Registration No. 333-
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As filed with the Securities and Exchange Commission on November 12, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CAREMATRIX CORPORATION
(Exact name of registrant as specified in charter)
Delaware 04-3069586
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
197 First Avenue
Needham, MA 02194
(781) 433-1000
(Address, including zip code, and telephone number,
including area code of registrant's principal
executive offices)
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Robert M. Kaufman Copies to:
Chief Executive Officer Michael J. Bohnen, Esq.
CareMatrix Corporation Nutter, McClennen & Fish, LLP
197 First Avenue One International Place
Needham, MA 02194 Boston, MA 02110-2699
(781) 433-1000 (617) 439-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement, as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is a post-effective amendment filed pursuant to Rule
426(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Each Class of Maximum Maximum Amount of
Securities to be Amount to be Offering Price Aggregate Registration
Registered Registered Per Share(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Shares of Common
Stock, $.05 par value 1,150,000 shares $26.0625 $29,971,875.00 $9,082.39
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(1) Determined pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, based upon the average of the high and low prices per share
of Common Stock reported on the American Stock Exchange on November 11,
1997.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
[RED HERRING]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
[/RED HERRING]
PROSPECTUS
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 12, 1997
1,150,000 Shares
CareMatrix Corporation
Common Stock, $.05 par value
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This Prospectus relates to 1,150,000 shares (the "Loaned Shares"), of
Common Stock, $.05 par value per share (the "Common Stock"), of CareMatrix
Corporation, a Delaware corporation (the "Company"), which Loaned Shares are
owned by certain of the Company's executive officers and other individuals
(collectively, the "Lenders") and which may be loaned to and offered and sold
from time to time by BancAmerica Robertson Stephens ("BARS"), or by certain
transferees of BARS, in connection with ordinary trading or market-making
activities by BARS in securities of the Company. See "Selling Stockholders."
BARS may obtain the Loaned Shares pursuant to a Securities Loan Agreement (the
"Securities Loan Agreement") among BARS, American Securities Transfer & Trust
Co., Inc. (the "Custodian") and the Lenders. Under the Securities Loan
Agreement, subject to certain restrictions, BARS may from time to time borrow,
return and reborrow the Loaned Shares. The number of Loaned Shares that may be
borrowed under the Securities Loan Agreement at any time may not exceed
1,150,000.
The Securities Loan Agreement was entered into on October 16, 1997 in
connection with the issuance of $115,000,000 original principal amount of the
Company's 6 1/4% Convertible Subordinated Notes due 2004 (the "Notes") and is
intended to facilitate market-making activity in the Notes by BARS. The Notes
are convertible, at any time, into 3,982,684 shares of the Company's Common
Stock.
BARS, or certain transferees of BARS, may from time to time offer the
Loaned Shares directly to one or more purchasers at negotiated prices, at market
prices prevailing at the time of sale or at prices related to such market
prices. See "Plan of Distribution." The Company's Common Stock is currently
listed and traded on the American Stock Exchange ("AMEX") under the symbol
"CMD." On November 11, 1997, the closing price reported for such shares on AMEX
was $26.125.
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 BARS, or certain
transferees of BARS.
See "Risk Factors" beginning on Page 3 for a discussion of certain
factors that should be considered by prospective purchasers of the securities
offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Date of this Prospectus is _________________, 1997
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No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus, and, if given or made, such information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy the securities described herein by anyone in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making the
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Under no circumstances shall the
delivery of this Prospectus or any sale made pursuant to this Prospectus create
any implication that the information contained in this Prospectus is correct as
of any time subsequent to the date of this Prospectus.
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TABLE OF CONTENTS
Page
Available Information....................................................... 2
Documents Incorporated by Reference......................................... 3
Risk Factors................................................................ 3
The Company................................................................. 9
Use of Proceeds............................................................. 9
Plan of Distribution........................................................ 9
Legal Matters...............................................................10
Experts.....................................................................10
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 (together
with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act covering the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, and the exhibits and schedules thereto. For further
information, with respect to the Company and the Common Stock, reference is made
to the Registration Statement, and the exhibits and schedules thereto, which can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Reports, proxy statements and information statements and
other information filed electronically by the Company with the Commission are
available at the Commission's worldwide web site at http://www.sec.gov. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and information statements and other information
with the Commission. Such reports, proxy statements and information statements
and other information may be inspected and copied at the public reference
facilities maintained by the Commission referenced above.
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DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as amended by the Company's
Annual Report on Form 10-K/A filed with the Commission on April 14, 1997
(including those portions of the Company's definitive proxy statement for the
Annual Meeting of Stockholders held on June 16, 1997 incorporated by reference
therein), (ii) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, as amended by the Company's Quarterly Report on
Form 10-Q/A filed with the Commission on August 12, 1997, (iii) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, (iv)
the Company's Current Report on Form 8-K filed August 5, 1997, (v) the Company's
current report on Form 8-K filed August 19, 1997, and (vi) the description of
the Company's Common Stock contained in the Company's Registration Statement on
Form 8-A, declared effective October 23, 1996.
All reports filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to any
termination of the offering of the shares of Common Stock covered by this
Prospectus are deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the respective dates of filing. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document that is also incorporated herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) will be provided without charge to each person
who receives a copy of this Prospectus on written or oral request to Investor
Relations, CareMatrix Corporation, 197 First Avenue, Needham, MA 02194, or by
telephone at (781) 433-1000.
RISK FACTORS
In addition to the other information contained in this Prospectus, before
purchasing the shares of Common Stock offered hereby, prospective purchasers
should carefully consider the factors set forth below. Such factors could cause
the Company's actual results or other events to differ materially from the
results or events anticipated in certain forward-looking statements contained or
incorporated by reference herein. Such forward-looking statements involve risks
and uncertainties.
History of Losses From Operations; Accumulated Deficit. Although the
Company recorded net earnings for the six months ended June 30, 1997 of
$2,042,964, from its inception on June 24, 1994 through December 31, 1996, the
Company experienced significant losses from operations. Through December 31,
1996, the Company's accumulated deficit was $16.4 million. For the year ended
December 31, 1996, the Company incurred losses from operations of $6.0 million.
As of June 30, 1997, the Company's accumulated deficit was $14.4 million. There
can be no assurance that the Company will be able to continue to generate income
from operations or net income at any time, whether from its existing operations
or from any facilities that are operated in the future. Failure of the Company
to achieve profitability could have a material adverse effect on the future
viability of the Company.
Dependence by the Company on Related Party Agreements. The Company has
entered and expects to continue to enter into agreements with related parties in
connection with a significant number of transactions, including development,
management and lease agreements. Generally, the Company will enter into
development agreements whereby construction financing is obtained by the related
or third parties. The Company expects that risks related to construction and the
initial operation of the facilities it develops will be borne primarily by such
related
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or third parties. The Company has not, and expects in the future that it will
not, enter into agreements with these parties until six months prior to
completion of the construction of such facilities or upon acquisition of
completed facilities. These management agreements would generally be for a
ten-year period, with annual fees approximating 5% of gross revenues (less
contractual adjustments for uncollectible accounts). The Company has and expects
in the future to have the option to convert such management agreements into fair
market value leases (which will be a negotiated percentage of total project
costs) for a 15-year initial term with three to four five-year fair market value
renewal options. Abraham D. Gosman is the principal owner, and certain members
of the Company's senior management and stockholders also have an ownership
interest in, Chancellor Senior Housing Group, Inc. and certain like entities
(collectively referred to herein as "Chancellor"), with which the Company has
entered and expects to enter into most such agreements. Failure of the Company
to continue to enter into such agreements with Chancellor or other such related
parties, or the inability of Chancellor to secure all necessary financing at
acceptable terms, could have a material adverse effect on the Company.
Need for Additional Financing. The Company's development and acquisition
strategy will require substantial capital resources. The estimated cumulative
cost to complete approximately 60 new facilities, with an aggregate capacity of
approximately 7,200 residents, targeted for completion over the next three years
is between $700 million and $800 million, which substantially exceeds the
financial resources of the Company and Chancellor. The Company's future growth
will depend primarily on the ability of related parties, such as Chancellor, for
whom the Company develops facilities to obtain financing on acceptable terms. To
finance its capital needs, the Company plans both to incur indebtedness and to
issue, from time to time, additional debt or equity securities, including Common
Stock or convertible notes, in connection with its acquisitions and
affiliations. If additional funds are raised through the issuance of equity
securities, dilution to the Company's stockholders may result, and if additional
funds are raised through the incurrence of debt, the Company would likely become
subject to certain covenants that impose restrictions on its operations and
finances. There can be no assurance that the Company or such related parties
will be able to raise additional capital when needed, on satisfactory terms or
at all. Prior to its secondary offering in October 1996, the Company had relied
upon equity and loans provided primarily by Abraham D. Gosman, the Company's
Chairman of the Board and principal stockholder, or companies affiliated with
him. There can be no assurance that any additional financing from Mr. Gosman,
Chancellor or any other sources will be available in the future. Any limitation
on the Company's ability to obtain additional financing could have a material
adverse effect on the Company.
Substantial Debt and Lease Obligations; Increased Leverage. At June 30,
1997, the Company's debt was $9.3 million. Debt service and annual operating
lease payment obligations are expected to increase significantly as the Company
pursues its growth strategy. There can be no assurance that the Company will
generate sufficient cash flow to meet its obligations. Any payment default or
other default with respect to such obligations could cause a lender to foreclose
upon any collateral securing the indebtedness or, in the case of an operating
lease, could terminate the lease, with a consequent loss of income and asset
value to the Company. Moreover, because certain of the Company's mortgages, debt
instruments and leases may contain cross-default and cross-collateralization
provisions, a default by the Company on one of its payment obligations could
result in acceleration of other obligations and adversely affect a significant
number of the Company's other facilities.
In connection with the issuance in August and October 1997 of the
Company's 6 1/4% Convertible Subordinated Debentures due 2004, the Company
incurred $115 million in additional indebtedness which increased the ratio of
its long-term debt to its total capitalization from 6.6% at June 30, 1997, to
56.7%, on a pro forma basis. As a result of this increased leverage, the
Company's principal and interest obligations increased substantially. The degree
to which the Company is leveraged could adversely affect the Company's ability
to obtain additional financing for working capital, acquisitions or other
purposes and could make it more vulnerable to economic downturns and competitive
pressures. The Company's increased leverage could also adversely affect its
liquidity, as a substantial portion of available cash from operations may have
to be applied to meet debt service requirements and, in the event of a cash
shortfall, the Company could be forced to reduce other expenditures and forego
potential acquisitions to be able to meet such requirements.
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Development and Construction Risks. During the next three years, the
Company plans to develop approximately 60 new facilities with a resident
capacity of approximately 7,200 residents. The Company's ability to achieve its
development goals will depend upon a variety of factors, many of which are
beyond the Company's control. There can be no assurance that the Company will
not suffer delays in its development program. The successful development of
additional facilities will involve a number of risks, including the possibility
that the Company may be unable to locate suitable sites at acceptable prices or
may be unable to obtain, or may experience delays in obtaining, necessary
certificates of need, zoning, land use, building, occupancy, licensing and other
required governmental permits and authorizations. The Company may also incur
construction costs that exceed original estimates or even so-called guaranteed
maximum cost construction contracts, and may not complete construction projects
on schedule. The Company will rely on third-party general contractors to
construct its new facilities. There can be no assurance that the Company will
not experience difficulties in working with general contractors and
subcontractors, which could result in increased construction costs and delays.
Further, facility development is subject to a number of contingencies over which
the Company will have little control and that could have a material adverse
effect on project cost and completion time, including shortages of, or the
inability to obtain, labor or materials, the inability of the general contractor
or subcontractors to perform under their contracts, strikes, adverse weather
conditions and changes in applicable laws or regulations or in the method of
applying such laws and regulations. Failure of the Company to achieve its
development goals could have a material adverse effect on the Company.
Accordingly, there can be no assurance that the Company's facilities in
development or under construction will ultimately be completed.
Risks Related to Acquisition Strategy. The Company's strategy includes
growth through acquisition. The Company is subject to various risks associated
with its acquisition growth strategy, including the risk that the Company will
be unable to identify or acquire suitable acquisition candidates or to integrate
the acquired companies into the Company's operations. Any failure of the Company
to identify and consummate economically feasible acquisitions could have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to achieve and manage its planned acquisition growth, that
the liabilities assumed by the Company in any acquisition will not have a
material adverse effect on the Company or that the addition of facilities will
be profitable for the Company.
Dependence on Attracting Seniors with Sufficient Resources to Pay. The
Company expects to rely primarily on the ability of its residents to pay for
services from their own and their families' financial resources. Generally, only
seniors with income or assets meeting or exceeding the comparable median in the
regions where the Company's assisted living facilities are located can afford
the applicable fees for its facilities for an extended period of time. Any
difficulty in attracting seniors with adequate resources to pay for the
Company's services could have a material adverse effect on the Company.
Inflation or other circumstances which adversely affect the ability of the
Company's residents and potential residents to pay for assisted living services
could also have a material adverse effect on the Company.
Dependence Upon Key Personnel. The Company is dependent upon the ability
and experience of its executive officers, including its Chairman, and there can
be no assurance that the Company will be able to retain all of such officers.
The failure of such officers to remain active in the Company's management could
have a material adverse effect on the Company. There can be no assurance that
the anticipated contributions of senior management will be realized, and the
failure of such contributions to be realized could have a material adverse
effect on the Company.
Risks Related to Goodwill. At June 30, 1997, the Company's total assets
were approximately $108.2 million, of which approximately $25.4 million, or
approximately 23.5% of total assets, was goodwill. Goodwill is the excess of
cost over the fair value of the net assets of businesses acquired. There can be
no assurance that the value of such goodwill will ever be realized by the
Company. This goodwill is being amortized on a straight-line basis over 25
years. The Company evaluates on a regular basis whether events and circumstances
have occurred that indicate all or a portion of the carrying amount of goodwill
may no longer be recoverable, in which case an additional charge to earnings
would become necessary. Although at June 30, 1997 the net unamortized balance of
goodwill is not
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considered to be impaired, any such future determination requiring the write-off
of a significant portion of unamortized goodwill could have a material adverse
effect on the Company.
Competition. The assisted living industry is highly competitive and, given
the relatively low barriers to entry and continuing healthcare cost containment
pressures, the Company expects that it will become increasingly competitive in
the future. The Company competes with other companies providing assisted living
services as well as numerous other companies providing similar service and care
alternatives, such as home health care agencies, congregate care facilities,
retirement communities and skilled nursing facilities. While the Company
believes there is a need for additional assisted living residences in the
markets where it intends to develop facilities, the Company expects that, as
assisted living facilities receive increased attention, competition will
increase from new market entrants. Moreover, in implementing its growth
strategy, the Company expects to face competition for development and
acquisition opportunities from local developers and regional and national
assisted living companies. Some of the Company's present and potential
competitors have, or may have access to, greater financial resources than those
of the Company. Consequently, increased competition in the future could limit
the Company's ability to attract and retain residents, to maintain or increase
resident service fees or to expand its business. As a result, any increased
competition could have a material adverse effect on the Company.
Limited Experience with New Service Models and Facility Designs. The
Company's success is dependent, in part, on its ability to develop and offer new
service models and facility designs to prospective residents of its facilities.
Currently, the Company does not have extensive operating experience with these
new service models and facility designs, and the failure of the Company to
successfully implement and integrate these new service models and facility
designs could have a material adverse effect on the Company.
Potential Conflicts of Interest. Abraham D. Gosman, the Company's
principal stockholder and Chairman, and certain members of the Company's senior
management, have a controlling ownership interest in Chancellor with which the
Company has entered and expects to enter into development, management and lease
agreements. These agreements are and will be on terms that the Company believes
will be fair and no less favorable to the Company than those which the Company
could have obtained from unaffiliated third parties. Such ownership interests in
Chancellor and other healthcare entities that compete with the Company, however,
may create actual or potential conflicts of interest on the part of these
members of the Company's management. In the case of such related party
transactions, it is the Company's policy to require that any such transactions
be approved by a majority of the disinterested members of the Executive
Committee of the Board of Directors.
Control by Management. As of September 30, 1997, members of the Board of
Directors and management are the beneficial owners of approximately 47.9% of the
outstanding Common Stock of the Company. As of September 30, 1997, Abraham D.
Gosman, together with his sons, Andrew D. Gosman and Michael M. Gosman, all of
whom are members of the Board of Directors and executive officers of the
Company, are the beneficial owners of approximately 44.6% of the outstanding
Common Stock. Accordingly, management and the Gosmans may have the ability, by
voting shares of Common Stock, to determine (i) the election of the Company's
Board of Directors and, thus, the direction and future operations of the
Company, and (ii) the outcome of all other matters submitted to the Company's
stockholders, including mergers, consolidations and the sale of all or
substantially all of the Company's assets.
Residence Staffing and Labor Costs. The Company competes with other
providers of assisted living services with respect to attracting and retaining
qualified and skilled personnel. The Company is dependent upon its ability to
attract and retain management personnel responsible for the day-to-day
operations of each of the Company's facilities. In addition, a possible shortage
of nurses or other trained personnel may require the Company to enhance its wage
and benefits package in order to compete in the hiring and retention of such
personnel or to hire more expensive temporary personnel. The Company will also
be dependent upon the available labor pool of semi-skilled and unskilled
employees in each of the markets in which it will operate. Any significant
failure by the Company to
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attract and retain qualified management and staff personnel, to control its
labor costs or to pass on any increased labor costs to residents through rate
increases could have a material adverse effect on the Company.
Government Regulation. Health care is an area of extensive and frequent
regulatory change. The assisted living industry is relatively new, and,
accordingly, the manner and extent to which it is regulated at the federal and
state levels are evolving. Changes in the laws or new interpretations of
existing laws may have a significant impact on the Company's methods and costs
of doing business. The Company is subject to varying degrees of regulation and
licensing by health or social service agencies and other regulatory authorities
in the various states and localities where it operates or intends to operate.
The Company's success will depend in part upon its ability to satisfy
applicable regulations and requirements and to procure and maintain required
licenses in rapidly changing regulatory environments. Any failure to satisfy
applicable regulations or to procure or maintain a required license could have a
material adverse effect on the Company. Furthermore, certain regulatory
developments such as revisions in building code requirements for assisted living
facilities, mandatory increases in the scope and quality of care to be offered
to residents and revisions in licensing and certification standards could have a
material adverse effect on the Company. There can be no assurance that federal,
state or local laws or regulations will not be imposed or expanded which would
have a material adverse effect on the Company. The Company's operations are also
subject to health and other state and local government regulations.
In addition, in most states in which the Company participates in
government reimbursement programs, the Company's operations are subject to
federal and/or state requirements or provisions which prohibit certain business
practices and relationships that might affect the provision and cost of health
care services reimbursable under Medicaid. The Company's failure to comply with
the regulations and requirements applicable to a facility could result in the
imposition of significant fines and increased costs, a revocation of the
Company's license to operate that facility, and, if sufficiently serious in
nature, the inability of the Company to maintain or obtain licenses to operate
other facilities. Any such event could have a material adverse effect on the
Company.
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
healthcare items or services. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between
healthcare providers and sources of patient referral. Similar state laws vary
from state to state, are sometimes vague and seldom have been interpreted by
courts or regulatory agencies. Violation of these laws can result in loss of
licensure, civil and criminal penalties, and exclusion of healthcare providers
or suppliers from participation in (i.e., furnishing covered items or services
to beneficiaries of) the Medicare and Medicaid programs. It is expected that the
Company will be subject to these laws. There can be no assurance that such laws
will be interpreted in a manner consistent with the practices of the Company,
and any interpretation inconsistent with the practices of the Company could have
a material adverse effect on the Company.
Environmental Risks. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be held liable for the cost of removal or remediation of
certain hazardous or toxic substances, including, without limitation,
asbestos-containing materials, that could be located on, in or under such
property. As a result, the presence, with or without the Company's knowledge, of
hazardous or toxic substances at any property held or operated by the Company,
or acquired or operated by the Company in the future, could have a material
adverse effect on the Company. Environmental audits performed on properties
leased or managed by the Company have not revealed any significant environmental
liability that management believes would have a material adverse effect on the
Company; however, there can be no assurance that existing environmental audits
with respect to any of the properties leased or managed by the Company have
revealed all environmental liabilities.
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Liability and Insurance. The Company's business entails an inherent risk
of liability. In recent years, participants in the assisted living and long-term
care industry, including the Company, have become subject to an increasing
number of lawsuits alleging negligence or related legal theories, many of which
involve large claims and significant legal costs. The Company is from time to
time subject to such suits as a result of the nature of its business. The
Company currently maintains insurance policies in amounts and with such coverage
and deductibles as it believes are adequate, based on the nature and risks of
its business, historical experience and industry standards. The Company
currently maintains professional liability insurance and general liability
insurance. There can be no assurance that claims will not arise which are in
excess of the Company's insurance coverage or are not covered by the Company's
insurance. Any successful claim against the Company not covered by, or in excess
of, the Company's insurance could have a material adverse effect on the Company.
Claims against the Company, regardless of their merit or eventual outcome, may
also have a material adverse effect on the Company's ability to attract
residents or expand its business and would require management to devote time to
matters unrelated to the operation of the Company's business. In addition, the
Company's insurance policies must be renewed annually, and there can be no
assurance that the Company will be able to continue to obtain liability
insurance coverage in the future or, if available, that such coverage will be
available on acceptable terms. Any failure of the Company to retain liability
insurance coverage or to obtain such coverage on acceptable terms could have a
material adverse effect on the Company.
Dependence on Reimbursement by Third-Party Payors. The Company's revenues
from the services it provides for skilled nursing facilities are dependent upon
reimbursement from third-party payors, including Medicare, state Medicaid
programs and private insurers. There can be no assurance that such revenues will
fully pay the cost of providing services to residents covered by Medicare and
Medicaid. Although in 1996 a substantial portion of the Company's revenue was
derived from Medicare and Medicaid payments, the Company anticipates that in
1997 and going forward, revenue from sources other than Medicare and Medicaid
will constitute a substantially greater portion of overall revenue. The revenues
and profitability of the Company will be affected by the continuing efforts of
governmental and private third-party payors to contain or reduce the costs of
health care by attempting to lower reimbursement rates, increasing case
management review of services and negotiating reduced contract pricing. In an
attempt to reduce the federal and certain state budget deficits, there have
been, and management expects that there will continue to be, a number of
proposals to limit Medicare and Medicaid reimbursement in general. Adoption of
any such proposals at either the federal or the state level could have a
material adverse effect on the Company.
Certain Anti-takeover Provisions. Certain provisions of the Company's
Restated Certificate of Incorporation and By-laws and of Delaware General
Corporation Law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. Certain of these provisions provide for the issuance, without
further stockholder approval, of preferred stock with rights and privileges
which could be senior to the Common Stock, the payment of a "fair" price (or
Board approval by continuing directors) in connection with certain business
combinations with interested stockholders, no right of the stockholders to call
a special meeting of stockholders, restrictions on the ability of stockholders
to nominate directors and submit proposals to be considered at stockholders'
meetings, and a super-majority voting requirement in connection with the removal
of directors and the adoption of stockholders' amendments to the By-laws. The
Company also is subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any "interested"
stockholder for a period of three years following the date that such stockholder
became an interested stockholder.
Possible Volatility Stock Price. Economic or other external factors may
have a significant impact on the Company's business and on the market price of
the Common Stock. Fluctuations in financial performance from period to period
also may have a significant impact on the market price of the Common Stock.
-8-
<PAGE>
THE COMPANY
The Company is a provider of assisted living services, and owns, leases or
manages its facilities. The Company's strategy is to provide a full range of
assisted living and related services across a range of pricing options. The
Company expects its assisted-living facilities to serve as the foundation from
which it will provide a continuum of care for its residents. When its assisted
living facilities are integrated with supportive independent living facilities,
skilled nursing/rehabilitation facilities and Alzheimer's care programs, the
Company believes that it will have the ability to provide to those of its
residents who need a higher degree of care a less stressful transition to more
supportive environments either within the same facility, in a campus setting or
in a nearby facility.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02194; and its telephone number at that address is (781) 433-1000.
Unless otherwise indicated or required by the context, references to the
"Company" include its consolidated subsidiaries.
USE OF PROCEEDS
None of the proceeds from the sale of the Loaned Shares pursuant to this
Prospectus will be received by the Company.
PLAN OF DISTRIBUTION
In connection with ordinary trading or market-making activities in
securities of the Company, BARS may from time to time borrow, return and
reborrow all or a portion of Loaned Shares pursuant to the Securities Loan
Agreement; provided, however, that (i) the number of shares borrowed under the
Securities Loan Agreement at any time may not exceed 1,150,000, and (ii) shares
may be borrowed only for the purposes permitted by Regulation T of the Board of
Governors of the Federal Reserve System (which are to make delivery of shares in
the case of short sales, failure to receive shares required to be delivered, or
other similar situations).
Subject to the foregoing, BARS may from time to time offer for sale the
Loaned Shares directly to one or more purchasers at negotiated prices, at market
prices prevailing at the time of sale or at prices related to such market prices
or through the facilities of a national securities exchange. In addition, in the
course of ordinary trading or market-making activities, BARS may lend to third
parties the Loaned Shares. Such third parties may offer for sale such shares
under this Prospectus directly to one or more purchasers at negotiated prices,
at market prices prevailing at the time or sale or at prices related to such
market prices or through the facilities of a national market exchange.
To the extent required, the aggregate principal amount of the Loaned
Shares to be sold hereby, 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 BARS from
the sale of the Loaned Shares offered by them hereby will be the purchase price
of such Loaned Shares less discounts and commissions, if any.
The Company is paying all expenses incident to the offer and sale of the
Loaned Shares offered hereby by BARS to the public, other than selling
commissions and fees.
The Lenders and the Company have agreed to indemnify BARS against certain
liabilities, including liabilities under the Securities Act.
BARS may from time to time acquire shares of the Company's Common Stock,
the Notes or other securities of the Company or any of its affiliates in the
ordinary course of its market-making or trading activities. In the past, in
-9-
<PAGE>
addition to acting as underwriter of the Notes, BARS has acted as underwriter or
purchaser of securities of, and has provided investment banking and other
services to, the Company and its affiliates.
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 of Nutter, McClennen & Fish,
LLP, is the Assistant Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and for the year then ended, and the combined financial statements of the
Company as of December 31, 1995 and for the year ended December 31, 1995 and the
period from June 24, 1994 (inception) to December 31, 1994, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
-10-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the offering to which this Registration
Statement relates, other than commissions, are to be borne by the Company. All
amounts shown are estimated except the Securities and Exchange commission
registration fee.
Securities and Exchange Commission Registration Fee $ 9,083
Accounting Fees 5,000
Legal Fees 10,000
Printing Expenses 3,000
Miscellaneous Expense 417
-------
Total $27,500
Item 15. Indemnification of Directors and Officers.
The Company is a Delaware corporation. Reference is made to Section 145
of the Delaware General Corporation Law, as amended, which provides that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite an adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Article 11 of the Company's Third Restated Certificate of Incorporation
eliminates the personal liability of directors to the Company or its
Stockholders for monetary damages for breach of fiduciary duty to the full
extent permitted by Delaware law. Article VII of the Company's By-Laws provides
that the Company indemnify its officers and directors to the full extent
permitted by the Delaware General Corporation Law.
The Company has entered into indemnification agreements with each of
its directors. The Company may also enter into similar agreements with certain
of its officers who are not also directors. Generally, the Company's By-Laws and
the indemnification agreements attempt to provide the maximum protection
permitted by Delaware law with respect to indemnification of directors and
officers.
II-1
<PAGE>
The indemnification agreements provide that the Company will pay
certain amounts incurred by a director or officer in connection with any civil
or criminal action or proceeding, and specifically including actions by or in
the name of the Company (derivative suits), where the individual's involvement
is by reason of the fact that he is or was a director or officer of the Company.
Such amounts include, to the maximum extent permitted by law, attorney's fees,
judgments, civil or criminal fines, settlement amounts, and other expenses
customarily incurred in connection with legal proceedings. Under the
indemnification agreements and the Company's By-Laws, a director or officer will
not receive indemnification if he is found not to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company.
The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.
Item 16. List of Exhibits.
Exhibit No.
+ 4.1 Securities Loan Agreement dated October 16, 1996 by and among
BancAmerica Robertson Stephens, American Securities Transfer & Trust,
Inc., not in its individual capacity but solely as Custodian, and each
of Abraham D. Gosman and Michael J. Bohnen, not in their individual
capacities but solely as Trustees under the Gosman CareMatrix Trust
and that certain group of officers of the Company and other
individuals set forth therein.
+ 5.1 Opinion of Nutter, McClennen & Fish, LLP
+10.1 Registration Rights Agreement dated as of October 23, 1997 by and
between the Company and BancAmerica Robertson Stephens.
+23.1 Consent of Coopers & Lybrand L.L.P.
+23.2 Consent of Nutter, McClennen & Fish, LLP (included in
Exhibit 5.1)
+24.1 Power of Attorney (contained in Page II-4)
- -------------------
+ Filed herewith.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted against such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering; and
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Needham, Commonwealth of Massachusetts on this
11th day of November 1997.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
------------------------------
Robert M. Kaufman
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
Robert M. Kaufman, James M. Clary, III, Michael J. Bohnen and Alexander S.
Glovsky, and each of them, with full power to act without the other, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-3 of the Registrant, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do an perform each and every act and thing requisite
and necessary fully to all intents and purposes as he might or could do in
person thereby ratifying and confirming all that said attorney's-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
/s/ Abraham D. Gosman November 11, 1997
- -----------------------------------
Abraham D. Gosman,
Chairman of the Board of Directors
/s/ Robert M. Kaufman November 11, 1997
- ------------------------------------
Robert M. Kaufman
Chief Executive Officer and
Principal Accounting Officer
/s/ Andrew D. Gosman November 11, 1997
- ------------------------------------
Andrew D. Gosman,
Director and President
II-4
<PAGE>
/s/ Michael M. Gosman November 11, 1997
- ------------------------------------
Michael M. Gosman,
Director, Executive Vice President
and Vice Chairman of the Board
of Directors.
/s/ Robert Cataldo November 11, 1997
- ------------------------------------
Robert Cataldo,
Director
/s/ Donald J. Amaral November 11, 1997
- ------------------------------------
Donald J. Amaral,
Director
/s/ H. Loy Anderson, Jr. November 11, 1997
- ------------------------------------
H. Loy Anderson, Jr.,
Director
/s/ Bedros Baharian November 11, 1997
- ------------------------------------
Bedros Baharian,
Director
/s/ Stephen E. Ronai November 11, 1997
- ------------------------------------
Stephen E. Ronai,
Director
II-5
SECURITIES LOAN AGREEMENT (the "Agreement") dated October 16, 1997 by
and among BancAmerica Robertson Stephens (the "Borrower"), American Securities
Transfer & Trust, Inc. not in its individual capacity, but solely as Custodian
under the Custodian Agreement dated as of the date hereof (the "Custodian
Agreement") between each of the Shareholders (as defined herein) and the
Custodian, and each of Abraham D. Gosman and Michael J. Bohnen, not in their
individual capacities but solely as Trustees (each a "Trustee") under the Gosman
CareMatrix Trust (the "Trust") and that certain group of officers of the Company
and other individuals set forth on the Exhibit C hereto (the "Officers and
Others Group"). The Custodian is referred to herein as the "Lender". The Trust
and any member of the Gosman Group to whom the Trust transfers or assigns shares
of Common Stock and the Officers and Others Group are collectively referred to
herein as the "Shareholders". Should the Trust assign or sell any shares of
Company Common Stock to any member of the Gosman Group, for purposes herewith
such member of the Gosman Group shall succeed to the rights and obligations of
the Trust hereunder and for purposes herewith "Trust" shall include such member
of the Gosman Group.
Reference is made to that certain Purchase Agreement (the "Purchase
Agreement") dated August 12, 1997, among the Initial Purchasers listed in
Schedule A thereto and CareMatrix Corporation (the "Company").
The parties hereto agree as follows:
1. Loans of Securities.
1.1 Subject to the terms and conditions of this Agreement, Borrower may,
from time to time following the effectiveness of the registration statement
provided for in the Registration Rights Agreement (as defined in Section 15
below), initiate a transaction whereby Lender will be obligated to lend
securities to Borrower. Borrower shall initiate a Loan by making a written
request, in a form agreeable to the parties hereto (a "Request"), that Lender
make such a Loan. Each Request shall state a number of shares of common stock
(the "Company Common Stock") of the Company that Borrower wishes Lender to loan
to Borrower hereunder. So long as the total number of shares of Company Common
Stock borrowed under this Agreement and not yet returned would not, after giving
effect to any Request, be greater than the lesser of (x) 1,150,000 shares of
Company Common Stock and (y) the number of shares owned by the Gosman Group and
the number of shares owned by members of the Officers and Others Group, so long
as such shares are covered by this Agreement, and Borrower is not in Default
under this Agreement, such Request shall be a valid request for a Loan under
this Agreement. Borrower agrees that, in the event that the number of shares
described in clause (y) of the preceding sentence shall be less than the number
of shares then borrowed under this Agreement and not yet returned, Borrower will
return such number of shares to Lender in accordance with the provisions of
Section 5 below; provided, however, that Borrower will return such shares on the
third Business Day following the notice described in Section 5 below. A Loan
hereunder shall not occur until the Loaned Securities are delivered. For
purposes of this Section 1.1, references to numbers of shares shall be adjusted
from time to time to reflect subdivisions, reclassifications, stock dividends
and other similar events affecting the Company Common
<PAGE>
2
Stock. The terms "Clearing Organization", "Collateral", "Default", "Gosman
Group", "Loan", "Loaned Securities", and certain other terms are defined below.
1.2 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER
AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO
RETURN LOANED SECURITIES.
2. Deliveries of Loaned Securities.
2.1. Unless otherwise specified in the applicable Request, delivery of
Loaned Securities by Lender hereunder shall be made on or before 12:30 p.m. on
the date of such Request if made before 10:30 a.m., otherwise by 12:30 p.m. of
the next Business Day; provided, however, that in either case the Lender shall
have received the Collateral contemplated under Section 3.1 below.
2.2. Lender shall deliver the Loaned Securities to Borrower by causing
the Loaned Securities to be credited to Borrower's account and debited to
Lender's account at the Clearing Organization, as agreed to by the parties
hereto, and each of Lender and Borrower shall provide notice of such debiting
and crediting to the other party at the same time similar notice is given to the
Clearing Organization by either party. The parties agree that such notice shall
be deemed to constitute a schedule of the Loaned Securities for the purposes of
Rule 15c3-3(b)(ii) under the Securities Exchange Act of 1934, as amended (the
"1934 Act").
3. Collateral.
3.1. Prior to the receipt of any Loaned Securities, Borrower shall
deliver to Lender Collateral to secure the performance by Borrower of its
obligations under this Agreement with respect to such Loan in an amount equal to
102% (the "Margin Percentage") of the market value of such Loaned Securities
(determined in accordance with Section 18 below).
3.2. Except as provided in Section 13 below, Lender shall be obligated
to return the Collateral to Borrower on termination of the Loan upon tender to
Lender of all Loaned Securities.
4. Fees for Loans.
4.1 Borrower shall pay Lender a monthly fee in arrears for Loans, such
fee to equal 0.1% of the greater of (x) the sum of the market values of all
Loaned Securities (as calculated pursuant to Sections 8 and 18 below) measured
as of the date such Loaned Securities
<PAGE>
3
were initially credited to Borrower's account for each Loan or (y) the sum of
the products of (1) each of the amounts specified in the preceding clause (x)
and (2) the sum of one and the percentage change, expressed as a decimal, in the
S&P 500 index on the date such Loaned Securities were borrowed and the last day
of the month, times the number of days such Loan was outstanding in each month.
(See Attachment A for an example of how the fee will be calculated.) Borrower
shall provide Lender and Mr. Gosman with a written confirmation of such basis of
compensation and the calculation thereof. Any fee payable hereunder shall be
payable by Borrower to Lender (i) within 10 days of the end of the month for
which the fee was incurred, or (ii) immediately, in the event of a Default
hereunder by Borrower.
4.2 Lender may, in the event Lender disputes the calculation referred to
in Section 4.1 above, submit to Borrower within 60 days any adjustment to such
calculation and Lender and Borrower shall, to the mutual satisfaction of both
parties, resolve any differences of calculation thereof.
5. Termination of the Loan. Unless otherwise agreed in writing, Borrower
may terminate a Loan on any Business Day by returning the Loaned Securities
before 11:30 a.m. New York City time on such day to Lender. Lender may terminate
a Loan with respect to any or all Shareholders on the 5th Business Day (subject
to the lesser time period indicated in Section 1.1 above) following the day on
which Lender, prior to the close of business on that day, gives written notice
of termination of the Loan to Borrower. Unless otherwise agreed, Borrower shall,
on or before such termination date, deliver the Loaned Securities to Lender, or
cause the Loaned Securities to be credited to Lender's account at the Clearing
Organization. Any Loan outstanding on the termination of this Agreement pursuant
to Section 22 hereof shall also be deemed terminated.
6. Rights of Borrower in Respect of the Loaned Securities. Until a Loan
is terminated in accordance herewith, Borrower shall have all the incidents of
ownership of the Loaned Securities, including the right to transfer the Loaned
Securities to any purchaser (as defined in the New York Uniform Commercial Code)
or to others free of any adverse claim (as defined in Article 8 in the New York
Uniform Commercial Code). Lender hereby waives the right to vote or to provide
any consent or to take any similar action with respect to the Loaned Securities
during the term of the Loan.
7. Dividends, Distributions, Etc.
7.1. Lender shall be entitled to receive from Borrower distributions in
lieu of distributions made on or in respect of the Loaned Securities, the record
dates for which are during the term of the Loan and which are not otherwise
received by Lender, to the full extent Lender would be so entitled if the Loaned
Securities had not been lent to Borrower, including, but not limited to: (a) all
property, (b) stock dividends, (c) securities received as a result of split ups
of the Loaned Securities and distributions in respect thereof, (d) interest
payments, and (e) all rights to purchase additional securities.
<PAGE>
4
7.2. Any cash distribution which Lender is entitled to receive pursuant
to Section 7.1 above shall be paid to Lender by Borrower as promptly as
practicable, but in no event more than three Business Days, after the cash
distribution in respect of the underlying Loaned Securities is received by the
holders of the Loaned Securities. Any non-cash distribution which Lender is
entitled to receive pursuant to Section 7.1 above shall be added to the Loaned
Securities and shall be considered such for all purposes, except that if the
Loan of the Loaned Securities with respect to which such distribution is payable
has terminated, Borrower shall forthwith deliver such distribution to Lender.
8. Mark to Market Margin.
8.1. Borrower shall daily mark to market any Loan hereunder and in the
event that at the close of trading on any Business Day the value of all the
Collateral delivered hereunder by Borrower to Lender shall be less than the
Margin Percentage of the market value of all the outstanding Loaned Securities,
Borrower shall deliver additional Collateral to Lender by the close of business
the next day Business Day so that the market value of additional Collateral when
added to market value of the Collateral shall equal the Margin Percentage of the
market value of the Loaned Securities as of the close of trading on the
preceding Business Day. Borrower shall provide Lender on a daily basis a
facsimile or other copy of the calculations made in determining the market value
of the Loaned Securities and Collateral.
8.2. In the event that at the close of trading on any Business Day the
value of all the Collateral held hereunder by Lender shall be greater than the
Margin Percentage of the market value of all the outstanding Loaned Securities:
(i) if the Collateral includes any assets other than letters of
credit, Lender shall deliver to Borrower an amount of Collateral, in the
form of assets other than letters of credit, selected by Borrower such that
the market value of the remaining Collateral equals the Margin Percentage
of the market value of the Loaned Securities; and
(ii) Borrower may, by notice to Lender, demand that Lender deliver by
the close of business the next day Business Day to Borrower such additional
Collateral specified by Borrower so long as the market value of the
remaining Collateral shall not be less than the Margin Percentage of the
market value of the Loaned Securities.
Any such delivery of Collateral under clause (i) or (ii) above is to be
made by 11:30 A.M. on the next Business Day.
9. Representations of the Parties Hereto. The parties hereby make the
following representations and warranties as of the date hereof and as of each
Loan hereunder:
9.1. Each party hereto represents and warrants that (a) it has the power
to execute and deliver this Agreement and to enter into the Loans contemplated
hereby and to
<PAGE>
5
perform its obligations hereunder; (b) it has taken all necessary action to
authorize such execution, delivery and performance; and (c) this Agreement
constitutes a legal, valid and binding obligation enforceable against it in
accordance with its terms, except as the enforceability hereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
9.2. Each party hereto represents and warrants that the execution,
delivery and performance by it of this Agreement and each Loan hereunder will at
all times comply with all applicable laws and regulations applicable to it, and
with respect to those of securities regulatory or self-regulatory organizations
applicable to it, to such party's knowledge.
9.3. Each party hereto represents and warrants that it has made its own
determination as to the tax treatment of any dividends, remuneration or other
funds received hereunder.
9.4. Borrower represents and warrants that (a) it is a corporation
organized under the laws of the State of Delaware and (b) it (or the party to
whom it relends the Loaned Securities) is borrowing or will borrow the Loaned
Securities for the purpose of making delivery of such securities in the case of
short sales, failure to receive securities required to be delivered, or as
otherwise permitted pursuant to Regulation T.
9.5. For purposes of entering into this Agreement, Mr. Gosman represents
and warrants that he is a duly authorized trustee under the Declaration of Trust
dated July 3, 1996 known as the "Gosman CareMatrix Trust" and in such capacity,
as Trustee, has full power and authority to enter into this Agreement and to
perform any obligations hereunder and to lend the shares of Company Common Stock
held by the Trust in accordance with the terms of this Agreement and that any
shares of Company Common Stock loaned to Borrower are directly owned by the
Trust free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
9.6. Mr. Gosman represents and warrants that as of the date hereof the
Trust is the beneficial owner of no less than 1,150,000 shares of Company Common
Stock.
9.7. Each member of the Officers and Others Group represents and
warrants that as of the date hereof he or she is the beneficial owner of the
number of shares of Company Common Stock appearing opposite his or her name on
Exhibit C attached hereto free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
9.8. Lender represents and warrants that it is a corporation duly
organized and validly existing under the laws of Colorado.
<PAGE>
6
10. Opinions of Counsel.
10.1 Each party hereto shall have delivered as of the effectiveness of
the Registration Statement pursuant to the Registration Rights Agreement
referred to in Section 15 hereof, an opinion of counsel addressed to the other
parties to the effect that:
(a) such party has the power to execute and deliver this Agreement and
to enter into the Loans contemplated hereby and to perform its obligations
hereunder; (b) this Agreement has been duly authorized, executed, and
delivered by such party; and (c) this Agreement constitutes a legal, valid
and binding obligation of such party enforceable against such party in
accordance with its terms, except as the enforceability hereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or other similar laws now or hereafter
in effect affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and
(b) the execution, delivery and performance by such party of this
Agreement has complied with all applicable laws and regulations.
10.2 Counsel for Mr. Gosman shall, in addition to the opinions set forth
in Section 10.1 above, deliver an opinion to the effect that (a) for purposes of
this Agreement, Mr. Gosman is the duly authorized trustee for the Trust and in
such capacity, as Trustee, has full power and authority to enter into this
Agreement and to perform any obligations thereunder and to lend the shares of
Company Common Stock held by the Trust in accordance with the terms of this
Agreement, and (b) by delivery by the Shareholders of a certificate or
certificates representing the shares of Company Common Stock loaned to Borrower,
Borrower shall have acquired all the rights of the Shareholders in such shares,
free of any adverse claim, any lien in favor of the Company, and any
restrictions on transfer imposed by the Company, assuming Borrower has purchased
such shares for value, in good faith and without notice of any adverse claim,
subject to the terms of this Agreement.
10.3 Counsel for Lender shall, in addition to the opinion set forth in
Section 10.1 above, deliver an opinion to effect that Lender is a corporation
duly organized and validly existing under the laws of Colorado.
10.4. Counsel for Borrower shall, in addition to the opinion set forth
in Section 10.1 above, deliver an opinion to effect that Borrower is a
corporation duly organized and validly existing under the laws of the State of
Delaware.
<PAGE>
7
11. Covenants.
11.1. Each party hereto agrees that this Agreement and the Loans made
hereunder shall be "securities contracts" for purposes of the Bankruptcy Code
and any bankruptcy proceeding thereunder.
11.2. Each party agrees to be liable as principal with respect to its
obligations hereunder.
11.3. Lender shall not be liable hereunder in its individual capacity
but solely as Custodian under the Custodian Agreement. Lender shall make all
Loans out of the account established by Lender under the Custodian Agreement.
11.4. Borrower has furnished and will continue to furnish Lender with
its most recent statement required to be furnished to customers pursuant to Rule
17a-5(c) under the 1934 Act.
11.5. Notwithstanding anything to the contrary herein, in any letter of
credit forming part of the Collateral or under applicable law, Lender may not
draw on any letter of credit forming part of the Collateral unless (i) Borrower
has failed to comply with its obligations under Section 8 above or is in Default
hereunder or (ii) such draw is expressly permitted under Section 11.6 below.
11.6. Lender may draw on any letter of credit forming part of the
Collateral if (i) not more than 45 and not less than 30 days prior to the
expiration of such letter of credit, Lender or any Shareholder has notified
Borrower in writing of such impending expiration, (ii) by the close of business
on the first Business Day following the 15th day prior to the expiration date of
such letter of credit (not counting such expiration date as one of the 15 days),
such letter of credit has not been extended for at least 120 days from such
expiration date or replaced with a letter of credit that meets the definition of
Collateral and that does not expire for at least 120 days from such expiration
date, and (iii) as of the close of business on the Business Day immediately
preceding the date of draw on such letter of credit, the value of all
Collateral, other than such letter of credit, is less than the Margin Percentage
of the market value of all the outstanding Loaned Securities. If any letter of
credit forming part of the Collateral requires Lender to state that Borrower has
failed to comply with its obligations hereunder as a condition to draw, then
(but only for the purposes of allowing Lender to make such statement) Borrower's
failure to extend or replace such letter of credit, as contemplated by clause
(ii) above, shall constitute a failure by Borrower to comply with its
obligations hereunder.
In the event of any draw by Lender on a letter of credit forming part of
the Collateral in accordance with this Section 11.6, the term "Collateral" shall
include (i) any cash received by Lender as a result of such draw, (ii) any
securities or other property acquired by Lender with such cash and (iii) all
interest, dividends and other income received by Lender in respect of any of the
foregoing. Such Collateral shall be security for Borrower's obligations
hereunder and Borrower hereby pledges with, assigns to, and grants Lender a
continuing security
<PAGE>
8
interest in, and a lien upon, such Collateral, which shall attach upon the
delivery of such Collateral to Lender and which shall cease upon the delivery of
such Collateral to Borrower. In addition to the rights and remedies given to
Lender hereunder, Lender shall have all the rights and remedies of a security
party under the New York Uniform Commercial Code. It is understood that Lender
may invest such Collateral, if such consists of cash, in United States Treasury
obligations, but that Lender may not pledge, repledge, hypothecate,
rehypothecate, lend, relend or commingle with other collateral or with its own
assets, such Collateral, if such consists of other than cash, other than in
accordance with this Agreement.
11.7. Borrower agrees to indemnify and hold harmless Lender and the
Shareholder against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any breach or alleged breach by Borrower
of its obligations in connection with any relending by Borrower of Loaned
Securities, other than any breach or alleged breach (i) relating to a matter
described in Section 3 of the Registration Rights Agreement (as defined in
Section 15 below) or (ii) caused by a breach of this Agreement by Lender (with
respect to indemnification of Lender) or by a Shareholder (with respect to
indemnification of such Shareholder).
11.8 Borrower agrees to provide notice to Lender within [ten] days of
the occurrence of the Event of Default described in Section 12(h) and Lender
agrees to provide notice to Borrower within ten days of the occurrence of the
Event of Default described in Section 12(i).
12. Events of Default. Any or all Loans between Borrower and Lender may
(at the option of the non-defaulting party or, if Borrower is the defaulting
party, at the option of any Shareholder, in each case exercised by notice to the
defaulting party) be terminated immediately upon the occurrence of any one or
more of the following events (individually a "Default"):
(a) if any Loaned Securities shall not be delivered to Lender on a
termination date of the applicable Loan previously specified pursuant to
Section 5 above;
(b) if any Collateral shall not be delivered to Borrower on the
termination date of the applicable Loan upon tender to Lender of Loaned
Securities and such default is not cured within four Business Days of
receipt of notice of such failure by Lender;
(c) if (1) any party shall fail to deliver or return Collateral, as
the case may be, as required by Section 3 above or Lender fails to return
Collateral, as required by Section 8 above, or (2) for four consecutive
Business Days Borrower has been required to deliver Collateral pursuant to
Section 8 above and has failed to do so;
(d) if Borrower shall fail to make the payment of distributions as
required by Section 7 above and such default is not cured within the
earlier of four Business Days
<PAGE>
9
of receipt of notice of such failure by Borrower or five Business Days
after mailing of such notice via overnight courier;
(e) if Borrower shall fail to pay any fee required pursuant to Section
4 above and such default is not cured within the earlier of four Business
Days of receipt of notice of such failure by Borrower or five Business Days
after mailing of such notice via overnight courier;
(f) any representation or warranty made pursuant to Section 9 above
was not true when made or ceases to be true during the term of any Loan
hereunder and such default is not cured within the earlier of four Business
Days of receipt of notice of such default by the defaulting party or five
Business Days after mailing of such notice via overnight courier;
(g) if Borrower shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a petition in bankruptcy or shall be adjudicated
a bankrupt or insolvent, or shall file a petition seeking reorganization,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall seek, consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of it or any material
part of its properties; or if any petition, not dismissed within 30
calendar days, is filed against a party hereto (other than by any other
party to this Agreement) in any court or before any agency alleging the
bankruptcy or insolvency of such party or seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or the
appointment of a receiver or trustee of all or any material part of such
party's property;
(h) if Borrower shall have been suspended or expelled from membership
or participation in any national securities exchange or association or
other self-regulatory organization or if it is suspended from dealing in
securities generally by any governmental agency;
(i) if Lender shall have its license, charter, or other authorization
necessary to conduct a material portion of its business withdrawn,
suspended or revoked by any applicable federal or state government or
agency thereof;
(j) if the Trustees shall no longer have authority to lend to Borrower
the Company Common Stock held by the Trust or if for any reason the Loan of
Company Common Stock shall violate any existing applicable law, rule,
regulation, judgment, order or decree of any government, government
instrumentality or court having jurisdiction over activities of the
Trustees or the Trust;
<PAGE>
10
(k) if either party notifies the other, orally or in writing, of its
inability to or its intention not to perform its obligations hereunder or
otherwise disaffirms, rejects or repudiates, any of its obligations
hereunder; or
(l) if either party (i) shall fail to perform any material obligation
under this Agreement not specifically set forth in clauses (a) through (k)
above, including but not limited to the payment of fees as required by
Section 4, and the payment of transfer taxes as required by Section 15,
(ii) shall have received notice of such failure from the non-defaulting
party and (iii) shall not have cured such failure before the close of
business on the next day.
13. Remedies. (a) In the event of any Default under Section 12(d),
12(e), 12(f), 12(g), 12(h) or 12(i) above, the non-defaulting party shall have
the right, in addition to any other remedies provided herein or under applicable
law (without further notice to the defaulting party), upon termination of all
Loans to retain such of the Collateral (if the non-defaulting party is Lender)
or Loaned Securities (if the non-defaulting party is Borrower) sufficient to
cover any allowable damage suffered by the non-defaulting party.
(b) In the event of any termination of a Loan of Loaned Securities as a
result of a Default by Borrower under Section 12 above, Lender (or, in
accordance with Section 14 below, any Shareholder) shall have the right, at its
option, in addition to any other remedies provided herein or under applicable
law, to either (i) purchase a like amount of the Loaned Securities in any
recognized and customary market for such securities and apply the Collateral
(but if not all Loans have been terminated, only in an amount not in excess of
the Margin Percentage of the market value of such Loaned Securities as of the
date of Default) to the payment of the purchase price of such securities, after
deducting therefrom all amounts, if any, due Lender under Sections 7 and 16
hereof or (ii) draw on any letter of credit constituting Collateral (or return
any cash Collateral) in an amount equal to the market value of such Loaned
Securities as of the date of Default or, if less, in the amount then available
under the Collateral. If Lender (or, in accordance with Section 14 below, any
Shareholder) exercises either of such rights, Borrower's obligation to return
such Loaned Securities shall terminate. Any such exercise by Lender (or, in
accordance with Section 14 below, any Shareholder) shall not, however,
terminate, satisfy or discharge any other obligations of Borrower hereunder.
Lender (or, in accordance with Section 14 below, any Shareholder) may also apply
the Collateral to any other obligation of Borrower under this Agreement,
including, without limitation, unpaid fees and distributions owed to Lender
pursuant to Sections 4 and 7 above. In the event the purchase price of a like
amount of Loaned Securities exceeds the amount of the Collateral that Lender or
any Shareholder was permitted to apply under clause (i) above, Borrower shall
(subject to Section 13(e) below) be liable to Lender (or, in accordance with
Section 14 below, any Shareholder) for the amount of such excess (plus all other
amounts, if any, due to Lender hereunder), together with interest on all such
amounts at the Prime Rate from the date of either the purchase of securities or
the drawing under the Collateral, as the case may be, until the date of payment
of such excess. The purchase price of securities purchased under this Section
13(b)
<PAGE>
11
shall include broker's fees and commissions and all other reasonable costs, fees
and expenses related to such purchase. In the event Lender (or, in accordance
with Section 14 below, Mr Gosman) elects to exercise its rights under clause
(ii) above and the Collateral is less than the market value of the Loaned
Securities on the date of such Default, Borrower shall be liable to Lender (or,
in accordance with Section 14 below, any Shareholder) for the amount of such
deficiency, together with interest on such deficiency at the Prime Rate from the
date of such Default until the date of payment. Upon the satisfaction of all
obligations hereunder, any remaining Collateral shall be returned to Borrower.
(c) In the event of any Default by Lender under Section 12(b) above,
Borrower shall have the right, in addition to any other remedies provided herein
or under applicable law, to (i) treat an amount of Loaned Securities with a
market value equal to the Margin Percentage of the Collateral not returned as
its own and (ii) sell a like amount of the Loaned Securities in the principal
market for such securities and to retain the proceeds of such sale. If Borrower
exercises such right, Lender's obligation to return the previously due
Collateral shall terminate and Lender shall have the right to draw on such
Collateral and retain the proceeds. Any such exercise by Borrower shall not,
however, terminate, satisfy or discharge any other obligations of Lender
hereunder. In the event the sale price received from such securities is less
than the value of the Collateral not returned, Lender shall be liable to
Borrower for the amount of any deficiency (plus all amounts, if any, due to
Borrower hereunder), together with Interest on such amount at the Prime Rate
from the date of such sale until the date of payment of such deficiency. In
calculating this deficiency, there shall be deducted from the proceeds of the
securities sold under this Section 12(c) broker's fees and commissions and all
other reasonable costs, fees and expenses related to such sale.
(d) Nothing in Section 12(a), 12(b) or 12(c) above shall be taken to
limit the remedies of one party for a breach of this Agreement by any party if
such breach does not constitute a Default.
(e) Notwithstanding anything else in this Agreement, in any letter of
credit forming part of the Collateral or under applicable law:
(1) unless and until a Default by Borrower under Section 12 above
(other than Section 12(a)) has occurred, the liability of Borrower for any
failure to comply with its obligations hereunder shall be limited to an
amount equal to the Margin Percentage of the market value of the Loaned
Securities on the date such failure arises;
(2) neither Lender nor any Shareholder may draw on any Collateral
following a Default by Borrower in an amount in excess of the Margin
Percentage of the market value of the Loaned Securities that Borrower
failed to deliver to Lender determined on the date such Default arises,
including brokers' fees and commissions and all other reasonable costs,
fees and expenses related to such purchase;
<PAGE>
12
(3) not later than the Business Day immediately preceding any purchase
by Lender or any Shareholder of Company Common Stock to cover, compensate
for or remedy a breach by Borrower hereunder, Lender or any Shareholder
shall orally notify Borrower that it intends to make such purchase (it
being agreed that such notification may be given prior to the time that
Lender or any Shareholder shall be authorized hereunder to make such
purchase); and
(4) not later than the Business Day immediately preceding any exercise
by Borrower of any of rights under Section 12(c) above, Borrower shall
orally notify the Shareholders of its intention to do so (it being agreed
that such notification may be given prior to the time that Borrower shall
be authorized hereunder to exercise such rights).
14. [Reserved.]
15. Registration Rights. The Shareholders will use their best efforts
(a) to cause the Company, as soon as practicable and no later than October 23,
1997, to enter into a registration rights agreement (the "Registration Rights
Agreement") substantially in the form attached as Exhibit B hereto and (b) upon
execution of the Registration Rights Agreement, to cause to have delivered an
opinion of Nutter, McClennen & Fish, LLP, special counsel for the Company, to
the effect that (i) the Company has corporate power and authority to enter into
the Registration Rights Agreement, (ii) the Registration Rights Agreement has
been duly authorized by all necessary corporate action on the part of the
Company, has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles, and except as enforceability of the
indemnification and contribution provisions thereof may be limited by applicable
law, equitable principles or public policy, and (iii) for purposes of entering
into this Agreement, Mr. Gosman is the duly authorized trustee for the Gosman
CareMatrix Trust and in such capacity, as Trustee, has full power and authority
to enter into the Agreement and to perform any obligations thereunder and to
lend the shares of Company Common Stock held by the Trust in accordance with the
terms of this Agreement.
16. Transfer Taxes. All transfer taxes with respect to the transfer of
the Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of each Loan shall be paid by Borrower.
17. Definitions. For the purposes hereof:
"Business Day" shall mean any day recognized as a settlement day by
the New York Stock Exchange, Inc.
"Clearing Organization" shall mean The Depository Trust Company
("DTC"), or, if agreed to by the parties hereto, such other clearing agency
at which Borrower and
<PAGE>
13
Lender (or Lender's agent) maintain accounts, or a Federal Reserve Bank
which maintains a book-entry system.
"Collateral" shall mean an irrevocable letter of credit issued by a
bank (as defined in Section 3(a)(6)(A)-(C) of the 1934 Act) acceptable to
Lender and delivered to Lender pursuant to Section 3 or 8 hereof
substantially in the form attached as Exhibit A hereto or in such other
form as shall be reasonably acceptable to Lender and further approved in
writing by Mr. Gosman.
"Gosman Group" shall mean Mr. Gosman, any member of Mr. Gosman's
family, the Trust, and any affiliate or family member of any of the
foregoing which either (x) holds Company Common Stock as of the date hereof
or (y) is the transferee of shares of Company Common Stock from any of the
foregoing subsequent to the date hereof.
"Loan" shall mean a loan of Loaned Securities hereunder.
"Loaned Security" shall mean any share of the Company Common Stock
delivered as a Loan hereunder until the Clearing Organization credits
Lender's accounts or the certificate for such share (or an identical share)
is delivered or otherwise accepted back hereunder or until the share is
replaced by purchase of an identical security, except that, if any new or
different security shall be exchanged for any Loaned Security by
reorganization, recapitalization or merger of the issuer of such Loaned
Security, such new or different security shall, effective upon such
exchange, be deemed to become a Loaned Security in substitution for the
former Loaned Security for which such exchange was made. For purposes of
the return of Loaned Securities by Borrower or the purchase or sale of
securities pursuant to Section 13 above, such term shall include securities
of the same issuer, class and quantity of Loaned Securities, as adjusted
pursuant to the preceding sentence. Notwithstanding the foregoing, any
non-cash property deemed added to the Loaned Securities pursuant to Section
7.2 above shall be deemed Loaned Securities until delivered to Lender upon
termination of the Loan thereof.
"Prime Rate" shall mean the prime rate as quoted in the Wall Street
Journal (New York Edition) for the Business Day preceding the date on which
such determination is made. If more than one rate is so quoted, the prime
rate shall be the average of the rates so quoted.
18. Market Value.
18.1. If the principal market for any securities to be valued is a
national securities exchange, their market value shall be determined for all
purposes by their last sale price on such exchange on the preceding Business Day
or, if there was no sale on that day, by the last sale price on the next
preceding day on which there was a sale on any such exchange, all as
<PAGE>
14
quoted on the consolidated tape for such exchange or, if not quoted on such
consolidated tape, then as quoted by any such exchange.
18.2. If the principal market for the securities to be valued is the
over-the-counter market, their market value shall be determined as follows. If
the securities are quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), their market value shall be the closing
sale price on NASDAQ on the preceding Business Day or, if the securities are
issues for which last sale prices are not quoted on NASDAQ, the closing bid
price on such day. If the securities to be valued are not quoted on NASDAQ,
their market value shall be the highest bid quotation as quoted in any of The
Wall Street Journal (New York Edition), the National Quotation Bureau pink
sheets, the quotation sheets of registered market makers and, if necessary,
dealers' telephone quotations on the preceding business day in which there was
such a quotation.
18.3. The value of any letter of credit forming part of the Collateral
shall equal the undrawn amount under such letter of credit.
19. Applicable Law. This Agreement shall be governed and construed in
accordance with the internal laws of the State of Colorado.
20. Waiver. The failure of any party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term of this Agreement. All waivers in respect of a Default must be in
writing.
21. Remedies. All remedies and limitations on damages hereunder shall
survive the termination of the relevant Loan, return of Loaned Securities or
Collateral and termination of this Agreement.
22. Termination. This Agreement shall terminate (a) upon the earliest to
occur of the following: (i) more than 3 million shares of Company Common Stock
shall have been sold pursuant to one or more underwritten public offerings for
cash, and (ii) September 16, 2000; (b) with respect to any member of the
Officers and Others Group, such time as such member shall have sold all his or
her shares of Company Common Stock; and (c) with respect to Mr. Gosman, such
time as a registration statement registering sales of all the shares of the
Gosman Group of Company Common Stock held at that time has been declared
effective in a firm underwritten offering for cash. In the case of clause
(a)(i), five Business Days' prior notice (the "Notice Period") shall be given to
the Borrower of the occurrence of such event and upon such notice, Borrower
agrees to suspend any pending or future loan request hereunder for the duration
of the Notice Period.
23. Notices. Any request, demand, authorization, notice, waiver,
consent, report or communication to a party hereunder shall, unless this
Agreement specifically provides
<PAGE>
15
otherwise, be in writing and delivered in person or mailed by first-class mail,
postage prepaid, addressed as follows or transmitted by facsimile transmission
to the following facsimile numbers (or to such address or facsimile number as
such party may designate by the notice):
if to Lender:
American Securities Transfer & Trust, Inc.
1825 Lawrence, Suite 444
Denver, CO 80202
Attention: Charles R. Harrison
Facsimile No.: (303) 298-5380
Telephone No.:(303) 298-5370
if to Borrower:
BancAmerica Robertson Stephens
555 California Street
San Francisco, CA 94104
Attention: Brendan Dyson
Facsimile No.: (415) 693-3557
Telephone No.: (415) 781-9700
if to Mr. Gosman:
Abraham D. Gosman
Trustee, Gosman CareMatrix Trust
513 North County Road
Palm Beach, FL 33480
Facsimile No.: (561) 848-0752
Telephone No.: (561) 881-1989
<PAGE>
16
with a copy to:
James M. Clary III
c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
if to a member of the Officer and Director Group:
Amy Beth Clary
c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
Robert M. Kaufman
c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
Frederick R. Leathers
c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
Joel A. Kanter
c/o CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
<PAGE>
17
with copies in the case of any notice, advice or instruction under
Section 5, 11.6, 12 or 13 above or this Section 23 to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Linda Quinn
Facsimile No.: (212 848-7179
Telephone No.: (212) 848-8747
and to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Attention: Michael J. Bohnen
Facsimile No.: (617) 439-2000
Telephone No.: (617) 973-9748
Any request, demand, authorization, notice, waiver, consent, report or
communication hereunder shall be deemed given when actually received, except
that any request, demand, authorization, notice waiver, consent, report or
communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day or five Business Days after mailing of such notice via
overnight courier.
24. Custodian's Fees. The Custodian's fees in connection with this
Agreement and the Custody Agreement will be paid by the Borrower pursuant to a
fee schedule agreed to by the Borrower.
25. Obligations of the Shareholders. The obligations of each of the
Shareholders under this Agreement are several and not joint, and this Agreement
is not among such Shareholders but is between each such Shareholder and the
Lender and the Borrower.
26. Miscellaneous. This Agreement supersedes any other agreement between
the parties concerning loans of securities between the parties hereto. This
Agreement shall not be assigned by any party without the prior written consent
of the other parties, and any such assignment without such consent shall be
void; provided, however, that any successor Custodian to Lender under the
Custodian Agreement shall automatically succeed to the rights and obligations of
Lender hereunder. Subject to the foregoing, this Agreement shall be binding upon
and shall enure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. This Agreement shall not be modified,
except by an instrument in writing signed by the party against whom enforcement
is sought.
<PAGE>
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Neil J. Sandler
----------------------------------
Name: Neil J. Sandler
Title: Managing Partner
ABRAHAM D. GOSMAN, as Trustee under the
Gosman CareMatrix Trust and not in his
individual capacity,
By: /s/ Abraham D. Gosman
----------------------------------
Name: Abraham D. Gosman
Title: Trustee
AMERICAN SECURITIES TRANSFER &
TRUST, INC., as Custodian,
By: /s/ Charles R. Harrison
----------------------------------
Name: Charles R. Harrison
Title: CEO and President
<PAGE>
AMY BETH CLARY
/s/ Amy Beth Clary
----------------------------------
ROBERT M. KAUFMAN
/s/ Robert M. Kaufman
----------------------------------
FREDERICK R. LEATHERS
/s/ Frederick R. Leathers
----------------------------------
JOEL A. KANTER
/s/ Joel A. Kanter
----------------------------------
<PAGE>
EXHIBIT A
(Bank Name)
(Address)
IRREVOCABLE STAND-BY LETTER OF CREDIT NO.
- -----------------------------------------
Effective Date:
AMOUNT AVAILABLE:
(In Numbers):
(In Words):
BENEFICIARY: APPLICANT:
ATTN:
EXPIRY DATE:
Dear Sir,
We hereby issue in your favor this irrevocable Stand-by Letter of Credit which
is available against your draft draw at sight or as accompanied by the
following:
Your signed statement that "(the applicant/address) has failed to
comply with the terms of the Securities Loan Agreement dated
October __, 1997."
Reference in this Letter of Credit to that certain agreement between (the
applicant) and (the Beneficiary) is for identification purposes only and is not
incorporated herein by reference.
Drafts drawn under this Letter of Credit must be drawn and presented together
with the accompanying documentation at our _________________________ ATTN:
____________ not later than (expiry date).
Drafts must be marked as drawn under this letter of credit (mentioning our
reference number).
We hereby engage with you that all drafts drawn and/or documents presented under
and in compliances with the terms of the Letter of Credit will be duly honored
upon presentation to us.
This Letter of Credit is to be issued subject to the Uniform Customs and
Practices for Documentary Credits (1983 Revision), International Chamber of
Commerce, Publication No. 400, and where not inconsistent with said Uniform
Customs and Practices, Article 3 of the New York Uniform Commercial Code.
Yours truly,
(BANK NAME)
- ----------------------------------- ---------------------------------
Authorized Signature Authorized Signature
<PAGE>
EXHIBIT B
[Form of Registration Rights Agreement]
October __, 1997
BANCAMERICA ROBERTSON STEPHENS
555 California Street
San Francisco, California 94104
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of October __, 1997 between CareMatrix Corporation, a Delaware
corporation (the "Company"), and you in consideration of the Securities Loan
Agreement of even date herewith. Reference is made to the Securities Loan
Agreement of even date herewith (the "Securities Loan Agreement"), by and among
BancAmerica Robertson Stephens (the "Borrower"), American Securities Transfer &
Trust, Inc., not in its individual capacity, but solely as Custodian under the
Custodian Agreement dated as of the date hereof (the "Custodian Agreement")
between each of the Shareholders (as defined herein) and the Custodian, and each
of Abraham D. Gosman and Michael J. Bohnen, not in their individual capacities
but solely as Trustees under the Gosman CareMatrix Trust (the "Trust") and that
certain group of officers of the Company and other individuals set forth on the
Exhibit C hereto (the "Officers and Others Group"). The Custodian is referred to
herein as the "Lender". Mr. Gosman and the Officers and Others Group are
collectively referred to herein as the "Shareholders". CareMatrix Corporation, a
Delaware corporation (the "Company"), hereby confirms its agreement with you as
follows:
1. SHELF REGISTRATION. The Company shall, as promptly as practicable
after the execution of this agreement but in no event later than October __,
1997, file with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-3 (the "Shelf Registration Statement") of the
Company under the Securities Act of 1933, as amended (the "1933 Act"), covering,
among other things, the sale by Borrower of shares of common stock of the
Company ("Common Stock") that are Loaned Securities ("Loaned Company Stock").
The Company shall use its all commercially reasonable efforts to cause the
Commission to declare the registration statement effective as promptly as
practicable and in any event not later than 45 days following the filing
thereof.
"Loaned Security" shall mean any share of Common Stock delivered as a
Loan under the Securities Loan Agreement until the Clearing Organization credits
Lender's accounts or the certificate for such share (or an identical share) is
delivered or otherwise accepted back under such Securities Loan Agreement or
until the share is replaced by purchase of an identical security, except that,
if any new or different security shall be exchanged for any Loaned Security by
reorganization, recapitalization or merger of the issuer of such Loaned
Security, such new or different security shall, effective upon such exchange,
be deemed to become a Loaned Security in
<PAGE>
B-2
substitution for the former Loaned Security for which such exchange was made.
For purposes of the return of Loaned Securities by Borrower or the purchase or
sale of securities pursuant to Section 13 of the Securities Loan Agreement, such
term shall include securities of the same issuer, class and quantity of Loaned
Securities, as adjusted pursuant to the preceding sentence. Notwithstanding the
foregoing, any non-cash property deemed added to the Loaned Securities pursuant
to Section 7.2 of the Securities Loan Agreement shall be deemed Loaned
Securities until delivered to Lender upon termination of the Loan thereof.
(b) The Company shall use its all commercially reasonable efforts to
keep the Shelf Registration Statement continuously effective in order to permit
the prospectus constituting a part thereof (the "Prospectus") to be usable by
Borrower, or any person to whom Borrower lends Loaned Company Stock (Borrower or
any such person being referred to herein as a "Holder"), in connection with any
public offering and sale of Loaned Company Stock.
(c) The Company shall be deemed not to have used all commercially
reasonable efforts to keep the Shelf Registration Statement effective during the
requisite period if the Company voluntarily takes any action that would result
in Borrower not being able to offer and sell any Loaned Borrowed Stock during
that period, unless (i) such action is required by applicable law, (ii) upon the
occurrence of any event contemplated by Section 2(c)(v) below, and such action
is taken by the Company in good faith and for valid business reasons or (iii)
the continued effectiveness of the Shelf Registration Statement would require
the Company to disclose a material financing, acquisition or other corporate
development, and the proper officers of the Company shall have determined in
good faith that such disclosure is not in the Company's best interests or the
best interests of its stockholders, and, in the case of clause (ii) above, the
Company thereafter promptly complies with the requirements of Section 2(h)
below.
2. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to Borrower, prior to the filing thereof
with the Commission, a copy of any Shelf Registration Statement and each
amendment thereto and each supplement, if any, to the Prospectus included
therein and of each report or other document incorporated therein by reference)
and shall use its best efforts to reflect in each such document, when so filed
with the Commission, such comments as Borrower reasonably may propose.
(b) Notwithstanding any other provision hereof, the Company shall take
such action as may be necessary so that (i) any Shelf Registration Statement,
and any amendment thereto, and any Prospectus forming a part thereof, and any
amendment or supplement thereto (and each report or other document incorporated
therein by reference in each case) complies in all material respects with the
1933 Act and the 1934 Act and the respective rules and regulations thereunder,
(ii) any Shelf Registration Statement, and any amendment thereto, does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii)
<PAGE>
B-3
any Prospectus forming a part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company shall not be responsible for
the correctness of any information contained in the Shelf Registration Statement
or the Prospectus or any amendment or supplement thereto provided to the Company
in writing by Borrower specifically for inclusion therein.
(c) The Company shall advise Borrower, and, if requested by Borrower,
confirm such advice in writing:
(i) when the Shelf Registration Statement or any amendment thereto has
been filed with the Commission and when the Shelf Registration Statement or
any amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Shelf Registration Statement, the Prospectus, or each report or other
document incorporated by reference therein, or for additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement or any amendments
thereto or the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Loaned Common Stock for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any
changes in the Shelf Registration Statement or any amendment thereto or
each supplement, if any, to the Prospectus forming a part thereof in order
to make the statements therein not misleading.
(d) The Company will make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement at the earliest possible time.
(e) The Company will furnish to Borrower, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, any report or document incorporated by reference therein, including
financial statements and
schedules, and, if Borrower so requests in writing, all exhibits (including
those incorporated by reference).
(f) The Company will deliver to Borrower, without charge, as many copies
of the Prospectus and any amendment or supplement thereto as Borrower may
reasonably request;
<PAGE>
B-4
and will consent to the use of the Prospectus or any amendment or supplement
thereto by Borrower in connection with the offering and sale of the Loaned
Company Stock.
(g) The Company will register or qualify or cooperate with Borrower in
connection with the registration or qualification of such securities for offer
and sale under the securities or blue sky laws of such jurisdictions as Borrower
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the Loaned
Company Stock; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
(h) Upon the occurrence of any event contemplated by Section 2(c)(v)
above, the Company will promptly prepare a post-effective amendment to the Shelf
Registration Statement or an amendment or supplement to the Prospectus forming a
part thereof or any document or report incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to purchasers of the Loaned Company Stock, the Prospectus will not
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(i) The Company shall instruct Borrower to immediately suspend its use
of the Prospectus if (i) the Commission has issued a stop order suspending the
effectiveness of the Shelf Registration Statement, (ii) an event contemplated by
Section 2(c)(v) above has occurred or (iii) the Board of Directors of the
Company, on the advice of its counsel, reasonably concludes that it is
inadvisable as a matter of the federal securities laws that the Prospectus
continue to be used. Such an instruction shall be given by facsimile
transmission, with receipt confirmed telephonically. Such an instruction shall
be deemed received (A) if receipt by each required recipient is telephonically
confirmed between the hours of 7:30 a.m. and 4:30 p.m. on any Business Day, two
hours after the last such confirmation is obtained or (B) otherwise, upon the
next opening of business of the American Stock Exchange following the time the
last such confirmation is made.
3. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify, contribute to and hold harmless Borrower and each person, if any, who
controls Borrower within the meaning of Section 15 of the 1933 Act as follows:
(1) against any and all loss, li ability, claim, damage, expense and
judgment whatsoever ("Loss"), as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement (or any amendment thereto or any information
document or report incorporated by reference therein), or the omission or
alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading or arising out
of
<PAGE>
B-5
any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (or any amendment or supplement thereto or any
information document or report incorporated by reference therein) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(2) against any and all loss, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(3) against any and all expense whatsoever, as incurred, reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (A) or (B) above;
provided, however, that the provisions of this Section 3 shall not apply
to any Loss to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by Borrower expressly for use
in the Shelf Registration Statement (or amendment thereto) or the Prospectus.
(b) The Company agrees to indemnify and hold harmless Borrower against
any and all Loss, as incurred, following receipt by Borrower of a written
instruction from the Company to cease using the Prospectus, to the extent such
Loss arises out of Borrower's inability to deliver Loaned Company Stock upon
settlement of trades entered into prior to receipt by Borrower of such
instruction. The Company shall not be required under this Section 3(b) to
indemnify Borrower for any Loss to the extent such Loss arises out of (1)
Borrower's inability to deliver Loaned Company Stock upon settlement of trades
entered into after receipt by Borrower of such instruction, (2) the bad faith or
gross negligence of Borrower or (3) Borrower's failure to take reasonable steps
to mitigate its Loss.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to the Company of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify the Company
shall not relieve the Company from any liability which it may have otherwise
than on account of the indemnity agreement. The Company may participate at its
own expense in the defense of any such action.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Sections 3(a),
(b) and (c) above is for any reason
<PAGE>
B-6
held to be unenforceable by the indemnified parties although applicable in
accordance with its terms, the Company and Borrower shall contribute to the
aggregate Losses of the nature contemplated by said indemnity agreement
incurred by the Company and Borrower, as incurred, in such proportions as
is appropriate to reflect the relative fault of the Company, on the one
hand, and Borrower, on the other hand, in connection with the statements or
omissions that resulted in such Losses, determined by reference to whether
any alleged untrue statement or omission related to information provided by
the Company, on the one hand, or Borrower, on the other hand; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 3(d), each person, if any, who controls
Borrower within the meaning of Section 15 of the 1933 Act shall have the
same rights to contribution as Borrower.
4. OBLIGATIONS OF THE COMPANY. (a) On the date which the Shelf
Registration Statement is declared effective, the Company shall deliver to
Borrower:
(1) The opinion of Nutter, McClennen & Fish, LLP, special counsel for
the Company, in form and substance reasonably satisfactory to Borrower, to
the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of Delaware, with the corporate power and authority to own or
lease its properties and to conduct its business as described in the
Shelf Registration Statement; and the Company is duly qualified to do
business and in good standing as a foreign corporation in all other
jurisdictions where its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the
failure to be duly qualified or to be in good standing would not have
a material adverse effect on the Company and its subsidiaries
considered as a whole;
(ii) Such counsel has been advised by the Commission that the
Shelf Registration Statement became effective under the 1933 Act as of
the date and time specified in such opinion, and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Shelf Registration Statement has been issued by the Commission and no
proceeding for that purpose is pending or threatened by the
Commission;
(iii) At the time the Shelf Registration Statement became
effective and at the date of such opinion, the Shelf Registration
Statement (other than the financial statements, financial statement
schedules and other financial and statistical data included or
incorporated by reference therein, as to which no opinion need be
rendered and that no opinion need be rendered with respect to the
incorporated documents complying as to form to the 1934 Act.) appeared
on its
<PAGE>
B-7
face to be appropriately responsive in all material respects to the
requirements of the 1933 Act and the regulations thereunder;
(iv) Mr. Gosman, as Trustee, is the duly authorized Trustee for
the Trust and in such capacity as Trustee, has full power and
authority to enter into the Securities Loan Agreement and to perform
any obligations thereunder and to lend the shares of Company Common
Stock held by the Trust in accordance with the terms of this
Agreement;
(v) Each document filed pursuant to the 1934 Act (other than the
financial statements and supporting schedules included therein, as to
which no opinion need be rendered) that was incorporated by reference
into the Shelf Registration Statement when it was declared effective
on its face is appropriately responsive in all material respects to
the requirements of the 1934 Act and the regulations thereunder;
(vi) Each of the Company's subsidiaries has been duly organized
and is validly existing and in good standing as a corporation under
the laws of its jurisdiction of organization, with the corporate power
and authority to own or lease its properties and to conduct its
businesses as described in the Shelf Registration Statement; and each
of the Company's subsidiaries is duly qualified to do business and in
good standing as a foreign corporation in all jurisdictions where its
ownership or leasing of properties or the conduct of its business
requires such qualification, except where the failure to be duly
qualified or to be in good standing would not have a material adverse
effect on the Company and its subsidiaries considered as a whole;
(vii) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened to which the Company
or any subsidiary is a party or of which any property of the Company
is the subject, which individually or in the aggregate are material;
and to the best of such counsel's knowledge no such proceedings are
threatened by governmental authorities or others;
(viii) The information in the Company's most recent Annual Report
on Form 10-K under the caption "Business--Legal Proceedings", to the
extent that it purports to summarize matters of law or legal
conclusions, has been reviewed by such counsel and fairly summarizes
the matters described therein in all material respects;
(ix) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Company
<PAGE>
B-8
of the transactions contemplated by this Agreement, except such as may
be required by the securities or Blue Sky laws of any jurisdiction;
(x) The descriptions in the Shelf Registration Statement of
statutes, legal and governmental proceedings or contracts and other
documents are fair summaries thereof and fairly present the
information required to be shown; and such counsel does not know of
any statutes or legal or governmental proceedings required to be
described in the Shelf Registration Statement that are not so
described;
(xi) The Company has corporate power and authority to enter into
this Agreement; and
(xii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization,
execution and delivery by Borrower, is a valid and binding agreement
of the Company enforceable in accordance with its respective terms,
except insofar as the indemnification, contribution and waiver
provisions thereof may be limited by applicable law, equitable
principles or public policy and except with respect to all such
agreements, as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company and the independent certified public accountants of the Company, at
which such conferences the contents of the Shelf Registration Statement and
the Prospectus and related matters were discussed, and although they have
not verified the accuracy or completeness of the statements contained in
the Shelf Registration Statement and the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that the Shelf
Registration, at the time it became effective, contained any untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that such
counsel will express no opinion with respect to the financial statements,
including supporting schedules and other financial and statistical
information derived therefrom).
(2) A certificate of the Company, signed by the Chief Executive
Officer, President or an Executive Vice President of the Company and the
chief financial or chief accounting officer of the Company, dated as of the
effective date of the Shelf Registration Statement, to the effect that (i)
from the date of the most recent financial information filed with the
Commission as of such effective date of the Shelf Registration Statement
there has been no material adverse change in the condition, financial or
otherwise, or in the
<PAGE>
B-9
earnings, business affairs or business prospects of the Company or its
subsidiaries, considered as one enterprise, (ii) the 1934 Act documents, as
amended or supplemented to the date of such certificate, do not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (iii) no stop
order suspending the effectiveness of the Shelf Registration Statement has
been issued and no proceedings for that purpose have been initiated or
threatened by the Commission.
(3) A letter from Coopers & Lybrand, in form and substances
satisfactory to Borrower, to the effect that:
(i) they are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
1933 Act and the Rules and Regulations thereunder;
(ii) it is their opinion that the financial statements and
supporting schedules included in or incorporated by reference in the
Shelf Registration Statement as of the time it became effective and
covered by their opinions therein complied as to form in all material
respects with the applicable accounting requirements of the 1933 Act
and the regulations thereunder;
(iii) based on limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to
believe that (A) any unaudited financial statement included in or
incorporated by reference in the Shelf Registration Statement as of
the time it became effective does not comply as to form in all
material respects with the applicable accounting requirements of the
1933 Act and the regulations thereunder or are not presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements included in or incorporated by reference in the Shelf
Registration Statement as of the time it became effective, (B) at a
specified date not more than five days prior to the date of
effectiveness of the Shelf Registration Statement, there has been any
change in the capital stock of the Company or any increase in the
consolidated long-term debt of the Company and its subsidiaries or any
decrease in consolidated net current assets or net assets as compared
with the amounts shown in the most recent balance sheet included in or
incorporated by reference in the Shelf Registration Statement as of
the time it became effective or (C) during the period from the most
recent balance sheet included in or incorporated by reference in the
Shelf Registration Statement as of the time it became effective to a
specified date not more than five days prior to the date of
effectiveness of the Shelf Registration Statement, there were any
decreases, as compared with the corresponding period in the preceding
year, in sales, net income or net income per share of the Company and
its subsidiaries, except in all instances for changes, increases or
decreases which the Shelf
<PAGE>
B-10
Registration Statement or the documents or reports incorporated by
reference therein disclose have occurred or may occur; and
(iv) in addition to the examination referred to in their opinions
and the limited procedures referred to in clause (iii) above, they
have carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information from documents or reports which are included in or
incorporated by reference in the Shelf Registration Statement as of
the time it became effective and have found such amounts, percentages
and financial information to be in agreement with the relevant
accounting, financial and other records of the Company and its
subsidiaries identified in such letter.
(b) Upon the date the Shelf Registration Statement is declared
effective, the favorable opinion of Shearman & Sterling, counsel for Borrower,
with respect to such matters as Borrower may request, shall be delivered.
(c) Upon request by Borrower following the filing by the Company of its
Annual Report on Form 10-K or any post-effective amendment to the Shelf
Registration Statement or supplement to the Prospectus (as contemplated by
Section 2(h) above), the Company shall deliver to Borrower an opinion of counsel
(who need not be outside counsel) to the effect of Section 4(a)(1) above, an
officer's certificate to the effect of Section 4(a)(2) above and an accountant's
letter to the effect of Section 4(a)(3) above; provided, however, that such
opinion, certificate or accountant's letter, as the case may be, shall (i) speak
of the Shelf Registration Statement as amended by such filing and (ii) with
respect to statements referencing the time of effectiveness of the Shelf
Registration Statement, shall reference the Shelf Registration Statement both at
the time of effectiveness and at the time of such subsequent filing.
5. REGISTRATION EXPENSES. The Company will bear all expenses incurred in
connection with the performance of its obligations under this Agreement
6. MISCELLANEOUS. (a). The Company has not entered into, nor will the
Company on or after the date of this Agreement enter into, any agreement which
is inconsistent with the rights granted to Borrower in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to Borrower
hereunder do not in any way conflict with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Borrower; provided no amendment, modification or
supplement or waiver or consent to the departure with respect to the provisions
of Section 3 hereof shall be effective as against Borrower unless consented to
in writing by Borrower.
<PAGE>
B-11
(c) Any request, demand, authorization, notice, waiver, consent, report
or communication to a party hereunder shall, unless this Agreement specifically
provides otherwise, be in writing and delivered in person or mailed by
first-class mail, postage prepaid, addressed as follows or transmitted by
facsimile transmission to the following facsimile numbers (or to such address or
facsimile number as such party may designate by the notice):
if to the Company:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention:
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
if to Borrower:
BancAmerica Robertson Stephens
555 California Street
San Francisco, California 94104
Attention: Brendan Dyson
Facsimile No.: (415) 693-3557
Telephone No.: (415) 781-9700
with copies in the case of any notice, advice or instruction under
Section 2 to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Linda Quinn
Facsimile No.: (212) 848-7179
Telephone No.: (212) 848-8747
and to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Attention: Michael J. Bohnen
Facsimile No.: (212) 439-2000
Telephone No.: (212) 973-9748
<PAGE>
B-12
Any request, demand, authorization, notice, waiver, consent, report or
communication hereunder shall be deemed given when actually received, except
that any request, demand, authorization, notice waiver, consent, report or
communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day.
(d) This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(f) This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
<PAGE>
B-13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CAREMATRIX CORPORATION
By:
-----------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
BANCAMERICA ROBERTSON STEPHENS
By:
-----------------------------
Name:
Title:
<PAGE>
B-14
EXHIBIT C
======================================|=========================================
Name of Person | Number of shares of Company Common
| Stock loaned
- --------------------------------------|-----------------------------------------
Gosman CareMatrix Trust | 850,000
- --------------------------------------|-----------------------------------------
James M. Clary, III | 100,000
- --------------------------------------|-----------------------------------------
Robert M. Kaufman | 100,000
- --------------------------------------|-----------------------------------------
Joel A. Kanter | 50,000
- --------------------------------------|-----------------------------------------
Frederick R. Leathers | 50,000
======================================|=========================================
NUTTER, McCLENNEN & FISH, LLP
ATTORNEYS AT LAW
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699
TELEPHONE: 617 439-2000 FACSIMILE: 617 973-9748
CAPE CODE OFFICE DIRECT DIAL NUMBER
HYANNIS, MASSACHUSETTS
November 12, 1997
22237-19
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by CareMatrix Corporation (the "Company")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the resale of an aggregate of
1,150,000 shares of Common Stock, $.05 par value, of the Company (the "Shares").
The Shares are to be loaned to the selling stockholders under the Registration
Statement pursuant to the Securities Loan Agreement dated as of October 16, 1997
(the "Securities Loan Agreement") by and among BancAmerica Robertson Stephens,
American Securities Transfer & Trust, Inc., solely in its capacity as Custodian,
and certain executive officers of the Company and other individuals.
We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of the
Company's Certificate of Incorporation and all amendments thereto and
restatements thereof, the Company's By-laws, as amended, the corporate records
of the Company to the date hereof, the Securities Loan Agreement, certificates
of public officials and such other certificates, documents, records and
materials as we have deemed necessary in connection with the opinion letter.
Based upon the foregoing, and in reliance upon information from time to
time furnished to us by the Company's officers, directors and agents, we are of
the opinion that the Shares have been duly authorized and are legally issued,
fully paid and non-assessable, and will continue to be so after their sale under
the Registration Statement.
We understand that this opinion letter is to be used in connection with the
Registration Statement. We hereby consent to the filing of this opinion letter
with and as a part of the Registration Statement, and to the reference to our
firm under the heading "Legal Matters" in the Prospectus filed as part thereof.
It is understood that this opinion letter is to be used in connection with the
offering and sale of the Shares only while said Registration Statement, as
amended from time to time, is effective under the Securities Act.
Very truly yours,
/s/ Nutter, McClennen & Fish, LLP
Nutter, McClennen & Fish, LLP
MJB/ASG
October 23, 1997
BANCAMERICA ROBERTSON STEPHENS
555 California Street
San Francisco, California 94104
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of October 23, 1997 between CareMatrix Corporation, a Delaware
corporation (the "Company"), and you in consideration of the Securities Loan
Agreement of even date herewith. Reference is made to the Securities Loan
Agreement of even date herewith (the "Securities Loan Agreement"), by and among
BancAmerica Robertson Stephens (the "Borrower"), American Securities Transfer &
Trust, Inc., not in its individual capacity, but solely as Custodian under the
Custodian Agreement dated as of the date hereof (the "Custodian Agreement")
between each of the Shareholders (as defined herein) and the Custodian, and each
of Abraham D. Gosman and Michael J. Bohnen, not in their individual capacities
but solely as Trustees under the Gosman CareMatrix Trust (the "Trust") and that
certain group of officers of the Company and other individuals set forth on the
Exhibit C hereto (the "Officers and Others Group"). The Custodian is referred to
herein as the "Lender". Mr. Gosman and the Officers and Others Group are
collectively referred to herein as the "Shareholders". CareMatrix Corporation, a
Delaware corporation (the "Company"), hereby confirms its agreement with you as
follows:
1. SHELF REGISTRATION. The Company shall, as promptly as practicable
after the execution of this agreement but in no event later than October 30,
1997, file with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-3 (the "Shelf Registration Statement") of the
Company under the Securities Act of 1933, as amended (the "1933 Act"), covering,
among other things, the sale by Borrower of shares of common stock of the
Company ("Common Stock") that are Loaned Securities ("Loaned Company Stock").
The Company shall use its all commercially reasonable efforts to cause the
Commission to declare the registration statement effective as promptly as
practicable and in any event not later than 45 days following the filing
thereof.
"Loaned Security" shall mean any share of Common Stock delivered as a
Loan under the Securities Loan Agreement until the Clearing Organization credits
Lender's accounts or the certificate for such share (or an identical share) is
delivered or otherwise accepted back under such Securities Loan Agreement or
until the share is replaced by purchase of an identical security, except that,
if any new or different security shall be exchanged for any Loaned Security by
reorganization, recapitalization or merger of the issuer of such Loaned
Security, such new or different security shall, effective upon such exchange, be
deemed to become a Loaned Security in substitution for the former Loaned
Security for which such exchange was made. For purposes of the return of Loaned
Securities by Borrower or the purchase or sale of securities pursuant to Section
13 of the Securities Loan Agreement, such term shall include securities of the
same
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issuer, class and quantity of Loaned Securities, as adjusted pursuant to the
preceding sentence. Notwithstanding the foregoing, any non-cash property deemed
added to the Loaned Securities pursuant to Section 7.2 of the Securities Loan
Agreement shall be deemed Loaned Securities until delivered to Lender upon
termination of the Loan thereof.
(b) The Company shall use its all commercially reasonable efforts to
keep the Shelf Registration Statement continuously effective in order to permit
the prospectus constituting a part thereof (the "Prospectus") to be usable by
Borrower, or any person to whom Borrower lends Loaned Company Stock (Borrower or
any such person being referred to herein as a "Holder"), in connection with any
public offering and sale of Loaned Company Stock.
(c) The Company shall be deemed not to have used all commercially
reasonable efforts to keep the Shelf Registration Statement effective during the
requisite period if the Company voluntarily takes any action that would result
in Borrower not being able to offer and sell any Loaned Borrowed Stock during
that period, unless (i) such action is required by applicable law, (ii) upon the
occurrence of any event contemplated by Section 2(c)(v) below, and such action
is taken by the Company in good faith and for valid business reasons or (iii)
the continued effectiveness of the Shelf Registration Statement would require
the Company to disclose a material financing, acquisition or other corporate
development, and the proper officers of the Company shall have determined in
good faith that such disclosure is not in the Company's best interests or the
best interests of its stockholders, and, in the case of clause (ii) above, the
Company thereafter promptly complies with the requirements of Section 2(h)
below.
2. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to Borrower, prior to the filing thereof
with the Commission, a copy of any Shelf Registration Statement and each
amendment thereto and each supplement, if any, to the Prospectus included
therein and of each report or other document incorporated therein by reference)
and shall use its best efforts to reflect in each such document, when so filed
with the Commission, such comments as Borrower reasonably may propose.
(b) Notwithstanding any other provision hereof, the Company shall take
such action as may be necessary so that (i) any Shelf Registration Statement,
and any amendment thereto, and any Prospectus forming a part thereof, and any
amendment or supplement thereto (and each report or other document incorporated
therein by reference in each case) complies in all material respects with the
1933 Act and the 1934 Act and the respective rules and regulations thereunder,
(ii) any Shelf Registration Statement, and any amendment thereto, does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
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state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming a part of any
Shelf Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the Company shall not be responsible for the correctness of any information
contained in the Shelf Registration Statement or the Prospectus or any amendment
or supplement thereto provided to the Company in writing by Borrower
specifically for inclusion therein.
(c) The Company shall advise Borrower, and, if requested by Borrower,
confirm such advice in writing:
(i) when the Shelf Registration Statement or any amendment thereto has
been filed with the Commission and when the Shelf Registration Statement or
any amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Shelf Registration Statement, the Prospectus, or each report or other
document incorporated by reference therein, or for additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement or any amendments
thereto or the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Loaned Common Stock for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any
changes in the Shelf Registration Statement or any amendment thereto or
each supplement, if any, to the Prospectus forming a part thereof in order
to make the statements therein not misleading.
(d) The Company will make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement at the earliest possible time.
(e) The Company will furnish to Borrower, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, any report or document incorporated by reference therein, including
financial statements and schedules, and, if Borrower so requests in writing, all
exhibits (including those incorporated by reference).
(f) The Company will deliver to Borrower, without charge, as many copies
of the Prospectus and any amendment or supplement thereto as Borrower may
reasonably request;
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and will consent to the use of the Prospectus or any amendment or supplement
thereto by Borrower in connection with the offering and sale of the Loaned
Company Stock.
(g) The Company will register or qualify or cooperate with Borrower in
connection with the registration or qualification of such securities for offer
and sale under the securities or blue sky laws of such jurisdictions as Borrower
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the Loaned
Company Stock; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
(h) Upon the occurrence of any event contemplated by Section 2(c)(v)
above, the Company will promptly prepare a post-effective amendment to the Shelf
Registration Statement or an amendment or supplement to the Prospectus forming a
part thereof or any document or report incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to purchasers of the Loaned Company Stock, the Prospectus will not
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(i) The Company shall instruct Borrower to immediately suspend its use
of the Prospectus if (i) the Commission has issued a stop order suspending the
effectiveness of the Shelf Registration Statement, (ii) an event contemplated by
Section 2(c)(v) above has occurred or (iii) the Board of Directors of the
Company, on the advice of its counsel, reasonably concludes that it is
inadvisable as a matter of the federal securities laws that the Prospectus
continue to be used. Such an instruction shall be given by facsimile
transmission, with receipt confirmed telephonically. Such an instruction shall
be deemed received (A) if receipt by each required recipient is telephonically
confirmed between the hours of 7:30 a.m. and 4:30 p.m. on any Business Day, two
hours after the last such confirmation is obtained or (B) otherwise, upon the
next opening of business of the American Stock Exchange following the time the
last such confirmation is made.
3. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify, contribute to and hold harmless Borrower and each person, if any, who
controls Borrower within the meaning of Section 15 of the 1933 Act as follows:
(1) against any and all loss, liability, claim, damage, expense and
judgment whatsoever ("Loss"), as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement (or any amendment thereto or any information
document or report incorporated by reference therein), or the omission or
alleged omission therefrom of a material fact required to be
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stated therein or necessary to make the statements therein not misleading
or arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or supplement
thereto or any information document or report incorporated by reference
therein) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(2) against any and all loss, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(3) against any and all expense whatsoever, as incurred, reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (A) or (B) above;
provided, however, that the provisions of this Section 3 shall not apply
to any Loss to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by Borrower expressly for use
in the Shelf Registration Statement (or amendment thereto) or the Prospectus.
(b) The Company agrees to indemnify and hold harmless Borrower against
any and all Loss, as incurred, following receipt by Borrower of a written
instruction from the Company to cease using the Prospectus, to the extent such
Loss arises out of Borrower's inability to deliver Loaned Company Stock upon
settlement of trades entered into prior to receipt by Borrower of such
instruction. The Company shall not be required under this Section 3(b) to
indemnify Borrower for any Loss to the extent such Loss arises out of (1)
Borrower's inability to deliver Loaned Company Stock upon settlement of trades
entered into after receipt by Borrower of such instruction, (2) the bad faith or
gross negligence of Borrower or (3) Borrower's failure to take reasonable steps
to mitigate its Loss.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to the Company of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify the Company
shall not relieve the Company from any liability which it may have otherwise
than on account of the indemnity agreement. The Company may participate at its
own expense in the defense of any such action.
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(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Sections 3(a),
(b) and (c) above is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and
Borrower shall contribute to the aggregate Losses of the nature contemplated by
said indemnity agreement incurred by the Company and Borrower, as incurred, in
such proportions as is appropriate to reflect the relative fault of the Company,
on the one hand, and Borrower, on the other hand, in connection with the
statements or omissions that resulted in such Losses, determined by reference to
whether any alleged untrue statement or omission related to information provided
by the Company, on the one hand, or Borrower, on the other hand; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 3(d), each person, if any, who controls Borrower within the
meaning of Section 15 of the 1933 Act shall have the same rights to contribution
as Borrower.
4. OBLIGATIONS OF THE COMPANY. (a) On the date which the Shelf
Registration Statement is declared effective, the Company shall deliver to
Borrower:
(1) The opinion of Nutter, McClennen & Fish, LLP, special counsel for
the Company, in form and substance reasonably satisfactory to Borrower, to
the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of Delaware, with the corporate power and authority to own or
lease its properties and to conduct its business as described in the
Shelf Registration Statement; and the Company is duly qualified to do
business and in good standing as a foreign corporation in all other
jurisdictions where its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the
failure to be duly qualified or to be in good standing would not have
a material adverse effect on the Company and its subsidiaries
considered as a whole;
(ii) Such counsel has been advised by the Commission that the
Shelf Registration Statement became effective under the 1933 Act as of
the date and time specified in such opinion, and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Shelf Registration Statement has been issued by the Commission and no
proceeding for that purpose is pending or threatened by the
Commission;
(iii) At the time the Shelf Registration Statement became
effective and at the date of such opinion, the Shelf Registration
Statement (other than the financial statements, financial statement
schedules and other financial and statistical data included or
incorporated by reference therein, as to which no
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7
opinion need be rendered and that no opinion need be rendered with
respect to the incorporated documents complying as to form to the 1934
Act.) appeared on its face to be appropriately responsive in all
material respects to the requirements of the 1933 Act and the
regulations thereunder;
(iv) Mr. Gosman, as Trustee, is the duly authorized Trustee for
the Trust and in such capacity as Trustee, has full power and
authority to enter into the Securities Loan Agreement and to perform
any obligations thereunder and to lend the shares of Company Common
Stock held by the Trust in accordance with the terms of this
Agreement;
(v) Each document filed pursuant to the 1934 Act (other than the
financial statements and supporting schedules included therein, as to
which no opinion need be rendered) that was incorporated by reference
into the Shelf Registration Statement when it was declared effective
on its face is appropriately responsive in all material respects to
the requirements of the 1934 Act and the regulations thereunder;
(vi) Each of the Company's subsidiaries has been duly organized
and is validly existing and in good standing as a corporation under
the laws of its jurisdiction of organization, with the corporate power
and authority to own or lease its properties and to conduct its
businesses as described in the Shelf Registration Statement; and each
of the Company's subsidiaries is duly qualified to do business and in
good standing as a foreign corporation in all jurisdictions where its
ownership or leasing of properties or the conduct of its business
requires such qualification, except where the failure to be duly
qualified or to be in good standing would not have a material adverse
effect on the Company and its subsidiaries considered as a whole;
(vii) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened to which the Company
or any subsidiary is a party or of which any property of the Company
is the subject, which individually or in the aggregate are material;
and to the best of such counsel's knowledge no such proceedings are
threatened by governmental authorities or others;
(viii) The information in the Company's most recent Annual Report
on Form 10-K under the caption "Business--Legal Proceedings", to the
extent that it purports to summarize matters of law or legal
conclusions, has been reviewed by such counsel and fairly summarizes
the matters described therein in all material respects;
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(ix) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Company of the transactions contemplated by this Agreement, except
such as may be required by the securities or Blue Sky laws of any
jurisdiction;
(x) The descriptions in the Shelf Registration Statement of
statutes, legal and governmental proceedings or contracts and other
documents are fair summaries thereof and fairly present the
information required to be shown; and such counsel does not know of
any statutes or legal or governmental proceedings required to be
described in the Shelf Registration Statement that are not so
described;
(xi) The Company has corporate power and authority to enter into
this Agreement; and
(xii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization,
execution and delivery by Borrower, is a valid and binding agreement
of the Company enforceable in accordance with its respective terms,
except insofar as the indemnification, contribution and waiver
provisions thereof may be limited by applicable law, equitable
principles or public policy and except with respect to all such
agreements, as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company and the independent certified public accountants of the Company, at
which such conferences the contents of the Shelf Registration Statement and
the Prospectus and related matters were discussed, and although they have
not verified the accuracy or completeness of the statements contained in
the Shelf Registration Statement and the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that the Shelf
Registration, at the time it became effective, contained any untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that such
counsel will express no opinion with respect to the financial statements,
including supporting schedules and other financial and statistical
information derived therefrom).
(2) A certificate of the Company, signed by the Chief Executive
Officer, President or an Executive Vice President of the Company and the
chief financial or chief accounting officer of the Company, dated as of the
effective date of the Shelf Registration
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Statement, to the effect that (i) from the date of the most recent
financial information filed with the Commission as of such effective date
of the Shelf Registration Statement there has been no material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company or its subsidiaries,
considered as one enterprise, (ii) the 1934 Act documents, as amended or
supplemented to the date of such certificate, do not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading and (iii) no stop order
suspending the effectiveness of the Shelf Registration Statement has been
issued and no proceedings for that purpose have been initiated or
threatened by the Commission.
(3) A letter from Coopers & Lybrand, in form and substances
satisfactory to Borrower, to the effect that:
(i) they are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
1933 Act and the Rules and Regulations thereunder;
(ii) it is their opinion that the financial statements and
supporting schedules included in or incorporated by reference in the
Shelf Registration Statement as of the time it became effective and
covered by their opinions therein complied as to form in all material
respects with the applicable accounting requirements of the 1933 Act
and the regulations thereunder;
(iii) based on limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to
believe that (A) any unaudited financial statement included in or
incorporated by reference in the Shelf Registration Statement as of
the time it became effective does not comply as to form in all
material respects with the applicable accounting requirements of the
1933 Act and the regulations thereunder or are not presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements included in or incorporated by reference in the Shelf
Registration Statement as of the time it became effective, (B) at a
specified date not more than five days prior to the date of
effectiveness of the Shelf Registration Statement, there has been any
change in the capital stock of the Company or any increase in the
consolidated long-term debt of the Company and its subsidiaries or any
decrease in consolidated net current assets or net assets as compared
with the amounts shown in the most recent balance sheet included in or
incorporated by reference in the Shelf Registration Statement as of
the time it became effective or (C) during the period from the most
recent balance sheet included in or incorporated by reference in the
Shelf Registration Statement as of the time it became effective to a
specified date not more than five days prior to
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the date of effectiveness of the Shelf Registration Statement, there
were any decreases, as compared with the corresponding period in the
preceding year, in sales, net income or net income per share of the
Company and its subsidiaries, except in all instances for changes,
increases or decreases which the Shelf Registration Statement or the
documents or reports incorporated by reference therein disclose have
occurred or may occur; and
(iv) in addition to the examination referred to in their opinions
and the limited procedures referred to in clause (iii) above, they
have carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information from documents or reports which are included in or
incorporated by reference in the Shelf Registration Statement as of
the time it became effective and have found such amounts, percentages
and financial information to be in agreement with the relevant
accounting, financial and other records of the Company and its
subsidiaries identified in such letter.
(b) Upon the date the Shelf Registration Statement is declared
effective, the favorable opinion of Shearman & Sterling, counsel for Borrower,
with respect to such matters as Borrower may request, shall be delivered.
(c) Upon request by Borrower following the filing by the Company of its
Annual Report on Form 10-K or any post-effective amendment to the Shelf
Registration Statement or supplement to the Prospectus (as contemplated by
Section 2(h) above), the Company shall deliver to Borrower an opinion of counsel
(who need not be outside counsel) to the effect of Section 4(a)(1) above, an
officer's certificate to the effect of Section 4(a)(2) above and an accountant's
letter to the effect of Section 4(a)(3) above; provided, however, that such
opinion, certificate or accountant's letter, as the case may be, shall (i) speak
of the Shelf Registration Statement as amended by such filing and (ii) with
respect to statements referencing the time of effectiveness of the Shelf
Registration Statement, shall reference the Shelf Registration Statement both at
the time of effectiveness and at the time of such subsequent filing.
5. REGISTRATION EXPENSES. The Company will bear all expenses incurred in
connection with the performance of its obligations under this Agreement
6. MISCELLANEOUS. (a). The Company has not entered into, nor will the
Company on or after the date of this Agreement enter into, any agreement which
is inconsistent with the rights granted to Borrower in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to Borrower
hereunder do not in any way conflict with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
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(b) The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Borrower; provided no amendment, modification or
supplement or waiver or consent to the departure with respect to the provisions
of Section 3 hereof shall be effective as against Borrower unless consented to
in writing by Borrower.
(c) Any request, demand, authorization, notice, waiver, consent, report
or communication to a party hereunder shall, unless this Agreement specifically
provides otherwise, be in writing and delivered in person or mailed by
first-class mail, postage prepaid, addressed as follows or transmitted by
facsimile transmission to the following facsimile numbers (or to such address or
facsimile number as such party may designate by the notice):
if to the Company:
CareMatrix Corporation
197 First Avenue
Needham, MA 02194
Attention:
Facsimile No.: (617) 433-1073
Telephone No.: (617) 433-1000
if to Borrower:
BancAmerica Robertson Stephens
555 California Street
San Francisco, California 94104
Attention: Brendan Dyson
Facsimile No.: (415) 693-3557
Telephone No.: (415) 781-9700
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with copies in the case of any notice, advice or instruction under
Section 2 to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Linda Quinn
Facsimile No.: (212) 848-7179
Telephone No.: (212) 848-8747
and to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Attention: Michael J. Bohnen
Facsimile No.: (212) 439-2000
Telephone No.: (212) 973-9748
Any request, demand, authorization, notice, waiver, consent, report or
communication hereunder shall be deemed given when actually received, except
that any request, demand, authorization, notice waiver, consent, report or
communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day.
(d) This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(f) This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
----------------------------
Name: Robert M. Kaufman
Title: Chief Executive Officer
Confirmed and accepted as of
the date first above written:
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Neil J. Sandler
----------------------------
Name: Neil J. Sandler
Title: Managing Director
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
CareMatrix Corporation on Form S-3 of our report dated February 7, 1997, on our
audits of the consolidated financial statements of CareMatrix Corporation as of
December 31, 1996 and for the year then ended, and the combined financial
statements of CareMatrix Corporation as of December 31, 1995 and for the year
ended December 31, 1995 and the period from June 24, 1994 (inception) to
December 31, 1994. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers & Lybrand L.L.P.
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Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 12, 1997
