Registration No. 333-
As filed with the Securities and Exchange Commission on October 17, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CAREMATRIX CORPORATION
(Exact name of registrant as specified in charter)
Delaware 04-3069586
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
197 First Avenue
Needham, MA 02194
(781) 433-1000
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
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Robert M. Kaufman Copies to:
Chief Executive Officer Michael J. Bohnen, Esq.
CareMatrix Corporation Nutter, McClennen & Fish, LLP
197 First Avenue One International Place
Needham, MA 02194 Boston, MA 02110-2699
(781) 433-1000 (617) 439-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement, as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this 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. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Title of Each Class of Maximum Maximum Amount of
Securities to be Amount to be Offering Price Aggregate Registration
Registered Registered Per Share(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Shares of Common
Stock, $.05 par value 300,000 shares $25.91 $7,771,560 $2,355
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</TABLE>
(1) Determined pursuant to Rule 457(g) under the Securities Act of 1933, as
amended, for purposes of calculating the registration fee. Pursuant to
said rule, the fee for 295,000 of such shares was the average of the
high and low prices per share of Common Stock reported on The American
Stock Exchange on October __, 1997.
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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, as amended, 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
PRELIMINARY PROSPECTUS DATED OCTOBER 17, 1997
PROSPECTUS
300,000 Shares
CareMatrix Corporation
Common Stock, $.05 par value
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This Prospectus relates to the resale of 300,000 shares of Common
Stock, $.05 par value (the "Common Stock"), of CareMatrix Corporation, a
Delaware corporation (the "Company"), which shares of Common Stock are owned and
may be offered and sold from time to time by certain persons and entities
referred to herein as the "Selling Stockholders."
The Common Stock may be offered from time to time by the Selling
Stockholders in transactions on the American Stock Exchange ("AMEX") or in
privately-negotiated transactions, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Specific information
concerning the Selling Stockholders and their plan of distribution is set forth
under "Selling Securityholders" and "Plan of Distribution."
The Company will not receive any proceeds from the sale of the Common
Stock. The Company is bearing certain expenses in connection with the
registration of the shares being offered and sold by the Selling Stockholders.
Shares of the Company's Common Stock are quoted on AMEX under the
symbol "CMD." On October 15, 1997, the closing price reported for such shares on
AMEX was $26.00.
See "Risk Factors" beginning on Page 10 for a discussion of certain
factors that should be considered by prospective purchasers of the securities
offered hereby.
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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.
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The Date of this Prospectus is __________, 1997
<PAGE>
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus, and, if given or made, such information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy the securities described herein by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making the
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Under no circumstances shall the
delivery of this Prospectus or any sale made pursuant to this Prospectus create
any implication that the information contained in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
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TABLE OF CONTENTS
Page
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Available Information....................................................... 2
Documents Incorporated by Reference......................................... 3
Risk Factors................................................................ 3
The Company................................................................. 9
Use of Proceeds............................................................. 9
Ratio of Earnings to Fixed Charges.......................................... 9
Selling Stockholders........................................................ 9
Plan of Distribution........................................................ 9
Legal Matters...............................................................10
Experts.....................................................................10
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 (together
with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act covering the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, and the exhibits and schedules thereto. For further
information, with respect to the Company and the Common Stock, reference is made
to the Registration Statement, and the exhibits and schedules thereto, which can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Reports, proxy statements and information statements and
other information filed electronically by the Company with the Commission are
available at the Commission's worldwide web site at http://www.sec.gov. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and information statements and other information
with the Commission. Such reports, proxy statements and information statements
and other information may be inspected and copied at the public reference
facilities maintained by the Commission referenced above.
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DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as amended by the Company's
Annual Report on Form 10-K/A filed with the Commission on April 14, 1997
(including those portions of the Company's definitive proxy statement for the
Annual Meeting of Stockholders held on June 16, 1997 incorporated by reference
therein), (ii) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, as amended by the Company's Quarterly Report on
Form 10-Q/A filed with the Commission on August 12, 1997, (iii) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, (iv)
the Company's Current Report on Form 8-K filed August 5, 1997, (v) the Company's
current report on Form 8-K filed August 19, 1997 and (vi) the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A, declared effective October 23, 1996.
All reports filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to any
termination of the offering of the shares of Common Stock covered by this
Prospectus are deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the respective dates of filing. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document that is also incorporated herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) will be provided without charge to each person
who receives a copy of this Prospectus on written or oral request to Investor
Relations, CareMatrix Corporation, 197 First Avenue, Needham, MA 02194, or by
telephone at (781) 433-1000.
RISK FACTORS
In addition to the other information contained in this Prospectus, before
purchasing the shares of Common Stock offered hereby, prospective purchasers
should carefully consider the factors set forth below. Such factors could cause
the Company's actual results or other events to differ materially from the
results or events anticipated in certain forward-looking statements contained or
incorporated by reference herein. Such forward-looking statements involve risks
and uncertainties.
History of Losses From Operations; Accumulated Deficit. Although the
Company recorded net earnings for the six months ended June 30, 1997 of
$2,042,964, from its inception on June 24, 1994 through December 31, 1996, the
Company experienced significant losses from operations. Through December 31,
1996, the Company's accumulated deficit was $16.4 million. For the year ended
December 31, 1996, the Company incurred losses from operations of $6.0 million.
As of June 30, 1997, the Company's accumulated deficit was $14.4 million. There
can be no assurance that the Company will be able to continue 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. The Company has
entered and expects to continue to 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
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or third parties. The Company has not, and expects in the future that it will
not, enter into agreements with these parties until six months prior to
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 has and expects
in the future 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 15-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
(collectively referred to herein as "Chancellor"), with which the Company has
entered and 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.
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 $700 million and $800 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. Prior to its secondary offering in October 1996, the Company had 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. There can be no assurance that any additional financing from Mr. Gosman,
Chancellor or any other sources will be available in the future. Any limitation
on the Company's ability to obtain additional financing could have a material
adverse effect on the Company.
Substantial Debt and Lease Obligations; Increased Leverage. At June 30,
1997, the Company's debt was $9.3 million. Debt service and annual operating
lease payment obligations are expected to increase significantly as the Company
pursues its growth strategy. 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.
In connection with the issuance in August and September 1997 of the
Company's 6 1/4% Convertible Subordinated Debentures due 2004, the Company
incurred $115 million in additional indebtedness which increased the ratio of
its long-term debt to its total capitalization from 6.6% at June 30, 1997, to
56.7%, on a pro forma basis. As a result of this increased leverage, the
Company's principal and interest obligations increased substantially. The degree
to which the Company is leveraged could adversely affect the Company's ability
to obtain additional financing for working capital, acquisitions or other
purposes and could make it more vulnerable to economic downturns and competitive
pressures. The Company's increased leverage could also adversely affect its
liquidity, as a substantial portion of available cash from operations may have
to be applied to meet debt service requirements and, in the event of a cash
shortfall, the Company could be forced to reduce other expenditures and forego
potential acquisitions to be able to meet such requirements.
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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 Company's facilities 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.
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 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, 1997, the Company's total assets
were approximately $108.2 million, of which approximately $25.4 million, or
approximately 23.5% 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, 1997 the net unamortized balance of
goodwill is not
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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.
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.
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.
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 has entered and expects to enter into development, management and lease
agreements. These agreements are and 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 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.
Control by Management. As of September 30, 1997, members of the Board of
Directors and management are the beneficial owners of approximately 47.9% of the
outstanding Common Stock of the Company. As of September 30, 1997, 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, are the beneficial owners of approximately 44.6% of the outstanding
Common Stock. Accordingly, management 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.
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 other 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
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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.
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 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.
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.
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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. Any failure of the Company to retain liability
insurance coverage or to obtain such coverage on acceptable terms could have a
material adverse effect on the Company.
Dependence on Reimbursement by Third-Party Payors. The Company's revenues
from the services it provides for skilled nursing facilities are dependent upon
reimbursement from third-party payors, including Medicare, state Medicaid
programs and private insurers. There can be no assurance that such revenues will
fully pay the cost of providing services to residents covered by Medicare and
Medicaid. Although in 1996 a substantial portion of the Company's revenue was
derived from Medicare and Medicaid payments, the Company anticipates that in
1997 and going forward, revenue from sources other than Medicare and Medicaid
will constitute a substantially greater portion of overall revenue. 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 a period of three years following the date that such stockholder
became an interested stockholder.
Possible Volatility Stock Price. Economic or other external factors may
have a significant impact on the Company's business and on the market price of
the Common Stock. Fluctuations in financial performance from period to period
also may have a significant impact on the market price of the Common Stock.
-8-
<PAGE>
THE COMPANY
The Company is a provider of assisted living services, and owns, leases or
manages its facilities. The Company's strategy is to provide a full range of
assisted living and related services across a range of pricing options. 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 to those of its
residents who need a higher degree of care a less stressful transition to more
supportive environments either within the same facility, in a campus setting or
in a nearby facility.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02194; and its telephone number at that address is (781) 433-1000.
Unless otherwise indicated or required by the context, references to the
"Company" include its consolidated subsidiaries.
USE OF PROCEEDS
The shares of Common Stock offered by the Selling Stockholders are not
being sold by the Company, and the Company will not receive any proceeds from
the sale thereof.
SELLING STOCKHOLDERS
The names of the Selling Stockholders, the number of shares of Common
Stock which may be offered from time to time by them under this Prospectus and
information concerning any material relationships between the Company and the
Selling Stockholders will be set forth as required in Supplements to this
Prospectus or amendments to the Registration Statement. The Company has issued
warrants to purchase shares of Common Stock offered under this Prospectus in
connection with previous financing and other activities.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell all or a portion of the Common Stock
offered hereby from time to time on any exchange on which the securities are
listed on terms to be determined at the times of such sales. The Selling
Stockholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the Selling Stockholders may from time to time
offer the Common Stock beneficially owned by them through underwriters, dealers
or agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Stockholders and the purchasers of
the Common Stock for whom they may act as agent.
To the extent required, the aggregate principal amount of the Common Stock
to be sold hereby, the names of the Selling Stockholders, the purchase price,
the name of any such agent, dealer or underwriter and any applicable
commissions, discounts or other terms constituting compensation with respect to
a particular offer will be set forth in any accompanying Prospectus Supplement.
The aggregate proceeds to the Selling Stockholders from the sale of the Common
Stock offered by them hereby will be the purchase price of such Common Stock
less discounts and commissions, if any.
The Common Stock which may be offered hereby may be sold from time to time
in one or more transactions at fixed offering prices, which may be changed, or
at varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the holders of the Common Stock or by agreement
between such holders and underwriters or dealers who receive fees or commissions
in connection therewith. In order to comply with the securities laws of certain
states, if applicable, the Common Stock offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers.
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<PAGE>
The Selling Stockholders and any broker-dealers, agent or underwriters
that participate with the Selling Stockholders in the distribution of the Common
Stock offered hereby may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), in which event
any commissions or discounts received by such broker-dealers, agents or
underwriters and any profit on the resale of the Common Stock offered hereby and
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Company is paying all expenses incident to the offer and sale of the
Common Stock offered hereby by the Selling Stockholders to the public, other
than selling commissions and fees.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock of Common Stock
being offered hereby will be passed upon by Nutter, McClennen & Fish, LLP,
Boston, MA 02110. Michael J. Bohnen, an attorney at Nutter, McClennen & Fish,
LLP, is the Assistant Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and for the year then ended, and the combined financial statements of the
Company as of December 31, 1995 and for the year ended December 31, 1995 and the
period from June 24, 1994 (inception) to December 31, 1994, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
-10-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the offering to which this Registration
Statement relates, other than commissions, are to be borne by the Company. All
amounts shown are estimated except the Securities and Exchange commission
registration fee.
Securities and Exchange Commission
Registration Fee...................................... $2,355
Accounting Fees....................................... 5,000
Legal Fees............................................ 15,000
Printing Expenses..................................... 10,000
Miscellaneous Expense................................. 645
-------
Total................................................ $33,000
Item 15. 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 Third 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
II-1
<PAGE>
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.
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 16. List of Exhibits.
Exhibit No.
* 5.1 Opinion of Nutter, McClennen & Fish, LLP
+ 23.1 Consent of Coopers & Lybrand L.L.P.
* 23.2 Consent of Nutter, McClennen & Fish, LLP (included in
Exhibit 5.1)
+ 24.1 Power of Attorney (contained in Page II-4)
- -----------------
* To be filed by amendment.
+ Filed herewith.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 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 Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering; and
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Needham, Commonwealth of Massachusetts on this
17th day of October 1997.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
------------------------------
Robert M. Kaufman
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
Robert M. Kaufman, James M. Clary, III, Michael J. Bohnen and Alexander S.
Glovsky, 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 Registration Statement
on Form S-3 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 an 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 attorney's-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 Registration Statement has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
/s/ Abraham D. Gosman October 17, 1997
- ------------------------------------------------
Abraham D. Gosman,
Chairman of the Board of Directors
/s/ Robert M. Kaufman October 17, 1997
- ------------------------------------------------
Rober---------------
Robert M. Kaufman
Chief Executive Officer and
Principal Accounting Officer
/s/ Andrew D. Gosman October 17, 1997
- ------------------------------------------------
Andrew D. Gosman,
Director and President
II-4
<PAGE>
/s/ Michael M. Gosman October 17, 1997
- ----------------------------------------------
Michael M. Gosman,
Director, Vice President and Vice Chairman
of the Board of Directors.
/s/ Robert Cataldo October 17, 1997
- ----------------------------------------------
Robert Cataldo,
Director
/s/ Donald J. Amaral October 17, 1997
- ----------------------------------------------
Donald J. Amaral,
Director
/s/ H. Loy Anderson, Jr. October 17, 1997
- ----------------------------------------------
H. Loy Anderson, Jr.,
Director
/s/ Bedros Baharian October 17, 1997
- ----------------------------------------------
Bedros Baharian,
Director
/s/ Stephen E. Ronai October 17, 1997
- ----------------------------------------------
Stephen E. Ronai,
Director
II-5
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration of statement of
CareMatrix Corporation on Form S-3 of our report dated February 7, 1997, on our
audits of the consolidated financial statements of CareMatrix Corporation as of
December 31, 1996 and for the year then ended, and the combined financial
statements of CareMatrix Corporation as of December 31, 1995 and for the year
ended December 31, 1995 and the period from June 24, 1994 (inception) to
December 31, 1994. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 17, 1997
