealt with any broker in connection with this
transaction, except Steve Keyes at Northside Commercial (the Buyer's
broker) and Denson Martin at Prudential Atlanta Realty. The Commission Fee
will be 6%. Further, each of the Buyer and the Seller agrees to indemnify
and hold harmless the other from any loss, cost or expense which such
non-indemnifying party may incur as a result of any inaccuracy in the other
party's warranties and representations as set forth in the prior sentence.
All brokerage fees due in connection with this transaction will be paid by
the Seller.
12. The costs of this transaction shall be shared as follows:
A. The Seller shall pay all costs and fees associated with:
(i) all documentary transfer taxes and recording costs associated
with this transaction; and
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with:
(i) fees and other expenses charged by the Buyer's attorney;
(ii) a current survey for the Property meeting ALTA requirements;
(iii) a current environmental site assessment for the Property; and
(iv) the ALTA Owner's Title Insurance Policy insuring the Buyer's
title to the Property.
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located. Ad valorem
taxes shall be pro-rated as of the date of the Closing.
13. A. The person executing this Offer as the Seller or on behalf of the Seller
warrants and represents to the Buyer that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Seller.
<PAGE>
T.L. Hodges, Sr. Trust
c/o Robert P. Hodges, Trustee
March 29, 1996
Page 6
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Buyer.
BUYER:
CAREMATRIX CORPORATION
By: /s/Michael Gosman
-------------------------
Name: Michael Gosman
Title: Ex. Vice President
The above Offer is hereby accepted in all respects.
Date: April 2, 96
------------------
SELLER:
T.L. HODGES, SR. TRUST
By: /s/Robert P. Hodges
-------------------
Robert P. Hodges
Trustee as aforesaid
<PAGE>
[COPY MISSING]
party of the first part has or may have had in and to lying and being partly in
Land Lot 328 of the 18th District of DaKalb County, Georgia, and partly in Land
Lot 16 of the 17th District of Fulton County, Georgia, being Lot 12 of Dunwoody
Hills Subdivision, according to a plat thereof recorded in Plat Book 55, page
128, of the Fulton County Records, and being more particularly described as
follows:
BEGINNING at an iron pin on the northeast side of South Johnson's Ferry Road,
672.1 feet southeasterly as measured along the northeast side of South Johnson's
Ferry Road from its intersection with the southwest line of Johnson's Ferry
Road, and which iron pin is at the southwest corner of Lot 13 of said
subdivision; thence northeasterly along the southeast line of said Lot 13, 250
feet to an iron pin on the northeast line of the subdivision; thence
southeasterly on a line which forms an exterior angle of 112 degrees 22 minutes
with the preceding course, 53.5 feet to an iron pin; thence southeasterly 3.7
feet to an iron pin at the northeast corner of Lot 11 on said subdivision;
thence southwesterly along the northwest line of Lot 11, 299.5 feet to the
northeast line of South Johnson's Ferry Road; thence northwesterly along the
northeast line of South Johnson's Ferry Road, 175 feet to the point of
beginning.
EXHIBIT "A"
<PAGE>
[LOT DIAGRAM]
EXHIBIT B
<PAGE>
[LETTERHEAD OF CAREPLEX]
January 18, 1996
Mr. W. Irvin Dutton
5662 Williamsburg Drive
Norcross, Georgia 30093
Re: Offer to Purchase Property located on
Old Johnson Ferry Road, Atlanta, Georgia
Dear Mr. Dutton:
This letter constitutes an offer (the "Offer") by CareMatrix Corporation, a
Delaware corporation, or its nominee (the "Buyer") to purchase from W. Irvin
Dutton (the "Seller") the Property (defined below) on the terms and conditions
contained in this letter.
1. The Buyer will acquire all of the Seller's interest in the following
described property (the "Property"); the land (and the improvements
thereon) known as Parcel 1 on Old Johnson Ferry Road in Atlanta, Georgia,
containing approximately 0.75 acres of land, together with all easements,
licenses, permits or approvals, entitlements, privileges, rights of ingress
and egress and all other appurtenances relating to such land (and
improvements), all as more particularly described on Exhibit A attached
hereto and made a part hereof.
2. The purchase price for the Property will be Three Hundred and Sixty
Thousand Dollars ($360,000)(the "Purchase Price"), to be paid as follows:
(a) $10,000 (the "Initial Deposit") will be paid (and held in escrow in
accordance with the terms of this letter by the Escrow Agent named below)
upon delivery of a fully executed copy of this Offer to the Buyer;
(b) $10,000 (the "Additional Deposit") will be paid (and also held in
escrow by the Escrow Agent) upon delivery to the Buyer of a fully executed
copy of the Purchase Agreement (defined below); and
(c) At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
3. A. The closing (the "Closing") for the Buyer's acquisition of the Property
will be at 12:00 noon (Boston) on December 1, 1996 at the office of the
Escrow Agent or such other location as is mutually agreeable to the Buyer
and the Seller.
<PAGE>
B. The Buyer shall have the option to extend the date of the Closing beyond
December 1, 1996 to as late as February 3, 1997 by giving to the Seller one
or more written extension notices at least five (5) days prior to the then
scheduled date of Closing. Each such extension notice shall be accompanied
by a payment to the Seller in the amount of $2,500 for each thirty (30) day
period (or fraction thereof) included within the extension set forth in
such notice. All such extension payments shall be non-refundable if the
Closing does not occur (except in the event of the Seller's default), but
shall be credited in full against the Purchase Price if the Closing does
occur. Time being of the essence for each and every date set forth in this
Section 3.
C. A General Warranty Deed with full warranties of title conveying good and
clear record and marketable title to the Property (including, without
limitation, free of all liens for past due but unpaid real estate or
personal property taxes or other municipal charges), shall be delivered by
the Seller to the Buyer at the Closing.
4. This Offer will remain open until 5:00 p.m. (Boston) on April 5, 1996, on
or before which time the Seller shall accept this Offer and return a fully
executed copy to the Buyer, otherwise this Offer shall be null and void.
5. The Buyer and the Seller will use their best efforts to prepare and execute
a more comprehensive Purchase and Sale Agreement (the "Purchase Agreement")
to carry out the terms of this Offer on or before 5:00 p.m. (Boston) on May
17, 1996 (the "Commitment Date"). The Purchase Agreement will incorporate
the terms of this Offer and will contain such other agreements,
representations, warranties or conditions as are customary in transactions
of the nature contemplated by this Offer. If and when the Purchase
Agreement is executed, the Purchase Agreement will constitute the entire
agreement between the Buyer and the Seller. If the Purchase Agreement is
not executed by the Commitment Date, then at the Buyer's election, the
Initial Deposit shall be immediately refunded to the Buyer and this Offer
shall be null and void.
6. A. Following the execution of this Offer by the Seller, the Buyer and the
Buyer's agents, representatives, lender(s), architect(s), engineer(s) and
employees shall have access to the Property at any time during normal
business hours and from time to time in order to perform such financial
analyses, topographical and engineering surveys, environmental site
assessments and other tests, surveys and studies of the Property. as the
Buyer or the Buyer's lender may deem necessary or appropriate.
B. Further, within five (5) days after the Seller's acceptance of this
Offer, the Seller will furnish to the Buyer, for the Buyer's review,
complete and accurate copies of all information, records and documentation
concerning the ownership and condition of the Property in the possession of
the Seller or the Seller's representatives. as the Buyer may reasonably
request, including, without limitation (but only for informational purposes
and
2
<PAGE>
without warranties or representations of any kind regarding accuracy),
plans and surveys, as-built plans and specifications for the building(s) on
the Property, soil tests, service contracts, governmental permits and
approvals, legal opinions regarding zoning or environmental matters
affecting the Property, engineering reports, environmental site
assessments, and title policies or abstracts. The Buyer will hold in strict
confidence all documents, data and information obtained from the Seller,
and if the Closing does not occur, will return the same to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results
of any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the Buyer may
terminate this Offer (or the Purchase Agreement, if signed) by written
notice to the Seller on or before 5:00 p.m. (Boston) on the Commitment
Date. Upon such termination, the Initial Deposit (and the Additional
Deposit, if previously paid) shall be immediately returned to the Buyer,
and neither parry shall have any further obligations or liabilities under
this Offer (or the Purchase Agreement, if signed). If the Buyer has not
sent such written notice to the Seller on or before 5:00 p.m. (Boston) on
the Commitment Date, then the Buyer's right to terminate pursuant to this
Paragraph 6. C shall have been waived in all respects.
7. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional conditions to the Buyer's obligation to acquire the
Property:
(a) Prior to the Closing, the Buyer shall review and be satisfied with all
zoning, land use and environmental laws, codes, ordinances and regulations
affecting the Property and shall have obtained all zoning, subdivision and
environmental permits and approvals and any other applicable permit or
approval as may be necessary for the Buyer's proposed development of up to
100 units of senior housing, including, without limitation, the expiration
of any applicable appeal period(s) without an appeal having been filed; and
(b) The simultaneous closing by the Buyer of the acquisition of
approximately 3.60 acres of land known as Parcels 2, 3 and 4 now or
formerly owned by Elizabeth S. Stocks, Gayle S. Barron, Joel M. Rappoport,
Edward J. Lad Family Trust and Robert P. Hedges Trust, respectively, all
as more particularly described in those certain Offers to Purchase dated
January 18, l996 and March 29, 1996.
If any of the foregoing conditions is not satisfied prior to the period(s)
specified above, the Buyer may elect not to purchase the Property. In such
case the Initial Deposit (and the Additional Deposit, if previously paid)
shall be refunded, and neither party shall thereafter have any further
obligations or liabilities under this Offer (or the Purchase Agreement, if
signed).
3
<PAGE>
8. In the event of a default by the Buyer under this Offer or under the
Purchase Agreement, any and all sums paid by the Buyer as the Initial
Deposit or the Additional Deposit to the date of such default shall be
retained by the Seller as liquidated damages and shall constitute the
Seller's sole and exclusive remedy with regard to any such default, either
at law or in equity.
9. From and after the date on which this Offer is signed and accepted by the
Seller, and until the obligations of the Buyer and the Seller under this
Offer have terminated, the Seller shall not offer or negotiate another sale
of all or any part of the Property to any third party. Further, the Seller
shall not enter into any new rental, management, maintenance or other
agreement affecting the Property without the prior written consent of the
Buyer and shall operate and maintain the Property in a professional manner.
1O. The Escrow Agent ("Escrow Agent") will be the law firm of Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A. located in West Palm Beach, Florida. In the
event of any dispute regarding either or both of the Initial or the
Additional Deposit (collectiveLy, the "Deposits"), the Escrow Agent shall
have the right to turn the Deposits over to any parry mutually agreeable to
the Buyer and the Seller (who shall hold the same subject to the terms
hereof) or, if the Buyer and the Seller are unable to agree upon such
party, pay the Deposits into. a federal or state court and, upon doing
either, will have no further liability regarding its role as Escrow Agent.
All Deposits made hereunder shall be held in an interest bearing account
and any interest which accrues on the Deposits shall be shared equally
between the Buyer and the Seller in the event the Closing occurs and
otherwise shall follow the Deposits. The Seller acknowledges that the
Escrow Agent is counsel for the Buyer, and may continue to act as such
counsel notwithstanding any dispute or litigation arising with respect to
its duties as Escrow Agent hereunder.
11. Each of the Buyer and the Seller hereby warrants and represents to the
other that such party has not dealt with any broker in connection with this
transaction, except Steve Keyes at Northside Commercial. The Commission Fee
will be 3%. Further, each of the Buyer and the Seller agrees to indemnify
and hold harmless the other from any loss, cost or expense which such
non-indemnifying party may incur as a result of any inaccuracy in the other
party's warranties and representations as set forth in the prior sentence.
All brokerage fees due in connection with this transaction will be paid by
the Seller.
12. The costs of this transaction shall be shared as follows:
A. The Seller shall pay all costs and fees associated with:
(i) all documentary transfer taxes and recording costs associated with this
transaction; and
4
<PAGE>
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with:
(i) fees and other expenses charged by the Buyer's attorney;
(ii) a current survey for the Property meeting ALTA requirements;
(iii) a current environmental site assessment for the Property; and
(iv) the ALTA Owner's Title Insurance Policy insuring the Buyer's title to
the Property.
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located.
14. A. The person executing this Offer as the Seller or on behalf of the Seller
warrants and represents to the Buyer that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Seller.
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Buyer.
BUYER:
CAREMATRIX CORPORATION
By: /s/Michael Gosman
--------------------------------
Name: Michael Gosman
Title: Ex. Vice President
5
<PAGE>
The above Offer is hereby accepted in all respects.
Date: 1-31-96 SELLER:
---------
[W. Irvin Dutton]
------------------
By: /s/W. Irvin Dutton
------------------
Name:
Title: [ILLEGIBLE]
6
<PAGE>
[LETTERHEAD OF CAREPLEX]
January 18, 1996
Edward J. Lad Family Trust
Co-Trustee Marie Charlotte Lad
1460 Johnson Ferry Road
Atlanta, GA 30319
Re: Offer to Purchase Property located on Johnson Ferry Road, Atlanta, Georgia
Dear Marie Charlotte Lad:
This letter constitutes an offer (the "Offer") by CareMatrix Corp., a
Delaware corporation, or its nominee (the "Buyer") to purchase from Edward J.
Lad Family Trust (the "Seller") the Property (defined below) on the terms and
conditions contained in this letter.
1. The Buyer will acquire all of the Seller's interest in the following
described property (the "Property"): the land (and the improvements
thereon) known as Parcel 3 on Johnson Ferry Road in Atlanta, Georgia,
containing approximately 1 acre of land, together with all easements,
licenses, permits or approvals, entitlements, privileges, rights of ingress
and egress and all other appurtenances relating to such land (and
improvements), all as more particularly described on Exhibit A attached
hereto and made a part hereof.
2. The purchase price for the Property will be Five Hundred Thousand Dollars
($500,000) (the "Purchase Price"), to be paid as follows:
(a) $10,000 (the "Initial Deposit") will be paid (and held in escrow in
accordance with the terms of this letter by the Escrow Agent named below)
upon delivery of a fully executed copy of this Offer to the Buyer;
(b) $10,000 (the "Additional Deposit") will be paid (and also held in
escrow by the Escrow Agent) upon delivery to the Buyer of a fully executed
copy of the Purchase Agreement (defined below); and
(c) At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
3. A. The closing (the "Closing") for the Buyer's acquisition of the Property
will be at 12:00 noon (Boston) on December 1, 1996 at the office of the
Escrow Agent or such other location as is mutually agreeable to the Buyer
and the Seller.
<PAGE>
B. The Buyer shall have the option to extend the date of the Closing beyond
December 1, 1996 to as late as February 3, 1997 by giving to the Seller one
or more written extension notices at least five (5) days prior to the then
scheduled date of Closing. Each such extension notice shall be accompanied
by a payment to the Seller in the amount of $2,500 for each thirty (30) day
period (or fraction thereof) included within the extension set forth in
such notice. All such extension payments shall be non-refundable if the
Closing does not occur (except in the event of the Seller's default), but
shall be credited in full against the Purchase Price if the Closing does
occur. Time being of the essence for each and every date set forth in this
Section 3.
C . A General Warrant Deed with full warranties of title conveying good and
clear record and marketable title to the Property (including, without
limitation, free of all liens for past due but unpaid real estate or
personal property taxes or other municipal charges), shall be delivered by
the Seller to the Buyer at the Closing.
4. This Offer will remain open until 5:00 p.m. (Boston) on April 5, 1996, on
or before which time the Seller shall accept this Offer and return a fully
executed copy to the Buyer, otherwise this Offer shall be null and void.
5. The Buyer and the Seller will use their best efforts to prepare and execute
a more comprehensive Purchase and Sale Agreement (the "Purchase Agreement")
to carry out the terms of this Offer on or before 5:00 p.m. (Boston) on May
31, 1996 (the "Commitment Date"). The Purchase Agreement will incorporate
the terms of this Offer and will contain such other agreements,
representations, warranties or conditions as are customary in transactions
of the nature contemplated by this Offer. If and when the Purchase
Agreement is executed, the Purchase Agreement will constitute the entire
agreement between the Buyer and the Seller. If the Purchase Agreement is
not executed by the Commitment Date, then at the Buyer's election, the
Initial Deposit shall be immediately refunded to the Buyer and this Offer
shall be null and void.
6. A. Following the execution of this Offer by the Seller, the Buyer and the
Buyer's agents, representatives, lender(s), architect(s), engineer(s) and
employees shall have access to the Property at any time during normal
business hours and from time to time in order to perform such financial
analyses, topographical and engineering surveys, environmental site
assessments and other tests, surveys and studies of the Property, as the
Buyer or the Buyer's lender may deem necessary or appropriate.
B. Further, within five (5) days after the Seller's acceptance of this
Offer, the Seller will furnish to the Buyer, for the Buyer's review,
complete and accurate copies of all information, records and documentation
concerning the ownership and condition of the Property in the possession of
the Seller or the Seller's representatives, as the Buyer may reasonably
request, including, without limitation (but only for informational purposes
and
2
<PAGE>
without warranties or representations of any kind regarding accuracy),
plans and surveys, as-built plans and specifications for the building(s) on
the Property, soil tests, service contracts, governmental permits and
approvals, legal opinions regarding zoning or environmental matters
affecting the Property, engineering reports, environmental site
assessments, and title policies or abstracts. The Buyer will hold in strict
confidence all documents, data and information obtained from the Seller,
and if the Closing does not occur, will return the same to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results
of any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the Buyer may
terminate this Offer (or the Purchase Agreement, if signed) by written
notice to the Seller on or before 5:00 p.m. (Boston) on the Commitment
Date. Upon such termination, the Initial Deposit (and the Additional
Deposit, if previously paid) shall be immediately returned to the Buyer,
and neither party shall have any further obligations or liabilities under
this Offer (or the Purchase Agreement, if signed). If the Buyer has not
sent such written notice to the Seller on or before 5:00 p.m. (Boston) on
the Commitment Date, then the Buyer's right to terminate pursuant to this
Paragraph 6. C shall have been waived in all respects.
7. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional conditions to the Buyer's obligation to acquire the
Property:
(a) Prior to the Closing, the Buyer shall review and be satisfied with all
zoning, land use and environmental laws, codes, ordinances and regulations
affecting the Property and shall have obtained all zoning, subdivision and
environmental permits and approvals and any other applicable permit or
approval as may be necessary for the Buyer's proposed development of up to
100 units of senior housing, including, without limitation, the expiration
of any applicable appeal period(s) without an appeal having been filed; and
(b) The simultaneous closing by the Buyer of the acquisition of
approximately 4.35 acres of land known as Parcels 1, 2 and 4 now or
formerly owned by W. Irvin Dutton, Elizabeth S. Stocks, Gayle S. Barron,
Joel M. Rappoport and Robert P. Hedges Trust, respectively, all as more
particularly described in those certain Offers to Purchase dated January
18, 1996 and March 29, 1996.
If any of the foregoing conditions is not satisfied prior to the period(s)
specified above, the Buyer may elect not to purchase the Property. In such
case the Initial Deposit (and the Additional Deposit, if previously paid)
shall be refunded, and neither party shall thereafter have any further
obligations or liabilities under this Offer (or the Purchase Agreement, if
signed).
3
<PAGE>
8. In the event of a default by the Buyer under this Offer or under the
Purchase Agreement, any and all sums paid by the Buyer as the Initial
Deposit or the Additional Deposit to the date of such default shall be
retained by the Seller as liquidated damages and shall constitute the
Seller's sole and exclusive remedy with regard to any such default, either
at law or in equity.
9. From and after the date on which this Offer is signed and accepted by the
Seller, and until the obligations of the Buyer and the Seller under this
Offer have terminated, the Seller shall not offer or negotiate another sale
of all or any part of the Property to any third party. Further, the Seller
shall not enter into any new rental, management, maintenance or other
agreement affecting the Property without the prior written consent of the
Buyer and shall operate and maintain the Property in a professional manner.
10. The Escrow Agent ("Escrow Agent") will be the law firm of Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A. located in West Palm Beach, Florida. In the
event of any dispute regarding either or both of the Initial or the
Additional Deposit (collectively, the "Deposits"), the Escrow Agent shall
have the right to turn the Deposits over to any party mutually agreeable to
the Buyer and the Seller (who shall hold the same subject to the terms
hereof) or, if the Buyer and the Seller are unable to agree upon such
party, pay the Deposits into a federal or state court and, upon doing
either, will have no further liability regarding its role as Escrow Agent.
All Deposits made hereunder shall be held in an interest bearing account
and any interest which accrues on the Deposits shall be shared equally
between the Buyer and the Seller in the event the Closing occurs and
otherwise shall follow the Deposits. The Seller acknowledges that the
Escrow Agent is counsel for the Buyer, and may continue to act as such
counsel notwithstanding any dispute or litigation arising with respect to
its duties as Escrow Agent hereunder.
11. Each of the Buyer and the Seller hereby warrants and represents to the
other that such party has not dealt with any broker in connection with this
transaction, except Steve Keyes at Northside Commercial. The Commission Fee
will be 6%. Further, each of the Buyer and the Seller agrees to indemnify
and hold harmless the other from any loss, cost or expense which such
non-indemnifying party may incur as a result of any inaccuracy in the other
party's warranties and representations as set forth in the prior sentence.
All brokerage fees due in connection with this transaction will be paid by
the Seller.
12. The costs of this transaction shall be shared as follows:
A. The Seller shall pay all costs and fees associated with:
(i) all documentary transfer taxes and recording costs associated with this
transaction; and
4
<PAGE>
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with:
(i) fees and other expenses charged by the Buyer's attorney;
(ii) a current survey for the Property meeting ALTA requirements;
(iii) a current environmental site assessment for the Property; and
(iv) the ALTA Owner's Title Insurance Policy insuring the Buyer's title to
the Property.
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located.
14. A. The person executing this Offer as the Seller or on behalf of the Seller
warrants and represents to the Buyer that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Seller.
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Buyer.
BUYER:
CareMatrix Corporation
By: /s/Michael Gosman
----------------------------
Name: Michael Gosman
Title: Ex. Vice President
5
<PAGE>
The above Offer is hereby accepted in all respects
Date: 1/30/96 SELLER:
-----------------
EDWARD J. LAD FAMILY TRUST
By: /s/Edward J. Lad
-------------------
/s/Marie C. Lad
Name:
Title:
6
<PAGE>
[LETTERHEAD OF CAREPLEX]
January 18, 1996
Ms. Elizabeth S. Stocks
Ms. Gayle S. Barron
Mr. Joel M. Rappoport
813 Crest Lake Drive, SE
Smyrna, GA 30080
Re: Offer to Purchase Property located on Old Johnson Ferry Road, Atlanta,
Georgia
Dear Ms. Stocks, Ms. Barron and Mr. Rappoport:
This letter constitutes an offer (the "Offer") by CareMatrix Corporation,
a Delaware corporation, or its nominee (the "Buyer") to purchase from
Elizabeth S. Stocks, Gayle S. Barron and Joel M. Rappoport (collectively, the
"Seller") the Property (defined below) on the terms and conditions contained in
this letter.
1. The Buyer will acquire all of the Seller's interest in the following
described property (the "Property"): the land (and the improvements
thereon) known as Parcel 2 on Old Johnson Ferry Road in Atlanta, Georgia,
containing approximately 2.6 acres of land, together with all easements,
licenses, permits or approvals, entitlements, privileges, rights of ingress
and egress and a11 other appurtenances relating to such land (and
improvements), an as more particularly described on Exhibit A attached
hereto and made a part hereof.
2. The purchase price for the Property will be Seven Hundred Thirty-Five
Thousand Dollars ($735,000) (the "Purchase Price"), to be paid as follows:
(a) $20,000 (the "Initial Deposit") will be paid (and held in escrow in
accordance with the terms of this letter by the Escrow Agent named below)
upon delivery of a fully executed copy of this Offer to the Buyer;
(b) $20,000 (the "Additional Deposit") will be paid (and also held in
escrow by the Escrow Agent) upon delivery to the Buyer of a fully executed
copy of the Purchase Agreement (defined below); and
(c) At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
3. A. The closing (the "Closing") for the Buyer's acquisition of the Property
will be at 12:00 noon (Boston) on December 1, 1996 at the office of the
Escrow Agent or such other location as is mutually agreeable to the Buyer
and the Seller.
<PAGE>
B. The Buyer shall have the option to extend the date of the Closing beyond
December 1, 1996 to as late as February 3, 1997 by giving to the Seller one
or more written extension notices at least five (5) days prior to the then
scheduled date of Closing. Each such extension notice shall be accompanied
by a payment to the Seller in the amount of $2,500 for each thirty (30) day
period (or fraction thereof) included within the extension set forth in
such notice. All such extension payments shall be non-refundable if the
Closing does not occur (except in the event of the Seller's default), but
shall be credited in full against the Purchase Price if the Closing does
occur. Time being of the essence for each and every date set forth in this
Section 3.
C. A General Warranty Deed with full warranties of title conveying good and
clear record and marketable title to the Property (including, without
limitation, free of all liens for past due but unpaid real estate or
personal property taxes or other municipal charges), shall be delivered by
the Seller to the Buyer at the Closing.
4. This Offer will remain open until 5:00 p.m. (Boston) on April 5, 1996, on
or before which time the Seller shall accept this Offer and return a
fully executed copy to the Buyer, otherwise this Offer shall be null and
void.
5. The Buyer and the Seller will use their best efforts to prepare and execute
a more comprehensive Purchase and Sale Agreement (the "Purchase Agreement")
to carry out the terms of this Offer on or before 5.00 p.m. (Boston) on May
14, 1996 (the "Commitment Date"). The Purchase Agreement will incorporate
the terms of this Offer and will contain such other agreements,
representations, warranties or conditions as are customary in transactions
of the nature contemplated by this Offer. If and when the Purchase
Agreement is executed, the Purchase Agreement will constitute the entire
agreement between the Buyer and the Seller. If the Purchase Agreement is
not executed by the Commitment Date, then at the Buyer's election, the
Initial Deposit shall be immediately refunded to the Buyer and this Offer
shall be null and void.
6. A. Following the execution of this Offer by the Seller, the Buyer and the
Buyer's agents, representatives, lender(s), architect(s), engieeer(s) and
employees shall have access to the Property at any time during normal
business hours and from time to time in order to perform such financial
analyses, topographical and engineering surveys, environmental site
assessments and other tests, surveys and studies of the Property, as the
Buyer or the Buyer's lender may deem necessary or appropriate .
B. Further, within five (5) days after the Seller's acceptance of this
Offer, the Seller will furnish to the Buyer, for the Buyer's review,
complete and accurate copies of all information, records and documentation
concerning the ownership and condition of the Property in the possession of
the Seller or the Seller's representatives, as the Buyer may reasonably
request, including, without limitation (but only for informational purposes
and
2
<PAGE>
without warranties or representations of any kind regarding accuracy),
plans and surveys, as-built plans and specifications for the building(s) on
the Property, soil tests, service contracts, governmental permits and
approvals, legal opinions regarding zoning or environmental matters
affecting the Property, engineering reports, environmental site
assessments, and title policies or abstracts. The Buyer will hold in strict
confidence all documents, data and information obtained from the Seller,
and if the Closing does not occur, will return the same to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results
of any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the Buyer may
terminate this Offer (or the Purchase Agreement, if signed) by written
notice to the Seller on or before 5:00 p.m. (Boston) on the Commitment
Date. Upon such termination, the Initial Deposit (and the Additional
Deposit, if previously paid) shall be immediately returned to the Buyer,
and neither party shall have any further obligations or liabilities under
this Offer (or the Purchase Agreement, if signed). If the Buyer has not
sent such written notice to the Seller on or before 5:00 p.m. (Boston) on
the Commitment Date, then the Buyer's right to terminate pursuant to this
Paragraph 6.C shall have been waived in all respects.
7. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional conditions to the Buyer's obligation to acquire the
Property:
(a) Prior to the Closing, the Buyer shall review and be satisfied with all
zoning, land use and environmental laws, codes, ordinances and regulations
affecting the Property and shall have obtained all zoning, subdivision and
environmental permits and approvals and any other applicable permit or
approval as may be necessary for the Buyer's proposed development of up to
100 units of senior housing, including, without limitation, the expiration
of any applicable appeal period(s) without an appeal having been filed; and
(b) The simultaneous closing by the Buyer of the acquisition of
approximately 2.75 acres of land known as Parcels 1, 3 and 4 now or
formerly owned by W. Irvin Dutton, Edward J. Lad Family Trust and Robert
P. Hedges Trust, respectively, all as more particularly described in those
certain Offers to Purchase dated January 18, l996 and March 24, 1996.
If any of the foregoing condition is not satisfied prior to the period(s)
specified above, the Buyer may elect riot to purchase the Property. In such
case the Initial Deposit (and the Additional Deposit, if previously paid)
shall be refunded, and neither party shall thereafter have any further
obligations or liabilities under this Offer (or the Purchase Agreement, if
signed).
3
<PAGE>
8. In the event of a default by the Buyer under this Offer or under the
Purchase Agreement, any and all sums paid by the Buyer as the Initial
Deposit or the Additional Deposit to the date of such default shall be
retained by the Seller as liquidated damages and shall constitute the
Seller's sole and exclusive remedy with regard to any such default, either
at law or in equity.
9. From and after the date on which this Offer is signed and accepted by the
Seller, and until the obligations of the Buyer and the Seller under this
Offer have terminated, the Seller shall not offer or negotiate another sale
of all or any part of the Property to any third party. Further, the Seller
shall not enter into any new rental, management, maintenance or other
agreement affecting the Property without the prior written consent of the
Buyer and shall operate and maintain the Property in a professional manner.
10. The Escrow Agent ("Escrow Agent") will be the law firm of Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A. located in West Palm Beach, Florida. In the
event of any dispute regarding either or both of the Initial or the
Additional Deposit (collectively, the "Deposits"), the Escrow Agent shall
have the right to turn the Deposits over to any party mutually agreeable to
the Buyer and the Seller (who shall hold the same subject to the terms
hereof) or1 if the Buyer and the Seller are unable to agree upon such
party, pay the Deposits into a federal or state court and, upon doing
either, will have no further liability regarding its role as Escrow Agent.
All Deposits made hereunder shall be held in an interest bearing account
and any interest which accrues on the Deposits shall be shared equally
between the Buyer and the Seller in the event the Closing occurs and
otherwise shall follow the Deposits. The Seller acknowledges that the
Escrow Agent is counsel for the Buyer, and may continue to act as such
counsel notwithstanding any dispute or litigation arising with respect to
its duties as Escrow Agent hereunder.
11. Each of the Buyer and the Seller hereby warrants and represents to the
other that such party has not dealt with any broker in connection with this
transaction, except Steve Keyes at Northside Commercial and Tom Sims at
Carter and Associates. The Commission Fee will be 6%. Further, each of the
Buyer and the Seller agrees to indemnify and hold harmless the other from
any loss, cost or expense which such non-indemnifying party may incur as a
result of any inaccuracy in the other party's warranties and
representations as set forth in the prior sentence. All brokerage fees due
in connection with this transaction will be paid by the Seller.
12. The costs of this transaction shall be shared as follows:
A. The Seller shall pay all costs and fees associated with:
(i) all documentary transfer taxes and recording costs associated with this
transaction; and
4
<PAGE>
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with:
(i) fees and other expenses charged by the Buyer's attorney;
(ii) a current survey for the Property meeting ALTA requirements;
(iii) a current environmental site assessment for the Property; and
(iv) the ALTA Owner's Title Insurance Policy insuring die Buyer's tide to
the Property.
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located.
14. A. The person executing this Offer as the Seller or on behalf of the Seller
warrants and represents to the Buyer that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Seller.
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase
Agreement and to perform the obligations of the Buyer.
BUYER:
CAREMATRIX CORPORATION
By: /s/Michael Gosman
-------------------------
Name: Michael Gosman
Title: Ex. Vice President
5
<PAGE>
The above Offer is hereby accepted in all respects.
Date: 2/14/96 SELLER:
By: /s/Elizabeth S. Stocks
-----------------------------
Ms. Elizabeth S. Stocks
By: /s/Gayle S. Barron
-----------------------------
Ms. Gayle S. Barron
By: /s/Joel M. Rappoport
-----------------------------
Mr. Joel M. Rappoport
6
PURCHASE AND SALE AGREEMENT
AGREEMENT made as of the ___ day of May, 1996 by and between CareMatrix
Corporation, a Delaware corporation (including any and all nominees permitted
hereunder "Buyer"), having an address at 197 First Avenue, Needham,
Massachusetts 02194, and ENSIGN-BICKFORD REALTY CORPORATION, a Connecticut
corporation ("Seller"), having an address at 19 Ensign Drive, Avon, Connecticut
06001-3705.
WITNESSETH:
In consideration of the mutual covenants herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller hereby agree as follows:
1. AGREEMENTS TO SELL AND PURCHASE; DESCRIPTION OF PROPERTY; NOMINEE.
(a) Purchase and Sale. Seller agrees to convey to Buyer and Buyer hereby
agrees to purchase from Seller, for the price and upon the terms and conditions
set forth herein, the following:
(i) The land located in Avon, Connecticut on Route 44, containing
approximately 6.568 acres of land, described on Exhibit 1.1 attached hereto and
made a part hereof, and all easements and rights of way appurtenant to such
land, and all of Seller's right, title and interest in and to any alleys, strips
and gores abutting or adjoining such land and in and to any highways, streets,
and ways abutting or adjoining the Land (hereinafter, collectively, the "Land").
For title reference purposes, see deed(s) recorded in the Land Records of the
Town of Avon and the metes and bounds description set forth on said Exhibit 1.1;
and
(ii) all buildings, structures and other improvements, if any, located
on the Land (collectively, the "Improvements"); and
(iii) an easement to discharge storm water into wetlands located on
land owned by the Seller as shown on Exhibit 1.1(a) ("Drainage Easement").
The Land and Improvements and Drainage Easement are, collectively, referred
to as the "Property". The Seller shall reserve an easement for a sanitary sewer
line including, without limitation, the right to construct such line and the
right to convey such easement to the Town of Avon. Such easement shall be in the
location set forth on the map attached hereto as Exhibit 1.1(a).
<PAGE>
(b) Intended Use. Seller understands and acknowledges that Buyer intends to
develop and use the Property as an assisted living facility comprised of at
least One Hundred Eight (108) units, together with related improvements,
parking, and landscaping (the "Intended Use").
(c) Nominee. Seller acknowledges and agrees that Buyer shall have the right
to designate a nominee to take title to the Property by notice to Seller given
not later than the Closing Date (as defined below). Any entity in which the
principals or affiliates of Buyer own or control, directly or indirectly, at
least 50% of the stock, partnership interests or beneficial interests, as the
case may be, or any master limited partnership or real estate investment trust
organized by Buyer or any of the principals or affiliates of Buyer, will be
deemed a nominee for the purposes of this Section. In addition, Buyer may assign
this agreement to an unrelated third party, provided, however, that in any such
event the Buyer shall remain primarily liable to the Seller for each of the
Buyer's obligations hereunder.
2. PURCHASE PRICE: DEPOSIT; ADJUSTMENTS; ESCROW.
(a) Purchase Price: The agreed purchase price for the Property (the
"Purchase Price") is One Million Three Hundred Thirteen Thousand Six Hundred
Dollars ($1,313,600), which Purchase Price shall be payable as follows:
(i) Twenty Thousand Dollars ($20,000) previously paid (and held in
escrow in accordance with the terms of this Agreement by Leventhal, Krasow &
Roos, P.C. (the "Escrow Agent") (the "Initial Deposit");
(ii) Twenty Thousand Dollars ($20,000) previously paid (and held in
escrow in accordance with the terms of this Agreement by the Escrow Agent for
the period beginning on the day after February 15, 1996 (the "Commitment Date")
through the ninetieth (90th) day after the Commitment Date (the "First Extension
Period");
(iii) Twenty Thousand Dollars ($20,000) previously paid (and held in
escrow in accordance with the terms of this Agreement by the Escrow Agent named
below) on the day after the last day of the First Extended Period for the period
beginning on the day after the last day of the First Extended Period and through
the ninetieth (90th) day thereafter (the "Second Extended Period"); and
(iv) Twenty Thousand Dollars ($20,000) will be paid (and held in
escrow in accordance with the terms of this Agreement by the Escrow Agent named
below) on the day after the last day of the Second Extended Period for the
period beginning on the day after the last day of the Second Extended Period
through the ninetieth (90th) day thereafter (the "Third Extension Period"). The
Twenty Thousand Dollar ($20,000) payments referred to in Item (ii) - (iv) above
are hereinafter collectively referred to as the ("Additional Deposits");
- 2 -
<PAGE>
(v) The Initial Deposit and the Additional Deposits (collectively the
"Deposits") are to be delivered to Seller by the Escrow Agent at the time of
delivery and recording of the Deed (as defined below); and
(vi) The balance of the Purchase Price is to be paid by Buyer to
Seller at the time of delivery and recording of the Deed (as defined below) in
cash or by certified check or by wire transfer to an account designated by
Seller, which designation shall be made not less than one business day prior to
the Closing Date.
(b) Deposit. (i) The Deposits shall be held in an interest-bearing escrow
account as provided in an Escrow Agreement by and between the Seller, the Buyer
and the Escrow Agent, dated December 21, 1995 ("Escrow Agreement"), subject to
the terms of the Escrow Agreement and this Agreement, and shall be duly
accounted for at the Closing (as defined below) . All interest on the Deposits
is to be accounted for and shared equally between Buyer and Seller if the
Closing occurs; or paid to Buyer if the Deposits are returned to Buyer under the
terms of this Agreement; or if Seller shall retain the Deposits under the terms
of this Agreement, then the entire amount of the interest shall be paid to
Seller.
(ii) Except in the event of a default by the Buyer as set forth in
paragraph 7.(b) or otherwise under the terms of this Agreement, notwithstanding
anything contained herein to the contrary, in the event the Closing does not
occur on or before the last day of the Third Extended Period (through no fault
of the Seller), Fifteen Thousand Dollars ($15,000) of the Additional Deposits
made for the First Extension Period through the Third Extension Period and any
extension payments made pursuant to Section 3.(b) shall become non-refundable to
the Buyer. All payments made hereunder as the Initial or Additional Deposits
shall be credited in full against the Purchase Price, with interest on the
Initial Deposit and the Additional Deposit to be treated as set forth in (b)(i)
above.
(c) Adjustments. The Purchase Price shall be adjusted to reflect the
following:
(i) Water and sewer use charges, charges for electricity, gas and
other utilities, operating expenses and collected rents, if any, and real
property taxes with respect to the Property for the then current fiscal tax
period, shall be apportioned as of the Closing Date, and the net amount shall be
added to or deducted from the Purchase Price, as the case may be.
(ii) Each party shall pay its own attorney's fees incurred in
connection with the negotiation of this Agreement and consummation of the
transactions contemplated by this Agreement, except as otherwise expressly
provided herein. Seller shall pay the cost of all state and municipal real
estate conveyance taxes assessed with respect to the sale of the Property, and
recording fees for releases and other documents required to clear title or to
comply with its obligations hereunder (except for fees for releases of liens
created by the actions of the Buyer, its servants, agents or independent
contractors). Buyer shall pay for recording costs of the Deed, the releases of
liens created by the actions of the Buyer, its
-3-
<PAGE>
servants, agents or independent contractors and any loan documents relating to
Buyer's financing for the Property, as well as the costs of any survey, owner's
or lender's title insurance policy, environmental site assessment or appraisal
which Buyer may elect to obtain in connection with its acquisition of the
Property.
(iii) If at any time following the malting of any of the adjustments
to the Purchase Price, the amount thereof shall prove to be incorrect, or it
should be discovered that some adjustment which should have been made was
inadvertently omitted altogether, the party in whose favor the error was made
shall pay the sum necessary to correct such error to the other party promptly
following receipt of notice of such error from such other party. The provisions
of this Section 2(c)(iv) shall survive the delivery of the Deed for a period of
one year from the date of such delivery.
3. CLOSING; EXTENSIONS.
(a) Closing Date and Place. The time for the delivery of the Deed and for
the performance of the other terms and conditions of this Agreement (the
"Closing"), shall be 10:00 A.M. on September 30, 1996 (as the same may be
extended pursuant to the provisions hereof, the "Closing Date") at the offices
of the Escrow Agent, or at such other place or time as shall be mutually agreed
upon by Buyer and Seller. It is agreed that time is of the essence.
(b) Acceleration of or Extension of Closing Date. Buyer shall have the
option to accelerate the date of the Closing upon thirty (30) days prior written
notice to the Seller. Buyer shall have the right to extend the Closing Date and
each subsequent extended date of the Closing by written notice to Seller given
at least ten (10) days in advance of the then applicable Closing Date; however,
no such extension may be made which will postpone the Closing Date to a date
subsequent to December 31, 1996. Time is of the essence of this Agreement. Each
such extension notice shall be accompanied by a payment to Seller in the amount
of $5,000 for each thirty (30) day period (or fraction thereof) included within
the extension set forth in such notice. Any and all such extension payments
shall be nonrefundable if the Closing does not occur (except as a result of
Seller's default), but shall be paid by the Escrow Agent to the Seller and
credited in full against the Purchase Price if the Closing does occur. If the
Buyer exercises its rights to extend the Closing as set forth in this Section 3,
any additional costs, up to $2,500, associated with the extension shall be borne
by the Buyer and paid to the Seller at the Closing.
4. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of Seller. Seller warrants and
represents to, and covenants and agrees with, Buyer as of the date hereof (and
on the Closing Date shall reaffirm all such representations, covenants and
warranties as of that date) as follows:
-4-
<PAGE>
(i) Seller is a duly organized and validly existing Connecticut
corporation, in good standing under the laws of the State of Connecticut and has
the legal right, power and authority to enter into this Agreement and to perform
all of its obligations hereunder. The execution by the undersigned officer of
Seller and delivery of this Agreement, and the performance by Seller of its
obligations hereunder, have been duly authorized by all necessary action by and
on behalf of Seller and will not conflict with, or result in a breach of, any of
the terms, covenants and provisions of the articles of organization or by-laws
of Seller as any of the same may have been amended, any agreement or instrument
to which Seller is a party or by which it is bound, or, to the best of Seller's
knowledge, any Permit or any Governmental Regulation (as defined below),
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority.
(ii) To the best of the Seller's knowledge, there are no uncured
notices, suits, orders, decrees or judgments relative to violations of, nor to
the best of Seller's knowledge, any other violations of, any easement,
restrictive covenant or other matter of record affecting the Property or any
part thereof, or has the Seller received notice of any violation of any laws,
statutes, ordinances, codes, regulations, rules, orders, or other requirements
of any local, state or federal authority or any other governmental entity or
agency having jurisdiction over the Property or any part thereof, including,
without limitation, any of the foregoing affecting zoning, subdivision,
building, health, traffic, environmental, hazardous waste or flood control
matters (all of the foregoing, collectively, "Governmental Regulations").
(iii) To the best of the Seller's knowledge, the Seller has not
received notice of any other suits, actions or proceedings pending or, to the
best of Seller's knowledge, threatened, against or affecting the Property or any
of the transactions provided for herein before any court or administrative
agency or officer, and Seller has not received notice of any default with
respect to any judgment, order, writ, injunction, rule or regulation of any
court or governmental agency or office to which Seller is subject in any way
affecting the Property or any of the transactions provided for herein.
(iv) Seller is familiar with the provisions of Sections 897 and 1445
of the Internal Revenue Code (the "Code"), and Seller is not a "foreign person"
as that term is defined in Section 1445(f)(3) of the Code.
(v) Except as disclosed on Exhibit 4.1, there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or oral) which grant any possessory interest in and to any space situated on or
in the Property or that otherwise give rights with regard to the use of the
Property or any portion thereof which will not terminate by the date of the
Closing.
As used in this Agreement, the phrase "to the best of Seller's knowledge"
shall mean the actual not constructive or imputed knowledge of the Seller.
-5-
<PAGE>
The Buyer is conducting its own due diligence investigation of the Property
and therefore not relying on the foregoing representations and warranties as an
inducement to purchase the Property. In the event that Seller breaches any of
such representations or warranties, the Seller shall only be liable for actual
damages arising out of such breach and not for any reliance damages.
(b) Representations and Warranties of Buyer. Buyer warrants and represents
to, and covenants and agrees with, Seller as of the date hereof (and on the
Closing Date share reaffirm all such representations, covenants and warranties
as of that date) as follows:
(i) Buyer is a duly organized and validly existing Delaware
corporation in good standing under the laws of the State of Delaware and has the
legal right, power and authority to enter into this Agreement and to perform all
of its obligations hereunder, and the execution and delivery of this Agreement.
The execution by the undersigned officer of the Buyer and the delivery of this
Agreement and the performance by Buyer of its obligations hereunder, have been
duly authorized by all necessary action by and on behalf of the Buyer; and will
not conflict with, or result in a breach of, any of the terms, covenants and
provisions of the Articles of Organization or By-Laws of Buyer, as same may have
been amended or, to the best of Buyer's knowledge, or order, judgment, writ,
injunction or decree of any court or any agreement or instrument to which Buyer
is a party or by which it is bound.
(ii) The officer signing this Agreement on behalf of Buyer is duly
authorized to execute the same on behalf of Buyer and Buyer shall provide a
corporate resolution to such effect at the Closing.
(c) Liability for Warranties and Representations. Seller agrees to
indemnify and hold Buyer harmless from and against any and all actual damages,
expenses and fees, including without limitation, reasonable attorneys' fees and
expenses, incurred by Buyer as the result of the failure of any of Seller's
warranties and representations contained in this Article 4 or elsewhere in this
Agreement. Conversely, Buyer agrees to indemnify and hold Seller harmless from
and against any and all claims, losses, liabilities, damages, expenses and fees,
including without limitation, reasonable attorneys' fees and expenses, incurred
by Seller as the result of the failure of any of Buyer's warranties and
representations contained in this Article 4 or elsewhere in this Agreement. The
provisions of this Article 4 shall survive the delivery of the Deed hereunder or
the termination of this Agreement.
5. RIGHTS AND OBLIGATIONS OF THE PARTIES PRIOR TO CLOSING;
CONDITIONS TO CLOSING.
(a) Seller's Covenants. Seller covenants that between the date of this
Agreement and the Closing:
-6-
<PAGE>
(i) Upon prior notice to the Seller, Buyer and its representatives,
agents, contractors, architects and engineers, and each of their respective
officers, directors, agents, contractors, employees, representatives, and
designees shall have access to the Property at any time and from time to time,
at Buyer's sole cost and expense: (A) to show the Property to third parties
(including, without limitation, contractors, engineers, architects, attorneys,
insurers, banks and other lenders or investors, and prospective tenants,
occupants or buyers) and (B) to perform any and all tests, borings, inspections,
environmental site assessments and measurements which Buyer reasonably deems
necessary or appropriate hereunder, including without limitation, for purposes
of locating all utility conduits serving the Property, making soil borings,
performing soil compaction tests, performing mechanical or structural
inspections, conducting any of the other tests described in Section 5 (b) below,
and making such surveys and other topographical and engineering studies, and
other tests, surveys and studies as Buyer or Buyer's lender may deem necessary
or appropriate. The Buyer agrees to name the Seller as an additional insured and
to furnish the Seller with a certificate evidencing same endorsed on its general
liability policy with coverage limits at $20,000,000 as the policy relates to
the Property and with mechanics' lien waivers from contractors, engineers or
architects performing work on the Property. Such certificate shall also provide
for notice to the Seller thirty (30) days prior to any cancellation thereof.
Promptly following such tests and surveys, Buyer shall restore any disturbed
Property to substantially the same condition as existed prior to such tests and
surveys. Buyer hereby indemnifies and holds Seller harmless from any cost or
expense suffered or incurred by Seller, including reasonable attorneys' fee,
caused by the entry upon the Property prior to the Closing by Buyer, its agents,
independent contractors, servants and employees, including but not limited to,
any injury to any person arising therefrom, for a period of one (1) year from
the date of the Closing.
(ii) Buyer may discuss the Project and/or the Property with any
federal, county, state or local officials or authorities concerning variances,
permits, certificates, consents, approvals, and other Governmental Regulations
for the use, operation, leasing and/or sale of the Property. The Buyer will hold
in strict confidence all documents, data and information obtained from the
Seller, and if the Closing does not occur, will return the same to the Seller.
(iii) Seller shall not permit any new occupancy of, or enter into any
new lease for, space in or on the Property, or any portion thereof, or enter
into or renew any management, maintenance or other agreement affecting the
Property, or enter into or renew any management, maintenance or other agreement
affecting the Property which will extend through the date of the Closing, unless
Buyer has previously approved such occupancy, lease or agreement in writing.
(iv) Seller shall not withdraw, settle or otherwise compromise, any
protest or reduction proceeding affecting real estate taxes assessed against the
Property for any fiscal period in which the Closing is to occur or any
subsequent fiscal period without the prior written consent of Buyer. The Buyer
may continue any such protest or reduction upon reimbursement to Seller of
Seller's costs paid to third parties in connection therewith.
-7-
<PAGE>
Buyer's continuance of any such protest or reduction shall be at the Buyer's
expense. Real estate tax refunds and credits received after the Closing Date
which are attributable to the fiscal tax year during which the Closing Date
occurs shall be apportioned between Seller and Buyer, after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
(v) Seller shall not modify or alter the Property in any material
respect.
(b) Certain Conditions to Buyer's Obligations. In addition to the other
conditions to be satisfied hereunder, Buyer's obligations hereunder are
expressly contingent upon fulfillment of all of the following terms and
conditions:
(i) Within two weeks after the date of the execution of this
Agreement, Buyer shall have obtained a commitment from a title insurance company
selected by Buyer pursuant to which such company agrees to insure title to the
Property, at normal premium rates, in an ALTA form, which commitment shall
delete the printed exceptions for mechanics' and materialmans' liens, parties in
possession and surveys, shall include a so-called Comprehensive Endorsement, and
shall (A) affirmatively insure that there will be no violation of any applicable
restrictions pertaining to the Property if used, operated, leased and/or sold as
contemplated herein, (B) insure that the Property has legal and actual access to
an identified public roadway, (C) take exception for a deed restriction which
shall limit the use of the Property to a nursing home facility, surgery center,
assisted living development, independent living development, continuing care
retirement community development or medical office use related to any of the
foregoing for a five (5) year period commencing on the date of the Closing, (D)
provide the following affirmative coverages:
(1) "This policy affirmatively insures that real estate taxes,
water and sewer use charges and other governmental charges due and payable
through the date of the Policy have been paid.
(2) "This policy affirmatively insures that the easements and/or
rights of way set forth on Schedule B of the policy do not, and the exercise of
any rights thereunder will not, adversely interfere with the use or enjoyment of
all or of any portion of the insured premises, including, without limitation,
the buildings and other improvements as currently constructed thereon.
(3) "This policy affirmatively insures that none of the
restrictions, covenants or conditions set forth in Schedule B have been violated
and no future violation of any of the same will result in (I) a forfeiture or
reversion of title, (II) the forced removal or relocation of any building,
structure or improvement located on the insured premises or (III) the lien of
the mortgage referred to in Schedule A being divested or subordinated or its
validity, priority or enforceability otherwise being impaired."
-8-
<PAGE>
(4) Access (reference to specific, publicly dedicated, open and
accepted streets and roadways to which the property has legal and actual access
sufficient for vehicular use).
(5) Same coverage available to future purchasers, lessees and
mortgagees.
(ii) Buyer shall have obtained all zoning, subdivision and
environmental permits and approvals and any other applicable permit, approval,
consent or license as may be necessary for the Intended Use, including without
limitation, approval of the Intended Use by the appropriate boards, and the
relevant appeal periods for all such permits, approvals, licenses and consents
shall have expired without any appeal having been taken.
(iii) Within sixty (60) days after the date of the execution of this
Agreement, Buyer shall conduct such soil borings, analyses, and tests of the
Property as reasonably deemed necessary by the Buyer and shall be satisfied that
the soil are suitable for the development of the Property for the Intended Use
and that the condition of the Improvements is satisfactory.
If the foregoing conditions specified in subsections (i) and (iii) above
are not fully satisfied in a manner which is acceptable to Buyer in its sole
discretion on or before 5:00 p.m. on the respective dates set forth above for
the satisfaction of such condition, Buyer shall have the right to notify Seller
thereof on or before 5:00 p.m. on such respective date, which notice shall
specify which condition(s) (has) (have) not been satisfied, then this Agreement
shall be terminated, and, except as set forth in Section 2.(b)(ii) and in
Section 3.(b), the Deposits, together with all interest thereon, shall be
immediately refunded to Buyer, whereupon all obligations of the parties hereto
shall cease and this Agreement shall be void and without recourse to the parties
hereto other than for matters covered under the indemnification and insurance
provisions set forth in Section 5(a)(i) of this Agreement. In such event, the
Buyer shall provide the Seller with a copy of any environmental site assessment
report (for informational purposes and without warranties or representations of
any kind regarding accuracy).
If the foregoing condition specified in (ii) above is not fully satisfied
in a manner which is acceptable to Buyer in its sole discretion on or before
fifteen (15) days prior to the original or any extended time for Closing, Buyer
shall notify Seller thereof prior to the Closing Date, which notice shall
specify which condition(s) has (have) not been satisfied. In such event, this
Agreement shall be terminated, and, except as set forth in Section 2.(b)(ii) and
in Section 3.(b), the Deposit together with all interest thereon, shall be
immediately refunded to Buyer, whereupon all obligations of the parties hereto
shall cease and this Agreement shall be void and without recourse to the parties
hereto other than for matters covered under the indemnification and insurance
provisions set forth in Section 5(a)(i) of this Agreement.
-9-
<PAGE>
6. CLOSING OBLIGATIONS; ESCROW INSTRUCTIONS.
(a) Seller's Closing Obligations. On the Closing Date, Seller shall:
(i) Deliver to Buyer full possession of the Property: (A) in the same
condition as it is as of the date hereof (except that Seller shall have no
responsibility for change to the Property as a result of work performed by the
Buyer, its agents or independent contractors) (B) with any encumbrances
expressly permitted by this Agreement and (C) free and clear of all tenants and
occupants. Buyer shall be entitled to an inspection of the Property prior to the
Closing Date in order to determine whether the condition thereof complies with
the terms of this Section.
(ii) Deliver to Buyer, in form and substance satisfactory to Buyer,
the following:
(A) a Connecticut form warranty deed (the "Deed") (in form
acceptable to Buyer's title insurance carrier, conveying good and clear record
and marketable title to the Land and Improvements insurable as provided in
Section 5(b)(iii) above, which shall convey title free from all liens,
encumbrances and encroachments except: (I) facts as shown on a survey, (II)
provisions of building and zoning laws existing as of the date hereof; (III)
such real property taxes for the then current fiscal tax period as are not yet
due and payable on the Closing Date, provided that if the Land is a portion of a
larger tax parcel, then Buyer shall take title subject only the proportionate
share of such real property taxes as relate to the Land; (IV) such liens for
betterment charges as may be assessed on the Property and due after the Closing
Date; (V) easements, restrictions and rights of way of record, if any, which do
not materially interfere (in Buyer's reasonable discretion) with the
development, use, operation, leasing and/or sale of the Property for the
Intended Use; and (VI) the deed restriction described in paragraph 5.(b)(i)
above.
(B) An Assignment of Seller's entire interest in any permits,
licenses or approvals affecting the Property (provided, however, in the absence
of an express assignment, delivery of the Deed will conclusively be deemed to
constitute the assignment of all of such permits, licenses and approvals to
Buyer);
(C) A receipted bill from the local water and sewer authority and
any other entity providing utility service to the Property that all charges for
water and sewer service and such other utilities have been paid through a date
not more than five (5) calendar days prior to the Closing Date.
(D) Affidavits to Buyer's title insurer as to parties in
possession or with a right to possession of, and mechanic's liens (with an
exception for those as a result of work contracted for by Buyer, its agents or
independent contractors) with respect to, the Property, which affidavits shall
be sufficient to have the normal printed exceptions with respect to such matters
deleted from Buyer's and Buyer's lender's title insurance policy(ies).
- 10-
<PAGE>
(E) An Affidavit certifying that Seller is not a "foreign person"
as of the Closing Date, as provided in Section 4(a)(xv) hereof.
(F) A certificate by Seller to the effect that all of the
representations and warranties set forth in Section 4 remain true and correct as
of the Closing Date except to the extent the same may have changed in accordance
with the terms and conditions of this Agreement.
(G) A 1099-B form for the Escrow Agent.
(H) A W-9 form stating that no backup withholding is necessary to
disburse Seller's share, if any, of the interest earned on the Deposit.
(I) A secretary's certificate and corporate resolution of Seller,
certifying as to the incumbent officers of Seller and the due authorization and
execution of this Agreement, and of the sale, assignment, instruments, and other
transactions contemplated hereby.
(J) A certificate of good standing for Seller and a copy of
Seller's by-laws and certificate of incorporation certified by the secretary of
Seller.
(K) Such documents, certificates and affidavit reasonably deemed
necessary or appropriate by Buyer's title insurance company to issue its title
insurance policy for the Property.
(L) All other documents expressly required by this Agreement to
be delivered by Seller, including, without limitation, the Drainage Easement.
(iii) To enable Seller to make conveyance as herein provided, at the
time of delivery of the Deed, Seller shall use the Purchase Price or any portion
thereof to clear title to the Property of any or all encumbrances (except for
those created by the Buyer, its agents or independent contractors), and all
instruments so procured shall be recorded simultaneously with the delivery of
the Deed, or provisions reasonably satisfactory to Buyer's attorney shall be
made prior to the Closing Date for recording thereof as soon as reasonably
practicable after the Closing Date.
(b) Buyer's Closing Obligations. At the Closing, Buyer shall:
(i) Deliver to Seller, by wire transfer or certified check, the
balance of the Purchase Price, as adjusted for apportionments under Section 2
above.
(ii) Deliver any other documents expressly required by this Agreement
to be delivered by Buyer.
-11-
<PAGE>
(iii) A W-9 form stating that no back-up withholding is necessary to
disburse Buyer's share, if any, of interest earned on the Deposit.
7. FAILURE OR INABILITY TO PERFORM; DEFAULTS; REMEDIES.
(a) Seller's Default. (i) If on the Closing Date, Buyer is not in default
of this Agreement and not through the actions of the Buyer, (A) Seller shall be
unable to give title or make conveyance or deliver possession of the Property as
required by this Agreement or to satisfy any of the terms and conditions
precedent to Closing set forth herein, except for matters caused by the Buyer,
its servants, agents or independent contractors, or (B) the Property does not
then conform to the provisions hereof, or (C) any of Seller's warranties and
representations contained herein are not fully accurate as of the Closing Date
(items (A) through (C), collectively, called "Seller's Obligations"), the time
for performance hereunder shall be extended for such period, not to exceed
ninety (90) days, as shall be reasonably specified by Buyer, and Seller shall
use diligent efforts to satisfy and perform all of Seller's Obligations. If
other than as caused by the actions of the Buyer or its agents, servants or
independent contractors, at the expiration of such extended time for
performance, despite having used such diligent efforts Seller shall remain
unable satisfy and perform all of Seller's Obligations, and such failure
adversely affects the Buyer's title to the Property, the Buyer's intended use of
the Property or the market value of the Property, then Buyer shall have the
option, at Buyer's sole discretion: (I) to terminate this Agreement by notice
given to Seller, whereupon the Deposit, together with all interest and other
sums paid by Buyer hereunder, shall be promptly refunded by Buyer and all
obligations of the parties hereto shall cease and this Agreement shall be void
and without recourse to the parties hereto, excluding, however, those provisions
hereof which are expressly provided herein to survive termination of the
Agreement (including without limitation, Buyer's indemnification of Seller as
set forth in Section 5(a) hereof), or (II) Buyer shall have the election, at the
original or at any extended time for Closing, to accept such title to, and
possession of, the Property as Seller can deliver in its then condition and to
thereupon pay the Purchase Price without any deductions, except such amount
necessary to remove all mortgages, liens or encumbrances which secure the
payment of money (except for those caused by the Buyer, its servants, agents or
independent contractors) and such adjustments computed in accordance with
Section 2(b) above, in which case Seller shall convey such title. In the event
that Seller seeks relief as a debtor under any applicable law, including without
limitation the federal bankruptcy code, or upon the involuntary commencement of
any such proceeding, Buyer shall have the right of possession of the Property
pending the Closing and shall be entitled to any and all rights pursuant to 11
U.S.C. ss.365(i)and (ii). Buyer shall have the right to obtain specific
performance of this Agreement, as well as the benefit of any other rights or
remedies provided herein or by applicable law, in the event of any default
hereunder by Seller (i.e., Seller's failure to perform its obligations hereunder
where such failure is not excused by any of the express terms of this
Agreement).
(b) Buyer's Default. If on the Closing Date, Seller is not in default of
this Agreement and if not through the actions of the Seller, Buyer shall fail to
fulfill its
- 12-
<PAGE>
agreements herein Seller's sole and exclusive remedy shall be to retain the
Deposits and any interest thereon as full and complete liquidated damages, both
at law and in equity, whereupon this Agreement shall terminate without further
recourse to either party other than for matters covered under the
indemnification and insurance provisions set forth in Section 5(a)(i) of this
Agreement, which shall, in any event, survive such termination. In addition,
nothing contained herein shall be construed so as to prevent Seller from
negotiating and/or accepting another offer to sell and/or lease all or any part
of the Property to any third party, after Buyer's default under this Agreement.
8. MISCELLANEOUS.
(a) Tax Identification Number. Seller warrants and represents that Seller's
federal tax identification number is 060860253, and Buyer warrants and
represents that Buyer's federal tax identification number is [04-3312235].
Seller and Buyer each acknowledge that the foregoing information will be relied
upon in reporting the transactions contemplated hereby to appropriate
governmental authorities.
(b) Agreement Not an Offer. The submission of any draft of this Agreement
or any portion thereof does not constitute an offer to buy the Property, it
being acknowledged and agreed that neither Buyer nor Seller shall be legally
obligated with respect to the purchase or sale of the Property unless and until
this Agreement has been executed by both Buyer and Seller and a fully executed
copy has been delivered to each of Buyer and Seller.
(c) Exhibits. The Exhibits attached hereto are incorporated herein by this
reference and made a part hereof.
(d) Notices. All notices or communications required or permitted hereunder
shall be in writing and delivered by hand or mailed by certified mall, return
receipt requested, postage and registration or certification charges prepaid, or
by nationally recognized overnight courier service, or by telefax, to the party
entitled thereto as follows:
-13-
<PAGE>
If to Seller:
Ensign-Bickford Realty Corporation
19 Ensign Drive
Avon, CT 06001-3705
Attention: Mr. Robert R. Occhialini, President
and Chief Executive Officer
with a copy to:
Ensign-Bickford Industries, Inc.
10 Millpond Lane
Simsbury, CT 06070
Attention: Michael T. Long, Esq.
with a courtesy copy to:
Leventhal, Krasow & Roos
100 Pearl Street
Hartford, CT
Attention: Herbert Krasow, Esq.
If to Buyer:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
Fax No.: (617) 433-1190
with a courtesy copy to:
Levy & Droney, P.C.
74 Batterson Park Road
Farmington, CT 06032
Attention: Joseph A. Vitale, Esq.
or such other party(ies), address(es) or telefax number(s) as either party shall
specify by written notice to the other from time to time. Any such notice or
communication shall be deemed to have been given as of the date of its receipt
or delivery.
-14-
<PAGE>
(e) Broker. (i) Each of Buyer and Seller hereby represents, covenants and
warrants to the other that the party so representing has dealt with no broker or
other person entitled to a commission in connection with the negotiation or
execution of this Agreement or the consummation of the transactions contemplated
hereby, other than Lexington Company with Jeff Sikes, as agent (the "Broker").
Further, each of Buyer and Seller agrees to indemnify and hold harmless the
other from any loss, cost or expense which such non-indemnifying party may incur
as a result of any inaccuracy in the other party's warranties and
representations as set forth in the prior sentence. Except in the case of a
breach of Buyer's warranty set forth above, any and all fees to be paid to the
Broker, or any other broker in connection with Buyer's purchase of the Property
will be paid by Seller.
(ii) Upon delivery and recording of the Deed and other instruments
contemplated herein, in consummation of the transactions contemplated hereby,
Seller shall pay to the Broker a brokerage commission in the amount of $60,000.
In the event that this Agreement is terminated for any reason, no such
commission or compensation of any kind shall be due and payable to the Broker.
The provisions of this Section 8(e) shall survive the delivery of the Deed or
the termination of this Agreement.
(iii) The Broker joins in this Agreement and becomes a party hereto
for the purposes of this Section 8(e) only. The consent of the Broker shall not
be required with respect to any amendments or modifications to this Agreement
other than Amendments or modifications to this Section 8(e).
(f) Entire Agreement; Rules of Construction. This Agreement, executed in
multiple counterparts, is to be construed as a Connecticut contract; sets forth
the entire agreement between the parties; merges all prior and contemporaneous
agreements, understandings, warranties, or representations, including, without
limitation, the letter from Buyer and accepted by Seller, dated December
13,1995; shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; and may be canceled, modified or
amended only by a written instrument executed by both Seller and Buyer. The
captions and section headings are used only as a matter of convenience and are
not to be considered a part of this Agreement or to be used in determining the
intent of the parties.
(g) Further Assurances. Upon Buyer's request, Seller agrees to execute and
deliver to Buyer such additional instruments, certificates and documents as
Buyer may reasonably require, whether or not after the Closing Date, in order to
provide Buyer with the rights and benefits to which Buyer is entitled under this
Agreement.
(h) Notice of Agreement. Buyer shall have the right to record and Seller
agrees to execute and acknowledge a Notice of Contract.
(i) Deed Restriction. The Buyer shall agree to a deed restriction which
shall limit the use of the Property to a nursing home facility, surgery center,
assisted living
-15-
<PAGE>
development, independent living development, continuing care retirement
development and for medical office uses related to any of the foregoing for a
five (5) year period commencing on the date of the Closing.
(j) Diligent Efforts Concerning Approvals. The Buyer agrees to diligently
pursue obtaining all necessary zoning, subdivision and environmental permits and
approvals and any other applicable permit or approval as may be necessary for
the development of the Property for its Intended Use.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it
to be executed by their respective duly authorized representatives, as an
instrument under seal as of the day and year first above written.
WITNESSES: BUYER:
CAREMATRIX CORPORATION
/s/ [Illegible] By: /s/ Michael Gosman
- ---------------------------------- -------------------------------
Name: Michael Gosman
/s/ [Illegible] Title: Ex Vice President
- ---------------------------------- hereunto duly authorized
SELLER:
ENSIGN-BICKFORD REALTY
CORPORATION
/s/ Herbert A. Krasow By: /s/ Thomas C. Pedrotty
- ---------------------------------- -------------------------------
Name: Thomas C. Pedrotty
/s/ Julie P. [Illegible] Title: VP & Controller
- ---------------------------------- hereunto duly authorized
ESCROW AGENT:
LEVENTHAL, KRASOW & ROOS
/s/ Margaret O. Sullivan By: /s/ Herbert A. Krasow
- ---------------------------------- -------------------------------
Name: Herbert A. Krasow
/s/ Julie P. [Illegible] Title: VP
- ---------------------------------- hereunto duly authorized
-17-
<PAGE>
STATE OF MASSACHUSETTS )
) ss:
COUNTY OF NORFOLK )
Personally appeared, Michael Gosman, the ex vice pres., of CareMatrix
Corporation, a Delaware corporation, signer and sealer of the foregoing
instrument, and acknowledged the same to be his free act and deed and the duly
authorized free act and deed of the corporation.
/s/ Carol A Blamhard
----------------------------------
My Commission Expires: 6/30/2000
Notary Public
STATE OF CONNECTICUT )
) ss: AVON
COUNTY OF HARTFORD )
Personally appeared, THOMAS C. PEDROTTY, the Vice President and Controller
of Ensign-Bickford Realty Corporation, signer and sealer of the foregoing
instrument, and acknowledged the same to be his free act and deed and the duly
authorized free act and deed of the corporation.
/s/ Herbert A Krakow
----------------------------------
Commissioner of the Superior Court
-18-
<PAGE>
Exhibits
Exhibit 1.1 Legal Description of the Land
Exhibit 4.1 Schedule of Contracts
- 19-
<PAGE>
EXHIBIT 1.1
All that certain parcel of land with the buildings and improvements thereon,
situated on the northerly street line of West Main Street (Route 44) in the Town
of Avon, County of Hartford and State of Connecticut, shown as "PARCEL 2A AREA =
6.568 acres" on a map entitled: "MAP OF LAND TO BE CONVEYED TO CAREMATRIX WEST
MAIN STREET & BICKFORD DRIVE EXTENSION AVON, CONNECTICUT SCALE 1" = 40' JUNE
1996 REVISED: JUNE 1, 1996 HODGE SURVEYING ASSOCIATES, P.C.", which map is on
file or to be filed in the Avon Town Clerk's Office, and being more particularly
bounded and described as follows:
COMMENCING at a point on the northerly street line of West Main Street
(Route 44), which point marks the south-westerly corner of
land now or formerly of Alpha Realty, Inc. and the
southeasterly corner of the land herein described;
THENCE running along the northerly street line of West Main Street,
the following courses and distances:
N 62(degrees) 15' 26" W, a distance of 4.59 feet, to a
point;
N 68(degrees) 59' 06" W, a distance of 22.62 feet, to a
point;
N 68(degrees) 59' 06" W, a distance of 38.07 feet, to a
point;
N 57(degrees) 17' 16" W, a distance of 62.42 feet, to a
point;
N 57(degrees) 17' 16" W, a distance of 8.17 feet, to a
point;
along the arc of a curve having a radius of 2924.93 feet, a
distance of 36.68 feet, to a point;
along the arc of a curve having a radius of 2924.93 feet, a
distance of 20.00 feet, to a point;
along the arc of a curve having a radius of 2924.93 feet, a
distance of 218.31 feet, to a point;
N 69 04' 26" W, a distance of 276.32 feet, to a point;
<PAGE>
N 69(degrees) 04' 26" W, a distance of 10.10 feet, to a
point;
N 69(degrees) 04' 26" W, a distance of 10.10 feet, to a
point;
N 69(degrees) 04' 26" W, a distance of 21.67 feet, to a
point marking the southeasterly corner of Lot No. 1 Avon
Elderly Housing T.D. Partnership and the southwesterly
corner of the land herein described;
THENCE running along Lot No. 1 Avon Elderly Housing T.D.
Partnership the following courses and distances:
N 16(degrees) 37' 20" E, a distance of 98.65 feet, to a
point;
N l6(degrees) 37' 20" E, a distance of 20.20 feet, to a
point;
N 13(degrees) 02' 44" W, a distance of 72.83 feet, to a
point;
N l6(degrees) 52' 07" E, a distance of 20.05 feet, to a
point;
N l6(degrees) 52' 07" E, a distance of 48.77 feet, to a
point;
N 46(degrees) 50' 51" E, a distance of 32.00 feet, to a
point;
N 46(degrees) 50' 51" E, a distance of 25.00 feet, to a
point;
N 46(degrees) 50' 51" E, a distance of 162.45 feet, to a
point;
S 56(degrees) 10' 58" E, a distance of 11.00 feet, to a
point;
S 56(degrees) 10' 58" E, a distance of 64.00 feet, to a
point;
S 56(degrees) 10' 58" E, a distance of 6.18 feet, to a
point;
S 56(degrees) 10' 58" E, a distance of 31.23 feet, to a
point on the westerly street line of Bickford Drive
Extension;
<PAGE>
THENCE running along Bickford Drive Extension the following courses
and distances:
along the arc of a curve having a radius of 60.00 feet, a
distance of 46.68 feet, to a point;
along the arc of a curve having a radius of 60.00 feet, a
distance of 132.26 feet, to a point;
along the arc of a curve having a radius of 40.83 feet, a
distance of 48.11 feet, to a point;
along the arc of a curve having a radius of 604.34 feet, a
distance of 216.03 feet, to a point marking the
northwesterly corner of Parcel 2B and the northeasterly
corner of the land herein described;
THENCE running along Parcel 2B as shown on said map, the following
courses and distances:
S 18(degrees) 42' 42" E, a distance of 52.25 feet, to a
point;
S l8(degrees) 42' 42" E, a distance of 32.73 feet, to a
point;
S l8(degrees) 42' 42" E, a distance of 146.91 feet, to a
point,
S 18(degrees) 42' 42" E, a distance of 53.13 feet, to a
point;
S l8(degrees) 42' 42" E, a distance of 126.57 feet, to a
point;
THENCE S 14(degrees) 51' 50" W, along land now or formerly of Alpha
Realty, Inc., a distance of 121.83 feet, to a point on the
northerly street line of West Main Street, being the point
of beginning.
Together with the right to drain in favor of Parcel 2A into land of
Ensign-Bickford Realty Corporation on the opposite side of Route 44 to Stub Pond
as shown on the aforementioned map.
<PAGE>
Exhibit 4.1
Schedule of Contracts
NONE
-21-
<PAGE>
EXHIBIT 1.l(a)
Map
ASSIGNMENT AGREEMENT
(Macon, Georgia)
THIS ASSIGNMENT AGREEMENT MADE THIS 3RD DAY OF July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
WITNESSETH
WHEREAS, Assignor has entered into that certain Offer to Purchase (the
"Offer"), dated June 3, 1996, relating to a certain parcel of land located in
Macon, Georgia (the "Land"), a copy of which is attached hereto as Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred fifty (150) units (the
"Project") and a medical office building and/or independent senior villas;
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Offer to Assignee, and Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Offer, and Assignee
hereby accepts the within assignment and assumes and agrees with
Assignor, to perform and comply with and to be bound by all of the
terms, covenants, agreements, provisions and conditions for the Offer
on the part of Assignor thereunder to be performed on and after the
date hereof, in the same manner and with the same force and effect as
if Assignee had originally executed the Offer.
2. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the
<PAGE>
Project pursuant to a management agreement in form and substance
reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Offer on or before the date hereof.
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Offer after
the date hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary
-----------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
[LETTERHEAD OF CAREMATRIX]
VIA FEDERAL EXPRESS
June 3, 1996
T. Baldwin Martin, Jr., Esq.
Martin, Snow, Grant & Napler
240 Third Street
P.O. Box 1606
Macon, Georgia 31202-1606
RE: OFFER TO PURCHASE PROPERTY AS THE HEPHZIBAH
CHILDREN'S HOME BEING 14 ACRES (PLUS/MINUS) LOCATED AT
4123 FORSYTH ROAD, MACON, GEORGIA
Dear Mr. Martin:
This letter constitutes an offer (the "Offer") by CareMatrix Corporation, a
Delaware corporation, or its nominee (the "Buyer") to purchase from the Wesleyan
Church (the "Seller") the property (defined below) on the terms and conditions
contained in this letter.
1. The Buyer will acquire all of the Seller's interest in the 14.77 acres of
Property outlined on Exhibit "A" hereto (the "Property"): That property
described as: all that tract or parcel of land situated, lying and being in
Bibb County, Georgia, containing 15 acres, more or less, and being more
particularly shown on a plat dated October 8, 1982, recorded in Plat Book
65, Page 79, Clerk's office, Bibb Superior, which said plat is attached
hereto as Exhibit "A" and made part hereof LESS AND EXCEPT that portion
thereof conveyed to the Georgia Department of Transportation for the
widening of Forsyth Road. The Property is zoned PDC & R-3, and includes all
easements, licenses, permits or approvals, entitlements, privileges, rights
of egress and ingress and all other appurtenances relating to such land.
Seller shall have the right, at its sole cost and expenses, at its
election, to remove any improvements located on the Property prior to the
Closing.
2. the purchase price for the Property will be Two Million Two Hundred
Thousand dollars ($2,200,000).
<PAGE>
T. Baldwin Martin Jr., Esq.
June 03, 1996
Page 2
A. Twenty-Five Thousand Dollars ($25,000) (the "Initial Deposit") will be
paid (and held in escrow in accordance with the terms of this letter
by the Escrow Agent named below) upon delivery of a fully executed
copy of this Offer to the Buyer;
B. One Hundred Thousand Dollars ($100,000) (the "Additional Deposit")
will be paid (and also held in escrow by the Escrow Agent) on or
before September 30, 1996 (the "Commitment Date"); and
C. At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
3. A. The closing (the "Closing") for the Buyer's acquisition of the
Property will be at 12:00 E.S.T., January 15, 1997, at the office of
the Escrow Agent or such other location as is mutually agreeable to
the Buyer and Seller.
B. The Buyer shall have the option to extend the date of the Closing
beyond January 15, 1997, to as late as March 15, 1997, by giving to
the Seller one or more written extension notices at least ten (10)
days prior to the then scheduled date of Closing. Each such extension
notice shall be accompanied by a payment to the Seller in the amount
of Five-Thousand Dollars ($5,000) for each thirty (30) day period (or
fraction thereof) included within the extension set forth in such
notice. All such extension payments shall be non-refundable if the
Closing does not occur (except in the event of the Seller's default),
but shall be credited in full against the Purchase Price if the
Closing does occur. Time being of the essence for each and every date
set forth in the Section 3.
C. A Statutory Warranty deed conveying good and clear record and
marketable title to the Property (including, without limitation, free
of all liens for past due but unpaid real estate or personal property
taxes or other municipal charges), shall be delivered by the Seller to
the Buyer at Closing.
4. This Offer will remain open until 5:00 p.m. E.S.T. on June 10, 1996, on or
before which time the seller shall accept this Offer and return a
fully-executed copy to the Buyer, otherwise this Offer shall be null and
void.
5. The Buyer and the Seller will use their best efforts to prepare and execute
a more comprehensive Purchase and Sale Agreement (the "Purchase Agreement")
to carry out the terms of this Offer on or before 5:00 p.m. E.S.T. on July
01, 1996. The Purchase Agreement will incorporate the terms of this Offer
and will contain such
<PAGE>
T. Baldwin Martin Jr., Esq.
June 03, 1996
Page 3
other agreements, representations, warranties or conditions as re customary
in transactions of the nature contemplated by this Offer. If and when the
Purchase Agreement is executed, the Purchase Agreement will constitute the
entire agreement between the Buyer and the Seller. If the Purchase
Agreement is not executed by July 1, 1996, then at the Buyer's or Seller's
election, the initial Deposit shall be immediately refunded to the Buyer
and this Offer shall be null and void.
6. A. Following the execution of this Offer by the Seller, the Buyer and
the Buyer's agents, representatives, lender(s), architect(s),
engineer(s) and employees shall have access to the property at any
time during normal business hours and from time to time in order to
perform such financial analyses, topographical and engineering
surveys, environmental site assessments and other tests, surveys and
studies of the Property, as the Buyer or the Buyer's lender by deem
necessary or appropriate.
B. Further, within ten (10) days after the Seller's acceptance of this
Offer, the Seller will furnish to the Buyer, for the Buyer's review,
complete and accurate copies of all information, records and
documentation concerning the ownership and condition of the Property
in the possession of the Seller or the seller's representatives, as
the Buyer may reasonably request, including without limitation (but
only for informational purposes and without warranties or
representations of any kind regarding accuracy), plans and surveys,
as-built plans and specifications for the building(s) on the Property,
engineering reports, environmental site assessments, and title
policies or abstracts. The Buyer will hold in strict confidence all
documents, data and information obtained from the Seller, and if the
Closing does not occur, will return the same to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results
of any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the
buyer may terminate this Offer (or the Purchase Agreement, if signed)
by written notice to the Seller on or before 5:00 p.m. E.S.T. on the
Commitment Date. Upon such termination, the Initial Deposit (and the
Additional Deposit, if previously paid) shall be immediately returned
to the Buyer, and neither party shall have any further obligations or
liabilities under this Offer (or Purchase Agreement, if signed). If
the Buyer has not sent such written notice to the
<PAGE>
T. Baldwin Martin Jr., Esq.
June 03, 1996
Page 4
Seller on or before 5:00 p.m. E.S.T., on the Commitment Date, then the
Buyer's right to terminate pursuant to this Paragraph 6.C shall have
been waived in all respects.
7. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional condition to the Buyer's obligation to acquire the
Property:
A. Prior to September 30, 1996, the Buyer shall review and be satisfied
with all zoning, land use and environmental laws, codes, ordinances
and regulations affecting the Property. Prior to closing, Buyer's
shall have obtained all zoning, subdivision and environmental permits
and approvals and any other applicable permit or approval as may be
necessary for the Buyer's proposed development and construction of a
proposed ALF/ILF development consisting of minimum of One-Hundred and
Fifty (150) units on the Property and the development and construction
of a Medical Office Building and/or Independent Senior villas on the
Property in such size and with such specifications as the Buyer shall
determine in its sole discretion the "Project"), without limitation,
the expiration of any applicable appeal period(s) without an appeal
having been filed; and
B. If any of the foregoing conditions are not satisfied prior to the
period(s) specified above, the Buyer may elect not to purchase the
Property. In such case the Initial Deposit (and the Additional
Deposit, if previously paid) shall be refunded to the Buyer, and
neither party shall thereafter have any further obligations or
liabilities under this Offer (or the Purchase Agreement, if signed).
8. In the event of a default by the Buyer under this Offer or under the
Purchase Agreement, any and all sums paid by the Buyer as the Initial
Deposit or the Additional Deposit to the date of such default shall be
retained by the Seller as liquidated damages and shall constitute the
Seller's sole and exclusive remedy with regard to any such default, either
at law or in equity.
9. From and after the date on which this Offer is signed and accepted by the
Seller, and until the obligations of the Buyer and the Seller under this
offer have terminated, the Seller shall not offer or negotiate another sale
of all or any part of the Property to any third party. Further, the Seller
shall not enter into any new rental, management, maintenance or other
agreement affecting the property without the prior written consent of the
Buyer and shall operate and maintain the Property in a professional manner.
<PAGE>
T. Baldwin Martin Jr., Esq.
June 03, 1996
Page 5
10. The Escrow Agent ("Escrow Agent") will be Gunster, Yoakley & Stewart P.A.
located in West Palm Beach, Florida. In the event of any dispute regarding
either or both of the Initial or the Additional Deposit (collectively, the
"Deposits"), the Escrow Agent shall have the right to turn the Deposits
over to any party mutually agreeable to the Buyer and the Seller (who shall
hold the same subject to the terms hereof) or, if the Buyer and the Seller
are unable to agree upon such party, pay the Deposits into a federal or
state court and, upon doing either, will have no further liability
regarding its role as Escrow Agent. All Deposits made hereunder shall be
held in an interest bearing account and any interest which accrues on the
Deposits shall be shared equally between the Buyer and the Seller in the
event the Closing occurs and otherwise shall follow the Deposits. The
Seller acknowledges that the Escrow Agent is counsel for the Buyer, and may
continue to act as such counsel notwithstanding any dispute or litigation
arising with respect to its duties as Escrow Agent hereunder.
11. Each of the Buyer and the Seller hereby warrants and represents to the
other that such party has not dealt with any broker in connection with this
transaction, except that Seller has engaged The Ramsbottom Company and has
agreed to pay them a fee equal to ten percent (10%) of the sales price.
Further, each of the Buyer and the Seller agrees to indemnify and hold
harmless the other from any loss, cost or expense which such
non-indemnifying party may incur as a result of any inaccuracy in the other
party's warranties and representations as set forth in the prior sentence.
All brokerage fees due in connection with this transaction will be paid by
the Seller upon the delivery and recording of the deed pursuant to Seller's
separate agreement with such Broker.
12. The costs of this transaction shall be shared as follows:
A. The Seller shall pay all costs and fees associated with:
(i) All documentary transfer taxes and recording costs associated
with this land transaction; and
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with:
(i) fees and other expenses charged by the Buyer's attorney;
(ii) a current survey for the Property meeting ALTA requirements;
(iii) a current environmental site assessment for the Property;
(iv) the ALTA Owner's Title Insurance Policy insuring the Buyer's
title to the property; and,
(v) any financing or mortgage fees including documentary stamps (if
customarily paid by Seller) and intangible tax on the note and
mortgage.
<PAGE>
T. Baldwin Martin Jr., Esq.
June 03, 1996
Page 6
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost
or expense within the jurisdiction where the Property is located.
13. A. The person executing this Offer as the Seller or on behalf of the
Seller warrants and represents to the Buyer that the undersigned has
full power and authority to execute and deliver this offer and the
Purchase Agreement and to perform the obligations of the Seller.
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full
power and authority to execute and deliver this Offer and the Purchase
Agreement and to perform the obligations of the Buyer.
BUYER:
CareMatrix Corporation
By: /s/ Andrew D. Gosman
------------------------
Name: Andrew D. Gosman
Title: President
The above Offer is hereby accepted in all respects.
Date: 6/8,1996
SELLER:
The Wesleyan Church Corporation
By: [ILLEGIBLE]
------------------------
Title: General Secretary
cc: Michael M. Gosman
James M. Clary, III, Esq.
William D. Ramabottom, CCIM
Attachment
<PAGE>
T. Baldwin Martin Jr., Esq.
June 03, 1996
Page 6
Diagram of Commercial Center and Office Park
ASSIGNMENT AGREEMENT
(Durham, North Carolina)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
W I T N E S S E T H
WHEREAS, Assignor has entered into that certain Purchase Agreement (the
"Purchase Agreement"), dated May 29, 1996, relating to a certain parcel of land
located in Durham, North Carolina (the "Land"), a copy of which is attached
hereto as Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred forty-eight (148) units
(the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Purchase Agreement to Assignee, and Assignee desires to assume such rights and
obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Purchase Agreement, and
Assignee hereby accepts the within assignment and assumes and agrees
with Assignor, to perform and comply with and to be bound by all of
the terms, covenants, agreements, provisions and conditions of the
Purchase Agreement on the part of Assignor thereunder to be performed
on and after the date hereof in the same manner and with the same
force and effect as if Assignee had originally executed the Purchase
Agreement.
2. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
2
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Purchase Agreement on or before the date hereof.
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, losses, injuries, liabilities
and expenses (including, without limitation, reasonable legal fees and
expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
----------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
----------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
PURCHASE AND SALE AGREEMENT
AGREEMENT made as of the 29 day of May, 1996 by and between CAREMATRIX
CORPORATION, a Delaware corporation (including any and all nominees permitted
hereunder, "Buyer"), having an address at 197 First Avenue, Needham,
Massachusetts 02194, and GARY M. HOCK, an individual ("Seller"), having an
address at do Hock Development Corporation, 4117 North Roxboro Road, Durham,
North Carolina 27704.
W I T N E S S E T H
In consideration of the mutual covenants herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller hereby agree as follows:
1. AGREEMENTS TO SELL AND PURCHASE; DESCRIPTION OF PROPERTY; NOMINEE.
(a) Purchase and Sale. Seller agrees to convey to Buyer and Buyer hereby
agrees to purchase from Seller, for the price and upon the terms and conditions
set forth herein, the land located at the intersection of Ben Franklin Blvd. and
Danube Lane (a/k/a Duke Lane) in Durham, North Carolina, containing
approximately 9.25 acres of land, described on the plan attached hereto and made
a part hereof as Exhibit 1.1, and all easements and rights of way appurtenant to
such land, and all of Seller's right, title and interest in and to any alleys,
strips and gores abutting or adjoining such land and in and to any highways,
streets, and ways abutting or adjoining the Land (hereinafter, collectively, the
"Property"). For title reference purposes, see deed(s) recorded in the Durham
County Registry of Deeds in Book 2151 at Page 934 of which the Property forms a
portion. Buyer and Seller acknowledge and agree that the final legal description
of the Property will be as set forth in the Survey (as hereinafter defined),
which description shall be acceptable to each of Buyer and Seller; and
(b) Intended Use. Seller understands and acknowledges that Buyer intends to
develop and use the Property as a 148-unit independent and assisted living
facility, together with related improvements, parking, and landscaping (the
"Intended Use"). Notwithstanding anything herein to the contrary, Seller makes
no representation or warranty that the Property is suitable for the Intended
Use, including, without limitation, zoning, subdivision, land use laws, rules,
regulating licenses and permits.
(c) Nominee. Seller acknowledges and agrees that Buyer shall have the right
to designate a nominee to take title to the Property by notice to Seller given
not later than the Closing Date (as defined below).
1
<PAGE>
2. PURCHASE PRICE; DEPOSIT; ADJUSTMENTS; ESCROW.
(a) Purchase Price: The agreed purchase price for the Property (the
"Purchase Price") is ONE MILLION TWO HUNDRED EIGHTY-FIVE THOUSAND DOLLARS
($l,285,000), which Purchase Price shall be payable as follows:
(i) a deposit (the "Deposit") in the amount of FIFTY THOUSAND DOLLARS
($50,000) has been paid prior to the date hereof, and is to be delivered to
Seller by the Escrow Agent at the time of delivery and recording of the Deed (as
defined below); and
(ii) ONE MILLION TWO HUNDRED THIRTY-FIVE THOUSAND DOLLARS ($1,235,000)
is to be paid by Buyer to Seller at the time of delivery and recording of the
Deed (as defined below) in cash or by certified, cashier's, treasurer's or bank
check or checks or by wire transfer to an account designated by Seller, which
designation shall be made not less than 72 hours prior to the Closing Date.
(b) Deposit. (i) The Deposit shall be held in an interest-bearing escrow
account as provided in Section 2(d) below, subject to the terms of this
Agreement, and shall be duly accounted for at the Closing (as defined below).
All interest on the Deposit is to be accounted for and shared equally between
Buyer and Seller if the Closing occurs; or paid to Buyer if the Deposit is
returned to Buyer under the terms of this Agreement; or if Seller shall retain
the Deposit under the provisions of Section 9(b) hereof, then the entire amount
of the interest shall be paid to Seller.
(ii) If Buyer exercises any of Buyer's options to terminate this
Agreement within the time periods provided herein, then the Deposit and all
other payments made to Seller by Buyer hereunder shall be promptly refunded in
full by Seller to Buyer, but in no event later than ten (10) calendar days after
such notice of termination is given. Notwithstanding the foregoing, the
Non-Refundable Deposit (as hereinafter defined), if paid, shall only be refunded
to Buyer in the event that Buyer has terminated this Agreement as a result of a
default by Seller or as a result of the failure of Seller to otherwise perform
its obligations hereunder. If Seller fails to authorize the Escrow Agent (as
defined below) to make said refund when due unless Seller is disputing the same
in good faith, Seller shall be responsible to pay Buyer interest on such funds
at a rate per annum equal to the Prime Rate or Base Rate of The Bank of Boston
plus ten percent (10%) per annum, commencing upon the date notice of termination
is given and continuing until said refund has been made in full and shall also
be responsible for all reasonable attorneys' fees and expenses and other
expenses, costs and disbursements incurred by Buyer in connection with the
collection thereof, whether or not suit is commenced.
2
<PAGE>
(c) Adjustments. The Purchase Price shall be adjusted to reflect the
following:
(i) Real property taxes with respect to the Property for the then
current fiscal tax period, shall be apportioned as of the Closing Date, and the
net amount shall be added to or deducted from the Purchase Price, as the case
may be.
(ii) If, on the Closing Date, the amount of real property taxes for
the then current fiscal tax period is not known or is estimated, the
apportionment of real property taxes called for herein shall be made on the
basis of the real property taxes for the preceding fiscal tax period or
estimate, respectively, and an appropriate reapportionment shall be made as soon
as the new rate and valuation can be ascertained for the then current fiscal tax
period for any increase or decrease (other than one attributable to the Buyer's
proposed use of the Property) in real estate taxes which may occur after the
Closing Date.
(iii) Each party shall pay its own attorney's fees incurred in
connection with the negotiation of this Agreement and consummation of the
transactions contemplated by this Agreement, except as otherwise expressly
provided herein. Seller shall pay the cost of all deed stamps or transfer taxes
assessed with respect to the sale of the Property, and recording fees for
releases and other documents required to clear title, if any. Buyer shall pay
for recording costs of the Deed and any loan documents relating to Buyer's
financing for the Property, as well as the costs of any survey, owner's or
lender's title insurance policy, environmental site assessment or appraisal
which Buyer may elect to obtain in connection with its acquisition of the
Property.
(iv) Except as provided above, at any time following the making of any
of the adjustments to the Purchase Price, the amount thereof shall prove to be
incorrect, or it should be discovered that some adjustment which should have
been made was inadvertently omitted altogether, the party in whose favor the
error was made shall pay the sum necessary to correct such error to the other
party promptly following receipt of notice of such error from such other party.
The provisions of this Section 2(c)(iv) shall survive the delivery of the Deed
for one (1) year.
(d) Escrow Account (i) The Deposit shall be held by First American Title
Insurance Company, One Financial Center, Boston, Massachusetts 02111, as escrow
agent (the "Escrow Agent"), in an interest-bearing account. Such account shall
be maintained until the Deposit and the interest thereon have been delivered to
Buyer, Seller or a court of competent jurisdiction in accordance with the
provisions of this Agreement, and shall terminate on the date of such delivery.
(ii) The Escrow Agent shall account for the Deposit in accordance with
the terms of this Agreement, or in such other manner as may be directed in a
joint written notice from Seller and Buyer directing some other disbursement of
the Deposit. If the Escrow Agent receives written notice from either Buyer or
Seller that the other party has defaulted in the performance of its obligations
under this Agreement or has failed to fulfill its obligations hereunder or that
any condition to the performance of obligations under this Agreement has not
been fulfilled within the
3
<PAGE>
time period stipulated, which notice shall describe in reasonable detail such
default, failure or non-performance, then the Escrow Agent shall (A) promptly
give notice to the party alleged to have defaulted or to have failed to fulfill
its obligation of the Escrow Agent's receipt of such notice from the other party
and shall enclose a copy of such notice from the other party, and (B) subject to
the provisions of Section 2(d)(iii) below which shall apply if a conflict
arises, on the fourteenth (14th) day after the giving of the notice referred to
in clause (A) above, deliver the Deposit and the interest thereon to the party
claiming the right to receive it.
(iii) If the Escrow Agent is uncertain as to its duties or actions
hereunder, or receives instructions or a notice from Buyer or Seller which are
in conflict with instructions or a notice from the other party or which, in the
reasonable opinion of the Escrow Agent, are in conflict with any of the
provisions of this Agreement, it shall be entitled to take any of the following
courses of action: (A) hold the Deposit as provided above in this Section 2(d)
and decline to take any further action until the Escrow Agent receives a joint
written direction from Buyer and Seller or an order of a court of competent
jurisdiction directing the disbursement of the Deposit, in which case the Escrow
Agent shall then disburse the Deposit in accordance with such direction; (B) in
the event of litigation between Buyer and Seller, deliver the Deposit and all
interest thereon to the clerk of any court in which such litigation is pending;
or (C) deliver the Deposit and all interest thereon to a court of competent
jurisdiction and commence an action for interpleader in such court, whereupon
the Escrow Agent shall have no further duty with respect to the Deposit.
(iv) The Escrow Agent shall not be liable for any action taken or
omitted in good faith and may rely, and shall be protected in acting or
refraining from acting in reliance, upon an opinion of counsel and upon any
directions, instructions, notices, certificates, instruments, requests, papers
or other documents believed by it to be genuine and to have been made, sent,
signed or presented by the proper party or parties.
(v) Notwithstanding any other provisions of this Agreement, Buyer and
Seller jointly indemnify and hold harmless the Escrow Agent against any losses,
costs, liabilities, claims and expenses incurred by the Escrow Agent arising out
of or in connection with its services under the terms of this Agreement,
including the costs and expenses of any interpleader action involving the
Deposit or of defending itself against any claim or liability. However, the
Escrow Agent will not charge any fee for its normal services hereunder as Escrow
Agent.
3. CLOSING; EXTENSIONS.
(a) Closing Date and Place. The time for the delivery of the Deed and for
the performance of the other terms and conditions of this Agreement (the
"Closing"), shall be 12:00 Noon on December 5, 1996 (as the same may be extended
pursuant to the provisions hereof, the "Closing Date") at the offices of Hutson
Hughes & Powell, P.A., 300 West Morgan Street, Durham, North Carolina 27702, or
at such other place or time as shall be mutually agreed upon in writing by Buyer
and Seller. It is agreed that time is of the essence.
4
<PAGE>
(b) Extension of Closing Date. Buyer shall have the right to extend the
Closing Date and each subsequent extended date of the Closing in order to
satisfy the conditions set forth in section 5(b)(v) hereof by written notice to
Seller given at least five (5) days in advance of the then applicable Closing
Date; however, no such extension may be made which will postpone the Closing
Date to a date subsequent to February 5, 1997. Each such extension notice shall
be accompanied by a payment to Seller in the amount of $5,000 (the
"Non-Refundable Deposit") for each thirty (30) day period (or fraction thereof)
included within the extension set forth in such notice. Any and all such
extension payments shall be non-refundable if the Closing does not occur (except
in the event of Seller's default or Seller's inability to otherwise comply with
its obligations hereunder), but shall be credited in full against the Purchase
Price if the Closing does occur.
4. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of Seller. Seller warrants and
represents to, and covenants and agrees with, Buyer as of the date hereof (and
on the Closing Date shall reaffirm all such representations, covenants and
warranties as of that date), as follows; provided, however, that the following
shall exclude matters caused by Buyer in the exercise of its rights hereunder
prior to the Closing:
(i) Seller holds the entire ownership interest in the Property and all
rights appurtenant thereto, and the signature of no other party is required to
convey any of such interests and rights.
(ii) Subject to Buyer's ability to obtain subdivision approval as
hereinafter provided, Seller has the legal right, power and authority to enter
into this Agreement and to perform all of its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms. Subject to Buyers ability to obtain
subdivision approval as hereinafter provided, the execution by Seller and
delivery of this Agreement, and the performance by Seller of its obligations
hereunder, will not conflict with, or result in a breach of, any of the terms,
covenants and provisions of any agreement or instrument to which Seller is a
party or by which it is bound, or, to the best of Seller's knowledge, any permit
or any Governmental Regulation (as defined below), regulation, order, judgment,
writ, injunction or decree of any court or governmental authority.
(iii) Subject to Buyer's ability to obtain subdivision approval as
hereinafter provided, no consent, approval or other authorization of, or
registration, declaration or filing with, any court or governmental agency or
commission is required for the due execution, delivery and performance of this
Agreement by Seller or for the validity or enforceability thereof against Seller
(iv) Seller has received no uncured notices, suits, orders, decrees or
judgments relative to violations of, nor to the best of Seller's knowledge, are
there any other violations of, (A) any easement, restrictive covenant or other
matter of record affecting the Property or any part thereof, or
5
<PAGE>
(B) any laws, statutes, ordinances, codes, regulations, rules, orders, or other
requirements of any local, state or federal authority or any other governmental
entity or agency having jurisdiction over the Property or any part thereof,
including, without limitation, any of the foregoing affecting zoning,
subdivision, building, health, traffic or flood control matters (all of the
foregoing, collectively, "Governmental Regulations").
(v) There are no other suits, actions or proceedings pending or, to
the best of Seller's knowledge, threatened, against or affecting the Property or
any of the transactions provided for herein before any court or administrative
agency or officer, and Seller is not in default with respect to any judgment,
order, writ, injunction, rule or regulation of any court or governmental agency
or office to which Seller is subject in any way affecting the Property or any of
the transactions provided for herein.
(vi) There are not presently pending or, to the best of Seller's
knowledge, threatened with respect to the Property (A) any special assessments
(except those which may arise from Buyer's development and utilization of the
Property), or (B) any condemnation or eminent domain proceedings.
(vii) Seller is familiar with the provisions of Sections 897 and 1445
of the Internal Revenue Code (the "Code"), and Seller is not a "foreign person"
as that term is defined in Section 1445(f)(3) of the Code.
(viii) Except for the Declaration (as hereinafter defined), there are
no leases, subleases, licenses or other rental agreements or occupancy
agreements (written or oral) with regard to the Property.
(ix) There are no monetary liens currently affecting the Property.
(x) Prior to the Closing, Seller shall perform the Seller's
obligations set forth in Section 5(a)(ix) hereof, such that the Property will
have adequate, direct, indefeasible legal and practical access of record for
ingress from and egress to a public way at or prior to the Closing.
(xi) Seller has received no uncured notices, suits, orders, decrees or
judgments relative to violations of Government Regulations which relate to
hazardous waste, hazardous substance or oil or hazardous materials in, on or
under the Property nor has Seller has never generated, stored (except in
material compliance with Governmental Regulations), handled or disposed of any
hazardous substance, hazardous waste, hazardous materials or oil (as any of such
terms are defined under applicable Governmental Regulations) in, on or under the
Property, and, to the best of Seller's knowledge, without any independent
inquiry, there has been no release of any such hazardous substance, hazardous
waste, hazardous materials or oil into the environment from the Property, or in,
on or under the Property.
6
<PAGE>
(b) Representations and Warranties of Buyer. Buyer warrants and represents
to, and covenants and agrees with, Seller as follows:
(i) Buyer has the legal right, power and authority to enter into this
Agreement and to perform all of its obligations hereunder, and the execution and
delivery of this Agreement and the performance by Buyer of its obligations
hereunder, have been or will be duly authorized by all necessary corporate
action at the Closing Date; and this Agreement and Buyer's performance hereunder
will not conflict with, or result in a breach of, any of the terms, covenants
and provisions of the Articles of Organization or By-Laws of Buyer, as same may
have been amended or, to the best of Buyer's knowledge, or order, judgment,
writ, injunction or decree of any court or any agreement or instrument to which
Buyer is a party or by which it is bound.
(ii) The officer signing this Agreement on behalf of Buyer is duly
authorized to execute the same on behalf of Buyer and Buyer shall provide a
corporate resolution to such effect at the Closing.
(c) Liability for Warranties and Representations. Seller agrees to
indemnify and hold Buyer harmless from and against any and all claims, losses,
liabilities, damages, expenses and fees, including without limitation,
reasonable attorneys' fees and expenses, incurred by Buyer as the result of the
failure of any of Seller's warranties and representations contained in this
Article 4. Conversely, Buyer agrees to indemnify and hold Seller harmless from
and against any and all claims, losses, liabilities, damages, expenses and fees,
including without limitation, reasonable attorneys' fees and expenses, incurred
by Seller as the result of the failure of any of Buyer's warranties and
representations contained in this Article 4. The provisions of this Article 4
shall survive the delivery of the Deed for one (1) year.
5. RIGHTS AND OBLIGATIONS OF THE PARTIES PRIOR TO CLOSING: CONDITIONS TO
CLOSING.
(a) Seller's Covenants. Seller covenants that between the date of this
Agreement and the Closing:
(i) Buyer and its representatives, agents, contractors, architects and
engineers, and each of their respective officers, directors, agents, employees,
representatives, and designees shall, upon prior notice to Seller, have access
to the Property at any time and from time to time, at Buyer's sole cost and
expense: (A) to show the Property to third parties (including, without
limitation, contractors, engineers, architects, attorneys, insurers, banks and
other lenders or investors, and prospective tenants, occupants or buyers) and
(B) to perform any and all tests, borings, inspections, environmental site
assessments and measurements which Buyer reasonably deems necessary or
appropriate hereunder, including without limitation, for purposes of locating
all utility conduits
7
<PAGE>
serving the Property, making soil borings, performing soil compaction tests,
performing mechanical or structural inspections, conducting any of the other
tests described in Section 5(b) below, and making such surveys and other
topographical and engineering studies, and other tests, surveys and studies as
Buyer or Buyer's lender may deem necessary or appropriate. Promptly following
such tests and surveys, Buyer shall restore any disturbed Property to its
condition prior to such tests and surveys and shall promptly remove or bond off
any liens resulting therefrom after receipt of written notice thereof from
Seller. In the event that Buyer fails to so restore the Property or remove or
bond off any such liens within thirty (30) days after written notice from
Seller, Seller may, unless Buyer is disputing the same in good faith, apply that
portion of the Deposit as shall be necessary to restore the Property or remove
or bond off any such liens. Buyer hereby indemnifies and holds Seller harmless
from any cost or expense (including, without limitation, reasonable attorney's
fees) suffered or incurred by Seller caused by the entry upon the Property prior
to the Closing by Buyer, its agents, servants and employees, including but not
limited to, any injury to any person arising therefrom, for a period of one (1)
year (which shall be deemed to include any claim raised during such one (1)
period notwithstanding that such claim may be settled after such one (1) year
period) following the Closing or the earlier termination hereof.
(ii) Buyer may discuss the Project and/or the Property, upon notice to
the Seller with Seller having the right to participate therein, with any
federal, county, state or local officials or authorities concerning variances,
permits, certificates, consents, approvals, and other Governmental Regulations
for the use, operation, leasing and/or sale of the Property.
(iii) Promptly upon its execution hereof (to the extent the same have
not been previously delivered to Buyer), Seller will furnish to Buyer for
Buyer's review and approval complete and accurate copies of all records and
documentation and all information, in its possession (and as to title
information in the possession of Seller's attorney) concerning the ownership and
condition of the Property (for informational purposes, without warranty or
representation regarding its accuracy), including, without limitation, any
available plans and surveys, engineering reports, recorded title documents,
title abstracts and title insurance policies, soil tests, service contracts,
environmental site assessments, permits, approvals and building specifications,
and such other available items as requested by Buyer. Except as necessary in
connection with the permitting and approval process for the Project, Buyer will
hold all such documents, data and information obtained solely from Seller,
confidential. Upon the consummation of the Closing or the termination of this
Agreement as provided herein, Buyer will promptly return to Seller all such
information obtained from Seller.
(iv) Seller shall not permit any new occupancy of, or enter into any
new lease for, space in or on the Property, or any portion thereof, or enter
into or renew any management, maintenance or other agreement affecting the
Property, or enter into or renew any management, maintenance or other agreement
affecting the Property, unless Buyer has previously approved such occupancy,
lease or agreement in writing. Seller shall not modify its correct level of
maintenance of the Property.
8
<PAGE>
(v) If filed prior to the Closing, Seller shall prosecute, and shall
not withdraw, settle or otherwise compromise, any protest or reduction
proceeding affecting real estate taxes assessed against the Property for any
fiscal period in which the Closing is to occur or any subsequent fiscal period
without the prior written consent of Buyer. Real estate tax refunds and credits
received after the Closing Date which are attributable to the fiscal tax year
during which the Closing Date occurs shall be apportioned between Seller and
Buyer, after deducting the expenses of collection thereof, which obligation
shall survive the Closing.
(vi) Seller shall not execute any new mortgage of the Property or
otherwise encumber the Property in an amount which, together with the amount of
all other monetary liens, will exceed the net amount of the Purchase Price to be
received by Seller at the Closing, after deduction (if any) for the adjustments
described in Section 2(c) above and payment of the broker's commission, if any,
described in Section 8(e) below or create any other new encumbrance or
restriction affecting the Property other than the Declaration.
(vii) Seller shall not modify or alter the Property in any material
respect.
(viii) The Seller shall deliver to the Buyer at or prior to the
Closing, in recordable form and in such other form and substance reasonably
satisfactory to the Buyer and Seller, an agreement (the "Restriction Agreement")
restricting the remaining portion of the land other than the Property (the
"Remaining Land") in the park known as "Independence Park" (and shown on the
Master Plan for such park) owned or controlled by the Seller or any affiliate,
from being used for the construction, operation or development of an independent
or assisted living facility for a period commencing on the date of the Closing
and ending on the earlier to occur of (i) six (6) years thereafter, or (ii) the
date (the "Outside Date") on which the Property is no longer operated for the
Intended Use (or any similar use) (the "Restriction Period") and restricting the
Seller (or any affiliate) from entering into any agreement for the sale of the
Remaining Land for any such use.
(ix) As a condition to Buyer's obligation to close hereunder, Seller
shall at its sole cost and expense prior to the Closing, complete the
construction of Ben Franklin Blvd. and Danube Lane as shown on Exhibit 1.1
attached hereto, but only in the event that completion of the same is required
under any Governmental Regulation affecting the Property or Independence Park,
or is required in order to permit Buyer to develop the Property for its Intended
Use. In the event that completion of such streets is not so required, Seller
shall (A) complete the construction of Ben Franklin Blvd. to a point which is at
least fifty (50) feet beyond the easterly portion of Buyer's proposed driveway,
and (B) remove any debris, grade, topsoil and seed the remaining portion of Ben
Franklin Blvd.
(b) Certain Conditions to Buyer's Obligations. In addition to the other
conditions to be satisfied hereunder, Buyer's obligations hereunder are
expressly contingent upon fulfillment of all of the following terms and
conditions:
9
<PAGE>
(i) Buyer may make or cause to be made all site assessments, tests,
borings and inspections it deems necessary to determine if there are any
"hazardous wastes", "hazardous substances", "oil" or "hazardous materials" (as
all those terms are defined under applicable Governmental Regulations), or any
medical wastes, radioactive materials, lead, asbestos, urea formaldehyde, or
radon, in, on, about, under or in the area of the Property, and shall be
satisfied in its sole discretion with the results of all such site assessments,
tests, borings and inspections.
(ii) Buyer may make or cause to be made an instrument survey of the
Property prior to July 31, 1996 (and updated on the Closing Date), and such
survey shall disclose no matters affecting the Property which are reasonably
determined by Buyer to adversely affect the title or value of the Property or
the use of the Property for the Intended Use (the "Survey").
(iii) Buyer shall have obtained a commitment from a title insurance
company selected by Buyer pursuant to which such company agrees to insure title
to the Property, at normal premium and endorsement rates, in an ALTA form, which
commitment shall delete the printed exceptions for mechanics' and materialmans'
liens, parties in possession and surveys, shall include a so-called
Comprehensive Endorsement, and shall (A) affirmatively insure that there will be
no violation of any applicable restrictions pertaining to the Property if used,
operated, leased and/or sold as contemplated herein, (B) insure that the
Property has legal and actual access to an identified public roadway, (C)
provide that all such affirmative coverage's will be available to future
purchasers and their mortgagees at normal premium rates, and (D) provide such
other affirmative coverage 5 as Buyer may reasonably require. On or before July
31, 1996 (except with respect to matters which first become known to Buyer in
any updates of the commitment, as to which Buyer shall have the later of ten
(10) days after receiving notice of same or the Closing to notify Seller of any
objections to such matters), Buyer shall notify Seller in writing of any items
in such commitment to which Buyer objects ("Title Defects"). Buyer and Seller
acknowledge and agree that the Restriction Agreement and the items set forth in
Sections 6(a)(ii)(A)(I)-(VI) shall not be deemed to be Title Defects and shall
be included within the definition of Permitted Encumbrances (as defined below).
Seller shall use diligent efforts to cure any Title Defects within thirty (30)
days after receipt of such notice. In the event that Seller fails to so cure any
such Title Defects to Buyer's and Buyer's title company's satisfaction, then
Buyer shall have the right (y) to terminate this Agreement, and the Deposit and
the Non-Refundable Deposit, if paid, together with all interest thereon, shall
be immediately refunded to Buyer, whereupon all obligations of the parties
hereto shall cease and this Agreement shall be void and without recourse to the
parties hereto except for those obligations which expressly survive the
termination hereof, or (z) accept title to, and possession of, the Property
subject to the Title Defects without any reduction of the Purchase Price. Any
items as to which Buyer does not object or to which Buyer agrees to waive its
right to terminate this Agreement shall be hereinafter referred to as "Permitted
Encumbrances".
(iv) Buyer shall have obtained surveys, engineering reports,
percolation tests, commitment letters and other evidence satisfactory to Buyer
indicating that: (A) the Property
10
<PAGE>
contains or is serviced by adequate water supplies and (B) adequate utilities
are available (or will be at Closing) at the boundaries of the Land without the
need for any third party easements not already unconditionally appurtenant to
the Property.
(v) Buyer shall have obtained, at its sole cost and expense, all
zoning, subdivision and environmental permits and approvals and any other
applicable permit, approval, consent or license as may be necessary for the
Intended Use, including without limitation, approval of the Intended Use by the
appropriate governmental authorities and boards and all requisite licensure
approvals and for certificates required under applicable law (to the extent the
same may pursuant to applicable law be obtained prior to commencement of
construction of the project), and the relevant appeal periods for all such
permits, approvals, licenses and consents shall have expired without any appeal
having been taken. Buyer agrees to use good faith efforts to obtain the same as
expeditiously as is reasonably possible and to keep Seller apprised of its
efforts in such regard. On or before June 20, 1996, Buyer shall submit to Seller
a written notice setting forth the permits and approvals which Buyer then
believes will be required hereunder. On or before July 19, 1996, Buyer shall
submit to Seller a written notice updating Seller as to the status of the items
set forth on the previous notice. Notwithstanding the foregoing, the failure of
Buyer to include any permit, approval, consent or license in either such notice
shall not be deemed a waiver by Buyer of its rights under this Section to
terminate this Agreement in the event that Buyer has not obtained any such
permit, approval, consent or license on or before the original or any extended
time for Closing.
(vi) Buyer shall conduct such surveys, analyses, inspections, and
tests of the Property as reasonably deemed necessary by the Buyer and shall be
satisfied that the soil, topography and other conditions on the Property are
suitable for the development of the Property for the Intended Use.
(vii) Buyer shall have reviewed prior to June 6, 1996 the Declaration
and shall be satisfied that the Declaration does not adversely affect the
development of the Property for the Intended Use; provided that Seller shall
have delivered to Buyer the materials and/or information as set forth in the
Declaration on or prior to May 31, 1996.
If the foregoing conditions specified in subsections (i), (ii), (iii), (iv)
and (vi) above are not fully satisfied in a manner which is acceptable to Buyer
in its sole discretion on or before July 31, 1996 (or the Closing with respect
to the updates set forth in subsections (ii) and (iii)), or June 6, 1996 with
respect to subsection (vii), or if any records or documentation or information
provided by Seller is unsatisfactory to Buyer, Buyer shall have the right to
notify Seller thereof on or before 5:00 p.m. on July 31, 1996 (or the Closing
with respect to the updates set forth in subsections (ii) and (iii)), or June 6,
1996 with respect to subsection (vii), which notice shall specify which
condition(s) (has) (have) not been satisfied, then this Agreement shall be
terminated, and the Deposit and the Non-Refundable Deposit, if paid, together
with all interest thereon, shall be immediately refunded to Buyer, whereupon all
obligations of the parties hereto shall cease and this Agreement shall be void
and without recourse to the parties hereto except for those obligations which
expressly survive the termination hereof.
11
<PAGE>
If any of the other conditions set forth in Sections 5(a)(ix) or 5(b)(v)
are not fully satisfied in a manner which is acceptable to Buyer in its sole
discretion on or before the original or any extended time for Closing, Buyer
shall notify Seller thereof prior to the Closing Date, which notice shall
specify which condition(s) has (have) not been satisfied. In such event, this
Agreement shall be terminated, and the Deposit and the Non-Refundable Deposit
(in the case of a termination for Seller's failure to comply with Section
5(a)(ix)), if paid, together with all interest thereon, shall be immediately
refunded to Buyer, whereupon all obligations of the parties hereto shall cease
and this Agreement shall be void and without recourse to the parties hereto
except for those obligations which expressly survive the termination hereof.
6. CLOSING OBLIGATIONS; ESCROW INSTRUCTIONS.
(a) Seller's Closing Obligations. On the Closing Date, Seller shall:
(i) Deliver to Buyer full possession of the Property: (A) in the same
condition as it is as of the date hereof subject only to conditions caused by
Buyer's exercise of its rights hereunder prior to the Closing, (B) in compliance
with all encumbrances expressly permitted by this Agreement, (C) free and clear
of all tenants and occupants and (D) subject only to the Permitted Encumbrances.
Buyer shall be entitled to an inspection of the Property prior to the Closing
Date in order to determine whether the condition thereof complies with the terms
of this Section.
(ii) Deliver to Buyer, in form and substance satisfactory to Buyer,
the following:
(A) a good and sufficient special warranty deed (the "Deed")
conveying good and clear record and marketable title to the Property insurable
as provided in Section 5(b)(iii) above, which shall convey title free from all
liens, encumbrances and encroachments except: (I) provisions of building and
zoning laws existing as of the date hereof; (II) ad valorem taxes for the then
current fiscal tax period as are not yet due and payable on the Closing Date
(which shall be adjusted as provided herein), provided that if the Property is a
portion of a larger tax parcel, then Buyer shall take title subject only the
proportionate share of such taxes as relate to the Property; (III) such liens
for betterment charges as may be assessed on the Property after the Closing
Date; (IV) the Permitted Encumbrances; (V) the Declaration of Covenants,
Conditions and Restrictions for Independence Park, executed by Seller on
February 22, 1996, (the "Declaration"); and (VI) items (not objected to by Buyer
as provided herein) shown on the Survey.
(B) An Assignment of Seller's entire interest in any permits,
licenses or approvals affecting the Property, if any, provided, however, in the
absence of an express assignment, delivery of the Deed will conclusively be
deemed to constitute the assignment of all of such permits, licenses and
approvals to Buyer);
12
<PAGE>
(C) Affidavits to Buyer's title insurer as to parties in
possession or with a right to possession of, and mechanic's liens (other than
for Buyer's activities) with respect to, the Property, which affidavits shall be
sufficient to have the normal printed exceptions with respect to such matters
deleted from Buyer's and Buyer's lender's title insurance policy(ies).
(D) An Affidavit certifying that Seller is not a "foreign person"
as of the Closing Date, as provided in Section 4(a)(xv) hereof.
(E) A certificate by Seller to the effect that all of the
representations and warranties set forth in Section 4 remain true and correct as
of the Closing Date except to the extent the same may have changed in accordance
with the terms and conditions of this Agreement.
(F) A 1099-B form.
(G) A W-9 form stating that no backup withholding is necessary to
disburse Seller's share, if any, of the interest earned on the Deposit.
(H) Such documents, certificates and instruments reasonably
deemed necessary or appropriate by Buyer's and Seller's counsel to effectuate
the transactions which are the subject of this Agreement.
(I) The Restriction Agreement.
(J) Such easements and maintenance agreements (in favor of Buyer
and Seller) as shall be reasonably necessary for the purposes of consummating
the transactions contemplated hereby, in form and substance reasonably
satisfactory to each of Buyer and Seller, for access and construction,
maintenance and operation of utility lines, provided the same will not violate
any Governmental Regulation affecting Independence Park or the Property and,
provided further, that the same will not in any way adversely affect Buyer's
proposed development of the Property for its Intended Use or Seller's operation
of Independence Park.
(K) All other documents expressly required by this Agreement to
be delivered by Seller.
(iii) To enable Seller to make conveyance as herein provided, at the
time of delivery of the Deed, Seller shall use the Purchase Price or any portion
thereof to clear title to the Property of any or all monetary liens (unless
bonded over to the satisfaction of Buyer's title insurance company), and all
instruments so procured shall be recorded simultaneously with the delivery of
the Deed, or provisions reasonably satisfactory to Buyer's attorney shall be
made prior to the Closing Date for recording thereof as soon as reasonably
practicable after the Closing Date.
13
<PAGE>
(b) Buyer's Closing Obligations. At the Closing, Buyer shall:
(i) Deliver to Seller, in immediately available funds, the balance of
the Purchase Price, as adjusted for apportionment's under Section 2 above.
(ii) Deliver any other documents expressly required by this Agreement
to be delivered by Buyer.
(iii) A certificate by Buyer to the effect that all of the
representations and warranties set forth in Section 4 remain true and correct as
of the Closing Date except to the extent the same may have changed in accordance
with the terms and conditions of this Agreement.
(iv) Counterparts of the agreements set forth in Section 6(a)(ii)(J)
hereof.
(v) Such documents, certificates and instruments reasonably deemed
necessary or appropriate by Seller's and Buyer's counsel to effectuate the
transactions which are the subject of this Agreement.
7. ADDITIONAL OBLIGATIONS.
(a) Agreement of Plans. Buyer acknowledges and agrees that the exterior of
the project shall conform in all reasonable respects with the architectural
integrity of Independence Park, provided the same shall not result in any
material increase in the cost of construction of the project as originally
intended. Buyer and Seller shall use good faith efforts to agree on Buyer's
plans for the exterior of the project. In the event that Buyer and Seller are
unable to so agree on or before July 31, 1996 notwithstanding their use of good
faith efforts to do so, then Buyer and Seller shall have the right to terminate
this Agreement by written notice given within five (5) business days thereafter,
in which event the Escrow Agent shall return to Buyer the Deposit, together with
accrued interest thereon, and the obligations of all parties hereunder shall
cease except for those obligations which expressly survive the termination
hereof.
(b) Right of First Refusal
(i) In the event that at any time after the date hereof, in the case
of a nursing home, or after the Restriction Period, in the case of an
independent or assisted living facility, Seller receives a bona fide third party
offer to purchase any portion of the Remaining Land for the purpose of
developing, constructing or operating any independent or assisted living
facility or nursing home, which offer Seller intends to accept, Seller shall
promptly notify Buyer and identify the property available (the "Offered
Property") and shall set forth the terms and conditions on which it is willing
to sell the Offered Property. Buyer may, by written notice to Seller (the
"Election
14
<PAGE>
Notice") given within fifteen (15) days after receipt of such notice, elect to
purchase the Offered Property on the terms so offered by Seller (the "Offered
Terms").
(ii) If Buyer elects to purchase the Offered Property, Buyer and
Seller shall enter into an agreement (the "First Refusal Agreement")
incorporating the terms contained in Seller's notice, except that in the event
that any offer or intends to construct a nursing home on the Offered Property
and has obtained (or has made arrangements to obtain) a Certificate of Need
therefor, then (A) Buyer and Seller shall enter into the first Refusal Agreement
within thirty (30) days after the date of the Election Notice, and (B) Buyer
shall, during such thirty (30) day period, begin to diligently pursue obtaining
(or making arrangements to obtain) a Certificate of Need. In such case, the
First Refusal Agreement shall incorporate the terms contained in Seller's
notice. Buyer shall be entitled to any due diligence periods or contingencies
set forth in Seller's notice, and in addition, shall have an additional
contingency for the sole purpose of enabling Buyer to obtain (or make
arrangements to obtain) a Certificate of Need, which additional contingency
shall be for a period of one hundred eighty (180) days from the date of the
Election Notice. In the event that Buyer does not elect to purchase the Offered
Property, Seller may sell the Offered Property on the Offered Terms. In the
event that Seller does not so sell the Offered Property on the Offered Terms,
Seller must notify Buyer of any new terms upon which Seller desires to sell the
offered Property, and Buyer's right of first refusal hereunder shall thereupon
be revised with respect to such new terms.
(c) Term of Right of First Refusal. The right of first refusal set forth in
subsection (b) above shall expire, in the case of an independent or assisted
living facility, on the earlier to occur of (i) two (2) years after the
Restriction Period; (ii) the Outside Date; (iii) with respect to any particular
Offered Property, the Buyer's election not to exercise its rights hereunder to
purchase the same; provided, and on the condition that, the Seller shall only be
entitled to sell, and shall have sold, the Offered Property on the Offered
Terms; or (iv) in the event that the Closing does not occur, upon the
termination of this Agreement. The right of first refusal shall expire, in the
case of a nursing home, on the earlier to occur of (w) six (6) years after the
Closing; (x) the Outside Date; (y) with respect to any particular Offered
Property, the Buyer's election not to exercise its rights hereunder to purchase
the same; provided, and on the condition that, the Seller shall only be entitled
to sell, and shall have sold, the Offered Property on the Offered Terms; or (z)
in the event that the Closing does not occur, upon the termination of this
Agreement.
8. CONDEMNATION. In the event that all or any part of the Property shall be
acquired or condemned for any public or quasi-public use or purpose, or if any
acquisition or condemnation proceedings shall be threatened or begun prior to
the Closing, Buyer shall have the option to either terminate this Agreement, in
which event the Escrow Agent shall return to Buyer the Deposit, together with
accrued interest thereon, and the obligations of all parties hereunder shall
cease except for those obligations which expressly survive the termination
hereof, or to proceed, subject to all other terms, covenants, conditions,
representations and warranties of this Agreement, to the Closing and receive
title to the Property, receiving, however, any and all damages, awards or other
15
<PAGE>
compensation arising from or attributable to such acquisition or condemnation
proceedings. Buyer shall have the right to participate in any such proceedings.
9. FAILURE OR INABILITY TO PERFORM; DEFAULTS; REMEDIES.
(a) Seller's Default (i) If, on the Closing Date, (A) Seller shall be
unable to give title or make conveyance or deliver possession of the Property as
required by this Agreement or to satisfy any of the terms and conditions
precedent to Closing set forth herein, or (B) any of Seller's warranties and
representations contained herein are not fully accurate as of the Closing Date
(collectively, "Seller's Obligations"), the time for performance hereunder shall
be extended for such period, not to exceed ninety (90) days, as shall be
reasonably specified by Buyer, and Seller use diligent efforts to satisfy and
perform all of Seller's Obligations. If; at the expiration of such extended time
for performance, despite having used such diligent efforts Seller shall remain
unable satisfy and perform all of Seller's Obligations, then Buyer shall have
the option, at Buyer's sole discretion: (I) to terminate this Agreement by
notice given to Seller, whereupon the Deposit and the Non-Refundable Deposit (if
paid), together with all interest and other sums paid by Buyer hereunder, shall
be promptly refunded by Buyer and all obligations of the parties hereto shall
cease and this Agreement shall be void and without recourse to the parties
hereto, excluding, however, those provisions hereof which are expressly provided
herein to survive termination of the Agreement, or (II) to accept title to the
Property as provided in Section 9(a)(ii) below. In the event that Seller seeks
relief as a debtor under any applicable law, including without limitation the
federal bankruptcy code, or upon the involuntary commencement of any such
proceeding, Buyer shall have the right of possession of the Property pending the
Closing and shall be entitled to any and all rights pursuant to 11 U.S.C.
ss.365(i)and (ii). In the event of any default hereunder by Seller (i.e.,
Seller's failure to perform its obligations hereunder where such failure is not
excused by any of the express terms of this Agreement) Buyer's sole remedy
(subject to the next succeeding sentence) shall be the right to obtain specific
performance, it being mutually agreed that Buyer's damages would be difficult to
ascertain. In the event that specific performance is not available for any
reason, Seller shall reimburse Buyer on demand for all costs and expenses
incurred in connection with its proposed acquisition and development of the
Property including, without limitation, reasonable attorneys fees and
disbursements.
(ii) Buyer shall have the election, at the original or at any extended
time for Closing, to accept such title to, and possession of; the Property as
Seller can deliver in its then condition and to thereupon pay the Purchase Price
without any deductions, except such amount necessary to remove all mortgages,
liens or encumbrances which secure the payment of money and such adjustments
computed in accordance with Section 2(b) above, in which case Seller shall
convey such title.
(b) Buyer's Default. If Buyer shall fail to fulfill its agreements herein
on the Closing Date, Seller's sole and exclusive remedy shall be to retain the
Deposit (and the Non-Refundable Deposit, if paid) and any interest thereon as
full and complete liquidated damages, both at law and in equity,
16
<PAGE>
whereupon this Agreement shall terminate without further recourse to either
party except for those obligations which expressly survive the termination
hereof. In addition, nothing contained herein shall be construed so as to
prevent Seller from negotiating and/or accepting another offer to sell and/or
lease all or any part of the Property to any third parry, after Buyer's default
under this Agreement.
10. MISCELLANEOUS.
(a) Tax Identification Number. Seller warrants and represents that Seller's
federal tax identification number is ###-##-####, and Buyer warrants and
represents that Buyer's federal tax identification number is ###-##-####. Seller
and Buyer each acknowledge that the foregoing information will be relied upon in
reporting the transactions contemplated hereby to appropriate governmental
authorities.
(b) Agreement Not an Offer. The submission of any draft of this Agreement
or any portion thereof does not constitute an offer to buy the Property, it
being acknowledged and agreed that neither Buyer nor Seller shall be legally
obligated with respect to the purchase or sale of the Property unless and until
this Agreement has been executed by both Buyer and Seller and a fully executed
copy has been delivered to each of Buyer and Seller.
(c) Exhibits. The Exhibits attached hereto are incorporated herein by this
reference and made a part hereof.
(d) Notices. All notices or communications required or permitted hereunder
shall be in writing and delivered by hand or mailed by certified mail, return
receipt requested, postage and registration or certification charges prepaid, or
by nationally recognized overnight courier service, or by telefax, to the party
entitled thereto as follows:
If to Seller:
Mr. Gary Hock
c/o Hock Development Corporation
4117 North Roxboro Road
Durham, North Carolina 27704
Fax No.: (919)471-6140
with a courtesy copy to:
Hutson Hughes & Powell, P.A.
300 West Morgan Street
17
<PAGE>
Suite 1500
Durham, North Carolina 27702
Attention: Stephanie C. Powell, Esq.
Fax No.: (919)683-1276
If to Buyer:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention: Ronald K. DeCola
Richard P. Zermani, Esq.
Fax No.: (617)433-1190
with a courtesy copy to:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
Fax No.: (617)433-1190
or such other party(ies), address(es) or telefax number(s) as either parry shall
specify by written notice to the other from time to time. Any such notice or
communication shall be deemed to have been given as of the date of its receipt
or delivery.
(e) Broker. Each of Buyer and Seller hereby represents, covenants and
warrants to the other that the party so representing has dealt with no broker or
other person entitled to a commission in connection with the negotiation or
execution of this Agreement or the consummation of the transactions contemplated
hereby. Further, each of Buyer and Seller agrees to indemnify and hold harmless
the other from any loss, cost or expense which such non-indemnifying party may
incur as a result of any ina ccuracy in the other party's warranties and
representations as set forth in the prior sentence.
(f) Entire Agreement: Rules of Construction. This Agreement may be executed
in multiple counterparts; sets forth the entire agreement between the parties;
merges all prior and contemporaneous agreements, understandings, warranties, or
representations,; shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; and may be canceled,
modified or amended only by a written instrument executed by both Seller and
Buyer. The captions and section headings are used only as a matter of
convenience and are not to be considered a part of this Agreement or to be used
in determining the intent of the parties.
18
<PAGE>
(g) Further Assurances. Upon Buyer's request, Seller agrees to execute and
deliver to Buyer such additional instruments, certificates and documents as
Buyer may reasonably require, whether or not after the Closing Date, in order to
provide Buyer with the rights and benefits to which Buyer is entitled under this
Agreement.
(h) Notice of Agreement. Buyer shall have the right to record and Seller
agrees to execute and acknowledge a notice or memorandum of agreement provided
that a termination memorandum is also executed, and held in escrow by Seller's
counsel. Seller's counsel shall hold such memorandum in escrow pending
instructions from each of Seller and Buyer that this Agreement has terminated
and that such memorandum may be recorded.
(i) Time of the Essence. Time is of the essence for each and every date set
forth in this Agreement. In the event that the time for performance of any
obligation hereunder shall fall on a Saturday, Sunday or holiday, then the same
shall be extended to the next business day.
(j) Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if each party had signed the same document.
All counterparts shall be construed together and shall constitute an agreement.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it
to be executed by their respective duly authorized representatives, as an
instrument under seal as of the day and year first above written.
WITNESSES: BUYER:
CAREMATRIX CORPORATION
[ILLEGIBLE] By: /s/ Andrew Gosman
- ----------------------------- ---------------------------
Name: Andrew Gosman
Title: President
SELLER:
[ILLEGIBLE] /s/ Gary M. Hock
- ----------------------------- ------------------------------
GARY M. HOCK
ESCROW AGENT:
FIRST AMERICAN TITLE INSURANCE
COMPANY
/s/ Marybeth Russo By: /s/ Annette Bennett
- ----------------------------- ---------------------------
Name: Annette Bennett
Title: Vice President
20
<PAGE>
Exhibit 1.1
[Property Description]
21
<PAGE>
[Lot Diagram]
ASSIGNMENT AGREEMENT
(Livingston, New Jersey)
THIS ASSIGNMENT AGREEMENT made the 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee") .
WITNESSETH
WHEREAS, Assignor is negotiating a Purchase Agreement (the "Purchase
Agreement") relating to a certain parcel of land located in Livingston, New
Jersey (the "Land");
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred eighteen (118) units
(the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, upon execution of the Purchase Agreement, Assignor desires to
assign its rights and obligations under the Purchase Agreement to Assignee, and
Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Upon execution of the Purchase Agreement, Assignor hereby agrees to
assign, set over and transfer unto Assignee to have and to hold from
and after such date, all of the right, title and interest of Assignor
in, to and under the Purchase Agreement, and Assignee agrees to accept
such assignment and to assume and agree with Assignor, to perform and
comply with and to be bound by all of the terms, covenants,
agreements, provisions and conditions of the Purchase Agreement on the
part of Assignor thereunder to be performed on and after such
assignment, in the same manner and with the same force and effect as
if Assignee had originally executed the Purchase Agreement.
2. Assignor and Assignee agree that Assignor shall act as developer of
the Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
2
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Purchase Agreement on or before the date of such
assignment.
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date of such assignment.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, losses, injuries, liabilities
and expenses (including, without limitation, reasonable legal fees and
expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CHANCELLOR OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
-------------------------------------
Name: James M. Clary
Title:
ASSIGNMENT AND ASSUMPTION OF MANAGEMENT AGREEMENT
(Park Ridge, New Jersey)
THIS AGREEMENT made this 3rd day of July, 1996, by and between CCC of New
Jersey, Inc., a Delaware corporation ("Assignor"), and CareMatrix of
Massachusetts, Inc., a Delaware corporation ("Assignee"').
WITNESSETH
WHEREAS, Assignor is the Manager under that certain Management Agreement
(the "Management Agreement"), dated June 23, 1995, between SVT Corporation and
Assignor relating to the management of the two hundred ten (210) licensed bed
nursing home facility, comprised of one hundred eighty (180) long term care beds
and thirty (30) residential care beds, to be located in Park Ridge, New Jersey
(the "Facility"), a copy of which is attached hereto as Exhibit A; and
WHEREAS, upon the completion of the construction of the Facility, Assignor
desires for Assignee to manage the Facility.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Management Agreement,
and Assignee hereby accepts the within assignment and assumes and
agrees with Assignor, to perform and comply with and to be bound by
all of the terms, covenants, agreements, provisions and conditions of
the Management Agreement on the part of the manager thereunder to be
performed on and after the date hereof in the same manner and with the
same force and effect as if Assignee had originally executed the
Management Agreement as manager.
2. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 4 hereof) accruing
or arising under the Management Agreement on or before the date
hereof.
3. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Management
Agreement after the date hereof
4. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
5. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts and
(iii) may not be modified orally, but only by a writing signed by both
parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CCC OF NEW JERSEY, INC
By: /s/ James M. Clary
-------------------------------------
Name: James M. Clary
Title:
ASSIGNEE:
CAREMATRIX OF MASSACHUSETTS By.
By: /s/ James M. Clary
-------------------------------------
Name: James M. Clary
Title:
<PAGE>
MANAGEMENT AGREEMENT
Between
SVT CORPORATION
And
CCC OF NEW JERSEY, INC.
<PAGE>
TABLE OF CONTENTS
Section 1 - Definitions
Section 2 - Agreement to Manage and Operate the Facility
Section 3 - Management and Operation Services; Duties of Manager
Section 4 - Non-Discrimination
Section 5 - Warranties and Representations of Operator
Section 6 - Warranties and Representations of Manager
Section 7 - Covenants by Operator
Section 8 - Covenants by Manager
Section 9 - Compensation
Section 10- Subordination
Section 11- Term of Agreement
Section 12- Arbitration
Section 13- Agreements Entered Into By Manager
Section 14- Miscellaneous
- i -
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT ("Agreement") is by and between SVT CORPORATION, a [New
Jersey corporation] with an office at 573 Cranbury Road, Suite A4, East
Brunswick, New Jersey 08816, ("Operator") and CCC OF NEW JERSEY, INC., a New
Jersey corporation with an office at 197 First Avenue, Needham, Massachusetts
02194 ("Manager") .
STATEMENT OF FACTS
1. The Operator desires to arrange for the licensure, management and
operation of a nursing home facility ("Facility") to be constructed in the
Township of Montvale, Bergen County, New Jersey ("Premises").
2. Manager or its affiliates furnishes or has furnished management services
to other health care facilities similar to the Facility.
3. The Operator desires to employ Manager to manage and operate the
Facility for the Operator in accordance with the terms and conditions of this
Agreement.
IT IS AGREED:
Section 1 - Definitions. As used in this Agreement:
(a) "Facility Expenses" means all costs, expenses and cash disbursements
of any type relating to or arising out of the ownership or operation
of the Facility and the Premises, including, without limitation,
taxes, capital improvements, debt service (interest and principal) and
expenses of operating, maintaining and repairing the Facility and
funding necessary reserves.
(b) "Gross Billings" shall mean and include:
(i) the gross dollar amount of all billings by the Facility to or on
behalf of patients and visitors directly or indirectly connected
with the Facility for the provision of all goods and services,
and will include, without limitation, billings to all
governmental payors, including Medicare and Medicaid, billings to
self-paying patients, and billings to all other third-party
insurance carriers; and
-1-
<PAGE>
(ii) the gross dollar amount received from non-patient care activity
but nevertheless arising from the operation of the Facility
including, but not limited to, gift shop, coffee shop, vending
machines, laundry machines, barber shop, beauty shop, and all
other concessions; provided, however, that the proceeds for all
borrowings shall be excluded from Gross Billings.
(c) "Positive Cash Flow" means the excess, if any, of the amount of Gross
Billings over the total amount of Facility Expenses, but excluding
depreciation and management fees to Manager under this Agreement.
(d) "Negative Cash Flow" means the excess, if any, of the total amount of
Facility Expenses over the amount of Gross Billings.
Section 2 - Agreement to Manage and Operate the Facility.
(a) For and during the term of the Agreement, the Operator hereby engages
Manager, and Manager accepts such engagement, to supervise,
administer, manage and operate the Facility and all phases of its
operation in the name of the Operator and on the Operator's behalf and
for the Operator's account, on the terms and subject to the conditions
set forth herein.
(b) Manager agrees that it will:
(i) perform its duties and responsibilities hereunder, in compliance
with all applicable laws and take those actions necessary so that
Operator satisfies its responsibilities as the licensee of the
Facility;
(ii) supervise and direct the management and operation of the
Facility, given the financial resources available to the
Facility, the location of the Facility, the restrictions of
applicable laws and other existing circumstances;
(iii) consult with the Operator on matters relating to the Facility;
and
(iv) pay, and be solely responsible for all Facility Expenses
regardless of whether the proceeds of Gross Billings are
sufficient for the payment of such Facility Expenses.
-2-
<PAGE>
Manager shall act in good faith to perform its obligations hereunder,
but shall have no liability to the Operator for any decisions made
with respect to or any actions taken or the omission of any actions in
connection with the Facility's operations which are not willful or
negligent actions or omissions, so long as such decisions, actions, or
omissions were made or taken in good faith. It is understood that
Manager makes no warranties, express or implied, except as otherwise
specifically provided for in this Agreement.
(c) Manager shall not be deemed to be in violation of this Agreement if it
is prevented from performing any of its obligations hereunder for any
reason beyond its control, including, but not limited to, strikes,
interference or noncooperation by Operator, lockouts, acts of God,
unavailability of supplies, statute, regulation or rule of the federal
or any state or any local government, or any agency thereof.
(d) Subject to the foregoing and to the other provisions of this
Agreement, Manager shall have the sole and exclusive authority and
responsibility, control and discretion with regard to the operation,
administration and management of the business, policies, and assets of
the Facility (including, without limitation, the exercise of its
rights and performance of its duties provided for in Section 3 hereof)
and the right to determine all operating policies affecting the
appearance, maintenance, standards of operation, quality of service,
and any other matter affecting the Facility or the operation thereof.
Section 3 - Management and Operation Services; Duties of Manager. In
addition to the general duties set forth above, Manager covenants that it shall
perform the following specific responsibilities. All such responsibilities shall
be carried out with the Operator's full cooperation. Manager shall:
(a) Start-Up Requirements.
(i) Prepare and recommend an estimated budget for licensure and
start-up purposes;
(ii) Be responsible for the licensing of the Facility, including the
performance of such duties as should be performed prior to such
commencement of operations, as dictated by the State of New
Jersey and applicable regulatory agencies. The Operator shall
cooperate with the Manager in such process;
-3-
<PAGE>
(iii) Participate in the on-site inspections of the Facility required
by the Department of Health of the State of New Jersey
("Department") and other applicable regulatory agencies prior to
permitting operation of the Facility;
(iv) Select and hire a licensed administrator, program director and a
nursing director as well as other personnel required by the
Department and various departmental heads deemed appropriate by
Manager;
(v) Establish nursing staff procedures (including the establishment
of records and manuals to the extent required by the Department;
(vi) Provide nursing staff direction (including the establishment of
records and manuals to the extent required by the Department;
(vii) Establish operational procedures (including the establishment of
records and manuals to the extent required by the Department; and
(viii) Establish a uniform personnel policy for the Facility's staff
(including the establishment of records and manuals to the extent
required by the Department.
(b) Accounting and Money Management.
(i) Develop and implement payroll systems, cash management systems,
claims fillings, patient billings, admissions policies concerning
credit, deposits, and uncompensated care agreements;
(ii) Prepare cost reports for the Facility as required by the
Department or any other authority having jurisdiction and prepare
any rate requests deemed desirable by the Manager, in its sole
discretion;
(iii) Pay all Facility Expenses on a timely basis.
(c) Administrative.
(i) Provide on-going review and monitoring of all obligations of the
Facility to regulatory agencies with respect to inspections and
compliance requirements for licensing of the
-4-
<PAGE>
Facility, assure compliance with licensing requirements for the
Facility and apply for modification of the license to the extent
deemed appropriate by Manager;
(ii) Comply with all requirements of the Department and all other
federal, state and local governmental entities or agencies having
jurisdiction over the Facility;
(iii) Advertise, as a Facility Expense, for employee positions with
the Facility and for attracting patients to the Facility and
otherwise arrange for the provision of marketing services,
including the discretion to change the name of the Facility in
connection with such efforts; and
(iv) Develop and implement admissions policies and procedures.
(d) Dietary Management.
(i) Establish and review menus, dietary practices and procedures and
supervise the dietary personnel; and
(ii) Develop and implement practices and procedures with respect to
purchasing and dietary control.
(e) Clinical Programs.
(i) Establish and implement clinical and special programs, services,
practices and procedures deemed appropriate by Manager, and
establish and maintain internal policies and procedures and plans
of organization for each program;
(ii) Establish and maintain standards and quality control of programs;
and
(iii) Prepare written evaluations of each program in relation to its
operation, goals and objectives and implement any required
changes in policies or programs of the Facility.
(f) Plant and Maintenance. Manager shall cause the Facility to be
maintained and repaired in accordance with federal, state, and local
codes, and in a condition consistent with the highest professional
-5-
<PAGE>
standards of nursing home maintenance, reasonable wear and tear
excepted, including but not limited to cleaning, painting, plumbing,
carpentry, grounds care, and such other maintenance and repair work as
may be deemed by Manager to be reasonably necessary. Manager shall
make or install or cause to be installed, as a Facility Expense, all
needed and proper repairs, replacements, additions, and improvements
in and to the Facility and the furnishings and equipment in order to
keep and maintain the same in good repair, working order, and
condition, reasonable wear and tear excepted.
(g) purchasing.
(i) Review the purchasing standards, procedures and policies, and
develop, implement, and maintain a purchasing system for medical
and food supplies, equipment, appliances, furnishings, other
materials and uniforms, and ordering and coordination of service
calls necessary to the proper conduct of the Facility;
(ii) Negotiate contracts for the purchase of items listed in
subsection (g) (i) above and service contracts;
(iii) Develop and implement methods of replacing obsolete equipment;
and
(iv) Control inventory levels and develop specifications for supplies.
(h) Data Processing.
(i) Provide data processing and payroll processing systems and
procedures or cause such systems and procedures to be provided in
order to process bills, accounts, general ledgers, monthly
financial, and statistical data and to record the receipt and
disbursement of all funds; and
(ii) Provide a system to itemize all accounts payable and accounts
receivable or cause such a system to be provided.
(i) Records and Reports. In addition to any other requirements specified
in this Agreement, Manager shall
-6-
<PAGE>
have the following responsibilities with respect to records and
reports:
(i) Manager shall cause to be established and maintained for the
Facility a comprehensive system of records, books, and accounts
in a manner conforming to the directives of all applicable
third-party payors. All records, books and accounts will be
subject to examination after prior notice and at reasonable hours
by an authorized representative of the Operator. Patient account
records shall be maintained at the Facility;
(ii) Manager shall furnish such information (including bed census
reports and a daily census log) as may be requested by the
Operator from time to time with respect to the financial,
physical or operational condition of the Facility;
(iii) Manager shall furnish to the Operator monthly operating
statements within thirty (30) days after the end of each month
and shall annex thereto a computation of the management fee for
the preceding month;
(iv) Manager shall supervise the preparation for the Operator of
budgets and internal financial reports;
(v) On or before forty-five (45) days after the close of each fiscal
year during the term of this Agreement (unless delayed by
circumstances beyond the control of Manager), Manager will also
cause to be delivered to the Operator a balance sheet and related
statement of profit and loss in a form sufficient to enable
Operator's parent company to prepare financial statements
certified by an independent certified public accounting firm
reflecting the assets employed in the operation of the Facility
and the liabilities incurred in connection therewith at the end
of the fiscal year, and the results of the operation of the
Facility during the preceding twelve (12) months and having
annexed thereto a computation of the management fee for such
preceding fiscal year; and
-7-
<PAGE>
(vi) All costs and expenses incurred in connection with the
preparation of any statements, reports, schedules, computations,
and other reports required under this Section or any other
provision of the Agreement shall be a Facility Expense.
(j) Utilities and Services. Manager shall make arrangements for water,
electricity, heating, fuel and sewage, trash disposal, vermin
extermination, decorating, laundry facilities, and telephone service
and television service, all of which shall be included as Facility
Expenses.
(k) Employees. Manager shall establish the number, qualifications, and
duties of the personnel to be regularly employed in the management and
operation of the Facility including (without limitation) the
administrator, program directors, assistant administrator(s),
department heads, supervisory personnel, nursing and para-professional
staff, and maintenance, bookkeeping, clerical and other managerial,
operating or service employees who will work at and for the Facility.
All of such personnel shall be employees of the Operator (except as
is otherwise expressly provided), but shall be hired, promoted,
supervised and discharged exclusively by Manager on behalf of
Operator. Manager shall pay such employees and the costs associated
with such employees as a Facility Expense. Manager's obligations
hereunder shall be subject to the following conditions:
(i) Except as otherwise provided for in this Agreement, the Manager
shall pay, as a Facility Expense, the compensation (including
fringe benefits) of those persons identified in this Agreement as
being employees of or otherwise working for the Facility, and
shall pay for all local, state and federal taxes and assessments
(including but not limited to Social Security taxes, unemployment
insurance and worker's compensation insurance) incident to the,
employment of such personnel. The Facility's payroll, including
payment of wages and salary to employees at the Facility, tax
reporting, and withholding of taxes, shall be administered by
Manager, as a Facility Expense;
(ii) Compensation (including fringe benefits) payable (i) to any
person who is an officer
-8-
<PAGE>
and/or director of Manager or any of its affiliated companies and
(ii) to all off-site personnel of Manager, plus all local, state
and federal taxes and assessments incident to the employment of
any such persons, shall be borne by Manager, and shall not be
paid out of the Operator's funds or treated as a Facility Expense
except as set forth below;
(iii) All management overhead expenses of Manager reasonably allocated
to the services rendered under this Agreement (including, but not
limited to, salaries and fringe benefits of Manager's employees
working directly with the Facility, costs of office supplies and
equipment, data processing services, postage, transportation for
managerial personnel of Manager and telephone services) shall be
treated as a Facility Expense not less frequently than monthly;
(iv) The term "fringe benefits" as used herein shall include, but not
be limited to, the employer's contribution of F.I.C.A.,
unemployment compensation and other employment taxes, workmen's
compensation, group life, pension plans, accident and health
insurance premiums, vacation, sick pay and holidays to the extent
deemed appropriate by Manager;
(v) The administrator, who shall serve as the chief operating officer
of the Facility, the controller and the director of nurses, shall
be employees of Manager. All persons employed by Manager whose
services are furnished to the Facility under this section are
referred to as "Key Personnel." All Key Personnel shall be
employees of Manager throughout the Term of the Agreement.
Manager shall determine the amount and nature of and shall pay
compensation (as hereinafter described) to the Key Personnel for
all services rendered by them in connection with this Agreement.
In addition to Manager's fee hereunder, the Manager shall cause
the Facility to pay from the Facility's Gross Revenues to Manager
an amount equal to the Key Personnel's fair and reasonable
compensation plus fringe benefits which are or may become
standard for administrative or
-9-
<PAGE>
managerial personnel of Manager and its affiliates. Furthermore,
the Facility shall reimburse Manager as a Facility Expense for
employment, payroll or other taxes imposed because of employment
of the Key Personnel.
(1) Budgets. Annual Budgets, operating and capital, for each full
fiscal year of operation of the Facility shall be prepared by
Manager and delivered to the Operator at least thirty (30) days
before the beginning of the fiscal year to which such budget
relates. The Operator shall not unreasonably withhold or delay
its approval of such budget.
(m) Insurance.
(i) Manager shall specify the types of insurance, amount of
coverage thereunder, applicable deductibles and premiums
therefor and issuers thereof to be carried with respect to
the to Facility and its operations and Manager shall use its
best efforts to cause such insurance to be placed and kept
in effect at all times at the expense of Operator. All
insurance shall be placed with such companies, on such
conditions, in such amounts and with such interests
appearing thereon (except that Operator shall be named as an
insured under each such policy) as shall be deemed by the
Manager to be appropriate but not less than the customary
amounts of coverage for similar types of nursing homes in
New Jersey. Each of the policies of insurance (except the
worker's compensation insurance, fire, earthquake, and
extended coverage insurance and use and occupancy insurance)
shall insure any lender whose loans are secured by the
Facility or any other assets of the Operator, the Operator
and Manager and their respective officers, agents and
employees, and the rights of Manager and its officers,
agents and employees under such policies shall be severable
from and independent of the Operator's rights;
(ii) Manager shall obtain and maintain at the Operator's expense,
worker's compensation, malpractice insurance, business
interruption insurance with provision for loss of profit
insurance, key employee insurance, and such other similar
insurance as may be required by law or as may be required to
insure the Operator and Manager against loss for the payment
of damages for such liabilities as may be imposed by law and
such
-10-
<PAGE>
fidelity and honesty insurance in such amount as Manager
shall deem advisable consistent with customary practice in
similar businesses;
(iii) Manager shall investigate and furnish the Operator with
full reports as to all accidents, claims and potential
claims for damage relating to the Facility and shall
cooperate with the aforesaid insurers in connection
therewith;
(iv) Upon request, Manager will provide evidence of the foregoing
insurance coverages to Operator.
(n) Licenses; Permits; Compliance with Governmental Regulation and
Orders. Manager shall apply for, obtain, and maintain in the
Operator's name and as a Facility Expense, all licenses and
permits required in connection with the management and operation
of the Facility. The Operator agrees to cooperate with Manager's
applying for, obtaining, and maintaining such licenses and,
permits. Manager shall cause, as a Facility Expense, all acts and
things to be done in and about the Facility as shall be required
by any statute, ordinance, law, rule, regulation, or order of any
governmental or regulatory body having jurisdiction over the
premises respecting the use or manner of use of the Facility;
provided however, that if the Operator shall adequately secure
and protect Manager from loss, cost, damage, or expense by bond
or other means satisfactory to Manager, the Operator, at its sole
expense, may contest the validity or applicability of any such
statute, ordinance, law, rule, regulation, or order provided such
contest shall not result in the suspension of operations of the
Facility. Manager shall notify the Operator in writing of all
notices of such orders or other requirements, as soon as possible
after their receipt.
(o) Taxes. Manager shall arrange and supervise the preparation, on
behalf of Operator and as a Facility Expense, of all returns and
other documents required under F.I.C.A., the Federal Unemployment
Compensation Act, the Internal Revenue Code of 1986, as amended
(including all withholding tax returns), and all other similar
documentation required by federal or state law. Manager may
employ, as a Facility Expense, consultants to prepare said
returns or other documents. Manager shall pay, as a Facility
Expense, the amount of any taxes payable by Operator to any
governmental authority on account of the income or operation of
the Facility in a timely manner. Manager shall cause, as a
Facility
-11-
<PAGE>
Expense, all taxes, assessments, charges of every kind imposed
upon the Operator by any governmental authority, contributions or
payments required to be paid on behalf of employees of the
Operator pursuant to such state or federal legislation as above
described (excluding the Operator's income (to the extent
unrelated to the Facility), gift or inheritance taxes), including
interest and penalties thereon to be paid when due, unless
payment thereof is in good faith being contested by the Operator
at its sole expense and without cost to Manager, and enforcement
thereof is stayed and the Operator shall have given Manager
written notice of such contest and stay and authorized the
non-payment thereof, not less than ten (10) days prior to the
date on which such tax, assessment, or charge is due and payable;
provided that such interest or penalty payments shall be
reimbursed by Manager to the Operator if imposed upon the
Operator by reason of negligence or default on the part of
Manager in making the payment if authorized in writing by the
Operator.
(p) Deposit and Disbursement of Funds.
(i) Manager shall establish and administer the overall charge
structure of the Facility and shall supervise the issuance
of bills and the collection of accounts for the Facility.
Manager shall take possession of and endorse the name of the
Operator on all notes, checks, money orders, insurance
payments, and any other instruments received in payment of
accounts described below;
(ii) Manager shall establish such accounts for the Facility in
Manager's name, separate from all other accounts and funds
of Manager, with a bank or banks whose deposits are insured
by the Federal Deposit Insurance Corporation ("FDIC") or
with a savings and loan institution or institutions whose
deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or
desirable. Manager, on behalf of the Operator, shall use
reasonable efforts to collect when due all accounts
receivable arising out of the operation of the Facility
(whether from patients, third-party payors or others) in
connection with the operation of the Facility and deposit
all monies received in such accounts. Upon Manager's
request, subject to applicable law, the Operator shall
-12-
<PAGE>
assign any past due account receivable to the Manager so
that Manager may take any steps it may deem necessary, in
its sole discretion, to collect such account receivable;
(iii) Draws on such accounts may be made by the sole signature of
an authorized representative of the Manager (or by wiring
instructions from such authorized representative of Manager)
and shall be used to pay Facility Expenses and, provided
that Manager has paid or provided for the timely payment of
Facility Expenses then due or to become due, paid to Manager
(or its affiliates) to reimburse Manager (or its affiliates)
for payments made pursuant to this Agreement by Manager (or
its affiliates) from its own accounts. Operator hereby
grants Manager for the term of this Agreement the right to
collect the accounts receivable of the Facility, depositing
the same and withdrawing, by writing checks against such
accounts, funds for payment of Facility Expenses and
reimbursement of all amounts payable to Manager pursuant to
this Agreement in connection with the operation of the
Facility. Operator agrees to execute, from time to time, any
additional documents reasonably required by any bank wherein
such accounts are held to effectuate these agreements,
including without limitation, a power of attorney if
required in order to collect any account receivable or if
required to establish any banking relationship for the
Facility. Manager shall disburse and pay such sums from such
accounts in such amounts and at such times as the same are
deemed by Manager to be appropriate.
(iv) On the tenth (10th) day of any month, to the extent there is
Positive Cash Flow for the preceding month, and provided
that Manager has paid or provided for the timely payment of
Facility Expenses then due or to become due, then any such
Positive Cash Flow shall be paid to the Manager as its
management fee pursuant to Section 9 of this Agreement.
(v) The Manager shall indemnify and hold the Operator harmless
from and against any and all claims, liabilities, expenses,
damages
-13-
<PAGE>
judgments, actions and causes of action arising out of, in
connection with or relating to any Negative Cash Flow.
(q) Legal Actions. With the prior written approval of the Operator,
Manager shall institute, in its own name or in the name of the
Operator, but in any event as a Facility Expense, any and all
legal actions or proceedings to collect charges, or other income
for the Facility or to lawfully oust or dispossess tenants or
other persons in possession under, or lawfully cancel, modify, or
terminate any lease, license, or concession agreement for the
breach thereof or default thereunder by the tenant, licensee,
concessionaire. After notifying Operator and obtaining Operator's
approval, Manager shall take, as a Facility Expense, any
appropriate steps to protect and/or litigate the final decision
in any appropriate court of forum any violation, order, rule, or
regulation affecting the Facility.
Section 4 - Non-discrimination. In the performance of its obligations under
this Agreement, Manager shall comply with the provisions of any applicable
federal, state or local law prohibiting discrimination on the grounds of age,
race, color, creed, sex or national origin.
Section 5 - Warranties and Representations of Operator. The Operator makes
the additional representations and warranties set forth in this Section, which
are material representations and warranties and upon which Manager relies as an
inducement to enter into this Agreement.
(a) This Agreement constitutes a valid and binding agreement by the
Operator, enforceable in accordance with its terms; and neither the
execution and delivery of the Agreement nor the consummation of the
transactions contemplated hereby nor compliance with any of the
provisions hereof will:
(i) conflict with, or result in, a breach of the certificate of
incorporation or bylaws of the Operator;
(ii) violate any applicable statute, law, rule or regulation or any
order, writ, injunction or decree of any court or governmental
authority;
(iii) violate or conflict with or constitute a default under (or give
rise to any right of
-14-
<PAGE>
termination, cancellation or acceleration under) the terms or
conditions or provisions of any note, instrument, bond, lease,
mortgage, obligation, agreement, understanding, arrangement or
restriction of any kind to which the Operator is a party or by
which the Operator or its assets or properties may be bound; or
(iv) require the consent or approval by any governmental authority.
(b) The Operator is a corporation, duly organized, validly existing, and
in good standing under the laws of the State of New Jersey, and has
all requisite power and authority to own, and to carry on its business
as now being conducted or as contemplated at the Facility, and to
perform its obligations hereunder.
Section 6 - Warranties and Representations of Manager. The Manager makes
the additional representations and warranties set forth in this Section, which
are material representations and warranties and upon which Operator relies as an
inducement to enter into this Agreement.
(a) This Agreement constitutes a valid and binding agreement by the
Manager, enforceable in accordance with its terms; and neither the
execution and delivery of the Agreement nor the consummation of the
transactions contemplated hereby nor compliance with any of the
provisions hereof will:
(i) conflict with, or result in, a breach of Manager's bylaws or
articles of incorporation;
(ii) violate any applicable statute, law, rule or regulation or any
order, writ, injunction or decree of any court or governmental
authority;
(iii) violate or conflict with or constitute a default under (or give
rise to any right of termination, cancellation or acceleration
under) the terms or conditions or provisions of any note,
instrument, bond, lease, mortgage, obligation, agreement,
understanding, arrangement or restriction of any kind to which
the Manager is a party or by which the Manager or its assets or
properties may be bound; or
-15-
<PAGE>
(iv) require the consent or approval by any governmental authority .
(b) The Manager is a corporation duly organized, validly existing, and in
good standing under the laws of the State of New Jersey and has all
requisite power and authority to own, and to carry on its business as
now being conducted or as contemplated at the Facility, and to perform
its obligations hereunder.
Section 7 - Covenants by Operator. The Operator makes the additional
covenants set forth in this Section, which are material covenants and upon which
Manager relies as inducement to enter into this Agreement.
(a) The Operator will cooperate with Manager in every reasonable respect
and will furnish Manager with all information required by it for the
performance of its services hereunder and will permit Manager to
examine and copy any data in possession and control of the Operator
affecting management and/or operation of the Facility and will in
every reasonable way cooperate to enable Manager to perform its
services hereunder.
(b) Operator will examine documents submitted by Manager and render
decisions pertaining thereto, when required, promptly, to avoid
unreasonable delay in the progress of Manager's work. Operator shall
execute and deliver any and all applications and other documents that
may be reasonably deemed by Manager to be necessary or proper to be
executed by Operator in connection with the Facility provided that
such documents do not require Operator to incur any liability or
obligation, other than Operator's statutory or regulatory obligations
by virtue of its ownership of the Facility.
(c) Operator shall comply with all federal, state and local laws, rules,
regulations and requirements which are applicable to Operator and are
not within the control of or the responsibility hereunder of Manager;
provided that Operator, at its sole expense and without cost to
Manager, shall have the right to contest by proper legal proceedings
the validity, so far as applicable to it, of any such law, rule,
regulation or requirement, provided that such contest shall not result
in a suspension of operations of the Facility.
(d) Operator hereby grants to Manager an exclusive irrevocable (except in
accordance with the termination provisions of the Agreement) and
nonassignable license to use the Facility during the Term of this
Agreement,
-16-
<PAGE>
for the purposes described herein. Any attempted assignment of the
license to use this Facility shall be null and void.
(e) Operator acknowledges that Manager retains all ownership and other
rights in all systems, manuals, materials, and other information, in
whatever form, developed by Manager in the performance of its services
hereunder
(f) Whenever Operator is requested hereunder to give its approval to a
matter, such approval shall not be unreasonably withheld or delayed.
If Operator shall not respond negatively in writing to the notice
within twenty (20) days after the sending thereof (unless some other
period for response is specified in this Agreement), Operator shall be
deemed to have approved the matter referred to in the notice. Any
provision hereof to the contrary notwithstanding, in emergency
situations an approval sought and given in any manner reasonable under
the circumstances shall be effective.
Section 8 - Covenants by Manager. The Manager makes the additional
covenants set forth in this Section, which are material covenants and upon which
Operator relies as inducement to enter into this Agreement.
(a) The Manager will cooperate with Operator in every reasonable respect
and will furnish Operator with all information required by it which
relates to the Facility, including information to enable the Operator
to review, prepare and pay its taxes (if applicable), its financial
statements and those of its parent company and any reports required of
the Operator or those of its parent company, whether to any regulatory
agency or to any lender.
(b) Manager shall comply with all federal, state and local laws, rules,
regulations and requirements which are applicable to Manager or the
operation or administration of the Facility; provided that Manager, at
its sole expense and without cost to Operator, shall have the right to
contest by proper legal proceedings the validity, so far as applicable
to it, of any such law, rule, regulation or requirement, provided that
such contest shall not result in a suspension of operations of the
Facility and that the Manager shall adequately secure and protect the
Operator from loss,
-17-
<PAGE>
cost, damage or expense by bond or other means satisfactory to the
Operator.
Section 9 - Compensation. As compensation for the services to be rendered
by Manager during the term of this Agreement, the Manager shall pay itself as a
Facility Expense, at its principal office given below (or at such other place as
Manager may from time to time designate in writing), and at the times
hereinafter specified, a management fee equal to, out of and to the extent of
Positive Cash Flow, each month through the term of this Agreement. Such
management fee shall be paid in monthly installments on the twentieth (20th) day
of each month based on a determination of Positive Cash Flow for the preceding
month, ("Due Date"). The management fee shall begin to accrue upon the opening
of the Facility.
Section 10 - Subordination. The right of Manager to receive its management
fee under Section 9 of this Agreement shall in all respects submit and be
subordinate to the rights of any lender providing permanent financing to the
Facility to receive amounts under any loan agreement under which permanent
financing is provided for the original project cost of the Facility and to the
payment of all Facility Expenses. Manager and its affiliates shall not be
entitled to receive, and the Facility shall not be required to pay, management
fees under Section 9 of this Agreement for any month or reimbursement of their
expenses until the Manager shall have first paid, or made adequate provision for
the payment of, all current, accrued or delinquent payments under any loan
agreement providing financing for the original project cost of the Facility for
such month and all Facility Expenses.
Section 11 - Term of Agreement.
(a) The initial term of this Agreement shall commence on the date hereof
(such date of commencement to be referred to as the "Commencement
Date"), and shall have an initial term of ten (10) years from the date
on which the Facility is first licensed, unless extended or sooner
terminated as provided herein. This Agreement may be extended for an
additional term of ten (10) years upon written notice from the Manager
to Operator.
(b) This Agreement may be terminated by the mutual written consent of the
Operator and Manager as of the end of any calendar month, provided
that at least thirty (30) days advance written notice thereof is given
to any lender providing permanent financing for the Facility.
-18-
<PAGE>
(c) Manager may terminate this Agreement if the Operator defaults in its
obligations hereunder after providing the Operator with written notice
of its intent to terminate this Agreement and a reasonable period
within which Operator may cure such default which shall not be less
than thirty (30) days.
(d) Operator or Manager may terminate this Agreement in the event that the
CON or License for the Facility expires or such CON is transferred to
the Manager prior to licensure
(e) Upon termination of this Agreement, Manager, shall submit to the
Operator, at the Facility's cost, any financial statements and other
information required by governmental agencies, and after the Operator
and Manager have accounted to each other with respect to all matters
outstanding as of the date of termination. In the event that, upon
termination of this Agreement, Operator remains the licensed operator
of the Facility, then the Manager shall submit to the Operator any and
all records relating to the operation of the Facility, including,
without limitation, patient records, lists of account payable,
accounts receivable, general ledgers, admissions records and the like.
(f) If Manager or Operator shall apply for or consent to the appointment
of a receiver, trustee, or liquidator of Manager or Operator or of all
or a substantial part of either's respective assets; file a voluntary
petition in bankruptcy; make a general assignment for the benefit of
creditors, file a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency law;
or if an order, judgment, or decree shall be entered by any court of
competent jurisdiction, on the application of a creditor, adjudicating
Manager or Operator bankrupt or insolvent or approving a petition
seeking reorganization of Manager or Operator or appointing a
receiver, trustee, or liquidator of Manager or Operator or of all or a
substantial part of either's respective assets, and such order,
judgment, or decree shall continue unstayed and in effect for a period
of ninety (90) consecutive days ("Insolvent Party"), then in case of
any such event and upon the expiration of the period of grace
applicable thereto, this Agreement may be terminated, at the option of
the party which is not the Insolvent Party upon written notice to the
Insolvent Party.
-19-
<PAGE>
(g) Upon any termination of this Agreement, the Manager shall satisfy any
Facility Expense incurred prior to the effective date of such
termination.
Section 12 - Arbitration.
(a) If any controversy should arise between the parties in the
performance, interpretation, and application of this Agreement which
involves accounting matters, either party may serve upon the other a
written notice stating that such party desires to have the controversy
reviewed by an arbitrator, who shall be a representative of a firm
specializing in accounting in the medical services industry. If the
parties cannot agree within fifteen (15) days from the service of such
notice upon the other party upon the selection of such arbitrator, he
shall be selected or designated by the American Arbitration
Association upon the written request of either party hereto.
Arbitration of such controversy, disagreement, or dispute shall be
conducted in accordance with the rules then in force of the American
Arbitration Association, and the decision and award of the arbitrator
so selected shall be binding upon both the Operator and Manager.
(b) If any controversy should arise between the parties in the
performance, interpretation, or application of this Agreement,
involving any matter other than an accounting matter within the scope
of the preceding paragraph, either party may serve upon the other a
written notice stating that such party desires to have the controversy
reviewed by a board of three (3) arbitrators and naming the person
whom such party has designated to act as an arbitrator. Within fifteen
(15) days after receipt of such notice, the other party shall
designate a person to act as arbitrator and shall notify the party
requesting arbitration of such designation and the name of the person
so designated. The two (2) arbitrators designated as aforesaid shall
promptly select a third arbitrator, and if they are not able to agree
on said third arbitrator, then either arbitrator, on five (5) day's
written notice to the other, or both arbitrators, shall apply to the
American Arbitration Association to designate and appoint said third
arbitrator. Any and all arbitrators chosen or appointed to arbitrate
such matters shall be experienced in the field of nursing home
operation and management. If the party upon whom said written request
for arbitration is served shall fail to designate its arbitrator
within fifteen (15) days after receipt of such notice, then the
arbitrator designated
-20-
<PAGE>
by the party requesting arbitration shall act as the sole arbitrator
to resolve the controversy, disagreement, or dispute. Arbitration of
such controversy, disagreement, or dispute shall be conducted in
accordance with the rules then in force of the American Arbitration
Association, and the decision and award of a majority of the
arbitrators, or of such sole arbitrator, shall be binding upon both
the Operator and Manager, and shall be enforceable in accordance with
the then applicable laws of the State of New Jersey.
Section 13 - Agreements Entered Into By Manager. Any agreements entered
into by the Manager for the provision of goods or services to the Facility shall
be entered into on an arms-length competitive basis.
Section 14 - Miscellaneous.
(a) Notices and Addresses. Unless specifically provided herein, all
notices provided to be given under this Agreement shall be given in
writing and may be deemed to have been given three (3) days after
being deposited in the United States certified or registered mail, or
Federal Express, postage prepaid, and addressed to the proper party,
at the following addresses, or to such other address as such party
shall give notice to the other party:
OPERATOR:
SVT CORPORATION
573 Cranbury Road - Suite A4
East Brunswick, New Jersey 08816
With Copies To:
Jay Ruder, Esq.
Bennett & Ruder, P.C.
498 Kings Highway N. Suite 207
Cherry Hill, New Jersey 08034-1018
MANAGER:
CCC of New Jersey, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: President and General Counsel
-21-
<PAGE>
With Copies To:
Jonathan D. Weiner, Esq.
Fox, Rothchild, O'Brien & Frankel
Princeton Pike Corporate Center
997 Lennox Drive, Building 3
Lawrenceville, NJ 08648-2311
And:
Joseph A. Vitale, Esq.
Levy & Droney, P.C.
74 Batterson Park Road
P.O. Box 887
Farmington, Connecticut 06032-0887
(b) Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, the other provisions hereof and this
Agreement shall be construed in accordance with the original intent of
the parties hereto.
(c) Amendment. No amendment, modification, or alteration of the terms
hereof shall be binding unless the same be in writing dated subsequent
to the date hereof, and duly executed by the parties hereto.
(d) Rights and Remedies Cumulative. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy
by either party shall not preclude or waive its right to use any or
all other remedies. Said rights and remedies are given in addition to
any other rights the parties may have by law, statute, ordinance, or
otherwise.
(e) Waiver of Default. No waiver by the parties hereto of any default or
breach of any term condition, or covenant of this Agreement shall be
deemed to be a waiver of any other breach of the same or any other
term, condition, or covenant contained herein. The waiver by a party
of any breach of any term, covenant or condition herein contained
shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance by a party of
performance by the other shall not be deemed to be a waiver of any
preceding breach of any term, covenant or condition of this Agreement,
other than failure to perform the particular duties so
-22-
<PAGE>
accepted, regardless of the knowledge of such preceding breach at the
time of acceptance of the performance.
(f) No Partnership Agency or Joint Venture. Nothing contained in this
Agreement shall constitute or be construed to be or create a
partnership or joint venture between the Operator, their respective
successors and assigns, on the one part, and Manager, its successors
or assigns, on the other part. It is expressly understood and agreed
by the parties hereto that Manager shall at all times during the
performance of services pursuant to this Agreement be acting as an
independent contractor and that no act or commission or omission of
any party hereto shall be construed to make or render the other party
its principal, agent or associate.
(g) Parties Bound; Assignment. The Manager reserves the right to assign
this Agreement, so long as the Manager remains primarily liable under
this Agreement and provided that such assignee is an Affiliate, as
that term is defined under the Securities Act of 1933 and the
regulations promulgated thereunder, of Continuum Care Corporation or
Abraham D. Gosman. At all times, this Agreement, shall inure to the
benefit of the Operator and Manager and their respective successors
and assigns and constitute a binding obligation upon the Operator and
Manager and their respective successors and assigns. Except as set
forth above, neither party shall assign this Agreement, except with
the prior written consent of the other party.
(h) Entire Agreement. This Agreement and the instruments and agreements
referred to herein and the Option Agreement constitute the entire
agreement between the Operator and Manager with respect to the
management and operation of the Facility, and the other subject
matters of this Agreement, and supersede all prior agreements,
understandings and letters related thereto (all of which are merged
herein) and no change hereto shall be valid, unless made by
supplemental written agreement, executed and approved by the Operator
and Manager.
(i) Captions. The headings used before the various paragraphs of this
Agreement are for ease of reference only and do not constitute parts
of this Agreement.
(j) Counterparts. This Agreement has been executed in several
counterparts, each of which shall constitute a complete original
Agreement which may be introduced in
-23-
<PAGE>
evidence or used far any other purpose without production of any of
the other counterparts
(k) Governing Law. This Agreement shall be governed by and interpreted
under the law of the State of New Jersey.
(1) Joint Effort. Preparation of this Agreement has been a joint effort of
the parties, and the resulting document shall not be construed more
severely against one of the parties then the other.
(m) Manager's Indemnification of Operator. Manager hereby agrees to defend
with counsel reasonably acceptable to operator and to indemnify and
hold the Operator harmless from and against any and all claims,
damages, losses, liabilities, debts, dues, reckonings or dues of money
suffered, incurred, sustained or required to be paid by the operator
in connection with or arising out of the operation of the Facility or
this Agreement, including, without limitation, reasonable attorney's
foes or court costs incurred, suffered or paid by the operator in
connection therewith, including further, without limitation, on amount
of taxes, employment issues, negative cash flow, Facility Expenses,
malpractice or regulatory sanctions, except, however, that Manager
need not indemnify or hold the Operator harmless from any matter
caused by or arising out of the operator us grass negligence or
willful misconduct, and including further still all costs, including
attorneys' fees and costs of enforcing this indemnification provision
(collectively, an "Indemnification Loss) . Should operator
nevertheless incur an Indemnification Loss, then Manager shall
reimburse operator for the amount of such Indemnification Lass on
demand.
Date as of the 23rd day of June, l995.
ATTEST: SVT CORPORATION
/s/ Surleh Tarkas By /s/ Surleh Tarkas
- --------------------------------- -------------------------------------
Secretary
Its
- --------------------------------- Duly Authorized President
-24-
<PAGE>
CCC OF NEW JERSEY, INC.
[ILLEGIBLE] By /s/ Michael Gosman
- --------------------------------- -------------------------------------
[ILLEGIBLE] Its Vice President
- --------------------------------- Duly Authorized
STATE OF NEW JEERSEY }
} ss.
COUNTY OF MORCER }
The foregoing instrument was acknowledged before me this 23rd day of June,
1995 by Surbni Tarkas, President of SVT CORPORATION, a New Jersey corporation,
on behalf of the corporation.
/s/ [ILLEGIBLE]
--------------------------------------
An Attorney of the State of New Jersey
-25-
AGREEMENT
(Park Ridge, New Jersey)
THIS AGREEMENT (this "Agreement") made this 3rd day of July, 1996, by and
between CCC of New Jersey, Inc., a Delaware corporation ("CCC"), and CareMatrix
of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware corporation
("CareMatrix").
WHEREAS, CCC has entered into that certain Purchase Agreement (the
"Purchase Agreement"), dated April 12, 1995, relating to a certain parcel of
land located in Park Ridge, New Jersey (the "Land"), a copy of which is attached
hereto as Exhibit A,
WHEREAS, CCC desires for CareMatrix to develop the Land for an
assisted/independent living facility consisting of approximately one hundred
(100) units (the "Project");
WHEREAS, upon the completion of construction of the Project, CCC desires
for CareMatrix to provide operational management services for the Project; and
WHEREAS, CCC desires to demonstrate its intention to enter into a turnkey
development agreement and a management agreement with CareMatrix.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. CCC and CareMatrix agree that CareMatrix shall act as developer of the
Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of CCC and CareMatrix.
2. CCC and CareMatrix agree that upon completion of construction of the
Project, CareMatrix shall provide operational management services for
the Project pursuant to a management agreement in form and substance
reasonably satisfactory to each of CCC and CareMatrix.
3. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
each of CCC and CareMatrix.
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
CCC OF NEW JERSEY, INC.
By: /s/ James M. Clary
--------------------------------
Name: James M. Clary
Title:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ James M. Clary
--------------------------------
Name: James M. Clary
Title:
<PAGE>
Exhibit A
PURCHASE AND SALE AGREEMENT
AGREEMENT made as of the 12th day of April, 1995 by and between Continuum
Care of New Jersey, Inc., a Delaware Corporation ("Buyer"), having an address at
197 First Avenue, Needham, Massachusetts 02194, and Noyes Data Corporation (the
"Corporation") and Robert Noyes ("Noyes"), individually (collectively,
"Seller"), having an address at Mill Road at Grand Avenue, Lakeside Center, Park
Ridge, New Jersey 07656.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller hereby agree as follows:
1. AGREEMENTS TO SELL AND PURCHASE, DESCRIPTION OF PROPERTY; NOMINEE.
(a) Purchase and Sale. Seller agrees to convey to Buyer and Buyer hereby
agrees to purchase from Seller, for the price and upon the terms and conditions
set forth herein, the following:
(i) The land located in the Boroughs of Montvale and Park Ridge,
Bergen County, New Jersey, containing ten (10) acres, more or less, described in
Exhibit 1.1 attached hereto and made a part hereof, shown on the current tax
assessment maps of the respective municipalities as Lots 1 and 2, Block 1401,
and Lot 6, Block 1402 in Park Ridge, New Jersey and Lot 1-C, Lot 4 and Lot 5,
Block 56 in Montvale, New Jersey, and all easements and rights of way
appurtenant to such land, and all of Seller's right, title and interest in and
to any alleys, strips and gores abutting or adjoining such land and in and to
any highways, streets, and ways abutting or adjoining the Land (hereinafter,
collectively, the "Land");
(ii) all buildings, structures and other improvements located on the
Land (collectively, the "Improvements") in their "as is" and "where is"
condition as of the "Closing Date" (as hereinafter defined);
(iii) the fixtures attached to the Land and Improvements
(collectively, the "Personal Property") in their "as is" and "where is"
condition as of the Closing Date;
The Land, Improvements and Personal Property and all of the foregoing are,
collectively, referred to as the "Property").
(b) Intended Use. Seller understands and acknowledges that Buyer intends to
use the Property for development of a facility or facilities to be used for two
hundred ten (210) beds for long-term care and up to one hundred (100) beds for
assisted living/senior housing, together with parking and related improvements
and landscaping (the "Intended Use") and Buyer understands and acknowledges that
the Intended Use is not a
<PAGE>
permitted use under existing zoning and other governmental restrictions thereto.
(c) Nominee. Seller acknowledges and agrees that Buyer shall have the right
to designate a nominee to take title to the Property by notice to Seller given
not later than the Closing Date provided that, in all events, Buyer shall be
primarily liable for performance of all obligations hereunder. Any entity in
which the principals or affiliates of Buyer own or control, directly or
indirectly, at least fifty (50%) percent of the beneficial interests therein, or
any Master limited partnership or real estate investment trust organized by
Buyer or any of the principals or affiliates of Buyer, will be deemed a nominee
for the purpose of this Section.
2. PURCHASE PRICE; DEPOSIT; ADJUSTMENTS; ESCROW.
(a) Purchase Price. The agreed purchase price for the Property (the
"Purchase Price") is Three Million Seven Hundred Thousand and no/100
($3,700,000.00) Dollars which Purchase Price shall be payable as follows:
(i) a total deposit (the "Deposit") in the amount of Two Hundred
Twenty-Five Thousand and no/10 ($225,000.00) Dollars has been paid on or before
the date hereof;
(ii) Three Million Four Hundred Seventy-Five Thousand and no/100
($3,475,000.00) Dollars is to be paid at the Closing, upon delivery of the Deed
and issuance by the "Title Insurer" (as defined below) of title insurance with
gap coverage, in cash or by certified, cashier's, treasurer's or bank check or
checks or by wire transfer to an account designated by Seller, which designation
shall be made not less than seventy-two (72) hours prior to the Closing Date.
(b) Deposit.
The Deposit shall be held in an interest-bearing escrow account as provided
in Section 2(d) below, subject to the terms of this Agreement, and shall be duly
accounted for at the Closing (as defined below). All interest on the Deposit is
to be accounted for and paid in equal shares to Buyer and Seller if the Closing
occurs. If the Deposit is returned to Buyer under the terms of this Agreement
then the entire amount and interest shall be paid to Buyer, and if Seller shall
retain the Deposit under the terms of this Agreement, then the entire amount of
the interest shall be paid to Seller.
c. Adjustments.
(i) Water and sewer charges, charges for electricity, gas and other
utilities and operating expenses, value of fuel stored on the Property at the
price then charged by Seller's
2
<PAGE>
supplier and real property taxes with respect to the Property for the then
current fiscal tax period, shall be apportioned as of the Closing Date, and the
net amount shall be added or deducted from the Purchase Price, as the case may
be.
(ii) If, on the Closing Date, the amount of real property taxes for
the then current fiscal tax period is not known or is estimated, the
apportionment of real property taxes called for herein shall be made on the
basis of the real property taxes for the preceding fiscal tax period or
estimate, respectively, and an appropriate reapportionment shall be made as soon
as the new rate and valuation can be ascertained for the then current fiscal tax
period for any increase or decrease in real estate taxes which may occur after
the Closing Date.
(iii) Each party shall pay its own attorney's fees incurred in
connection with the negotiation of this Agreement and consummation of the
transactions contemplated by this Agreement, except as otherwise expressly
provided herein. Seller shall pay the cost of all deed stamps or transfer taxes
assessed with respect to the sale of the Property, and recording fees for
releases and other documents required to clear title or to comply with its
obligations hereunder. Buyer shall pay for recording costs of the Deed and any
loan documents relating to Buyer's financing for the Property, as well as the
costs of any survey, owner's or lender's title insurance policy, environmental
site assessment or appraisal which Buyer may elect to obtain in connection with
the Property.
(iv) If at any time following the making of any of the adjustments to
the Purchase price, the amount thereof shall prove to be incorrect, or it should
be discovered that some adjustment which should have been made was inadvertently
omitted altogether, the party in whose favor the error was made shall pay the
sum necessary to correct such error to the other party promptly following
receipt of notice of such error from such other party. The provisions of this
Section 2(c)(iv) shall survive the delivery of the Deed or the termination of
this Agreement for a period of one (1) year thereafter when all liability under
this Section shall thereupon terminate.
(d) Escrow Account. (i) The Deposit shall be held by the law firm of
Beattie Padovano, 50 Chestnut Ridge Road, Montvale, New Jersey, as escrow agent
(the "Escrow Agent"), in an interest-bearing certificate or certificates of
deposit in United Jersey Bank and/or Jersey Bank for Savings, having a maturity
of not less than three (3) months. Such account shall be maintained until the
Deposit and the interest thereon have been delivered to Buyer, Seller or a court
of competent jurisdiction in accordance with the following provisions of this
Section, and shall terminate on the date of such delivery.
(ii) The Escrow Agent shall account for the Deposit in accordance with the
terms of this Agreement, or otherwise to
3
<PAGE>
Seller or Buyer promptly after receiving a joint written notice from Seller and
Buyer directing the disbursement of the same, such disbursement to be made in
accordance with such direction. If the Escrow Agent receives written notice from
either Buyer or Seller that the other party has defaulted in the performance of
its obligations under this Agreement or that any condition to the performance of
obligations under this Agreement has not been fulfilled within the time period
stipulated, which notice shall describe such default or non-performance, then
the Escrow Agent shall (A) promptly give notice to the party alleged to have
defaulted or to have failed to fulfill its obligation of the Escrow Agent's
receipt of such notice from the other party and shall enclose a copy of such
notice from the other party, and (B) subject to the provisions of Section 2(d)
(iii) below which shall apply if a conflict arises, on the fourteenth day after
the giving of the notice referred to in clause (A) above, deliver the Deposit
and the interest thereon to the party claiming the right to receive it.
(iii) If the Escrow Agent is uncertain as to its duties or action
hereunder, or receives instructions or a notice from Buyer or Seller which are
in conflict with instructions or a notice from the other party or which, in the
reasonable opinion of the Escrow Agent, are in conflict with any of the
provisions of this Agreement, it shall be entitled to take any of the following
courses of action: (A) hold the Deposit as provided above in this Section 2(d)
and decline to take any further action until the Escrow Agent receives a joint
written direction from Buyer and Seller or an order of a court of competent
jurisdiction directing the disbursement of all of the same, in which case the
Escrow Agent shall then disburse the same in accordance with such direction; (B)
in the event of litigation between Buyer and Seller, deliver the Deposit and all
interest thereon to the clerk of any court in which such litigation is pending;
or (C) deliver the Deposit and all interest thereon to a court of competent
jurisdiction and therein commence an action for interpleader. If any party
objects to the release of the Deposit to the other party and it is determined by
a court of competent jurisdiction that the objection was wrongful, then the
party wrongfully objecting shall be liable to the other party for interest on
the Deposit at the Prime Rate or Base Rate of the Bank of Boston plus five (5%)
per annum less all interest accrued on such Deposit from the date of such
wrongful objection and for reasonable attorney's fees and costs of suit.
(iv) The Escrow Agent shall not be liable for any action taken or
omitted in good faith and may rely, and shall be protected in acting or
refraining from acting in reliance, upon an opinion of counsel and upon any
directions, instructions, notice, certificate, instrument, request, paper or
other document believed by it to be genuine and to have been made, sent, signed
or presented by the proper party or parties. In no event shall the Escrow
Agent's liability hereunder exceed the amount of the Deposit and interest
thereon less any premature withdrawal penalties. The Escrow Agent shall not be
bound by any modification of this
4
<PAGE>
Agreement unless the same is in writing and signed by Buyer, Seller and the
Escrow Agent.
(v) Buyer and Seller acknowledge that the Escrow Agent is serving as
the attorney for the Seller in this transaction and may, without further consent
of the parties, continue to do so notwithstanding any dispute between Buyer and
Seller as to this Agreement or the Escrow Fund.
(e) Allocation of Purchase Price. The Buyer and the Seller agree that the
Purchase Price shall be allocated as follows:
(i) To Noyes $1,000,000.00
(ii) To the Corporation $2.700,000.00
-------------
Total $3,700,000.00
3. CLOSING EXTENSIONS.
(a) Closing Date and Place. The time for the delivery or the Deed and for
the performance of the other terms and conditions of this Agreement (the
"Closing"), shall be 10:00 a.m. on March 1, 1996 (as the same may be extended
pursuant to the provisions hereof, the "Closing Date") at the offices of Beattie
Padovano, 50 Chestnut Ridge Road, Montvale, New Jersey, or at such other place
or time as shall be mutually agreed upon by Buyer and Seller. It is agreed that
time is of the essence.
(b) Extension of Closing Date. Buyer shall have the right to extend the
Closing Date and each subsequent extended date of the closing by written notice
to Seller given at least five (5) days in advance of the then applicable Closing
Date accompanied by a good check (the "Extension Payment") payable to Seller in
the amount of Five Thousand and 00/100 ($5,000.00) Dollars for each thirty (30)
day extension of the Closing Date specified in the Buyer's notice. All Extension
Payments shall be nonrefundable by the Seller but shall be credited to Buyer
against the Purchase Price if, as and when title closes. Each such extension
shall be for at least one (1) month and no such extensions may be made for a
date to occur subsequent to July 1, 1996. Notwithstanding anything contained
herein to the contrary, in no event shall the Closing Date occur earlier than
the date which is six (6) months after the first day of the month following the
Approval Notice unless otherwise agreed upon by the parties. If such Closing
Date is later than March 1, 1996, the Buyer shall pay Extension Payments for
each month until Closing.
4. REPRESENTATION AND WARRANTIES.
(a) Representations and Warranties of Seller. Seller warrants and
represents to, and covenants and agrees with, Buyer as of the date hereof (and
on the Closing Date shall reaffirm all such representations, covenants and
warranties as of that date) as follows:
5
<PAGE>
(i) No person other than Seller is required to join in this agreement
or will be required to join in any conveyance in order to convey title in the
Property and all rights appurtenant thereto, as required by this Agreement.
(ii) The Corporation is a duly organized and validly existing
corporation under the laws of New Jersey, and has the legal right, power and
authority to enter into this Agreement and to perform all of its obligations
hereunder and this Agreement constitutes the legal, valid and binding obligation
of Seller, enforceable in accordance with its terms. The execution by the
undersigned officer of the Corporation and delivery of this Agreement, and the
performance by the Corporation of its obligations hereunder, have been duly
authorized by all necessary action and will not conflict with, or result in a
breach of, any of the terms, covenants and provisions of the Articles or
Organization or By-Laws of the Corporation as any of the same may have been
amended, any agreement or instrument to which Seller is a party or by which it
is bound, or, to the best of Seller's knowledge, any regulation, order,
judgment, writ, injunction or decree of any court or governmental authority.
(iii) Except for compliance with "ISRA" (as hereinafter defined) no
consent, approval or other authorization of, or registration, declaration or
filing with, any court or governmental agency or commission is required for the
due execution, delivery and performance of this Agreement by Seller or for the
validity or enforceability thereof against Seller.
(iv) There are no uncured notices or, to the best knowledge of Seller,
no suits, orders, decrees or judgments relative to violations of, (A) any
easement, restrictive covenant or other matter or record affecting the Property
or any part thereof, or (B) any laws, statutes, ordinances, codes, regulations,
rules, orders, or other requirements of any local, state or federal authority or
any other governmental entity or agency having jurisdiction over the Property or
any part thereof, including, without limitation, any of the foregoing affecting
zoning, subdivision, building, health, traffic, environmental, hazardous waste
or flood control matters (all of the foregoing, collectively, "Governmental
Regulations").
(v) There are no other suits, actions or proceedings pending or, to
the best of Seller's knowledge, threatened against or affecting the Property or
any of the transactions provided for herein before any court or administrative
agency or officer, and Seller is not in default with respect to any judgment,
order, writ, injuction, rule or regulation of any court of governmental agency
or office to which Seller is subject in any way affecting the Property or any of
the transactions provided for herein.
(vi) INTENTIONALLY DELETED.
6
<PAGE>
(vii) There are not presently pending or, to the best of Seller's
knowledge, threatened with respect to the Property (A) any special assessments,
or (B) any condemnation or eminent domain proceedings.
(viii) INTENTIONALLY DELETED.
(ix) INTENTIONALLY DELETED.
(x) INTENTIONALLY DELETED.
(xi) INTENTIONALLY DELETED
(xii) The portion of the Property held of record by the Corporation
does not constitute all or substantially all of the assets of the Corporation or
if it does, all action of the shareholders thereof necessary to consummate the
transactions contemplated hereby has been taken.
(xiii) Except as set forth in Exhibit 4.1 attached hereto, Seller has
never generated, stored (except in material compliance with "Environmental
Laws", as hereinafter defined), handled or disposed of any "Hazardous Materials"
(as hereinafter defined), and, to the best knowledge of Seller, there has,
during Seller's ownership of the Property, been no release of any such Hazardous
Materials from the Property, or in, on or under the Property. "Hazardous
Material" means any hazardous or toxic waste or hazardous or toxic substance as
defined in any Environmental Law including, without limitation, any asbestos,
PCB, toxic, noxious or radioactive substance, methane, volatile hydrocarbons,
industrial solvents, fuel oil, gasoline, petroleum products or by-products or
any other material or substance which could cause or constitute a health, safety
or other environmental hazard to any person or property.
"Environmental Law" means any applicable federal, state, county, municipal
or local environmental and clean-up statutes, laws, rules and regulations,
ordinances, orders, decrees and interpretations, now or hereafter in effect
including, without limitation any of the following, with all amendments thereto
and regulations thereunder. The Environmental Cleanup Responsibility Act,
N.J.S.A. 13:lK-6 et seq. and the Industrial Site Recovery Act, 1993 N.J. Laws,
Chapter 139 (hereinafter collectively called "ISRA"); The Spill Compensation and
Control Act (N.J.S.A. 58:10-23.11); a certain statute adopted by New Jersey for
Registration of Underground Storage Tanks (N.J.S.A. 58-l0A-21); Comprehensive
Environmental Response, Compensation and Liability Act of 1980; the Toxic
Substances Control Act; and the Resource Conservation and Recovery Act.
(xiv) INTENTIONALLY DELETED.
7
<PAGE>
(xv) Seller is familiar with the provisions of Sections 897 and 1445
of the Internal Revenue Code (the "Code"), and Seller is not a "foreign person"
as that term is defined in Section 1445(f)(3) of the Code.
(xvi) There are no service contracts or other agreements which affect
the Property except as expressly disclosed in Exhibit 4.2 attached hereto, and,
except as disclosed on Exhibit 4.3, there are no leases, subleases, licenses or
other rental agreements or occupancy agreements (written or verbal) which grant
any possessory interest in and to any space situated on or in the Property or
that otherwise give rights with regard to use of the Property.
(xvii) The amount necessary to discharge all outstanding mortgages and
other monetary liens currently affecting the Property does not exceed the net
amount of the Purchase Price to be received by Seller at the Closing, after
deduction (if any) for the adjustments described in Section 2(c) above and
payment of the broker's commission, if any, described in Section 7(e) below, and
there are no restrictions affecting prepayment contained in any such
mortgage(s).
(b) Representations and Warranties of Buyer. Buyer warrants and represents
to, and covenants and agrees with, Seller as follows:
(i) Buyer has the legal right, power and authority to enter into this
Agreement and to perform all of its obligations hereunder, and the execution and
delivery of this Agreement and the performance by Buyer of its obligations
hereunder, have been or will be duly authorized by all necessary corporate
action at the Closing Date; and this Agreement and Buyer's performance hereunder
will not conflict with, or result in a breach of, any of the terms, covenants
and provisions of the Articles of Organization or By-Laws of Buyer, as same may
have been amended or, to the best of Buyer's knowledge, any Governmental
Regulation or order, judgment, writ, injunction or decree of any court or any
agreement or instrument to which Buyer is a party or by which it is bound.
(ii) The officer signing this Agreement on behalf of Buyer is duly
authorized to execute the same on behalf of Buyer and Buyer shall provide a
corporate resolution to such effect at the Closing.
(iii) Buyer, together with Buyer's affiliates, has the financial
ability to perform its obligations under this Agreement without the necessity of
any third party financing and this Agreement is not contingent upon such
financing.
(c) Liability for Warranties and Representations. Seller agrees to
indemnify and hold Buyer harmless from and against any and all claims, losses,
liabilities, damages, expenses and fees,
8
<PAGE>
(including without limitation, reasonable attorneys fees and expenses), incurred
by Buyer as the result of the failure of any of Seller's warranties and
representations contained in Article 4 or elsewhere in this Agreement provided,
however, that if such failure of warranty or representation arises because
Seller is unable to reaffirm all of its warranties and representations as of the
Closing Date due to circumstances beyond the control of Seller which have
occurred subsequent to the date of this Agreement, then Seller's sole obligation
shall be to return the deposit, together with all interest thereon, to Buyer.
Conversely, Buyer agrees to indemnify and held Seller harmless from and against
any and all claims, losses, liabilities, damages, expenses and fees, including
without limitation, reasonable attorneys' fees and expenses, incurred by Seller
as the result of the failure of any of Buyer's warranties and representations
contained in this Article 4 or elsewhere in this Agreement except that if such
failure occurs at or prior to the Closing Date, Buyer's liability shall be
limited to the amount of the Deposit. The provisions of Sections (ii), (iii),
(iv), (v), (xii), (xiii), (xv) and (xvi) of Article 4(a), as reaffirmed at
Closing, shall survive the delivery of the Deed hereunder; provided that (1) the
provisions shall expire one (1) year after the Closing of title and if a claim
has not been made in such period it shall be forever barred; and (2) in no event
shall the Seller have any obligation unless the Buyer's claim pursuant hereto
exceeds $25,000.00.
5. RIGHTS AND OBLIGATIONS OF THE PARTIES PRIOR TO CLOSING; CONDITIONS TO
CLOSING.
(a) Seller's Covenants. Seller covenants that between the date of this
Agreement and the Closing:
(i) Buyer and its representatives, contractors, architects and
engineers, and each of their respective officers, directors, agents, employees,
representatives, and designees shall have access to the Property at any time and
from time to time, at Buyer's sole cost and expense: (A) to show the Property to
third parties (including, without limitation, contractors, engineers,
architects, attorneys, insurers, banks and other lenders or investors, and
prospective tenants, occupants or buyers) and (B) to perform any and all tests,
borings, inspections, and measurements which are contemplated hereby or which
Buyer deems reasonably necessary or appropriate hereunder, including without
limitation, for purposes of locating all utility conduits serving the Property,
making soil borings, performing soil compaction tests, performing mechanical or
structural inspections, conducting any of the other tests described in Section
5(b) below, and making such surveys and other topographical and engineering
studies, and other tests, surveys and studies as Buyer or its lender may deem
necessary or appropriate. Buyer agrees (w) to indemnify and hold harmless Seller
from any physical damage to property or physical injury or death to any person,
and from any reasonable expenses (including attorneys' fees) associated with any
claims arising from any such damage,
9
<PAGE>
injury or death, caused by Buyer or Buyer's employees, agents or contractors
while on the Property pursuant to this Section 5(a); (x) to restore the Property
substantially to the condition existing prior to such entry if title does not
close pursuant to this Agreement; (y) to provide, prior to each such entry, a
certificate of insurance evidencing commercial liability insurance having an
aggregate limit of not less than $1,000,000.00 with coverage for bodily injury
(including death) and property damage; and (z) to pay all costs and expenses for
such purposes and not to allow, permit, cause or suffer any person to claim or
have a lien on the Property for any of such costs and expenses.
(ii) Buyer may discuss the Property with any federal, county, state or
local officials or authorities concerning variances, permits, certificates,
consents, approvals, the Permits and other Governmental Regulations for the use,
operation, leasing and/or sale of the Property for the Intended Use.
(iii) Promptly upon execution hereof, Seller will furnish to Buyer for
Buyer's review and approval all information in its possession concerning
ownership and condition of the Property (including, without limitation, any
available plans and surveys, engineering reports, title documents, abstracts and
title insurance policies). Upon termination of this Agreement as provided
herein, and provided that such termination is not a result of Seller's default
hereunder, Buyer will return to Seller all such information obtained from
Seller.
(iv) Seller shall not permit occupancy of, or enter into any new lease
for, space in or on the Property, or any portion thereof, unless Buyer has
approved such occupancy or lease in writing.
(v) Seller shall not enter into any new service, maintenance or
management contract unless the same is terminable without penalty by the then
owner of the Property upon not more than thirty (30) days' notice.
(vi) INTENTIONALLY DELETED.
(vii) Seller may, in its sole and absolute discretion, prosecute
appeals from the real estate taxes assessed against the Property for any fiscal
period in which the Closing is to occur (or any subsequent period) but, having
filed such appeal, shall not withdraw, settle or otherwise compromise without
the prior written consent of Buyer. Real estate tax refunds and credits received
after the Closing Date which are attributable to the fiscal tax year during
which the Closing Date occurs shall be apportioned between Seller and Buyer,
after deducting the expenses of collection thereof, which obligation shall
survive the Closing.
(viii) So long as this Agreement is in effect, Seller shall maintain
fire and extended coverage and liability insurance
10
<PAGE>
coverage on the Property in the same amount as set forth in the Insurance
Certificate attached hereto as Exhibit 5.1. Subject to the provisions of
Paragraph 5(d), the risk of loss shall remain with Seller prior to the Closing
Date.
(ix) During the pendency of this Agreement, Seller shall not execute
any new mortgage of the Property or modify the existing mortgage(s) on the
Property, or otherwise encumber the Property in an amount which, together with
the amount of all other mortgages and monetary liens, will exceed the net amount
of the Purchase Price to be received by Seller at the Closing, after deduction
(if any) for the adjustments described in Section 2(c) above and payment of the
broker's commission, or create any other new encumbrance or restriction
affecting the Property.
(x) During the pendency of this Agreement, Seller shall not modify or
alter the Property in any material respect.
(xi) Promptly upon receipt by Seller of a written notice from Buyer
(the "Approval Notice") that the Final Condition stated in Section 5(b)(ii)
below has been satisfied or waived by Buyer, Seller shall give notice to the
tenants of the Property of the termination of their tenancies and thereafter
take such actions as may be necessary to deliver the Property free of tenancies
at Closing. When all tenants of the Property have vacated and all buildings on
the Property are unoccupied (except for occupancy by the Corporation, or any
affiliate thereof, who shall vacate prior to Closing), the Deposit shall be the
sole property of the Seller; shall not be refundable if the Closing does not
occur (unless the Closing fails to occur due to Seller's default); but shall be
credited against the Purchase Price at Closing.
(b) Certain Conditions to Buyer's Obligations. In addition to the other
conditions to be satisfied hereunder, Buyer's obligations hereunder are
expressly contingent upon fulfillment of all of the following terms and
conditions on or before the dates set forth herein, as extended, as hereinafter
provided:
(i) The Initial Conditions. The following shall be Initial Conditions:
(1) Buyer may make or cause to be made all tests, borings and
inspections it deems necessary to determine if there are any Hazardous Materials
or any medical wastes, radioactive materials, lead, asbestos, urea formaldehyde,
or radon, in, on, about, under or in the area of the Property, and shall be
satisfied in its sole discretion with the results of all such test, borings and
inspections.
(2) Buyer may make or cause to be made a survey of the Property prior
to the Closing Date, and such survey shall disclose no matters affecting the
Property which are inconsistent with the other provisions of this Agreement.
11
<PAGE>
(3) Buyer shall have obtained a commitment (the "Title Commitment")
from a title insurance company licensed in New Jersey selected by Buyer (the
"Title Insurer") pursuant to which such company agrees to insure title to the
Property, at normal premium rates, in an ALTA form, which commitment shall, upon
receipt of adequate proofs at Closing, delete the printed exceptions for
mechanics' and materialmans' liens, parties in possession and surveys, shall
include a so-called Comprehensive Endorsement, and shall (A) affirmatively
insure that there will be no violation of any applicable restrictions pertaining
to the Property if used, operated, leased and/or sold for the Intended Use, (B)
insure that the Property has legal and actual access to public roadways, (C)
provide that all such affirmative coverages will be available to future
purchasers and their mortgagees at normal premium rates, and (D) provide such
other affirmative coverages as Buyer may reasonably require. Without limiting
the generality of any other provisions in this Agreement, the Property shall not
be considered to be in compliance with the provisions of this Agreement with
respect to title unless: (X) all structures and improvements on the Property,
including, but not limited to any driveways, any parking areas, any cesspool(s)
and any leach fields, and all means of access to the Property and such parking
areas, shall be wholly within the lot lines of the Land and shall not encroach
upon or under any property not within such lot lines; and (Y) no building,
structure, improvement, way or property of any kind encroaches upon or under the
Land from other premises. Buyer shall supply Seller with a copy of such Title
Commitment within five (5) days of receipt thereof and, within such period,
shall set forth in a notice those exceptions to title that are not acceptable to
the Buyer (the "Unacceptable Exceptions") and those exceptions that are
acceptable (the "Permitted Exceptions").
(4) Buyer shall have obtained surveys, engineering reports,
percolation tests, commitment letters and other evidence satisfactory to Buyer
that: (A) the Property contained or is serviced by adequate water supplies; (B)
adequate utilities are available at the boundaries of the Land without the need
for private easements over the lands of others; (C) the Property has adequate,
direct, indefeasible legal and practical access of record to Grand Avenue and
Noyes Drive, both of which are public ways; and (D) the HVAC, mechanical,
electrical and other building systems serving the Property, as well as all
structural aspects of the Property, are all adequate in Buyer's judgment for the
use of the Property for the Intended Use.
If the foregoing Initial Conditions are not fully satisfied in a manner
which is acceptable to Buyer in its sole discretion, on or before June 1, 1995
(the "Initial Date"), Buyer shall have the right to elect by notice to Seller
and Escrow Agent, given before the Initial Date and accompanied by a precise
statement of reasons and the estimated cost of satisfying such condition, either
(a) to terminate this Agreement in which event the Deposit and interest thereon
shall be returned to Buyer; (b) to extend the Initial Date
12
<PAGE>
for up to two (2) months, provided that any extension of the Initial Date shall
not extend the Closing Date; or (c) to waive the Initial Conditions. In the
absence of a timely notice of the aforesaid election by Buyer, the Initial
Conditions shall be deemed to have been waived. If Seller elects to terminate as
aforesaid, Buyer shall have the right to negate any such termination within
thirty (30) days of Seller's notice by agreeing to cure any condition or to
allow Seller at Closing, a credit against the Purchase Price in the amount
specified in Seller's notice as necessary to satisfy such condition. In such
event, this Agreement shall remain in full force and effect and Buyer shall be
deemed to have waived the Initial Conditions. In the absence of a written notice
from Seller exercising the aforesaid right to negate a termination it shall be
deemed that Seller has not elected to negate the termination.
(ii) The Final Condition. If all of the Initial Conditions shall have
been met or waived in accordance with Section 5(b)(i), then the following shall
be the Final Condition:
(1) Buyer shall obtain all necessary "Governmental Approvals" (as
herein defined) from all "Governmental Authorities" necessary to construct the
Intended Use. "Governmental Approvals" shall mean all final and unappealable
approvals (other than a certificate of need and a building permit) for
development of the Intended Use on the Property including, but not limited to,
zoning variances or ordinance amendments from the Boroughs of Park Ridge and
Montvale to allow the Intended Use; site plan approval from the Boroughs of Park
Ridge and Montvale and, if necessary, the Bergen County Planning Board; stream
encroachment and other environmental approvals from the New Jersey Department of
Environmental Protection; and all other similar approvals. "Governmental
Authority" shall mean any governmental authority, including, without limitation,
any federal, state, county, municipal or other government department having
jurisdiction over the Property.
If the Final Condition is not fully satisfied in a manner which is
acceptable to Buyer in its sole discretion on or before the original or any
extended time for Closing, Buyer shall notify Seller thereof prior to the
Closing Date, which notice shall specify which condition(s) has (have) not been
satisfied. In such event, the Buyer shall have the right (A) to terminate this
Agreement in which event the Deposit and all interest thereon shall be returned
to the Buyer; or (B) to waive such Final Condition and proceed to closing.
(c) Covenants of Buyer. Buyer covenants that it will:
(i) promptly and diligently take all steps necessary, at its own cost
and expense, to satisfy the Initial Conditions and the Final Conditions;
(ii) Provide Seller with a copy of all letters, reports, applications
and other documents prepared and filed by
13
<PAGE>
Buyer in connection with the Initial Conditions and Final Condition and with all
responses thereto, promptly after filing or receipt thereof.
(iii) Advise Seller of all meetings or hearings of Governmental
Authorities in time sufficient to allow the Seller to be present; and
(iv) If this Agreement is terminated for any reason other than the
Seller's default, assign to Seller free and clear of all liens and encumbrances
all of Buyer's right, title and interest in any structural, environmental, soil,
engineering or other similar report in connection with the Property. The
covenants of this Section 5(c)(iv) shall survive termination of this Agreement.
(d) Fire or other casualty; condemnation.
(i) In the event the Improvements are damaged, in whole or in part, by
fire or other casualty (hereinafter "Damage") or in the event any portion of the
Land or Improvements has been taken or is threatened with a taking by any
governmental authority having the power of eminent domain (hereinafter a
"Taking"), the Seller shall give prompt notice thereof to the Buyer.
(ii) If such Damage or Taking occurs prior to the Approval Notice, the
Buyer shall have the right to elect, by notice to Seller within thirty (30) days
of Seller's notice aforesaid, to (1) terminate this Agreement, in which event
the Deposit and all interest thereon shall be returned to the Seller; or (2)
accept the Property as so damaged or taken and either an assignment of the
insurance proceeds or awards recovered or recoverable or a credit against the
Purchase Price in the amount of such proceeds or award and any deductibles. If
any governmental authority or insurance carrier requires that any portion of the
Improvements be demolished, after a fire or other casualty but prior to Closing,
Seller shall have the right to apply insurance proceeds to demolition and Buyer
shall be entitled to no assignment or credit with respect to the insurance
proceeds so applied. In the event of Damage, Seller shall have the right to
negate any termination by giving notice to the Buyer, within thirty (30) days of
Seller's notice of termination, that Seller will restore the Improvements, prior
to the Closing, to the condition existing prior to the damage and the Closing
shall be adjourned, if necessary, for a reasonable time to allow the Seller to
complete such restoration.
(iii) If such fire or other casualty or taking occurs after the
Approval Notice, Buyer shall have no right to terminate this Agreement but Buyer
and Seller shall have all other rights and obligations set forth in Paragraph
5(d)(ii) above.
14
<PAGE>
6. CLOSING OBLIGATIONS.
(a) Seller's Closing Obligations. On the Closing Date, Seller shall:
(i) Deliver to Buyer full possession of the Property: (A) in the same
condition as it is as of the date hereof, reasonable wear and tear excepted and
subject to damage by fire or other casualty as set forth in Paragraph 5(a)
(viii), and broom clean provided that (1) if Buyer's approved site plan
contemplates demolition of the mansion on the Property the Seller may,
specifically, remove the stained glass windows and the dining room chandelier
prior to Closing; and (2) Seller shall have no obligation to repair any bolt
holes, nail holes or other similar damages to the walls, floors or ceilings of
the Improvements arising from the removal of any property of the Seller or any
of its tenants; and (B) free and clear of all tenants and occupants. Buyer shall
be entitled to an inspection of the Property prior to the Closing Date in order
to determine whether the condition thereof complies with the terms of this
Section.
(ii) Deliver to Buyer, in form and substance satisfactory to Buyer,
the following:
(A) a good and sufficient bargain and sale deed (the "Deed")
conveying clear record and insurable title to the Land and Improvements, which
shall convey title free from all liens, encumbrances and encroachments except:
(I) the Permitted Exceptions as defined in Paragraph 5(b)(l)(3); (II) provisions
of building and zoning laws existing as of the date hereof; (III) such real
property taxes for the then current fiscal tax period as are not yet due and
payable on the Closing Date; and (IV) such liens for betterment charges as may
be assessed on the Property after the Closing Date;
(B) A Bill of Sale transferring Seller's entire interest in the
Personal Property.
(C) INTENTIONALLY DELETED.
(D) INTENTIONALLY DELETED.
(E) A bill from the local water and sewer authority and any other
entity providing utility service to the Property stating all charges for water
and sewer service and such other utilities, which, if not receipted, may be
adjusted from the proceeds of the Closing.
(F) Copies of all site plans, surveys, soil and substrata
studies, architectural drawings (including, without limitation, final "as built"
architectural and engineering drawings), plans and specifications, engineering
plans and studies,
15
<PAGE>
floor plans, landscape plans and other plans or studies of any kind that are in
the possession of Seller or Seller's attorney and relate to the Property and the
Intended Use.
(G) The standard New Jersey form of Affidavit to Buyer's title
insurer as to parties in possession or with a right to possession of, and
mechanic's liens with respect to, the Property, which affidavits shall be
sufficient to have the normal printed exceptions with respect to such matters
deleted from Buyer's and Buyer's lender's title insurance policy(ies).
(H) An Affidavit certifying that Seller is not a "foreign person"
as of the Closing Date, as provided in Section 4(a)(xv) hereof.
(I) A certificate of the Secretary of the Corporation certifying
as to the due authorization an execution of this Agreement, and of the sale,
assignment, instruments, and other transactions contemplated hereby.
(J) Certificates of corporate legal existence and good standing
and tax good standing the Corporation.
(K) An opinion of Seller's counsel addressed to Buyer, and if
required, Buyer's title insurance company, in form and substance reasonably
satisfactory to Buyer's counsel, confirming the Corporation's capacity, right
and authority to convey the Property and to otherwise consummate the
transactions contemplated by this Agreement, and that all persons signing on
behalf of the Corporation have been duly authorized and directed to execute,
acknowledge and deliver all documents necessary or convenient to so convey and
consummate such transactions.
(L) A certificate by Seller to the effect that all of the
representations and warranties set forth in Section 4 remain true and correct as
of the Closing Date except with respect to the Contracts to the extent the same
may have changed in accordance with the terms and conditions of this Agreement.
(M) A 1099-B form.
(N) A W-9 form stating that no backup withholding is necessary to
disburse Seller's share, if any, of the interest earned on the Deposit.
(O) All keys and key cards to the Property, appropriately tagged
for identification.
(P) All other documents, certificates and instruments reasonably
deemed necessary or appropriate by Buyer's counsel to effectuate the
transactions which are the subject of this Agreement.
16
<PAGE>
(iii) To enable Seller to make conveyance as herein provided, at the
time of delivery o the Deed, Seller shall use the Purchase Price or any portion
thereof to clear title to the Property of any or all encumbrances, and all
instruments so procured shall be recorded simultaneously with the delivery of
the Deed, or provisions reasonably satisfactory to Buyer's Title Insurer shall
be made prior to the Closing Date for recording thereof as soon as reasonably
practicable after the Closing Date.
(b) Buyer's Closing Obligations. At the Closing, Buyer shall:
(i) Deliver to Seller, in immediately available funds at a Seller's
bank, the Purchase Price, as adjusted for apportionments under Section 2.
(ii) Deliver any other documents expressly required by this Agreement
to be delivered by Buyer.
7. FAILURE OR INABILITY TO PERFORM; DEFAULTS; REMEDIES.
(a) Seller's Default. (i) If, on the Closing Date, Seller shall be unable
to give title or make conveyance or deliver possession of the Property as
required by this Agreement or to satisfy any of the terms and conditions
precedent to closing set forth herein, or if the Property does not then conform
to the provisions hereof, or if any of Seller's warranties and representations
contained herein are not correct as of the Closing Date, the time for
performance hereunder shall be extended for such period, not to exceed ninety
(90) days, as shall be reasonably specified by Buyer, and Seller use diligent
efforts to give title or make conveyances or deliver possession as provided
herein, or to satisfy such terms and conditions, to make the Property conform to
the provisions hereof, or to cure the inaccuracy in such warranty or
representation, as the case may be. If, at the expiration of such extended time
for performance, despite having used such diligent efforts, Seller shall remain
unable to convey title, or deliver possession, or make the Property conform, or
any of Seller's warranties and representations contained herein shall remain
incorrect as of such extended time, as the case may be, then Buyer shall have
the option, at Buyer' sole discretion: (A) to terminate this Agreement by notice
given to Seller, whereupon the Deposit, together with all interest and other
sums paid by Buyer hereunder, shall be promptly refunded by Buyer and all
obligations of the parties hereto shall cease and this Agreement shall be void
and without recourse to the parties hereof, excluding, however, those provisions
hereof which are expressly provided herein to survive termination of the
Agreement, or (B) to accept title to the Property as provided in Section 7(a)
(ii) below. In the event that Seller seeks relief as a debtor under any
applicable law, including without limitation the federal bankruptcy code, or
upon the involuntary commencement of any such proceeding, Buyer shall have the
right of possession of the Property pending the Closing and shall be entitled
17
<PAGE>
to any and all rights pursuant to 11 U.S.C. ss.365(i) and (ii). Buyer shall have
the right to obtain specific performance of this Agreement, as well as the
benefit of any other rights or remedies provided herein or by applicable law, in
the event of any default hereunder by Seller (i.e., Seller's failure to perform
its obligations hereunder where such failure is not excused by any of the
express terms of this Agreement), provided, however, that if Seller's sole
inability to perform arises because Seller is unable to reaffirm all of its
warranties and representations as of the Closing Date due to circumstances
beyond the control of Seller which have occurred subsequent to the date of this
Agreement, then Seller's sole obligation shall be to return the Deposit,
together with all interest thereon, to the Buyer.
(ii) Buyer shall have the election, at the original or at any extended
time for Closing, to accept such title to, and possession of, the Property as
Seller can deliver in its then condition and to thereupon pay the Purchase Price
without any deductions, except such amount necessary to remove all mortgages,
liens or encumbrances which secure the payment of money and such adjustments
computed in accordance with Section 2(b) above, in which case Seller shall
convey such title.
(b) Buyer's Default. If Buyer shall fail to fulfill its agreements herein
on the Closing Date (including, without limitation, any breach of Buyer's
warranties), Seller's sole and exclusive remedy shall be to retain the Deposit
and any interest thereon as full and complete liquidated damages, both at law
and in equity, whereupon this Agreement shall terminate without further recourse
to either party.
8. ISRA.
(a) Seller shall obtain and deliver to Buyer (and/or any designees or
assignees), at Seller's sole cost and expense, from the New Jersey Department of
Environmental Protection or its successor ("NJDEP"), prior to June 1, 1995 or
any extended date for Buyer to satisfy the Initial Conditions, a
nonapplicability letter (the "Nonapplicability Letter") under ISRA. In the event
that the application for a Nonapplicability Letter has not been decided prior to
such date, the period to satisfy the Initial Conditions shall be extended until
such Nonapplicability Letter has been granted or denied, but in no event later
than September 30, 1995. In the event ISRA is determined to be applicable to
this transaction, the Seller shall (a) have the right for a period of thirty
(30) days after such determination of applicability to terminate this Agreement
by a written notice to Buyer; or (b) if such termination does not occur, to
obtain, at or prior to the Closing Date an "ISRA Approval" consisting of a "no
further action letter" (also known as a "negative declaration approval") or a
"certificate or letter of compliance" stating that a cleanup or remediation plan
has been completed. In the event the Seller is unable to deliver the ISRA
Approval at or prior to the Closing Date, the Seller shall have the
18
<PAGE>
right to extend the Closing until such ISRA approval has been obtained but in no
event to a date later than September 30, 1996.
B. Seller shall apply for the Nonapplicability Letter or ISRA Approval
as soon as possible after the execution of this Agreement.
C. Seller shall contemporaneously, from time to time, deliver to Buyer
true and complete copies of all documents, reports, affidavits, submissions and
correspondence provided by Seller to NJDEP and all documents, reports,
directives and correspondence provided by the NJDEP to Seller. Seller shall also
promptly deliver to Buyer true and complete copies of all sampling and test
results obtained from samples and tests taken at and around the Premises. Seller
shall notify Buyer in advance of all meetings scheduled between Seller and
NJDEP, and Buyer, and its designees may attend all such meetings.
9. TAX DEFERRED EXCHANGE. Seller may wish to use the Property as part of a
tax deferred exchange of property with a third party pursuant to Section 1031 of
the Internal Revenue Code as amended. Seller shall have the right to assign its
interest in this Agreement to a third party participating in such exchange,
provided that such exchange of property is accomplished by a direct deed of the
exchanged property to the Seller; provided however that Buyer may elect not to
cooperate in such exchange if, in Buyer's reasonable judgment, Buyer may incur
any liability for which Seller's indemnity, hereinafter provided, may be
inadequate. Seller hereby indemnifies and agrees to save Buyer harmless from and
against any additional claims or liabilities arising as a result of Buyer's
participation in such tax deferred exchange. Seller shall promptly notify Buyer
of the intent of the Seller to participate in such tax deferred exchange. Buyer
shall therafter cooperate with Seller to effectuate such exchange. Seller shall
pay any additional transfer taxes, recording fees or similar closing costs
resulting from such tax deferred exchange.
10. MISCELLANEOUS.
(a) Tax Identification Number. Seller warrants and represents that the
Corporation's federal tax identification number is 13-195550, and Robert Noyes'
social security number is ###-##-#### and Buyer warrants and represents that
Buyer's federal tax identification number is ###-##-####. Seller and Buyer each
acknowledge that the foregoing information will be relied upon in reporting the
transactions contemplated hereby to appropriate governmental authorities.
(b) Agreement Not an Offer. The submission of any draft of this Agreement
or any portion thereof does not constitute an offer to sell or buy the Property,
it being acknowledged and agreed that neither Buyer nor Seller shall be legally
obligated with respect to the purchase or sale of the Property unless and until
19
<PAGE>
this Agreement has been executed by both Buyer and Seller and a fully executed
copy has been delivered to each of Buyer and Seller.
(C) Exhibits. The exhibits attached hereto are incorporated herein by
reference and made a part hereof.
(d) Notices. All notices or communications required or permitted hereunder
shall be in writing and delivered by hand or mailed by certified mail, return
receipt requested, postage and registration or certification charges prepaid, or
by nationally recognized overnight courier service, or by telefax, to the party
entitled thereto as follows:
If to Seller:
Robert Noyes
Noyes Data Corporation
Mill Road at Grand Avenue
Lakeside Center
Park Ridge, New Jersey 07656
Fax No. (201) 391-6833
with a copy to:
Beattie Padovano
50 Chestnut Ridge Road
Montvale, New Jersey 07645
Attn: Thomas W. Dunn, Esq.
Fax No. (201) 573-9736
If to Buyer:
Continuum Care of New Jersey, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attn: James M. Clary, III, Esq.
Fax No. (617) 433-1190
and a copy to:
Frank Giso III, Esq.
Choate, Hall & Stewart
Exchange Place, 53 State Street
Boston, Massachusetts 02109
Fax No. (617) 248-4000
or such other party(ies), address(es) or telefax number(s) as either party shall
specify by written notice to the other from time to time. Any such notice or
communication shall be deemed to have been given as of the date of its receipt
or delivery.
(e) Broker. (i) Each of Buyer and Seller hereby represents, covenants and
warrants to the other that the party so representing has dealt with no broker or
other person entitled to a
20
<PAGE>
commission in connection with the negotiation or execution of this Agreement or
the consummation of the transactions contemplated hereby, except as expressly
provided in this Section 8(e).
(ii) Upon delivery and recording of the Deed and other instruments
provided hereby, and consummation of the transactions contemplated hereby,
Seller shall pay to Edward S. Gordon Co., Inc. and David Houston Co.
(collectively, the "Broker") a brokerage commission as set forth in a separate
written agreement between Seller and the Broker.
(f) Entire Agreement; Rules of Construction. This Agreement, executed in
multiple counterparts, is to be construed as a New Jersey contract; is to take
effect as a sealed instrument; sets forth the entire agreement between the
parties; merges all prior and contemporaneous agreements, understandings;
warranties, or representations, including, without limitation, the letter from
Buyer and accepted by Seller, dated February 8, 1995; shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; and may be canceled, modified or amended only by a written instrument
executed by both Seller and Buyer. The captions and section headings are used
only as a matter of convenience and are not to be considered a part of this
Agreement or to be used in determining the intent of the parties.
(g) Further Assurances. Upon Buyer's request, Seller agrees to execute and
deliver to Buyer such additional instruments, certificates and documents as
Buyer may reasonably require, whether or not after the Closing Date, in order to
provide Buyer with the rights and benefits to which Buyer is entitled under this
Agreement.
(h) Notice of Agreement. Neither party shall record this Agreement or any
Notice or Memorandum of Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it
to be executed by their respective duly authorized representatives, as an
instrument under seal as of the day and year first above written.
Witness: BUYER:
CONTINUUM CARE OF NEW JERSEY, INC.
/s/ Elizabeth Derrico By: /s/ Michael Gosman
------------------------- -----------------------------
Name: Michael Gosman
Title: Vice President
(more signatures on next page)
21
<PAGE>
SELLER:
NOYES DATA CORPORATION
/s/ Thomas W. Dunn By: /s/ Robert Noyes
------------------------- -----------------------------
Name:
Title:
/s/ Thomas W. Dunn By: /s/ Robert Noyes
------------------------- -----------------------------
Robert Noyes, Individually
22
<PAGE>
EXHIBITS
Exhibit 1.1 Legal Description of the Land
Exhibit 4.1 Environmental
Exhibit 4.2 Service Contracts
Exhibit 4.3 Leases
Exhibit 5.1 Insurance Certificate
<PAGE>
EXHIBIT 1.1
LEGAL DESCRIPTIONS
TRACT I
All that tract or parcel of land and premises, situate, lying and being in
the Boroughs of Park Ridge and Montvale in the County of Bergen and State of New
Jersey, more particularly described as follows:
PARCEL I:
BEGINNING at the northwesterly corner thereof, at a point in the center
line of Grand Avenue (formerly South Avenue) where the same is intersected by
the center line of a private right of way between the line of lands of the
William H. Dean Company and the herein described property, and running thence
(1) along the center line of the right of way (14 feet in width), South eleven
degrees and sixteen minutes West (S 11 (degrees) l6'W) three hundred
forty-seven and six tenth (347.6) feet; thence
(2) South sixteen degrees and twenty-seven minutes West (S 16 (degrees) 27'W)
ninety-eight and fifty-five hundredths (98.55) feet; thence
(3) South twenty-nine degrees and twenty-one minutes West (S 29 (degrees) 2l'W)
eighty-one and eighty-two hundredths (81.82) feet; thence
(4) South thirty-seven degrees and one minute West (S 37 (degrees) 0l'W)
ninety-eight and twenty-three hundredths (98.23) feet; thence
(5) South fifty-degrees and twenty-six minutes West (S 50 (degrees) 26'W) one
hundred and forty-nine (149) feet to a point in the north line of lands
formerly of Andrew P. Perry, (Courses 1 to 5 inclusive being along with
center line of the right of way as above referred to); thence
(6) along the north line of lands formerly of Andrew P. Perry, South fifty-nine
degrees and five minutes East (S 59 (degrees) 05'E), three hundred
ninety-nine and sixty-two hundredths (399.62) feet; thence
(7) South thirty degrees and fifty-five minutes West (S 30 (degrees) 55'W)
twenty (20) feet; thence
(8) South fifty-nine degrees and five minutes East (S 59 (degrees) 05'E) ninety
and fifteen hundredths (90.15) feet; thence
(9) North twenty-nine degrees and forty-eight minutes East (N 29 (degrees)
48'E) fifty-two (52) feet; thence
(10) North fifty-nine degrees and five minutes West (N 59 (degrees) 05'W)
sixteen (16) feet to a point in the west line of lands formerly of Margaret
Hopper; thence
(11) along the west line of lands formerly of Margaret Hopper, north twenty-nine
degrees and forty-eight minutes East (N 29 (degrees) 48'E) seven hundred
twelve (712) feet, more or less, to a point in the north bank of the
Pascack Brook; thence
1.1-1
<PAGE>
(12) easterly along the north bank of the Pascack Brook, the several courses
thereof, a distance of one hundred and ten (110) feet more or less, to a
point in the center line of Grand Avenue; thence
(13) westerly along the center line of Grand Avenue, north fifty-six degrees and
twenty minutes West (N 56 (degrees) 20'W) two hundred twenty-eight and
three tenths (228.3) feet; thence
(14) still along said center line North seventy-four degrees thirty minutes and
thirty seconds West (N 74 (degrees) 30'30"W) three hundred thirty-four and
eighteen hundredths (334.18) feet; thence
(15) still along said center line of Grand Avenue, North sixty-four degrees and
thirty-two minutes West (N 64 (degrees) 32'W) fifty-nine and thirty-eight
hundredths (59.38) feet to the point or place of BEGINNING.
PARCEL II:
BEGINNING at the southeast corner thereof, at a corner in the south line of
lands of Erhard Klug, said point being also in the north line of a proposed
street, and being 282.99 feet westerly from the intersection of same with the
west line of Hawthorne Avenue, and from thence running
(1) North 30 (degrees) 55' East along the line of lands of Erhard Klug 20.00
feet to a corner; thence
(2) North 59 (degrees) 05' West along the south line of land of Klug 235.93
feet to a point; thence
(3) South 30 (degrees) 55' West, 20.00 feet to a point; thence
(4) Easterly, parallel with (South 59 (degrees) O5' East) and distant 20.00
feet southerly at right angles from the second course above described, and
partly along the north line of a proposed street 235.93 feet to the place
of BEGINNING.
BEING the same premises conveyed to Noyes Data Corporation by Carola Klug,
Individually and as Executrix of George Erhard Klug, deceased, dated September
7, 1977 and recorded September 9, 1977 in Deed Book 6292 at page 275.
1.1-2
<PAGE>
TRACT II
All that tract or parcel of land and premises, hereinafter particularly
described, situate, lying and being in the Borough of Park Ridge in the County
of Bergen and State of New Jersey:
BEGINNING at a point in the dividing line between lands of the mortgagor
and lands formerly of Andrew P. Perry now of the Borough of Park Ridge, said
point being located in the center line of a 14 foot right of way or roadway
described in a certain deed made by William H. Dean and Evangeline A. Dean, his
wife, to the mortgagor, dated April 16, 1906 and recorded May 10, 1906 in Book
628 of Deeds, page 545, Bergen County Clerk's Office and running thence through
the center line of said right of way or roadway the following courses and
distances:
(1) North 49 degrees 55 minutes East (being parallel with the easterly
foundation line of the factory located on the premises herein described)
149 feet; thence
(2) North 36 degrees 30 minutes East 98.23 feet; thence
(3) North 27 degrees 30 minutes East 81.62 feet; thence
(4) North 15 degrees East 98.55 feet; thence
(5) North 10 degrees 35 minutes East 349 feet to a point in the center line of
Grand (formerly South) Avenue; returning thence to the point of beginning
and running
(6) Along the aforesaid dividing line between lands of The W. H. Dean Company
and lands formerly of Perry, now of the Borough of Park Ridge, in a
northwesterly direction on a course of about North 66 degrees West a
distance of 148.80 feet, more or less, to a point on which is known as the
eighteen foot line, being the southeasterly boundary line of lands now of
the Borough of Park Ridge, formerly of the mortgagor; thence along said
boundary line the following courses and distances:
(7) North 66 degrees 43 minutes East, 34.23 feet; thence
(8) North 28 degrees 12 minutes East, 10.52 feet; thence
(9) North 52 degrees 54 minutes East, 20 feet; thence
(10) North 55 degrees 3 minutes East, 71.36 feet; thence
(11) North 65 degrees 8 minutes East, 36.20 feet; thence
(12) North 77 degrees 1 minute East 74.75 feet; thence
(13) North 49 degrees 10 minutes East, 58.20 feet; thence
(14) North 34 degrees 21 minutes East 72.53 feet; thence
(15) North 21 degrees 45 minutes East 163.57 feet; thence
(16) North 15 degrees 45 minutes East, 42.85 feet; thence
(17) North 11 degrees 53 minutes East 131.14 feet; thence
(18) North 26 degrees 44 minutes East, 15.34 feet to the southwesterly corner of
the abutment of the private bridge of William H. Dean over the Pascack
Road, thence
(19) Along the westerly side of said bridge North 10 degrees 19 minutes 15
seconds East 32.05 feet to the northwesterly abutment of same; thence
1.1-3
<PAGE>
(20) North 11 degrees 12 minutes East, 11.24 feet all along the said eighteen
foot line; thence
(21) North 20 degrees 47 minutes East 27.61 feet to the center of Grand Avenue;
thence
(22) Along the center line of Grand Avenue in a southeasterly direction, a
distance of 20 feet, more or less, to the end of the fifth course
hereinabove described.
Together with an easement in, over and upon the above described fourteen foot
right of way for all purposes of ingress and egress.
BEING the same premises conveyed to Robert Noyes by deed from W. H. Dean
Company, dated August 6, 1965 and recorded August 11, 1965 in Book 4813, Page
335 in the Bergen County Clerk's Office.
1.1-4
<PAGE>
TRACT III
All that tract or parcel of land and premises, situate, lying and being in
the Borough of Park Ridge in the County of Bergen and State of New Jersey, more
particularly described as follows:
BEGINNING at a point in the northerly line of lands now or formerly of
William H. Dean Estate said point being distant southeasterly along same 5.14
feet from the northwesterly corner of the above mentioned lands now or formerly
of William H. Dean; thence (1) S. 56 (degrees) 35' E. along the aforementioned
northerly line of lands n/f of Dean a distance of 307.35 feet; thence (2) S. 33
(degrees) 25' W. a distance of 20.00 feet; thence (3) S. 56 (degrees) 35' E.
along the southerly line of lands n/f of Erhard Klug a distance of 87.98 feet;
thence (4) S. 36 (degrees) 23' 30" W. a distance of 50.07 feet; thence (5) N. 56
(degrees) 35' W. a distance of 400.56 feet to a point thence (6) N. 39 (degrees)
47' 40" E. a distance of 70.44 feet to the point or place of beginning, the same
containing 26,123 square feet. The above description taken from survey made by
Hook and Easterbrook, Engineers and Surveyors, Mahwah, New Jersey, August, 1965.
BEING the same premises as shown on a certain map entitled "Subdivision of
Property of William H. Dean, Jr., Dorothy D. Gerdenier and Alice D. Schrader,
Borough of Park Ridge, Bergen Co. N.J." dated February, 1966, made by Garrett E.
Lockwood, E. & S., Park Ridge, N.J. and filed in the Bergen County Clerk's
Office on July 11, 1966, as Map No. 6481, being designated as "Exception -
26,123 sq. ft. to be retained by current owners."
BEING the same premises conveyed to Robert Noyes by William H. Dean, Jr.
and Janet Freston Dean by deed dated February 4, 1967 and recorded March 13,
1967 in Bergen County Book 5023 of Deeds at Page 51.
1.1-5
<PAGE>
Exhibit 4.1
The Seller has obtained deliveries of, stored and used heating oil in three
underground storage tanks located substantially as shown on the plan attached
hereto. Such tanks were decommissioned and abandoned in place beginning in
approximately 1990.
Further there may be asbestos in various materials used in the buildings on the
property. There is one pipe in the "red building" with visible asbestos
insulation and there may be other pipes within the walls of the red building and
any other buildings on the property that are insulated with asbestos. In
addition, the current siding siding on the "red building" may be underlain with
a former layer of asbestos cement siding.
<PAGE>
[DIAGRAM OF UNDERGROUND STORAGE TANK]
<PAGE>
Exhibit 4.2
Service Contracts
None
<PAGE>
Exhibit 4.3
Leases
Lease dated September 21, 1993 between Noyes Data Corporation and R. L.
Engineering, Inc.
Lease dated June 29, 1994 between Noyes Data Corporation and Simex Medical
Imaging, Inc. and Abraham Danan.
Leases dated February 5, 1990 and February 15, 1991 and Lease Modification and
Extension Agreement dated January 30, 1995 between Noyes Data Corporation and
Indices-Pac Research Corporation.
Lease dated December 3, 1991 and Lease Modification and Extension Agreement
dated September, 1994 between Noyes Data Corporation and Dolce International,
Inc.
Lease dated August 9, 1982 and Extension Agreement dated October 5, 1992 between
Noyes Data Corporation and Titan Group, Inc. and its successor Construction
Counsellors, Inc.
<PAGE>
Exhibit 5.1
Insurance Certificate
ATTACHED
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD. CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY)
|_| 04/07/95
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND
The Milton J. Grant Agency CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE
168 Franklin Avenue Po Box 89 DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW
Pearl River, NY 10695 ---------------------------------------------------------------
(914) 735-5200 COMPANIES AFFORDING COVERAGE
---------------------------------------------------------------
COMPANY
LETTER A AMERICAN EMPLOYERS INSURANCE CO
---------------------------------------------------------------
- ---------------------------------------------------------------------COMPANY
INSURED LETTER B NORTHERN ASSURANCE CO
ROBERT NOYES ---------------------------------------------------------------
COMPANY
224 W. SADDLE RIVER ROAD LETTER C
SADDLE RIVER NJ 07458 ---------------------------------------------------------------
(201) 391-8484 COMPANY
LETTER D
---------------------------------------------------------------
COMPANY
LETTER E
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED, NOTWITHSTANDING ANY REQUIREMENT. TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- ------------------------------------------------------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR DATE (MM/DD/YY) DATE (MM/DD/YY)
- ------------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY GENERAL AGGREGATE $2,000,000
|X| COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG. $2,000,000
|_|_| CLAIMS MADE |X| OCCUR. AJR 403972 09/15/94 09/15/95 PERSONAL & ADV. INJURY $
|_| OWNERS & CONTRACTOR'S PROT. EACH OCCURRENCE $1,000,000
|_| __________________________ FIRE DAMAGE (Any one fire) $ 50,000
MED. EXPENSE (Any one person)$ 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY COMBINED SINGLE
|_| ANY AUTO LIMIT $
|_| ALL OWNED AUTOS BODILY INJURY
|_| SCHEDULED AUTOS / / / / (Per person) $
|_| HIRED AUTOS BODILY INJURY
|_| NON-OWNED AUTOS (Per accident) $
|_| GARAGE LIABILITY PROPERTY DAMAGE $
|_|
- ------------------------------------------------------------------------------------------------------------------------------------
B EXCESS LIABILITY EACH OCCURRENCE $3,000,000
|X| UMBRELLA FORM NJDZ 15801 09/15/94 09/15/95 AGGREGATE $3,000,000
|_| OTHER THAN UMBRELLA FORM
- ------------------------------------------------------------------------------------------------------------------------------------
A OTHER - PROPERTY
BLDG.#5 SPEC ALL RISK $ 940,000
AJR 403972 09/15/94 09/15/95
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
BLDG #5 - 118 MILL ROAD, PARK RIDGE, NJ
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
- ------------------------------------------------------------------------------------------------------------------------------------
Continuum Care of N. J., SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
Inc. EXPIRATION DATE THEREOF. THE ISSUING COMPANY WILL ENDEAVOR TO
197 First Avenue MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE
Needham, Mass 02194 LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
-------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
/s/ Edward A. Grant
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-8 (7/90) (c) ACORD CORPORATION 1990
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD. CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY)
|_| 04/07/95
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND
The Milton J. Grant Agency CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE
168 Franklin Avenue Po Box 89 DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW
Pearl River, NY 10695 ---------------------------------------------------------------
(914) 735-5200 COMPANIES AFFORDING COVERAGE
---------------------------------------------------------------
COMPANY
LETTER A AMERICAN EMPLOYERS INSURANCE CO
---------------------------------------------------------------
- ---------------------------------------------------------------------COMPANY
INSURED LETTER B NORTHERN ASSURANCE CO
NOYES DATA CORPORATION ---------------------------------------------------------------
NOYES PUBLICATION, INC. COMPANY
120 MILL ROAD LETTER C
PARK RIDGE NJ 07656 ---------------------------------------------------------------
(201) 391-8484 COMPANY
LETTER D
---------------------------------------------------------------
COMPANY
LETTER E
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED, NOTWITHSTANDING ANY REQUIREMENT. TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- ------------------------------------------------------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR DATE (MM/DD/YY) DATE (MM/DD/YY)
- ------------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY GENERAL AGGREGATE $2,000,000
|X| COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG. $2,000,000
|_|_| CLAIMS MADE |X| OCCUR. AJR 403967 09/15/94 09/15/95 PERSONAL & ADV. INJURY $
|_| OWNERS & CONTRACTOR'S PROT. EACH OCCURRENCE $1,000,000
|_| __________________________ FIRE DAMAGE (Any one fire) $ 50,000
MED. EXPENSE (Any one person)$ 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY COMBINED SINGLE
|_| ANY AUTO LIMIT $
|_| ALL OWNED AUTOS BODILY INJURY
|_| SCHEDULED AUTOS / / / / (Per person) $
|_| HIRED AUTOS BODILY INJURY
|_| NON-OWNED AUTOS (Per accident) $
|_| GARAGE LIABILITY PROPERTY DAMAGE $
|_|
- ------------------------------------------------------------------------------------------------------------------------------------
B EXCESS LIABILITY EACH OCCURRENCE $3,000,000
|X| UMBRELLA FORM NJDZ 15801 09/15/94 09/15/95 AGGREGATE $3,000,000
|_| OTHER THAN UMBRELLA FORM
- ------------------------------------------------------------------------------------------------------------------------------------
A OTHER - PROPERTY
BLDG. #4 SPEC ALL RISK $ 182,000
AJR 403967 09/15/94 09/15/95
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
BLDG #4 - 124 MILL ROAD, PARK RIDGE, NJ
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
- ------------------------------------------------------------------------------------------------------------------------------------
Continuum Care of N. J., SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
Inc. EXPIRATION DATE THEREOF. THE ISSUING COMPANY WILL ENDEAVOR TO
197 First Avenue MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE
Needham, Mass 02194 LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
-------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
/s/ Edward A. Grant
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-8 (7/90) (c) ACORD CORPORATION 1990
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD. CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY)
|_| 04/07/95
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND
The Milton J. Grant Agency CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE
168 Franklin Avenue Po Box 89 DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW
Pearl River, NY 10695 ---------------------------------------------------------------
(914) 735-5200 COMPANIES AFFORDING COVERAGE
---------------------------------------------------------------
COMPANY
LETTER A AMERICAN EMPLOYERS INSURANCE CO
---------------------------------------------------------------
- ---------------------------------------------------------------------COMPANY
INSURED LETTER B NORTHERN ASSURANCE CO
NOYES DATA CORPORATION ---------------------------------------------------------------
NOYES PUBLICATION, INC. COMPANY
120 MILL ROAD LETTER C
PARK RIDGE NJ 07656 ---------------------------------------------------------------
(201) 391-8484 COMPANY
LETTER D
---------------------------------------------------------------
COMPANY
LETTER E
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED, NOTWITHSTANDING ANY REQUIREMENT. TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- ------------------------------------------------------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR DATE (MM/DD/YY) DATE (MM/DD/YY)
- ------------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY GENERAL AGGREGATE $2,000,000
|X| COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG. $2,000,000
|_|_| CLAIMS MADE |X| OCCUR. AJR 403967 09/15/94 09/15/95 PERSONAL & ADV. INJURY $
|_| OWNERS & CONTRACTOR'S PROT. EACH OCCURRENCE $1,000,000
|_| __________________________ FIRE DAMAGE (Any one fire) $ 50,000
MED. EXPENSE (Any one person)$ 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY COMBINED SINGLE
|_| ANY AUTO LIMIT $
|_| ALL OWNED AUTOS BODILY INJURY
|_| SCHEDULED AUTOS / / / / (Per person) $
|_| HIRED AUTOS BODILY INJURY
|_| NON-OWNED AUTOS (Per accident) $
|_| GARAGE LIABILITY PROPERTY DAMAGE $
|_|
- ------------------------------------------------------------------------------------------------------------------------------------
B EXCESS LIABILITY EACH OCCURRENCE $3,000,000
|X| UMBRELLA FORM NJDZ 15801 09/15/94 09/15/95 AGGREGATE $3,000,000
|_| OTHER THAN UMBRELLA FORM
- ------------------------------------------------------------------------------------------------------------------------------------
A OTHER - PROPERTY
BLDG. #1 SPEC ALL RISK $ 433,000
BLDG. #2 AJR 403967 09/15/94 09/15/95 SPEC ALL RISK $ 355,000
BLDG. #3 SPEC ALL RISK $ 708,000
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
BLDG #1 - 120 MILL ROAD, PARK RIDGE, NJ (OFFICE)
BLDG #2 - 120 MILL ROAD, PARK RIDGE, NJ (STORAGE)
BLDG #3 - 122 MILL ROAD, PARK RIDGE, NJ
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
- ------------------------------------------------------------------------------------------------------------------------------------
Continuum Care of N. J., SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
Inc. EXPIRATION DATE THEREOF. THE ISSUING COMPANY WILL ENDEAVOR TO
197 First Avenue MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE
Needham, Mass 02194 LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
-------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
/s/ Edward A. Grant
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-8 (7/90) (c) ACORD CORPORATION 1990
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit A
DEVELOPMENT AGREEMENT
THIS AGREEMENT made as of this 18 day of April 1996, by and between
WOODBRIDGE CARE, LLC, a Connecticut limited liability company, having an office
at 88 Notch Hill Road, North Branford, Connecticut 06471 ("WOODBRIDGE"), and
CAREMATRIX CORPORATION, a Delaware corporation having an office at 197 First
Avenue, Needham, Massachusetts 02194, formerly known as The CarePlex Group,
which was also located at 197 First Avenue, Needham, Massachusetts, and formerly
known as Continuum Care of Massachusetts, Inc. ("CareMatrix").
WHEREAS, Woodbridge has entered into a Property Purchase Agreement with
Edna DeGennaro, June DeGennaro, Carolyn DeGennaro, Nancy DiGennaro and Lois
Baldini (collectively, the "Sellers") dated as of June 1, 1995, as amended by a
Supplemental Agreement dated as of September 27, 1995 (collectively, the
"Purchase Agreement") relating to the purchase of certain property situated at
21 Bradley Road, Woodbridge, Connecticut, as more particularly described in the
Purchase Agreement (the "Property"); and
WHEREAS, Woodbridge intends to develop the Property as a project of
approximately ninety (90) "assisted living" elderly residential units, including
accessory on-site parking and customary amenities (the "Project"); and
WHEREAS, Woodbridge wishes to retain certain services of CareMatrix in
connection with the development of the Project, and may wish to retain certain
services of CareMatrix in connection
<PAGE>
with the construction and management of the Project, and CareMatrix is willing
to provide such services on the terms and conditions set forth herein;
NOW, therefore, for valuable consideration, it is agreed:
1. Performance of the Purchase Agreement. Subject to the terms and
conditions of the Purchase Agreement, including any conditions or contingencies
as to Woodbridge's obligations thereunder, Woodbridge agrees to perform its
obligations under the Purchase Agreement, including the acquisition of the
Property. Woodbridge shall be responsible for all costs of acquisition of the
Property, including, but not limited to, deposits, taxes, insurance, recording
fees, title examination fees, title insurance premiums and legal fees.
2. Use of Consultants. The architects for the Project shall be Englebrect
and Griffin (the "Project Architects") and the engineers for the Project shall
be Milone and MacBroom (the "Project Engineers"). All contracts between
Woodbridge and the Project Architects and the Project Engineers shall be subject
to the prior approval of CareMatrix. Neither the Project Architects nor the
Project Engineers shall be changed without the prior approval of Woodbridge and
CareMatrix. The Project Architects have prepared and submitted design criteria
and related site plans and facility schematics for the Project (the "Preliminary
Plans"), which have been reviewed and approved by Woodbridge and CareMatrix.
After Development Approvals (as hereinafter defined) have been obtained,
Woodbridge shall instruct the Project
-2-
<PAGE>
Architects and the Project Engineers to prepare final architectural and
engineering plans (the "Final Plans"), which shall be consistent with the
Preliminary Plans unless otherwise agreed by Woodbridge and CareMatrix. All
changes, additions or revisions to the Preliminary Plans shall be subject to the
approval of Woodbridge and CareMatrix. All changes, additions or revisions to
the Final Plans that are not consistent with the Preliminary Plans shall be
subject to the approval of Woodbridge and CareMatrix. Woodbridge shall contract
directly with the Project Architects and the Project Engineers and shall be
directly responsible for the payment of all fees and expenses payable to the
Project Architects and the Project Engineers after completion of the Final
Plans. Subject to reimbursement as hereinafter set forth, CareMatrix shall be
responsible for the payment of fees and expenses payable to the Project
Architects and the Project Engineers for invoices issued by them pursuant to
their respective contracts with Woodbridge through completion of the Final
Plans.
3. Development Approvals. Attached hereto as Exhibit A is a time schedule
for applying for and obtaining Development Approvals and Construction Permits
(both as hereinafter defined), which schedule may be modified from time to time
by agreement of Woodbridge and CareMatrix (the "Schedule"). CareMatrix shall, as
Owner's agent, and in accordance with the Schedule, apply for and diligently
pursue all required federal, state and local approvals and permits needed for
the Project, including, but not limited to
-3-
<PAGE>
approvals and permits required under relevant laws relating to zoning, wetlands,
parking and curb cuts, highway and traffic, historic districts, sewer and water
or environmental matters (the "Development Approvals"), but, excluding permits
required to commence construction on the Property; e.g., building permits,
foundation permits, grading permits, clearing permits or other similar
construction related permits (the "Construction Permits"). Woodbridge shall
cooperate with CareMatrix and assist CareMatrix in its efforts to obtain the
Development Approvals and shall sign all necessary applications in connection
therewith. CareMatrix shall use reasonable efforts to obtain the Development
Approvals in accordance with the Schedule. If a Development Approval is denied,
CareMatrix shall not be obligated to appeal such denial; and if a Development
Approval is granted, but a Third party appeals such approval, CareMatrix shall
not be obligated to defend such appeal. If CareMatrix elects not to appeal a
denial or to defend an appeal, as the case may be, as to any Development
Approval other than a necessary zone change, and Woodbridge elects to take such
action on its own behalf, the amount otherwise payable to CareMatrix pursuant to
Paragraph 7 shall be reduced by an amount equal to fifty percent (50%) of the
actual out-of-pocket costs incurred by Woodbridge in pursuing or defending such
appeal. If Woodbridge elects to pursue or defend any appeal relating to a zone
change, such appeal shall be at Woodbridge's sole expense. CareMatrix shall not
be liable for delay in obtaining or denial of Development Approvals unless
-4-
<PAGE>
caused by the negligence, willful act or omission of CareMatrix. Woodbridge
acknowledges that any claim of negligence, willful act or omission of CareMatrix
in obtaining the Development Approvals shall constitute a claim for breach of
contract by CareMatrix subject to the default remedies set forth in Paragraph 15
and not a claim of negligence under tort law. Subject to the limitations as to
expenses of appeals in this Paragraph and subject to reimbursement as set forth
in this Agreement, CareMatrix shall pay all costs, including attorneys' fees,
associated with the Development Approvals.
4. Construction Permits. If all Development Approvals are obtained, and
after all appeal periods relevant thereto have expired without an appeal having
been taken (or, if an appeal has been taken, after such appeal has been
withdrawn, dismissed or adjudicated in favor of Woodbridge), CareMatrix shall,
as Owner's agent, and in accordance with the Schedule apply for and diligently
pursue all Construction Permits required for the Project. Woodbridge shall
cooperate with CareMatrix and assist CareMatrix in its efforts to obtain the
Construction Permits and shall sign all necessary applications in connection
therewith. CareMatrix shall use reasonable efforts to obtain the Construction
Permits in accordance with the Schedule. If a Construction Permit is denied,
CareMatrix shall not be obligated to appeal such denial; and if a Construction
Permit is granted, but a third party appeals issuance of such Construction
Permit, CareMatrix shall not be obligated to defend such appeal. If
-5-
<PAGE>
CareMatrix does not appeal a denial or defend an appeal, as the case may be, as
to any Construction Permit, and Woodbridge elects to take such action on its own
behalf, the amount otherwise payable to CareMatrix pursuant to Paragraph 7 shall
be reduced by an amount equal to fifty percent (50%) of the actual out-of-pocket
costs incurred by Woodbridge in pursuing or defending such appeal. CareMatrix
shall not be liable for delay in obtaining or denial of Construction Permits
unless caused by the negligence, willful act or omission of CareMatrix.
Woodbridge acknowledges that any claim of negligence, willful act or omission of
CareMatrix in obtaining the Construction Permits shall constitute a claim for
breach of contract by CareMatrix subject to the default remedies set forth in
Paragraph is and not a claim of negligence under tort law. Subject to the
limitations as to expenses of appeals in this Paragraph and subject to
reimbursement as set forth in this Agreement, CareMatrix shall pay all costs,
including attorneys' fees, associated with the Construction Permits.
5. Appointment of Manager. CareMatrix shall appoint from time to time a
project manager (the "Project Manager"), subject to Woodbridge's reasonable
approval, to oversee the development of the Project. Until further notice from
CareMatrix, the Project Manager shall be: Bernard Plante, CareMatrix's Vice
President of Planning and Development or John Netherton, CareMatrix's Project
Manager.
-6-
<PAGE>
6. Project Financing. If all Development Approvals are obtained, and after
all appeal periods relevant thereto have expired without an appeal having been
taken (or, if an appeal has been taken, after such appeal has been withdrawn,
dismissed or adjudicated in favor of Woodbridge), Woodbridge shall apply for and
diligently pursue a written commitment (the "Commitment") for construction
financing for the Project in an amount which (when combined with the equity of
Woodbridge in the Property and any infusion of capital by Woodbridge in the
Project and any committed secondary financing), will be sufficient to pay all
development and construction costs for the Project (the "Project Financing").
Woodbridge shall use reasonable efforts to obtain the commitment by that date
which is (a) if CareMatrix and Woodbridge authorize the Project Architect to
commence with the preparation of working drawings on or before April 30, 1996,
four (4) months after that date on which the Development Approvals, and
otherwise six (6) months after that date on which the Development Approvals are
received; and (b) three (3) months after that date on which the Final Plans are
completed, whichever is later (the "Project Financing Date"). Woodbridge shall
be responsible for payment of all costs associated with the Project Financing.
If Woodbridge is unable to obtain the Commitment by the Project Financing Date,
or if Woodbridge obtains the Commitment by the Project Financing Date, but fails
to close the Project Financing by that date which is the earlier of (a) sixty
(60) days after issuance of the Commitment; or (b) one hundred
-7-
<PAGE>
twenty (120) days after transfer of title to the Property to Woodbridge if
consummated prior to the Project Financing (the "Financing Closing Date"),
Woodbridge shall have the right to extend the Financing Closing Date for two (2)
periods of thirty (30) days each, by written notice of each such extension given
to CareMatrix at least two (2) business days before the then relevant Financing
Closing Date, provided that, for each such extension of the Financing Closing
Date, Woodbridge shall pay to CareMatrix a sum equal to one percent (1%) of
CareMatrix's Development Costs as defined in Paragraph 7 (the "Extension
Interest Charge") at the time and in the manner specified in Paragraph 7. If
Woodbridge fails to close the Project Financing by the Financing Closing Date,
as it may be so extended pursuant to this Paragraph, CareMatrix shall have the
right, but not the obligation, to acquire the Property and to develop the
Project at a total purchase price of NINE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($925,000.00) (the "Buyout Price"). If Woodbridge has not acquired title to the
Property at the date upon which CareMatrix elects to acquire the Property and to
develop the Project, the Buyout Price shall be applied first to amounts due to
the Sellers under the Purchase Agreement with any the balance to be paid to
Woodbridge. If Woodbridge has acquired title to the Property at the date upon
which CareMatrix elects to acquire the Property and to develop the Project, the
Buyout Price shall be paid to Woodbridge and shall be allocated in such manner
as Woodbridge may reasonably request. If CareMatrix elects to
-8-
<PAGE>
exercise its option to acquire title to the Property and develop the Project, it
shall do so by written notice to Woodbridge given within thirty (30) days after
the Project Financing Date or the Financing Closing Date, as it may be extended
pursuant to this Paragraph, whichever is applicable. Within sixty (60) days
after CareMatrix's notice of election to Woodbridge, Woodbridge shall transfer
title to the Project or assign the Purchase Agreement; assign all relevant
Development Approvals and Construction Permits; if requested to do so by
CareMatrix, assign all architects' contracts, engineers' contracts or other
contracts relating to the Project; and deliver all Preliminary Plans or Final
Plans and all other reports, surveys, studies, or other documentation relating
to the Project (the "Project Documents") to CareMatrix. If Woodbridge has
acquired title to the Property, the Property shall be transferred by Woodbridge
to CareMatrix by warranty deed free and clear of all encumbrances except those
encumbrances subject to which the Property was conveyed by Sellers to Woodbridge
and non-monetary encumbrances relating to the Development Approvals and/or
Construction Permits as long as such non-monetary encumbrances do not interfere
with the development of the Project and as otherwise agreed by Woodbridge and
CareMatrix; Woodbridge shall pay all applicable conveyance taxes and execute
applicable conveyance tax forms, title affidavits and other customary closing
documents; and customary adjustments shall be made as of transfer of title. If
CareMatrix does not exercise its right to acquire the Property and develop
-9-
<PAGE>
the Project within the time periods specified herein or, if CareMatrix does
exercise such rights and the transfer of title to the Property and the
assignment of the Project Documents to CareMatrix from Woodbridge, or the
assignment of the Purchase Agreement and assignment of the Project Documents to
CareMatrix from Woodbridge are consummated, neither CareMatrix nor Woodbridge
shall have any further obligation or liability to the other for expenses,
reimbursements, costs or liabilities incurred in connection with the Project.
7. Reimbursement of CareMatrix. Upon closing of the Project Financing,
Woodbridge shall reimburse to CareMatrix immediately, but without interest
(other than the Extension Interest Charge, if payable), all actual out-of-pocket
development costs paid to unrelated third parties by CareMatrix in connection
with the Project, including, but not limited to, costs relating to the
Development Approvals, the Construction Permits, the Preliminary Plans, and the
Final Plans, but excluding, without limiting the generality of the foregoing,
CareMatrix's legal fees relating to its agreements with Woodbridge (in contrast
to legal fees incurred in connection with the Development Approvals or
Construction Permits or otherwise incurred in connection with the development of
the Project itself) and the internal cost of CareMatrix's staff time
(collectively, the "Development Costs"). If any Development Costs have not been
paid by CareMatrix at the time of the closing of the Project Financing,
CareMatrix shall provide to Woodbridge
-10-
<PAGE>
at the time of such closing an accounting of known unpaid Development Costs, if
any, and Woodbridge shall reimburse CareMatrix for such Development Costs within
ten (10) days after request for payment. If CareMatrix fails to include any
items of Development Costs as to which Woodbridge has entered into contracts
directly with third parties and CarePlex is administering payments for
Woodbridge, Woodbridge shall remain responsible for all additional payments due
and shall indemnify CareMatrix against all claims for payments due after the
accounting at Closing by such third parties. If CareMatrix fails to include any
items of Development Costs as to which CareMatrix has entered into contracts
directly with third parties, CareMatrix shall be deemed to have waived its
rights to reimbursement for those items not so included. CareMatrix shall
provide to Woodbridge and/or its lender such documentation as Woodbridge and/or
its lender may reasonably require to support reimbursement of Development Costs.
8. Construction of the Project. Woodbridge agrees that CareMatrix shall be
appointed as either the general contractor or the construction manager of the
Project, the selection of which appointment to be in Woodbridge's sole and
absolute discretion. Within thirty (30) days after completion and approval of
Woodbridge and CareMatrix of the Final Plans, CareMatrix shall deliver to
Woodbridge a proposed contract for construction of the Project based upon a
Stipulated Sum Contract, AIA Form Al01 (with General Conditions Form A201), as
may be reasonably modified by
-11-
<PAGE>
CareMatrix (the "Proposed Contract"), which Proposed Contract shall include all
construction and site costs, builder's overhead and profit, and construction
management fees, but shall exclude any pre-existing Development Costs for which
CareMatrix is entitled to reimbursement under this Agreement. The Proposed
Contract may require 100% performance bonds, but shall not obligate CareMatrix
to provide bonds in excess of the Stipulated Sum specified therein less all
costs attributable to furniture, fixtures and equipment. Woodbridge may instruct
CareMatrix and/or the Project Architects to make the Preliminary Plans and/or
the Final Plans available to other general contractors to allow the Project to
be competitively bid. Woodbridge shall have the right in its sole discretion to
select CareMatrix or any other bidder as its general contractor, but shall make
its election and give CareMatrix written notice of its election within thirty
(30) days after receipt of the Proposed Contract. If CareMatrix is selected as
the general contractor of the Project, CareMatrix and Woodbridge shall execute
the Proposed Contract with such changes as may be mutually agreed upon by
CareMatrix and Woodbridge (the "Construction Contract"), and CareMatrix shall
have the right to assign the Construction Contract to any wholly-owned
subsidiary of CareMatrix or to Suffolk Construction, Inc., provided, however,
that following such assignment, CareMatrix shall remain responsible for the
performance of its duties and obligations under the Construction
-12-
<PAGE>
Contract. If CareMatrix is not selected as the general contractor of the
Project, CareMatrix shall serve as the construction manager of the Project;
shall provide customary construction management services to Woodbridge; and
shall be paid a fee for such services at the rate of seven percent (7.0%) of all
construction costs (exclusive of change orders), site costs, fixed equipment
costs, and costs for labor associated with furnishings and finishes (but not the
actual cost of furnishings and finishes). Such fees shall be in addition to
Development Costs incurred by and to be reimbursed to CareMatrix pursuant to
this Agreement. If CareMatrix is to serve as the construction manager,
Woodbridge and CareMatrix shall execute an AIA-form construction management
agreement, modified to the extent appropriate to be consistent with the terms of
this Agreement.
9. Operation of Project. Woodbridge and CareMatrix may, at the option and
in the sole discretion of Woodbridge, enter into an agreement under which
CareMatrix or any wholly-owned subsidiary of CareMatrix or any entity 50% or
more owned by CareMatrix, or by any of its subsidiaries, or by Abraham Gosman,
or by Andrew Gosman or his wife or children and/or by Michael Gosman or his wife
or children, or by one or more of them, directly or indirectly (collectively,
"CareMatrix Affiliates") will provide management operational services to the
Project after its completion (the "Operational Agreement"); provided, however,
that if Woodbridge elects to enter into an Operational Agreement with CareMatrix
or a CareMatrix Affiliate, (i) it shall give
-13-
<PAGE>
CareMatrix written notice of its election to do so not later than ninety (90)
days after commencement of construction of the Project; and (ii) CareMatrix or a
CareMatrix Affiliate and Woodbridge shall execute a formal Operational Agreement
which shall contain the following terms and conditions and such other terms and
conditions as may be mutually acceptable to both CareMatrix and Woodbridge and
their respective counsel:
(a) The operational management fee (the "Operational Fee") payable to
CareMatrix or a CareMatrix Affiliate from Woodbridge shall be equal to either
(i) five percent (5%) of the Gross Revenues (as hereinafter defined) for the
Project during any period in which the Project is the only facility in which
CareMatrix or a CareMatrix Affiliate manages operations for Woodbridge or for
any other corporation, limited liability company or partnership in which David
Reis is the president, member, principal stockholder, managing partner or
general partner (collectively, "Woodbridge Affiliates"), or (ii) four and
one-half percent (4.5%) of Gross Revenues (as hereinafter defined) for the
Project during any period in which CareMatrix or a CareMatrix Affiliate manages
operations for more than one facility for Woodbridge or Woodbridge Affiliates.
The Operational Fee shall be payable monthly.
(b) Gross Revenues shall be defined in detail in the Operational Agreement,
but shall include all revenues actually received exclusive of interest received
on reserves, intercompany transfers and security deposits received. Rent
received shall be
-14-
<PAGE>
included in gross revenues only for the periods to which the rents apply.
(c) The Operational Agreement shall include a provision under which
CareMatrix agrees that neither CareMatrix, nor any CareMatrix Affiliate, nor
Abraham Gosman, nor Andrew Gosman or his wife or children, nor Michael Gosman or
his wife or children (collectively, the "Gosmans") directly or indirectly, shall
own or operate a similar facility in the Towns of Orange, Ansonia, Seymour,
Bethany, Woodbridge, Naugatuck, Milford, Hamden, Cheshire or New Haven (other
than an assisted-living facility that may be developed in connection with the
so-called Lee High School Project in New Haven (the "New Haven Facility"))
during the term of the Operational Agreement.
(d) If, but only if required by Woodbridge's lender(s) for permanent
financing on the Project, CareMatrix shall subordinate the management fees
payable to it under the Operational Agreement to Woodbridge's debt to such
lender(s).
(e) The term of the Operational Agreement shall be not less than five (5)
years, subject to extension for successive periods of one (1) year each in the
event that CareMatrix has made a working Capital Loan (as hereinafter defined)
to Woodbridge and the Working Capital Loan has not been paid in full at the
expiration date of the then current term of the Operational Agreement.
10. Working capital Loan. If Woodbridge and CareMatrix enter into the
Operational Agreement, CareMatrix agrees to
-15-
<PAGE>
provide, at Woodbridge's option, to Woodbridge a working capital loan (the
"Working Capital Loan") equal to the projected Operational Fee payable to
CareMatrix during the first three (3) years of operation of the Project.
CareMatrix and Woodbridge shall mutually agree upon the projections and the
amount of the Working Capital Loan prior to the execution of the Operational
Agreement. The Working Capital Loan shall bear interest at a rate equal to the
lesser of (i) the prime rate (as defined by the Wall Street Journal) plus one
hundred basis points (1.0%) or (ii) the interest rate provided for in any first
mortgage loan secured by the Project during the term of the Operational
Agreement. The Working Capital Loan shall be evidenced by a promissory note and,
if and to the extent permitted by Woodbridge's first mortgagee, shall be secured
by a valid second lien against the Property and all personal property at or used
in connection with the Project, but shall be nonrecourse as to any individual
member of Woodbridge. All documentation in connection with the Working Capital
Loan shall be in form and content reasonably satisfactory to CareMatrix and its
counsel and shall be executed and delivered simultaneously with the Operational
Agreement, together with such resolutions, title insurance policies and opinion
letters as CareMatrix or its counsel may reasonably require. If Woodbridge does
not enter into an Operational Agreement with CareMatrix for any reason,
CareMatrix shall have no obligation to make the working Capital Loan, and
nothing contained in this Agreement shall be deemed to create an intention or
obligation on the part
-16-
<PAGE>
of CareMatrix to make any other loan or the Working Capital Loan under any other
circumstances to Woodbridge.
11. Assisted Living Services. Whether or not CareMatrix and Woodbridge
enter into an Operational Agreement, Woodbridge agrees that upon completion of
the Project, Woodbridge shall enter into a services agreement (the "Services
Agreement") with CareMatrix, pursuant to which CareMatrix, directly or through
SALSA, Inc., its assisted living services agency ("SALSA") or any other
CareMatrix Affiliate, shall provide "assisted living services" for the Project
to the level and standards required of providers of such services under the
regulations of the State of Connecticut Department of Health (together with any
successor department thereto with jurisdiction the "DOH"), provided CareMatrix
or SALSA or such other CareMatrix Affiliate is then licensed by the DOH to
provide such services. If CareMatrix provides assisted living services directly,
the Services Agreement shall specify the rates at which such services are to be
paid; if CareMatrix provides such services through SALSA or a CareMatrix
Affiliate, the Services Agreement shall specify that CareMatrix shall be
reimbursed for all charges of SALSA or such other agency plus fifteen percent
(15%) of the total thereof, in either case with payment to be made on a monthly
basis. The Services Contract shall have a term of not less than forty-two (42)
months and shall otherwise be in form and substance reasonably satisfactory to
Woodbridge, CareMatrix and their respective counsel.
-17-
<PAGE>
12. Term of this Agreement. The term of this Agreement shall expire on the
day prior to the third anniversary of the date hereof (the "Termination Date").
If Woodbridge has not acquired the Property under the Purchase Agreement for
reasons other than the failure of Woodbridge to perform its obligations
thereunder by the Termination Date, or if Woodbridge has been unable to obtain
Project Financing by the time specified in Paragraph 6, but CareMatrix has not
exercised its right to acquire the Property and develop the Project as described
in Paragraph 6, this Agreement shall expire upon the Termination Date and
neither party shall have any continued obligation or liability to the other for
expenses, reimbursements, costs or liabilities hereunder.
13. Covenant Against Competing Development. Woodbridge Affiliates and
CareMatrix are in the process of seeking sites and negotiating agreements for
developments similar to the Project. CareMatrix agrees that until the
termination of this Agreement, neither CareMatrix, nor any CareMatrix Affiliate,
nor the Gosmans, directly or indirectly, shall, for its or their own account or
that of any party other than a Woodbridge Affiliate, contract to purchase or
develop property in the Towns of Orange, Ansonia, Seymour, Bethany, Woodbridge,
Naugatuck, Milford, Hamden, Cheshire or New Haven (other than the New Haven
Facility) for "assisted-living" elderly residential use except after acquisition
of the Property pursuant to Paragraph 6 or Paragraph is or acquisition of other
properties pursuant to
-18-
<PAGE>
analogous provisions in any other agreement between CareMatrix and a Woodbridge
Affiliate.
14. Termination Rights. (a) Woodbridge shall have the right, at its sole
option, to terminate this Agreement (the "Woodbridge Optional Termination") at
any time prior to the execution of either a construction contract or a
construction management contract as described in Paragraph 8 upon (i) written
notice to CareMatrix and (ii) payment to CareMatrix of a termination fee (the
"Termination Fee") equal to (1) all CareMatrix's actual out-of-pocket costs paid
to unrelated third parties by CareMatrix in connection with the Project,
including all legal fees incurred in connection with the development of the
Project and in connection with CareMatrix's agreements with Woodbridge (the
"Termination Costs") plus (2) a sum equal to the lesser of (y) Two Hundred
Thousand Dollars ($200,000.00) or (z) One Hundred Percent (100%) of the
Termination Costs. The Termination Fee shall be payable at the time and in the
manner Development Costs would be payable pursuant to Paragraph 7. Upon exercise
of the Woodbridge Optional Termination, other than the obligation to pay the
Termination Fee as provided herein, this Agreement, including, the provisions of
Paragraph 13, shall terminate and, except as provided herein, neither CareMatrix
nor Woodbridge shall have any further obligation or liability to the other for
expenses, reimbursement, costs or liabilities incurred in connection with the
Project. In the event that Woodbridge exercises its termination right pursuant
to this Paragraph at any
-19-
<PAGE>
time during which Woodbridge has alleged a default by CareMatrix and a right to
terminate this Agreement pursuant to Paragraph 15, Woodbridge shall pay to
CareMatrix the Termination Fee as provided in this Paragraph and shall pursue a
determination in arbitration of its allegation of default and right to terminate
pursuant to Paragraph 15. If such determination in arbitration is in favor of
Woodbridge, CareMatrix shall refund the Termination Fee paid. If such
determination in arbitration is in favor of CareMatrix, CareMatrix shall be
entitled to retain the Termination Fee. Each party shall pay its own costs,
including attorneys' fees, incurred in such arbitration.
(b) CareMatrix shall have the right, at its sole option, to terminate this
Agreement (the "CareMatrix Optional Termination") at any time prior to the
execution of either a construction contract or a construction management
agreement as described in Paragraph 8 upon written notice to Woodbridge. Upon
exercise of CareMatrix of the CareMatrix Optional Termination, Woodbridge shall
be entitled to the same rights as it would have if CareMatrix had defaulted
pursuant to Paragraph 15 without reference to or a determination in arbitration
as to the existence of a default or propriety of termination.
15. Default. In the event that CareMatrix defaults in its obligations under
this Agreement and/or a CareMatrix Affiliate and/or a Gosman violates the
provisions contained in the Operational Agreement or in Paragraph 13 of this
Agreement and such default remains uncured thirty (30) days after written
-20-
<PAGE>
notice thereof from Woodbridge to CareMatrix, Woodbridge may terminate this
Agreement after determination in arbitration that CareMatrix or such person or
entity has so defaulted and that such termination is proper or, before such
determination, in the manner provided in Paragraph 14. Pending such
determination, unless Woodbridge exercises the Woodbridge Optional Termination,
This Agreement shall remain in effect. Upon such termination by Woodbridge after
determination in arbitration that CareMatrix or such person or entity has
defaulted and that such termination is proper, Woodbridge shall not be obligated
to reimburse CareMatrix for any Development Costs not yet paid to CareMatrix;
CareMatrix shall reimburse Woodbridge for reasonable legal fees to Woodbridge
relating to its agreements with CareMatrix (in contrast to legal fees incurred
in connection with the development of the Project itself); and neither party
shall have any continuing obligation or liability to the other. In the event
that Woodbridge defaults in its obligations under this Agreement and such
default remains uncured for thirty (30) days after written notice thereof from
CareMatrix to Woodbridge, CareMatrix shall have the right, but not the
obligation, to acquire the Property and to develop the Project at the Buyout
Price and otherwise on the terms and conditions set forth in Paragraph 6, except
that if such default occurs prior to the obtaining of Development Approvals, the
transfer of the Property or assignment of the Purchase Agreement and the payment
of the Buyout Price shall be subject to CareMatrix's ability to obtain
-21-
<PAGE>
the Development Approvals and shall be payable ninety (90) days after receipt of
the Development Approvals and expiration of all appeal periods without an appeal
having been taken (or, if an appeal has been taken, after such appeal has been
withdrawn, dismissed or adjudicated in favor of CareMatrix or Woodbridge) During
the pendency of Development Approvals, Woodbridge shall cooperate with
CareMatrix in seeking the Development Approvals and sign all necessary
applications in connection therewith. If after such default and election by
CareMatrix to acquire the Property and develop the Project, Woodbridge fails to
perform its obligations relating thereto, CareMatrix shall be entitled to pursue
all its rights and remedies at law or in equity, including specific performance.
16. Mutual Representations. (a) CareMatrix warrants to Woodbridge that it
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; that it has the corporate power and authority to
make, execute, deliver and perform this Agreement; that this Agreement has been
duly authorized and approved by all required corporate action on its part
required; and that it is not subject to any charter, by-law, mortgage, lien,
lease, agreement, instrument, order, law, rule, regulation, judgment or decree
or any other restriction of any kind or character, which would prevent
consummation of the transactions contemplated by this Agreement.
(b) Woodbridge warrants to CareMatrix that it is a limited liability
company duly organized and validly existing under the
-22-
<PAGE>
laws of The State of Connecticut; that it has the power and authority to make,
execute, deliver and perform this Agreement; that this Agreement has been duly
authorized and approved by all required action on its part required; and that it
is not subject to any charter, by-law, mortgage, lien, lease, agreement,
instrument, order, law, rule, regulation, judgment or decree or any other
restriction of any kind or character, which would prevent consummation of the
transactions contemplated by this Agreement.
17. Assignment. Neither party shall assign this Agreement without the
other's prior written consent.
18. Notices. All notices, deliveries or tenders given or made in connection
herewith shall be in writing and shall be deemed given when personally delivered
or three (3) days after being deposited with the United States Postal Service by
certified or registered mail, return receipt requested, or on the day after
being deposited with a commercial overnight courier, addressed as follows:
To Woodbridge:
Woodbridge Care, LLC
88 Notch Hill Road
North Branford, Connecticut 06471
Attention: David Reis
With a copy to:
Valerie Seiling, Esquire
Wiggin & Dana
CityPlace I
185 Asylum Street
Hartford, Connecticut 06103
-23-
<PAGE>
To CareMatrix:
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Attention: Mr. Michael J. Zaccaro
with copies to:
James C. Clary, Esquire
CareMatrix Corporation
197 First Avenue
Needham, Massachusetts 02194
Barbara A. Sarrantonio, Esquire
Muttha, Cullina, Richter and Pinney
CityPlace I
185 Asylum Street
Hartford, Connecticut 06103
19. Brokers. CareMatrix and Woodbridge each represent and warrant to and
with each other that they respectively: (i) have not had any dealings,
negotiations or consultations with any real estate broker, finder or any other
party entitled to a commission in connection with this Agreement (as opposed to
any commissions payable under the Purchase Agreement by the Sellers), (ii) have
not been induced to enter into this Agreement by any other real estate broker,
finder or other party entitled to a commission, and (iii) have not incurred and
will not incur any liability for finder's fees, brokerage fees or other
commissions payable in connection with this Agreement. CareMatrix shall
indemnify and save Woodbridge harmless from and against any loss or damage
arising from CareMatrix's breach of its representation and warranty contained in
this Paragraph and Woodbridge shall indemnify and save CareMatrix harmless from
and against any loss
-24-
<PAGE>
or damage arising from Woodbridge's breach of its representation and warranty
contained in this Paragraph.
20. Arbitration. Any dispute under this Agreement shall be resolved by
arbitration conducted in accordance with the rules of the American Arbitration
Association through its office in New Haven, Connecticut. Woodbridge and
CareMatrix shall each select one (1) arbitrator and the two (2) arbitrators so
chosen shall select a third arbitrator. The panel of arbitrators shall hold one
or more hearings at which CareMatrix and Woodbridge may be represented by
counsel. The determination by the panel of arbitrators shall be final, binding
and conclusive upon CareMatrix and Woodbridge and judgment rendered by the panel
of arbitrators may be entered in any court of competent jurisdiction. The costs
of arbitration shall be borne by the losing party.
21. Time of the Essence. Time whenever specified herein for performance by
CareMatrix or Woodbridge is hereby made and declared to be of the essence of
this Agreement.
22. Governing Law. This Agreement shall be governed by the laws of the
State of Connecticut.
23. Entire Agreement. This Agreement constitutes the entire agreement by
and between Woodbridge and CareMatrix and supersedes any and all previous
agreements, oral or written, between the parties which affects the Property. No
modification of this Agreement nor waiver of any term or condition hereof,
-25-
<PAGE>
shall be of any force or effect, unless the same is in writing, signed by the
parties.
24. Effect. This Agreement shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of the parties
hereof. Wherever used herein the singular shall include The plural, the plural
the singular and The use of any gender shall be applicable to all genders.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
this 18 day of April, 1996.
WITNESSES: WOODBRIDGE CARE, LLC
/s/ Donna Reis By /s/ [Illegible]
- ------------------------------- ---------------------------------
Its Managing Director
/s/ [Illegible] Hereunto Duly Authorized
- -------------------------------
CAREMATRIX CORPORATION
/s/ Donna Reis By /s/ Michael J. Zaccaro
- ------------------------------- ---------------------------------
Its Sr. Vice President
/s/ [Illegible] Hereunto Duly Authorized
- -------------------------------
-26-
<PAGE>
STATE OF CT :
: ss. 4/18, 1996
COUNTY OF NEW HAVEN :
Personally appeared David Reis, Managing Partner of CHESHIRE CARE, LLC, a
Connecticut limited liability company, signer and sealer of the foregoing
instrument and acknowledged the same to be his/her free act and deed as such
member and the free act and deed of said limited liability company, before me.
/s/ [Illegible]
------------------------------------
Notary Public
My Commission Expires: Aug. 31, 1998
STATE OF MASSACHUSETTS :
: ss. , 1996
COUNTY OF NORFOLK :
Personally appeared ____________________,_______________ of CAREMATRIX
CORPORATION, a Delaware corporation, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed as such officer
and the free act and deed of said corporation, before me.
Elizabeth Derrico
------------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires:
-27-
EXHIBIT 10.138
ASSIGNMENT AGREEMENT
(Glen Cove, Roslyn, Great Neck, Wallingford)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
W I T N E S S E T H
WHEREAS, Assignor has entered into that certain Letter of Intent (the
"Letter of Intent"), dated June 27, 1996, relating to a certain parcels of
land located in Glen Cove, New York, Great Neck, New York, Wallingford,
Connecticut and Roslyn, New York (collectively, the "Land), a copy of which
is attached hereto as Exhibit A;
WHEREAS, Assignor intends to co-develop three (3) of the parcels
constituting the Land for senior housing facilities consisting of
approximately one hundred forty (140) units, eighty (80) units, and one
hundred six (106) units, respectively, with the Glen Cove parcel to consist
of approximately eighty (80) units (collectively, the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign certain of its rights and obligations
under the Letter of Intent to Assignee, and Assignee desires to assume such
rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title
and interest of Assignor in, to and under the Letter of Intent other
than Assignor's rights and obligations with respect to the development
and management of the Project, and Assignee hereby accepts the within
assignment and assumes and agrees with Assignor, to perform and comply
with and to be bound by all of the terms, covenants, agreements,
provisions and conditions of the Letter of Intent on the part of
Assignor thereunder to be performed on and after the date hereof, in
the same manner and with the same force and effect as if Assignee had
originally executed the Letter of Intent.
1
<PAGE>
2. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 4 hereof) accruing
or arising under the Letter of Intent on or before the date hereof.
3. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Letter of
Intent after the date hereof.
4. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
5. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts,
and (iii) may not be modified orally, but only by a writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/___________________________
Name:
Title:
ASSIGNEE:
CHANCELLOR OF
MASSACHUSETTS, INC.
By: /s/___________________________
Name:
Title:
2
<PAGE>
[CAREMATRIX LOGO]
June 27, 1996
Hassett-Belfer Senior Housing, LLC
40 Cutler Mill Road
Suite 503
Great Neck, New York 11021
Attention: Mr. Andrew B. Belfer
Mr. William D. Hassett
RE: CareMatrix/Hasset-Belfer Joint Venture
Gentlemen:
This letter shall confirm that we have reached a general understanding
regarding the essential features of a transaction between Hassett-Belfer
Senior Housing, LLC ("HBSH") and CareMatrix Corporation or its nominee
("CareMatrix"), relating to the acquisition, development, ownership,
financing and management of the following projects (each a "Project" and
collectively, the "Projects"): (i) an 80 unit assisted living facility to be
located in Glen Cove, New York (the "Glen Cove Project"), (ii) an assisted
living facility consisting of approximately 140 units to be located in Great
Neck, New York (the "Great Neck Project"), (iii) an assisted living facility
consisting of approximately 106 units to be located in Roslyn, New York (the
"Roslyn Project"), (iv) an assisted living facility consisting of
approximately 80 units to be located in Wallingford, Connecticut, and (v)
certain other assisted living facilities to be identified and located in the
Designated Area (as defined below). Subject to the preparation, execution and
performance of the necessary written agreements containing the mutual
covenants and agreements of the parties, which upon execution will supersede
the terms of this letter, the parties agree as follows:
1. Definitive Agreement: CareMatrix and HBSH will enter into a master joint
venture agreement for all of the Projects (the "Joint Venture Agreement"),
which Joint Venture Agreement shall include, without limitation, that
CareMatrix and HBSH shall each obtain a fifty percent (50%) interest in
the Projects. Each of CareMatrix and HBSH agrees to use reasonable efforts
to agree on the Joint Venture Agreement within forty-five (45) days after
the execution of this letter by both parties.
CAREMATRIX CORPORATION
197 First Avenue, Needham, Massachusetts 02194 Telephone: 617-433-1000
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 2
2. Site Acquisition and Approvals:
(a) The Joint Venture shall acquire and retain ownership of the site for the
applicable Project (each a "Site" and collectively, the "Sites"), which
shall be pre-approved by each of CareMatrix and HBSH. Subject to the
performance of the due diligence review as set forth herein, CareMatrix
and HBSH agree that the Sites for the Glen Cove Project (The Mayfair at
Glen Cove, located at the corner of Glen Street and Town Path Road, Glen
Cove, New York), the Great Neck Project (The Mayfair at Great Neck, 96
Cuttermill Road, Great Neck, New York) and the Roslyn Project (Village
School Property, Roslyn, New York) are hereby approved. The date upon
which the Site for each of the other Projects is approved, subject to
the performance of the due diligence review as set forth herein, by each
of CareMatrix and HBSH, is referred to herein as the "Site
Identification Date".
(b) HBSH (and/or CareMatrix to the extent required below) shall be
responsible for all costs and expenses incurred in connection with
acquiring the Sites, including, without limitation, option payments,
deposits, taxes, insurance and legal fees associated with any land
option or purchase contracts (the "Site Costs"). The Site Costs shall be
included within the definition of Development Costs as set forth in
subsection (c) below.
(c) (i) Upon approval by each of CareMatrix and HBSH of a development budget
and operating pro-formas for the first five (5) operating years of the
applicable Project, HBSH (and/or CareMatrix to the extent required
below) shall, subject to reimbursement as provided in Section 4 hereof,
fund or cause to be funded all reasonable costs and expenses associated
with obtaining all required Federal, state and local approvals necessary
for the development of each of the Projects including, but not limited
to, zoning, wetlands, historic district, sewer and water, and
environmental, all as applicable (collectively, the "Approvals"; the
costs for obtaining such Appovals, together with the Site Costs and all
out-of-pocket expenses paid to unrelated third parties, are hereinafter
collectively referred to as the "Development Costs"), up to the maximum
amount of Two Hundred Thousand Dollars ($200,000) for any individual
Project.
(ii) In the event that the total amount of Development Costs for any
individual Project exceeds Two Hundred Thousand Dollars ($200,000), then
CareMatrix shall, subject to reimbursement as provided in Section 4
thereof, fund or cause to be funded the same up to the maximum amount of
Two Hundred Thousand Dollars ($200,000) for any individual Project.
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 3
(iii) In the event that the total amount of Development Costs for any
individual Project exceeds Four Hundred Thousand Dollars ($400,000),
then CareMatrix and HBSH shall each, subject to reimbursement as
provided in Section 4 hereof, fund or cause to be funded the same, fifty
percent (50%) of any such amounts, subject to the agreement of
CareMatrix and HBSH to proceed with the applicable Project.
(iv) Notwithstanding the provisions of subsections (i)-(iii) above,
CareMatrix and HBSH acknowledge that HBSH has previously funded, or
caused to have been funded, Development Costs in the approximate amount
of Four Hundred Thousand Dollars ($400,000), subject to verification
during the due diligence period set forth in Section 11(d) below, for
the Glen Cove Project and CareMatrix has previously funded, or caused to
have been funded, certain Development Costs for the Roslyn Project,
subject to verification during the due diligence period outlined below.
(d) HBSH and CareMatrix shall be responsible for diligently pursuing all
Approvals. HBSH and CareMatrix shall mutually agree on a time schedule
pursuant to which HBSH and CareMatrix shall obtain the Approvals, which
may be reasonably modified by the mutual agreement of the parties from
time to time. CareMatrix and HBSH acknowledge that certain of the
Approvals for the Glen Cove Project have previously been obtained.
(e) CareMatrix and HBSH acknowledge that, subject to verification during the
due diligence period set forth in Section 11(d) below, HBSH has acquired
the land for the Glen Cove Project and will transfer the same to the
Joint Venture at the closing of the Project Financing, free and clear of
all liens (other than those agreed to by CareMatrix and HBSH), including
any existing mortgages on such land, in exchange for Nine Hundred
Twenty-Five Thousand Dollars ($925,000) to be paid by the Joint Venture.
3. Project Plans:
(a) CareMatrix and HBSH shall jointly select a project architect (a "Project
Architect") and a project engineer (a "Project Engineer") and any other
necessary consultants and professionals for each of the Projects. The
Project Architect(s) and the Project Engineer(s) shall contract directly
with the Joint Venture. The Joint Venture shall direct the Project
Architect(s) and the Project Engineer(s) to develop a preliminary site
plan and facility schematics. CareMatrix and HBSH shall approve the
design criteria, including overall size and layout, which criteria shall
be incorporated in the development of the applicable Project.
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 4
(b) After the applicable Project has received the necessary Approvals, HBSH
(and/or CareMatrix to the extent required under Section 2(c) hereof)
shall, subject to reimbursement as provided in Section 4 hereof, fund or
cause to be funded the reasonable costs necessary to complete final
architectural and engineering plans (the "Plans") for the Projects and
such other costs required to obtain the permits necessary to commence
construction (all such costs shall be subject to the limitations
relating to the funding of Development Costs as set forth in Section
2(c) above and shall be included within the definition of the
Development Costs). The Plans shall be consistent with the preliminary
site plan and facility schematics and shall be mutually agreed upon by
HBSH and CareMatrix; provided, however, that each of CareMatrix and HBSH
agree that CareMatrix's prototype plans shall be utilized for the
Projects to the extent feasible. Notwithstanding the foregoing,
CareMatrix and HBSH acknowledge that the Project Architect and the
Project Engineer have previously been selected, and the Plans have been
completed, for the Glen Cove Project.
4. Financing:
(a) CareMatrix shall be responsible for obtaining constructing financing and
permanent financing for the Projects sufficient, in conjunction with any
equity financing by CareMatrix and HBSH, to fund all costs associated
with the development and construction of the Projects (each a "Project
Financing"). Except for the Initial Guarantee Fees and the CareMatrix
Additional Guarantee Fees provided below, the parties acknowledge that
CareMatrix shall not be entitled to any financing fee in connection with
the foregoing. The terms and conditions of each Project Financing shall
be subject to the approval of each of CareMatrix and HBSH. Each Project
Financing shall be (except for any guarantees as provided herein)
non-recourse or substantially non-recourse to CareMatrix and HBSH and
their respective principals.
(b) Notwithstanding the foregoing, in the event that a portion of any
Project Financing is required to be guaranteed, HBSH and CareMatrix
shall each provide guarantees up to a maximum amount of One Million
Dollars ($1,000,000) for any individual Project, and each shall be
entitled to an annual guarantee fee equal to two percent (2%) of the
guaranteed amount outstanding, computed as of the effective date of the
guaranty, if any (the "Initial Guarantee Fees"). In addition to the
foregoing, CareMatrix shall be entitled to an annual guarantee fee equal
to two percent (2%) of any amount in excess of Two Million Dollars
($2,000,000), up to fifty percent (50%) of the amount of the Project
Financing, computed as of the effective date of the guaranty (the
"CareMatrix Additional Guarantee Fee"). With respect to the Glen Cove
Project, if necessary to close the Project Financing (other
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 5
than the tax-exempt financing as provided in subsection (e) below),
CareMatrix agrees to provide a guarantee of up to thirty percent (30%)
of the amount of such Project Financing (after taking into account the
guarantees set forth in the first sentence of this subsection). No
CareMatrix Additional Guaranty Fee shall accrue or be payable on the
balance of the principal amount of the Project Financing. The Initial
Guarantee Fees, the CareMatrix Additional Guarantee Fee, and the
CareMatrix Construction Guarantee Fee (defined below) are collectively
referred to herein as the "Guarantee Fees"). The Guarantee Fees shall be
paid on a priority basis from the cash flow from operations at the
applicable Project (the "Project Cash Flow") as set forth in Section 7
hereof. In the event that CareMatrix elects to provide any payment and
completion guarantees under any construction financing for any Project,
and in the case of the Glen Cove Project, CareMatrix hereby agrees to
provide such guarantees, if necessary, then CareMatrix shall be entitled
to a guarantee fee equal to one-half percent (0.5%) of the CareMatrix
guaranteed amount, computed as of the effective date of the guaranty
(the "CareMatrix Construction Guarantee Fee").
(c) Simultaneously with the closing of the applicable Project Financing, the
Development Costs shall be paid to HBSH and/or CareMatrix on a pro-rata
basis, in full from the first advance under the construction financing
for the applicable Project. In the event that, for any reason, the total
amount of the Development Costs for any Project is not so paid to HBSH
and/or CareMatrix, then the balance shall accrue interest at a rate
equal to the rate announced by Fleet Bank of Massachusetts, N.A. from
time to time as its prime rate (the "Prime Rate") plus two percent (2%)
(such balance, together with such interest, the "Balance") and the
Balance shall be repaid to HBSH and/or CareMatrix, pro-rata, on a
priority basis from the applicable Project Cash Flow as set forth in
Section 7.
(d) In the event that the amount of any Project Financing is less than one
hundred percent (100%) of the amount necessary to acquire, develop and
construct the applicable Project, each of CareMatrix and HBSH agrees to
contribute equity ("Initial Equity") to the Joint Venture at the closing
of the applicable Project Financing in an amount not to exceed Three
Hundred Fifty Thousand Dollars ($350,000) each for any individual
Project (which maximum amount shall be deemed to include any
unreimbursed Development Costs). In the event that CareMatrix and/or
HBSH elect to contribute additional equity ("Additional Equity") in
order to close any Project Financing, and in the case of the Glen Cove
Project, CareMatrix hereby agrees to contribute Additional Equity up to
the maximum amount of Five Hundred Thousand Dollars ($500,000) in order
to close the Project Financing for such Project, if necessary, the same
shall be repaid to CareMatrix and/or HBSH, as the case may be, together
with interest thereon from
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 6
the date of advance at the Prime Rate plus two percent (2%), on a
priority basis from the applicable Project Cash Flow as set forth in
Section 7.
(e) Notwithstanding the foregoing provisions of this Section 4, each of
CareMatrix and HBSH acknowledges that HBSH has been negotiating to
complete a tax-exempt permanent financing for the Glen Cove Project, and
the parties shall use best efforts to continue to pursue and utilize the
same for the Glen Cove Project. The out-of-pocket costs paid by HBSH to
date for such financing have been included within the amount set forth
in Section 2(c)(iv) hereof as the Development Costs for the Glen Cove
Project. The balance of the costs expected to be incurred in connection
with such financing are listed as "Bond Issuance Costs" or "Additional
Bond Issuance Costs" on Exhibit B attached hereto (collectively, the
"Issuance Costs"). Each of CareMatrix and HBSH agrees that the Issuance
Costs (or such lower amount as shall be negotiated by the Joint Venture
and the applicable third parties) shall be paid by the Joint Venture
regardless of whether such tax-exempt financing is utilized. In the
event that such financing is not utilized by the Joint Venture, HBSH
shall use best efforts to obtain releases from each of the consultants
employed in connection with such financing, including, without
limitation, [those identified on Exhibit B attached hereto, releasing
the Joint Venture from and against all losses, claims, damages and
expenses, including reasonable attorney's fees, which may be incurred in
connection with the failure of the Joint Venture to utilize such
financing.
(f) The Project budget for the Glen Cove Project is attached hereto as
Exhibit B, and subject to the performance of the due diligence review as
set forth in Section 11(d) below, is hereby approved by each of
CareMatrix and HBSH.
5. Construction: The Joint Venture shall make the Plans available to general
contractors and construction managers acceptable to each of HBSH and
CareMatrix (it being agreed that Suffolk Construction Company is an
acceptable contractor and HRH Construction Company ("HRH") is an
acceptable contractor for the Great Neck Project) in order to allow the
Projects to be competitively bid. Each of CareMatrix and HBSH acknowledge
that HRH shall be the contractor for the Glen Cove Project.
6. Development Fees:
(a) Subject to subsection (b) below, HBSH and CareMatrix shall be entitled
to a development fee (the "Development Fee") in the amount of Four
Hundred Fifty Thousand Dollars ($450,000) for each Project, or such
other amount as the parties may mutually agree, to be shared equally by
CareMatrix and HBSH, (except in the case of the Glen Cove Project for
which HBSH shall be entitled to the entire
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 7
Development Fee), payable, subject to the terms and conditions of the
applicable Project Financing, as follows: fifty percent (50%) from the
first draw under the applicable Project Financing and fifty percent
(50%) payable in equal monthly installments during the course of
construction of the applicable Project.
(b) In the event that, for any reason, the Development Fee for any Project
is not so paid to HBSH and CareMatrix, then the balance shall accrue
interest at a rate equal to the Prime Rate plus two percent (2%) (such
balance, together with such interest, the "Balance") and the Balance
shall be repaid on a priority basis from the applicable Project Cash
Flow as set forth in Section 7.
7. Distributions: Subject to the terms and conditions of the applicable
Project Financing, the applicable Project Cash Flow shall be distributed
in the following order of priority:
(a) Payment of debt service on the Project Financing;
(b) Payment of all operating expenses of the Joint Venture and the Project,
including, without limitation, the management fees under the terms of
the Management Agreement (as defined below);
(c) Payment of (i) interest on any unreimbursed Development Costs from the
date of closing, (ii) interest on any unreimbursed Initial Equity and
Additional Equity from the date of contribution, (iii) interest on any
unpaid Development Fees from the date due, and (iv) any unpaid Guarantee
Fees (without interest), to the extent provided herein, such payments to
be made pro-rata, based upon the unreimbursed or unpaid amount, as the
case may be, outstanding for each of the foregoing;
(d) Payment of any Development Costs to the extent not paid as provided
herein;
(e) Payment of the Development Fee for the Glen Cove Project;
(f) Until the Development Fees and the Additional Equity are repaid in full,
(i) Eighty percent (80%) to the payment of (A) the Development Fees
(other than the Glen Cove Project) and (B) Additional Equity, such
payments to be made pro-rata, based upon the unpaid amount outstanding
for each of the foregoing and (ii) twenty percent (20%) to be paid as
follows: fifty percent (50%) to CareMatrix and fifty percent (50%) to
HBSH;
(g) Thereafter, fifty percent (50%) to CareMatrix and fifty percent (50%)
HBSH.
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 8
8. Allocations Among Projects: Each of CareMatrix and HBSH agrees that any
losses on a Project, whether in the form of unreimbursed equity
contributions, unreimbursed Development Fees or Development Costs, or
losses on any Guaranty, shall be reimbursed, as mutually agreed to by
CareMatrix and HBSH, on Projects which have opened and generate cash flow,
subject to, and provided the same does not violate, the terms of any
Project Financing for any of the Projects.
9. Management:
(a) The Joint Venture shall enter into a management agreement with
CareMatrix for each of the Projects (each a "Management Agreement"),
pursuant to which CareMatrix shall provide operational management
services for the Projects upon completion thereof. The term of each
Management Agreement shall be for fifteen (15) years with, at the option
of the Joint Venture, two (2) renewal terms of five (5) years each, and
shall provide for a management fee equal to five percent (5%) of the
gross revenues from operations at the Project. Other terms and
conditions of each Management Agreement shall be as mutually agreed upon
by the Joint Venture and CareMatrix.
(b) HBSH represents and warrants to CareMatrix (and shall reaffirm the same
in the Joint Venture Agreement) that HBSH requested from CareMatrix that
CareMatrix provide to HBSH proposals for the ownership, development and
management of the Glen Cove Project, and that this letter memorializes
the discussions of the parties from and after such request.
10. Non-Compete Area: CareMatrix and HBSH each agrees that neither (nor any
successors, assigns or affiliate, as such term is defined in the
Securities Act of 1933) shall engage in the development, management,
ownership or operation of an assisted living or senior housing facility
or project, in any capacity whatsoever, without the prior written consent
of the other, and shall only engage in such activities with each other,
in the area outlined on the map attached hereto as Exhibit A (the
"Designated Area") during the term of the Management Agreement.
Notwithstanding the foregoing, in the event that either CareMatrix or
HBSH identifies any such project in the Designated Area, and the other
party does not approve the same as provided herein, CareMatrix or HBSH,
as the case may be, shall have the right to proceed with such project
individually, and the terms of this letter shall not apply to such
project provided that such project is not less than three (3) miles from
any other existing Project including any case in which the proposed
project is not located within the Designated Area.
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 9
11. Due Diligence Review Period:
(a) Following the execution of this letter by HBSH and CareMatrix, and each
Site Identification Date, CareMatrix and HBSH and their respective
agents, representatives, lender(s), architect(s), engineer(s) and
employees shall have access to each Site at any time during normal
business hours and from time to time in order to perform such financial
analyses, topographical and engineering surveys, environmental site
assessments and other tests, surveys and studies of the site as each may
deem necessary or appropriate (collectively, the "Tests").
(b) Further, promptly after execution of this letter, HBSH and CareMatrix
will furnish to the other, for its review, complete and accurate copies
of all information, records and documentation concerning the Sites or
the Projects in the possession of each or its representatives,
including, without limitation (but only for informational purposes and
without warranties or representations of any kind regarding accuracy),
plans and surveys, construction, architect and engineer agreements, soil
tests, service contracts, governmental permits and approvals, legal
opinions regarding zoning or environmental matters affecting the
Projects, engineering reports, environmental site assessments, and title
policies or abstracts (collectively, the "Due Diligence Documents").
Each agrees to hold in strict confidence all documents, data and
information obtained from the other, and if the closing of the
applicable Project does not occur, will return the same to the other.
(c) If CareMatrix or HBSH, each in its sole discretion, is dissatisfied with
the results of any of the Tests, or with the content of any of the Due
Diligence Documents, then either may terminate this letter with respect
to any Site and/or Project by written notice to the other on or before
sixty (60) days after each Site Identification Date. Upon such
termination, neither party shall have any further obligations or
liabilities hereunder with respect to the applicable Site(s) and/or the
applicable Project(s).
(d) Notwithstanding the foregoing, with respect to the Glen Cove Project,
CareMatrix shall have a period of five (5) business days after the date
hereof in which to conduct its Tests and review the Due Diligence
Documents. If CareMatrix, in its sole discretion, is dissatisfied with
the results of any such Tests, or with the content of any of the Due
Diligence Documents, then CareMatrix may terminate this letter with
respect to the Glen Cove Project within such five (5) business day
period. In the event that CareMatrix does not so terminate this letter,
then such Tests and Due Diligence Documents shall be deemed
satisfactory.
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 10
(e) Notwithstanding the foregoing, it is acknowledged and agreed that each
of CareMatrix and HBSH is currently conducting its Tests and reviewing
the Due Diligence Documents for each of the Great Neck Project and the
Roslyn Project. This letter with respect to such Projects is subject to
the completion of such tests and the review of such Due Diligence
Documents for such Projects, to the satisfaction of each of CareMatrix
and HBSH, in the sole and absolute discretion of each. If either
CareMatrix and/or HBSH is dissatisfied with the results of any Tests, or
with the content of any of the Due Diligence Documents, relating to
either or both of such Projects, then either may terminate this letter
with respect to the Great Neck Project and/or the Roslyn Project within
a period to be mutually agreed to by the parties.
12. Confidentiality: In the course of the discussions and negotiations each
party may disclose to the other certain proprietary, confidential or
other non-public information (collectively, the "Information") relating
to its respective business, the proprietary, confidential and non-public
nature of which information both parties desire to maintain. Except as
herein set forth, neither party shall (a) reveal or make known to any
person, firm, corporation or entity, other than its own management and
advisors, including its attorneys, accountants and lenders, or (b)
utilize in its own business or (c) make any other usage of, any
Information disclosed to it by the other in connection with the
discussions and negotiations above mentioned. Notwithstanding the
foregoing, (i) each party may disclose any Information received from the
other party to any governmental or regulatory authority in connection
with obtaining approval of the transactions contemplated hereby or as
required by law; and (ii) if required, CareMatrix may disclose any
Information received from HBSH to its lenders in connection with
obtaining their approval of the transactions contemplated hereby and in
connection its ongoing negotiations with The Standish Care Company
("Standish"). Notwithstanding the foregoing, no information will be
provided to Standish without its execution of a confidentiality agreement
in a form reasonably satisfactory to HBSH. A party'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; provided, however,
that such public disclosure did not result, directly or indirectly, from
any act, omission, or fault of such party with respect to that item of
Information. Both parties agree that the Information either has received
or may receive from the other has been and will be used by the receiving
party solely for the limited purpose of its investigation and evaluation
of the other party in connection with the transactions contemplated
hereby.
13. Successors: This letter shall be binding upon, and shall inure to the
benefit, of each parties successors and assigns.
<PAGE>
Hassett-Belfer Senior Housing, LLC
June 27, 1996
Page 11
14. Standstill: From and after the date hereof until the execution of the
Joint Venture Agreement, neither party shall enter into, or participate
in, negotiations or discussions with any other party regarding the Joint
Venture or the Projects, without the consent of the other party. Each
party agrees to discontinue all ongoing negotiations with third parties
regarding the Projects.
15. Termination: This letter shall terminate upon the earlier to occur of (i)
December 31, 1996, or (ii) the execution of a master Joint Venture
Agreement for the Projects.
16. Governing Law: This letter shall be governed by and construed in
accordance with the laws of the State of New York.
If the foregoing terms are acceptable to you, please so indicate by
signing and dating the enclosed copy of this letter and returning it to the
undersigned.
Very Truly yours,
CAREMATRIX CORPORATION
By: /s/ Andrew Gosman
Name: Andrew Gosman
Title: President
AGREED AND ACCEPTED
THIS 28th DAY OF JUNE, 1996
HASSETT-BELFER SENIOR HOUSING, LLC
By: /s/ Andrew Belfer
Name: Andrew Belfer
Title: Member
<PAGE>
Exhibit A
See attached.
<PAGE>
[MAP OF LONG ISLAND]
<PAGE>
Exhibit B
See attached.
<PAGE>
Page 1 of 2
HRH Construction Corporation
909 Third Avenue
New York, New York 10022 *PRIVILEGED AND CONFIDENTIAL*
Hassett-Belfer Senior Housing, LLC,
PROJECT: The MAYFAIR at Glen Cove
<TABLE>
<CAPTION>
13-Jun-96
SPEC TRADE GMP Proposal TRADES CLOSED
<S> <C> <C> <C> <C> <C>
01000 SITE SURVEY & TEST BORINGS BY OWNER BY OWNER
01005 DEMOLITION 5,000 5,000
02200 EXCAVATION, FOUNDATIONS 750,000 750,000
02350 PILES (W/02200) (W/02200)
02500 SITE IMPROVEMENTS (W/02200) (W/02200)
02900 TOP SOIL & PLANTING (W/02200) (W/02200)
03300 CONCRETE WORK 65,000
03301 GYP-CRETE UNDERLAYMENT 35,000
03310 CONCRETE SIDEWALKS (W/02200) (W/02200)
03410 STRUCTURAL PRECAST CONCRETE 385,000 385,000
04200 MASONRY 660,000 660,000
05500 MISC. METALS & STRUCT. STEEL 97,000 97,000
06100 CARPENTRY AND PROTECTION 1,021,000 1,021,000
06200 MILLWORK 196,700 196,700
06610 GLASSFIBER REINF. POLYESTER (W/06100) (W/06100)
07140 METAL OXIDE WATERPROOFING 4,000
07160 DAMPPROOFING 7,000
07240 EIFS FINISH 130,000
07250 SPRAYED-ON FIREPROOFING 0
07500 BUILT-UP ROOFING 100,000
07900 CAULKING 25,000
08111 HOLLOW METAL DOORS 45,000
08410 ALUMINUM ENTRANCE WORK 15,000
08520 ALUMINUM WINDOWS AND GLASS (W/06100) (W/06100)
08710 FINISH HARDWARE A 30,000
08800 GLASS AND GLAZING 2,000
09250 GYPSUM DRYWALL (W/06100) (W/06100)
09300 CERAMIC TILE 12,000
09400 TERRAZZO FLOORING 0
09510 ACOUSTICAL TILE (W/06100) (W/06100)
3,500
</TABLE>
<PAGE>
GLEN COVE PROJECT COST SUMMARY
Construction Costs Under GMP Contract $ 7,219,340
(See Attached)
Land 990,000
Architecture and Engineering 320,000
Redesign Fees 45,000
Architecture Reimbursables 15,000
Kitchen Equipment 115,000
Minor Equipment 100,000
FF&E 567,000
Real Estate Taxes 50,000
Developer's Fee 450,000
Pre-Opening (Marketing, etc.) 250,000
Bond Issuance Costs (See Attached) 599,500
Additional Bond Issuance Costs
Legal 30,000
Glen Cove Housing Authority 10,000
Barclay 25,000
Kapson 25,000
Other Project Costs (See Attached) 205,000
Additional Title Charges 33,000
Construction Loan Expense (See Attached) 660,000
Working Capital 534,000
Pre-Marketing, Feasibility, etc. 28,500
Legal 52,800
Design, Traffic, Environmental 10,750
Title Costs, (Bridge Loan) 16,200
Fencing 5,900
Financing Costs (Bridge Loan-Interest through 5/31/96) 37,500
Permits and Licenses 5,660
Consulting 8,900
-----------
Total Project Cost: $12,409,050
Note: No deal contingency is provided other than HRH Construction contingency
of $225,000 which is included in GMP.
<PAGE>
GLEN COVE, NEW YORK
SENIOR LIVING FACILITY REVENUE BONDS
THE MAYFAIR AT GLEN COVE
SERIES 1996
Estimated Costs of Issuance
Underwriter's Discount @ 2.25% of Bond Proceeds $293,287.50
Bond Counsel 55,000.00
Authority Fee (est. at .5% of Bond Proceeds) 65,175.00
Underwriter's Counsel Fee 47,500.00
Underwriter's Expenses 7,500.00
Borrower's Counsel Fee 30,000.00
Printing Fee 7,500.00
Trustee Fee 4,250.00
Bond Purchaser's Counsel 25,000.00
Feasibility Consultant 50,000.00
Contingency 14,287.50
-----------
Total Estimated Costs of Issuance $599,500.00
Other Project Costs
Title Insurance $ 25,000.00
Inspecting Architect 17,500.00
Appraisal 7,500.00
Survey 2,500.00
Phase I Environment Report 2,500.00
Mortgage Recording Fee 20,000.00
Mortgage Tax 130,000.00
-----------
TOTAL $205,000.00
Construction Loan Related Expenses
Construction Loan Interest $589,943.00
Construction Lenders Fee 50,000.00
Construction Lenders Costs 20,000.00
-----------
TOTAL $659,943.00
EXHIBIT 10.139
ASSIGNMENT AGREEMENT
(Bonita Springs, Florida)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
WITNESSETH
WHEREAS, Assignor has entered into that certain Offer to Purchase (the
"Offer"), dated May 3, 1996, relating to a certain parcel of land located in
Bonita Springs, Florida (the "Land"), a copy of which is attached hereto as
Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred forty-eight (148) units
(the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Offer to Assignee, and Assignee desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title and
interest of Assignor in, to and under the Offer, and Assignee hereby
accepts the within assignment and assumes and agrees with Assignor, to
perform and comply with and to be bound by all of the terms, covenants,
agreements, provisions and conditions of the Offer on the part of
Assignor thereunder to be performed on and after the date hereof, in the
same manner and with the same force and effect as if Assignee had
originally executed the Offer.
2. Assignor and Assignee agree that Assignor shall act as developer of the
Project pursuant to a turnkey development agreement in form and substance
reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
2
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services for
the Project pursuant to a management agreement in form and substance
reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and against
any and all Claims (as defined in paragraph 6 hereof) accruing or arising
under the Offer on or before the date hereof.
5. Assignee agrees to indemnify and hold harmless Assignor from and against
any and all Claims accruing or arising under the Offer after the date
hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, causes of action, losses,
injuries, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, (ii) shall be
governed by the laws of the Commonwealth of Massachusetts, and (iii) may
not be modified orally, but only by a writing signed by both parties
hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/
-------------------------------------
Name:
Title:
ASSIGNEE:
CHANCELLOR OF MASSACHUSETTS, INC.
By: /s/
-------------------------------------
Name:
Title:
<PAGE>
Exhibit A
[CareMatrix Logo]
May 3, 1996
Tom Smith, Vice President
Bonita Bay Properties, Inc.
3451 Bonita Bay Blvd., Suite 202
Bonita Springs, Florida 33923-4395
RE: OFFER TO PURCHASE PROPERTY KNOWN AS TRACT D OF BONITA BAY COMMONS
Dear Mr. Smith:
This letter constitutes an offer (the "Offer") by CareMatrix Corporation, a
Delaware corporation, or its nominee (the "Buyer") to purchase from Bonita Bay
Properties, Inc. (the "Seller") the property (defined below) on the terms and
conditions contained in this letter.
1. The Buyer will acquire all of the Seller's interest in the property outlined
on Exhibit "A" hereto (the "Property"): That property designated as 5.43
acres of land zoned for a 148-unit assisted living facility, said property
being located in Tract D of Bonita Bay Commons, together with all
improvements, if any, easements, licenses, permits or approvals,
entitlements, privileges, rights of egress and ingress and all other
appurtenances related to such land.
2. The purchase price for the Property will be One-Million Three-Hundred and
Sixty Thousand Dollars ($1,360,000.00) to be paid as follows:
A. Twenty-Five Thousand Dollars ($25,000) (the "Initial Deposit") will be
paid (and held in escrow in accordance with the terms of this letter by
the Escrow Agent named below) upon delivery of a fully executed copy of
this Offer to the Buyer;
<PAGE>
Tom Smith
May 3, 1996
Page 2
2. B. Fifty-Thousand Dollars ($50,000) (the "Additional Deposit") will be
paid (and also held in escrow by the Escrow Agent) upon delivery to the
Buyer of a fully executed copy of the Purchase Agreement (defined
below); and
C. At the Closing (defined below), the Buyer will pay the balance of the
Purchase Price.
3. A. The closing (the "Closing") for the Buyer's acquisition of the Property
will be at 12:00 E.S.T., October 18, 1996, at the office of the Escrow
Agent or such other location as is mutually agreeable to the Buyer and
Seller.
B. The Buyer shall have the option to extend the date of the Closing beyond
October 18, 1996, to as late as December 17, 1996, by giving to the Seller
one or more written extension notices at least ten (10) days prior to the
then scheduled date of Closing, provided that the Buyer is diligently
pursuing the Permits (defined below). Each such extension notice shall be
accompanied by a payment to the Seller in the amount of Seven-Thousand
Five-Hundred Dollars ($7,500) for each thirty (30) day period (or fraction
thereof) included within the extension set forth in such notice. All such
extension payments shall be non-refundable if the Closing does not occur
(except in the event of the Seller's default or in the event that the
Buyer does not obtain the Permits), but shall be credited in full against
the Purchase Price if the Closing does occur. Time being of the essence
for each and every date set forth in the Section 3.
C. A Statutory Warranty Deed conveying good and clear record and marketable
title to the Property (including, without limitation, free of all liens
for past due but unpaid real estate or personal property taxes or other
municipal charges), shall be delivered by the Seller to the Buyer at
Closing.
4. This Offer will remain open until 5:00 p.m. E.S.T. on May 8, 1996, on or
before which time the seller shall accept this Offer and return a
fully-executed copy to the Buyer, otherwise this Offer shall be null and
void.
5. The Buyer and the Seller will use their best efforts to prepare and execute a
more comprehensive Purchase and Sale Agreement (the "Purchase Agreement") to
carry out the terms of this Offer on or before 5:00 p.m. E.S.T. on June 28,
1996, (the "Commitment Date"). The Purchase Price will incorporate the terms
of this Offer and will contain such other agreements, representations,
warranties or conditions as are customary in transactions of the nature
contemplated by this Offer. If and when
<PAGE>
Tom Smith
May 3, 1996
Page 3
the Purchase Agreement is executed, the Purchase Agreement will constitute the
entire agreement between the Buyer and the Seller. If the Purchase Agreement
is not executed by the Commitment Date, then at the Buyer's or the Seller's
election, the Initial Deposit shall be immediately refunded to the Buyer and
this Offer shall be null and void.
6. A. Following the execution of this Offer by the Seller, the Buyer and the
Buyer's agents, representatives, lender(s), architect(s), engineer(s) and
employees shall have access to the property at any time during normal
business hours and from time to time in order to perform such financial
analyses, topographical and engineering surveys, environmental site
assessments and other tests, surveys and studies of the Property, as the
Buyer or the Buyer's lender by deem necessary or appropriate.
B. Further, within five (5) days after the Seller's acceptance of this Offer,
the Seller will furnish to the Buyer, for the Buyer's review, complete and
accurate copies of all information, records and documentation concerning
the ownership and condition of the Property in the possession of the
Seller or the seller's representatives, as the Buyer may reasonably
request, including, without limitation (but only for information purposes
and without warranties or representations of any kind regarding accuracy),
plans and surveys, as-built plans and specifications for the building(s)
on the Property, soil tests, service contracts, governmental permits and
approvals, legal opinions regarding zoning or environmental matters
affecting the Property, engineering reports, environmental site
assessments, title policies or abstracts, deed restrictions, merchants
associations and other restrictions regarding the Property. The Buyer will
hold in strict confidence all documents, data and information obtained
from the Seller, and if the Closing does not occur, will return the same
to the Seller.
C. If the Buyer, in its sole discretion, is dissatisfied with the results of
any such tests or inspections, or with the content of any of the
documents, data or information obtained from the Seller, then the Buyer
may terminate this Offer (or the Purchase Agreement, if signed) by written
notice to the Seller on or before 5:00 p.m. E.S.T. on October 8, 1996.
Upon such termination, the Initial Deposit (and the Additional Deposit, if
previously paid) shall be immediately returned to the Buyer, and neither
party shall have any further obligations or liabilities under this Offer
(or Purchase Agreement, if signed). If the Buyer has not sent such written
notice to the Seller on or before 5:00 p.m. E.S.T. on October 8, 1996,
then the Buyer's right to terminate pursuant to this Paragraph 6.C shall
have been waived in all respects.
<PAGE>
Tom Smith
May 3, 1996
Page 4
7. This Offer (and the Purchase Agreement, if signed) will be subject to the
following additional condition to the Buyer's obligation to acquire the
Property:
A. Prior to October 8, 1996, the Buyer shall review and be satisfied with all
zoning, land use and environmental laws, codes, ordinances and regulations
affecting the Property and shall have obtained all zoning, subdivision and
environmental permits and approvals and any other applicable permit or
approval (collectively, the "Permits") as may be necessary for the Buyer's
proposed development and construction of a proposed senior housing
development consisting of 148 independent and/or assisted living units on
the Property (the "Project"), including, without limitation, the
expiration of any applicable appeal period(s) without an appeal having
been filed. From and after the Commitment Date, the Buyer agrees to use
diligent efforts to obtain the Permits; and
B. Prior to October 8, 1996, the Buyer shall have obtained financing for its
acquisition of the Property and development and construction of the
Project on terms and conditions which are satisfactory to the Buyer in its
sole and absolute discretion.
If any of the foregoing conditions are not satisfied prior to the period(s)
specified above, the Buyer may elect not to purchase the Property. In such
case the Initial Deposit (and the Additional Deposit, if previously paid)
shall be refunded to the Buyer, and neither party shall thereafter have any
further obligations or liabilities under this Offer (or the Purchase
Agreement, if signed).
8. In the event of a default by the Buyer under this Offer or under the Purchase
Agreement, any and all sums paid by the Buyer as the Initial Deposit or the
Additional Deposit to the date of such default shall be retained by the
Seller as liquidated damages and shall constitute the Seller's sole and
exclusive remedy with regard to any such default, either at law or in equity.
9. This is a non-binding Offer and shall not bind or obligate Buyer or Seller
until such time as a formal Purchase and Sale Agreement is executed by both
parties. The Seller shall not enter into any new rental, management,
maintenance or other agreement affecting the Property without the prior
written consent of the Buyer and shall operate and maintain the Property in a
professional manner.
<PAGE>
Tom Smith
May 3, 1996
Page 5
10. The Escrow Agent ("Escrow Agent") will be Gunster, Yoakley & Stewart P.A.
located in West Palm Beach, Florida. In the event of any dispute regarding
either or both of the Initial or the Additional Deposit (collectively, the
"Deposits"), the Escrow Agent shall have the right to turn the Deposits over
to any party mutually agreeable to the Buyer and the Seller (who shall hold
the same subject to the terms hereof) or, if the Buyer and the Seller are
unable to agree upon such party, pay the Deposits into a federal or state
court and, upon doing either, will have no further liability regarding its
role as Escrow Agent. All Deposits made hereunder shall be held in an
interest bearing account and any interest which accrues on the Deposits
shall be shared equally between the Buyer and the Seller in the event the
Closing occurs and otherwise shall follow the Deposits. The Seller
acknowledges that the Escrow Agent is counsel for the Buyer, and may
continue to act as such counsel notwithstanding any dispute or litigation
arising with respect to its duties as Escrow Agent hereunder.
11. Each of the Buyer and the Seller hereby warrants and represents to the other
that such party has not dealt with any broker in connection with this
transaction, except that Seller has engaged John R. Wood, Inc., Realtors and
Buyer has engaged John H. Peterson, P.A., Realtor. Further, each of the
Buyer and the Seller agrees to indemnify and hold harmless the other from
any loss, cost or expense which such non-indemnifying party may incur as a
result of any inaccuracy in the other party's warranties and representations
as set forth in the prior sentence. All brokerage fees due in connection
with this transaction will be paid by the Seller upon the delivery and
recording of the Deed pursuant to a separate agreement(s) with such Brokers.
12. The costs of this transaction shall be shared as follows:
A. The Seller shall pay all costs and fees associated with:
(i) all documentary transfer taxes and recording costs associated with
this land transaction; and
(ii) fees and other expenses charged by the Seller's attorney.
B. The Buyer shall pay all costs and fees associated with: (i) fees and other
expenses charged by the Buyer's attorney; (ii) a current survey for the
Property meeting ALTA requirements; (iii) a current environmental site
assessment for the Property; (iv) the ALTA Owner's Title Insurance Policy
insuring the Buyer's
title to the property; and,
<PAGE>
Tom Smith
May 3, 1996
Page 6
(v) any financing or mortgage fees including documentary stamps (if
customarily paid by Seller) and intangible tax on the note and
mortgage.
C. Any items of cost or expense not specifically allocated above shall be
paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located.
13. A. The person executing this Offer as the Seller or on behalf of the
Seller warrants and represents to the Buyer that the undersigned has
full power and authority to execute and deliver this Offer and the
Purchase Agreement and to perform the obligations of the Seller.
B. The person executing this Offer as the Buyer or on behalf of the Buyer
warrants and represents to the Seller that the undersigned has full power
and authority to execute and deliver this Offer and the Purchase Agreement
and to perform the obligations of the Buyer.
BUYER:
CareMatrix Corporation
By: /s/ Michael M. Gosman
------------------------
Name: Michael M. Gosman
Title: Executive Vice
President
The above Offer is hereby accepted in all respects.
Date: May 7, 1996 SELLER:
Bonita Bay Properties, Inc.
By: /s/
------------------------
Title: Pres
---------------------
cc: Andrew D. Gosman
James M. Clary, III, Esq.
8
EXHIBIT 10.140
ASSIGNMENT AGREEMENT
(Jensen Beach, Florida)
THIS ASSIGNMENT AGREEMENT made this 3rd day of July, 1996, by and between
CareMatrix of Massachusetts, Inc. (f/k/a CareMatrix Corporation), a Delaware
corporation ("Assignor"), and Chancellor of Massachusetts, Inc., a Delaware
corporation ("Assignee").
W I T N E S S E T H
WHEREAS, Assignor has entered into that certain Purchase Agreement (the
"Purchase Agreement"), dated February 27, 1996, relating to a certain parcel
of land located in Jensen Beach, Florida (the "Land"), a copy of which is
attached hereto as Exhibit A;
WHEREAS, Assignor intends to develop the Land for an assisted/independent
living facility consisting of approximately one hundred sixty-eight (168)
units (the "Project");
WHEREAS, upon the completion of construction of the Project, Assignor
intends to provide operational management services for the Project; and
WHEREAS, Assignor desires to assign its rights and obligations under the
Purchase Agreement to Assignee, and Assignee desires to assume such rights
and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof, all of the right, title and
interest of Assignor in, to and under the Purchase Agreement, and
Assignee hereby accepts the within assignment and assumes and agrees
with Assignor, to perform and comply with and to be bound by all of the
terms, covenants, agreements, provisions and conditions of the Purchase
Agreement on the part of Assignor thereunder to be performed on and
after the date hereof, in the same manner and with the same force and
effect as if Assignee had originally executed the Purchase Agreement.
2. Assignor and Assignee agree that Assignor shall act as developer of the
Project pursuant to a turnkey development agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
<PAGE>
2
3. Assignor and Assignee agree that Assignor shall, upon completion of
construction of the Project, provide operational management services
for the Project pursuant to a management agreement in form and
substance reasonably satisfactory to each of Assignor and Assignee.
4. Assignor agrees to indemnify and hold harmless Assignee from and
against any and all Claims (as defined in paragraph 6 hereof) accruing
or arising under the Purchase Agreement on or before the date hereof.
5. Assignee agrees to indemnify and hold harmless Assignor from and
against any and all Claims accruing or arising under the Purchase
Agreement after the date hereof.
6. For the purposes of this Agreement, the term "Claims" means all costs,
claims, obligations, damages, penalties, losses, injuries, liabilities
and expenses (including, without limitation, reasonable legal fees and
expenses).
7. This Agreement (i) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, (ii)
shall be governed by the laws of the Commonwealth of Massachusetts, and
(iii) may not be modified orally, but only by a writing signed by both
parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
ASSIGNOR:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/
-----------------------------
Name:
Title:
ASSIGNEE:
CHANCELLOR OF MASSACHUSETTS, INC.
By: /s/
-----------------------------
Name:
Title:
<PAGE>
Exhibit A
173269.6
16204.00002
PURCHASE AND SALE AGREEMENT
AGREEMENT made as of the 27th day of February, 1996 by and between THE
CAREPLEX GROUP, INC., a Delaware corporation (including any and all nominees
permitted hereunder, "Buyer"), having an address at 197 First Avenue,
Needham, Massachusetts 02194 and FLORIDA INSTITUTE OF TECHNOLOGY, INC., a
Florida not for profit corporation ("Seller"), having an address at 150 W.
University Boulevard, Melbourne, Florida 32901, Attention: Robert C. Bowie,
Vice President and Treasurer.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Buyer and Seller hereby agree as follows:
1. AGREEMENTS TO SELL AND PURCHASE; DESCRIPTION OF PROPERTY; NOMINEE.
(a) Purchase and Sale. Seller agrees to convey to Buyer and Buyer hereby
agrees to purchase from Seller, for the price and upon the terms and
conditions set forth herein, the following:
(i) The land located to the west of Sewell's Point Road, Martin County,
Florida, described on Exhibit 1(a) attached hereto and made a part hereof,
and all easements and rights of way appurtenant to such land, and all of
Seller's right, title and interest in and to any alleys, strips and gores
abutting or adjoining such land and in and to any highways, streets, roads,
accesses and ways appurtenant to or abutting or adjoining the Land
(collectively, the "Land"); and
(ii) all buildings, structures and other improvements, if any, located
on the Land (collectively, the (Improvements"); and
(iii) to the extent that such items are in Seller's possession or
control, all documents, technical matter and work product of all
professionals and paraprofessionals relating to the Land an/or the
development thereof, including, without limitation, all agreements,
approvals, permits and the like with or from governmental or quasi
governmental authorities and all architectural, construction, engineering and
landscaping drawings, plans and specifications and all surveys, maps, site
plans, plats and other graphics relating to the Land and/or the Improvements
(collectively, the "Development Work Product"). Notwithstanding the
foregoing, Development Work Product shall not include (i) any item subject to
attorney-client privilege or work product privilege, (ii) any item which is
the subject of a written confidentiality agreement between Seller and an
unrelated third party or written instructions from an unrelated third party
or (iii) any item which inextricably relates to both the Land and property
adjacent to the Land owned by Seller.
The Land, Improvements and Development Work Product are, collectively,
referred to as the "Property".
<PAGE>
(b) Intended Use. Seller understands and acknowledges that Buyer intends
to develop and use the Property as a senior housing development consisting of
168 independent and/or assisted living units, as well as related
improvements, parking and landscaping (the "Intended Use").
(c) Nominee. Seller acknowledges and agrees that Buyer shall have the
right to designate a nominee to take title to the Property by notice to
Seller given not later than the Closing Date (as defined below). Any entity
in which the principals or affiliates of Buyer own or control, directly or
indirectly, at least 50% of the stock, partnership interests or beneficial
interests, as the case may be, or any master limited partnership or real
estate investment trust organized by Buyer or any of the principals or
affiliates of Buyer, will be deemed a nominee for the purposes of this
Section.
2. PURCHASE PRICE; DEPOSIT; ADJUSTMENTS; ESCROW.
(a) Purchase Price: The agreed purchase price for the Property (the
"Purchase Price") is ONE MILLION THREE HUNDRED FIFTY THOUSAND and NO/100
DOLLARS ($1,350,000.00), which Purchase Price shall be payable as follows:
(i) a deposit (the "Initial Deposit") in the amount of FIFTY THOUSAND
and NO/100 DOLLARS ($50,000.00) has been paid to Escrow Agent by Buyer prior
to the date hereof, and is to be delivered to Seller by the Escrow Agent at
the time of delivery and recording of the Deed (as defined below);
(ii) an additional deposit (the "Additional Deposit") (the Initial
Deposit and the Additional Deposit are sometimes hereinafter collectively
referred to as the Deposit) in the amount of FIFTY THOUSAND and NO/100
DOLLARS ($50,000.00) shall be delivered to the Escrow Agent by Buyer upon
delivery to Buyer of a fully executed copy of this Agreement, and is to be
delivered to Seller by the Escrow Agent at the time of delivery and recording
of the Deed; and
(iii) the outstanding balance of ONE MILLION TWO HUNDRED FIFTY THOUSAND
and NO/100 DOLLARS ($1,250,000.00) is to be paid by Buyer to Seller at the
time of delivery and recording of the Deed (as defined below) by cashier's or
bank check or checks or by wire transfer, as Seller shall elect.
(b) Deposit.
(i) The Deposit shall be held in an interest-bearing escrow account as
provided in Section 2(d) below, subject to the terms of this Agreement, and
shall be duly accounted for at the Closing (as defined below). All interest
on the Deposit is to be accounted for and shared equally between Buyer and
Seller if the Closing occurs; or paid to Buyer if the Deposit is returned to
Buyer under the terms of this Agreement; or if Seller shall retain the
Deposit under the provisions of Section 8(b) hereof, then the entire amount
of the interest shall be paid to Seller.
2
<PAGE>
(ii) If Buyer exercises any of Buyer's options to terminate this
Agreement as provided herein, then the Deposit and all other payments made to
Seller by Buyer hereunder shall be promptly refunded in full by Seller to
Buyer, but in no event later than fourteen (14) calendar days after such
notice of termination is given.
(c) Adjustments; Prorations; Credits. The Purchase Price shall be adjusted
to reflect the following:
(i) Water and sewer use charges, charges for electricity, gas and other
utilities, operating expenses and collected rents, if any, and real property
taxes with respect to the Property for 1996 (with full discounts) shall be
apportioned as of the Closing Date, and the net amount shall be added to or
deducted from the Purchase Price, as the case may be. Seller shall pay real
property taxes with respect to the Property for all years prior to 1996.
Without limiting the effect of the foregoing provisions regarding
apportionment, in the event the closing of the transaction contemplated by
this Agreement closes on or before October 31, 1996, Buyer shall pay the real
property taxes with respect to the property for 1996. Without limiting the
effect of the foregoing provisions regarding apportionment, in the event the
closing of the transaction contemplated by this Agreement closes after
October 31, 1996, Seller shall pay real property taxes with respect to the
Property for 1996.
(ii) If, on the Closing Date, the 1996 real property tax bill with
respect to the Property is not available, the amount of real property taxes
shall be apportioned based on the current year's millage and the current
year's assessment. If the current year's millage is not fixed and the current
year's assessment is available, taxes will be apportioned based on such
assessment and the prior year's millage. If the current year's assessment is
not available, then real property taxes will be apportioned on the prior
year's tax. Any apportionment of taxes based upon any figures other than a
final tax bill shall, at the request of either Buyer or Seller, be
subsequently reapportioned based upon receipt of the final tax bill for the
current year.
(iii) Certified, confirmed and ratified special assessment liens as of
the Closing Date are to be paid by Seller. Pending liens as of the Closing
Date shall be assumed by the Buyer. If the improvement which is the subject
of the special assessment has been substantially completed as of the date of
this Agreement, such pending lien shall be considered certified, confirmed or
ratified and Seller shall, at closing, be charged an amount equal to the last
estimate of assessment for the improvement by the applicable public body.
(iv) Each party shall pay its own attorneys' fees and costs incurred in
connection with the negotiation of this Agreement and consummation of the
transactions contemplated by this Agreement, except as otherwise expressly
provided herein. Seller shall pay the cost of all documentary stamp or
transfer taxes with respect to the transactions contemplated by this
Agreement and all recording costs related to the transfer of title to Buyer
as well as recording costs associated with releases and other documents
required to clear title or to comply with seller's obligations hereunder.
Buyer shall pay the cost of any survey, the owner's title insurance policy
described in Section 5(b)(iii) of this Agreement and a current environmental
site
3
<PAGE>
assessment or appraisal which Buyer may elect to obtain in connection with
the transactions contemplated by this Agreement.
(v) If at any time following the making of any of the adjustments to the
Purchase Price, the amount thereof shall prove to be incorrect, or it should
be discovered that some adjustment which should have been made was
inadvertently omitted altogether, the party in whose favor the error was made
shall pay the sum necessary to correct such error to the other party promptly
following receipt of notice of such error from such other party. The
provisions of this Section 2(c)(v) shall survive the closing of the
transaction contemplated by this Agreement and the delivery of the Deed.
(d) Escrow Account.
(i) The Deposit shall be held by the law firm of Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A., as escrow agent (the "Escrow Agent"), in an
interest-bearing account. Such account shall be maintained until the Deposit
and the interest thereon have been delivered to Buyer, Seller or a court of
competent jurisdiction in accordance with the provisions of this Agreement,
and shall terminate on the date of such delivery.
(ii) The Escrow Agent shall account for the Deposit in accordance with
the terms of this Agreement, or in such other manner as may be directed in a
joint written notice from Seller and Buyer directing some other disbursement
of the Deposit. If the Escrow Agent receives written notice from either Buyer
or Seller that the other party has defaulted in the performance of its
obligations under this Agreement or that any condition to the performance of
obligations under this Agreement has not been fulfilled within the time
period stipulated, which notice shall describe in reasonable detail such
default or non-performance, then the Escrow Agent shall (A) promptly give
notice to the party alleged to have defaulted or to have failed to fulfill
its obligation of the Escrow Agent's receipt of such notice from the other
party and shall enclose a copy of such notice from the other party, and (B)
subject to the provisions of Section 2(d)(iii) below which shall apply if a
conflict arises, on the fourteenth (14th) day after the giving of the notice
referred to in clause (A) above, deliver the Deposit and the interest thereon
to the party claiming the right to receive it.
(iii) If the Escrow Agent is uncertain as to its duties or actions
hereunder, or receives instructions or a notice from Buyer or Seller which
are in conflict with instructions or a notice from the other party or which,
in the reasonable opinion of the Escrow Agent, are in conflict with any of
the provisions of this Agreement, it shall be entitled to take any of the
following courses of action: (A) hold the Deposit as provided above in this
Section 2(d) and decline to take any further action until the Escrow Agent
receives a joint written direction from Buyer and Seller or an order of a
court of competent jurisdiction directing the disbursement of the Deposit, in
which case the Escrow Agent shall then disburse the Deposit in accordance
with such direction; (B) in the event of litigation between Buyer and Seller,
deliver the Deposit and all interest thereon to the clerk of any court in
which such litigation is pending; or (C) deliver the Deposit and all interest
thereon to a court of competent jurisdiction and commence an action for
interpleader in such court, whereupon the Escrow Agent shall have no further
duty with respect to the Deposit.
4
<PAGE>
(iv) The Escrow Agent shall not be liable for any action taken or
omitted in good faith and may rely, and shall be protected in acting or
refraining from acting in reliance, upon an opinion of counsel and upon any
directions, instructions, notices, certificates, instruments, requests,
papers or other documents believed by it to be genuine and to have been made,
sent, signed or presented by the proper party or parties.
(v) Seller acknowledges that the Escrow Agent is counsel for Buyer and
may continue to act as such counsel notwithstanding its duties as Escrow
Agent hereunder or any dispute or litigation arising as to its duties as
Escrow Agent.
(vi) The Escrow Agent shall have no liability with regard to any duty
under this Agreement nor be responsible for the loss of any moneys held by it
except in the event of willful and intentional misconduct on the part of the
Escrow Agent. Notwithstanding any other provisions of this Agreement, Buyer
and Seller jointly indemnify and hold harmless the Escrow Agent against any
losses, costs, liabilities, claims and expenses incurred by the Escrow Agent
arising out of or in connection with its services under the terms of this
Agreement, including reasonable attorneys' fees and expenses and the costs
and expenses of any interpleader action involving the Deposit or of defending
itself against any claim or liability. However, the Escrow Agent will not
charge any fee for its normal services hereunder as Escrow Agent.
(vii) The terms of this Section 2(d) shall survive any termination of
this Agreement or the closing of the transactions contemplated by this
Agreement.
3. CLOSING; EXTENSIONS.
(a) Closing Date and Place. The time for the delivery of the Deed and for
the performance of the other terms and conditions of this Agreement (the
"Closing"), shall be 12:00 P.M. (Boston) on the earlier of (i) forty-five
(45) days following Buyer having obtained the zoning and/or planned unit
development permits or approvals contemplated by Section 5(b)(viii) of this
Agreement or (ii) October 31, 1996 (as the same may be extended pursuant to
the provisions hereof, the ("Closing Date") at the offices of Escrow Agent,
or at such other place or time as shall be mutually agreed upon by Buyer and
Seller.
(b) Extension of Closing Date. Buyer shall have the right to extend the
Closing Date beyond the date referred to in Section 3(a) above twice for
periods of thirty (30) days in each instance by giving Seller notice at least
five (5) days prior to the then scheduled Closing Date. Each such extension
notice shall be accompanied by a payment to Seller in the amount of
$15,000.00 for such extension. $7,500.00 of each such extension payment shall
be placed in escrow with the Escrow Agent and shall be non-refundable if the
Closing does not occur (except in the event of Seller's default), but shall
be credited in full against the Purchase Price if the Closing does occur. The
remaining $7,500.00 of each payment shall be paid to Seller, without
restriction, as consideration for such extension.
5
<PAGE>
4. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of Seller. Seller warrants and
represents to, and covenants and agrees with, Buyer as of the date hereof
(and on the Closing Date shall reaffirm all such representations, covenants
and warranties as of that date) as follows:
(i) Seller holds the entire ownership interest in the Land, the
Improvements and all appurtenances thereto, and the signature of no other
party is required to convey any of such interests and rights.
(ii) Seller is a duly organized and validly existing not for profit
corporation, in good standing under the laws of Florida, and has the legal
right, power and authority to enter into this Agreement and to perform all of
its obligations hereunder, and this Agreement constitutes the legal, valid
and binding obligation of Seller, enforceable in accordance with its terms.
The execution by the undersigned officer of Seller and delivery of this
Agreement, and the performance by Seller of its obligations hereunder, have
been duly authorized by all necessary action by and on behalf of Seller and
will not conflict with, or result in a breach of, any of the terms, covenants
and provisions of the articles of incorporation or bylaws of Seller as any of
the same may have been amended, any agreement or instrument to which Seller
is a party or by which it is bound, or, to the best of Seller's knowledge,
any Permit, Governmental Regulation (as defined below), regulation, order,
judgment, writ, injunction or decree of any court or governmental authority.
(iii) No consent, approval or other authorization of, or registration,
declaration or filing with, any court or governmental agency or commission is
required for the due execution, delivery and performance of this Agreement by
Seller or for the validity or enforceability thereof against Seller.
(iv) There are no uncured notices, suits, orders, decrees or judgments
relative to violations of, nor to the best of Seller's knowledge without
independent inquiry, any other violations of, (A) any easement, restrictive
covenant or other matter of record affecting the Property or any part
thereof, or (B) any laws, statutes, ordinances, codes, regulations, rules,
orders, or other requirements of any local, state or federal authority or any
other governmental entity or agency having jurisdiction over the Property or
any part thereof, including, without limitation, any of the foregoing
affecting zoning, subdivision, building, health, traffic, environmental,
hazardous waste or flood control matters (all of the foregoing, collectively,
"Governmental Regulations").
(v) There are no other suits, actions or proceedings pending or, to the
best of Seller's knowledge without independent inquiry, threatened, against
or affecting the Property or any of the transactions provided for herein
before any court or administrative agency or officer, and to the best of
Seller's knowledge without independent inquiry, Seller is not in default with
respect to any judgment, order, writ, injunction, rule or regulation of any
court or governmental agency or office to which Seller is subject in any way
affecting the Property or any of the transactions provided for herein.
6
<PAGE>
(vi) Seller has not received written notice of any pending legal or
administrative proceedings relative to the condemnation, or other taking by
governmental authority, of all or any portion of the Property, and to the
best of Seller's knowledge without independent inquiry, there are no present
or pending legal or administrative proceedings relative to condemnation, or
other taking by governmental authority, of all or any portion of the
Property, and that no such proceeding is contemplated.
(vii) Seller has not received written notice of any existing or pending
special assessments affecting the Property, which may be assessed by any
governmental authority, water or sewer authority, drainage district or any
other special taxing district, and to the best of Seller's knowledge without
independent inquiry, there are no such existing or pending special
assessments affecting the Property.
(viii) Except as disclosed on Exhibit 4(a)(viii), there are no service,
maintenance, management or similar contracts relating to or affecting the
Property.
(ix) All ad valorem property taxes for the Property have been fully paid
for the year 1995, and all prior years.
(x) Seller has entered into no other contracts for the sale of any
portion of the Property.
(xi) Seller is not a "foreign person" as that term is defined in Section
1445(f)(3) of the Code.
(xii) Attached as Exhibit 4(a)(xii) is a true, correct and complete copy
of that certain Recreational Sports Facility Lease and all modifications,
extensions and renewals thereof (collectively, the "Recreational Lease")
entered into between Seller and Martin County, the term of which has been
extended to October 30, 1998. Other than the Recreational Lease, there are no
leases, subleases, licenses or other rental agreements or occupancy
agreements (written or oral) which grant any possessory interest in and to
any space situated on or in the Property or that otherwise give rights with
regard to the use of the Property or any portion thereof.
(xiii) To the best of Seller's knowledge, Seller has never generated,
stored (except in material compliance with Governmental Regulations), handled
or disposed of any hazardous substance, hazardous waste, hazardous materials
or oil (as any of such terms are defined under applicable Governmental
Regulations) in, on or under the Property, and, to the best of Seller's
knowledge without independent inquiry, there has been no release of any such
hazardous substance, hazardous waste, hazardous materials or oil into the
environment from the Property, or in, on or under the Property.
(xiv) Buyer shall have no duty to investigate or inquire regarding the
accuracy or veracity of any representation or warranty of Seller and it shall
be deemed reasonable for Buyer to fully rely upon same. All rights and
remedies herein of the Buyer regarding any misrepresentation or breach of
warranty shall be cumulative, and nothing herein shall be deemed
7
<PAGE>
to limit any right or remedy of the Buyer otherwise provided by law or
equity. No misrepresentation or breach of warranty by Seller shall be deemed
to be merged or extinguished due to the closing of the transaction.
(b) Representations and Warranties of Buyer. Buyer warrants and represents
to, and covenants and agrees with, Seller as follows:
(i) Buyer is a duly organized and validly existing corporation, in good
standing under the laws of Delaware and qualified to transact business in the
State of Florida, and has the legal right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms. The execution by the undersigned
officer of Buyer and delivery of this Agreement, and the performance by Buyer
of its obligations hereunder, have been duly authorized by all necessary
corporate action by and on behalf of Buyer and will not conflict with, or
result in a breach of, any of the terms, covenants and provisions of the
articles of organization or by-laws of Buyer, as same may have been amended,
any agreement or instrument to which Buyer is a party or by which it is
bound, or, to the best of Buyer's knowledge, any Permit, Governmental
Regulation, regulation, order, judgment, writ, injunction or decree of any
court or government authority.
(ii) The officer signing this Agreement on behalf of Buyer is duly
authorized to execute the same on behalf of Buyer and Buyer shall provide a
corporate resolution to such effect at the Closing.
(iii) No consent, approval or other authorization of, or registration,
declaration or filing with, any court or governmental agency or commission is
required for the due execution, delivery and performance of this Agreement by
Buyer or for the validity or enforceability thereof against Buyer.
(iv) There are no uncured notices, suits, orders, decrees or judgments
against Buyer which would materially adversely affect Buyer's ability to
perform its obligations under this Agreement.
(v) Seller shall have no duty to investigate or inquire regarding the
accuracy or veracity of any representation or warranty of Buyer and it shall
be deemed reasonable for Seller to fully rely upon same. All rights and
remedies herein of the Seller regarding any misrepresentation or breach of
warranty shall be cumulative, and nothing herein shall be deemed to limit any
right or remedy of the Seller otherwise provided by law or equity. No
misrepresentation or breach of warranty by Buyer shall be deemed to be merged
or extinguished due to the closing of the transaction.
(c) Liability for Warranties and Representations. Buyer and Seller agree
as follows:
(i) Seller agrees to indemnify and hold Buyer harmless from and against
any and all claims, losses, liabilities, damages, expenses and fees,
including without limitation,
8
<PAGE>
reasonable attorneys' fees and expenses, incurred by Buyer as the result of
the failure of any of Seller's warranties and representations contained in
this Article 4 or elsewhere in this Agreement. Conversely, Buyer agrees to
indemnify and hold Seller harmless from and against any and all claims,
losses, liabilities, damages, expenses and fees, including without
limitation, reasonable attorneys' fees and expenses, incurred by Seller as
the result of the failure of any of Buyer's warranties and representations
contained in this Article 4 or elsewhere in this Agreement. The provisions of
this Article 4 shall survive the closing of the transaction contemplated by
the Agreement and delivery of the Deed hereunder or the termination of this
Agreement.
(ii) Except for such covenants, representations and warranties of Seller
as herein expressly set forth, no statement, representation, warranty,
covenant or inducement of any kind, express or implied, made by Seller has
been relied upon by Buyer as to (a) the compliance of the Property, in its
current or any future state, with statutes, laws, ordinances, rules,
regulations and orders of governmental or quasi-governmental bodies,
authorities or agencies, (b) the ability to obtain changes in laws, rules,
ordinances and regulations of governmental or quasi-governmental bodies,
authorities or agencies, (c) the current or future zoning, development or use
of the property, (d) the right to or the availability of any utility services
(including, without limitation, water, sewer, electricity, gas, telephone and
cable television) in respect of the Property or any part thereof, the costs
of any utility services and the procedures and costs for procurement of any
utility services, (e) the presence or absence of any laws, statutes,
ordinances, rules, or regulations of any governmental or quasi-governmental
bodies, authorities or agencies or any violations thereof, (f) the condition,
use or quality of the Property or any part thereof, (g) the marketability of
title to the Property or any part thereof, (h) the presence or absence of any
hazardous or toxic substance or material in, on, or under the Land or the
presence of any underground storage tanks or aboveground storage tanks on the
Land, (i) the presence or absence of any wetland, environmentally sensitive
area or endangered or threatened species of animal or plant or the habitat
thereof on or near the Land, or (j) any other matter. Except for such
covenants, representations and warranties of Seller as are herein expressly
set forth or as expressly set forth in any of the documents described in
Paragraph 6(a) hereof, Buyer acknowledges that it is purchasing the Property
in an "as is" condition without any implied warranties of merchantability,
habitability or fitness for any particular purpose.
(iii) Both Buyer's and Seller's liability for the breach of any warranty
or representation contained in this Agreement shall survive for a period of
three (3) years following the Closing Date.
5. RIGHTS AND OBLIGATIONS OF THE PARTIES PRIOR TO CLOSING; CONDITIONS TO
CLOSING.
(a) Seller's Covenants. Seller covenants that between the date of this
Agreement and the Closing:
(i) Upon twenty-four (24) hour notice to Seller and Buyer's execution
and delivery to Seller of a release in the form attached hereto as Exhibit
5(a)(i), Buyer and its
9
<PAGE>
representatives, agents, contractors, architects and engineers, and each of
their respective officers, directors, agents, employees, representatives, and
designees shall have access to the Property at any time and from time to
time, at Buyer's sole cost and expense: (A) to show the Property to third
parties (including, without limitation, contractors, engineers, architects,
attorneys, insurers, banks and other lenders or investors, and prospective
tenants, occupants or buyers) and (B) to perform any and all tests, borings,
inspections, environmental site assessments and measurements which Buyer
reasonably deems necessary or appropriate hereunder, including without
limitation, for purposes of locating all utility conduits serving the
Property, making soil borings, performing soil compaction tests, performing
mechanical or structural inspections, conducting any of the other tests
described in Section 5(b) below, and making such surveys and other
topographical and engineering studies, and other tests, surveys and studies
as Buyer or Buyer's lender may deem necessary or appropriate. Promptly
following such tests and surveys, Buyer shall restore any disturbed Property
to a condition as close as possible to its condition prior to such tests and
surveys; provided, however, that with respect to the Improvements, Buyer's
obligation shall be limited to causing the Improvements to be returned to a
secure condition. In the event this Agreement is terminated for any reason
other than a breach by Seller, Buyer shall provide Seller, at Seller's
expense (except in the event the Agreement is terminated due to a breach by
Buyer, in which event, at Buyer's expense), copies of the results of all such
tests and surveys which are in its possession or control; provided, however,
in no event shall Buyer be obligated to provide Seller with (i) any item
which is subject to attorney-client privilege or work product privilege or
(ii) any item which is subject to the terms of a written confidentiality
agreement between Buyer and any unrelated third party.
(ii) Buyer may discuss the Property and/or the Intended Use with any
federal, county, state or local officials or authorities concerning
variances, permits, certificates, consents, approvals, and other Governmental
Regulations for the use, operation, leasing and/or sale of the Property.
(iii) Promptly upon its execution hereof and in any event within five
(5) days following its execution hereof, Seller will furnish to Buyer for
Buyer's review, inspection and approval complete and accurate copies of all
records and documentation and all information in its possession (or in the
possession of Seller's attorney) concerning the ownership and condition of
the Property (for informational purposes, without warranty or representation
regarding its accuracy), including, without limitation, any available plans
and surveys, engineering reports, recorded title documents, title abstracts
and title insurance policies, soil tests, service contracts, legal opinions,
environmental site assessments, permits, approvals, and building
specifications, and such other available items as requested by Buyer. Except
as necessary in connection with the permitting and approval process for the
Project, Buyer will hold all such documents, data and information obtained
solely from Seller in confidence in accordance with the terms of the
Confidentiality Agreement entered into between Buyer and Seller on November
22, 1995. Upon termination of this Agreement as provided herein, and provided
that such termination is not a result of Seller's default hereunder, Buyer
will promptly return to Seller all such information obtained from Seller.
10
<PAGE>
(iv) Seller shall not permit any new sale of, occupancy of, or enter
into any new lease for, space in or on the Property, or any portion thereof,
or enter into or renew any management, maintenance, service or other
agreement affecting the Property, or enter into or renew any management,
maintenance, service or other agreement affecting the Property, unless the
term of any such agreements affecting the Property ends prior to the Closing
Date or unless Seller terminates any such agreement prior to the Closing
Date. Buyer shall operate and maintain the Property in the same manner as it
is currently operating and maintaining the Property.
(v) Seller shall not prosecute, and shall not withdraw, settle or
otherwise compromise, any protest or reduction proceeding affecting real
estate taxes assessed against the Property for the year in which the Closing
is to occur or any prior year without the prior written consent of Buyer.
Real estate tax refunds and credits received after the Closing Date which are
attributable to the year during which the Closing Date occurs shall be
apportioned between Seller and Buyer, after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
(vi) Seller shall not execute any new mortgage of the Property or modify
the existing mortgage(s) on the Property, or otherwise encumber the Property,
or create any other new encumbrance or restriction affecting the Property in
any manner which would prevent Seller from obtaining a partial release at the
time of Closing as referenced below at Section 5(a)(ix).
(vii) Subject to Buyer's approval, Seller shall make no material
alterations of buildings on the property, nor shall Seller take any actions
to modify or alter the Property in a manner which would affect the Property's
land use or zoning classification.
(viii) Within thirty (30) days of the execution of this Agreement,
Seller shall obtain, in writing, a partial release agreement between Seller
and the lender currently holding a lien on the Property or a letter from said
lender whereby said lender agrees to discharge its lien on the Property at
Closing for an amount not to exceed the net amount of the Purchase Price to
be received by Seller at the Closing, after deduction (if any) for the
adjustments described in Section 2(c) above and payment of the broker's
commission, if any, described in section 9(l).
(ix) In the event Buyer shall be required to obtain a drainage easement
to drain surface water run off from the Property across Seller's property
located east of Sewell's Point Road, Seller shall grant to Buyer (or the
applicable governmental authority) and shall cause any successor in title to
Seller to grant to Buyer (or the applicable governmental authority) such
drainage easement; provided, however, that (i) the location of such drainage
easement would be mutually agreed upon by Buyer and Seller (or Seller's
successor in title) and (ii) the construction of the facilities in such
drainage easement shall be acceptable to Buyer and Seller (or Seller's
successor in title). In the event Seller shall convey or lease all or any
portion of its property east of Sewell's Point Road, Seller shall notify such
transferee or lessee of this obligation, and shall impose this obligation
(including the obligation to impose this obligation on subsequent transferees
or lessees) upon such transferee or lessee. Within thirty (30) days following
the execution of this Agreement, Seller shall provide Buyer with a written
acknowledgment from the
11
<PAGE>
Trust for Public Land (which party is a proposed purchaser of such property)
acknowledging its knowledge of this obligation, its agreement to comply with
the same and its agreement to impose such obligation on any subsequent
purchaser of such property. In the event the Trust for Public Land shall
enter into an agreement to sell or lease all or any portion of such property
to Martin County, Florida, Seller shall provide Buyer, or shall cause the
Trust for Public Land to provide Buyer, with a written acknowledgment from
Martin County, Florida acknowledging its knowledge of this obligation, its
agreement to comply with the same and its agreement to impose such obligation
on any subsequent purchaser of such property.
(x) Within thirty (30) days following the execution of this Agreement,
Seller shall deliver to Buyer written evidence indicating the approval of
this Agreement by Seller's Board of Trustees.
(b) Certain Conditions to Buyer's Obligations. In addition to the other
conditions to be satisfied hereunder, Buyer's obligations hereunder are
expressly contingent upon fulfillment of all of the following terms and
conditions:
(i) Seller delivering to Buyer the items contemplated by Section
5(a)(viii) above, Section 5(a)(x) above and the penultimate sentence of
Section 5(a)(ix) above within thirty (30) days following the execution of
this Agreement.
(ii) Buyer may make or cause to be made all site assessments, tests,
borings and inspections it deems necessary to determine if there are any
"hazardous wastes", "hazardous substances", "oil" or "hazardous materials"
(as all those terms are defined under applicable Governmental Regulations),
or any medical wastes, radioactive materials, lead, asbestos, urea
formaldehyde, or radon, in, on, about, under or in the area of the Property,
and shall be satisfied in its sold discretion with the results of all such
site assessments, tests, borings and inspections.
(iii) Buyer may make or cause to be made an instrument survey of the
Property prior to the Closing Date, and such survey shall disclose no matters
affecting the Property which are reasonably determined by Buyer to materially
adversely affect the title or value of the Property or the use of the
Property for the Intended Use.
(iv) Buyer shall have obtained a commitment from a title insurance
company selected by Buyer pursuant to which such company agrees to issue to
Buyer, upon recording of the Deed, an ALTA Form B owners policy of title
insurance in the amount of the Purchase Price insuring Buyer's title to the
Land, subject only to such easements, restrictions, rights of way and other
matters of record as are shown on Exhibit 5(b)(iv) attached hereto (the
"Permitted Exceptions") and containing such endorsements as are shown on
Exhibit 5(b)(iv). In the event such title insurance commitment contains any
matter other than a Permitted Exception or does not contain any required
endorsement, Buyer shall notify Seller in writing specifying its objection to
such exception or the lack of such endorsement. Seller shall cure such
objections within ninety (90) days following receipt of such notice (Seller's
obligation to cure shall include Seller's obligation to bring suit against
the appropriate parties), failing which Buyer shall have the option of either
accepting title as it then exists or terminating this
12
<PAGE>
Agreement, in which event the Deposit together with all interest thereon
shall be immediately refunded to Buyer, where upon all obligations of the
parties hereto shall cease and this Agreement shall be void and without
recourse to the parties hereto. At closing, the title insurance commitment
shall be endorsed to delete any and all requirements or preconditions to the
issuance of the title insurance policy (and Seller shall execute and deliver
such documents and instruments and undertake such actions and activities as
may be reasonably required to delete such requirements or preconditions) and
to delete any exception for matters arising or attaching subsequent to the
effective date of the commitment and before acquisition of record of fee
simple title to the Land by Buyer and any standard exception; provided,
however, the standard exception relating to parties in possession shall be
replaced with a specific exception relating to tenants, residents and
licensees in possession of the Land and Improvements pursuant to the Leases
as tenants, residents or licensees only. From and after the date of this
Agreement, except as contemplated by the terms of this Agreement, Seller
shall take no action which impairs or otherwise affects title to any portion
of the Property and shall record no documents or instruments in the public
records which would affect title to the Property, without the prior written
consent of Buyer.
(v) Buyer shall have obtained surveys, engineering reports, percolation
tests, commitment letters and other evidence satisfactory to Buyer indicating
that: (A) the Property contains or is serviced by water supplies in amounts
adequate for the Intended Use and (B) utilities are available at the
boundaries of the Land in amounts adequate for the Intended Use without the
need for any third party easements not already unconditionally appurtenant to
the Property.
(vi) Buyer shall review and be satisfied with all zoning, land use, land
development and environmental laws, codes, ordinances, regulations affecting
the Property.
(vii) Buyer shall have obtained all subdivision and environmental
permits, approvals, consents and licenses and any other applicable permit,
approval, consent or license as may be necessary for the Intended Use (other
than those contemplated by subparagraph (viii) below), and the relevant
appeal periods for all such permits, approvals, licenses and consents shall
have expired without any appeal having been taken. Buyer covenants and agrees
to undertake commercially reasonable efforts to pursue in good faith and
obtain the foregoing; provided, however, in no event shall Buyer be obligated
to institute litigation against any person or entity whatsoever to obtain any
of the foregoing. Seller covenants and agrees to execute and deliver such
applications and the like as are necessary or expedient to allow Buyer to
pursue and obtain the foregoing.
(viii) Buyer shall have obtained all utility, subdivision,
environmental, zoning and/or planned unit development permits, approvals,
consents or licenses from Martin County, Florida as may be necessary for the
Intended Use (other than building permits), including, without limitation,
approval of the Intended Use by all applicable governmental authority boards,
and the relevant appeal periods for such permits, approvals, consents, or
licenses shall have expired without any appeal having been taken. Buyer
covenants and agrees to undertake commercially reasonable efforts to pursue
in good faith and obtain the foregoing; provided, however, in no
13
<PAGE>
event shall Buyer be obligated to institute litigation against any person or
entity whatsoever to obtain any of the foregoing. Seller covenants and agrees
to execute and deliver such applications and the like as are necessary or
expedient to allow Buyer to pursue and obtain the foregoing.
(ix) Buyer shall conduct such other surveys, analyses, inspections, and
tests as are deemed necessary or desirable by the Buyer in its sole and
absolute discretion and shall be satisfied in its sole and absolute
discretion, with the Property and the Intended Use.
(x) Seller shall have obtained such documents and instruments, in
recordable form and otherwise satisfactory to Buyer and the title company in
their reasonable discretion, as are necessary to cause the matter set forth
on Exhibit 5(b)(x) to be discharged from the public records.
If the foregoing conditions specified in subsections (i) and (x) above is
not fully satisfied on or before thirty (30) days after the date of this
Agreement, Buyer shall have the right to notify Seller thereof on or before
5:00 P.M. (Boston time) on the 33rd day following the date of this Agreement,
in which event this Agreement shall be terminated, the deposit, together with
all interest thereon, shall be immediately refunded to Buyer and Seller shall
immediately reimburse to Seller all reasonable costs and expenses incurred by
Buyer arising out of or related to the Property or this Agreement between the
date of this Agreement and the date of such notice, whereupon all obligations
of the parties hereto shall cease and this Agreement shall be void without
recourse of the parties hereto. If Buyer does not provide such notice as of
the 33rd day following the date of this Agreement, the above conditions will
be deemed to have been waived or satisfied.
If the foregoing conditions specified in subsections (ii), (iii), (iv),
(v), (vi) and (ix) above are not fully satisfied in a manner which is
acceptable to Buyer in its sole discretion on or before April 15, 1996 or if
any records or documentation or information provided by Seller is
unsatisfactory to Buyer, Buyer shall have the right to notify Seller thereof
on or before 5:00 P.M. (Boston time) on April 18, 1996 (the "Commitment
Date") which notice shall specify which condition(s) (has) (have) not been
satisfied (which notice shall be accompanied by copies of any materials, if
any, upon which such lack of satisfaction is based), then this Agreement
shall be terminated, and the Deposit, together with all interest thereon,
shall be immediately refunded to Buyer, whereupon all obligations of the
parties hereto shall cease and this Agreement shall be void and without
recourse to the parties hereto. If Buyer does not provide such notice as of
the Commitment Date, the above conditions will be deemed to have been waived
or satisfied.
If the other conditions specified in subsection (vii) are not fully
satisfied in a manner which is acceptable to Buyer in its sole discretion on
or before August 16, 1996, Buyer shall notify Seller thereof on or prior to
5:00 P.M. (Boston time) on August 19, 1996, which notice shall specify which
condition(s) has (have) not been satisfied (which notice shall be accompanied
by copies of any materials, if any, upon which such lack of satisfaction is
based), then this Agreement shall be terminated, and the Deposit together
with all interest thereon, shall be immediately refunded to Buyer, whereupon
all obligations of the parties hereto shall cease and this Agreement shall be
void and without recourse to the parties hereto. If Buyer does not
14
<PAGE>
provide such notice on or prior to August 16, 1996, such condition shall be
deemed to have been waived or satisfied.
If the other conditions specified in subsection (viii) are not fully
satisfied in a manner which is acceptable to Buyer in its sole discretion on
or before October 31, 1996, Buyer shall notify Seller thereof on or prior to
5:00 P.M. (Boston time) on November 1, 1996, which notice shall specify which
condition(s) has (have) not been satisfied (which notice shall be accompanied
by any materials, if any, upon which such lack of satisfaction is based). In
such event, this Agreement shall be terminated, and the Deposit together with
all interest thereon, shall be immediately refunded to Buyer, whereupon all
obligations of the parties hereto shall cease and this Agreement shall be
void and without recourse to the parties hereto. If Buyer does not provide
such notice on or prior to November 1, 1996, such condition shall be deemed
to have been waived or satisfied.
6. CLOSING OBLIGATIONS; ESCROW INSTRUCTIONS.
(a) Seller's Closing Obligations. On the Closing Date, Seller shall:
(i) Deliver to Buyer full possession of the Property. Buyer shall be
entitled to an inspection of the Property prior to the Closing Date in order
to determine whether the condition thereof complies with the terms of this
Agreement.
(ii) Deliver to Buyer, in form and substance satisfactory to Buyer, the
following:
(A) a Special Warranty Deed (the "Deed") conveying good and marketable
title to the Land and Improvements insurable as provided in Section 5(b)(iii)
above, which shall convey title free from all liens, encumbrances and
encroachments except: (i) provisions of building and zoning laws existing as
of the date hereof; (ii) such real property taxes for the then current year
as are not yet due and payable on the Closing Date, provided that if the Land
is a portion of a larger tax parcel, then Buyer shall take title subject only
the proportionate share of such real property taxes as relate to the Land;
(iii) special assessment liens which are not certified, confirmed or ratified
as of the Closing; and (iv) the Permitted Exceptions.
(B) An assignment of the Development Work Product and any studies of
any kind that relate to the Property and all originals thereof, to the extent
the foregoing are assignable.
(C) An Assignment of Seller's entire interest in any permits, licenses
or approvals affecting the Property (provided, however, in the absence of an
express assignment, delivery of the Deed will conclusively be deemed to
constitute the assignment of all of such permits, licenses and approvals to
Buyer).
(D) Affidavits to Buyer's title insurer as to matters appearing
between the effective date of the title commitment referred to in Section
5(b) and the Closing Date, parties in
15
<PAGE>
possession or with a right to possession of, easements not of public record
and mechanic's liens with respect to, the Property, which affidavits shall be
sufficient to have the normal printed exceptions with respect to such matters
deleted from Buyer's and Buyer's lender's title insurance policy(ies).
(E) An affidavit certifying that Seller is not a "foreign person" as
of the Closing Date, as provided in Section 4(a)(xi) hereof.
(F) A certificate by Seller to the effect that all of the
representations and warranties set forth in Section 4 remain true and correct
as of the Closing Date except to the extent the same may have changed in
accordance with the terms and conditions of this Agreement.
(G) A W-9 form stating that no backup withholding is necessary to
disburse Seller's share, if any, of the interest earned on the Deposit.
(H) A DR-219 Form
(I) A secretary's certificate and corporate resolution of Seller,
certifying as to the incumbent officers of Seller and the due authorization
and execution of this Agreement, and of the sale, assignment, instruments,
and other transactions comtemplated hereby.
(J) Certificates of legal existence and good standing for Seller.
(K) Such documents, certificates and instruments reasonably deemed
necessary or appropriate by Buyer's and Seller's counsel to effectuate the
transactions which are the subject of this Agreement.
(L) All other documents expressly required by this Agreement to be
delivered by Seller.
(iii) To enable Seller to make conveyance as herein provided, at the
time of delivery of the Deed, Seller shall use the Purchase Price or any
portion thereof to clear title to the Property of any or all encumbrances,
including but not limited to those set forth on Exhibit 6(a)(iii), and all
instruments so procured shall be recorded simultaneously with the delivery of
the Deed, or provisions reasonably satisfactory to Buyer's attorney shall be
made prior to the Closing Date for recording thereof as soon as reasonably
practicable after the Closing Date.
(b) Buyer's Closing Obligations. At the Closing, Buyer shall deliver to
Seller:
(i) In immediately available funds, the balance of the Purchase Price,
as adjusted for apportionments under Section 2 above.
(ii) A secretary's certificate and corporate resolution of Buyer (or its
equivalent from Buyer's nominee), certifying as to the incumbent officers of
Buyer and the due
16
<PAGE>
authorization and execution of this Agreement, and the purchase, assignment,
instruments and other transactions contemplated hereby.
(iii) Certificate of legal existence and good standing for Buyer (or its
equivalent from Buyer's nominee).
(iv) A certificate by Buyer to the effect that all the representations
and warranties set forth in Section 4 remain true and correct as of the
Closing Date except to the extent the same may have changed in accordance
with the terms and conditions of this Agreement.
(v) Such documents, certificates and instruments reasonably deemed
necessary or appropriate by Buyer's and Seller's counsel to effectuate the
transactions which are the subject of this Agreement.
(vi) Any other documents expressly required by this Agreement to be
delivered by Buyer.
7. CONDEMNATION. In the event that all or any part of the Property shall
be acquired or condemned for any public or quasi-public use or purpose, or if
any acquisition or condemnation proceedings shall be threatened or begun
prior to the closing of this transaction, Buyer shall have the option to
either terminate this Agreement, in which event the Escrow Agent shall return
to Buyer the Deposit, together with accrued interest thereron, and the
obligations of all parties hereunder shall cease, or to proceed, subject to
all other terms, covenants, conditions, representations and warranties of
this Agreement, to the closing of the transaction contemplated hereby and
receive title to the Property, receiving, however, any and all damages,
awards or other compensation arising from or attributable to such acquisition
or condemnation proceedings. Buyer shall have the right to participate in any
such proceedings.
8. FAILURE OR INABILITY TO PERFORM: DEFAULTS; REMEDIES.
(a) Seller's Default.
(i) If Seller shall not perform any of its obligations hereunder within
the time required (time being of the essence) for such performance or if any
of Seller's warranties and representations contained herein are not fully
accurate as of the Closing Date (collectively, the "Seller's Obligations")
the time for performance hereunder shall be extended for such period, not to
exceed ninety (90) days, as shall be reasonably specified by Buyer, and
Seller shall use diligent efforts to satisfy and perform all of Seller's
Obligations. If, at the expiration of such extended time for performance,
despite having used such diligent efforts Seller shall remain unable to
satisfy and perform all of Seller's Obligations, then Buyer shall have the
option, at Buyer's sole discretion: (I) to terminate this Agreement by notice
given to Seller, whereupon the Deposit, together with all interest and other
sums paid by Buyer hereunder, shall be promptly refunded by Escrow Agent and
all obligations of the parties hereto shall cease and this Agreement shall be
void and without recourse to the parties hereto, excluding, however, those
provisions hereof which are expressly provided herein to survive termination
of the Agreement,
17
<PAGE>
or (II) to accept title to the Property as provided in Section 8(a)(ii)
below. In the event that Seller seeks relief as a debtor under any applicable
law, including without limitation the federal bankruptcy code, or upon the
involuntary commencement of any such proceeding, Buyer shall have the right
of possession of the Property pending the Closing and shall be entitled to
any and all rights pursuant to 11 U.S.C. Section 365(i) and (ii). Buyer shall
have the right to obtain specific performance of this Agreement, as well as
the benefit of any other rights or remedies provided herein or by applicable
law, in the event of any default hereunder by Seller (i.e., Seller's failure
to perform its obligations hereunder where such failure is not excused by any
of the express terms of this Agreement).
(ii) Buyer shall have the election, at the original or at any extended
time for Closing, to accept such title to, and possession of, the Property as
Seller can deliver in its then condition and to thereupon pay the Purchase
Price without any deductions, except such amount necessary to remove all
mortgages, liens or encumbrances which secure the payment of money and such
adjustments computed in accordance with Section 2(b) above, in which case
Seller shall convey such title.
(b) Buyer's Default. If Buyer shall not perform any of its obligations
hereunder within the time required (time being of the essence) for such
performance, Seller's sole and exclusive remedy shall be to retain the
Deposit and any interest thereon as full and complete liquidated damages,
both at law and in equity, whereupon this Agreement shall terminate without
further recourse to either party. In addition, nothing contained herein shall
be construed so as to prevent Seller from negotiating and/or accepting
another offer to sell and/or lease all or any part of the Property to any
third party, after Buyer's default under this Agreement. Any such other offer
shall contain an express acknowledgment from the party making such offer of
the existence of this Agreement.
9. MISCELLANEOUS.
(a) Tax Identification Number. Seller warrants and represents that
Seller's federal tax identification number is 59-6046500, and Buyer warrants
and represents that Buyer's federal tax identification number is 04-3227229.
Seller and Buyer each acknowledge that the foregoing information will be
relied upon in reporting the transactions contemplated hereby to appropriate
governmental authorities.
(b) Agreement Not an Offer. The submission of any draft of this Agreement
or any portion thereof does not constitute an offer to buy the Property, it
being acknowledged and agreed that neither Buyer nor Seller shall be legally
obligated with respect to the purchase or sale of the Property unless and
until this Agreement has been executed by both Buyer and Seller and a fully
executed copy has been delivered to each of Buyer and Seller.
(c) Exhibits. The Exhibits attached hereto are incorporated herein by this
reference and made a part hereof.
18
<PAGE>
(d) Notices. All notices or communications required or permitted hereunder
shall be in writing and delivered by hand or mailed by certified mail, return
receipt requested, postage and registration or certification charges prepaid,
or by nationally recognized overnight courier service to the party entitled
thereto as follows:
If to Seller:
Florida Institute of Technology, Inc.
150 West University Boulevard
Melbourne, Florida 32901
Attention: Mr. Robert C. Bowie, Vice President and Treasurer
With a courtesy copy to:
Dean, Mean & Minton
1903 S. 15th Street
Suite 200, Ft. Pierce, Florida 34947
Attention: Robert N. Klein, Esq.
If to Buyer:
The Careplex Group, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: James M. Clary, III, Esq.
With a courtesy copy to:
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Suite 500, East Tower
777 South Flagler Drive
West Palm Beach, Florida 33401
Attention: Thomas P. Hunt, Esq.
or such other party(ies), address(es) or telefax number(s) as either party
shall specify by written notice to the other from time to time. Any such
notice or communication shall be deemed to have been given as of the date of
its receipt or delivery.
(d) Time is of the Essence. Time is of the essence with respect to each
provision of this Agreement which requires that action be taken by either
party within a stated time period, or upon a specified date.
(f) Assignment. This Agreement shall be freely assignable by Buyer to any
nominee contemplated by Section 1(c) of the Agreement, and in the event of
assignment, all of the rights and obligations of Buyer may be enforced and
shall be performed by its assignee, as fully as if by Buyer itself. Buyer
shall provide Seller with written notice of any such assignment, together
with evidence satisfactory to Seller in its reasonable discretion that such
assignee qualifies as a nominee contemplated by Section 1(c) of this
Agreement.
(g) Maintenance of Property. At all times prior to closing, Seller shall
continue to maintain the Property in the same manner as it is currently
maintaining the Property.
19
<PAGE>
(h) Attorneys Fees and Costs. In the event of any dispute or litigation
arising out of this Agreement, the prevailing party shall be entitled to
recover all fees, expenses and costs incurred, including reasonable
attorneys' fees at both trial and appellate levels.
(i) Venue; Jurisdiction. The venue of any litigation arising out of this
Agreement shall be Martin County, Florida. Each of the parties irrevocably
and unconditionally agrees that any suit, action or legal proceeding arising
out of or related to this Agreement shall be brought in the court of records
of the State of Florida in Martin County and not in the courts of the United
States. Each party irrevocably and unconditionally consents to the
jurisdiction of such court in any suit, action or proceeding and waives any
objection which it may have to the laying of venue or jurisdiction of any
such suit, action or proceeding in such courts.
(j) Captions. The descriptive captions contained herein are for
convenience only and shall not control or affect the meaning or construction
of any provision hereof.
(k) Binding Effect. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, and shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
legal representatives, successors and assigns.
(l) Broker.
(i) Each of Buyer and Seller hereby represents, covenants and warrants
to the other that the party so representing has dealt with no broker or other
person entitled to a commission in connection with the negotiation or
execution of this Agreement or the consummation of the transactions
contemplated hereby, other than Fenton & Lang of Stuart, Inc. ("Fenton") and
Stuart Land Company ("Stuart") (collectively, the "Brokers"). Further, each
of Buyer and Seller agrees to indemnify and hold harmless the other from any
loss, cost or expense which such nonindemnifying party may incur as a result
of any inaccuracy in the other party's warranties and representations as set
forth in the prior sentence. Except in the case of a breach of Buyer's
warranty set forth above, any and all fees to be paid to the Brokers, or any
other broker claiming by, through or under Seller or Brokers in connection
with Buyer's purchase of the Property will be paid by Seller.
(ii) Upon delivery and recording of the Deed and other instruments
contemplated herein, in consummation of the transactions contemplated hereby,
Seller shall pay to Fenton a brokerage commission in the amount of $67,500.
At the closing, Fenton will pay Stuart a brokerage commission in the amount
of $27,000. In the event that this Agreement is terminated for any reason, no
such commission or compensation of any kind shall be due and payable to the
Brokers. The provisions of this Section 9(l) shall survive the delivery of
the Deed or the termination of this Agreement.
(iii) The Brokers join in this Agreement and become parties hereto for
the purposes of this Section 9(l) only. The consent of the Brokers shall not
be required with respect to any amendments or modifications to this Agreement
other than Amendments or modifications to this Section 9(l).
20
<PAGE>
(m) Entire Agreement; Rules of Construction. This Agreement may be
executed in multiple counterparts; may be executed and delivered by facsimile
transmission; sets forth the entire agreement between the parties; merges all
prior and contemporaneous agreements, understandings, warranties, or
representations, including, without limitation, the letter from Buyer and
accepted by Seller, dated October 27, 1995 and that Confidentiality Agreement
entered into between Buyer and Seller on November 22, 1995 shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; and may be canceled, modified or amended only by a
written instrument executed by both Seller and Buyer. The captions and
section headings are used only as a matter of convenience and are not to be
considered a part of this Agreement or to be used in determining the intent
of the parties.
(n) Further Assurances. Upon Buyer's reasonable request, Seller agrees to
execute and deliver to Buyer such additional instruments, certificates and
documents as Buyer may reasonably require, whether or not after the Closing
Date, in order to provide Buyer with the rights and benefits to which Buyer
is entitled under this Agreement.
(o) Notice of Agreement. Provided Buyer shall execute, acknowledge and
deliver to Seller a release of any such notice or memorandum, Buyer shall
have the right to record and Seller agrees to execute, acknowledge and
deliver to Buyer a notice or memorandum of agreement.
(p) Other Contracts. Neither Seller nor any representatives thereof, shall
solicit, authorize the solicitation of, enter into or authorize any
discussions with any third party concerning, or furnish or authorize the
furnishing of any information relating to Seller or the Property to any third
party for the purpose of studying, considering, soliciting or inducing, any
offer or possible offer by any such third party or any third party to acquire
all or substantially all of the ownership interest in Seller or the Property
or enter into any agreement for any of the foregoing unless such third party
shall agree in writing, for the benefit of Buyer, that any such other
agreement, and such third party's rights thereunder, are inferior and
subordinate to the terms and provisions, and rights of Buyer under this
Agreement and that such third party shall not pursue any permits nor make any
investigations regarding the zoning or land use specifications matters unless
and until this Agreement has been terminated in accordance with its terms.
Seller shall enforce the terms and provisions of any such agreement against
such third party; provided, however, that all costs and expenses associated
with any litigation related thereto shall be the cost and expense of Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it
to be executed by their respective duly authorized representatives, as an
instrument under seal as of the day and year first above written.
WITNESSES: BUYER:
THE CAREPLEX GROUP, INC.
/s/ By: Michael M. Gosman
Name: Michael M. Gosman
21
<PAGE>
/s/ Title: Executive Vice President
Hereunto Duly Authorized
SELLER:
/s/ FLORIDA INSTITUTE OF TECHNOLOGY,
INC.
By: /s/
Name: Robert C. Bowie
/s/ Title: Vice President and
Treasurer
Hereunto Duly Authorized
ESCROW AGENT:
GUNSTER, YOAKLEY, VALDES-FAULI &
/s/ STEWART, P.A.
By: /s/
Name: Thomas P. Hunt
/s/ Title: Vice President
Hereunto Duly Authorized
BROKERS:
/s/ FENTON & LANG OF STUART, INC.
By: /s/
/s/ Name: /s/
Title: Broker
STUART LAND COMPANY
/s/ By: /s/
Name: /s/
/s/ Title: Vice President
22
<PAGE>
0173269.04
23
<PAGE>
Exhibits
Exhibit 1(a) Legal Description of the Land
Exhibit 4(a)(viii) Schedule of Contracts
Exhibit 4(a)(xii) Copy of Recreational Lease
Exhibit 5(a)(i) Buyer's Release for Access to Property
Exhibit 5(b)(iv) Permitted Exceptions and Required Endorsements
Exhibit 5(b)(x) Schedule of Zoning Agreements/Ordinances to be Discharged
Exhibit 6(a)(iii) Schedule of Encumbrances to be Discharged
24
<PAGE>
Exhibit 1(a)
Legal Description
See Attached
25
<PAGE>
#94-345
LEGAL DESCRIPTION: LOW DENSITY RESIDENTIAL/COMMERCIAL/
OFFICE/RESIDENTIAL
A PARCEL OF LAND SITUATED IN SECTION 26, TOWNSHIP 37 SOUTH, RANGE 41 EAST,
MARTIN COUNTY, FLORIDA; BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHWEST CORNER OF THE NORTH ONE-HALF OF GOVERNMENT LOT 4,
SECTION 26, TOWNSHIP 37 SOUTH, RANGE 41 EAST; THENCE NORTH 00(degree) 46'27"
EAST, ALONG THE SOUTHERLY EXTENSION OF THE EAST LINE OF THE PLAT OF SOUTH
JENSEN HEIGHTS, AS RECORDED IN PLAT BOOK 3, PAGE 55, PUBLIC RECORDS OF MARTIN
COUNTY, FLORIDA, A DISTANCE OF 33 FEET TO THE SOUTHEASTERLY CORNER OF LOT 68,
SAID PLAT OF SOUTH JENSEN HEIGHTS, ALSO BEING THE POINT OF BEGINNING;
THENCE NORTH 00(degree) 46'27" EAST, ALONG THE EASTERLY LINE OF SAID PLAT AND
THE EASTERLY LINES OF THE PLATS OF 1ST ADDITION TO SOUTH JENSEN HEIGHTS AND
2ND ADDITION TO SOUTH JENSEN HEIGHTS, AS RECORDED IN PLAT BOOK 3, PAGE 68 AND
PLAT BOOK 3, PAGE 81, RESPECTIVELY, OF THE PUBLIC RECORDS OF MARTIN COUNTY,
FLORIDA, A DISTANCE OF 1550.10 FEET TO A POINT ON A LINE BEING 40 FEET
SOUTHWESTERLY OF AND PARALLEL WITH THE CENTERLINE OF SEWALL'S POINT ROAD,
SAID POINT BEING A POINT ON A CURVE FROM WHICH A RADIAL LINE BEARS NORTH
59(degree) 12'24" EAST; THENCE SOUTHEASTERLY ALONG SAID LINE THROUGH THE
FOLLOWING SIX (6) COURSES:
ON A CURVE TO THE LEFT, HAVING A RADIUS OF 540.00 FEET, SUBTENDING A CENTRAL
ANGLE OF 11(degree) 36'23" AND AN ARC DISTANCE OF 109.39 FEET TO THE POINT OF
TANGENCY; THENCE SOUTH 42(degree) 23'59" EAST, A DISTANCE OF 1002.31 FEET TO
THE POINT OF CURVATURE; THENCE SOUTHEASTERLY, ON A CURVE TO THE RIGHT, HAVING
A RADIUS OF 460.00 FEET, SUBTENDING A CENTRAL ANGLE OF 11(degree) 05'13" AND
ARC DISTANCE OF 89.01 FEET TO THE POINT OF TANGENCY; THENCE SOUTH 31(degree)
18'46" EAST, A DISTANCE OF 516.06 FEET TO THE POINT OF CURVATURE OF A CURVE
CONCAVE TO THE SOUTHWEST HAVING A RADIUS OF 960.00 FEET; THENCE SOUTHEASTERLY
ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 09(degree) 10'48", AN
ARC DISTANCE OF 153.81 FEET TO THE POINT OF TANGENCY; THENCE SOUTH
22(degree)07'58" EAST, A DISTANCE OF 102.47 FEET TO A POINT ON THE NORTHERLY
RIGHT-OF-WAY LINE OF PALMER ROAD LYING 33 FEET NORTHERLY OF AND PARALLEL WITH
THE SOUTH LINE OF THE NORTH ONE-HALF OF SAID GOVERNMENT LOT 4; THENCE NORTH
88(degree)56'24" WEST, ALONG SAID RIGHT-OF-WAY LINE, A DISTANCE OF 1191.31
FEET TO THE POINT OF BEGINNING.
THE ABOVE DESCRIBED PARCEL OF LAND CONTAINS AN AREA OF 23.615 ACRES, MORE OR
LESS.
<PAGE>
Exhibit 4(a)(viii)
Schedule of Contracts
1. An oral, month-to-month, caretaker's agreement for maintaining the
Property.
26
<PAGE>
Exhibit 4(a)(xii)
Copy of Recreational Lease
See Attached
27
<PAGE>
LEASE
THIS LEASE is made and entered into effective as of the 1st day of
October, 1992, by and between FLORIDA INSTITUTE OF TECHNOLOGY, INC., a
Florida not-for-profit corporation ("Lessor"), and MARTIN COUNTY, a political
subdivision of the State of Florida ("Lessee").
WITNESSETH:
WHEREAS, Lessor owns fee title in and to a parcel of land in Martin
County, Florida, as more particularly described in Exhibit "A", attached
hereto and made a part hereof (the "Property");
WHEREAS, Lessee is authorized to lease property for public purposes and
desires to lease that portion of the Property depicted in Exhibit "B",
attached hereto and made a part hereof (the "Leased Property") for the
purpose of providing recreational fields to its citizens for organized team
sports use; and
WHEREAS, Lessor desires to lease the Leased Property to Lessee on the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the sum of $1.00, the receipt of which
is hereby acknowledged, and of the covenants and agreements hereinafter
mentioned, the parties hereto agree as follows:
1. The recitals set forth above are true and correct and incorporated
herein as if fully set forth herein verbatim.
2. Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor the
Leased Property.
3. Lessee shall use the Leased Property as recreational fields for
football, baseball, soccer and other organized-team or recreational sports
and for no other purpose.
4. The term of this Lease shall commence on October 1, 1992, and shall
continue for a term of one (1) year, unless sooner terminated or extended as
herein set forth. At the expiration of the initial term, the term of this
Lease shall automatically be renewed and extended for an additional one (1)
year period, unless sooner terminated as provided herein. At the expiration
of the first extended term, the term of this Lease shall automatically be
renewed and extended for an additional one (1) year period; provided,
however, that the term, as extended, shall not exceed a total period of three
(3) years from the effective date hereof. It is further provided that either
Lessor or Lessee may elect to terminate this Lease by giving to the other
party notice of such termination in writing not less than sixty (60) days
prior to the requested date of termination, in which event this Lease shall
terminate on the said date.
5. Lessor agrees that authorized users of the Leased Property shall be
entitled to park their cars and other vehicles on Lessor's adjoining parking
lots during Lessee's hours of use of the Leased Property, but they have no
right to use such parking lots for any other purposes.
6. Lessee shall be solely responsible for the condition, operation, and
maintenance of the Leased Property, and shall maintain the same in a manner
consistent with the maintenance of parks and playgrounds owned or leased by
Lessee.
<PAGE>
7. Upon receipt of Lessor's written approval, Lessee, during the term of
this Lease, at its own cost and expense, may make certain alterations and
improvements in, to or upon the Leased Property. Minor improvements such as
goalposts, striping, and baseball diamond markings shall not require written
approval, nor shall Lessee's provision of portable bleachers and/or portable
toilet facilities.
8. The Martin County Property Appraiser has determined that the Leased
Premises are exempt from ad valorem taxes, and the assessment rolls will so
reflect that no ad valorem taxes will be assessed against the Leased Property
during the term of this Lease. Lessee agrees to pay as additional rent all
other assessments, rates and charges, which may be levied, assessed, charged
or imposed on or against the Leased Property or any part thereof, or on or
against any improvements thereon. If such assessment, rate or charge is made
relative to the entire Property rather than only the Leased Premises, then
the parties agree that Lessee's charge shall be based upon the proportion of
the total Property represented by the Leased Property, which is 29%.
9. Lessee agrees to keep in full force in effect during the term of this
Lease, or any extension thereof, sufficient insurance to insure against loss
or damage for which it may be liable, and to cover Lessee's risks and
liabilities to the full extent of the provisions of Florida Statutes, Section
768.28 (1993) (Statutory Waiver of Sovereign Immunity). Lessee shall include
the Leased Property with all other property covered by Martin County under
the Tri-County Risk Management Program, such that (a) Lessee is insured
against liabilities, (b) Lessor is named as an additional insured thereunder,
and (c) such policy cannot be canceled except upon thirty (30) days' written
notice to Lessor. Lessee shall provide Lessor with a certificate of such
insurance coverage upon execution of this Lease, and upon any extension of
the term of this Lease, if any.
10. At the termination of this Lease, Lessee shall quit and surrender the
Leased Property to Lessor, and Lessor shall accept the same, in its then
existing condition and thereupon this Lease shall be null and void and of no
further force and effect. However, Lessee shall have the obligation to remove
any capital improvements made upon the Leased Property if Lessor so requests,
and if removal can be done without damage to the Leased Property, and Lessee
shall repair any of the Leased Property so affected to the condition it was
at the commencement of this Lease. With the exception of portable facilities,
all additions and improvements made or placed upon the Leased Property by
Lessee and not so requested to be removed by Lessor, shall, as further
consideration for this Lease, become and be the property of the Lessor and
shall remain upon and be surrendered with the Leased Property as part thereof
at the termination or expiration of this Lease.
11. No waiver, by either party hereto, of a breach of any covenant herein
contained, shall be construed to be a waiver of any succeeding breach of the
same covenant.
12. Lessee shall have the right to reasonably regulate the use and
operation of the Leased Property and to determine and establish the hours of
operation of same.
2
<PAGE>
13. Any and all notices at any time to be served by and upon the parties
hereto pursuant to this Lease shall be in writing and shall be sent by United
States certified mail, postage prepaid, return receipt requested, to the
following addresses:
TO LESSOR:
FLORIDA INSTITUTE OF TECHNOLOGY, INC.
150 West University Boulevard
Melbourne, Florida 32901
Attn: Robert C. Bowie, Vice President
WITH COPY TO:
DEAN, MEAD & MINTON
P.O. Box 2757
Ft. Pierce, FL 34954
Attn: Robert N. Klein, Esquire
TO LESSEE:
MARTIN COUNTY
2401 S.E. Monterey Road
Stuart, Florida 34996
Attn: County Administrator
Any notice given as herein specified shall be deemed delivered as of the
date of postmark in any United States post office.
14. All of the covenants and agreements herein contained shall be binding
upon and enure to the benefit of the parties hereto, their respective heirs,
executors, administrators, successors and assigns; provided, however, that
Lessee shall not assign this Lease or sublet the Leased Property without the
express written consent of Lessor, which may be withheld in Lessee's sole and
absolute discretion.
15. If any action at law or in equity shall be brought on account of any
breach of, or to enforce or interpret any of the covenants, terms, or
conditions of this Lease, or for the recovery of the possession of the Leased
Property, the prevailing party shall be entitled to recover from the other
party as part of the prevailing party's costs, reasonable attorneys' and
paralegals' fees incurred at or before the trial level and during any
appellate proceeding, the amount of which shall be fixed by the court and
shall be made a part of any judgment or decree rendered.
16. Lessor and Lessee agree that neither this Lease nor a memorandum
thereof shall be recorded in the real estate records of Martin County,
Florida.
17. All prior understandings and agreements between the parties (oral and
written) are merged within this Lease, which alone fully and completely sets
forth the understandings of the parties, and this Lease may not be changed or
terminated orally or in any manner other than by an agreement in writing and
signed by the party against whom enforcement of the change or termination is
sought. This Lease and every provision hereof is the result of negotiation by
and between the respective parties hereto, and it is agreed that in the event
any litigation arises with respect hereto, a strict construction of the terms
of this Lease shall not be applied against any of the parties hereto because
of the fact that it drafted or prepared this Lease.
3
<PAGE>
If any term, covenant, condition or provision of this Lease is declared
invalid or unenforceable, the balance of this Lease shall not be affected
thereby.
IN WITNESS WHEREOF, the said parties have hereunto set their hands and
seals effective as of the 1st day of October, 1992.
WITNESSES: LESSOR:
FLORIDA INSTITUTE OF TECHNOLOGY,
INC.
/s/ By: /s/
Robert C. Bowie, Vice President
/s/
[Corporate Seal]
LESSEE:
ATTEST: BOARD OF COUNTY COMMISSIONERS
MARTIN COUNTY, FLORIDA
/s/
By: Jeffrey A. Krauskopf, Chairman
MARSHA STILLER, CLERK
APPROVED AS TO FORM AND
CORRECTNESS:
/s/
Noreen S. Dreyer
County Attorney
STATE OF FLORIDA
COUNTY OF BREVARD
The foregoing instrument was acknowledged before me this 11th day of
November, 1993, by Robert C. Bowie, as Vice President of FLORIDA INSTITUTE OF
TECHNOLOGY, INC., a Florida Corporation, on behalf of the corporation. Said
person did not take an oath and (check one) [X] is personally known to me, [
] produced a driver's license (issued by a state of the United States within
the last five (5) years) as identification, or [ ] produced other
identification, to wit:
. /s/ Patricia M. Tilton
[NOTARY SEAL] Print Name: Patricia M. Tilton
Notary Public, State of Florida
Commission No.: CC162924
My Commission Expires: 11/20/95
4
<PAGE>
LEGAL DESCRIPTION
THAT PORTION OF THE FOLLOWING DESCRIBED PROPERTY LOCATED WESTERLY OF INDIAN
RIVER DRIVE, MARTIN COUNTY, FLORIDA:
Beginning at the Southwest corner of the North one-half of Government Lot #4
in Section 6, Township 37 South, Range 41 East, and extending thence:
1. North 00(degree) 44'00" East, and along the Easterly line of the SOUTH
JENSEN HEIGHTS SUBDIVISION recorded in Plat Book 3, Page 55, a distance
of 1331.19 feet to the Northwest corner of Government Lot 4; thence
2. North 00(degree) 44'00" East continuing along the line of SOUTH JENSEN
HEIGHTS SUBDIVISION, a distance of 336.50 feet to a point in the
centerline of Sewall's Point Road to a point marked by an iron rod and
cap; thence
3. North 26(degree) 07'00" West along said centerline of Sewall's Point Road
a distance of 311.31 feet to a point marked by an iron rod and cap;
thence
4. North 57(degree) 32'13" East along the Northerly boundary of the entire
tract being also the division line between this tract and the lands, now
or formerly, of E.A. Mathews, a distance of 933.87 feet to a 14" x 14"
square concrete monument; thence
5. North 57(degree) 32'13" East continuing along said Northerly tract
boundary line with lands of E.A. Mathews, a distance of 59.69 feet to a
point in the waters of the Indian River; thence
6. North 57(degree)32'13" East continuing along the same line a distance of
250.00 feet to a point in the Jensen Beach bulkhead line; thence
7. South 46(degree) 38'22" East along the Jensen Beach bulkhead line, a
distance of 348.25 feet and continuing the following courses along said
bulkhead line; thence
8. South 33(degree) 55'00" East, a distance of 272.08 feet to a point;
thence
9. South 27(degree 50'00" East, a distance of 334.00 feet to a point; thence
10. South 15(degree) 17'00" East, a distance of 275.00 feet to a point;
thence
11. South 09(degree) 43'17" East, a distance of 493.91 feet to a point;
thence
12. South 02(degree) 50'18" East, a distance of 345.63 +/- feet to a point;
thence
13. South 02(degree) 50'18" East, a distance of 109.37 feet to a point;
thence
14. South 17(degree) 34'52" East, a distance of 264.97 feet to a point;
thence
15. South 17(degree) 34'52" East, a distance of 135.21 feet to a point of
intersection with the Northerly line extended of Lot 2 of the Florida
Institute of Technology Minor Subdivision #1 and a dividing line between
this parcel and the lands of the L & E Corporation; thence
16. North 98(degree) 56'15" West over the waters of the Indian River and to
the upland a distance of 314.09 feet to a concrete monument in said
northerly line of Lot 2 of the Florida Institute of Technology Minor
Subdivision #2; thence
17. North 98(degree) 56'15" West continuing along the same Northerly line of
said Lot 2, a distance of 329.87 feet to a point in the Easterly
right-of-way of Sewall's Point Road marked by a concrete monument; thence
18. South 31(degree) 43'31" East along the Easterly right-of-way of Sewall's
Point Road being the Westerly boundary of said Lot 2, a distance of 46.50
feet to a point marked by a monument; thence
19. South 21(degree) 10'41" East continuing along said Easterly right-of-way
of Sewall's Point Road, a distance of 281.81 feet to a permanent
reference monument #5 where the Easterly line of Sewall's Point Road
intersects the centerline of Palmer Road, said centerline being also the
Southerly line of the Northerly one-half of Government Lot 4; thence
20. North 88(degree) 56'15" West along said Southerly line of the Northerly
one-half of Government Lot 4, also being the centerline of Palmer Road, a
distance of 1277.20 feet to the point and place of beginning.
21. Subject to existing easements, restrictions, reservations, and
encumbrances.
EXHIBIT A
<PAGE>
EXHIBIT "B"
[DIAGRAM OF PLOT]
<PAGE>
FIRST AMENDMENT TO LEASE
This Agreement is made and entered into effective as of the 1st day of
October, 1995, by and between FLORIDA INSTITUTE OF TECHNOLOGY, INC., a
Florida not-for-profit corporation ("Lessor"), and MARTIN COUNTY, a political
subdivision of the State of Florida ("Lessee").
W I T N E S S E T H:
WHEREAS, effective as of the 1st day of October, 1992, Lessor and Lessee
entered into a Lease (the "Lease") allowing Lessee to use the property
described therein for recreational fields for organized sports teams;
WHEREAS, the Lease had a term not to exceed three (3) years from the
effective date thereof; and
WHEREAS, Lessor and Lessee desire to extend the term of the Lease for an
additional three (3) years and to otherwise modify and amend the Lease as set
forth herein.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) in hand paid,
other good and valuable consideration and the mutual covenants and promises
of the parties hereto, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Paragraph 4 of the Lease is hereby deleted, and the following is
substituted in lieu thereof:
The term of this Lease shall commence on October 1, 1995, and shall
continue for a term of one (1) year, unless sooner terminated or extended
as herein set forth. At the expiration of the initial term, the term of
this Lease shall automatically be renewed and extended for an additional
one (1) year period, unless sooner terminated as provided herein. At the
expiration of the first extended term, the term of this Lease shall
automatically be renewed and extended for an additional one (1) year
period; provided, however, that the term, as extended, shall not exceed a
total period of three (3) years from the effective date hereof. It is
further provided that either Lessor or Lessee may elect to terminate this
Lease by giving to the other party notice of such termination in writing
not less than thirty (30) days prior to the requested date of termination,
in which event this Lease shall terminate on the said date.
<PAGE>
2. Except as herein specifically modified and amended, the Lease shall
remain in full force and effect.
IN WITNESS WHEREOF, the authorized officers of the parties hereto have
executed this Agreement as of the date first above written.
WITNESSES: LESSOR:
FLORIDA INSTITUTE OF TECHNOLOGY,
INC.
/s/ By: /s/
Robert C. Bowie, Vice President
/s/
[Corporate Seal]
LESSEE:
BOARD OF COUNTY COMMISSIONERS
ATTEST: MARTIN COUNTY, FLORIDA
/s/ By: /s/
MARSHA STILLER, CLERK Janet Gettig, Chairperson
APPROVED AS TO FORM AND
CORRECTNESS:
/s/
Gary K. Oldehoff, Asst.
County Attorney
STATE OF FLORIDA
COUNTY OF MARTIN
The foregoing instrument was acknowledged before me this 5th day of
December, 1995, by ROBERT C. BOWIE, as Vice President of FLORIDA INSTITUTE OF
TECHNOLOGY, INC., a Florida corporation, on behalf of the corporation. Said
person did not take an oath and (check one) [X] is personally known to me, [
] produced a driver's license (issued by a state of the United States within
the last five (5) years) as identification, or [ ] produced other
identification, to wit: .
[NOTARY SEAL]
/s/
Print Name:
Notary Public, State of Florida
Commission No.:
My Commission Expires:
<PAGE>
Exhibit 5(a)(i)
Buyer's Release For Access
See Attached
<PAGE>
INDEMNIFICATION AND RELEASE
In consideration for the permission being granted by FLORIDA INSTITUTE OF
TECHNOLOGY, INC. ("FIT") allowing the undersigned to enter upon the property
and buildings owned by FIT, and located in Jensen Beach, Florida (the
"Property") for the purpose of conducting inspections or investigations, the
undersigned do/does hereby acknowledge and agree to the following:
1. The undersigned enter upon the Property at their own risk.
2. The undersigned shall only enter upon the Property following
authorization from James C. Morgan, at Fenton & Lang of Stuart, Inc. ("Fenton
& Lang"), for FIT.
3. The undersigned hereby release(s) FIT, Fenton & Lang, their agents,
employees, officers, principals, trustees, licensees, invitees and
contractors from any injury to the undersigned or damage to the property of,
or used by, the undersigned arising out of or resulting from entry by the
undersigned, its agents, employees, licensees, invitees or contractors upon
the Property or the buildings located thereon, even if such injury or damage
shall result, in whole or in part, from the negligence of FIT, Fenton & Lang,
their agents, employees, officers, principals, trustees, licensees or
contractors.
4. The undersigned, jointly and severally, if more than one, agree to
indemnify and hold harmless FIT, Fenton & Lang, their agents, employees,
officers, principals, trustees, licensees, invitees and contractors, from any
and all manner of actions, suits, debts, controversies, trespasses, damages,
judgments, executions, claims, costs, losses, demands, expenses and any and
all liabilities (including legal fees at and before the trial level and
during any appellate and bankruptcy proceedings and expenses and amounts paid
in settlement) suffered or incurred by FIT, Fenton & Lang, their agents,
employees, officers, principals, trustees, licensees, invitees and/or
contractors, arising out of, connected with or in any way relating to entry
upon the Property by any of the undersigned, even if such actions, suits,
debts, controversies, trespasses, damages, judgments, executions, claims,
costs, losses, demands, expenses and any and all liabilities shall result, in
whole or in part, from the negligence of FIT, Fenton & Lang, their agents,
employees, officers, principals, trustees, licensees, invitees or
contractors.
5. The rights granted herein to the undersigned are not assignable.
6. In the event that any of the foregoing covenants, agreements, terms or
provisions shall be invalid, illegal or unenforceable in any respect, the
validity of the remaining covenants, agreements, terms or provisions
contained herein shall be in no way affected, prejudiced or disturbed
thereby.
7. This Indemnification and Release may be executed and a copy of such
signature received through telefax transmission shall bind the party whose
signature is so received as if such signature were an original.
IN WITNESS WHEREOF, the undersigned have executed this instrument
effective as of this day of , 1996.
<TABLE>
<CAPTION>
<S> <C>
Print Name: Print Name:
Print Name: Print Name:
</TABLE>
<PAGE>
JOINDER
In consideration for FIT allowing the employees or agents ("Consultants")
of Continuum Care of Massachusetts, Inc., or its affiliates or related
entities or persons, to enter upon the Property, Continuum Care of
Massachusetts, Inc., on behalf of its affiliated or related entities or
persons, their agents and employees, hereby:
1. Releases FIT, Fenton & Lang, their agents, employees, officers,
principals, trustees, licensees, invitees and contractors from any injury to
the undersigned or damage to the Property of the undersigned used by the
Consultants arising out of or resulting from entry by the Consultants upon
the Properety or the buildings located thereon, even if such injury or damage
shall result, in whole or in part, from the negligence of FIT, Fenton & Long,
their agencies, employees, officers, principals, trustees, licensees,
invitees or contractors.
2. Agrees to indemnify and hold harmless FIT, Fenton & Lang, their agents,
employees, officers, principals, trustees, licensees, invitees and
contractors from any and all manner of actions suits, debts, controversies,
trespasses, damages, judgments, executions, claims, costs, losses, demands,
expenses and any and all liabilities (including legal fees at and before the
trial level and during any appellate and bankruptcy proceedings and expenses
and amounts paid in settlement) suffered or incurred by FIT, Fenton & Lang,
their agents, employees, officers, principals, trustees, licensees, invitees
and contractors, arising out of, connected with or in any way relating to
entry upon the Property or the buildings located thereon, by the Consultants,
even if such actions, suits, debts, controversies, trespasses, damages,
judgments, executions, claims, costs, losses, demands, expenses and any and
all liabilities shall result, in whole or in part, from the negligence of
FIT, Fenton & Lang, their agents, employees, officers, principals, trustees,
licensees, invitees or contractors.
3. Accepts full responsibility for anyone in its employ or control, or
anyone who purports to be an employee or agent of the undersigned, and who
enters upon the Property without executing the foregoing Indemnification and
Release and/or without prior authorization.
4. This Indemnification and Release may be executed and a copy of such
signature received through telefax transmission shall bind the party whose
signature is so received as if such signature were an original.
IN WITNESS WHEREOF, the authorized officer has executed this instrument
effective as of the day of , 1996.
CONTINUUM CARE OF MASSACHUSETTS, INC.
By:
Its:
(Corporate Seal)
-2-
<PAGE>
Exhibit 5(b)(iv)
Permitted Exceptions and Required Endorsements
1. Taxes for the year 1996 and thereafter.
2. Road right-of-way from Sisters of St. Joseph to Martin County, Florida
dated June 17, 1964 and recorded in Official Record Book 167, Page 121,
Public Records of Martin County, Florida, over a strip 35-feet wide, lying
west of the centerline of Sewall's Point Road.
3. Oil, Gas and Mineral Reservations in favor of Trustees of the Internal
Improvement Fund as contained in Deed No. 22345 (514-43), dated December
18, 1959 and recorded December 24, 1959 in Official Records Book 38, Page
141, Public Records of Martin County, Florida. The right of entry for
mining and exploration in said reservations has been released by Section
270.11, F.S.
4. Easement in favor of Florida Power and Light Company contained in
instrument dated August 5, 1957, recorded August 12, 1957 in Deed Book 94,
page 497, as clarified in Official Record Book 158, page 182, Public
Records of Martin County, Florida.
5. Easement in favor of Florida Power and Light Company contained in
instrument dated June 11, 1962, recorded June 21, 1962 in Official Record
Book 158, page 184, Public Records of Martin County, Florida.
6. Subject to the right-of-way of N.E. Indian River Drive, a/k/a Sewall's
Point Road.
7. Subject to the right-of-way of N.E. Palmer Road.
8. Those portions of the property herein described comprising artificially
filled land in what was formerly navigable water are subject to any and
all rights of the United States government arising by reason of the United
States government's control over navigable waters in the interest of
navigation and commerce. This exception applies to those lands described
in Official Records Book 38, Page 141, Public Records of Martin County,
Florida, and those lands east thereof.
NOTE: No endorsements will be required.
29
<PAGE>
Exhibit 5(b)(x)
Schedule of Zoning Agreements/Ordinances to be Discharged
1. Planned Unit Development Zoning Agreement between Outrigger Resort
Corporation and Board of County Commissioners of Martin County, as
recorded in Official Record Book 852, Page 2328, as re-recorded in
Official Record Book 861, Page 1889, and Official Record Book 852, Page
2353, as re-recorded in Official Record Book 861, Page 1914, Public
Records of Martin County, Florida.
30
<PAGE>
Exhibit 6(a)(iii)
Schedule of Encumbrances to be Discharged
1. Mortgage and Security Agreement in favor of Sun Bank, National
Association, from Florida Institute of Technology, Inc., recorded in
Official Record Book 712, Page 1877, as modified in Official Record Book
758, Page 1975, and Official Record Book 772, Page 187, and Official
Record Book 803, Page 2003, and Official Record Book 822, Page 2221, and
Official Record Book 842, Page 1456, and Official Record Book 867, Page
172, and Official Record Book 916, Page 978, and as assigned to First
Union National Bank of Florida in Official Record Book 969, Page 2075, and
as modified by Official Record Book 969, Page 2078, and Official Record
Book 1146, Page 2033, Public Records of Martin County, Florida
2. Assignment of Rents, Leases, Profits and Contracts in favor of Sun Bank,
National Association, from Florida Institute of Technology, Inc., recorded
in Official Record Book 712, Page 1885, and as assigned in Official Record
Book 969, Page 2076, and as modified by Official Record Book 969, Page
2078, and Official Record Book 1146, Page 2033, Public Records of Martin
County, Florida.
3. UCC-1 Financing Statements recorded in Official Record Book 712, Page
1891, and Official Record Book 961, Page 1079, and as assigned in Official
Record Book 969, Page 2077, and as modified by Official Record Book 969,
Page 2078, and Official Record Book 1146, Page 2033, Public Records of
Martin County, Florida.
31
EXHIBIT 10.141
ASSIGNMENT AND AGREEMENT
(Darien, Connecticut)
THIS AGREEMENT made this 3rd day of July, 1996, by and between CareMatrix of
Stony Brook, Inc., a Delaware corporation ("Stony Brook"), and CareMatrix of
Massachusetts, Inc., a Delaware corporation ("CareMatrix").
WITNESSETH
WHEREAS, Stony Brook is a member of Stony Brook Court, LLC (the "Joint
Venture"), pursuant to the Stony Brook Court, LLC Operating Agreement (the
"Operating Agreement"), dated May 21, 1996, relating to a certain parcel of land
located in Darien, Connecticut (the "Land"), a copy of which is attached hereto
as Exhibit A;
WHEREAS, the Joint Venture intends to develop the Land for an
assisted/independent living facility consisting of approximately eighty-six (86)
units (the "Project");
WHEREAS, Stony Brook desires to assign its rights and obligations relating to
the co-development and management of the Project to CareMatrix, which rights
have been orally agreed to by the members of the Joint Venture, and CareMatrix
desires to assume such rights and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Stony Brook hereby assigns, sets over and transfers unto CareMatrix to
have and to hold from and after the date hereof, all of Stony Brook's
rights with respect to the co-development and management of the Project,
and CareMatrix hereby accepts the within assignment and assumes and agrees
with Stony Brook, to perform and comply with and to be bound by all of the
obligations of Stony Brook with respect to such co-development and
management of the Project.
2. This Agreement (i) shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, (ii) shall be
governed by the laws of the Commonwealth of Massachusetts, and (iii) may
not be modified orally, but only by a writing signed by both parties
hereto.
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date and year first above written.
CAREMATRIX OF STONY BROOK, INC.
By: /s/
Name:
Title:
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/
Name:
Title:
<PAGE>
ARTICLES OF ORGANIZATION
OF
STONY BROOK COURT, LLC
These Articles of Organization are executed and filed by the undersigned
organizer of Stony Brook Court, LLC for the purpose of forming a limited
liability company under the Connecticut Limited Liability Company Act, as
follows:
FIRST. Name. The name of the limited liability company is Stony Brook
Court, LLC (the "Company").
SECOND. Business. The nature of the business to be transacted by the
Company and the purpose for which the company is organized is to engage in
any lawful act or activity for which limited liability companies may be
formed under the Connecticut Limited Liability Company Act (the "Act").
THIRD. Office. The principal office address of the Company is 197 First
Avenue, Needham, Massachusetts 02194- 2812.
FOURTH. Statutory Agent. The name and address of the statutory agent is
Frank J. Saccomandi, III, Esquire, having a business address at Murtha,
Cullina, Richter and Pinney, CityPlace I, 185 Asylum Street, Hartford,
Connecticut 06103, and a residence address at 92 Heritage Drive, Glastonbury,
Connecticut 06033.
FIFTH. Management. The management of the Company shall be vested in one
or more managers.
SIXTH. Duration. The latest date upon which the Company is to dissolve is
December 31, 2046.
IN WITNESS WHEREOF, the undersigned organizer has executed these Articles of
Organization at Hartford, Connecticut, this 21st day of May, 1996.
Barbara A. Sarrantonio, Organizer /s/ Barbara A. Sarrantonio
Type Name and Capacity of Signatory Signature
Acceptance of Appointed Statutory Agent
Frank J. Saccomandi, III /s/ Frank J. Saccomandi, III
Print Name Signature
<PAGE>
Exhibit A
THE INTERESTS IN STONY BROOK COURT, LLC HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE SECURITIES ACT OF ANY STATE AND MAY NOT
BE RESOLD UNLESS SUBSEQUENTLY REGISTERED UNDER SUCH ACTS OR UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. ADDITIONAL RESTRICTIONS ON TRANSFERABILITY
ARE CONTAINED IN THIS OPERATING AGREEMENT.
STONY BROOK COURT, LLC
OPERATING AGREEMENT
THIS OPERATING AGREEMENT made as of the Twenty-First (21st) day of May, 1996,
by and between CAREMATRIX OF STONY BROOK, INC., a Delaware corporation having an
office at 197 First Avenue, Needham, Massachusetts 02194-2812 and THE BENENSON
MARCH 1985 TRUST, a trust created under the laws of the State of
pursuant to a certain trust agreement dated , having
an office at 28th Floor, 708 3rd Avenue, New York, New York 10017 (hereinafter
called the "Members").
ARTICLE I
GENERAL PROVISIONS
1.01 Formation; Articles. The Members hereby form a limited liability company
pursuant to the Act. The Members shall from time to time execute or cause to be
executed all such articles or other documents or cause to be done all such
filing, recording, publishing, or other acts as may be necessary or appropriate
to comply with the requirements for the formation and the operation of a limited
liability company under the laws of the State of Connecticut and all other
jurisdictions in which the Company may conduct business.
1.02 Name. The name of the Company is Stony Brook Court, LLC.
1.03 Office. The office of the Company at which the Company shall keep
records shall be located at 197 First Avenue, Needham, Massachusetts 02194-2812
or at such other place or places within or without the State of Connecticut as
the Manager shall designate from time to time by written notice to the Members.
1.04 Agent for Service of Process. The statutory agent for service of process
on the Company shall be the person designated as such in the Articles, as filed
with the Office of the Secretary of State. The Manager from time to time may
designate
<PAGE>
a different statutory agent for service of process through appropriate filings
with the Secretary of State.
1.05 Purpose of the Company. The purposes of the Company shall be to engage
in any lawful act or activity for which limited liability companies may be
formed under the Act.
1.06 Transactions of Member with Company. A Member may lend money to and
otherwise deal with the Company and shall have the same rights and obligations
with respect thereto as a person who is not a Member, subject to applicable law
and the provisions of this Agreement.
1.07 Term of the Company. The term of the Company shall commence upon the
filing of the Articles of Organization of the Company and shall continue until
December 31, 2046, unless sooner terminated as provided in Article VII of this
Agreement.
1.08 Title to Company Property. All assets owned by the Company, whether real
or personal, tangible or intangible, shall be deemed to be owned by the Company
as an entity, and no Member shall have any ownership of such assets
individually.
1.09 Definitions. As used in this Agreement, unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Act" means the Connecticut Limited Liability Company Act.
"Affiliate" means any Person (i) which directly or indirectly controls, or
is controlled by, or is under common control with the Person in question; (ii)
which directly or indirectly beneficially owns or holds five percent (5%) or
more of any class of voting stock of the Person in question; or (iii) five
percent (5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Person in question. The term "control" means
the possession, directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Operating Agreement inclusive of all Schedules or
other attachments or amendments hereto.
"Allocation Percentage" of a Member means the percentage set forth opposite
the Member's name on Schedule A to this Agreement.
"Articles" means the Articles of Organization that are filed by the Company
with the office of the Secretary of the State of Connecticut, as amended from
time to time, including any exhibits, schedules or amendments thereto.
-2-
<PAGE>
"Assignment" means any sale, transfer, gift, assignment, pledge or grant of
a security interest, by operation of law or otherwise, in or of a Membership
Interest.
"Capital Contribution" means the amount of cash that a Member contributes
to the Company in his capacity as a Member.
"Cash Flow" means the gross cash receipts of the Company of any kind or
description during any applicable computation period, less:
(i) all operating or other expenses of the Company paid in cash during
the period, but not including expenses paid in cash to the extent that such
expenses were reserved against and funded from such reserves;
(ii) all cash payments made with respect to the discharge of Company
indebtedness during the period, but not including any such payments to the
extent that the amounts thereof were reserved against and funded from such
reserves; and
(iii) all amounts of reserved cash as shall be determined by the Manager
to be necessary and advisable for (a) the payment of Company expenses coming
due at some future time, (b) the repayment of any Company indebtedness coming
due at some future time, (c) reasonable increases in working capital, and (d)
reasonable contingency reserves.
"Company" means Stony Brook Court, LLC.
"Distributions" means distributions of cash or other property made by the
Company to the Members from any source.
"Event of Dissociation" means an event that causes a person to cease to be
a Member as provided in the Act.
"Majority in Interest" means one or more Members (i) whose Allocation
Percentage(s) exceed fifty percent (50%) of the combined Allocation Percentage
of all Members whose Membership Interests are to be taken into account, and (ii)
whose Capital Account(s) (as defined in Section 2.05) represent more than fifty
percent (50%) of the combined value of the Capital Accounts of all Members whose
Membership Interests are to be taken into account.
"Manager" shall mean CareMatrix Corporation, a Delaware corporation having
an office at 197 First Avenue, Needham, Massachusetts 02194-2812, and any
additional or successor Manager. In the event that there shall be more than one
Manager, all references to "Manager" shall be deemed to be references to
"Managers."
-3-
<PAGE>
"Members" shall mean CareMatrix of Stony Brook, Inc. and The Benenson March
1995 Trust, and any other person who or which may be admitted as a member in
accordance with this Agreement and the Act, and who has not disassociated from
the Company.
"Membership Interest" means a Member's share of the Profits and Losses of
the Company and the right to receive Distributions.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Profits and Losses" means, for each fiscal year or other period, an amount
equal to the Company's income or loss for such year or period, determined in
accordance with the Company's applicable method of accounting.
"Qualified Transferee" shall have the meaning provided in Section 5.02
hereof.
"Schedule A" means the Schedule of Contributions and Allocation Percentages
attached to this Agreement.
"Secretary of State" means the Secretary of State of the State of
Connecticut.
"Stabilization of Occupancy" shall mean that date upon which the project of
the Company to be constructed on property located at 50 Ledge Road, Darien,
Connecticut shall have first experienced ninety (90) consecutive days of at
least ninety percent (90%) occupancy.
"Subsidiary" means, as to any Person, a corporation of which shares of
stock having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned or
controlled, or the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such Person.
ARTICLE II
CONTRIBUTIONS AND ALLOCATIONS
2.01 Mandatory Capital Contributions. Simultaneous with the execution and
delivery of this Agreement, each of the Members shall make a capital
contribution in the amount of Five Hundred
-4-
<PAGE>
Dollars ($500). The amount of a Member's mandatory capital contributions and any
voluntary additional capital contributions pursuant to Section 2.02 shall be set
forth opposite the Member's name on Schedule A hereto.
2.02 Voluntary Additional Capital Contributions. In the event that the
Manager determines that the Company requires additional capital and that the
Company is not able to borrow such capital based on its own credit, the Manager
shall submit to the Members a plan for raising additional capital from the
Members. If such plan is approved by a Majority in Interest of the Members, the
Company shall request that each Member make an additional capital contribution
to the Company in proportion to the Members' respective Allocation Percentages.
No Member shall be obligated to make any additional contribution to the
Company's capital; provided, however, that if any Member fails to make an
additional capital contribution then the Allocation Percentages of the Members
shall be adjusted in a manner set forth in the plan approved by the Majority in
Interest of the Members. It is specifically understood that there may be
multiple requests for voluntary additional capital contributions from the
Members pursuant to this Section 2.02.
2.03 No Third Party Rights. The right of the Company or the Members to
require any additional contributions under the terms of this Agreement shall not
be construed as conferring any rights or benefits to or upon any party not a
party to this Agreement, including, but not limited to, the holder of any
obligations secured by a mortgage, deed of trust, security interest or other
liens or encumbrances upon or affecting the Company or any interest of a Member
therein.
2.04 Withdrawal; Interest. No Member shall have the right to withdraw any
part of the Member's Capital Contribution. Except as otherwise specifically set
forth in this Agreement, no Member, as such, shall have the right to receive any
cash or other property of the Company. No interest shall be paid by the Company
to any Member with respect to his Capital Contribution.
2.05 Capital Accounts.
(a) The Company shall maintain a separate Capital Account for each Member
in accordance with the provisions of this Section 2.05. Each Member's Capital
Account shall be determined and adjusted as follows: (i) each Member's Capital
Account shall be increased by (A) such Member's Capital Contribution, and (B)
such Member's distributive share of Profits; and (ii) such Member's Capital
Account shall be decreased by (A) distributions to such Member pursuant to this
Agreement, and (B) such Member's distributive share of Losses.
-5-
<PAGE>
(b) In the event that any interest in the Company is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent such Capital Account relates to
the transferred interest.
2.06 Allocations. For all purposes including, without limitation, federal,
state and local income tax purposes, all Profits and Losses and any tax credits
for any period shall be allocated to the Members in accordance with their
Allocation Percentages in effect for that period as set forth on Schedule A
hereto. Each of the initial Members shall have an Allocation Percentage of fifty
percent (50%) prior to the admission of any new Members. Thereafter, Allocation
Percentages may change as a result of voluntary additional capital contributions
pursuant to Section 2.02 or the admission of other new Members pursuant to
Section 5.01. The Company is authorized to amend Schedule A hereto from time to
time to reflect any changes in Allocation Percentages that result from
additional voluntary capital contributions or the admission of new Members.
ARTICLE III
DISTRIBUTIONS
3.01 Cash Flow Distributions. Cash Flow shall be computed with respect to
each fiscal quarter and distributed within thirty (30) days after the end of
each such fiscal quarter. Cash Flow may be computed and distributed more
frequently in the discretion of the Manager. Cash Flow for any period shall be
distributed in cash in accordance with the manner in which Profits for the
identical period were allocated.
3.02 Dissolution. Upon dissolution and winding up of the Company, the assets
of the Company shall be distributed to the Members as provided in Section 7.03.
3.03 No Priority; Property Other Than Cash. No Member shall have priority
over any other Member either as to the return of its Capital Contribution or as
to Distributions. No Member shall have the right to demand or receive property
other than cash in return of its Capital Contribution or as to other
Distributions.
3.04 Return of Distributions. The obligation of a Member to return cash or
other property paid or distributed to a Member in violation of this Agreement or
of applicable law may be compromised by the Manager without the consent of the
Members.
-6-
<PAGE>
ARTICLE IV
MANAGEMENT
4.01 General Powers and Authority.
(a) The management of the business, property and affairs of the Company
shall be vested in the Manager. Except as otherwise provided in this Agreement,
the affirmative vote of a majority of the Managers (and of the sole Manager if
there is only one Manager) shall be sufficient to decide any matter connected
with the business, property and affairs of the Company.
(b) Without limiting the generality of subsection (a) above, the Manager
shall have power and authority, on behalf of the Company:
(i) To purchase liability and other insurance to protect the Company's
property and business;
(ii) To hold and own any Company real and/or personal properties in
the name of the Company;
(iii) To invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short- term governmental obligations,
commercial paper, or other investments;
(iv) To employ accountants, legal counsel, managing agents, or other
experts to perform services for the Company and to compensate them from
Company funds;
(v) To enter into any and all other agreements on behalf of the Company
with any other person for any purpose relating to the business of the
Company; and
(vi) To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business;
(c) Notwithstanding the foregoing, no Manager or Member(s) of the Company,
attorney-in-fact, employee, or other agent of the Company shall have any power
or authority to make any investment or to enter into any contract which may
cause personal liability to be incurred by any Member.
4.02 Limitations on Authority of Manager. Notwithstanding the provisions of
Section 4.01 hereof, the Manager shall not have the power or authority to cause
the Company to engage in any of the following transactions without the approval
of a Majority in Interest of the Members:
-7-
<PAGE>
(a) acquisition of real property or any interest therein;
(b) borrowing money for the Company;
(c) hypothecating, encumbering or otherwise granting a security interest
in the assets of the Company; or
(d) selling or otherwise disposing of all or substantially all of the
assets of the Company.
The fact that the Manager or any Member is directly or indirectly affiliated or
connected with any Person which may be involved in any of the foregoing
transactions shall not prohibit the Company from dealing with such Person.
4.03 Time and Effort; Independent Ventures. The Manager shall devote such
time and effort to the Company business as may be necessary to promote
adequately the interests of the Company and the mutual interests of the Members.
The Manager shall not be required to devote full time to the Company business,
and may engage in and possess interests in other business ventures of any nature
and description. Neither the Company nor any other Member shall have any rights
in or to such independent ventures, or the income or profit derived therefrom by
virtue of this Agreement.
4.04 Liability; Indemnification.
(a) The Manager shall not be liable to the Company or the Members for any
loss or damage incurred by the Company by reason of any act or omission
performed or omitted by the Manager in good faith on behalf of the Company and
in a manner reasonably believed by the Manager to be within the scope of the
authority granted to the Manager by this Agreement or in the best interest of
the Company, unless fraud, willful misconduct or gross negligence can be
established by the Company or the Members.
(b) The Company shall indemnify and hold harmless the Manager from and
against any claim, loss, expense, liability, action or damage incurred by the
Manager by reason of any act or omission performed or omitted by the Manager
within the scope of the Manager's authority as a Manager, including, without
limitation, reasonable fees and expenses of attorneys engaged by the Manager and
such other reasonable costs and expenses of litigation and appeal in defense of
such act or omission; but, specifically excluding fraud, willful misconduct,
gross negligence or failure to comply with any representation, warranty,
covenant, condition or other agreement of the Manager contained in this
Agreement, each of which excluded items shall not be deemed to be within the
scope of the Manager's authority hereunder. Any indemnification, or other
payments to a Manager under this
-8-
<PAGE>
paragraph, shall be paid from the assets of the Company, and no Member shall
have any personal liability therefor.
(c) The Manager shall indemnify and save harmless the Company and its
Members from and against any claim, loss, expense, liability, action or damage
including, without limitation, reasonable costs and expenses of litigation and
appeal (including, without limitation, reasonable fees and expenses of attorneys
engaged by the Members and the Company) by reason of said Manager's fraud,
willful misconduct, gross negligence, or failure to comply in any material
respect with any representation, warranty, covenant, condition or other
agreement of said Manager contained in this Agreement.
4.05 Election of Additional or Successor Manager. Additional or successor
Managers may be elected only with the specific written consent of a Majority
in Interest of the Members.
4.06 Resignation. The Manager of the Company may resign at any time by giving
written notice to the Members of the Company. The resignation of the Manager
shall take effect upon receipt of that notice or at such later time as shall be
specified in the notice; and, unless otherwise specified in the notice, the
acceptance of the resignation shall not be necessary to make it effective. The
resignation of the Manager who is also a Member shall not affect the Manager's
rights as a Member and shall not constitute an event of dissociation.
4.07 Removal. At a meeting called expressly for that purpose, all or any
lesser number of Managers may be removed at any time, with or without cause, by
the affirmative vote of a Majority in Interest of the Members. The removal of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute an event of dissociation.
4.08 Vacancies. Any vacancy occurring for any reason in the number of
Managers of the Company may be filled by the affirmative vote of a Majority in
Interest of the Members.
4.09 Manager May Be Member. The Manager may participate in the Company as a
Member. A person who is both the Manager and a Member shall have all the rights
and powers and be subject to all the restrictions and liabilities of the Manager
under this Agreement and the Act, and shall also have the powers, and shall be
subject to the restrictions, of a Member to the extent of such Manager's
participation in the Company as a Member.
4.10 Compensation. The compensation of the Manager shall be established by
the affirmative vote of a Majority in Interest of the Members.
-9-
<PAGE>
4.11 Voting Rights. All Members, except for any Members with respect to which
there shall have occurred an Event of Dissociation, shall be entitled to vote on
any matter submitted to a vote of the Members.
4.12 Required Voting Percentage. Whenever any matter is required under the
Act or permitted under this Agreement to be approved or consented to by the
Members of the Company, such matter shall be considered approved or consented to
upon the receipt of the affirmative approval or consent, either in writing or at
a meeting of the Members, of Members having a Majority in Interest of the
Company.
4.13 Liability of Members. No Member shall be liable as such for the
liabilities of the Company. The failure of the Company to observe any
formalities or requirements relating to the exercise of its powers or the
management of its business or affairs under this Agreement or the Act shall not
be grounds for imposing personal liability of the Members for any liabilities of
the Company.
4.14 Representations and Warranties. Each Member, and in the case of an
entity, the person(s) executing this Agreement on behalf of the entity hereby
represents and warrants to the Company and each other Member that: (a) if that
Member is an entity, that it is duly organized, validly existing and in good
standing under the laws of the state which governs its creation and that it has
full power and authority to execute this Agreement and perform its obligations
hereunder; and (b) that the Member is acquiring its interest in the Company for
the Member's own account as an investment and without an intent to distribute
the interest. In addition, each Member acknowledges that the interests have not
been registered under the Securities Act of 1933 or any state securities laws,
and may not be resold or transferred by the Member without appropriate
registration or the availability of an exemption from such requirements.
4.15 Conflicts of Interest. A Member shall be entitled to enter into
transactions that may be considered to be competitive with, or a business
opportunity that may be beneficial to, the Company, it being expressly
understood that the Members may enter into transactions that are similar to the
transactions into which the Company may enter. A Member, including any Member
who is also a Manager, does not violate a duty or obligation to the Company
merely because the Member's conduct furthers the Member's own interest. A Member
may lend money to and transact other business with the Company. The rights and
obligations of a Member who lends money to or transacts business with the
Company are the same as those of a person who is not a Member, subject to other
applicable law. Notwithstanding the foregoing, every Member shall account to the
Company and hold as trustee for it any property or benefit derived by that
person without the
-10-
<PAGE>
consent of more than one-half by number of the disinterested Managers or a
Majority in Interest of the disinterested Members from (a) any transaction
connected with the conduct or winding up of the Company or (b) any use or
appropriation by the Member of Company property, including confidential or
proprietary information of the Company or other matters entrusted to the Member
as a result of his status as a Member.
ARTICLE V
ADMISSION OF NEW MEMBERS,
ASSIGNMENT OF MEMBERSHIP INTERESTS
5.01 Additional Members. Except as provided below, the Company may admit new
Members only with the express written consent of all of the then Members. The
Company is authorized to amend Schedule A hereto from time to time to reflect
the admission of additional or substitute Members.
5.02 Restrictions on Assignment.
(a) No Member shall make or effect an Assignment of all, or any part of, a
Membership Interest, except to another Member or to a Qualified Transferee,
without first offering to sell such Interest to the Company at a price and on
terms set forth in Section 5.04 below. The Company shall have the right for a
period of forty-five (45) days after receipt of such offer to elect to purchase
all of such Interest. If the Company does not timely elect to purchase the
Membership Interest, the selling Member may effect the Assignment, subject to
the provisions of Section 5.03. If the selling Member does not effect the
Assignment within ninety (90) days after the right of the Company to purchase
the Membership Interest has expired, the selling Member shall be required to
make a new offer to the Company and the provisions of this Section 5.02(a) shall
apply again if the Member wishes to assign the Membership Interest.
(b) For purposes of this Section 5.02, in the case of CareMatrix of Stony
Brook, Inc. "Qualified Transferee" means any of the following Persons: (i)
CareMatrix Corporation; (ii) any Affiliate of CareMatrix of Stony Brook, Inc. or
any Affiliate of a Subsidiary of CareMatrix of Stony Brook, Inc.; (iii) any
Affiliate of CareMatrix Corporation or any Affiliate of a Subsidiary of
CareMatrix Corporation; (iv) Abraham D. Gosman; (v) any spouse, descendant or
spouse of a descendant of Abraham D. Gosman; (vi) trusts of which substantially
all of the beneficiaries are any of the Persons set forth in clauses (iv) or (v)
above; (vii) trustees of any of the trusts described in clause (vi) above;
(viii) estates of any of the Persons set forth in clauses (iv) or (v) above and
estates of which substantially all of the beneficiaries are any of the Persons
set forth in
-11-
<PAGE>
clauses (iv) or (v) above; (ix) any partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, or other
entity which is legally entitled to own an interest in a limited liability
company and which is owned or controlled; or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by any of the Persons set forth in clauses (i) through (viii) above;
and (x) any combination of the Persons described in clauses (i) through (ix)
above.
(c) For purposes of this Section 5.02, in the case of The Benenson March 1985
Trust "Qualified Transferee" means any of the following Persons: (i) any
Affiliate of the Benenson March 1985 Trust; (ii) Charles Benenson; (iii) any
spouse, descendant or spouse of a descendant of Charles Benenson; (iv) trusts of
which substantially all of the beneficiaries are any of the Persons set forth in
clauses (ii) or (iii) above; (v) trustees of any of the trusts described in
clause (iv) above; (vi) estates of any of the Persons set forth in clauses (ii)
or (iii) above and any estates of which substantially all of the beneficiaries
are any of the Persons set forth in clauses (ii) or (iii) above; (vii) any
partnership, corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, or other entity which is legally
entitled to own an interest in a limited liability company and which is owned or
controlled, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by any of the Persons
set forth in clauses (i) through (vi) above; and (viii) any combination of the
Persons described in clauses (i) through (vii) above.
(d) Each Member agrees not to withdraw voluntarily from the Company without
the express written consent of all of the other Members. Any Member who suffers
an Event of Dissociation, including a voluntary withdrawal in contravention of
this Section 5.02(d), shall be liable to the other Members for money damages.
5.03 Manner of Assignment.
(a) No assignment shall be effective unless all of the following conditions
shall have been satisfied or waived by the Members:
(i) the assignee shall have furnished to the Manager an executed and
delivered Assignment of the assignor's Membership Interest in form and substance
satisfactory to the Manager;
(ii) the assignee shall have executed and delivered to the Manager an
undertaking of the assignee to be bound by all the terms and provisions of this
Agreement,
-12-
<PAGE>
in form and substance satisfactory to the Manager, and such other
instruments as may be required by law;
(iii) the Assignment shall not result in the termination of the
Company for federal income tax purposes;
(iv) the Assignment shall comply with applicable federal and state
securities laws;
(v) the assignee shall have paid to the Company the amount determined by
the Manager to be equal to the costs and expenses incurred in connection with
such Assignment, including, without limitation, costs incurred in preparing
and filing such amendments to the Articles or this Agreement as may be
required by law;
(vi) the assignee shall execute and swear to an instrument by the terms
of which such assignee grants to the Manager the power of attorney set forth
in this Agreement; shall acknowledge that the Membership Interest has not
been registered under the Securities Act of 1933, or any applicable state
securities laws, in reliance upon exemptions therefrom, and, shall covenant,
represent, and warrant that the assignee is acquiring the Membership Interest
for investment only and not with a view to the resale or distribution
thereof; and
(vii) the assignee shall furnish the Manager with such other similar
information or documentation as the Manager may reasonably request.
(b) No purported Assignment or other act of a Member in contravention of
the provisions of this Section 5.03 shall be or constitute an effective
Assignment of a Membership Interest, or otherwise be binding upon or recognized
by the Company unless the assignor and the assignee shall have complied with the
requirements of this Section 5.03.
(c) An Assignment made or effected in compliance with the provisions of
this Section 5.03 entitles the assignee to receive, to the extent assigned, the
Distributions to which the assignor would be entitled. An Assignment of the
Member's Membership Interest does not entitle the assignee to become or to
exercise any rights of a Member unless (a) the assignor gives the assignee that
right, and (b) a Majority in Interest of the other Members consent to the
admission of the assignee as a Member. Until the assignee becomes a Member, the
assignor shall continue to be a Member and shall have the power to exercise any
rights of a Member, subject to the Members' right to remove the assignor
pursuant to the Act.
-13-
<PAGE>
(d) An assignee who has become a Member shall have, to the extent assigned,
the rights and powers, and shall be subject to the restrictions and liabilities,
of a Member as provided in this Agreement and the Act.
(e) Each Member hereby agrees to indemnify and hold harmless the Company,
and the other Members, from and against all loss, damage or expense, including,
without limitation, tax liabilities or loss of tax benefits, arising directly or
indirectly as a result of any assignment or purported assignment in
contravention of the provisions of this Section 5.03.
(f) The Manager is authorized to amend Schedule A hereto from time to time
to reflect the admission of substitute Members.
5.04 Purchase of Member's Membership Interest.
(a) In the event that the Company elects to purchase a Member's Membership
Interest pursuant to Section 5.02, the purchase price shall be an amount equal
to the selling Member's Capital Account as of the end of the month preceding the
month in which the purchase occurs; provided, however, that if such purchase
occurs after stabilization of Occupancy, in determining the value of a Member's
Capital Account the book value of the Company's tangible assets shall be
disregarded, and, inserted in its place, shall be an amount equal to the
appraised value of the assets as determined by the independent accounting firm
then servicing the Company or an appraiser selected by said firm. There shall be
no value assigned to goodwill or any other intangible asset except for
intangible assets purchased by the Company for which a value has theretofore
been recorded on the Company's books, which assets shall be valued at their book
value at the time of the purchase. The determination of the value of a Member's
Capital Account, as modified, shall be made by said accounting firm and shall be
final and binding on all parties in the absence of fraud or gross error.
(b) Closing. The closing shall take place at the office of the Company (or
at any other mutually convenient place) as soon as practicable. At the closing,
the Company shall deliver a promissory note evidencing the obligation of the
Company to pay the purchase price. The promissory note shall provide for forty
(40) equal consecutive quarterly installments of principal and interest. The
promissory note shall bear interest at the rate equal to the rate prevailing on
ten year U.S. treasury notes as reported in The Wall Street Journal (or a
similar publication if The Wall Street Journal is no longer published) on the
closing date. The determination of the applicable interest rate by the Manager
of the Company shall be final and binding on all parties in the absence of fraud
or gross error.
-14-
<PAGE>
ARTICLE VI
BOOKS, RECORDS, ACCOUNTING AND REPORTS
6.01 Availability. The Manager shall keep or cause to be kept full and true
books of account in accordance with good accounting principles and procedures
applied in a consistent manner. The books of account shall reflect all Company
transactions, and shall be appropriate and adequate for the Company's business.
Any Member, or any Member's duly authorized representative, shall have the right
at any time to inspect and copy such books and documents during normal business
hours upon reasonable notice. Unless requested to do so by a Member, the Manager
shall not be required to deliver to any Member copies of the Articles, this
Agreement or any amendments thereto.
6.02 Financial Reports. As soon as practicable after the close of each fiscal
year, the Manager shall have delivered to the Members a financial report of the
Company for such year. The financial report shall include a balance sheet, a
statement of Profit and Loss, and schedules showing (a) Distributions to the
Members and allocations to the Members of Profit and Loss, (b) all necessary tax
reporting information required by the Members for preparation of their income
tax returns, and (c) on request, a copy of the tax returns (federal, state and
local, if any) of the Company for such fiscal year.
6.03 Accounting Decisions. Except as specifically provided to the contrary
herein, all decisions as to accounting matters for both financial and tax
reporting shall be made by the Manager, including, without limitation, decisions
with regard to method of accounting, allocation of income and accounting
conventions to be used in connection with the admission or withdrawal of a
Member or a change in a continuing Member's Membership Interest.
6.04 Fiscal Year. The Company's fiscal year shall be the calendar year,
which shall also be its taxable year.
6.05 Bank Accounts. The Manager shall maintain bank accounts in the name of
the Company in such banking institutions as the Manager shall determine. All
cash receipts of the Company shall be deposited in such accounts, and
withdrawals shall be made on such signature or signatures as the Manager shall
determine. All monies deposited in such accounts shall be and remain the
property of the Company until withdrawn and disbursed by the Manager for the
purposes specified in this Agreement. The Manager shall not deposit in any of
such accounts any funds other than funds belonging to the Company, and no other
funds shall be commingled with such funds belonging to the Company.
-15-
<PAGE>
ARTICLE VII
DISSOLUTION AND TERMINATION
7.01 Events of Dissolution. The Company shall be dissolved and its affairs
shall be wound up upon the happening of the first to occur of the following:
(a) When the period fixed for the duration of the Company shall expire
pursuant to Section 1.07 above;
(b) The written consent of a Majority in Interest of the Members;
(c) An Event of Dissociation, unless there are at least two remaining
Members and the business of the Company is continued by the written consent
of a Majority in Interest of the remaining Members within ninety (90) days
after the Event of Dissociation; or
(d) Entry of a decree of judicial dissolution under the Act.
7.02 Articles or Certificates. Upon dissolution, the Manager shall file such
articles, certificates or notices as may be required by the Act or by other
applicable law.
7.03 Winding Up. The business and affairs of the Company shall be wound up by
the Manager, or if there is no Manager, by the Members. The persons winding up
the business and affairs of the Company shall sell or otherwise convert all
property of the Company into cash or receivables to the extent practicable or
transfer the same in satisfaction of Company obligations, and the proceeds of
such liquidation, or such assets that it is not practicable to liquidate, shall
be applied and distributed in the following order of priority:
(a) to expenses of liquidation, and to creditors, including Members who
are creditors, to the extent permitted by law, in satisfaction of liabilities
of the Company;
(b) to the setting up of any reserves deemed reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Company, such reserve
to be paid over to a commercial bank or an attorney-at-law, as escrowee, to be
held for the purpose of disbursing such reserves in payment of any of the
aforementioned contingencies, and, at the expiration of such period as shall be
deemed advisable, any balance to be distributed in the manner hereinafter
provided;
-16-
<PAGE>
(c) to Members and former Members in satisfaction of liabilities, if
any, for Distributions; and
(d) to Members in accordance with their respective Capital Account
balances.
7.04 Period of Dissolution. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to enable the Company to minimize the normal
losses attendant upon a liquidation.
7.05 Final Accounting; Discharge of Liabilities. Each of the Members shall
be furnished with a statement constituting a final accounting which shall be
prepared by the Company.
7.06 Liabilities for Capital Contributions. The Manager shall not be liable
for the return of the Capital Contributions of any Member or any portion of such
Contributions. Any such return shall be made solely from Company assets.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 Power of Attorney. Each Member irrevocably constitutes and appoints the
Manager, or any of them if there is more than one, and if the Manager is a
corporation, each Member irrevocably constitutes and appoints the then President
and each Vice President of the corporate Manager, acting singly, with full power
of substitution, as such Member's true and lawful attorney in such Member's
name, place and stead to make, execute, acknowledge, deliver, swear to and/or
file:
(i) all agreements, instruments or other documents as the Manager may deem
necessary or desirable for Company purposes (including any agreements,
instruments or other documents executed by the Company as a member in any
other company);
(ii) any counterparts of the Articles and this Agreement;
(iii) all certificates and other instruments as the Manager may deem
necessary or desirable to qualify or continue the Company in the state of its
formation and in the state or states where it may be doing business;
(iv) any other filings with agencies of the federal government, of any
state or local government, or of
-17-
<PAGE>
any other jurisdiction as the Manager may deem necessary or desirable for
Company purposes; and
(v) all assignments, conveyances or other instruments or documents
necessary to effect the dissolution of the Company.
It is expressly intended by each Member that said power of attorney is coupled
with an interest, that it shall be irrevocable, that it shall survive the
transfer by a Member of the whole or any part of his Membership Interest, and
that it shall survive the death, incapacity or bankruptcy of any Member that is
a natural person, the bankruptcy or dissolution of any Member that is a
corporation, trust, association or other entity, or any change in the owners,
beneficiary or trustees of any non- corporate entity, trust, group or
association which is a Member hereunder provided that the business of such
entity, trust, group or association is continued as permitted by law.
8.02 Members' Representatives and Successors. If a Member who is a natural
person dies or a court of competent jurisdiction adjudges the Member to be
incompetent to manage his or her person or property, the Member's executor,
administrator, guardian, conservator or other legal representative may exercise
all the Member's rights for the purpose of settling the Member's estate or
administering the Member's property.
8.03 Indemnity. The Company shall indemnify each present or former Member
against any judgments, settlements, penalties, fines or expenses incurred in any
proceeding to which such person was a party because such person is or was a
Member, provided that any indemnity under this Section shall be provided out of
and to the extent of Company assets only, and no Member shall have any personal
liability on account thereof.
8.04 Notices. Any and all notices or elections permitted or required to be
made as provided in this Agreement shall be in writing, signed by the Member or
Manager giving such notice or making such election, and shall be sent by
registered or certified U.S. Mail, postage prepaid, return receipt requested, to
the Company, in care of the Manager or to the Members, at their addresses set
forth in Schedule A, or if the Company, at its address as set forth in section
1.03, or at such other address as may be designated from time to time by such
written notice to the Company and the Members.
8.05 Amendment. Amendment to this Agreement may be made by the affirmative
vote of a Majority in Interest of the Members.
8.06 No Waiver. The failure of any Member to insist upon strict
performance of any covenant or obligation under this Agreement shall not be
deemed a waiver or relinquishment of such
-18-
<PAGE>
Member's right to demand strict compliance in the future with respect to such
covenant or obligation or any other covenant or obligation, and no consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation under this Agreement, shall be deemed to constitute a consent or
waiver to or of any other breach or default in the performance of the same or
any other obligation under this Agreement.
8.07 Captions; Sections. The captions contained in this Agreement have been
inserted for convenience only and shall not affect or be effective to interpret,
change or restrict the express terms and provisions of this Agreement. All
references in this Operating Agreement to a "Section" shall refer to a Section
of this Operating Agreement unless the context otherwise requires.
8.08 Entire Agreement. This Agreement constitutes the entire agreement among
the Members with respect to the subject matter hereof and supersedes any and all
previous agreements, written or oral, between the Members with respect to the
subject matter hereof. No covenant, representation or condition not expressed in
this Agreement shall affect or be effective to interpret, change or restrict the
express terms and provisions of this Agreement. The terms and provisions of this
Agreement may not be modified or waived except by amendment approved as provided
in Section 8.05.
8.09 Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall constitute one Agreement for
all purposes, binding on all the Members, notwithstanding that all Members are
not signatories to the same counterpart, provided that no counterpart shall be
binding unless it is signed by all of the Members. All references herein to this
Agreement are deemed to refer to all such counterparts.
8.10 Benefit and Burden, etc. Except as otherwise provided in this Agreement,
the covenants, conditions, agreements and terms of this Agreement shall be
binding upon and inure to the benefit of the Manager(s) and the Members and
their respective heirs, personal representatives, successors and permitted
assigns. Whenever used, the singular shall mean the plural, the plural shall
mean the singular, and the use of any gender shall mean all genders, as the
context may require. None of the provisions of this Agreement shall be for the
benefit of, or enforceable by, any creditors of the Company.
8.11 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
-19-
<PAGE>
8.12 Limitation on Liability of Trustees. CareMatrix of Stony Brook, Inc.
acknowledges that the Trustees executing this Agreement on behalf of The
Benenson March 1985 Trust are executing this Agreement in their capacities as
Trustees only and not individually, and they shall have no personal liability
with respect hereto.
IN WITNESS WHEREOF, the Members have executed this Agreement as of the day
and year first above written.
CAREMATRIX OF STONY BROOK, INC.
By:
Name:
Title:
Hereunto Duly Authorized
THE BENENSON MARCH 1985 TRUST
By:
Name:
Title: Trustee
Hereunto Duly Authorized
By:
Name:
Title: Trustee
Hereunto Duly Authorized
-20-
<PAGE>
SCHEDULE A
CONTRIBUTIONS AND ALLOCATION PERCENTAGES
STONY BROOK COURT, LLC OPERATING AGREEMENT
DATED: May , 1996
ALLOCATION
MEMBERS CAPITAL CONTRIBUTIONS PERCENTAGES
CareMatrix of Stony Brook, Inc. $500.00 50%
197 First Avenue
Needham, Massachusetts 02194-2812
The Benenson March 1985 Trust $500.00 50%
28th Floor
708 3rd Avenue
New York, New York 10017 --------- ---
$1,000.00 100%
-21-
AGREEMENT OF SALE
THIS AGREEMENT ("Agreement") is made and entered into as of this 6th of
September, 1996 ("Effective Date"), by and between RESTON LAND CORPORATION, a
Delaware corporation authorized to conduct business in the Commonwealth of
Virginia hereinafter called "Seller"), and CAREMATRIX OF MASSACHUSETTS, INC., a
Delaware corporation authorized to conduct business in the Commonwealth of
Virginia (hereinafter called "Buyer")
W I T N E S E T H:
That for and in consideration of the Deposit (as hereinafter defined) and
other good and valuable consideration, and of the mutual promises herein
contained, the Seller agrees to sell and the Buyer agrees to buy all of that
certain parcel of ground (hereinafter referred to as the "Property"), situate,
lying and being in Hunter Mill District, Fairfax County, Virginia, containing a
total of approximately five (5) acres for the purposes intended herein, and
being a portion of Section 95, Block 1, Reston (a portion of Fairfax County Tax
Map No. 17-3-1-5), which Property is outlined on Exhibit A, attached hereto and
made a part hereof, and all easements and rights of way appurtenant thereto,
upon the terms and conditions hereinafter set forth:
1. Purchase Price and Method of Payment.
1.1 The purchase price for the Property shall be Two Million One Hundred
Thousand and 00/100 Dollars ($2,100,000.00) ("Purchase Price"). This is a sale
in gross of the Property.
1.2 Upon execution and delivery of this Agreement, by Buyer and Seller,
Buyer shall deliver to First American Title Insurance
<PAGE>
Company ("Title Company") cash in the amount of Fifty Thousand Dollars
($50,000.00) ("Initial Deposit"). In the event that Buyer does not elect to
terminate this Agreement pursuant to Section 9.1 herein, then Buyer shall
deliver to Title Company prior to expiration of the Study Period as defined in
Section 9.1 herein, cash in the amount of Fifty Thousand Dollars ($50,000.00)
("Additional Deposit"). In the event of approval by the appropriate government
authorities of the special exception application regarding the Project, Buyer
shall deliver to Title Company within five (5) days after the final
(unappealable) disposition of the same, cash in the amount of Fifty Thousand
Dollars ($50,000.00) ("Final Deposit"). Failure of the Buyer to deliver the
Initial Deposit, the Additional Deposit or the Final Deposit as provided herein
shall cause Buyer's rights to immediately lapse and this Agreement shall
terminate and be of no further force and effect except for those duties,
obligations or liabilities of Buyer which expressly survive the expiration or
termination of the Agreement. The Initial Deposit; the Additional Deposit and
the Final Deposit once posted are hereafter collectively referred to as the
"Deposit". The Deposit shall be held in escrow by the Title Company pursuant to
the terms of this Agreement and the terms of the Escrow Agreement to be entered
into by the parties and acknowledged by the Title Company in the form attached
hereto as Exhibit E, or in such other form as may be mutually agreed upon by
Seller, Buyer and Title Company. In the event that a genuine and material
dispute exists between the parties as to which party hereunder is
-2-
<PAGE>
entitled to a refund or receipt of the Deposit under this Agreement, Seller
hereby agrees to interplead such funds to the Circuit Court of Fairfax County,
Virginia for a final and binding determination as to such matter.
1.3 At Settlement, Buyer shall pay to Seller, by cash or its equivalent,
100% of the Purchase Price for the Property less the Deposit, subject to
adjustments as provided herein.
1.4 Buyer and Seller acknowledge and agree that the Deposit is being
delivered to Seller and that Seller shall have no obligation to hold such
Deposit in a separate account, however, if Buyer shall be entitled to the
Deposit in accordance with the terms hereof, Seller shall promptly return said
Deposit to Buyer. The Deposit shall be deemed to accrue simple interest at the
rate of four percent (4%) per annum to be credited to the Buyer at Settlement or
shall otherwise be payable to the party entitled to the Deposit hereunder. If
there is a dispute as to whether either party is entitled to the Deposit, at the
request of Buyer, Seller shall deposit the Deposit with a court of competent
jurisdiction until such time as the dispute is finally resolved.
2. Settlement.
2.1 (a) Except as otherwise provided in this Agreement, Settlement shall
occur on or before June 1, 1997 ("Settlement" or "Settlement Date") or such
other date which is mutually agreed to in writing by Buyer and Seller.
(b) Buyer shall have the right to extend the Settlement beyond June 1,
1997 for up to six (6) extensions of thirty (30) days in each instance, but in
no event later than December 1,
-3-
<PAGE>
1997 by giving the Seller a written extension notice on or before five (5) days
prior to the then scheduled date of Settlement. Each extension notice shall be
accompanied by a payment to the Seller in the amount of Ten Thousand and 00/100
Dollars ($10,000.00) in cash or check ("Extension Fee") for each 30-day
extension. Such Extension Fee shall be non-refundable if the Settlement does not
occur (except in the event of Seller's default or Seller's inability to
otherwise comply with its contractual obligations hereunder), but shall be
credited in full against the Purchase Price if the Settlement does occur.
(c) Buyer shall have the right to extend the Settlement beyond
December 1, 1997 by giving the Seller a written extension notice on or before
five (5) days prior to such scheduled date of Settlement. As consideration for
such extension, the Buyer shall acknowledge that one-half of the then-existing
Deposit ($105,000.00) shall be fully at risk and non-refundable to Buyer for any
reason whatsoever other than Seller's default hereunder. Upon the granting of
such extension of Settlement, Seller and Buyer shall enter into a written
amendment of this Agreement; acknowledging the proposed and agreed to Settlement
Date, which is acceptable to both parties hereto.
2.2 Settlement shall be conducted by an attorney or title insurance
company (the "Settlement Agent") at a location in the Washington, D.C., metro
area selected by Buyer and reasonably acceptable to Seller. The deed, repurchase
option agreement and option release (the "Release") to be executed and delivered
at Settlement shall be substantially in the form as attached hereto
-4-
<PAGE>
as Exhibits B, C and C-l. The form of any documents to be executed at Settlement
that are not attached hereto as exhibits, together with a statement of
settlement charges, shall be prepared for Seller and Buyer for approval not less
than five (5) business days prior to the date scheduled for Settlement. Real
estate taxes and other similar charges or assessments against the Property are
to be adjusted to the date of Settlement. The Seller shall bear the risk of loss
or damage to the Property until the date of Settlement thereon. Possession of
the Property shall be given to the Buyer at Settlement in the condition that
exists as of the date hereof, subject to wear and tear and natural
deterioration.
3. Settlement Costs.
3.1 The State Grantor's tax upon the deed of conveyance and the charges for
recordation of the repurchase option, if recorded, shall be at the cost of the
Seller. Charges for title examination, surveys, owner's title insurance
premiums, all recording taxes (other than documents necessary to clear title)
and all other charges including the Settlement Agent's charge for conducting
settlement shall be at the cost of the Buyer. Each party shall pay its own
counsel fees.
3.2 Real estate taxes and assessments imposed by a governmental authority
("Taxes") and any assessments by private covenant constituting a lien or charge
on the Property for the then-current calendar year or other current tax period
not yet due and payable shall be prorated, based on the most recent tax bill
pertaining to the Property and taking into account any
-5-
<PAGE>
discount available based on an early payment of such Taxes, between Seller and
Buyer as of the close of the day immediately preceding settlement. If settlement
occurs prior to the receipt by Seller of the tax bill for the calendar year or
other applicable tax period in which settlement occurs, Buyer and Seller shall
prorate Taxes for such calendar year or other applicable tax period based upon
the most recent ascertainable assessed value and tax rates, final adjustment to
be made as soon as reasonably possible after settlement.
3.3 If the Property is taxed as a portion of a larger tax parcel, the
Seller and Buyer agree to pay the real estate taxes covering the year of
settlement (and any previous years) for the entire parcel to the taxing
authorities at settlement, or, if the tax bill is not available, the parties
shall estimate the real estate taxes for the larger tax parcel, based upon the
most recent ascertainable assessed value and tax rates, final adjustment to be
made as soon as reasonably possible after settlement, and shall execute and
deliver such documentation before and after settlement as may be necessary to
cause the Property to be assessed as a separate parcel. Seller shall pay the
amount of the real estate taxes shown on said bill to the taxing authorities
when the tax bill becomes available, and Seller shall indemnify and hold Buyer
harmless against liability, cost or expense incurred by Buyer in connection
with, or arising out of, Seller's failure to pay the real estate taxes in a
timely manner.
-6-
<PAGE>
4. Title
4.1 Within forty five (45) days after the Effective Date, Buyer shall
obtain a current title commitment issued by a reputable title company (the
"Title Commitment"), with copies of all underlying documents and a survey (the
"Survey") of the Property. During the Study Period, as hereinafter defined,
Buyer shall review title to the Property as disclosed by the Title Commitment
and the Survey. Seller will cooperate with Buyer in curing any reasonable
objections Buyer may have to title to the Property. Seller shall have no
obligation to cure title objections, except liens of an ascertainable monetary
amount which liens Seller shall cause to be released at Settlement. Buyer may
terminate this Agreement and receive a refund of the Deposit and all interest
accrued thereon, and the Extension Fee, if paid, if the title company revises
the Title Commitment after the expiration of the Study Period to add or modify
exceptions or to delete or modify the conditions to obtaining any endorsement
requested by Buyer during the Study Period if any such changes render title to
the Property unmarketable or materially and adversely affect the proposed
development at the Property as determined by Buyer in its reasonable discretion.
The term "Permitted Exceptions" shall mean the specific exceptions (exceptions
that are not part of the promulgated title insurance form) in the Title
Commitment that the title company has not agreed to insure over or remove from
the Title Commitment and to which Buyer has not specifically objected in writing
during the
-7-
<PAGE>
Study Period and that Seller is not required to remove as provided above, and
real estate taxes not yet due and payable.
4.2 At Settlement, as a condition to Buyer's obligation to close, the title
company shall deliver to Buyer an ALTA Owner's Policy of Title Insurance ("Title
Policy") issued by the title company containing the endorsements that the title
company has agreed to issue, dated the date and time of the recording of the
Deed in the amount of the Purchase Price, insuring Buyer as owner of good,
marketable and indefeasible fee simple title to the Property, subject only to
the Permitted Exceptions.
4.3 The costs of the Title Policy shall be paid by Buyer. The cost of the
Survey including any necessary revisions shall be paid by Buyer.
4.4 Seller agrees to convey title at settlement by special warranty deed
(the "Deed"), free and clear of all liens, encumbrances and encroachments and
subject only to the Permitted Exceptions and the provisions of the Declaration
of Covenants, Conditions and Restrictions for the Reston Town Center Industrial,
dated November 14, 1989, and recorded in Deed Book 7472, page 345 et seq., of
the land records of Fairfax County.
4.5 Should Seller be unable to convey title to the Property in accordance
with the provisions of this Article 4, Seller's sole liability under this
Agreement shall be limited to the return to Buyer of the Deposit and all
interest accrued thereon, and the Extension Fee, if paid, hereunder.
4.6 Seller shall discharge at settlement all liens, mortgages, encumbrances
and other obligations affecting title to
-8-
<PAGE>
the Property that can be discharged by the payment of money. Buyer agrees that
the Seller may apply the purchase proceeds for such purpose.
5. Failure to Make Settlement.
5.1 If the Buyer breaches or violates any term, covenant, or condition of
this Agreement, including failure to purchase the Property for any reason other
than Seller's default, failure of a condition to Buyer's obligation to close, or
the exercise by Buyer of an express right of termination granted herein,
Seller's sole remedy in such event shall be to terminate this Agreement and be
entitled to liquidated damages in an amount equal to the Deposit. Except as set
forth in the immediately preceding sentence, Seller hereby waives all other
rights or remedies in the event of such default by Buyer. The parties
acknowledge that Seller's actual damages in the event of a default by Buyer
under this Agreement will be difficult to ascertain, and that such liquidated
damages represent the parties' best estimate of such damages. As per the terms
of Section 5.2 hereof, the Deposit and all interest accrued thereon, and the
Extension Fee, if paid, shall promptly be returned to Buyer in the event of a
Seller default hereunder or if Buyer elects to terminate this Agreement pursuant
to an express right herein granted or failure of a condition. In addition, in
the event Buyer fails to complete Settlement in accordance with Article 2
hereunder and this Agreement is terminated by Seller, Buyer will, upon demand by
Seller, to the extent permitted by the applicable third party, assign to Seller,
without representation or warranty as to the
-9-
<PAGE>
accuracy, validity or correctness of the contents, all studies, tests, reports
plats and surveys relating to the Property, free and clear of all liens or
claims for payment, which were acquired by Buyer for use in development of the
Property, all at no cost to Seller.
5.2 In the event Seller fails to perform or breaches any of its
representations or warranties or the covenants or obligations to be performed by
Seller under this Agreement, Buyer's sole and exclusive remedy shall be to
either: (i) terminate this Agreement, in which event the Deposit shall be
returned to the Buyer in accordance with the terms of this Agreement or (ii)
enforce its rights of specific performance hereunder upon payment of the full
Purchase Price. In no event whatsoever shall Buyer be entitled to any other
damages, rights or remedies against Seller hereunder.
6. Buyer's Use of the Property.
6.1 Buyer shall construct on the Property up to "150 Units of Assisted
Living/senior Housing" with associated parking (the "Project")
6.2 The size and configuration of the Project to be constructed by Buyer
shall be subject to Seller's prior approval, which approval shall not be
unreasonably withheld. Seller shall approve or disapprove the size and
configuration of the Project within thirty (30) business days after Buyer shall
submit same to Seller. If Seller shall fail to disapprove said size and
configuration of the Project within said thirty (30) business day period, Seller
shall be deemed to have approved said size and
-10-
<PAGE>
configuration of the Project. Otherwise, Seller shall inform Buyer as to those
items of the proposed Project of which Seller disapproves.
7. Approval of Architectural Plans.
The Buyer agrees to submit its landscape, site and architectural plans to
the Town Center Design Review Board ("TCDB") for approval prior to commencement
of construction, it being the intention of the parties that the exterior of the
Buyer's buildings will be harmonious with the buildings in the surrounding area
in design, materials and treatment. All buildings or structures shall be
constructed in accordance with such plans as approved by the TCDB.
8. Project Name.
Seller shall have the right, in its reasonable discretion, to approve all
names to be used in connection with the project and/or individual building or
other structures on the Property. Buyer shall obtain such approval from the
Seller prior to any public use or display of the desired project or building
name or prior to any submission of documents bearing such proposed name to
lending institutions or governmental agencies. If the Seller does not approve of
a project or building name, Seller has the right to require the removal of any
sign bearing such unapproved name erected by or on behalf of the Buyer.
9. Contingencies.
9.1 Beginning with the date of execution of this Agreement by both parties
and until 5:00 p.m. on October 30, 1996, "the
-11-
<PAGE>
Study Period") Buyer shall have the opportunity to do the following:
(a) Enter the Property and make any engineering and soil boring tests
or any other tests or surveys relating to the Property, at
Buyer's cost, provided Seller is notified in writing a minimum of
forty-eight (48) hours prior to such tests or surveys. Such tests
shall not interfere with Seller's current use of the Property or
the adjacent areas, shall not necessitate the closing of any
access route to the Property, and shall not violate any law of
any governmental unit having jurisdiction over the property. Upon
the completion of such tests, if any, Buyer shall restore the
Property to its former condition. Buyer agrees to hold the Seller
harmless from any claims of injury to person or property asserted
by third parties arising out of the tests referred to above for a
period of up to one (1) year after the date of Settlement or one
(1) year after the date of termination of this Agreement, as the
case may be;
(b) Conduct such economic studies it deems appropriate regarding the
feasibility of the construction and/or operation of the building
contemplated
-12-
<PAGE>
hereunder, to and including, but not limited to storm water
management;
(c) Verify the zoning applicable to the Property; determine if there
are any further zoning or land use approvals to be obtained which
are necessary for Buyer's contemplated use and development of the
Property, and ascertain the size and scope of the development
permitted by such zoning;
(d) Investigate the availability of water, sewer, electricity,
telephone and all other utilities to serve the Property;
(e) Examine title and Survey relating to the Property;
(f) Perform environmental assessments as deemed necessary or
appropriate.
9.2 As a result of the determinations made by Buyer under paragraphs 9.1(a)
through (f) above, Buyer may decide, In its sole, absolute and nonreviewable
discretion, that it is not feasible, practical, or advisable to purchase the
Property and construct the building contemplated hereunder, in which event Buyer
may terminate this Agreement by notice in writing to Seller, provided such
notice is given not later than the expiration date of the Study Period. In the
event of such termination, the Deposit and all interest accrued thereon, and the
Extension Fee, If paid, paid hereunder shall be returned to Buyer, and Buyer
shall, upon demand by Seller, to the extent permitted by the applicable third
party, assign to Seller, without representation or warranty as to the accuracy,
validity
-13-
<PAGE>
or correctness of the content, to Seller all plats, surveys, and soil tests,
which have been prepared for Buyer and which were obtained by it for use in
development of the Property, free and clear of all liens or claims for payment,
all at no cost to Seller.
9.3 Should Buyer, after conducting the studies set forth in paragraph 9.1,
decide to proceed under the terms of this Agreement, Buyer shall have the right
throughout the term of this Agreement to enter any portion of the Property (as
shown on Exhibit A) for the purpose of conducting such additional engineering
and soil boring test or surveys as it deems necessary, provided Seller is
notified in writing a minimum of forty-eight (48) hours prior to such tests or
surveys, all at its costs. Upon completion of such tests, Buyer shall restore
the Property to as close to its former condition as is reasonably practicable.
Buyer agrees to hold the Seller harmless from any claims of injury to person or
property asserted by third parties arising out of such tests for a period of up
to one (1) year after the date of Settlement or one (1) year after the date of
termination of this Agreement, as the case may be.
9.4 Upon reasonable prior written notice delivered to Seller at any time
after the Effective Date hereof, Seller shall, to the extent in Seller's
possession, make available for the Buyer's review at either the Seller's or its
Managing Agent's offices, all information, records and documentation concerning
the ownership and condition of the Property in the possession of Seller or
Seller's representatives including, plans, surveys,
- 14 -
<PAGE>
specifications, soil tests, service contracts, government permits and
approvals, environmental matters, engineering reports, environmental reports,
and title policies or abstracts, if any, with regard to all matters described
above. The Buyer will hold in strict confidence all documents, data and
information obtained from the Seller and if the Settlement does not occur, will
return the same to Seller.
10. Zoning and Approvals.
10.1 The Property is presently zoned PRC Town Center, which permits the use
contemplated in this Agreement. Buyer acknowledges that, prior to approval of a
site plan or issuance of a building permit, a Town Center concept plan approval
will have to be obtained from the Fairfax County Planning Commission and special
exception approval will have to be obtained from the Fairfax County Planning
Commission and the Fairfax County Board of Supervisors. Seller, at its expense,
shall make all necessary applications for such concept plan approval and special
exception approval and employ all reasonable and diligent efforts to obtain same
and Buyer shall cooperate with and provide such reasonable assistance as may be
necessary to obtain such approvals. All costs directly associated with such
application (including, but not limited to all engineering and architectural
fees and costs) shall be the responsibility of Buyer; provided, however, Seller
shall select and retain legal counsel of its choice and at its expense to obtain
such approvals from the Fairfax County Planning Commission and the Fairfax
County Board of Supervisors. During the Study Period, Buyer and Seller shall
endeavor in good faith
-15-
<PAGE>
to develop a schedule and/or timeline pursuant to which the parties shall pursue
obtaining the Approvals (as such term is defined below). Seller and Buyer
covenant and agree to cooperate and communicate with each other regarding all
aspects of the processing and administration of the Approvals regarding the
Project.
10.2 Buyer's obligation to consummate Settlement hereunder shall be
specifically conditioned upon the approval (in form and substance acceptable to
Buyer) of all zoning, land use, subdivision and environmental permits and
approvals and any other applicable permit or approval as may be necessary for
the Buyer's proposed acquisition, development and construction of the Project
(collectively the "Approvals"). If the foregoing condition is not satisfied
prior to the Settlement (as may be extended by any appeal periods relating to
the Approvals or pursuant to Section 2.1(b) of this Agreement), the Buyer may
elect not to purchase the Property. In such case, at Buyer's option, the Deposit
and all interest accrued thereon, and the Extension Fee, if paid, shall be
refunded to Buyer and neither party shall thereafter have any further
obligations or liabilities under this Agreement. Notwithstanding anything set
forth above to the contrary, Purchaser shall be solely responsible for all costs
and expenses associated with the site plan or plans and all building permits for
the Property and the Project. Purchaser covenants and agrees to pursue any and
all site plans and building permits with all reasonable and diligent efforts
prior to Settlement hereunder. Furthermore, notwithstanding any provision of
this Agreement to
- 16 -
<PAGE>
the contrary, the Seller shall be granted the right to terminate this Agreement
and all of its obligations to sell the Property to the Buyer if Buyer has not
obtained a building permit for the Project from the applicable Fairfax County
governmental authorities on or before December 1, 1998. Both the Buyer and
Seller shall notify the other party of its respective right to terminate this
Agreement in writing in accordance with the notice provisions of this Agreement.
Should the Seller exercise its right to terminate this Agreement, one-half of
the Deposit and all interest accrued thereon, and the Extension Fee, if paid,
shall be retained by the Seller and neither party shall thereafter have any
further obligations or liabilities under this Agreement.
11. Utilities.
Sanitary sewer to serve the Property for the Project is shown on Exhibit A
in brown. Water service is available for the Project in the street adjacent to
the site as shown in green on Exhibit A. Buyer shall have the sole
responsibility for making appropriate arrangements, including all costs
associated therewith, for extending all utilities to the Property from the
locations shown on Exhibit A and installing same on the Property including but
not limited to sanitary and storm sewer, water, electricity and telephone
service. Buyer shall be responsible for payment of all utility connection fees.
Buyer shall arrange for the installation of any and all outdoor lighting on the
Property.
-17-
<PAGE>
12. Work on Property.
12.1 Buyer shall be responsible for the preparation, at its expense, of all
necessary and required site engineering, building design, site planning and any
other related work which may be necessary to obtain all permits, licenses and
approvals from Fairfax County and any other government authorities in connection
with the Project. Additionally, Buyer shall have the sole obligation at its cost
to relocate any existing utilities on the Property.
12.2 The Buyer agrees that all excavation and grading, disposal of surplus
materials, land development, field engineering, soil erosion control, and
utility work necessary for the development of its buildings will be done within
the boundary line limits of the Property or within limits approved by Seller,
subject to the provisions of Section 11 above. The Buyer further agrees to
repair damage to adjacent areas caused by its construction activities, excluding
the replacement of vegetation, shrubs or trees. The streets affording access to
the Property shall be cleaned by the Buyer whenever construction activity into
and out of the Property dictates that such cleaning is required. Should the
Buyer fail to do so after five (5) days written notification from the Seller
that such cleaning is required, then the Seller may perform such cleaning and
charge the reasonable cost thereof to the Buyer.
12.3 The Buyer agrees to landscape the appropriate areas of the Property
after construction thereon is completed in conformance with its landscaping
design plans, such work to
-18-
<PAGE>
include fine grading, shrubbery, seeding or sodding, side or lead walks and any
paving required. All driveway and parking areas constructed by the Buyer shall
be hard surfaced.
12.4 All construction waste, including all tree stumps, shall be
disposed of by the Buyer at its cost either at the construction site or beyond
the limits of Reston.
12.5 Buyer agrees that during the periods of grading, clearing and
construction, Buyer will comply with the preservation standards set forth in
Exhibit D attached hereto and made a part hereof.
12.6 Buyer agrees to maintain that portion of the Property adjacent to
the curb lines of streets. Buyer's maintenance obligations shall extend to
adjacent property lying within the street right-of-way but not actually being
used for street purposes. All construction debris in connection with the
construction of the Project shall be removed from the site as quickly as
reasonably possible by Buyer. Should the Buyer fail to do so, the Seller may,
after at least five (5) business days notice to Buyer, remove such debris and
charge the reasonable cost thereof to the Buyer by deducting the cost thereof
from the Deposit referred to in paragraph 14.4 below. Buyer, for itself, its
successors and assigns, hereby grants a license to Seller and Seller's agents to
enter on the Property after Settlement for the purpose of enforcing the
provisions of this paragraph.
13. Signs.
The Buyer shall not place or erect or cause or permit to be placed or
erected any exterior signs on any part of the Property
-19-
<PAGE>
or anywhere else within the community of Reston unless the wording, design,
location and construction thereof have been approved by the Seller which
approval shall not be unreasonably withheld. The Buyer agrees that all of its
exterior signs, after approval by the Seller, will be maintained in a reasonable
state of repair. The Buyer further agrees that any signs erected by it without
the Seller's prior approval as hereinbefore provided, or not maintained in a
reasonable state of repair, will be removed by the Buyer at the Seller's request
or may, after ten days written notice to Buyer, be removed by the Seller at the
Buyer's expense.
14. Protection of Structures. Trees and Adjacent Property.
14.1 The Buyer agrees to protect (in a commercially reasonable manner)
pavements, curbs, gutters, walks, streets, shoulders, and utility structures
within the immediate vicinity of the Property from damage, and to keep
pedestrian and road rights-of-way and drives clear of equipment and building
materials.
14.2 The Buyer agrees to install, prior to the start of site development on
the Property, and to maintain during the entire period of construction, those
protective measures outlined in Exhibit D in order to protect from damage those
trees that were indicated it be saved on the site plan submitted by the Buyer to
the Seller.
14.3 The Buyer agrees to confine its construction activities to the area
within the boundary lines of the Property and to adjacent areas where off-site
improvements are to be constructed
-20-
<PAGE>
which serve the Property, and to take all necessary precautions to protect
adjacent property from damage. The Buyer further agrees to take whatever
precautions are reasonably necessary so as to prevent siltation and the washing
away of earth from the Property in the excavation and movement of earth, and
also to comply at its expense with all federal, state and county rules regarding
siltation control.
14.4 In order to assure compliance by the Buyer with paragraphs 14.1, 14.2
and 14.3, above, the Buyer shall deposit with the Seller at Settlement the sum
of Five Thousand Dollars ($5,000.00) from which the Seller may deduct reasonable
sums required to repair damage to pavements, curbs, gutters, walks, streets,
shoulders, utility structures, and adjacent property caused by the Buyer, Its
employees, invitees, contractors, or subcontractors, or to compensate the Seller
for the Buyer's failure to comply with paragraph 14.2 above. Seller shall
release and otherwise return such deposit to buyer upon the happening of all of
the following:
(a) Completion of Buyer's building and termination of all
construction activity in connection therewith.
(b) The release of the Buyer by the County of Fairfax under any bond
or contract requiring the Seller to do site work on the Property,
if any.
(c) The stabilization and necessary repair of adjacent property to
the Seller's reasonable satisfaction when damage has resulted
from Buyer's construction activities.
-21-
<PAGE>
14.5 Notwithstanding the terms of Article 5 hereof or of this Article 14 to
the contrary, should the damages hereunder caused by the Buyer, its employees,
invitees, contractors or subcontractors exceed the amount so deposited, this
Article 14 shall not limit the Seller's right of recovery against the Buyer for
such excess. In the event damage to the structures or areas set forth under
paragraph 14.1 above is caused by a party other than the Buyer, its employees,
invitees, contractors, or subcontractors, the Buyer may be relieved of liability
hereunder by prompt notification to the Seller of the damage incurred and the
identification of the responsible party.
15. Seller's Option to Repurchase.
15.1 Buyer agrees that at Settlement it will grant to the Seller an
exclusive option substantially in the form attached hereto as Exhibit C to
repurchase the Property. Such option may be exercised by the Seller during the
twelve (12) month period commencing thirty (30) months after the date of
Settlement, unless prior to the exercising of such option, the Buyer begins
construction of a building on the Property.
15.2 The pouring of footings for Buyer's building shall be considered as
the commencement of construction so as to nullify Seller's option to repurchase.
15.3 In the event that the Seller exercises its option hereunder the
purchase price shall be calculated on the basis of the original purchase price,
without escalation, paid by Buyer for the Property.
-22-
<PAGE>
15.4 In the event that the Seller exercises its option hereunder,
Settlement shall be held within thirty (30) days of the date of the exercise of
the option, at a place to be selected by the Seller in the Washington, D.C.,
metro area. The Property repurchased shall be conveyed by special warranty deed
free and clear of all liens, encumbrances, and encroachments except those
specified in Article 4 above. Seller shall pay the state and local Grantee tax.
Buyer shall pay the state and local Grantor tax and bear the cost of preparation
of the deed.
15.5 In the event that Seller shall fail to exercise the repurchase option
in a timely manner or shall not be entitled to exercise such repurchase option
as set forth herein, the Settlement Agent shall be instructed by Buyer to
deliver from escrow the Release and record in the applicable recorder's office.
The provisions of this Section shall survive the Closing of Settlement.
16. Sale of Property by Buyer.
So long as the option to repurchase remains in effect for any portion of
the Property under the provisions of Article 15, the Buyer shall not sell or
otherwise dispose of the Property subject to such option, or any portion
thereof.
17. Resubdivision.
Prior to Settlement, the Property has or will be subdivided, at Seller's
expense, as Block 1 Section 95 Reston. Any further subdivision of the Property
shall be the responsibility of Buyer and at the expense of Buyer. All such
Resubdivision plans and
-23-
<PAGE>
documents shall be subject to Seller's reasonable approval prior 4 to submission
to Fairfax County.
18. Assignment.
This Agreement may not be assigned by Buyer except as set forth herein.
Buyer may assign this Agreement without Seller's consent to an Affiliate of
Buyer, provided that the assignee shall assume the obligations hereunder of the
assignment. Seller shall be permitted to freely assign its rights under this
Agreement. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the respective legal representatives, successors,
assign, heirs, and advisees of the parties. For the purpose of this paragraph,
the term "Affiliate" means (a) an entity that directly or indirectly controls,
is controlled by or is under common control with the Buyer or Abraham D. Gosman,
Andrew D. Gosman, or Michael M. Gosman or (b) an entity created by or for the
benefit of Buyer to be utilized in conjunction with a sale/leaseback of the
Property and/or Project or (c) an entity at least a majority of whose economic
interest is owned by Buyer or Abraham D. Gosman, Andrew D. Gosman, or Michael N.
Gosman; and the term "control" means the power to direct the management of such
entity through voting rights, ownership and contractual obligations.
19. Notices.
Any notices required or permitted under this Agreement shall be in writing
and delivered by telephone facsimile or in person or sent by registered or
certified mail postage prepaid, return receipt requested, as follows:
-24-
<PAGE>
If to Buyer: CareMatrix of Massachusetts, Inc.
Attn: Michael Gosman
Executive Vice President
197 First Avenue
Needham, Massachusetts 02194
Telephone: (617) 433-1000
Facsimile: (617) 433-1190
With Copies to: CareMatrix of Massachusetts, Inc.
Attn: James M. Clary, Esquire
197 First Avenue
Needham, Massachusetts 02194
Telephone: (617) 433-1000
Facsimile: (617) 433-1190
If to Seller: Reston Land Corporation
Attn: Mr. Gregory Hamm
11911 Freedom Drive
Reston, Virginia 22090
Telephone: (703) 742-6482
Facsimile: (703) 742-6447
With Copies to: Reston Land Corporation
Attn: David R. Schultz, Esq.
11911 Freedom Drive
Reston, Virginia 22090
Telephone: (703) 742-6400
Facsimile: (703) 742-6443
Either party may, by proper notice, designate a different address to which
notice shall be sent. Notices given in accordance with these provisions shall be
deemed given when delivered by telephone facsimile, when personally delivered,
or when mailed.
20. Commissions.
Except as provided in a separate agreement between Seller and Williams
Property Venture d/b/a Smithy Braedon-Oncor International ("Broker") which
agreement is hereby affirmatively acknowledged by Seller, this Agreement was not
negotiated by a real estate agency or broker and no commission will be payable
on the sale hereunder. Buyer represents and warrants that it shall
-25-
<PAGE>
pay any and all sums of fees due to Walter Drimer of Genesis Development
Group, Inc., relating to this Agreement and the transaction contemplated hereby.
Buyer shall indemnify and hold harmless Seller by reason of any breach of the
foregoing representation or warranty with regard to Mr. Drimer and/or Genesis
Development Group, Inc. Each party hereto warrants and represents that it had
employed no other brokers or real estate agencies other than Broker in the
negotiations relating to this Agreement and each party shall indemnify and hold
harmless the other party hereto by reason of any breach by such party of its
warranty and representation under this paragraph. This Section 20 shall survive
Settlement or the termination of this Agreement.
21. Storm Water Management.
Buyer shall construct a storm water management facility on the Property
which facility shall be used by Buyer to manage storm water on its Property and
to accommodate some offsite storm water management from Seller's adjacent
property. In consideration of such use, Buyer and Seller shall each pay their
prorata share of the cost of construction of such facility, such prorata share
to be calculated by dividing the total acreage to be served by the facility
including the acreage of the Property by the number of acres contained in the
Property. Seller shall pay for any outfall structure or connection of the storm
water facility to Seller's adjacent property. At settlement, Buyer shall assume
the obligation to construct and maintain such on site facility, provided,
however, (I) Seller shall pay only its prorata share of the cost of maintenance
as calculated above,
-26-
<PAGE>
(ii) Buyer and Seller shall cause each of the owners of land served by the storm
water management facility to enter into an agreement, on terms and conditions
reasonably satisfactory to Buyer governing the repair and maintenance of such
facility and (iii) Buyer and/or the owner of the land upon which the storm water
management facility has been or will be constructed shall grant certain
recordable easement agreements, the form and substance of which shall be agreed
upon prior to settlement, to Seller for the benefit of the Seller's adjacent
property so that Seller shall have access to the facility to fulfill its
maintenance obligations. If requested, Buyer shall execute such documents as may
be reasonably required by Fairfax County or Seller to evidence such maintenance
obligations.
22. Miscellaneous.
22.1 Seller covenants that Buyer and its agents, employees, representatives
and contractors shall have uninterrupted and continuous adequate access to the
Property during the pendency of this Agreement for the purpose of conducting
surveys, engineering, geotechnical, and environmental inspections and tests
(including intrusive inspection and sampling), and any other inspections,
studies, or tests reasonably required by Buyer.
22.2 Unless otherwise specified, In computing any period of time described
herein, the day of the act or event after which the designated period of time
begins to run is not to be included and the last day of the period so computed
is to be included, unless such last day Is a Saturday, Sunday or legal holiday,
In
-27-
<PAGE>
which event the period shall run until the end of the next day which is neither
a Saturday, Sunday or legal holiday. The last day of any period of time
described herein shall be deemed to end at 5 p.m. Eastern Standard Time.
22.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of such counterparts shall
constitute one Agreement. To facilitate execution of this Agreement, the parties
may execute and exchange by telephone facsimile counterparts of the signature
pages.
22.4 From and after the date on which this Agreement is fully executed and
until the obligations of Buyer and Seller under this Agreement have terminated,
and subject to the terms of Section 18 hereof, the Seller shall not offer or
negotiate another competing sale of all or any part of the Property to any third
party. However, the parties recognize and agree that the Seller shall be
permitted to accept or entertain offers for the Property which are backup or
subordinate offers to this Agreement and the transactions contemplated hereby.
In no event could such backup offer supersede the rights of Buyer hereunder
unless and until Buyer is in default or otherwise terminates this Agreement.
Furthermore, Seller's obligations under this Section 22.4 shall be conditioned
at all times upon Buyer's exercise of due diligence pursuant to the terms hereof
with respect to the processing of any and all Approvals or permitting required
hereunder.
-28-
<PAGE>
23. representations and Warranties.
(a) representations and Warranties of Seller. Seller warrants and
represents to, and covenants and agrees with, Buyer as of the date hereof (and
on the Settlement Date shall reaffirm all such representations, covenants and
warranties as of that date) as follows:
(i) Seller holds the entire ownership interest in the Property and all
rights appurtenant thereto, and the signature of no other party is required to
convey any of such interests and rights.
(ii) Seller is a duly organized and validly existing Delaware
corporation, in good standing under the laws of Virginia, and has the legal
right, power and authority to enter into this Agreement and to perform all of
its obligations hereunder, and this Agreement constitutes the legal, valid and
binding obligation of Seller, enforceable in accordance with its terms. The
execution by the undersigned officer of Seller and delivery of this Agreement,
and the performance by Seller of its obligations hereunder, have been duly
authorized by all necessary action by and on behalf of Seller and will not
conflict with, or result in a breach of, any of the terms, covenants and
provisions of the articles of organization or by-laws of Seller as any of the
same may have been amended, any agreement or instrument to which Seller is a
party or by which it is bound, or, to the best of Seller's knowledge, any permit
or any Governmental Regulation (as defined below), regulation, order, judgment,
writ, injunction or decree of any court or governmental authority.
-29-
<PAGE>
(iii) No consent, approval or other authorization of, or registration,
declaration or filing with, any court or governmental agency or commission is
required for the due execution, delivery and performance of this Agreement by
Seller or for the validity or enforceability thereof against Seller.
(iv) There are no uncured notices, suits, orders, decrees or judgments
relative to violations of, nor to the best of Seller's knowledge, any other
violations of, (A) any easement, restrictive covenant or other matter of record
affecting the Property or any part thereof, or (B) any laws, statutes,
ordinances, codes, regulations, rules, orders, or other requirements of any
local, state or federal authority or any other governmental entity or agency
having jurisdiction over the Property or any part thereof, including, without
limitation, any of the foregoing affecting zoning, subdivision, building,
health, traffic, environmental, hazardous waste or flood control matters (all of
the foregoing, collectively, "Governmental Regulations").
(v) There are no other suits, actions or proceedings pending or, to
the best of Seller's knowledge, threatened, against or affecting the Property or
any of the transactions provided for herein before any court or administrative
agency or officer, and Seller is not in default with respect to any judgment,
order, writ, injunction, rule or regulation of any court or governmental agency
or office to which Seller is subject in any way affecting the Property or any of
the transactions provided for herein.
-30-
<PAGE>
(vi) There are not presently pending or, to the best of Seller's
knowledge, threatened with respect to the Property (A) any special assessments,
or (B) any condemnation or eminent domain proceedings.
(vii) Seller is familiar with the provisions of Sections 897 and 1445
of the Internal Revenue Code (the "Code") and Seller is not a "foreign person"
as that term is defined in Section 1445(f) (3) of the Code.
(viii) There are no leases, subleases, licenses or other rental
agreements or occupancy agreements (written or oral) which grant any possessory
interest in and to any space situated on or in the Property or that otherwise
give rights with regard to the use of the Property or any portion thereof.
(ix) The amount necessary to discharge all outstanding mortgages and
other monetary liens currently affecting the Property does not exceed the net
amount of the Purchase Price to be received by Seller at the Closing, after
deduction (if any) for the adjustments described above and payment of the
broker's commission payable hereunder, and there are no restrictions affecting
prepayment contained in any such mortgage(s).
(x) The Property has adequate, direct, indefeasible legal and
practical access of record for ingress from and egress to a public way.
(xi) Seller has never generated, stored (except in material compliance
with Governmental Regulations), handled or disposed of any hazardous substance,
hazardous waste, hazardous materials or oil (as any of such terms are defined
under
-31-
<PAGE>
applicable Governmental Regulations), and, to the best of Seller's knowledge,
there has been no release of any such hazardous substance, hazardous waste,
hazardous materials or oil into the environment from the Property, or in, on or
under the Property.
The foregoing representations of the Seller are true and correct in
all material respects, and the foregoing warranties and agreements are in full
force and effect and binding on Seller as of the Effective Date, and shall be
true and correct in all material respects and in full force and effect, and
shall be deemed to have been reaffirmed and restated by Seller, as of the
Settlement Date. Seller's representations and warranties as to the status and
condition of the Property made herein are based solely upon the actual knowledge
of the asset manager currently responsible for the disposition of the Property
on behalf of the Seller and neither Seller nor said employee shall be under any
obligation, at any time, to independently investigate those matters about which,
or relative to which, Seller has made a representation or warranty to Buyer
herein.
(b) representations and Warranties of Buyer. Buyer warrants and represents
to, and covenants and agrees with, Seller as follows:
(i) Buyer has the legal right, power and authority to enter into this
Agreement and to perform all of its obligations hereunder, and the execution and
delivery of this Agreement and the performance by Buyer of its obligations
hereunder, have been or will be duly authorized by all necessary corporate
action at
-32-
<PAGE>
the Settlement Date; and this Agreement and Buyer's performance hereunder will
not conflict with, or result in a breach of, any of the terms, covenants and
provisions of the Articles of Organization or By-Laws of Buyer, as same may have
been amended or, to the best of Buyer's knowledge, or order, judgment, writ,
injunction or decree of any court or any agreement or instrument to which Buyer
is a party or by which it is bound.
(ii) The officer signing this Agreement on behalf of Buyer is duly
authorized to execute the same on behalf of the Buyer and Buyer shall provide a
corporate resolution to such effect at the Closing.
(c) Liability for Warranties and representations. Seller agrees to
indemnify and hold Buyer harmless from and against any and all claims, losses,
liabilities, damages, expenses and fees, including without limitation,
reasonable attorneys' fees and expenses, incurred by Buyer as the result of the
failure of any of Seller's warranties and representations contained in this
Article 23. Conversely, Buyer agrees to indemnify and hold Seller harmless from
and against any and all claims, losses, liabilities, damages, expenses and fees,
including without limitation, reasonable attorneys' fees and expenses, incurred
by Seller as the result of the failure of any of Buyer's warranties and
representations contained in this Article 23 or elsewhere in this Agreement. The
provisions of this Article 23 shall survive the delivery of the Deed hereunder
or the termination of this Agreement for a period of up to one (1) year after
the Settlement Date.
-33-
<PAGE>
24. Entire Agreement - General Provisions.
This Agreement contains the entire understanding between the parties and
the parties agree that no representation was made by or on behalf of the other
which is not contained in this Agreement and that in entering into this
Agreement neither relied upon any representation not herein contained. All
provisions of this Agreement shall survive Settlement and shall not be merged in
the deed of conveyance from the Seller to the Buyer. Whenever references are
made to specific dates or times within which events are to occur, it is agreed
that TIME IS OF THE ESSENCE. This Agreement shall be interpreted under the laws
of the Commonwealth of Virginia. Paragraph headings are for convenience or
reference only and shall not affect the meanings or interpretations of the
sections. This Agreement shall not be binding upon Buyer or Seller until, having
been executed by Buyer, his Agreement Is executed by an officer of Seller and a
fully executed copy of this Agreement has been delivered to the Buyer.
[Signatures begin on following page.]
-34-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement of Sale as of
the day and year set forth in the first paragraph above.
WITNESS: RESTON LAND CORPORATION, a
Delaware corporation
By: /s/ [Illegible] By: /s/ [Illegible]
------------------------------ -------------------------------
Asst. Sec. Vice President
WITNESS: CAREMATRIX OF MASSACHUSETTS
By: /s/ [Illegible] By: /s/ Andrew Gosman
------------------------------ -------------------------------
Exhibits:
- ---------
Exhibit A: Description of Property
Exhibit B: Form of Special Warranty Deed
Exhibit C: Form of Option Agreement
Exhibit C-1: Form of Option Release
Exhibit D: Preservation Standards
Exhibit E: Form of Escrow Agreement
-35-
<PAGE>
EXHIBIT A
Description of Property
[Attached]
-36-
<PAGE>
EXHIBIT A (Legal Description To Be Inserted)
[Diagram of Reston Town Center]
<PAGE>
EXHIBIT B
THIS DEED, made this _____ day of _____________ 199, by and between RESTON
LAND CORPORATION, a Delaware corporation, party of the first part ("Grantor");
and _______________ party of the second part ("Grantee").
W I T N E S S E T H:
That for and in consideration of the sum of Ten Dollars ($10.00) cash in
hand paid, and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the party of the first part does hereby grant, bargain,
sell and convey unto the party of the second part, with Special Warranty of
Title, all that certain parcel of land, situate and being in Fairfax County,
Virginia, and being more particularly described in Exhibit "A", attached hereto,
and made a part hereof, subject to the following:
TOGETHER WITH AND SUBJECT TO the Declaration of Covenants, Conditions and
Restrictions for Reston Town Center Industrial recorded in Deed Book 7472
at Page 345 et seq. among the land records of Fairfax County, Virginia,
which are hereby incorporated by reference and imposed upon the real
property herein being conveyed. The imposition of the aforesaid Declaration
of Covenants on the land herein conveyed by this Deed and the acceptance of
this Deed by Grantee shall be deemed to fully satisfy and comply with the
provisions of Article VII, Section 1 of such Declaration;
TOGETHER WITH AND SUBJECT TO all other easements, restrictions,
reservations, covenants and rights-of-way of record in the chain of title
to the real property being conveyed.
IN WITNESS WHEREOF, RESTON LAND CORPORATION, a Delaware corporation, has
caused these presents to be executed by its Vice
-37-
<PAGE>
President pursuant to resolutions heretofore duly adopted by its Board of
Directors.
GRANTOR:
RESTON LAND CORPORATION
By: ____________________________
Vice President
GRANTEE:
_____________________________a,
________________________________
By:_____________________________
Name: __________________________
Title: _________________________
STATE OF VIRGINIA
COUNTY OF FAIRFAX, to-wit:
I, the undersigned Notary Public in and for the State and County aforesaid,
whose commission expires on the _____day of _______________ 199 do hereby
certify that _______________ whose name is signed as Vice President of Reston
Land Corporation to the foregoing Deed bearing date on the ____ day of
_____________ 199, personally appeared before me in my County aforesaid and
acknowledged the same to be the act and deed of Reston Land Corporation.
GIVEN under my hand this ______ day of ______________ 199
_________________________________
Notary Public
My Commission Expires:________________
-38-
<PAGE>
STATE OF ______________
COUNTY OF _____________, to-wit:
I, the undersigned Notary Public in and for the State and County aforesaid,
whose commission expires on the _____day of ______________ 199 do hereby certify
that ____________ whose name is signed as _________________ of ________________
___________________________ to the foregoing Deed bearing date on the ____ day
of ____________, 199, personally appeared before me in my County aforesaid and
acknowledged the same to be the act and deed of ________________________________
GIVEN under my hand this ______ day of ______________ 199
_________________________________
Notary Public
My Commission Expires:________________
-39-
<PAGE>
EXHIBIT C
THIS OPTION AGREEMENT, made this ___ day of _________$ 199 by and between
_________________, party of the first part; and RESTON LAND CORPORATION, a
Delaware corporation, party of the second part;
W I T N E S S E T H:
That for and in consideration of one dollar ($1.00) cash in hand paid, and
other good and valuable consideration, receipt whereof is hereby acknowledged,
the party of the first part does grant to Reston Land Corporation, the exclusive
right and option (the "Option") to purchase all of that certain parcel of land
situate, lying and being in Centreville District, Fairfax County, Virginia, and
more particularly described in Exhibit "A" attached hereto and made a part
hereof (hereinafter called the "Property")
Such Option may be exercised only at any time during the one year period
commencing thirty (30) months from the date hereof and ending forty two (42)
months from the date hereof, unless prior to the exercise of the Option the
party of the first part shall begin construction on the Property of up to 150
units of senior housing. The pouring of foundation footings for said building
shall be considered the start of construction so as to nullify the Option to
purchase the Property.
The consideration for such purchase shall be the original price set forth
in an Agreement of Sale (the "Agreement") between and Reston Land Corporation
dated _____________ 199_, and incorporated herein by reference.
-40-
<PAGE>
This Option shall be exercised by Reston Land Corporation by sending
written notice of such exercise to the party of the first part during the option
period.
Should Reston Land Corporation exercise its option hereunder, Settlement
shall be held within thirty (30) days from the date of the exercise of the
option at a place to be selected by Reston Land Corporation and satisfactory to
the party of the first part. Real estate taxes and other charges and
encumbrances shall be adjusted to the date of Settlement and the Property shall
be conveyed by Special Warranty Deed free and clear of all liens, encumbrances
and encroachments, but subject however to the following:
(a) The Declaration of Covenants, Conditions and Restrictions for Reston
Town Center Industrial recorded in Deed Book 7472 at Page 345 et seq.
among the land records of Fairfax County, Virginia.
(b) All other easements, restrictions, reservations and rights of way
affecting the Property, as of the date hereof, and those which have
been subsequently added with approval of the party of the second part.
Reston Land Corporation shall pay the state and local Grantee Tax on the
deed. ____________________ shall pay the state and local Grantor Tax and bear
the cost of preparation of the deed.
If the party of the first part commences construction on the Property of up
to 150 units of senior housing prior to the exercise of the Option, or
alternatively, if Reston Land
-41-
<PAGE>
Corporation fails to exercise the Option prior to expiration of the option
period, this Agreement shall cease as to the Property and shall become null and
void and of no further force and effect.
So long as this Option remains in effect, the party of the first part
warrants and represents that it will not sell, transfer or otherwise dispose of
the Property, without the prior written consent of Reston Land Corporation.
WITNESS the following signature and seal.
__________________________________
-42-
<PAGE>
STATE OF VIRGINIA
COUNTY OF FAIRFAX, to-wit:
I, the undersigned Notary Public in and for the County and State aforesaid,
do hereby certify that _________________ whose name is signed to the above
Option Agreement dated the ____ day of ______________ 199_, has this day
acknowledged the same before me in my county and state aforesaid.
GIVEN under my hand this ______ day of ___________________ 199.
_________________________________
Notary Public
My Commission Expires:________________
-43-
<PAGE>
EXHIBIT C-1
THIS RELEASE is made as of _________________________, 199, by and between
____________________ the party of the first part, and RESTON LAND CORPORATION, a
Delaware corporation;
RECITALS:
By Option Agreement, dated ____________________, by and between the party
of the first part and Reston Land Corporation (the "Option"), the party of the
first part granted to Reston Land Corporation the exclusive right and option to
purchase all of that certain parcel of land situate, lying and being in Hunter
Mill District, Fairfax County, Virginia, and or particularly described in
Exhibit "A" attached hereto and made a part hereof (hereinafter called the
"Property")
NOW, THEREFORE, WITNESSETH THAT for and in consideration of the foregoing
and the sum of Ten Dollars ($10.00) the receipt of which is hereby acknowledged,
the Reston Land Corporation hereby releases, relinquishes and terminates all
rights title and interest which it, as party to the Option, acquired in and to
the Option and the Property described therein.
This Release shall in all respects, be governed, construed, applied and
enforced in accordance with the laws of the Commonwealth of Virginia.
This Release shall be binding upon and inure to the benefit of the
respective legal representatives. successors, assigns, heirs, and devisees of
the parties.
-44-
<PAGE>
WITNESS the following signature and seal:
___________________________ (SEAL)
RESTON LAND CORPORATION
-45-
<PAGE>
STATE OF VIRGINIA
COUNTY OF FAIRFAX, to-wit:
I, the undersigned Notary Public in and for the County and State aforesaid,
do hereby certify that _________________ whose name is signed to the above
Release dated the ____ day of _______________________ 199_, has this day
acknowledged the same before me in my county and state aforesaid.
GIVEN under my hand this ______ day of ____________________ 199 .
_________________________________
Notary Public
My Commission Expires:________________
-46-
<PAGE>
EXHIBIT D
Preservation Standards
[Attached]
-47-
<PAGE>
Projects Subject to DRB Approval
Reston Standards: PRESERVATION OF NATURAL, AREAS
[Diagram of Natural Area to be Preserved]
1. SCOPE:
Field flags and fencing are intended to provide protection to trees and
shrubs within natural areas. In this context, natural area means
essentially "untouched and undisturbed" (i.e., no grubbing may occur).
2. APPROVALS: To obtain the following approvals contact the DRE Secretary at
Reston Association (435-6567) and Architecture & Design at Reston Land
Corporation (RLC) (620-4780).
a. Field Flags shall be in place prior to the use of clearing equipment.
Location shall be field checked by the Design Review Board (DRB) and
Reston Land Corporation (RLC) prior to equipment operation.
b. Fencing shall be in place prior to the use of grading equipment.
Location shall be field checked by RLC prior to equipment operation.
c. Removal of any living vegetation within natural areas must be
specifically approved by DRE.
d. All easements to be placed in natural areas or special changes to
approved site plans shall require approval by DRB and RLC.
3. GENERAL REQUIREMENTS: Fencing required shall be 4' to 6' high snow fencing
or chain link fencing, at the discretion of RLC & DRB.
a. Fencing shall not be nailed to any tree or shrub.
b. Fencing shall be maintained in a vertical position at all times, and
shall not be removed until all heavy equipment is removed from the
site and final grading has commenced.
c. No materials or supplies shall be stored within preservation areas.
d. Any roots from trees to be saved that protrude from a cut in grade
surrounding a save area, must be cut cleanly to grade and, if over 1"
diameter, painted with asphalt base paint (Treekote) to hold moisture.
e. Trees and shrubs located within natural areas that have specifically
been approved for removal shall be cut horizontal as close as possible
to grade. The root system shall remain intact. The size of the natural
area will determine whether such cut materials should remain for
natural decay or be completely
<PAGE>
EXHIBIT E
ESCROW AGREEMENT
THIS ESCROW AGREEMENT made and entered into as of the 6th day of September
1996 by and among RESTON LAND CORPORATION, a Delaware corporation authorized to
conduct business in the Commonwealth of Virginia ("Seller"), CAREMATRIX OF
MASSACHUSETTS, INC., a Delaware corporation authorized to conduct business in
the Commonwealth of Virginia ("Purchaser"), and _____________________ ("Title
Company")
STATEMENT OF PURPOSE
Seller and Purchaser have entered into an Agreement of Sale dated
_________________, 1996 ("Purchase Agreement"), for the sale and purchase of
that certain parcel of ground situate, lying and being in Hunter Mill District,
Fairfax County, Virginia, containing a total of approximately five (5) acres,
and being a portion of Section 95, Block 1, Reston (a portion of Fairfax County
Tax Map No. 17-3-1-5), as more particularly described in the Purchase Agreement
(the "Property"). Purchaser and Seller desire to have the Title Company hold the
Initial Deposit, the Additional Deposit and the Final Deposit, as required under
the Purchase Agreement, in escrow pursuant to the terms of this Agreement .
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
25. Appointment. Purchaser and Seller hereby appoint Title Company as
Escrow Agent hereunder.
26. Earnest Money Deposit. Purchaser has delivered and deposited with the
Title Company to serve as "Escrow Agent", (i) the amount of $50,000.00
representing the Initial Deposit, (ii) the amount of $50,000.00 representing the
Additional Deposit, and (iii) the amount of $50,000.00 representing the Final
Deposit, as required by the Purchase Agreement. The Title Company agrees to
immediately deposit said funds in an account at a federally insured depository
institution, and to hold and disburse said funds, and any interest earned
thereon (together the "Earnest Money") as hereinafter provided.
27. Instructions. Upon written notification from Purchaser and Seller that
the sale contemplated is to be consummated, Title Company shall deliver the
Earnest Money at Closing by wire transfer to Seller to be applied to the
purchase price for the benefit of Purchaser, unless otherwise instructed by the
parties hereto. Upon written notification from both Purchaser and Seller that
the contemplated sale shall not take place, Title Company
-48-
<PAGE>
shall deliver the Earnest Money to Purchaser or to Seller, as directed, or as
otherwise instructed by the parties hereto.
28. Duties of Title Company/Exculpation. Purchaser and Seller agree that in
performing any of its duties under this Agreement, Title Company shall not be
liable for any loss, costs or damage which it may incur as a result of serving
as Title Company hereunder, except for any loss, costs or damage arising out of
its willful default or negligence. Accordingly, Title Company shall not incur
any liability with respect to (a) any action taken or admitted to be taken in
good faith upon advice of its counsel given with respect to any questions
relating to its duties and responsibilities, or (b) to any action taken or
admitted to be taken in reliance upon any document, including any written notice
of instruction provided for in this Agreement, not only as to its due execution
and validity and effectiveness of its provisions, but also to the truth and
accuracy of any information contained therein, which Title Company shall in good
faith believe to be genuine, to have been signed or presented by a proper person
or persons and to conform with the provisions of this Agreement.
29. Indemnification. Purchaser and Seller hereby agree to indemnify and
hold harmless Title Company against any and all losses, claims, damages,
liabilities and expenses, including, without limitation, reasonable attorneys'
fees and disbursements, which may be imposed upon or incurred by Title Company
in connection with its serving as Title Company hereunder, unless such losses,
claims, damages, liabilities and expenses are the result of Title Company's
willful default or negligence in performing its obligations hereunder.
30. Disputes. In an event of dispute between any of the parties hereto,
sufficient in the discretion of Title Company to justify its doing so, Title
Company shall be entitled to tender unto the registry or custody of any court of
competent jurisdiction all money or property held by it under the terms of this
Agreement, together with such legal pleadings as it deems appropriate and
thereupon be discharged.
IN WITNESS WHEREOF, the undersigned have caused this instrument to be duly
executed and sealed as of the day and year first above written.
SELLER:
RESTON LAND CORPORATION, a Delaware
corporation
By: /s/ [Illegible]
-------------------------------
Name: /s/ [Illegible]
-----------------------------
Title: Vice President
----------------------------
-49-
<PAGE>
PURCHASER:
CAREMATRIX OF MASSACHUSETTS, INC., a
Delaware corporation
By:______________________________
Name: ___________________________
Title: __________________________
ESCROW AGENT:
By:______________________________
Name: ___________________________
Title: __________________________
-50-
ALF SITE - 8/26/96
Bonita Bay
------------------
DEPOSIT RECEIPT AND SALES AGREEMENT
THIS AGREEMENT, made and entered into this 5th day of September, 1996, by
and between BONITA BAY PROPERTIES, INC., a Florida Corporation, 3451 Bonita Bay
Boulevard, S.W., Suite 202, Bonita Springs, Florida 33923, hereinafter "Seller",
and CAREMATRIX OF MASSACHUSETTS, INC., (f/k/a CAREMATRIX CORPORATION), a
Delaware corporation, whose address is 197 First Avenue, Needham, Massachusetts
02194, hereinafter "Purchaser".
W I T N E S S E T H:
That for and in consideration of the mutual covenants contained in this
Agreement, other good and valuable considerations, and subject to all the
conditions and restrictions, contained in this Agreement, Seller agrees to sell
to Purchaser and Purchaser agrees to purchase from Seller the land described on
Exhibit A attached hereto, and all easements and rights of way appurtenant to
such land, (collectively, the "Land");
Seller understands and acknowledges that Purchaser intends to develop and
use the Land as a senior housing facility offering personal care with a minimum
of 148 and a maximum of 175 independent and/or assisted living units (provided,
however, that Purchaser at its sole election may elect to construct less than
175 such units), together with related improvements, parking and landscaping
(the "Intended Use").
Seller acknowledges and agrees that Purchaser shall have the right to
designate a nominee to take title to the Land by notice to
<PAGE>
Seller given not later than the Closing Date (as defined below), provided that
such nominee owns or controls or is owned or controlled by (i) Purchaser, any
affiliate of Purchaser, (ii) PhyMatrix Corporation, any affiliate of PhyMatrix
Corporation, or (iii) any entity owned or controlled by or under common control
with Abraham Gosman, Michael Gosman or Andrew Gosman, or any combination of
them.
1. PURCHASE PRICE AND CLOSING. The overall purchase price for the Land
shall be One Million Three Hundred Sixty Thousand Dollars ($1,360,000.00),
payable as follows:
A. Purchaser has paid Twenty-Five Thousand Dollars ($25,000.00) upon
execution of a letter of intent, which deposit is held by Attorneys for
Purchaser, Gunster, Yoakley, Valdes-Fauli and Stewart, P.A., Phillips
Point, Suite 500 East, 777 South Flagler Drive, West Palm Beach, Florida
33940-6194, ("Escrow Agent").
B. An additional deposit of Fifty Thousand Dollars ($50,000) will be
paid by Purchaser to the Escrow Agent upon execution of this Agreement and
will also be held in escrow by the Escrow Agent.
C. The last date upon which both parties execute this Agreement, shall
be the "Effective Date." All monies paid pursuant to this Paragraph shall
be referred to as "Deposits" and upon receipt of a duly executed I.R.S.
form W-9 from Purchaser, shall be deposited in an interest bearing money
market account in a Federally
-2-
<PAGE>
insured depository institution. All interest shall be paid to Purchaser at
the time said Deposits are disbursed pursuant to this Agreement, unless
such Deposits are forfeited to Seller as a result of Purchaser's default.
If Purchaser is entitled to and in fact exercises any of Purchaser's
options to terminate this Agreement as provided herein, then the Deposits
and all other payments made to Escrow Agent or Seller by Purchaser
hereunder shall be promptly refunded in full by Escrow Agent and/or Seller,
as appropriate, to Purchaser in accordance with the terms of this
Agreement, but in no event later than ten (10) calendar days after such
notice of termination is given. If Seller fails to authorize the Escrow
Agent to make said refund when due, Seller shall be responsible to pay
Purchaser interest on such funds at a rate per annum equal to the prime
rate or base rate of The First National Bank of Boston plus ten percent
(10%) per annum, commencing upon the date notice of termination is given
and continuing until said refund has been made in full.
D. Purchaser shall pay One Million Three Hundred Sixty Thousand
Dollars ($1,360,000.00) cash at closing on the Land, subject to the
adjustments set forth in paragraph 1.G below of which the deposits referred
to in Sub-Paragraphs A and B shall be a part.
E. All monies due shall be U.S. funds in the form of cash, cashier's
check drawn on a local bank or wire
-3-
<PAGE>
transfer completed before noon on the date due. Any prorations shall be
added to or deducted from cash at closing.
F. The closing hereunder shall take place at the office of Seller's
attorney. Closing on the Land shall occur at 12:00 E.S.T. on March 3, 1997,
unless extended as provided herein (the "Closing Date"). If Purchaser is
diligently pursuing the financing and Permits (as defined below) necessary
to construct its proposed development as specified in paragraph 2.B. below,
but has not obtained the same by February 21, 1997, Purchaser may extend
the Closing Date for up to two thirty (30) day periods to no later than May
2, 1997, by giving Seller written notices of each thirty (30) day extension
a minimum of ten (10) days prior to the closing date, each notice being
accompanied by Seven Thousand Five Hundred Dollars ($7,500). Each payment
for an extension shall be paid for each thirty (30) day period or any
fraction thereof. Extension payments are non-refundable if the closing does
not occur, except in the event of Seller's default or Buyer's failure to
obtain permits. The extension payments shall be credited against the
purchase price at closing.
G. The purchase price referred to in Paragraph 1.A. above (the
"Purchase Price") shall be adjusted to reflect the following:
(i) Assessments due under the recorded declarations affecting the
Land shall be apportioned as of the Closing
-4-
<PAGE>
Date, and the net amount shall be added to or deducted from the
Purchase Price, as the case may be;
(ii) Ad valorem real estate taxes shall be adjusted in the manner
set forth in Paragraph 12.C. below;
(iii) If at any time following the making of any of the
adjustments to the Purchase Price, the amount thereof shall prove to
be incorrect, or it should be discovered that some adjustment which
should have been made was inadvertently omitted altogether, the party
in whose favor the error was made shall pay the sum necessary to
correct such error to the other party promptly following receipt of
notice of such error from such other party. The provisions of this
Paragraph 1.G. shall survive the closing of the transaction
contemplated by this Agreement.
2. INSPECTION OF LAND; PERMITS
A. Purchaser shall have ninety (90) days from the Effective Date
("Inspection Period") to inspect the Land and conduct any tests and studies
necessary to satisfy Purchaser that the Land is suitable for the Intended
Use. Seller hereby acknowledges granting Purchaser and its agents and
employees the right to enter on to the Land commencing on the Effective
Date, through the Closing Date, unless this Agreement is canceled pursuant
to terms herein, for the purpose of performing inspections, appraisals,
environmental tests, including but not limited to soil borings, and all
other
-5-
<PAGE>
relevant investigation required by Purchaser. Seller acknowledges and
agrees that Purchaser and its representatives shall have access to the Land
at any time during normal business hours and from time to time, at
Purchaser's sole cost and expense:
(i) to show the Land to third parties (including, without
limitation, contractors, engineers, architects, attorneys, insurers,
banks and other lenders or investors, and prospective tenants,
occupants or buyers) and
(ii) to perform any and all tests, borings, inspections,
environmental site assessments and measurements which Purchaser
reasonably deems necessary or appropriate hereunder, including without
limitation, for purposes of locating all utility conduits serving the
Land, making soil borings, performing soil compaction tests,
performing mechanical or structural inspections, and making such
surveys and other topographical and engineering studies, and other
tests and studies as Purchaser or Purchaser's lender may deem
necessary or appropriate. Seller further acknowledges and agrees that
Purchaser may discuss the Land and/or the Intended Use with any
federal, county, state or local officials or authorities concerning
variances, permits, certificates, consents, approvals and other
governmental regulations for the use, operation, and/or leasing of the
Land.
-6-
<PAGE>
Seller shall not be liable to Purchaser for any damage suffered by
Purchaser as a result of any delays or accidents resulting from such
inspections or tests performed by or for Purchaser.
B. Purchaser shall have until February 21, 1997, to
(i) obtain all permits, consents, licenses, technical deviations
and approvals, including all building permits (collectively "Permits")
necessary for the Intended Use of the Property in accordance with, and
as contemplated by, the Final plans and specifications approved by the
parties hereunder (the "Development"), and the relevant appeal periods
for such Permits, if any, shall have expired without any appeals
having been taken, and (ii) to obtain financing for the Development
upon such terms and conditions which are satisfactory to Purchaser in
its sole discretion (the "Approval Period"). Purchaser shall be
obligated to diligently pursue obtaining such Permits and financing.
Seller agrees to reasonably cooperate with Purchaser in obtaining such
Permits and financing, including the execution of any necessary
documents or approvals. If either the financing or all Permits have
not been obtained (including the expiration of applicable appeal
periods without any appeals being filed) by February 21, 1997,
Purchaser shall have the right to extend the Approval
-7-
<PAGE>
Period for up to two additional thirty (30) day periods by providing a
notice in the manner described in Paragraph 1.F above. Each extension
shall be for the sole purpose of obtaining financing and completing
the required regulatory approval process as set forth herein. However,
Purchaser may not commence any work or construction whatsoever,
including clearing, except as is necessary to conduct Inspection
Period investigations on any portion of the Land until Purchaser has
closed on the Land.
C. Purchaser agrees to indemnify, defend and hold harmless Seller from
and against any and all loss, cost, damage or expense (including without
limitation reasonable attorneys' fees and expenses, including on appeal)
resulting from Purchaser's (or its agents', employees' and contractors')
entry on the Land and/or the performance by them of any inspections, tests
or other actions, except where any such loss, cost, damage or expense is
the result of Seller's negligence, and in all events such agreement shall
survive the termination of, and any closing under, this Agreement for a
period equal to the applicable statutes of limitations for any claim made
against Seller for which Purchaser's indemnity applies.
D. Purchaser may, for any reason or no reason, cancel this Agreement
on or before the expiration of the Inspection
-8-
<PAGE>
Period. After the expiration of the Inspection Period, Purchaser may only
cancel this Agreement if it fails to obtain all Permits (or determines that
the same will not be forthcoming) or if it fails to obtain financing for
the Development upon such terms and conditions as are satisfactory to the
Purchaser in its sole discretion. The cancellation must be by written
notice sent to Seller on or before 5:00 p.m. E.S.T. at the expiration of
the Inspection Period or Approval Period (which ever is applicable),
whereupon all Deposits, together with interest earned thereon, shall be
returned to Purchaser, and each party shall be relieved of any obligations
hereunder except Purchaser's indemnifications provided in Sub-Paragraph C
above and Paragraph 19 below.
E. If Purchaser has not notified Seller that it is canceling this
Agreement as specified herein, it shall be conclusively presumed that
Purchaser has elected to close hereunder.
F. Seller covenants that between the date of this Agreement and the
closing:
(i) Promptly upon its execution hereof and in any event within
five (5) days following its execution hereof, Seller will furnish to
Purchaser for Purchaser's review, inspection and approval complete and
accurate copies of all records and documentation and all information
in its possession (or in the possession of Seller's attorneys or
representatives) as Purchaser may
-9-
<PAGE>
reasonably request concerning the ownership and condition of the Land
or are the subject of the declarations referred to herein (for
informational purposes, without warranty or representation regarding
its accuracy), including, without limitation, any available plans and
surveys, engineering reports, recorded title documents, soil tests,
environmental site assessments, permits, approvals, and such other
available items as requested by Purchaser. Except as necessary in
connection with the permitting and approval process for the Project,
Purchaser will hold all such documents, data and information obtained
solely from Seller confidential. Upon termination of this Agreement as
provided herein, and provided that such termination is not a result of
Seller's default hereunder, Purchaser will promptly return to Seller
all such information obtained from Seller;
(ii) Seller shall not permit any new occupancy of or enter into
any new lease for, space in or on the Land, or any portion thereof, or
enter into a renew any management, maintenance, service or other
agreement affecting the Land, or enter into a renew any management,
maintenance, service or other agreement affecting the Land, unless
Purchaser has previously approved such agreement in writing;
-10-
<PAGE>
(iii) Seller shall not prosecute, and shall not withdraw, settle
or otherwise compromise, any protest or reduction proceeding affecting
real estate taxes assessed against the Land for the year in which the
closing occurs or any prior or subsequent year without the prior
written consent of Purchaser; and
(iv) Seller shall not encumber, modify or alter the Land in any
respect.
3. USE OF LAND. Seller represents that the Land may be used by Purchaser to
develop the Land for the Intended Use, together with adequate parking of no less
than one hundred forty two (142) spaces, driveways, and landscaping, consistent
with the "Site Restrictions" to be delivered by Seller as described in Sub
Paragraph 4.B. below. The Preliminary Site Plans attached as Exhibit B are
approved by Seller.
4. PRE-CLOSING DEVELOPMENT ACTIONS. In addition to the other pre-closing
actions set forth herein, the parties agree to take the following actions after
the Effective Date and by the deadlines herein established:
A. Within forty-five (45) days after the Effective Date, Purchaser
shall at its sole expense cause to be prepared and submit to Seller a PUD
site plan of the Development, which site plan shall be in conformance with
one of the Preliminary Site Plans (the "PUD Site Plan"). Within five (5)
business days after receipt of the PUD Site Plan, Seller shall submit the
same to Lee County and
-11-
<PAGE>
diligently attempt to obtain written approval for the PUD Site Plan from
the appropriate governmental officials of Lee County, Florida. The date on
which such approval is granted, if at all, is hereinafter referred to as
the "PUD Approval Date." If Seller fails to obtain such approval within
thirty (30) days after submission, then Purchaser shall be entitled to
terminate this Agreement in accordance with Paragraph 2.D above.
B. Within fifteen (15) days after the PUD Approval Date, Seller shall
cause to be prepared and shall submit to Purchaser "Site Restrictions" for
the Land, consistent with the terms of Paragraph 3 above.
C. Within forty-five (45) days after the PUD Approval Date, but in any
event prior to submission to Lee County, purchaser will cause to be
prepared and shall submit to Seller final site development plans ("Final
Site Development Plans") meaning the final plans and specifications for the
site development work ("Site Development Work") proposed to be submitted by
Purchaser to Lee County, Florida ("Lee County") with applications for a
final development order ("FDO") permitting construction of infrastructure
on the Land. The Final Site Development Plans will be prepared at
Purchaser's expense and shall be in substantial conformance with one of the
proposed Preliminary Site Plans.
D. Within forty-five (45) days after the PUD Approval Date, Purchaser
shall cause to be prepared and
-12-
<PAGE>
submit to Seller elevations and related design proposals (including without
limitation proposals showing exterior materials and colors) for the
building and related improvements Purchaser intends to build upon the Land
(the "Building Plans") reasonably sufficient in detail to allow Seller to
confirm consistency of the building and related improvements with the other
development existing and contemplated within the Bonita Bay development and
to otherwise approve the building and related improvements. The Building
Plans shall be prepared at Purchaser's expense. The final plans and
specifications for the building and related improvements, shall be a true
extension of and consistent with the Building Plans.
E. Within forty-five (45) days after the PUD Approval Date, Purchaser
shall cause to be prepared and submit to Seller signage and landscaping
plans (the "Signage Plan" and "Landscaping Plan", respectively) for the
signage and landscaping that Purchaser plans to install on the Land. The
Signage Plan and Landscaping Plan shall be prepared at Purchaser's expense.
F. Seller acknowledges that it has appointed Dick Plowman and Dennis
Gilkey and J. Gleeson (the "Appointees") as members of the New Construction
Committee which has been formed pursuant to the Declaration of Covenants,
Conditions and Restrictions for Bonita Bay Merchants' Association recorded
August 1, 1994
-13-
<PAGE>
in official Records Book 2523, Page 3148, Public Records of Lee County,
Florida. Seller shall cause all Appointees (and such other members of the
New Construction Committee which Seller may appoint after the Effective
Date, or which are affiliated with or under the control of Seller) to
approve any plans submitted by Purchaser so long as such plans are in
substantial conformance with the proposed Site Plans, Building Plans,
signage Plan or Landscaping Plan, as the case may be.
G. All other permits or approvals required from any governmental
authority to construct and operate Purchaser's Development shall be
Purchaser's sole obligation.
H. The party receiving documents pursuant to SubParagraphs 4.A - D
above shall review and provide written comments (in reasonable detail) or
approval to the other party within fifteen (15) days of receipt. Failure to
timely provide such written comments shall mean that the documents are
acceptable as submitted. Purchaser understands and agrees that Seller has
the right to reject any proposed site plans, plans and specifications for
aesthetic reasons including, without limitation, the architectural
components and theme and colors so long as any denial is supported in
writing with constructive resolutions. It is the parties' intent hereunder
that all such documents shall be approved prior
-14-
<PAGE>
to the expiration of the Inspection Period. It the parties are unable to
reach agreement on all such documents, Purchaser or Seller may cancel this
Agreement during the forty-five (45) day period following the PUD Approval
Date by giving written notice to the other party, whereupon all Deposits
shall be returned to Purchaser, and each party shall be relieved of any
obligations hereunder except Purchaser's indemnifications provided in
Sub-Paragraph 2.C. herein and the provisions of Paragraph 19 below. If
Purchaser cancels the Agreement, the provisions of Sub-Paragraph 2.D. shall
apply.
5. INTENTIONALLY OMITTED.
6. INTENTIONALLY OMITTED.
7. COMPLETION OF CONSTRUCTION.
A. Purchaser agrees to commence construction of the Development
(defined as completion of the foundation footers) within twelve (12) months
after Closing. If Purchaser fails to timely commence construction, Seller
shall have a right to repurchase the Land upon written notice to Purchaser.
Seller shall have three (3) months within which to exercise its right and
closing shall occur thirty (30) days thereafter. The Seller's repurchase
price shall be the Purchaser's price on the original sale, deducting from
that price the Seller's costs from both the original and repurchase sales.
If Purchaser has commenced construction after the deadline for
-15-
<PAGE>
commencement but prior to Seller's exercise of its right of repurchase,
then Seller shall not have a right of repurchase. However, Purchaser's
deadline for completion of construction (as defined below) shall be thirty
(30) months after Closing. If Seller fails to exercise its repurchase right
in accordance with this Paragraph 7, then such repurchase right shall
automatically be terminated and of no further force or effect.
Notwithstanding the foregoing, in no event shall Purchaser be obligated to
develop or construct anything upon the Land, whether as contemplated by the
Preliminary Site Plans or otherwise.
B. In the event that the Purchaser has commenced construction of the
Development but fails to complete construction (defined as securing a
temporary or permanent certificate of occupancy from the appropriate
authorities of Lee County) within eighteen (18) months after commencement,
Seller shall be entitled to enforce Purchaser's obligation to complete by
suit for specific performance. Provided, however that the time period to
complete all construction on the Land shall be extended for delays caused
by Seller or by events constituting Force Majeure. For purposes of this
Agreement, the term Force Majeure shall be defined as any "Acts of God" or
other acts outside of the reasonable control of the Purchaser.
8. TITLE EVIDENCE.
-16-
<PAGE>
A. Purchaser may, at its option, obtain a title insurance commitment
(and an owner's policy of title insurance after closing) for the Land. In
any event, without limiting Purchaser's right to terminate under Paragraph
2.D., Seller shall convey fee simple marketable and insurable title to the
Land by Warranty Deed, subject only to the following "Permitted
Encumbrances":
(1) Real property taxes for the current and subsequent years which
are not yet due or payable
(2) Covenants, conditions, restrictions, easements, terms, notices,
and other matters as reflected on the Plats of Bonita Bay Unit 28
recorded in Plat Book 55, Page 91,
(3) Zoning, subdivision, building and other ordinances and
regulations of Lee County, Florida;
(4) The Commercial Restrictions recorded in O.R. Book 2523, Page 3148
of the Public Records of Lee County, Florida, which restrictions
shall impose assessments for maintenance of Common Areas;
(5) The Site Restrictions;
(6) Declaration of Protective Covenants and Restrictions recorded in
O.R. Book 2523, page 3262, Public Records of Lee County, Florida.
B. In addition to the other conditions to be satisfied hereunder,
Purchaser's obligations to close hereunder are expressly contingent upon
Purchaser obtaining a commitment from a title insurance company selected by
Purchaser pursuant to which such company agrees to issue to Purchaser an
ALTA Form B owners' policy of title insurance in the amount of the Purchase
Price insuring Purchaser's title to the Land and its
-17-
<PAGE>
mortgagee's interest thereto, subject only the Permitted Encumbrances, and
provided the same do not interfere (in Purchaser's reasonable discretion)
with the development, use, operation, leasing and/or sale of the Land for
the Intended Use and containing such endorsements as Purchaser may require
and as may be available under applicable Florida law. Within thirty (30)
days after the Effective Date, Purchaser shall obtain the title insurance
commitment and notify Seller in writing specifying its objection to any
matters therein which are not Permitted Encumbrances. Seller shall cure
such objections within sixty (60) days following receipt of such notice,
failing which Purchaser shall have the option of either accepting title as
it then exists or terminating this Agreement, in which event the Deposits
together with all interest thereon shall be immediately refunded to
Purchaser, where upon all obligations of the parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto. At
closing, the title insurance commitment shall be endorsed to delete any and
all requirements or preconditions to the issuance of the title insurance
policy (and Seller shall execute and deliver such documents and instruments
and undertake such actions and activities as may be required to delete such
requirements or preconditions) and to delete any exception for matters
arising or
-18-
<PAGE>
attaching subsequent to the effective date of the commitment and before
acquisition of record of fee simple title to the Land by Purchaser and any
standard exception. If such endorsements cannot be obtained by Purchaser,
Purchaser shall notify Seller in writing of such fact. Seller shall obtain
such endorsements between ninety (90) days following receipt of such
notice, failing which Purchaser shall have the option of either accepting
title as it then exists or terminating this Agreement, in which event the
Deposits together with all interest thereon shall be immediately refunded
to Purchaser, whereupon all obligations of the parties hereto shall cease
and this Agreement shall be void and without recourse as to the parties
hereto.
9. OTHER CONDITIONS AND RESTRICTIONS. Without limiting Purchaser's rights
under Paragraph 2.D. above, Purchaser understands and agrees that:
A. Use of the Land is subject to the permitted zoning and other
conditions and restraints imposed by PUD Ordinance 81-55 (the "Ordinance")
enacted by the Board of County Commissioners of Lee County, Florida, and by
Development Order 81-55 (the "DO") also issued by the Board, and by any
amendments to the PUD Ordinance and Development Order. The Ordinance and
the DO have been delivered to Purchaser upon execution hereof.
-19-
<PAGE>
B. Surface water drainage and management for the Land conform to the
Bonita Bay Master Development Plan.
C. The Land will be conveyed subject to the Commercial Restrictions
recorded in O.R. Book 2523, Page 3148, et. seq., of the Public Records of
Lee County, Florida, which created a property owners association for the
Commercial Development and other commercially zoned property within Bonita
Bay. Purchaser understands and agrees that ownership of the Land shall not
confer upon Purchaser, or its successors, assigns or any of its customers,
any right of access to or use of any of the amenities within the Bonita Bay
development intended for the use of its residential owners, including but
not limited to, parks, bike paths, the golf or tennis club, or the beach
park.
10. REPRESENTATIONS AND WARRANTIES. As part of the consideration of this
Agreement, Seller hereby makes the following representations and warranties
which Seller shall reaffirm as of the closing date:
A. Seller has not and will not make any arrangements concerning the
use of the Land without the approval of Purchaser, except such agreements
that are actually terminable upon closing on the Land and do not physically
alter the Land. No changes to the covenants, restrictions and association
documents which affect the Land shall be made by Seller without prior
written notification to Purchaser.
-20-
<PAGE>
B. All ad valorem property taxes for the Land have been fully paid for
the year 1995, and all prior years, and except for assessments which may be
levied pursuant to the Commercial Restrictions, there are no special or
other assessments levied against the Land which are not yet a lien on the
Land, and the Land is not benefitted by existing or contemplated
improvements which may result in special taxes or assessments to be paid
subsequent to the date hereof.
C. No representation, covenant or warranty by Seller nor any statement
or certification given or to be given to Purchaser hereunder, or with
respect to the transaction contemplated hereby, contains or will contain,
on the dates as of which they are given or made, any untrue statement of a
material fact necessary to make the statements contained therein not
misleading.
D. Except for this Agreement, the Land is currently not subject to nor
shall Seller enter into any purchase contracts or options or the like.
E. There are currently no applications, ordinances, petitions,
resolutions or other matters pending before any governmental agency which
would adversely affect the development of the Land for the Intended Use in
accordance with this Agreement and Seller shall not take any affirmative
action during the term of this Agreement which could so affect the Land.
-21-
<PAGE>
F. The Land is zoned C-1, which permits the construction of the
Development for the Intended Use as described in Paragraph 3.
G. To the best of Seller's knowledge and belief, there are currently
no condemnation proceedings threatened or pending which would affect any or
all of the Land or the Commercial Development. There are no matters
threatened or pending before any governmental agency in regard to access
routes, curb cuts, median strips, or other contemplated actions of public
agencies which, in the exercise of Seller's reasonable judgment, might tend
to diminish or curtail the full flow of traffic by the Land and access
thereto.
H. To the best of Seller's knowledge: the Land is free of all
hazardous materials or substances; the Land has been operated and
maintained in compliance with all applicable environmental laws, statutes,
ordinances, rules, and regulations; no release of any hazardous substance
or discharge of any solid or hazardous waste has taken place on the Land;
no migration of hazardous waste or hazardous substances has taken place
from the Land which would cause the release of any hazardous substance or
discharge of any solid or hazardous waste on any adjoining lands or any
other lands in the vicinity of the Land, there are no bulk or underground
storage tanks on, in or adjacent to the Land, and there are no threatened
or endangered species of wildlife on the Land as such terms are defined by
applicable Federal or State law.
-22-
<PAGE>
I. Seller is duly organized, validly existing and in good standing
under the laws of Florida, and has the legal right, power and authority to
enter into this Agreement and to perform all of its obligations hereunder,
and this Agreement constitutes the legal, valid and binding obligation of
Seller, enforceable in accordance with its terms. The execution by the
undersigned officer of Seller on behalf of Seller and delivery of this
Agreement, and the performance by Seller of its obligations hereunder, have
been duly authorized by all necessary action by and on behalf of Seller and
will not conflict with, or result in a breach of, any of the terms,
covenants and provisions of any agreement or instrument to which Seller is
a party or by which it is bound, or, to the best of Seller's knowledge, any
permit, regulation, order, judgment, writ, injunction or decree of any
court or governmental authority.
J. No consent, approval or other authorization of, or registration,
declaration or filing with, any court or governmental agency or commission
is required for the due execution, delivery and performance of this
Agreement by Seller or for the validity or enforceability thereof against
Seller.
K. There are no uncured notices, suits, orders, decrees or judgments
relative to violations of, nor to the best of Seller's knowledge, any other
violations of, (A) any easement, restrictive covenant or other matter of
record affecting the
-23-
<PAGE>
Land or any part thereof, or (B) any laws, statutes, ordinances, codes,
regulations, rules, orders, or other requirements of any local, state or
federal authority or any other governmental entity or agency having
jurisdiction over the Land or any part thereof, including, without
limitation, any of the foregoing affecting zoning, subdivision, building,
health, traffic, environmental, hazardous waste or flood control matters.
L. There are no other suits, actions or proceedings pending or, to the
best of Seller's knowledge, threatened, against or affecting the Land or
any of the transactions provided for herein before any court or
administrative agency or officer, and Seller is not in default with
respect to any judgment, order, writ, injunction, rule or regulation of any
court or governmental agency or office to which Seller is subject in any
way affecting the Land or any of the transactions provided for herein.
M. There are no leases, subleases, licenses or other rental agreements
or occupancy agreements (written or oral) which grant any possessory
interest in and to any portion of the Land or that otherwise give rights
with regard to the use of any portion of the Land. There are no service,
maintenance, management or similar contracts relating to or affecting the
Land.
N. Seller is familiar with the provisions of Sections 897 and 1445 of
the Internal Revenue Code (the "Code"), and
-24-
<PAGE>
Seller is not a "foreign person" as that term is defined in Section
1445(f)(3) of the Code.
O. The Land has adequate, direct, indefeasible legal and practical
access of record for ingress from and egress to a paved public road.
P. The Land is in full compliance with all applicable building,
zoning, land use classification, platting and subdivision laws, rules and
regulations.
Q. Purchaser's development of the Property for the Intended Use will
not (i) require the filing of a Notice of Proposed Change pursuant to
Section 380.06, Florida Statutes, or (ii) constitute a Substantial
Deviation from the DO pursuant to Section 380.06, Florida Statutes. Seller
acknowledges and agrees that, if for any reason whatsoever, a Notice of
Proposed change is required to be filed with the Florida Department of
Community Affairs1 then (a) Seller shall be obligated, at its sole cost and
expense, to make such filing, (b) Seller shall indemnify, defend and hold
Purchaser harmless from and against any and all claims, losses,
liabilities, damages, expenses and fees, including without limitation,
reasonable attorneys' fees and expenses, incurred by Purchaser in
connection with the need for such filing, and (c) if the need for such
filing postpones the Closing Date (as the same may be extended by purchaser
under Paragraph 1.F above) for a period of more than sixty (60) days, then,
Purchaser shall have the option of terminating this Agreement,
-25-
<PAGE>
in which event the Deposits together with all interest thereon shall be
immediately refunded to Purchaser. If the need for such filing postpones
the Closing Date (as the same may be extended by Purchaser under Paragraph
1.F. above) for a period for more than sixty (60) days, and Purchaser
elects not to terminate this Agreement in accordance with this Paragraph
10.Q, then time period in which Purchaser is obligated to commence and
complete construction of the Development under Paragraph 7 above shall be
extended for the period of time commencing on the Closing Date and
terminating on the date upon which such filing is unconditionally approved
by the Florida Department of Community Affairs.
R. There are sufficient unallocated dwelling units and sufficient
unallocated vehicle trips under the Ordinance and the DO, so that Purchaser
will have the requisite number of dwelling units and vehicle trips under
applicable law to develop the Property for Intended Use. Seller further
represents and warrants that (i) there will not be any conditions precedent
under the Ordinance or the DO to Purchaser's use of such dwelling units and
vehicle trips, and (ii) Purchaser's development of the Property for the
Intended Use will not require Purchaser to construct any off-site
infrastructure improvements under the Ordinance or the DO.
S. Purchaser represents and warrants that Purchaser is duly organized,
validly existing and in good standing under the laws of Delaware, and has
the legal right, power and
-26-
<PAGE>
authority to enter into this Agreement and to perform all of its
obligations hereunder, and the execution and delivery of this Agreement and
the performance by Purchaser of its obligations hereunder, have been or
will be duly authorized by all necessary corporate action at the Closing
Date; and this Agreement and Purchaser's performance hereunder will not
conflict with, or result in a breach of, any of the terms, covenants and
provisions of the articles of organization or by-laws of Purchaser, as same
may have been amended or, to the best of Purchaser's knowledge, or order,
judgment, writ, injunction or decree of any court or any agreement or
instrument to which Purchaser is a party or by which it is bound.
T. Seller agrees to indemnify, defend and hold Purchaser harmless from
and against any and all claims, losses, liabilities, damages, expenses and
fees, including without limitation, reasonable attorneys' fees and
expenses1 incurred by Purchaser as the result of the failure of any of
Seller's warranties and representations contained in this Paragraph 10 or
elsewhere in this Agreement. Conversely, Purchaser agrees to indemnify and
hold Seller harmless from and against any and all claims, losses,
liabilities, damages, expenses and fees, including without limitation,
reasonable attorneys' fees and expenses, incurred by Seller as the result
of the failure of any of Purchaser's warranties and representations
contained in this Paragraph 10 or elsewhere in
-27-
<PAGE>
this Agreement. The provisions of this Paragraph 10 shall survive the
closing of the transaction contemplated by the Agreement.
11. OTHER INFRASTRUCTURE. Purchaser understands and agrees that:
A. Bonita Springs Utilities, Inc., is the supplier of potable water
and sewer to the Land. Purchaser agrees to abide by the rules, regulations
and fees of Bonita Springs Utilities, Inc. In all events, Purchaser shall
be solely responsible for all water, sewer and irrigation tap-in and
connection fees, capacity reservation fees, and meter fees and will pay
same as and when due such that Purchaser (and Seller) may comply with its
obligations hereunder. Purchaser shall be responsible for all impact fees
(ANC fees).
B. Irrigation water will be provided by Resource Conservation Systems,
Inc. through a system separate and distinct from potable water and there
will be meter fees, connection fees and other charges associated therewith
(which shall be paid by Purchaser). Further, Purchaser understands and
agrees that no wells may be drilled on the Land.
C. Seller represents to Purchaser that it has obtained a surface water
management permit for the stormwater management system for the Bonita Bay
development. Purchaser must comply with said permit and additional
filtration and purification of stormwater
-28-
<PAGE>
prior to such stormwater entering retention areas may be required to comply
with said permit.
12. CLOSING COSTS. Seller and Purchaser agree to the Closing costs and
recording expenses as follows:
A. Seller agrees to pay.
(1) Preparation of statutory warranty deed and recording costs
associated therewith;
(2) Special taxes or assessments for which a bill has been rendered
by governmental authority prior to closing of this Agreement.
Seller represents that it will not take or cause to be taken any
action to delay until after closing the assessment of any special
tax or assessment;
(3) State documentary stamps to be affixed to the warranty deed;
(4) Seller's attorney's fees; and
(5) Costs of preparing all closing documents as described in
paragraph 13 herein.
B. Purchaser agrees to pay:
(1) Cost of any Owner's or Mortgagee's Title Insurance Policy;
(2) Cost of any survey, if obtained.
(3) State documentary stamps and intangible tax on any note and
mortgage and all recording fees for any note and mortgage;
(4) Special taxes or assessments for which no bill has been rendered
by governmental authority prior to closing of this Agreement.
Purchaser represents that it will not take or cause to be taken
any action to delay closing until after the rendering of any bill
for special taxes or assessments;
(5) Purchaser's attorney's fees;
(6) A current environmental site assessment for the Property.
-29-
<PAGE>
C. At the closing, ad valorem real estate taxes shall be prorated
between the parties through the day of closing. Taxes shall be prorated
based on the taxes for the current year. If the closing occurs on a date
when the current year's millage is not fixed and current year's assessment
is available, taxes will be prorated based upon such assessment and the
prior year's millage. If the current year's assessment is not available,
then taxes will be prorated based on the prior year's tax. If taxes are
being adjusted on a portion of the Land which is included in a tax bill
covering additional lands, taxes shall be estimated based on the acreage of
the Land as compared to the acreage of all property covered by the tax
bill, unless such method would lead to an unjust result, in which event a
substitute just method shall be used. A tax proration based upon an
estimate shall, at the request of either party, be subsequently readjusted
upon receipt of the actual tax bill.
D. Any items of cost or expense not specifically allocated above shall
be paid by the party to the transaction who customarily bears such cost or
expense within the jurisdiction where the Property is located.
13. CLOSING DOCUMENTS. Conveyance shall be by warranty deeds (statutory
form) at closing and Seller shall convey good, insurable and marketable title to
the Land subject only to the Permitted Encumbrances and any other matters
expressly excepted herein. At
-30-
<PAGE>
the closing hereunder, Seller shall deliver or cause to be delivered to
purchaser:
A. Seller's Affidavit in customary form sufficient to allow a Title
Company to delete the standard printed Schedule B exceptions, except for
taxes for the current year which are not due or payable; and
B. Certificate of Non-Foreign Status evidencing that Seller is not a
foreign person (in compliance with I.R.C. 1445 and applicable regulations);
and
C. Warranty Deed.
D. An Assignment of Seller's entire interest in any permits, licenses
or approvals affecting the Land (provided, however, in the absence of an
express assignment, delivery of the Deed will conclusively be deemed to
constitute the assignment of all of such permits, licenses and approvals to
Purchaser).
E. A certificate by Seller to the effect that all of the
representations and warranties set forth in this Agreement remain true and
correct as of the Closing Date.
F. A 1099-B Form.
G. A W-9 Form stating that no backup withholding is necessary to
disburse Seller's share, if any, of the interest earned on the Deposits.
H. A DR-219 Form.
I. An opinion of Seller's counsel addressed to Purchaser, Purchaser's
lender, and if required, Purchaser's
-31-
<PAGE>
title insurance company and/or counsel, in form and substance reasonably
satisfactory to Purchaser's counsel, confirming Seller's capacity, right
and authority to convey the Property and to otherwise consummate the
transactions contemplated by this Agreement, and that all persons signing
on behalf of Seller have been duly authorized and directed to execute,
acknowledge and deliver all documents necessary or convenient to so convey
and consummate such transactions.
J. Such documents, certificates and instruments reasonably deemed
necessary or appropriate by Purchaser's counsel to effectuate the
transactions which are the subject of this Agreement.
The parties shall each execute and deliver all customary documents or
documents referenced herein in order to effect the closing.
14. DEFAULT, TERMINATION
A. Default by Purchaser, Termination and Remedies.
If Purchaser shall fail to fulfill its agreements herein on the
Closing Date, Seller's sole and exclusive remedy shall be to retain the
Deposits and any interest thereon as full and complete liquidated damages,
both at law and in equity, whereupon this Agreement shall terminate without
further recourse to either party; provided, however, that if Purchaser
closes and then fails to construct the Project in substantial accordance
with the plans approved pursuant to Paragraph 4,
-32-
<PAGE>
then Seller shall have the right to seek specific performance in accordance
with such plans.
B. Default by Seller. If for any reason other than failure of Seller
to cure defects in title after diligent effort within the time periods
provided in Paragraph 8.B above, Seller fails, neglects, or refuses to
perform under this Agreement, the Purchaser may seek specific performance
or elect to receive the return of Purchaser's deposits without waiving its
right to pursue any remedies permitted by law.
15. ATTORNEY'S FEES. Seller and Purchaser agree that in the event it
becomes necessary for either party to litigate or to enforce its rights under
the terms of this Agreement, then, in that event, the successful party shall be
entitled to recover reasonable attorney's fees and the cost of such litigation,
which fees and costs shall include those incurred by reason of any appellate
proceedings.
16. RECORDING. Seller and Purchaser agree this Agreement shall not be
recorded among the public records of any county in the State of Florida.
17. SURVIVAL. All terms; conditions, covenants, and agreements contained in
this Agreement which are not fully performed at or by the Closing Date,
including, but not limited to, those contained in Paragraphs 2.C., 6, 7, 10, 11
and 19 shall survive the closing and be binding on Seller and Purchaser and any
subsequent purchaser or owner of all or a portion of the Land.
-33-
<PAGE>
18. NOTICE. Notice shall be deemed properly given hereunder when made in
writing and hand-delivered by courier or messenger, sent by certified mail,
return receipt requested, or by Federal Express (or other nationally known
overnight courier), with sufficient postage costs prepaid thereon to carry it to
its addressed destination; and the said notices shall be addressed as follows:
For the Seller:
Richard Plowman, President
Bonita Bay Properties, Inc.
Bonita Bay Executive Center
3451 Bonita Bay Boulevard, S.W., Suite 202
Bonita Springs, Florida 33923
Phone: (941) 495-1000
Fax: (941) 992-2672
With a copy to:
David L. Cook, Esq.
Young, van Assenderp & Varnadoe, P.A.
801 Laurel Oak Drive, Suite 300
Naples, Florida 34101
Phone: (941) 597-2814
Fax: (941) 597-1060
For the Purchaser:
Michael M. Gosman
Carematrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Phone: (617) 433-1100
Fax: (617) 433-1190
With a copy to:
Thomas P. Hunt
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Phillips Pointe, Suite 500 East
777 South Plagler Drive
West Palm Beach, Florida 33401-6194
Phone: (561) 650-0624
Fax: (561) 655-5677
-34-
<PAGE>
Nothing herein contained shall be construed as prohibiting the parties
respectively from changing the place at which notice is henceforth to be given,
but no such change shall be effective unless and until it has been accomplished
by written notice given in the manner set forth in this paragraph.
19. REAL ESTATE BROKERS. Each party represents and warrants to the other
that it has not consulted, dealt or negotiated with any real estate broker,
finder, salesperson or agent in connection with the sale of the property by the
Seller to the Purchaser or any other matter associated with this Agreement other
than John R. Wood, Inc., and John H. Peterson, P.A., Realtor. John R. Wood, Inc.
is the agent of Seller and John H. Peterson, P.A., Realtor is the agent of
Purchaser. All brokerage fees due in connection with this transaction will be
paid by Seller pursuant to a separate agreement with such Brokers. Each party
hereby agrees to otherwise indemnify and hold harmless the other from any
losses, damages, costs, liabilities or expenses, including reasonable costs and
attorneys tees (incurred in trial, appellate or post-judgment proceedings)
related to or arising out of any breach of this representation and warranty.
20. CONDEMNATION. In the event that all or any part of the Land shall be
acquired or condemned for any public or quasi-public use or purpose, or if any
acquisition or condemnation proceedings shall be threatened or begun prior to
the closing of this transaction, Purchaser shall have the option to either
-35-
<PAGE>
(a) terminate this Agreement, in which event the Escrow Agent shall
return to Purchaser the Deposits, together with accrued interest thereon,
and the obligations of all parties hereunder shall cease, or
(b) proceed, subject to all other terms, covenants, conditions,
representations and warranties of this Agreement, to the closing of the
transaction contemplated hereby and receive title to the Property,
receiving, however, any and all damages, awards or other compensation
arising from or attributable to such acquisition or condemnation
proceedings. Purchaser shall have the right to participate in any such
proceedings.
21. MISCELLANEOUS.
A. Purchaser shall not place or allow to be placed any lien on the
Land, prior to closing on the Land, in its endeavor to comply with the
applicable conditions of this Agreement.
B. Except as provided above, this Agreement shall not be assignable by
Purchaser without Seller's prior written consent, which may be withheld by
Seller in its sole discretion, except that this Agreement may be assigned
to an entity which controls or is controlled by Purchaser without Seller's
consent.
C. Time is of the essence of this Agreement.
-36-
<PAGE>
D. In order for this Agreement to create binding obligations on either
party, it must be duly executed by Seller and Purchaser no later than
August 30, 1996.
E.
(i) The account in which the Deposits are held shall be
maintained by Escrow Agent until the Deposits and the interest thereon
have been delivered to Purchaser, Seller, or a court of competent
jurisdiction in accordance with this Agreement, and shall terminate on
the date of such delivery;
(ii) Escrow Agent shall account for the Deposits in accordance
with this Agreement, or in such other manner as may be directed in a
joint written notice from Seller and Purchaser directing some other
disbursement of the Deposits. If Escrow Agent receives written notice
from either Purchaser or Seller that the other party has defaulted in
the performance of its obligations under this Agreement or that any
condition to the performance of its obligations under this Agreement
or that any condition to the performance of obligations under this
Agreement has not been fulfilled within the time period stipulated,
which notice shall describe in reasonable detail such default or
non-performance, then Escrow Agent shall (A) promptly give notice to
the party alleged to have defaulted or to have failed to fulfill its
obligation of Escrow Agent's receipt of such notice from
-37-
<PAGE>
the other party and shall enclose a copy of such notice from the other
party, and (B) subject to the provisions of Paragraph 20.E (iii) below
which shall apply if a conflict arises, on the tenth (10th) calendar
day after the giving of the notice referred to in the clause (A)
above, deliver the Deposits (or the appropriate portion thereof) and
the interest thereon to the party claiming the right to receive it.
(iii) If Escrow Agent is uncertain as to its duties or actions
hereunder, or receives instructions or a notice from Purchaser or
Seller which are in conflict with instructions or a notice from the
other party or which in the reasonable opinion of Escrow Agent, are in
conflict with any of the provisions of this Agreement, it shall be
entitled to take any of the following courses of action; (A) hold the
Deposits as provided above in this Paragraph 20.E. and decline to take
any further action until Escrow Agent receives a joint written
direction from Purchaser and Seller or an order of a court of
Competent jurisdiction directing the disbursement of the Deposits, in
which case Escrow Agent shall then disburse the Deposits in accordance
with such direction; (B) in the event of litigation between Purchaser
and Seller, deliver the Deposits and all interest thereon to the clerk
of any court in which such litigation is pending; or (C) deliver the
Deposits and all interest thereon to
-38-
<PAGE>
a court of competent jurisdiction and commence an action for
interpleader in such court, whereupon Escrow Agent shall have no
further duty with respect to the Deposits.
(iv) Escrow Agent shall not be liable for any action taken or
omitted in good faith and may rely, and shall be protected in acting
or refraining from acting in reliance, upon an opinion of counsel and
upon any directions, instructions, notices, certificates, instruments,
requests, papers or other documents believed by it to be genuine and
to have been made, sent, signed or presented by the proper party or
parties.
(v) Seller acknowledges that Escrow Agent is counsel for
Purchaser and may continue to act as such counsel notwithstanding its
duties as Escrow Agent hereunder or any dispute or litigation arising
as to its duties as Escrow Agent.
(vi) Escrow Agent shall have no liability with regard to any duty
under this Agreement nor be responsible for the loss of any moneys
held by it except in the event of willful and intentional misconduct
on the part of Escrow Agent. Notwithstanding any other provisions of
this Agreement, Purchaser and Seller jointly indemnify and hold
harmless Escrow Agent against any losses, costs, liabilities, claims
and expenses incurred by Escrow Agent arising out of or in connection
with its services under the terms of this Agreement,
-39-
<PAGE>
including attorneys' fees and expenses and the costs and expenses of
any interpleader action involving the Deposits or of defending itself
against any claim or liability. However, Escrow Agent will not charge
any fee for its normal services hereunder as Escrow Agent.
(vii) The terms of this Paragraph 20.E. shall survive any
termination of this Agreement or the closing of the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto placed their hands and
seals on the date first set forth above.
Signed, sealed and delivered
in the presence of:
Witnesses: SELLER:
BONITA BAY PROPERTIES, INC.
/s/ Jennifer Keating By:/s/ Richard W. Plowman
- ----------------------------- -------------------------------
RICHARD W. PLOWMAN
Its: President
Jennifer Keating Date: 9/5/96
- ----------------------------- -------------------------------
Witnesses: PURCHASER:
CAREMATRIX
OF MASSACHUSETTS, INC.
/s/ Lynn M. Silva By: /s/ Michael Grosman
- ----------------------------- -------------------------------
Its: Vice President
-------------------------------
Lynn M. Silva Date: August 30, 1996
- ----------------------------- -------------------------------
-40-
<PAGE>
Acknowledgement by Escrow Agent: By its execution below, Escrow Agent
acknowledges receipt of the Deposits described in Paragraphs 1.A and B herein
and agrees to comply with the terms of this Agreement applicable to Escrow
Agent.
Gunster, Yoakley, Valdes-
Fauli & Stewart, P.A.
By: /s/ [Illegible]
----------------------------
Its: Vice President
----------------------------
Enclosure. (1)
-41-
<PAGE>
EXHIBIT "1"
Letterhead of
WILSON, MILLER, BARTON & PEEK, INC.
[Logo] -----------------------------------------------
BONITA BAY UNIT TWENTY EIGHT
(Plat Book 55, pages 9l and 92)
Lee County, Florida
All that part of Tract "D" of BONITA BAY UNIT TWENTY EIGHT" according to the
plat thereof as recorded in Plat Book 55, pages 91 and 92, Public Records of Lee
County, Florida, being more particularly described as follows:
Commencing at the southwest corner of said Tract "D";
thence along the boundary of said Tract "D"; northerly 67.12 feet along the arc
of a circular curve concave to the west, having a radius of 1812.78 feet through
a central angle of 02 (degrees) 07'18" and being subtended by a chord which
bears North 13 (degrees) 13'05" West 67.12 feet to a point on said curve end the
Point of Beginning of the parcel herein described;
thence continue along said boundary of Tract "D" in the following two (2)
described courses:
1) continuing along said curve northwesterly 133.55 feet along the arc of a
tangential circular curve concave to the west, through a central angle of
04 (degrees) 13'16" and being subtended by a chord which bears North
l6(degrees) 23'22" West 133.52 feet;
2) North 18(degrees) 30'00" West 228.61 feet; thence leaving said boundary
or Tract "D", North 89(degrees) 08'36' East 356.12 feet; thence North
00(degrees) 40'00" West 140.55 feet to said boundary of Tract "D"; thence
along said boundary of Tract "D" in the following four (4) described
courses:
1) North 89(degrees) 20'00" East 73.70 feet;
2) South 60(degrees) 57'20" East 387.95 feet;
3) southwesterly and southerly 163.61 feet along the arc of a
non-tangential circular curve concave to the southeast having a radius of
125.00 feet through a central angle of 74(degrees) 59'4l" and being
subtended by a chord which bears South 27(degrees) 3'10" West 152.18 feet;
4) South 09(degrees) 59'4l" East 74.64 feet; thence leaving said boundary
of Tract "D", South 67(degrees) 35'19' West 59.54 feet; thence South
33(degrees) 22'32" West 49.90 feet; thence southwesterly, westerly and
northwesterly 97.30 feet along the arc of a tangential circular curve
concave to the northwest, having a radius of 65.00 feet through a central
angle of 85(degrees) 45'59" and being subtended by a chord which bears
South 76(degrees) l5'31" West 88.47 feet; thence North 60(degrees) 5l'29"
West 40.66 feet; thence North 78(degrees) 50'59" West 98.55 feet; thence
westerly 18.90 feet along the arc of a tangential circular curve concave to
the south, having a radius of 74.00 feet through a central angle of
14(degrees) 38'03" and being subtended by a chord which bears North
86(degrees)l0'00" West 18.85 feet; thence South 86(degrees) 30'58" West
82.77 feet; thence South 77(degrees) 19'13" West 202.66 feet to the Point
of Beginning of the parcel herein described
Subject to easements and restrictions of record.
Containing 5.43 acres more or less.
Bearings are based on the north line of said Tract "D" as being North'89
(degrees) 20'00" East.
WILSON, MILLER, BARTON & PEEK, INC.
Registered Engineers and Land Surveyors
By: /s/ George G. Gibala Date June 11, 1996
------------------------------------
George G. Gibala,P.S.M. #5l87
Not valid unless embossed with the Professional's seal.
Ref. 4K-401
W.O. 37l2l
<PAGE>
EXHIBIT "B" Sheet 1 of 2
[Drawing of plan]
<PAGE>
Sheet 2 of 2
Tract F
[Drawing of plan]
DEVELOPMENT AND TURNKEY SERVICES AGREEMENT
This Development and Turnkey Services Agreement (this "Agreement") is
entered into by and between CareMatrix of Massachusetts, Inc., a Delaware
corporation ("CareMatrix"), and Chancellor Senior Housing Group, Inc., a
Delaware corporation ("Chancellor"), this 1st day of September, 1996.
RECITALS:
--------
WHEREAS, Chancellor has been established to own and/or operate assisted
living facilities, independent living facilities, skilled nursing facilities and
other related medical facilities (each a "Facility" and collectively the
"Facilities"); and
WHEREAS, Chancellor desires to have CareMatrix develop, construct,
market and manage the Facilities; and
WHEREAS, CareMatrix and its related entities have expertise in
coordinating the development and construction of assisted living facilities,
independent living facilities, skilled nursing facilities and other related
medical facilities;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
undertakings of each of the parties to the other, the parties hereto agree as
follows:
1. Engagement. Chancellor hereby retains CareMatrix and CareMatrix
hereby agrees to provide the Services as set forth in Section (2) below.
2. CareMatrix's Duties. CareMatrix's duties under this Agreement shall
be divided into three (3) phases, a development phase, construction phase, and a
post-construction phase (collectively, the "Services"), and shall be as follows:
I. Development Phase.
(a) Filing of Applications for Permits, Consents and Approvals.
Coordination, advice, recommendations and consultations with respect to the
filing of all necessary documents required by any applicable federal, state or
local government under applicable law in order to obtain any required permit,
approval, consent or certificate ("Permit"), including, without limitation, any
applicable certificate of need for any Facility, including, without limitation,
the preparation and filing by or on behalf of Chancellor of application forms,
notices of intent to file and other legal notices.
-1-
<PAGE>
(b) Prosecution of Permit Applications and Appeals. Prosecution of
Permit applications, preparation of responses to appropriate governmental
agencies comments with respect to completeness review as to Permit applications,
preparation of responses to taxpayer groups and others with respect to such
applications, including attendance at public hearings and meetings with
community groups and health planning organizations. CareMatrix shall appeal with
all due diligence, on behalf of Chancellor, any denials of Permit applications
or challenges to the granting thereof which Chancellor elects to contest. The
cost of such appeals shall be included in the Contract Price (as defined herein)
of each Facility.
(c) Site Selection. CareMatrix shall assist Chancellor in locating an
appropriate site for each Facility ("Site"). CareMatrix shall be responsible for
obtaining financing on behalf of Chancellor for all funds necessary to secure
land options, purchase agreements and to acquire all land, easements, rights of
way and rights of egress or ingress for any such Site; provided, however, that
prior to incurring any non-refundable costs and expenses with respect to the
location and/or procurement of any such Site, CareMatrix shall first obtain the
written approval of Chancellor as to the amount thereof. At CareMatrix's cost
(to be included in each Contract Price), the amount of which shall be subject to
Chancellor's prior approval, CareMatrix shall order a Phase I Environmental
Report to determine the presence or absence of hazardous waste or materials on
any such Site. At CareMatrix's cost (to be included in each Contract Price),
CareMatrix shall coordinate the title examination to determine that the Site is
not subject to any easements, encumbrances, restrictions or agreements which
adversely affect the ability of CareMatrix to develop and construct the Facility
or the ability of Chancellor to operate the intended Facility thereon. To date,
CareMatrix has identified and Chancellor has approved for development each of
the Sites identified on Exhibit A attached hereto.
(d) Zoning Approvals. CareMatrix shall provide assistance in obtaining
all applicable governmental permits and approvals for the construction of each
Facility, including, without limitation, coordination, advice, recommendations
and consultations with respect to the filing of all necessary documents to
obtain zoning and inland/wetlands approvals ("Zoning Approvals"). CareMatrix
shall prepare all applications for and prosecute the same for all Zoning
Approvals required for any Facility. All filing, notice and reasonable legal
fees in connection therewith shall be included in the Contract Price. CareMatrix
shall not have the right to retain legal counsel without the prior approval of
Chancellor which shall not be unreasonably withheld, delayed or conditioned.
(e) Chancellor Representative. Chancellor shall appoint a representative
to communicate with CareMatrix with respect to each Facility (the "Chancellor
Representative"). CareMatrix shall, on a periodic basis not less frequently than
bi-weekly (or more frequently as reasonably requested by Chancellor) communicate
in person or by telephone (at Chancellor's option) with the Chancellor
Representative to report with respect to the progress and status of each
Facility and to obtain the opinions, views and direction of the Chancellor
Representative with respect to the completion of each Facility.
-2-
<PAGE>
(f) Decision Making. Nothing herein shall be construed as imposing any
obligation on Chancellor to proceed with the construction of the Facilities
whether or not the Zoning Approvals for the applicable Facilities are granted,
it being understood and agreed that Chancellor shall have a period of thirty
(30) days after written notice from CareMatrix to Chancellor of the issuance of
a final, non-appealable Zoning Approvals (the "Election Deadline") in which to
make such determination as to such Facility and it being further understood and
agreed that, except as otherwise provided in this Agreement, in the event
Chancellor so elects to proceed, it shall then enter into a development
agreement in the form attached hereto as Exhibit B (the "Development Agreement"
and collectively "Development Agreements") with CareMatrix with respect to the
applicable Facility within ten (10) days after the Election Deadline. In the
event Chancellor fails to notify CareMatrix of its determination within such
thirty (30) day period, Chancellor shall be deemed to have elected, and shall be
obligated to proceed with, the Facility. In such event, CareMatrix may transmit
a copy of any such Development Agreement executed by a representative of
CareMatrix to Chancellor and within five (5) days of receipt of such agreement,
Chancellor shall cause an authorized representative to execute such copy and
return the same to CareMatrix.
II. Construction Phase
Upon the execution of a Development Agreement for a Facility, the
parties' rights and obligations shall be as described in each Development
Agreement which shall include, without limitation, the following:
(a) Plans and Specifications. All of the Facilities shall be constructed
by CareMatrix pursuant to plans and specifications approved by Chancellor in all
material respects.
(b) Contract Prices. The contract prices for the construction and
furnishing (subject to an allowance set forth below) of the subject Facility
under the applicable Development Agreements (herein the "Contract Prices") shall
be an amount equal to the costs incurred by CareMatrix in the development and
construction of such Facility plus an amount to be agreed upon between four
percent (4%) and seven percent (7%) for overhead and profit.
(c) Allowances.
(i) FF&E. The Contract Price for each Facility will include an allowance
for furniture, fixtures & equipment ("FF&E") equal to the amount of the
allowance therefor as agreed upon by CareMatrix and Chancellor. Chancellor will
make selections in a timely fashion and all items will be ordered by CareMatrix.
Any amounts expended for FF&E above the allowance therefor will be an increase
adjustment to the Contract Price, the cost of which will be passed through to
Chancellor at CareMatrix's actual cost. CareMatrix will endeavor to obtain the
lowest possible cost for such items. Prior to incurring any costs in excess of
the FF&E Allowance, CareMatrix shall use its reasonable best efforts to notify
Chancellor in writing of the
-3-
<PAGE>
estimated amount of such excess. CareMatrix will, upon request, provide
Chancellor with documentation of the costs incurred by CareMatrix for which
reimbursement is sought.
(d) Unusual Site Conditions. The costs incurred by CareMatrix in
remedying unusual site conditions will be an increase adjustment to the Contract
Price for each Facility to the extent that such costs exceed an agreed upon
allowance therefor as a result of unusual Site conditions not identifiable by
CareMatrix after the exercise of reasonable diligence at the time the Site was
acquired. At such time as CareMatrix becomes aware of any such unusual site
conditions, CareMatrix shall promptly notify Chancellor of the same and of the
amount by which the estimated cost to correct said site conditions shall exceed
such allowance. CareMatrix will endeavor to obtain the lowest possible cost in
remedying such unusual site conditions and will charge Chancellor for
CareMatrix's actual cost incurred.
(e) Financing. CareMatrix will arrange for the provision of construction
and permanent financing for each of the Facilities. Notwithstanding the
foregoing, CareMatrix shall not have any obligation to guaranty the payment or
performance obligations of Chancellor under the terms of such financing.
III. Post-Construction Phase
Each Facility unless otherwise agreed upon by Chancellor and CareMatrix
prior to the execution of the Development Agreement, shall be managed by
CareMatrix or an affiliate of CareMatrix ("Manager") pursuant to the terms of a
Management Agreement (a copy of which shall be attached to the Development
Agreement as an exhibit thereto) in form and substance mutually agreeable to the
parties ("Management Agreement"). Manager shall be responsible for establishing
all policies and objectives for the Project subject to the approval of
Chancellor. In the event of the termination of the Management Agreement,
Chancellor may either elect to manage the Facility itself or may select such
management firm as it desires.
(a) Manager shall, beginning approximately one hundred twenty (120) days
prior to the date of completion of each Facility, provide consultant and
management services, install operating procedures and take such steps as it
deems necessary, all subject to and in accordance with the policies and
guidelines approved by Chancellor to prepare the Facility for occupancy and
operation.
(b) Manager shall recruit and train, at its expense a competent
executive director and acceptable to the Chancellor for the supervision of the
administrative functions of each Facility. Such executive director shall be
qualified to meet the requirements established by all federal, state and/or
local administrative bodies or agencies having jurisdiction over each Facility.
(c) Manager shall assist Chancellor in the licensing, equipping and
staffing phases of each Facility. The staff of each Facility shall be employees
of the Manager.
-4-
<PAGE>
(d) Manager shall furnish and install operating procedures, systems and
controls developed by it for the purposes of providing effective management
techniques and functions for the benefit of the Residents of each Facility.
(e) Manager shall assist in the preparation of each initial operating
budget and annual operating budgets for each Facility for each year of the term
of the Management Agreement. Following the initial occupancy of each Facility,
Manager will report to Chancellor at least once each month on the financial
status of each Facility during the previous month.
(f) Manager shall receive a base annual fee under the Management
Agreement equal to five percent (5%) of Net Revenues (as defined in the
Management Agreement) determined in accordance with generally accepted
accounting principles consistently applied.
(g) The Management Agreement shall also provide, at the option of
CareMatrix, CareMatrix will have the right to lease each Facility upon the
terms and conditions set forth in a mutually agreeable lease agreement (which
shall be attached to each Management Agreement as an Exhibit thereto).
3. Agency. CareMatrix shall be designated as Chancellor's agent for
purposes of performing all of the above services; provided, however, that
CareMatrix shall consult with and secure the approval of Chancellor prior to
signing any applications or documents in Chancellor's name.
4. Costs and Expenses. CareMatrix shall be responsible for all costs
and expenses incurred by CareMatrix in the performance of its obligations
hereunder, including but not limited to, the payment of all compensation and
benefits to employees of CareMatrix and any normal and customary transportation
or incidental business related expenses incurred by employees of CareMatrix. In
the event a final, non-appealable Permit is not granted or final and a Facility
is not constructed or in the event Chancellor elects not to proceed with a
project after the granting thereof in accordance with the terms contained
hereinabove, to the extent not previously or directly paid by Chancellor,
Chancellor will reimburse CareMatrix for all reasonable and documented
out-of-pocket expenses incurred by it, if any, in connection with the provision
of the foregoing services.
5. Independent Agreements. The agreements with respect to each Facility
as set forth herein are independent of the agreements with respect to any other
Facilities since there is no guaranty that a suitable Site or other condition
precedent will be met with respect to any particular Facility.
-5-
<PAGE>
6. Indemnity. CareMatrix agrees at all times to indemnify and defend
Chancellor affiliates, and its respective employees, officers, directors,
servants and agents (collectively, the "Chancellor Parties") and hold and save
the Chancellor Parties harmless of and from and against any and all liabilities
and indebtedness, obligations, losses, damages, costs and expenses (including
reasonable attorneys' fees) suffered or incurred by the Chancellor Parties by
reason of any claim or demand brought by anyone or any action or proceeding
instituted or judgment rendered against the Chancellor Parties arising out of or
resulting in any manner from CareMatrix's breach or failure to perform
CareMatrix's material obligations, responsibilities or duties as required by
this Agreement, CareMatrix's failure to be appropriately licensed to perform the
services required of it hereunder, or any negligent willful act or omission of
CareMatrix or any of its subcontractors, agents or employees.
Chancellor agrees at all times to indemnify and defend CareMatrix and its
affiliates and their respective employees, officers, directors, servants and
agents (collectively, the "CareMatrix Parties") and hold and save the CareMatrix
Parties harmless of and from and against any and all liabilities and
indebtedness, obligations, losses, damages, costs and expenses (including
reasonable attorneys' fees) suffered or incurred by the CareMatrix Parties, by
reason of any claim or demand brought by anyone or any action or proceeding
instituted or judgment rendered against the CareMatrix Parties arising out of or
resulting in any manner from Chancellor's breach or failure to perform,
Chancellor's material obligations, responsibilities or duties as required by
this Agreement, or any negligent willful act or omission of Chancellor or any of
its subcontractors, agents or employees.
7. Termination. Chancellor shall not be required to proceed with the
execution and delivery of any additional Development Agreements for additional
Facilities in the event of a material default by CareMatrix with respect to one
or more Facilities then under construction which is not cured within any
applicable cure period provided for in the applicable Development Agreement. In
the event of the termination of any Development Agreement, any amounts due on
account of services performed prior to the effective date of termination which
have not been previously paid will be paid (pro rata through the effective date
of termination) promptly following termination less any damages sustained by
the non-breaching party as a result of the breach. Any such termination shall
not affect the rights of the parties under this Agreement which relate to events
prior to such termination, including without limitation, rights under this
Section 7.
8. Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be either sent by telecopy transmission
to a telecopy machine located in the office of Chancellor or CareMatrix, as the
case may be, or hand delivered or sent by registered or certified mail, return
receipt requested, or by Federal Express or similar nationally recognized
overnight delivery service providing a receipt, and postage prepaid as follows:
-6-
<PAGE>
To CareMatrix:
CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: President
With a copy to:
CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
To Chancellor:
Chancellor Senior Housing
Group, Inc.
197 First Avenue
Needham, MA 02194
Attention: President
Such addresses may be changed from time to time by notice from
Chancellor or CareMatrix to the other.
The effective date of any such notice shall be the date of actual
receipt at Chancellor's address or CareMatrix's address, as applicable, if hand
delivered, sent by overnight delivery or sent by facsimile transmission or
registered mail, or three (3) days after such notice is properly deposited for
mailing if sent by United States mail.
9. General Provisions.
(a) Gender, Number. Whenever the context requires, the use herein of (i)
the neuter general includes the masculine and the feminine genders; and (ii) the
singular number includes the plural number.
(b) Entire Agreement. This Agreement and any document executed pursuant
hereto contains the entire agreement between the parties relating to the
transactions contemplated hereby and all prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged into
and superseded by this Agreement.
(c) Modifications. No modifications, waiver or discharge of this
Agreement will be valid unless it is in writing and signed by the parties
hereto.
-7-
<PAGE>
(d) Attorneys, Fees and Costs. If either party commences an action for
the interpretation reformation, enforcement or rescission of this Agreement, the
prevailing party will be entitled to recover from the other party reasonable
attorneys' fees and court and other costs incurred, including without
limitation, its costs and fees on appeal.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one instrument.
(f) Applicable Laws. This Agreement will be construed and enforceable in
accordance with the laws of the Commonwealth of Massachusetts.
(g) Time of Essence. Time is strictly of the essence with respect to each
and every term, condition, obligation and provision herein.
(h) Further Instruments. Each party hereto shall from time to time
execute and deliver such further instruments as the other party or its counsel
may reasonably request to effectuate the intent of this Agreement.
(i) Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
(j) Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
(k) Severability. The invalidity or unenforceability of one or more of
the phrases, sentences, provisions, clauses, sections or Articles contained in
this Agreement shall not affect the validity or enforceability of the remaining
portions, so long as the material purposes of this Agreement can be determined
and effectuated.
(l) Exhibits. The Exhibits attached to this Agreement are hereby
incorporated by reference and made a part of this Agreement.
(m) Successors. Subject to the limitations on assignment set forth in
Section [8(o)], this Agreement shall be binding upon the parties hereto, their
respective successors and assigns.
(n) Brokers. Each of Chancellor and CareMatrix represents and warrants to
the other that no broker or finder has acted on its behalf in connection with
this Agreement, or the transactions contemplated hereby or referred to herein.
Each of Chancellor and CareMatrix
-8-
<PAGE>
agrees to indemnify and hold the other harmless from any claim or demand for
commission or other compensation by any broker, finder or similar agent claiming
to have been employed by or on behalf of such party.
(o) Assignment. Chancellor shall have no right to assign its rights or
delegate its obligations under this Agreement to another entity or person
without the prior written consent of CareMatrix except that this Agreement or
this Agreement as it relates to a specific Facility may be assigned by
Chancellor, in whole or in part, to an affiliate of Chancellor without the
consent of CareMatrix, provided that Chancellor shall remain primarily liable
for payment and performance of all obligations under this Agreement after the
assignment. CareMatrix shall have no right to assign its rights or delegate its
obligations under this Agreement to another entity or person without the prior
written consent of Chancellor, except that this Agreement may be assigned by
CareMatrix, in whole or in part, to an affiliate of CareMatrix without the
consent of Chancellor, provided that CareMatrix shall remain primarily liable
after such assignment. Each of Chancellor and CareMatrix shall promptly provide
the other with notice of an assignment permitted by the terms hereof without the
consent of the other party. The term "affiliate" shall mean any entity which is
controlled by, under common control with or which controls, Chancellor or
CareMatrix, as the case may be.
(p) Cooperation. Both parties agree that they shall cooperate with each
other in allowing CareMatrix to perform its duties under this Agreement,
including without limitation, by Chancellor providing prompt responses to all
inquiries made by CareMatrix in connection with all aspects of the work for each
Facility, including, without limitation, in the selection of the FF&E for each
Facility and all background documentation (including without limitation,
financials, census data and corporate documents) needed to complete, file and
prosecute the Permit applications and Zoning Approvals and will sign all
applications as necessary.
(q) Development Agreement to Control. In the event that any of the terms
or conditions set forth herein are inconsistent with or contrary to any of those
set forth in an applicable Development Agreement for a Facility, then the terms
and conditions set forth in such Development Agreement shall control.
EXECUTED as an instrument under seal effective as of the date first set
forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Robert M. Kaufman
-------------------------
/s/ Elizabeth Derrico Name: Robert M. Kaufman
- --------------------- Its President
Name: Elizabeth Derrico Duly Authorized
-9-
<PAGE>
WITNESS: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ Abraham D. Gosman
-------------------------
/s/ James M. Clark Name: Abraham D. Gosman
- --------------------- Its President and Treasurer
Name: James M. Clark Duly Authorized
-10-
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
Resident Capacity
- ------------------------------------------------------------------------------------------------------------------------
Independent Skilled
Site Location Assisted Living Living Nursing Ownership Manager
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arizona
Yuma 80 40 -- Joint Venture Netwest
Peoria 80 40 -- Joint Venture Netwest
Tucson 80 40 -- Joint Venture Netwest
- ------------------------------------------------------------------------------------------------------------------------
Connecticut
Southington 96 -- -- Joint Venture Cal Moffie
Darien 67 19 -- Joint Venture CareMatrix
Cheshire 104 -- -- Third Party Third Party
Ridgefield 55 70 -- Chancellor CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
Florida
Boynton Beach 82 66 -- Chancellor CareMatrix
Jensen Beach 82 66 -- Chancellor CareMatrix
Deerfield Beach 80 48 -- Chancellor CareMatrix
Bonita Bay 82 66 -- Chancellor CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
Georgia
Atlanta 82 66 -- Chancellor CareMatrix
Macon 82 66 -- Chancellor CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
Massachusetts
Dedham -- -- 142 Chanellor CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
North Carolina
Durham 82 66 -- Chancellor CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
New Jersey
Princeton 83 -- 180 Chancellor CareMatrix
(ACLF only)
Park Ridge 100 -- 210 Chancellor CareMatrix
(ACLF only)
Livingston 118 -- -- Chancellor CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
New York
Ossining 122 -- -- Joint Venture CareMatrix
Glen Cove 80 -- -- Joint Venture CareMatrix
Riverdale 80 -- -- Joint Venture CareMatrix
Upper Nyack 148 -- -- Chancellor CareMatrix
Great Neck 140 -- -- Joint Venture CareMatrix
Ryebrook 160 -- -- Joint Venture CareMatrix
- ------------------------------------------------------------------------------------------------------------------------
Texas
Houston 82 66 -- Chancellor CareMatrix
Georgetown 82 66 -- Chancellor CareMatrix
</TABLE>
<PAGE>
EXHIBIT B
---------
TO
DEVELOPMENT AND TURNKEY SERVICES AGREEMENT
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF _______, INC.
<PAGE>
Table of Contents
ARTICLE I - Representations
Section 1.1 - Title to Property
Section 1.2 - Encumbrances
Section 1.3 - Permits and Approvals
Section 1.4 - Documentation
Section 1.5 - Other Agreements
Section 1.6 - Utility Services
Section 1.7 - Good Standing of Developer
Section 1.8 - Good Standing of The Owner
ARTICLE II - Construction of the Project
Section 2.1 - Control of Construction
Section 2.2 - Architectural and Engineering Services
Section 2.3 - Other Professionals and General Assumed Obligations
Section 2.4 - Plans and Specifications
Section 2.5 - Construction
Section 2.6 - Personal Property
Section 2.7 - Changes
Section 2.8 - Commencement of Construction
Section 2.9 - Continuity of Construction
Section 2.10 - Completion of Construction
Section 2.11 - The Owner's Noninvolvement
Section 2.12 - Punch-List
Section 2.13 - Work and Warranties
Section 2.14 - Subcontractors
Section 2.15 - Financing Arrangements
ARTICLE III - Closing
Section 3.1 - Date of Closing
Section 3.2 - Total Contract Price
Section 3.3 - Payment of Contract Price
Section 3.4 - Form of Conveyance
ARTICLE IV - Additional Responsibilities of Parties
Section 4.1 - Developer's Responsibilities
Section 4.2 - The Owner's Responsibilities
Section 4.3 - Indemnification
<PAGE>
ARTICLE V - Contingencies
Section 5.1 - Required Occurrences
Section 5.2 - Failure of Contingencies
ARTICLE VI - Additional Covenants of The Owner
Section 6.1 - Indemnification by The Owner
Section 6.2 - Confidentiality
Section 6.3 - Provision of Further Information
Section 6.4 - Management Agreement
ARTICLE VII - Concluding Provisions
Section 7.1 - Entire Agreement
Section 7.2 - Representations
Section 7.3 - Amendments
Section 7.4 - Joint Effort
Section 7.5 - Brokers
Section 7.6 - Assignment
Section 7.7 - Notices
Section 7.8 - Arbitration
Section 7.9 - Captions
Section 7.10 - Successors
Section 7.11 - Counterparts
Section 7.12 - Severability
Section 7.13 - Effective Date
Section 7.14 - No Offer
EXHIBITS LIST
Exhibit A - Property
Exhibit B - Encumbrances
Exhibit C - Environmental Report
Exhibit C-2 - Licenses and Permits
Exhibit D - Condition of Property
Exhibit E - Developer's Approvals
Exhibit F - The Owner's Approvals
Exhibit G - Utility Services Letters
Exhibit H - Architectural Contract
Exhibit I - Furniture, Furnishings & Equipment
Exhibit J - Management Agreement
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of ____________,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of a proposed assisted/independent living
project to be comprised of ______ units (the "Project") to be located in
_______________ described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have good, record and
marketable title in fee simple to the Property consisting of approximately ____
(___) acres of land as more fully described in Exhibit "A". Exhibit "A" and each
of the other Exhibits referred to in this Agreement shall be incorporated into
this Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by
________________________ entitled "__________________________________",
dated ___________, (Map No. ______) for the Property, and will be
subject to those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Developer securing regulatory, development and construction approvals
for the Project and attendant site improvements. The Owner and the
Developer each represents to the other that it has reviewed or shall
review the boundary survey and the topographical survey of the Property
and has made a physical inspection of
1
<PAGE>
the Property and is satisfied with as to the site characteristics and
attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date the Developer elects to commence construction
in accordance with this Agreement, the Owner shall provide the Developer
with full possession and complete control of the Property for purposes
of performing the Developer's obligations hereunder.
Section l.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of the Closing (as defined in Article III
hereof), all state, federal, county and municipal land use approvals and
permits, licenses, easements, and utility agreements which are necessary
for the development, construction and opening of the Project on the
Property as set forth on Exhibit "E" (the "Developer's Approvals"). The
Developer covenants to diligently use its best efforts to obtain all of
the Approvals in an expeditious manner. In the event that the Developer
is unable to obtain the Approvals, the Developer shall have no liability
whatsoever to the Owner, or any other party and at the Owner's or the
Developer's option, this Agreement shall be terminated without recourse
to either party hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of the Closing (as defined in Article III hereof), all
state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and operation of the Project on the Property
as set forth on Exhibit "F" (the "Owner's Approvals"). The Owner
covenants to diligently use its best efforts to obtain all of the
Approvals in an expeditious manner. In the event that the Owner is
unable to obtain the Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Approvals and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the
2
<PAGE>
performance of the Developer's obligations hereunder; provided, however
that no transfer or assignment of any of the foregoing shall occur
which is prohibited by applicable law or the respective terms hereof.
Section 1.4 - Documentation. The Owner shall provide or obtain construction and
permanent financing for the Property, the Project, the Personal Property (as
defined herein) and related development costs (collectively, the "Project Loan")
which shall be sufficient, together with the Owner's equity contributions, if
necessary (which shall in no event exceed ten percent (10%) of the Contract
Price), to pay the full amount of the Contract Price (as defined herein). The
Owner covenants that it will provide fully and in a timely fashion all
reasonable documentation required by the Owner's lender in connection with the
Project Loan. Such documentation shall include, but is not limited to, all
zoning and plan approvals, all utility letters indicating positive availability
of service, inventory of concessions made to and agreements with any or all
municipal bodies, site plans, title policies, and all other regulatory body
approvals. The Owner also covenants that it will, in a timely manner, provide
whatever financial or other information the Owner's lender might reasonably
require in connection with the Developer's applications for financing for the
construction of the Project and as required by such lender in connection with
the Project Loan. The Owner will use its best efforts to pursue its application
for construction and permanent financing for the Project.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make
such utilities available to the Property for the construction or operation of
the Project, except for the matters, if any, set forth on Exhibit "D". Copies
of letters from the providers of such utility services confirming such
availability are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of The Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding
and legal obligation of the Developer, enforceable in accordance with its terms
and, duly authorized by a vote of its Board of Directors in compliance with its
certificate of incorporation and bylaws and all applicable laws of the state of
its incorporation.
Section 1.8 - Good Standing of The Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid,
3
<PAGE>
binding and legal obligation of the Owner, enforceable in accordance with its
terms and duly authorized by a vote of its Board of Directors in compliance with
its certificate of incorporation and bylaws and all applicable laws of the State
of Delaware.
ARTICLE II
Construction of the Project
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Developer shall
have sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein, so long as the same are in compliance with
Approvals, the Final Plans (as defined below) and all applicable laws.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that [______________] and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Developer. The Developer will be
responsible for payment of the architectural fees due to the Architect, pursuant
to the contract with respect to the Project dated (said contracts herein
collectively, the "Architectural Contract"). The Owner represents and warrants
to the Developer that a true, accurate and complete copy of the Architectural
Contract is attached hereto as Exhibit "H". The Developer shall not be
responsible to the Owner, or any other party for any errors, omissions, breaches
or failures thereof, or any damages resulting from the acts or omissions of the
Architect. At the Developer's option, the Owner shall assign to the Developer
all of its right, title and interest in the Architectural Contract and any and
all architectural, engineering and other contracts with respect to the Project
free of any claims other than outstanding amounts owed under the Architectural
Contract. In no event shall the Developer be obligated to assume any of said
contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project other than
payments due to the Architect under the Architectural Contract.
4
<PAGE>
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Developer shall, under
the direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and the Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion of the Basic Plans and delivery to the Owner, and
the Developer, the Architect and Engineers shall meet to review and
approve the Basic Plans. The parties shall initial the Basic Plans to
indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and the Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt and
reasonable conclusion concerning the acceptability of the Final Plans
(and Personal Property, see Section 2.6). The parties shall initial the
Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall construct the Project in a good
and workmanlike manner and in accordance with the Final Plans, the Approvals,
and all applicable laws subject to field changes and minor design changes. The
Project is to be licensed for the unit complement described above and shall be
constructed in accordance with the requirements in effect on the date of this
Agreement as set forth by all federal, state and local governmental agencies
having jurisdiction of the Project, including Life Safety Code requirements
imposed by the Federal Department of Health and Human Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or "F
F & E") required for the Project within the allowance (defined below).
The allowance for the "F F & E" is [________________ ($__________)] (the
"F F & E Allowance"), which F F & E Allowance shall be included in the
Contract Price (as defined below).
5
<PAGE>
(b) In the event that the cost of the F F & E furnished pursuant to
subsection 2.6 (a) above shall exceed the F F & E Allowance, any such
excess shall be an increase to the Contract Price.
(c) In order to reduce the risk that the F F & E will be delivered prior
to the Closing contemplated herein, the Owner covenants that it shall
approve such F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(d) F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or Personal Property. The Owner shall be notified of any
such changes or substitutions in the Personal Property, however, the Developer
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start on or prior to the date which is thirty (30) days after the satisfaction
of the last of the conditions set forth in Section 5.1 to be satisfied, or as
soon thereafter as weather and ground conditions permit but not later than
_________________________.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion (as such term is defined in Section 2.10) is achieved, which shall
not occur later than eighteen (18) months after the completion of the foundation
for the Project. Any delays caused by acts of God, fire, accident, casualty,
cessation of activity due to refusal to work by labor, or any other cause not
attributable to the failure of the Developer to use reasonable care and due
diligence, however, shall be excused by the Owner, provided that the Developer
shall use its best efforts to minimize any such delays and shall resume
construction at the earliest possible time.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of Occupancy
with conditions or a Punch-List listing items requiring completion or
correction,
6
<PAGE>
so long as such conditions or Punch-List items do not prevent or
prohibit occupancy as determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities may,
so long as it does not interfere with completion of construction, enter
upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Noninvolvement. The Owner shall have access to the
construction site while construction is in progress, but it shall not be
empowered to interfere or become involved with construction or require changes
thereto, provided, however that the Owner's agents shall have the right to view
the construction in progress and shall have access to the site for the purpose
of equipping the Project and preparing the Project for operation.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties) after transfer of title, further
agreeing to permit the Owner to complete any such items, at the Developer's
expense, if the Developer has failed to complete the same within the forty-five
(45) day time period.
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of Personal Property, the Developer will assign to the Owner,
in addition to any warranties created by law, all warranties and guarantees
received from designers, the Architect, the general contractor and suppliers of
equipment and furnishings, to the extent assignable. The Developer will agree to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, the Owner hereby waives and the Developer hereby disclaims all other
express and implied warranties of every kind or nature with respect to the
Project and the Personal Property, including, without limitation, waiving all
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Subcontractors. The Developer agrees to indemnify and save the
Owner harmless from claims for payment by any subcontractor who furnishes
materials or supplies or performs
7
<PAGE>
labor or services in the prosecution of the work pursuant to this Agreement. The
Developer reserves absolute discretion on the selection of subcontractors.
Section 2.15 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the Contract Price. This Agreement may be terminated by either the
Developer or the Owner without further recourse to either party (except
for reimbursement of Project related expenses) in the event that the
closing and funding of the construction loan financing with respect to
the Project pursuant to the Project Loan (with all conditions precedent
to such closing either satisfied or irrevocably waived by the lender)
shall not have occurred by __________________________.
The Owner and the Developer also contemplate that the Property and
Project, together with all fixtures, furnishing, equipment, and articles
of personal property now owned or hereafter acquired by the Owner which
are or may be attached to or used in connection with the Property or
Project, together with any and all replacements thereto and
substitutions therefor, and all proceeds thereof; and all present and
future rents, issues, leases, and profits of the Property and Project
will serve as security for the payment obligations to any lenders
relating to the Project Loan or otherwise, and that the Owner will be
the principal obligor for the repayment of all financial obligations
thereunder after the transfer of title to the Owner. The Owner
therefore, agrees to execute and deliver all commitments, promissory
notes, mortgages, collateral assignments, documents, certificates,
affidavits, and other writings required to be executed by any lender in
connection with such financing.
ARTICLE III
Closing
Section 3.1 - Date of Closing. The delivery of possession of the Property and
Project to the Owner and payment of the Contract Price, less one hundred fifty
percent (150%) of the value of the Punch-List, shall take place
contemporaneously within three (3) working days after Physical Completion of the
Project but in no event later than the date established in Section 2.9;
provided, however, that the Developer has completed its obligations as set forth
in this Agreement, including, but not limited to, Sections 2.10 and 2.13.
Section 3.2 - Contract Price.
(a) The price to be paid by the Owner to the Developer for the
development, construction and furnishing of the Project and for the
Property shall be ___________________________ Dollars
($___________________) plus the costs incurred as the result of any
unforeseen site conditions and cost of F F & E in excess of the F F & E
Allowance (the "Contract Price").
8
<PAGE>
(b) In addition to the Contract Price, if the Closing does not take
place within three (3) business days after Physical Completion due to
delays incurred through the fault of or through circumstances under the
control of the Owner, the Owner shall pay to the Developer interest,
payable monthly in arrears, on the Contract Price accruing from the date
which is three (3) days after Physical Completion to the date of which
is three (3) days after delivery of possession of the Project pursuant
to Section 3.1; such monthly interest shall be computed at a rate equal
to the Prime Rate as announced by Fleet Bank, N.A. from time to time
plus two percent (2%) per annum.
Section 3.3 - Payment of Contract Price. At the time of transfer of title, the
balance of the Contract Price not paid through the Developer's requisitions
under the construction financing for the Project shall be paid by the Owner to
the Developer by wire transfer, certified check or other mutually acceptable
means less any Punch-List Amount or retainage required by the Owner's lender.
Section 3.4 - Form of Conveyance and Status of Title. The Project and Personal
Property shall be conveyed by warranty bill of sale. The Project and Personal
Property may be subject to the mortgages and security interests described in
Section 2.15.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer shall have the following
responsibilities:
(a) To obtain and pay for necessary building permits and the Certificate
of Occupancy;
(b) To pay for all labor and material required to develop, construct and
furnish the Project in accordance with the Final Plans (except as
otherwise expressly set forth herein) and to pay for the Personal
Property to be provided;
(c) The Developer shall at all times, commencing with the date upon
which construction begins, carry the following types of insurance with
an insurance carrier or carriers acceptable to the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury with
limits of not less than $300,000 for one person and $ 1,000,000 for any
one accident or disaster; and property damage coverage limits of not
less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
(iii) "Builders Risk" insurance against damage or destruction by fire
and full extended coverage, including vandalism and malicious mischief,
covering all improvements to be
9
<PAGE>
erected hereunder and all materials for the same which are on or about
the Property, in an amount equal to the full insurable value of such
improvements and materials; such insurance to be payable to the Owner,
the Developer and the Owner's lender as their interests may appear, with
a standard mortgagee endorsement to the Owner's lender or its assigns as
mortgagee.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth in
subparagraphs (i), (ii), and (iii) hereof. Each of such policies shall,
if the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) At Closing, the Developer shall deliver to the Owner, at the
Owner's option:
(i) duly executed waivers of mechanic's liens signed by each
subcontractor which provided labor or materials on the Project; or
(ii) reasonable proof of payment or proof of a provision for
payment to such subcontractors; or
(iii) an indemnification to the Owner with respect to same.
Section 4.2 - The Owner's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Owner shall have the following
responsibilities:
(a) To expeditiously pursue obtaining commitments for financing the
contemplated construction, including the furnishing of financial
statements, providing an appraisal of the Property and Project and by
execution of applications, notes, mortgages, assumption agreements and
other documents reasonably necessary to effectuate such financing or the
financing of the Personal Property.
(b) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the Department at the date of physical completion.
(c) To pay to the Developer, in addition to the Contract Price, the
costs for correcting unusual site conditions. Such payment shall be made
on the basis of the actual costs of the Owner in correcting the same
plus fifteen percent (15%) of such costs to cover the Developer's
overhead expenses and shall be due and payable upon the transfer of
title to the Owner. For the purpose of this Agreement, the term unusual
site conditions shall include, without limitation, any of the following
which have not been noted in the Final Plans or otherwise disclosed in
the due diligence materials:
(i) unusual soil or water conditions requiring extraordinary
preparation, i.e., piles, curtain drains, retaining walls, blasting or
rip-rap;
10
<PAGE>
(ii) tying in of water, sewer or other utility services beyond the
locations as shown in the Final Plans;
(iii) holding tanks and pumps for the water system or the sprinkler
system;
(iv) water purification or filter system;
(v) leaching field; and
(vi) any requirement imposed upon the Developer by governmental
agencies having jurisdiction, if not provided for in the Final Plans,
because of reasons other than errors or omissions in such Final Plans,
such as requirements imposed as conditions for the granting of any of
the Approvals.
(d) The Owner shall be solely responsible for the removal of any
hazardous wastes and materials, if any, from the Property, at the
Owner's sole cost and expense, and not as part of the Contract Price.
Section 4.3 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until transfer of title.
The Developer further covenants to use proper care and caution in the
performance of its work hereunder so as not to cause damage to any adjoining or
adjacent property, and the Developer shall indemnify and hold the Owner harmless
from any liabilities, claims, or demands for damage to such adjoining or
adjacent property.
ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals and current utility availability
letters shall have been obtained by __________________________________.
(b) Title. And the Owner's title insurance policy commitment and Class
A-2 ALTA survey, satisfactory to the Developer, in its sole discretion,
shall have been obtained by the Owner which confirms that there are no
exceptions or conditions which would render title to the Property
unmarketable or which will prohibit or restrict the construction or
operation of the Project or which would prevent an institutional lender
from closing a construction or permanent mortgage loan for the Project
in the usual course of its business.
11
<PAGE>
(c) Additional Due Diligence Regarding the Property. The Developer shall
have received due diligence information concerning the Property,
satisfactory to the Developer, in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available. On or before ________________________,
the Developer shall notify the Owner of any issues.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1 by ___________________________________________.
(e) Construction Financing. The Owner shall have received construction
financing in the full amount of the Contract Price by
_______________________________________________.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
Notice, either party may terminate this Agreement. In such event, neither party
shall have any further responsibility or liability to the other. The Developer
reserves the right, at its option, to waive or defer any one or more of the
conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
Section 6.1 - Indemnification by The Owner. The Owner hereby indemnifies and
defends the Developer against any claims for unpaid fees or costs associated
with the Property or the Project incurred by or on behalf of the Owner or the
Developer as a result of any claim by any broker. The parties acknowledge that
no broker was responsible for procuring the transactions set forth in this
Agreement, nor any part hereof, and each party will indemnify and defend the
other from any and all claims, actual or threatened, for a commission or other
compensation by any third person with whom such party has had dealings.
Section 6.2 - Confidentiality. The Owner, its partners, affiliates, agents,
servants and employees hereby agree:
(a) To maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) Not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
12
<PAGE>
advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) To comply therewith for a period of two (2) years commencing on the
date of this Agreement.
Section 6.3 - Provision of Further Information. The Developer agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.4 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent,
and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his
rights nor delegate its obligations under this Agreement to another entity or
person without the prior written consent of the Owner except that the Developer
shall have the right to assign this Agreement to, merge with or consolidate with
an "Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or transfer.
13
<PAGE>
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of ______________, Inc., 197 First Avenue, Needham, MA
02194, Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham, MA
02194, Attention: President, with a copy to James M. Clary, III, Esq. at
the same address; or at such other address or addresses as the Developer
shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
14
<PAGE>
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party
until this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this ___________ day of __________________ , 199_ and executed under seal.
Witness: CHANCELLOR OF ____________________, INC.
By:
- --------------------------- --------------------------------
Name:
Title:
CAREMATRIX OF MASSACHUSETTS, INC.
By:
- --------------------------- --------------------------------
Name:
Title:
15
<PAGE>
EXHIBITS A - I
Documents in Planning and Zoning Files
16
<PAGE>
EXHIBIT J
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the
_______________ day of ________________, 1996, by and among CareMatrix of
Massachusetts, Inc., a Delaware corporation, with its principal place of
business at 197 First Avenue, Needham, Massachusetts 02194 ("Manager"), and
Chancellor of [________________________________], Inc., a Delaware corporation,
with its principal place of business at 197 First Avenue, Needham, Massachusetts
02194 ("Owner").
WHEREAS, the Owner is the owner of a [__________________( )] unit senior
housing facility to be located in [_______________________] (the "Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager will
augment the services provided by it and the employees of the Facility so as to
increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such administrative
functions as may be necessary in the management of the Facility; select, hire
(or contract with), train,
1
<PAGE>
supervise, monitor the performance of, and discipline, promote, terminate or
fire (subject to the rights of the Owner under Section 2.1 of this Agreement to
approve the hiring, disciplining and termination of the Executive Director, the
Assistant Administrator and Director of Resident Services) all personnel
involved in the administration and day-to-day operation of the Facility,
including, without limitation, management, resident assistance and other related
personnel, custodial, food service, cleaning, maintenance and other operational
personnel, and secretarial or bookkeeping personnel, each of whom, other than
the Executive Director (as hereinafter described), shall be employees of the
Owner; supervise the accounting, billing, purchasing and bill payment functions
for the Facility; establish systems of accounts and supervise the maintenance of
ledgers and other primary accounting records by the personnel of the Facility;
supervise the financial affairs of the Facility; establish and supervise the
implementation of operating and capital budgets, including those required to
establish reimbursement rates, if any, with respect to state or federal
entitlement programs as well as self-pay rates; prepare and maintain true,
complete and accurate records necessary for the preparation of such operating
budgets; determine which items of cost and expense properly relate to resident
care; establish and administer financial controls over the operation of the
Facility, develop and establish financial standards and norms by which the
income, costs and operations of the Facility may be evaluated; serve as advisor
and consultant in connection with policy decisions to be made by the Owner;
furnish reports to the Owner as the Owner may reasonably request and provide the
Owner with economic and statistical data in connection with or relative to the
operations of the Facility; represent the Facility in its day-to-day dealings
with creditors, residents, personnel, agents for collection, and insurers; act
as agent for the Owner in disbursing or collecting the funds of the Facility and
in paying the debts and fulfilling the obligations of the Facility; coordinate
and supervise a marketing plan for the Facility to insure that the Facility
obtains full occupancy as soon as possible and, after the Facility has achieved
full occupancy, assist in the development of an annual marketing plan and budget
to maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with all
applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
2
<PAGE>
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and hire
a qualified and properly licensed Executive Director (provided, however, that
the wages, salaries and other compensation of the Executive Director shall be
the responsibility of the Owner as set forth in Section 4.2 hereof) who shall be
responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees
the Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is
3
<PAGE>
made under circumstances reasonably requiring emergency action (so long as the
Manager attempts to notify the Owner on a concurrent basis). The Manager shall
prepare and submit to the Owner any certificates of purchasing expenses incurred
for the Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall supervise the Facility
bookkeeping personnel which shall prepare and submit bills and collect for the
account of the Owner any and all moneys owing to the Owner from residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner. The Manager shall be responsible for filing all local, state and
federal tax returns relating to the operation of the Facility, with the
exception of corporate income tax and pension returns, and shall be responsible
for penalties, interest, and audit costs arising out of late, inaccurate, or
incomplete filings or the Manager's failure to file such tax returns provided,
however, that the Owner makes available sufficient funds for payment of any
taxes due and any information needed to complete such returns on a timely
basis).
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days
after the close of each calendar month, a balance sheet as of the end of the
month and a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's
4
<PAGE>
judgment, will tend to maintain the financial stability of the Facility and will
comply with the covenants in any Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month and showing
projected expenditures and projected revenues for such budget period; and (b)
such other budgets as may be reasonably required of the Owner under any
Financing Agreement or by regulatory authorities showing, inter alia, projected
ordinary and extraordinary expenditures and protected revenues for such budget
period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense, on
behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above
with respect to the Manager's employees, if any. Such insurance shall be
written by a responsible insurance company or companies reasonably satisfactory
to the Owner in kinds and amounts and a certificate of insurance shall be
provided to the Owner. The Owner shall retain the right to designate any
insurance agent or agency of its choice through which such insurance shall be
obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and supervise
the agreed upon marketing plan for the Facility during the fill-up phase (the
"Marketing Plan"). Monthly statistical census analysis reports will be generated
by the Manager and delivered to the Owner. The Manager will recommend
adjustments in the Marketing Plan as needed to achieve full occupancy. For
purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status
5
<PAGE>
shall be reviewed in regularly scheduled quarterly meetings and at other
meetings as may be deemed necessary or desirable by the Owner.
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance (this
item may be provided by outside parties if economically feasible) and, to the
extent deemed feasible by the Manager and the Owner, the services of regular
Facility maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee.
Base Management Fee. As compensation for the services to be rendered
by the Manager during the term of this Agreement, the Manager shall pay
itself, at its principal office given below (or at such other place as the
Manager may from time to time designate in writing), and at the times
hereinafter specified, a monthly management fee (the "Management Fee") during
the terms of this Agreement equal to five percent (5%) of Net Revenues. The
Management Fee will be paid in arrears and shall be due and payable on or
before the fifteenth (15th) day of each month following the month in which
services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below) less
contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues received
or receivable from or by reason of the operation of the Facility, including,
without limitation, all revenue of the Facility for or on account of any and
all goods provided and services rendered or activities during the period from
the date of this Agreement and thereafter, the gross dollar amount of all such
billings by the Facility to or on behalf of residents directly or indirectly
connected with the Facility or the provision of all such goods and services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following expenses
incurred by it in the management of the business and properties of the Facility:
(a) Salary and expenses (including, without limitation, payroll
taxes, costs of employee benefit plans, travel, insurance, and fidelity bonds)
of all personnel employed by the Manager (other than the Executive Director, who
will be paid by the Owner as set forth in Section 4.2 hereof) to carry out all
responsibilities detailed above.
6
<PAGE>
(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of financial and accounting personnel employed by the Manager to maintain
accounting books and records of the Facility, except as provided below.
4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available
to the Manager as of the date such payments were due, shall be the
responsibility of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen and
food service equipment, linens, beds, furniture, clothing and all other supplies
and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
acquisition, sale, mortgaging or leasing of property, litigation and
proceedings relating to rates and charges at the Facility, any other litigation
or proceedings to which the Owner is a party. However, such fees shall not
include those fees resulting from or arising out of the gross negligence by the
Manager
7
<PAGE>
and the Owner shall provide such necessary funds to the Manager within ten (10)
days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be paid on behalf of the Owner by the Manager,
the Manager shall promptly notify the Owner of the amount necessary to cure and
the reason for such deficit and the Owner shall provide such necessary funds to
the Manager within ten (10) days after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The
Manager, on behalf of the Owner, shall use reasonable efforts to collect (using
legal counsel approved by the Owner, if necessary) all sums due and owing to
Owner in connection with the operation of the Facility. The Manager and the
Owner shall deposit into such accounts all monies furnished by the Owner as
working funds and all receipts and monies arising from the operation of the
Facility or otherwise received by the Owner or by the Manager for or on the
behalf of the Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
8
<PAGE>
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers. All dealings between the
Owner and the Manager are at arms length as between non-related parties.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue for an initial
term of ten (10) years commencing on the date the Facility is opened for
occupancy, and ending on the last day of the calendar month in which the
[ ( )] anniversary of such opening date occurs (the "Original Expiration
Date"). The Owner and Manager agree to execute a certificate setting forth the
date on which the initial term commences promptly after such opening.
Thereafter, this Agreement shall be renewed automatically for [ ( )]
additional five (5) year terms unless the Manager sends the Owner written
notice no less than ninety (90) days prior to the then applicable Expiration
Date that it does not wish to have the Agreement renew beyond the then
applicable Expiration Date. As used herein the term "Expiration Date" shall
mean the later of the Original Expiration Date, or the date to which this
Agreement has been extended as provided in this Section 7.1.
7.2 Termination for Cause. Any party may terminate this Agreement
for "cause" be delivering thirty (30) days written notice to the others. "Cause"
shall include, but not be limited to, each of the following:
(i) the violation by any party of any material provision in,
or obligation imposed by, this Agreement which violation shall not have been
cured to the reasonable satisfaction of the other party within thirty (30) days
(except in the event that the same is not susceptible to cure within thirty
(30) days, in which event such cure period shall be extended for a reasonable
period of time provided that the defaulting party is diligently pursuing such
cure) following the date on which written notice of termination has been
received by the party who has violated a material provision or obligation
imposed by this Agreement;
(ii) any illegal act engaged in by any party in the
operation of the Facility; or
(iii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay
the Management Fee when due unless the Owner cures the payment default within
ten (1O) days after receiving written notice from the Manager.
9
<PAGE>
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and
complete records or to obtain any necessary opinion of counsel as required by
Section 1.1 of this Agreement. The Manager shall indemnify the Owner and hold
it harmless of, from and against all Costs incurred or suffered by the Owner
as a result of any of the Manager's fraud, willful misconduct, or gross
negligence, or as a result of the Manager's failure to submit proper reports
to the appropriate regulatory agencies, to keep true, accurate and complete
records or to obtain any necessary opinion of counsel as required by
Section 1.1 of this Agreement.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861 (v)(1)(i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the
Manager's books, documents, and records necessary to verify the nature and
extent of the costs of services provided to the Owner. Such access will be
available until the expiration of four (4) years after the services to which
the costs are related have been furnished,
The provision of this Section 9 shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is
not subject to the Act. The Manager agrees that if it carries out any of the
duties of this Agreement through a subcontract with a related organization
which subcontract has a value or cost of $10,000 or more over a twelve (12)
month period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to be
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated, or
discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is
10
<PAGE>
rendered invalid, illegal, or unenforceable, that they shall negotiate in good
faith to amend any such part of this Agreement so as to comply with any such
law, as amended, and further the respective objectives of the parties hereto.
13. Assignment. Neither the Owner nor the Manager will assign its interests
in this Agreement, other than to an affiliate, without the prior written consent
of the other, which consent shall not be unreasonably withheld, delayed or
conditioned.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert Kaufman, President
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
As to Owner: ___________________________________
___________________________________
___________________________________
Attention: ________________________
Any party shall have the right to change the place to which such Notice shall
be sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail shall be deemed received three (3)
days after the date postmarked. All notices that are hand delivered shall be
deemed received upon delivery to the office or address of the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the
11
<PAGE>
Manager. All operational forms and documents including, but not limited to,
policy and procedure manuals, operational forms, level of care determination
systems, management policy books, inspection control manuals, and nursing
management books are and will remain the property of the Manager. All financial
management forms, documents and software systems including, but not limited to,
bookkeeping manuals, financial forms, financial spreadsheets, database or word
processing forms, financial accounting packages and outcome information systems
are and will remain the property of the Manager. Upon termination of this
Agreement, the Owner shall have the option to purchase operational material
belonging to the Manager, except for the financial accounting packages and
outcome information systems, at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
19. Lease Option. The Owner hereby agrees that so long as the Manager is not
in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after the receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement substantially in the form attached hereto as
Exhibit A (the "Lease"), which Lease shall include, without limitation, a ten
(1O) year initial term (with three (3) 5-year renewal terms) and rental
payments equal to the fair market value (which will be a negotiated percentage
of total project costs) as determined immediately prior to the initial term of
the Lease and immediately prior to any renewal terms.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: By:
---------------------------- ----------------------------------
Name: Name:
Title:
WITNESS: ----------------------------------
By: By:
---------------------------- ----------------------------------
Name: Name:
Title:
12
<PAGE>
EXHIBIT A
FACILITY LEASE AGREEMENT
CHANCELLOR OF ________________, INC.
as
Lessor
AND
CAREMATRIX OF ________________, INC.
as
Lessee
Dated as of ________________, 19__
For Premises Located At
_____________________________
_____________________________
_____________________________
_____________________________
i
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 Leased Property
1.2 Term
1.3 Extended Terms
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions
2.2 Rules of Construction
ARTICLE 3 RENT
3.1 Rent for Land, Leased Improvements, Related
Rights and Fixtures
3.2 Intentionally Omitted
3.3 Intentionally Omitted
3.4 Additional Charges
3.5 Intentionally Omitted
3.6 Net Lease
3.7 No Lessee Termination or Offset
3.7.1 No Termination
3.7.2 Waiver
3.7.3 Independent Covenants
3.8 Abatement of Rent Limited
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS
4.1 Payment of Impositions
4.1.1 Lessee To Pay
4.1.2 Installment Elections
4.1.3 Returns and Reports
4.1.4 Refunds
4.1.5 Protest
ii
<PAGE>
4.2 Notice of Impositions
4.3 Adjustment of Impositions
4.4 Utility Charges
4.5 Insurance Premiums
4.6 Deposits
4.6.1 Lessor's Option
4.6.2 Use of Deposits
4.6.3 Deficits
4.6.4 Other Properties
4.6.5 Transfers
4.6.6 Security
4.6.7 Return
4.6.8 Receipts
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY; INSTALLATION,
REMOVAL AND REPLACEMENT OF PERSONAL PROPERTY;
5.1 Ownership of the Leased Property
5.2 Personal Property; Removal and Replacement of
Personal Property
5.2.1 Lessee To Equip Facility
5.2.2 Sufficient Personal Property
5.2.3 Removal and Replacement; Lessor's Option to
Purchase
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS
6.1 Security for Lessee's Obligations; Permitted
Prior Security Interests
6.1.1 Security
6.1.2 Purchase-Money Security Interests
Receivables and Equipment Leases
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY; MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property
7.2 Use of the Leased Property; Compliance;
Management
iii
<PAGE>
7.2.1 Obligation to Operate
7.2.2 Permitted Uses
7.2.3 Compliance with Insurance Requirements
7.2.4 No Waste
7.2.5 No Impairment
7.2.6 No Liens
7.3 Compliance with Legal Requirements
7.4 Management Agreements
ARTICLE 8 REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair
8.1.1 Lessee's Responsibility
8.1.2 No Lessor Obligation
8.1.3 Lessee May Not Obligate Lessor
8.2 Encroachments; Title Restrictions
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS
9.1 Lessor's Approval
9.2 General Provisions as to Capital Additions and
Certain Material Structural Work
9.2.1 No Liens
9.2.2 Lessee's Proposal Regarding Capital Additions
and Material Structural Work
9.2.3 Lessor's Options Regarding Capital Additions
and Material Structural Work
9.2.4 Lessor May Elect to Finance Capital Additions
or Material Structural Work
9.3 Capital Additions Financed by Lessor
9.3.1 Lessee's Financing Request
9.3.2 Lessor's General Requirements
9.3.3 Payment of Costs
9.4 General Limitations
9.5 Non-Capital Additions
iv
<PAGE>
ARTICLE 10 WARRANTIES AND REPRESENTATIONS
10.1 Representations and Warranties
10.1.1 Existence; Power; Qualification
10.1.2 Valid and Binding
10.1.3 Single Purpose
10.1.4 No Violation
10.1.5 Consents and Approvals
10.1.6 No Liens or Insolvency Proceedings
10.1.7 No Burdensome Agreements
10.1.8 Commercial Acts
10.1.9 Adequate Capital, Not Insolvent
10.1.10 Not Delinquent
10.1.11 No Affiliate Debt
10.1.12 Taxes Current
10.1.13 Financials Complete and Accurate
10.1.14 Pending Actions, Notices and Reports
10.1.15 Compliance with Legal and Other Requirements
10.1.16 No Action By Governmental Authority
10.1.17 Property Matters
10.1.18 Third Party Payor Agreements
10.1.19 Rate Limitations
10.1.20 Free Care
10.1.21 No Proposed Changes
10.1.22 ERISA
10.1.23 No Broker
10.1.24 No Improper Payments
10.1.25 Nothing Omitted
10.1.26 No Margin Security
10.1.27 No Default
10.1.28 Principal Place of Business
10.1.29 Labor Matters
10.1.30 Intellectual Property
10.1.31 Management Agreements
10.2 Continuing Effect of Representations and Warranties
v
<PAGE>
ARTICLE 11 FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates
11.2 Financial Statements; Reports; Notice and Information
11.2.1 Obligation to Furnish
11.2.2 Responsible Officer
11.2.3 No Material Omission
11.2.4 Confidentiality
11.3 Financial Covenants
11.3.1 No Indebtedness
11.3.2 No Guaranties
11.4 Affirmative Covenants
11.4.1 Maintenance of Existence
11.4.2 Materials
11.4.3 Compliance with Legal Requirements and
Applicable Agreements
11.4.4 Books and Records
11.4.5 Participation in Third Party Payor Programs
11.4.6 Conduct of its Business
11.4.7 Address
11.4.8 Subordination of Affiliate Transactions
11.4.9 Inspection
11.4.10 Additional Property
11.5 Additional Negative Covenants
11.5.1 Restrictions Relating to Lessee
11.5.2 No Liens
11.5.3 Limits on Affiliate Transactions
11.5.4 Intentionally Omitted
11.5.5 No Default
11.5.6 Intentionally Omitted
11.5.7 Intentionally Omitted
11.5.8 ERISA
11.5.9 Forgiveness of Indebtedness
11.5.10 Value of Assets
11.5.11 Changes in Fiscal Year and Accounting Procedures
11.5.12 Changes in Executive Officers
vi
<PAGE>
ARTICLE 12 INSURANCE AND INDEMNITY
12.1 General Insurance Requirements
12.1.1 Types and Amounts of Insurance
12.1.2 Insurance Company Requirements
12.1.3 Policy Requirements
12.1.4 Notices; Certificates and Policies
12.1.5 Lessor's Right to Place Insurance
12.1.6 Payment of Proceeds
12.1.7 Irrevocable Power of Attorney
12.1.8 Blanket Policies
12.1.9 No Separate Insurance
12.1.10 Assignment of Unearned Premiums
12.2 Indemnity
12.2.1 Indemnification
12.2.2 Indemnified Parties
12.2.3 Limitation on Lessor Liability
12.2.4 Risk of Loss
ARTICLE 13 FIRE AND CASUALTY
13.1 Restoration Following Fire or Other Casualty
13.1.1 Following Fire or Casualty
13.1.2 Procedures
13.1.3 Disbursement of Insurance Proceeds
13.2 Disposition of Insurance Proceeds
13.2.1 Proceeds To Be Released To Pay For Work
13.2.2 Proceeds Not To Be Released
13.2.3 Lessee Responsible for Short-Fall
13.3 Tangible Personal Property
13.4 Restoration of Certain Improvements and the
Tangible Personal Property
13.5 No Abatement of Rent
13.6 Termination of Certain Rights
13.7 Waiver
13.8 Application of Rent Loss and/or Business Interruption Insurance
13.9 Obligation To Account
vii
<PAGE>
ARTICLE 14 CONDEMNATION
14.1 Parties' Rights and Obligations
14.2 Total Taking
14.3 Partial or Temporary Taking
14.4 Restoration
14.5 Award Distribution
14.6 Control of Proceedings
ARTICLE 15 PERMITTED CONTESTS
15.1 Lessee's Right to Contest
15.2 Lessor's Cooperation
15.3 Lessee's Indemnity
ARTICLE 16 DEFAULT
16.1 Events of Default
16.2 Remedies
16.3 Damages
16.4 Lessee Waivers
16.5 Application of Funds
16.6 Intentionally Omitted
16.7 Lessor's Right to Cure
16.8 No Waiver by Lessor
16.9 Right of Forbearance
16.10 Cumulative Remedies
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 Surrender
17.2 Transfer of Permits and Contracts
17.3 No Acceptance of Surrender
17.4 Holding Over
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY
18.1 Purchase of the Leased Property
18.2 Appraisal
18.2.1 Designation of Appraisers
18.2.2 Appraisal Process
18.2.3 Specific Enforcement and Costs
viii
<PAGE>
ARTICLE 19 SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment
19.2 Attornment
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 No Merger of Title
20.2 Transfers by Lessor
20.3 Lessor May Grant Liens
20.4 Subordination and Non-Disturbance
ARTICLE 21 LESSOR OBLIGATIONS
21.1 Quiet Enjoyment
21.2 Memorandum of Lease
21.3 Default by Lessor
ARTICLE 22 NOTICES
ARTICLE 23 INTENTIONALLY OMITTED
ARTICLE 24 MISCELLANEOUS PROVISIONS
24.1 Broker's Fee Indemnification
24.2 No Joint Venture or Partnership
24.3 Amendments, Waivers and Modifications
24.4 Captions and Headings
24.5 Time is of the Essence
24.6 Counterparts
24.7 Entire Agreement
24.8 WAIVER OF JURY TRIAL
24.9 Successors and Assigns
24.10 No Third Party Beneficiaries
24.11 Governing Law
24.12 General
ix
<PAGE>
EXHIBIT A LEGAL DESCRIPTION OF THE LAND
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
EXHIBIT D OPEN COST REPORTS
EXHIBIT E RATE LIMITATIONS
EXHIBIT F FREE CARE REQUIREMENTS
EXHIBIT G CURRENT RATES
x
<PAGE>
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the _____ day of
_______________, 19__ and is between ______________ ("Lessor"), a Delaware
corporation having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02194, and Chancellor of _______________ Inc. ("Lessee"), a
Delaware corporation, having its principal office at 197 First Avenue, Needham,
Massachusetts 02194.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A attached hereto (the
"Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines, and parking
areas and roadways appurtenant to such buildings and structures presently or
hereafter situated upon the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefiting any or all of the Land
and the Leased Improvements; and
(d) all equipment, machinery, building fixtures, and other items of
property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to the
greatest extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tangible Personal Property (as hereinafter
defined) which are not permanently affixed to or incorporated in the Leased
Property (collectively, the "Fixtures");
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by the Lessor and
subject to: (i) the rights of parties
1
<PAGE>
in possession; (ii) the existing state of title including all covenants,
conditions, Liens (as hereinafter defined) and other matters of record
(including, without limitation, the matters set forth in EXHIBIT B); (iii) all
applicable laws and (iv) all matters, whether or not of a similar nature, which
would be disclosed by an inspection of the Leased Property or by an accurate
survey thereof.
1.2 Term. The term of this Lease shall consist of: the "Initial Term",
which shall commence on __________ ___ ___ (the "Commencement Date") and end on
_______ __ _______________ (the "Expiration Date"); provided, however, that
this Lease may be sooner terminated as hereinafter provided. In addition, the
Lessee shall have the option(s) to extend the Term (as hereinafter defined) as
provided for in Section 1.3.
1.3 Extended Terms. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, the
Lessee is hereby granted the option to extend the Initial Term of this Lease for
three (3) additional periods (collectively, the "Extended Terms") as follows:
three (3) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on ___________ __, ____. The Lessee's
extension options shall be exercised by the Lessee by giving written notice to
the Lessor of each such extension at least one hundred eighty (180) days, but
not more than three hundred sixty (360) days, prior to the termination of the
Initial Term or the then current Extended Term, as the case may be. The Lessee
shall have no right to rescind any such notice once given. The Lessee may not
exercise its option for more than one Extended Term at a time. During each
effective Extended Term, all of the terms and conditions of this Lease shall
continue in full force and effect, except that the Base Rent (as hereinafter
defined) for each such Extended Term shall be adjusted as set forth in
Section 3.1.1(b).
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
Accounts: As defined in the UCC.
Accreditation Body: Persons having or claiming jurisdiction over the
accreditation, certification, evaluation or operation of the Facility.
2
<PAGE>
Additional Charges: As defined in Article 3.
Additional Land: As defined in Section 9.3.
Affiliate: With respect to any Person (i) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with
such Person, (ii) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares
or equity interests of such Person or (iii) any officer, director, employee,
general partner or trustee of such Person, or any other Person controlling,
controlled by, or under common control with, such Person (excluding trustees
and Persons serving in a fiduciary or similar capacity who are not otherwise an
Affiliate of such Person). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
Appurtenant Agreements: Collectively, all instruments, documents and other
agreements that now or hereafter create any utility, access or other rights or
appurtenances benefiting or relating to the Leased Property.
Award: All compensation, sums or anything of value awarded, paid or received
on a total or partial Condemnation.
Bankruptcy Code: Subsection 365(h) of the United States Bankruptcy Code, 11
U.S.C. [S]365(h), as the same may hereafter be amended and including any
successor provision thereto.
Base Rent: As defined in Section 3.1.
Business Day: Any day which is not a Saturday or Sunday or a public holiday
under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional structures
annexed to any portion of any of the Leased Improvements and material expansions
of any of the Leased Improvements which are constructed on any portion of the
Land during the Term, including, without limitation, the construction of a new
wing or new story, the renovation of any of the Leased Improvements on the
Leased Property in order to provide a functionally new facility that is needed
or used to provide services not previously offered and any expansion,
construction, renovation or conversion or in order to (i) increase the unit
capacity of a Facility, (ii) change the purpose for which such beds are utilized
and/or (iii) change the utilization of any material portion of any of the Leased
Improvements.
3
<PAGE>
Capital Addition Cost: The cost of any Capital Addition made by the Lessee
whether paid for by the Lessee or the Lessor. Such cost shall include all costs
and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
Casualty: As defined in Section 13.1.
Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Condemnation: With respect to the Leased Property or any interest therein or
right accruing thereto or use thereof (i) the exercise of any Governmental
Authority, whether by legal proceedings or otherwise, by a Condemnor or (ii) a
voluntary sale or transfer by the Lessor to any Condemnor, either under threat
of Condemnation or Taking or while legal proceedings for Condemnation or Taking
are pending.
Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of condemnation.
Consolidated and Consolidating: The consolidated and consolidating accounts
of the relevant Person and its Subsidiaries consolidated in accordance with
GAAP.
Consolidated Financials: For any fiscal year or other accounting period for
any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
Consultants: Collectively, the architects, engineers, inspectors, surveyors
and other consultants that are engaged from time to time by the Lessor to
perform services for the Lessor in connection with this Lease.
Contracts: All agreements (including, without limitation, Provider
Agreements and Patient Admission Agreements), contracts, (including without
limitation, construction contracts, subcontracts, and architects' contracts,)
contract rights, warranties and representations, franchises, and records and
books of account benefiting, relating to or affecting the Leased Property or the
ownership, construction, development, maintenance,
4
<PAGE>
management, repair, use, occupancy, possession, or operation thereof, or the
operation of any programs or services in conjunction with the Leased Property
and all renewals, replacement and substitutions therefor, now or hereafter
issued by or entered into with any Governmental Authority, Accreditation Body or
Third Party Payor or maintained or used by any member of the Leasing Group or
entered into by any member of the Leasing Group with any third Person.
Date of Taking: The date the Condemnor has the right to possession of the
property being condemned.
Documents: As defined in the UCC.
Encumbrance: As defined in Section 20.3.
Environmental Laws: Collectively, all Legal Requirements applicable to (i)
environmental conditions on, under or emanating from the Leased Property and
(ii) the generation, storage, transportation, utilization, disposal, management
or release (whether or not on, under or from the Leased Property) of Hazardous
Substances by the Lessee.
ERISA: The Employment Retirement Income Security Act of 1974, as amended.
Event of Default: As defined in Article 16.
Expiration Date: As defined in Section 1.2.
Extended Terms: As defined in Section 1.3.
Facility: The ____________ unit, [INSERT DESCRIPTION OF FACILITY] facility
[OPTIONAL: to be] known as [INSERT NAME] [OPTIONAL: to be constructed] on the
Land (together with related parking and other amenities)].
Failure to Operate: As defined in Article 16.
Failure to Perform: As defined Article 16.
Fair Market Added Value: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by the Lessee had been
constructed.
Fair Market Value of the Capital Addition: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
5
<PAGE>
Fair Market Value of the Leased Property: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the Leased Property, and (a) assuming the same is unencumbered
by this Lease, (b) determined in accordance with the appraisal procedures set
forth in Section 18.2 or in such other manner as shall be mutually acceptable to
the Lessor and the Lessee (including, without limitation, as a negotiated
percentage of total project costs) and (c) not taking into account any
reduction in value resulting from any Lien to which the Leased Property is
subject and which Lien the Lessee or the Lessor is otherwise required to remove
at or prior to closing of the transaction. However, the positive or negative
effect on the value of the Leased Property attributable to the interest rate,
amortization schedule, maturity date, prepayment provisions and other terms and
conditions of any Lien on the Leased Property which is not so required or agreed
to be removed shall be taken into account in determining the Fair Market Value
of the Leased Property. The Fair Market Value shall be determined as the overall
value based on due consideration of the "income" approach, the "comparable
sales" approach, and the "replacement cost" approach.
Fair Market Value of the Material Structural Work: The amount by which the
Fair Market Value of the Leased Property upon the completion of any particular
Material Structural Work exceeds the Fair Market Value of the Leased Property
just prior to the construction of the applicable Material Structural Work.
Fee Mortgage: As defined in Section 20.3.
Fee Mortgagee: As defined in Section 20.3.
Financing Party: Any Person who is or may be participating with the Lessor
in any way in connection with the financing of any Capital Addition.
Fiscal Quarter: Each of the three (3) month periods commencing on January
1st, April 1st, July 1st and October 1st.
Fiscal Year: The twelve (12) month period from January 1st to December 31st.
Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
General Intangibles: As defined in the UCC.
Governmental Authorities: Collectively, all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures, and offices of any
nature whatsoever of any government, quasi-government unit or political
subdivision, whether with a federal, state, county, district, municipal, city or
otherwise and whether now or hereinafter in existence.
6
<PAGE>
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by the Lessee, including,
without limitation, all resident revenues received or receivable for the use of,
or otherwise by reason of, all rooms, units and other facilities provided, meals
served, services performed, space or facilities subleased or goods sold on or
from the Leased Property and further including, without limitation, except as
otherwise specifically provided below, any consideration received under any
subletting, licensing, or other arrangements with any Person relating to the
possession or use of the Leased Property and all revenues from all ancillary
services provided at or relating to the Leased Property; provided, however, that
Gross Revenues shall not include non-operating revenues such as interest income
or gain from the sale of assets not sold in the ordinary course of business; and
provided, further, that there shall be excluded or deducted (as the case may be)
from such revenues:
(i) contractual allowances (relating to any period during the Term of
this Lease and thereafter until the Rent hereunder is paid in full) for billings
not paid by or received from the appropriate Governmental Agencies or Third
Party Payors,
(ii) allowances according to GAAP for uncollectible accounts,
(iii) all proper resident billing credits and adjustments according to
GAAP relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and excise taxes
and any tax based upon or measured by said Gross Revenues which is added to or
made a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately,
(v) provider discounts for hospital or other medical facility
utilization contracts;
(vi) the cost of any federal, state or local governmental program
imposed specially to provide or finance indigent patient care (other than
Medicare, Medicaid and the like); and
(vii) deposits refundable to residents of the Facility.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee, Gross Revenues calculated for all purposes of this
Lease shall include the Gross Revenues of such Sublessee with respect to the
premises demised under the applicable Sublease (i.e., the Gross Revenues
generated from the operations conducted on such subleased portion of the Leased
Property) and the rent received or receivable from such Sublessee pursuant to
such Subleases shall be excluded from Gross Revenues for all such purposes. As
to any Sublease between the Lessee and a non-Affiliate of the Lessee, only the
rental actually received by the Lessee from such non-Affiliate shall be
included in Gross Revenues.
7
<PAGE>
Hazardous Substances: Collectively, (i) any "hazardous material,"
"hazardous substance," "hazardous waste," "oil," "regulated substance," "toxic
substance," "restricted hazardous waste", "special waste" or words of similar
import as defined under any of the Environmental Laws; (ii) asbestos in any
form; (iii) urea formaldehyde foam insulation; (iv) polychlorinated biphenyl
(v) radon gas; (vi) flammable explosives; (vii) radioactive materials; (viii)
any chemical, containment, solvent, material, pollutant or substance that may be
dangerous or detrimental to the Leased Property, the environment, or the health
and safety of the residents and other occupants of the Leased Property or of the
owners or occupants of any other real property nearby the Leased Property and
(iv) any substance, the generation, storage, transportation, utilization,
disposal, management, release or location of which, on, under or from the Leased
Property is prohibited or otherwise regulated pursuant to any of the
Environmental Laws.
Impositions: Collectively, all taxes (including, without limitation, all
capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), ground
rents, water and sewer rents, water charges or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), transfer taxes and recordation taxes imposed as
a result of this Lease or any extensions hereof, and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of either or both of the
Leased Property and the Rent (including all interest and penalties thereon due
to any failure in payment by the Lessee), which at any time prior to, during or
in respect of the Term hereof and thereafter until the Leased Property is
surrendered to the Lessor as required by the terms of this Lease, may be
assessed or imposed on or in respect of or be a Lien upon (a) the Lessor or the
Lessor's interest in the Leased Property, (b) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease shall
be construed to require the Lessee to pay (1) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed on
the Lessor or any other Person, except the Lessee or its successors, (2) any net
revenue tax of the Lessor or any other Person, except the Lessee and its
successors, (3) any tax imposed with respect to the sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, or (4)
except as expressly provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property; provided, however, the provisos set
forth in clauses (1) and (2) of this sentence shall not be applicable to the
extent that any tax, assessment, tax levy or charge which the Lessee is
obligated to pay pursuant to the first sentence of this definition and which is
in effect at any time during the Term hereof is totally or partially repealed,
and a tax, assessment, tax levy or charge set forth in clause (1) or (2) is
levied, assessed or imposed expressly in lieu thereof. In computing the amount
of any
8
<PAGE>
franchise tax or capital stock tax which may be or become an Imposition, the
amount payable by the Lessee shall be equitably apportioned based upon all
properties owned by the Lessor that are located within the particular
jurisdiction subject to any such tax.
Indebtedness: The total of all obligations of a Person, whether current
or long-term, which in accordance with GAAP would be included as liabilities
upon such Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include (i) all capital lease obligations and (ii)
all guarantees, endorsements (other than for collection of instruments in the
ordinary course of business), or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement contingent
or otherwise to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
Indemnified Parties: As defined in Section 12.2.
Index: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of five (5) years as calculated by the Federal Reserve Board.
Initial Term: As defined in Section 1.2.
Instruments: As defined in the UCC.
Insurance Requirements: All terms of any insurance policy required by
this Lease, all requirements of the issuer of any such policy with respect to
the Leased Property and the activities conducted thereon and the requirements of
any insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
Land: As defined in Article 1.
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
Lease Documents: Collectively, this Lease, and any and all other
instruments, documents, certificates or agreements now or hereafter (i) executed
or furnished by any member of the Leasing Group in connection with the
transactions evidenced by this Lease and/or any of the foregoing documents
and/or (ii) evidencing or securing any of the Lessee's obligations relating to
the Leased Property, including, without limitation, the Lessee's obligations
hereunder.
9
<PAGE>
Lease Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the Lessor's
obligations) under this Lease and the other Lease Documents.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Group: Collectively, the Lessee, any Sublessee and any Manager.
Legal Requirements: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and health-care licensing
statutes, ordinances, by-laws, codes, rules and regulations), whether now or
hereafter enacted, promulgated or issued by any Governmental Authority,
Accreditation Body or Third Party Payor affecting the Lessor, any member of the
Leasing Group or the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession or
operation thereof or the operation of any programs or services in connection
with the Leased Property, including, without limitation, any of the foregoing
which may (i) require repairs, modifications or alterations in or to the Leased
Property, (ii) in any way affect (adversely or otherwise) the use and enjoyment
of the Leased Property or (iii) require the assessment, monitoring, clean-up,
containment, removal, remediation or other treatment of any Hazardous Substances
on, under or from the Leased Property. Without limiting the foregoing, the term
Legal Requirements includes all Environmental Laws and shall also include all
Permits and Contracts issued or entered into by any Governmental Authority, any
Accreditation Body and/or any Third Party Payor and all Permitted Encumbrances.
Lessee: As defined in the preamble of this Lease and its successors and
assigns.
Lessee's Election Notice: As defined in Section 14.3.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Lessor's Investment: The sum of (i) _________ plus (ii) the aggregate
amount of all Subsequent Investments.
Lien: With respect to any real or personal property, any mortgage,
easement, restriction, lien, pledge, collateral assignment, hypothecation,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
Limited Parties: As defined in Section 11.5; provided, however, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity,
10
<PAGE>
unless such shareholder is a member of the Leasing Group or an Affiliate of any
member of the Leasing Group.
Managed Care Plans: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
Management Agreement: Any agreement, whether written or oral, between
the Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility.
Manager: Any Person who has entered into a Management Agreement with the
Lessee or any Sublessee.
Material Structural Work: Any (i) structural alteration, (ii) structural
repair or (iii) structural renovation to the Leased Property that would,
require (a) the design and/or involvement of a structural engineer and/or
architect and/or (b) the issuance of a Permit.
Medicaid: The medical assistance program established by Title XIX of the
Social Security Act (42 USC [ss] 1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC [ss] 1395 et
seq.) and any statute succeeding thereto.
Monthly Deposit Date: As defined in Section 4.6.
Net Income (or Net Loss): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
Obligations: Collectively, the Lease Obligations and the Related Party
Obligations.
Officer's Certificate: A certificate of the Lessee signed on behalf of
the Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
Overdue Rate: On any date, a rate of interest per annum equal to the
greater of: (i) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (ii) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
11
<PAGE>
PBGC: Pension Benefit Guaranty Corporation,
Permits: Collectively, all permits, licenses, approvals, qualifications,
rights, variances, permissive uses, accreditations, certificates,
certifications, consents, agreements, contracts, contract rights, franchises,
interim licenses, permits and other authorizations of every nature whatsoever
required by, or issued under, applicable Legal Requirements benefiting, relating
or affecting the Leased Property or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacements
and substitutions therefor, now or hereafter required or issued by any
Governmental Authority, Accreditation Body or Third Party Payor to any member of
the Leasing Group, or maintained or used by any member of the Leasing Group, or
entered into by any member of the Leasing Group with any third Person.
Permitted Encumbrances: As defined in Section 10.1.
Permitted Prior Security Interests: As defined in Section 6.1.
Person: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
Plans and Specifications: As defined in Section 13.1.
Primary Intended Use: The use of the Facility as a [ ] facility with
________ ( ) units or such additional number of units as may hereafter be
permitted under this Lease, and such ancillary uses as are permitted by law and
may be necessary in connection therewith or incidental thereto.
Prime Rate: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
Principal Place of Business: As defined in Section 10.1.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
Lessee or any Sublessee in
12
<PAGE>
connection with the operation of the Facility relating to any right of payment
or other claim arising out of or in connection with the Lessee's or such
Sublessee's participation in any Third Party Payor Program.
Purchaser: As defined in Section 11.5.
Receivables: Collectively, all (i) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (ii) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party,
whether now in existence or arising from time to time hereafter and whether or
not yet earned by performance, including, without limitation, obligations
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness.
Reference Bank: [______________]
Rent: Collectively, the Base Rent, the Additional Charges and all other
sums payable under this Lease and the other Lease Documents.
Rent Adjustment Date: Each ___ anniversary of the Commencement Date
during the Term of the Lease, including, without limitation, any Extended
Terms.
Rent Insurance Proceeds: As defined in Section 13.8.
Residence Agreements: All contracts, agreements and consents executed by
or on behalf of any resident or other Person seeking services at the Facility,
including, without limitation, assignments of benefits and guarantees.
Retainage: As defined in Section 13.1.
State: The state or commonwealth in which the Leased Property is located.
Sublease: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements, room rentals, rentals of
other facilities of the Leased Property and all other occupancy agreements of
every kind and nature, whether oral or in writing, now in existence or
subsequently entered into by the Lessee, encumbering or affecting the Leased
Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but, excluding any resident of the Facility
under any Resident Agreement.
Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by the Lessor in connection with Capital Additions.
13
<PAGE>
Subsidiary or Subsidiaries: With respect to any Person, any corporation
or other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
Taking: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
Tangible Net Worth: An amount determined in accordance with GAAP equal to
the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost
over book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
Tangible Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by the Lessee and used in connection with the operation of the
Leased Property.
Term: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
Third Party Payor Programs: Collectively, all third party payor programs
in which the Lessee or any Sublessee presently or in the future may participate,
including without limitation, Medicare, Medicaid, Champus, Blue Cross and/or
Blue Shield, Managed Care Plans, other private insurance plans and employee
assistance programs.
Third Party Payors: Collectively, Medicare, Medicaid, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.
UCC: The Uniform Commercial Code as in effect from time to time in the
[INSERT STATE].
Unavoidable Delays: Delays due to strikes, lockouts, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing
14
<PAGE>
an obligation hereunder, provided that lack of funds shall not be deemed a cause
beyond the control of either party hereto.
United States Treasury Securities: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
Unsuitable For Its Primary Intended Use: As used anywhere in this Lease,
the term "Unsuitable For Its Primary Intended Use" shall mean that, by reason
of Casualty, or a partial or temporary Taking by Condemnation, in the good faith
judgment of the Lessor, the Facility cannot be operated on a commercially
practicable basis for the Primary Intended Use, taking into account, among other
relevant factors, the number of usable units affected by such Casualty or
partial or temporary Taking.
Work: As defined in Section 13.1.
Work Certificates: As defined in Section 13.1.
2.2 Rules of Construction. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (a) references to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Lease or
the other applicable Lease Document, and shall not be limited to the particular
text or section or subsection in which such words appear; (b) the use of any
gender shall include all genders and the singular number shall include the
plural and vice versa as the context may require; (c) references to the Lessor's
attorneys shall be deemed to include, without limitation, special counsel and
local counsel for the Lessor; (d) reference to attorneys' fees and expenses
shall be deemed to include all costs for administrative, paralegal and other
support staff; (e) references to Leased Property shall be deemed to include
references to all of the Leased Property and references to any portion thereof;
(f) references to the Lease Obligations shall be deemed to include references to
all of the Lease Obligations and references to any portion thereof; (g)
references to the Obligations shall be deemed to include references to all of
the Obligations and references to any portion thereof; (h) the term "including",
when following any general statement, will not be construed to limit such
statement to the specific items or matters as provided immediately following the
term "including" (whether or not non-limiting language such as "without
limitation" or "but not limited to" or words of similar import are also used),
but rather will be deemed to refer to all of the items or matters that could
reasonably fall within the broadest scope of the general statement; (i) any
requirement that financial statements be Consolidated in form shall apply only
to such financial statements as relate to a period during any portion of which
the relevant Person has one or more Subsidiaries; (j) all accounting terms not
specifically defined in the Lease Documents shall be construed in accordance
with GAAP and (k) all exhibits annexed to any of the Lease Documents as
referenced therein shall be deemed incorporated in such Lease Document by such
annexation and/or reference.
15
<PAGE>
ARTICLE 3
RENT
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures.
The Lessee will pay to the Lessor, in lawful money of the United States of
America, at the Lessor's address set forth herein or at such other place or to
such other Person as the Lessor from time to time may designate in writing,
rent for the Leased Property, as follows: The Lessee shall pay to the Lessor a
base rent (the "Base Rent") per annum that is equal to [INSERT AMOUNT DOLLARS
($ )] and that is payable in advance in equal, consecutive monthly installments
due on the first day of each calendar month, commencing on _________; provided,
however, that on each Rent Adjustment Date, the Base Rent shall be adjusted to
equal the Base Rent then in effect multiplied by __________.
3.2 Intentionally Omitted.
3.3 Intentionally Omitted.
3.4 Additional Charges. Subject to the rights to contest as set forth
in Article 15, in addition to the Base Rent, (a) the Lessee will also pay and
discharge as and when due and payable all Impositions, all amounts, liabilities
and obligations under the Appurtenant Agreements due from or payable by the
owner of the Leased Property, all amounts, liabilities and obligations under
the Permitted Encumbrances due from or payable by the owner of the Leased
Property and all other amounts, liabilities and obligations which the Lessee
assumes or agrees to pay under this Lease, and (b) in the event of any failure
on the part of the Lessee to pay any of those items referred to in clause (a)
above, the Lessee will also promptly pay and discharge every fine, penalty,
interest and cost which may be added for non-payment or late payment of such
items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"), and the Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided in this
Lease, by statute or otherwise, in the case of non-payment of the Additional
Charges, as well as the Base Rent. To the extent that the Lessee pays any
Additional Charges to the Lessor pursuant to any requirement of this Lease, the
Lessee shall be relieved of its obligation to pay such Additional Charges to
any other Person to which such Additional Charges would otherwise be due.
3.5 Intentionally Omitted.
3.6 Net Lease. The Rent shall be paid absolutely net to the Lessor,
so that this Lease shall yield to the Lessor the full amount of the installments
of Base Rent and Additional Charges throughout the Term.
3.7 No Lessee Termination or Offset.
16
<PAGE>
3.7.1 No Termination. Except as may be otherwise specifically and
expressly provided in this Lease, the Lessee, to the extent not prohibited by
applicable law, shall remain bound by this Lease in accordance with its terms
and shall neither take any action without the consent of the Lessor to modify,
surrender or terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent, nor
shall the respective obligations of the Lessor and the Lessee be otherwise
affected by reason of (a) any Casualty or any Taking of the Leased Property,
(b) the lawful or unlawful prohibition of, or restriction upon, the Lessee's
use of the Leased Property or the interference with such use by any Person
(other than the Lessor, except to the extent permitted hereunder) or by reason
of eviction by paramount title; (c) any claim that the Lessee has or might have
against the Lessor, (d) any default or breach of any warranty by the Lessor
under this Lease or any other Lease Document, (e) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting the Lessor or any assignee or transferee of the
Lessor or (f) any other cause whether similar or dissimilar to any of the
foregoing, other than a discharge of the Lessee from any of the Lease
Obligations as a matter of law.
3.7.2 Waiver. The Lessee to the fullest extent not prohibited by
applicable law, hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
to (a) modify, surrender or terminate this Lease or quit or surrender
the Leased Property or (b) entitle the Lessee to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by the Lessee
hereunder, except as otherwise specifically and expressly provided in this
Lease.
3.7.3 Independent Covenants. The obligations of the Lessor and the Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by the Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those instances
where the obligation to pay expressly survives the termination of this Lease) by
termination of this Lease other than by reason of an Event of Default.
3.8 Abatement of Rent Limited. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3, the Base
Rent shall be abated as follows: (a) in the case of such a partial Taking, Base
Rent then due during the Lease Year in which such Taking occurs shall be
reduced to equal the product of (i) the then current Base Rent multiplied by
(ii) the difference between one minus a fraction the numerator of which is the
Award, the denominator of which is the fair Market Value of the Leased
Property, and (b) in the case of such a temporary Taking, by reducing the Base
Rent for the period of such a temporary Taking, by the net amount of the Award
received by the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by the Lessor" shall mean the Award paid to the Lessor on account of
such Taking, minus all costs
17
<PAGE>
and expenses incurred by the Lessor in connection therewith, and minus any
amounts paid to or for the account of the Lessee to reimburse for the costs
and expenses of reconstructing the Facility following such Taking in order to
create a viable and functional Facility under all of the circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 Payment of Impositions.
4.1.1 Lessee To Pay. Subject to the provisions of Section 4.1.2 and
Article 15, the Lessee will pay or cause to be paid all Impositions before any
fine, penalty, interest or cost may be added for non-payment, such payments to
be made directly to the taxing authority where feasible, and the Lessee will
promptly furnish the Lessor copies of official receipts or other satisfactory
proof evidencing payment not later than the last day on which the same may be
paid without penalty or interest.
4.1.2 Installment Elections. If any such Imposition may, at the option of
the taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), the Lessee may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such installments
during the Term hereof (subject to the Lessee's right to contest pursuant to
the provisions of Section 4.1.5 below) as the same respectively become due and
before any fine, penalty, premium, further interest or cost may be added
thereto.
4.1.3 Returns and Reports. The Lessor, at its expense, shall, to the
extent permitted by applicable law, prepare and file all tax returns and
reports as may be required by Governmental Authorities in respect of the
Lessor's net income, gross receipts, franchise taxes and taxes on its capital
stock, and the Lessee, at its expense, shall, to the extent permitted by
applicable laws and regulations, prepare and file all other tax returns and
reports in respect of any Imposition as may be required by Governmental
Authorities. The Lessor and the Lessee shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made
with respect to the Leased Property as may be necessary to prepare any
required returns and reports. In the event that any Governmental Authority
classifies any property covered by this Lease as personal property, the Lessee
shall file all personal property tax returns in such jurisdictions where it may
legally so file. The Lessor, to the extent it possesses the same, and the
Lessee, to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for
any portion of Leased Property so classified as personal property. Where the
Lessor is legally required to file personal property tax returns, if the Lessee
notifies the Lessor of the obligation to do so in each year at least thirty
(30) days prior to the date any protest must be filed, the
18
<PAGE>
Lessee will be provided with copies of assessment notices so as to enable the
Lessee to file a protest.
4.1.4 Refunds. If no Lease Default shall have occurred and be continuing,
any refund due from any taxing authority in respect of any Imposition paid by
the Lessee shall be paid over to or retained by the Lessee. If a Lease Default
shall have occurred and be continuing, at the Lessor's option, such funds shall
be paid over to the Lessor and/or retained by the Lessor and applied toward the
Obligations in accordance with the Lease Documents and/or the Related Party
Agreements.
4.1.5 Protest. Upon giving notice to the Lessor, at the Lessee's option
and sole cost and expense, and subject to compliance with the provisions of
Article 15, the Lessee may contest, protest, appeal, or institute such other
proceedings as the Lessee may deem appropriate to effect a reduction of any
Imposition and the Lessor, at the Lessee's cost and expense as aforesaid, shall
fully cooperate in a reasonable manner with the Lessee in connection with such
protest, appeal or other action.
4.2 Notice of Impositions. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but the Lessor's failure to give any such notice shall
in no way diminish the Lessee's obligations hereunder to pay such Impositions.
4.3 Adjustment of Impositions. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between the Lessor and the Lessee, whether or not
such Impositions are imposed before or after such expiration or termination, and
the Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
4.4 Utility Charges. The Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, telephone and other utilities used in
the Leased Property during the Term and thereafter until the Lessee surrenders
the Leased Property in the manner required by this Lease.
4.5 Insurance Premiums. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee shall furnish the Lessor with evidence
satisfactory to the Lessor that all such premiums have been so paid prior to the
commencement of the Term and thereafter at least thirty (30) days prior to the
due date of each premium which thereafter becomes due. Notwithstanding the
foregoing, the Lessee may pay such insurance premiums to the insurer in monthly
installments so long as the applicable insurer is contractually obligated to
give the Lessor not less than a sixty (60) days notice of non-payment and so
long as no Lease Default has occurred and is continuing. In the event of the
failure of the Lessee either to comply with the insurance requirements in
Article 12, or to
19
<PAGE>
pay the premiums for such insurance, or to deliver such policies or certificates
thereof to the Lessor at the times required hereunder, the Lessor shall be
entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, which premiums shall be a demand obligation of the Lessee to
the Lessor.
4.6 Deposits.
4.6.1 Lessor's Option. At the option of the Lessor, which may be
exercised at any time, the Lessee shall, upon written request of the Lessor, on
the first day on the calendar month immediately following such request, and on
the first day of each calendar month thereafter during the Term (each of which
dates is referred to as a "Monthly Deposit Date"), pay to and deposit with the
Lessor a sum equal to one-twelfth (1/12th) of the Impositions to be levied,
charged, filed, assessed or imposed upon or against the Leased Property within
one (1) year after said Monthly Deposit Date and a sum equal to one-twelfth
(1/12th) of the premiums for the insurance policies required pursuant to Article
12 which are payable within one (1) year after said Monthly Deposit Date. If the
amount of the Impositions to be levied, charged, assessed or imposed or
insurance premiums to be paid within the ensuing one (1) year period shall not
be fixed upon any Monthly Deposit Date, such amount for the purpose of computing
the deposit to be made by the Lessee hereunder shall be estimated by the Lessor
with an appropriate adjustment to be promptly made between the Lessor and the
Lessee as soon as such amount becomes determinable. In addition, the Lessor may,
at its option, from time to time require that any particular deposit be greater
than one-twelfth (1/12th) of the estimated amount payable within one (1) year
after said Monthly Deposit Date, if such additional deposit is required in order
to provide to the Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment thereof, or to
make payment of any required insurance premiums not later than the due date
thereof.
4.6.2 Use of Deposits. The sums deposited by the Lessee under this
Section 4.6 shall be held by the Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of the Lessor, and shall be
deposited by the Lessor at such bank as the Lessor may, from time to time
select, and the Lessor shall not be liable to the Lessee or any other Person (a)
based on the Lessor's (or such bank's) choice of investment vehicles, (b) for
any consequent loss of principal or interest or (c) for any unavailability of
funds based on such choice of investment. Furthermore, the Lessor shall bear no
responsibility for the financial condition of, nor any act or omission by, the
Lessor's depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as no Lease
Default has occurred and is then continuing, and as long as no fact or
circumstance exists which, with the giving of notice and/or the passage of time,
would constitute a Lease Default. The Lessee shall give not less than ten (10)
days prior written notice to the Lessor in each instance when an Imposition or
insurance premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which the same may
be paid in order to comply with the requirements of this Lease. If the Lessor,
in violation of its obligations under this Lease, does not pay any Imposition or
insurance premium
20
<PAGE>
when due, for which a sufficient deposit exists, the Lessee shall not be in
default hereunder by virtue of the failure of the Lessor to pay such Imposition
or such insurance premium and the Lessor shall pay any interest or fine assessed
by virtue of the Lessor's failure to pay such Imposition or insurance premium.
4.6.3 Deficits. If for any reason any deposit held by the Lessor under
this Section 4.6 shall not be sufficient to pay an Imposition or insurance
premium within the time specified therefor in this Lease, then, within ten (10)
days after demand by the Lessor, the Lessee shall deposit an additional amount
with the Lessor, increasing the deposit held by the Lessor so that the Lessor
holds sufficient funds to pay such Imposition or premium in full (or in
installments as otherwise provided for herein), together with any penalty or
interest due thereon. The Lessor may change its estimate of any Imposition or
insurance premium for any period on the basis of a change in an assessment or
tax rate or on the basis of a prior miscalculation or for any other good faith
reason; in which event, within ten (10) days after demand by the Lessor, the
Lessee shall deposit with the Lessor the amount in excess of the sums previously
deposited with the Lessor for the applicable period which would theretofore have
been payable under the revised estimate.
4.6.4 Other Properties. If any Imposition shall be levied, charged,
filed, assessed, or imposed upon or against the Leased Property, and if such
Imposition shall also be a levy, charge, assessment, or imposition upon or for
any other real or personal property that does not constitute a part of the
Leased Property, then the computation of the amounts to be deposited under this
Section 4.6 shall be based upon the entire amount of such Imposition and the
Lessee shall not have the right to apportion any deposit with respect to such
Imposition.
4.6.5 Transfers. In connection with any assignment of the Lessor's
interest under this Lease, the original the Lessor named herein and each
successor in interest shall have the right to transfer all amounts deposited
pursuant to the provisions of this Section 4.6 then in its possession to such
assignee (as the subsequent holder of the Lessor's interest in this Lease) and
upon such transfer, the original the Lessor named herein or the applicable
successor in interest transferring the deposits shall thereupon be completely
released from all liability with respect to such deposits so transferred and the
Lessee shall look solely to said assignee, as the subsequent holder of the
Lessor's interest under this Lease, in reference thereto. The original the
Lessor named herein or the applicable successor in interest transferring the
deposits shall provide written notice to the Lessee of such transfer.
4.6.6 Security. All amounts deposited with the Lessor pursuant to the
provisions of this Section 4.6 shall be held by the Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, the Lessor may, in its sole and absolute
discretion, apply said amounts towards payment or performance of such
Obligations.
21
<PAGE>
4.6.7 Return. Upon the expiration or earlier termination of this Lease,
provided, that, all of the Lease Obligations have been fully paid and performed,
any sums then held by the Lessor under this Section 4.6 shall be refunded to the
Lessee.
4.6.8 Receipts. The Lessee shall deliver to the Lessor copies of all
notices, demands, claims, bills and receipts in relation to the Impositions and
insurance premiums immediately upon receipt thereof by the Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY;
5.1 Ownership of the Leased Property. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that the Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease.
5.2 Personal Property; Removal and Replacement of Personal Property.
5.2.1 Lessee To Equip Facility. The Lessee, at its sole cost and expense,
shall install, affix or assemble or place on the Leased Property, sufficient
items of Tangible Personal Property, to enable the Leased Property to be
operated, in accordance with the requirements of this Lease for the Primary
Intended Use, and such Tangible Personal Property and replacements thereof,
shall be at all times the property of the Lessee.
5.2.2 Sufficient Personal Property. The Lessee shall maintain, during the
entire Term, the Tangible Personal Property in good order and repair and shall
provide at its expense all necessary replacements thereof, as may be necessary
in order to operate the Leased Property in compliance with all applicable Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Primary Intended Use. In addition,
the Lessee shall (a) furnish all necessary replacements of obsolete items of the
Tangible Personal Property during the Term, unless the Lessee provides the
Lessor with an explanation (reasonably acceptable to the Lessor) as to why such
Tangible Personal Property is no longer required in connection with the
operation of the Leased Property and (b) at least once a year, and more
frequently if requested by the Lessor, deliver to the Lessor, a detailed
inventory of all such Tangible Personal Property.
5.2.3 Removal and Replacement; Lessor's Option to Purchase. The Lessee
shall not remove from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the fair market
value of which exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually or
ONE HUNDRED THOUSAND DOLLARS ($100,000.00) collectively, except if such Tangible
Personal
22
<PAGE>
Property is simultaneously suitably replaced or the Lessee provides the Lessor
with an explanation (reasonably satisfactory to the Lessor) as to why such
Tangible Personal Property is no longer required in connection with the
operation of the Leased Property. At its sole cost and expense, the Lessee shall
restore the Leased Property to the condition required by Article 8, including
repair of all damage to the Leased Property caused by the removal of the
Tangible Personal Property, whether effected by the Lessee or the Lessor. Upon
the expiration or earlier termination of this Lease, the Lessor shall have the
option, which may be exercised prior to or within sixty (60) days following such
expiration or termination, of (a) acquiring the Tangible Personal Property
(pursuant to a bill of sale and assignments of any equipment leases, all in such
forms as are reasonably satisfactory to the Lessor) upon payment of its book
value (the Lessee's cost, minus depreciation), but not in excess of its fair
market value or (b) requiring the Lessee to remove the Tangible Personal
Property. If the Lessor exercises its option to purchase the Tangible Personal
Property, the price to be paid by the Lessor shall be (i) reduced by the amount
of all payments due on any equipment leases or any other Permitted Prior
Security Interests assumed by the Lessor and (ii) applied to the Lease
Obligations before any payment to the Lessee. If the Lessor requires the removal
of the Tangible Personal Property, then all of the Tangible Personal Property
that is not removed by the Lessee within ten (10) days following such request
shall be considered abandoned by the Lessee and may be appropriated, sold,
destroyed or otherwise disposed of by the Lessor without first giving notice
thereof to the Lessee, without any payment to the Lessee and without any
obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 Security for Lessee's Obligations.
6.1.1 Security. Notwithstanding anything to the contrary set forth
herein, in no event shall the Lessee be required to grant to the Lessor any
security interest in Receivables; provided, however, upon any Lease Default or
the expiration or earlier termination of this Lease, the Lessee shall provide
the Lessor with copies of its books and records relating to Receivables, even if
excluded from the security granted to the Lessor, so as to facilitate continuity
of patient care and billing.
6.1.2 Purchase-Money Security Interests, Receivables and Equipment
Leases. Notwithstanding any other provision hereof regarding the creation of
Liens, but subject to Section 11.3.1, the Lessee may (a) grant priority
purchase money security interests in items of Tangible Personal Property, (b)
lease Tangible Personal Property from equipment Lessors and (c) grant a prior
security interest in Receivables to an institutional lender which is providing a
working capital line of credit to the Lessee for the exclusive use of the
Facility. Security interests granted by the Lessee in full compliance with the
provisions of this Section 6.1.2 are referred to as "Permitted Prior Security
Interests."
23
<PAGE>
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property. The Lessee acknowledges receipt and
delivery of possession of the Leased Property and that the Lessee has examined
and otherwise has acquired knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder. The Lessee
is leasing the Leased Property "AS-IS" in its present condition. The Lessee
waives any claim or action against the Lessor in respect of the condition of the
Leased Property. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER AS TO ITS FITNESS FOR ANY
PARTICULAR PURPOSE OR USE, ITS DESIGN OR CONDITION OR OTHERWISE, OR AS TO
DEFECTS IN THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT;
IT BEING AGREED THAT ALL RISKS RELATING TO THE DESIGN, CONDITION AND/OR USE OF
THE LEASED PROPERTY ARE TO BE BORNE BY THE LESSEE. THE LESSEE HEREBY ASSUMES ALL
RISK OF THE PHYSICAL CONDITION OF THE LEASED PROPERTY, THE SUITABILITY OF THE
LEASED PROPERTY FOR THE LESSEE'S PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE
OF THE LEASED PROPERTY WITH ALL APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT
NOT LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor, at any time and from time to time during
the Term, the Lessee shall engage one (1) or more independent professional
consultants, engineers and inspectors, qualified to do business in the State and
acceptable to the Lessor to perform any environmental and/or structural
investigations and/or other inspections of the Leased Property and the Facility
as the Lessor may reasonably request in order to detect (a) any structural
deficiencies in the Leased Improvements or the utilities servicing the Leased
Property or (b) the presence of any condition that (i) may be harmful or present
a health hazard to the residents and other occupants of the Leased Property or
(ii) constitutes a breach or violation of any of the Lease Documents. In the
event that the Lessor reasonably determines that the results of such testing or
inspections are unsatisfactory, within thirty (30) days of notice from the
Lessor, the Lessee shall commence such appropriate remedial actions as may be
reasonably requested by the Lessor to correct such unsatisfactory conditions
and, thereafter, shall diligently and continuously prosecute such remedial
actions to completion within the time limits prescribed in this Lease or the
other Lease Documents.
7.2 Use of the Leased Property; Compliance; Management.
24
<PAGE>
7.2.1 Obligation to Operate. The Lessee shall continuously operate the
Leased Property in accordance with the Primary Intended Use and maintain its
qualifications for licensure and accreditation as required by all applicable
Legal Requirements and Insurance Requirements.
7.2.2 Permitted Uses. During the entire Term, the Lessee shall use the
Leased Property, or permit the Leased Property to be used, only for the Primary
Intended Use. The Lessee shall not use the Leased Property or permit the Leased
Property to be used for any other use without the prior written consent of the
Lessor, which consent may be withheld in the Lessor's sole and absolute
discretion.
7.2.3 Compliance With Insurance Requirements. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done which will
cause the cancellation of any insurance policy covering the Leased Property, nor
shall the Lessee, any Manager or any other Person sell or otherwise provide to
any residents, other occupants or invitees therein, or permit to be kept, used
or sold in or about the Leased Property, any article which may be prohibited by
any Legal Requirement or by any of the Insurance Requirements. Furthermore, the
Lessee shall, at its sole cost and expense, take whatever other actions that may
be necessary to comply with and to insure that the Leased Property complies with
all Insurance Requirements.
7.2.4 No Waste. The Lessee shall not commit or suffer to be committed any
waste on, in or under the Leased Property, nor shall the Lessee cause or permit
any nuisance thereon.
7.2.5 No Impairment. The lessee shall neither suffer nor permit the
Leased Property to be used in such a manner as (a) might reasonably tend to
impair the Lessor's title thereto or (b) may reasonably make possible a claim or
claims of adverse usage or adverse possession by the public or of implied
dedication of the Leased Property.
7.2.6 No Liens. Except as permitted pursuant to Section 6.1.2, the Lessee
shall not permit or suffer any Lien to exist on the Tangible Personal Property
and shall in no event cause, permit or suffer any Lien to exist with respect to
the Leased Property other than as set forth in Section 11.5.2.
7.3 Compliance with Legal Requirements. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee, at its sole cost and expense, will promptly (a) comply with, and shall
cause every other member of the Leasing Group to comply with, all Legal
Requirements relating to the use, operation, maintenance, repair and restoration
of the Leased Property, whether or not compliance therewith shall require
structural change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply with (in
all material respects), and shall cause every other member of the Leasing Group
to procure, maintain and comply with (in all material respects), all Contracts
and Permits necessary or
25
<PAGE>
desirable in order to operate the Leased Property for the Primary Intended Use,
and for compliance with all of the terms and conditions of this Lease. Unless a
Lease Default has occurred or any event has occurred which, with the passage of
time and/or the giving of notice would constitute a Lease Default, the Lessee
may, upon prior written notice to the Lessor, contest any Legal Requirement to
the extent permitted by, and in accordance with, Article 15.
7.4 Management Agreements. From and after the Commencement Date, the
Lessee shall not enter into any Management Agreement without the prior written
approval of the Lessor, in each instance, which approval shall not be
unreasonably withheld. The Lessee shall not, without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld, agree to or allow: (a) any change in the Manager or change in the
ownership or control of the Manager, (b) any change in the Management Agreement,
(c) the termination of any Management Agreement (other than in connection with
the exercise by the Lessee of any of its remedies under the Management Agreement
as a result of any default by the Manager thereunder), (d) any assignment by the
Manager of its interest under the Management Agreement or (e) any material
amendment of the Management Agreement. In addition, the Lessee shall, at its
sole cost and expense, promptly and fully perform or cause to be performed every
covenant, condition, promise and obligation of the licensed operator of the
Leased Property under any Management Agreement.
Each Management Agreement shall provide that the Lessor shall be provided
notice of any defaults thereunder and, at the Lessor's option, an opportunity to
cure such default. The Lessee shall furnish to the Lessor, within three (3) days
after receipt thereof, or after the mailing or service thereof by the Lessee, as
the case may be, a copy of each notice of default which the Lessee shall give
to, or receive from any Person, based upon the occurrence, or alleged
occurrence, of any default in the performance of any covenant, condition,
promise or obligation under any Management Agreement.
Whenever and as often as the Lessee shall fail to perform, promptly and
fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under and
pursuant to any Management Agreement, the Lessor, or a lawfully appointed
receiver of the Leased Property, may, at their respective options (and without
any obligation to do so), after five (5) days' prior notice to the Lessee
(except in the case of an emergency) enter upon the Leased Property and perform,
or cause to be performed, such work, labor, services, acts or things, and take
such other steps and do such other acts as they may deem advisable, to cure such
defaulted covenant, condition, promise or obligation, and any amount so paid or
advanced by the Lessor or such receiver and all costs and expenses reasonably
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses and court costs), shall be a demand obligation of the Lessee to the
Lessor or such receiver, and, the Lessor shall have the same rights and remedies
for failure to pay such costs on demand as for the Lessee's failure to pay any
other sums due hereunder.
26
<PAGE>
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. The Lessee, at its sole cost and expense,
shall keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto which are under the Lessee's control in good order and
repair (whether or not the need for such repairs occurs as a result of the
Lessee's use, any prior use, the elements or the age of the Leased Property or
such private roadways, sidewalks and curbs or any other cause whatsoever) and,
subject to Articles 9, 13 and 14, the Lessee shall promptly, with the exercise
of all reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement of, or during, the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. In
addition, the Lessee, at its sole cost and expense, shall make all repairs,
modifications, replacements, renovations and alterations of the Leased Property
(and such private roadways, sidewalks and curbs) that are necessary to comply
with all applicable Legal Requirements and Insurance Requirements so that the
Leased Property can be legally operated for the Primary Intended Use. All
repairs, replacements, renovations, alterations, and modifications required by
the terms of this Section 8.1 shall be (a) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance Requirements and the
requirements of Article 9 hereof, using new materials well suited for their
intended purpose and (b) consistent with the operation of the Leased Property in
a first class manner. The Lessee will not take or omit to take any action the
taking or omission of which might materially impair the value or the usefulness
of the Leased Property for the Primary Intended Use. To the extent that any of
the repairs, replacements, renovations, alterations or modifications required by
the terms of this Section 8.1 constitute Material Structural Work, the Lessee
shall obtain the Lessor's prior written approval (which approval shall not be
unreasonably withheld) of the specific repairs, replacements, renovations,
alterations and modifications to be performed by or on behalf of the Lessee in
connection with such Material Structural Work. Notwithstanding the foregoing, in
the event of a bona fide emergency during which the Lessee is unable to contact
the appropriate representatives of the Lessor, the Lessee may commence such
Material Structural Work as may be necessary in order to address such emergency
without the Lessor's prior approval, provided, however, that the Lessee shall
immediately thereafter advise the Lessor of such emergency and the nature and
scope of the Material Structural Work commenced and shall obtain the Lessor's
approval of the remaining Material Structural Work to be completed.
8.1.2 No Lessor Obligation. The Lessor shall not, under any
circumstances, be required to build or rebuild any improvements on the Leased
Property (or any private
27
<PAGE>
roadways, sidewalks or curbs appurtenant thereto), or to make any repairs,
replacements, renovations, alterations, restorations, modifications, or renewals
of any nature or description to the Leased Property (or any private roadways,
sidewalks or curbs appurtenant thereto), whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto in connection with this Lease, or to maintain
the Leased Property (or any private roadways, sidewalks or curbs appurtenant
thereto) in any way.
8.1.3 Lessee May Not Obligate Lessor. Nothing contained herein nor any
action or inaction by the Lessor shall be construed as (a) constituting the
consent or request of the Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) giving the Lessee any right,
power or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion as
would permit the making of any claim against the Lessor for the payment thereof
or to make any agreement that may create, or in any way be the basis for, any
right, title or interest in, or Lien or claim against, the estate of the Lessor
in the Leased Property. Without limiting the generality of the foregoing, the
right title and interest of the Lessor in and to the Leased Property shall not
be subject to liens or encumbrances for the performance of any labor or services
or the furnishing of any materials or other property furnished to the Leased
Property at or by the request of the Lessee or any other Person other than the
Lessor. The Lessee shall notify any contractor, subcontractor, laborer,
materialman or vendor providing any labor, services or materials to the Leased
Property of this provision.
8.2 Encroachments; Title Restrictions. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other Lien now or hereafter affecting the
Leased Property, or shall impair the rights of others under any easement,
right-of-way or other Lien to which the Leased Property is now or hereafter
subject, then promptly upon the request of the Lessor, the Lessee shall, at its
sole cost and expense, subject to the Lessee's right to contest the existence of
any encroachment, violation or impairment as set forth in Article 15, (a) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment or (b)
make such alterations to the Leased Improvements, and take such other actions,
as the Lessee in the good faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, or to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements. Notwithstanding the foregoing, the Lessee shall, in any event,
take all such actions as may be reasonably necessary in order to be able to
continue the operation of the Leased Improvements for the Primary Intended Use
substantially in the manner and to the extent that the Leased Improvements were
operated prior to the assertion of such encroachment, violation or impairment
and nothing contained herein shall limit the Lessee's obligations to operate the
Leased Property in accordance with its Primary Intended Use. Any such alteration
made
28
<PAGE>
pursuant to the terms of this Section 8.2 shall be completed in conformity with
the applicable requirements of Section 8.1 and Article 9. The Lessee's
obligations under this Section 8.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 Lessor's Approval. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without limitation, any change in the
size or unit capacity of the Facility), except as may be otherwise expressly
required pursuant to Article 8.
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
9.2.1 No Liens. The Lessee shall not be permitted to create any Lien on
the Leased Property in connection with any Capital Addition or Material
Structural Work.
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work. If the Lessee desires to undertake any Capital Addition or
Material Structural Work, the Lessee shall submit to the Lessor in writing a
proposal setting forth in reasonable detail any proposed Capital Addition or
Material Structural Work and shall provide to the Lessor copies of, or
information regarding, the applicable plans and specifications, Permits,
Contracts and any other materials concerning the proposed Capital Addition or
Material Structural Work, as the case may be, as the Lessor may reasonably
request. Without limiting the generality of the foregoing, each such proposal
pertaining to any Capital Addition shall indicate the approximate projected cost
of constructing such Capital Addition, the use or uses to which it will be put
and a good faith estimate of the change, if any, in the Gross Revenues that the
Lessee anticipates will result from the construction of such Capital Addition.
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work. The Lessor shall have the options of: (a) denying permission
for the construction of the applicable Capital Addition or Material Structural
Work, (b) offering to finance the construction of the Capital Addition or
Material Structural Work pursuant to Section 9.3, (c) allowing the Lessee to pay
for or separately finance the construction of the Capital Addition or
29
<PAGE>
Material Structural Work, subject to compliance with the terms and conditions of
Section 9.2.1, Section 9.4, Section 13.1, all Legal Requirements and all other
requirements of this Lease and to such other terms and conditions as the Lessor
may in its discretion impose or (d) any combination of the foregoing. Unless the
Lessor notifies the Lessee in writing of a contrary election within forty-five
(45) days of the Lessee's request, the Lessor shall be deemed to have denied the
request for the Capital Addition or Material Structural Work.
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work. If the Lessor elects to offer financing for the proposed
Capital Addition or Material Structural Work, the provisions of Section 9.3
shall apply.
9.3 Capital Additions and Material Structural Work Financed by Lessor.
9.3.1 Lessee's Financing Request. The Lessee may request that the Lessor
provide or arrange financing for a Capital Addition or Material Structural Work
by providing to the Lessor such information about the Capital Addition or
Material Structural Work as the Lessor may reasonably request, including,
without limitation, all information referred to in Section 9.2 above. The Lessee
understands, however, that the Lessor shall be under no obligation to agree to
such request. Nevertheless, the Lessor shall use reasonable efforts to notify
the Lessee, within forty-five (45) days of receipt of such information, as to
whether the Lessor will finance the proposed Capital Addition or Material
Structural Work and, if so, the terms and conditions upon which it would do so,
including the terms of any amendment to this Lease (including, without
limitation, an increase in Base Rent based on the Lessor's then existing terms
and prevailing conditions to compensate the Lessor for the additional funds
advanced by it). The Lessee may withdraw its request by notice to the Lessor at
any time before such time as the Lessee accepts the Lessor's terms and
conditions. All advances of funds for any such financing shall be made in
accordance with the Lessor's then standard construction loan requirements and
procedures, which may include, without limitation, the requirements and
procedures applicable to Work under Section 13.1.
9.3.2 Lessor's General Requirements. If the Lessor agrees to finance the
proposed Capital Addition or Material Structural Work and the Lessee accepts the
Lessor's proposal therefor, in addition to all other items which the Lessor or
any applicable Financing Party may reasonably require, the Lessee shall provide
to the Lessor the following:
(a) prior to any advance of funds, (i) any information, opinions,
certificates, Permits or documents reasonably requested by the Lessor or any
applicable Financing Party which are necessary to confirm that the Lessee will
be able to use the Capital Addition upon the completion thereof or the
applicable portion of the Facility upon the completion of the Material
Structural Work in accordance with the Primary Intended Use and (ii) evidence
satisfactory to the Lessor and any applicable Financing Party that all Permits
required for the construction and use of the Capital Addition or the applicable
portion of the Facility have been obtained, are in full force and effect and are
not subject to appeal, except only for those Permits which cannot in the normal
course be obtained prior to commencement or completion of the
30
<PAGE>
construction; provided, that the Lessor and any applicable Financing Party are
furnished with reasonable evidence that the same will be available in the normal
course of business without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate and, if
requested, a certificate from the Lessee's architect, setting forth in
reasonable detail the projected (or actual, if available) Capital Addition Cost
or the cost of the Material Structural Work;
(c) bills of sale, instruments of transfer and other documents required
by the Lessor so as to vest title to the Capital Addition or the applicable
Material Structural Work in the Lessor free and clear of all Liens, and
amendments to this Lease and any recorded notice or memorandum thereof, duly
executed and acknowledged, in form and substance reasonably satisfactory to the
Lessor, providing for any changes required by the Lessor including, without
limitation, changes in the Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to the Lessor title to any
land acquired for the purpose of constructing the Capital Addition or the
applicable Material Structural Work ("Additional Land") free and clear of any
Liens except those approved by the Lessor;
(e) upon completion of the Capital Addition or the Material Structural
Work, a final as-built survey thereof reasonably satisfactory to the Lessor, if
required by the Lessor;
(f) during and following the advance of funds and the completion of the
Capital Addition or the Material Structural Work, endorsements to any
outstanding policy of title insurance covering the Leased Property satisfactory
in form and substance to the Lessor and any Financing Party (i) updating the
same without any additional exception except as may be reasonably permitted by
the Lessor, (ii) if applicable, including the Additional Land in the premises
covered by such title insurance policy and (iii) increasing the coverage thereof
by an amount equal to any amount paid by the Lessor for the Additional Land plus
the Fair Market Value of the Capital Addition or the Fair Market Value of the
Material Structural Work (except to the extent covered by the owner's policy of
title insurance referred to in subparagraph (g) below);
(g) simultaneous with the initial advance of funds, if appropriate, (i)
an owner's policy of title insurance insuring fee simple title to any Additional
Land conveyed to the Lessor pursuant to subparagraph (d) free and clear of all
Liens except those approved by the Lessor and (ii) a lender's policy of title
insurance reasonably satisfactory in form and substance to any applicable
Financing Party;
(h) following the completion of the Capital Addition or the Material
Structural Work, if reasonably deemed necessary by the Lessor, an appraisal of
the Leased Property by an M.A.I. appraiser acceptable to the Lessor, which
states that the Fair Market Value of the Leased Property upon completion of the
Capital Addition or the Material Structural Work exceeds the Fair Market Value
of the Leased Property prior to the commencement of the
31
<PAGE>
construction of such Capital Addition or Material Structural Work by an
amount not less than one hundred twenty-five percent (125%) of the Capital
Addition Cost or the cost of the Material Structural Work; and
(i) during or following the advancement of funds, prints of architectural
and engineering drawings relating to the Capital Addition or the Material
Structural Work and such other materials, including, without limitation,
endorsements to the title insurance policies (insuring the Lessor and any
applicable Financing Party with respect to the Leased Property) contemplated by
subsection (f) above, opinions of counsel, appraisals, surveys, certified copies
of duly adopted resolutions of the board of directors of the Lessee authorizing
the execution and delivery of the lease amendment and any other documents and
instruments as may be reasonably required by the Lessor and any applicable
Financing Party.
9.3.3 Payment of Costs. By virtue of making a request to finance a
Capital Addition or any Material Structural Work, whether or not such financing
is actually consummated, the Lessee shall be deemed to have agreed to pay, upon
demand, all costs and expenses reasonably incurred by the Lessor and any Person
participating with the Lessor in any way in the financing of the Capital
Addition or Material Structural Work, including, but not limited to (a) fees and
expenses of their respective attorneys, (b) all photocopying expenses, if any,
(c) the amount of any filing, registration and recording taxes and fees, (d)
documentary stamp taxes and intangible taxes and (e) title insurance charges and
appraisal fees.
9.4 General Limitations. Without in any way limiting the Lessor's options
with respect to proposed Capital Additions or Material Structural Work: (a) no
Capital Addition or Material Structural Work shall be completed that could, upon
completion, significantly alter the character or purpose or detract from the
value or operating efficiency of the Leased Property, or significantly impair
the revenue-producing capability of the Leased Property, or adversely affect the
ability of the Lessee to comply with the terms of this Lease, (b) no Capital
Addition or Material Structural Work shall be completed which would tie in or
connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless the Lessee shall have obtained the
prior written approval of the Lessor, which approval may be withheld in the
Lessor's sole and absolute discretion and (c) all proposed Capital Additions and
Material Structural Work shall be architecturally integrated and consistent with
the Leased Property.
9.5 Non-Capital Additions. The Lessee shall have the obligation and right
to make repairs, replacements and alterations which are not Capital Additions as
required by the other Sections of this Lease, but in so doing, the Lessee shall
always comply with and satisfy the conditions of Section 9.4, mutatis, mutandis.
The Lessee shall have the right, from time to time, to make additions,
modifications or improvements to the Leased Property which do not constitute
Capital Additions or Material Structural Work as it may deem to be desirable or
necessary for its uses and purposes, subject to the same limits and conditions
imposed under Section 9.4. The cost of any such repair, replacement, alteration,
addition, modification or
32
<PAGE>
improvement shall be paid by the Lessee and the results thereof shall be
included under the terms of this Lease and become a part of the Leased
Property, without payment therefor by the Lessor at any time. Notwithstanding
the foregoing, all such additions, modifications and improvements which affect
the structure of any of the Leased Improvements, or which involve the
expenditure of more than TWENTY-FIVE THOUSAND DOLLARS ($25,000.00), shall be
undertaken only upon compliance with the provisions of Section 13.1, all Legal
Requirements and all other applicable requirements of this Lease; provided,
however, that in the event of a bona fide emergency during which the Lessee is
unable to contact the appropriate representatives of the Lessor, the Lessee may
commence such additions, modifications and improvements as may be necessary in
order to address such emergency without the Lessor's prior approval, as long as
the Lessee immediately thereafter advises the Lessor of such emergency and the
nature and scope of the additions, modifications and improvements performed and
obtains the Lessor's approval of the remaining work to be completed.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 Representations and Warranties. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 Existence; Power; Qualification. The Lessee is a corporation duly
organized, validly existing and in good standing under the laws of _______ . The
Lessee has all requisite corporate power to own and operate its properties and
to carry on its business as now conducted and as proposed to be conducted and is
duly qualified to transact business and is in good standing in each jurisdiction
where such qualification is necessary or desirable in order to carry out its
business as presently conducted and as proposed to be conducted;
10.1.2 Valid and Binding. The Lessee is duly authorized to make and enter
into all of the Lease Documents to which the Lessee is a party and to carry out
the transactions contemplated therein. All of the Lease Documents to which the
Lessee is a party have been duly executed and delivered by the Lessee, and each
is a legal, valid and binding obligation of the Lessee, enforceable in
accordance with its terms.
10.1.3 Single Purpose. The Lessee is, and during the entire time that
this Lease remains in force and effect shall be, engaged in no business, trade
or activity other than the operation of the Leased Property for the Primary
Intended Use.
10.1.4 No Violation. The execution, delivery and performance of the Lease
Documents and the consummation of the transactions thereby contemplated shall
not result in any breach of, or constitute a default under, or result in the
acceleration of, or constitute an event which, with the giving of notice or the
passage of time, or both, could result in default or acceleration of any
obligation of any member of the Leasing Group under any of the Permits or
33
<PAGE>
Contracts or any other contract, mortgage, lien, lease, agreement,
instrument, franchise, arbitration award, judgment, decree, bank loan or credit
agreement, trust indenture or other instrument to which any member of the
Leasing Group is a party or by which any member of the Leasing Group or the
Leased Property may be bound or affected and do not violate or contravene any
Legal Requirement.
10.1.5 Consents and Approvals. Except as already obtained or filed, as
the case may be, no consent or approval or other authorization of, or exemption
by, or declaration or filing with, any Person and no waiver of any right by any
Person is required to authorize or permit, or is otherwise required as a
condition of the execution and delivery of any of the Lease Documents by any
member of the Leasing Group and the performance of such member's obligations
thereunder or as a condition to the validity (assuming the due authorization,
execution and delivery by the Lessor of the Lease Documents to which it is a
party).
10.1.6 No Liens or Insolvency Proceedings. Each member of the Leasing
Group is financially solvent and there are no actions, suits, investigations or
proceedings including, without limitation, outstanding federal or state tax
liens, garnishments or insolvency or bankruptcy proceedings, pending or, to the
best of the Lessee's knowledge and belief, threatened:
(a) against or affecting any member of the Leasing Group, which if
adversely resolved to such member of the Leasing Group, would materially
adversely affect the ability of any of the foregoing to perform their respective
obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use, occupancy,
possession or operation thereof; or
(c) which may involve or affect the validity, priority or enforceability
of any of the Lease Documents, at law or in equity, or before or by any
arbitrator or Governmental Authority.
10.1.7 No Burdensome Agreements. The Lessee is a party to any agreement
the terms of which now have, or, as far as can be reasonably foreseen, may have,
a material adverse affect on its respective financial condition or business or
on the operation of the Leased Property.
10.1.8 Commercial Acts. The Lessee's performance of and compliance with
the obligations and conditions set forth herein and in the other Lease Documents
will constitute commercial acts done and performed for commercial purposes.
10.1.9 Adequate Capital, Not Insolvent. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
member of the Leasing Group:
34
<PAGE>
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds and capital to carry on its business as
now conducted or as contemplated to be conducted (in accordance with the terms
of the Lease Documents);
(c) will own property having a value both at fair valuation and at
present fair saleable value greater than the amount required to pay its debts as
they become due; and
(d) will not be rendered insolvent as determined by applicable law.
10.1.10 Not Delinquent. No member of the Leasing Group is delinquent or
claimed to be delinquent under any obligation for the payment of borrowed money.
10.1.11 No Affiliate Debt. The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether direct
or contingent) for borrowed money from any Affiliate of the Lessee that is not
fully subordinated to the Lease Obligations pursuant to a written agreement in
form and substance acceptable to the Lessor.
10.1.12 Taxes Current. Each member of the Leasing Group has filed all
federal, state and local tax returns which are required to be filed as to which
extensions are not currently in effect and have paid all taxes, assessments,
impositions, fees and other governmental charges (including interest and
penalties) which have become due pursuant to such returns or pursuant to any
assessment or notice of tax claim or deficiency received by each such member of
the Leasing Group. No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal, state or
local taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in excess of
those already paid.
10.1.13 Financials Complete and Accurate. The financial statements of
each member of the Leasing Group given to the Lessor in connection with the
execution and delivery of the Lease Documents were true, complete and accurate,
in all material respects, and fairly presented the financial condition of each
such member of the Leasing Group as of the date thereof and for the periods
covered thereby, having been prepared in accordance with GAAP and such financial
statements disclosed all liabilities, including, without limitation, contingent
liabilities, of each such member of the Leasing Group. There has been no
material adverse change since such date with respect to the Tangible Net Worth
of any member of the Leasing Group or with respect to any other matters
contained in such financial statements, nor have any additional material
liabilities, including, without limitation, contingent liabilities, of any
member of the Leasing Group arisen or been incurred or asserted since such date.
The projections heretofore delivered to the Lessor continue to be reasonable
(with respect to the material assumptions upon which such projections are based)
and the Lessee reasonably anticipates the results projected therein will be
achieved, there having been (a) no material adverse change in the business,
assets or condition, financial or otherwise of any member of
35
<PAGE>
the Leasing Group or the Leased Property and (b) no material depletion of the
cash or decrease in working capital of any member of the Leasing Group.
10.1.14 Pending Actions, Notices and Reports.
(a) There is no action or investigation pending or, to the best knowledge
and belief of the Lessee, threatened, anticipated or contemplated (nor, to the
knowledge of the Lessee, is there any reasonable basis therefor) against or
affecting the Leased Property or any member of the Leasing Group (or any
Affiliate thereof) before any Governmental Authority, Accreditation Body or
Third Party Payor which could prevent or hinder the consummation of the
transactions contemplated hereby or call into question the validity of any of
the Lease Documents or any action taken or to be taken in connection with the
transactions contemplated thereunder or which in any single case or in the
aggregate might result in any material adverse change in the business,
prospects, condition, affairs or operations of any member of the Leasing Group
or the Leased Property (including, without limitation, any action to revoke,
withdraw or suspend any Permit necessary or desirable for the operation of the
Leased Property in accordance with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location other than the Leased
Property) or any material impairment of the right or ability of any member of
the Leasing Group to carry on its operations as presently conducted or proposed
to be conducted or which may materially adversely impact reimbursement to any
member of the Leasing Group for services rendered to beneficiaries of Third
Party Payor Programs.
(b) Neither the Facility nor any member of the Leasing Group has received
any notice of any claim, requirement or demand of any Governmental Authority,
Accreditation Body, Third Party Payor or any insurance body having or claiming
any licensing, certifying, supervising, evaluating or accrediting authority over
the Leased Property to rework or redesign the Leased Property, its professional
staff or its professional services, procedures or practices in any material
respect or to provide additional furniture, fixtures, equipment or inventory or
to otherwise take action so as to make the Leased Property conform to or comply
with any Legal Requirement;
(c) The most recent utilization reviews relating to the Leased Property
by all applicable Third Party Payors, Accreditation Bodies and Governmental
Authorities and reviews or scrutiny by any managed care or utilization review
companies have not had a material adverse impact on the utilization of units or
programs at any of the Leased Property. No claims or assertions have been made
in any utilization review that any of the practices or procedures used at the
Leased Property are improper or inappropriate other than such claims or
assertions which singly and in the aggregate will not have a material adverse
impact on the Leased Property; and
(d) The Lessee has delivered or caused to be delivered to the Lessor true
and correct copies of all licenses, inspection surveys and accreditation reviews
relating to the Leased Property, issued by any Governmental Authority or
Accreditation Body during the most recent licensing period, together with all
plans of correction relating thereto.
36
<PAGE>
10.1.15 Compliance with Legal and Other Requirements.
(a) The Lessee and the Leased Property and the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements and there is no
claim of any violation thereof known to the Lessee. Without limiting the
foregoing, the Lessee has obtained all Permits that are necessary or desirable
to operate the Leased Property in accordance with its Primary Intended Use and
all such Permits are in full force and effect.
(b) Except as previously delivered to the Lessor pursuant to
Section 10.1.14(d) hereof, there are no outstanding notices of deficiencies,
notices of proposed action or orders of any kind relating to the Leased Property
issued by any Governmental Authority, Accreditation Body or Third Party Payor
requiring conformity to any of the Legal Requirements.
(c) The Facility is accredited by [INSERT ANY OTHER APPLICABLE
ORGANIZATIONS] and there are no deficiencies in either the Leased Property or
any services provided at the Facility that would prevent the extension of the
accreditation of the Facility by [INSERT ANY OTHER APPLICABLE ORGANIZATIONS]
after their next regularly scheduled inspections.
10.1.16 No Action By Governmental Authority. There is no action pending
or, to the best knowledge and belief of the Lessee, recommended, by any
Governmental Authority or Accreditation Body to revoke, repeal, cancel, modify,
withdraw or suspend any Permit or Contract or to take any other action of any
other type which could have a material adverse effect on the Leased Property.
10.1.17 Property Matters.
(a) The Leased Property is free and clear of agreements, covenants and
Liens, except those agreements, covenants and Liens to which this Lease is
expressly subject, whether presently existing, as are listed on EXHIBIT B or
were listed on the UCC lien search results delivered to the Lessor at or prior
to the execution and delivery of this Lease (and were not required to be
terminated as a condition of the execution and delivery of this Lease), or which
may hereafter be created in accordance with the terms hereof (collectively
referred to herein as the "Permitted Encumbrances"); and the Lessee shall
warrant and defend the Lessor's title to the Leased Property against any and all
claims and demands of every kind and nature whatsoever;
(b) There is no Condemnation or similar proceeding pending with respect
to or affecting the Leased Property, and the Lessee is not aware, to the best of
the Lessee's knowledge and belief, that any such proceeding is contemplated;
37
<PAGE>
(c) No part of the Leased Property has been damaged by any fire or other
casualty. The Leased Improvements are in good operating condition and repair,
ordinary wear and tear excepted, free from known defects in construction or
design;
(d) None of the Permitted Encumbrances has or is likely to have a
material adverse impact upon, nor interfere with or impede, in any material
respect, the operation of the Leased Property in accordance with the Primary
Intended Use;
(e) All buildings, facilities and other improvements necessary, both
legally and practically, for the proper and efficient operation of the Facility
are located upon the Leased Property and all real property and personal property
currently utilized by the Lessee is included within the definition of the Leased
Property;
(f) The Leased Property abuts on and has direct vehicular access to a
public road or access to a public road via permanent, irrevocable, appurtenant
easements;
(g) The Leased Property constitutes a separate parcel for real estate tax
purposes and no portion of any real property that does not constitute a portion
of the Leased Property is part of the same tax parcel as any part of the Leased
Property;
(h) All utilities necessary for the use and operation of the Facility are
available to the lot lines of the Leased Property:
(i) in sufficient supply and capacity;
(ii) through validly created and existing easements of record appurtenant
to or encumbering the Leased Property (which easements shall not impede or
restrict the operation of the Facility); and
(iii) without need for any Permits and/or Contracts to be issued by or
entered into with any Governmental Authority, except as already obtained or
executed, as the case may be, or as otherwise shown to the satisfaction of the
Lessor to be readily obtainable; and
(i) The Lessee has made no structural alterations or improvements to any
of the Leased Improvements that changed the foot-print of any of the Leased
Improvements, added an additional story to any of the Leased Improvements,
decreased the amount of parking available on the Leased Property or otherwise
involved any alteration which would be regulated by applicable zoning
requirements and the Lessee has no actual knowledge of any such structural
alteration or improvement made to any of the Leased Improvements during the last
ten (10) years and has no knowledge of any such structural alteration or
renovation made to any of the Leased Improvements or any such decrease in
parking during such period.
10.1.18 Third Party Payor Agreements.
38
<PAGE>
(a) The Lessee or the Facility is fully qualified as a provider of
services under and participates in all Third Party Payor Programs and referral
programs as is necessary for the prudent operation of the Facility in the good
faith exercise of commercially reasonable business judgment.
(b) Attached hereto as EXHIBIT C is a list of national accounts and local
discount agreements, which constitute all of the agreements between the Lessee
or the Facility, on the one hand, and Third Party Payors on the other hand,
pursuant to which the Lessee or the Facility agrees to provide services based on
a discount factor from the rates regularly charged for services rendered by the
Lessee or the Facility.
(c) No member of the Leasing Group, nor the Facility has any rate appeal
currently pending before any Governmental Authority or any administrator of any
Third Party Payor Program or any other referral source other than such appeals
which, if determined adversely to any member of the Leasing Group or the
Facility would not have a materially adverse effect, either singly or in the
aggregate, on the financial condition of any member of the Leasing Group or the
Facility.
(d) All cost reports and financial reports submitted to any Third Party
Payor with respect to the Facility by any member of the Leasing Group have been
materially accurate and complete and have not been misleading in any material
respect. As a result of any audits by any Third Party Payor, there are no
related recoupment claims made or contests pending or threatened other than such
recoupment claims or contests which, if determined adversely to any member of
the Leasing Group or the Facility, would not have a materially adverse effect,
either singly or in the aggregate, on the financial condition of any member of
the Leasing Group or the Facility. As of the date hereof, no cost reports for
the Facility remain open or unsettled other than those listed on EXHIBIT D.
10.1.19 Rate Limitations. Except as disclosed on EXHIBIT E, the State
currently imposes no restrictions or limitations on rates which may be charged
to private pay residents receiving services at the Facility.
10.1.20 Free Care. Except as disclosed on EXHIBIT F, there are no
Contracts, Permits or Legal Requirements which require that a percentage of beds
or slots in any program at the Facility be reserved for Medicaid or Medicare
eligible residents or that the Facility provide a certain amount of welfare,
free or charity care or discounted or government assisted patient care.
10.1.21 No Proposed Changes. The Lessee has no actual knowledge of any
Legal Requirements which have been enacted, promulgated or issued within the
eighteen (18) months preceding the date of this Lease or any proposed Legal
Requirements currently pending in the State which may materially adversely
affect rates at the Facility (or any program operated in conjunction with the
Facility) or may result in the likelihood of increased competition at the
Facility or the imposition of Medicaid, Medicare, charity, free care, welfare
39
<PAGE>
or other discounted or government assisted residents at the Facility or require
that the Lessee or the Facility obtain a certificate of need, Section 1122
approval or the equivalent, which the Lessee or the Facility does not currently
possess.
10.1.22 ERISA. No employee pension benefit plan maintained by any member
of the Leasing Group has any accumulated funding deficiency within the meaning
of the ERISA, nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor thereto) in
connection with any employee pension benefit plan (or other class of benefit
which the PBGC has elected to insure), and there have been no "reportable
events" (not waived) or "prohibited transactions" with respect to any such plan,
as those terms are defined in Section 4043 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 No Broker. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by the Lease Documents.
10.1.24 No Improper Payments. No member of the Leasing Group nor any of
their respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or property to
or for the private use of any government official, employee, agent or other
Person where either the payment or the purpose of such contribution, payment or
gifts is illegal under the laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any
purpose or has made any false or artificial entries on any of its books or
records for any reason;
(c) made any payments to any Person with the intention or understanding
that any part of such payment was to be used for any other purpose other than
that described in the documents supporting the payment; or
(d) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state or local, where such contribution would be in violation of
applicable law.
10.1.25 Nothing Omitted. Neither this Lease, nor any of the other Lease
Documents, nor any certificate, agreement, statement or other document,
including, without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be furnished to
the Lessor or its attorneys in connection with the transactions contemplated by
the Lease Documents, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to
prevent all statements contained herein and therein from being misleading. There
is no fact within the special knowledge of the Lessee which has not been
disclosed herein or in writing to
40
<PAGE>
the Lessor that materially adversely affects, or in the future, insofar as the
Lessee can reasonably foresee, may materially adversely affect the business,
properties, assets or condition, financial or otherwise, of any member of the
Leasing Group or the Leased Property.
10.1.26 No Margin Security. The Lessee is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Lessor's Investment will be used to
purchase or carry any margin security or to extend credit to others for the
purpose of purchasing or carrying any margin security or in any other manner
which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System. The Lessee is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
10.1.27 No Default. No event or state of facts which constitutes, or
which, with notice or lapse of time, or both, could constitute, a Lease Default
has occurred and is continuing.
10.1.28 Principal Place of Business. The principal place of business and
chief executive office of the Lessee is located at 197 First Avenue, Needham,
Massachusetts 02194 (the "Principal Place of Business").
10.1.29 Labor Matters. There are no proceedings now pending, nor, to the
best of the Lessee's knowledge, threatened with respect to the operation of the
Facility before the National Labor Relations Board, State Commission on Human
Rights and Opportunities, State Department of Labor, U.S. Department of Labor or
any other Governmental Authority having jurisdiction of employee rights with
respect to hiring, tenure and conditions of employment, and no member of the
Leasing Group has experienced any material controversy with any Facility
administrator or other employee of similar stature or with any labor
organization.
10.1.30 Intellectual Property. The Lessee is duly licensed or authorized
to use all (if any) copyrights, rights of reproduction, trademarks, trade-names,
trademark applications, service marks, patent applications, patents and patent
license rights, (all whether registered or unregistered, U.S. or foreign),
inventions, franchises, discoveries, ideas, research, engineering, methods,
practices, processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used in or
necessary for the operation of the Facility in accordance with its Primary
Intended Use, without conflict with or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in others.
10.1.31 Management Agreements. There is no Management Agreement in force
and effect as of the date hereof.
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute
41
<PAGE>
continuing representations and warranties which shall remain true,
correct and complete throughout the Term. Notwithstanding the provisions of the
foregoing sentence but without derogation from any other terms and provisions of
this Lease, including, without limitation, those terms and provisions containing
covenants to be performed or conditions to be satisfied on the part of the
Lessee, the representations and warranties contained in Sections 10.1.6,
10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c), 10.1.18(b),
10.1.18(c), 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.28, 10.1.29, in the
second sentence of Section 10.1.12, in the second and third sentences of
Section 10.1.13, and in the second and third sentences of Section 10.1.18(d)
shall not constitute continuing representations and warranties throughout the
Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates. At any time, and from time to time, upon
request from the Lessor, the Lessee shall furnish to the Lessor, within ten (10)
Business Days after receipt of such request, an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the Lessor and any such prospective purchaser
or mortgagee of the Leased Property.
11.2 Financial Statements; Reports; Notice and Information.
11.2.1 Obligation To Furnish. The Lessee will furnish and shall cause to
be furnished to the Lessor the following statements, information and other
materials:
(a) Annual Statements. Within ninety (90) days after the end of each of
their respective fiscal years, (i) a copy of the Consolidated Financials for
each of (x) the Lessee and (y) any Sublessee for the preceding fiscal year,
certified and audited by, and with the unqualified opinion of, independent
certified public accountants acceptable to the Lessor and certified as true and
correct by the Lessee or the applicable Sublessee, as the case may be (and,
without limiting anything else contained herein, the Consolidated Financials for
the Lessee and for each Sublessee shall include a detailed balance sheet for
Leased Property as of the last day of such fiscal year and a statement of
earnings from the Leased Property for such fiscal year showing, among other
things, all rents and other income therefrom and all expenses paid or incurred
in connection with the operation of the Leased Property); (ii) separate
statements, certified as true and correct by the Lessee and each Sublessee,
stating whether, to the best of the signer's knowledge and belief after making
due inquiry, the Lessee or such Sublessee, as the case may be, is in default in
the performance or observance of any of the terms of this Lease or any of the
other Lease Documents and, if so, specifying all such defaults, the nature
42
<PAGE>
thereof and the steps being taken to immediately remedy the same; (iii) a copy
of all letters from the independent certified accountants engaged to perform the
annual audits referred to above, directed to the management of the Lessee or the
applicable Sublessee, as the case may be, regarding the existence of any
reportable conditions or material weaknesses and (iv) a statement certified as
true and correct by the Lessee setting forth all Subleases as of the last day of
such fiscal year, the respective areas demised thereunder, the names of the
Sublessees thereunder, the respective expiration dates of such Subleases, the
respective rentals provided for therein, and such other information pertaining
to such Subleases as may be reasonably requested by the Lessor.
(b) Permits and Contracts. Promptly after the issuance or the execution
thereof, as the case may be, true and complete copies of (i) all Permits which
constitute operating licenses for the Facility issued by any Governmental
Authority having jurisdiction over assisted living matters and (ii) Contracts
(involving payments in the aggregate in excess of $100,000 per annum),
including, without limitation, all Provider Agreements.
(c) Contract Notices. Promptly after the receipt thereof, true and
complete copies of any notices, consents, terminations or statements of any kind
or nature relating to any of the Contracts (involving payments in the aggregate
in excess of $100,000 per annum) other than those issued in the ordinary course
of business.
(d) Permit or Contract Defaults. Promptly after the receipt thereof, true
and complete copies of all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in the ordinary course
of business), terminations and notices of any kind (other than those notices
that are furnished in the ordinary course of business) issued or provided to the
Lessee or any Sublessee by any Governmental Authority, Accreditation Body or any
Third Party Payor, including, without limitation, any notices pertaining to any
delinquency in, or proposed revision of, the Lessee's or any Sublessee's
obligations under the terms and conditions of any Permits or Contracts now or
hereafter issued by or entered into with any Governmental Authority,
Accreditation Body or Third Party Payor and the response(s) thereto made by or
on behalf of the Lessee or any Sublessee.
(e) Official Reports. Upon completion or filing thereof, complete copies
of all applications (other than those that are furnished in the ordinary course
of business), notices (other than those that are furnished in the ordinary
course of business), statements, annual reports, cost reports and other reports
or filings of any kind (other than those that are furnished in the ordinary
course of business) provided by the Lessee or any Sublessee to any Governmental
Authority, Accreditation Body or any Third Party Payor with respect to the
Leased Property.
(f) Other Information. With reasonable promptness, such other information
as the Lessor may from time to time reasonably request respecting (i) the
financial condition and affairs of each member of the Leasing Group and the
Leased Property and (ii) the licensing and
43
<PAGE>
operation of the Leased Property; including, without limitation, audited
financial statements, certificates and consents from accountants and all other
financial and licensing/operational information as may be required or requested
by any Governmental Authority.
(g) Default Conditions. As soon as possible, and in any event within five
(5) days after the occurrence of any Lease Default, or any event or circumstance
which, with the giving of notice or the passage of time, or both, could
constitute a Lease Default, a written statement of the Lessee setting forth the
details of such Lease Default, event or circumstance and the action which the
Lessee proposes to take with respect thereto.
(h) Official Actions. Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any Governmental Authority or
Accreditation Body which could have a material adverse effect on (i) any member
of the Leasing Group to perform any of its obligations under any of the Lease
Documents or (ii) the Leased Property.
(i) Audit Reports. Promptly after receipt, a copy of all audits or
reports submitted to any member of the Leasing Group by any independent public
accountant in connection with any annual, special or interim audits of the books
of any such member of the Leasing Group and, if requested by the Lessor, any
letter of comments directed by such accountant to the management of any such
member of the Leasing Group.
(j) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit or Provider Agreement
necessary for the operation of the Leased Property;
(ii) any loss, damage or destruction to or of the Leased Property
in excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000) (regardless of whether the
same is covered by insurance);
(iii) any material controversy involving the Lessee or any
Sublessee and (x) Facility administrator or Facility employee of similar stature
or (y) any labor organization;
(iv) any controversy that calls into question the eligibility of
the Lessee or the Facility for the participation in any Medicaid, Medicare or
other Third Party Payor Program;
(v) any refusal of reimbursement by any Third Party Payor which,
singularly or together with all other such refusals by any Third Party Payors,
could have a material adverse effect on the financial condition of the Lessee or
any Sublessee; and
(vi) any fact within the special knowledge of any member of the
Leasing Group, or any other development in the business or affairs of any member
of the Leasing
44
<PAGE>
Group, which may be materially adverse to the business, properties, assets or
condition, financial or otherwise, of any member of the Leasing Group or the
Leased Property.
(k) Responses To Inspection Reports. Within thirty (30) days after
receipt of an inspection report relating to the Leased Property from the Lessor,
a written response describing in detail prepared plans to address concerns
raised by the inspection report.
(l) Public Information. Upon the completion or filing, mailing or other
delivery thereof, complete copies of all financial statements, reports, notices
and proxy statements, if any, sent by any member of the Leasing Group (which is
a publicly held corporation) to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a publicly held corporation)
with any securities exchange or with the Securities Exchange Commission.
(m) Annual Budgets. At least thirty (30) days prior to the end of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall submit to the
Lessor a preliminary annual financial budget for the Facility for the next
Fiscal Year, a preliminary capital expenditures budget for the Facility for the
next Fiscal Year and a report detailing the capital expenditures made in the
then current Fiscal Year and on or before the end of the first month of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall submit to the
Lessor revised finalized versions of such budgets and report.
11.2.2 Responsible Officer. Any certificate, instrument, notice, or
other document to be provided to the Lessor hereunder by any member of the
Leasing Group shall be signed by an executive officer of such member (in the
event that any of the foregoing is not an individual), having a position of Vice
President or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief financial
officer of such member.
11.2.3 No Material Omission. No certificate, instrument, notice or other
document, including without limitation, any financial statements furnished or to
be furnished to the Lessor pursuant to the terms hereof or of any of the other
Lease Documents shall contain any untrue statement of a material fact or shall
omit to state any material fact necessary in order to prevent all statements
contained therein from being misleading.
11.2.4 Confidentiality. The Lessor shall afford any information received
pursuant to the provisions of the Lease Documents the same degree of
confidentiality that the Lessor affords similar information proprietary to the
Lessor; provided, however, that the Lessor does not in any way warrant or
represent that such information received from any member of the Leasing Group
shall remain confidential (and shall not be liable in any way for any subsequent
disclosure of such information by any Person that the Lessor has provided such
information in accordance with the terms hereof) and provided, further, that the
Lessor shall have the unconditional right to (a) disclose any such information
as the Lessor deems necessary or appropriate in connection with any sale,
transfer, conveyance, participation or assignment of
45
<PAGE>
the Leased Property or any of the Lease Documents or any interest therein and
(b) use such information in any litigation or arbitration proceeding between the
Lessor and any member of the Leasing Group. Without limiting the foregoing, the
Lessor may also utilize any information furnished to it hereunder as and to the
extent (i) counsel to the Lessor determines that such utilization is necessary
pursuant to 15 U.S.C. 77a-77aa or 15 U.S.C. 78a-78jj and the rules and
regulations promulgated thereunder, (ii) the Lessor is required or requested by
any Governmental Authority to disclose any such information and/or (iii) the
Lessor is requested to disclose any such information by any of its lenders or
potential lenders. The Lessor shall not be liable in any way for any subsequent
disclosure of such information by any Person to whom the Lessor provided such
information in accordance with the terms hereof. Nevertheless, in connection
with any such disclosure, the Lessor shall inform the recipient of any such
information of the confidential nature thereof. The Lessor shall observe any
prohibitions or limitations on the disclosure of any such information under
applicable confidentiality law or regulations, to the extent that the same are
applicable to such information, including, without limitation, any duly enacted
"Patients' Bill of Rights" or similar legislation, including such limitations as
may be necessary to preserve the confidentiality of the facility-patient
relationship and the physician-patient privilege.
11.3 Financial Covenants. The Lessee covenants and agrees that,
throughout the Term and as long as the Lessee is in possession of the Leased
Property:
11.3.1 No Indebtedness. The Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to the
Lessor under the Lease Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business, (iv) Indebtedness created in
connection with any financing of any Capital Addition, provided, that each such
financing has been approved by the Lessor in accordance with the terms of
Article 9 hereof, (v) Indebtedness to any Affiliate, provided, that, such
Indebtedness is fully subordinated to this Lease pursuant to a written agreement
in form and substance acceptable to the Lessor, and (vi) other Indebtedness of
the Lessee in the aggregate amount not to exceed ____________ incurred, for the
exclusive use of the Leased Property, on account of purchase money indebtedness
or finance lease arrangements, each of which shall not exceed the fair market
value of the assets or property acquired or leased and shall not extend to any
assets or property other than those purchased or leased and purchase money
security interests in equipment and equipment leases which comply with the
provisions of Section 6.1.2.
11.3.2 No Guaranties. The Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
46
<PAGE>
11.4 Affirmative Covenants. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 Maintenance of Existence. If the Lessee is a corporation, trust
or partnership, during the entire time that this Lease remains in full force and
effect, the Lessee shall keep in effect its existence and rights as a
corporation, trust or partnership under the laws of the state of its
incorporation or formation and its right to own property and transact business
in the State.
11.4.2 Materials. Except as provided in Section 6.1.2, the Lessee shall
not suffer the use in connection with any renovations or other construction
relating to the Leased Property of any materials, fixtures or equipment intended
to become part of the Leased Property which are purchased upon lease or
conditional bill of sale or to which the Lessee does not have absolute and
unencumbered title, and the Lessee covenants to cause to be paid punctually all
sums becoming due for labor, materials, fixtures or equipment used or purchased
in connection with any such renovations or construction, subject to the Lessee's
right to contest to the extent provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable Agreements. The
Lessee and the Leased Property and all uses thereof shall comply with (i) all
Legal Requirements, (ii) all Permits and Contracts, (iii) all Insurance
Requirements, (iv) the Lease Documents, (v) the Permitted Encumbrances and (vi)
the Appurtenant Agreements.
11.4.4 Books And Records. The Lessee shall cause to be kept and
maintained, and shall permit the Lessor and its representatives to inspect at
all reasonable times, accurate books of accounts in which complete entries will
be made in accordance with GAAP reflecting all financial transactions of the
Lessee (showing, without limitation, all materials ordered and received and all
disbursements, accounts payable and accounts receivable in connection with the
operation of the Leased Property).
11.4.5 Participation in Third Party Payor Programs. The Lessee and each
Sublessee shall participate in all Third Party Payor Programs (which would be
participated in by a prudent operator in the good faith exercise of
commercially reasonable business judgment), in accordance with all requirements
thereof (including, without limitation, all applicable Provider Agreements), and
shall remain eligible to participate in such Third Party Payor Programs, all as
shall be necessary for the prudent operation of the Facility in the good faith
exercise of commercially reasonable business judgment.
11.4.6 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager to maintain, experienced and competent professional
management with respect to its business and with respect to the Leased Property.
The Lessee, any Sublessee and any Manager shall conduct, in the ordinary course,
the operation of the Facility, and the Lessee and any Sublessee shall not enter
into any other business or venture during the Term or such time as the Lessee or
any Sublessee is in possession of the Leased Property.
47
<PAGE>
11.4.7 Address. The Lessee shall provide the Lessor thirty (30) days'
prior written notice of any change of its Principal Place of Business from its
current Principal Place of Business. The Lessee shall maintain all books and
records relating to its business, solely at its Principal Place of Business and
at the Leased Property. The Lessee shall not (a) remove any books or records
relating to the Lessee's business from either the Leased Property or the
Lessee's Principal Place of Business or (b) relocate its Principal Place of
Business until after receipt of a certificate from the Lessor, signed by an
officer thereof, stating that the Lessor has, to its satisfaction, obtained all
documentation that it deems necessary or desirable to obtain, maintain, perfect
and confirm the first priority security interests granted in the Lease
Documents.
11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease, any payments to be made by the
Lessee to (a) any member of the Leasing Group (or any Affiliate of any member of
the Leasing Group) or (b) any Affiliate of the Lessee, in connection with any
transaction between the Lessee and such Person, including, without limitation,
the purchase, sale or exchange of any property, the rendering of any service to
or with any such Person (including, without limitation, all allocations of any
so-called corporate or central office costs, expenses and charges of any kind or
nature) or the making of any loan or other extension of credit or the making of
any equity investment, shall be subordinate to the complete payment and
performance of the Lease Obligations; provided, however, that all such
subordinated payments may be paid at any time unless: (x) after giving effect to
such payment, the Lessee shall be unable to comply with any of its obligations
under any of the Lease Documents or (y) a Lease Default has occurred and is
continuing and has not been expressly waived in writing by the Lessor or an
event or state of facts exists, which, with the giving of notice or the passage
of time, or both, would constitute a Lease Default.
11.4.9 Inspection. At reasonable times and upon reasonable notice, the
Lessee shall permit the Lessor and its authorized representatives (including,
without limitation, the Consultants) to inspect the Leased Property as provided
in Section 7.1 above.
11.4.10 Additional Property. In the event that at any time during the
Term, the Lessee holds the fee title to or a leasehold interest in any real
property and/or personal property which is used as an integral part of the
operation of the Leased Property (but is not subject to this Lease), the Lessee
shall (i) provide the Lessor with prior notice of such acquisition and (ii)
shall take such actions and enter into such agreements as the Lessor shall
reasonably request in order to grant the Lessor a first priority mortgage or
other security interest in such real property and personal property, subject
only to the Permitted Encumbrances and other Liens reasonably acceptable to the
Lessor.
11.5 Additional Negative Covenants. The Lessee covenants and agrees that,
throughout the Term and such time as the Lessee remains in possession of the
Leased Property:
48
<PAGE>
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in Section 19.4 or in any of the other Lease Documents, the
Lessee shall not, without the prior written consent of the Lessor, in each
instance, which consent may be withheld in the sole and absolute discretion of
the Lessor:
(a) convey, assign, hypothecate, transfer, dispose of or encumber, or
permit the conveyance, assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial interest in this
Lease, its other assets or the Leased Property; provided, however, that this
restriction shall not apply to (i) the Permitted Encumbrances that may be
created after the date hereof pursuant to the Lease Documents; (ii) Liens
created in accordance with Section 6.1.2 against Tangible Personal Property
securing Indebtedness permitted under Section 11.3.1(vi) relating to
equipment leasing or financing for the exclusive use of the Leased Property;
(iii) the sale, conveyance, assignment, hypothecation, lease or other transfer
of any material asset or assets (whether now owned or hereafter acquired), the
fair market value of which equals or is less than TWENTY-FIVE THOUSAND DOLLARS
($25,000), individually, or ONE HUNDRED THOUSAND DOLLARS ($100,000)
collectively; (iv) without limitation as to amount, the disposition in
the ordinary course of business of any obsolete, worn out or defective fixtures,
furnishings or equipment used in the operation of the Leased Property provided
that the same are replaced with fixtures, furnishings or equipment of equal or
greater utility or value or the Lessee provides the Lessor with an explanation
(reasonably satisfactory to the Lessor) as to why such fixtures, furnishings or
equipment is no longer required in connection with the operation of the Leased
Property; (v) without limitation as to amount, any sale of inventory by the
Lessee in the ordinary course of business; and (vi) subject to the terms of the
Pledge Agreement and the Affiliated Party Subordination Agreement, distributions
to the shareholders of the Lessee;
(b) permit the use of the Facility for any purpose other than the Primary
Intended Use; or
(c) liquidate, dissolve or merge or consolidate with any other Person.
11.5.2 No Liens. The Lessee will not directly or indirectly create or
allow to remain and will promptly discharge at its expense any Lien, title
retention agreement or claim upon or against the Leased Property (including the
Lessee's interest therein) or the Lessee's interest in this Lease or any of the
other Lease Documents, or in respect of the Rent, excluding (a) this Lease and
any permitted Subleases, (b) the Permitted Encumbrances, (c) Liens which are
consented to in writing by the Lessor, (d) Liens for those taxes of the Lessor
which the Lessee is not required to pay hereunder, (e) Liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either not yet due or being
contested in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of the Lessor pursuant to the provisions
of Article 20, (g) Liens for Impositions which are either not yet due and
payable or which are in the process of being contested in strict compliance with
the terms and conditions of Article 15 and (h) involuntary Liens caused by the
actions or omissions of the Lessor.
49
<PAGE>
11.5.3 Limits on Affiliate Transactions. The Lessee shall not enter into
any transaction with any Affiliate, including, without limitation, the
purchase, sale or exchange of any property, the rendering of any service to or
with any Affiliate and the making of any loan or other extension of credit,
except in the ordinary course of, and pursuant to the reasonable requirements
of, the Lessee's business and upon fair and reasonable terms no less favorable
to the Lessee than would be obtained in a comparable arms'-length transaction
with any Person that is not an Affiliate.
11.5.4 Intentionally Omitted.
11.5.5 No Default. The Lessee shall not commit any default or breach
under any of the Lease Documents.
11.5.6 Intentionally Omitted.
11.5.7 Intentionally Omitted.
11.5.8 ERISA. The Lessee shall not establish or permit any Sublessee to
establish any new pension or defined benefit plan or modify any such existing
plan for employees subject to ERISA, which plan provides any benefits based on
past service without the advance consent of the Lessor to the amount of the
aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. The Lessee will not waive, or permit
any sublessee or Manager which is an Affiliate to waive any debt or claim,
except in the ordinary course of its business.
11.5.10 Value of Assets. Except as disclosed in the financial statements
provided to the Lessor as of the date hereof, the Lessee will not write up (by
creating an appraisal surplus or otherwise) the value of any assets of the
Lessee above their cost to the Lessee, less the depreciation regularly allowable
thereon.
11.5.11 Changes in Fiscal Year and Accounting Procedures. The Lessee
shall not, without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the Lessor's reasonable discretion (a) change
its fiscal year or capital structure or (b) change, alter, amend or in any
manner modify, except in accordance with GAAP, any of its current accounting
procedures related to the method of revenue recognition, billing procedures or
determinations of doubtful accounts or bad debt expenses nor will the Lessee
permit any of its Subsidiaries to change its fiscal year or suffer or permit any
circumstance to exist in which any Subsidiary is not wholly-owned, directly or
indirectly, by the Lessee.
50
<PAGE>
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 General Insurance Requirements. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall at its sole cost and expense keep the
Leased Property and the Tangible Personal Property located thereon and the
business operations conducted on the Leased Property insured as set forth below.
12.1.1 Types and Amounts of Insurance. The Lessee's insurance shall
include the following:
(a) property loss and physical damage insurance on an all-risk basis
(with only such exceptions as the Lessor may in its reasonable discretion
approve) covering the Leased Property (exclusive of Land) for its full
replacement cost, which cost shall be reset once a year at the Lessor's option,
with an agreed-amount endorsement and a deductible not in excess of TEN THOUSAND
DOLLARS ($10,000.00). Such insurance shall include, without limitation, the
following coverages: (i) increased cost of construction, (ii) cost of
demolition, (iii) the value of the undamaged portion of the Facility and (iv)
contingent liability from the operation of building laws, less exclusions
provided in the normal "All Risk" insurance policy. During any period of
construction, such insurance shall be on a builder's-risk, completed value,
non-reporting form with permission to occupy;
(b) flood insurance (if the Leased Property or any portion thereof is
situated in an area which is considered a flood risk area by the U.S. Department
of Housing and Urban Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in limits acceptable to
the Lessor;
(c) boiler and machinery insurance (including related electrical
apparatus and components) under a standard comprehensive form, providing
coverage against loss or damage caused by explosion of steam boilers, pressure
vessels or similar vessels, now or hereafter installed on the Leased Property,
in limits acceptable to the Lessor;
(d) earthquake insurance (if deemed necessary by the Lessor) in limits
and with deductibles acceptable to the Lessor;
(e) environmental impairment liability insurance (if available) in limits
and with deductibles acceptable to the Lessor;
(f) business interruption and/or rent loss insurance in an amount equal
to the annual Base Rent due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one year;
51
<PAGE>
(g) comprehensive general public liability insurance including coverages
commonly found in the Broad Form Commercial Liability Endorsements with amounts
not less than [FIVE MILLION DOLLARS ($5,000,000)] per occurrence with respect to
bodily injury and death and [THREE MILLION DOLLARS ($3,000,000)] for property
damage and with all limits based solely upon occurrences at the Leased Property
without any other impairment;
(h) professional liability insurance in an amount not less than [TEN
MILLION DOLLARS ($10,000,000)] for each medical incident;
(i) physical damage insurance on an all-risk basis (with only such
exceptions as the Lessor in its reasonable discretion shall approve) covering
the Tangible Personal Property for the full replacement cost thereof and with a
deductible not in excess of one percent (1%) of the full replacement cost
thereof;
(j) Workers' Compensation and Employers' Liability Insurance providing
protection against all claims arising out of injuries to all employees of the
Lessee or of any Sublessee (employed on the Leased Property or any portion
thereof) in amounts equal for Workers' Compensation, to the statutory benefits
payable to employees in the State and for Employers' Liability, to limits of not
less than ONE HUNDRED THOUSAND DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per employee for disease and FIVE HUNDRED
THOUSAND DOLLARS ($500,000) disease policy limit;
(k) subsidence insurance (if deemed necessary by the Lessor) in limits
acceptable to the Lessor; and
(l) such other insurance as the Lessor from time to time may reasonably
require and also, as may from time to time be required by applicable Legal
Requirements and/or by any Fee Mortgagee.
12.1.2 Insurance Company Requirements. All such insurance required by
this Lease or the other Lease Documents shall be issued and underwritten by
insurance companies licensed to do insurance business by, and in good standing
under the laws of, the State and which companies have and maintain a rating of
A:X or better by A.M. Best Co.
12.1.3 Policy Requirements. Every policy of insurance from time to time
required under this Lease or any of the other Lease Documents (other than
worker's compensation) shall name the Lessor as owner, loss payee, secured party
(to the extent applicable) and additional named insured as its interests may
appear. If an insurance policy covers properties other than the Leased Property,
then the Lessor shall be so named with respect only to the Leased Property. Each
such policy, where applicable or appropriate, shall:
52
<PAGE>
(a) include an agreed amount endorsement and loss payee, additional
named insured and secured party endorsements, in forms acceptable to the Lessor
in its sole and absolute discretion;
(b) include mortgagee, secured party, loss payable and additional named
insured endorsements reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be canceled or materially modified
except upon thirty (30) days' prior written notice to the Lessor and any Fee
Mortgagee;
(d) be payable to the Lessor and any Fee Mortgagee notwithstanding any
defense or claim that the insurer may have to the payment of the same against
any other Person holding any other interest in the Leased Property;
(e) be endorsed with standard noncontributory clauses in favor of and in
form reasonably acceptable to the Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part of the insurer
against the Lessor, any Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be reasonably acceptable to the
Lessor.
12.1.4 Notices; Certificates and Policies. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the expiration of any
insurance policy required hereunder, the Lessee shall deliver to the Lessor
certificates and evidence of insurance relating to all renewals and replacements
thereof, together with evidence, satisfactory to the Lessor, of payment of the
premiums thereon. The Lessee shall deliver to the Lessor original counterparts
or copies certified by the insurance company to be true and complete copies, of
all insurance policies required hereunder not later than the earlier to occur of
(a) ninety (90) days after the effective date of each such policy and (b) ten
(10) days after receipt thereof by the Lessee.
12.1.5 Lessor's Right to Place Insurance. If the Lessee shall fail to
obtain any insurance policy required hereunder by the Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such policy to
the Lessor, or if any insurance policy required hereunder (or any part thereof)
shall expire or be canceled or become void or voidable by reason of any breach
of any condition thereof, or if the Lessor determines that such insurance
coverage is unsatisfactory by reason of the failure or impairment of the capital
of any insurance company which wrote any such policy, upon demand by the Lessor,
the Lessee shall promptly obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured by the provisions
hereof, satisfactory to the Lessor, and, at its option, the Lessor may obtain
such insurance and pay the premium or premiums therefor; in which event any
amount so paid or advanced by the Lessor and all costs and expenses
53
<PAGE>
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses and court costs), shall be a demand obligation of the Lessee to the
Lessor, payable as an Additional Charge.
12.1.6 Payment of Proceeds. All insurance policies required hereunder
(except for general public liability, professional liability and workers'
compensation and employers liability insurance) shall provide that in the event
of loss, injury or damage, subject to the rights of any Fee Mortgagee, all
proceeds shall be paid to the Lessor alone (rather than jointly to the Lessee
and the Lessor). The Lessor is hereby authorized to adjust and compromise any
such loss with the consent of the Lessee or, following any Lease Default,
whether or not cured, without the consent of the Lessee, and to collect and
receive such proceeds in the name of the Lessor and the Lessee, and the Lessee
appoints the Lessor (or any agent designated by the Lessor) as the Lessee's
attorney-in-fact with full power of substitution, to endorse the Lessee's name
upon any check in payment thereof. Subject to the provisions of Article 13, such
insurance proceeds shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by the Lessor in collecting said insurance
proceeds, then toward payment of the Lease Obligations or any portion thereof,
then due and payable, in such order as the Lessor determines, and then in
whole or in part toward restoration, repair or reconstruction of the Leased
Property for which such insurance proceeds shall have been paid.
12.1.7 Irrevocable Power of Attorney. The power of attorney conferred on
the Lessor pursuant to the provisions of this Section 12.1, being coupled with
an interest, shall be irrevocable for as long as this Lease is in effect or any
Lease Obligations are outstanding, shall not be affected by any disability or
incapacity which the Lessee may suffer and shall survive the same. Such power of
attorney, is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power, and neither the
Lessor nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or willful misconduct.
12.1.8 Blanket Policies. Notwithstanding anything to the contrary
contained herein, the Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by the Lessee and its Affiliates;
provided, however, that the coverage afforded to the Lessor shall not be reduced
or diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 No Separate Insurance. The Lessee shall not, on the Lessee's own
initiative or pursuant to the request or requirement of any other Person, take
out separate insurance concurrent in form or contributing in the event of loss
with the insurance required hereunder to be furnished by the Lessee, or increase
the amounts of any then existing insurance by securing an additional policy or
additional policies, unless (a) all parties having an insurable interest in the
subject matter of the insurance, including the Lessor, are included therein as
additional
54
<PAGE>
insureds and (b) losses are payable under said insurance in the same
manner as losses are required to be payable under this Lease. The Lessee shall
immediately notify the Lessor of the taking out of any such separate insurance
or of the increasing of any of the amounts of the then existing insurance by
securing an additional insurance policy or policies.
12.1.10 Assignment of Unearned Premiums. The Lessee hereby assigns to the
Lessor all rights of the Lessee in and to any unearned premiums allocable to the
Leased Property on any insurance policy required hereunder to be furnished by
the Lessee which may become payable or are refundable after the occurrence of an
Event of Default hereunder. In the event that this Lease is terminated for any
reason (other than the purchase of the Leased Property by the Lessee), the
insurance policies required to be maintained hereunder, including all right,
title and interest of the Lessee thereunder, shall become the absolute property
of the Lessor.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence or
willful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Lessee hereby agrees to defend with counsel
acceptable to the Lessor, indemnify and hold harmless the Lessor and each of
the other Indemnified Parties from and against all damages, losses, claims,
liabilities, obligations, penalties, causes of action, costs and expenses
(including, without limitation, attorneys' fees, court costs and other expenses
of litigation) suffered by, or claimed or asserted against, the Lessor or any of
the other Indemnified Parties, directly or indirectly, based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property or any
business conducted therein, (b) any act, fault, omission to act or misconduct by
(i) any member of the Leasing Group, (ii) any Affiliate of the Lessee or (iii)
any employee, agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing parties, relating to, directly or indirectly,
the Leased Property, (c) any accident, injury or damage whatsoever caused to any
Person, including, without limitation, any claim of malpractice, or to the
property of any Person in or about the Leased Property or outside of the Leased
Property where such accident, injury or damage results or is claimed to have
resulted from any act, fault, omission to act or misconduct by any member of the
Leasing Group or any Affiliate of the Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any Lease Default,
(e) any claim brought or threatened against any of the Indemnified Parties by
any member of the Leasing Group or by any other Person on account of (i) the
Lessor's relationship with any member of the Leasing Group pertaining in any way
to the Leased Property and/or the transaction evidenced by the Lease Documents
and/or (ii) the Lessor's negotiation of, entering into and/or performing any of
its obligations and/or exercising any of its right and remedies under any of the
Lease Documents, (f) any attempt by any member of the Leasing Group or any
Affiliate of the Lessee to transfer or relocate any of the Permits to any
location other than the Leased Property and/or (g) the enforcement of this
indemnity. Any amounts which become payable by the Lessee under this Section
12.2.1 shall be a demand obligation of the Lessee to the Lessor, payable as an
Additional Charge. The indemnity provided for in this Section 12.2.1 shall
survive any termination of this Lease.
55
<PAGE>
12.2.2 Indemnified Parties. As used in this Lease the term "Indemnified
Parties" shall mean Lessor, any Fee Mortgagee and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
12.2.3 Limitation on Lessor Liability. Neither the Lessor nor any
Affiliate of the Lessor shall be liable to any member of the Leasing Group or
any Affiliate of any member of the Leasing Group, or to any other Person
whatsoever for any damage, injury, loss, compensation, or claim (including, but
not limited to, any claim for the interruption of or loss to any business
conducted on the Leased Property) based on, arising out of or resulting from any
cause whatsoever, including, but not limited to, the following: (a) repairs to
the Leased Property, (b) interruption in use of the Leased Property; (c) any
accident or damage resulting from the use or operation of the Leased Property or
any business conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or crime, (f)
the actions, omissions or misconduct of any other Person, (g) damage to any
property, or (h) any damage from the flow or leaking of water, rain or snow. All
Tangible Personal Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of the Lessee and the Lessor shall not
in any manner be held responsible therefor. Notwithstanding the foregoing, the
Lessor shall not be released from liability for any injury, loss, damage or
liability suffered directly by the Lessee to the extent caused directly by the
gross negligence or willful misconduct of the Lessor, its servants, employees or
agents acting within the scope of their authority on or about the Leased
Property or in regards to the Lease; provided, however, that in no event shall
the Lessor, its servants, employees or agents have any liability based on any
loss with respect to or interruption in the operation of any business at the
Leased Property or for any indirect or consequential damages.
12.2.4 Risk of Loss. During the Term of this Lease, the risk of loss or
of decrease in the enjoyment and beneficial use of the Leased Property in
consequence of any damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by the Lessor in
accordance with the provisions of Article 20) is assumed by the Lessee and, in
the absence of the gross negligence or willful misconduct as set forth in
Section 12.2.3, the Lessor shall in no event be answerable or accountable
therefor (except for the obligation to account for insurance proceeds and Awards
to the extent provided for in Articles 13 and 14) nor shall any of the events
mentioned in this Section entitle the Lessee to any abatement of Rent (except
for an abatement, if any, as specifically provided for in Section 3.8).
ARTICLE 13
FIRE AND CASUALTY
13.1 Restoration Following Fire or Other Casualty.
56
<PAGE>
13.1.1 Following Fire or Casualty. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or casualty
(a "Casualty"), the Lessee shall give immediate written notice thereof to the
Lessor and, subject to the terms of this Article 13, the Lessee shall proceed
with reasonable diligence, in full compliance with all applicable Legal
Requirements, to perform such repairs, replacement and reconstruction work
(referred to herein as the "Work") to restore the Leased Property to the
condition it was in immediately prior to such damage or destruction and to a
condition adequate to operate the Facility for the Primary Intended Use and in
compliance with Legal Requirements. All Work shall be performed and completed in
accordance with all Legal Requirements and the other requirements of this Lease
within one hundred and twenty (120) days following the occurrence of the damage
or destruction plus a reasonable time to compensate for Unavoidable Delays
(including for the purposes of this Section, delays in obtaining Permits and in
adjusting insurance losses), but in no event beyond two-hundred and seventy
(270) days following the occurrence of the Casualty.
13.1.2 Procedures. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of TWENTY-FIVE THOUSAND
DOLLARS ($25,000) or in any structural damage to the Leased Property, regardless
of the extent of such structural damage, prior to commencing the Work, the
Lessee shall comply with the following requirements:
(a) The Lessee shall furnish to the Lessor complete plans and
specifications for the Work (collectively, the "Plans and Specifications"), for
the Lessor's approval, in each instance, which approval shall not be
unreasonably withheld. The Plans and Specifications shall bear the signed
approval thereof by an architect, licensed to do business in the State,
reasonably satisfactory to the Lessor and shall be accompanied by a written
estimate from the architect, bearing the architect's seal, of the entire cost of
completing the Work, and to the extent feasible, the Plans and Specifications
shall provide for Work of such nature, quality and extent, that, upon the
completion thereof, the Leased Property shall be at least equal in value and
general utility to its value and general utility prior to the Casualty and shall
be adequate to operate the Leased Property for the Primary Intended Use;
(b) The Lessee shall furnish to the Lessor certified or photostatic
copies of all Permits and Contracts required by all applicable Legal
Requirements in connection with the commencement and conduct of the Work;
(c) The Lessee shall furnish to the Lessor a cash deposit or a payment
and performance bond sufficient to pay for completion of and payment for the
Work in an amount not less than the architect's estimate of the entire cost of
completing the Work, less the amount of property insurance proceeds, if any,
then held by the Lessor and which the Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section 13.2;
57
<PAGE>
(d) The Lessee shall furnish to the Lessor such insurance with respect to
the Work (in addition to the insurance required under Section 12.1 hereof) in
such amounts and in such forms as is reasonably required by the Lessee; and
(e) The Lessee shall not commence any of the Work until the Lessee shall
have complied with the requirements set forth in clauses (a) through (d)
immediately above, as applicable, and, thereafter, the Lessee shall perform the
Work diligently, in a good and workmanlike fashion and in good faith in
accordance with (i) the Plans and Specifications referred to in clause (a)
immediately above, (ii) the Permits and Contracts referred to in clause (b)
immediately above and (iii) all applicable Legal Requirements and other
requirements of this Lease; provided, however, that in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Work as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor of
such emergency and the nature and scope of the Work performed and obtains the
Lessor's approval of the remaining Work to be completed.
13.1.3 Disbursement of Insurance Proceeds. If, as provided in Section
13.2, the Lessor is required to apply any property insurance proceeds toward
repair or restoration of the Leased Property, then as long as the Work is being
diligently performed by the Lessee in accordance with the terms and conditions
of this Lease, the Lessor shall disburse such insurance proceeds from time to
time during the course of the Work in accordance with and subject to
satisfaction of the following provisions and conditions. The Lessor shall not be
required to make disbursements more often than at thirty (30) day intervals. The
Lessee shall submit a written request for each disbursement at least ten (10)
Business Days in advance and shall comply with the following requirements in
connection with each disbursement:
(a) Prior to the commencement of any Work, the Lessee shall have received
the Lessor's written approval of the Plans and Specifications (which approval
shall not be unreasonably withheld) and the Work shall be supervised by an
experienced construction manager with the consultation of an architect or
engineer qualified and licensed to do business in the State.
(b) Each request for payment shall be accompanied by (x) a certificate of
the architect or engineer, bearing the architect's or engineer's seal, and (y) a
certificate of the general contractor, qualified and licensed to do business in
the State, that is performing the Work (collectively, the "Work Certificates"),
each dated not more than ten (10) days prior to the application for withdrawal
of funds, and each stating:
(i) that all of the Work performed as of the date of the certificates has
been completed in compliance with the approved Plans and Specifications,
applicable Contracts and all applicable Legal Requirements;
58
<PAGE>
(ii) that the sum then requested to be withdrawn has been paid by the
Lessee or is justly due to contractors, subcontractors, materialmen, engineers,
architects or other Persons, whose names and addresses shall be stated therein,
who have rendered or furnished certain services or materials for the Work, and
the certificate shall also include a brief description of such services and
materials and the principal subdivisions or categories thereof and the
respective amounts so paid or due to each of said Persons in respect thereof and
stating the progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all sums
previously withdrawn, does not exceed the cost of the Work insofar as actually
accomplished up to the date of such certificate;
(iv) that the remainder of the funds held by the Lessor will be
sufficient to pay for the full completion of the Work in accordance with the
Plans and Specifications;
(v) that no part of the cost of the services and materials described in
the applicable Work Certificate has been or is being made the basis of the
withdrawal of any funds in any previous or then pending application; and
(vi) that, except for the amounts, if any, specified in the applicable
Work Certificate to be due for services and materials, there is no outstanding
indebtedness known, after due inquiry, which is then due and payable for work,
labor, services or materials in connection with the Work which, if unpaid, might
become the basis of a vendor's, mechanic's, laborer's or materialman's statutory
or other similar Lien upon the Leased Property.
(c) The Lessee shall deliver to the Lessor satisfactory evidence that the
Leased Property and all materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if any, securing
indebtedness due to Persons (whose names and addresses and the several amounts
due them shall be stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the funds then being
requested, (ii) any Fee Mortgage and (iii) the Permitted Encumbrances. The
Lessor shall accept as satisfactory evidence of the foregoing lien waivers in
customary form from the general contractor and all subcontractors performing the
Work, together with an endorsement of its title insurance policy (relating to
the Leased Property) in form acceptable to the Lessor, dated as of the date of
the making of the then current disbursement, confirming the foregoing.
(d) If the Work involves alteration or restoration of the exterior of any
Leased Improvement that changes the footprint of any Leased Improvement, the
Lessee shall deliver to the Lessor, upon the request of the Lessor, an
"as-built" survey of the Leased Property dated as of a date within ten (10) days
prior to the making of the first and final advances (or revised to a date within
ten (10) days prior to each such advance) showing no encroachments other than
such encroachments, if any, by the Leased Improvements upon or over the
Permitted Encumbrances as are in existence as of the date hereof.
59
<PAGE>
(e) The Lessee shall deliver to the Lessor (i) an opinion of counsel
(satisfactory to the Lessor both as to counsel and as to the form of opinion)
prior to the first advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased Property have been obtained and
that the Leased Property, if repaired, replaced or rebuilt in accordance, in all
material respects, with the approved Plans and Specifications and such Permits,
shall comply with all applicable Legal Requirements and (ii) an architect's
certificate (satisfactory to the Lessor both as to the architect and as to the
form of the certificate) prior to the final advance, certifying that the Leased
Property was repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and complies with all
applicable Legal Requirements, including, without limitation, all Permits
referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any state of facts or circumstance
existing which, with the giving of notice and/or the passage of time, would
constitute any Lease Default.
The Lessor, at its option, may waive any of the foregoing requirements in
whole or in part in any instance. Upon compliance by the Lessee with the
foregoing requirements (except for such requirements, if any, as the Lessor may
have expressly elected to waive), and to the extent of (x) the insurance
proceeds, if any, which the Lessor may be required to apply to restoration of
the Leased Property pursuant to the provisions of this Lease and (y) all other
cash deposits made by the Lessee, the Lessor shall make available for payment to
the Persons named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%) as to all
hard costs of the Work (the "Retainage"). It is understood that the Retainage is
intended to provide a contingency fund to assure the Lessor that the Work shall
be fully completed in accordance with the Plans and Specifications and the
requirements of the Lessor. Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the Retainage shall be made
available for payment to those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any further
advance, in addition to the requirements set forth above, the Lessee shall
promptly deliver to the Lessor:
(i) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor, certifying that the
Work has been fully completed in a good and workmanlike manner in material
compliance with the Plans and Specifications and all Legal Requirements;
(ii) an endorsement of its title insurance policy (relating to the Leased
Property) in form reasonably acceptable to the Lessor insuring the Leased
Property against all mechanic's and materialman's liens accompanied by the final
lien waivers from the general contractor and all subcontractors;
60
<PAGE>
(iii) a certificate by the Lessee in form and substance reasonably
satisfactory to the Lessor, listing all costs and expenses in connection with
the completion of the Work and the amount paid by the Lessee with respect to the
Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all other
applicable Permits and Contracts (that have not previously been delivered to the
Lessor) issued by or entered into with any Governmental Authority with respect
to the Leased Property and the Primary Intended Use and by the appropriate Board
of Fire Underwriters or other similar bodies acting in and for the locality in
which the Leased Property is situated; provided, that within thirty (30) days
after completion of the Work, the Lessee shall obtain and deliver to the Lessor
a permanent certificate of occupancy for the Leased Property.
Upon completion of the Work and delivery of the documents required
pursuant to the provisions of this Section 13.1, the Lessor shall pay the
Retainage to the Lessee or to those Persons entitled thereto and if there shall
be insurance proceeds or cash deposits, other than the Retainage, held by the
Lessor in excess of the amounts disbursed pursuant to the foregoing provisions,
then provided that no Lease Default has occurred and is continuing, nor any
state of facts or circumstances which, with the giving of notice and/or the
passage of time would constitute a Lease Default, the Lessor shall pay over such
proceeds or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after construction
shall constitute a warranty or representation by the Lessor, or any of its
agents or Consultants, as to the technical sufficiency, adequacy or safety of
any structure or any of its component parts, including, without limitation, any
fixtures, equipment or furnishings, or as to the subsoil conditions or any other
physical condition or feature pertaining to the Leased Property. All acts,
including any failure to act, relating to the Lessor are performed solely for
the benefit of the Lessor to assure the payment and performance of the Lease
Obligations and are not for the benefit of the Lessee or the benefit of any
other Person.
13.2 Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pay For Work. In the event of any
Casualty, except as provided for in Section 13.2.2, the Lessor shall release
proceeds of property insurance held by it to pay for the Work in accordance with
the provisions and procedures set forth in this Article 13, only if:
(a) all of the terms, conditions and provisions of Sections 13.1 and
13.2.1 are satisfied;
(b) there does not then exist any Lease Default or any state of facts or
circumstance which, with the giving of notice and/or the passage of time, would
constitute such a Lease Default;
61
<PAGE>
(c) The Lessee demonstrates to the Lessor's satisfaction that the Lessee
has the financial ability to satisfy the Lease Obligations during such repair
or restoration; and
(d) no Sublease (excluding Resident Agreements) material to the operation
of the Facility immediately prior to such damage or taking shall have been
canceled or terminated, nor contain any still exercisable right to cancel or
terminate, due to such Casualty if and to the extent that the income from such
Sublease is necessary in order to avoid the violation of any of the financial
covenants set forth in this Lease or otherwise to avoid the creation of an Event
of Default.
13.2.2 Proceeds Not To Be Released. If, as the result of any Casualty,
the Leased Property is damaged to the extent it is rendered Unsuitable For Its
Primary Intended Use and if either: (a) the Lessee, after exercise of diligent
efforts, cannot within a reasonable time (not in excess of ninety (90) days)
obtain all necessary Permits in order to be able to perform all required Work
and to again operate the Facility for its Primary Intended Use within two
hundred and seventy (270) days from the occurrence of the damage or destruction
in substantially the manner as immediately prior to such damage or destruction
or (b) such Casualty occurs during the last twenty-four (24) months of the Term
and would reasonably require more than nine (9) months to obtain all Permits and
complete the Work, then the Lessee may either (i) acquire the Leased Property
from the Lessor for a purchase price equal to the greater of (x) the Lessor's
Investment or (y) the Fair Market Value of the Leased Property minus the Fair
Market Added Value, with the Fair Market Value and the Fair Market Added Value
to be determined as of the day immediately prior to such Casualty and prior to
any other Casualty which has not been fully repaired, restored or replaced, in
which event, the Lessee shall be entitled upon payment of the full purchase
price to receive all property insurance proceeds (less any costs and expenses
incurred by the Lessor in collecting the same), or (ii) terminate this Lease, in
which event (subject to the provisions of the last sentence of this Section
13.2.2) the Lessor shall be entitled to receive and retain the insurance
proceeds; provided, however, that the Lessee shall only have such right of
termination effective upon payment to the Lessor of all Rent and other sums due
under this Lease and the other Lease Documents through the date of termination
plus an amount, which when added to the sum of (1) the Fair Market Value of the
Leased Property as affected by all unrepaired or unrestored damage due to any
Casualty (and giving due regard for delays, costs and expenses incident to
completing all repair or restoration required to fully repair or restore the
same) plus (2) the amount of insurance proceeds actually received by the Lessor
(net of costs and expenses incurred by the Lessor in collecting the same) equals
(3) the greater of the Lessor's Investment or the Fair Market Value of the
Leased Property minus the Fair Market Added Value, with the Fair Market Value
and the Fair Market Added Value to be determined as of the day immediately
prior to such Casualty and prior to any other Casualty which has not been fully
repaired. Any acquisition of the Leased Property pursuant to the terms of this
Section 13.2.2 shall be consummated in accordance with the provisions of Article
18, mutatis, mutandis. If such termination becomes effective, the Lessor shall
assign to the Lessee any outstanding insurance claims.
62
<PAGE>
13.2.3 Lessee Responsible for Short-Fall. If the cost of the Work exceeds
the amount of proceeds received by the Lessor from the property insurance
required under Article 12 (net of costs and expenses incurred by the Lessor in
collecting the same), the Lessee shall be obligated to contribute any excess
amount needed to repair or restore the Leased Property and pay for the Work.
Such amount shall be paid by the Lessee to the Lessor together with any other
property insurance proceeds for application to the cost of the Work.
13.3 Tangible Personal Property. All insurance proceeds payable by
reason of any loss of or damage to any of the Tangible Personal Property shall
be paid to the Lessor as secured party, subject to the rights of the holders of
any Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutandis.
13.4 Restoration of Certain Improvements and the Tangible Personal
Property. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (a) restore (i) all alterations and improvements to the
Leased Property made by the Lessee and (ii) the Tangible Personal Property or
(b) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 No Abatement of Rent. In no event shall any Rent abate as a result
of any Casualty.
13.6 Termination of Certain Rights. Any termination of this Lease
pursuant to this Article 13 shall cause any right of the Lessee to extend the
Term of this Lease, granted to the Lessee herein and any right of the Lessee to
purchase the Leased Property contained in this Lease to be terminated and to be
without further force or effect.
13.7 Waiver. The Lessee hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction to the Leased Property
due to any Casualty which the Lessee is obligated to restore or may restore
under any of the provisions of this Lease.
13.8 Application of Rent Loss and/or Business Interruption Insurance. All
proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(a) if the Work has been promptly and diligently commenced by the Lessee
and is in the process of being completed in accordance with this Lease and no
fact or condition exists which constitutes, or which with the giving of notice
and/or the passage of time would
63
<PAGE>
constitute, a Lease Default, the Lessor shall each month pay to the Lessee out
of the Rent Insurance Proceeds a sum equal to that amount, if any, of the Rent
Insurance Proceeds paid by the insurer which is allocable to the rental loss
and/or business interruption for the preceding month minus an amount equal to
the sum of the Rent due hereunder for such month plus any Impositions relating
to the Leased Property then due and payable;
(b) if the Work has not been promptly and diligently commenced by the
Lessee or is not in the process of being completed in accordance with this
Lease, the Rent Insurance Proceeds shall be applied to any Rent then due, and,
to the extent sufficient therefor, an amount equal to Base Rent, Impositions and
insurance premiums payable for the next twelve (12) months, as reasonably
projected by the Lessor, shall be held by the Lessor as security for the Lease
Obligations and applied to the payment of Rent as it becomes due; and
(c) if such Rent Insurance Proceeds received by the Lessor (net of costs
and expenses incurred by the Lessor in collecting the same) exceed the amounts
required under clauses (a) and (b) above, the excess shall be paid to the
Lessee, provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such insurance proceeds towards the Lease Obligations or
hold such proceeds as security therefor.
13.9 Obligation To Account. Upon the Lessee's written request, which may
not be made not more than once in any three (3) month period, the Lessor shall
provide the Lessee with a written accounting of the application of all insurance
proceeds received by the Lessor.
ARTICLE 14
CONDEMNATION
14.1 Parties' Rights and Obligations. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 Total Taking. If there is a permanent Taking of all or substantially
all of the Leased Property, this Lease shall terminate on the Date of Taking.
14.3 Partial or Temporary Taking. If there is a Permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use for a period
not likely to, or which does not, exceed two hundred and
64
<PAGE>
seventy (270) days. If, however, the Leased Property is thereby so
rendered permanently or temporarily Unsuitable For Its Primary Intended Use:
(a) the Lessee shall have the right to restore the Leased Property, at its own
expense, (subject to the right under certain circumstances as provided for in
Section 14.5 to receive the net proceeds of an Award for reimbursement) to the
extent possible, to substantially the same condition as existed immediately
before the partial or temporary Taking or (b) the Lessee shall have the right to
acquire the Leased Property from the Lessor (i) upon payment of all Rent due
through the date that the purchase price is paid, for a purchase price equal to
the greater of (x) the Lessor's Investment or (y) the Fair Market Value of the
Leased Property minus the Fair Market Added Value, with the Fair Market Value of
the Leased Property and the Fair Market Added Value to be determined as of the
day immediately prior to such partial or temporary Taking and (ii) in
accordance with the terms and conditions set forth in Article 18; in which
event, this Lease shall terminate upon payment of such purchase price and the
consummation of such acquisition. Notwithstanding the foregoing, the Lessor may
overrule the Lessee's election under clause (a) or (b) and instead either (1)
terminate this Lease as of the date when the Lessee is required to surrender
possession of the portion of the Leased Property so taken or (2) compel the
Lessee to keep the Lease in full force and effect and to restore the Leased
Property as provided in clause (a) above, but only if the Leased Property may be
operated for at least eighty percent (80%) of the unit capacity of the
Facility if operated in accordance with its Primary Intended Use. The Lessee
shall exercise its election under this Section 14.3 by giving the Lessor notice
thereof ("Lessee's Election Notice") within sixty (60) days after the Lessee
receives notice of the Taking. The Lessor shall exercise its option to overrule
the Lessee's election under this Section 14.3 by giving the Lessee notice of the
Lessor's exercise of its rights under Section 14.3 within thirty (30) days after
the Lessor receives the Lessee's Election Notice. If, as the result of any such
partial or temporary Taking, this Lease is not terminated as provided above,
the Lessee shall be entitled to an abatement of Rent, but only to the extent, if
any, provided for in Section 3.7, effective as of the date upon which the Leased
Property is rendered Unsuitable For Its Primary Intended Use.
14.4 Restoration. If there is a partial or temporary Taking of the Leased
Property and this Lease remains in full force and effect pursuant to Section
14.3, the Lessee shall accomplish all necessary restoration and the Lessor shall
release the net proceeds of such Award to reimburse the Lessee for the actual
reasonable costs and expenses thereof, subject to all of the conditions and
provisions set forth in Article 13 as though the Taking was a Casualty and the
Award was insurance proceeds. If the cost of the restoration exceeds the amount
of the Award (net of costs and expenses incurred in obtaining the Award), the
Lessee shall be obligated to contribute any excess amount needed to restore the
Facility or pay for such costs and expenses. To the extent that the cost of
restoration is less than the amount of the Award (net of cost and expenses
incurred in obtaining the Award), the remainder of the Award shall be retained
by the Lessor and Rent shall be abated as set forth in Section 3.7.
14.5 Award Distribution. In the event the Lessee completes the purchase
of the Leased Property, as described in Section 14.3, the entire Award shall,
upon payment of the purchase price and all Rent and other sums due under this
Lease and the other Lease
65
<PAGE>
Documents, belong to the Lessee and the Lessor agrees to assign to the Lessee
all of the Lessor's rights thereto. In any other event, the entire Award shall
belong to and be paid to the Lessor.
14.6 Control of Proceedings. Subject to the rights of any Fee Mortgagee,
unless and until the Lessee completes the purchase of the Leased Property as
provided in Section 14.3, all proceedings involving any Taking and the
prosecution of claims arising out of any Taking against the Condemnor shall be
conducted, prosecuted and settled by the Lessor; provided, however, that the
Lessor shall keep the Lessee apprised of the progress of all such proceedings
and shall solicit the Lessee's advice with respect thereto and shall give due
consideration to any such advice. In addition, the Lessee shall reimburse the
Lessor (as an Additional Charge) for all costs and expenses, including
reasonable attorneys' fees, appraisal fees, fees of expert witnesses and costs
of litigation or dispute resolution, in relation to any Taking, whether or not
this Lease is terminated; provided, however, if this Lease is terminated as a
result of a Taking, the Lessee's obligation to so reimburse the Lessor shall be
diminished by the amount of the Award, if any, received by the Lessor which is
in excess of the Lessor's Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1. Lessee's Right to Contest. To the extent of the express references
made to this Article 15 in other Sections of this Lease, the Lessee, any
Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental
Authority related to the operation of the Leased Property for its Primary
Intended Use or any Lien or claim relating to the Leased Property not otherwise
permitted by this Agreement; provided, that (a) prior written notice of such
contest is given to the Lessor, (b) in the case of an unpaid Imposition, Lien or
claim, the commencement and continuation of such proceedings shall suspend the
collection thereof from the Lessor and/or compliance by any applicable member of
the Leasing Group with the contested Legal Requirement or other matter may be
legally delayed pending the prosecution of any such proceeding without the
occurrence or creation of any Lien, charge or liability of any kind against the
Leased Property, (c) neither the Leased Property nor any rent therefrom would be
in any immediate danger of being sold, forfeited, attached or lost as a result
of such proceeding, (d) in the case of a Legal Requirement, neither the Lessor
nor any member of the Leasing Group would be in any immediate danger of civil or
criminal liability for failure to comply therewith pending the outcome of such
proceedings, (e) in the event that any such contest shall involve a sum of money
or potential loss in excess of TEN THOUSAND DOLLARS ($10,000), the Lessee shall
deliver to the Lessor an Officer's Certificate and opinion of counsel, if the
Lessor deems the delivery of an opinion to be appropriate, certifying or
opining, as the case may be, as to the validity of the statements set
66
<PAGE>
forth to the effect set forth in clauses (b), (c) and (d), to the extent
applicable, (f) the Lessee shall give such cash security as may be demanded in
good faith by the Lessor to insure ultimate payment of any fine, penalty,
interest or cost and to prevent any sale or forfeiture of the affected portion
of the Leased Property by reason of such non-payment or non-compliance, (g) if
such contest is finally resolved against the Lessor or any member of the Leasing
Group, the Lessee shall promptly pay, as Additional Charges due hereunder, the
amount required to be paid, together with all interest and penalties accrued
thereon and/or comply (and cause any Sublessee and any Manager to comply) with
the applicable Legal Requirement, and (h) no state of facts or circumstance
exists which constitutes, or with the passage of time and/or the giving of
notice, could constitute a Lease Default; provided, however, the provisions of
this Article 15 shall not be construed to permit the Lessee to contest the
payment of Rent or any other sums payable by the Lessee to the Lessor under any
of the Lease Documents.
15.2 Lessor's Cooperation. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor to any civil or criminal liability, and, if
reasonably requested by the Lessee or if the Lessor so desires, the Lessor shall
join as a party therein.
15.3 Lessee's Indemnity. The Lessee, as more particularly provided for
in Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 Events of Default. Each of the following shall constitute an "Event
of Default" hereunder and shall entitle the Lessor to exercise its remedies
hereunder and under any of the other Lease Documents:
(a) any failure of the Lessee to pay any amount due hereunder or under
any of the other Lease Documents within ten (10) days following the date when
such payment was due;
(b) any failure in the observance or performance of any other covenant,
term, condition or warranty provided in this Lease or any of the other Lease
Documents, other than the payment of any monetary obligation and other than as
specified in subsections (c) through (v) below (a "Failure to Perform"),
continuing for thirty (30) days after the giving of notice by the Lessor to the
Lessee specifying the nature of the Failure to Perform; except as to matters not
susceptible to cure within thirty (30) days, provided that with respect to such
matters, (i) the Lessee commences the cure thereof within thirty (30) days after
the giving of such notice
67
<PAGE>
by the Lessor to the Lessee, (ii) the Lessee continuously prosecutes such cure
to completion, (iii) such cure is completed within ninety (90) days after the
giving of such notice by the Lessor to the Lessee and (iv) such Failure to
Perform does not impair the value of, or the Lessor's rights with respect to,
the Leased Property;
(c) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any of the other Lease Documents;
(d) if any representation, warranty or statement contained herein or in
any of the other Lease Documents proves to be untrue in any material respect as
of the date when made or at any time during the Term if such representation or
warranty is a continuing representation or warranty pursuant to Section 10.2;
(e) if any member of the Leasing Group shall (i) voluntarily be
adjudicated a bankrupt or insolvent, (ii) seek or consent to the appointment of
a receiver or trustee for itself or for the Leased Property, (iii) file a
petition seeking relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, (iv) make a general assignment for the
benefit of creditors, (v) make or offer a composition of its debts with its
creditors or (vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree appointing,
without the consent of any member of the Leasing Group, a receiver or trustee
for such member or for any of its property and such order, judgment or decree
shall remain in force, undischarged or unstayed, sixty (60) days after it is
entered;
(g) if a petition is filed against any member of the Leasing Group which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any other jurisdiction, and such petition is not dismissed within
sixty (60) days after it is filed;
(h) in the event that, without the prior written consent of the Lessor,
in each instance, which consent may be withheld by the Lessor in its sole and
absolute discretion:
i. there shall be a change in the Person or Persons presently in control of
any member of the Leasing Group (whether by operation of law or otherwise);
ii. all or any portion of the interest of any partner or member of any member of
the Leasing Group shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise transferred (whether by
operation of law or otherwise), if such member of the Leasing Group shall be a
partnership, joint venture, syndicate or other group;
iii. more than [ percent ( %)], in the aggregate, of the shares of the
issued and outstanding capital stock of any member of the Leasing Group shall
be, on any one or more occasions, directly or indirectly, sold, assigned,
hypothecated or otherwise transferred
68
<PAGE>
(whether by operation of law or otherwise), if such member of the Leasing Group
shall be a corporation; or
iv. all or any portion of the beneficial interest in any member of the
Leasing Group shall be, directly or indirectly, sold or otherwise transferred
(whether by operation of law or otherwise), if such member of the Leasing Group
shall be a trust;
(i) the death, incapacity, liquidation, dissolution or termination of
existence of the any member of the Leasing Group or the merger or consolidation
of any member of the Leasing Group with any other Person;
(j) if, without the prior written consent of the Lessor, in each
instance, which consent may be withheld by the Lessor in its sole and absolute
discretion, the Lessee's or any Sublessee's interest in the Leased Property
shall be, directly or indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances), subleased, sold,
assigned, hypothecated or otherwise transferred (whether by operation of law or
otherwise);
(k) the occurrence of a default or breach of condition continuing beyond
the expiration of the applicable notice and grace periods, if any, in connection
with the payment or performance of any other material obligation of the Lessee
or any Sublessee, whether or not the applicable creditor or obligee elects to
declare the obligations of the Lessee or the applicable Sublessee under the
applicable agreement due and payable or to exercise any other right or remedy
available to such creditor or obligee, if such creditor's or obligee's rights
and remedies may involve or result in (i) the taking of possession of the Leased
Property or (ii) the assertion of any other right or remedy that, in the
Lessor's reasonable opinion, may impair the Lessee's ability punctually to
perform all of its obligations under this Lease and the other Lease Documents,
may impair such Sublessee's ability punctually to perform all of its
obligations under its Sublease or may materially impair the Lessor's security
for the Lease Obligations; provided, however, that in any event, the election by
the applicable creditor or obligee to declare the obligations of the Lessee
under the applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee shall be an Event of Default
hereunder only if such obligations, individually or in the aggregate, are in
excess of ONE HUNDRED THOUSAND DOLLARS ($100,000);
(l) intentionally omitted;
(m) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any credit agreement, loan agreement or other agreement establishing a major
line of credit (or any documents executed in connection with such lines of
credit) on behalf of any member of the Leasing Group whether or not the
applicable creditor has elected to declare the indebtedness due and payable
under such line of credit or to exercise any other right or remedy available to
it. For the purposes of this
69
<PAGE>
provision, a major line of credit shall mean and include any line of credit
established in an amount equal to or greater than FIVE HUNDRED THOUSAND DOLLARS
($500,000);
(n) except as a result of Casualty or a partial or complete Condemnation,
if the Lessee or any Sublessee ceases operation of the Facility for a period in
excess of thirty (30) days (a "Failure to Operate");
(o) if one or more judgments against the Lessee or any Sublessee or
attachments against the Lessee's interest or any Sublessee's interest in the
Leased Property, which in the aggregate exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) or which may materially and adversely interfere with the operation of
the Facility, remain unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of thirty (30) days;
(p) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED THOUSAND
DOLLARS ($500,000) shall be rendered against any member of the Leasing Group and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such award or judgment or (ii) such award or judgment shall continue
unsatisfied and in effect for a period of ten (10) consecutive days without an
insurance company satisfactory to the Lessor (in its sole and absolute
discretion) having agreed to fund such award or judgment in a manner
satisfactory to the Lessor (in its sole and absolute discretion) and in either
case such award or judgment shall, in the reasonable opinion of the Lessor, have
a material adverse affect on the ability of any member of the Leasing Group to
operate the Facility;
(q) if any Provider Agreement material to the operation or financial
condition of any member of the Leasing Group shall be terminated prior to the
expiration of the term thereof or, without the prior written consent of the
Lessor, in each instance, which consent may be withheld in the Lessor's
reasonable discretion, shall not be renewed or extended upon the expiration of
the stated term thereof;
(r) if, after the Lessee or any Sublessee has obtained approval for
participation in the Medicare and/or Medicaid programs with regard to the
operation of the Facility, a final unappealable determination is made by the
applicable Governmental Authority that the Lessee or any Sublessee shall have
failed to comply with applicable Medicare and/or Medicaid regulations in the
operation of the Facility, as a result of which failure the Lessee or such
Sublessee is declared ineligible to continue its participation in the Medicare
and/or Medicaid programs;
(s) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful construction or operation of
the Facility in accordance with the Primary Intended Use or the loss of any
Permit under any other circumstances under which any member of the Leasing Group
is required to cease the operation of the Facility in accordance with the
Primary Intended Use; and
70
<PAGE>
(t) any failure to maintain the insurance required pursuant to Section 12
of this Lease in force and effect at all times until the Lease Obligations are
fully paid and performed;
(u) the appointment of a temporary manager (or operator) for the Leased
Property by any Governmental Authority; or
(v) the entry of an order by a court with jurisdiction over the Leased
Property to close the Facility, to transfer one or more residents from the
Facility as a result of an allegation of abuse or neglect or to take any action
to eliminate an emergency situation then existing at the Facility.
16.2 Remedies.
(a) If any Lease Default shall have occurred, the Lessor may at its
option terminate this Lease by giving the Lessee not less than ten (10) days'
notice of such termination, or exercise any one or more of its rights and
remedies under this Lease or any of the other Lease Documents, or as available
at law or in equity and upon the expiration of the time fixed in such notice,
the Term shall terminate (but only if the Lessor shall have specifically
elected by a written notice to so terminate the Lease) and all rights of the
Lessee under this Lease shall cease. Notwithstanding the foregoing, in the event
of the Lessee's failure to pay Rent, if such Rent remains unpaid beyond ten (10)
days from the due date thereof, the Lessor shall not be obligated to give ten
(10) days' notice of such termination or exercise of any of its other rights and
remedies under this Lease, or the other Lease Documents, or otherwise available
at law or in equity, and the Lessor shall be at liberty to pursue any one or
more of such rights or remedies without further notice. No taking of possession
of the Leased Property by or on behalf of the Lessor, and no other act done by
or on behalf of the Lessor, shall constitute an acceptance of surrender of the
Leased Property by the Lessee or reduce the Lessee's obligations under this
Lease or the other Lease Documents, unless otherwise expressly agreed to in a
written document signed by an authorized officer or agent of the Lessor.
(b) To the extent permitted under applicable law, the Lessee shall pay as
Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, the Lessee shall,
to the extent permitted under applicable law, if required by the Lessor so to
do, upon not less than ten (10) days' prior notice from the Lessor, immediately
surrender to the Lessor the Leased Property pursuant to the provisions of
Paragraph (a) of this Section and quit the same, and the Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove the Lessee and all other Persons and any
and all of the Tangible Personal Property from the Leased Property, subject to
the rights of any residents or residents of the Facility and any Sublessees who
are not Affiliates of any member of the Leasing Group
71
<PAGE>
and to any requirements of applicable law, or the Lessor may claim ownership of
the Tangible Personal Property as set forth in Section 5.2.3 hereof or the
Lessor may exercise its rights as secured party under the Security Agreement.
The Lessor shall use reasonable, good faith efforts to relet the Leased Property
or otherwise mitigate damages suffered by the Lessor as a result of the Lessee's
breach of this Lease.
(d) In addition to all of the rights and remedies of the Lessor set forth
in this Lease and the other Lease Documents, if the Lessee shall fail to pay any
rental or other charge due hereunder (whether denominated as Base Rent,
Additional Charges or otherwise) within ten (10) days after same shall have
become due and payable, then and in such event the Lessee shall also pay to the
Lessor (i) a late payment service charge (in order to partially defray the
Lessor's administrative and other overhead expenses) equal to two hundred-fifty
($250) dollars and (ii) to the extent permitted by applicable law, interest on
such unpaid sum at the Overdue Rate; it being understood, however, that nothing
herein shall be deemed to extend the due date for payment of any sums required
to be paid by the Lessee hereunder or to relieve the Lessee of its obligation to
pay such sums at the time or times required by this Lease.
16.3 Damages. None of (a) the termination of this Lease pursuant to
Section 16.2, (b) the eviction of the Lessee or the repossession of the Leased
Property, (c) the failure or inability of the Lessor, notwithstanding reasonable
good faith efforts, to relet the Leased Property, (d) the reletting of the
Leased Property or (e) the failure of the Lessor to collect or receive any
rentals due upon any such reletting, shall relieve the Lessee of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, the Lessee shall forthwith pay to
the Lessor all Rent due and payable with respect to the Leased Property to and
including the date of such termination, repossession or eviction. Thereafter,
the Lessee shall forthwith pay to the Lessor, at the Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to occur of
termination, repossession or eviction, together with interest thereon at the
Overdue Rate to the date of payment, plus (y) the worth (calculated in the
manner stated below) of the amount by which the unpaid Rent for the balance of
the Term after the later to occur of the termination, repossession or eviction
exceeds the fair market rental value of the Leased Property for the balance of
the Term, plus (z) any other amount necessary to compensate the Lessor for all
damage proximately caused by the Lessee's failure to perform the Lease
Obligations or which in the ordinary course would be likely to result therefrom;
or
(ii) each payment of Rent as the same would have become due and payable
if the Lessee's right of possession or other rights under this Lease had not
been terminated, or if the Lessee had not been evicted, or if the Leased
Property had not been repossessed which Rent, to the extent permitted by law,
shall bear interest at the Overdue Rate from the date when due until the date
paid, and the Lessor may enforce, by action or otherwise, any other term or
covenant of this Lease. There shall be credited against the Lessee's
obligation under this Clause (ii) amounts actually collected by the Lessor from
another tenant to whom the Leased
72
<PAGE>
Property may have actually been leased or, if the Lessor is operating the Leased
Property for its own account, the actual net cash flow of the Leased Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 Lessee Waivers. If this Lease is terminated pursuant to Section
16.2, the Lessee waives, to the extent not prohibited by applicable law, (a) any
right of redemption, re-entry or repossession, (b) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
16.5 Application of Funds. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 Intentionally Omitted.
16.7 Lessor's Right to Cure. If the Lessee shall fail to make any
payment, or to perform any act required to be made or performed under this Lease
and to cure the same within the relevant time periods provided in Section 16.1,
the Lessor, after five (5) Business Days' prior notice to the Lessee (except in
an emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee, and may, to the extent permitted by law, enter upon the Leased Property
for such purpose and take all such action thereon as, in the Lessor's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of the Lessee. All sums so paid by the Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by the Lessee to the Lessor on demand as an Additional Charge. The
obligations of the Lessee and rights of the Lessor contained in this Article
shall survive the expiration or earlier termination of this Lease.
16.8 No Waiver By Lessor. The Lessor shall not by any act, delay,
omission or otherwise (including, without limitation, the exercise of any right
or remedy hereunder) be deemed to have waived any of its right or remedies
hereunder or under any of the other Lease Documents unless such waiver is in
writing and signed by the Lessor, and then, only to the extent specifically set
forth therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant,
73
<PAGE>
representation or warranty of any of the Lease Documents, nor shall such a
waiver in any one instance or circumstances be construed as a waiver of the
same term, condition, covenant, representation or warranty in any subsequent
instance or circumstance. No such failure, delay or waiver shall be construed
as creating a requirement that the Lessor must thereafter, as a result of such
failure, delay or waiver, give notice to the Lessee or any other Person that
the Lessor does not intend to, or may not, give a further waiver or to refrain
from insisting upon the strict performance of the terms, conditions, covenants,
representations and warranties set forth in the Lease Documents before the
Lessor can exercise any of its rights or remedies under any of the Lease
Documents or before any Lease Default can occur, or as establishing a course of
dealing for interpreting the conduct of and agreements between the Lessor and
the Lessee or any other Person.
The acceptance by the Lessor of any payment that is less than payment in
full of all amounts then due under any of the Lease Documents at the time of the
making of such payment shall not: (a) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(b) constitute an accord and satisfaction or (c) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (i) as a novation of this Lease or any of the other Lease Documents,
(ii) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(iii) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable law; and to the maximum extent not
prohibited by applicable law, the Lessor hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 Right of Forbearance. Whether or not for consideration paid or
payable to the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by the Lessee and all those claiming by, through or under the Lessee.
16.10 Cumulative Remedies. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of the
Lessor under each of the Lease Documents shall be separate and
74
<PAGE>
cumulative and may be exercised concurrently or successively in the Lessor's
sole and absolute discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 Surrender. The Lessee shall, upon the expiration or prior
termination of the Term (unless the Lessee has concurrently purchased the Leased
Property in accordance with the terms hereof), vacate and surrender the Leased
Property to the Lessor in good repair and condition, in compliance with all
Legal Requirements, all Insurance Requirements, and in compliance with the
provisions of Article 8, except for: (a) ordinary wear and tear (subject to the
obligation of the Lessee to maintain the Leased Property in good order and
repair during the entire Term of the Lease), (b) damage caused by the gross
negligence or willful acts of the Lessor, and (c) any damage or destruction
resulting from a Casualty or Taking that the Lessee is not required by the terms
of this Lease to repair or restore.
17.2 Transfer of Permits and Contracts. In connection with the expiration
or any earlier termination of this Lease (unless the Lessee has concurrently
purchased the Leased Property in accordance with the terms hereof), upon any
request made from time to time by the Lessor, the Lessee shall (a) promptly and
diligently use its best efforts to (i) transfer and assign all Permits and
Contracts necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Lease to the Lessor or its designee and/or
(ii) arrange for the transfer or assignment of such Permits and Contracts to the
Lessor or its designee, all to the extent the same may be transferred or
assigned under applicable law and (b) cooperate in every respect (and to the
fullest extent possible) and assist the Lessor or its designee in obtaining such
Permits and Contracts (whether by transfer, assignment or otherwise). Such
efforts and cooperation on the part of the Lessee shall include, without
limitation, the execution, delivery and filing with appropriate Governmental
Authorities and Third Party Payors of any applications, petitions, statements,
notices, requests, assignments and other documents or instruments requested by
the Lessor. Furthermore, the Lessee shall not take any action or refrain from
taking any action which would defer, delay or jeopardize the process of the
Lessor or its designee obtaining said Permits and Contracts (whether by
transfer, assignment or otherwise). Without limiting the foregoing, the Lessee
shall not seek to transfer or relocate any of said Permits or Contracts to any
location other than the Leased Property. The provisions of this Section 17.2
shall survive the expiration or earlier termination of this Lease.
The Lessee hereby appoints the Lessor as its attorney-in-fact, with full
power of substitution to take such actions, in the event that the Lessee fails
to comply with any request made by the Lessor hereunder, as the Lessor (in its
sole absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on the Lessor by
the provisions of this Section 17.2, being coupled with an interest,
75
<PAGE>
shall be irrevocable until the Obligations are fully paid and performed and
shall not be affected by any disability or incapacity which the Lessee may
suffer and shall survive the same. Such power of attorney is provided solely to
protect the interests of the Lessor and shall not impose any duty on the Lessor
to exercise any such power and neither the Lessor nor such attorney-in-fact
shall be liable for any act, omission, error in judgment or mistake of law,
except as the same may result from its gross negligence or willful misconduct.
17.3 No Acceptance of Surrender. Except at the expiration of the Term in
the ordinary course, no surrender to the Lessor of this Lease or of the Leased
Property or any interest therein shall be valid or effective unless agreed to
and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 Holding Over. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent payable at the
time of such expiration or earlier termination of the Term; (ii) all Additional
Charges accruing during the month and (iii) all other sums, if any, payable by
the Lessee pursuant to the provisions of this Lease with respect to the Leased
Property. During such period of tenancy, the Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenants at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of the Lessor to the holding over of the Lessee after the expiration or
earlier termination of this Lease.
ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 Purchase of the Leased Property. If this Lease is in full force and
effect and there exists no Event of Default which has not been cured within the
applicable grace period, then the Lessee shall have the option exercisable on
not less than six (6) months nor more than twenty-four (24) months notice to
purchase the Leased Property beginning on the ____ anniversary of the
Commencement Date at a purchase price equal to the Fair Market Value of the
Leased Property. In the event the Lessee purchases the Leased Property from the
Lessor pursuant to any of the terms of this Lease, the Lessor shall, upon
receipt from the Lessee of the applicable purchase price, together with full
payment of any unpaid Rent due and payable with respect to any period ending on
or before the date of the purchase, deliver to the Lessee a deed with covenants
only against acts of the Lessor conveying the entire interest of the Lessor in
and to the Leased Property to the Lessee subject to all Legal Requirements, all
of the matters described in clauses (a), (b), (e) and (g) of Section 11.5.2,
Impositions, any Liens
76
<PAGE>
created by the Lessee, any Liens created in accordance with the terms of this
Lease or consented to by the Lessee, the claims of all Persons claiming by
through or under the Lessee, any other matters assented to by the Lessee and
all matters for which the Lessee has responsibility under any of the Lease
Documents, but otherwise not subject to any other Lien created by the Lessor
from and after the Commencement Date (other than an Encumbrance permitted under
Article 20 which the Lessee elects to assume). The applicable purchase price
shall be paid in cash to the Lessor, or as the Lessor may direct, in federal or
other immediately available funds except as otherwise mutually agreed by the
Lessor and the Lessee. All expenses of such conveyance, including, without
limitation, title examination costs, standard (and extended) coverage title
insurance premiums, attorneys' fees incurred by the Lessor in connection with
such conveyance, recording and transfer taxes and recording fees and other
similar charges shall be paid by the Lessee.
18.2 Appraisal.
18.2.1 Designation of Appraisers. In the event that it becomes necessary
to determine the Fair Market Value of the Leased Property for any purpose of
this Lease, the party required or permitted to give notice of such required
determination shall include in the notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after receipt of any such
notice, the Lessor (or the Lessee, as the case may be) shall by notice to the
Lessee (or the Lessor, as the case may be) appoint a second Person as appraiser
on its behalf.
18.2.2 Appraisal Process. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto), shall, within forty-five (45) days after the
date of the notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value of the Leased Property as of
the relevant date (giving effect to the impact, if any, of inflation from the
date of their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall have been
so appointed but only one such appraiser shall have made such determination
within fifty (50) days after the making of the Lessee's or the Lessor's request,
then the determination of such appraiser shall be final and binding upon the
parties. If two appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten percent
(10%) of the lesser of such amounts, then the Fair Market Value of the Leased
Property shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the amounts so determined shall
exceed ten percent (10%) of the lesser of such amounts, then such two appraisers
shall have twenty (20) days to appoint a third appraiser, but if such appraisers
fail to do so, then either party may request the American Arbitration
Association or any successor organization thereto to appoint an appraiser within
twenty (20) days of such request, and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such appraiser
shall have been appointed within such twenty (20) days or within ninety (90)
days of the original request for a determination of Fair Market Value of the
Leased Property, whichever is earlier, either the Lessor or the Lessee may apply
to any court having jurisdiction
77
<PAGE>
to have such appointment made by such court. Any appraiser appointed by the
original appraisers, by the American Arbitration Association or by such court
shall be instructed to determine the Fair Market Value of the Leased Property
within thirty (30) days after appointment of such Appraiser. The determination
of the appraiser which differs most in terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and fifty percent
(50%) of the sum of the remaining two determinations shall be final and binding
upon the Lessor and the Lessee as the Fair Market Value of the Leased Property.
18.2.3 Specific Enforcement and Costs. This provision for determination
by appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law. The
Lessor and the Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment. Except as set forth in Section 19.2,
the Lessee may not, without the prior written consent of the Lessor, which
consent may be withheld in the Lessor's sole and absolute discretion, assign or
pledge all or any portion of its interest in this Lease or any of the other
Lease Documents (whether by operation of law or otherwise) or sublet all or any
part of the Leased Property. For purposes of this Section 19.1, the term
"assign" shall be deemed to include, but not be limited to, any one or more
sales, pledges, hypothecations or other transfers (including, without
limitation, any transfer by operation of law) of any of the capital stock of or
partnership interest in the Lessee or sales, pledges, hypothecations or other
transfers (including, without limitation, any transfer by operation of law) of
the capital or the assets of the Lessee. Any such assignment, pledge, sale,
hypothecation or other transfer made without the Lessor's consent shall be void
and of no force and effect.
19.2 Permitted Sublease. Notwithstanding the foregoing, the Lessee shall
have the right to enter into Resident Agreements without the prior consent of
the Lessor.
19.3 Attornment. The Lessee shall insert in each Sublease approved by the
Lessor, provisions to the effect that (a) such Sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of the Lessor hereunder, (b) in the event this Lease shall terminate before the
expiration of such Sublease, the Sublessee thereunder will, at the Lessor's
option, attorn to the Lessor and waive any right the Sublessee may have to
terminate the Sublease or to surrender possession thereunder, as a result of
the termination of this Lease and (c) in the event the Sublessee receives a
written notice from the Lessor stating that the
78
<PAGE>
Lessee is in default under this Lease, the Sublessee shall thereafter be
obligated to pay all rentals accruing under said Sublease directly to the Lessor
or as the Lessor may direct. All rentals received from the Sublessee by the
Lessor shall be credited against the amounts owing by the Lessee under this
Lease.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby with the fee estate in the Leased Property
by reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate in the Leased
Property.
20.2 Transfers By Lessor. If the original the Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of the Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original the Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 Lessor May Grant Liens. Without the consent of the Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, the
Lessor may, from time to time, directly or indirectly, create or otherwise
cause to exist any lien, encumbrance or title retention agreement upon the
Leased Property or any interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing, provided that the Lessee
shall have no obligation to make payments under such Encumbrances. The Lessee
shall subordinate this Lease to the lien of any such Encumbrance, on the
condition that the beneficiary or holder of such Encumbrance executes a
non-disturbance agreement in conformity with the provisions of Section 20.4. To
the extent that any such Encumbrance consists of a mortgage or deed of trust on
the Lessor's interest in the Leased Property the same shall be referred to
herein as a "Fee Mortgage" and the holder thereof shall be referred to herein as
a "Fee Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (a) the
applicable Fee Mortgagee consents to this Lease and (b)
79
<PAGE>
agrees that, notwithstanding the terms of the applicable Fee Mortgage held by
such Fee Mortgagee, or any default, expiration, termination, foreclosure,
sale, entry or other act or omission under or pursuant to such Fee Mortgage or
a transfer in lieu of foreclosure, (i) the Lessee shall not be disturbed in
peaceful enjoyment of the Leased Property nor shall this Lease be terminated or
canceled at any time, except in the event that the Lessor shall have the right
to terminate this Lease under the terms and provisions expressly set forth
herein, (ii) the Lessee's option to purchase the Leased Property shall remain
in force and effect pursuant to the terms hereof and (iii) in the event that
the Lessee elects its option to purchase the Leased Property and performs all
of its obligations hereunder in connection with any such election, the holder
of the Fee Mortgage shall release its Fee Mortgage upon payment by the Lessee
of the purchase price required hereunder, provided, that (1) such purchase
price is paid to the holder of the Fee Mortgage, in the event that the
Indebtedness secured by the applicable Fee Mortgage is equal to or greater than
the purchase price or (2) in the event that the purchase price is greater than
the Indebtedness secured by the Fee Mortgage, a portion of the purchase price
equal to the Indebtedness secured by the Fee Mortgage is paid to the Fee
Mortgagee and the remainder of the purchase price is paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall
(a) subordinate this Lease and all of the Lessee's rights and estate hereunder
to the Fee Mortgage held by such Fee Mortgagee and (b) agree that the Lessee
will attorn to and recognize such Fee Mortgagee or the purchaser at any
foreclosure sale or any sale under a power of sale contained in any such Fee
Mortgage as the Lessor under this Lease for the balance of the Term then
remaining. To effect the intent and purpose of the immediately preceding
sentence, the Lessee agrees to execute and deliver such instruments in
recordable form as are reasonably requested by the Lessor or the applicable Fee
Mortgagee; provided, however, that such Fee Mortgagee simultaneously executes,
delivers and records a written agreement of the type described in the preceding
paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 Quiet Enjoyment. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, the Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property throughout the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by the Lessee. No failure by the Lessor to comply with
the foregoing covenant shall give the Lessee any right to cancel or terminate
this Lease, or to fail to perform any other sum payable under this Lease, or to
fail to perform any other obligation of the Lessee hereunder. Notwithstanding
the foregoing, the Lessee shall have the right by
80
<PAGE>
separate and independent action to pursue any claim it may have against the
Lessor as a result of a breach by the Lessor of the covenant of quiet enjoyment
contained in this Article 21.
21.2 Memorandum of Lease. The Lessor and the Lessee shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease and all options contained herein shall be made. The Lessee shall pay all
recording costs and taxes associated therewith.
21.3 Default by Lessor. The Lessor shall be in default of its obligations
under this Lease only if the Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such failure
shall continue for a period of thirty (30) days after notice thereof from the
Lessee (or such shorter time as may be necessary in order to protect the health
or welfare of any residents of the Facility or to insure the continuing
compliance of the Facility with the applicable Legal Requirements), unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed to continue if the Lessor, within
said thirty (30) day period, proceeds promptly and with due diligence to cure
the failure and diligently completes the curing thereof. The time within which
the Lessor shall be obligated to cure any such failure shall also be subject to
extension of time due to the occurrence of any Unavoidable Delay.
ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or under
any of the other Lease Documents shall be in writing and shall be deemed duly
given if personally delivered, sent by certified mail, return receipt requested,
or sent by a nationally recognized commercial overnight delivery service with
provision for a receipt, postage or delivery charges prepaid, and shall be
deemed given when so personally delivered or postmarked or placed in the
possession of such mail or delivery service and addressed as follows:
If to the Lessee: ---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
With a copy to: ---------------------------------------------
[The Lessee's counsel] ---------------------------------------------
---------------------------------------------
---------------------------------------------
81
<PAGE>
If to the Lessor: ---------------------, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: ---------------------, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
or such other address as the Lessor or the Lessee shall hereinafter from time to
time designate by a written notice to the others given in such manner. Any
notice given to the Lessee by the Lessor at any time shall not imply that such
notice or any further or similar notice was or is required.
ARTICLE 23
INTENTIONALLY OMITTED
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 Broker's Fee Indemnification. The Lessee shall and hereby agrees to
indemnify, defend (with counsel acceptable to the Lessor) and hold the Lessor
harmless from and against any and all claims for premiums or other charges,
finder's fees, taxes, brokerage fees or commissions and other similar
compensation due in connection with any of the transactions contemplated by the
Lease Documents. Notwithstanding the foregoing, the Lessor shall have the option
of conducting its own defense against any such claims with counsel of the
Lessor's choice, but at the expense of the Lessee, as aforesaid. This
indemnification shall include all attorneys' fees and expenses and court costs
reasonably incurred by the Lessor in connection with the defense against any
such claims and the enforcement of this indemnification agreement and shall
survive the termination of this Lease.
24.2 No Joint Venture or Partnership. Neither anything contained in any
of the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
82
<PAGE>
24.3 Amendments, Waivers and Modifications. Except as otherwise expressly
provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (a) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (b) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the
Permits and/or the Contracts. References herein and in the other Lease Documents
to any of the Lease Documents, the Management Agreements, the Permits and/or the
Contracts shall be deemed to include any renewals, replacements, amendments,
extensions, substitutions, revisions, consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the
Lease Documents, whether express or implied, to any renewal, replacement,
amendment, extension, substitution, revisions, consolidation or modification of
any of the Lease Documents or any Management Agreement, Permit and/or the
Contract is not intended to constitute an agreement or consent by the Lessor to
any such renewal, replacement, amendment, substitution, revision, consolidation
or modification; but, rather as a reference only to those instances where the
Lessor may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification as the same may
be required pursuant to the terms, covenants and conditions of any of the Lease
Documents.
24.4 Captions and Headings. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 Time is of the Essence. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 Counterparts. This Lease may be executed in one or more
counterparts, each of which taken together shall constitute an original and all
of which shall constitute one and the same instrument.
24.7 Entire Agreement. This Lease and the other Lease Documents set forth
the entire agreement of the parties with respect to the subject matter.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, THE LESSOR AND THE LESSEE HEREBY
83
<PAGE>
MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT WHICH ANY
PARTY HERETO MAY NOW OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE LEASE OR ANY OF THE
LEASE DOCUMENTS. The Lessee hereby certifies that neither the Lessor nor any of
the Lessor's representatives, agents or counsel has represented expressly or
otherwise that the Lessor would not, in the event of any such suit, action or
proceeding seek to enforce this waiver to the right of trial by jury and
acknowledges that the Lessor has been induced by this waiver (among other
things) to enter into the transactions evidenced by this Lease and the other
Lease Documents and further acknowledges that the Lessee (a) has read the
provisions of this Lease, and in particular, the paragraph containing this
waiver, (b) has consulted legal counsel, (c) understands the rights that it is
granting in this Lease and the rights that it is waiving in this paragraph in
particular and (d) makes the waivers set forth herein knowingly, voluntarily and
intentionally.
24.9 Successors and Assigns. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (a) upon the Lessee and the
Lessee's legal representatives and permitted successors and assigns and (b) the
Lessor and any other Person who may now or hereafter hold the interest of the
Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, the Lessee shall not assign any of its rights or
obligations hereunder or under any of the other Lease Documents without the
prior written consent of the Lessor, in each instance, which consent may be
withheld in the Lessor's sole and absolute discretion.
24.10 No Third Party Beneficiaries. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Indemnified Parties, the Lessee, the other members
of the Leasing Group and their respective permitted successors and assigns, and,
except as otherwise expressly set forth in any of the Lease Documents, nothing
contained therein shall confer upon any Person other than such parties any right
to insist upon or to enforce the performance or observance of any of the
obligations contained therein. All conditions to the obligations of the Lessor
to advance or make available proceeds of insurance or Awards, or to release any
deposits held for Impositions or insurance premiums are imposed solely and
exclusively for the benefit of the Lessor, its successors and assigns. No other
Person shall have standing to require satisfaction of such conditions in
accordance with their terms, and no other Person shall, under any circumstances,
be a beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by the Lessor at any time, if, in the Lessor's sole and
absolute discretion, the Lessor deems it advisable or desirable to do so.
24.11 Governing Law. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
The Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts,
84
<PAGE>
for the purpose of any suit, action or other proceeding arising out of or with
respect to any of the Lease Documents, the negotiation and/or consummation of
the transactions evidenced by the Lease Documents, the Lessor's relationship of
any member of the Leasing Group in connection with the transactions evidenced by
the Lease Documents and/or the performance of any obligation or the exercise of
any remedy under any of the Lease Documents and expressly waives any and all
objections the Lessee may have as to venue in any of such courts.
24.12 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents or any
application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any of
the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE:
- ------------------------------- By: ---------------------------------
Name: Name:
Title:
WITNESS: LESSOR:
- ------------------------------- By: ---------------------------------
Name: Name:
Title:
G:/MASTERS/CAREMATRIX/0020b
85
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
86
<PAGE>
EXHIBIT B
PERMITTED ENCUMBRANCES
87
<PAGE>
EXHIBIT C
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
88
<PAGE>
EXHIBIT D
OPEN COST REPORTS
89
<PAGE>
EXHIBIT E
RATE LIMITATIONS
90
<PAGE>
EXHIBIT F
FREE CARE REQUIREMENTS
91
<PAGE>
EXHIBIT G
CURRENT RATES
g:/masters/carematrix/0020b/bd
92
CAREMATRIX CORPORTION
LIST OF SUBSIDIARY ENTITIES AND PERCENTAGE OWNERSHIP
Percentage Date of Incorporation
Subsidiary Ownership or Organization
---------- --------- ---------------
Adams Square, Inc. 30%* March 22, 1993
Adams Square LP 0.3%** July 1, 1993
AMA New Jersey Development, Inc. 100% July 7, 1995
Bailey Retirement Center, Inc. 100% June 18, 1992
CareMatrix of Amethyst Arbor, Inc. 100% April 9, 1996
CareMatrix of Emerald Springs, 100% March 7, 1996
Inc.
CareMatrix of Darien, Inc. 100% March 15, 1996
CareMatrix of Massachusetts, Inc. 100% March 7, 1996
CareMatrix of ARI, Inc. 100% December 1, 1995
CareMatrix of Cypress Station, 100% March 25, 1996
Inc.
CareMatrix of Amber Lights, Inc. 100% March 25, 1996
CarePlex of Miami Shores, Inc. 100% December 1, 1995
CarePlex of Cragganmore, Inc. 100% March 1, 1996
CarePlex of Homestead, Inc. 100% December 1, 1995
CCC of Maryland, Inc. 100% July 24, 1996
Dominion Villages, Inc. 100% October 19, 1993
Lakes Region Villages, LLC 51% April 5, 1995
Lowry Place LP 80% December 21, 1993
Lowry Village, Inc. 100% December 15, 1993
Piedmont Villages, Inc. 100% January 27, 1996
Standish Lakes Region Villages, 100% February 9, 1995
Inc.
Standish Marketing, Inc. 100% January 14, 1993
Stan/Oak Development Corp. 100% April 28, 1993
- ------------
*Owned through Stan/Oak Development Corp.
**Owned through Adams Square, Inc.
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement of Form S-1 (File No.
333-11455) 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."
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 18, 1996
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
333-11455) 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."
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 18, 1996
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-1 No. 333-11455) and
prospectus of CareMatrix Corporation (formerly The Standish Care Company).
/s/ LOVELACE, ROBY & COMPANY, P.A.
LOVELACE, ROBY & COMPANY, P.A.
Certified Public Accountants
Orlando, Florida
October 18, 1996
