Filed pursuant to 424(b)(3)
Registration No. 333-38111
PROSPECTUS
[CAREMATRIX LOGO]
300,000 Shares
Common Stock, $.05 par value
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This Prospectus relates to the resale of 300,000 shares of Common Stock,
$.05 par value (the "Common Stock"), of CareMatrix Corporation, a Delaware
corporation (the "Company"), which shares of Common Stock are owned or may be
acquired and may be offered and sold from time to time by certain persons and
entities referred to herein as the "Selling Stockholders."
The Common Stock may be offered from time to time by the Selling
Stockholders in transactions on the American Stock Exchange ("AMEX") or in
privately-negotiated transactions, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Specific information
concerning the Selling Stockholders and their plan of distribution is set forth
under "Selling Securityholders" and "Plan of Distribution."
The Company will not receive any proceeds from the sale of the Common
Stock. The Company is bearing certain expenses in connection with the
registration of the shares being offered and sold by the Selling Stockholders.
Shares of the Company's Common Stock are quoted on AMEX under the symbol
"CMD." On December 8, 1997, the closing price reported for such shares on AMEX
was $28.625.
See "Risk Factors" beginning on Page 5 for a discussion of certain factors
that should be considered by prospective purchasers of the securities offered
hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The Date of this Prospectus is December 12, 1997
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information and representations must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or a solicitation of any offer to buy the
securities described herein by anyone in any jurisdiction in which such offer
or solicitation is not authorized, or in which the person making the offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Under no circumstances shall the delivery
of this Prospectus or any sale made pursuant to this Prospectus create any
implication that the information contained in this Prospectus is correct as of
any time subsequent to the date of this Prospectus.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information ................................................... 4
Documents Incorporated by Reference .................................... 4
Risk Factors ............................................................ 5
The Company ............................................................ 10
Use of Proceeds ......................................................... 10
Selling Stockholders ................................................... 10
Plan of Distribution ................................................... 11
Legal Matters ......................................................... 12
Experts ............................................................... 12
</TABLE>
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AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 (together
with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act covering the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, and the exhibits and schedules thereto. For
further information, with respect to the Company and the Common Stock,
reference is made to the Registration Statement, and the exhibits and schedules
thereto, which can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained at prescribed rates from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy statements and
information statements and other information filed electronically by the
Company with the Commission are available at the Commission's worldwide web
site at http://www.sec.gov. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and
information statements and other information with the Commission. Such reports,
proxy statements and information statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission referenced above.
DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as amended by the Company's
Annual Report on Form 10-K/A filed with the Commission on April 14, 1997
(including those portions of the Company's definitive proxy statement for the
Annual Meeting of Stockholders held on June 16, 1997 incorporated by reference
therein), (ii) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, as amended by the Company's Quarterly Report on
Form 10-Q/A filed with the Commission on August 12, 1997, (iii) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, (iv)
the Company's Current Report on Form 8-K filed August 5, 1997, (v) the
Company's current report on Form 8-K filed August 19, 1997, (vi) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997,
and (vii) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, declared effective October 23,
1996.
All reports filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to any
termination of the offering of the shares of Common Stock covered by this
Prospectus are deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the respective dates of filing. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document that is also incorporated herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Copies of all documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) will be provided without charge to each
person who receives a copy of this Prospectus on written or oral request to
Investor Relations, CareMatrix Corporation, 197 First Avenue, Needham, MA
02194, or by telephone at (781) 433-1000.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
purchasing the shares of Common Stock offered hereby, prospective purchasers
should carefully consider the factors set forth below. Such factors could cause
the Company's actual results or other events to differ materially from the
results or events anticipated in certain forward-looking statements contained
or incorporated by reference herein. Such forward-looking statements involve
risks and uncertainties.
History of Losses From Operations; Accumulated Deficit. Although the
Company recorded net earnings for the nine months ended September 30, 1997 of
$3,978,095, from its inception on June 24, 1994 through December 31, 1996, the
Company experienced significant losses from operations. Through December 31,
1996, the Company's accumulated deficit was $16.4 million. For the year ended
December 31, 1996, the Company incurred losses from operations of $6.0 million.
As of September 30, 1997, the Company's accumulated deficit was $12.4 million.
There can be no assurance that the Company will be able to continue to generate
income from operations or net income at any time, whether from its existing
operations or from any facilities that are operated in the future. Failure of
the Company to achieve profitability could have a material adverse effect on
the future viability of the Company.
Dependence by the Company on Related Party Agreements. The Company has
entered and expects to continue to enter into agreements with related parties
in connection with a significant number of transactions, including development,
management and lease agreements. Generally, the Company will enter into
development agreements whereby construction financing is obtained by the
related or third parties. The Company expects that risks related to
construction and the initial operation of the facilities it develops will be
borne primarily by such related or third parties. The Company has not, and
expects in the future that it will not, enter into agreements with these
parties until six months prior to completion of the construction of such
facilities or upon acquisition of completed facilities. These management
agreements would generally be for a ten-year period, with annual fees
approximating 5% of gross revenues (less contractual adjustments for
uncollectible accounts). The Company has and expects in the future to have the
option to convert such management agreements into fair market value leases
(which will be a negotiated percentage of total project costs) for a 15-year
initial term with three to four five-year fair market value renewal options.
Abraham D. Gosman is the principal owner, and certain members of the Company's
senior management and stockholders also have an ownership interest in,
Chancellor Senior Housing Group, Inc. and certain like entities (collectively
referred to herein as "Chancellor"), with which the Company has entered and
expects to enter into most such agreements. Failure of the Company to continue
to enter into such agreements with Chancellor or other such related parties, or
the inability of Chancellor to secure all necessary financing at acceptable
terms, could have a material adverse effect on the Company.
Need for Additional Financing. The Company's development and acquisition
strategy will require substantial capital resources. The estimated cumulative
cost to complete approximately 60 new facilities, with an aggregate capacity of
approximately 7,200 residents, targeted for completion over the next three
years is between $700 million and $800 million, which substantially exceeds the
financial resources of the Company and Chancellor. The Company's future growth
will depend primarily on the ability of related parties, such as Chancellor,
for whom the Company develops facilities to obtain financing on acceptable
terms. To finance its capital needs, the Company plans both to incur
indebtedness and to issue, from time to time, additional debt or equity
securities, including Common Stock or convertible notes, in connection with its
acquisitions and affiliations. If additional funds are raised through the
issuance of equity securities, dilution to the Company's stockholders may
result, and if additional funds are raised through the incurrence of debt, the
Company would likely become subject to certain covenants that impose
restrictions on its operations and finances. There can be no assurance that the
Company or such related parties will be able to raise additional capital when
needed, on satisfactory terms or at all. Prior to its secondary offering in
October 1996, the Company had relied upon equity and loans provided primarily
by Abraham D. Gosman, the Company's Chairman of the Board and principal
stockholder, or companies affiliated with him. There can be no assurance that
any additional financing from Mr. Gosman, Chancellor or any other sources will
be available in the future. Any limitation on the Company's ability to obtain
additional financing could have a material adverse effect on the Company.
Substantial Debt and Lease Obligations; Increased Leverage. At September
30, 1997, the Company's debt was $102.4 million. Debt service and annual
operating lease payment obligations are expected to increase significantly as
the Company pursues its growth strategy. There can be no assurance that the
Company will generate sufficient cash flow to meet its obligations. Any payment
default or other default with respect to such obligations
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could cause a lender to foreclose upon any collateral securing the indebtedness
or, in the case of an operating lease, could terminate the lease, with a
consequent loss of income and asset value to the Company. Moreover, because
certain of the Company's mortgages, debt instruments and leases may contain
cross-default and cross-collateralization provisions, a default by the Company
on one of its payment obligations could result in acceleration of other
obligations and adversely affect a significant number of the Company's other
facilities.
In connection with the issuance in August and October 1997 of the
Company's 61/4% Convertible Subordinated Debentures due 2004, the Company
incurred $115 million in additional indebtedness which increased the ratio of
its long-term debt to its total capitalization from 8.9% at December 31,1996,
to 54.3%, on a pro forma basis at September 30, 1997. As a result of this
increased leverage, the Company's principal and interest obligations increased
substantially. The degree to which the Company is leveraged could adversely
affect the Company's ability to obtain additional financing for working
capital, acquisitions or other purposes and could make it more vulnerable to
economic downturns and competitive pressures. The Company's increased leverage
could also adversely affect its liquidity, as a substantial portion of
available cash from operations may have to be applied to meet debt service
requirements and, in the event of a cash shortfall, the Company could be forced
to reduce other expenditures and forego potential acquisitions to be able to
meet such requirements.
Development and Construction Risks. During the next three years, the
Company plans to develop approximately 60 new facilities with a resident
capacity of approximately 7,200 residents. The Company's ability to achieve its
development goals will depend upon a variety of factors, many of which are
beyond the Company's control. There can be no assurance that the Company will
not suffer delays in its development program. The successful development of
additional facilities will involve a number of risks, including the possibility
that the Company may be unable to locate suitable sites at acceptable prices or
may be unable to obtain, or may experience delays in obtaining, necessary
certificates of need, zoning, land use, building, occupancy, licensing and
other required governmental permits and authorizations. The Company may also
incur construction costs that exceed original estimates or even so-called
guaranteed maximum cost construction contracts, and may not complete
construction projects on schedule. The Company will rely on third-party general
contractors to construct its new facilities. There can be no assurance that the
Company will not experience difficulties in working with general contractors
and subcontractors, which could result in increased construction costs and
delays. Further, facility development is subject to a number of contingencies
over which the Company will have little control and that could have a material
adverse effect on project cost and completion time, including shortages of, or
the inability to obtain, labor or materials, the inability of the general
contractor or subcontractors to perform under their contracts, strikes, adverse
weather conditions and changes in applicable laws or regulations or in the
method of applying such laws and regulations. Failure of the Company to achieve
its development goals could have a material adverse effect on the Company.
Accordingly, there can be no assurance that the Company's facilities in
development or under construction will ultimately be completed.
Risks Related to Acquisition Strategy. The Company's strategy includes
growth through acquisition. The Company is subject to various risks associated
with its acquisition growth strategy, including the risk that the Company will
be unable to identify or acquire suitable acquisition candidates or to
integrate the acquired companies into the Company's operations. Any failure of
the Company to identify and consummate economically feasible acquisitions could
have a material adverse effect on the Company. There can be no assurance that
the Company will be able to achieve and manage its planned acquisition growth,
that the liabilities assumed by the Company in any acquisition will not have a
material adverse effect on the Company or that the addition of facilities will
be profitable for the Company.
Dependence on Attracting Seniors with Sufficient Resources to Pay. The
Company expects to rely primarily on the ability of its residents to pay for
services from their own and their families' financial resources. Generally,
only seniors with income or assets meeting or exceeding the comparable median
in the regions where the Company's assisted living facilities are located can
afford the applicable fees for its facilities for an extended period of time.
Any difficulty in attracting seniors with adequate resources to pay for the
Company's services could have a material adverse effect on the Company.
Inflation or other circumstances which adversely affect the ability of the
Company's residents and potential residents to pay for assisted living services
could also have a material adverse effect on the Company.
Dependence Upon Key Personnel. The Company is dependent upon the ability
and experience of its executive officers, including its Chairman, and there can
be no assurance that the Company will be able to retain all of such officers.
The failure of such officers to remain active in the Company's management could
have a material
6
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adverse effect on the Company. There can be no assurance that the anticipated
contributions of senior management will be realized, and the failure of such
contributions to be realized could have a material adverse effect on the
Company.
Risks Related to Goodwill. At September 30, 1997, the Company's total
assets were approximately $210.3 million, of which approximately $27.2 million,
or approximately 12.9% of total assets, was goodwill. Goodwill is the excess of
cost over the fair value of the net assets of businesses acquired. There can be
no assurance that the value of such goodwill will ever be realized by the
Company. This goodwill is being amortized on a straight-line basis over 25
years. The Company evaluates on a regular basis whether events and
circumstances have occurred that indicate all or a portion of the carrying
amount of goodwill may no longer be recoverable, in which case an additional
charge to earnings would become necessary. Although at September 30, 1997 the
net unamortized balance of goodwill is not considered to be impaired, any such
future determination requiring the write-off of a significant portion of
unamortized goodwill could have a material adverse effect on the Company.
Competition. The assisted living industry is highly competitive and, given
the relatively low barriers to entry and continuing healthcare cost containment
pressures, the Company expects that it will become increasingly competitive in
the future. The Company competes with other companies providing assisted living
services as well as numerous other companies providing similar service and care
alternatives, such as home health care agencies, congregate care facilities,
retirement communities and skilled nursing facilities. While the Company
believes there is a need for additional assisted living residences in the
markets where it intends to develop facilities, the Company expects that, as
assisted living facilities receive increased attention, competition will
increase from new market entrants. Moreover, in implementing its growth
strategy, the Company expects to face competition for development and
acquisition opportunities from local developers and regional and national
assisted living companies. Some of the Company's present and potential
competitors have, or may have access to, greater financial resources than those
of the Company. Consequently, increased competition in the future could limit
the Company's ability to attract and retain residents, to maintain or increase
resident service fees or to expand its business. As a result, any increased
competition could have a material adverse effect on the Company.
Limited Experience with New Service Models and Facility Designs. The
Company's success is dependent, in part, on its ability to develop and offer
new service models and facility designs to prospective residents of its
facilities. Currently, the Company does not have extensive operating experience
with these new service models and facility designs, and the failure of the
Company to successfully implement and integrate these new service models and
facility designs could have a material adverse effect on the Company.
Potential Conflicts of Interest. Abraham D. Gosman, the Company's
principal stockholder and Chairman, and certain members of the Company's senior
management, have a controlling ownership interest in Chancellor with which the
Company has entered and expects to enter into development, management and lease
agreements. These agreements are and will be on terms that the Company believes
will be fair and no less favorable to the Company than those which the Company
could have obtained from unaffiliated third parties. Such ownership interests
in Chancellor and other healthcare entities that compete with the Company,
however, may create actual or potential conflicts of interest on the part of
these members of the Company's management. In the case of such related party
transactions, it is the Company's policy to require that any such transactions
be approved by a majority of the disinterested members of the Executive
Committee of the Board of Directors.
Control by Management. As of September 30, 1997, members of the Board of
Directors and management are the beneficial owners of approximately 48.2% of
the outstanding Common Stock of the Company. As of September 30, 1997, Abraham
D. Gosman, together with his sons, Andrew D. Gosman and Michael M. Gosman, all
of whom are members of the Board of Directors and executive officers of the
Company, are the beneficial owners of approximately 44.9% of the outstanding
Common Stock. Accordingly, management and the Gosmans may have the ability, by
voting shares of Common Stock, to determine (i) the election of the Company's
Board of Directors and, thus, the direction and future operations of the
Company, and (ii) the outcome of all other matters submitted to the Company's
stockholders, including mergers, consolidations and the sale of all or
substantially all of the Company's assets.
Residence Staffing and Labor Costs. The Company competes with other
providers of assisted living services with respect to attracting and retaining
qualified and skilled personnel. The Company is dependent upon its ability to
attract and retain management personnel responsible for the day-to-day
operations of each of the Company's
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facilities. In addition, a possible shortage of nurses or other trained
personnel may require the Company to enhance its wage and benefits package in
order to compete in the hiring and retention of such personnel or to hire more
expensive temporary personnel. The Company will also be dependent upon the
available labor pool of semi-skilled and unskilled employees in each of the
markets in which it will operate. Any significant failure by the Company to
attract and retain qualified management and staff personnel, to control its
labor costs or to pass on any increased labor costs to residents through rate
increases could have a material adverse effect on the Company.
Government Regulation. Health care is an area of extensive and frequent
regulatory change. The assisted living industry is relatively new, and,
accordingly, the manner and extent to which it is regulated at the federal and
state levels are evolving. Changes in the laws or new interpretations of
existing laws may have a significant impact on the Company's methods and costs
of doing business. The Company is subject to varying degrees of regulation and
licensing by health or social service agencies and other regulatory authorities
in the various states and localities where it operates or intends to operate.
The Company's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses in rapidly changing regulatory environments. Any failure to satisfy
applicable regulations or to procure or maintain a required license could have
a material adverse effect on the Company. Furthermore, certain regulatory
developments such as revisions in building code requirements for assisted
living facilities, mandatory increases in the scope and quality of care to be
offered to residents and revisions in licensing and certification standards
could have a material adverse effect on the Company. There can be no assurance
that federal, state or local laws or regulations will not be imposed or
expanded which would have a material adverse effect on the Company. The
Company's operations are also subject to health and other state and local
government regulations.
In addition, in most states in which the Company participates in
government reimbursement programs, the Company's operations are subject to
federal and/or state requirements or provisions which prohibit certain business
practices and relationships that might affect the provision and cost of health
care services reimbursable under Medicaid. The Company's failure to comply with
the regulations and requirements applicable to a facility could result in the
imposition of significant fines and increased costs, a revocation of the
Company's license to operate that facility, and, if sufficiently serious in
nature, the inability of the Company to maintain or obtain licenses to operate
other facilities. Any such event could have a material adverse effect on the
Company.
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
healthcare items or services. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between
healthcare providers and sources of patient referral. Similar state laws vary
from state to state, are sometimes vague and seldom have been interpreted by
courts or regulatory agencies. Violation of these laws can result in loss of
licensure, civil and criminal penalties, and exclusion of healthcare providers
or suppliers from participation in (i.e., furnishing covered items or services
to beneficiaries of) the Medicare and Medicaid programs. It is expected that
the Company will be subject to these laws. There can be no assurance that such
laws will be interpreted in a manner consistent with the practices of the
Company, and any interpretation inconsistent with the practices of the Company
could have a material adverse effect on the Company.
Environmental Risks. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be held liable for the cost of removal or remediation of
certain hazardous or toxic substances, including, without limitation,
asbestos-containing materials, that could be located on, in or under such
property. As a result, the presence, with or without the Company's knowledge,
of hazardous or toxic substances at any property held or operated by the
Company, or acquired or operated by the Company in the future, could have a
material adverse effect on the Company. Environmental audits performed on
properties leased or managed by the Company have not revealed any significant
environmental liability that management believes would have a material adverse
effect on the Company; however, there can be no assurance that existing
environmental audits with respect to any of the properties leased or managed by
the Company have revealed all environmental liabilities.
Liability and Insurance. The Company's business entails an inherent risk
of liability. In recent years, participants in the assisted living and
long-term care industry, including the Company, have become subject to an
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increasing number of lawsuits alleging negligence or related legal theories,
many of which involve large claims and significant legal costs. The Company is
from time to time subject to such suits as a result of the nature of its
business. The Company currently maintains insurance policies in amounts and
with such coverage and deductibles as it believes are adequate, based on the
nature and risks of its business, historical experience and industry standards.
The Company currently maintains professional liability insurance and general
liability insurance. There can be no assurance that claims will not arise which
are in excess of the Company's insurance coverage or are not covered by the
Company's insurance. Any successful claim against the Company not covered by,
or in excess of, the Company's insurance could have a material adverse effect
on the Company. Claims against the Company, regardless of their merit or
eventual outcome, may also have a material adverse effect on the Company's
ability to attract residents or expand its business and would require
management to devote time to matters unrelated to the operation of the
Company's business. In addition, the Company's insurance policies must be
renewed annually, and there can be no assurance that the Company will be able
to continue to obtain liability insurance coverage in the future or, if
available, that such coverage will be available on acceptable terms. Any
failure of the Company to retain liability insurance coverage or to obtain such
coverage on acceptable terms could have a material adverse effect on the
Company.
Dependence on Reimbursement by Third-Party Payors. The Company's revenues
from the services it provides for skilled nursing facilities are dependent upon
reimbursement from third-party payors, including Medicare, state Medicaid
programs and private insurers. There can be no assurance that such revenues
will fully pay the cost of providing services to residents covered by Medicare
and Medicaid. Although in 1996 a substantial portion of the Company's revenue
was derived from Medicare and Medicaid payments, the Company anticipates that
in 1997 and going forward, revenue from sources other than Medicare and
Medicaid will constitute a substantially greater portion of overall revenue.
The revenues and profitability of the Company will be affected by the
continuing efforts of governmental and private third-party payors to contain or
reduce the costs of health care by attempting to lower reimbursement rates,
increasing case management review of services and negotiating reduced contract
pricing. In an attempt to reduce the federal and certain state budget deficits,
there have been, and management expects that there will continue to be, a
number of proposals to limit Medicare and Medicaid reimbursement in general.
Adoption of any such proposals at either the federal or the state level could
have a material adverse effect on the Company.
Certain Anti-takeover Provisions. Certain provisions of the Company's
Restated Certificate of Incorporation and By-laws and of Delaware General
Corporation Law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares
of the Common Stock. Certain of these provisions provide for the issuance,
without further stockholder approval, of preferred stock with rights and
privileges which could be senior to the Common Stock, the payment of a "fair"
price (or Board approval by continuing directors) in connection with certain
business combinations with interested stockholders, no right of the
stockholders to call a special meeting of stockholders, restrictions on the
ability of stockholders to nominate directors and submit proposals to be
considered at stockholders' meetings, and a super-majority voting requirement
in connection with the removal of directors and the adoption of stockholders'
amendments to the By-laws. The Company also is subject to Section 203 of the
Delaware General Corporation Law which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested" stockholder for a period of three
years following the date that such stockholder became an interested
stockholder.
Possible Volatility Stock Price. Economic or other external factors may
have a significant impact on the Company's business and on the market price of
the Common Stock. Fluctuations in financial performance from period to period
also may have a significant impact on the market price of the Common Stock.
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THE COMPANY
The Company is a provider of assisted living services, and owns, leases or
manages its facilities. The Company's strategy is to provide a full range of
assisted living and related services across a range of pricing options. The
Company expects its assisted-living facilities to serve as the foundation from
which it will provide a continuum of care for its residents. When its assisted
living facilities are integrated with supportive independent living facilities,
skilled nursing/rehabilitation facilities and Alzheimer's care programs, the
Company believes that it will have the ability to provide to those of its
residents who need a higher degree of care a less stressful transition to more
supportive environments either within the same facility, in a campus setting or
in a nearby facility.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02194; and its telephone number at that address is (781)
433-1000. Unless otherwise indicated or required by the context, references to
the "Company" include its consolidated subsidiaries.
USE OF PROCEEDS
The shares of Common Stock offered by the Selling Stockholders are not
being sold by the Company, and the Company will not receive any proceeds from
the sale thereof.
SELLING STOCKHOLDERS
This Prospectus relates to the resale of shares of Common Stock issuable
upon the exercise of warrants (the "Warrants") granted by the Company to the
Selling Stockholders. The following table sets forth information concerning
certain of the Selling Stockholders, including the number of shares of Common
Stock issuable upon conversion of the Warrants and the exercise price with
respect to such Warrants. Pursuant to information provided to the Company by
such Selling Stockholders, (i) no Selling Stockholder is the beneficial owner of
1% or more of the Company's Common Stock, and (ii) assuming the sale of all the
Shares, following the offering, none of the Selling Stockholders will own any
shares of Common Stock, except as noted below. The information set forth below
was provided by the Selling Stockholders. Share ownership information is as of
December 8, 1997.
<TABLE>
<CAPTION>
Exercise Price of the
Selling Stockholder Shares Underlying Warrant (1) Warrant Per Share (1)
- ---------------------------------------------- ------------------------------- ----------------------
<S> <C> <C>
Jane C. Carroll(2)(3) 1,500 $17.75
Arnold B. Chace, Jr., individually(3)(4)(5) 1,000 $17.75
A.B. Chace, Jr. and M.G. Chace, III, as
Trustees(3)(6) 2,500 $17.75
Arnold B. Chace, Jr. and William Nolen, as
Trustees(3)(7) 500 $17.75
Malcolm G. Chace, III, individually(3)(4)(8) 3,500 $17.75
Malcolm G. Chace, III and Edith G. Thayer, as
Trustees(3)(9) 500 $17.75
John DeShazo 3,749 $18.90
Elizabaeth C.G. Emmet(3)(10) 500 $17.75
The Equity Group, Inc.(11) 11,875 $22.40
J. Edmund & Company 8,060 $18.90
Lory Roston Associates, Inc. 2,400 $35.45
Edward M. Mulherin 3,000 $20.65
Neil G. Berkman Associates(12) 6,000 $20.80
Roger O. Peterkin, III(13) 8,060 $18.90
Charles H. Resnick 1,000 $22.50
Robert A. Schneider 11,184 $19.00
64,207 $18.00
7,858 $18.60
Dennis K. Waldman 5,248 $18.90
</TABLE>
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(1) The number of shares of Common Stock underlying each Warrant and the
exercise price per share of each Warrant is subject to adjustment in
certain circumstances pursuant to the terms of each individual Warrant,
including in the event of stock splits, stock dividends and issuances of
debt or equity securities by the Company.
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<PAGE>
(2) In addition, Ms. Carroll is the beneficial owner of 937.5 shares of Common
Stock.
(3) Pursuant to a Purchase Agreement between the Company, each of the parties
indicated by this note (collectively, the "Manold Owners") and the Manold
Company as Agent and Representative for the Manold Owners ("Manold") dated
January 23, 1993, the Manold Owners purchased from the Company (i) certain
York County Industrial Development Authority Bonds ("Bonds"), (ii) 10,000
shares of Common Stock, and (iii) 10,000 Warrants. Pursuant to an
Agreement between the Company, the Manold Owners and Manold dated March
21, 1996, the Manold Owners sold a portion of the Bonds to the Company and
exchanged the remaining Bonds for a new issue of bonds (the "1996 Bonds").
The Manold Owners subsequently sold the 1996 Bonds to the Company in
February 1997.
(4) During the period August 1992 through March 1996, the Company provided
development marketing and operations management services to Cornish Realty
Associates, L.P., a Rhode Island limited partnership ("Cornish") and to
Laurelmead Cooperative, Inc., a Rhode Island cooperative housing
corporation ("Laurelmead"). Cornish was the developer of Laurelmead, a
senior living community in Providence, Rhode Island. Pursuant to a
Management and Marketing Agreement by and between the Company, Cornish and
Laurelmead dated March 23, 1993, the Company received a total compensation
of approximately $357,000 plus reimbursable expenses for its services. The
Management and Marketing Agreement was terminated as of April 1, 1996.
Malcolm G. Chace, III is a limited partner in Cornish and Arnold B. Chace,
Jr. is a limited partner in Cornish and a half-owner of Cornish's corporate
general partner. Arnold B. Chace, Jr. purchased one-half of the Company's
interest in Cornish for $112,500 in installments payable to the Company's
over the period March 1996 through December 1997.
(5) During the period August 1992 through March 1996, the Company provided
development consulting services to Laurelmead Nursing Center, LLC, a Rhode
Island limited liability company ("LNC"). LNC was the developer of
Beechwood at Laurelmead, a senior living and health care community in
Providence, Rhode Island. Pursuant to a letter agreement by and between
the Company and LNC dated June 30, 1995, the Company received total
compensation of $100,000 plus reimbursable expenses for its services.
Arnold B. Chace, Jr. was a member in LNC and a half-owner of LNC's
corporate managing member.
(6) Arnold B. Chace, Jr. and Malcolm G. Chace, III are trustees (i) under
Article Nine for the benefit of Evelyn T. Chace, who is the beneficial
owner of Warrants relating to 1,000 shares of Common Stock and holds 625
shares of Common Stock, (ii) under Article Ten for the benefit of Evelyn T.
Chace, who is the beneficial owner of Warrants relating to 1,000 shares of
Common Stock and holds 625 shares of Common Stock, and (iii) for the
benefit of J. Patricia Kent, who is the beneficial owner of Warrants
relating to 500 shares of Common Stock and holds 312.5 shares of Common
Stock.
(7) Arnold B. Chace, Jr. and William Nolen are trustees for the benefit of
Elizabeth E. Chace, who, in addition to the Warrant, is the beneficial
owner of 312.5 shares of Common Stock.
(8) In addition, Mr. Chace is the beneficial owner of 1,562.5 shares of Common
Stock.
(9) Malcolm G. Chace, III and Edith G. Thayer are trustees for the benefit of
Elizabeth C.G. Burden, who, in addition to the Warrant, is the beneficial
owner of 312.5 shares of Common Stock.
(10) In addition, Ms. Emmet is the beneficial owner of 312.5 shares of Common
Stock.
(11) The Equity Group, Inc. provided public relations services to the Company
from October 1993 until January 1995.
(12) Neil G. Berkman Associates was an investor relations consultant to the
Company from January 1995 to July 1995.
(13) Roger O. Peterkin, III is an officer of Moors & Cabot, which served as an
underwriter of the Company for its secondary offering of common stock in
October 1996.
The names of additional Selling Stockholders, the number of shares of
Common Stock which may be offered from time to time by them under this
Prospectus by such Selling Stockholders and information concerning any material
relationships between the Company and such Selling Stockholders will be set
forth as required in Supplements to this Prospectus or amendments to the
Registration Statement. The Company has issued Warrants
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<PAGE>
to such Selling Stockholders to purchase shares of Common Stock offered under
this Prospectus in connection with previous financing and other activities.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell all or a portion of the Common Stock
offered hereby from time to time on any exchange on which the securities are
listed on terms to be determined at the times of such sales. The Selling
Stockholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the Selling Stockholders may from time to time
offer the Common Stock beneficially owned by them through underwriters, dealers
or agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Stockholders and the purchasers of
the Common Stock for whom they may act as agent.
To the extent required, the aggregate principal amount of the Common Stock
to be sold hereby, the names of the Selling Stockholders, the purchase price,
the name of any such agent, dealer or underwriter and any applicable
commissions, discounts or other terms constituting compensation with respect to
a particular offer will be set forth in any accompanying Prospectus Supplement.
The aggregate proceeds to the Selling Stockholders from the sale of the Common
Stock offered by them hereby will be the purchase price of such Common Stock
less discounts and commissions, if any.
The Common Stock which may be offered hereby may be sold from time to time
in one or more transactions at fixed offering prices, which may be changed, or
at varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the holders of the Common Stock or by agreement
between such holders and underwriters or dealers who receive fees or
commissions in connection therewith. In order to comply with the securities
laws of certain states, if applicable, the Common Stock offered hereby will be
sold in such jurisdictions only through registered or licensed brokers or
dealers.
The Selling Stockholders and any broker-dealers, agent or underwriters
that participate with the Selling Stockholders in the distribution of the
Common Stock offered hereby may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event any commissions or discounts received by such broker-dealers,
agents or underwriters and any profit on the resale of the Common Stock offered
hereby and purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company is paying all expenses incident to the offer and sale of the
Common Stock offered hereby by the Selling Stockholders to the public, other
than selling commissions and fees.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock of Common Stock
being offered hereby will be passed upon by Nutter, McClennen & Fish, LLP,
Boston, MA 02110. Michael J. Bohnen, a partner at Nutter, McClennen & Fish,
LLP, is the Assistant Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and for the year then ended, and the combined financial statements of the
Company as of December 31, 1995 and for the year ended December 31, 1995 and
the period from June 24, 1994 (inception) to December 31, 1994, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
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