Filed pursuant to Rule 424(b)(3)
Registration No. 333-40015
PROSPECTUS
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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 "Plan of Distribution." The
Lenders have entered into a Custody Services Agreement with Union Bank of
California, National Association ("Union Bank"), pursuant to which the Common
Stock owned by the Lenders will be deposited with Union Bank. Union Bank may
lend such Loaned Shares to BARS pursuant to securities loan arrangements with
BARS. The number of Loaned Shares that will be deposited pursuant to the Custody
Services Agreement and subsequently lent to BARS at any time may not exceed
1,150,000.
In August and October of 1997, the Company issued $115,000,000
aggregate principal amount of the Company's 6 1/4% Convertible Subordinated
Notes due 2004 (the "Notes") which are convertible, at any time, into 3,982,684
shares of the Company's Common Stock. These arrangements are intended to
facilitate market making activity in the Common Stock by BARS.
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 December 16, 1997, the closing price reported for such shares on AMEX
was $28.75.
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 December 19, 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, (vi) the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1997, and (vii)
the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A, declared effective October 23, 1996.
All reports filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to any
termination of the offering of the shares of Common Stock covered by this
Prospectus are deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the respective dates of filing. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document that is also incorporated herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) will be provided without charge to each person
who receives a copy of this Prospectus on written or oral request to Investor
Relations, CareMatrix Corporation, 197 First Avenue, Needham, MA 02194, or by
telephone at (781) 433-1000.
RISK FACTORS
In addition to the other information contained in this Prospectus, before
purchasing the shares of Common Stock offered hereby, prospective purchasers
should carefully consider the factors set forth below. Such factors could cause
the Company's actual results or other events to differ materially from the
results or events anticipated in certain forward-looking statements contained or
incorporated by reference herein. Such forward-looking statements involve risks
and uncertainties.
History of Losses From Operations; Accumulated Deficit. Although the
Company recorded net earnings for the nine months ended September 30, 1997 of
$3,978,095, from its inception on June 24, 1994 through December 31, 1996, the
Company experienced significant losses from operations. Through December 31,
1996, the Company's accumulated deficit was $16.4 million. For the year ended
December 31, 1996, the Company incurred losses from operations of $6.0 million.
As of September 30, 1997, the Company's accumulated deficit was $12.4 million.
There can be no assurance that the Company will be able to continue to generate
income from operations or net income at any time, whether from its existing
operations or from any facilities that are operated in the future. Failure of
the Company to achieve profitability could have a material adverse effect on the
future viability of the Company.
Dependence by the Company on Related Party Agreements. The Company has
entered and expects to continue to enter into agreements with related parties in
connection with a significant number of transactions, including development,
management and lease agreements. Generally, the Company will enter into
development agreements whereby construction financing is obtained by the related
or third parties. The Company expects that risks related to construction and the
initial operation of the facilities it develops will be borne primarily by such
related
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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 September
30, 1997, the Company's debt was $102.4 million. Debt service and annual
operating lease payment obligations are expected to increase significantly as
the Company pursues its growth strategy. There can be no assurance that the
Company will generate sufficient cash flow to meet its obligations. Any payment
default or other default with respect to such obligations 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 8.9% at December 31, 1996,
to $54.3%, on a pro forma basis, at September 30, 1997. As a result of this
increased leverage, the Company's principal and interest obligations increased
substantially. The degree to which the Company is leveraged could adversely
affect the Company's ability to obtain additional financing for working capital,
acquisitions or other purposes and could make it more vulnerable to economic
downturns and competitive pressures. The Company's increased leverage could also
adversely affect its liquidity, as a substantial portion of available cash from
operations may have to be applied to meet debt service requirements and, in the
event of a cash shortfall, the Company could be forced to reduce other
expenditures and forego potential acquisitions to be able to meet such
requirements.
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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 September 30, 1997, the Company's total
assets were approximately $210.3 million, of which approximately $27.2 million,
or approximately 12.9% of total assets, was goodwill. Goodwill is the excess of
cost over the fair value of the net assets of businesses acquired. There can be
no assurance that the value of such goodwill will ever be realized by the
Company. This goodwill is being amortized on a straight-line basis over 25
years. The Company evaluates on a regular basis whether events and circumstances
have occurred that indicate all or a portion of the carrying amount of goodwill
may no longer be recoverable, in which case an additional charge to earnings
would become necessary. Although at September 30, 1997 the net unamortized
balance of goodwill is not
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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 48.2% of the
outstanding Common Stock of the Company. As of September 30, 1997, Abraham D.
Gosman, together with his sons, Andrew D. Gosman and Michael M. Gosman, all of
whom are members of the Board of Directors and executive officers of the
Company, are the beneficial owners of approximately 44.9% of the outstanding
Common Stock. Accordingly, management and the Gosmans may have the ability, by
voting shares of Common Stock, to determine (i) the election of the Company's
Board of Directors and, thus, the direction and future operations of the
Company, and (ii) the outcome of all other matters submitted to the Company's
stockholders, including mergers, consolidations and the sale of all or
substantially all of the Company's assets.
Residence Staffing and Labor Costs. The Company competes with other
providers of assisted living services with respect to attracting and retaining
qualified and skilled personnel. The Company is dependent upon its ability to
attract and retain management personnel responsible for the day-to-day
operations of each of the Company's 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.
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THE COMPANY
The Company is a provider of assisted living services, and owns, leases or
manages its facilities. The Company's strategy is to provide a full range of
assisted living and related services across a range of pricing options. The
Company expects its assisted-living facilities to serve as the foundation from
which it will provide a continuum of care for its residents. When its assisted
living facilities are integrated with supportive independent living facilities,
skilled nursing/rehabilitation facilities and Alzheimer's care programs, the
Company believes that it will have the ability to provide to those of its
residents who need a higher degree of care a less stressful transition to more
supportive environments either within the same facility, in a campus setting or
in a nearby facility.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02194; and its telephone number at that address is (781) 433-1000.
Unless otherwise indicated or required by the context, references to the
"Company" include its consolidated subsidiaries.
USE OF PROCEEDS
None of the proceeds from the sale of the Loaned Shares pursuant to this
Prospectus will be received by the Company.
PLAN OF DISTRIBUTION
Certain of the Company's executive officers and other individuals (the
"Lenders") have entered into a Custody Services Agreement with Union Bank
pursuant to which 1,150,000 shares of Common Stock (the "Loaned Shares") owned
by the Lenders will be deposited with Union Bank. Union Bank may lend such
Loaned Shares to BARS pursuant to securities loan arrangements with BARS. 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 securities loan arrangements with Union
Bank; provided, however, that (i) the number of shares borrowed under such
arrangements 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). Pursuant to the securities loan arrangements with
Union Bank, BARS will deposit collateral securing such loan, the Lenders will be
entitled to receive a portion of the investment income from such collateral and
BARS may receive a portion of such income.
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. Because
BARS, and/or the parties to whom BARS may loan the Loaned Shares, engage or will
engage in market making activities with respect to the securities of the
Company, in that capacity, from time to time each, as applicable, will hold
fluctuating quantities of shares of the Company's Common Stock and Notes which
are convertible into shares of Common Stock. Because BARS or such third parties
may offer all or some of the Loaned Shares pursuant to the offering contemplated
by this Prospectus, and because to the Company's knowledge there are currently
no agreements, arrangements or understandings, other than the aforementioned
securities loan arrangement, with respect to the sale of any of the Company's
securities, no estimate can be given as to the Common Stock and Common Stock
equivalents that will be held by BARS or such third parties during or after
completion of this offering.
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
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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.
The names of the third parties, if any, to whom BARS has loaned certain of
the Loaned Shares, the number of shares of Common Stock which may be offered
from time to time by them under this Prospectus and information concerning any
material relationships between the Company and such third parties will be set
forth as required in Supplements to this Prospectus or amendments to the
Registration Statement.
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.
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