UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996.
Commission File No. 0-19815
CAREMATRIX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3069586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
197 First Avenue, Needham, MA 02194
(Address of principal executive offices) (Zip Code)
(617) 433-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered.
Common Stock, par value $.05 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
On March 25, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $156,985,860. As of March 25,
1997, there were outstanding 17,099,087 shares of the registrant's Common
Stock, $0.05 par value.
Documents Incorporated by Reference
Portions of the Company's definitive Proxy Statement for its annual meeting of
shareholders which the Company intends to file within 120 days after the end of
the Company's fiscal year ended December 31, 1996 are incorporated by reference
into Part II hereof as provided therein.
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ITEM 1. BUSINESS
Overview
CareMatrix Corporation (the "Company") (formerly known as The
Standish Care Company) is a provider of assisted living services. As of December
31, 1996, the Company operated 21 facilities in eight states with a capacity of
approximately 1,700 residents. Of these facilities, two are owned, nine are
leased and ten 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 was incorporated in Delaware in October 1989. On October
4, 1996, twelve wholly owned subsidiaries of the Company were merged into
twelve corporations (the "CareMatrix Affiliates"), owned primarily by Abraham,
Andrew and Michael Gosman (the "Merger"). The stockholders of CareMatrix
Affiliates received approximately 92% of the outstanding shares of Common Stock
of the Company. The managements of the Company and the CareMatrix Affiliates
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 (as defined herein). The
Merger was accounted for as a reverse acquisition, whereby the CareMatrix
Affiliates were treated as the acquiror for accounting purposes.
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.
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.
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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, offering seniors
greater independence and enabling 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 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
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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. The Company
believes that 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
targeted 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 who require a higher
degree of care to a more supportive environment suited to their evolving needs.
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 do not have similar flexibility to allow their residents to age
in place.
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.
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 an individual care plan
for each resident based on professional assessments and family consultations. To
keep in step with a resident's evolving needs, the care plan is updated
regularly 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
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targeted for cluster development are located in a number of states, including
Arizona, Connecticut, Florida, Massachusetts, New Jersey, New York and North
Carolina.
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.
Service Models
While providing services ranging from supportive independent living
to skilled nursing/rehabilitative care, the primary focus of the Company's
efforts centers on 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 impairments.
Based on these resident needs, the Company has developed three
service models 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. 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, 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.
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. Staffing is generally 15% to 20% higher in order to meet
the needs of this population group. The Company generally charges
monthly rates which are 20% to 40% higher for the Alzheimer's Model
than the rates for more traditional assisted living services.
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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.
Supportive Independent Living. Supportive independent living is
provided for seniors who do not yet need assistance with ADLs but who require a
residential environment that offers available health care services. The Company
provides this level of service in both moderate and upper income markets. The
Company believes that the availability of supportive independent living 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 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
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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 also 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.
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 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
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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. The unit wings of the combined facilities
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.
The Company occupies executive offices located in Needham,
Massachusetts under a lease expiring in 2001.
Development and Acquisition
Development Activities. The Company currently plans to develop
approximately 60 facilities with a capacity of approximately 7,200 residents
over the next three years.
The Company's in-house market research and development staff 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 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.
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
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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 15 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 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.
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.
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 to 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. 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.
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,
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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.
Government 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 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
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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.
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.
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.
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
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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.
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 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
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<PAGE>
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.
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.
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.
Employees
As of December 31, 1996, the Company had approximately 800 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.
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[Intentionally left blank]
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ITEM 2. PROPERTIES
The following table sets forth certain information regarding
facilities owned, leased or managed by the Company at December 31, 1996:
Resident
Facility Location Care Level Capacity
- --------------------------------------------------------------------------
OWNED/LEASED
Florida
Bailey Suites (2) Gainesville Assisted Living 14
Bailey Village (3) Gainesville Assisted Living 72
Courtyard at
Lowry Place (4)(5) Tampa Alzheimer's Care 70
Maryland
Silver Spring (2) Silver Spring Skilled Nursing 138
Massachusetts
Avery Manor (2) Needham Assisted Living 142
New Hampshire
Sunny Knoll (6) Franklin Alzheimer's Care 30
North Carolina
Piedmont Village at
Newton (2) Newton Assisted Living 39
Piedmont Village at
Statesville (2) Statesville Assisted Living 75
Piedmont Village at
Yadkinville (2) Yadkinville Assisted Living 50
Virginia
Dominion Village at
Chesapeake(4) Chesapeake Assisted Living 54
Dominion Village at
Poquoson (4) Poquoson Assisted Living 46
Dominion Village at
Williamsburg(4) Williamsburg Assisted Living 58
-----
788
-----
MANAGED (1)
Connecticut
Westfield Court (7) Stamford Independent Living 165
Florida
Homestead Manor Homestead Skilled Nursing 56
Franco Miami Skilled Nursing 120
Maryland
Annapolis Care Center Annapolis Assisted Living 84
Massachusetts
Cadbury Commons Cambridge Assisted Living 78
Courtland House of
Leominister (8) Leominster Assisted Living 68
Standish Village at
Lower Mills (9) Boston Assisted Living 92
Avery Crossing (7) Needham Assisted Living 58
CareMatrix of Dedham (7) Dedham Skilled Nursing/ 56
Alzheimer's Care
Pennsylvania
Fox Ridge Manor Dover Assisted Living 145
-----
922
-----
1,710
=====
- ------------
(1) Management contracts typically have a term of between 5 and 15 years
(with renewal options).
(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) In addition to base management fees, as manager, the Company is entitled to
10% of excess cash flow under certain circumstances.
(9) The company holds a 30% interest in the corporate general partner, which
owns a 1% interest in the owner partnership.
In addition, the Company occupies executive offices located in
Needham, Massachusetts under a lease expiring in 2001.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to litigation in the ordinary course of
business. The Company does not believe that any such litigation will have a
material adverse effect on its business, financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
Special Meeting of the Stockholders of the Company on October 3, 1996
On October 3, 1996, the Company held a special meeting of its
shareholders at which it submitted to the vote of the shareholders the following
matters:
Merger with CareMatrix Companies.
The shareholders voted upon the merger (the "Merger") of 12
subsidiaries of the Company with and into 12 affiliated corporations (the
"CareMatrix Affiliates") which were privately-held and in the business of the
development operation and management of assisted living communities and other
senior care facilities. Upon completion of the Merger, the shares of common
stock of the CareMatrix Affiliates would be converted into the right to receive
an aggregate of 50 million pre-Reverse Split (as defined herein) shares of the
Company's common stock, par value $.01 per share (the "Common Stock"). Upon
completion of the Merger, (i) all of the members of the Board of Directors would
resign, with the exception of Michael J. Doyle, (ii) the Board of Directors
would be increased to eight members and would include Michael J. Doyle, the
Company's Chief Executive Officer, four outside directors and Abraham D. Gosman,
Andrew D. Gosman and Michael D. Gosman, who together controlled the CareMatrix
Affiliates and who, upon completion of the Merger, would beneficially own, in
the aggregate, over 78% of the outstanding Common Stock, and (iii) the executive
officers of the CareMatrix Affiliates would become executive officers of the
Company.
The number of votes in favor of the Merger was 2,103,761, the number
of votes against was 9,550 and the number of abstentions was 4,050.
Authorized Stock Amendment.
The shareholders were asked to approve and adopt an amendment to the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 30,000,000 pre-Reverse Split shares to
75,000,000 pre-Reverse Split shares. Such Amendment was required in order to
permit the Company to consummate the Merger with the CareMatrix Affiliates.
The number of votes in favor of the authorized stock amendment was
3,217,019, the number of votes against was 48,950, and the number of abstentions
was 7,650.
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<PAGE>
Stock Option Plan Amendment.
The shareholders were asked to approve and adopt an amendment to the
Company's 1991 Restated Combination Stock Option Plan to increase from 785,000
to 2,000,000 the total authorized pre-Reverse Split shares of Common Stock
reserved for issuance thereunder. The Stock Option Plan Amendment was necessary
in order to permit the Company to issue the full number of shares of common
stock required to be issued pursuant to the grant of the options to Michael J.
Doyle and Kenneth M. Miles, the Chairman of the Board and Chief Financial
Officer, respectively, of the Company.
The number of votes in favor of the stock option plan amendment was
1,999,598, the number of votes against was 100,785 and the number of abstentions
was 23,250.
Election of Directors.
The following nominees were elected directors of the Company at the
Special Meeting to serve until the earlier of (i) the next annual meeting of
shareholders of the Company and until their successors are duly elected and
qualified or (ii) the consummation of the Merger. The following table sets forth
a summary with respect to the results of the shareholder vote.
Nominee For Against Withheld
- ------- --- ------- --------
Michael J. Doyle 3,274,959 0 12,160
Kenneth M. Miles 3,276,559 0 10,560
Marshall S. Sterman 3,276,559 0 10,560
Robert W. DeVore 3,276,559 0 10,560
John A. Carucci 3,276,559 0 10,560
The Merger was consummated on October 4, 1996, and with the exception
of Mr. Doyle, each of the above-named Directors resigned on that date, and
Abraham D. Gosman, Michael M. Gosman and Andrew D. Gosman were each named
Directors to fill three of such vacancies. Thereafter, on October 4, the Board
of Directors voted to increase the size of the Board to seven members and
appointed Donald J. Amaral, H. Loy Anderson, Jr., Bedros Baharian and Stephen E.
Ronai Directors of the Company to serve until the next annual meeting or until
their successors were duly qualified and elected.
Shareholder Action by Written Consent dated October 4, 1996
On October 4, 1996, the following action was taken by written consent
of the shareholders of the Company holding 42,446,539 shares of Common Stock (or
78.6% of the Company's outstanding Common Stock), effective October 14, 1996:
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<PAGE>
Change in Name.
The shareholders voted to amend the Restated Certificate of
Incorporation of the Company to change the name of the Company from The Standish
Care Company to CareMatrix Corporation.
Reverse Split of Common Stock
The shareholders voted to amend the Restated Certificate of
Incorporation of the Company to effect a one-for-five reverse stock split of the
Company's Common Stock (the "Reverse Split"). As a result of the Reverse Split,
the par value of the Common Stock became $.05 per share.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Company's Shares are traded on the American Stock Exchange under the symbol
CMD. The following table sets forth for the periods shown here the high and low
sales price for the Shares (as reported on the American Stock Exchange for the
fourth quarter and the NASDAQ Stock Exchange for the first, second, and third
quarters as well as for the entire year 1995). All prices have been adjusted to
reflect the one-for-five reverse split of the Company's common stock (see Note 1
of Notes to Financial Statements).
1996 1995
- ------------------------------- --------------------------------
Quarter High Low Quarter High Low
- ------- ------ ------- ------- ------- -------
First $22.188 $14.375 First $12.500 $ 9.375
Second $29.375 $10.625 Second $11.250 $10.000
Third $26.875 $17.500 Third $14.375 $11.250
Fourth $21.875 $11.625 Fourth $20.625 $11.875
As of March 19, 1997, there were outstanding 17,111,649 shares of common stock
held by 124 holders of record. Included in the number of shareholders of record
are shares held in "nominee" or "street" name.
Dividends. 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. In that regard, no dividends may be paid on any shares of
Common Stock unless all accumulated and unpaid dividends on the Series A
Preferred Stock have been declared and paid in full.
Recent Sales of Unregistered Securities. On July 30, 1996, for cash
consideration of $14,000 per share, the Company issued 100 shares of the Series
B Cumulative Convertible Preferred Stock (the "Series B Preferred Stock") which
was convertible at an initial conversion price of $4.16 per share, into 336,538
shares of the Common Stock to Abraham D. Gosman. The Company also issued to Mr.
Gosman a currently exercisable five-year warrant to purchase 400,000 shares of
Common Stock at an initial exercise price of $4.16 per share. On October 30,
1996, the Company redeemed the Series B Preferred Stock.
In addition, the Company granted stock options (i) on June 3, 1996
and October 4, 1996, to two individuals to purchase an aggregate of 150,000
shares of Common Stock at an exercise price per share of $14.70 pursuant to the
Restated 1991 Combination Stock Option Plan (the "1991 Plan"), (ii) on October
3, 1996, to three individuals to purchase an aggregate of 3,600 of Common Stock
at an exercise price per share of $21.25 pursuant to the 1995 Non-Qualified
Stock Option Plan for Non-Employee Directors (the "1995 Plan"), (iii) on October
4, 1996, to 13 individuals to purchase an aggregate of 266,000 shares of Common
Stock at an exercise price per share of $10.00 pursuant to the 1996 Equity
Incentive Plan, and (iv) on November 27, 1996, to 79 individuals to purchase an
aggregate of 241,740 shares of Common Stock at an exercise price per share of
$15.00 pursuant to the 1996 Equity Incentive Plan. On June 24, December 3 and
December 9, 1996, options previously granted under the 1991 Plan were exercised
for 3,500, 6,600 and 3,000 shares of unregistered Common Stock, respectively. On
December 9, 1996, options previously granted under the 1995 Plan were exercised
for 2,400 shares of unregistered Common Stock.
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 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------ June 24, 1994 (inception)
1996 1995 to December 31, 1994
---- ---- -------------------------
<S> <C> <C> <C>
Operating revenue $ 12,907,445 $ 2,484,857 $ 366,214
Net loss $ (6,645,614) $ (7,206,243) $ (2,555,352)
Net loss per common share $ (0.59) $ (0.72) $ (0.26)
BALANCE SHEET DATA:
Total assets $ 108,065,144 $ 2,409,844 $ 330,323
Long-term obligations $ 10,109,037 $ 10,312,197 $ 2,729,791
Redeemable preferred stock $ 250,000 $ -- $ --
Total stockholder's equity (deficit) $ 88,035,557(1) $ (9,761,595) $ (2,555,352)
Cash dividend declared
per common share $ -- $ -- $ --
</TABLE>
On October 4, 1996, twelve wholly-owned subsidiaries of the Company were merged
into the CareMatrix Affiliates, with the stockholders of the CareMatrix
Affiliates receiving approximately 92% (10,000,000 shares) of Common Stock.
Following the Merger, the Company changed its name to CareMatrix Corporation.
The Merger was accounted for as a reverse acquisition, whereby the Company was
treated as the acquirer for accounting purposes. Accordingly, the financial
history presented is that of the Company prior to the Merger. In conjunction
with the Merger, the Company effected the Reverse Split. Accordingly, all common
stock data presented herein, including the retroactive restatement of the
Company's historical capitalization, has been adjusted to reflect the Reverse
Split and the Merger.
(1) In October 1996, the Company completed a secondary public offering of its
common stock. The Company sold 6,250,000 shares of Common Stock at $15 per
share, which resulted in net proceeds to the Company of approximately
$87,254,000.
THE SELECTED FINANCIAL DATA SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On October 4, 1996, 12 wholly-owned subsidiaries of the Company consummated a
Merger with the CareMatrix Affiliates. In the Merger, the Company acquired all
of the assets and operations of the CareMatrix Affiliates and issued 10,000,000
shares of its Common Stock (as adjusted to give effect to the Reverse Split) to
the stockholders of the CareMatrix Affiliates. The Merger was treated as a
"reverse acquisition" for accounting purposes, with the CareMatrix Affiliates
treated as the accounting acquiror, even though the Company was the surviving
parent corporation for legal purposes. In a reverse acquisition, the accounting
acquiror is treated as the surviving entity even though the Company's legal
existence does not change and the financial statements of the Company reflect
the historical financial statements of the CareMatrix Affiliates. 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 the CareMatrix Affiliates, and the estimated fair value of the
Company's assets and liabilities.
OVERVIEW
The Company is a leading provider of assisted living services to the elderly. At
December 31, 1996, the Company operated 21 facilities in 8 states with a
capacity of approximately 1,700 residents, including 11 facilities owned or
leased by the Company or in which it has ownership interests and ten facilities
managed for third parties. The Company provides assistance with the activities
of daily living and other personalized support services in a residential setting
for elderly residents who cannot live independently but who do not need the
level of medical care provided in a skilled nursing facility. The Company also
provides additional specialized care and services to residents with certain low
acuity medical needs and residents with Alzheimer's disease or other forms of
dementia. By offering this full range of services, the Company is able to
accommodate the changing needs of residents as they age within a facility and
develop further physical or cognitive frailties.
The Company derives its revenues from three primary sources: (i) resident fees
for the delivery of assisted living services; (ii) management services income
for management of facilities; and (iii) fee income from the development and
construction of facilities. Resident fees typically are paid monthly by
residents, their families or other responsible parties. Resident fees and
management fees are recognized as revenues when services are provided.
Development fee revenue is recognized on the percentage of completion basis.
The Company classifies its operating expenses into the following categories: (i)
facility operating; (ii) facility lease expense; (iii) general and
administrative expenses, which primarily include headquarters and regional staff
expenses and other overhead costs; and (iv) depreciation and amortization. In
anticipation of its growth plans, the Company made significant investments in
its infrastructure in 1996 through the addition of headquarters and regional
staff.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
The following discussion reviews the Company's results of operations for the
period June 24, 1994 (inception) to December 31, 1994 (the "1994 Period"), and
years ended December 31, 1995 (fiscal 1995) and December 31, 1996 (fiscal 1996).
The CareMatrix Financial Statements and the Notes thereto present the results of
operations of the entities that had been operated under common control on a
combined basis prior to the Merger. 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 following discussion, as well as other portions of this document, includes
certain statements which are or may be construed as forward looking about the
Company's business, sales and expenses, and operating and capital requirements.
Any such statements are subject to risks that could cause the actual results or
requirements to vary materially.
THE YEAR ENDED DECEMBER 31, 1996 (FISCAL 1996) COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995 (FISCAL 1995)
REVENUES. Net revenues for fiscal 1996 increased by $10.4 million compared to
fiscal 1995. The increase is due to increases of $7.3 million in resident
operations revenue, $2.2 million in development fee income, and $.9 million in
management fees.
Resident operations revenue increased $7.3 million primarily due to an
incremental $6.9 million earned from one facility which is contributing a full
year of revenue in fiscal 1996 compared to five months in fiscal 1995 and from a
facility the Company began leasing in October 1996, and $1.6 million from
Standish properties which were included in the Company's results of operations
after the Merger in October 1996, offset by a decrease of $1.0 million from the
closing of the Company's outpatient rehabilitation facility in Atlanta, Georgia.
Development fee income was $2.2 million in fiscal 1996 versus none in fiscal
1995 as the Company did not begin development activity until after the Merger.
Management fee revenue for fiscal 1996 increased $.9 million. This increase was
due to the recognition of fees in 1996 on two new third-party management
properties in Florida which contributed $415,000 compared to $0 in the prior
year, three new related-party management contracts entered into during fiscal
1996 and four Standish management contracts which were included in the Company's
results of operations after the Merger in October 1996.
FACILITY EXPENSES. Facility expenses increased by $6.3 million compared to
fiscal 1995. The $6.3 million increase consists of $7.1 million from the
operation of one facility for an entire year plus expenses from the Company's
newly leased facility and $1.2 million from former Standish properties which
were included in the Company's results of operations after the Merger in October
1996, offset by a decrease of $2.2 million from the closing of the Company's
outpatient rehabilitation facility in Atlanta, Georgia.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
THE YEAR ENDED DECEMBER 31, 1996 (FISCAL 1996) COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995 (FISCAL 1995), CONTINUED
GENERAL AND ADMINISTRATIVE. General and administrative expenses in fiscal 1996
increased to $8.1 million from $4.3 million in fiscal 1995. As a percentage of
operating revenue, general and administrative expenses in 1996 declined to 63%
from 175% in 1995. The increase in expense is primarily due to an increase in
salary and benefits expenses relating to the hiring of additional corporate
staff in anticipation of the Company's growth plans.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization in fiscal 1996
increased by $570,000 compared to fiscal 1995. The $570,000 increase is
primarily due to $250,000 of amortization of goodwill incurred as a result of
the merger, $151,000 for a full year of depreciation and amortization on the
Company's leased facility and $104,000 for assets acquired from Standish.
INTEREST INCOME. The Company's interest income was $576,000 for fiscal 1996. No
interest income was recorded for fiscal 1995. The fiscal 1996 interest income
was primarily due to $507,000 earned as a result of investing the cash balances
from the proceeds of the secondary offering during the period of October 28,
1996 through December 31, 1996.
INTEREST EXPENSE. Interest expense for fiscal 1996 increased to $1.1 million
from $544,000 in fiscal 1995. The $594,000 increase is primarily due to interest
expense of $430,000 to the Company's principal stockholder and $190,000 of
interest expense of Standish. These increases were partially offset by a
decrease of $116,000 in interest expense for the closing of the Company's
outpatient rehabilitation facility.
THE YEAR ENDED DECEMBER 31, 1995 (FISCAL 1995) COMPARED TO THE PERIOD FROM
JUNE 24, 1994 (INCEPTION) TO DECEMBER 31, 1994 (THE "1994 PERIOD")
REVENUES. During the 1994 Period and fiscal 1995 the Company derived revenues
from one or more of the following services: the operation of an inpatient
extended care facility in Maryland; and the operation of an outpatient
rehabilitation facility in Georgia.
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 fiscal 1995 were $2.5 million. Such revenues during the 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.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
THE YEAR ENDED DECEMBER 31, 1995 (FISCAL 1995) COMPARED TO THE PERIOD FROM
JUNE 24, 1994 (INCEPTION) TO DECEMBER 31, 1994 (THE "1994 PERIOD"), CONTINUED
FACILITY OPERATING AND LEASE EXPENSES. For the 1994 Period and fiscal 1995,
expressed as a percentage of net revenues, facility operating expenses were 324%
and 185%, respectively. Included in facility operating expenses for the 1994
Period is a $0.8 million charge recorded to write-down assets at the outpatient
rehabilitation facility to their net realizable value. Included in facility
operating expenses fiscal 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 and $0.6
million for the 1994 Period and fiscal 1995, respectively. The change in rent
expense is attributable primarily to the ten-year lease entered into during
August 1995 for an extended care facility.
GENERAL AND ADMINISTRATIVE EXPENSES. For the 1994 Period and fiscal 1995,
expressed as a percentage of net revenues, general corporate expenses were 447%
and 175%, respectively. General corporate expenses represent primarily salaries,
wages and benefits, and professional fees for administration, marketing and
facility development of the Company. In both periods, these expenses were paid
to a related party, Continuum Care of Massachusetts, Inc. in the form of
management fees.
INTEREST EXPENSE. The Company's interest expense was $55,856 and $0.5 million
for the 1994 Period and fiscal 1995, 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 and cash equivalents at December 31, 1996 were $57.9 million compared to
$145,000 at December 31, 1995, an increase of approximately $57.7 million. This
increase is primarily due to the net proceeds received from the Company's
secondary offering of $87.3 million in October 1996, offset by amounts of $21.7
million and $2.8 million paid to the Company's primary stockholder for repayment
of advances and the acquisition of a lease, respectively, as well as for general
corporate expenses.
Cash used by operations was $10.2 million in 1996 compared to a use of $6.0
million in 1995. The increase in the use of cash is due primarily to an increase
in accounts receivable due to the acquisition of new facilities, an increase in
development fees receivable of $1.7 million and losses incurred.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
Cash used in investing activities was $5.5 million in 1996 compared to $741,000
in 1995. The increase is due primarily to $2.8 million of payments to acquire
the management and lease rights to a facility, capital expenditures of $1.5
million, and $1.1 million of advances.
Cash flows provided by financing activities were $73.5 million compared to $6.9
million in 1995. This increase is due primarily to the proceeds received from
the secondary offering (see Note 9 of Notes to Financial Statements), net of
offering costs, offset by $21.7 million of debt repaid to the Company's
principal stockholder.
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 its cash on hand as
well as related party or third-party financing of assisted living facilities.
The Company and certain related parties are presently in discussions with a
number of third 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included under
Part IV, Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's fiscal year ended December 31, 1996 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's fiscal year ended December 31, 1996 and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's fiscal year ended December 31, 1996 and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's fiscal year ended December 31, 1996 and such
information is incorporated herein by reference.
-23-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Reports on Form 8-K.
None
Financial Statements.
Report of Independent Certified Public Accountants... F-1
Balance Sheets as of December 31, 1996 and 1995...... F-2
Statements of Operations for the years ended
December 31, 1996 and 1995 and the
period from June 24, 1994 (inception)
to December 31, 1994 ...................... F-3
Statements of Cash Flows for the years ended
December 31, 1996 and 1995 and the
period from June 24, 1994 (inception)
to December 31, 1994 ...................... F-4
Statement of Changes in Stockholders' Equity
(Deficit) ended December 31, 1996 and
1995 and the period from June 24, 1994
(inception) to December 31, 1994 .......... F-5
Notes to Consolidated Financial Statements .......... F-6
Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts and
Reserves
All other schedules omitted are not required, inapplicable
or the information required is furnished in the financial
statements or notes therein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
CareMatrix Corporation:
We have audited the financial statements and the financial statement schedule of
CareMatrix Corporation listed in Item 14(a) of this Form 10-K. 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 and the financial statement schedule 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 consolidated financial position of CareMatrix
Corporation as of December 31, 1996, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles. Further, in our opinion, the financial
statements referred to above present fairly in all material respects, the
combined financial position of the Company as of December 31, 1995, 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. 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.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 7, 1997
F-1
<PAGE>
CAREMATRIX CORPORATION
BALANCE SHEETS
as of December 31, 1996 and 1995
Consolidated Combined
------------ --------
ASSETS 1996 1995
- ------ ---- ----
Current assets:
Cash and cash equivalents $ 57,966,360 $ 144,643
Restricted cash 836,745 -
Receivables:
Accounts receivable, net of allowance
for doubtful accounts of $1,067,092
and $247,706 at December 31, 1996 and
1995, respectively 3,959,233 837,787
Accounts receivable - related party 938,910 -
Other receivables 309,613 -
Prepaid expenses and other current assets 1,772,995 185,647
Assets held for sale 576,573 -
------------ ----------
Total current assets 66,360,429 1,168,077
Lease acquisition costs, net 4,553,332 -
Property and equipment, net 9,503,011 730,017
Due from stockholder 356,740 -
Deposits and other assets 1,329,974 511,750
Goodwill, net of accumulated
amortization of $249,978 at
December 31, 1996 25,961,658 -
------------ ----------
Total assets $108,065,144 $2,409,844
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,776,522 $ -
Accounts payable 1,346,140 651,860
Accrued compensation 693,120 171,777
Accrued liabilities 4,565,503 436,178
Accrued interest - stockholder - 599,427
Other current liabilities 539,265 -
------------ ----------
Total current liabilities 9,920,550 1,859,242
Long-term debt 8,903,156 -
Due to stockholder - 9,661,381
Other long-term liabilities 1,152,960 650,816
Minority interest 52,921 -
Commitments and contingencies (Note 10)
Stockholders' equity (deficit):
Preferred stock, stated at
liquidation value, 25,000 shares
issued and outstanding at
December 31, 1996 250,000 -
Common stock, par value $.05,
authorized 75,000,000 shares,
17,111,649 and 10,000,000 shares
issued and outstanding at
December 31, 1996 and 1995,
respectively 855,582 500,000
Additional paid-in capital 103,337,184 (500,000)
Accumulated deficit (16,407,209) (9,761,595)
------------ ----------
Total stockholders' equity (deficit) 88,035,557 (9,761,595)
------------ ----------
Total liabilities and
stockholders' equity (deficit) $108,065,144 $ 2,409,844
============ ===========
The accompanying notes are an integral part of the financial
statements.
F-2
<PAGE>
CAREMATRIX CORPORATION
STATEMENTS OF OPERATIONS
for the years ended December 31, 1996 and 1995 and the
period from June 24, 1994 (Inception) to December 31, 1994
<TABLE>
<CAPTION>
Combined
Consolidated -------------------------------------
------------ June 24, 1994
Year Ended Year Ended (Inception) to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue:
Resident operations $10,419,567 $ 2,484,857 $ 366,214
Resident operations -
related party 263,293 - -
Development fee income 1,548,968 - -
Development fee income -
related party 675,617 - -
----------- ----------- -----------
Total revenue 12,907,445 2,484,857 366,214
----------- ----------- -----------
Expenses:
Facility operating expenses 8,701,264 3,268,369 420,924
Facility lease expense 1,230,902 645,702 45,868
Facility lease expense -
related party 291,677 - -
Provision for asset write-down
and closure costs - 894,872 757,095
General and administrative 3,022,328 - -
General and administrative -
related party 5,105,845 4,335,655 1,638,220
Depreciation and amortization 573,091 2,931 3,603
----------- ----------- -----------
Total expenses 18,925,107 9,147,529 2,865,710
----------- ----------- -----------
Loss from operations (6,017,662) (6,662,672) (2,499,496)
Other income (expense):
Interest income 576,244 - -
Interest expense (263,098) - -
Interest expense -
related party (874,876) (543,571) (55,856)
----------- ----------- -----------
Total other expense (561,730) (543,571) (55,856)
----------- ----------- -----------
Loss before preferred dividends (6,579,392) (7,206,243) (2,555,352)
Preferred dividends 66,222 - -
----------- ----------- -----------
Net loss $(6,645,614) $(7,206,243) $(2,555,352)
=========== =========== ===========
Net loss per common share $ (0.59) $ (0.72) $ (0.26)
=========== =========== ===========
Average shares outstanding 11,271,169 10,000,000 10,000,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
CAREMATRIX CORPORATION
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995 and the period from
June 24, 1994 (Inception) to December 31, 1994
<TABLE>
<CAPTION>
Combined
Consolidated -------------------------------------
------------ June 24, 1994
Year Ended Year Ended (Inception) to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss $(6,645,614) $(7,206,243) $(2,555,352)
Noncash items included in
net loss:
Issuance of stock to
employees 1,200,000 - -
Minority interest in
net losses (12,151) - -
Depreciation of fixed assets 247,301 2,931 1,263
Amortization of intangible
assets 325,790 - 2,340
Accretion of deferred rent
liability 10,240 - -
Accretion of bargain purchase
option 82,136 - -
Provision for write-down
of assets and closure loss - 894,872 757,095
Changes in current assets (5,247,599) (509,252) (328,535)
Changes in current liabilities (165,196) 1,467,225 127,056
Changes in other assets - (697,397) -
------------ ----------- -----------
Net cash used by operating
activities (10,205,093) (6,047,864) (1,996,133)
------------ ----------- -----------
Cash flows from investing
activities:
Additions to property and
equipment (1,549,592) (740,871) (29,764)
Net change in assets held
for sale (288,583) - -
Return of investment
from Cornish 80,000 - -
Change in other long-term
assets 27,125 - -
Increase in notes receivable (1,057,813) - -
Change in restricted cash (97,251) - -
Increase in lease acquisition
costs (2,800,000) - -
Acquisition, net of cash
acquired - - (702,106)
Cash acquired in merger 212,907 - -
------------ ----------- -----------
Net cash used by investing
activities (5,473,207) (740,871) (731,870)
------------ ----------- -----------
Cash flows from financing
activities:
Advances of funds from
stockholder 9,613,923 6,931,590 2,729,791
Redemption of preferred
stock (1,400,000) - -
Gross proceeds from
secondary offering 93,750,000 - -
Secondary offering
expenses (6,496,234) - -
Exercise of stock options 138,000 - -
Repayments to stockholder (21,700,000) - -
Repayment of debt (405,672) - -
------------ ----------- -----------
Net cash provided by
financing activities 73,500,017 6,931,590 2,729,791
------------ ----------- -----------
Increase in cash and
cash equivalents 57,821,717 142,855 1,788
Cash and cash equivalents,
beginning of period 144,643 1,788 -
------------ ----------- -----------
Cash and cash equivalents,
end of period $ 57,966,360 $ 144,643 $ 1,788
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
CAREMATRIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the years ended December 31, 1996 and 1995 and the period from
June 24, 1994 (Inception) to December 31, 1994
<TABLE>
<CAPTION>
Preferred Stock
----------------------------------------------
Common Stock Series A Series B
------------------------ ------------------- -----------------------
Shares Amount Shares Amount Shares Amount
---------- --------- ------ --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - June 24, 1994 (Note 1) 10,000,000 $ 500,000
Net Loss
---------- --------- ------ --------- ------ -----------
Balance - December 31, 1994 10,000,000 500,000
Net loss
---------- --------- ------ --------- ------ -----------
Balance - December 31, 1995 10,000,000 500,000
Standish shares acquired upon
merger (Note 1) 740,747 37,037 27,000 $ 270,000 100 $ 1,400,000
Shares issued upon secondary
offering, net 6,250,000 312,500
Shares issued in connection
with merger 107,408 5,370
Cost of stock issued to employees
Redemption of preferred stock (100) (1,400,000)
Conversion of preferred stock 1,494 75 (2,000) (20,000)
Exercise of stock options 12,000 600
Net loss
---------- --------- ------ --------- ------ -----------
Balance - December 31, 1996 17,111,649 $ 855,582 25,000 $ 250,000 - $ -
========== ========= ====== ========= ====== ===========
</TABLE>
<TABLE>
<CAPTION>
Additional
Paid-in Accumulated
Capital Deficit Total
------------- ------------- ------------
<S> <C> <C> <C>
Balance - June 24, 1994 (Note 1) $ (500,000)
Net Loss $ (2,555,352) $ (2,555,352)
------------- ------------- ------------
Balance - December 31, 1994 (500,000) (2,555,352) (2,555,352)
Net loss (7,206,243) (7,206,243)
------------- ------------- ------------
Balance - December 31, 1995 (500,000) (9,761,595) (9,761,595)
Standish shares acquired upon
merger (Note 1) 15,543,963 17,251,000
Shares issued upon secondary
offering, net 86,941,266 87,253,766
Shares issued in connection
with merger (5,370) -
Cost of stock issued to employees 1,200,000 1,200,000
Redemption of preferred stock (1,400,000)
Conversion of preferred stock 19,925 -
Exercise of stock options 137,400 138,000
Net loss (6,645,614) (6,645,614)
------------- ------------- ------------
Balance - December 31, 1996 $ 103,337,184 $ (16,407,209) $ 88,035,557
============= ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS, ORGANIZATION AND PRESENTATION:
CareMatrix Corporation ("CareMatrix" or the "Company") develops,
manages and operates assisted living facilities and various
other health care facilities.
Prior to the merger described below, the Company consisted of a
combination of business entities which were operated since their
date of inception (June 24, 1994) under common control by
Abraham D. Gosman ("Mr. Gosman"), principal stockholder of the
Company, directly or through trusts.
On October 4, 1996, twelve wholly owned subsidiaries of The
Standish Care Company ("Standish") were merged into the business
entities controlled by Mr. Gosman with the stockholders of the
Company receiving approximately 92% (10,000,000 shares) of
Standish common stock (the "Merger"). Following the Merger,
Standish changed its name to CareMatrix Corporation. The Merger
was accounted for as a reverse acquisition, whereby the Company
was treated as the acquirer for accounting purposes.
Accordingly, the financial history presented is that of the
Company prior to the Merger. In conjunction with the Merger,
the Company effected a one-for-five reverse stock split (the
"Split") of the Company's common stock. Accordingly, all common
stock data presented herein, including the retroactive
restatement of the Company's historical capitalization has been
adjusted to reflect this transaction and the Merger.
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, recognition
of revenue on development contracts, 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.
RESTRICTED CASH
Restricted cash is comprised primarily of security
deposits received from residents at the assisted living
facilities.
REVENUE RECOGNITION
Revenue from resident operations consists primarily of
resident fees from the assisted living and other health
care facilities. Resident fees are paid by residents for
housing, health care and related services and are
recognized in the period in which the Company provides
the services. 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.
Management fee revenues are recognized in the period in
which the Company provides services. The Company
normally receives fees based on a percentage of net
revenues of the facilities managed (generally
approximating 5%), and in some cases receives fixed fees
over certain terms.
Development fee revenues are recognized on the
percentage of completion basis. The Company enters
development agreements with both related and unrelated
parties and the time required for fulfillment of
obligations under these agreements in many cases exceeds
one year.
F-6
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
THIRD-PARTY REIMBURSEMENT
For the years ended December 31, 1996 and 1995 and for
the period from June 24, 1994 (inception) to December
31, 1994, approximately 59%, 46% and 16%, respectively,
of the Company's operating 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 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. Maintenance and
repairs are charged to expense as incurred. Major
renewals or improvements are capitalized.
GOODWILL
Goodwill represents the excess of the acquisition cost
over the fair market value of net assets acquired in
purchase transactions and is being amortized over 25
years.
INCOME TAXES
Income taxes are provided using the liability method in
accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). Under the liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases (temporary differences).
Prior to the Merger, the entities comprising the Company
were S Corporations or partnerships; accordingly,
liabilities for income taxes were the responsibility of
the respective owners or partners. Provisions for income
taxes and deferred tax assets and liabilities entities
have not been reflected for the periods prior to the
merger as there was no taxable income on a combined
basis.
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.
NET LOSS PER COMMON SHARE
Net loss per common share is calculated based on net
loss divided by the weighted average number of common
shares outstanding during the year. Fully diluted net
loss per common share has not been presented as the
amount would be anti-dilutive.
During 1997, the Financial Accounting Standards Board
issued FASB Statement No. 128, "Earnings Per Share."
This standard is designed to improve the Earnings Per
Share ("EPS") information provided in financial
statements by simplifying the existing computational
guidelines, revising the disclosure requirements, and
increasing the comparability of EPS data on an
international basis. The Company will implement the new
standard in its fiscal year ending December 31, 1997.
The impact of the implementation of this standard has
not yet been determined.
F-7
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RECLASSIFICATIONS
Certain 1995 and 1994 balances have been reclassified to
conform with the 1996 presentation.
3. MERGERS AND ACQUISITIONS:
In October 1996, the Company completed a merger with Standish
(the Merger, see Note 1). The Company's shareholders received
10,000,000 shares of Standish common stock in exchange for all
of the shares of the Company. The Company recorded
approximately $26 million of goodwill related to the Merger.
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
approximated the remaining lease obligations.
4. ASSETS HELD FOR SALE:
In connection with the Merger, the Company initiated a plan to
dispose of certain of the acquired Standish facilities. The
net assets associated with these facilities and the estimated
costs to dispose of the facilities have been separately
recorded on the balance sheet.
The assets held for sale are comprised of two operating
facilities containing 179 beds which were previously owned by
Standish. The net assets include fixed assets and various
other operating assets and current liabilities and long-term
debt associated with the facilities. The Company estimated the
fair market value of the facilities assuming an orderly
disposal, less the costs to sell the facilities as well as an
estimate of the results of the facilities' operations through
the expected date of disposition. The Company expects to
dispose of the facilities during 1997. During the year ended
December 31, 1996, the facilities generated $190,984 of losses
which have been excluded from the Company's consolidated
statement of operations and accounted for as an adjustment to
the carrying amount of the assets.
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
Estimated
Useful Life Consolidated Combined
(Years) December 31, 1996 December 31, 1995
------- ----------------- -----------------
Land $ 745,904 $ -
Buildings and
improvements 30-32 6,239,673 -
Furniture and
fixtures 5-7 1,388,790 256,074
Equipment 3-10 220,275 65,719
Computer software 3 157,166 11,568
Leasehold improvements 4-20 1,001,436 399,587
---------- ----------
Property and
equipment, gross 9,753,244 732,948
Less accumulated
depreciation (250,233) (2,931)
---------- ----------
Property and
equipment, net $9,503,011 $ 730,017
========== ==========
Accumulated amortizaton for assets held under capitalized lease
obligations totaled $59,405 at December 31, 1996.
F-8
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
Consolidated Combined
----------------- ----------
December 31,
----------------------------------
1996 1995
---- ----
Accrued consulting fees $ 718,325 $ -
Accrued merger related costs 2,417,715 -
Accrued closure costs 250,317 244,056
Accrued rent 309,318 88,542
Other 869,828 103,580
---------- ----------
Total accrued liabilities $4,565,503 $ 436,178
========== ==========
The accrued closure costs are for the closure of an outpatient rehabilitation
facility and represent the current portion of the remaining lease obligation.
Closure costs in the amount of $388,409 and $650,816 of these amounts are
classified as long-term liabilities at December 31, 1996 and 1995, respectively.
7. LONG-TERM DEBT:
Long-term debt at December 31, 1996 consisted of the following:
Facility mortgage payable with interest
equal to the bank base rate plus 1.75%
(10% at December 31, 1996), principal payable
monthly in varying amounts, all remaining
principal due April 1997, collateralized
by real estate $ 734,968
Note payable at 9.5% interest, principal due April 1997 1,100,000
Other notes payable, interest rates
varying form 8.5% to 10%, due through April, 1998 929,438
Convertible debentures with 8.5% interest due in
June 1998, convertible to common stock at
$20.80 per share 2,000,000
Capital lease obligations for healthcare facilities 6,915,272
-----------
Subtotal 11,679,678
Less current maturities (2,776,522)
-----------
Long-term debt $ 8,903,156
===========
In conjunction with the Merger, the Company acquired 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 $20.80 per share, subject to
customary anti-dilution adjustments. The most restrictive
covenant with respect to the convertible debentures is a cross
default clause which allows the holder to accelerate the
repayment of the debentures by declaring the unpaid principal
balance and all accrued interest on the debentures due and
payable immediately upon an event of default, as defined, under
any other obligation of the Company which results in an
acceleration of debt of $250,000 or more.
The most restrictive covenants with respect to the leases
require the respective entities to maintain a debt coverage
ratio of 1.25 to 1.0. In addition, the Company as guarantor of
the lease payments is required to maintain consolidated net
worth of at least $3,000,000.
At December 31, 1996, the maturities of the notes, convertible debenture and
capital leases over the next five fiscal years are as follows:
1997 $ 3,091,123
1998 2,961,147
1999 671,831
2000 689,324
2001 705,272
Thereafter 1,783,005
Bargain purchase option 3,513,198
Less amounts representing interest (1,735,222)
-----------
Subtotal 11,679,678
Less current maturities (2,776,522)
-----------
Total long-term debt $ 8,903,156
===========
Interest paid in the years ended December 31, 1996 and 1995 and
the period from June 24, 1994 (inception) to December 31, 1994,
was $1,690,422, $0 and $0, respectively.
F-9
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. 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.
A valuation allowance is recognized if its is more likely than
not that some portion of the deferred tax assets will not be
realized.
The Company's deferred tax assets are comprised of the following
at December 31, 1996:
Net operating loss carryforwards $ 3,658,000
Other deferred tax assets 2,001,000
Deferred tax asset valuation allowance (5,659,000)
-----------
$ -
===========
The valuation allowance has been established since the use of
the loss carryforwards and other deferred tax assets is
uncertain. The loss carryforwards, other deferred tax assets
and the related valuation allowance have increased by $5,659,000
as a result of operating losses for the year ended December 31,
1996, loss carryforwards acquired in the Merger and the
recognition of a deferred tax asset upon the change in tax
status of the Company.
The net operating loss carryforwards of $9,144,000 will expire
from 2004 to 2011. In addition, utilization of the net
operating loss carryforwards may be further impacted by Internal
Revenue Code Section 382, which limits the amount of loss
carryforwards which may be used following an ownership change.
No income taxes have been paid by the Company for the periods
presented.
9. EQUITY:
COMMON STOCK
In October 1996, the Company completed a secondary public
offering of its Common Stock. The Company sold 6,250,000
shares of Common Stock at $15 per share, which resulted in net
proceeds to the Company of approximately $87,254,000.
STOCK OPTIONS
In August 1996, the Company adopted a stock option plan for
officers and employees to purchase up to 1,200,000 shares of
its Common Stock. Options granted under the plan vest over a
three year period and expire ten years after the date of the
grant.
Additionally, in connection with the Merger, the Company
assumed all responsibilities with regard to former Standish
stock options. Standish maintained two plans although no
further options will be granted under those plans. The
following is a summary of option activity:
Shares Exercise Price
------ --------------
Outstanding at December 31, 1995 - $ -
Granted 533,400 10.00 - 15.00
Assumed in connection with the Merger 207,740 10.00 - 14.70
Exercised (12,000) 10.00 - 11.90
------- --------------
Outstanding at December 31, 1996 729,140 $10.00 - 15.00
=======
Options to purchase 373,540 shares of Common Stock were
exercisable at December 31, 1996 at a weighted average
exercise price of $13.09. The number of shares available for
the granting of options at December 31, 1996 was 666,600. The
weighted average exercise price of options granted during the
year was $12.09. At December 31, 1996, the weighted average
exercise price and remaining contractual life of all
outstanding options was $12.60 and 9.6 years, respectively.
The Company applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its options and warrants.
Accordingly, no compensation expense has been recognized for
its stock-based compensation plan. Had compensation cost for
the Company's other stock options and warrants been determined
based upon the fair value at the grant date consistent with
the methodology prescribed under FAS 123, the Company's net
loss and loss per share would have been increased by
approximately $1,300,000, or $.12 per share. The fair value of
the options granted during 1996 is estimated as $3,500,000 on
the date of grant using the Black-Scholes valuation model with
the following assumptions: volatility of 63%, risk-free
interest rate of 6.06% and an expected life of 4.3 years.
F-10
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. EQUITY, CONTINUED:
WARRANTS
In connection with the Merger, the Company assumed warrants
issued by Standish. At December 31, 1996, there were 269,663
warrants to purchase shares of the Company's common stock
outstanding with exercise prices ranging from $17.84 to
$35.45. At December 31, 1996, all warrants were exercisable.
SERIES A PREFERRED STOCK
In connection with the Merger, the Company acquired the rights
and obligations of the Series A Cumulative Convertible
Preferred Stock issued by Standish prior to the Merger. The
conversion price of the Convertible Preferred Stock at
December 31, 1996 was $11.40. The Convertible Preferred Stock
is redeemable by the Company at $10.00 per share, plus accrued
but unpaid dividends, under certain circumstances.
SERIES B PREFERRED STOCK
Also acquired in connection with the Merger was Series B
Convertible Preferred Stock. Prior to the Merger, Standish
issued 100 shares of the $14,000 liquidation value preferred
stock to Mr. Gosman in return for $1,400,000. Subsequent to
the Common Stock offering described above, this stock was
redeemed for $1,442,000 (including accrued dividends). No
Series B Preferred Stock was outstanding at December 31, 1996.
10. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
The Company leases various office space and certain equipment
pursuant to operating lease agreements. The Company also
leases certain of its health care facilities. These leases are
generally for periods between five and fifteen years plus
renewal options.
Future minimum lease commitments at December 31, 1996
consisted of the following:
1997 $ 3,030,961
1998 3,096,988
1999 3,086,666
2000 3,001,203
2001 3,050,589
Thereafter 18,436,999
----------
$33,703,406
===========
CONTINGENCIES
The Company is subject to complaints, claims and litigation
which have risen in the normal course business. In addition,
the Company is subject to compliance with laws and regulations
of various governmental agencies. While no regulatory
inquiries have been made at the Company, compliance with these
laws and regulations is subject to future government review,
interpretation or actions which are unknown and unasserted at
this time.
11. RELATED PARTY TRANSACTIONS:
As used herein, a "Chancellor Entity" is Chancellor Senior
Housing Group, Inc. or a company in which Mr. Gosman and/or
members of the Company's senior management and stockholders,
have an ownership interest in excess of 90%.
During the year ended December 31, 1996, the Company
recognized $675,617 of development fees related to projects
contracted with Chancellor Entities or joint ventures within
which Chancellor Entities have certain interests. At December
31, 1996, this amount was recorded as a receivable.
During the year ended December 31, 1996, the Company
recognized $263,293 of management fee revenues from certain
Chancellor Entities. At December 31, 1996, this amount was
recorded as a receivable.
During 1996, the Company purchased certain assets for use in
its corporate office and the rights to manage and lease two
facilities from a Chancellor Entity for $5,100,000. The
Company was also assigned the rights to certain development
contracts and management agreements at no charge from certain
Chancellor Entities.
F-11
<PAGE>
CAREMATRIX CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
11. RELATED PARTY TRANSACTIONS, CONTINUED:
For the years ended December 31, 1996 and 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, general and administrative
services to the Company. Fees for these services in the amount
of $5,105,845, $4,335,655 and $1,638,220, respectively, have
been included in the financial statements. 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 general and administrative expenses related-party
is rent expense of $318,885, $311,639 and $193,600 for the
years ended December 31, 1996 and 1995 and the period from
June 24, 1994 (inception) to December 31, 1994, respectively,
for the Company's principal office space in Needham,
Massachusetts. The lessor of the office space is an entity
principally owned by Mr. Gosman. In October 1996, the Company
began leasing a health care facility from a Chancellor Entity.
At December 31, 1995, the Company had borrowed $9,661,381 from
Mr. Gosman. Interest on such outstanding indebtedness at the
prime rate of interest during the years ended December 31,
1996 and 1995 and the period June 24, 1994 (inception) to
December 31, 1994 was $874,876, $543,571 and $55,856,
respectively. All principal and interest were repaid
concurrent with the secondary stock offering.
12. SUPPLEMENTAL CASH FLOW INFORMATION:
The Company acquired certain assets and liabilities of
Standish in a non-cash transaction (the Merger). The assets
and liabilities acquired had the following non-cash impact on
the balance sheet:
Current assets $ 1,259,559
Property, plant and equipment 7,470,703
Goodwill and other long-term assets 24,647,913
Current liabilities (6,122,684)
Long-term debt (9,939,419)
Other long-term liabilities (1,465,072)
13. PRO FORMA RESULTS OF OPERATIONS (UNAUDITED):
The following represents the unaudited pro forma results of operations as
if the Company had completed its secondary stock offering and Standish was
acquired January 1, 1996.
1996
------------
Net revenues $18,243,403
Net loss (5,649,434)
Net loss per common share $ (.33)
The pro forma information given above does not purport to be indicative of
the results that actually would have been attained if these transactions
had occurred on the date noted, and is not intended to be a projection of
future results or trends.
F-12
<PAGE>
CAREMATRIX CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
beg. of costs and other end of
Description period expenses accounts Deductions period
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at 12/31/94 $ - $ 36,700 $ - $- $ 36,700
Allowance for
doubtful accounts 36,700 211,006 - - 247,706
-----------------------------------------------------------------
Balance at 12/31/95 247,706 - - - 247,706
Allowance for
doubtful accounts 247,706 62,729 756,657 - 1,067,092
-----------------------------------------------------------------
Balance at 12/31/96 $247,706 $ 62,729 $756,657(A) $0 $1,067,092
=================================================================
</TABLE>
(A) This balance is primarily due to the acquisition of Standish Care Company.
<PAGE>
Exhibits. The following is a list of exhibits which are incorporated
as part of the Registration Statement by reference.
Exhibit Description
- ------- -----------
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)
<PAGE>
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, 12 subsidiaries thereof and the CareMatrix
Affiliates (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 Registrant
(15)
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)
<PAGE>
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 Certificate of Amendment to Restated Certificate of
Incorporation filed on October 3, 1996 (15)
3.10 Certificate of Amendment of Restated Certificate of
Incorporation filed on October 14, 1996 (15)
3.11 By-laws of the Registrant, as amended through December 9, 1996
(*)
10.01 Lease Agreement dated as of November 10, 1993, between Health
Care REIT, Inc. and Dominion Villages Inc. (6)
10.02 Lease Guaranty by the Registrant to Health Care REIT, Inc. dated
November 10, 1993, related to the obligations of Dominion
Villages, Inc. under its Lease Agreement (6)
10.03 Lease Agreement dated February 11, 1994 between Health Care
REIT, Inc. and Lowry Village Limited Partnership (6)
10.04 Lease Guaranty by the Registrant to Health Care REIT, Inc.,
dated February 11, 1994, related to the obligations of Lowry
Village Limited Partnership under its Lease Agreement (6)
10.05 Management Agreement dated January 1, 1994, by and between Lowry
Village Limited Partnership and the Registrant (6)
10.06 Lease Agreement dated as of March 2, 1994, between Health Care
REIT, Inc. and Piedmont Villages, Inc. (6)
10.07 Lease Guaranty by the Registrant to Health Care REIT, Inc. dated
March 1, 1994, related to the obligations of Piedmont Villages,
Inc. under its Lease Agreement (6)
<PAGE>
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 Second Amended and Restated Employment Agreement dated as of
July 1, 1995 between the Registrant and Michael J. Doyle (13)
10.13 First Amendment to Second Amended and Restated Employment
Agreement dated as of March 1, 1996 between the Registrant and
Michael J. Doyle (13)
10.14 Form of Third Amended and Restated Employment Agreement between
the Registrant and Michael J. Doyle which was executed on
October 4, 1996 (14)
10.15 New Employment Agreement dated as of December 1, 1995 between
the Registrant and Michael J. Brenan (13)
10.16 First Amendment to New Employment Agreement dated as of March 1,
1996 between the Registrant and Michael J. Brenan (13)
10.17 Termination Agreement dated as of August 15, 1996 between the
Registrant and Michael J. Brenan (14)
10.18 Employment Agreement dated as of July 1, 1995 between the
Registrant and Kenneth M. Miles (13)
10.19 First Amendment to Employment Agreement dated as of March 1,
1996 between the Registrant and Kenneth M. Miles (13)
10.20 Form of Amended and Restated Employment Agreement between the
Registrant and Kenneth M. Miles which was executed on October 4,
1996 (14)
10.21 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)
<PAGE>
10.22 Restated 1991 Combination Stock Option Plan of the Registrant
(8)
10.23 Amendment to the Registrant's Restated 1991 Combination Stock
Option Plan (2)
10.24 Amendment No. 2 to Registrant's Restated 1991 Combination Stock
Option Plan (13)
10.25 Amendment No. 3 to Registrant's Restated 1991 Combination Stock
Option Plan (13)
10.26 Amendment No. 4 to Registrant's Restated 1991 Combination Stock
Option Plan (13)
10.27 1995 Non-Qualified Stock Option Plan for Non-Employee Directors
("1995 Non- Employee Directors' Plan") (13)
10.28 1996 Equity Incentive Plan (15)
10.29 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)
10.30 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)
10.31 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)
10.32 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)
10.33 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)
10.34 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)
10.35 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)
10.36 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)
<PAGE>
10.37 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)
10.38 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)
10.39 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)
10.40 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)
10.41 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)
10.42 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)
10.43 Gain Participation Agreement between the Registrant and certain
limited partners of Lakeview Estates of Sandestin, L.P. dated
October 30, 1991 (3)
10.44 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)
10.45 Form of Stock Purchase Warrants dated as of January 28, 1993,
numbered 1 to 10, inclusive, to purchase an aggregate of 50,000
shares of the Registrant's Common Stock, issued to the
"Purchasers" under the Purchase Agreement (Exhibit 10.52) (4)
10.46 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 in exchange for cash and subordinate
bonds issued by the York County Industrial Development Authority
on behalf of Northwood Retirement Community, Inc. (13)
10.47 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)
<PAGE>
10.48 Revolving Loan and Security Agreement between the Registrant and
Northwood Retirement Community, Inc. dated as of March 21, 1996
(13)
10.49 $150,000 Promissory Note from Northwood Retirement Community,
Inc. to the order of the Registrant dated as of March 21, 1996
(13)
10.50 Subordinated Trust Indenture between the Northwood Retirement
Community, Inc. and First Valley Bank, as Subordinated Trustee
dated as of March 21, 1996 (13)
10.51 Mortgage from the York County Industrial Development Authority
to First Valley Bank, as Subordinated Trustee dated as of March
21, 1996 (13)
10.52 Form of Pledge, Security, Escrow and Subordination Agreement
between the Registrant and The Manold Company dated as of March
21, 1996 (13)
10.53 Management Agreement dated July 6, 1995 by and between Cortland
House and the Registrant for the management of Cortland House,
Leominster, MA (13)
10.54 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)
10.55 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)
10.56 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)
10.57 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)
10.58 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)
10.59 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)
<PAGE>
10.60 Management Agreement and Marketing Services Agreement between
Adams Square Limited Partnership and the Registrant dated
January 29, 1994 (6)
10.61 Development Services and Reimbursement Agreement between Adams
Square Limited Partnership and Stan/Oak Development Corp., dated
January 31, 1994 (6)
10.62 $127,000 Demand Note from the Registrant to Adams Square, Inc.
dated January 31, 1994 (6)
10.63 Unconditional Guaranty from the Registrant to SAI Mortgage
Group, Inc., dated February 25, 1994 (6)
10.64 Management and Marketing Agreement between Cornish Realty
Associates, L.P., Laurelmead Cooperative and the Registrant
dated October, 1993 (6)
10.65 First Amendment to Management and Marketing Agreement between
Cornish Realty Associates, L.P., Laurelmead Cooperative and the
Registrant, dated March 23, 1993 (6)
10.66 Laurelmead Resignation Agreement dated February 23, 1996, among
the Registrant, Cornish Realty Associates, L.P. and Laurelmead
Cooperative (13)
10.67 $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)
10.68 Mortgage from Bailey Retirement Center, Inc. and the Registrant
to First Union National Bank of Florida dated January 26, 1994
(13)
10.69 $100,000 Promissory Note from Bailey Retirement Center, Inc. to
Mark V. Barrow, M.D. and Mary B. Barrow, dated January 26, 1994
(13)
10.70 Mortgage from Bailey Retirement Center, Inc. to Mark V. Barrow,
M.D. and Mary B. Barrow, dated January 26, 1994 (13)
10.71 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)
10.72 Mortgage from Bailey Retirement Center, Inc. and the Registrant
to First Union National Bank of Florida dated December 2, 1994
(13)
10.73 Convertible Debenture Agreement between the Registrant and
Columbia Pacific Group, Inc. dated June 10, 1994 (9)
<PAGE>
10.74 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)
10.75 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)
10.76 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)
10.77 Registration Rights Agreement dated June 10, 1994 between the
Registrant, Columbia Pacific Group, Inc. and Daniel R. Baty (9)
10.78 Advisory Agreement between the Registrant and Daniel R. Baty
dated as of June 10, 1994 (9)
10.79 Management Agreement dated June 29, 1995 between Emeritus Corp.
and the Registrant, for the management of Woodholme Commons in
Pikesville, MD (13)
10.80 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)
10.81 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)
10.82 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)
10.83 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)
10.84 Underwriter's Warrant Agreement dated as of August 31, 1993
issued to RAS Securities corp. (2)
10.85 Warrants dated June 10, 1994 to purchase an aggregate of 32,500
shares of Registrant's Common Stock issued to RAS Securities
Corp. (13)
<PAGE>
10.86 Draft of Warrants dated September 29, 1994, to purchase an
aggregate of 37,500 Common Shares issued to The Equity Group,
Inc. (13)
10.87 Warrants dated January 15, 1995 to purchase an aggregate of
30,000 shares of Registrant's Common Stock issued to Neil
Berkman Associates (13)
10.88 Form of Indemnification Agreement for officers and directors (3)
10.89 Confidentiality Agreements dated May 20 and May 22, 1996
exchanged between the Registrant and a certain CareMatrix
Affiliate (14)
10.90 Preferred Stock Purchase Agreement dated as of July 30, 1996
between the Registrant and Abraham D. Gosman (14)
10.91 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)
10.92 First Amendment to Warrant dated as of July 30, 1996 (15)
10.93 Registration Rights Agreement dated as of July 30, 1996 between
the Registrant and Abraham D. Gosman (14)
10.94 Employment Agreement dated July 29, 1996 by and between
CareMatrix of Massachusetts, Inc. and Marc H. Benson (15)
10.95 Lease Agreement concerning 197 First Avenue office space (15)
10.96 Assignment Agreement dated July 3, 1996 by and between
CareMatrix of Massachusetts, Inc. ("CMM") and Chancellor of
Massachusetts, Inc. (Tampa, Florida) (15)
10.97 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Atlanta, Georgia) (15)
10.98 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Boynton Beach, Florida) (15)
10.99 Management Agreement, dated as of June 30, 1996, between CMM and
Continuum Care of Dedham, Inc. (Dedham, Massachusetts) (15)
10.100 Management Agreement, dated as of July 1996, between CMM and
Continuum Care of Needham, Inc. (Needham, Massachusetts) (15)
<PAGE>
10.101 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of West Bridgewater, Inc. (West Bridgewater,
Massachusetts) (15)
10.102 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of Massachusetts, Inc. (Auburn, Massachusetts)
(15)
10.103 Assignment Agreement, dated as of June 6, 1996, between CMM and
Continuum Care of Massachusetts, Inc. (Plymouth, Massachusetts)
(15)
10.104 Assignment Agreement, dated June 6, 1996, between CMM and
Continuum Care of Massachusetts, Inc. (Raynham, Massachusetts)
(15)
10.105 Development Agreement, dated September 1, 1996, between
CareMatrix of Cypress Station, Inc. and Chancellor of Houston,
Inc. (Houston, Texas) (15)
10.106 Assignment Agreement, dated July 3, 1996, by and among AMA
Funding Corporation, CareMatrix of Massachusetts, Inc., and
Chancellor of Massachusetts, Inc. (Peoria, Arizona) (15)
10.107 Turnkey Construction Agreement, dated August 14, 1996, by and
among CMM, Atlantic on the Hudson, LLC and Cambridge House
Associates General Partnership (Ossining, New York) (15)
10.108 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) (15)
10.109 Development Agreement, dated March 8, 1996, between CareMatrix
of Emerald Springs Inc./Netwest of Yuma, Inc. and Emerald
Springs Associates General Partnership (Yuma, Arizona) (15)
10.110 Development Agreement, dated August 28, 1996, between CareMatrix
of Amethyst Arbor, Inc./Netwest Development Corporation and
Amethyst Arbor Associates General Partnership (Peoria, Arizona)
(15)
10.111 Assignment Agreement, dated as of June 6, 1996 between CCC of
Connecticut, Inc. and CareMatrix of Massachusetts, Inc.
(Westfield Court, Connecticut) (15)
10.112 Assignment Agreement, dated July 3, 1996, by and between
Chancellor of Houston, Inc. and CareMatrix of Massachusetts,
Inc. (Houston, Texas) (15)
10.113 Assignment Agreement, dated July 3, 1996, by and between
Continuum Care of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Ridgefield, Connecticut) (15)
<PAGE>
10.114 Assignment Agreement, dated June 6, 1996, by and between CCC of
Florida, Inc. and CareMatrix of Massachusetts, Inc. (Millbury,
Massachusetts) (15)
10.115 Assignment Agreement, dated July 3, 1996, by and among AMA
Funding Corporation, CareMatrix of Massachusetts, Inc., and
Chancellor of Massachusetts, Inc. (Tucson, Arizona) (15)
10.116 Management Agreement, dated August 14, 1996, by and among CMM
and Cambridge House Associates General Partnership (Ossining,
New York) (15)
10.117 Assignment Agreement, dated July 3, 1996, by and between
CarePlex of Southington, Inc., and Chancellor of Massachusetts,
Inc. (Southington, Connecticut) (15)
10.118 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)
(15)
10.119 Development Agreement, dated April 18, 1996, by and between
Cheshire Care, LLC and CareMatrix Corporation (Cheshire,
Connecticut) (15)
10.120 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Atlanta, Georgia) (15)
10.121 Purchase and Sale Agreement, dated May 1996, between CMM (f/k/a
CareMatrix Corporation) and Ensign-Bickford Realty Corporation
(Avon, Connecticut) (15)
10.122 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Macon, Georgia) (15)
10.123 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Durham, North Carolina) (15)
10.124 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Livingston, New Jersey) (15)
10.125 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) (15)
10.126 Agreement, dated July 3, 1996, by and between CCC of New Jersey,
Inc. and CareMatrix of Massachusetts, Inc. (15)
<PAGE>
10.127 Development Agreement, dated April 18, 1996, by and between
Woodbridge Care, LLC and CareMatrix Corporation (15)
10.128 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc., and Chancellor of
Massachusetts, Inc. (Glen Cove, NY; Roslyn, NY; Great Neck, NY;
Wallingford, CT) (15)
10.129 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Bonita Springs, Florida) (15)
10.130 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Massachusetts, Inc. and Chancellor of
Massachusetts, Inc. (Jensen Beach, Florida) (15)
10.131 Assignment Agreement, dated July 3, 1996, by and between
CareMatrix of Stony Brook, Inc. and CareMatrix of Massachusetts,
Inc. (Darien, Connecticut) (15)
10.132 Agreement of Sale, dated September 6, 1996, by and between
Reston Land Corporation and CMM (Reston, Virginia) (15)
10.133 Deposit Receipt and Sales Agreement, dated September 5, 1996,
between Bonita Bay Properties, Inc. and CMM (Bonita Bay,
Florida) (15)
10.134 Global Services Agreement, dated September 1, 1996, between
Chancellor Senior Housing Group, Inc. and CMM (15)
10.135 Master Agreement, dated effective December 31, 1996, between
Registrant and North Shore Health System (excluding exhibits)
(*)
10.136 Management Agreement, dated as of December 20, 1996, between
CareMatrix of Massachusetts, Inc. and Brazilian Court, Inc. (*)
10.137 Facility Lease, dated as of December 16, 1996, between The
Annapolitan Care Center, Inc. and CareMatrix of Annapolis, Inc.
(*)
10.138 First Amendment to Facility Lease, dated as of December 15,
1996, between The Annapolitan Care Center, Inc. and CareMatrix
of Annapolis, Inc. (*)
10.139 Office Lease, dated as of December 31, 1996, between Continuum
Care of Dedham, Inc. and Registrant (*)
10.140 Guaranty Agreement, dated November 25, 1996, between Registrant
and Sylvan Manor Health Care Center Limited Partnership (*)
<PAGE>
21.01 Subsidiaries of the Company (*)
23.01 Consent of Coopers & Lybrand, L.L.P. (*)
27.01 Financial Data Schedule (*)
- ----------
*Filed herewith
(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
<PAGE>
(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)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
------------------------------
Robert M. Kaufman
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Robert M. Kaufman Robert M. Kaufman March 28, 1997
- ----------------------------- President and Treasurer
Robert M. Kaufman (Principal Executive
Officer and Principal
Accounting Officer)
/s/ Abraham D. Gosman Abraham D. Gosman March 28, 1997
- ---------------------------- Chairman and Director
Abraham D. Gosman
/s/ Andrew D. Gosman Andrew D. Gosman March 28, 1997
- ---------------------------- Vice Chairman and
Andrew D. Gosman Director
/s/ Michael M. Gosman Michael M. Gosman March 28, 1997
- ---------------------------- Executive Vice
Michael M. Gosman President and Director
/s/ Michael J. Doyle Michael J. Doyle March 28, 1997
- ---------------------------- Chief Executive
Michael J. Doyle Officer and Director
<PAGE>
Donald J. Amaral March , 1997
- ---------------------------- Director
H. Loy Anderson, Jr. March , 1997
- ---------------------------- Director
/s/ Bedros Baharian Rev. Bedros Baharian March 28, 1997
- ---------------------------- Director
Bedros Baharian
/s/ Stephen E. Ronai Stephen E. Ronai March 28, 1997
- ---------------------------- Director
Stephen E. Ronai
S-2
CAREMATRIX CORPORATION
BY-LAWS
(as amended through December 9, 1996)
<PAGE>
BY-LAWS
TABLE OF CONTENTS
Page
----
ARTICLE I. STOCKHOLDERS................................. 1
Section 1.1. Annual Meeting............................... 1
Section 1.2. Special Meeting.............................. 1
Section 1.3. Notice of Meeting............................ 1
Section 1.4. Quorum....................................... 2
Section 1.5. Voting and Proxies........................... 2
Section 1.6. Action at Meeting............................ 2
Section 1.7. Action Without Meeting....................... 2
Section 1.8. Voting of Shares of Certain Holders.......... 2
Section 1.9. Stockholder Lists............................ 3
ARTICLE II. BOARD OF DIRECTORS........................... 3
Section 2.1. Powers....................................... 3
Section 2.2. Number of Directors; Qualifications.......... 4
Section 2.3. Nomination of Directors...................... 4
Section 2.4. Election of Directors........................ 4
Section 2.5. Vacancies; Reduction of the Board............ 4
Section 2.6. Enlargement of the Board..................... 4
Section 2.7. Tenure and Resignation....................... 5
Section 2.8. Removal...................................... 5
Section 2.9. Meetings..................................... 5
Section 2.10. Notice of Meeting............................ 5
Section 2.11. Agenda....................................... 6
Section 2.12. Quorum....................................... 6
Section 2.13. Action at Meeting............................ 6
Section 2.14. Action Without Meeting....................... 6
Section 2.15. Committees................................... 6
ARTICLE III. OFFICERS..................................... 6
Section 3.1. Enumeration.................................. 6
Section 3.2. Election..................................... 7
Section 3.3. Qualification................................ 7
Section 3.4. Tenure....................................... 7
Section 3.5. Removal...................................... 7
Section 3.6. Resignation.................................. 7
(i)
<PAGE>
Section 3.7. Vacancies.................................... 7
Section 3.8. Chairman of the Board........................ 7
Section 3.9. Chief Executive Officer...................... 7
Section 3.10. President.................................... 7
Section 3.11. Vice-President(s)............................ 8
Section 3.12 Chief Financial Officer...................... 8
Section 3.13. Treasurer and Assistant Treasurers........... 8
Section 3.14. Secretary and Assistant Secretaries.......... 8
Section 3.15. Other Powers and Duties...................... 9
ARTICLE IV. CAPITAL STOCK................................ 9
Section 4.1. Stock Certificates........................... 9
Section 4.2. Transfer of Shares........................... 9
Section 4.3. Record Holders............................... 9
Section 4.4. Record Date.................................. 10
Section 4.5. Transfer Agent and Registrar for Shares
of Corporation....................... 10
Section 4.6. Loss of Certificates......................... 11
Section 4.7. Restrictions on Transfer..................... 11
Section 4.8. Multiple Classes of Stock.................... 11
ARTICLE V. DIVIDENDS.................................... 11
Section 5.1. Declaration of Dividends..................... 11
Section 5.2. Reserves..................................... 12
ARTICLE VI. POWERS OF OFFICERS TO CONTRACT WITH THE
CORPORATION.................................. 12
ARTICLE VII. INDEMNIFICATION.............................. 12
Section 7.1. Definitions.................................. 12
Section 7.2. Right to Indemnification in General.......... 14
Section 7.3. Proceedings Other Than Proceedings
by or in the Right of the Corporation 14
Section 7.4. Proceedings by or in the right of
the Corporation...................... 14
Section 7.5. Indemnification of a Party Who is
Wholly or Partly Successful.......... 15
Section 7.6. Indemnification for Expenses of a
Witness.............................. 15
Section 7.7. Advancement of Expenses...................... 15
Section 7.8. Notification and Defense of Claim............ 16
(ii)
<PAGE>
Section 7.9. Procedures................................... 17
Section 7.10. Action by the Corporation.................... 17
Section 7.11. Non-Exclusivity.............................. 17
Section 7.12. Insurance.................................... 18
Section 7.13. No Duplicative Payment....................... 18
Section 7.14. Expenses of Adjudication..................... 18
Section 7.15. Severability................................. 18
ARTICLE VIII. MISCELLANEOUS PROVISIONS..................... 19
Section 8.1. Certificate of Incorporation................. 19
Section 8.2. Fiscal Year.................................. 19
Section 8.3. Corporate Seal............................... 19
Section 8.4. Execution of Instruments..................... 19
Section 8.5. Voting of Securities......................... 19
Section 8.6. Evidence of Authority........................ 19
Section 8.7. Corporate Records............................ 19
Section 8.8. Charitable Contributions..................... 20
ARTICLE IX. AMENDMENTS................................... 20
Section 9.1. Amendment by Stockholders.................... 20
Section 9.2. Amendment by Board of Directors.............. 20
(iii)
<PAGE>
By-Laws
of
CareMatrix Corporation
ARTICLE I
Stockholders
Section 1.1. Annual Meeting. The annual meeting of the stockholders
of the corporation shall be held on the first Monday of May at such time and
place within or without the State of Delaware as may be designated in the notice
of meeting. If the day fixed for the annual meeting shall fall on a legal
holiday, the meeting shall be held on the next succeeding day not a legal
holiday. If the annual meeting is omitted on the day herein provided, a special
meeting may be held in place thereof, and any business transacted at such
special meeting in lieu of annual meeting shall have the same effect as if
transacted or held at the annual meeting.
Section 1.2. Special Meetings. Special meetings of the stockholders
may be called at any time by the president or by the board of directors. Special
meetings of the stockholders shall be held at such time, date and place within
or outside of the State of Delaware as may be designated in the notice of such
meeting.
Section 1.3. Notice of Meeting. A written notice stating the place,
date and hour of the meeting of the stockholders, and, in the case of a special
meeting, the purposes for which the meeting is called shall be given to each
stockholder entitled to vote at such meetings and to such stockholder who, under
the Certificate of Incorporation or these By-laws, is entitled to such notice,
by delivering such notice to such person or leaving it at their residence or
usual place of business, or by mailing it, postage prepaid, and addressed to
such stockholder at his address as it appears upon the books of the corporation,
at least ten (10) days and not more than sixty (60) before the meeting. Such
notice shall be given by the secretary, an assistant secretary, or any other
officer or person designated either by the secretary or by the person or persons
calling the meeting.
The requirement of notice to any stockholder may be waived (i) by a
written waiver of notice, executed before or after the meeting by the
stockholder or his attorney thereunto duly authorized, and filed with the
records of the meetings (ii) if communication with such stockholder is unlawful
(iii) by attendance at the meeting without protesting prior thereto or at its
commencement the lack of notice, or (iv) as otherwise excepted by law. A waiver
of notice of any regular or special meeting of the stockholders need not specify
the purposes of the meeting.
If a meeting is adjourned to another time or place notice need not be
given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken except that if the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
<PAGE>
Section 1.4. Quorum. The holders of a majority in interest of all
stock issued, outstanding and entitled to vote at a meeting shall constitute a
quorum. Any meeting may be adjourned from time to time by a majority of the
votes properly cast upon the questions, whether or not a quorum is present.
Section 1.5. Voting and Proxies. Stockholders shall have one vote for
each share of stock entitled to vote owned by them of record according to the
books of the corporation, unless otherwise provided by law or by the Certificate
of Incorporation. Stockholders may vote either in person or by written proxy,
but no proxy shall be voted or acted upon after three years from its date unless
the proxy provides for a longer period. Proxies shall be filed with the
secretary of the meeting, or of any adjournment thereof. Except as otherwise
limited therein, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting. A proxy purporting to be executed by or on
behalf of a stockholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
A proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them.
Section 1.6. Action at Meeting. When a quorum is present at any
meeting a plurality of the votes properly cast for election to any office shall
elect to such offices and a majority of the votes properly cast upon any
question other than election to an office shall decide such question, except
where a larger vote is required by law the Certificate of Incorporation or these
By-laws. No ballot shall be required for any election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election.
Section 1.7. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of the minimum
number of votes necessary to authorize or take such action at a meeting at which
shares entitled to vote thereon were present and voted and copies are delivered
to the corporation in the manner proscribed by law.
Section 1.8. Voting of Shares of Certain Holders. Shares of stock of
the corporation standing in the name of another corporation domestic or foreign,
may be voted by such officers agent, or proxy an the by-laws of such corporation
may prescribe, or, in the absence of such provision, as the board of directors
of such corporation may determine.
Shares of stock of the corporation standing in the name of a deceased
person, a minor ward or an incompetent person, may be voted by his
administrator, executor, court appointed guardian or conservator without a
transfer of such shares into the name of such administrator, executor, court
appointed guardian or conservator. Shares of capital stock of the corporation
standing in the name of a trustee or fiduciary may be voted by such trustee or
fiduciary.
-2-
<PAGE>
Shares of stock of the corporation standing in the name of a receiver
may be voted by such receiver and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof into his
name if authority so to do be contained in an appropriate order of the court by
which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer by the pledgor on the books of the corporation he
expressly empowered the pledgee to vote thereon, in which case only the pledgee
or its proxy shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be
voted directly or indirectly at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by the corporation in a fiduciary capacity may be voted
and shall be counted in determining the total number of outstanding shares.
Section 1.9. Stockholder Lists. The secretary (or the corporation's
transfer agent or other person authorized by these By-laws or by law) shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meetings either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
ARTICLE II.
Board of Directors
Section 2.1. Powers. Except as reserved to the stockholders by law,
by the Certificate of Incorporation or by these By-laws, the business of the
corporation shall be managed under the direction of the board of directors, who
shall have and may exercise all of the powers of the corporation. In particular,
and without limiting the foregoing, the board of directors shall have the power
to issue or reserve for issuance from time to time the whole or any part of the
capital stock of the corporation which may be authorized from time to time to
such person, for such consideration and upon such terms and conditions as they
shall determine, including the granting of options, warrants, or conversion or
other rights to stock.
Section 2.2. Number of Directoral Qualifications. The board of
directors shall consist of such number of directors, not less than one (1) nor
more than ten (10), as shall be fixed
-3-
<PAGE>
initially by the incorporator and thereafter by the board of directors. No
director need be a stockholder.
Section 2.3. Nomination of Directors.
(a) Nominations for the election of directors may be made by the
board of directors or by any stockholder entitled to vote for the election of
directors. Nominations by stockholders shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid to the
secretary of the corporation not less than 14 days nor more than 60 days prior
to any meeting of the stockholders called for the election of directors;
provided, however, that if less than 21 written days' notice of the meeting is
given to stockholders, such notice of nomination by a stockholder shall be
delivered or mailed, in the manner prescribed above, to the secretary of the
corporation not later than the close of the fifth day following the day on which
notice of the meeting was mailed to stockholders.
(b) Each notice under subsection (a) shall set forth (i) the name,
age, business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of each such
nominee, and (iii) the number of shares of stock of the corporation which are
beneficially owned by each such nominee.
(c) The chairman of the meeting of stockholders shall determine
whether or not a nomination was made in accordance with the procedures of this
Section 2.3, and if he shall determine that it was not, he shall so declare to
the meeting and the defective nomination shall be disregarded.
Section 2.4. Election of Directors. The initial board of directors
shall be designated in the certificate of incorporation, or if not so
designated, elected by the incorporators at the first meeting thereof.
Thereafter, directors shall be elected by the stockholders at their annual
meeting or at any special meeting the notice of which specifies the election of
directors as an item of business for such meeting.
Section 2.5. Vacancies; Reduction of the Board. Any vacancy in the
board of directors however occurring, including a vacancy resulting from the
enlargement of the board of directors, may be filled by the stockholders or by
the directors then in office or by a sole remaining director. In lieu of filling
any such vacancy the stockholders or board of directors may reduce the number of
directors, but not to a number less than one (1). When one or more directors
shall resign from the board of directors, effective at a future date, a majority
of the directors then in office, including those who have so resigned shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
Section 2.6. Enlargement of the Board. The board of directors may be
enlarged by the stockholders at any meeting or by vote of a majority of the
directors then in office.
-4-
<PAGE>
Section 2.7. Tenure and Resignation. Except as otherwise provided by
law, by the Certificate of Incorporation or by these By-laws, directors shall
hold office until the next annual meeting of stockholders and thereafter until
their successors are chosen and qualified. Any director may resign by delivering
or mailing postage prepaid a written resignation to the corporation at its
principal office or to the president secretary or assistant secretary, if any.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 2.8. Removal. A director whether elected by the stockholders
or directors, may be removed from office with or without cause at any annual or
special meeting of stockholders by vote of a majority of the stockholders
entitled to vote in the election of such directors, or for cause by a vote of a
majority of the directors then in office, provided, however, that a director may
be removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.
Section 2.9. Meetings. Regular meetings of the board of directors may
be held without call or notice at such times and such places within or without
the State of Delaware as the Board may, from time to time, determine, provided
that notice of the first regular meeting following any such determination shall
be given to directors absent from such determination. A regular meeting of the
board of directors shall be held without notice immediately after and at the
same place as, the annual meeting of the stockholders or the special meeting of
the stockholders held in place of such annual meeting, unless a quorum of the
directors is not then present. Special meetings of the board of directors may be
held at any time and at any place designated in the call of the meeting when
called by the president, treasurer or one or more directors. Members of the
board of directors or any committee elected thereby may participate in a meeting
of such board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at the meeting.
Section 2.10. Notice of meeting. It shall be sufficient notice to a
director to send notice by mail at least seventy-two (72) hours before the
meeting addressed to such person at his usual or last known business or
residence address or to give notice to such person in person or by telephone at
least twenty-four (24) hours before the meeting. Notice shall be given by the
secretary, or in his absence or unavailability, may be given by any of an
assistant secretary, if any, or by the officer or directors calling the meeting.
The requirement of notice to any director may be waived by a written waiver of
notice, executed by such person before or after the meeting or meetings and
filed with the records of the meeting or by attendance at the meeting without
protesting prior thereto or at its commencement the lack of notice. A notice or
waiver of notice of a directors' meeting need not specify the purposes of the
meeting.
Section 2.11. Agenda, Any lawful business may be transacted at a
meeting of the board of directors, notwithstanding the fact that the nature of
the business may not have been specified in the notice or waiver of notice of
the meeting.
-5-
<PAGE>
Section 2.12. Quorum. At any meeting of the board of directors, a
majority of the directors then in office shall constitute a quorum for the
transaction of business. Any meeting may be adjourned by a majority of the votes
cast upon the question, whether or not a quorum is present, and the meeting may
be held as adjourned without further notice.
Section 2.13. Action at Meeting. Any motion adopted by vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors, except where a different vote is
required by law, by the Certificate of Incorporation or by these By-laws. The
assent in writing of any director to any vote or action of the directors taken
it any meetings whether or not quorum was present and whether or not the
director had or waived notice of the meeting, shall have the same effect as if
the director so assenting was present at such meeting and voted in favor of such
vote or action.
Section 2.14. Action Without Meeting. Any action by the directors may
be taken without a meeting if all of the directors consent to the action in
writing and the consents are filed with the records of the directors' meetings.
Such consent shall be treated for all purposes as a vote of the directors at a
meeting.
Section 2.15. Committees. The board of directors may, by the
affirmative vote of a majority of the directors then in office, appoint an
executive committee or other committees consisting of one or more directors and
may by vote delegate to any such committee some or all of their powers except
those which by law, the Certificate of Incorporation or these By-laws they may
not delegate. In the absence or disqualification of a member of a committee, the
members of the committee present and not disqualified, whether or not they
constitute a quorum, may by unanimous vote appoint another member of the board
of directors to act at the meeting in place of the absence or disqualified
member. Unless the board of directors shall otherwise provide, any such
committee may make rules for the conduct of its business, but unless otherwise
provide by the board of directors or such rules, its meetings shall be called,
notice given or waived, its business conducted or its action taken as nearly as
may be in the same manner as is provided in these By-laws with respect to
meetings or for the conduct of business or the taking of actions by the board of
directors. The board of directors shall have power at any time to fill vacancies
in, change the membership of, or discharge any such committee at any time. The
board of directors shall have power to rescind any action of any committee, but
no such rescission shall have retroactive effect.
ARTICLE III
Officers
Section 3.1. Enumeration. The officers shall consist of a chairman of
the board of directors, a chief executive officer, a president, a treasurer, a
secretary and such other officers and agents (including a vice chairman of the
board of directors and one or more senior vice-presidents, executive vice
presidents, vice-presidents, assistant treasurers and assistant secretaries), as
the Board of Directors may, in their discretion, determine.
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Section 3.2. Election. The chairman of the board, chief executive
officer, president, treasurer and secretary shall be elected annually by the
directors at their first meeting following the annual meeting of the
stockholders or any special meeting held in lieu of the annual meeting. Other
officers may be chosen by the directors at such meeting or at any other meeting.
Section 3.3. Qualification. An officer may, but need not, be a
director or stockholder. Any two or more offices may be held by the same person.
Any officer may be required by the directors to give bond for the faithful
performance of his duties to the corporation in such amount and with such
sureties as the directors may determine. The premiums for such bonds may be paid
by the corporation.
Section 3.4. Tenure. Except as otherwise provided by the Certificate
of Incorporation or these By-laws, the term of office of each officer shall be
for one year or until his successor is elected and qualified or until his
earlier resignation or removal.
Section 3.5. Removal. Any officer may be removed from office, with or
without cause, by the affirmative vote of a majority of the directors then in
office; provided, however, that an officer may be removed for cause only after
reasonable notice and opportunity to be heard by the board of directors prior to
action thereon.
Section 3.6. Resignation. Any officer may resign by delivering or
mailing postage prepaid a written resignation to the corporation at its
principal office or to the president, secretary, or assistance secretary, if
any, and such resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some event.
Section 3.7. Vacancies. A vacancy in any office arising from any
cause may be filled for the unexpired portion of the term by the board of
directors.
Section 3.8. Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and of the board of directors at
which present. The chairman of the board shall have such duties and powers as
are commonly incident to the office of chief executive officer and such duties
and powers as the board of directors shall from time to time designate.
Section 3.9. Chief Executive Officer. Except as otherwise provided by
the board, the chief executive officer shall have such duties and powers as are
commonly incident to the office and such duties and powers as the board of
directors shall from time to time designate.
Section 3.10. President. In the absence of the chairman of the board,
except as otherwise voted by the board of directors, the president shall preside
at all meetings of the stockholders and of the board of directors at which
present. The president shall have such duties and powers as are commonly
incident of the office and such duties and powers as the board of directors
shall from time to time designate.
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Section 3.11. Vice-President(s). In the absence of the chairman of
the board and the president or in the event of their inability or refusal to
act, the vice president (or in the event there be more than one vice president,
the vice-presidents in the order designated by the directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of both the chairman of the board and the president, respectively, and
when so acting, shall have all the respective powers of, and be subject to all
the respective restrictions upon, the chairman of the board and the president.
The vice-president(s) shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe. The vice presidents)
shall have such powers and perform such duties as the board of directors may
from time to time determine.
Section 3.12. Chief Financial Officer. Except as otherwise voted by
the board of directors, the chief financial officer shall be the principal
financial and accounting officer of the corporation. Subject to the direction
and under the supervision and control of the board of directors, the chief
financial officer shall have general charge of the financial affairs and
policies and of the financial systems of the corporation. The chief financial
officer shall have such duties and powers as are commonly incident to the office
and such other duties and powers as the board of directors shall from time to
time designate.
Section 3.13. Treasurer and Assistant Treasurers. The treasurer,
subject to the direction and under the supervision and control of the board of
directors and the chief financial officer, shall have such powers and perform
such duties in respect of the financial affairs of the corporation as are
delegated from time to time. The treasurer shall have custody of all funds,
securities and valuable papers of the corporation, except as the board of
directors may otherwise provide. The treasurer shall keep or cause to be kept
full and accurate records of account which shall be the property of the
corporation, and which shall be always open to the inspection of each elected
officer and director of the corporation. The treasurer shall deposit or cause to
be deposited all funds of the corporation in such depository or depositories as
may be authorized by the board of directors. The treasurer shall have the power
to endorse for deposit or collection all notes, checks, drafts, and other
negotiable instruments payable to the corporation. The treasurer shall perform
such other duties as are incidental to the office, and such other duties as may
be assigned by the board of directors.
Assistant treasurers, if any, shall have such powers and perform such
duties as the board of directors may from time to time determine.
Section 3.14. Secretary and Assistant Secretaries. The secretary
shall record, or cause to be recorded, all proceedings of the meetings of the
stockholders and directors (including committees thereof) in the book of records
of this corporation. the record books shall be open at reasonable times to the
inspection of any stockholder, director, or officer. The secretary shall notify
the stockholders and directors, when required by law or by these By-laws, of
their respective meetings, and shall perform such other duties as the directors
and stockholders may from time to time prescribe. The secretary shall have the
custody and charge of the corporate seal, and shall affix the seal of the
corporation to all instruments requiring such seal, and shall
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certify under the corporate seal the proceedings of the directors and of the
stockholders, when required. In the absence of the secretary at any such
meeting, a temporary secretary shall be chosen who shall record the proceedings
of the meeting in the foresaid books.
Assistant secretaries, if any, shall have such powers and perform
such duties as the board of directors may from time to time designate.
Section 3.15. Other Powers and Duties. Subject to these Bylaws and to
such limitations as the board of directors may from time to time prescribe, the
officers of the corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the board of directors."
ARTICLE IV
Capital Stock
Section 4.1. Stock Certificates. Each stockholder shall be entitled
to a certificate representing the number of shares of the Capital stock of the
corporation owned by such person in such form as shall, in conformity to law, be
prescribed from time to time by the board of directors. Each certificate shall
be signed by the president or vice-president and treasurer or assistant
treasurer or such other officers designated by the board of directors from time
to time as permitted by law, shall bear the seal of the corporation, and shall
express on its face its number, date of issue, class, the number of shares for
which, and the name of the person to whom, it is issued. The corporate seal and
any or all of the signatures of corporation officers may be facsimile if the
stock certificate is manually counter-signed by an authorized person on behalf
of a transfer agent or registrar other than the corporation or its employee.
If an officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed on, a certificate shall have ceased to be
such before the certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or registrar at the
time of its issue.
Section 4.2. Transfer of Shares. Title to a certificate of stock and
the shares represented thereby shall be transferred only on the books of the
corporation by delivery to the corporation or its transfer agent of the
certificate properly endorsed, or by delivery of the certificate accompanied by
a written assignment of the same, or a properly executed written power of
attorney to sell, assign or transfer the same or the shares represented thereby.
Upon surrender of a certificate for the shares being transferred, a new
certificate or certificates shall be issued according to the interests of the
parties.
Section 4.3. Record Holders. Except as otherwise may be required by
law, by the Certificate of Incorporation or by these By-laws, the corporation
shall be entitled to treat the record holder of stock as shown on its books as
the owner of such stock for all purposes,
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including the payment of dividends and the right to vote with respect thereto,
regardless of any transfer, pledge or other disposition of such stock, until the
shares have been transferred on the books of the corporation in accordance with
the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
Section 4.4. Record Date. In order that the corporation may determine
the stockholders entitled to receive notice of or to vote at any meeting of
stockholders or any adjournments thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date which shall not be more than sixty days prior to any
other action. In such case only stockholders of record on such record date shall
be so entitled notwithstanding any transfer of stock an the books of the
corporation after the record date.
If no record date is fixed: (i) the record date for determining
stockholders entitled to receive notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived at the close of business on
the day next preceding the day on which the meeting is held; (ii) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is necessary, shall be the day on which the first written consent is
expressed; and (iii) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 4.5. Transfer Agent and Registrar for Shares of Corporation.
The board of directors may appoint a transfer agent and a registrar of the
certificates of stock of the corporation. Any transfer agent so appointed shall
maintain, among other records, a stockholders' ledger setting forth the names
and addresses of the holders of all issued shares of stock of the corporation,
the number of shares held by each, the certificate numbers representing such
shares, and the date of issue of the certificates representing such shares. Any
registrar so appointed shall maintain, among other records, a share register,
setting forth the total number of shares of each class of shares which the
corporation is authorized to issue and the total number of shares actually
issued. The stockholders' ledger and the share register are hereby identified an
the stock transfer books of the corporation; but as between the stockholders'
ledger and the share register, the names and addresses of stockholders, as they
appear on the stockholders' ledger maintained by the transfer agent shall be the
official list of stockholders of record of the corporation. The name and address
of each stockholder of record, as they appear upon the stockholders' ledger,
shall be conclusive evidence of who are the stockholders entitled to receive
notice of the meetings of stockholders, to vote at such meetings, to examine a
complete list of the stockholders entitled to vote at meeting, and to own, enjoy
and exercise any other property or rights deriving from such shares against the
corporation. Stockholders, but
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not the corporation, its directors officers, agents or attorneys, shall be
responsible for notifying the transfer agent, in writing, of any changes in
their names or addresses from time to time, and failure to do so will relieve
the corporation, its other stockholders, directors, officers, agents and
attorneys, and its transfer agent and registrar, of liability for failure to
direct notices or other documents, or pay over or transfer dividends or other
property or rights, to a name or address other than the name and address
appearing in the stockholders' ledger maintained by the transfer agent.
Section 4.6. Loss of Certificates. In case of the loss, destruction
or mutilation of a certificate of stock a replacement certificate may be issued
in place thereof upon such terms as the board of directors may prescribe,
including in the discretion of the board of directors, a requirement of bond and
indemnity to the corporation.
Section 4.7. Restrictions on Transfer. Every certificate for shares
of stock which are subject to any restriction on transfer, whether pursuant to
the Certificate of Incorporation, the By-laws or any agreement to which the
corporation is a party, shall have the fact of the restriction noted
conspicuously on the certificate and shall also set forth on the face or back
either the full text of the restriction or a statement that the corporation will
furnish a copy to the holder of such certificate upon written request and
without charge.
Section 4.8. Multiple Classes of Stock. The amount and classes of the
capital stock and the par value, if any, of the shares, shall be as fixed in the
Certificate of Incorporation. At all times when there are two or more classes of
stock, the several classes of stock shall conform to the description and the
terms and have the respective preferences, voting powers, restrictions and
qualifications set forth in the Certificate of Incorporation and these By-laws.
Every certificate issued when the corporation is authorized to issue more than
one class or series of stock shall set forth on its face or back either (i) the
full text of the preferences, voting powers, qualifications and special and
relative rights of the shares of each class and Series authorized to be issued,
or (ii) a statement of the existence of such preferences, powers, qualifications
and rights, and a statement that the corporation will furnish a copy thereof to
the holder of such certificate upon written request and without charge.
ARTICLE V
Dividends
Section 5.1. Declaration of Dividends. Except as otherwise required
by law or by the Certificate of Incorporation, the board of directors may, in
its discretion, declare what, if any, dividends shall be paid from the surplus
or from the net profits of the corporation for the current or preceding fiscal
year, or as otherwise permitted by law. Dividends may be paid in cash, in
property, in shares of the corporation's stock, or in any combination thereof.
Dividends shall be payable upon such dates as the board of directors may
designate.
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Section 5.2. Reserves. Before the payment of any dividend and before
making any distribution of profits, the board of directors, from time to time
and in its absolute discretion shall have power to set aside out of the surplus
or net profits of the corporation such sum or sums as the board of directors
deems proper and sufficient as a reserve fund to meet contingencies or for such
other purpose as the board of directors shall deem to be in the best interests
of the corporation, and the board of directors may modify or abolish any such
reserve.
ARTICLE VI
Powers of Officers to Contract
With the Corporation
Any and all of the directors and officers of the corporation,
notwithstanding their official relations to it, may enter into and perform any
contract or agreement of any nature between the corporation and themselves or
any and all of the individuals from time to time constituting the board of
directors of the corporation, or any firm or corporation in which any such
director may be interested, directly or indirectly, whether such individual,
firm or corporation thus contracting with the corporation shall thereby derive
personal or corporate profits or benefits or otherwise; provided, that (i) the
material facts of such interest are disclosed or are known to the board of
directors or committee thereof which authorizes such contract or agreement; (ii)
if the material facts as to such person's relationship or interest are disclosed
or are known to the stockholders entitled to vote thereon, and the contract is
specifically approved in good faith by a vote of the stockholders; or (iii) the
contract or agreement is fair as to the corporation as of the time it is
authorized, approved or ratified by the board of directors or a committee
thereof, or the stockholders. Any director of the corporation who is interested
in any transaction as aforesaid may nevertheless be counted in determining the
existence of a quorum at any meeting of the board of directors which shall
authorize or ratify any such transaction. This Article shall not be construed to
invalidate any contract or other transaction which would otherwise be valid
under the common or statutory law applicable thereto.
ARTICLE VII
Indemnification
Section 7.1. Definitions. For purposes of this Article VII the
following terms shall have the meanings indicated:
"Corporate Status" describes the status of a person who is or was a
director, officer, employee agent, trustee or fiduciary of the corporation or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which such person is or was serving at the express written
request of the corporation.
"Court" means the Court of Chancery of the State of Delaware, the
court in which the Proceeding in respect of which indemnification is sought by a
Covered Person shall have been
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brought or is pending, or another court having subject matter jurisdiction and
personal jurisdiction over the parties.
"Covered Person" means a person who is a present or former director
or officer of the corporation and shall include such person's legal
representatives, heirs, executors and administrators.
"Disinterested" describes any individuals whether or not that
individual is a director, officer, employee or agent of the corporation who is
not and was not and is not threatened to be made a party to the Proceeding in
respect of which indemnification, advancement of expenses or other action, is
sought by a Covered Person.
"Expenses" shall include, without limitation, all reasonable
attorneys' fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating or being or preparing
to be a witness in a proceeding.
"Good Faith" shall mean a Covered Person having acted in good faith
and in a manner such Covered Person reasonably believed to be in or not opposed
to the best interests of this corporation or, in the case of an employee benefit
plan, the best interests of the participants or beneficiaries of said plan, as
the case may be, and, with respect to any Proceeding which is criminal in
nature, having had no reasonable cause to believe such Covered Person's conduct
was unlawful.
"Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and may include law firms or
members thereof that are regularly retained by the corporation but not by any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the standards of professional conduct then
prevailing and applicable to such counsel, would have a conflict of interest in
representing either the corporation or Covered Person in an action to determine
the Covered Person's rights under this Article.
"Officer" means the chairman of the board, president, vice
presidents, treasurer, assistant treasurer(s), secretary, assistant secretary
and such other executive officers as are appointed by the board of directors of
the corporation and explicitly entitled to indemnification hereunder.
"Proceeding" includes any actual, threatened or completed action,
suits, arbitration, alternate dispute resolution mechanism, investigation
(including any internal corporate investigation), administrative hearing or any
other proceeding, whether civil, criminal, administrative or investigative,
other than one initiated by the Covered Person, but including one initiated by a
Covered Person for the purpose of enforcing such Covered Person's rights under
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this Article to the extent provided in Section 7.14 of this Articles.
"Proceeding" shall not include any counterclaim brought by any Covered Person
other than one arising out of the same transaction or occurrence that is the
subject matter of the underlying claim.
Section 7.2. Right to Indemnification in General.
(a) Covered Persons. The corporation shall indemnify, and advance
Expenses to, each Covered Person who is, was or is threatened to be made a party
or is otherwise involved in any Proceeding, as provided in this Article and to
the fullest extent permitted by applicable law in effect on the date hereof and
to such greater extent as applicable law may hereafter from time to time permit.
The indemnification provisions in this Article shall be deemed to be
a contract between the corporation and each Covered Person who serves in any
Corporate Status at any time while these provisions as well an the relevant
provisions of the Delaware General Corporation Law are in effect, and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any Proceeding
previously or thereafter brought or threatened based in whole or in part upon
any such state of facts. Such a contract right may not be modified retroactively
without the consent of such Covered Person.
(b) Employees and Agents. The corporation may, to the extent
authorized from time to time by the board of directors, grant indemnification
and the advancement of Expenses to any employee or agent of the corporation to
the fullest extent of the provisions of this Article with respect to the
indemnification and advancement of Expenses of Covered Persons.
Section 7.3. Proceedings Other Than Proceedings by or in the Right of
the Corporation. Each Covered Person shall be entitled to the rights of
indemnification provided in this Section 7.3 if, by reason of such Covered
Person's Corporate Status, such Covered Person is, or is threatened to be made,
a party to or is otherwise involved in any Proceeding, other than a Proceeding
by or in the right of the corporation. Such Covered Person shall be indemnified
against Expenses, judgments, penalties, fines and amounts paid in settlements,
actually and reasonably incurred by such Covered Person or on such Covered
Person's behalf in connection with such Proceeding or any claim, issue or matter
therein, if such Covered Person acted in Good Faith.
Section 7.4. Proceedings by or in the Right of the Corporation. Each
Covered Person shall be entitled to the rights of indemnification provided in
this Section 7.4 if, by reason of such Covered Person's Corporate Status, such
Covered Person is, or is threatened to be made, a party to or is otherwise
involved in any Proceeding brought by or in the right of the corporation to
procure a judgment in its favor. Such Covered Person shall be indemnified
against Expenses, judgments, penalties and amounts paid in settlement, actually
and reasonably incurred by such Covered Person or on such Covered Person's
behalf in connection with such Proceeding if such Covered Person acted in Good
Faith. Notwithstanding the foregoing, no such indemnification
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shall be made in respect of any claim, issue or matter in such Proceeding as to
which such Covered Person shall have been adjudged to be liable to the
corporation if applicable law prohibits such indemnification; provided however,
that, if applicable law so permits, indemnification shall nevertheless be made
by the corporation in such event if and only to the extent that the Court which
is considering the matter shall so determine.
Section 7.5. Indemnification of a Party Who is Wholly or Party
Successful. Notwithstanding any other provision of this Article, to the extent
that a Covered Person is, by reason of such Covered Person's Corporate Status, a
party to or is otherwise involved in and is successful, on the merits or
otherwise, in any Proceeding, such Covered Person shall be indemnified to the
maximum extent permitted by law, against all Expenses, judgment, penalties,
fines, and amounts paid in settlement, actually and reasonably incurred by such
Covered Person or on such covered Person's behalf in connection therewith. If
such Covered Person is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the corporation shall indemnify
such Covered Person to the maximum extent permitted by law, against all Expenses
judgments, penalties, fines, and amounts paid in settlement, actually and
reasonably incurred by such Covered Person or on such Covered Person's behalf in
connection with each successfully resolved claim, issue or matter. For purposes
of this Section 7.5 and without limitation, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
Section 7.6. Indemnification for Expenses of a Witness.
Notwithstanding any other provision of this Article, to the extent that a
Covered Person is, by reason of such Covered Person's Corporate Status, a
witness in any Proceeding, such Covered Person shall be indemnified against all
Expenses actually and reasonably incurred by such Covered Person or on such
Covered Person's behalf in connection therewith.
Section 7.7. Advancement of Expenses. Notwithstanding any provision
to the contrary in this Article, the corporation shall advance all reasonable
Expenses which by reason of a Covered Person's Corporate Status, were incurred
by or on behalf of such Covered Person in connection with any Proceeding, within
twenty (20) days after the receipt by the corporation of a statement or
statements from such Covered Person requesting such advance or advances, whether
prior to or after final disposition of such Proceeding. Such statement or
statements shall reasonably evidence the Expenses incurred by the Covered Person
and shall include or be preceded or accompanied by an undertaking by or on
behalf of the Covered Person to repay any Expenses if such Covered Person shall
be adjudged to be not entitled to be indemnified against such Expenses. Any
advance and undertakings to repay made pursuant to this Section 7.7 shall be
unsecured and interest free. Advancement of Expenses pursuant to this Section
7.7 shall not require approval of the board of directors or the stockholders of
the corporation, or of any other person or body. The secretary of the
corporation shall promptly advise the Board in writing of the request for
advancement of Expenses, of the amount and other details of the advance and of
the undertaking to make repayment provided pursuant to this Section 7.7.
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Section 7.8. Notification and Defense of Claim. Promptly after
receipt by a Covered Person of notice of the commencement of any Proceeding,
such Covered Person shall, if a claim is to be made against the corporation
under this Article, notify the corporation of the commencement of the
Proceeding. The omission of such notice will not relieve the corporation from
any liability which it may have to such Covered Person otherwise than under this
Article. With respect to any such Proceedings of which such Covered Person has
provided notice to the corporation:
(a) The corporation will be entitled to participate in the defense at
its own expense.
(b) Except an otherwise provided below, the corporation (jointly with
any other indemnifying party similarly notified) will be entitled to assume the
defense with counsel reasonably satisfactory to the Covered Person. After notice
from the corporation to the Covered Person of its election to assume the defense
of a suit, the corporation will not be liable to the Covered Person under this
Article for any legal or other expenses subsequently incurred by the Covered
Person in connection with the defense of the Proceeding other than reasonable
costs of investigation or as otherwise provided below.
The Covered Person shall have the right to employ his own counsel in
such Proceeding but the fees and expenses of such counsel incurred after notice
from the corporation of its assumption of the defense shall be at the expense of
the Covered Person except as follows. The fees and expenses of counsel shall be
at the expense of the corporation if (i) the employment of counsel by the
Covered Person has been authorized by the corporation, (ii) the Covered Person
shall have concluded reasonably that there may be a conflict of interest between
the corporation and the Covered Person in the conduct of the defense of such
action and such conclusion is confirmed in writing by the corporation's outside
counsel regularly employed by it in connection with corporate matters, or (iii)
the corporation shall not in fact have employed counsel to assume the defense of
such Proceeding. The corporation shall be entitled to participate in, but shall
not be entitled to assume the defense of, any Proceeding brought by or in the
right of the corporation or as to which the Covered Person shall have made the
conclusion provided for in (ii) above and such conclusion shall have been so
confirmed by the corporation's said outside counsel.
(c) Notwithstanding any provision of this Article to the contrary,
the corporation shall not be liable to indemnify the Covered Person under this
Article for any amounts paid in settlement of any Proceeding effected without
its written consent. The corporation shall not settle any Proceeding or claim in
any manner which would impose any penalty, limitation or disqualification of the
Covered Person for any purpose without such Covered Person's written consent.
Neither the corporation nor the Covered Person will unreasonably withhold their
consent to any proposed settlement.
(d) If it is determined that the Covered Person is entitled to
indemnification other than as afforded under subparagraph (b) above, payment to
the Covered Person of the additional
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amounts for which he is to be indemnified shall be made within ten (10) days
after such determination.
Section 7.9. Procedures.
(a) Method of Determination. A determination (as provided for by this
Article or if required by applicable law in the specific case) with respect to a
Covered Person's entitlement to indemnification shall be made either (a) by the
board of directors by a majority vote of a quorum consisting of Disinterested
directors, or (b) in the event that a quorum of the board of directors
consisting of Disinterested directors is not obtainable or, even if obtainable,
such quorum of Disinterested directors so directs, by Independent Counsel in a
written determination to the board of directors, a copy of which shall be
delivered to the Covered Person seeking indemnification, or (c) by the vote of
the holders of a majority of the corporation's capital stock outstanding at the
time entitled to vote thereon.
(b) Initiating Request. A Covered Person who seeks indemnification
under this Article shall submit a Request for Indemnification, including such
documentation and information as is reasonably available to such Covered Person
and is reasonably necessary to determine whether and to what extent such Covered
Person is entitled to indemnification.
(c) Presumptions. In making a determination with respect to
entitlement to indemnification hereunder, the person or persons or entity making
such determination shall presume that the Covered Person is entitled to
indemnification under this Article.
(d) Burden of Proof. The person or entity opposing a Covered Person's
claim for indemnification shall have the burden of proof to overcome the
presumption described by Section 7.9(c) above in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
(e) Effect of Other Proceedings. The termination of any Proceeding or
of any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of guilty or of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this Article) of itself
adversely affect the right of a Covered Person to indemnification or create a
presumption that a Covered Person did not act in Good Faith.
Section 7.10. Action by the Corporation. Any action, payment, advance
determination other than a determination made pursuant to Section 7.9,
authorization, requirement, grant of indemnification or other action taken by
the Corporation pursuant to this Article shall be effected exclusively through
any Disinterested person so authorized by the board of directors of the
corporation, including the president or any vice president of the corporation.
Section 7.11. Non-Exclusivity. The rights to indemnification and to
receive advancement of Expenses as provided by this Article shall not be deemed
exclusive of any other rights to which a Covered Person may at any time be
entitled under applicable law, the
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Certificate of Incorporation, these By-Laws, any agreement, a vote of
stockholders, a resolution of the board of directors, or otherwise. No
amendment, alteration, rescission or replacement of this Article or any
provision hereof shall be effective as to a Covered Person with respect to any
action taken or omitted by such Covered Person in such Covered Person's
Corporate Status or with respect to any state of facts then or previously
existing or any Proceeding previously or thereafter brought or threatened based
in whole or to the extent based in part upon any such state of facts existing
prior to such amendment, alteration, rescission or replacement.
Section 7.12. Insurance. The corporation may maintain, at its
expense, an insurance policy or policies to protect itself and any Covered
Person, officer, employee or agent of the corporation or another Enterprise
against liability arising out of this Article or otherwise, whether or not the
corporation would have the power to indemnify any such person against such
liability under the Delaware General Corporation Law.
Section 7.13. No Duplicative Payment. The corporation shall not be
liable under this Article to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that a Covered Person has otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
Section 7.14. Expenses of Adjudication. In the event that any Covered
Person seeks a judicial adjudication, or an award in arbitration, to enforce
such Covered Person's rights under, or to recover damages for breach of, this
Article, the Covered Person shall be entitled to recover from the corporation,
and shall be indemnified by the corporation against, any and all expenses (of
the types described in the definition of Expenses in Section 7.1 of this
Article) actually and reasonably incurred by such Covered Person in seeking such
adjudication or arbitration, but only if such Covered Person prevails therein.
If it shall be determined in such adjudication or arbitration that the Covered
Person is entitled to receive part but not all of the indemnification of
expenses sought, the expenses incurred by such Covered Person in connection with
such adjudication or arbitration shall be appropriately prorated.
Section 7.15. Severability. If any provision or provisions of this
Article shall be held to be invalid, illegal or unenforceable for any reason
whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Article (including without limitation, each portion of any
Section of this Article containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this
Article (including, without limitation, each portion of any Section of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that is not itself held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
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<PAGE>
ARTICLE VIII.
Miscellaneous Provisions
Section 8.1. Certificate of Incorporation. All references in these
By-laws to the Certificate of Incorporation shall be deemed to refer to the
Certificate of Incorporation of the corporation, as amended and in effect from
time to time.
Section 8.2. Fiscal Year. Except as from time to time otherwise
provided by the board of directors, the fiscal year of the corporation shall end
on the 31st day of December.
Section 8.3. Corporate Seal. The board of directors shall have the
power to adopt and alter the seal of the corporation.
Section 8.4. Execution of Instruments. All deeds, leases, transfers,
contracts, bond, notes, and other obligations authorized to be executed by an
officer of the corporation on its behalf shall be signed by the president or the
treasurer except as the board of directors may generally or in particular cases
otherwise determine.
Section 8.5. Voting of Securities. Unless the board of directors
otherwise provides, the president or the treasurer may waive notice of and act
on behalf of this corporation, or appoint another person or persons to act as
proxy or attorney in fact for this corporation with or without discretionary
power and/or power of substitution, at any meeting of stockholders or
shareholders of any other corporation or organization, any of whose securities
are held by this corporation.
Section 8.6. Evidence of Authority. A certificate by the secretary or
any assistant secretary as to any action taken by the stockholders, directors or
any officer or representative of the corporation shall, as to all persons who
rely thereon in good faith, be conclusive evidence of such action. The exercise
of any power which by law, by the Certificate of Incorporation, or by these
By-laws, or under any vote of the stockholders or the board of directors, may be
exercised by an officer of the corporation only in the event of absence of
another officer or any other contingency shall bind the corporation in favor of
anyone relying thereon in good faith, whether or not such absence or contingency
existed.
Section 8.7. Corporate Records. The original, or attested copies, of
the Certificate of Incorporation, By-laws, records of all meetings of the
incorporators and stockholders, and the stock transfer books (which shall
contain the names of all stockholders and the record address and the amount of
stock held by each) shall be kept in Delaware at the principal office of the
corporation, or at an office of the corporation, or at an office of its transfer
agent or of the secretary or of the assistant secretary, if any. Said copies and
records need not all be kept in the same office. They shall be available at all
reasonable times to inspection of any stockholder for any purpose but not to
secure a list of stockholders for the purpose of selling said list or copies
thereof or for using the same for a purpose other than in the interest of the
applicant, as a stockholder, relative to the affairs of the corporation.
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Section 8.8. Charitable Contributions. The board of directors from
time to time may authorize contributions to be made by the corporation in such
amounts as it may determine to be reasonable to corporations, trusts, funds or
foundations organized and operated exclusively for charitable, scientific or
educational purposes, no part of the net earning of which inures to the private
benefit of any stockholder of individual.
ARTICLE IX.
Amendments
Section 9.1. Amendment by Stockholders. Prior to the issuance of
stock, these By-laws may be amended, altered or repealed by the incorporator(s)
by majority vote. After stock has been issued, these By-laws may be amended,
altered or repealed by the stockholders at any annual or special meeting by vote
of a majority of all shares outstanding and entitled to vote, except that where
the effect of the amendment would be to reduce any voting requirement otherwise
required by law, the Certificate of Incorporation or these By-laws, such
amendment shall require the vote that would have been required by such other
provision. Notice and a copy of any proposal to amend these By-laws must be
included in the notice of meeting of stockholders at which action is taken upon
such amendment.
Section 9.2. Amendment by Board of Directors. These By-laws may be
amended or altered by the board of directors at a meeting duly called for the
purpose by majority vote of the directors then in office, except that directors
shall not amend the By-laws in a manner which:
(a) changes the stockholder voting requirements for any action;
(b) alters or abolishes any preferential right or right of redemption
applicable to a class or series of stock with shares already outstanding;
(c) alters the provisions of Article IX hereof; or
(d) permits the board of directors to take any action which under
law, the Certificate of Incorporation, or these By-laws is required to be taken
by the stockholders.
Any amendment of these By-laws by the board of directors may be
altered or repealed by the stockholders at any annual or special meeting of the
stockholders.
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Exhibit 10.135
Master Agreement
between
CareMatrix Corporation
and
North Shore Health System
This Agreement is entered into by and between CareMatrix Corporation, a Delaware
corporation and North Shore Health System, a New York not-for-profit corporation
and shall be effective as of December 31, 1996.
WHEREAS, North Shore (as such term is defined below) has experience in the
provision of in patient and out patient health care services, has active
physician-hospital and management services organizations and is experienced in
managed care arrangements; and
WHEREAS, CareMatrix (as such term is defined below) is interested in the
acquisition, development, ownership, financing, management and operation of
Assisted Living Facilities, Independent Living Facilities, Skilled Nursing
Facilities and Medical Office Buildings (as such terms are defined below); and
WHEREAS, the parties desire to cooperate and compliment each others efforts in
applying their respective expertise and skills to the acquisition, development,
ownership, financing, management and operation of certain Projects (defined
below); and
WHEREAS, CareMatrix and North Shore have reached a general understanding
regarding the essential features relating to the acquisition, development,
ownership, financing, management and operation of certain Projects in the
Designated Area (defined below), and wish to enter into an alliance in
accordance with the principles established under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants in this
Agreement, the parties agree as follows:
1.0 Definitions
1.1 Acquisition Documents -- All documents related to the option,
purchase, lease or other acquisition of any Site.
1.2 Affiliates -- With respect to either CareMatrix or North Shore, any
other Person which, directly or indirectly, controls or is controlled by or is
under common control with either CareMatrix or North Shore. For purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with") 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
<PAGE>
other equity interests. Notwithstanding the foregoing, in no event shall
CareMatrix or its Affiliates be deemed or construed to be Affiliates of
PhyMatrix Corp. or its Affiliates.
1.3 Approvals -- All permits, licenses, approvals, variances,
permissive uses, accreditations, certificates, certifications, consents,
agreements, contracts, contract rights, franchises, interim licenses, and other
authorizations of every nature whatsoever required by, or issued under,
applicable legal requirements benefiting or relating to the construction or
development of a Site or Project required or issued by any agency, authority,
body, board, commission, court, instrumentality, legislature, and office of any
nature whatsoever of any government unit or political subdivision, whether
federal, state, county, district, or municipality.
1.4 Assisted Living Facilities -- Any facility offering a combination
of housing, supportive services, personalized assistance and health care
designed to meet the needs of individuals who need help with activities of daily
living (e.g., dressing, bathing, transferring, eating, toileting, incontinence
management, personal hygiene and assistance with medications).
1.5 Base Rent -- With respect to each Project, a sum equal to (i) debt
service on the Project Financing for such project; (ii) all operating expenses
of the applicable Joint Venture; (iii) debt service on any working capital loan
for the applicable Joint Venture; (iv) interest on any unreimbursed Development
Costs for the applicable Project; (v) interest on any unpaid Development Fees
for the applicable Project; (vi) any unpaid guarantee fees, to the extent
provided herein, for the applicable Project; (vii) Development Costs for the
applicable Project to the extent not paid as provided herein; and (viii)
Development Fees for the applicable Project to the extent not paid as provided
herein.
1.6 Budget -- A preliminary financial plan and statement of estimated
revenues and expenditures including estimated cash flows and anticipated capital
outlays, which Budget shall be sufficient in detail to allow the parties to make
an informed decision concerning the Project to which such Budget is applicable
as contemplated by the terms of this Agreement.
1. 7 CareMatrix -- CareMatrix Corporation, a Delaware corporation or
its Affiliate(s) formed for any particular Project.
1.8 Designated Area -- Nassau, Suffolk, Queens, Kings, and Richmond
counties of New York.
1.9 Development Agreement -- The agreement between CareMatrix and the
Joint Venture (or such other entity that shall own or operate the Project in
question as provided in this Agreement) for each of the Projects, pursuant to
which CareMatrix shall provide services related to the development of the
Projects.
1.10 Development Costs -- The costs for obtaining the Approvals,
together with the Site Costs and all out of pocket expenses paid to unrelated
third parties, including all reasonable costs necessary to complete final
architectural and engineering plans for the applicable Project and such other
costs required to obtain the permits necessary to commence construction.
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1.11 Development Fee -- A-fee equal to six percent (6%) and a general
overhead fee equal to two and one-half percent (2-1/2%) of the construction
costs, Site Costs and costs for fixed equipment, furnishings and finishes of the
applicable Project.
1.12 Due Diligence Documents -- Complete and accurate copies of all
information, records and documentation concerning the Sites or the Projects in
the possession of each of CareMatrix or North Shore and representatives,
including, without limitation (but only for informational purposes and without
warranties or representations of any kind regarding accuracy), a Budget, plans
and surveys, construction, architect and engineer agreements, soil tests,
service contracts, governmental permits and approvals, legal opinions regarding
zoning or environmental matters affecting Projects, engineering reports,
environmental site assessments, and title policies or abstracts.
1.13 Due Diligence Period -- The sixty (60) day period following the
Site Identification Date during which time CareMatrix and North Shore, 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 Tests and access to Due
Diligence Documents.
1.14 Equity -- The equity required to be contributed by CareMatrix and
North Shore to fund the difference between one hundred percent (100%) of the
amount necessary to acquire, develop or construct any Project and the amount of
any Project Financing for such Project.
1.15 Independent Living Facilities -- Any residential facility
designed primarily for a senior population providing access to residential
services, including, but not limited to, food service, housekeeping, laundry,
transportation and social activities.
1.16 Joint Venture -- Any Person formed by or existing pursuant to the
terms of any Joint Venture Agreement.
1.17 Joint Venture Agreement -- The agreement(s) between CareMatrix
and North Shore that sets forth the terms, conditions and responsibilities of
the parties concerning the acquisition, development, ownership, financing and
management of the applicable Project.
1.18 Joint Venture Cash Flow -- All cash received from or by reason of
the acquisition, development, ownership, financing or leasing (to CareMatrix,
North Shore or otherwise) of the applicable Project, including the Base Rent and
Participation Rent for such Project.
1.19 Licensed Projects -- All Projects which, due to the nature of the
goods or services provided, are required by applicable State law (as in effect
from time to time) to be operated by North Shore as opposed to the Joint Venture
for such Project.
1.20 Medical Office Building -- Any office building in which 50% or
more of its net leasable area is leased to physicians, groups of physicians or
other legal entities owned or
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controlled by physicians and engaged in the practice of medicine or other legal
entities providing ancillary medical services in such building.
1.21 North Shore -- North Shore Health System, a New York
not-for-profit corporation or its Affiliate(s) formed for the purpose of any
particular Project.
1.22 Operating Entity--With respect to a Licensed Project, North
Shore; with respect to an Unlicensed Project, until execution of the Lease
referred to in Section 5.1, the Joint Venture for such Project and, thereafter,
CareMatrix.
1.23 Participation Rent -- With respect to each Unlicensed Project, an
amount equal to 50% of the applicable Project Cash Flow after the payment of all
operating expenses of the Project (including, without limitation, the fees under
the terms of the Services Agreement and the Base Rent) other than the
Participation Rent.
1.24 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,
governmental authority or other entity of any kind or nature.
1.25 Project Cash Flow -- All cash received from or by reason of the
operation of the applicable Project, including, without limitation, to the
extent applicable to such Project, all cash received for or on account of any
and all goods provided and services rendered, the gross dollar amount of all
billings by the Project to or on behalf of guests, residents, tenants or
patients directly or indirectly connected with the Project (including, 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 all cash received (whether from tenants or
otherwise) by reason of any leasing, subleasing, licensing or other arrangements
with third parties relating to the possession or use of any part of the Project.
1.26 Project Components -- The Assisted Living Facility(ies),
Independent Living Facility(ies), Skilled Nursing Facility(ies) and/or Medical
Office Building(s) that comprise any applicable Project.
1.27 Project Financing -- The construction financing and permanent
financing for the Projects sufficient, in conjunction with any equity financing
by CareMatrix and North Shore to fund all costs associated with the development
and construction of the Projects.
1.28 Projects -- The Assisted Living Facilities, Independent Living
Facilities, Skilled Nursing Facilities and/or Medical Office Buildings developed
by any Joint Venture pursuant to this Agreement.
1.29 Services Agreement -- The agreement between CareMatrix and the
Joint Venture (or such other entity as shall own or operate the Project in
question as provided in this Agreement) for each of the Projects, pursuant to
which CareMatrix shall provide certain agreed upon operational services for the
Projects upon completion thereof.
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<PAGE>
1.30 Site Costs -- All costs and expenses incurred in connection with
acquiring, owning and maintaining the Site other than the purchase price for
such Site, including, without limitation, option payments, deposits, taxes,
insurance and legal fees associated with any land option or purchase contracts.
1.31 Site Identification Date -- The date upon which the Site for any
Project is approved by each of CareMatrix and North Shore pursuant to Section
3.0 of this Agreement.
1.32 Skilled Nursing Facilities -- Any subacute long-term care
facility providing geriatric and/or rehabilitation service on an inpatient
basis.
1.33 System PHO -- North Shore Health System Physician Hospital
Organization, a New York taxable not-for-profit corporation, or its successors
or assigns (provided such successors or assigns are controlled by North Shore
Health System or hospitals in which North Shore Health System is the sole
member).
1.34 Tests -- Such financial analyses, topographical and engineering
surveys, environmental site assessments and other tests, surveys and studies of
a Site as each party to this Agreement or their Affiliates may deem necessary or
appropriate.
1.35 Unlicensed Projects -- Any Project which is not a Licensed
Project.
Roles and Responsibilities
2.0 Global Plan
CareMatrix and North Shore shall cooperate to prepare, as soon as
practicable, a global plan tentatively outlining the number and types of
Projects to be developed pursuant to this Agreement over the next two (2) years
and the likely equity contributions of the parties for such Projects.
3.0 Site Identification Period
North Shore shall use commercially reasonable efforts to locate and
identify appropriate sites (each a "Site" and, collectively, the "Sites") within
the Designated Area for development of Projects. CareMatrix may identify
appropriate Sites. The final determination whether to engage in a Project at any
Site shall be subject to the mutual agreement of CareMatrix and North Shore.
Upon location or identification of a potential Site, each party shall present
the Site to the other party in writing, which writing shall include in
reasonable detail the terms of, and facts and circumstances surrounding, such
Site (including the type of Project to be developed at the Site) and shall be
sufficient in detail to allow the party receiving the notice to make an informed
decision concerning such Site and Project. If within sixty (60) days the party
receiving such notice has not indicated, in writing, its intention to proceed
further with such Site, then the party giving the notice shall be entitled to
pursue the intended Project at the Site independent of the other party and not
subject to the terms of this Agreement, except for the provisions of Sections
6.2 through 6.11; provided, however, that construction or renovation of such
intended Project
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<PAGE>
must be commenced within fourteen (14) months after termination of the sixty
(60) day period described herein. If construction or renovation of such Project
is not commenced within such fourteen (14) month period, then the identification
and presentation requirements of this Section are revived with respect to such
Site before a Project may be commenced on the Site independent of the other
party. Notwithstanding any provision to the contrary contained herein, such
fourteen (14) month period shall be extended by a reasonable period of time in
the event of force majeure and/or to the extent necessary given the governmental
approval process in the applicable jurisdiction(s).
4.0 Development Period
4.1 Acquisition of the Site
Following the Site Identification Date for a Site, CareMatrix shall
negotiate with the owner of such Site to option, purchase, lease or
otherwise acquire the Site and shall negotiate all Acquisition
Documents. The Site shall be optioned, purchased, leased or otherwise
acquired, if at all, in accordance with the terms of the Acquisition
Documents, and the closing of which shall in no event occur earlier
than the end of the Due Diligence Period for the applicable Site.
CareMatrix shall provide North Shore with copies of the Acquisition
Documents three (3) business days prior to their execution by
CareMatrix. Title to any Site shall be taken and held only in the name
of the Joint Venture or in such other name as the parties may agree.
4.2 Due Diligence on Site
4.2.1 The Due Diligence Period for such Site and Project shall
begin upon the Site Identification Date for such Site. Within a
reasonable time after commencement thereof, CareMatrix and North
Shore will furnish to the other, for review, the Due Diligence
Documents. Each party to this Agreement agrees to hold in strict
confidence all documents, data and information obtained from the
other, and if the closing of the applicable Site does not occur,
will, upon request, return the same to the other.
4.2.2 If CareMatrix or North Shore each in its sole discretion, is
dissatisfied with the results of any of the Tests, with the
content of any of the Due Diligence Documents, or with any
proposed financing, then it may terminate any further activities
with respect to any Site and/or Project under this Agreement by
written notice to the other within 30 days of the end of the Due
Diligence Period. Upon such termination, the other party shall be
entitled to pursue the intended Project at the Site independent of
the other party and not subject to the terms of this Agreement,
except for the provisions of Sections 6.2 through 6.11; provided,
however, that construction of such intended Project must be
commenced within fourteen (14) months after such termination. If
construction of such intended Project is not commenced within such
fourteen (14) month period, then the identification and
presentation requirements of this Agreement are revived with
respect to such Site before a Project may be commenced on the Site
independent
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<PAGE>
of the other party. Notwithstanding any provision to the contrary
contained herein, such fourteen (14) month period shall be
extended by a reasonable period of time in the event of force
majeure and/or to the extent necessary given the governmental
approval process in the applicable jurisdiction(s).
4.3 Negotiation of Definitive Documents
4.3.1 Promptly after the Site Identification Date, but in any
event during the Due Diligence Period, CareMatrix and North Shore,
shall engage in good faith negotiations to agree upon the Project
Components for the applicable Project. In addition, during the Due
Diligence Period, CareMatrix and North Shore, shall engage in good
faith negotiations to agree upon the terms of a final Joint
Venture Agreement. The Joint Venture shall be in the form of a
limited liability company, general partnership, limited
partnership or other joint venture entity as is mutually agreed
upon by CareMatrix and North Shore. Each of CareMatrix and North
Shore shall own 50% of the ownership interests in each Joint
Venture and such ownership interest percentage shall be set forth
in the Joint Venture Agreement for each such Joint Venture. The
Joint Venture Agreement shall, subject to the terms and conditions
of the applicable Project Financing, provide that the applicable
Joint Venture Cash Flow shall be distributed in the following
order of priority: (i) payment of debt service on the Project
Financing; (ii) payment of all operating expenses of the Joint
Venture; (iii) payment of debt service on any initial or ongoing
working capital loan for the Joint Venture; (iv) payment of (1)
interest on any unreimbursed Development Costs, (2) interest on
any unpaid Development Fees, and (3) any unpaid guarantee fees, 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; (v) payment of Development
Costs to the extent not paid as provided herein; (vi) payment of
the Development Fees to the extent not paid as provided herein;
and (vii) thereafter, to CareMatrix in the case of Licensed
Projects and to North Shore in the case of Unlicensed Projects.
4.3.2 During the Due Diligence Period, CareMatrix and North Shore,
shall engage in good faith negotiations to agree upon the final
terms of a Services Agreement substantially in the form of Exhibit
B attached hereto, and as more fully described in Section 5.2. Any
modifications or amendments of the Services Agreement shall be
subject to the approval of CareMatrix and North Shore.
4.4 Development of Budget
Promptly after the Site Identification Date, but in any event
during the Due Diligence Period, CareMatrix shall prepare a Budget
for the first five (5) operating years of the applicable Project.
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4.5 Pursuit of Approvals
During the Due Diligence Period for the applicable Site,
CareMatrix and North Shore, shall determine all Approvals
necessary to acquire, development and construct the applicable
Project and shall agree upon a time schedule pursuant to which
such Approvals shall be pursued. CareMatrix shall be responsible
for pursuing all Approvals and shall pay all costs and expenses
associated therewith (subject to reimbursement as provided in
Section 4.7 hereof).
4.6 Project Plans
4.6.1 During the Due Diligence Period for a Project, CareMatrix
shall select a project architect (a "Project Architect") and a
project engineer (a "Project Engineer") for such Project;
provided, however, that CareMatrix shall ensure that any Project
Architect or Project Engineer is adequately insured given the
nature, scope and construction cost of the applicable Project and
in no event shall CareMatrix select a Project Architect or Project
Engineer which, directly or indirectly, controls or is controlled
by or is under common control with CareMatrix, PhyMatrix,
Meditrust, Abraham D. Gosman, Michael M. Gosman or Andrew D.
Gosman without the prior consent of North Shore. Notwithstanding
the foregoing, in no event shall CareMatrix be liable in any
manner to North Shore or the applicable Joint Venture for any act
or omission of the Project Architect or the Project Engineer.
North Shore covenants and agrees not to bring any action or
proceeding of any type against CareMatrix arising out of or
related to any act or omission of any Project Architect or Project
Engineer and each of CareMatrix and North Shore shall look to the
applicable Project Architect and/or Project Engineer for any loss,
claim or damage which either of them may suffer arising out of or
related to any act or omission of any Project Architect or Project
Engineer. The Project Architect(s) and the Project Engineer(s)
shall contract directly with the Joint Venture upon its formation.
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 North Shore, shall approve the
design criteria, including overall size and layout, which criteria
shall be incorporated in the development of the applicable
Project.
4.6.2 After the applicable Project has received the necessary
Approvals, CareMatrix shall fund or cause to be funded the
reasonable costs necessary to complete final architectural and
engineering plans (the "Plans") for the Project, subject to
reimbursement as provided in Section 4.7 hereof. The Plans shall
be consistent with the preliminary site plan and facility
schematics and shall be mutually agreed upon by North Shore and
CareMatrix; provided, however, that each of CareMatrix and North
Shore agree that CareMatrix's prototype plans shall be utilized
for the Projects to the extent feasible.
4.7 Initial Financing
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4.7.1 Following the Site Identification Date for each Project,
CareMatrix shall use commercially reasonable efforts to
obtain the Project Financing for the applicable Project.
Carematrix shall consider, as appropriate, tax-exempt
financing available to North Shore. The terms and conditions
of each Project Financing shall be subject to the approval
of each of CareMatrix and North Shore. Each Project
Financing shall be non-recourse or substantially
non-recourse to CareMatrix and North Shore.
4.7.2 Notwithstanding the foregoing, in the event that any lease
or debt obligation for any Project Financing is required to
be guaranteed, North Shore and CareMatrix shall each provide
guarantees in proportion to their percentage ownership
interest in such Joint Venture. In the event the ownership
interests of the parties are unequal, each shall be entitled
to an annual guarantee fee equal to two percent (2%) of the
outstanding amount guaranteed by such party. Such guarantee
fee shall be paid on a priority basis from the Joint Venture
Cash Flow as set forth in the particular Joint Venture
Agreement.
4.7.3 Prior to the closing of the applicable Project Financing,
CareMatrix shall present an accounting to North Shore of
Development Costs. Simultaneously with the closing of the
applicable Project Financing, the Development Fee and the
Development Costs shall be paid to CareMatrix, each 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 Fee or the Development
Costs for any Project is not so paid to 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 CareMatrix on
a priority basis from the applicable Project Cash Flow as
set forth in the Joint Venture Agreement for the applicable
Project.
4.7.4 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 North Shore agrees to contribute
Equity to the Joint Venture at the closing of the applicable
Project Financing in proportion to their percentage
ownership interest in such Project sufficient to make
available 100% of the Project Financing.
4.8 Development
CareMatrix shall be the developer for each of the Projects. Upon the
completion and approval of the Plans, CareMatrix shall present to the
Joint Venture a Development Agreement upon the general terms and
conditions set forth in the Development Agreement attached hereto as
Exhibit A. CareMatrix shall make the Plans available to general
contractors (it being agreed that Suffolk Construction is an
acceptable contractor) in order to allow the applicable Project to be
competitively bid, and CareMatrix shall, in accordance with the terms
of the
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Development Agreement, act as construction manager and provide
construction management services in exchange for a Development Fee.
CareMatrix shall cause the general contractor to provide North Shore
or its representatives complete and customary access to books and
records relating to the construction of the Project.
5.0 Operation Period
5.1 Unlicensed Projects
5.1.1 Upon completion of any Unlicensed Project and the
stabilization of the income thereof (as determined by
CareMatrix in its sole and absolute discretion), at the
option of CareMatrix, such Project shall be leased to
CareMatrix in accordance with the terms and conditions set
forth in a Lease in a form mutually agreeable to the parties
(a "CareMatrix Lease"). The term of each CareMatrix Lease
shall be for fifteen (15) years with, at the option of
CareMatrix, two (2) renewal terms of five (5) years each,
and shall provide for rent equal to the Base Rent and
Participation Rent for such Project. CareMatrix shall apply
the Project Cash Flow for each Project in the following
order of priority; (i) payment of all operating expenses of
the Project, including, without limitation, the Base Rent
and Participation Rent; (ii) payment of any debt service on
any working capital loan for the Project (whether provided
by a third party or the applicable Joint Venture); (iii)
thereafter, to CareMatrix. In the event CareMatrix elects
not to lease the Project, the Project Cash Flow shall be
applied in the same manner as the Joint Venture Cash Flow
would have been applied had CareMatrix leased the Project
except with respect to the distribution set forth in Section
4.3.l(vii), which shall be made to the parties in
proportion to their ownership interests in the Joint
Venture.
5.1.2 With respect to any Projects which are Medical Office
Buildings, the Joint Venture or CareMatrix, as applicable,
shall grant North Shore a right of first refusal with
respect to all leasable space in such Medical Office
Building pursuant to a right of first refusal agreement
mutually agreeable to the parties. Additionally, the Joint
Venture or CareMatrix, as applicable, shall grant CareMatrix
a right of first refusal with respect to all leasable space
in such Medical Office Building pursuant to a right of first
refusal agreement mutually agreeable to the parties, which
right of first refusal shall apply only if North Shore shall
elect not to exercise its right of first refusal. Any such
lease to North Shore or CareMatrix shall be pursuant to a
lease mutually agreeable to the parties, which lease shall
grant to the lessee exclusivity within such Medical Office
Building for the ancillary medical services offered in the
space leased other than (i) in-office laboratory services,
(ii) services in connection with X-ray machines, ultrasound
machines, EKG machines or (iii) ancillary services utilizing
other machines or equipment not requiring substantial
capital outlay and
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which services do not account for a disproportionately large
portion of a physician's revenue.
5.2 Operational Services
CareMatrix shall provide certain agreed upon operational services
for each Project upon completion thereof in accordance with the
general terms and conditions set forth in a Services Agreement in
a form mutually agreeable to the parties. The term of each
Services Agreement shall be for fifteen (15) years with, at the
option of CareMatrix, two (2) renewal terms of five (5) years
each, and shall provide for a fee to be negotiated between the
parties and subject to a fair market valuation determination.
Other terms and conditions of each Services Agreement shall be as
mutually agreed upon by North Shore and CareMatrix. Any
modifications or amendments to the Services Agreement shall
require the approval of North Shore and CareMatrix.
5.3 Transfer Agreements
The parties shall cause each Operating Entity which operates a
Skilled Nursing Facility or Assisted Living Facility which is
required by applicable state law to enter into transfer agreements
to enter into an appropriate transfer agreement with North Shore
for each Project (each a "Transfer Agreement"). The term of each
Transfer Agreement shall be for fifteen (15) years with, at the
option of North Shore, two (2) renewal terms of five (5) years
each. Other terms and conditions of each Transfer Agreement shall
be as mutually agreed upon by the Joint Venture and North Shore.
5.4 Managed Care Contracting
5.4.1 The parties shall cause each Operating Entity to enter into
a participating provider agreement with the System PHO for
its Project (each a "Provider Agreement") pursuant to which
the System PHO shall be, except as hereinafter provided, the
exclusive provider of managed care contracts for the
services provided by the applicable Project; provided,
however, that nothing contained herein shall prohibit,
restrict or impair any such Operating Entity from
contracting directly with any third party payor to provide
such services in the event (i) the System PHO shall refuse
to enter into a Provider Agreement with such Operating
Entity on the terms provided in this Section 5.4.1 with
respect to any managed care contract between the System PHO
and such third party payor or (ii) the System PHO shall not
be a party to a managed care contract with such third party
payor (provided, however, that should the System PHO then be
in negotiations with such third party payor, the Operating
Entity shall not contract with such third party payor prior
to the earlier of (a) the termination of negotiations
between the System PHO and such third party payor or (b)
forty-five (45) days following the date of a written notice
from the Operating Entity to the System PHO that it intends
to contract with such third party payor). North Shore shall
use its best
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efforts to have the System PHO enter into Provider
Agreements with each Operating Entity and each Operating
Entity shall be entitled to participate in any such managed
care contracts held by the System PHO based upon terms and
conditions as favorable as the most favorable provided by
the System PHO to any party.
5.4.2 The parties shall use their best efforts to cause each
entity owning or operating a Project described in Section
6.6 of this Agreement to enter into a Provider Agreement
with the System PHO for such Project pursuant to which the
System PHO shall be, except as hereinafter provided, the
exclusive provider of managed care contracts for the
services provided by the applicable Project; provided,
however, that nothing contained herein shall prohibit,
restrict or impair any such entity from (i) contracting
directly with any third party payor to provide such services
in the event (a) the System PHO shall refuse to enter into a
Provider Agreement with such entity on the terms provided in
this Section 5.4.2 with respect to any managed care contract
between the System PHO and such third party payor or (ii)
the System PHO shall not be a party to a managed care
contract with such third party payor (provided, however,
that should the System PHO then be in negotiations with such
third party payor, such entity shall not contract with such
third party payor prior to the earlier of (x) the
termination of negotiations between the System PHO and such
third party payor or (y) forty-five (45) days following the
date of a written notice from such entity to the System PHO
that it intends to contract with such third party payor) or
(ii) completing the term of any provider agreement which
such entity may be a party to at the time of the
consummation of the transaction described in Section 6.6.
North Shore shall use its best efforts to have the System
PHO enter into Provider Agreements with each entity owning a
Project described in Section 6.6 and each such entity shall
be entitled to participate in any such managed care
contracts held by the System PHO based upon terms and
conditions as favorable as the most favorable provided by
the System PHO to any party.
5.4.3 The parties shall cause each Operating Entity operating a
Medical Office Building to provide the System PHO with the
names and contact persons for all persons or entities
expressing an interest in leasing space within such Medical
Office Building.
5.4.4 Neither of the parties intend, and nothing contained herein
shall be construed to imply, that the System PHO is or shall
be a third party beneficiary or any other type of
beneficiary of any term or provision of this Agreement and
the System PHO shall have no rights against any party to
this Agreement arising out of or related to this Agreement.
5.5 Working Capital Loans
CareMatrix will use reasonable efforts to obtain third party
working capital financing for each Joint Venture to pay such funds
as are necessary for the start-
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up costs of the applicable Project and the ongoing working capital
needs of the applicable Project established in the annual budget
for the applicable Project approved by both CareMatrix and North
Shore on such terms and conditions as CareMatrix shall determine
in its sole and absolute discretion, subject, however, to
CareMatrix providing North Shore with notification of the terms of
such financing prior to closing such financing. To the extent that
third party working capital financing is not available, each of
CareMatrix and North Shore shall contribute (as capital or loan)
to the applicable Joint Venture such funds as are necessary to
provide such working capital financing to the Operating Entity. In
turn, each Joint Venture shall loan such funds (whether obtained
from third party financing or contributed by CareMatrix or North
Shore) to the applicable Operating Entity as an operating loan. To
the extent not prohibited by either North Shore's or CareMatrix's
corporate indebtedness covenants, each such loan shall be secured
by the revenues of the applicable Project but shall otherwise be
nonrecourse to the Operating Entity. Such loan shall bear interest
and be payable on the same terms and conditions as are provided
for in any third party financing pursuant to which such funds were
obtained or shall otherwise be upon market terms and conditions.
5.6 Licensed Projects
The parties acknowledge that the structure referred to in this
Section 5 shall apply only to Unlicensed Projects due to the
inability of any Joint Venture or CareMatrix to operate certain
Projects due the nature of the goods or services provided by such
Project. Accordingly, the parties intend to coordinate on Licensed
Projects recognizing that certain fundamental provisions of this
Section 5, such as the identity of the party operating the Project
and the method of compensation contemplated hereby, may not be
permitted pursuant to applicable state law at this time. The
parties agree to negotiate in good faith on Licensed Projects
wherein North Shore will be required to own and operate the
Licensed Project, be paid an imputed services fee for the medical
and medical management services it provides and CareMatrix shall
own all or a portion of the underlying real estate and improvements
and shall provide such services as may be permitted by applicable
law upon such terms as may be permitted by applicable law using,
insofar as is lawful and prudent, the fundamental economic
arrangement contemplated by this Section 5.
6.0 Exclusivity
6.1 For the term of this Agreement, the relationship among
CareMatrix, North Shore and the Joint Ventures shall be exclusive
for Projects within the Designated Area except as provided in
Sections 3.0, 4.2.2 and the remainder of this Section 6.0. Such
exclusivity shall be binding upon each Affiliate of CareMatrix and
North Shore regardless of whether such Affiliate was formed for any
particular Project.
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6.2 Should either of Carematrix or North Shore decline to participate
in a Project pursuant to this Agreement (a "Declining Party"), and
the other party (the "Proceeding Party") proceeds independent of
the other, with a Project the Proceeding Party shall offer the
Declining Party, the opportunity to provide, on a contract basis,
the Development Agreement or Services Agreement functions in the
event CareMatrix is the Declining Party and/or Transfer Agreement
function in the event North Shore is the Declining Party
with respect to such Project upon terms hereinafter set forth.
6.2.1 The Proceeding Party shall, by written notice to the
Declining Party, notify the Declining Party of its intent to
proceed with the applicable Project ("Proposed Project"),
which notice shall set forth in reasonable detail the nature
and scope of the Proposed Project and shall set forth the
date by which the Declining Party must respond as provided
herein. The Declining Party shall have thirty (30) days from
the receipt of such notice within which to exercise its
rights hereunder. The Declining Party may exercise this
right with respect to all or any function (e.g., CareMatrix
may elect to act as the developer and/or manager of the
Proposed Project). In the event the Declining Party
determines to exercise its rights hereunder, the Declining
Party shall provide written notice of such election to the
Proceeding Party within the thirty (30) day period, which
notice shall disclose the fee for the applicable functions
but shall otherwise be upon the general terms set forth in
the respective agreements attached to this Agreement as
Exhibits (a "Proposal"). In the event the Proposal is
acceptable to the Proceeding Party, the Proceeding Party and
Declining Party shall thereafter enter into the appropriate
agreement(s) upon the terms and conditions set forth in the
Proposal. In the event the Declining Party elects not to
exercise its rights hereunder or does not respond in writing
to the Proceeding Party within the thirty (30) day period,
the Declining Party shall be deemed to have waived its
rights hereunder with respect to Proposed Project and the
Proceeding Party shall then be entitled to enter into such
agreement(s) with any third party in connection with the
Proposed Project or to provide such function(s) itself;
provided, however, that if the Proceeding Party shall not
enter into such agreement(s) with a third party(ies) within
thirty (30) days after the expiration of the Declining
Party's rights hereunder for any reason other than it having
elected to provide such function(s) itself or if such
agreement(s) is (are) executed but is (are) not fully
performed as specified in the relevant agreement, the
Declining Party's rights hereunder shall apply to all future
development and/or management of the Proposed Project.
6.2.2 In addition to the rights established under Section 6.2.1
above, in the event North Shore is the Proceeding Party and
receives a bonafide third party proposal or offer to act as
the developer and/or manager of any Proposed Project (an
"Offer"), which Offer North Shore determines to accept,
North Shore shall, by written notice to CareMatrix, first
offer CareMatrix the right to act as the developer and/or
manager of the Proposed Projects upon the same terms and
conditions as the Offer, which notice shall set forth the
date by which the CareMatrix must respond as provided
herein. CareMatrix shall have fifteen (15) days from the
date of receipt of such notice within which to exercise the
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right granted hereby. If the Offer contemplates the offeree
acting in more than one function (e.g., an Offer in which
the offeree intends to act as both developer and manager),
CareMatrix may exercise this right with respect to all or
any of such functions (e.g., CareMatrix may elect to act as
both the developer and manager or only as developer or
manager). In the event CareMatrix determines to exercise
this right, CareMatrix shall provide written notice of such
election to North Shore within the fifteen (15) day period
and the North Shore and CareMatrix shall thereafter enter
into the appropriate agreement(s) upon the same terms and
conditions as contained in the original Offer. In the event,
CareMatrix elects not to exercise this right with respect to
any Offer, or does not respond in writing to North Shore
within the fifteen (15) day period, the Declining Party
shall be deemed to have waived its rights hereunder with
respect to such Offer; provided, however that if the
applicable agreement(s) is (are) not entered into or is
(are) entered into but is (are) not fully performed as
specified in the relevant agreement, the CareMatrix's rights
hereunder shall not be deemed to be waived and shall apply
to all future offers with respect to the Proposed Project.
6.2.3 In addition to the rights established under Section 6.2.1
above, in the event CareMatrix is the Proceeding Party, the
Proposed Project is a Medical Office Building and CareMatrix
receives a bonafide third party proposal or offer to lease
all or any portion of Proposed Project (an "Offer"), which
Offer CareMatrix determines to accept, CareMatrix shall, by
written notice to North Shore, first offer North Shore the
right to lease the space contemplated by the Offer upon the
same terms and conditions as the Offer, which notice shall
set forth the date by which North Shore must respond as
provided herein. North Shore shall have fifteen (15) days
from the date of receipt of such notice within which to
exercise the right granted hereby. In the event North Shore
determines to exercise this right, North Shore shall provide
written notice of such election to CareMatrix within the
fifteen (15) day period and CareMatrix and North Shore shall
thereafter enter into a lease upon the same terms and
conditions as contained in the original Offer. In the event
North Shore elects not to exercise this right with respect
to any Offer, or does not respond in writing to CareMatrix
within the fifteen (15) day period, North Shore shall be
deemed to have waived its rights hereunder with respect to
such Offer; provided, however, that if the applicable lease
is not entered into, North Shore's rights hereunder shall
not be deemed to be waived and shall apply to all future
offers with respect to the space to be leased pursuant to
the Offer.
6.2.4 In addition to the rights established under Section 6.2.1
above, in the event CareMatrix is the Proceeding Party, the
Proposed Project is an unlicensed Assisted Living Facility,
CareMatrix determines to lease space in such Assisted Living
Facility to a physician and receives a bonafide third party
proposal or offer to lease such space (an "Offer"), which
Offer CareMatrix determines to accept, CareMatrix shall, by
written notice to North Shore, first offer North Shore the
right to lease the space contemplated by the Offer upon
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the same terms and conditions as the Offer, which notice
shall set forth the date by which North Shore must respond
as provided herein. North Shore shall have fifteen (15) days
from the date of receipt of such notice within which to
exercise the right granted hereby. In the event North Shore
determines to exercise this right, North Shore shall provide
written notice of such election to CareMatrix within the
fifteen (15) day period and CareMatrix and North Shore shall
thereafter enter into a lease upon the same terms and
conditions as contained in the original Offer. In the event
North Shore elects not to exercise this right with respect
to any Offer, or does not respond in writing to CareMatrix
within the fifteen (15) day period, North Shore shall be
deemed to have waived its rights hereunder with respect to
such Offer; provided, however, that if the applicable lease
is not entered into, North Shore's rights hereunder shall
not be deemed to be waived and shall apply to all future
offers with respect to the space to be leased pursuant to
the Offer.
6.3 In no event shall CareMatrix acquire, develop, own, finance,
manage or operate any Project other than an Assisted Living
Facility or Independent Living Facility within two (2) miles of
the hospital(s) listed on Exhibit B attached hereto, five (5)
miles of the hospital(s) listed on Exhibit C attached hereto or
ten (10) miles of the hospital(s) listed on Exhibit D attached
hereto, without the prior written consent of North Shore.
6.4 In no event shall either party acquire, develop, own, finance,
manage or operate any Project containing any Project Components
which are the same as any Project Components of any Project of any
Joint Venture which is within two (2) miles of the contemplated
Project without the prior written consent of the other party;
provided, however, that this restriction shall not apply to any
medical office building acquired by either party as part of the
acquisition of a physician practice (whether through an asset or
ownership interest acquisition) provided such office building has
no more than 15,000 square feet of leasable space and 80% or more
of such space is leased to such physician practice or an entity
controlled by such physicians and providing ancillary medical
services.
6.5 In no event shall a Declining Party acquire, develop, own,
finance, manage or operate any Project within two (2) miles of a
Project pursued independently by a Proceeding Party in accordance
with the terms of this Agreement without the prior written consent
of the Proceeding Party; provided, however, that this restriction
shall not apply to any medical office building acquired by either
party as part of the acquisition of a physician practice (whether
through an asset or ownership interest acquisition) provided such
office building has no more than 15,000 square feet of leasable
space and 80% or more of such space is leased to such physician
practice or an entity controlled by such physicians and providing
ancillary medical services.
6.6 In no event shall any of the restrictions set forth above apply to
any Project which either party may acquire, develop, own, finance,
manage or operate as a result of or in connection with such party
merging with another entity, acquiring all of the stock or
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other equity interests in or having its stock acquired by another
entity or selling all or substantially all of its assets to or
purchasing all or substantially all of the assets of another
entity provided any such Project(s) does not account for more than
25% of the gross revenues of such party or the resulting entity.
6.7 In no event shall any of the restrictions set forth in this
Agreement prevent:
6.7.1 North Shore from serving as a member of a not-for-profit
hospital which may own, finance, manage, operate or
affiliate with a facility or facilities which would
constitute a Project as defined in this Agreement provided
any such hospital does not thereafter acquire, develop, own,
finance, manage, operate or otherwise engage in any joint
enterprise with another person or entity with respect to any
additional facility or facilities which would constitute a
Project as such term is defined in this Agreement; or
6.7.2 Franklin Hospital, Southside Hospital, Huntington Hospital
or Staten Island University Hospital (collectively, the
"Existing Sponsored Hospitals") from owning, financing,
managing, operating or affiliating with a facility or
facilities which would constitute a Project as defined in
this Agreement; provided, however, that North Shore shall
use its best efforts (which best efforts shall not include
North Shore being required to exercise its right to remove
the board of directors or management of any of the Existing
Sponsored Hospitals) to have the Existing Sponsored
Hospitals agree not to enter into any sponsorship or other
relationship to own, finance, manage, operate or otherwise
engage in any joint enterprise with another person or entity
with respect to any facility or facilities which would
constitute a Project as such term is defined in this
Agreement following the effective date of this Agreement
other than a facility or facilities which they own, finance,
manage, operate or are affiliated with as of the effective
date of this Agreement.
6.8 The parties acknowledge and agree that none of the terms or
provisions of this Agreement, including any restrictions set forth
herein, shall apply to Meditrust, a Delaware corporation, or any
of its affiliates.
6.9 Notwithstanding any other provision in this Agreement, North Shore
shall have the right to perform managed care contracting for any
Project within the Designated Area as and to the extent described
in Section 5.4 of this Agreement (including any Project described
in Section 6.6).
6.10 The parties acknowledge and agree that, notwithstanding any other
provision in this Agreement (including Section 6.7), the terms or
provisions of this Agreement shall not prohibit, restrict or
impair either party from pursuing the transactions identified on
Exhibit E attached hereto as such transactions are described in
such Exhibit.
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6.11 CareMatrix acknowledges and agrees that none of the terms or
provisions of this Agreement shall prohibit, restrict or impair
North Shore from pursuing the transactions identified in that
certain Master Agreement of even date herewith entered into
between North Shore and PhyMatrix Corp.
7.0 Agreement Limited in Scope
This Agreement is not intended to abridge, limit, or restrict the rights of
the parties to pursue, either independently or in conjunction with any other
person or entity, other business opportunities outside the scope of this
Agreement. Without limiting the generality of the foregoing, each of the
parties acknowledge and agree that this Agreement, and the rights of the
parties hereunder, apply solely to the acquisition, development, ownership,
financing, management and operation of Assisted Living Facilities,
Independent Living Facilities, Skilled Nursing Facilities and/or Medical
Office Buildings and to no other types of facilities or businesses (such as,
but not limited to, ancillary medical services and/or physician practices)
and apply to such types of facilities within the Designated Area and to no
other geographic area.
8.0 Warranties, Representations and Indemnity
8.1 Except as otherwise contemplated by this Agreement or any Joint
Venture Agreement, neither party at any time shall enter into,
incur, or hold itself out to third parties as having authority to
enter into or incur, on behalf of the other party, any commitment,
expense or liability whatsoever.
8.2 Each party represents and warrants that it is free to enter into
this Agreement, that it has obtained any necessary approvals to do
so, and is not in violation of any existing agreements or
obligations it may have with other Persons or entities.
8.3 Each party agrees to defend, indemnify and hold the other party
harmless for any costs, damages or expenses which are caused by
its gross negligence or willful misconduct.
9.0 Term
The term of this Agreement shall commence upon the date hereof and expire
upon the earliest to occur of (i) the second (2nd) anniversary of the date
hereof unless the parties shall have entered into a Joint Venture Agreement
during such two (2) year period, (ii) any subsequent annual anniversary of
the date hereof unless the parties shall have entered into a Joint Venture
Agreement during the preceding year, (iii) for each Project, the execution
of the Joint Venture Agreement for the applicable Project, or (iv) Abraham
D. Gosman, Andrew D. Gosman and/or Michael M. Gosman, or entities controlled
by all or any of them, ceasing to own ten percent (10%) or more of issued
and outstanding stock of CareMatrix Corporation (provided, however, that at
the election of either CareMatrix or North Shore (which election must be
exercised within 30 days following notice of such cessation or the intention
to cause such cessation to occur) this Agreement shall not terminate upon
the occurrence of such event).
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10.0 Waiver
The failure or delay of any party at any time to require performance by
another party of any provision of this Agreement, even if known, shall not
affect the right of such party to require performance of that provision or
to exercise any right, power or remedy hereunder. Any waiver by any party
of any breach of any provision of this Agreement should not be construed as
a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under
this Agreement. No notice to or demand on any party in any circumstance
shall, of itself, entitle such party to any other or further notice or
demand in similar or other circumstances.
11.0 Severability
If any provision of this Agreement or any other agreement entered into
pursuant hereto is contrary to, prohibited by or deemed invalid under
applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full
force and effect so far as possible. If any provision of this Agreement may
be construed in two or more ways, one of which would render the provision
invalid or otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision shall have the
meaning which renders it valid and enforceable.
12.0 Notices
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including electronic
transmission) and shall be (as elected by the person giving such notice)
hand delivered by messenger or courier service, electronically transmitted,
or mailed (airmail if international) by registered or certified mail
(postage prepaid), return receipt requested, addressed to:
With a copy to:
CareMatrix Corporation Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
197 First Avenue Suite 500 East
Needham, MA 02194 777 South Flagler Drive
Attn: General Counsel West Palm Beach, Florida 33402-4587
Attn: Thomas P. Hunt, Esquire
With a copy to:
North Shore Health System Winston & Strawn
150 Community Drive 1400 L Street, N.W.
Great Neck, New York 11021 Washington, D.C. 20005
Attn: General Counsel Attn: Thomas L. Mills, Esquire
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or to such other address as any party may designate by notice complying
with the terms of this Section. Each such notice shall be deemed delivered
(a) on the date delivered if by personal delivery; (b) on the date of
transmission with confirmed answer back if by electronic transmission; and
(c) on the date upon which the return receipt is signed or delivery is
refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
13.0 Assignment
No party shall assign his or its rights and/or obligations under this
Agreement, other than to an Affiliate, without the prior written consent of
each other party to this Agreement. Notwithstanding the foregoing,
CareMatrix shall have the right to designate any Person which, directly or
indirectly, is controlled by Abraham D. Gosman, Michael M. Gosman or Andrew
D. Gosman, to act as its participant in any Joint Venture and/or serve as
the CareMatrix party to any Service Agreement, Management Agreement and/or
CareMatrix Lease.
14.0 Technology Ownership and Transfer
During the course of this Agreement and any Joint Venture by the parties to
this Agreement, the ownership and rights to use any and all technology,
proprietary information or intellectual property developed jointly by
employees of both parties shall be agreed to prior to engaging in such
initiatives by both parties. Any and all technology, proprietary
information or intellectual property developed solely by the employees of
one party shall be owned solely by that one party. However, if any such
solely owned technology, proprietary information or intellectual property
is required to be used by the other party in performance of a task with
respect to which the parties are engaged in a Joint Venture, the parties
shall provide for such use by entering into a mutually acceptable
royalty-bearing license agreement.
15.0 Applicable Law
This Agreement shall be construed in accordance with the laws of the State
of New York.
16.0 Jurisdiction and Venue
Any civil action or legal proceeding arising out of or relating to this
Agreement shall be brought in the courts of record of the State of New York
held in and for the County of Nassau or the United States District Court,
Eastern District of New York. Each party consents to the jurisdiction of
such court in any such civil action or legal proceeding and waives any
objection to the laying of venue of any such civil action or legal
proceeding in such court. Service of any court paper may be effected on
such party by mail, as provided in this Agreement, or in such other manner
as may be provided under applicable laws, rules of procedure or local
rules.
17.0 Relationship of the Parties.
17.1 As contemplated by this Agreement, either party may acquire,
develop, own, finance, manage and/or operate any Project by or
through one or more of its Affiliates;
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provided, however, that such party shall guarantee the fu11 and
timely payment and the full and timely performance of all sums,
duties and obligations whatsoever of such Affiliate with respect
to such Project pursuant to the terms of a Guaranty in the form
attached hereto as Exhibit F.
17.2 It is acknowledged and agreed that CareMatrix and North Shore,
and their related Affiliates, are at all times acting and
performing under this Agreement as independent contractors.
Unless and until a Joint Venture Agreement is entered into by
the parties with respect to a Project, nothing contained herein
shall be construed as making the parties hereto, or their
respective Affiliates, partners, joint venturers or any other
similar relationship and, upon execution of a Joint Venture
Agreement for a Project, the scope of such joint enterprise shall
be limited as provided therein. Neither CareMatrix or North
Shore, nor their respective Affiliates, shall, by entering into
and performing their obligations under this Agreement, become
liable for any obligations, liabilities or debts of the other
parties hereto except as specifically provided for under the
terms of this Agreement. Neither party shall be permitted to use
the name of the other party hereto without such party's prior
written consent other than in connection with the acquisition,
development, ownership, financing, management or operation of any
Project.
18.0 Compliance with Law.
The parties acknowledge and agree that it is their intent that all Projects
and transactions undertaken by them in accordance with the terms of this
Agreement be in compliance with all applicable local, state and federal
laws, rules, regulations and the like, now existing or enacted or
promulgated after the date of this Agreement (collectively, "Applicable
Law") but that such Project and/or transactions provide the parties with
the underlying economic and financial arrangements contemplated by this
Agreement. In the event any Applicable Law is interpreted by judicial
decision, regulatory agency or legal counsel of both parties in such a
manner as to indicate that the structure of any Project or transaction
contemplated by this Agreement may be in violation of such Applicable Law,
the parties shall negotiate in good faith to restructure this Agreement
and/or the definitive documents for such Project or transaction to the
maximum extent possible to comply with such Applicable Law while preserving
the underlying economic and financial arrangements between the parties as
contemplated by this Agreement. If such a restructuring is not possible,
neither party shall pursue such Project or transaction without the prior
written consent of the other.
19.0 Use of Names.
Neither party shall use the name of the other party or its Affiliates in
any manner without the prior written consent of such other party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
CareMatrix Corporation North Shore Health System
/s/ James M. Clary Jr. /s/ John S.T. Gallagher
By: James M. Clary Jr. By: John S.T. Gallagher
Its: EVP Its: President
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Exhibit A
Form of Development Agreement
(See Attached Copy)
<PAGE>
DEVELOPMENT AGREEMENT
Between
[CAREMATRIX OR PHYMATRIX AFFILIATE]
And
[APPLICABLE JOINT VENTURE]
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between [CAREMATRIX OR
PHYMATRIX AFFILIATE], a __________, with an office at __________, (the
"Developer"), and [APPLICABLE JOINT VENTUREl, with an office at __________, (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 _______________ project to be comprised of __________ (the
"Project") to be located in __________, New York 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 or has 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 __________, 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 the Property and is satisfied as to the site characteristics and
other 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
<PAGE>
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 that the Developer commences construction in
accordance with the terms of 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 Physical Completion (as hereinafter defined), 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 Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's 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 Physical Completion, 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 Owner's
Approvals in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's 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
Developer's Approvals and the Owner's Approvals (collectively, 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 Developer shall use its best efforts to
obtain, on behalf of the Owner, construction and permanent financing for the
Property, the Project, the Personal Property (as
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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 total costs
to construct the Project in accordance with the development budget), to pay the
full amount of the total costs to construct the Project in accordance with the
development budget. The Owner covenants that it will provide fully and in a
timely fashion all reasonable documentation required by the 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 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.
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 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 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 __________. 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
in compliance with its certificate of [limited partnership or incorporation] and
[partnership agreement or bylaws] and all applicable laws of the state of its
organization.
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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 Owner 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.
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 Owner. 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 "Architect Contract"). 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.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner 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
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 and delivery of the Basic Plans, the Owner, 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 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
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<PAGE>
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 the 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 cause the Project to be
constructed 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 the
"FF&E") required for the Project.
(b) In order to reduce the risk that the FF&E will be delivered prior to the
Closing contemplated herein, the Owner covenants that it shall approve the
FF&E as soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&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 the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
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 within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
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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 (as
hereinafter defined) 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 Access. The Owner shall have access to the
construction site while construction is in progress.
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).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of equipment and furnishings.
The Developer will cause the applicable contractor 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.
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Section 2.14 - 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 costs to construct the Project in accordance with the development
budget.
The Owner and the Developer also contemplate that the Property and the
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 the 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 the 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
Development Fee
Section 3.1 - Amount of Development Fee. The price to be paid by the Owner to
the Developer for development and design services rendered pursuant to this
Agreement (the "Development Fee") is _______________ Dollars ($__________).
Section 3.2 - Payment of Development Fee. The Development Fee shall be paid to
the Developer upon the closing of the Project Loan. In the event that, for any
reason, the total amount of the Development Fee is not so paid to the Developer,
then the balance shall accrue interest at a rate equal to the rate announced by
Fleet Bank of Massachusetts, NA, from time to time as its prime rate ("Prime
Rate") plus two percent (2%) (such balance, together with such interest, the
"Balance") and the Balance shall be repaid to the Developer on a priority basis
from the cash flow of the Project as set forth in that certain Agreement of
Limited Partnership of the Owner dated _______________,19__.
Section 3.3 - Form of Conveyance and Status of Title. The Personal Property
shall be conveyed by warranty bill of sale and may be subject to the mortgages
and security interests described in Section 2.14.
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 (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and materials
required to develop, construct and furnish the Project in accordance with
the Final Plans (except as otherwise expressly set forth herein);
(c) To 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 and 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.
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) and (ii) 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) Upon Physical Completion, the Developer shall deliver to the Owner, at
the Owner's option, duly executed waivers of mechanic's liens signed by each
contractor and subcontractor which provided labor or materials on the
Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) 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 applicable governmental agency(ies) at the date of Physical
Completion.
Section 4.2 - 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 Physical Completion.
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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 (to the extent then obtainable) and
current utility availability letters shall have been obtained by
_______________, 199__.
(b) Title. An Owner's title insurance policy 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.
(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.
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
written 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.
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ARTICLE VI
Additional Covenants of The Owner
Section 6.1 - Confidentiality. The Owner, its partners, affiliates,
agents, 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 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 6.2 - Provision of Further Information. The Owner 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. This Agreement, together with the other written
agreements between the parties executed prior to or concurrently herewith or
referenced herein, contain the entire understanding of the parties. 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 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
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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 other 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
_______________, Attention: _______________, 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 _______________, Attention: _______________, with a copy to
_______________ 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
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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 State of New York.
Dated this _____ day of __________ 199_ and executed under seal.
Witness: ___________________________________
________________________________ By: _______________________________
Name: Name:
Title:
___________________________________
________________________________ By: _______________________________
Name: Name:
Title:
12
<PAGE>
Exhibit B
Two Mile Exclusion Hospitals
North Shore University Hospital at Forest Hill
24
<PAGE>
Exhibit C
Five Mile Exclusion Hospitals
North Shore University Hospital, Manhasset
North Shore University Hospital at Glen Cove
North Shore University Hospital at Plainview
North Shore University Hospital at Syosset
Franklin General Medical Center
Staten Island University Hospital-North Division
Staten Island University Hospital-South Division
25
<PAGE>
Exhibit D
Ten Mile Exclusion Hospitals
Huntington Hospital
Stonybrook Hospital
Southside Hospital
26
<PAGE>
Exhibit E
Excluded Transactions
As to North Shore:
1. Long Island Jewish Medical Center/Parker Geriatric ("LIJ")
North Shore and LIJ are discussing a potential affiliation of the two
health systems. Parker Geriatric, an existing not-for-profit long term care
affiliate of LIJ, may become part of the combined system.
2. Episcopal Health System (EHS)
North Shore and EHS are discussing a potential affiliation of the two
health systems. EHS has existing non-for-profit long term care and continuing
care community affiliates that may become part of the combined system.
As to CareMatrix:
1. Hasset-Belfer Senior Housing ("HBSI")
CareMatrix and HBSI have affiliated to develop, manage, own and operate assisted
living and senior housing facilities in the area described on Exhibit E-1.
27
<PAGE>
Exhibit E-1
Hasset-Belfer Designated Area
(See attached Map)
28
<PAGE>
[map of Long Island]
<PAGE>
Exhibit F
Form of Guarantee
(See Attached Copy)
29
<PAGE>
GUARANTEE
To induce [INSERT NAME OF APPLICABLE AFFILIATE], a [INSERT TYPE OF ENTITY] (the
"Obligee") to enter into that or those certain [INSERT NAME(S) OF DOCUMENT(S) TO
BE ENTERED INTO] (individually, an "Agreement" and collectively, the
"Agreements") with [INSERT NAME OF APPLICABLE AFFILIATE], a [INSERT TYPE OF
ENTITY] (the "Obligor"), the undersigned guarantor (the "Guarantor") does
hereby absolutely and unconditionally guarantee the full and timely performance
of all duties and obligations whatsoever of the Obligor to the Obligee, whether
now existing or hereafter arising, under the Agreements and the full and timely
payment to the Obligee of all debts and liabilities whatsoever of the Obligor to
the Obligee, whether now existing or hereafter arising, under the Agreements and
agrees, in the event Obligor fails to fully and timely perform any of said
duties and obligations or fails to fully and timely pay any of said debts or
liabilities, to fully and timely perform and/or pay the same, and to pay any
reasonable fees, costs and expenses incurred with respect to or arising out of
such duties, obligations, debts or liabilities or any collateral therefore, any
reasonable fees, costs, liabilities or damages incurred by or awarded against
the Obligee in connection with any proceeding against the Obligor, the
Guarantor, any other guarantor or any collateral (including, without limitation,
all reasonable attorneys fees, costs and other legal expenses (including fees of
paraprofessionals such as paralegals, investigators, etc.) including those
incident to litigation and any appellate, bankruptcy and postjudgment
proceedings), any monies paid by the Obligee on account of taxes, wages,
insurance or to any other person as a result of this Guaranty or arising out of
or connected with the duties, obligations, debts or liabilities of the Obligor
(all such duties, obligations, debts, liabilities, costs, fees, expenses and
damages herein collectively called the "Obligations").
Additionally, the Guarantor specifically agrees that this Guarantee shall be a
continuing Guarantee of all duties, obligations, debts and liabilities of the
Obligor to the Obligee under the Agreements and it shall apply and be binding on
the Guarantor until all Obligations to the Obligee have been satisfied in full,
regardless of how long before or after the date hereof any of the Obligations
were or are incurred. The Guarantor further agrees that he, she or it shall not
become subrogated to any of the Obligee's rights in connection with the
Obligations, even if the Guarantor makes payments or performs duties or
obligations hereunder, nor shall the Guarantor have any interest in any of the
collateral securing any of the Obligations. The Guarantor subordinates all debts
and obligations now or hereafter owing by the Obligor to the Guarantor, and any
liens securing the same, to the Obligations and any liens securing any of the
Obligations. The Guarantor shall not be entitled to receive payment on, or
enforce, any such debts and liens during any period in which the Guarantor is in
default of its obligations hereunder.
The Guarantor hereby assents to all terms and agreements heretofore or hereafter
made by the Obligor with the Obligee and further agrees and consents that the
Obligee may, without in anyway releasing or affecting the liability of the
Guarantor hereunder and with all rights against
<PAGE>
the Guarantor being expressly reserved: exchange, release, or surrender any
collateral to the Obligor or to any other person; waive, release or subordinate
any security interest, in whole or in part, now or hereafter held as security in
any of the Obligations; substitute any collateral held as security for the
Obligations for other collateral of any kind, regardless of value; waive or
delay the exercise of any of its rights or remedies against the Obligor, any
other guarantor or any other person; release or agree not to sue any other
guarantor or any other person other than the Obligor or any collateral granted
as security for the Obligations; modify the terms of the Agreements; and apply
payments received from the Obligor, the Guarantor, or any other person, or from
any security, in whole or in part, to any of the Obligations, all as the Obligee
deems appropriate.
The Guarantor hereby specifically waives any and all defenses to any action or
proceeding brought to enforce this Guarantee or any part of this Guarantee,
either at law or in equity, except for defenses that Obligor may have against
the Obligee and the defense that the duty, obligation, debt or liability claimed
by the Obligee to be due has actually been performed for the benefit of or paid
to the Obligee. The Guarantor specifically, without limiting the foregoing in
any way, waives any right to claim that the Obligee has unjustifiably impaired
the collateral or released any other guarantor from its obligations and waives
any defenses with respect to any other acts or omissions of the Obligee which
change the scope of the Guarantor's risk.
The Guarantor hereby waives all notices whatsoever with respect to the
Obligations or any security therefor including, but without limitation, notice
of: the Obligee's acceptance of this Guarantee or its intention to act, or its
action, in reliance thereon; the present existence or future creation or
modification of the Agreements or any of the Obligations or any terms or amounts
thereof; any default by the Obligor, or other person; any disposition of
collateral; and the release of any guarantee or surety agreement (in addition to
this Guarantee), or the release of any guarantor, security, or surety for any of
the Obligations hereunder. The Guarantor also waives presentment, demand, and
notice of protest, dishonor and nonpayment in relation to any instrument
evidencing any of the Obligations, and any other demands and notices required by
law, except as such waiver may be expressly prohibited by law. The Guarantor
represents that he, she or it has independent means of obtaining financial
information about the Obligor, and that the Obligee has no obligation, either
prior to the execution of this Guarantee or at any time thereafter, to notify
the Guarantor of the Obligor's financial condition or of any event or occurrence
affecting the Obligor's financial condition. Nothing contained in this Guarantee
shall be considered a waiver by Obligor of any notice required under the
Agreements.
Should any of the Obligations not be performed or paid when due or should there
be any default under any document in connection therewith, the Obligee may sell,
assign or deliver or otherwise dispose of any property or security of the
Guarantor in the possession of the Obligee in the manner prescribed by law for
realizing upon collateral security upon default. The Guarantor hereby grants to
the Obligee a security interest under the New York Uniform Commercial Code all
such property or security of the Guarantor from time to time in the possession
of the Obligee, in order to secure the Guarantor's obligations hereunder.
2
<PAGE>
The liability of the Guarantor under this Guarantee is absolute and
unconditional, without regard to the liability of any other person, and shall
not in any manner be affected by reason of: (i) the failure of any other
guarantor to execute a guarantee; (ii) any action taken or not taken by the
Obligee, which action or inaction is herein consented and agreed to; (iii) any
delay in making demand on the Guarantor for satisfaction of its liability
hereunder; (iv) any delay in the Obligee enforcing, or the failure of the
Obligee to enforce, any rights or remedies against the Obligor or any other
party liable to the Obligee on account of the Obligations; or (v) any delay in
the Obligee seeking, or the failure of the Obligee to seek, the enforcement of
any remedies with respect to any security interest, lien or encumbrance granted
to the Obligee by the Obligor or any other party in connection with the
Obligations. All of the Obligee's rights and remedies shall be cumulative and
any failure of the Obligee to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time, and from time to time, thereafter.
This Guarantee shall be operative and binding upon the Guarantor and possession
of this Guarantee by the Obligee shall be conclusive evidence that this
Guarantee was not delivered in escrow or pursuant to any agreement that it
should not be effective until any conditions precedent or subsequent had been
complied with, unless at the time of receipt of this Guarantee the Obligee
delivers to the Guarantor a letter setting out any terms and conditions that may
affect the enforceability of this Guarantee.
The liability of the Guarantor hereunder shall continue until 90 days after this
Guarantee is marked "cancelled" by the Obligee and returned to the Guarantor.
Guarantor may not cancel the Guarantor's liability under this Guarantee and
hereby waives any right to do so.
Upon the filing of a petition in bankruptcy with respect to the Obligor, any
assignment for the benefit of creditors of the Obligor, or any other
circumstances necessitating the Obligee to file its claim against the Obligor,
the Guarantor agrees that, notwithstanding any stay, injunction or other
prohibition preventing the maturity, acceleration or collection of all or any
portion of the Obligations, the Obligations (whether or not then due and payable
by the Obligor) shall forthwith become due and payable by the Guarantor for
purposes of this Guarantee, on demand. The Obligations of the Guarantor
hereunder shall not be affected or impaired by the Obligee's omission or failure
to prove its claim against the Obligor. Notwithstanding that this Guarantee may
have been returned to the Guarantor and marked "cancelled" by the Obligee, the
Obligations of the Guarantor hereunder shall continue at all times for any
amounts guaranteed hereunder that were paid by the Obligor to the Obligee within
90 days after the date of cancellation of this Guarantee. If for any reason
whatsoever, including, without limitation, the bankruptcy of the Obligor, the
Obligee is not permitted to retain any amounts guaranteed hereunder that were
paid by the Obligor to the Obligee during said 90-day period, the Guarantor
shall be liable under this Guarantee for the amount of such payments as if this
Guarantee had never been cancelled and the Obligee shall be entitled to recover
such amounts from the Guarantor.
In the event the Obligor named herein is a corporation or a partnership, this
Guarantee shall cover all Obligations to the Obligee purporting to be made on
behalf of the Obligor by any
3
<PAGE>
officer, director, general partner or agent of the Obligor without regard to the
actual authority of such officer, director, general partner or agent. The term
"corporation" shall include cooperatives and associations of all kinds, and all
purported corporations, whether correctly and legally chartered and organized or
not. The term "partnership" shall include limited partnerships and general
partnerships.
The Guarantor agrees that this Guarantee shall be governed exclusively by the
laws of the State of New York.
The Guarantor further agrees to pay all costs of collection, including
reasonable attorneys' fees, costs and other legal expenses (including those
incident to appellate, bankruptcy or post-judgment proceedings) incurred by the
Obligee in attempting to enforce the Guarantor's liability under this Guarantee.
Any notice relative to this Guarantee shall be in writing and shall be deemed
delivered if delivered in person or if sent by registered mail, postage prepaid,
return receipt requested, as follows, unless such address is changed by written
notice hereunder:
(a) If to the Obligee: (b) If to the Guarantor:
This Guarantee shall inure to the benefit of the Obligee, its successors and
assigns, and to any person to whom the Obligee may grant an interest in any of
the Obligations, and shall be binding upon the Guarantor and his or her
respective heirs, personal representatives, successors and assigns.
In this Guarantee, the use of any gender shall be deemed to include all genders,
and the use of the singular shall include the plural and vice-versa, wherever it
appears appropriate from the context. The term "person" shall include natural
persons and corporations, partnerships, limited partnerships, trusts, estates
and all other artificial persons or entities.
If any part of this Guarantee is contrary to, prohibited by or deemed invalid
under any applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and affect so far as possible.
Any terms or statements contained herein which may be interpreted as being
ambiguous or misleading shall be strictly construed against the Guarantor and
for the enforcement of this Guarantee and the payment of the Obligations of the
Obligor to the Obligee. The Guarantor
4
<PAGE>
agrees to do, sign and execute all things, deeds and documents which the Obligee
may deem necessary or advisable for the protection of its rights hereunder.
The Guarantor hereby acknowledges and agrees that he, she or it has received and
reviewed a copy of this Guarantee and all documents referred to herein and that
he, she or it has received or has had an opportunity to have received the advice
of legal counsel in connection herewith and therewith. This Guarantee shall be
deemed and treated as being drafted jointly by the Guarantor and the Obligee. No
term, condition or provision of this Guarantee shall be construed more strictly
against the Guarantor or the Obligee because the Obligee, or its counsel, was
responsible for the physical preparation hereof.
This instrument covers all agreements between the parties hereto relative to
this Guarantee, and none of the parties shall be bound by any representations or
promises made by any person relative hereto which is not embodied herein. No
course of dealing, course of performance or trade usage, and no parol evidence
of any nature, shall be used to supplement or modify any terms hereof.
IN WITNESS WHEREOF, the Guarantor, intending to be legally bound
hereby, has duly executed this Guarantee as of the ______ day of __________,
199_.
[INSERT SIGNATURE BLOCK]
STATE OF _____________
COUNTY OF __________
The foregoing instrument was acknowledged before me this ______ day of
_______________, 199_, by
___________________________________________________________________, the
_______________ of _______________.
___________________________________________
Notary Public
My Commission Expires:
(NOTARIAL SEAL)
5
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 20th day of
December, 1996, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and Brazilian Court, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner").
WHEREAS, the Owner is the owner of a one hundred one (101) unit senior
residential hotel located in Palm Beach, Florida known as "The Brazilian Court
Hotel" (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
<PAGE>
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 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) 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
Owner 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,
or cause to be prepared and submitted, 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, or cause to be prepared and
submitted, 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 who 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; 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.
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
4
<PAGE>
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 (as hereinafter defined), 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") equal to
five (5%) percent of Net Revenues for the period commencing on the first day of
the month after the opening of the Facility for occupancy through the remainder
of the Term. 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 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 all of the Manager's home office personnel and overhead.
6
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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 all staff employed at the Facility by
the Owner, including, without limitation, all 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
Facility, and 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.
7
<PAGE>
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.
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.
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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 Term. This Agreement shall continue for an initial term (the
"Initial Term") commencing on the date which is twelve (12) months prior to the
anticipated date (as mutually agreed to by the Owner and the Manager) for the
opening of the Facility and continue for a period of ten (10) years after the
date on which the Facility is opened for occupancy. The Owner and Manager agree
to execute a certificate setting forth the date on which the Initial Term
commences promptly after such opening. The Term of this Agreement shall be
automatically renewed for three (3) additional five (5) year terms (the "Renewal
Terms)", unless the Manager sends the Owner written notice no less than ninety
(90) days prior to the Initial Term or the then applicable Renewal Term, as the
case may be. The Initial Term and the Renewal Terms being collectively referred
to herein as the "Term".
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; or
(iii) 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 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 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.
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.
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. 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 or to keep true, accurate and complete records.
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 provisions of this Section 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
10
<PAGE>
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. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
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 M. Kaufman, President
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: Brazilian Court, Inc.
197 First Avenue
Needham, MA 02194
Attention: President
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 or are hand delivered shall be deemed
received upon delivery or when delivery is refused 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
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<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.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Elizabeth Derrico By: /s/ James M. Clary
------------------------------ -------------------------------
Name: Elizabeth Derrico Name: James M. Clary
Title: EVP
WITNESS: BRAZILIAN COURT, INC.
By: /s/ Elizabeth Derrico By: /s/ Michael M. Gosman
------------------------------ -------------------------------
Name: Elizabeth Derrico Name: Michael M. Gosman
Title: Vice President
12
FACILITY LEASE
THIS FACILITY LEASE (this "Lease") is made as of the 16th day of
December, 1996, by and between The Annapolitan Care Center, Inc., a Maryland
corporation, having a business address at 84 North Old Mill Bottom Road,
Annapolis, Maryland 21401 ("Landlord"), and CareMatrix of Annapolis, Inc., a
Delaware corporation, a wholly-owned subsidiary of CareMatrix Corporation, a
Delaware corporation, having a business address at 197 First Avenue, Needharn,
Massachusetts 02194 ("Tenant"), and amends and restates in its entirety (i) the
Facility Lease between Landlord and Tenant, dated as of December 15, 1996 and
(ii) the First Amendment to that Facility Lease.
Landlord hereby leases to Tenant and Tenant hereby rents and leases
from Landlord all of Landlord'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") locally known as 84 North Old Mill Bottom Road containing
approximately seven and four tenths (7.4) acres of land;
(b) all buildings, structures, Fixtures (as hereinafter defined)
and other improvements of every kind including, but not limited to,
the Facility, 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, licenses, permits or approvals, entitlements,
privileges, rights of ingress and egress, and all other rights and
appurtenances of every nature and description now or hereafter
relating to or benefitting any or all of the Land and the Leased
Improvements;
(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
<PAGE>
defined) which are not permanently affixed to or incorporated in the
Leased Property (collectively, the "Fixtures");
(e) all Personal Property owned by Landlord which is located on
or about the Facility (as defined hereafter) at the Commencement Date.
"Personal Property" shall include, but shall not be limited to, the
following items; all supplies, resident records, resident trust
accounts, furniture, trade fixtures, appliances, equipment, beds,
nursing equipment, food service preparation and distribution
equipment, housekeeping equipment, maintenance equipment, activities
equipment, therapy equipment, policy and procedure manuals, dietary
menus, contracts and forms promulgated by Landlord, and in-service
training materials, as determined by an inventory conducted by the
parties prior to the Commencement Date and as set forth in EXHIBIT B
attached hereto and made a part hereof. Except as specifically
provided for herein in Section 10, Personal Property shall not include
any of the following: all of Landlord's ownership interest in and
rights to the accounts receivable from the operation of the Leased
Property as they exist at the Commencement Date; Landlord's cash and
cash equivalents, including, but not limited to, any bank accounts,
reserves or escrowed funds for the repair, maintenance and/or
replacement of all or any portion of the Leased Property (by whomever
held); all prepayments of the Contracts (as hereinafter defined)
and/or insurance on the Leased Property prorated as of the
Commencement Date; all insurance on the Leased Property; all refunds
or reimbursements of whatever nature or description, including
deposits and escrowed funds, which relate to, or are attributable to,
or otherwise paid during, the period prior to the Commencement Date;
all amounts of any nature or description related to any claim, dispute
or litigation to the extent such dispute, claim or litigation is
related to the period prior to the Commencement Date; proprietary
materials of Landlord respecting its ownership and operation of the
Facility prior to the Commencement Date, including, but not limited
to, internal financial information.
1. REFERENCE DATA.
Each of the capitalized terms used in this Lease shall have the meaning
set forth opposite such term below:
Accreditation Body: CARF, JCAHO, Governmental Authorities, and all other
Persons having or claiming jurisdiction over
the accreditation, certification, evaluation
or operation of the Facility.
Broker: None.
CARF: The Commission on Accreditation of Rehabilitation
Facilities.
2
<PAGE>
Champus: The Civilian Health and Medical Program of the Uniform
Service, a program of medical benefits covering retirees
and dependents of members or former members of a uniformed
service provided, financed and supervised by the United
States Department of Defense and established by 10 U.S.C.
[sec.][sec.]1071 et seq.
Commencement Date: If the approval of no Governmental Authority is required
for the consummation of this Lease and the operation of the
Facility by the Tenant, the "Commencement Date" shall be
February 1, 1997. If the approval of any Governmental
Authority is required for the consummation of this Lease
and the operation of the Facility by the Tenant, the
"Commencement Date" shall be the first business day
following the date upon which all such approvals, permits
or licenses required by any Governmental Authority shall
have become final upon terms substantially similar to those
approvals, permits or licenses which the Landlord has
obtained for the operation of the Facility by it.
Contracts: All agreements (including, without limitation, Provider
Agreements, if any, and Resident 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,
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 the Tenant or entered into by the
Tenant with any third Person.
Excess Gross
Revenues: Gross Revenues in excess of the Monthly Revenue
Threshold Amount.
Facility: The fully licensed domiciliary care facility consisting of
60 assisted living beds and 24 specialty care/Alzheimer
beds constructed on the Land (together with related parking
and other amenities).
3
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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 actually received by reason of
the operation of the Leased Property, either directly or
indirectly received by the Tenant, including, without
limitation, all resident revenues received 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) all proper resident billing credits and adjustments,
(ii) 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,
(iii) the cost of any federal, state or local governmental
program imposed specifically to provide or finance
indigent patient care (other than Medicare, Medicaid
and the like), and
(iv) deposits refundable to residents of the Facility.
4
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HUD: The United States Department of Housing and Urban
Development.
Impositions: All real estate taxes, charges, and assessments,
extraordinary as well as ordinary, levied, imposed or
assessed for a particular fiscal year during the Term of
this Lease by Governmental Authorities upon or attributable
to the Leased Property.
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.
Insured Mortgage: A mortgage, indenture or deed of trust securing
notes, bonds, or other credit instruments which create a
first priority lien against the Leased Property and which is
insured by HUD pursuant to 12 U.S.C. [sec.]1715(w) or any
successor statute thereto.
JCAHO: The Joint Commission on Accreditation of Health Care
Organizations.
Landlord's
Mailing
Address: The Annapolitan Care Center, Inc.
c/o Robert J. Test
5845 Richmond Highway, Suite 300
Alexandria, VA 22303
Lease Year: A period of twelve (12) consecutive calendar months
commencing on the Commencement Date or the first day of
the month in which the Commencement Date occurs if the
Commencement Date is any day other than the first day of
a month, and then each consecutive twelve (12) month
period occurring thereafter during the Term of this Lease.
5
<PAGE>
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 assisted living licensing statutes,
ordinances, by-laws, codes, rules and regulations), whether
now or hereafter enacted, promulgated or issued by any
Governmental Authority, affecting the Tenant, 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.
Managed
Care Plans: All health maintenance organizations, preferred provider
organizations, individual practice associations,
competitive medical plans, and similar arrangements.
Medicaid: The medical assistance program established by Title XIX of
the Social Security Act (42 U.S.C. [sec.][sec.]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
U.S.C. [sec.][sec.] 1395 et seq.) and any statute succeeding
thereto.
Monthly Revenue
Threshold Amount: For the period commencing on the first day of the month in
which the sixth month anniversary of the Commencement Date
occurs and ending on the day of the month immediately prior
to the month in which the thirtieth month anniversary of the
Commencement Date occurs, the Monthly Revenue Threshold
Amount shall be Two Hundred Thirty Five Thousand Dollars
($235,000.00) plus five times (5x) the Tenant's Additional
Contribution to the Reserve Account. For the period
commencing on the first day of the month in which the
thirtieth month anniversary of the Commencement Date occurs
and thereafter for the remainder of the Term, the Monthly
Revenue Threshold Amount shall be Two Hundred Twenty Five
Thousand Dollars ($225,000.00) plus five times (5x) the
Tenant's Additional Contribution to the Reserve Account.
6
<PAGE>
Officer's
Certificate: A certificate of the Tenant signed on behalf of the Tenant
by the Chairman of the Board of Directors, the President,
any Vice President or the Treasurer of the Tenant, or
another officer authorized to so sign by the Board of
Directors or By-Laws of the Tenant, 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.
Permitted Use: The use of the Facility as a domiciliary care facility
consisting of sixty (60) assisted living units and
twenty-four (24) specialty care/Alzheimer's units or such
additional number of units as may hereafter be permitted
under this Lease or such ancillary uses as are permitted by
law.
Person: Any individual, corporation, general 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.
Provider
Agreements: All participation, provider and reimbursement agreements or
arrangements now or hereafter in effect for the benefit of
the Tenant 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 Tenant's or
such sublessee's participation in any Third Party Payor
Program.
Rent: Collectively, the Base Rent, the Additional Rent, the
Additional Charges and all other sums payable under this
Lease.
Resident
Admission
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.
7
<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).
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 Tenant and used
in connection with the operation of the Leased Property.
Tenant's Additional
Contributions to
Reserve Account: As defined in Section 10.3.
Tenant's
Mailing Address: 197 First Avenue
Needham, MA 02194
Attn: Robert M. Kaufman, President
James M. Clary III, Esq.
Third Party
Payor Programs: Collectively, all Third Party Payor Programs in which the
Tenant 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.
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2. LEASE TERM; EXTENSIONS.
2.1 Term. The term of this Lease shall be for a period of five (5)
years commencing on the Commencement Date and ending on the last day of the
month immediately prior to the month in which the fifth (5th) anniversary of the
Commencement Date occurs (the "Term").
2.2 Extension Rights. Provided there is not then an Event of Default
hereunder or at the commencement of the relevant Option Term, Tenant shall have
the right to extend the Term for seven (7) five-year extension periods
(collectively, the "Option Terms" and individually, an "Option Term") upon the
following terms and conditions:
2.2.1 Tenant must notify Landlord of its election to extend
the Term for each of the Option Terms on or before one hundred eighty (180) days
prior to the date on which the original Term or then current Option Term, as the
case may be, expires.
2.2.2 Tenant shall only have the right to extend the Term for
the fifth, sixth and seventh Option Terms if the deed of trust or mortgage
creating a lien against the Leased Premises of record at the time the option is
exercised is an Insured Mortgage. If such mortgage is not an Insured Mortgage at
the time such option is exercised, Tenant shall not have the option to extend
for such Option Term.
2.2.3 All provisions of this Lease shall remain in effect
during each of the Option Terms except the right to extend as set forth in this
Section 2.2, it being agreed that there are no further rights of extension after
the second Option Term. Unless expressly stated herein to the contrary, all
references in this Lease to the "Term" shall include the Option Terms when and
if Landlord receives Tenant's notice of election to extend the Term as herein
provided.
3. RENT.
3.1 Base Rent. Tenant shall pay to Landlord rent ("Base Rent") equal to
Seven Hundred Seventy Four Thousand and 00/100 Dollars ($774,000.00) per year,
payable in advance on the first day of each calendar month during the Term in
equal monthly installments of Sixty Four Thousand Five Hundred and 00/100
Dollars ($64,500.00).
3.2 Additional Rent. In addition to the Base Rent, Tenant shall pay to
Landlord additional rent (the "Additional Rent") in an amount equal to twenty
percent (20%) of Excess Gross Revenues for each calendar year during the Term.
Additional Rent shall accrue commencing on the Commencement Date, and shall be
payable during the Term, monthly in arrears, commencing on July 15, 1997 and
there shall be an annual reconciliation as provided below.
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3.3 Calculation and Payment of Additional Rent; Annual Reconciliation.
3.3.1 Estimates and Payments. Commencing on January 1, 1998,
Additional Rent to be paid during each calendar year during the Term shall be
estimated by Tenant at the beginning of each calendar year for which it is
payable (and in no event shall such estimate be less than the Additional Rent
payable for the prior calendar year), and shall be paid monthly in arrears based
on such estimate, to be adjusted at the end of each such year based on the
actual Excess Gross Revenues during that calendar year. In addition, on the
Commencement Date, Tenant shall estimate the Additional Rent to be paid for the
period from (and including) the Commencement Date through (and including)
December 31, 1997. Additional Rent due for any portion of any calendar year
shall be prorated accordingly. Notwithstanding the foregoing, on a monthly
basis, with the prior consent of Landlord, Tenant may also adjust the monthly
payments of Additional Rent to be made hereunder based upon a comparison of (a)
the actual Gross Revenues generated by the Leased Property during the applicable
month and (b) the original estimate of Additional Rent for the applicable
calendar year prepared by Tenant and the amount of Additional Rent already paid
by Tenant pertaining to the applicable calendar year.
3.3.2 Annual Statement. In addition, on or before the first
day of April of each year following any calendar year for which Additional Rent
is payable hereunder, Tenant shall deliver to Landlord an Officer's Certificate,
reasonably acceptable to Landlord and certified by the chief financial officer
of Tenant, setting forth the Gross Revenues for the immediately preceding
calendar year.
3.3.3 Deficits. If the Additional Rent, as finally determined
for any calendar year (or portion thereof), exceeds the sum of the monthly
payments of Additional Rent previously paid by Tenant with respect to said
calendar year, within thirty (30) days after such determination is required to
be made hereunder, Tenant shall pay such deficit to Landlord and, if the deficit
exceeds ten percent (10%) of the Additional Rent which was previously paid to
Landlord with respect to said calendar year, then Tenant shall also pay Landlord
interest on such deficit at the rate of twelve percent (12%) per annum from the
applicable monthly date that such payment should have originally been made by
Tenant to the date that Landlord receives such payment.
3.3.4 Overpayments. If the Additional Rent, as finally
determined for any calendar year (or portion thereof), is less than the amount
previously paid with respect thereto by Tenant, and if no Event of Default
exists, Tenant shall notify Landlord either (a) to pay to Tenant an amount equal
to such difference or (b) to grant Tenant a credit against Additional Rent next
coming due in the amount of such difference.
3.3.5 Final Determination. The obligation to pay Additional
Rent shall survive the expiration or earlier termination of the Term (as to
Additional Rent payments that are due and payable with respect to periods prior
to the expiration or earlier termination of the Term and during any periods that
Tenant remains in possession of the Leased Property), and a final
reconciliation.
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3.4 Confirmation and Audit of Additional Rent.
3.4.1 Maintain Accounting Systems. Tenant shall utilize, or
cause to be utilized, an accounting system for the Leased Property on a cash
basis which will accurately record all Gross Revenues. Tenant shall retain, for
at least three (3) years after the expiration of each calendar year (and in any
event until the final reconciliation described above has been made), adequate
records conforming to such accounting system showing all Gross Revenues for such
calendar year.
3.4.2 Audit By Landlord. Landlord, at its own expense except
as provided hereinbelow, shall have the right from time to time to have its
accountants or representatives audit the information set forth in the Officer's
Certificate referred to in Section 4.2 and in connection with such audits, to
examine Tenant's records with respect thereto (including supporting data, income
tax and sales tax returns), subject to any prohibitions or limitations on
disclosure of any such data under applicable law or regulations, 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 any Facility-patient relationship and any physician-patient
privilege.
3.4.3 Deficiencies and Overpayments. If any such audit
discloses a deficiency in the reporting of Gross Revenues and either Tenant
agrees with the result of such audit or the matter is compromised, Tenant shall
forthwith pay to Landlord the amount of the deficiency in Additional Rent which
would have been payable by it had such deficiency in reporting Gross Revenues
not occurred, as finally agreed or determined, together with interest on the
Additional Rent which should have been payable by it, calculated at the rate of
twelve percent (12%) per annum, from the date when said payment should have been
made by Tenant to the date that Landlord receives such payment. Notwithstanding
anything to the contrary herein, with respect to any audit that is commenced
more than two (2) years after the date Gross Revenues for any calendar year are
reported by Tenant to Landlord, the deficiency, if any, with respect to
Additional Rent shall bear interest as permitted herein only from the date such
determination of deficiency is made, unless such deficiency is the result of
gross negligence or willful misconduct on the part of Tenant. If any audit
conducted for Landlord pursuant to the provisions hereof discloses that (a) the
Gross Revenues actually received by Tenant for any calendar year exceed those
reported by Tenant by more than ten percent (10%), Tenant shall pay the
reasonable cost of such audit and examination or (b) Tenant has overpaid
Additional Rent, and if no Event of Default exists, Landlord shall so notify
Tenant and Tenant shall direct Landlord either (i) to refund the overpayment to
Tenant or (ii) grant a credit against Additional Rent next coming due in the
amount of such difference.
3.4.4 Survival. The obligations of Landlord and Tenant
contained in this Section shall survive the expiration or earlier termination of
this Lease
3.5 Purchase of Personal Property. The Landlord shall cause Robert J.
Test ("Mr. Test") to convey to the Tenant for the purchase price of Three
Hundred and Twenty-Five
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Thousand Dollars all personal property currently used in connection with the
operation of the Facility which is not owned by the Landlord, nor subject to the
lien of the HUD Mortgage (as hereinafter defined).
3.6 Limited Setoff Rights. In the event (a) the Landlord fails to make
any payments to HUD under either the HUD Mortgage or the Regulatory Agreement
(as defined in Section 10.1 below) or the Tenant is otherwise required to make
payments under Section 10.5 below beyond those payments which the Tenant is
expressly and specifically required to make pursuant to sections of the Lease
other than said Section 10.5 or (b) the Landlord has failed to make payment(s)
to any other third party in connection with the Leased Property such that Tenant
reasonably determines its use and enjoyment of the Leased Property may be
impaired in some material way by Landlord's failure to make payment(s), and the
Tenant makes any such payment(s) described in (a) or (b) above, the Tenant may
thereafter setoff against the Rent next coming due the full amount of any
payment(s) so made by the Tenant. However, the Tenant will give the Landlord at
least fifteen (15) days prior notice of its intention to make any such
payment(s). Further, in the event the Tenant reasonably determines that such
right of setoff is not available to it in any practical sense (for example, the
exercise of the right of setoff will simply create other defaults under the HUD
Mortgage or Regulatory Agreement and so the Tenant will not be able to
effectively preserve the Lease by making such payments and then exercising its
setoff rights), then the Tenant may elect not to make any of the payment(s)
described above and terminate this Lease as an alternative to making such
payments.
4. ADDITIONAL CHARGES.
4.1 Additional Charges. Subject to the rights to contest as set forth
below, in addition to Base Rent and Additional Rent, the Tenant will also pay
and discharge as and when due and payable (a) 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; (b) all charges for
electricity, power, gas, oil, water, telephone and other utilities used in the
Leased Property during the Term; and (c) all other amounts, liabilities and
obligations which the Tenant assumes or agrees to pay under this Lease
(collectively, "Additional Charges"). To the extent that the Tenant pays any
Additional Charges to the Landlord pursuant to any requirement of this Lease,
the Tenant shall be relieved of its obligation to pay such Additional Charges to
any other Person to which such charges would otherwise be due. Impositions shall
be prorated should this Lease be in effect with respect to only a portion of any
fiscal year to which such Impositions relate.
4.2 Installment Election. 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 Tenant 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 (unless Tenant is making monthly
deposits with the Landlord in accordance with Section 4.6 hereof), shall pay
such installments during the Term hereof (subject to the Tenant's right to
contest set forth below)
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as the same respectively become due and before any fine, penalty, premium,
future interest or cost may be added thereto.
4.3 Refunds. Any refund due from any taxing authority in respect of any
Imposition paid by the Tenant shall be paid over to or retained by the Tenant.
4.4 Protest. Upon giving notice to the Landlord, at the Tenant's option
and sole cost and expense, the Tenant may contest, protest, appeal or institute
such other proceedings as the Tenant may deem appropriate to effect a reduction
of any Imposition and the Landlord, at the Tenant's cost and expense as
aforesaid, shall cooperate in a reasonable manner with the Tenant in connection
with such protest, appeal or other action.
4.5 Notice of Impositions. The Landlord shall give prompt notice to the
Tenant of all Impositions payable by the Tenant hereunder of the Landlord at any
time has knowledge, but the Landlord's failure to give any such notice shall in
no way diminish the Tenant's obligation hereunder to pay such Impositions.
4.6 Escrow Account for Impositions and Insurance Premiums.
4.6.1 Tenant shall deposit with Landlord on the first day of
each calendar month during the Term, actual amounts if known, and, if not known,
then as reasonably estimated by Landlord to be sufficient to pay in full the
amounts of all Impositions and the premiums for the insurance required in
Section 17 hereof (the "Insurance Premiums") at least thirty (30) days prior to
the due date of such Impositions and Insurance Premiums.
4.6.2 The sums deposited by Tenant hereunder shall be held by
Landlord in a segregated interest bearing account and shall be applied in
payment of such Impositions and Insurance Premiums prior to the final date such
items can be paid without interest or penalty, provided Tenant shall timely
furnish to Landlord bills for such Impositions and Insurance Premiums.
4.6.3 If for any reason the sums on deposit with Landlord
shall not be sufficient to pay an Imposition or Insurance Premium as required
herein, then Tenant shall, within ten (10) days after demand by Landlord,
deposit sufficient sums so that Landlord may pay such Imposition or Insurance
Premium in full, together with any penalty and interest thereon. Landlord may
change its estimate of Impositions or Insurance Premiums 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 reason, in which event Tenant shall deposit with
Landlord within ten (10) days after demand the amount of any excess of the
deposits which would theretofore have been payable under the revised estimate
over the sums actually deposited. The excess of any deposits made by Tenant over
the payments actually made by Landlord for Impositions or Insurance Premiums
shall continue to be held by Landlord for subsequent payments of Impositions or
Insurance Premiums. Upon the expiration of the Term of this Lease, any sums held
by Landlord hereunder shall be refunded to Tenant.
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4.7 Net Lease. The Rent shall be paid absolutely net to the Landlord,
so that this Lease shall yield to the Landlord the full amount of the
installments of Base Rent and the payments of Additional Rent and Additional
Charges throughout the term.
5. WARRANTIES AND COVENANTS.
5.1 Landlord Warranties. Landlord represents and warrants to Tenant as
of the date hereof and as of the Commencement Date the following:
(a) Landlord is duly organized and a validly existing corporation in
good standing in the State of Maryland and is qualified to do business in the
State of Maryland. Landlord has full power and authority to execute and delivery
this Lease, and to carry on its business as presently conducted.
(b) Landlord has the complete and unrestricted power to enter into this
Lease and perform its obligations hereunder. The Lease when executed and
delivered by Landlord, constitutes the valid and legally binding obligation of
Landlord, enforceable against Landlord in accordance with its term; subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and (ii) the exercise of judicial
discretion in accordance with general principles of equity.
(c) To the best information, knowledge and belief of Landlord, there is
no deficiency (or defect) in or relating to the Leased Property which adversely
effects (or with the passage of time, would adversely effect) the Facility
licenses or the certification of the Facility, and all necessary utilities,
including without limitation, gas, electricity, telephone, sewer and water have
been installed in the Facility and all such utilities are currently in service
and adequate for the operation of the Facility.
(d) Landlord is not a party to any litigation, proceeding or
controversy pending before any court or administrative agency or, to Landlord's
knowledge, threatened against Landlord, nor is Landlord in receipt of any
inquiry, notice, citation, investigation or complaint from any governmental
agency or department, which might materially adversely affect Landlord's ability
to enter into and/or perform its obligations under this Lease, nor does Landlord
have any knowledge of any occurrence or condition that might properly constitute
a basis for such litigation, proceeding or controversy or such inquiry, notice,
citation, investigation or complaint, as the case may be other than those items
listed on EXHIBIT C attached hereto and made a part hereof.
(e) Neither the execution or delivery, nor performance of this Lease or
the other agreements contemplated herein in accordance with their respective
terms, does or will, after the giving of notice, the lapse of time or otherwise,
conflict with, result in a breach of, or constitute a default under, the Charter
or bylaws of Landlord or to the knowledge of Landlord constitute a default under
any Contract or other agreement to
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which Landlord is a party (except those for which consent has been or will be
obtained by the Commencement Date) or by which Landlord is bound, or of any
federal or state law, statute, ordinance, rule or regulation, or of any court or
administrative order or process.
(f) Landlord is not a party to, subject to or bound by, any agreement,
judgment, order, writ, injunction or decree of any court or governmental body
which could prevent the consummation of the transactions contemplated herein. To
the knowledge of Landlord, no applicable federal, state or local law or
ordinance prevents or prohibits the consummation of the transactions
contemplated herein or necessitates any filing or the taking of any action by
Landlord, other than actions that have been or will be taken prior to the
Commencement Date, as contemplated herein.
(g) Each of the Contracts are in full force and effect, and, to the
information, knowledge and belief of Landlord, no default, or event which with
notice or passage of time would constitute a default, has occurred and is
continuing thereunder. Landlord has delivered true and correct copies of the
Contracts and any amendments thereto to Tenant.
(h) Landlord has provided to Tenant accurate information regarding all
of the employees of Landlord at the Facility and a schedule of their respective
job descriptions, rates of pay, length of employment and a description of their
respective employee benefits. There are no accrued pension plan or other
benefits for any employees of Landlord at the Facility, nor are there any labor
union contracts or collective bargaining agreements at or relating to the
Facility. Landlord has not received any notice that a representative petition
has been filed by any labor organization with the National Labor Relations Board
relating to the employees of the Facility, nor is the administrator of the
Facility aware of any union organizing activity at or relating to the Facility.
(i) Landlord has not, nor to Landlord's information, knowledge and
belief, has any other person ever caused or permitted any Hazardous Materials to
be placed, held, located or disposed of on, under or at the Facility and to
Landlord's information, knowledge and belief, no real property constituting a
portion of the Facility or the Leased Property has ever been used as a dump site
or storage site (whether permanent or temporary) for any Hazardous Materials.
Landlord has or has contracted for services of third parties to properly dispose
of and stored all Hazardous Materials used or handled in the conduct of its
business and Landlord has not disposed of, stored, handled or used any Hazardous
Materials in any manner which would give rise to or result in any violation of
any Legal Requirement.
(j) The Facility has all licenses for the operation of a domiciliary
care facility.
(k) Landlord has filed (or will file) all sales and use tax, provider
tax and unemployment tax returns required to be filed by Landlord relating to
the Facility for all taxable periods ending on or before the Commencement Date
and Landlord has paid (or
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will timely pay) all such taxes for which Landlord may be statutorily liable.
Landlord agrees to file all tax returns required to be filed with respect to its
operation of the Facility prior to the Commencement Date and shall pay any and
all taxes due as a result thereof.
5.2 Tenant's Warranties. Tenant hereby represents and warrants to
Landlord as of the date hereof and as of the Commencement Date the following:
(a) Tenant is a duly organized and validly existing corporation, in
good standing in the State of Delaware and is qualified to do business in the
State of Maryland. Tenant has full power and authority to execute and deliver
this Lease and to carry on the business contemplated by this Lease.
(b) Tenant has the complete and unrestricted corporate power to enter
into this Lease and perform its obligations hereunder. The Lease, when executed
and delivered by Tenant, constitutes the valid and legally binding obligation of
Tenant, enforceable against Tenant in accordance with its terms; subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and (ii) the exercise of judicial
discretion in accordance with general principles of equity.
(c) Neither the execution or delivery, nor performance of this Lease or
the other agreements contemplated herein in accordance with their respective
terms, does nor will, after the giving of notice, the lapse of time or
otherwise, conflict with, result in a breach of, or constitute a default under,
the charter or bylaws of Tenant or to the knowledge of Tenant constitute a
default under any contract or other agreement to which Tenant is a party (except
those for which consent has been or will be obtained by the Commencement Date)
or by which Tenant is bound, or of any federal or state law, statute, ordinance,
rule or regulation, or of any court or administrative order or process.
(d) Tenant is not a party to, subject to or bound by, any agreement,
judgment, order, writ, injunction or decree of any court or governmental body
which could prevent the consummation of the transactions contemplated herein. To
the knowledge of Tenant, no applicable federal, state or local law or ordinance
prevents or prohibits the consummation of the transactions contemplated herein
or necessitates any filing or the taking of any action by Tenant, other than
actions that have been or will be taken prior to the Commencement Date, as
contemplated herein.
6. [Intentionally Omitted.]
7. UTILITIES; TRASH REMOVAL.
7.1 Tenant's Direct Payment to Utility Providers. Tenant shall pay
directly to the relevant provider, as they become due, all bills for utilities
(whether they are used for furnishing heat or other purposes) that are furnished
directly to the Leased Property.
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7.2 Tenant's Obligations Regarding Additional Utilities. Landlord
warrants and represents to Tenant that the following utilities are presently
available to the Leased Property: water, sewer, gas, electricity, cable
television and telephone. Landlord shall have no obligation to provide utilities
or equipment other than the utilities and equipment within the Leased Property
as of the Commencement Date of this Lease. In the event Tenant requires
additional utilities or equipment or utilities of greater capacity, the
installation and maintenance thereof shall be Tenant's sole obligation and shall
be performed at Tenant's sole cost and expense, provided that such installation
shall be subject to the prior written consent of Landlord.
7.3 Trash Removal. Trash generated in the ordinary course of business
by Tenant shall be deposited in dumpster(s) and the cost of the dumpster(s) and
removal of trash from the dumpster(s) shall be the responsibility of Tenant. It
shall be the sole responsibility of Tenant to segregate any and all hazardous
and/or medical waste from the trash deposited in such dumpster and to have such
hazardous and/or medical waste also removed at its own cost and expense from the
Leased Property by a licensed contractor in accordance with all applicable laws
as more fully detailed in Section 9.5 below.
8. BROKERAGE.
Tenant warrants that it has dealt with no broker in connection with
this Lease other than the Broker or Brokers named in Section 1 above and agrees
to defend and indemnify Landlord against any claim, loss, damage, cost or
expense (including, without limitation, reasonable attorney's fees) incurred by
Landlord on account of any breach of such warranty. Landlord warrants that it
has dealt with no broker in connection with the consummation of this Lease
except the Broker or Brokers named in Section 1 above, and agrees to indemnify
Tenant against any claim, loss damage, cost or expense (including, without
limitation, reasonable attorney's fees) incurred by Tenant on account of any
breach of such warranty.
9. USE OF LEASED PROPERTY; COMPLIANCE WITH LAWS AND FIRE INSURANCE REQUIREMENTS;
HAZARDOUS MATERIALS.
9.1 Use of Leased Property. Tenant acknowledges that no trade or
occupation shall be conducted in the Leased Property or use made thereof other
than the Permitted Use.
9.2 Compliance with Laws. Tenant, at its sole expense, shall comply
with all laws, rules, orders and regulations of federal, state, county, and
municipal authorities (collectively, "Governmental Regulations"), and with any
direction of any public officers pursuant to law, which impose any duty upon
Landlord or Tenant with respect to the Leased Property.
9.3 No Nuisance or Other Harmful or Disruptive Activity. Tenant shall
not perform any acts or carry on any practices which may injure any part of the
Leased Property, the Property or common areas, violate any certificate of
occupancy affecting the same, constitute a public or private nuisance or a
menace to other tenants on the Property, produce undue noise, create obnoxious
fumes or other odors.
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9.4 Compliance with Fire Insurance Requirements. Tenant shall not
permit any use of the Leased Property which will make voidable any insurance on
the Leased Property or which shall be contrary to any law.
9.5 Hazardous Materials. Tenant shall not permit the emission, release,
threat of release or other escape of any Hazardous Materials so as to adversely
affect in any manner, even temporarily, any element or part of the Leased
Property. Tenant shall not use, generate, store or dispose of Hazardous
Materials in or about the Leased Property, or dump, flush or in any way
introduce Hazardous Materials into sewage or other waste disposal systems
serving the Leased Property (nor shall Tenant permit or suffer any of the
foregoing), in any manner not in full compliance with all applicable federal,
state and local statutes, laws, codes, ordinances, by-laws, rules and
regulations for the use, generation, storage and disposal of Hazardous
Materials.
Tenant will indemnify, defend and hold Landlord harmless from and
against all claims, loss, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements, diminution in the value of the
Leased Property, costs incurred in connection with any investigation of site
conditions or any clean-up or remedial work required by any federal, state or
local governmental agency) incurred as a result of any breach of Tenant's
covenants in the first paragraph of this Section by Tenant or Tenant's
contractors, licensees, invitees, agents, servants or employees. Without
limiting the foregoing, if the presence of any Hazardous Materials in, on or
under the Leased Property caused or permitted by Tenant results in any
contamination of the Leased Property or the Property, Tenant shall promptly take
all actions at its sole expense as are necessary to return the Leased Property
to the condition existing prior to the introduction of any such Hazardous
Material by Tenant, provided that Landlord's approval of such action shall first
be obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect on the Leased Property.
Landlord will indemnify, defend and hold harmless Tenant from and
against all claims, loss, cost and expenses (including, without limitation,
reasonable attorneys fees and disbursements) incurred by Tenant as a result of
Hazardous Materials existing in, on or under the Leased Property as of the date
of this Lease.
The obligations of Tenant and Landlord in this Section shall survive
the expiration or earlier termination of this Lease and any transfer of title to
the Leased Property, whether by sale, foreclosure, deed in lieu of foreclosure
or otherwise.
For purposes of this Lease, "Hazardous Materials" means, collectively,
any animal wastes, medical waste, blood, biohazardous materials, hazardous
waste, hazardous substances, pollutants or contaminants, oils, radioactive
materials, asbestos in any form or condition, or any pollutant or contaminant or
hazardous, dangerous or toxic chemicals, materials or substances within the
meaning of any applicable federal, state or local law, regulation, ordinance or
requirement relating to or imposing liability or standards of conduct concerning
any such substances or materials on
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account of their biological, chemical, radioactive, hazardous or toxic nature,
all as now in effect or hereafter from time to time enacted or amended.
10. HUD-RELATED PROVISIONS. For as long as the Regulatory Agreement (defined
below) and the HUD Mortgage (defined below) remain in effect with respect to the
Leased Property, the following terms and conditions shall be part of this Lease
(although the second sentence of Section 10.4 should continue in effect until
satisfied by Landlord):
10.1 Regulatory Agreement. The Landlord has executed a Regulatory
Agreement with HUD dated June 30, 1994, attached hereto as EXHIBIT D and Tenant
and HUD will also execute a Regulatory Agreement relating to the Leased Property
(collectively, the "Regulatory Agreement") which is hereby incorporated into
this Lease. In the event of any inconsistency between the terms of this Lease
and the Regulatory Agreement, the terms of the Regulatory Agreement supersede
and control the terms of this Lease. The Landlord agrees to continue to be
obligated by and to fully comply with the Regulatory Agreement executed by
Landlord, any deed of trust or mortgage currently encumbering the Leased
Property in favor of HUD (the "HUD Mortgage"), and all applicable Federal
Housing Authority laws, statutes, rules, regulations, orders and decrees.
10.2 Landlord's Contribution to the Reserve Account. The Landlord
represents that as of the Commencement Date, it shall have funded no less than
Sixty Eight Thousand Nine Hundred Forty Dollars ($68,940.00) (the "Landlord's
Contribution") towards the monthly replacement reserve required by the HUD
Mortgage (the "Reserve Account").
10.3 Tenant's Contribution to the Reserve Account. The Tenant
covenants that on the Commencement Date, it will fund an additional Sixty Eight
Thousand Nine Hundred Forty Dollars ($68,940.00) towards the Reserve Account,
such that the Reserve Account shall have a balance of no less than One Hundred
Thirty-Nine Eight Hundred Eighty Thousand Dollars ($139,880.00) (the "Opening
Balance"). In the event that during the term of this Lease, HUD requires any
additional amounts to be funded towards the Reserve Account in excess of the
Opening Balance, which additional contributions are not in replacement of funds
used for the repair or maintenance of the Property or the Facility during the
term of the Lease, but are in addition thereto, the Tenant shall be responsible
for making such required contributions (the sum of all such contributions being
referred to herein as the "Tenant's Additional Contribution to the Reserve
Account").
10.4 The Reserve Account. On the Commencement Date, the Tenant shall
pay to the Landlord an amount equal to the Landlord's Contribution less Twenty
Thousand Dollars ($20,000.00). Upon payment of such amount to the Landlord, the
then entire balance of the Reserve Account, including all accrued interest shall
be deemed to be held for the Tenant's benefit and account, subject to the
Regulatory Agreement and the HUD Mortgage. Upon the termination of this Lease
(or termination of the Regulatory Agreement and HUD Mortgage, if earlier),
Landlord shall pay to Tenant an amount equal to the entire unexpended balance of
the Reserve Account, including all accrued interest, less Tenant's Additional
Contribution to the
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Reserve Account, provided that the Tenant has maintained the Leased Property in
accordance with the terms and conditions of this Lease. If the Tenant has not so
maintained the Leased Property, an amount necessary to bring the Leased Property
to the condition required under the terms of this Lease shall be deducted from
the Reserve Account and paid to Landlord. Any funds remaining thereafter shall
be paid to Tenant.
10.5 Payments Sufficient to Meet HUD Obligations. Subject to Tenant's
termination rights stated in Section 3.6 below, Tenant shall make such payments
under this Lease, either by virtue of payment of Rent to Landlord and the other
payments to third parties required by this Lease, as are necessary to assure
that all obligations owed to HUD under the HUD Mortgage and the Regulatory
Agreement (including mortgage payments, payments to reserve for taxes,
insurance, mortgage insurance, payments for the reserve for replacement and
maintenance of the Leased Property) can be satisfied. However, Tenant's
agreements in this Section 10.5 are subject to the express condition that there
shall be no amendment to the HUD Mortgage or Regulatory Agreement which
increases in any way the obligations and burdens of Landlord or Tenant, without
the express written approval of Tenant.
10.6 Assignment or Subleasing. There shall be no assignment of this
Lease, nor subleasing of the Leased Premises without the prior consent of HUD.
However, it is understood and agreed that agreements by which residents of the
Leased Premises occupy beds or units within the Leased Premises shall not
constitute a sublease for purposes of this Section.
10.7 Alterations to Leased Premises. Tenant shall not remodel or
reconstruct or add to the Leased Premises in any material way nor demolish any
material part of the Leased Premises without the prior consent of HUD.
10.8 Subordinate Status of Lease. The Tenant agrees that all of its
rights and benefits under this Lease are subordinate and subject to the rights
of HUD under the HUD Mortgage and the Regulatory Agreement.
10.9 Termination of Lease Due to Violation of Regulatory Agreement.
Provided that the Tenant has received at least thirty (30) days prior written
notice from HUD and an opportunity to cure the default in question, HUD may
terminate this Lease on account of any default of the provisions contained in
the Regulatory Agreement.
10.10 Fidelity Bond. The Tenant shall maintain a fidelity bond in the
amount of two months worth of potential collections from the residents at the
Leased Property.
10.11 Accounting. The Tenant shall keep its books relating to the
Leased Property on an accrual basis.
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11. MAINTENANCE; REPAIRS.
11.1 Tenant's Obligations. Tenant shall, at Tenant's sole cost and
expense, (a) maintain and keep in good repair, good working order and free of
litter and refuse the interior of the Leased Property and make any and all
repairs and replacements thereto as and when required, ordinary or
extraordinary, foreseeable or unforeseeable, including, but not limited to, the
maintenance, repair and replacement of any and all furnishings, fixtures,
leasehold improvements, exterior entrances, windows, plate glass, electrical
wiring, lighting fixtures, heating or plumbing fixtures, pipes, air conditioning
or heating components contained within the Leased Property or exclusively
serving the Leased Property, but specifically excluding any repairs or
replacements required by damage from fire or other casualty (except that Tenant
shall be fully liable and responsible to Landlord for the deductible amount of
any insurance if such damage is caused by Tenant or Tenant's agents, employees
or contractors); (b) keep unclogged and in good repair all drains, traps and
sewer pipes and maintain and leave same in good working order; and (c)
periodically repaint and redecorate the Leased Property as and when required to
maintain a clean and fresh appearance.
11.2 Landlord's Obligations. Landlord agrees to maintain the
structural elements and the roof of the Leased Property in good working order
and repair, reasonable wear and tear, damage by fire and other casualty only
excepted. Further, if such maintenance is required because of the act or
negligence of Tenant or those for whose conduct Tenant is legally responsible
and such maintenance is not covered by insurance, then Tenant shall be
responsible for such maintenance, and if such maintenance is covered by
insurance, then Tenant shall be fully liable and responsible to Landlord for the
deductible amount of any such insurance.
11.3 Removal of Snow and Ice. Removal of snow and ice from the
sidewalks, driveways and parking areas of the Leased Property shall be the
responsibility of Tenant.
11.4 Tenant's Failure to Make Repairs. If repairs are required to be
made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant
make the same forthwith, and if Tenant refuses or neglects to commence such
repairs and complete the same with reasonable dispatch, after such demand,
Landlord may (but shall not be required to do so) make or cause such repairs to
be made (the provisions of Section 19.4 being applicable to the costs thereof).
12. ALTERATIONS.
12.1 Alterations or Additions bv Tenant. Tenant shall not make
structural alterations or additions to the Leased Property, but may make
non-structural alterations provided that, in cases involving an expenditure in
excess of Fifty Thousand Dollars ($50,000.00), Landlord gives its prior written
consent thereto, which consent shall not be unreasonably withheld or delayed.
All such allowed alterations shall be at Tenant's sole cost and expense. Tenant
shall not permit any mechanics' liens, or similar liens, to remain upon the
Leased Property for labor and material furnished to Tenant or claimed to have
been furnished to Tenant in connection with work of any
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character performed or claimed to have been performed at the direction of Tenant
and shall cause any such lien to be released of record forthwith without cost to
Landlord. Any alterations or improvements made by Tenant shall become the
property of the Landlord at the expiration or earlier termination of the Term.
All alterations or additions made by Tenant shall be performed in a good and
workmanlike manner and in compliance with all the applicable laws, ordinances,
orders, rules, regulations and requirements applicable thereto and shall he
performed only by contractors or mechanics approved by Landlord. All such
contractors and mechanics shall carry adequate liability insurance (which shall
name Landlord and Tenant as an additional insured) and workmen's compensation
insurance and Landlord shall be presented with certificates of same prior to the
commencement of any work.
12.2 Alterations or Additions by Landlord. Landlord hereby reserves
the right at any time to enter upon the Property or the Leased Property and make
alterations or additions thereto, or to any or all of the common facilities,
improvements or personalty comprising a part thereof, provided such alterations
or additions do not unreasonably interfere with Tenant's use of the Leased
Property.
13. ASSIGNMENT; SUBLEASING.
Tenant shall not assign this Lease or sublet the whole or any part of
the Leased Property without Landlord's prior written consent, which consent
shall not be unreasonably withheld or delayed; it being agreed, however, that
Landlord will give its consent to any sublease or assignment of all or any
portion of the Leased Property to an affiliate (i.e., an entity in common
ownership with Tenant or wholly owned by Tenant or wholly owning Tenant) of
Tenant for the Permitted Use. Notwithstanding such consent, Tenant shall remain
liable to Landlord for the payment of all Base Rent, Additional Rent, Additional
Charges, any other charges due hereunder, and for the full performance of the
covenants and conditions of this Lease. Landlord's consent to any such transfer,
assignment or sublease will not be deemed a consent to any subsequent transfer,
assignment or sublease. In the event of a default under the terms of this Lease,
if the Leased Property or any part thereof are then assigned or sublet,
Landlord, in addition to any other remedies herein provided or provided by law,
may at its option collect directly from assignee or subtenant all rents becoming
due to Tenant under such assignment or sublease and apply such rent against any
sums due it by Tenant hereunder, and no such collection shall be construed to
constitute a novation or a release of Tenant from the further performance of its
obligations hereunder.
14. SUBORDINATION TO MORTGAGES; ESTOPPEL CERTIFICATES.
14.1 Subordination. This Lease shall be subject and subordinate to any
and all mortgages, deeds of trust and other instruments in the nature of a
mortgage, easements or rights-of-way (provided no such easement or right of way
shall unreasonably interfere with Tenant's use of the Leased Property) now or at
a time hereafter, constituting a lien or encumbrance on the Property and Tenant
shall, when requested, promptly execute and deliver such written instruments as
shall be necessary to show the subordination of this Lease to such mortgages,
deeds of trust
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or other such instruments. Failure to execute any such instruments within twenty
(20) days after request shall constitute a default hereunder. It is the
understanding of the parties hereto that Landlord shall obtain and deliver a
non-disturbance agreement from the current mortgagee of the Premises as of the
date of this Lease and shall use its best efforts to secure a non-disturbance
agreement with any and all subsequent lenders requiring such subordination from
Tenant or grantees under such other instruments, but the effectiveness of the
other provisions of this Section 14.1 shall not be conditioned in any manner
upon the actual receipt of a non-disturbance agreement from such subsequent
lenders.
14.2 Estoppel Certificates. Tenant shall, within ten (10) days after
request from Landlord, deliver to any proposed mortgagee or purchaser of all or
any part of the Property, in recordable form, a certificate certifying and
covenanting any and all information requested, including, but not limited to,
the following: (a) the date of this Lease, the date when the Term of this Lease
commenced, the date of the expiration of the Term, and the date when Base Rent
and Additional Rent commenced to accrue hereunder; (b) that this Lease is
unmodified, not amended, and in full force and effect; or, if there have been
any amendments or modifications, that the Lease is in full force and effect as
so amended or modified and stating the amendments or modifications and the dates
thereof; (c) whether or not there are then existing any setoffs or defenses
against the enforcement of any of the terms and/or conditions of this Lease and
any amendments or modifications hereof on the part of Tenant to be performed,
and, if so, specifying the same; (d) the dates, if any, to which the Base Rent,
the Additional Rent and other sums on Tenant's part to be paid hereunder have
been paid and/or paid in advance; and (e) that Tenant has accepted the Leased
Property in the condition then existing and in accordance with the Lease, or
Tenant will specify any particular items which Tenant has not accepted. If
Landlord shall submit to Tenant a proposed instrument containing any of the
foregoing information, then, if Tenant shall fail to respond to Landlord's
request for confirmation of the information set forth therein within twenty (20)
days after Landlord's request, any information contained in such proposed
instrument shall be deemed to be true, and Tenant shall be deemed to have waived
any rights accruing by reason of any inaccuracy in such proposed instrument.
Further, Tenant's failure or refusal to execute and deliver such certificate
within such twenty (20) day period shall constitute a default under this Lease.
15. LANDLORD'S ACCESS.
Landlord or agents of Landlord may, upon twenty-four (24) hours prior
notice to Tenant (or at any time without notice in the case of emergency), enter
the Leased Property to (a) inspect the same, (b) make alterations as provided in
Section 12.2 above or repairs, (c) show the Leased Property to prospective
lenders at any time and to prospective tenants within one year prior to the
then-scheduled expiration of the Term, and (d) at any time within six (6) months
before the expiration of the Term, affix to any suitable part of the Leased
Property a notice that the Leased Property are available for lease and keep the
same so affixed without hindrance or molestation.
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16. INDEMNIFICATION AND LIABILITY.
16.1 Damage to Property. Tenant shall save Landlord harmless from all
loss and damage to property occurring within the Leased Property occasioned by
the use or escape of water or by the bursting of pipes, as well as from any
claim or damage resulting from neglect in not removing snow and ice from the
roof of the Building, or by any nuisance made or suffered on the Leased
Property. Tenant also agrees to save Landlord harmless from any claim or damage
resulting from neglect in not removing snow and ice from the sidewalks bordering
upon the Leased Property, unless such loss is caused by the intentional
misconduct or negligence of Landlord. Landlord shall not be liable for any loss
or damage arising from any latent defect in the Leased premises or in the
Building except as may be otherwise expressly and specifically provided herein.
All personal property or improvements of Tenant at or about the Leased Property
shall be installed, used, or enjoyed at the sole risk of Tenant, and Tenant
shall defend, indemnify and hold Landlord harmless from and against any and all
claims and/or causes of action pertaining to or arising out of damage to the
same, including but not limited to subrogation claims by Tenant's insurance
carrier, but excepting such claims and/or causes of action resulting from the
actual negligence and/or willful and wanton conduct of Landlord.
16.2 Indemnity Against Liability. Tenant shall also indemnify and hold
Landlord harmless, to the fullest extent permitted by law, from and against any
and all claims, actions, loss, damage, liability and expense (including, without
limitation, attorney's fees and related legal costs incurred by Landlord) in
connection with loss of life, personal injury and/or damage to property arising
out of or resulting from any occurrence in, upon or at the Leased Property or
the occupancy or use of the Leased Property or any part thereof, or anywhere on
or about the Property if caused wholly or in part by any act, neglect or failure
to perform the obligations imposed by this Lease or any breach thereof, or
omission of Tenant, its officers, agents, employees, subtenants, licensees,
concessionaires, or others occupying space in the Leased Property. However,
Tenant shall have no obligation to indemnify Landlord for that portion of
liability which is imposed upon Landlord as a result of any comparative
negligence by Landlord (or its agents, employees or contractors) which forms
part of the basis for any such claim, action, loss, damage, liability or
expense; but only the portion of the claim, action, loss, damage, liability or
expense actually attributable to Landlord's comparative negligence shall be
exempted from Tenant's indemnification obligations hereunder.
17. INSURANCE.
17.1 Insurance to be Maintained by Tenant. At its own cost and expense,
Tenant shall obtain and maintain throughout the Term of this Lease the following
insurance coverage: (a) comprehensive general public liability insurance
covering claims for injury to persons or property occurring in or about the
Leased Property, or arising out of ownership, maintenance, use, or occupancy
thereof by the Tenant, in the amount of Three Million Dollars ($3,000,000.00),
with property damage insurance with limits of Five Hundred Thousand Dollars
($500,000.00); (b) all risk hazard insurance including and not limited to fire,
extended coverage, vandalism and malicious mischief insurance, business
interruption insurance, covering any and all of the Leased
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Property, Personal Property and Tangible Personal Property in, at, or about the
Leased Property, in the full amount of the replacement cost of any and all of
the same, and also including fire legal liability coverage as to the Leased
Improvements; (c) Worker's Compensation and all other insurance coverages for
employees, agents, servants, and others at or about the Leased Property in
compliance with and as required by any and all applicable governmental
regulations and statutes; (d) if and when the Premises include plate glass,
plate glass insurance for the benefit of Landlord in the amount of replacement
cost thereof; and (e) medical malpractice insurance in the amount of Three
Million Dollars ($3,000,000.00) per occurrence. Landlord may from time to time
require Tenant to maintain other insurance coverage or may increase the amount
of the foregoing insurance to be maintained by Tenant so as to provide insurance
coverage in forms and amounts consistent with the extent of coverage maintained
by similar tenants in similar buildings located in the vicinity of the Leased
Property.
17.2 Other Insurance Requirements; Waiver of Subrogation. All such
insurance procured by Tenant as provided herein shall be in responsible
companies qualified to do business in Maryland and in good standing therein,
insuring Landlord and Landlord's mortgagee (if any) as well as Tenant against
injury to persons or damage to property as herein provided. Tenant shall deposit
with Landlord certificates for such insurance at or prior to the Commencement
Date, and thereafter within thirty (30) days prior to the expiration of any such
policies. All such insurance certificates shall provide that such policies shall
not be cancelled or modified without at least ten (10) days prior written notice
to each insured named therein. Insofar as, and to the extent that, the following
provision may be effective without invalidating or making it impossible to
secure insurance coverage obtainable from responsible insurance companies doing
business in the locality in which the Property is located (even though an extra
premium may result therefrom), Landlord and Tenant mutually agree that, with
respect to any hazard, the loss from which is covered by insurance then being
carried by them, respectively, the party carrying such insurance and suffering
such loss releases the other of and from any and all claims with respect to such
loss to the extent of the insurance proceeds paid with respect thereto; and they
further mutually agree that their respective insurance companies shall have no
right of subrogation against the other on account thereof.
18. FIRE: CASUALTY; EMINENT DOMAIN.
18.1 Damage by Casualty. Should a substantial portion of the Leased
Property, or of the Property, be substantially damaged by fire or other
casualty, Landlord may elect to terminate this Lease. When such fire or casualty
renders the Leased Property substantially unsuitable for its intended use, a
just and proportionate abatement of rent shall be made. Further, within thirty
(30) days after such fire or other casualty, Landlord shall give written notice
to Tenant with respect to whether or not Landlord will restore the Leased
Property. Tenant may elect to terminate this Lease if either (a) Landlord
notifies Tenant that Landlord has elected not to restore the Leased Property, or
(b) Landlord elects to restore but fails to restore the Leased Property to a
condition substantially suitable for its intended use within one hundred eighty
(180) days after such fire or casualty. However, Tenant's failure to give such
notice of termination within five (5) days after the date on which the right to
terminate ripens under either (a) or (b) above shall
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constitute a waiver of such right by Tenant. Landlord will seek to have the
first mortgagee of the Leased Property, if any, provide for application of
hazard insurance loss proceeds to the repair or reconstruction of the Leased
Property upon any hazard loss. Subject to the mortgagee (if any) of the Leased
Property making the hazard loss insurance proceeds available for such
restoration and to Landlord's receipt of such proceeds for that purpose, if
Landlord elects to repair, reconstruct, or cause to be repaired or
reconstructed, such damage or destruction, Landlord shall not be required to
expend, in connection with such repair or reconstruction, any amount exceeding
the amount of casualty insurance proceeds actually received by Landlord.
Notwithstanding the foregoing, in the event such mortgagee shall not make the
insurance loss proceeds available for repair or restoration, Landlord shall not
be required to repair or reconstruct the Leased Property and shall notify Tenant
within thirty (30) days next following such hazard loss, of its election in this
respect and thereupon, Tenant shall have the termination rights described above
in this Section.
18.2 "Complete" Taking of Leased Property. If, prior to the
Commencement Date or otherwise, the Leased Property shall be taken in its
entirety under any condemnation or eminent domain proceedings (each such
occurrence being hereinafter referred to as a "Taking") by any governmental
authority (the "Taking Authority") during the Term hereof, or in the event
twenty-five (25%) percent or more of the Leased Property is taken in any such
proceedings and the remaining portion shall not be suitable or adequate (in the
reasonable opinion of Tenant exercised in good faith) for the uses described in
this Lease, and Tenant notifies Landlord of such determination within thirty
(30) days next following the taking of physical possession of such portion of
the Leased Property by the Taking Authority or the date upon which Tenant
receives written notice that title has vested in the Taking Authority, whichever
is first to occur, then in any such event this Lease and the Term hereof shall
terminate as of the date physical possession of the Property (or a portion
thereof) is taken by the Taking Authority, and Tenant shall be liable for the
payment of Base Rent, Additional Rent, Additional Charges and all other charges
due from Tenant hereunder, and performance of the other terms and conditions of
this Lease on Tenant's part to be performed only up to date of such termination,
and any Base Rent paid in advance for periods following such date shall be
apportioned and promptly refunded to Tenant.
18.3 "Partial" Taking of Leased Property. If less than the entire Lease
Premises, or less than twenty-five (25%) percent of the Leased Property, shall
be acquired or taken by condemnation or eminent domain as aforesaid, and the
mortgagee of the Leased Property shall not make the proceeds of any awards or
damages payable as to the Taking available for restoration and repair of the
balance of the Building, or Landlord shall determine in its reasonable
discretion that the restoration and repair of the balance of the Building shall
be impracticable; or in the event the Taking occurs within the last eighteen
(18) months of the initial Term (or of a renewal term, if any), Landlord shall
be entitled to terminate this Lease without liability by reason of such Taking.
If Landlord does not so terminate this Lease, this Lease shall not cease and
terminate and Landlord shall rebuild and restore the Leased Property as nearly
as possible to the condition existing next preceding such Taking, with due
allowance for the portion so taken; further, Tenant shall promptly restore or
repair any improvements made by it in the Leased Property to the extent proceeds
from such awards are made available to Tenant for such purpose
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and this Lease shall be and remain in full force and effect and be unaffected
by, the Taking, except that from the date possession of the taken portion of the
Leased Property is acquired by the Taking Authority, the Base Rent payable under
this Lease shall be diminished by a percentage equal to the percentage of the
Leased Property so taken. The restoration or repair work to be done by Tenant
shall be done subject to any and all terms and conditions elsewhere set forth in
this Lease governing alterations or work on Tenant's part to be performed.
18.4 Miscellaneous Provisions Regarding Casualty or Taking.
18.4.1 In the event this Lease is terminated or terminates by
reason of a Taking or a Casualty, the provisions of the Lease applicable upon
expiration of the Lease shall govern the parties.
18.4.2 Landlord will seek to have any mortgagee of the Leased
Property provide for application of the proceeds of any Taking awards to
restoration, repair, and reconstruction of the portion of such property
remaining after the Taking. Notwithstanding the amount of land, building, or
improvements taken by condemnation or eminent domain or the termination or
continuance of this Lease with respect thereto, Tenant shall not participate or
share in any recovery, award, or damages payable or paid as to such Taking, nor
have or assert any right, claim, or cause of action against Landlord, the fee
owner, or mortgagee of the Leased Property or, except as expressly provided in
Section 18.4.3 below, the Taking Authority whether for the loss of, or
diminution in value of, the unexpired Term of this Lease, or as to the Taking of
any such land, building, and/or improvements or otherwise; and Tenant for itself
and its successors and assigns hereby waives, surrenders, and releases to
Landlord any and all claims or rights to claim or receive all or any portion of
any and all recovery, awards, and/or damages as to such Taking.
18.4.3 If permitted by statute, Tenant may assert a separate
and independent claim for and recover from the Taking Authority, but not from
Landlord, any compensation as may be separately awarded or recoverable by Tenant
in its own name and right for any damage to Tenant's portable fixtures and
equipment, or on account of any expenses which it shall incur in removing its
merchandise, furnishings, and equipment from the Leased Property, but in no
event shall any such claims or recoveries be claims or asserted in the event the
same would, may, or shall diminish, offset, or bar any damages, recovery, or
award to Landlord or the fee owner of the Leased Property.
19. DEFAULT; REMEDIES; BANKRUPTCY.
19.1 Events of Default. Each of the following shall be an event of
default ("Event of Default") under this Lease:
19.1.1 Tenant shall default in the payment of any installment
of rent or other sum herein specified and such default shall continue for five
(5) days after written notice thereof; provided, however, that Landlord shall
not be required to give more than two (2) notices during any consecutive twelve
(12) month period with regard to defaults in the payment of installments
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of Base Rent, Additional Rent or any other sums due under this Lease, and in the
event that Landlord has already given two (2) such notices during any
consecutive twelve (12) month period, any subsequent failure of Tenant during
such twelve (12) month period to make any payment due hereunder shall
immediately constitute a default even though no notice has been given;
19.1.2 Tenant shall fail to maintain insurance as required by
this Lease;
19.1.3 Tenant shall default in the observance or performance
of any other of Tenant's covenants, agreements, or obligations hereunder and
such default shall not be cured within thirty (30) days after written notice
thereof, or if such default is of a nature that it cannot be reasonably cured
within such thirty (30) day period, Tenant shall not have commenced to cure such
default within said thirty (30) day period and diligently proceed to completion
of said cure, provided such extended period without a completed cure will not
have a material adverse effect on the value of the Leased Property or expose
Landlord to any liability; provided however, that Landlord shall not be required
to give more than two (2) notices during any consecutive twenty-four (24) month
period with regard to Tenant's failure to perform its obligations under a
particular Section of this Lease (a "Previously Defaulted Provision") and in the
event that Landlord has already given two (2) such notices during any
consecutive twenty-four (24) month period, any subsequent failure of Tenant
during such twenty-four (24) month period to fully and punctually observe such
Previously Defaulted Provision shall immediately constitute a default even
though no notice has been given; or
19.1.4 Tenant or any other party shall file a petition or
application under any state or federal bankruptcy, insolvency or debtor's relief
law relating to Tenant or Tenant shall consent to an assignment or composition
for the benefit of Tenant's creditors or consent to the appointment of a
receiver for any of Tenant's property; provided, however, that if such petition,
application or receivership proceedings are instituted against Tenant by a third
party, there shall be no default hereunder unless the same shall remain
undischarged for a period of greater than sixty (60) days from the filing of
such petition or application or the commencement of the receivership
proceedings, as the case may be.
19.2 Landlord's Remedies. Upon the occurrence of an event of default,
Landlord shall have the following rights and remedies:
19.2.1 Landlord shall have the right at its election, at any
time thereafter, to give Tenant written notice of Landlord's election to
terminate this Lease on a date specified in such notice. Upon the giving of such
notice, this Lease and the estate hereby granted shall expire and terminate on
such date as fully and completely and with the same effect as if such date were
the date hereinbefore fixed for the expiration of the Term, and all rights of
Tenant hereunder shall expire and terminate, but Tenant shall remain liable as
hereinafter provided.
19.2.2 Landlord shall have the immediate right, whether or not
this Lease shall have been terminated pursuant to Section 19.2.1, to re-enter
and repossess the Leased Property
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or any part thereof in the name of the whole and repossess the same as of its
former estate by force, summary proceedings, ejectment or otherwise and the
right to remove all persons and property therefrom. Landlord shall be under no
liability for or by reason of any such entry, repossession or removal. No such
re-entry or taking of possession of the Leased Property by Landlord shall be
deemed to waive or prejudice any remedies provided to Landlord hereunder, nor be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such election be given to Tenant pursuant to Section 20.2 or
unless the termination of this Lease be decreed by a court of competent
jurisdiction.
19.2.3 At any time or from time to time after the repossession
of the Leased Property or any part thereof pursuant to Section 19.2.2, whether
or not this Lease shall have been terminated pursuant to Section 19.2.1,
Landlord may relet the Leased Property or any part thereof for the account of
Tenant, in the name of Tenant or Landlord or otherwise, without notice to
Tenant, for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the Term) and on such
conditions (which may include free rent and any other concessions) and for such
uses as Landlord, in its absolute discretion, may determine; and Landlord may
collect and receive any rents payable by reason of such reletting. Landlord
shall not be responsible or liable for any failure to relet or to collect any
rent due upon such reletting.
19.2.4 In the event of any termination of this Lease or
repossession of the Leased Property or any part thereof by reason of the
occurrence of an Event of Default, Tenant will pay to Landlord the Base Rent,
and any Additional Rent, Additional Charges and other sums required to be paid
by Tenant for the period to and including the date of such termination or
repossession.
19.2.5 At any time after any such termination of this Lease or
repossession of the Leased Property or any part thereof by reason of the
occurrence of an Event of Default, Landlord shall be entitled to recover from
Tenant, and Tenant will pay to Landlord on demand, as and for liquidated and
agreed final damages for Tenant's default and in lieu of all current damages
beyond the date of such demand (it being agreed that it would be impracticable
or extremely difficult to fix the actual damages), an amount equal to the
excess, if any, of the present value of the excess of (a) the Base Rent, any
Additional Rent and other sums which would be payable under this Lease from the
date of such demand (or, if it be earlier, the date to which Tenant shall have
satisfied in full its obligations under Section 19.2.4 to pay current damages)
for what would be the then unexpired Term in the absence of such termination or
repossession plus Landlord's estimate of the aggregate expenses of reletting the
Leased Property, over (b) the then net fair rental value of the Leased Property
for the same period (after deducting from such fair rental value the time needed
to relet the Leased Property in the amount and concessions which would normally
be given to a new tenant). Fair rental value shall be established by reference
to the terms and conditions upon which Landlord relets the Leased Property if
such reletting is accomplished within a reasonable period of time after such
termination or repossession and otherwise established on the basis of Landlord's
estimates and assumptions of fact regarding market and other relevant
circumstances, which shall govern unless shown to be clearly erroneous.
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19.3 Landlord's Cure Rights. If Tenant shall default in the observance
or performance of any conditions or covenants on Tenant's part to be observed or
performed under or by virtue of any of the provisions of this Lease, Landlord,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of Tenant.
19.4 Tenant's Obligation to Reimburse Landlord. If Landlord makes any
expenditures (pursuant to Section 19.3 above or otherwise) or incurs any
obligations for the payment of money in connection with any failure of Tenant to
perform fully all of its obligations under this Lease, such sums paid or
obligations incurred (including but not limited to, reasonable attorney's fees
and court costs in instituting, prosecuting or defending any action or
proceeding), with interest at the rate of one and one half percent (1-1/2%) per
month and costs, shall upon demand be paid to Landlord by Tenant as Additional
Rent.
19.5 No Waiver. Landlord's failure to take action against Tenant with
respect to any default in Tenant's performance of its obligations hereunder
shall not, under any circumstances, constitute a waiver of any of Landlord's
rights under this Lease and, further, no waiver of any of the provisions of this
Lease shall be effective unless given in writing nor shall any waiver be
construed as a waiver of any of the other provisions hereof or as a waiver of
the same provisions for any subsequent time.
19.6 Acceptance of Late Payments. No payment by Tenant, or acceptance
by Landlord, of a lesser amount than then due from Tenant to Landlord shall be
treated otherwise than as a payment on account regardless of any letter
accompanying such check or legend entered upon such check. Further, no
acceptance of any payment by Landlord from Tenant shall in any way constitute a
waiver of any default then existing or which would exist with the proper giving
of notice.
19.7 Interest on Late Payments. If Tenant shall fail to pay, when the
same is due and payable, any Base Rent, Additional Rent, Additional Charges or
any other charges or payments required hereunder (excluding the payments
described in Section 19.4 above), such unpaid amounts shall bear interest from
ten (10) days after the due date thereof to the date of payment at the annual
rate of interest of twelve percent (12%) per annum, but in no event higher than
the maximum rate permitted by law; and, in addition, Tenant shall pay Landlord a
late charge for any Base Rent, Additional Rent, Additional Charges or any other
charges or payments due hereunder which is paid more than ten (10) days after
its due date equal to five percent (5%) of such payment.
19.8 Remedies Cumulative. Any and all remedies set forth in this Lease
(a) shall be in addition to any and all other remedies Landlord may have at law
or in equity, (b) shall be cumulative, and (c) may be pursued successively or
concurrently as Landlord may elect. The exercise of any remedy by Landlord shall
not be deemed an election of remedies or preclude Landlord from exercising any
other remedies in the future.
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19.9 Landlord's Rights in Tenant's Bankruptcy. If this Lease is
assigned to any person or entity pursuant to the provisions of the Bankruptcy
Code, 11 U.S.C. 101 et seq. as now existing or hereafter amended (the
"Bankruptcy Code"), any and all monies or other considerations payable or
otherwise to be delivered in connection with such assignment shall be paid and
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any and all monies or other considerations
constituting Landlord's property under the preceding sentence not paid or
delivered to Landlord shall be held in trust for the benefit of Landlord and be
promptly paid to or turned over to the Landlord. Notwithstanding anything in
this Lease to the contrary, all amounts payable by Tenant to or on behalf of
Landlord under this Lease, whether or not expressly denominated as rent,
including, without limitation, the Base Rent and Additional Rent specified
herein, shall constitute rent for the purpose of Section 502(b)(7) of the
Bankruptcy Code.
If Tenant assumes this Lease and proposes to assign the same pursuant
to the provisions of the Bankruptcy Code to any person or entity who shall have
made a bona fide offer to accept an assignment of this Lease on terms acceptable
to Tenant, then notice of such proposed assignment, setting forth (a) the name
and address of such person; (b) all of the terms and conditions of such offer,
and (c) the adequate assurance to be provided Landlord to assure such person's
future performance under the Lease, including without limitation, the assurance
referred to in Section 365(b)(3) of the Bankruptcy Code, shall be given to
Landlord by the Tenant no later than twenty (20) days after receipt by the
Tenant, but in any event no later than ten (10) days prior to the date that the
Tenant shall make application to a court of competent jurisdiction for authority
and application to enter into such assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be exercised by notice to the
Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed without further act or deed to have assumed
on and after the date of such assignment all of the obligations arising under
this Lease. Any such assignee shall upon demand execute and deliver to Landlord
an instrument confirming such assumption.
20. NOTICES.
Any and all notices, demands, consents or approvals required hereunder
shall be given in writing in accordance with this Section 20. Any notice from
Landlord to Tenant shall be deemed duly served, if left at the Leased Property
addressed to Tenant or mailed to Tenant's Mailing Address (as defined in Section
1 above) by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid. Any notice from Tenant to Landlord shall be
deemed duly served, if mailed to Landlord by overnight courier, or by registered
or certified mail, return receipt requested, postage prepaid, addressed to
Landlord at Landlord's Mailing Address (as defined in Section 1 above) or at
such other address as Landlord may from time to time advise
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in writing. All Rent shall be paid and sent to Landlord at Landlord's Mailing
Address.
21. SURRENDER; HOLDING OVER
21.1 Surrender of Leased Property. Tenant shall, at the expiration or
other termination of the Term, (a) remove all of Tenant's goods and effects from
the Leased Property (including, without hereby limiting the generality of the
foregoing, all signs and lettering affixed or painted by Tenant either inside or
outside the Leased Property), and (b) deliver to Landlord the Leased Property,
in broom clean condition, and otherwise in the same condition as existed as of
the Commencement Date (normal wear and tear and damage by fire or other casualty
excepted), all keys, locks thereto, other fixtures connected therewith and all
alterations and additions made to or upon the Leased Property. Upon Tenant's
failure to comply with the preceding sentence, Landlord is hereby authorized,
without liability to Tenant for loss or damage thereto, and at the sole risk of
Tenant, to remove and store any of such property at Tenant's expense, or to
retain same under Landlord's control or to sell, at public or private sale,
without notice, any or all of such property not so removed and to apply the net
proceeds of such sale to the payment of any sum due hereunder, or to destroy
such property.
21.2 Holding Over. If Tenant remains in Possession of the Leased
Property or any part thereof after the expiration or earlier termination of the
Term of this Lease, Tenant shall be deemed to be in use and Occupancy of the
Leased Property as a month-to-month tenant at a rate of monthly rent one and
one-half (1-1/2) times the rate of the total monthly installment of Base Rent
then in effect upon the date of expiration or termination of this Lease and
subject to the same terms and conditions (including, without limitation,
provisions concerning the payment of all other charges hereunder) as those set
forth in this Lease other than as to the length of Term. However, nothing in
this Lease provision shall be deemed to extend the Term beyond that set forth in
Section 2 hereof, nor grant any right to Tenant or any other person to use,
occupy, or remain in Possession of all or any part of the Leased Property beyond
the expiration or earlier termination of the Term of this Lease.
22. LANDLORD'S LIABILITY.
22.1 No Consequential Damages. In no event shall either Landlord or
Tenant ever be liable to the other for any loss of business or any other
indirect or consequential damages suffered by such other party as a result of
the defaulting party's breach of its obligations under this Lease.
22.2 Liability after Conveyance of Property. The term "Landlord," as
used herein, shall mean and refer to the owner of the fee estate in the Leased
Property whosoever such owner may be from time to time or to the person or
entity named as Landlord above or its successors or assigns, as the case may be;
and upon any conveyance or transfer of the interest of such person or entity as
Landlord, such person or entity shall be thereupon released and discharged from
any and all liability under this Lease or otherwise to Tenant and any and all
others whomsoever except for breaches of this Lease occurring prior to such
transfer.
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23. MISCELLANEOUS.
23.1 Governing Law. This Lease shall be governed by the law of the
State of Maryland and shall be deemed to have been made, executed, delivered and
accepted by the respective parties in that state.
23.2 Partial Invalidity. 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 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. It is the intention of the parties hereto that if any
provision of this Lease is capable of two constructions, one of which would
render the provision valid, then the provision shall have the meaning which
renders it valid.
23.3 Captions. The captions of this Lease are for convenience and
reference only and shall not be deemed or construed to bind, modify, increase,
or decrease the terms and conditions of this Lease, or any interpretation or
construction thereof.
23.4 Successors and Assigns. The terms and conditions in this Lease
shall apply to and be binding upon the parties herein and their respective
successors and assigns, except as expressly otherwise provided.
23.5 Recording of Lease. Tenant shall not record this Lease. However,
at the request of either party, Landlord and Tenant shall execute, acknowledge,
deliver, exchange, and record at the requestor's expense a Notice of Lease or
other short-form instrument permitted under applicable state law and prepared by
Tenant.
23.6 Entire Agreement. This Lease and any and all exhibits and riders
attached hereto and made a part of this Lease constitute the entire agreement of
the parties concerning this Lease, and any and all other or prior agreements,
representations, or warranties are hereby terminated, cancelled, and agreed to
be void and of no force or effect.
23.7 Amendments. No change, amendment, deletion, or addition to this
Lease shall be effective unless in writing and signed by the parties.
23.8 Quiet Enjoyment. So long as Tenant is not in default of any of its
obligations under this Lease, beyond any applicable grace period, Tenant shall
peaceably and quietly have, hold and enjoy the Leased Property free of any
claims by, through or under Landlord.
23.9 No Partnership. Nothing in this Lease shall create or be construed
to create a partnership between Tenant and Landlord, or make them joint
venturers, or bind or make Landlord in any way liable or responsible for any
acts, omissions, negligence, debts or obligations of Tenant.
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23.10 Time of Essence. Time is of the essence in this Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed and delivered as a sealed instrument by their respective duly
authorized officers as of the day and year first written above.
LANDLORD: TENANT:
THE ANNAPOLITAN CARE CAREMATRIX OF
CENTER, INC. ANNAPOLIS, INC.
By: /s/ Robert Test By: /s/ Robert M. Kaufman
Name: Robert Test Name: Robert M. Kaufman
Title: President Title: President
Approved as to Form and Content:
Secretary of Housing and Urban Development
By: /s/ Mary Ann Henderson
Name:
Authorized Agent
Date: 2-14-97
34
Exhibit 10.138
Approved as to Form and Content
Secretary of Housing and Urban Development
By: ________________________________
Name:
Authorized Agent
Date: ______________________________
FIRST AMENDMENT TO FACILITY LEASE
Reference is made to the Facility Lease ("Lease"), dated as of December
15, 1996, by and between The Annapolitan Care Center, Inc. ("Landlord") and
CareMatrix of Annapolis, Inc. ("Tenant").
WHEREAS, Tenant is being required to execute a Regulatory Agreement
(the "Tenant Regulatory Agreement") with the Secretary of Housing and Urban
Development ("HUD") relating to the Leased Property (as defined in the Lease);
and
WHEREAS, the Tenant Regulatory Agreement may obligate Tenant to make
payments to HUD with respect to the Leased Property over and above the payments
which Tenant is currently obligated to make under the Lease; and
WHEREAS, Tenant also desires to have the ability to protect its
leasehold interest by being able to make certain other payments to third parties
that it is not currently obligated to make under the Lease.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, Landlord and Tenant hereby
agree as follows:
1. The following new Section 3.6 is hereby added to the Lease:
3.6 Limited Setoff Rights. In the event the Landlord (a) fails to make
any payments to HUD under either the Insured Mortgage or the Regulatory
Agreement (as defined in Section 10.1 below) or (b) has failed to make
payment(s) to any other third party in connection with the Leased
Property such that Tenant reasonably determines its use and enjoyment
of the Leased Property may be impaired by Landlord's failure to make
payment(s), the Tenant may (but shall not be obligated to) make such
payment(s) to HUD or to such third party after giving the Landlord at
least 15 business days notice of its intention to do so and
thereafter setoff against the Rent next coming due the full amount of
the payment(s) so made.
2. Except as expressly modified above and by the Agreement Amending
Commencement Date of Facility Lease, the Lease remains unchanged and in
full force and effect.
Executed as an instrument under seal as of the 23rd day of January, 1997.
CAREMATRIX OF ANNAPOLIS, THE ANNAPOLITAN CARE CENTER,
INC.
By: /s/ ????????????? By: /s/ Robert J. Test
Name: Robert J. Test, President
Title:
Exhibit 10.139
OFFICE LEASE
THIS OFFICE LEASE (this "Lease") is made as of the 31st day of
December, 1996, by and between Continuum Care of Dedham, Inc., having a business
address at 197 First Avenue, Needham, Massachusetts 02194 ("Landlord"), and
CareMatrix Corporation, a Delaware corporation, having a business address at 197
First Avenue, Needham, Massachusetts 02194 ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Leased Premises (as defined below). Further, Tenant shall have the right to
use, in common with others entitled thereto, the exterior walkways, parking
areas and driveways, and the hallways, stairways and elevators necessary for
access to the Leased Premises and any and all common facilities, improvements
and services serving the Building, all as more particularly described on the
Site Plan attached hereto as Exhibit A.
1. REFERENCE DATA.
Each of the capitalized terms used in this Lease shall have the meaning
set forth opposite such term below:
1.1 Commencement Date: March 1, 1997.
1.2 Building: The building located at 20 CareMatrix
Drive in Dedham, Massachusetts,
containing Thirty-Seven Thousand Five
Hundred Eighty-Five (37,585) square feet
of floor space.
1.3 Leased Premises: A portion of the Building at 20
CareMatrix Drive containing Twelve
Thousand Six Hundred Forty-Three (12,643)
square feet of floor space, located
within the Building on the first floor,
and Six Thousand One Hundred Forty-Nine
(6,149) square feet of floor space,
located within the Building on the second
floor all as shown on Exhibit FP attached
hereto.
1.4 Permitted Use: Medical office, including, without
limitation an ambulatory surgery center
and other general medical office uses,
but only to the extent permitted by
applicable zoning, and no other purpose.
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1.5 Property: The Building and its common areas and the land on
which the Building is located.
1.6 Landlord's Mailing
Address: 197 First Avenue
Needham, Massachusetts 02194
Attn: James M. Clary, III, Esq.
1.7 Tenant's Mailing
Address: 197 First Avenue
Needham, Massachusetts 02194
1.8 Broker: None.
1.9 Tenant's Prorata
Share: Fifty (50%) percent.
1.10 Security Deposit: None.
1.11 Guarantor: None.
1.12 Leased Premises
Rentable Area: One Hundred (100%) percent square feet.
1.13 Lease Year: A period of twelve (12) consecutive
calendar months commencing on the
Commencement Date or the first day
of the month in which the
Commencement Date occurs if the
Commencement Date is any day other
than the first day of a month, and
then each consecutive twelve (12)
month period occurring thereafter
during the Term of this Lease.
2. LEASE TERM; EXTENSIONS.
2.1 Term. The term of this Lease shall be for a period of ten (10)
years commencing on the Commencement Date and ending on the last day of the
month immediately prior to the month in which the tenth (l0th) anniversary of
the Commencement Date occurs (the "Term").
2.2 Extension Rights. Provided there is not then an Event of Default
hereunder or at the commencement of the relevant Option Term, Tenant shall have
the right to extend the Term for two (2) five-year extension periods
(collectively, the "Option Terms" and individually, an "Option Term") upon the
following terms and conditions:
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2.2.1 Tenant must notify Landlord of its election to extend
the Term for each of the Option Terms on or before one hundred eighty (l80) days
prior to (a) the date on which the original Term expires with respect to the
first Option Term and (b) the date on which the first Option Term expires with
respect to the second Option Term.
2.2.2 The annual Base Rent for each of the Option Terms shall
be equal to the Fair Market Rental Value as determined in Exhibit FMRV attached
hereto as determined on the last day of the original Term with respect to the
Base Rent due during the first Option Term and as determined on the last day of
the first Option Term with respect to the Base Rent due during the second option
Term.
2.2.3 All other provisions of this Lease shall also remain in
effect during each of the Option Terms except the right to extend as set forth
in this Section 2.2, it being agreed that there are no further rights of
extension after the second Option Term. Unless expressly stated herein to the
contrary, all references in this Lease to the "Term" shall include the Option
Terms when and if Landlord receives Tenant's notice of election to extend the
Term as herein provided.
3. BASE RENT.
During the Original Term, Tenant shall pay to Landlord rent ("Base
Rent") equal to Five Hundred Sixty-Five Thousand Four Hundred Eighty-Five
($565,485) Dollars per annum.
Payments of Base Rent shall be made by Tenant in equal monthly
installments on the Commencement Date and thereafter on the first day of each
month during the Term in advance, without offset, deduction, demand, or
abatement whatsoever, except as otherwise expressly and specifically provided
herein, in lawful money of the United States. The Base Rent payment for any
fractional month at the commencement, termination or expiration of the Term will
be prorated accordingly.
4. ADDITIONAL RENT.
In addition to the Base Rent, Tenant shall pay to Landlord the
following amounts as additional rent (the "Additional Rent") during the Term:
4.1 Contribution to Taxes. Tenant will pay to Landlord Tenant's Prorata
Share of all Taxes. "Taxes" shall mean the total of all real estate taxes,
charges, and assessments, extraordinary as well as ordinary, levied, imposed, or
assessed for a particular fiscal year during the Term of this Lease by
governmental authorities upon or attributable to the Property, or to any and all
personalty installed in or about the same by Landlord. If Landlord obtains an
abatement of any such Taxes, a proportionate share of
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such abatement, less the reasonable fees and costs incurred in obtaining the
same, if any, shall be refunded to Tenant. This contribution to Taxes shall be
prorated should this Lease be in effect with respect to only a portion of any
fiscal year to which such Taxes relate. Tenant shall be fully responsible for
any tax assessment or other charge levied by any governmental authority against
any personalty placed upon the Property by Tenant.
4.2 Contribution to Operating Costs. Tenant shall pay to Landlord
Tenant's Prorata Share of the Operating Costs. This contribution to Operating
Costs shall be prorated should this Lease be in effect with respect to only a
portion of any calendar year. For the purposes of this Lease, the term
"Operating Costs" shall mean the items listed in Exhibit OC attached hereto and
made a part hereof.
4.3 Share of Additional Rent. Landlord shall reasonably estimate
Tenant's Prorata Share of Taxes and Operating Costs for the Lease Year in
question and Tenant shall pay with each monthly installment of Base Rent during
that Lease Year, in advance as Additional Rent, an amount equal to one-twelfth
of the total of Tenant's Prorata Share of such Taxes and Operating Costs. If
total payments made by Tenant based upon such estimates exceed actual Taxes and
Operating Costs as finally determined for the Lease Year in question, then any
overpayment shall be credited in full to such payments next coming due under
this Lease. If total payments based upon such estimates are less than the actual
amounts required to pay in full Tenant's Prorata Share, then Tenant shall pay to
Landlord the full amount of the deficiency within thirty (30) days after
receiving written notice from Landlord of the amount of such deficiency. The
Additional Rent payment for any fractional month at the commencement,
termination or expiration of the Term shall be prorated accordingly.
5. INTENTIONALLY DELETED.
6. UTILITIES; TRASH REMOVAL.
6.1 Tenant's Direct Payment to Utility Providers. Tenant shall pay
directly to the relevant provider, as they become due, all bills for utilities
(whether they are used for furnishing heat or other purposes) that are furnished
directly to the Leased Premises. However, with respect to the electricity
provided to the Leased Premises, Tenant shall pay directly to Landlord monthly
(within 10 days after written notice showing the calculation of Tenant's share)
Tenant's share of charges for electricity as established by the sub-meter (the
"Sub-meter") between the main meter (the "Main Meter") for the Building and the
Leased Premises which monitors electricity usage at the Leased Premises.
Tenant's share shall equal the total monthly electric bill for the Building
times a fraction of which the denominator is the total kilowatt hours shown on
the Main Meter for the month in question and the
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numerator of which is the total kilowatt hours shown on the Sub-meter for the
month in question.
6.2 Tenant's Obligations Regarding Additional Utilities. Landlord
warrants and represents to Tenant that the following utilities are presently
available to the Leased Premises: water, sewer, gas, electricity, cable
television and telephone. Landlord shall have no obligation to provide utilities
or equipment other than the utilities and equipment within the Leased Premises
as of the Commencement Date of this Lease. In the event Tenant requires
additional utilities or equipment or utilities of greater capacity, the
installation and maintenance thereof shall be performed at Tenant's sole
obligation and shall be performed at Tenant's sole cost and expense, provided
that such installation shall be subject to the prior written consent of
Landlord.
6.3 Landlord's Right to Install Other Utilities. Landlord shall be
entitled to install in or through the Leased Premises and the Property and
repair, maintain, and replace pipes, conduits, wires, and other utility lines
serving other tenants or portions of the Property provided said installation,
repair, maintenance or replacements do not unreasonably interfere with Tenant's
use of the Leased Premises, other than a reasonable time necessary to complete
such installation, repair, maintenance, or replacement.
6.4 Trash Removal. Trash generated in the ordinary course of business
by Tenant shall be deposited in a dumpster designated by Landlord adjacent to
the Leased Premises and the cost of this dumpster and removal of trash from the
dumpster will be included in Operating Costs. However, it shall be the sole
responsibility of Tenant to segregate any and all hazardous and/or medical waste
from the trash deposited in such dumpster and to have such hazardous and/or
medical waste removed at its own cost and expense from the Leased Premises by a
licensed contractor in accordance with all applicable laws as more fully
detailed in Section 9.6 below.
7. BROKERAGE.
Tenant warrants that it has dealt with no broker in connection with
this Lease other than the Broker or Brokers named in Section 1.8 above and
agrees to defend and indemnify Landlord against any claim, loss, damage, cost or
expense (including, without limitation, reasonable attorney's fees) incurred by
Landlord on account of any breach of such warranty. Landlord warrants that it
has dealt with no broker in connection with the consummation of this Lease
except the Broker or Brokers named in Section 1.8 above, and agrees to indemnify
Tenant against any claim, loss damage, cost or expense (including, without
limitation, reasonable attorney's fees) incurred by Tenant on account of any
breach of such warranty.
8. USE OF LEASED PREMISES; COMPLIANCE WITH LAWS AND FIRE INSURANCE REQUIREMENTS;
HAZARDOUS MATERIALS.
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8.1 Use of Leased Premises. Tenant acknowledges that no trade or
occupation shall be conducted in the Leased Premises or use made thereof other
than the Permitted Use set forth in Section 1.4 above.
8.2 Compliance with Laws. Tenant, at its sole expense, shall comply
with all laws, rules, orders and regulations of federal, state, county, and
municipal authorities (collectively, "Governmental Regulations"), and with any
direction of any public officers pursuant to law, which impose any duty upon
Landlord or Tenant with respect to the Leased Premises. Conversely, Landlord, at
its sole expense, shall comply with all Governmental Regulations which impose
any duty with respect to the portions of the Building outside of the Leased
Premises, except to the extent that such duty is triggered by the particular use
for which Tenant is utilizing the Leased Premises, in which event the provisions
of the prior sentence shall govern.
8.3 Compliance with Americans with Disabilities Act. Landlord will
complete the Tenant Improvements in compliance with applicable provisions of the
Americans with Disabilities Act and all of the regulations promulgated
thereunder (collectively, the "ADA"). Thereafter, without in any way limiting
the generality of the obligations set forth in Section 8.2 above, Tenant also
shall comply at Tenant's sole cost and expense with all provisions of the ADA as
they apply to Tenant's use and occupancy of the Leased Premises and the
operation of Tenant's business therein and shall be fully responsible for any
modifications or alterations to the Leased Premises or the common areas of the
Property necessary to meet requirements of the ADA which have become applicable
to the Leased Premises or the Property as a result of Tenant's operation of its
business within the Leased Premises.
8.4 No Nuisance or Other Harmful or Disruptive Activity. Tenant shall
not perform any acts or carry on any practices which may injure any part of the
Leased Premises, the Property or common areas, violate any certificate of
occupancy affecting the same, constitute a public or private nuisance or a
menace to other tenants on the Property, produce undue noise, create obnoxious
fumes or other odors or otherwise cause unreasonable interference with other
tenants or occupants of the Property. Further, Tenant agrees not to use the
Leased Premises for any purpose whatsoever which may injure the reputation of
the Leased Premises or the Property.
8.5 Compliance with Fire Insurance Requirements. Tenant shall not
permit any use of the Leased Premises which will make voidable any insurance on
the Property or on the contents of the Building or which shall be contrary to
any law or regulation from time to time established by the New England Fire
Insurance Rating Association or any similar body succeeding to its powers.
Tenant shall on demand reimburse Landlord, and all other tenants to the extent
of insurance carried directly by them, all extra insurance
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premiums, caused in any way by Tenant's use of the Leased Premises, including,
without limitation, the volume of electricity and electrical equipment used by
Tenant.
8.6 Hazardous Materials. Tenant shall not permit the generation,
storage, transportation, use, emission, disposal release, threat of release or
other escape of any Hazardous Materials on, under or from the Leased Premises or
the Property. Tenant shall not use, generate, store, transport, release, emit or
dispose of Hazardous Materials on, under or from the Leased Premises or the
Property, or dump, flush or in any way introduce Hazardous Materials into sewage
or other waste disposal systems serving the Property (nor shall Tenant permit or
suffer any of the foregoing).
Without limiting any other provision of this Lease, Tenant will
indemnify, defend and hold Landlord harmless from and against all claims, loss,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements, diminution in the value of the Leased Premises or the
Property, costs incurred in connection with any investigation of site conditions
or any clean-up or remedial work required by any federal, state or local
governmental agency) incurred as a result of any breach of Tenant's covenants in
the first paragraph of this Section by Tenant or Tenant's contractors,
licensees, invitees, agents, servants or employees. Without limiting the
foregoing, if the presence of any Hazardous Materials in, on or under the Leased
Premises or the Property caused or permitted by Tenant results in any
contamination of the Leased Premises or the Property, Tenant shall promptly take
all actions at its sole expense as are necessary to return the Leased Premises
or the Property to the condition existing prior to the introduction of any such
Hazardous Material by Tenant, provided that Landlord's approval of such action
shall first be obtained, which approval shall not be unreasonably withheld so
long as such actions would not potentially have any material adverse long-term
or short-term effect on the Leased Premises or the Property.
Landlord will indemnify, defend and hold harmless Tenant from and
against all claims, loss, cost and expenses (including, without limitation,
reasonable attorneys fees and disbursements) incurred by Tenant as a result of
Hazardous Materials existing in, on or under the Property as of the date of this
Lease.
The obligations of Tenant and Landlord in this Section shall survive
the expiration or earlier termination of this Lease and any transfer of title to
the Leased Premises, whether by sale, foreclosure, deed in lieu of foreclosure
or otherwise.
For purposes of this Lease, "Hazardous Materials" means, collectively,
any animal wastes, medical waste, blood, biohazardous materials, hazardous
waste, hazardous substances, pollutants or contaminants, oils, radioactive
materials, radon gas, asbestos in
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any form or condition, polychlorinated biphenyls, flammable explosives and any
pollutant or contaminant or hazardous, dangerous or toxic chemicals, materials
or substances within the meaning of any applicable federal, state or local law,
regulation, ordinance or requirement relating to or imposing liability or
standards of conduct concerning any such substances or materials on account of
their biological, chemical, radioactive, hazardous or toxic nature, all as now
in effect or hereafter from time to time enacted or amended.
Notwithstanding the foregoing, the term Hazardous Materials as defined
herein shall not include (a) pharmaceuticals and cleaning agents of the types
and in the quantities and concentrations normally stocked by health care
providers in medical office buildings, (b) oil in de minimis amounts typically
associated with the use of certain portions of the Property for driving and
parking motor vehicles or (c) medical wastes generated at the Leased Premises;
provided that the foregoing are used, stored, transported and/or disposed of in
accordance with all applicable federal, state and local statutes, ordinances,
codes, orders, decrees, rules and regulations now or hereafter in effect.
9. RULES AND REGULATIONS; SIGNS.
9.1 Rules and Regulations. Tenant agrees to comply with any and all
rules and regulations for general application to at tenants established by
Landlord for the Property, from time to time, as reasonably determined by
Landlord to be necessary for the orderly and efficient operation of the
Property. However, Landlord shall not be responsible to Tenant for failure to
enforce any of such rules and regulations or for the non-observance or violation
of any of such rules and regulations by any other tenant or by any other person,
or for the non-observance or violation of or failure to enforce or to perform
the provisions of any other lease.
9.2 Signs. Landlord and Tenant have agreed upon specifications for
Tenant's sign at the Building as set forth in Exhibit Sign attached hereto.
Tenant shall obtain the prior written consent of Landlord before deviating from
such specifications in any way or erecting any other sign at, on, or about the
Property or the outside of the Building or any exterior door, wall, window, or
portion of the Leased Premises. Any materials or displays approved by Landlord,
shall at all times be maintained by Tenant at its cost and expense in good
condition, good working order and appearance and in compliance with all
applicable laws, codes, ordinances and by-laws; and Tenant hereby
unconditionally and irrevocably authorizes Landlord to enter upon the Leased
Premises at Tenant's expense and without liability or penalty, and to remove any
materials or displays not in accordance with each and all of the foregoing
provisions.
10. MAINTENANCE; REPAIRS.
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10.1 Tenant's Obligations. Tenant shall, at Tenant's sole cost and
expense, (a) maintain and keep in good repair, good working order and free of
litter and refuse the interior of the Leased Premises and make any and all
repairs and replacements thereto as and when required, ordinary or
extraordinary, foreseeable or unforeseeable, including, but not limited to, the
maintenance, repair and replacement of any and all furnishings, fixtures,
leasehold improvements, exterior entrances, windows, plate glass, electrical
wiring, lighting fixtures, heating or plumbing fixtures, pipes, air conditioning
or heating components contained within the Leased Premises or exclusively
serving the Leased Premises, but specifically excluding any repairs or
replacements required by damage from fire or other casualty (except that Tenant
shall be fully liable and responsible to Landlord for the deductible amount of
any insurance if such damage is caused by Tenant or Tenant's agents, employees
or contractors); (b) keep unclogged and in good repair all drains, traps and
sewer pipes and maintain and leave same in good working order; and (c)
periodically repaint and redecorate the Leased Premises as and when required to
maintain a clean and fresh appearance.
10.2 Landlord's Obligations. Landlord agrees to maintain the structure
the roof, and the building systems (except for portions of those systems
exclusively serving the Leased Premises) of the Building in good working order
and repair, reasonable wear and tear, damage by fire and other casualty only
excepted. Further, if such maintenance is required because of the act or
negligence of Tenant or those for whose conduct Tenant is legally responsible
and such maintenance is not covered by insurance, then Tenant shall be
responsible for such maintenance, and if such maintenance is covered by
insurance, then Tenant shall be fully liable and responsible to Landlord for the
deductible amount of any such insurance.
10.3 Removal of Snow and Ice. Removal of snow and ice from the
sidewalks, driveways and parking areas of the Property shall be the
responsibility of Landlord.
10.4 Tenant's Failure to Make Repairs. If repairs are required to be
made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant
make the same forthwith, and if Tenant refuses or neglects to commence such
repairs and complete the same with reasonable dispatch, after such demand,
Landlord may (but shall not be required to do so) make or cause such repairs to
be made.
11. ALTERATIONS.
11.1 Alterations or Additions by Tenant. Tenant shall not make
structural alterations or additions to the Leased Premises, but may make
non-structural alterations provided that, in cases involving an expenditure in
excess of $10,000, Landlord gives its prior written consent thereto, which
consent shall not be
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unreasonably withheld or delayed. However, Tenant may not make any alterations
whatsoever to the hallway or any of the walls forming the hallway which runs
through the Leased Premises from the West Street entrance to the Building to the
nursing home facility located within the Building adjacent to the Leased
Premises. All such allowed alterations shall be at Tenant's sole cost and
expense. Tenant shall not permit any mechanics' liens, or similar liens, to
remain upon the Leased Premises for labor and material furnished to Tenant or
claimed to have been furnished to Tenant in connection with work of any
character performed or claimed to have been performed at the direction of Tenant
and shall cause any such lien to be released of record forthwith without cost to
Landlord. Any alterations or improvements made by Tenant shall become the
property of the Landlord at the expiration or earlier termination of the Term.
All alterations or additions made by Tenant shall be performed in a good and
workmanlike manner and in compliance with all the applicable laws, ordinances,
orders, rules, regulations and requirements applicable thereto and shall he
performed only by contractors or mechanics approved by Landlord. All such
contractors and mechanics shall carry adequate liability insurance (which shall
name Landlord and Tenant as an additional insured) and workmen's compensation
insurance and Landlord shall be presented with certificates of same prior to the
commencement of any work.
11.2 Alterations or Additions by Landlord. Landlord hereby reserves the
right at any time to enter upon the Property or the Leased Premises and make
alterations or additions thereto, or to any or all of the common facilities,
improvements or personalty comprising a part thereof, provided such alterations
or additions do not unreasonably interfere with Tenant's use of the Leased
Premises.
12. ASSIGNMENT; SUBLEASING.
Tenant shall not assign this Lease or sublet the whole or any part of
the Leased Premises without Landlord's prior written consent, which consent
shall not be unreasonably withheld or delayed; it being agreed, however, that
Landlord will give its consent to any sublease or assignment of all or any
portion of the Leased Premises to an affiliate (i.e., an entity in common
ownership with Tenant or wholly owned by Tenant or wholly owning Tenant) of
Tenant for the Permitted Use provided such affiliate of Tenant is not a
competitor of Landlord or any affiliate of Landlord. Notwithstanding such
consent, Tenant shall remain liable to Landlord for the payment of all Base
Rent, Additional Rent, any other charges due hereunder, and for the full
performance of the covenants and conditions of this Lease. Landlord's consent to
any such transfer, assignment or sublease will not be deemed a consent to any
subsequent transfer, assignment or sublease. In the event of a default under the
terms of this Lease, if the Leased Premises or any part thereof are then
assigned or sublet, Landlord, in addition to any other remedies herein provided
or provided by law, may at its option collect directly from assignee or
subtenant all
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rents becoming due to Tenant under such assignment or sublease and apply such
rent against any sums due it by Tenant hereunder, and no such collection shall
be construed to constitute a novation or a release of Tenant from the further
performance of its obligations hereunder. For purposes of this Lease, (a) any
assignment, transfer or conveyance of any sort of 25% or more of the stock or
other beneficial ownership of Tenant and (b) any merger or consolidation of
Tenant with any other entity shall constitute an "assignment" which is subject
to Landlord's prior reasonable consent under this Section 12.
13. SUBORDINATION TO MORTGAGES: ESTOPPEL CERTIFICATES.
13.1 Subordination. This Lease shall be subject and subordinate to any
and all mortgages, deeds of trust and other instruments in the nature of a
mortgage, easements or rights-of-way (provided no such easement or right of way
shall unreasonably interfere with Tenant's use of the Leased Premises, Tenant's
parking rights or any other rights appurtenant to the Leased Premises under the
terms of this Lease) now or at a time hereafter, constituting a lien or
encumbrance on the Property and Tenant shall, when requested, promptly execute
and deliver such written instruments as shall be necessary to show the
subordination of this Lease to such mortgages, deeds of trust or other such
instruments. Failure to execute any such instruments within twenty (20) days
after request shall constitute a default hereunder. It is the understanding of
the parties hereto that Landlord shall obtain and deliver a non-disturbance
agreement from the current mortgagee of the Premises as of the date of this
Lease and shall use its best efforts to secure a non-disturbance agreement with
any and all subsequent lenders requiring such subordination from Tenant or
grantees under such other instruments, but the effectiveness of the other
provisions of this Section 13.1 shall not be conditioned in any manner upon the
actual receipt of a non-disturbance agreement from such subsequent lenders.
13.2 Estoppel Certificates. Tenant shall, within ten (10) days after
request from Landlord, deliver to any proposed mortgagee or purchaser of all or
any part of the Property, in recordable form, a certificate certifying and
covenanting any and all information requested, including, but not limited to,
the following: (a) the date of this Lease, the date when the Term of this Lease
commenced (the "Commencement Date"), the date of the expiration of the Term, and
the date when Base Rent and Additional Rent commenced to accrue hereunder; (b)
that this Lease is unmodified, not amended, and in full force and effect; or, if
there have been any amendments or modifications, that the Lease is in full force
and effect as so amended or modified and stating the amendments or modifications
and the dates thereof; (c) whether or not there are then existing any setoffs or
defenses against the enforcement of any of the terms and/or conditions of this
Lease and any amendments or modifications hereof on the part of Tenant to be
performed, and, if so, specifying the same; (d) the dates, if any,
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to which the Base Rent, the Additional Rent and other sums on Tenant's part to
be paid hereunder have been paid and/or paid in advance; and (e) that Tenant has
accepted the Leased Premises, the Tenant Improvements as being complete in
accordance with the Lease, or Tenant will specify any particular items which
Tenant has not accepted. If Landlord shall submit to Tenant a proposed
instrument containing any of the foregoing information, then, if Tenant shall
fail to respond to Landlord's request for confirmation of the information set
forth therein within twenty (20) days after Landlord's request, any information
contained in such proposed instrument shall be deemed to be true, and Tenant
shall be deemed to have waived any rights accruing by reason of any inaccuracy
in such proposed instrument. Further, Tenant's failure or refusal to execute and
deliver such certificate within such (20) day period shall constitute a default
under this Lease.
14. LANDLORD'S ACCESS.
Landlord or agents of Landlord, the holder of any mortgage encumbering
the Property and/or its agents may, upon twenty-four (24) hours prior notice to
Tenant (or at any time without notice in the case of emergency), enter the
Leased Premises to (a) inspect the same, (b) remove placards and signs affixed
thereto and not approved as herein provided, (c) make alterations as provided in
Section 11.2 above or repairs, (d) show the Leased Premises to prospective
lenders at any time and to prospective tenants within one year prior to the
then-scheduled expiration of the Term, and (e) at any time within six (6) months
before the expiration of the Term, affix to any suitable part of the Leased
Premises a notice that the Leased Premises are available for lease and keep the
same so affixed without hindrance or molestation.
15. INDEMNIFICATION AND LIABILITY.
15.1 Damage to Property. Tenant shall and hereby agrees to save
Landlord harmless from all loss and damage to property occurring within the
Leased Premises occasioned by the use or escape of water or by the bursting of
pipes. All personal property or improvements of Tenant at or about the Leased
Premises shall be installed, used, or enjoyed at the sole risk of Tenant, and
Tenant shall defend, indemnify and hold Landlord harmless from and against any
and all claims and/or causes of action pertaining to or arising out of damage to
the same, including but not limited to subrogation claims by Tenant's insurance
carrier, but excepting such claims and/or causes of action resulting from the
actual negligence and/or willful and wanton conduct of Landlord.
15.2 Indemnity Against Liability. In addition, and without limiting any
other provision of this Lease, Tenant shall and hereby agrees to indemnify and
hold Landlord harmless, to the fullest extent permitted by law, from and against
any and all claims, actions, loss, damage, liability and expense (including,
without limitation, attorney's fees and related legal costs incurred by
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Landlord) in connection with loss of life, personal injury and/or damage to
property arising out of or resulting from (a) any occurrence in, upon or at the
Leased Premises, (b) the occupancy or use of the Leased Premises or any part
thereof by Tenant, its officers, agents, employees, subtenants, licensees,
concessionaires and/or invitees, or (c) on or about the Property if caused
wholly or in part by any act or omission of Tenant, its officers, agents,
employees, subtenants, licensees, concessionaires, invitees and/or others
occupying space in the Leased Premises. However, Tenant shall have no obligation
to indemnify Landlord for that portion of liability which is imposed upon
Landlord as a result of any comparative negligence by Landlord (or its agents,
employees or contractors) which forms part of the basis for any such claim,
action, loss, damage, liability or expense; but only the portion of the claim,
action, loss, damage, liability roe expense actually attributable to Landlords'
comparative negligence shall be exempted from Tenant's indemnification
obligations hereunder.
16. INSURANCE.
16.1 Insurance to be Maintained by Tenant. At its own cost and expense,
Tenant shall obtain and maintain throughout the Term of this Lease the following
insurance coverage: (a) comprehensive general public liability insurance
covering claims for injury to persons or property occurring in or about the
Leased Premises or the Property, or arising out of ownership, maintenance, use,
or occupancy thereof by the Tenant, in the amount of Three Million Dollars
($3,000,000.00), with property damage insurance with limits of Five Hundred
Thousand Dollars ($500,000.00); (b) all risk hazard insurance including and not
limited to fire, extended coverage, vandalism and malicious mischief insurance,
covering any and all of the Tenant's equipment, trade fixtures, tools,
inventory, and personal property in, at, or about the Leased Premises, in the
full amount of the replacement cost of any and all of the same, and also
including fire legal liability coverage as to the portion of the Building of
which the Leased Premises are a part; (c) Worker's Compensation and all other
insurance coverages for employees, agents, servants, and others at or about the
Leased Premises in compliance with and as required by any and all applicable
governmental regulations and statutes; (d) if and when the Premises include
plate glass, plate glass insurance for the benefit of Landlord in the amount of
replacement cost thereof; and [(e) medical malpractice insurance in the amount
of Three Million Dollars ($3,000,000.00) per occurrence.] Landlord may from time
to time require Tenant to maintain other insurance coverage or may increase the
amount of the foregoing insurance to be maintained by Tenant so as to provide
insurance coverage in forms and amounts consistent with the extent of coverage
maintained by similar tenants in similar buildings located in the vicinity of
the Leased Premises.
16.2 Other Insurance Requirements; Waiver of Subrogation. All such
insurance procured by Tenant as provided herein shall be
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in responsible companies qualified to do business in Massachusetts and in good
standing therein, insuring Landlord and Landlord's mortgagee (if any) as well as
Tenant against injury to persons or damage to property as herein provided.
Tenant shall deposit with Landlord certificates for such insurance at or prior
to the Commencement Date, and thereafter within thirty (30) days prior to the
expiration of any such policies. All such insurance certificates shall provide
that such policies shall not be cancelled or modified without at least ten (10)
days prior written notice to each insured named therein. Insofar as, and to the
extent that, the following provision may be effective without invalidating or
making it impossible to secure insurance coverage obtainable from responsible
insurance companies doing business in the locality in which the Property is
located (even though an extra premium may result therefrom), Landlord and Tenant
mutually agree that, with respect to any hazard, the loss from which is covered
by insurance then being carried by them, respectively, the party carrying such
insurance and suffering such loss releases the other of and from any and all
claims with respect to such loss to the extent of the insurance proceeds paid
with respect thereto; and they further mutually agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof.
16.3 Insurance to be Maintained by Landlord. Landlord shall maintain
property and casualty insurance with respect to the Building and other
improvements constituting the Property in such amounts as are required by the
first mortgage lender for the Property, or in the absence of a first mortgage
lender, in amounts which are comparable to those maintained by other reasonably
prudent property owners of facilities of the type of character of the Property.
17. FIRE: CASUALTY; EMINENT DOMAIN.
17.1 Damage by Casualty. Should a substantial portion of the Leased
Premises, or of the Property, be substantially damaged by fire or other
casualty, Landlord may elect to terminate this Lease. When such fire or casualty
renders the Leased Premises substantially unsuitable for its intended use, a
just and proportionate abatement of rent shall be made. Further, within thirty
(30) days after such fire or other casualty, Landlord shall give written notice
to Tenant with respect to whether or not Landlord will restore the Leased
Premises. Tenant may elect to terminate this Lease if either (a) Landlord
notifies Tenant that Landlord has elected not to restore the Leased Premises, or
(b) Landlord elects to restore but fails to restore the Leased Premises to a
condition substantially suitable for its intended use within two hundred seventy
(270) days after such fire or casualty. However, Tenant's failure to give such
notice of termination within five (5) days after the date on which the right to
terminate ripens under either (a) or (b) above shall constitute a waiver of such
right by Tenant. Landlord will seek to have the first mortgagee of
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the Property, if any, provide for application of hazard insurance loss proceeds
to the repair or reconstruction of the Leased Premises upon any hazard loss.
Subject to the mortgagee (if any) of the Property making the hazard loss
insurance proceeds available for such restoration and to Landlord's receipt of
such proceeds for that purpose, if Landlord elects to repair, reconstruct, or
cause to be repaired or reconstructed, such damage or destruction, Landlord
shall not be required to expend, in connection with such repair or
reconstruction, any amount exceeding the amount of casualty insurance proceeds
actually received by Landlord. Notwithstanding the foregoing, in the event such
mortgagee shall not make the insurance Loss proceeds available for repair or
restoration, Landlord shall not be required to repair or reconstruct the Leased
Premises and shall notify Tenant within thirty (30) days next following such
hazard loss, of its election in this respect and thereupon, Tenant shall have
the termination rights described above in this Section.
17.2 "Complete" Taking of Property or Leased Premises. If, prior to
the Commencement Date or otherwise, the Property shall be taken in its entirety
under any condemnation or eminent domain proceedings (each such occurrence being
hereinafter referred to as a "Taking") by any governmental authority (the
"Taking Authority") during the Term hereof, or in the event twenty-five (25%)
percent or more of the Leased Premises is taken in any such proceedings and the
remaining portion shall not be suitable or adequate (in the reasonable opinion
of Tenant exercised in good faith) for the uses described in this Lease, and
Tenant notifies Landlord of such determination within thirty (30) days next
following the taking of physical possession of such portion of the Leased
Premises by the Taking Authority or the date upon which Tenant receives written
notice that title has vested in the Taking Authority, whichever is first to
occur, then in any such event this Lease and the Term hereof shall terminate as
of the date physical possession of the Property (or a portion thereof) is taken
by the Taking Authority, and Tenant shall be liable for the payment of Base
Rent, Additional Rent and all other charges due from Tenant hereunder, and
performance of the other terms and conditions of this Lease on Tenant's part to
be performed only up to date of such termination, and any Base Rent paid in
advance for periods following such date shall be apportioned and promptly
refunded to Tenant.
17.3 "Partial" Taking of Property or Leased Premises. If less than the
entire Property, or less than twenty-five (25%) percent of the Leased Premises,
shall be acquired or taken by condemnation or eminent domain as aforesaid, and
the mortgagee of the Property shall not make the proceeds of any awards or
damages payable as to the Taking available for restoration and repair of the
balance of the Building, or Landlord shall determine in its reasonable
discretion that the restoration and repair of the balance of the Building shall
be impracticable; or in the event the Taking occurs within the last eighteen
(18) months of the initial Term (or of a renewal term, if any), Landlord shall
be entitled to
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terminate this Lease without liability by reason of such Taking. If Landlord
does not so terminate this Lease, this Lease shall not cease and terminate and
Landlord shall rebuild and restore the Leased Premises as nearly as possible to
the condition existing next preceding such Taking, with due allowance for the
portion so taken; further, Tenant shall promptly restore or repair any
improvements made by it in the Leased Premises to the extent proceeds from such
awards are made available to Tenant for such purpose and this Lease shall be and
remain in full force and effect and be unaffected by, the Taking, except that
from the date possession of the taken portion of the Leased Premises is acquired
by the Taking Authority, the Base Rent payable under this Lease shall be
diminished by a percentage equal to the percentage of the Leased Premises so
taken. The restoration or repair work to be done by Tenant shall be done subject
to any and all terms and conditions elsewhere set forth in this Lease governing
alterations or work on Tenant's part to be performed.
17.4 Miscellaneous Provisions Regarding Casualty or Taking.
17.4.1 In the event this Lease is terminated or terminates by
reason of a Taking or a Casualty, the provisions of the Lease applicable upon
expiration of the Lease shall govern the parties.
17.4.2 Landlord will seek to have any mortgagee of the
Building provide for application of the proceeds of any Taking awards to
restoration, repair, and reconstruction of the portion of such property
remaining after the Taking. Notwithstanding the amount of land, building, or
improvements taken by condemnation or eminent domain or the termination or
continuance of this Lease with respect thereto, Tenant shall not participate or
share in any recovery, award, or damages payable or paid as to such Taking, nor
have or assert any right, claim, or cause of action against Landlord, the fee
owner, or mortgagee of the Property or, except as expressly provided in Section
17.4.3 below, the Taking Authority whether for the loss of, or diminution in
value of, the unexpired Term of this Lease, or as to the Taking of any such
land, building, and/or improvements or otherwise) and Tenant for itself and its
successors and assigns hereby waives, surrenders, and releases to Landlord any
and all claims or rights to claim or receive all or any portion of any and all
recovery, awards, and/or damages as to such Taking.
17.4.3 If permitted by statute, Tenant may assert a separate
and independent claim for and recover from the Taking Authority, but not from
Landlord, any compensation as may be separately awarded or recoverable by Tenant
in its own name and right for any damage to Tenant's portable fixtures and
equipment, or on account of any expenses which it shall incur in removing its
merchandise, furnishings, and equipment from the Leased Premises, but in no
event shall any such claims or recoveries be claims or asserted in the event the
same would, may, or shall diminish,
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offset, or bar any damages, recovery, or award to Landlord or the fee owner of
the Leased Premises.
.
18. DEFAULT; REMEDIES; BANKRUPTCY.
18.1 Events of Default. Each of the following shall be an event of
default ("Event of Default") under this Lease:
18.1.1 Tenant shall default in the payment of any installment
of rent or other sum herein specified and such default shall continue for ten
(10) days;
18.1.2 Tenant shall fail to maintain insurance as required by
this Lease;
18.1.3 Tenant shall default in the observance or performance
of any other of Tenant's covenants, agreements, or obligations hereunder and
such default shall not be cured within thirty (30) days after written notice
thereof, or if such default is of a nature that it cannot be reasonably cured
within such thirty (30) day period, Tenant shall not have commenced to cure such
default within said thirty (30) day period and diligently proceed to completion
of said cure within ninety (90) days after written notice thereof, provided such
extended period without a completed cure will not have a material adverse effect
on the value of the Property or the Leased Premises or expose Landlord to any
liability; provided however, that Landlord shall not be required to give more
than two (2) notices during any consecutive twenty-four (24) month period with
regard to Tenant's failure to perform its obligations under a particular Section
of this Lease (a "Previously Defaulted Provision") and in the event that
Landlord has already given two (2) such notices during any consecutive
twenty-four (24) month period, any subsequent failure of Tenant during such
twenty-four (24) month period to fully and punctually observe such Previously
Defaulted Provision shall immediately constitute a default even though no notice
has been given; or
18.1.4 Tenant or any other party shall file a petition or
application under any state or federal bankruptcy, insolvency or debtor's relief
law relating to Tenant or Tenant shall consent to an assignment or composition
for the benefit of Tenant's creditors or consent to the appointment of a
receiver for any of Tenant's property; provided, however, that if such petition,
application or receivership proceedings are instituted against Tenant by a third
party, there shall be no default hereunder unless the same shall remain
undischarged for a period of greater than sixty (60) days from the filing of
such petition or application or the commencement of the receivership
proceedings, as the case may be.
18.2 Landlord's Remedies. Upon the occurrence of an Event of Default,
subject to Section 18.8 hereof, Landlord shall have the following rights and
remedies:
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18.2.1 Landlord shall have the right at its election, at any
time thereafter, to give Tenant written notice of Landlord's election to
terminate this Lease on a date specified in such notice. Upon the giving of such
notice, this Lease and the estate hereby granted shall expire and terminate on
such date as fully and completely and with the same effect as if such date were
the date hereinbefore fixed for the expiration of the Term, and all rights of
Tenant hereunder shall expire and terminate, but Tenant shall remain liable as
hereinafter provided. Further, Tenant hereby expressly waives any rights of
redemption it may have under M.G.L. c. 186, [sec] 11 or any other applicable
statute now or hereafter in effect.
18.2.2 Landlord shall have the immediate right, whether or
not this Lease shall have been terminated pursuant to Section 18.2.1, to
re-enter and repossess the Leased Premises or any part thereof in the name of
the whole and repossess the same as of its former estate by force, summary
proceedings, ejectment or otherwise and the right to remove all persons and
property therefrom. Landlord shall be under no liability for or by reason of any
such entry, repossession or removal. No such re-entry or taking of possession of
the Leased Premises by Landlord shall be deemed to waive or prejudice any
remedies provided to Landlord hereunder, nor be construed as an election on
Landlord's part to terminate this Lease unless a written notice of such election
be given to Tenant pursuant to Section 19 or unless the termination of this
Lease be decreed by a court of competent jurisdiction.
18.2.3 At any time or from time to time after the repossession
of the Leased Premises or any part thereof pursuant to Section 18.2.2, whether
or not this Lease shall have been terminated pursuant to Section 18.2.1,
Landlord may relet the Leased Premises or any part thereof for the account of
Tenant, in the name of Tenant or Landlord or otherwise, without notice to
Tenant, for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the Term) and on such
conditions (which may include free rent and any other concessions) and for such
uses as Landlord, in its absolute discretion, may determine; and Landlord may
collect and receive any rents payable by reason of such reletting. Landlord
shall not be responsible or liable for any failure to relet or to collect any
rent due upon such reletting.
18.2.4 In the event of any termination of this Lease or
repossession of the Leased Premises or any part thereof by reason of the
occurrence of an Event of Default, Tenant will pay to Landlord the Base Rent,
and any Additional Rent and other sums required to be paid by Tenant for the
period from the Commencement Date through and including the date of such
termination or repossession.
18.2.5 At any time after any such termination of this Lease
or repossession of the Leased Premises or any part thereof by
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reason of the occurrence of an Event of Default, Landlord shall be entitled to
recover from Tenant, and Tenant will pay to Landlord on demand, as and for
liquidated and agreed final damages for Tenant's default and in lieu of all
current damages beyond the date of such demand (it being agreed that it would be
impracticable or extremely difficult to fix the actual damages), an amount equal
to the present value of the excess of (a) the Base Rent, any Additional Rent and
other sums which would be payable under this Lease from the date of such demand
(or, if it be earlier, the date to which Tenant shall have satisfied in full its
obligations under Section 18.2.4 to pay current damages) for what would be the
then unexpired Term in the absence of such termination or repossession plus
Landlord's estimate of the aggregate expenses of reletting the Leased Premises,
over (b) the then net fair rental value of the Leased Premises for the same
period (after deducting from such fair rental value the time needed to relet the
Leased Premises in the amount and concessions which would normally be given to a
new tenant). Fair rental value shall be established by reference to the terms
and conditions upon which Landlord relets the Leased Premises if such reletting
is accomplished within a reasonable period of time after such termination or
repossession and otherwise established on the basis of Landlord's estimates and
assumptions of fact regarding market and other relevant circumstances, which
shall govern unless shown to be clearly erroneous.
18.3 Landlord's Cure Rights. If Tenant shall default in the observance
or performance of any conditions or covenants on Tenant's part to be observed or
performed under or by virtue of any of the provisions of this Lease, Landlord,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of Tenant.
18.4 Tenant's Obligation to Reimburse Landlord. If Landlord makes any
expenditures (pursuant to Section 18.3 above or otherwise) or incurs any
obligations for the payment of money in connection with any failure of Tenant to
perform fully all of its obligations under this Lease, such sums paid or
obligations incurred (including but not limited to, reasonable attorney's fees
and court costs in instituting, prosecuting or defending any action or
proceeding), with interest at the rate of one and one half percent (1-1/2%) per
month and costs, shall upon demand be paid to Landlord by Tenant as Additional
Rent.
18.5 No Waiver. Landlord's failure to take action against Tenant with
respect to any default in Tenant's performance of its obligations hereunder
shall not, under any circumstances, constitute a waiver of any of Landlord's
rights under this Lease and, further, no waiver of any of the provisions of this
Lease shall be effective unless given in writing nor shall any waiver be
construed as a waiver of any of the other provisions hereof or as a waiver of
the same provisions for any subsequent time.
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18.6 Acceptance of Late Payments. No payment by Tenant, or acceptance
by Landlord, of a lesser amount than then due from Tenant to Landlord shall be
treated otherwise than as a payment on account regardless of any letter
accompanying such check or legend entered upon such check. Further, no
acceptance of any payment by Landlord from Tenant shall in any way constitute a
waiver of any default then existing or which would exist with the proper giving
of notice.
18.7 Interest on Late Payments. If Tenant shall fail to pay, when the
same is due and payable, any Base Rent, or Additional Rent or any other charges
or payments required hereunder (excluding the payments described in Section 18.4
above), such unpaid amounts shall bear interest from ten (10) days after the due
date thereof to the date of payment at the annual rate of interest of twelve
percent (12%) per annum, but in no event higher than the maximum rate permitted
by law; and, in addition, Tenant shall pay Landlord a late charge for any Base
Rent, any Additional Rent or any other charges or payments due hereunder which
is paid more than ten (10) days after its due date equal to five percent (5%) of
such payment.
18.8 Remedies Cumulative. Any and all remedies set forth in this Lease
(a) shall be in addition to any and all other remedies Landlord may have at law
or in equity, (b) shall be cumulative, and (c) may be pursued successively or
concurrently as Landlord may elect. The exercise of any remedy by Landlord shall
not be deemed an election of remedies or preclude Landlord from exercising any
other remedies in the future.
18.9 Landlord's Rights in Tenant's Bankruptcy. If this Lease is
assigned to any person or entity pursuant to the provisions of the Bankruptcy
Code, 11 U.S.C. 101 et seq. as now existing or hereafter amended (the
"Bankruptcy Code"), any and all monies or other considerations payable or
otherwise to be delivered in connection with such assignment shall be paid and
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any and all monies or other considerations
constituting Landlord's property under the preceding sentence not paid or
delivered to Landlord shall be held in trust for the benefit of Landlord and be
promptly paid to or turned over to the Landlord. Notwithstanding anything in
this Lease to the contrary, all amounts payable by Tenant to or on behalf of
Landlord under this Lease, whether or not expressly denominated as rent,
including, without limitation, the Base Rent and Additional Rent specified
herein, shall constitute rent for the purpose of Section 502(b)(7) of the
Bankruptcy Code.
If Tenant assumes this Lease and proposes to assign the same pursuant
to the provisions of the Bankruptcy Code to any person or entity who shall have
made a bona fide offer to accept an assignment of this Lease on terms acceptable
to Tenant, then notice of such proposed assignment, setting forth (a) the name
and address
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of such person; (b) all of the terms and conditions of such offer, and (c) the
adequate assurance to be provided Landlord to assure such person's future
performance under the Lease, including without limitation, the assurance
referred to in Section 365(b)(3) of the Bankruptcy Code, shall be given to
Landlord by the Tenant no later than twenty (20) days after receipt by the
Tenant, but in any event no later than ten (10) days prior to the date that the
Tenant shall make application to a court of competent jurisdiction for authority
and application to enter into such assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be exercised by notice to the
Tenant given at any time prior to the effective date of such proposed
assignment, to accept an assignment of this Lease upon the same terms and
conditions and for the same consideration, if any, as the bona fide offer made
by such person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed without further act or deed to have assumed
on and after the date of such assignment all of the obligations arising under
this Lease. Any such assignee shall upon demand execute and deliver to Landlord
an instrument confirming such assumption.
19. NOTICES.
Any and all notices, demands, consents or approvals required hereunder
shall be given in writing in accordance with this Section 19. Any notice from
Landlord to Tenant shall be deemed duly served, if left at the Leased Premises
addressed to Tenant or mailed to Tenant's Mailing Address (as defined in Section
1.7 above) by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid. Any notice from Tenant to Landlord shall be
deemed duly served, if mailed to Landlord by overnight courier, or by registered
or certified mail, return receipt requested, postage prepaid, addressed to
Landlord at Landlord's Mailing Address (as defined in Section 1.6 above) or at
such other address as Landlord may from time to time advise in writing. All rent
payments shall be paid and sent to Landlord at Landlord's Mailing Address.
Any notice from Tenant to Landlord shall concurrently be given by
Tenant to the holder of any mortgage encumbering the Property. Any notice from
Landlord to Tenant shall concurrently be given by Landlord to the holder of any
mortgage encumbering the Property.
20. SURRENDER: HOLDING OVER.
20.1 Surrender of Leased Premise. Tenant shall, at the expiration or
other termination of the Term, (a) remove all of Tenant's goods and effects from
the Leased Premises (including, without hereby limiting the generality of the
foregoing, all signs and lettering affixed or painted by Tenant either inside or
outside the Leased Premises), and (b) deliver to Landlord the Leased
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Premises, in broom clean condition, and otherwise in the same condition as
existed as of the Commencement Date (normal wear and tear and damage by fire or
other casualty excepted), all keys, locks thereto, other fixtures connected
therewith and all alterations and additions made to or upon the Leased Premises.
Upon Tenant's failure to comply with the preceding sentence, Landlord is hereby
authorized, without liability to Tenant for loss or damage thereto, and at the
sole risk of Tenant, to remove and store any of such property at Tenant's
expense, or to retain same under Landlord's control or to sell, at public or
private sale, without notice, any or all of such property not so removed and to
apply the net proceeds of such sale to the payment of any sum due hereunder, or
to destroy such property.
20.2 Holding Over. If Tenant remains in Possession of the Leased
Premises or any part thereof after the expiration or earlier termination of the
Term of this Lease, Tenant shall be deemed to be in use and Occupancy of the
Leased Premises as a month-to-month tenant at a rate of monthly rent one and
one-half (1-1/2) times the rate of the total monthly installment of Base Rent
then in effect upon the date of expiration or termination of this Lease and
subject to the same terms and conditions (including, without limitation,
provisions concerning the payment of all other charges hereunder) as those set
forth in this Lease other than as to the length of Term. However, nothing in
this Lease provision shall be deemed to extend the Term beyond that set forth in
Section 2 hereof, nor grant any right to Tenant or any other person to use,
occupy, or remain in Possession of all or any part of the Leased Premises beyond
the expiration or earlier termination of the Term of this Lease.
21. LANDLORD'S LIABILITY.
21.1 Limited Recourse. 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.
21.2 Interruption of Services and Utilities. With respect to services
or utilities, if any, to be furnished by Landlord to Tenant under this Lease,
Landlord shall in no event be liable for failure to furnish the same when
Landlord is prevented from doing so (a) by strike, lockout, breakdown, accident,
order or regulation of or by an governmental authority, or failure of supply,
(b) by
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reason of the making of repairs or alterations which Landlord is required or is
permitted by this Lease or by law to make or in good faith deems necessary, (c)
by inability after the exercise of reasonable diligence to obtain supplies,
parts or employees necessary to furnish such services, or because of war or
other emergency, (d) by any other cause beyond Landlord's reasonable control
(but not including any lack of available funds on the part of the Landlord), or
(e) by any cause due to any act or neglect of Tenant or Tenant's servants,
agents, employees, licensees or any person's claiming by, through or under
Tenant. Notwithstanding anything to the contrary herein, if any material
services or utilities supplied by Landlord are interrupted then Landlord shall
use its best efforts to cause the restoration of such services and if such
interruption lasts for more than forty-eight (48) hours, then Base Rent shall be
suitably abated to reflect the diminution in value of the Leased Premises
arising from the lack of the utility service in question.
21.3 No Consequential Damages. In no event shall either Landlord or
Tenant ever be liable to the other for any loss of business or any other
indirect or consequential damages suffered by such other party as a result of
the defaulting party's breach of its obligations under this Lease.
21.4 Liability after Conveyance of Property. The term "Landlord", as
used herein, shall mean and refer to the owner of the fee estate in the Property
whosoever such owner may be from time to time or to the person or entity named
as Landlord above or its successors or assigns, as the case may be; and upon any
conveyance or transfer of the interest of such person or entity as Landlord,
such person or entity shall be thereupon released and discharged from any and
all liability under this Lease or otherwise to Tenant and any and all others
whomsoever except for breaches of this Lease occurring prior to such transfer.
22. MISCELLANEOUS.
22.1 Governing Law. This Lease shall be governed by the law of the
Commonwealth of Massachusetts and shall be deemed to have been made, executed,
delivered and accepted by the respective parties in that state.
22.2 Partial Invalidity. 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 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. It is the intention of the parties hereto that if any
provision of this Lease is capable of two constructions, one of which would
render the provision valid, then the provision shall have the meaning which
renders it valid.
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22.3 Captions. The captions of this Lease are for convenience and
reference only and shall not be deemed or construed to bind, modify, increase,
or decrease the terms and conditions of this Lease, or any interpretation or
construction thereof.
22.4 Successors and Assigns. The terms and conditions in this Lease
shall apply to and be binding upon the parties herein and their respective
successors and assigns, except as expressly otherwise provided.
22.5 Recording of Lease. Tenant shall not record this Lease. However,
at the request of either party, Landlord and Tenant shall execute, acknowledge,
deliver, exchange, and record at the requestor's expense a Notice of Lease or
other short-form instrument permitted under applicable state law and prepared by
Landlord.
22.6 Entire Agreement. This Lease and any and all exhibits and riders
attached hereto and made a part of this Lease constitute the entire agreement of
the parties concerning this Lease, and any and all other or prior agreements,
representations, or warranties are hereby terminated, cancelled, and agreed to
be void and of no force or effect.
22.7 Amendments. No change, amendment, deletion, or addition to this
Lease shall be effective unless in writing and signed by the parties.
22.8 Quiet Enjoyment. So long as Tenant is not in default of any of
its obligations under this Lease, beyond any applicable grace period, Tenant
shall peaceably and quietly have, hold and enjoy the Leased Premises free of any
claims by, through or under Landlord.
22.9 No Partnership. Nothing in this Lease shall create or be
construed to create a partnership between Tenant and Landlord, or make them
joint venturers, or bind or make Landlord in any way liable or responsible for
any acts, omissions, negligence, debts or obligations of Tenant.
22.10 Time of Essence. Time is of the essence in this Lease.
22.11 Landlord's Consent In the event that Landlord's consent is
required by the terms hereof for any purpose whatsoever, it is understood and
agreed that (a) Landlord's consent shall be subject to the consent of the holder
of any mortgage encumbering the Property but only to such extent such consent is
required under the applicable financing documents (which consent Landlord shall
seek to obtain) and (b) notwithstanding anything to the contrary set forth
herein, it shall not be deemed unreasonable for Landlord to withhold its consent
in any given circumstance based upon
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Landlord's inability to obtain any required consent from the holder of any
mortgage encumbering the Property.
22.12 Meditrust Loan Documents. Reference is made to the loans in the
aggregate amount of $18,720,000 made by Meditrust Mortgage Investments, Inc. to
Continuum Care of Dedham, Inc. (the "Loans"). In the event of any conflict
between the provisions hereof and the provisions of any of the documents
evidencing and/or securing the Loans (collectively, the "Meditrust Loan
Documents"), the Meditrust Loan Documents shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed and delivered as a sealed instrument by their respective duly
authorized officers as of the day and year first written above.
LANDLORD: TENANT:
CONTINUUM CARE OF DEDHAM. INC. CAREMATRIX CORPORATION
By: /s/ Frederick R. Leathers By: /s/ James M. Leaky Jr.
Name: Frederick R. Leathers Name: James M. Leaky Jr.
Title: VP Title: EVP
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List of Exhibits:
Exhibit A - Site Plan
Exhibit FP - Floor Plan of Leaned Premises
Exhibit OC - Operating Costs
Exhibit FMRV - Calculation of Fair Market Rental Value
Exhibit Sign - Sign Specifications
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EXHIBIT A
SITE PLAN
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Site Plan of Proposed Parking for Nursing Home, Medical Office & Surgery Center
<PAGE>
EXHIBIT FP
FLOOR PLAN OF LEASED PREMISES
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Demised Premises Dedham Ambulatory Surgical Center
Site Plan
<PAGE>
Demised Premises CareMatrix
Site Plan
<PAGE>
EXHIBIT OC
OPERATING COSTS
"Operating Costs" shall mean:
(a) all costs and expenses paid or incurred by Landlord in
operating, managing, equipping, insuring, controlling traffic, policing (if and
to the extent provided by Landlord), lighting, cleaning, maintaining, repairing
(including minor replacements associated with such repair) and restoring the
common areas of the Property, including all utility lines, pipes and conduits,
drainage or sewage systems, elevators and escalators, and electricity, steam,
water, fuel, heating, lighting and air conditioning systems serving the Property
and also including the costs and expenses for mail collection and distribution,
sweeping, snowplowing, sanding, refuse removal, planting and replacing
decorations, flowers and landscaping, painting, uniforms, wages, fidelity bonds,
unemployment taxes, social security taxes, workmen's compensation insurance
premiums, fees for required licenses and permits, supplies, repair, maintenance,
operation, replacement and debt service of any equipment associated with the
maintenance or operation of such common areas (but excluding the cost of
equipment properly chargeable to the capital account and depreciation of the
original cost of construction of the parking facilities and other common areas,
buildings and building systems), and any other expense or charge, whether or not
hereinbefore mentioned, which, in accordance with generally accepted accounting
and management principles, would be considered an expense of managing,
operating, maintaining or repairing the common areas of the Property (provided,
however, that the Operating Costs shall not include any capital expenditures as
defined under generally accepted accounting principles); and
(b) all premiums for comprehensive general public liability,
property damage, difference in condition, casualty, rent loss, elevator, and
other insurance maintained by Landlord with respect to all of the Property,
including the common areas and all buildings and improvements.
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EXHIBIT FNRV
CALCULATION OF FAIR MARKET RENTAL VALUE
For purposes of Section 2.2, "Fair Market Rental Value" shall be as
reasonably determined by Landlord to be the annual rental charge on a so-called
"triple net" basis (including without limitation Base Rent, Additional Rent and
other charges) as of the commencement date of each Option Period, for new leases
then being negotiated or executed for comparable office space in the area
surrounding Dedham, Massachusetts for terms commencing on or about the date of
commencement of the Option Period. In determining Fair Market Rental Value,
Landlord shall take into consideration the size of the premises, location of the
premises, lease term, condition and location of the applicable office building,
services provided by the landlord, rental concessions and other comparable
factors). Bona fide written offers to lease comparable space received by
Landlord from third parties (at arm's length) may be used by Landlord as an
indication of the Fair Market Rental Value.
Landlord shall notify Tenant of its determination of Fair Market
Rental Value within ten (10) days after Landlord's receipt of Tenant's notice
exercising its option to extend and Landlord shall furnish data in support of
such determination. If the Landlord does not receive written notice from Tenant
of Tenant's disagreement with landlord's determination of the Fair Market Rental
Value within ten (10) days after Tenant's receipt of said determination, Tenant
shall be deemed to have accepted said determination by Landlord. If Tenant
disagrees with Landlord's determination of the Fair Market Rental Value, Tenant
shall have the right, by written notice given to Landlord within thirty (30)
days after Tenant has received notice of Landlord's determination, to request
that such Fair Market Value be determined by appraisal in accordance with the
provisions of this Exhibit FMRV. In such event, the Fair Market Rental Value
shall be determined by impartial MAI appraisers, one to be chosen by Landlord,
one to be chosen by Tenant (the "Initial Appraisers"), and, if necessary, a
third to be selected as provided below. Landlord and Tenant shall each notify
the other of its selected appraiser within ten days following giving of Tenant's
request for appraisal as provided above. Each appraiser shall be independent,
have at least five (5) years experience with commercial properties in the area,
and be familiar with office parks and leases and rents in Dedham, Massachusetts
and experienced in making real estate appraisals. The cost of each Initial
Appraiser shall be paid by the party selecting such Appraiser. The appraisers
shall render their written appraisal of the Fair Market Rental Value for the
Option Period within thirty (30) days following the appointment of both such
appraisers. If the appraisals determined by each of the Initial Appraisers are
less than five percent (5%) apart (i.e., the higher appraisal is less than 105%
of the lower appraisal), then the Fair Market Rental Value shall be determined
by taking the average of the two appraisals. In the event Appraisers are five
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percent (5%) or more apart, the Initial Appraisers shall promptly select a third
appraiser who meets the same criteria as required of the Initial Appraisers
("Third Appraiser"). The Third Appraiser shall submit to Landlord and Tenant,
within twenty-one (21) days after its appointment, its written appraisal of the
Fair Market Rental Value with respect to the Leased Premises as of the
applicable commencement date, which appraisal shall be binding upon Landlord and
Tenant. The cost of the Third Appraiser shall be borne equally by Landlord and
Tenant.
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EXHIBIT SIGN
To be subsequently attached by Landlord and Tenant (it being agreed
that Landlord and Tenant will cooperate reasonably and in good faith with one
another in developing and agreeing upon such sign specifications).
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EXHIBIT 10.140
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made and entered into this 25th
day of November, 1996 by and between CareMatrix Corporation (hereinafter
referred to as "Guarantor") and Sylvan Manor Health Care Center Limited
Partnership (hereinafter referred to as "Landlord").
WITNESSETH:
WHEREAS, CCC of Maryland, Inc ("Tenant"), a wholly owned subsidiary of
Guarantor, has leased the premises located at 2700 Barker Street, Silver Spring,
Maryland 20910 (the "Demised Premises") from Landlord pursuant to a certain
Indenture of Lease dated August 1, 1995, as amended by that certain Amendment of
Indenture of Lease dated September 7, 1995 and a certain Letter Agreement dated
August 16, 1996 (the "Lease"), all as more particularly described in the Lease;
and
WHEREAS, the terms of the Lease require the Tenant to post a letter of
credit or provide a certain unconditional and irrevocable guarantee of the
performance of all covenant, terms, conditions, agreements, obligations,
liabilities, warranties and indemnifications of Tenant under the Lease
("Tenant's Obligations"), including, but not limited to, the payment of Monthly
Rant, Additional Rent and all other charges due Landlord under the Lease,
including any damages that may arise as a consequent of any default of Tenant
under the Lease; and
WHEREAS, Guarantor has agreed to unconditionally and irrevocably
guaranty to Landlord the performance of Tenant's Obligations.
NOW, THEREFORE, in consideration of the foregoing premises, the sum of
Ten ($10.00) Dollars and other good and valuable consideration, the receipt and
adequacy of which is hereby conclusively acknowledged by Guarantor, the
Guarantor does hereby covenant and agree as follows:
1. The Guarantor hereby unconditionally and irrevocably guarantees to
Landlord the full and timely performance of all of Tenant's Obligations under
the Lease.
2. If Tenant defaults in the full, complete and timely performance of
Tenant's Obligations (after any notice and/or opportunity to cure provided
Tenant under the Lease, if any), Guarantor shall promptly pay or perform
Tenant's Obligations ("Guarantor's Obligations"). Guarantor's Obligations under
this Guaranty shall remain in full force and effect until Tenant's Obligations
pursuant to the Lease have been fully discharged.
3. This Guaranty shall be a continuing guarantee of Tenant's Obligations
under the Lease, and the liability of Guarantor hereunder shall in no way be
affected, modified, diminished or terminated by reason of (i) any assignment,
renewal, amendment, modification and/or extension of the Lease, (ii) any
compromise, release or waiver of Tenant's Obligations, (iii) any assignment or
transfer of any interest of Tenant in the Lease and/or the Demised Premises,
including any sublease of the Demised Premises by Tenant, (iv) any extension of
time granted by Landlord to Tenant and/or (v) any bankruptcy, insolvency,
reorganization, arrangement assignment for the benefit of creditors,
receivership or trusteeship affecting Tenant, whether or not notice has been
given to or received by Guarantor of any of the foregoing. Guarantor hereby
waives all notice of and consents to the foregoing, waives any right to notice
for a default by Tenant of its obligations under the Lease, waives notice of
acceptance of this Guaranty by Landlord (or its successors or assigns) whether
or not Landlord (or its successor assigns) is or becomes a signatory to this
Guaranty, and waives any and all suretyship defenses it may have with respect to
the enforcement of this Guaranty.
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4. At the option of Landlord, Guarantor may be joined in any action or
proceeding against Tenant with respect to the Lease and Tenant's Obligations
thereunder, or Landlord may bring a separate action or proceeding directly
against the Guarantor, without any requirement that Landlord first assert,
prosecute or exhaust any remedy or claim against Tenant, all to the effect that
Guarantor's liability hereunder shall be deemed primary, direct and immediate
and not conditional or contingent. In the event Landlord shall commence any
action or proceeding for the enforcement of this Guaranty, the Guarantor will
reimburse Landlord, promptly upon demand, for any and all expenses incurred by
Landlord in connection with such action or proceeding, including, but not
limited to, reasonable attorneys' fees, court costs and expenses. Guarantor
hereby waives its right to a jury trial with respect to any action or proceeding
pertaining or related to the Lease, this Guaranty and/or the enforcement of the
lease and/or the Guaranty.
5. Guarantor hereby represents and warrants to Landlord that there is
not now pending against or affecting Guarantor, nor, to the best of Guarantor's
knowledge is there threatened, any action, suit or proceeding at law, in equity
or before any administrative agency which if adversely determined would
materially impair or affect the financial condition or operation of Guarantor.
Furthermore, Guarantor hereby represents and warrants to Landlord that if called
upon to perform Tenant's Obligations hereunder, Guarantor has the capacity,
experience and ability to perform each of Tenant's Obligations under the Lease.
6. All of the grants, covenants, terms, provisions and conditions of
this Guaranty shall apply, bind and inure to the benefit of the successors and
assigns of Guarantor and the successors and assigns of Landlord, and all persons
claiming any interest to the Demised Premises and/or the Lease under or through
any of them. If Guarantor is comprised of more than one individual, entity or
combination thereof, this Guaranty and its provisions shall be binding upon and
enforceable against any one or more of such individuals and entities, and the
liability of such individuals and entities shall be joint and severable.
7. Landlord's interest in this Guaranty may be assigned by it, by way of
security or otherwise, with or without notice to Guarantor.
8. This Guaranty shall be governed by and construed, interpreted and
enforced in accordance with and pursuant to the laws of the state in which the
Demised Premises is located.
9. All notices, demands, reports and other communications required or
desired to be given hereunder shall be in writing and deemed to have been
properly given or served when personally delivered (by hand, courier or
commercial overnight delivery service) or sent by United States registered or
certified mail, return receipt requested, postage prepaid, or by telex or
facsimile transmission when receipt is acknowledged (unless sent after 5 00 p.m.
of any business day or on the weekend in which event it will be deemed received
on the next business day) to the following addresses:
(a) If to Landlord, then to Landlord:
7830 Old Georgetown Road, Suite 125
Bethesda, Maryland 20814
Attn: Sandy Rosen
Telephone: (301) 654-4644
Telecopier: (301) 654-1591
2
<PAGE>
With a copy to:
Deckelbaum Ogens & Fischer, Chtd.
1140 Connecticut Avenue, N.W.
Suite 703
Washington, D.C. 20036
Attn: Ronald L. Ogens, Esquire
Telephone: (202) 293-1471
Telecopier: (202) 223-1474
(b) If to Guarantor, then to Guarantor at:
197 First Avenue
Needham, Massachusetts 02194
Attn: Chairman of Board or President
and General Counsel
Telephone: (617) 433-1000
Telecopier: (617) 433-1190
Any of the parties may designate a change of address by notice in writing to the
other party, with a change of address effective upon receipt by such other
party. Whenever in this Guaranty the giving of notice is required, the giving of
such notice may be waived in writing by the person or persons entitled to
receive such notice.
10. The Guarantor hereby represents and warrants to Landlord that all
corporate action has been taken to authorize the Guarantor, and the undersigned
officer of Guarantor, to execute and deliver this Guaranty, and that this
Guaranty when executed and delivered by Guarantor shall be the valid, legal and
binding obligation of Guarantor enforceable in accordance with its terms.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty intending to
be legally bound the day and year first above written.
WITNESS/ATTEST GUARANTOR:
CareMatrix Corporation
???????
- ----------------------- /s/ Robert M. Kaufman (SEAL)
-----------------------------
By: Robert M. Kaufman, President
THE UNDERSIGNED hereby acknowledges and accepts the above Guaranty.
WITNESS: LANDLORD:
Sylvan Manor Health Care Center
Limited Partnership
Jeffrey C. ???????? /s/ Sanford I. Rosen
- --------------------- ---------------------
By: Sanford I. Rosen
General Partner
3
<PAGE>
GUARANTOR'S ACKNOWLEDGMENT
STATE OF MASSACHUSETTS
COUNTY OF NORFOLK, ss:
I a Notary Public in and for said County and State, do hereby certify that
Robert M. Kaufman, who acknowledged himself to be the President of CareMatrix
Corporation, and party to a certain Guaranty Agreement bearing the date of
November 25, 1996 and hereto annexed, personally appeared before me, being well
known to me (or satisfactorily proven) as the person who executed the said
Guaranty Agreement on behalf of the Corporation, and acknowledge the same to be
the free act and deed of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
26th day of November, 1996.
/s/ Elizabeth Denise
-----------------------
Notary Public
My commission expires: Sept. 4, 1998
(Notarial Seal)
Exhibit 21.01
CAREMATRIX CORPORATION
LIST OF SUBSIDIARY ENTITIES AND PERCENTAGE OWNERSHIP
<TABLE>
<CAPTION>
Percentage State of Incorporation
Subsidiary Ownership or Organization
<S> <C> <C>
Adams Square, Inc. 30%* Massachusetts
Adams Square LP 0.3%** Massachusetts
AMA New Jersey Development, Inc. 100% New Jersey
Bailey Retirement Center, Inc. 100% Florida
CareMatrix of Amber Lights, Inc. 100% Delaware
CareMatrix of Amethyst Arbor, Inc. 100% Delaware
CareMatrix of Annapolis, Inc. 100% Delaware
CareMatrix of ARI, Inc. 100% Delaware
CareMatrix of Cypress Station, Inc. 100% Delaware
CareMatrix of Darien, Inc. 100% Delaware
CareMatrix of Emerald Springs, Inc. 100% Delaware
CareMatrix of Massachusetts, Inc. 100% Delaware
CareMatrix of Needham, Inc. 100% Delaware
CareMatrix of Westfield Court, Inc. 100% Delaware
CareMatrix Turnkey Holding Corporation 100% Delaware
CarePlex of Cragganmore, Inc. 100% Delaware
CarePlex of Homestead, Inc. 100% Delaware
CarePlex of Miami Shores, Inc. 100% Delaware
CCC of Maryland, Inc. 100% Delaware
Dominion Villages, Inc. 100% Virginia
Lakes Region Villages, LLC 51% New Hampshire
Lowry Village, Inc. 100% Florida
Lowry Village Limited Partnership 80% Florida
Piedmont Villages, Inc. 100% North Carolina
Standish Lakes Region Villages, Inc. 100% New Hampshire
Stan/Oak Development Corp. 100% Delaware
</TABLE>
- ------------------
* Owned through Stan/Oak Development Corp.
** Owned through Adams Square, Inc.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
CareMatrix Corporation on Form S-8 (File No. 333-18103) of our report dated
February 7, 1997 on our audits of the financial statements and financial
statement schedule of CareMatrix Corporation as of December 31, 1996 and 1995,
and for the two years ended December 31, 1996 and the period from June 24, 1994
(inception) to December 31, 1994, which report is included in this Annual Report
on Form 10-K.
Boston, Massachusetts
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<CASH> 58,803,105
<SECURITIES> 0
<RECEIVABLES> 6,274,848
<ALLOWANCES> (1,067,092)
<INVENTORY> 0
<CURRENT-ASSETS> 66,360,429
<PP&E> 9,753,244
<DEPRECIATION> (250,233)
<TOTAL-ASSETS> 108,065,144
<CURRENT-LIABILITIES> 9,920,550
<BONDS> 8,903,156
0
250,000
<COMMON> 855,582
<OTHER-SE> 86,929,975
<TOTAL-LIABILITY-AND-EQUITY> 108,065,144
<SALES> 12,907,445
<TOTAL-REVENUES> 12,907,445
<CGS> 0
<TOTAL-COSTS> 10,223,843
<OTHER-EXPENSES> 8,701,264
<LOSS-PROVISION> 62,729
<INTEREST-EXPENSE> 1,137,974
<INCOME-PRETAX> (6,645,614)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,645,614)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,645,614)
<EPS-PRIMARY> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
