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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Year Ended December 31, 1998.
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Period from ___________ to ______________.
Commission File No. 0-19815
CAREMATRIX CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 04-3069586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
197 First Avenue, Needham, MA 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 433-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, Par Value $.05 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
On March 19, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $200,212,759. As of March 19, 1999, there
were outstanding 18,029,197 shares of registrant's Common Stock, $0.05 par
value.
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Document Incorporated by Reference
Portions of the Company's definitive Proxy Statement for its annual meeting of
shareholders which the Company intends to file within 120 days after the end of
the Company's fiscal year ended December 31, 1998 are incorporated by reference
into Part II hereof as provided therein.
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ITEM 1. BUSINESS
Overview
CareMatrix Corporation (the "Company") (formerly known as The Standish
Care Company, Inc.) is a provider of assisted living and other long-term care
services. Currently, the Company operates 52 facilities in 15 states with a
capacity of 6,530 residents. Of these facilities, 13 are owned, 14 are leased
and 25 are managed. The Company's three year growth objective is to open
approximately 25 facilities a year, with a total capacity of over 8,000
residents, and to acquire additional assisted living facilities or operations.
Currently, the Company is developing 80 facilities, of which 24 facilities are
under construction. The Company's strategy is to provide a full range of
assisted living and other long-term care and related services across a range of
pricing options.
The Company's principal place of business is 197 First Avenue, Needham,
Massachusetts 02494 and its telephone number at that address is (781) 433-1000.
Unless otherwise indicated herein or required by the context, references to the
"Company" include its subsidiaries.
Assisted Living Industry
The Company believes that the assisted living industry is evolving as
the preferred alternative to meet the growing demands for a cost effective
setting for those seniors who cannot live independently due to physical or
cognitive frailties but who do not require the more intensive medical attention
provided by a skilled nursing facility. According to industry estimates, the
assisted and independent living industries generated approximately $12 billion
to $15 billion in revenues in 1996 and is expected to generate $25 billion in
revenues in 2000.
Generally, assisted living represents a combination of housing and
24-hour per day personal support services designed to assist seniors with the
activities of daily living ("ADLs"), which include bathing, eating, personal
hygiene, grooming, medication reminders, ambulating and dressing. Certain
assisted living facilities may offer higher levels of personal assistance for
residents with Alzheimer's disease or other forms of dementia.
The Company believes that a number of factors will allow assisted
living companies to continue as one of the fastest growing segments of senior
care:
Consumer Preference. The Company believes that assisted living is
increasingly becoming the setting preferred by prospective residents as well as
their families, who are often the decision makers for seniors. Assisted living
is a cost effective alternative to other types of care, offering seniors greater
independence and enabling them to age in place in a residential setting.
Cost Effectiveness. The average annual cost for a patient in a skilled
nursing home can exceed $40,000. The average cost for a private pay patient in a
skilled nursing home can exceed $75,000 per year in certain markets. In
contrast, assisted living services are provided at a cost which is generally 30%
to 50% lower than skilled nursing facilities located in the same region.
Additionally, the Company also believes that the cost of assisted living
services compares favorably with home health care, particularly when costs
associated with housing, meals and personal care assistance are taken into
account.
Demographics and Changing Family Dynamics. The target market
for the Company's services are persons generally 75 years and older, one of the
fastest growing segments of the U.S. population.
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According to the U.S. Census Bureau, the portion of the U.S. population
age 75 and older is expected to increase by 28.7%, from approximately 13.0
million in 1990 to approximately 16.8 million by the year 2000, and the number
of persons age 85 and older, as a segment of the U.S. population, is expected to
increase by 46%, from approximately 3.9 million in 1998 to over 5.7 million by
the year 2010. Furthermore, the number of persons afflicted with Alzheimer's
disease is also expected to grow in the coming years. According to data
published by the Alzheimer's Association, this group will grow from the current
4.4 million people to 10.0 million, or an increase of 127%, by the year 2010. As
Alzheimer's disease and other forms of dementia are more likely to occur as a
person ages, the increasing life expectancy of seniors is expected to result in
a greater number of persons afflicted with Alzheimer's disease and other forms
of dementia in future years absent breakthroughs in medical research.
According to the U.S. Census Bureau, the median income of the elderly
population has been increasing. Accordingly, the Company believes that the
number of seniors (and their families) who are able to afford high-quality
senior residential services, such as those offered by the Company, has also
increased.
In addition, the number of two-income households has increased over the
last decade and the geographical separation of senior family members from their
adult children has risen with the geographic mobility of the U.S. population. As
a result, many families that traditionally would have provided the type of care
and services offered by the Company to senior family members are in less of a
position to do so.
Supply/Demand Imbalance. While the senior population is growing
significantly, the supply of skilled nursing beds per thousand is declining.
This imbalance may be attributed to a number of factors in addition to the aging
of the population. Many states, in an effort to maintain controls of Medicaid
expenditures on long-term care, have implemented more restrictive Certificate of
Need regulations or similar legislation that restricts the supply of licensed
skilled nursing facility beds. Additionally, acuity-based reimbursement systems
have encouraged skilled nursing facilities to focus on higher acuity patients.
The Company also believes that high construction costs and limits on government
reimbursement for the full cost of construction and start-up expenses also will
constrain the growth and supply of traditional skilled nursing beds. The Company
believes that these factors, taken in combination, result in relatively fewer
skilled nursing beds available for the increasing number of seniors who require
assistance with ADLs but do not require 24-hour medical attention.
Business Strategy
Provide a Full Range of Senior Residential Services. The Company
expects its existing and future assisted living facilities to serve as the
foundation on which it will provide a continuum of care for its seniors within
targeted cluster market regions. When such facilities are combined with
supportive independent living and skilled nursing/rehabilitation facilities and
an Alzheimer's care program, the Company's facilities will have the resources to
provide a less stressful transition for its residents who require a higher
degree of care to a more supportive environment suited to their evolving needs.
The Company believes that by combining different levels of care in a single
facility, on an integrated campus or in nearby facilities, it will gain an
advantage over those competitors that operate free-standing assisted living
facilities and do not have similar flexibility to allow their residents to age
in place.
Extend Average Length of Stay. Industry studies suggest that the length
of stay at assisted living facilities averages two to two and a half years. The
Company believes that extending the average stay can have a significant positive
impact on earnings. Decreasing turnover lowers marketing costs, apartment
renovation costs and results in higher occupancy. By combining a focus on
hospitality and health care with larger apartment sizes, we expect to attract
seniors earlier in the aging process. By building larger and more adaptable
facilities with different components, often within campus-style developments, we
strive to accommodate residents as they age in place leading to a longer length
of stay.
Provide Services Across a Range of Pricing Options. In addition to
providing a broad range of services, the Company believes it will eventually be
able to serve nearly all income segments of the senior population by providing
these services over a range of pricing options. The Company provides, and is
developing models designed to provide, these services to both the moderate and
upper income markets. Also, the Company continually evaluates models intended to
provide assisted living services for lower income and Medicaid-eligible
individuals.
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Offer Personalized, High Quality Care and Services. The Company's
strategy includes providing its residents with personalized, high quality care
and services. The Company, through its facility-based staff, develops an
individual care plan for each resident based on professional assessments and
family consultations. To keep in step with a resident's evolving needs, the care
plan is updated regularly by the facility's health care and social service staff
in conjunction with the resident, the resident's physician and family members.
The Company maintains a quality assurance program with the goal of meeting and
exceeding the expectations of its residents and their families. The Company pays
special attention to recruitment, screening and training of all personnel
assigned to serve its residents and surveys its own facilities to ensure that
its quality standards are being maintained.
Develop Regional Cluster Markets. The Company seeks to be a leading
provider of assisted living services and related residential services in each of
its current and targeted cluster market regions. By positioning itself in such
cluster regions, the Company believes it can become the provider of choice in a
particular market through increased community familiarity. This strategy will
also help enable it to achieve operational management efficiencies within these
markets. The Company targets middle to upper income metropolitan and suburban
areas which have well-established populations of persons 75 years or older.
States currently targeted for cluster development include Arizona, California,
Connecticut, Florida, Illinois, Massachusetts, Michigan, New Jersey, New York,
Ohio and Pennsylvania.
Develop Hospital and Other Health Care Provider Relationships. The
Company continues to seek to develop relationships with regional hospital
systems, physician groups, managed care organizations and other care providers
to offer a full continuum of care in the areas of assisted living, supportive
independent living, Alzheimer's care and skilled nursing/rehabilitative care.
Service Models
While providing services ranging from independent and supportive
independent living to skilled nursing/rehabilitative care, the primary focus of
the Company's efforts centers on the various assisted living service models
developed by the Company.
Assisted Living. The Company offers a full range of assisted living
services based on individual resident needs. The Company has found that resident
needs generally fall in one or more of the following categories: (i) those
requiring socialization and interaction with others but needing assistance with
only the instrumental activities of daily living (IADLs), (ii) those requiring
physical support or assistance with ADLs, and (iii) those who require assistance
due to Alzheimer's disease or other cognitive impairments.
Based on these resident needs, the Company has developed three service
models that can be implemented either individually or in combination with one
another within the same facility or in a campus setting.
Health Care Services Model. This service model provides a lower
cost alternative for individuals needing lower acuity services than
those available in a skilled nursing facility. The Health Care Services
Model is designed to meet the needs of two different market segments.
This model provides long-term care services to moderate and upper
income seniors who are generally 75 years of age or older and require
assistance with at least two ADLs. In addition, it serves as a
step-down provider of services, where it emphasizes short-term
stays in a variety of rehabilitative situations and also provide
pre-operative and post-operative care services. In both instances, the
need for these services is due primarily to physical limitations rather
than cognitive impairment. Personal care assistance with ADLs is
provided on a 24-hour basis and averages between one and two hours per
day for each resident.
Alzheimer's Model. Alzheimer's care services are provided for
residents with early or intermediate stage Alzheimer's disease in
specially-designed freestanding facilities or as distinct components
contained within an assisted living facility. Residents with
Alzheimer's disease or other forms of dementia require high levels of
care and services as a result of the decline of their cognitive
abilities. Staffing is generally 15% to 20% higher in order to meet the
needs of this population group. The Company generally charges monthly
rates which are 20% to 40% higher for the Alzheimer's Model than the
rates for more traditional assisted living services.
Social Model. Within this model, the Company provides three
meals daily, housekeeping, personal laundry services, transportation,
24-hour security, regular health screening and assessment as well as
personal care services. Additionally, there is a greater focus on
resident interaction as well as social and recreational activities.
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Supportive Independent Living. Supportive independent living is
provided for seniors who do not yet need assistance with ADLs but who require a
residential environment that offers available health care services. The Company
provides this level of service in both moderate and upper income markets. The
Company believes that the availability of supportive independent living broadens
the market attractiveness of each facility or integrated campus by providing a
residential setting for those seniors who wish to maintain their independence
but desire a supportive environment. Services provided include daily meals,
transportation, social and recreational activities, linen, local transportation,
housekeeping and health care monitoring. Depending on government regulation,
personal care and medical services are available through either facility staff
or through home health care agencies. Residents generally pay a monthly rate to
cover all services, which is approximately 20% to 30% less than the rate for
more traditional assisted living services.
Skilled Nursing/Rehabilitation. In certain cluster market regions, the
Company provides skilled nursing/rehabilitative services within a skilled
nursing facility setting. These services include both short-term rehabilitation
and traditional long-term care and will be an important component of the
continuum of care provided by the Company within an integrated campus setting or
within cluster market regions. The short-term rehabilitation component addresses
the needs of patients requiring short-term rehabilitation or therapy services,
generally after a hospital stay.
Adaptability of Model
The Company has focused on developing models which are adaptable to
various locations, income levels and aging in place (increased resident acuity).
Location. One of the most significant barriers to entry is the ability
to obtain zoning and planning approval. For this reason the Company has
developed models which can be modified in size, unit count and exterior
appearance to best fit with local planning concerns and sensitivities. While
these modifications purposely change the external appearance and density to best
conform to the local market, the buildings are designed to preserve operating
efficiencies and program integrity.
Income Levels. The Company has developed models which can be adapted to
different income levels while again preserving operating efficiencies and
program integrity. Buildings in more affluent markets are enhanced by adding and
upgrading common space, enlarging unit sizes and using a higher level of finish
throughout the facility to maximize revenue. In more cost-sensitive markets, the
model is made more affordable through less elaborate common spaces, a higher
proportion of studio units and access to less expensive labor markets through
site location.
Aging in Place. The Company's new facilities are purposely built for
assisted living and senior housing. Each model, however, is designed so that
components or wings of the building can be converted over time to accommodate
higher acuity residents. Additionally, many individual units are designed in
such a way that smaller units can be combined to create larger apartments for
couples, individuals with caregivers or individuals with more income who desire
larger spaces. Likewise, many of the facility's two bedroom units are designed
so that they can be divided into two separate units to accommodate more
cost-sensitive residents.
Unit Mix and Size
The Company has and continues to conduct extensive consumer market
research in most of its markets. In response to that research, the Company has
designed most of its buildings with a wider range of apartment styles than more
traditional assisted living providers. Many assisted living providers offer
predominately one room studio apartments. While the Company focuses on providing
a high level of health care related to supportive services, our research
suggests that potential residents are reluctant to sacrifice their privacy and
sense of choice. For this reason we have designed most of our buildings to offer
a mix of studio, one bedroom and two bedroom apartments. In addition, our studio
apartments tend to be larger than those of most traditional providers. We
believe that this approach will prove to be more effective in marketing,
maximizing revenue and enhancing resident satisfaction.
Company Operations
The Company centralizes many of its financial, administrative and
operational functions at its corporate headquarters. Such centralization allows
facility-based personnel to focus on resident care and ensures that Company-wide
policies and procedures are maintained. Corporate personnel with expertise in
administration, nursing, marketing, food service, social services, financial
management and plant maintenance directly assist and supervise personnel at the
facility level. The Company believes that these corporate resources enable each
facility
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to provide services to its residents in a more professional and cost
effective manner. The Company is also developing regional offices in certain
cluster market regions to enhance its ability to manage its development and
operational activities.
Facility Staffing. Each of the Company's facilities has an
Administrator or Executive Director responsible for the day-to-day operations of
the facility. The Administrator is supported by the Director of Wellness,
typically a licensed nurse who oversees the nursing personnel and personal care
assistants and who is directly responsible for the day-to-day care of the
residents. Other key management personnel typically include a Social Services
Director, a Marketing Director, a Food Services Director, an Activities Director
and a Director of Environmental Services. Additionally, those facilities which
offer additional services, such as Alzheimer's care, also include a Director of
Specialty Services and additional management or medical staff as warranted.
The Company has attracted and continues to attract highly dedicated and
experienced personnel. The Company believes that education, training, staff
development and staff recognition enhance the effectiveness of its employees.
The Company provides training in all aspects of facility operations as well as
specialized training for programs offered. The Company also encourages
continuing education and provides a tuition reimbursement plan for its
employees. The Company believes it provides competitive wages and employee
benefits enabling it to attract and maintain qualified personnel. The Company
has developed employee recognition and incentive programs that increase employee
awareness of the importance of providing high quality care and services to
residents.
Financial Management. Corporate personnel oversee cash management,
billing and collection, accounts payable, payroll and all other financial and
accounting functions. The Company monitors and controls operating expenses for
each of its facilities through monthly budgeting, standardized management
reporting and centralized purchasing.
Quality Assurance. The Company's quality assurance program is intended
to achieve and maintain a high degree of resident and family satisfaction with
the care and services it provides. The Company coordinates the implementation of
its quality assurance program at each of its facilities through its corporate
personnel. The Company encourages resident and family participation and seeks
feedback from families and residents through surveys conducted on a regular
basis. In addition, facility inspections are conducted regularly by corporate
staff. These inspections review all aspects of operations, care and services
provided and the overall appearance and cleanliness of the facility.
Marketing. The Company's marketing efforts are implemented on a
regional and local level, all under the supervision of the corporate marketing
staff. This structure provides greater cost effectiveness through cost sharing
and ensures a consistency in the presentation of the Company to the various
regional market places. These efforts are intended to create awareness of the
Company and its services among prospective residents, their families,
professional referral sources and other key decision makers. The corporate
marketing office develops overall strategies to promote the Company and its
service offerings throughout the markets in which the Company is currently
operating and has targeted. The corporate marketing staff conducts regional and
local market surveys of age and income-qualified seniors to help ensure that the
Company is meeting the needs and demands of that marketplace. To further both
market awareness of the Company by prospective residents and to more accurately
assess the needs and demands of seniors, the Company conducts regional focus
groups. Corporate personnel develop the overall marketing strategies for each
facility, produce all marketing materials, maintain marketing databases, oversee
direct mailings, place all media advertising and support facility personnel in
the initial development and continuing implementation of marketing plans and
sales for each facility.
Corporate and local marketing offices commence marketing of each
newly-developed facility nine to 12 months prior to the scheduled facility
opening. Approximately six months prior to each facility opening, a marketing
director and marketing sales person are hired for each facility. They are
responsible for community outreach activities and community relations, the
coordination of referral activities, and providing information to prospective
residents and their families with respect to the Company's facilities and
services, and conducting facility tours.
Facilities
Three basic designs have been developed for the Company's existing and
future facilities: (i) the stand-alone assisted living facility; (ii) the
combined assisted living/supportive independent living facility, and/or with an
attached Alzheimer's wing; and (iii) the stand-alone Alzheimer's care facility.
The unit wings of the combined facilities are designed in a modular fashion
which allows for modification of the size of the facility in increments of 12
units. This modular design allows for greater development flexibility and
encourages social interaction. Current
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designs include facilities ranging in size from 63 to 168 units for stand-alone
assisted living facilities. Combined assisted living/supportive independent
living designs range from 124 to 148 units. The residential wings are accented
by a large living room centrally located and adjacent to elevators on each
floor. The Alzheimer's care facility design is generally smaller than the
Company's other facility designs to accommodate the cognitive limitation and
needs of the residents and closer, more supportive care programs. The design
accommodates a minimum of 32 units which house up to 40 residents and can be
expanded to include as many as 64 units, or 80 residents.
The Company occupies executive offices located in Needham,
Massachusetts under a lease expiring in 2001.
Development and Acquisition
Development Activities. The Company currently plans to develop
approximately 25 facilities a year with a total capacity of over 8,000 residents
over the next three years.
The Company's in-house market research and development staff has the
ability to target potential markets, perform the appropriate market studies,
identify zoning issues and determine the appropriate size and configuration of
facilities to develop and/or acquire. With respect to properties that it intends
to develop, the Company will coordinate all aspects of each project, including
obtaining the final permits and approvals, design, construction and capital
budgeting.
Facilities will be developed primarily in conjunction with: (i) related
party entities, (ii) joint ventures in which related parties have some level of
ownership, ranging from minority to majority ownership and (iii) third parties.
It is anticipated that a majority of the facilities developed in the next three
to four years may be for related party entities owned primarily by Abraham D.
Gosman, members of his immediate family and other members of the Company's
senior management. The Company expects that it will only enter into agreements
with entities that it believes have demonstrated the capabilities to obtain the
financing necessary to construct and own the facilities.
Generally, the Company has entered into development agreements whereby
construction financing is obtained by the related or third parties. The Company
expects that risks related to construction and the initial operation of the
facilities it develops will be borne primarily by related or third parties. The
Company enters into management agreements with these parties either at the time
of property acquisition or upon completion of the construction of such
facilities or upon acquisition of completed facilities. These management
agreements generally are for a 10 year period, with annual fees approximating 5%
of net revenues. The Company also generally has an option to convert such
management agreements into fair market value leases (which will be a negotiated
percentage of total project costs) for a fifteen-year initial term with two to
four five-year fair market value renewal options. There also may be an option to
acquire the facility at either fair market value or based on a percentage of
Consumer Price Index increases at the end of the initial term or option periods.
The Company expects to exercise the lease option at such time as the facilities
reach profitability. The related party may sell some of the developed facilities
to REITs or other financing sources; however, no such agreements are currently
in place. Any such sale would be subject to any management, lease or purchase
terms already in place.
Going forward, the Company expects to enter into long-term management
agreements for most developed facilities commencing at the time of property
acquisition. These agreements will generally be for a 15 year period with up to
three five-year options. Such options normally may only be exercised if the
facility has achieved positive cash flow for the three fiscal years immediately
prior to the extension. The management fee will generally equal the
greater of $10,000 per month or 5% of net revenues plus incentive management
fees based on the net cash flow from the facilities. Under these agreements, the
manager is responsible for all expenses related to the operations of the
facility other than debt service and is reimbursed for such costs. In addition,
the agreements will often contain an option for the manager to purchase the
facility at various times during the agreement at mutually agreed upon prices.
The Company expects that its development projects for joint ventures
and third parties either will be turnkey projects or will result in either
management contracts or leases.
The primary milestones in the development process are (i) site
selection and signing of a development contract, (ii) obtaining the permitting
and approvals necessary to commence construction and (iii) completion of
construction. Once a market has been identified, site selection and signing of a
development contract typically take approximately one to three months. Land
permitting generally takes five to 12 months, although it may take as long as
two years, and is typically the most difficult step in the development process
due to the Company's selection of
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sites in established communities which usually require site rezoning. Facility
construction normally takes 12 months. After a facility receives a certificate
of occupancy, residents usually begin to move in immediately.
Acquisition Activities. In addition to its development activities, the
Company intends to continue to aggressively pursue acquisitions of existing
facilities, management agreements and/or leases to the extent that they
complement its growth strategy by helping to augment existing cluster markets or
to enter new markets. Such acquisitions will depend on a number of factors,
including the advantages of acquiring a facility versus leasing for its own
benefit, regional or local competition, reputation and quality of the facilities
and contribution of the facility to operating results. All potential
acquisitions are presented to the Company's Board of Directors or its Executive
Committee before authorization is provided for the Company to proceed.
In September 1998, the Company completed the acquisition of six
operating facilities and three development sites ("SeniorCare") on Long Island,
New York, from various affiliated individuals (the "Sellers"). The acquisition
of a tenth facility, located in New Jersey, was completed in January 1999 upon
receiving the necessary licenses. Including the New Jersey facility, the
acquisition price consists of approximately $105.7 million in cash and $4.1
million in future payments, 400,000 stock options of the Company, and the
assumption of approximately $44.2 million in debt. In addition, the Company
entered into an arrangement whereby the Sellers have the right to put to the
Company and the Company has the right to buy from the Sellers beginning
September 2001 certain pharmacy and home health companies for the greater of
$8.0 million or eight times net earnings before income taxes for a specified
period prior to closing.
Competition
Providers of assisted living services compete for residents primarily
on the basis of quality of care, reputation, physical appearance of the
facilities, price, services offered, family preferences, physician referrals and
location. Some of the Company's competitors operate on a not-for-profit basis or
as charitable organizations. Some of the Company's competitors are significantly
larger than the Company and have, or may obtain, greater resources than those of
the Company.
The long-term care industry generally is highly competitive, and the
Company expects that the assisted living business in particular will become more
competitive in the future. The Company will be competing with numerous other
companies providing similar long-term care alternatives such as home health
agencies, life care at home, community-based service programs, retirement
communities and convalescent centers. The Company expects that, as assisted
living receives greater attention, competition will grow from new market
entrants, including companies focused primarily on assisted living. Nursing
facilities that provide long-term care services are also a potential source of
competition for the Company.
The Company believes that there is moderate competition for less
expensive segments of the private market and for Medicaid-eligible residents in
small communities. Management's experience indicates that seniors who move into
assisted living facilities frequently choose facilities near their homes,
therefore, the Company's major competitors are other long-term care facilities
within the same geographic area as its facilities.
Government Funding
Assisted living residents or their families generally pay the cost of
care from their own financial resources. Depending on the nature of an
individual's health insurance program or long-term care insurance policy, the
individual may receive reimbursement for costs of care under an alternative care
benefit. Government funding for assisted living has been limited. Some state or
local governments offer housing subsidies for rent or housing-related services
for low income seniors. Others may provide subsidies in the form of additional
payment for those who receive Supplement Security Income (SSI). Medicaid
provides insurance for certain financially or medically needy persons,
regardless of age, and is funded jointly by federal, state and local
governments. Medicaid reimbursement varies from state to state.
In 1981, the federal government approved a Medicaid waiver program
called Home and Community-Based Care which was designed to permit states to
develop programs specific to the health care and housing needs of the low-income
elderly eligible for nursing home placement (a Medicaid Waiver Program). Under a
Medicaid Waiver Program, states apply to the Health Care Financing
Administration for a waiver to use Medicaid funds to support community-based
options for low-income elderly who need long-term care. These waivers permit
states to reallocate a portion of Medicaid funding for nursing facility care to
other forms of care such as assisted living. In 1994, the federal government
implemented new regulations which empowered states to further expand their
Medicaid Waiver Programs and eliminated restrictions on the amount of Medicaid
funding states could allocate to
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community-based care, such as assisted living. A limited number of states
currently have such programs operating that allow them to pay for assisted
living care. Without a Medicaid Waiver Program, states can only use federal
Medicaid funds for long-term care in nursing facilities.
The Company expects that state Medicaid and Medicare reimbursement
programs will constitute an additional source of future revenues at its skilled
nursing and rehabilitation centers. Medicaid programs typically provide for
fixed rate payment to health care providers. Providers must accept reimbursement
from Medicaid as payment in full for all covered services rendered to Medicaid
patients. Medicare is a federally-funded and administered health insurance
program that provides coverage for a wide range of health care services,
including intensive rehabilitation, skilled nursing and certain related medical
services. With respect to skilled nursing and rehabilitation, Medicare is a
retrospective payment system in which each facility receives an interim payment
during the year, which is later adjusted to reflect actual allowable direct and
indirect costs of services based on the submission of a cost report at the end
of each year. There can be no assurance that either Medicaid or Medicare will
pay rates that recognize all of the Company's costs of providing services to
residents covered by those programs.
Government Regulation
The health care industry is subject to substantial federal, state and
local regulation. The various layers of governmental regulation affect the
Company's business by controlling its growth, requiring licensure or
certification of its facilities, regulating the use of its facilities and
controlling reimbursement to the Company for services provided. Licensing,
certification and other applicable governmental regulations vary from
jurisdiction to jurisdiction and are revised periodically. It is not possible to
predict the content or impact of future legislation and regulations affecting
the health care industry.
Many of the states in which the Company operates have adopted
Certificate of Need statutes applicable to the assisted living and skilled
nursing services provided by the Company. Such statutes provide generally that,
prior to the addition of new services or the making of certain capital
expenditures exceeding defined levels, a state agency must determine that a need
exists for such proposed activities. Failure to obtain the necessary state
approval can result in the inability to provide the service, operate the
facility or complete the addition or other change, and also can result in the
imposition of sanctions or adverse action in respect of the facility's license
and reimbursement. To date, the Company has generally not experienced any
difficulty in obtaining such state approvals where required.
The ability of the Company to operate profitably will depend in part
upon the Company obtaining and maintaining all necessary licenses, certificates
of need and other approvals and operating in compliance with applicable health
care regulations.
Some residents may require ancillary health services from time to time,
such as skilled nursing, therapy, pharmacy or other health services. In some
states, these services must be provided by persons or entities that are
specifically licensed or certified, as applicable, to provide such health care
services. The Company may from time to time enter into agreements with other
entities to provide ancillary services where it is not itself licensed or
certified to provide them.
In certain states, the Company's assisted living facilities are subject
to certain state regulations and licensing requirements. In order to qualify as
a state licensed facility and therefore eligible to receive Medicaid funding,
the Company's facilities must comply with regulations which address, among other
things, staffing, physical design, required services and resident profile. The
Company expects that it will obtain licenses in states as required. The
Company's residences are also subject to various local building codes and other
ordinances, including fire safety codes. These requirements vary from state to
state and are monitored, to varying degrees, by state agencies.
The laws of many states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion. Although the Company believes its
operations are in compliance with such laws, the Company's business operations
have not been the subject of judicial or regulatory interpretation. There can be
no assurance that review of the Company's business by courts or regulatory
authorities will not result in determinations that could adversely affect the
operations of the Company or that the health care regulatory environment will
not change so as to restrict the Company's existing operations or their
expansion. In addition, the
8
<PAGE>
regulatory framework of certain jurisdictions may limit the Company's expansion
into such jurisdictions if the Company is unable to modify its operational
structure to conform with such regulatory framework.
Beginning in the spring of 1999, the Health Care Financing
Administration ("HCFA") will impose new rules regarding the imposition of civil
monetary penalties for nursing homes found to be in substantial non-compliance
with Medicare and Medicaid regulations. In the past, HCFA or the state has been
able to sanction nursing homes with penalties for non-compliance in amounts up
to $10,000 per day for each day the nursing home is found to be in
non-compliance. The penalties are imposed at the end of the non-compliance
period. The new rules allow for HCFA or the state to impose civil monetary
penalties on either a per day or a per instance basis, with the associated civil
monetary penalties attaching at the first instance of non-compliance. These new
rules do not envision a time period for the nursing home to correct its
non-compliance prior to the imposition of civil monetary penalties. The new per
instance sanctions have a minimum penalty of $1,000.
The Balanced Budget Act of 1997 also sets forth a consolidated billing
or "bundling" requirement applicable to all skilled nursing facilities providing
Medicare services. For items and services furnished on or after July 1, 1998,
the facility will be responsible for billing Medicare for virtually all of the
services that its residents receive. This approach is similar to that which
Medicare uses for inpatient hospital services. The consolidated billing
requirement does not apply to the services of physicians and certain other
providers.
Federal and state anti-renumeration laws, such as the Medicare/Medicaid
anti-kickback law, govern certain financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
such providers. These laws prohibit, among other things, certain direct and
indirect payments that are intended to induce the referral of patients to, the
arranging for services by, or the recommending of, a particular provider of
health care items or services. The Medicare/Medicaid anti-kickback law has been
broadly interpreted to apply to certain contractual relationships between health
care providers and sources of patient referral. Similar state laws vary from
state to state, are sometimes vague and seldom have been interpreted by courts
or regulatory agencies. Violation of these laws can result in loss of licensure,
civil and criminal penalties, and exclusion of health care providers or
suppliers from participation in (i.e., furnishing covered items or services to
beneficiaries of) the Medicare and Medicaid programs. Although the Company does
not receive all of its total revenues from certain Medicaid waiver programs and
is otherwise not a Medicare or Medicaid provider or supplier, it is subject to
these laws because (i) the state laws typically apply regardless of whether
Medicare or Medicaid payments are at issue and (ii) as required and under some
state licensure laws, and for the convenience of its residents, some of the
Company's assisted living facilities maintain contracts with certain health care
providers and practitioners, including pharmacies, visiting nurse organizations
and hospices, through which the health care providers made their health care
items or services (some of which may be covered by Medicare or Medicaid)
available to the Company's residents. There can be no assurance that such laws
will be interpreted in a manner consistent with the practices of the Company.
In addition, the Company is subject to various federal, state and local
environmental laws and regulations. Such laws and regulations often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of hazardous or toxic substances. The costs of any required
remediation or removal of these substances could be substantial and the
liability of an owner or operator as to any property is generally not limited
under such laws and regulations and could exceed the property's value and the
aggregate assets of the owner or operator. The presence of these substances or
failure to remediate such contamination properly may also adversely affect the
owner's ability to sell or rent the property, or to borrow using the property as
collateral. Under these laws and regulations, an owner, operator or an entity
that arranges for the disposal of hazardous or toxic substances, such as
asbestos-containing materials, at a disposal site may also be liable for the
costs of any required remediation or removal of the hazardous or toxic
substances at the disposal site. In connection with the ownership or operation
of its properties, the Company could be liable for these costs, as well as
certain other costs, including governmental fines and injuries to persons or
properties.
The Company believes that the structure and composition of government,
and specifically health care, regulations will continue to change and, as a
result, regularly monitors developments in the law. The Company expects to
modify its agreements and operations from time to time as the business and
regulatory environment changes. While the Company believes it will be able to
structure all its agreements and operations in accordance with applicable law,
there can be no assurance that its arrangements will not be successfully
challenged.
Insurance
Health care companies are subject to medical malpractice, personal
injury and other liability claims, which are customary risks inherent in the
operation of health facilities and generally covered by insurance. The Company
maintains property, liability and professional malpractice insurance policies in
amounts and with such coverages and deductibles which are deemed appropriate by
management, based upon historical claims, industry standards, and the nature and
risks of its business. The Company currently maintains professional liability
insurance and general liability insurance. The general liability insurance is
limited to $1.0 million per occurrence and $3.0 million in the aggregate. The
Company also has an umbrella excess liability protection policy in the total
amount of $25.0 million. There can be no assurance that a future claim will not
exceed available insurance coverages or that such coverages will continue to be
available for the same scope at reasonable premium rates. Any substantial
increase in the cost of such insurance or the unavailability of any such
coverages could have an adverse effect on the Company's business.
9
<PAGE>
Employees
As of December 31, 1998, the Company had approximately 2,250 full-time
employees. In addition, administrators of certain managed facilities, while not
employees of the Company, are under the supervision of the Company. None of the
Company's employees is represented by a union. The Company considers its
employee relations to be good. Although the Company believes it is able to
employ sufficiently skilled personnel to staff the facilities it operates or
manages, a shortage of skilled personnel in any of the geographic areas in which
it operates could adversely affect both the Company's ability to recruit and
retain qualified employees and its operating expenses.
10
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth certain information regarding
facilities owned, leased or managed by the Company as of March 1999.
<TABLE>
<CAPTION>
Resident
Facility Location Care Level Capacity
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OWNED/LEASED
Arizona
Desert Amethyst (2) Peoria Assisted Living/
Independent Living 250
Inn at the Amethyst (2) Peoria Assisted Living/
Independent Living 81
Connecticut
Laurelwood Rehab. and
Skilled Nursing Ctr. (2) Ridgefield Skilled Nursing 120
Westfield Court (2) Stamford Independent Living 167
Stony Brook Court (2) Darien Assisted Living/ 87
Independent Living
Florida
Bailey Village (3) Gainesville Assisted Living 72
Brazilian Court Palm Beach Senior Residential 101
Forest Trace at Inverrary (2) Lauderhill Assisted Living/ 386
Independent Living
Gardens Court (2) Palm Beach Skilled Nursing 120
Gardens
Maryland
CareMatrix of Silver Spring(2) Silver Spring Skilled Nursing 138
Massachusetts
Avery Crossing (2) Needham Assisted Living 60
Avery Manor (2) Needham Skilled Nursing/ 142
Alzheimer's Care
CareMatrix of Dedham (2) Dedham Skilled Nursing/
Alzheimer's Care 142
New Hampshire
Sara's Garden at Sunny Knoll (3) Franklin Alzheimer's Care 32
New Jersey
Forrestal Skilled Nursing and
Rehab. Ctr. (2) Princeton Skilled Nursing 180
Chancellor Park at The Windrows (2) Princeton Assisted Living/ 87
Alzheimer's Care
The Fountains (3) Pennsauken Assisted Living 174
New York
Westbury (3) Jericho Assisted Living 142
Island Manor (3) Bohemia Assisted Living 180
Islandia (3) Hauppage Assisted Living 185
Islandia East (3) Hauppage Assisted Living 116
Islandia West (3) Hauppage Alzheimer's Care 67
Senior Plaza (3) Hauppage Assisted Living 179
SeniorCare at Lynbrook (3) Lynbrook Assisted Living 182
Virginia
Dominion Village at Chesapeake (3) Chesapeake Assisted Living/ 57
Alzheimer's Care
Dominion Village at Poquoson (3) Poquoson Assisted Living 48
Dominion Village at Williamsburg (3) Williamsburg Assisted Living/ 54
Alzheimer's Care
------
3,549
------
11
<PAGE>
<S> <C> <C> <C>
MANAGED (1)
Arizona
Emerald Springs Yuma Assisted Living/ 140
Independent Living
California
Coventry Park San Francisco Assisted Living/ 169
Alzheimer's Care
Magnolia of Millbrae Millbrae Assisted Living 158
Connecticut
Laurel Gardens of Avon Avon Assisted Living 108
Laurel Gardens of Woodbridge Woodbridge Assisted Living/ 90
Alzheimer's Care
Laurel Gardens of Milford Milford Assisted Living 107
Laurel Gardens of Hamden Hamden Assisted Living 105
Chancellor Gardens of Southington Southington Assisted Living/ 92
Alzheimer's Care
Florida
Chancellor Park of Jensen Beach Stuart Assisted Living/ 148
Supportive Living
Chancellor Park of Bonita Springs Bonita Springs Assisted Living/ 148
Supportive Living
Chancellor Park of Deer Creek Deerfield Assisted Living/ 128
Alzheimer's Care
Chancellor Park of Boynton Beach Aberdeen Assisted Living/ 148
Independent Living/
Alzheimer's Care
Chancellor Park of Naples Naples Assisted Living/ 148
Independent Living/
Alzheimer's Care
Indiana
Chancellor Gardens of Merrillville Merrillville Assisted Living/ 63
Alzheimer's Care
Maine
Chancellor Gardens of Cape Elizabeth Cape Elizabeth Assisted Living 60
Maryland
Chancellor Gardens of Ellicott City Ellicott City Assisted Living/ 107
Alzheimer's Care
Massachusetts
Standish Village of Lower Mills (4) Boston Assisted Living/ 92
Alzheimer's Care
Nevada
Chancellor Gardens of the Lakes Las Vegas Assisted Living/ 128
Alzheimer's Care
New Jersey
Park Ridge Rehab & Skilled Nursing Center Park Ridge Skilled Nursing 210
Chancellor Park at Park Ridge Park Ridge Assisted Living/ 100
Alzheimer's Care
New York
The Mayfair at Glen Cove Glen Cove Assisted Living 80
Cambridge House on the Hudson Ossining Assisted Living 112
The Mayfair at Great Neck Great Neck Assisted Living 148
North Carolina
Chancellor Gardens of Durham Durham Assisted Living/ 96
Alzheimer's Care
Texas
Chancellor Gardens of Cypress Station Houston Assisted Living/ 96
Alzheimer's Care
-----
2,981
-----
6,530
=====
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
(1) Management contracts typically have a term of between 5 and 15 years.
(2) Operating lease.
(3) 100% owned by the Company.
(4) The Company holds a 30% interest in the corporate general partner, which
owns a 1% interest in the owner partnership.
In addition, the Company occupies executive offices located in Needham,
Massachusetts under a lease expiring in 2001.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to litigation in the ordinary course of
business. The Company does not believe that any such litigation will have a
material adverse effect on its business, financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
None.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
The Company's shares are traded on the American Stock Exchange under
the symbol CMD. The following table sets forth for the periods shown here the
high and low sales price for the shares.
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ------------------------------------
Quarter High Low Quarter High Low
------- ---- --- ------- ---- ---
<S> <C> <C> <C> <C>
First $35.000 $23.125 First $19.375 $13.250
Second $31.000 $22.250 Second $25.000 $16.125
Third $28.375 $13.000 Third $25.875 $20.250
Fourth $31.000 $18.625 Fourth $30.000 $25.000
</TABLE>
As of March 19, 1999, there were outstanding 18,029,197 shares of
common stock held by 89 holders of record. Included in the number of
shareholders of record are shares held in "nominee" or "street" name.
Dividends. The Company has not declared or paid any cash dividends on
its Common Stock since its inception and does not currently plan to declare or
pay any cash dividends on its Common Stock in the foreseeable future. Dividends
may be paid only out of legally available funds as proscribed by statute,
subject to the discretion of the Company's Board of Directors. In addition, the
Company's ability to pay cash dividends is restricted by the provisions of its
Restated Certificate of Incorporation pertaining to the Series A Preferred
Stock. In that regard, no dividends may be paid on any shares of Common Stock
unless all accumulated and unpaid dividends on the Series A Preferred Stock have
been declared and paid in full.
In connection with the exercise of warrants issued by the Company, the
following party was issued shares of the Company's Common Stock pursuant to an
exemption from registration under Section 4(2) of the Act, Dennis K. Waldman
exercised a warrant on December 14, 1998 with respect to 2,878 shares of Common
Stock at an exercise price of $18.90 per share.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
June 24, 1994
(inception) to
1998 1997 1996 1995 December 31, 1994
------------ ------------ ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
Operating revenue...................... $146,918,478 $ 73,193,088 $ 12,907,445 $ 2,484,857 $ 366,214
Net earnings (loss).................... $ 18,058,941 $ 6,576,387 $ (6,645,614) $(7,206,243) $(2,555,352)
Diluted earnings (loss) per common
share.................................. $ 0.99 $ 0.38 $ (0.59) $ (0.72) $ (0.26)
BALANCE SHEET DATA:
Total assets........................... $349,646,447 $232,048,480 $108,065,144 $ 2,409,844 $ 330,323
Long-term obligations ................. $186,753,053(3) $117,211,412(2) $ 10,109,037 $10,312,197 $ 2,729,791
Redeemable preferred stock ............ $ 73,000 $ 233,000 $ 250,000 $ -- $ --
Total stockholders' equity (deficit)... $134,420,241 $ 99,161,300 $ 88,035,557(1) $(9,761,595) $(2,555,352)
Cash dividend declared per
common share......................... $ -- $ -- $ -- $ -- $ --
</TABLE>
(1) In October 1996, the Company completed a public offering of its common
stock. The Company sold 6,250,000 shares of Common Stock at $15 per share,
which resulted in net proceeds to the Company of approximately $87,254,000.
(2) In August and October 1997, the Company issued a total of $115,000,000 of
6-1/4% Convertible Subordinated Notes.
(3) In August 1998, the Company assumed approximately $44.2 million of
long-term debt from the acquisition of six operating facilities.
Additionally, the Company had outstanding $20.9 million of revolving credit
debt at December 31, 1998.
Prior to the Merger (described below), the Company consisted of a
combination of business entities which were operated since their date of
inception (June 24, 1994) under common control by Abraham D. Gosman ("Mr.
Gosman"), who, together with his sons, Andrew D. Gosman and Michael M. Gosman,
owns a controlling interest in the Company, directly or through family limited
partnerships.
On October 4, 1996, twelve wholly-owned subsidiaries of The Standish
Care Company, Inc. ("Standish") were merged into twelve corporations (the
"CareMatrix Affiliates") owned primarily by Abraham, Andrew and Michael Gosman
(as well as other members of the Company's senior management) ("the "Merger").
The stockholders of the CareMatrix Affiliates received approximately 92%
(10,000,000 shares) of the then outstanding shares of Standish common stock.
Following the Merger, Standish changed its name to CareMatrix Corporation. The
Merger was accounted for as a reverse acquisition, whereby the CareMatrix
Affiliates were treated as the acquirer for accounting purposes. Accordingly,
the financial history presented is that of the CareMatrix Affiliates prior to
the Merger. In conjunction with the Merger, the Company effected a one-for-five
reverse stock split (the "Split") of the Company's common stock. Accordingly,
all common stock data presented herein, including the retroactive restatement of
the Company's historical capitalization, has been adjusted to reflect this
transaction and the Merger.
THE SELECTED FINANCIAL DATA SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On October 4, 1996, twelve wholly-owned subsidiaries of the Company
consummated a Merger with the CareMatrix Affiliates. In the Merger, the Company
acquired all of the assets and operations of the CareMatrix Affiliates and
issued 10,000,000 shares of its Common Stock (as adjusted to give effect to the
Split) to the stockholders of the CareMatrix Affiliates. The Merger was treated
as a "reverse acquisition" for accounting purposes, with the CareMatrix
Affiliates treated as the accounting acquirer, even though the Company was the
surviving parent corporation for legal purposes. In a reverse acquisition, the
accounting acquirer is treated as the surviving entity, even though the
Company's legal existence does not change, and the financial statements of the
Company reflect the historical financial statements of the CareMatrix
Affiliates. The Company, as the accounting acquirer, treats the Merger as a
purchase acquisition. The Merger was recorded using the historical cost basis
for the assets and liabilities of the CareMatrix Affiliates, and the estimated
fair value of the Company's assets and liabilities.
Overview
The Company is a leading provider of assisted living services to the
elderly. The Company operates 52 facilities in 15 states with a capacity of
6,530 residents, including 27 facilities owned or leased by the Company and 25
facilities managed for related or third parties. The Company provides assistance
with the activities of daily living and other personalized support services in a
residential setting for elderly residents who may not be able to live
independently but who do not need the level of medical care provided in a
skilled nursing facility. The Company also provides additional specialized care
and services to residents with certain low acuity medical needs and residents
with Alzheimer's disease or other forms of dementia. By offering this full range
of services, the Company is able to accommodate the changing needs of residents
as they age within a facility and develop further physical or cognitive
frailties.
The Company derives its revenues from three primary sources: (i)
resident fees for the delivery of independent and assisted living and other
long-term care services; (ii) management services income for the management of
and marketing for facilities; and (iii) fee income from the development and
construction of facilities. Resident fees typically are paid monthly by
residents, their families or other responsible parties. Resident fees and
management fees are recognized as revenues when services are provided.
Development fee revenue is recognized on a percentage of completion basis using
the achievement of specific milestones in the development process.
For the years ended December 31, 1998, 1997 and 1996, approximately
27%, 25%, and 59%, respectively, of the Company's operating revenue was derived
primarily from the participation of the Company's nursing homes in Medicare and
Medicaid programs (see Note 2). In addition to extensive existing governmental
health care regulation, there are numerous initiatives at the federal and state
levels for comprehensive reforms affecting the payment for and availability of
health care services. Legislative changes to federal or state reimbursement
systems could adversely and retroactively affect recorded revenues. See Item 1.
Business--Government Regulations.
The Company classifies its operating expenses into the following
categories: (i) facility operating expense; (ii) facility lease expense; (iii)
general and administrative expenses, which primarily include headquarters and
regional staff expenses and other overhead costs; and (iv) depreciation and
amortization. In anticipation of its growth plans, the Company made significant
investments in its infrastructure in 1998 and 1997 through the addition of
headquarters and regional staff.
The following discussion, as well as other portions of this report,
includes certain statements which are or may be construed as forward-looking
about the Company's business, sales and expenses, and operating and capital
requirements. Forward-looking statements include information concerning possible
or future results of operations of the Company. Also, when used in this report,
words such as "believes," "expects," "anticipates" or similar expressions,
often, but not always, convey forward-looking statements. The Company based
these forward-looking statements on its current expectations and projections
about future events. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things: (i) risks related
to the Company's operating history and available financing; (ii) risks related
to the Company's anticipated growth and acquisition strategy; (iii) risks
inherent in the construction and development industry; (iv) uncertainty about
the changing regulatory environment; (v) risks related to competition; and (vi)
risks related to the Company's ability to attract and retain key personnel.
Any of such factors, or others not enumerated here, could affect the
future financial results of the Company and could cause such results to differ
materially from those expressed in the Company's forward-looking statements.
All cross references to "Notes" refer to the Notes to the Company's
Consolidated Financial Statements, included as a part of this Annual Report on
Form 10-K.
THE YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1997
REVENUES. Net revenues for 1998 increased by $73.7 million compared to
1997. The increase is due to increases of $66.2 million in resident operations
revenue and $7.5 million in development fee income. During 1998 the Company
entered into four management agreements with third parties and 32
management/development agreements with related parties.
15
<PAGE>
THE YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED
DECEMBER 31, 1997 (continued)
REVENUES. (continued)
Resident operations revenue increased primarily due to $28.0 million
earned from facilities leased or owned less than one year, including $8.1
million from six facilities acquired during the acquisition of SeniorCare Group
Ltd. ("SeniorCare") (see Note 3), $26.3 million earned from four non-comparable
facilities which contributed a full year of revenue in 1998, and increases in
management fees due to the opening of new facilities and greater number of
facilities in development. During 1998, the Company acquired or entered into
leases for 13 facilities and disposed of four.
Development fee income was $25.1 million in 1998 versus $17.6 million
in 1997. The increase is primarily due to the higher number of projects in
development in 1998 compared to the number of projects in 1997.
FACILITY EXPENSES. Facility expenses increased by $45.1 million in 1998
compared to 1997. The increase in facility expenses is comprised of an increase
in lease expenses of $7.9 million and an increase in operating expenses of $37.2
million.
Facility operating expenses were $75.6 million in 1998 compared to
$38.4 million in 1997, an increase of $37.2 million. The increase is primarily
due to $19.5 million of expenses from facilities leased or owned less than one
year, and $17.7 million from non-comparable facilities which contributed a full
year of expenses in 1998.
Facility lease expense was $16.4 million in 1998 compared to $8.5
million in 1997, an increase of $7.9 million. The increase is primarily due to
$2.4 million of expenses from facilities leased less than one year and $5.7
million from non-comparable facilities which have a full year of lease expense
in 1998. Comparable facility lease expense decreased $0.2 million.
GENERAL AND ADMINISTRATIVE. General and administrative expenses in 1998
increased to $19.4 million from $15.0 million in 1997. As a percentage of
operating revenue, general and administrative expenses in 1998 declined to 13.2%
from 20.5% in 1997. The increase in expense is primarily due to an increase in
salary and related benefits of $3.0 million for the hiring of additional
corporate staff due to the Company's growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization in 1998
increased by $2.5 million compared to 1997. The increase is primarily due to
$1.3 million of depreciation and amortization incurred from the acquisition of
SeniorCare (see Note 3), and depreciation and amortization of other intangible
assets, primarily lease acquisition and deferred financing costs.
INTEREST AND OTHER INCOME. Interest and other income increased by $3.3
million compared to 1997. The increase is due primarily to income from the
investment of the proceeds from the convertible notes issued in August 1997 (see
Note 9) and income from loans to various related and, to a lesser extent, third
parties.
INTEREST EXPENSE. Interest expense increased by $5.4 million compared
to 1997. The increase is primarily due to $4.5 million of incremental interest
expense on the convertible notes and $1.0 million of interest related to debt
assumed in the SeniorCare acquisition.
INCOME TAXES. The Company's effective tax rate was 41.0% in 1998
compared to 40.2% in 1997. The increase in the effective tax rate is due to the
increase in the amount of income subject to the federal tax rate of 35% for
1998, as compared to 34% for 1997, and the utilization in 1997 of certain tax
benefits that had been fully reserved in 1996.
THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE
YEAR ENDED DECEMBER 31, 1996
REVENUES. Net revenues for 1997 increased by $60.3 million compared to
1996. The increase is due to increases of $39.8 million in resident operations
revenue, $15.4 million in development fee income and $5.1 million in management
fees.
16
<PAGE>
THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE
YEAR ENDED DECEMBER 31, 1996 (continued)
REVENUES. (continued)
Resident operations revenue increased $39.8 million primarily due to
$24.2 million earned from facilities leased less than one year, $9.2 million
earned from one facility which is contributing a full year of revenue in 1997
compared to three months in 1996, and $5.2 million from former Standish
properties which are contributing a full year in 1997 compared to three months
in 1996. Comparable facility revenue increased $1.2 million.
Development fee income was $17.6 million in 1997 versus $2.2 million in
1996. The increase is primarily due to the higher number of projects in
development in 1997 compared to the number of projects in 1996. The Company
began its development operations in the fourth quarter of 1996.
Management fee revenue for 1997 increased by $5.1 million compared to
1996. This increase is due to $3.1 million in fees earned for marketing and
preopening services related to development projects and $2.1 million earned from
new contracts partially offset by a decrease of $51,000 in fees as a result of
three properties changing from management contracts to leases.
FACILITY EXPENSES. Facility expenses increased by $36.8 million in 1997
compared to 1996. The increase in facility expenses is comprised of an increase
in lease expenses of $7.0 million and an increase in operating expenses of $29.8
million.
Facility operating expenses were $38.4 million in 1997 compared to $8.6
million in 1996, an increase of $29.8 million. The increase is primarily due to
$17.6 million of expenses from facilities leased less than one year, and $11.4
million from four facilities which were open for an entire year compared to
three months in 1996. Comparable facility operating expenses increased $553,000.
Facility lease expense was $8.5 million in 1997 compared to $1.5
million in 1996, an increase of $7.0 million. The increase is primarily due to
$3.1 million of expenses from facilities leased less than one year, $1.3 million
from two facilities which have a full year of lease expense compared to three
months in 1996, $2.4 million from two facility leases entered into in January
1997, and $200,000 from a former Standish property which was converted from a
capital lease to an operating lease in August 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses in 1997
increased to $15.0 million from $8.3 million in 1996. As a percentage of
operating revenue, general and administrative expenses in 1997 declined to 20.5%
from 64.1% in 1996. The increase in expense is primarily due to an increase in
salary and benefits of $4.4 million for the hiring of additional corporate staff
in anticipation of the Company's growth, $800,000 for travel related expenses,
and $322,000 for advertising expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization in 1997
increased by $1.7 million compared to 1996. The increase is primarily due to
$1.1 million of amortization of goodwill incurred as a result of the Merger,
$369,000 of amortization of lease acquisition costs, $144,000 of depreciation of
assets acquired from Standish, and $133,000 of depreciation of assets from
facilities leased less than one year.
INTEREST INCOME. Interest income increased by $4.8 million compared to
1996. The increase is primarily due to interest earned as a result of investing
cash balances for a full year from the secondary offering (see Note 10) and from
the net proceeds received in 1997 from the issuance of $115.0 million of
convertible debt (see Note 8).
INTEREST EXPENSE. Interest expense increased by $2.2 million compared
to 1996. The increase is primarily due to interest expense of $2.6 million on
the convertible notes issued in 1997 (see Note 8) offset by a decrease of
$875,000 in interest expense due to the Company's principal stockholder.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 1998 were $28.2 million
compared to $152.6 million at December 31, 1997, a decrease of approximately
$124.4 million. This decrease is primarily due to the cash used to acquire
SeniorCare and various leases, additions to fixed assets, and increases in
accounts receivable due to new facilities.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (continued)
Cash provided by operations was $8.2 million in 1998 compared to a use
of $2.3 million in 1997. The increase in the cash provided by operations is
primarily due to a $13.7 million increase in net earnings before depreciation
and amortization and other noncash items and a $1.8 million increase in current
liabilities due to the leasing of new facilities, offset by a $6.0 million
increase in current assets which is primarily due to increases in receivables
from new facilities in development and operation.
Cash used in investing activities was $164.2 million in 1998 compared
to $12.2 million in 1997. The increase in cash used is due primarily to $100.7
million used for the purchase of SeniorCare, a $19.6 million increase in lease
deposits and lease acquisition costs associated with acquiring lease rights to
new facilities, a $17.6 million increase in restricted cash primarily related to
the Company's cash collateral account, and a net $5.9 million increase for
capital expenditures, primarily for the purchase of three facilities,
renovations to existing facilities, and the upgrade of the Company's information
systems.
Cash flow provided by financing activities was $31.6 million in 1998
compared to $109.2 million in 1997. This decrease in cash is due primarily to
the issuance in the prior year of the Notes, partially offset by the $20.9
million of borrowings under the line of credit (see Note 9), and a $9.2 million
increase in the proceeds from the exercise of stock options and warrants.
In March 1999, the Company's Board of Directors approved a plan,
subject to obtaining the necessary lender approvals, to acquire up to 1.0
million shares of the Company's common stock from time to time in the open
market.
The Company will require resources in the future to fund the planned
acquisition and development of additional assisted living, independent and
supportive independent and extended care facilities as well as its working
capital requirements and common stock repurchases. The Company expects to
partially fund these resource requirements with its cash on hand, borrowings
under its $35.0 million line of credit (of which $14.1 million was unused at
December 31, 1998) as well as related party or third-party financing of
facilities to be developed. Furthermore, the Company intends to seek bank
borrowings and other debt or equity financings to provide additional sources of
capital in the future. The Company is in the process of refinancing some of the
debt assumed in the SeniorCare acquisition and hopes to raise approximately
$20.0 million through these refinancings.
YEAR 2000
The Year 2000 problem concerns the inability of information systems to
recognize properly and process date-sensitive information beyond December 31,
1999. In July 1998, the Company initiated a formal program to identify and
resolve Year 2000 issues. The scope of the program includes the investigation of
all Company functions and services, including embedded systems in what are not
traditionally considered information technology systems.
The Company has identified its resident billing and general ledger as
internal systems that present a high level of risk from a Year 2000 perspective.
The Company has also identified several key external systems that could pose
significant risk to the Company: those of various governmental agencies,
particularly Medicare and Medicaid, its payroll provider, and its investment
management companies and other financial intermediaries. The Company has also
acquired several facilities and/or utilizes third-party management companies to
provide financial information. These acquired systems must also be brought into
the Company's program.
The Company has completed the planning and awareness and systems
inventory phases of the program. The assessment phase is scheduled to be
completed in the second quarter of fiscal 1999, with the correction phase being
completed by the third quarter of the same year. The Company is beginning the
process of assessing the risk of supplier readiness, and in selected cases will
review the preparedness of individual suppliers for the Year 2000 problem.
The Company currently estimates the cost of the Year 2000 program will
approximate $200,000, with a range of plus or minus twenty-five percent. The
Company's corporate personnel who directly oversee functions at the facility
level will also assist in the Year 2000 program as part of their regular duties.
This is expected to help reduce Year 2000 costs. All costs, except long-lived
assets, are expensed as incurred. These costs include the costs of outside
consultants, systems replacements, and other equipment requirements. The costs
incurred to date are not material.
18
<PAGE>
YEAR 2000 (continued)
Ultimately, the potential impact of the Year 2000 issue will depend not
only on the corrective measures the Company undertakes, but also on the way in
which the Year 2000 issue is addressed by governmental agencies, businesses and
other entities whose financial condition or operational capability is important
to the Company. Communications with significant third parties will be initiated
to determine the extent of risk created by those third parties' failure to
remediate their own Year 2000 issues; however, it is not possible, at present,
to determine the financial effect if their remediation efforts are not completed
in a timely manner. While the Company expects to resolve all Year 2000 risks
without a material adverse impact on its results of operations and financial
position, there can be no assurance as to the ultimate success of the program.
Uncertainties exist as to the Company's ability to detect all Year 2000 problems
as well as its ability to achieve successful and timely resolution of all Year
2000 issues. A "reasonably likely worst case" scenario of Year 2000 risks for
the Company could include the inability to receive reimbursement from Medicare
and Medicaid, and problems involving the inability of the Company's financial
intermediaries to accurately reflect the Company's cash position. The
consequences of these issues may include lost revenue and lower cash receipts.
The Company is unable to quantify the potential effect of these items on its
results of operations, liquidity, and financial position should some or a
combination of these events occur.
In addition, because the Company's day-to-day operations are heavily
dependent on its ability to communicate information throughout its network of
facilities, the Company would be particularly susceptible to any possible
effects that the Year 2000 issue has on local and national communications
systems, including without limitation, telephone and data lines, because of the
difficulty in implementing viable contingency plans. Any interruption or
malfunction of such systems could have a material adverse effect on the Company.
As the correction phase of the program is completed in mid-1999, the
Company expects to have developed contingency plans, which would augment
existing contingency plans, for the then current risks.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included under Part
IV, Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's year ended December 31, 1998 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's year ended December 31, 1998 and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's year ended December 31, 1998 and such
information is incorporated herein by reference.
19
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item will be contained in the
Company's Proxy Statement, which the Company intends to file within 120 days
following the end of the Company's year ended December 31, 1998 and such
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Applicable Schedules Thereto
<TABLE>
<S> <C>
Report of Independent Accountants.................................................. F-1
Balance Sheets as of December 31, 1998 and 1997.................................... F-2
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996............................................... F-3
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996............................................... F-4
Statement of Changes in Stockholders' Equity (Deficit) for the years
ended December 31, 1998, 1997 and 1996......................................... F-5
Notes to Consolidated Financial Statements ........................................ F-6
Financial Statement Schedules...................................................... F-19
</TABLE>
Schedule II - Valuation and Qualifying Accounts
All other schedules omitted are not required, inapplicable or
the information required is furnished in the financial statements or notes
therein.
(b) Reports on Form 8-K: None
(c) Exhibits: See Exhibit List immediately following the signature pages
hereto for a list of the exhibits filed with this Annual Report on Form
10-K.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of CareMatrix Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) present fairly, in all material respects, the
financial position of CareMatrix Corporation at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the index under Item 14(a) presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 15, 1999
F-1
<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED BALANCE SHEETS
as of December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28,217,373 $ 152,619,435
Restricted cash 22,305,371 3,102,468
Receivables:
Accounts receivable, net of allowance for doubtful accounts of
$2,077,198 and $1,105,432 at December 31, 1998
and 1997, respectively 25,334,127 12,461,704
Accounts receivable -- related party 21,662,515 11,718,862
Other receivables ---- 730,584
Prepaid expenses and other current assets 4,875,075 3,488,592
------------- -------------
Total current assets 102,394,461 184,121,645
Lease acquisition costs, net 15,792,315 4,240,733
Property and equipment, net 147,938,997 4,650,823
Other long-term assets, net 41,023,981 17,262,630
Goodwill, net of accumulated amortization of $2,429,494 and $1,319,277 at
December 31, 1998 and 1997, respectively 42,496,693 21,772,649
------------- -------------
Total assets $ 349,646,447 $ 232,048,480
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 848,600 $ 2,000,000
Accounts payable 9,315,591 3,819,719
Accrued compensation 2,262,161 1,103,308
Accrued liabilities 14,800,794 7,925,147
Other current liabilities 1,246,007 827,594
------------- -------------
Total current liabilities 28,473,153 15,675,768
Borrowings under line of credit 20,863,687 ---
Convertible subordinated notes 115,000,000 115,000,000
Mortgages and notes payable 43,029,548 ---
Other long-term liabilities 7,859,818 2,211,412
Commitments and contingencies
Stockholders' equity:
Preferred stock, stated at liquidation value of $10.00 per share,
authorized 232,968 shares, 7,300 and 23,300 shares issued and
outstanding at December 31, 1998 and 1997, respectively 73,000 233,000
Common stock, par value $.05, authorized 75,000,000 shares,
18,014,562 and 17,261,893 shares issued and outstanding
at December 31, 1998 and 1997, respectively 900,729 863,095
Additional paid-in capital 125,218,393 107,896,027
Retained earnings (deficit) 8,228,119 (9,830,822)
------------- -------------
Total stockholders' equity 134,420,241 99,161,300
------------- -------------
Total liabilities and stockholders' equity $ 349,646,447 $ 232,048,480
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
CAREMATRIX CORPORATION
STATEMENTS OF OPERATIONS
for the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Consolidated
---------------------------------------------------------------
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue:
Resident operations $ 108,939,058 $ 50,784,960 $ 10,419,567
Resident operations -- related party 12,848,264 4,771,799 263,293
Development fee income 3,409,925 5,790,795 1,548,968
Development fee income -- related party 21,721,231 11,845,534 675,617
------------- ------------ ------------
Total revenue 146,918,478 73,193,088 12,907,445
------------- ------------ ------------
Expenses:
Facility operating expenses 75,582,973 38,385,616 8,556,340
Facility lease expense 1,592,586 4,501,279 1,230,902
Facility lease expense -- related party 14,854,450 4,013,918 291,677
General and administrative 19,358,307 15,003,514 3,167,252
General and administrative -- related party --- --- 5,105,845
Depreciation and amortization 4,823,494 2,315,189 573,091
------------- ------------ ------------
Total expenses 116,211,810 64,219,516 18,925,107
------------- ------------ ------------
Earnings (loss) from operations 30,706,668 8,973,572 (6,017,662)
Other income (expense):
Interest and other income 6,284,099 5,421,078 576,244
Interest expense (8,493,224) (3,357,716) (263,098)
Interest income (expense) -- related party 2,127,866 --- (874,876)
------------- ------------ ------------
Total other income (expense) (81,259) 2,063,362 (561,730)
------------- ------------ ------------
Earnings (loss) before income taxes and
preferred dividends 30,625,409 11,036,934 (6,579,392)
Income taxes 12,556,418 4,436,847 ---
------------- ------------ ------------
Earnings (loss) before preferred dividends 18,068,991 6,600,087 (6,579,392)
Preferred dividends 10,050 23,700 66,222
------------- ------------ ------------
Net earnings (loss) $ 18,058,941 $ 6,576,387 $ (6,645,614)
============= ============ ============
Basic shares outstanding 17,632,278 17,144,338 11,271,169
============= ============ ============
Basic earnings (loss) per share $ 1.02 $ 0.38 $ (0.59)
============= ============ ============
Diluted shares outstanding 18,154,159 17,536,173 11,271,169
============= ============ ============
Diluted earnings (loss) per share $ 0.99 $ 0.38 $ (0.59)
============= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
CAREMATRIX CORPORATION
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Consolidated
----------------------------------------------------------------
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 18,058,941 $ 6,576,387 $ (6,645,614)
Noncash items included in net earnings (loss):
Issuance of stock to employees --- --- 1,200,000
Depreciation of fixed assets 2,055,379 644,237 247,301
Amortization of intangible assets 2,768,115 1,670,952 325,790
Other noncash items --- 277,105 80,225
Increase in accounts receivable (21,989,698) (16,514,572) (3,912,003)
Increase in other current assets (512,985) -- --
Increase (decrease) in current liabilities 6,466,413 4,714,040 (165,196)
Other 1,362,437 328,630 (1,335,596)
---------- ----------- -----------
Net cash provided by (used by)
operating activities 8,208,602 (2,303,221) (10,205,093)
---------- ----------- ------------
Cash flows from investing activities:
Additions to property and equipment (11,794,744) (1,948,169) (1,549,592)
Sales of property and equipment 3,917,574 --- ---
Purchase of SeniorCare Group, Ltd. (100,727,631) --- ---
Increase in assets held for sale --- (781,237) (288,583)
Increase in lease deposits (13,459,949) (4,125,000) ---
(Increase) decrease in other long-term assets (6,074,395) (82,219) 107,125
Increase in long-term notes receivable (4,541,243) (1,575,996) (1,057,813)
Increase in restricted cash (19,202,903) (1,623,374) (97,251)
Lease acquisition costs (12,315,974) (2,087,568) (2,800,000)
Cash acquired in merger --- --- 212,907
------------ ----------- -----------
Net cash used by investing activities (164,199,265) (12,223,563) (5,473,207)
------------ ----------- ----------
Cash flows from financing activities:
Advances of funds from stockholder --- --- 9,613,923
Redemption of preferred stock --- --- (1,400,000)
Gross proceeds from secondary offering --- --- 93,750,000
Secondary offering expenses --- --- (6,496,234)
Borrowings under the line of credit 20,863,687 --- ---
Exercise of stock options and warrants, net 11,231,383 2,032,282 138,000
Repayments to stockholder --- (1,468,756) (21,700,000)
Proceeds from issuance of convertible
subordinated notes, net --- 111,448,423 ---
Repayment of debt and other long-term
liabilities, net (598,444) (2,832,090) (405,672)
Other 91,975 --- ---
---------- ------------ -----------
Net cash provided by financing activities 31,588,601 109,179,859 73,500,017
---------- ------------ -----------
(Decrease) Increase in cash and cash equivalents (124,402,062) 94,653,075 57,821,717
Cash and cash equivalents, beginning of period 152,619,435 57,966,360 144,643
----------- ----------- ------------
Cash and cash equivalents, end of period $ 28,217,373 $ 152,619,435 $ 57,966,360
============ ============= ============
Other noncash items:
Conversion of convertible debentures into equity $ 2,000,000
===========
Issuance of stock options in connection with
the acquisition of SeniorCare Group, Ltd. $ 3,968,617
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
CAREMATRIX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the years ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Preferred Stock
-------------------------------------------
Common Stock Series A Series B
----------------------- ------------------- ------------------
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 10,000,000 $ 500,000 --- $ --- --- $ ---
Standish shares acquired upon merger 740,747 37,037 27,000 270,000 100 1,400,000
Shares issued upon secondary offering, net 6,250,000 312,500
Shares issued in connection with merger 107,408 5,370
Cost of stock issued to employees
Redemption of preferred stock (100) (1,400,000)
Conversion of preferred stock 1,494 75 (2,000) (20,000)
Exercise of stock options 12,000 600
Net loss --- --- --- --- --- ---
---------- --------- ------ --------- ----- -----------
Balance - December 31, 1996 17,111,649 855,582 25,000 250,000 --- ---
Conversion of preferred stock 1,489 74 (1,700) (17,000)
Exercise of stock options 149,569 7,478
Income tax effect of stock option exercises
Repurchase of shares (12,874) (644)
Exercise of warrants 12,060 605
Change in measurement date of employee stock options
Issuance of warrants
Net earnings --- --- --- --- --- ---
---------- --------- ------ --------- ----- -----------
Balance - December 31, 1997 17,261,893 863,095 23,300 233,000 --- ---
Conversion of preferred stock 14,121 706 (16,000) (160,000)
Exercise of stock options 456,163 22,808 --- ---
Income tax effect of stock option exercises
Exercise of warrants 149,052 7,453
Issurance of options in connection with acquisition
Issuance of shares upon conversion of debt 133,333 6,667
Net earnings --- --- --- --- --- ---
---------- --------- ------ --------- ----- -----------
Balance - December 31, 1998 18,014,562 $ 900,729 7,300 $ 73,000 --- $ ---
========== ========= ===== ========= ===== ===========
</TABLE>
<TABLE>
<CAPTION>
Additional
Paid-in Retained
Capital Earnings Total
------- -------- -----
<S> <C> <C> <C>
Balance - December 31, 1995 $ (500,000) $ (9,761,595) $ (9,761,595)
Standish shares acquired upon merger 15,543,963 17,251,000
Shares issued upon secondary offering, net 86,941,266 87,253,766
Shares issued in connection with merger (5,370) ---
Cost of stock issued to employees 1,200,000 1,200,000
Redemption of preferred stock (1,400,000)
Conversion of preferred stock 19,925 ---
Exercise of stock options 137,400 138,000
Net loss (6,645,614) (6,645,614)
----------- ----------- ----------
Balance - December 31, 1996 103,337,184 (16,407,209) 88,035,557
Conversion of preferred stock 16,926 ---
Exercise of stock options 1,797,736 1,805,214
Income tax effect of stock option exercises 717,248 717,248
Repurchase of shares (644)
Exercise of warrants 227,111 227,716
Change in measurement date of employee stock options 1,154,750 1,154,750
Issuance of warrants 645,072 645,072
Net earnings 6,576,387 6,576,387
----------- ----------- ----------
Balance - December 31, 1997 107,896,027 (9,830,822) 99,161,300
Conversion of preferred stock 159,294 ---
Exercise of stock options 6,421,232 6,444,040
Income tax effect of stock option exercises 1,990,000 1,990,000
Exercise of warrants 2,789,890 2,797,343
Issuance of options in connection with acquisition 3,968,617 3,968,617
Issuance of shares upon conversion of debt 1,993,333 2,000,000
Net earnings --- 18,058,941 18,058,941
----------- ----------- ----------
Balance - December 31, 1998 $125,218,393 $ 8,228,119 $134,420,241
============= ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS, ORGANIZATION AND PRESENTATION:
CareMatrix Corporation ("CareMatrix" or the "Company") develops,
manages and operates assisted living and various other health care facilities.
Prior to the Merger (described below), the Company consisted of a
combination of business entities which were operated since their date of
inception (June 24, 1994) under common control by Abraham D. Gosman ("Mr.
Gosman"), who, together with his sons, Andrew D. Gosman and Michael M. Gosman,
owns a controlling interest in the Company, directly or through family limited
partnerships.
On October 4, 1996, twelve wholly-owned subsidiaries of The Standish
Care Company, Inc. ("Standish") were merged into twelve corporations (the
"CareMatrix Affiliates") owned primarily by Abraham, Andrew and Michael Gosman
(as well as other members of the Company's senior management) ("the "Merger").
The stockholders of the CareMatrix Affiliates received approximately 92%
(10,000,000 shares) of the then outstanding shares of Standish common stock.
Following the Merger, Standish changed its name to CareMatrix Corporation. The
Merger was accounted for as a reverse acquisition, whereby the CareMatrix
Affiliates were treated as the acquirer for accounting purposes. Accordingly,
the financial history presented is that of the CareMatrix Affiliates prior to
the Merger. In conjunction with the Merger, the Company effected a one-for-five
reverse stock split (the "Split") of the Company's common stock. Accordingly,
all common stock data presented herein, including the retroactive restatement of
the Company's historical capitalization, has been adjusted to reflect this
transaction and the Merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ESTIMATES USED IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used when accounting for the collectibility of receivables and third party
settlements, depreciation and amortization, recognition of revenue on
development contracts, and contingencies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated. Certain balances in the prior year financial
statements have been reclassified to conform to the current year's presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid instruments with
maturities at the time of purchase of three months or less and whose cost
approximates market value.
RESTRICTED CASH
Restricted cash is comprised of amounts held as cash collateral (see
Note 4) and security deposits received from residents at the independent and
assisted living facilities.
REVENUE
Revenue from resident operations consists primarily of resident and
marketing fees from the assisted living and other health care facilities.
Resident fees are paid by residents for housing, health care and related
services and are recognized in the period in which the Company provides the
services. Revenue under certain third-party payor agreements is subject to audit
and retroactive adjustments. Provisions for estimated third-party payor
settlements and adjustments are estimated in the period the related services are
rendered and adjusted in future periods as final settlements are determined.
F-6
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Management and marketing fee revenues are included in resident
operations and are recognized in the period in which the Company provides
services. The Company normally receives fees based on either a percentage of net
revenues of the facilities managed (generally approximating 5%) or fixed fees
over certain terms. On one related party arrangement, the Company is
contractually responsible for all revenues and expenses and therefore includes
these amounts in its results.
Development fee revenues are recognized on a percentage of completion
basis using the achievement of specific milestones in the development process.
The Company enters into development agreements with both related and unrelated
parties and the time required for fulfillment of obligations under these
agreements normally exceeds one year. Included in development fee income is $3.1
million in 1997 and $525,000 in 1996 from development fees earned per the terms
of certain development agreements for work related to a 1996 contract.
THIRD-PARTY REIMBURSEMENT
For the years ended December 31, 1998, 1997 and 1996, approximately
27%, 25%, and 59%, respectively, of the Company's operating revenue was derived
primarily from the participation of the Company's nursing homes in Medicare and
Medicaid programs. Medicare compensates the Company both on a "cost
reimbursement" and on a "prospective payment system" basis. Medicaid compensates
the Company for nursing services, patient care and administrative and routine
services based on interim payments and re-indexed rate payments (final
settlements) subject to ceilings. In addition to extensive existing governmental
health care regulation, there are numerous initiatives at the federal and state
levels for comprehensive reforms affecting the payment for and availability of
health care services. Legislative changes to federal or state reimbursement
systems could adversely and retroactively affect recorded revenues.
PROPERTY AND EQUIPMENT
Additions are recorded at cost and depreciation is recorded principally
by use of the straight-line method for buildings, improvements and equipment
over their useful lives or, in the case of leasehold improvements, over the life
of the lease, if shorter. Maintenance and repairs are charged to expense as
incurred. Major renewals or improvements are capitalized.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the acquisition cost over the fair
market value of net assets acquired in purchase transactions and is being
amortized over lives ranging from 25 to 30 years from the date of acquisition.
Lease acquisition costs are amortized over the term of the related lease.
INCOME TAXES
Prior to the Merger, the entities comprising the Company were S
Corporations or partnerships; accordingly, liabilities for income taxes were the
responsibility of the respective owners or partners. Provisions for income taxes
and deferred tax assets and liabilities for these entities have not been
reflected for the periods prior to the Merger as there was no taxable income on
a combined basis.
LONG-LIVED ASSETS
The Company periodically assesses the recoverability of long-lived
assets, including property and equipment and intangibles, when there are
indications of potential impairment, based on estimates of undiscounted future
cash flows. The amount of impairment is calculated by comparing anticipated
discounted future cash flows with the carrying value of the related assets. In
performing this analysis, management considers such factors as current results,
trends and future prospects, in addition to other economic factors.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is calculated based on net
earnings (loss) divided by the weighted average number of common shares
outstanding during the year. Diluted earnings (loss) per common share is
computed assuming the issuance or conversion of all potentially dilutive
securities.
COMPREHENSIVE INCOME
For the periods included in this Form 10-K, the Company does not have
items of comprehensive income requiring reporting or disclosure.
F-7
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
SEGMENT REPORTING
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," ("FAS 131"). FAS 131 establishes standards for the way public
business enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial statements. It also
requires disclosures about products and services, geographic areas and major
customers.
The Company is in the business of providing a continuum of assisted
living and other services to seniors, including development, management, leasing
and ownership of senior care facilities. The Company's executive management and
Board of Directors evaluates the activities and financial information associated
with providing these services as a single operating segment. Because the Company
is operated as a single operating segment, the adoption of FAS 131 did not
affect the results of operations, financial position, or require the disclosure
of segment information.
3. MERGERS, ACQUISITIONS AND DISPOSITIONS:
In October 1996, the Company completed a merger with Standish (the
Merger, see Note 1). The Company's shareholders received 10,000,000 shares of
Standish common stock in exchange for all of the shares of the Company. The
Company recorded approximately $26 million of goodwill related to the Merger.
In September 1998, the Company completed the acquisition of six
operating facilities and three development sites ("SeniorCare") on Long Island,
New York, from various affiliated individuals (the "Sellers"). The acquisition
of a tenth facility, located in New Jersey, was completed in January 1999 upon
receiving the necessary licenses.
Including the New Jersey facility, the acquisition price consists of
approximately $105.7 million in cash and $4.1 million of future payments,
400,000 stock options of the Company, and the assumption of approximately $44.2
million in debt. The acquisition was accounted for as a purchase and
accordingly, the results of operations of SeniorCare are included in the
Company's results beginning September 1, 1998. The Company recorded
approximately $22.3 million of goodwill related to the purchase, which is being
amortized over 30 years. The remainder of the purchase price was allocated
primarily to the acquired land and buildings.
In addition, the Company entered into an arrangement whereby the
Sellers have the right to put to the Company and the Company has the right to
buy from the Sellers beginning September 2001 certain pharmacy and home health
companies for the greater of $8.0 million or eight times net earnings before
income taxes for a specified period prior to closing.
The following represents the unaudited pro forma combined results of
operations of the Company as if SeniorCare was acquired on January 1, 1997
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
------------ ------------
<S> <C> <C>
Revenue $164,927,380 $94,913,386
Net earnings $ 16,933,209 $ 3,659,347
Basic earnings per share $ 0.96 $ 0.21
Diluted earnings per share $ 0.93 $ 0.93
</TABLE>
The pro forma information given above does not purport to be indicative
of the results that actually would have been attained if the acquisition of
SeniorCare had occurred on the date noted, and is not intended to be a
projection of future results or trends.
F-8
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. MERGERS, ACQUISITIONS AND DISPOSITIONS (continued):
During the quarter ended September 30, 1998, the Company purchased six
former facilities of Standish which it had previously been leasing under the
terms of various operating leases. The total purchase price was approximately
$8.4 million. Subsequently, three of these facilities representing 164 units
were sold.
4. RESTRICTED CASH:
Cash collateral. Under the terms of an agreement to fix interest rates
on future leases with Chancellor Senior Housing Group, Inc., the Company is
required to maintain specified levels of cash collateral with a financial
institution. Interest on the funds held accrues to the benefit of the Company.
At December 31, 1998, the amount held as collateral was approximately $19.1
million.
5. ASSETS HELD FOR SALE:
In connection with the Merger, the Company initiated a plan to dispose
of certain of the acquired facilities, of which one facility containing 72 beds
remains to be sold at December 31, 1998. The Company expects to dispose of this
facility during 1999. Included in general and administrative expenses in 1998
are losses of $35,054 from this facility. During the years ended December 31,
1997 and December 31, 1996, the facilities generated operating losses of
$303,501 and $190,984, respectively, which have been excluded from the Company's
consolidated statement of operations and accounted for as an adjustment to the
carrying amount of assets.
6. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated Useful
Life Years December 31, 1998 December 31, 1997
---------- ----------------- -----------------
<S> <C> <C> <C>
Land...................................... $ 33,738,439 $ 42,900
Buildings and improvements................. 30 - 35 105,737,248 1,156,512
Furniture, fixtures and equipment.......... 3 - 8 9,719,042 2,946,853
Leasehold improvements..................... 4 - 15 1,169,448 1,181,209
Construction in progress................... 363,435 ---
------------ ----------
150,727,612 5,327,474
Accumulated depreciation ................. (2,788,615) (676,651)
------------ ----------
Property and equipment, net................ $147,938,997 $4,650,823
============ ==========
</TABLE>
F-9
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. OTHER LONG-TERM ASSETS:
Other long-term assets consist of the following at December 31, 1998
and 1997:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Notes receivable........................................... $ 9,273,807 $4,001,980
Deferred financing costs, net.............................. 3,470,384 3,391,584
Deferred tax assets....................................... 2,637,061 2,999,443
Lease deposits............................................. 17,584,949 4,125,000
Investments................................................ 2,643,969 ---
Other, net................................................. 5,413,811 2,744,623
----------- -----------
$41,023,981 $17,262,630
=========== ===========
</TABLE>
In July 1998, the Company entered into an affiliation agreement with
National Assisted Living Limited Partnership. Under the terms of the agreement,
the parties have a put and call related to the purchase/sale of up to 600 units
in nine facilities once they achieve stabilized occupancy. The Company is
required to make a purchase deposit of $0.6 million within five days after the
certificate of occupancy is obtained for a facility. In connection with entering
into the agreement, the Company made an initial deposit of $1.0 million and, at
December 31, 1998, had made deposits on two properties.
During 1998, the Company made lease deposits on six facilities with a
third-party and on two facilities which are owned 50% by a third-party and 50%
by a related party (see Note 13).
8. ACCRUED LIABILITIES:
Accrued liabilities consist of the following at December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Accrued consulting fees.......................................... $ 165,124 $ 230,525
Accrued merger and acquisition related costs ................... 5,937,768 2,057,795
Accrued closure costs .......................................... 201,733 244,056
Accrued interest................................................. 2,793,104 2,736,243
Accrued taxes.................................................... 330,318 1,238,929
Other .......................................................... 5,372,747 1,417,599
---------- ----------
Total accrued liabilities........................................ $14,800,794 $7,925,147
========== ==========
</TABLE>
F-10
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. DEBT:
Long-term debt consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
a) Convertible subordinated notes, 6.25% interest, due in
August 2004, convertible to common stock at $28.875 per
share.............................................................. $115,000,000 $115,000,000
b) Convertible debentures, 8.5% interest, due in April 1998,
convertible to common stock at $15.00 per share.................... -- 2,000,000
c) Facility mortgages payable with imputed interest rates at 7.2% due
between December 2001 and July 2006, collateralized
by real estate..................................................... 43,724,996 --
d) Borrowings under line of credit.................................... 20,863,687 --
Other notes payable at varying interest rates........................... 153,152 --
------------ ------------
Subtotal................................................................ 179,741,835 117,000,000
Less current maturities................................................. 848,600 2,000,000
------------ ------------
Long-term debt.......................................................... $178,893,235 $115,000,000
============ ============
</TABLE>
a) In August 1997, the Company completed a private offering of $100.0
million 6 1/4% Convertible Subordinated Notes (the "Notes") due August
15, 2004. The aggregate discounts and commissions related to the Notes
was $2.8 million. Interest is payable semi-annually in February and
August. The Notes are convertible into common stock of the Company at
any time through the close of business on the final maturity date of
the Notes, unless previously redeemed or repurchased, at a conversion
price of $28.875 per share, subject to adjustment under certain
conditions. Prior to August 18, 2000, the Notes are not redeemable at
the option of the Company. Thereafter, the Notes are redeemable at the
option of the Company, in whole or in part, at declining redemption
prices. The Notes are unsecured obligations of the Company and are
subordinated to all existing and future Senior Indebtedness, as
defined, and all liabilities of the Company and its subsidiaries. The
proceeds of the offering have or will be used for general corporate
purposes, including, but not limited to, capital expenditures, working
capital and acquisitions. In October 1997, the over-allotment option on
the Notes was exercised in full and the Company received an additional
$14.6 million in cash upon the issuance of $15.0 million principal
amount of Notes. The fair value of the Notes at December 31, 1998 and
1997 was estimated at $134.5 million and $130.5 million, respectively,
based on the quoted market prices of the Notes at those dates.
b) These debentures were converted into 133,333 shares of common stock in
February 1998. The fair value of these debentures was estimated as $3.8
million at December 31, 1997 based on the quoted price of the Company's
common stock at that date.
c) The facility mortgages were assumed as part of the purchase of
SeniorCare (see Note 3). The fair value of these mortgages is the same
as the book value based on interest rates offered to the Company for
similar borrowings.
d) In September 1998, the Company entered into an agreement with several
banks for a $35.0 million line of credit (the "Line"). The Line will be
used to fund ongoing working capital, acquisitions, letters of credit
and general corporate purposes. The Line bears interest at a spread
over LIBOR or Prime Rate as selected by the Company. The interest rate
on the outstanding balance at December 31, 1998 was 9.00%. The
agreement requires the Company to pay a commitment fee of between
0.250% and 0.625% on the
F-11
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. DEBT (continued):
unused portion of the Line. The Line matures in September 2001 and is
collateralized, in part, by certain of the Company's accounts
receivable. In addition, $3.9 million of the Line is restricted to be
used to fund an existing Letter of Credit. The agreement contains,
among other restrictions, provisions limiting the issuance of
additional debt, the amount and type of investments and the payment of
dividends, and the maintenance of specified financial ratios.
At December 31, 1998, the principal payments due on the debt noted
above over the next five fiscal years are as follows:
<TABLE>
<CAPTION>
Year Ended
----------
<S> <C>
1999 $ 848,600
2000 747,205
2001 35,674,937
2002 14,585,169
2003 169,249
Thereafter 127,716,675
------------
$179,741,835
============
</TABLE>
Interest paid in the years ended December 31, 1998 and 1997, was
$8.7 million and $0.8 million, respectively.
10. INCOME TAXES:
Deferred income taxes reflect the net effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A valuation allowance is
recognized if it is more likely than not that some portion of the deferred tax
assets will not be realized.
The Company's deferred tax assets and liabilities, included in prepaid
expenses and other current and long-term assets and other long-term liabilities
on the balance sheet, are comprised of the following at December 31, 1998 and
December 31, 1997:
F-12
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets
Accrued merger costs................................ $ 986,918 $1,105,945
Accrued consulting.................................. 67,990 92,671
Intangible assets................................... --- 92,156
Bad debt reserve.................................... 706,803 388,685
Accrued vacation.................................... 200,595 80,440
Net operating loss carryforwards.................... 2,637,062 2,907,287
Insurance reserves.................................. 82,350 --
----------- -----------
Deferred tax assets................................. 4,681,718 4,667,184
----------- -----------
Deferred tax liabilities
Fixed assets........................................ (2,034,595) (104,032)
Intangible assets................................... (62,343) ---
----------- -----------
Deferred tax liabilities............................ (2,096,938) (104,032)
----------- -----------
$2,584,780 $4,563,152
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Rate reconciliation 1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Federal tax at statutory rate...................... 35.0% 34.0% (34.0)%
State tax, net of federal benefit.................. 6.2 5.7 (6.0)
Goodwill amortization.............................. 1.1 3.3 ---
Utilization of net operating loss carryforwards.... --- (1.6) ---
Other.............................................. (1.3) 0.7 ---
Change in valuation allowance...................... --- (1.9) 40.0
------ ----- -----
Net effective rate................................. 41.0% 40.2% ---%
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Tax provision
Current:
Federal...................................... $ 9,125,718 $2,504,505
State........................................ 2,890,688 836,494
------------ -----------
12,016,406 3,340,999
------------ ----------
Deferred:
Federal...................................... 485,384 877,769
State........................................ 54,628 218,079
------------ ---------
540,012 1,095,848
------------ ----------
Total............................................. $12,556,418 $4,436,847
============ ==========
</TABLE>
During 1997, both the valuation allowance and goodwill were reduced by
$5.1 million to reflect the utilization of deferred tax assets which were
recorded as part of the Merger. In 1997, the Company also recognized a tax
benefit of $0.5 million to reflect the utilization of deferred tax assets
existing at December 31, 1996 which related to post-Merger activity. As a result
of the acquisition of SeniorCare, the Company recorded additional deferred tax
liabilities of $1.5 million. Additionally, the Company recorded tax benefits of
$2.0 million in 1998 and $0.7 million in 1997 related to the exercise of
employee stock options which was recognized as an addition to additional paid-in
capital.
F-13
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. INCOME TAXES: (continued)
The Company has net operating loss carryforwards of $7.6 million which will
expire from 2004 to 2011. Utilization of the net operating loss is subject to
Internal Revenue Code Section 382 which limits the annual amount of the
pre-Merger loss carryforward which may be deducted annually.
The Company has paid federal income taxes of $7.1 million in 1998 and
$1.2 million in 1997 and state income taxes of $3.6 million in 1998 and $0.8
million in 1997.
11. EQUITY:
STOCK OPTIONS
In 1996, the Company adopted a stock option plan for officers and
employees. The number of shares available under this plan was increased from
1,200,000 in 1996 to 1,600,000 in 1997 and 2,600,000 in 1998. The Company also
maintains a stock option plan for non-employee members of the Board of Directors
to purchase up to 36,000 shares of its Common Stock. Options granted under these
plans vest over three and four year periods and expire ten years after the date
of the grant. The total shares available under these plans and the Company's
Amended and Restated 1991 Combination Stock Option Plan are 3,036,000.
<TABLE>
<CAPTION>
Weighted average
Shares exercise price
--------------- -----------------
<S> <C> <C>
Outstanding at December 31, 1995............................ -- $ --
Granted..................................................... 533,400 12.09
Assumed in connection with Merger........................... 207,740 13.87
Exercised................................................... (12,000) 11.58
--------- ----------
Outstanding at December 31, 1996............................ 729,140 12.62
Granted ................................................... 944,200 23.79
Exercised ................................................. (149,569) 12.07
Canceled .................................................. (62,286) 17.81
---------- ---------
Outstanding at December 31, 1997 ........................... 1,461,485 19.66
Granted ................................................... 1,381,850 18.69
Exercised ................................................. (456,163) 14.12
Canceled .................................................. (164,384) 20.64
---------- ---------
Outstanding at December 31, 1998............................ 2,222,788 $ 20.11
========== =========
</TABLE>
The number of shares available for the granting of options at December
31, 1998 was 207,480.
<TABLE>
<CAPTION>
Options outstanding Options exercisable
----------------------------------------- ---------------------------------
Weighted
Range of Shares average Remaining contractual Weighted average
exercise prices outstanding exercise price life in months exercise price Number
- --------------------- ------------- -------------- ----------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
$10.00 - $15.00 190,486 $12.04 97 $11.68 159,746
$15.01 - $22.50 1,416,350 $17.81 113 $18.81 72,333
$22.51 - $31.63 615,952 $27.95 100 $28.47 155,850
--------- ------ --- ------ -------
2,222,788 $20.11 108 $19.69 387,929
========= =======
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its options. Accordingly, no compensation expense has been
recognized for its stock-based compensation plan. Had compensation cost for the
Company's stock options been determined based upon the fair value at the grant
date consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the
Company's net earnings in 1998 would have been reduced by $2.4 million, or
$0.13 per share on a diluted basis in 1998 and by $1.8 million, or $0.10 per
share on a diluted basis in 1997. In 1996, the Company's net loss would have
been increased by approximately $1.3 million, or $0.12 per share on a diluted
basis.
The fair value of the options granted during the previous three years
and the valuation assumptions used are as follows:
<TABLE>
<CAPTION>
Weighted Weighted
average average
Year Ended Fair value of interest expected
December 31, options granted Volatility rate life
- ------------ --------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
1998 $8,100,000 48% 5.0% 4.0
1997 8,600,000 38% 6.3% 4.0
1996 3,500,000 63% 6.1% 4.3
</TABLE>
F-14
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
WARRANTS
In connection with the Merger, the Company assumed warrants issued by
Standish. During 1997, 14,808 warrants were issued at $16.55 per share and
50,000 warrants were issued at $13.125 per share. At December 31, 1998, there
were 176,497 warrants to purchase shares of the Company's common stock
outstanding with exercise prices ranging from $13.125 to $35.45. At December 31,
1998, all warrants were exercisable.
SERIES A PREFERRED STOCK
In connection with the Merger, the Company acquired the rights and
obligations of the Series A Cumulative Convertible Preferred Stock issued by
Standish prior to the Merger. The conversion price of the Convertible Preferred
Stock at December 31, 1998 was $11.33. The Convertible Preferred Stock is
redeemable by the Company at $10.00 per share, plus accrued but unpaid
dividends, under certain circumstances.
EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Year ended December 31, 1998
Earnings Shares Per Share
----------------- ----------------- ------------
<S> <C> <C> <C>
Basic earnings per share
Earnings available to common stockholders....... $ 18,058,941 17,632,278 $ 1.02
Effect of dilutive securities:
Stock options................................. --- 427,185 ---
Warrants...................................... --- 76,919 ---
6.25% Convertible Debentures ................. --- 17,777 ---
--------------- -------------- ------------
Diluted earnings per share....................... $ 18,058,941 18,154,159 $ 0.99
=============== ============== ============
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1997
Earnings Shares Per Share
----------------- ----------------- ------------
<S> <C> <C> <C>
Basic earnings per share
Earnings available to common stockholders....... $ 6,576,387 17,144,338 $ 0.38
Effect of dilutive securities:
Stock options................................. --- 331,424 ---
Warrants...................................... --- 60,411 ---
--------------- -------------- -----------
Diluted earnings per share....................... $ 6,576,387 17,536,173 $ 0.38
=============== ============== ===========
</TABLE>
At December 1, 1998 and 1997, 527,250 and 439,500 shares, respectively,
of Common Stock and 4,800 warrants were outstanding but not included in the
calculation of earnings per share as their assumed exercise would be
antidilutive. At December 31, 1997, the 6.25% Convertible Debentures and
preferred stock was not included in the computation of earnings per share as
their assumed conversion would be antidilutive.
For the year ended December 31, 1996, basic loss per share was the same
as diluted loss per share as the impact of the exercise or conversion of the
Company's options, warrants, preferred stock and convertible debentures would be
antidilutive.
12. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
The Company leases various office space and certain equipment pursuant
to operating lease agreements. The Company also leases certain of its health
care facilities. These leases are generally for periods between five and fifteen
years plus renewal options. Certain of the Company's leases contain provisions
which adjust the amount of rent payable based upon the cash flow of the
facility.
F-15
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. COMMITMENTS AND CONTINGENCIES (continued):
Future minimum lease payments under the terms of non-cancelable lease agreements
at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999................................. $ 17,755,475
2000................................. 17,959,570
2001................................. 15,870,023
2002................................. 15,879,930
2003................................. 15,964,774
Thereafter........................... 81,017,090
------------
$164,446,862
============
</TABLE>
The Company has provided letters of credit totaling $7.6 million at
December 31, 1998 related to management/ownership agreements for two of its
facilities.
The Company sponsors a defined contribution 401(k) savings plan for
employees meeting certain employment conditions. In addition to permitting
employee contributions, the 401(k) plan provides for company matching
contributions under certain conditions. Company matching contributions were
approximately $50,000 in 1998 and $10,000 in 1997.
CONTINGENCIES
The Company is subject to complaints, claims and litigation which have
risen in the normal course of business. The Company does not believe that any
such litigation will have a material adverse effect on its business, financial
position or results of operations. The Company was notified that its compliance
with certain Medicare regulations will be reviewed. Based on its own review of
the Medicare regulations, such regulations which are subject to interpretation,
the Company feels it has complied therewith. The Company does not expect the
impact of the review on its statements of operations or financial position will
be material.
13. RELATED PARTY TRANSACTIONS:
As used herein, a "Chancellor Entity" is Chancellor Senior Housing
Group, Inc. (a company primarily owned by Abraham D. Gosman, Chairman of the
Board of Directors of the Company, and certain members of the Company's senior
management) or a company in which Mr. Gosman and certain members of the
Company's senior management exercise significant control.
During the years ended December 31, 1998, 1997, and 1996, the Company
recognized revenue of $12.8 million, $4.8 million, and $0.3 million,
respectively, for marketing and management services provided to various
Chancellor Entities.
At December 31, 1998 and 1997, $15.8 million and $8.2 million,
respectively, of development fees earned from projects contracted with
Chancellor Entities or joint ventures within which Chancellor Entities have
certain interests were recorded as a receivable. The balance of the related
party receivable relates to amounts due from Chancellor Entities for management
fees and various facility receivables.
In January 1998, the Company purchased, for $0.8 million, a management
agreement for a skilled nursing facility located in Florida from PhyMatrix
Corp., a publicly-owned physician practice management company of which Mr.
Gosman is Chairman of the Board and Chief Executive Officer and of which he,
together with his two sons, beneficially owns approximately 24.6%. The Company
began leasing this facility in the second quarter of 1998. This amount is still
outstanding at December 31, 1998. During 1998 the Company also entered into 31
additional management/development agreements with various Chancellor Entities.
In 1998, the Company has paid various Chancellor Entities a total of
$7.1 million for lease rights to three facilities. The Company also exercised
its option to lease, from certain Chancellor Entities, four facilities which it
had been managing. The Company has paid a total of $4.0 million in lease
deposits related to two of these facilities which are owned 50% by certain
Chancellor Entities and 50% by an unrelated third party.
During 1998, the Company also paid a Chancellor Entity $2.0 million for
development and lease rights related to a senior living community in New York
and $1.0 million to another Chancellor Entity to purchase, at original cost, its
interest in a limited partnership.
During 1998, the Company recorded interest income of $1.8 million from
various Chancellor Entities related primarily to amounts owed pursuant to
various development and management agreements, escrow deposits, and other
short-term advances. Such outstanding amounts earned interest at the same rate
as the Company pays under its Line. All short-term advances were repaid as of
December 31, 1998.
In 1997, the Company purchased from a related party, for $2.1 million,
a subordinated loan related to a facility that it managed for a Chancellor
Entity. The loan has a face value of $2.4 million, bears interest at 8.5%
F-16
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. RELATED PARTY TRANSACTIONS (continued):
and matures November 2024. Payment of accrued interest on the note is
subordinated to the facility achieving certain financial performance measures.
During 1998, $0.4 million of this note was repaid.
In 1997, the Company entered into a management/lease contract with a
Chancellor Entity for a senior living facility in Florida. Under the terms of
the agreement, the Company is not required to make a lease payment until the
facility achieves certain financial performance measures. No lease payments were
made in either 1998 or 1997.
During 1997, the Company entered into four additional leases with
Chancellor Entities. The lease terms are generally for 15 year periods plus
renewal options. The Company had been managing three of these facilities. In
connection with one of these leases, the Company paid $1.8 million to a
Chancellor Entity for the lease rights and paid $3.8 million to another
Chancellor Entity as a lease deposit.
For the year ended December 31, 1996, Continuum Care of Massachusetts,
Inc., whose principal stockholder is Mr. Gosman, provided management, general
and administrative services to the Company. Fees for these services in the
amount of $5.1 million have been included in the financial statements. Such fees
were based on the discretion of Continuum Care of Massachusetts, Inc. and may
not be indicative of what they would have been if the Company had performed
these services internally or had contracted for such services with unaffiliated
entities.
During 1996, interest expense on outstanding indebtedness due to Mr.
Gosman at the prime rate of interest during the year ended December 31, 1996 was
$0.9 million. All principal and interest outstanding were repaid concurrent with
the secondary stock offering (see Note 1).
14. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS:
The FASB has issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Investments and Hedging Activities," ("FAS
133"). FAS 133 is effective for fiscal years beginning after June 15, 1999. FAS
133 requires that all derivatives are required to be recognized on the balance
sheet as either assets or liabilities and measured at fair value. FAS 133 is not
expected to have an impact on the Company's statement of financial position or
results of operations.
F-17
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
---------------- ---------------- ---------------- ---------------- ----------------
FISCAL 1998
<S> <C> <C> <C> <C> <C>
Total revenue $ 29,645,703 $ 34,166,646 $ 39,604,947 $ 43,501,182 $ 146,918,478
================ ================ ================ ================ ================
Total operating expenses $ 24,366,371 $ 27,521,712 $ 31,048,617 $ 33,275,110 $ 116,211,810
================ ================ ================ ================ ================
Net earnings $ 3,365,190 $ 4,150,535 $ 4,937,234 $ 5,605,982 $ 18,058,941
================ ================ ================ ================ ================
Diluted earnings per share $ 0.19 $ 0.23 $ 0.27 $ 0.30 $ 0.99
================ ================ ================ ================ ================
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
---------------- ---------------- ---------------- ---------------- ----------------
FISCAL 1997
Total revenue $ 13,091,518 $ 14,930,479 $ 20,818,581 $ 24,352,510 $ 73,193,088
================ ================ ================ ================ ================
Total operating expenses $ 12,217,435 $ 13,414,709 $ 18,180,974 $ 20,406,398 $ 64,219,516
================ ================ ================ ================ ================
Net earnings $ 814,600 $ 1,228,364 $ 1,935,131 $ 2,598,292 $ 6,576,387
================ ================ ================ ================ ================
Diluted earnings per share $ 0.05 $ 0.07 $ 0.11 $ 0.15 $ 0.38
================ ================ ================ ================ ================
</TABLE>
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
----------------------
Robert M. Kaufman
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert M. Kaufman Robert M. Kaufman March 29, 1999
- ---------------------------- Chief Executive Officer
Robert M. Kaufman (Principal Accounting Officer)
/s/ Abraham D. Gosman Abraham D. Gosman March 29, 1999
- ---------------------------- Chairman of the Board
Abraham D. Gosman
/s/ Abraham D. Gosman Andrew D. Gosman March 29, 1999
- ---------------------------- President and Director
Andrew D. Gosman
/s/ Michael M. Gosman Michael M. Gosman March 29, 1999
- ---------------------------- Executive Vice President and Vice
Michael M. Gosman Chairman of the Board
/s/ Donald J. Amaral Donald J. Amaral March 29, 1999
- ---------------------------- Director
Donald J. Amaral
/s/ H. Loy Anderson, Jr. H. Loy Anderson, Jr. March 29, 1999
- ---------------------------- Director
H. Loy Anderson, Jr.
/s/ Rev. Bedros Baharian Rev. Bedros Baharian March 29, 1999
- ---------------------------- Director
Rev. Bedros Baharian
/s/ Robert Cataldo Robert Cataldo March 29, 1999
- ---------------------------- Director
Robert Cataldo
/s/ Stephen E. Ronai, Esq. Stephen E. Ronai, Esq. March 29, 1999
- ---------------------------- Director
Stephen E. Ronai, Esq.
</TABLE>
<PAGE>
CAREMATRIX CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged Balance at
beginning costs and to other end of
Description of period expenses accounts Deductions period
- ------------ -------------- ------------ --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at 12/31/96 $ 247,706 $ 62,729 $ 756,657(A) $ --- $1,067,092
Allowance for doubtful accounts 1,067,092 317,588 --- 279,248(A) 1,105,432
-------------- ------------- --------------- ------------- --------------
Balance at 12/31/97 1,067,092 317,588 --- 279,248 1,105,432
Allowance for doubtful accounts 1,105,432 887,753 84,013 --- 2,077,198
-------------- ------------- --------------- ------------- --------------
Balance at 12/31/98 $ 1,105,432 $ 887,753 $ 84,013 $ --- $2,077,198
============== ============= =============== ============= ==============
</TABLE>
(A) Primarily due to the acquisition of The Standish Company.
F-19
<PAGE>
Exhibits. The following is a list of exhibits as required by Item 601
of Regulation S-K under the Act.
Exhibit Description
------- -----------
2.01 Agreement and Plan of Merger dated as of July 3, 1996 by and among the
Company, 12 subsidiaries thereof and the CareMatrix Affiliates (with
certain exhibits and schedules attached thereto) (8)
3.01 Corrected Third Restated Certificate of Incorporation of the Company
(15)
3.02 By-laws of the Company, as amended through December 9, 1996 (12)
4.01 Indenture, dated as of August 15, 1997, between the Company and State
Street Bank and Trust Company, providing for the terms and conditions of
up to $115,000,000 of the Notes (10)
10.04 Warrants dated November 9, 1993, January 13, 1994, February 4, 1994,
March 1, 1994, May 25, 1995 and June 28, 1995 to purchase an aggregate
of 35,833 shares of the Company's Common Stock issued to Health Care
REIT, Inc. (7)
10.05 Adams Square Limited Partnership First Amended and Restated Limited
Partnership Agreement dated as of January 31, 1994 (with certain
exhibits attached) (7)
10.12 Amended and Restated 1991 Combination Stock Option Plan, as amended
through June 19, 1997 (13)
10.13 1995 Non-Qualified Stock Option Plan for Non-Employee Directors ("1995
Non-Employee Directors' Plan") (7)
10.14 1996 Equity Incentive Plan, as amended through June 19, 1997 (13)
10.15 Warrants dated May 26, 1993 to purchase an aggregate of 15,000 shares of
the Company's Common Stock granted to Robert W. DeVore at a price of
$4.50 per share (7)
10.40 Form of Indemnification Agreement for officers and directors (2)
10.41 Warrants dated July 30, 1996 to purchase an aggregate of 80,000 shares
of the Company's Common Stock issued to Abraham D. Gosman (8)
10.42 First Amendment to Warrant dated as of July 30, 1996 (9)
10.43 Registration Rights Agreement dated as of July 30, 1996 between the
Company and Abraham D. Gosman (8)
10.44 Employment Agreement dated July 29, 1996 by and between CareMatrix of
Massachusetts, Inc. and Marc H. Benson (9)
10.45 Lease Agreement concerning 197 First Avenue office space (9)
10.46 Assignment Agreement dated July 3, 1996 by and between CareMatrix of
Massachusetts, Inc. ("CMM") and Chancellor of Massachusetts, Inc.
(Tampa, Florida) (9)
10.47 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Atlanta, Georgia) (9)
10.48 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Boynton Beach, Florida) (9)
10.49 Management Agreement dated as of June 30, 1996 between CMM and Continuum
Care of Dedham, Inc. (Dedham, Massachusetts) (9)
10.50 Management Agreement dated as of July 1996 between CMM and Continuum
Care of Needham, Inc. (Needham, Massachusetts) (9)
10.51 Assignment Agreement dated as of June 6, 1996 between CMM and Continuum
Care of West Bridgewater, Inc. (West Bridgewater, Massachusetts) (9)
10.52 Assignment Agreement dated as of June 6, 1996 between CMM and Continuum
Care of Massachusetts, Inc. (Auburn, Massachusetts) (9)
10.53 Assignment Agreement dated as of June 6, 1996 between CMM and Continuum
Care of Massachusetts, Inc. (Plymouth, Massachusetts) (9)
10.54 Assignment Agreement dated June 6, 1996 between CMM and Continuum Care
of Massachusetts, Inc. (Raynham, Massachusetts) (9)
10.55 Development Agreement dated September 1, 1996 between CareMatrix of
Cypress Station, Inc. and Chancellor of Houston, Inc. (Houston, Texas)
(9)
<PAGE>
Exhibit Description
------- -----------
10.56 Assignment Agreement dated July 3, 1996 by and among AMA Funding
Corporation, CMM, and Chancellor of Massachusetts, Inc. (Peoria,
Arizona) (9)
10.57 Turnkey Construction Agreement dated August 14, 1996 by and among CMM,
Atlantic on the Hudson, L.L.C. and Cambridge House Associates General
Partnership (Ossining, New York) (9)
10.58 Management Agreement dated October 3, 1996 among CMM and The Mayfair at
Glen Cove, L.L.C. and Hassett-Belfer Senior Housing, L.L.C. (Glen Cove,
New York) (9)
10.59 Development Agreement dated March 8, 1996 between CareMatrix of Emerald
Springs Inc./Netwest of Yuma, Inc. and Emerald Springs Associates
General Partnership (Yuma, Arizona) (9)
10.60 Development Agreement dated August 18, 1996 between CareMatrix of
Amethyst Arbor, Inc./Netwest Development Corporation and Amethyst Arbor
Associates General Partnership (Peoria, Arizona) (9)
10.61 Assignment Agreement dated as of June 6, 1996 between CCC of
Connecticut, Inc. and CMM (Westfield Court, Connecticut) (9)
10.62 Assignment Agreement dated July 3, 1996 by and between Chancellor of
Houston, Inc. and CMM (Houston, Texas) (9)
10.63 Assignment Agreement dated July 3, 1996 by and between Continuum Care of
Massachusetts, Inc. and Chancellor of Massachusetts, Inc. (Ridgefield,
Connecticut) (9)
10.64 Assignment Agreement dated June 6, 1996 by and between CCC of Florida,
Inc. and CMM (Millbury, Massachusetts) (9)
10.65 Assignment Agreement dated July 3, 1996 by and among AMA Funding
Corporation, CMM and Chancellor of Massachusetts, Inc. (Tucson, Arizona)
(9)
10.66 Management Agreement dated August 14, 1996 by and among CMM and
Cambridge House Associates General Partnership (Ossining, New York) (9)
10.67 Assignment Agreement dated July 3, 1996 by and between CarePlex of
Southington, Inc., and Chancellor of Massachusetts, Inc. (Southington,
Connecticut) (9)
10.68 Assignment Agreement dated July 3, 1996 by and among The CarePlex Group,
Inc., CMM and Chancellor of Massachusetts, Inc. (Deerfield Beach,
Florida) (9)
10.69 Development Agreement dated April 18, 1996 by and between Cheshire Care,
L.L.C. and CMM (Cheshire, Connecticut) (9)
10.70 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Atlanta, Georgia) (9)
10.71 Purchase and Sale Agreement dated May 1996 between CMM (f/k/a CareMatrix
Corporation) and Ensign-Bickford Realty Corporation (Avon, Connecticut)
(9)
10.72 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Macon, Georgia) (9)
10.73 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Durham, North Carolina) (9)
10.74 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Livingston, New Jersey) (9)
10.75 Assignment and Assumption of Management Agreement dated July 3, 1996 by
and between CCC of New Jersey, Inc. and CMM (Park Ridge, New Jersey) (9)
10.76 Agreement dated July 3, 1996 by and between CCC of New Jersey, Inc. and
CareMatrix of Massachusetts (9)
10.77 Development Agreement dated April 18, 1996 by and between Woodbridge
Care, L.L.C. and CareMatrix Corporation (9)
10.78 Assignment Agreement dated July 3, 1996 by and between CareMatrix of
Massachusetts, Inc., and Chancellor of Massachusetts, Inc. (Glen Cove,
NY; Roslyn, NY; Great Neck, NY; Wallingford, CT) (9)
10.79 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Bonita Springs, Florida) (9)
10.80 Assignment Agreement dated July 3, 1996 by and between CMM and
Chancellor of Massachusetts, Inc. (Jensen Beach, Florida) (9)
<PAGE>
Exhibit Description
------- -----------
10.81 Assignment Agreement dated July 3, 1996 by and between CareMatrix of
Stony Brook, Inc. and CMM (Darien, Connecticut) (9)
10.82 Agreement of Sale dated September 6, 1996 by and between Reston Land
Corporation and CMM (Reston, Virginia) (9)
10.83 Deposit Receipt and Sale Agreement dated September 5, 1996 between
Bonita Bay Properties, Inc. and CMM (Bonita Bay, Florida) (9)
10.84 Global Services Agreement dated September 1, 1996 between Chancellor
Senior Housing Group, Inc. and CMM (9)
10.85 Master Agreement dated effective December 31, 1996 between Company and
North Shore Health System (excluding exhibits) (12)
10.86 Management Agreement dated as of December 20, 1996 between CMM and
Brazilian Court, Inc. (12)
10.87 Facility Lease dated as of December 16, 1996 between The Annapolitan
Care Center, Inc. and CareMatrix of Annapolis, Inc. (12)
10.88 First Amendment to Facility Lease dated as of December 15, 1996 between
The Annapolitan Care Center, Inc. and CareMatrix of Annapolis, Inc. (12)
10.89 Office Lease dated as of December 31, 1996 between Continuum Care of
Dedham, Inc. and Company (12)
10.90 Guaranty Agreement dated November 25, 1996 between Company and Sylvan
Manor Health Care Center Limited Partnership (12)
10.91 Purchase Agreement dated August 12, 1997 by and among the Company and
certain initial purchasers of the Company's 6 1/4% Convertible
Subordinated Notes (10)
10.92 Registration Rights Agreement dated as of August 15, 1997 by and among
the Company and the Initial Purchasers (10)
10.93 Registration Agreement dated as of October 23, 1997 by and between the
Company and BancAmerica Robertson Stephens ("BARS") (11)
10.94 Resignation Agreement by and between CareMatrix Corporation and Michael
J. Doyle, dated as of July 30, 1997 (15)
10.95 Resignation Agreement by and between CareMatrix Corporation and Kenneth
M. Miles, dated as of April 10, 1997 (15)
10.96 Warrant dated August 22, 1997 to purchase an aggregate of 11,131 shares
of the Company's Common Stock issued to Health Care REIT, Inc. (15)
10.97 Warrant dated September 18, 1997 to purchase an aggregate of 3,677
shares of the Company's Common Stock issued to Health Care REIT, Inc.
(15)
10.98 Management Agreement dated August 14, 1996 by and among CMM and
Cambridge House Associates General Partnership (12)
10.99 Management Agreement dated October 3, 1996 by and among CMM and The
Mayfair at Glen Cove, LLC and Hassett-Belfer Senior Housing, LLC (12)
10.100 Management Agreement dated April 15, 1997 by and among CMM and CCC of
New Jersey, Inc. (15)
10.101 Assignment Agreement dated January 1, 1997 by and between CMM and CCC of
Massachusetts, Inc. (15)
10.102 Lease dated August 20, 1997 between CareMatrix of Dedham, Inc. and
Continuum Care of Dedham, Inc. (15)
10.103 Lease dated June 2, 1997 between CareMatrix of Needham, Inc. and
Continuum Care of Needham, Inc. (15)
10.104 Sublease dated July 1, 1997 between CareMatrix of Lauderhill I, Inc. and
Chancellor of Lauderhill I, Inc. (15)
10.105 Development Agreement between CareMatrix of Massachusetts, Inc. and
Chancellor of Aberdeen, Inc. dated April 11, 1997 (15)
10.106 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 26, 1997 (Bayport, New York) (15)
10.107 Development Agreement between CMM and Chancellor of Clearwater, Inc.
dated December 4, 1997 (15)
<PAGE>
Exhibit Description
------- -----------
10.108 Development Agreement between CMM and Chancellor of Dix Hills, Inc.
dated December 30, 1997 (15)
10.109 Development Agreement between CMM and Chancellor of East Longmeadow,
Inc. dated December 4, 1997 (15)
10.110 Development Agreement between CMM and Chancellor of Easton, Inc. dated
December 4, 1997 (15)
10.111 Development Agreement between CMM and Chancellor of Greenbelt, Inc.
dated December 4, 1997 (15)
10.112 Development Agreement between CMM and Chancellor of Islandia, Inc. dated
December 4, 1997 (15)
10.113 Development Agreement between CMM and Chancellor of Livingston, Inc.
dated December 4, 1997 (15)
10.114 Development Agreement between CMM and Chancellor of Middletown, Inc.
dated September 26, 1997 (15)
10.115 Development Agreement between CMM and Chancellor of Senior Housing
Group, Inc. dated September 26, 1997 (Naples, Florida) (15)
10.116 Development Agreement between CMM and Chancellor of Watchung, Inc. dated
December 4, 1997 (15)
10.117 Development Agreement between CMM and Chancellor of Westport, Inc. dated
December 30, 1997 (15)
10.118 Turnkey Construction Contract between CarePlex of Cragganmore, Inc. and
The Cragganmore Associates Limited Partnership dated October 3, 1996
(15)
10.119 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Atlanta, Georgia) (15)
10.120 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated July 25, 1997 (Cape Elizabeth, Maine) (15)
10.121 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Durham, North Carolina) (15)
10.122 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Ellicott City, Maryland) (15)
10.123 Development Agreement between CareMatrix of Massachusetts, Inc. and
Chancellor Senior Housing Group, Inc. dated March 31, 1996 (Houston,
Texas) (15)
10.124 Assignment Agreement between CarePlex of Newton, Inc. and CMM dated July
3, 1996 (Newton, Massachusetts; Lasell Village) (15)
10.125 Development Agreement between CM and Chancellor Senior Housing Group,
Inc. September 26, 1997 (Merrillville, Indiana) (15)
10.126 Development Agreement between CMM and CCC of New Jersey, Inc. dated July
15, 1996 (Park Ridge, New Jersey) (15)
10.127 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 26, 1997 (Pennington, New Jersey) (15)
10.128 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated July 25, 1997 (Pineville, North Carolina) (15)
10.129 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 26, 1997 (Reston, Virginia) (15)
10.130 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 26, 1997 (Tamarac, Florida) (15)
10.131 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 26, 1997 (Upper Nyack, New York) (15)
10.132 Development Agreement between CMM and Chancellor of Deerfield Beach,
Inc. dated March 19, 1997 (15)
10.133 Development Agreement between CMM and Chancellor Stuart, Inc. dated
January 10, 1997 (15)
10.134 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Jensen Beach (Villas), Florida) (15)
<PAGE>
Exhibit Description
------- -----------
10.135 Development Agreement between CMM and Chancellor of Logan Square, Inc.
dated April 11, 1997 (15)
10.136 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Ridgefield, Connecticut) (15)
10.137 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Roswell, Georgia) (15)
10.138 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 11, 1997 (Saco, Maine) (15)
10.139 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated July 25, 1997 (Upper Providence, Pennsylvania) (15)
10.140 Development Services Agreement between CMM, The Mayfair at Great Neck,
LLC, and Hassett-Belfer Senior Housing & Services, LLC dated December 5,
1997 (15)
10.141 Development Agreement between CareMatrix of Amber Lights, Inc., Netwest
Development Corporation and Amber Lights Associates General Partnership
dated December 10, 1996 (15)
10.142 Development Agreement between CareMatrix of Amethyst Arbor, Inc.,
Netwest Development Corporation and Amethyst Arbor Associates General
Partnership dated August 28, 1996 (15)
10.143 Development Agreement between CMM and Chancellor of the Armory, Inc.
dated September 1, 1998 (*)
10.144 Management Agreement between CMM and Chancellor of Aberdeen, Inc. dated
April 11, 1997 (*)
10.145 Consulting Agreement between CMM and Chancellor of Aberdeen, Inc. dated
July 1, 1998 (*)
10.146 First Amendment to Management Agreement between CMM and Chancellor of
Aberdeen, Inc. dated April 15, 1998 (*)
10.147 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 30, 1998 (Bradenton, Florida) (*)
10.148 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated July 10, 1998 (Brooklyn, Ohio) (*)
10.149 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated November 19, 1998 (Burr Ridge, Illinois) (*)
10.150 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 30, 1998 (Chestnut, Pennsylvania) (*)
10.151 Management Agreement between CMM and Chancellor of Deerfield Beach, Inc.
dated March 19, 1997 (*)
10.152 Consulting Agreement between CMM and Chancellor of Deerfield Beach, Inc.
dated July 1, 1998 (*)
10.153 First Amendment to Management Agreement between CMM and Chancellor of
Deerfield Beach, Inc. dated April 15, 1998 (*)
10.154 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated March 3, 1998 (Garden City, New York) (*)
10.155 Management Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 26, 1997 (Merrillville, Indiana) (*)
10.156 Assignment Agreement between Chancellor Senior Housing Group, Inc. and
Chancellor of Merrillville, Inc. dated November 19, 1997 (*)
10.157 First Amendment to Management Agreement between CMM and Chancellor of
Merrillville, inc. dated April 15, 1998 (*)
10.158 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated September 1, 1998 (Old Saybrook, Connecticut) (*)
10.159 Consulting Agreement between CMM and CCC of New Jersey, Inc. dated
December 31, 1997 (Park Ridge, New Jersey) (*)
<PAGE>
Exhibit Description
------- -----------
10.160 Consulting Agreement between CMM and CCC of New Jersey, Inc. dated July
1, 1998 (Park Ridge/Princeton, New Jersey) (*)
10.161 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated July 1, 1998 (Southbury, Connecticut) (*)
10.162 Management Agreement between CMM and Cragganmore
Associates Limited Partnership dated August 1, 1998 (*)
10.163 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated December 22, 1997 (Chicago, Illinois) (*)
10.164 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated December 24, 1998 (Venice, Florida) (*)
10.165 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated March 31, 1998 (Vernon Hills, Illinois) (*)
10.166 Development Agreement between CMM and Chancellor of Abington, Inc. dated
August 31, 1998 (Abington, Pennsylvania) (*)
10.167 Development Agreement between CMM and Chancellor of Cordova, Inc. dated
January 20, 1998 (Cordova, Tennessee) (*)
10.168 Development Agreement between CMM and Chancellor of Easton, Inc. dated
December 4, 1997 (Easton, Connecticut) (*)
10.169 Development Agreement between CMM and Chancellor of Flossmoor, Inc.
dated March 31, 1998 (Flossmoor, Illinois) (*)
10.170 Development Agreement between CMM and Chancellor of Ft. Myers, Inc.
dated March 6, 1998 (Ft. Myers, Florida) (*)
10.171 Development Agreement between CMM and Chancellor of Haverford, Inc.
dated March 12, 1998 (Haverford, Pennsylvania) (*)
10.172 Development Agreement between CMM and Chancellor of Mt. Prospect, Inc.
dated May 6, 1998 (Mt. Prospect, Illinois) (*)
10.173 Development Agreement between CMM and Cambridge House Associates General
Partnership dated September 1, 1998 (Ossining, New York) (*)
10.174 Development Agreement between CMM and Chancellor of Pennington, Inc.
dated September 26, 1997 (Pennington, New Jersey) (*)
10.175 Development Agreement between CMM and Chancellor of Stoneham, Inc. dated
December 12, 1997 (Stoneham, Massachusetts) (*)
10.176 Development Agreement between CMM and Chancellor Senior Housing Group,
Inc. dated April 1, 1998 (Wellington, Florida) (*)
10.177 Development Agreement between CMM and Chancellor of Westlake, Inc. dated
June 26, 1998 (Westlake, Ohio) (*)
10.178 Facility Lease Agreement between CCC of New Jersey, Inc. and CareMatrix
of Princeton (ALF), Inc. dated October 30, 1998 (*)
10.179 Purchase agreement between CMM and various affiliated individuals dated
July 13, 1998 (14)
10.180 First Amendment between CMM and various affiliated individuals dated
August 31, 1998 (14)
10.181 Development Agreement between CMM, The Benenson Capital Company,
Spectrum Bellefair Corporation and Bellefair Holding Company (Ryebrook)
dated January 1, 1998 (*)
10.182 Development Agreement between CMM, The Benenson Capital Company,
Spectrum Bellefair Corporation and The Bellefair Home & Land Company
(Ryebrook) dated January 1, 1998 (*)
21.00 Subsidiaries of the Company (*)
23.00 Consent of PricewaterhouseCoopers LLP (*)
27.1 Financial Data Schedule (*)
27.2 Financial Data Schedule (*)
<PAGE>
Exhibit Description
------- -----------
- -----------------------------------
* Filed herewith
(1) Filed as an Exhibit to the Company's Registration Statement on
Form S-1 (No. 33-64720)
(2) Filed as an Exhibit to the Company's Registration Statement on
Form S-18 (No. 33-44966-B)
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992
(4) Filed as an Exhibit to the Company's Report on Form 10-K dated
for the fiscal year ended December 31, 1993
(5) Filed as an Exhibit to the Company's Report on Form 10-K for the
fiscal year ended December 31, 1994
(6) Filed as an Exhibit to the Company's Report on Form 8-K dated
July 20, 1992
(7) Filed as an Exhibit to the Company's Report on Form 10-K for the
fiscal year ended December 31, 1995
(8) Filed as an Exhibit to the Company's Registration Statement on
Form S-4 (No. 333-5364)
(9) Filed as an Exhibit to the Company's Registration Statement on
Form S-1 (No. 333-11455)
(10) Filed as an Exhibit to the Company's Registration Statement on
Form S-3 filed by the Company on October 17, 1997 (No.
333-38113)
(11) Filed as an Exhibit to the Company's Registration Statement on
Form S-3 filed by the Company on November 12, 1997 (No.
333-40015)
(12) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996
(13) Filed as an Exhibit to the Company's Proxy Statement dated May
2, 1997
(14) Filed as an Exhibit to the Company's Report on Form 8-K dated as
of September 1, 1998
(15) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF THE ARMORY, INC.
2
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Developer"), and Chancellor of the Armory,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02494 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project and
50 independent villas (the "Project") to be located in New York, New York
described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
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Representations
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The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately ___
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Earl B. Lovell S.P.
Belcher, Inc. for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
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(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any
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of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner,
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enforceable in accordance with its terms and in compliance with its certificate
of incorporation and bylaws and all applicable laws of the State of Delaware.
ARTICLE II
Construction of the Project
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Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Costas Kondylis and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers
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shall meet to review and approve the Basic Plans. The parties shall
initial the Basic Plans to indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
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Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and
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suppliers of equipment and furnishings. The Developer will cause the applicable
contractor to remedy any defect in construction caused by poor workmanship or
materials which are brought to its attention by written notice within a period
of one (1) year from the date of the issuance of the Certificate of Occupancy.
Aside from the foregoing, the Owner hereby waives and the Developer hereby
disclaims all other express and implied warranties of every kind or nature with
respect to the Project and the Personal Property, including, without limitation,
waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
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Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
December 31, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
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(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of
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the Owner except that the Developer shall have the right to assign this
Agreement to, merge with or consolidate with an "Affiliate" (defined herein as
defined in the Securities and Exchange Act of 1934 and the regulations
thereunder) in connection with a public offering, merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of the Armory, Inc., 197 First Avenue, Needham, MA 02494,
Attention: President, or at such other address or addresses the Owner
shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
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Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 1st day of September, 1998 and executed under seal.
Witness: CHANCELLOR OF THE ARMORY, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
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MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 11th day of
April 1997, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and Chancellor of Aberdeen, Inc., a
Delaware corporation, with an office at 197 First Avenue, Needham, Massachusetts
02194 (the "Owner").
WHEREAS, the Owner is the operator of a one hundred forty-eight (148) unit
assisted/independent living facility to be located in Boynton Beach, Florida
(the "Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the
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rights of the Owner under Section 2.1 of this Agreement to approve the hiring,
disciplining and termination of the Executive Director, the Assistant
Administrator and Director of Resident Services) all personnel involved in the
administration and day-to-day operation of the Facility, including, without
limitation, management, resident assistance and other related personnel,
custodial, food service, cleaning, maintenance and other operational personnel,
and secretarial or bookkeeping personnel, each of whom, other than the Executive
Director (as hereinafter described), shall be employees of the Owner; supervise
the accounting, billing, purchasing and bill payment functions for the Facility;
establish systems of accounts and supervise the maintenance of ledgers and other
primary accounting records by the personnel of the Facility; supervise the
financial affairs of the Facility; establish and supervise the implementation of
operating and capital budgets, including those required to establish
reimbursement rates, if any, with respect to state or federal entitlement
programs as well as self-pay rates; prepare and maintain true, complete and
accurate records necessary for the preparation of such operating budgets;
determine which items of cost and expense properly relate to resident care;
establish and administer financial controls over the operation of the Facility,
develop and establish financial standards and norms by which the income, costs
and operations of the Facility may be evaluated; serve as advisor and consultant
in connection with policy decisions to be made by the Owner; furnish reports to
the Owner as the Owner may reasonably request and provide the Owner with
economic and statistical data in connection with or relative to the operations
of the Facility; represent the Facility in its day-to-day dealings with
creditors, residents, personnel, agents for collection, and insurers; act as
agent for the Owner in disbursing or collecting the funds of the Facility and in
paying the debts and fulfilling the obligations of the Facility; coordinate and
supervise a marketing plan for the Facility to insure that the Facility obtains
full occupancy as soon as possible and, after the Facility has achieved full
occupancy, assist in the development of an annual marketing plan and budget to
maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
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2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and
hire a qualified and properly licensed Executive Director (provided, however,
that the wages, salaries and other compensation of the Executive Director shall
be the responsibility of the Owner as set forth in Section 4.2 hereof) who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees.
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager
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<PAGE>
attempts to notify the Owner on a concurrent basis). The Manager shall prepare
and submit to the Owner any certificates of purchasing expenses incurred for the
Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of the Owner any and all moneys owing to the Owner from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after
the close of each calendar month, a balance sheet as of the end of the month and
a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month
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<PAGE>
and showing projected expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required of the Owner
under any Financing Agreement or by regulatory authorities showing, inter alia,
projected ordinary and extraordinary expenditures and protected revenues for
such budget period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense,
on behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and
supervise the agreed upon marketing plan for the Facility during the fill-up
phase (the "Marketing Plan"). Monthly statistical census analysis reports will
be generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full occupancy.
For purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance
(this item may be provided by outside parties if economically feasible) and, to
the extent deemed feasible by the
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<PAGE>
Manager and the Owner, the services of regular Facility maintenance employees
shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee. As compensation for the services to be rendered by the
Manager during the Term (as hereinafter defined), the Manager shall pay itself,
at its principal office as set forth in Section 18 (or at such other place as
the Manager may from time to time designate in writing), and at the times
hereinafter specified, a monthly management fee (the "Management Fee") equal to
(i) Ten Thousand ($10,000) Dollars per month until the opening of the Facility
for occupancy, (ii) the greater of Ten Thousand ($10,000) Dollars per month or
five (5%) percent of Net Revenues (as hereinafter defined) for the period
commencing on the opening of the Facility for occupancy through the last day of
the twelfth (12th) month following such date, and (iii) five (5%) percent of Net
Revenues for the period commencing on the first day of the month immediately
after the period described in the foregoing clause (ii) through the remainder of
the Term. The Management Fee will be paid in arrears and shall be due and
payable on or before the fifteenth (15th) day of each month following the month
in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following
expenses incurred by it in the management of the business and properties of the
Facility:
(a) Salary and expenses (including, without limitation,
payroll taxes, costs of employee benefit plans, travel, insurance, and fidelity
bonds) of all personnel employed by the Manager (other than the Executive
Director, who will be paid by the Owner as set forth in Section 4.2 hereof) to
carry out all responsibilities detailed above.
(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of all of the Manager's home office personnel and overhead.
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4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed at the Facility by
the Owner, including, without limitation, all administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available to
the Manager as of the date such payments were due, shall be the responsibility
of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen
and food service equipment, linens, beds, furniture, clothing and all other
supplies and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
Facility, and any other litigation or proceedings to which the Owner is a party.
However, such fees shall not include those fees resulting from or arising out of
the gross negligence by the Manager and the Owner shall provide such necessary
funds to the Manager within ten (10) days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be
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<PAGE>
paid on behalf of the Owner by the Manager, the Manager shall promptly notify
the Owner of the amount necessary to cure and the reason for such deficit and
the Owner shall provide such necessary funds to the Manager within ten (10) days
after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The Manager,
on behalf of the Owner, shall use reasonable efforts to collect (using legal
counsel approved by the Owner, if necessary) all sums due and owing to Owner in
connection with the operation of the Facility. The Manager and the Owner shall
deposit into such accounts all monies furnished by the Owner as working funds
and all receipts and monies arising from the operation of the Facility or
otherwise received by the Owner or by the Manager for or on the behalf of the
Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
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6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers. All dealings between the
Owner and the Manager are at arms length as between non-related parties.
7. Term and Termination.
7.1 Term. This Agreement shall continue for an initial term (the
"Initial Term") commencing on the date which is twelve (12) months prior to the
anticipated date (as mutually agreed to by the Owner and the Manager) for the
opening of the Facility and continue for a period of ten (10) years after the
date on which the Facility is opened for occupancy. The Owner and Manager agree
to execute a certificate setting forth the date on which the Initial Term
commences promptly after such opening. The Term of this Agreement shall be
automatically renewed for three (3) additional five (5) year terms (the "Renewal
Terms)", unless the Manager sends the Owner written notice no less than ninety
(90) days prior to the Initial Term or the then applicable Renewal Term, as the
case may be. The Initial Term and the Renewal Terms being collectively referred
to herein as the "Term".
7.2 Termination for Cause. Either party may terminate this
Agreement by delivering thirty (30) days written notice (a "Termination Notice")
to the other party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the
operation of the Facility;
(ii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iii) the breach by any party (the "Breaching Party") of
any other material provision in, or obligation imposed by, this Agreement which
violation shall have not been cured to the reasonable satisfaction of the other
party (the "Claiming Party") within thirty (30) days following the date on which
the Claiming Party delivers notice to the Breaching Party describing with
specificity both the claimed breach and the actions required to be taken in
order to cure the claimed breach; provided that in the event that the claimed
breach is not reasonably susceptible of being cured within thirty (30) days, the
cure period shall be extended for such additional time as may be reasonably
required, provided further that in the event that the Claiming Party delivers a
Termination Notice and the Breaching Party commences legal proceedings
contesting the termination within thirty (30) days following delivery of the
Termination Notice, then this Agreement shall not terminate unless and until a
final judicial resolution of such legal proceedings beyond the expiration of any
appeal period has been issued upholding said termination.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the
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Owner cures the payment default within ten (10) days after receiving written
notice from the Manager.
10
<PAGE>
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and complete
records. The Manager shall indemnify the Owner and hold it harmless of, from and
against all Costs incurred or suffered by the Owner as a result of any of the
Manager's fraud, willful misconduct, or gross negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies or to keep true, accurate and complete records.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v) (1) (i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any
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change in any applicable law which has the effect of rendering any part of this
Agreement invalid, illegal, or unenforceable shall not render the remainder of
this Agreement invalid, illegal, or unenforceable, and the parties hereto agree
that in the event that any part of this Agreement is rendered invalid, illegal,
or unenforceable, that they shall negotiate in good faith to amend any such part
of this Agreement so as to comply with any such law, as amended, and further the
respective objectives of the parties hereto.
13. Assignment. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert M. Kaufman, Chief Executive Officer
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: Chancellor of Aberdeen, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail or are hand delivered shall be deemed
received upon delivery or when delivery is refused to the office or address of
the addressee.
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17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, financial accounting packages and outcome information systems are and
will remain the property of the Manager. Upon termination of this Agreement, the
Owner shall have the option to purchase operational material belonging to the
Manager, except for the financial accounting packages and outcome information
systems, at a mutually agreed upon price.
18. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after the receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement substantially in the form attached hereto as
Exhibit A (the "Lease"), which Lease shall include, without limitation, a ten
(10) year initial term (with three (3) 5-year renewal terms) and rental payments
equal to the fair market value (which will be a negotiated percentage of total
project costs) as determined immediately prior to the initial term of the Lease
and immediately prior to any renewal terms.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
Witness: CAREMATRIX OF MASSACHUSETTS, INC.
By: By: /s/ Jeffery P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffery P. Neterval
Title: Vice President
WITNESS:
CHANCELLOR OF ABERDEEN, INC.
By: By: /s/ Jeffery P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffery P. Neterval
Title: Vice President
13
CONSULTING AGREEMENT
(Boynton Beach)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between Chancellor of Aberdeen, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facility located at Boynton
Beach, Florida.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Twenty-Two Thousand Two Hundred Twenty-Two and 22/100 Dollars ($22,222.22) (the
"Consulting Fee) per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
service, delivered
2
<PAGE>
by a nationally recognized overnight delivery service, or mailed by registered
or certified mail (postage prepaid), return receipt requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. Chancellor of Aberdeen, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
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<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CHANCELLOR OF ABERDEEN, INC.
Presence of:
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: David B. Currie
Print Name: Title: Vice President
--------------------
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: David B. Currie
Print Name: Title: Vice President
--------------------
4
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
---------------------------------------
This First Amendment to Management Agreement (this "Amendment") is
entered into as of the 15th day of April, 1998, by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation (the "Manager"), and Chancellor of
Aberdeen, Inc. (the "Owner").
WHEREAS, reference is made to that certain Management Agreement dated
as of April 11, 1997 and entered into by and between the Manager and the Owner
(the "Management Agreement"); and
WHEREAS, the Manager and the Owner desire to revise the term of the
Management Agreement and include a right of termination of the Owner in the
event certain events do not occur after a "change in control" of the Manager as
described below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Manager and the Owner agree as
follows:
1. Capitalized terms used herein but not defined in this Amendment
shall have the same meanings given to them in the Management Agreement.
2. Section 7.1 (Term) of the Management Agreement is hereby deleted in
its entirety and the following is hereby substituted therefore:
"7.1 Term. This Agreement shall continue for a term (the "Term")
commencing on the date which is twelve (12) months prior to the anticipated date
(as mutually agreed to by the Owner and the Manager) for the opening of the
Facility and continue for a period of ten (10) years after the date on which the
Facility is opened for occupancy. The Owner and Manager agree to execute a
certificate setting forth the date on which the Term commences promptly after
such opening."
3. The following Section 7.4 is hereby inserted immediately after
Section 7.3 of the Management Agreement:
"7.4 Termination Upon Change of Control. The Owner shall have the right
to terminate this Agreement upon thirty (30) days written notice to the Manager
in the event that there has been a "change in control" of the Manager during the
Term and the Owner and the Manager have not executed the Lease (defined below)
in accordance with Section 18 below within the later to occur of (i) fifteen
(15) months following the receipt of the certificate of occupancy for the
Facility, or (ii) one (1) year following the "change of control" of the Manager.
For purposes of this provision, "change of control" shall mean with respect to
the Manager: (a) the transfer of all or substantially all of the assets of the
Manager; (b) the transfer of an equity interest in the Manager after which the
acquiror
<PAGE>
holds more than fifty (50%) percent of the voting power of all equity interests
in the Manager; (c) the merger, consolidation, or other reorganization of the
Manager with or into another entity, which results in a change of more than
fifty (50%) percent of the composition of the governing body of the Manager; or
(d) a change in the composition of the governing body of the Manager, other than
in the ordinary course of business, which results in the replacement of more
than fifty (50%) percent of the membership of such governing body, as a result
of one transaction or a series of related transactions."
Except as modified hereby all of the other terms and provisions of the
Management Agreement shall be unchanged and shall remain in full force and
effect.
EXECUTED under seal on this 15th day of April, 1998.
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Richard Zermani
-----------------------------
Name: Richard Zermani
Title: Vice President
CHANCELLOR OF ABERDEEN, INC.
By: /s/ James M. Clary
-----------------------------
Name: James M. Clary
Title: Vice President
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
and 18 independent villas (the "Project") to be located in Bradenton, Florida
described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 25
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Lombardo & Skipper for
the Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from the Developer securing regulatory,
development and construction approvals for the Project and attendant
site improvements. The Owner and the Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection
of the Property and is satisfied as to the site characteristics and
other attributes in all material respects.
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<PAGE>
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any
3
<PAGE>
of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner,
4
<PAGE>
enforceable in accordance with its terms and in compliance with its certificate
of incorporation and bylaws and all applicable laws of the State of Delaware.
5
<PAGE>
ARTICLE II
Construction of the Project
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that DiGiorgio and Associates and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
6
<PAGE>
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
7
<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
8
<PAGE>
Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
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Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by August
31, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02494, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 30th day of September, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
15
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF BROOKLYN, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Brooklyn,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of a 58 unit assisted/independent living
project and 60 independent villas (the "Project") to be located in Brooklyn,
Ohio described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately
sixteen (16) acres of land as more fully described in Exhibit "A". Exhibit "A"
and each of the other Exhibits referred to in this Agreement shall be
incorporated into this Agreement by such reference as if fully set forth in this
Agreement. The Property shall be (i) free and clear of any and all encumbrances
which would, in the Developer's sole discretion, impair the construction or
operation of the Project except as set forth on Exhibit "B", and (ii) free of
any hazardous wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Western Reserve
Engineering, for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
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(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any
3
<PAGE>
of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner,
4
<PAGE>
enforceable in accordance with its terms and in compliance with its certificate
of incorporation and bylaws and all applicable laws of the State of Delaware.
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Bowen and their consulting engineers (the "Architect and Engineers") have
or will be retained by the Owner. The Owner represents and warrants to the
Developer that a true, accurate and complete copy of the Architectural Contract
is attached hereto as Exhibit "H" (the "Architect's Contract"). The Developer
shall not be responsible to the Owner, or any other party for any errors,
omissions, breaches or failures thereof, or any damages resulting from the acts
or omissions of the Architect and Engineers. At the Developer's option, the
Owner shall assign to the Developer all of its right, title and interest in the
Architect's Contract and any and all architectural, engineering and other
contracts with respect to the Project free of any claims other than outstanding
amounts owed under the Architect's Contract. In no event shall the Developer be
obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers
5
<PAGE>
shall meet to review and approve the Basic Plans. The parties shall
initial the Basic Plans to indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
6
<PAGE>
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and
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suppliers of equipment and furnishings. The Developer will cause the applicable
contractor to remedy any defect in construction caused by poor workmanship or
materials which are brought to its attention by written notice within a period
of one (1) year from the date of the issuance of the Certificate of Occupancy.
Aside from the foregoing, the Owner hereby waives and the Developer hereby
disclaims all other express and implied warranties of every kind or nature with
respect to the Project and the Personal Property, including, without limitation,
waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
8
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ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
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Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by April
15, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
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(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the
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transactions contemplated hereby or referred to herein; and each agrees to
indemnify and hold and save the other harmless from any claim or demand for
commission or other compensation by any broker, finder or similar agent claiming
to have been employed by or on behalf of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Brooklyn, Inc., 197 First Avenue, Needham, MA 02194,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the
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validity or enforceability of this remaining portions so long as the material
purposes of this Agreement can be determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 10th day of July, 1998 and executed under seal.
Witness: CHANCELLOR OF BROOKLYN, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Burr Ridge, Illinois described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately
19.765 acres of land as more fully described in Exhibit "A". Exhibit "A" and
each of the other Exhibits referred to in this Agreement shall be incorporated
into this Agreement by such reference as if fully set forth in this Agreement.
The Property shall be (i) free and clear of any and all encumbrances which
would, in the Developer's sole discretion, impair the construction or operation
of the Project except as set forth on Exhibit "B", and (ii) free of any
hazardous wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey for the Property, and will be subject to
those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Developer securing regulatory, development and construction approvals
for the Project and attendant site improvements. The Owner and the
Developer each represents to the other that it has reviewed or shall
review the boundary survey and the topographical survey of the Property
and has made a physical inspection of the Property and is satisfied as
to the site characteristics and other attributes in all material
respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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<PAGE>
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
4
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that architects and consulting engineers (the "Architect and Engineers") have or
will be retained by the Owner. The Owner represents and warrants to the
Developer that a true, accurate and complete copy of the Architectural Contract
is attached hereto as Exhibit "H" (the "Architect's Contract"). The Developer
shall not be responsible to the Owner, or any other party for any errors,
omissions, breaches or failures thereof, or any damages resulting from the acts
or omissions of the Architect and Engineers. At the Developer's option, the
Owner shall assign to the Developer all of its right, title and interest in the
Architect's Contract and any and all architectural, engineering and other
contracts with respect to the Project free of any claims other than outstanding
amounts owed under the Architect's Contract. In no event shall the Developer be
obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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<PAGE>
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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<PAGE>
Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
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Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by August
9, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02494, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 19th day of November, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
<PAGE>
EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Chestnut Hill, PA described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 6.17
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Pennoni Associates,
for the Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from the Developer securing regulatory,
development and construction approvals for the Project and attendant
site improvements. The Owner and the Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection
of the Property and is satisfied as to the site characteristics and
other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Martin Architectural and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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<PAGE>
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
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Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
December 16, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02194, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 30th day of September, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 19th day of
March 1997, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and Chancellor of Deerfield Beach, Inc., a
Delaware corporation, with an office at 197 First Avenue, Needham, Massachusetts
02194 (the "Owner").
WHEREAS, the Owner is the operator of a one hundred twenty-eight (128) unit
assisted/independent living facility to be located in Deerfield Beach, Florida
(the "Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the
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rights of the Owner under Section 2.1 of this Agreement to approve the hiring,
disciplining and termination of the Executive Director, the Assistant
Administrator and Director of Resident Services) all personnel involved in the
administration and day-to-day operation of the Facility, including, without
limitation, management, resident assistance and other related personnel,
custodial, food service, cleaning, maintenance and other operational personnel,
and secretarial or bookkeeping personnel, each of whom, other than the Executive
Director (as hereinafter described), shall be employees of the Owner; supervise
the accounting, billing, purchasing and bill payment functions for the Facility;
establish systems of accounts and supervise the maintenance of ledgers and other
primary accounting records by the personnel of the Facility; supervise the
financial affairs of the Facility; establish and supervise the implementation of
operating and capital budgets, including those required to establish
reimbursement rates, if any, with respect to state or federal entitlement
programs as well as self-pay rates; prepare and maintain true, complete and
accurate records necessary for the preparation of such operating budgets;
determine which items of cost and expense properly relate to resident care;
establish and administer financial controls over the operation of the Facility,
develop and establish financial standards and norms by which the income, costs
and operations of the Facility may be evaluated; serve as advisor and consultant
in connection with policy decisions to be made by the Owner; furnish reports to
the Owner as the Owner may reasonably request and provide the Owner with
economic and statistical data in connection with or relative to the operations
of the Facility; represent the Facility in its day-to-day dealings with
creditors, residents, personnel, agents for collection, and insurers; act as
agent for the Owner in disbursing or collecting the funds of the Facility and in
paying the debts and fulfilling the obligations of the Facility; coordinate and
supervise a marketing plan for the Facility to insure that the Facility obtains
full occupancy as soon as possible and, after the Facility has achieved full
occupancy, assist in the development of an annual marketing plan and budget to
maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
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2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and
hire a qualified and properly licensed Executive Director (provided, however,
that the wages, salaries and other compensation of the Executive Director shall
be the responsibility of the Owner as set forth in Section 4.2 hereof) who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees.
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager
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attempts to notify the Owner on a concurrent basis). The Manager shall prepare
and submit to the Owner any certificates of purchasing expenses incurred for the
Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of the Owner any and all moneys owing to the Owner from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after
the close of each calendar month, a balance sheet as of the end of the month and
a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month
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and showing projected expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required of the Owner
under any Financing Agreement or by regulatory authorities showing, inter alia,
projected ordinary and extraordinary expenditures and protected revenues for
such budget period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense,
on behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and
supervise the agreed upon marketing plan for the Facility during the fill-up
phase (the "Marketing Plan"). Monthly statistical census analysis reports will
be generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full occupancy.
For purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance
(this item may be provided by outside parties if economically feasible) and, to
the extent deemed feasible by the
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Manager and the Owner, the services of regular Facility maintenance employees
shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee. As compensation for the services to be rendered by the
Manager during the Term (as hereinafter defined), the Manager shall pay itself,
at its principal office as set forth in Section 18 (or at such other place as
the Manager may from time to time designate in writing), and at the times
hereinafter specified, a monthly management fee (the "Management Fee") equal to
(i) Ten Thousand ($10,000) Dollars per month until the opening of the Facility
for occupancy, (ii) the greater of Ten Thousand ($10,000) Dollars per month or
five (5%) percent of Net Revenues (as hereinafter defined) for the period
commencing on the opening of the Facility for occupancy through the last day of
the twelfth (12th) month following such date, and (iii) five (5%) percent of Net
Revenues for the period commencing on the first day of the month immediately
after the period described in the foregoing clause (ii) through the remainder of
the Term. The Management Fee will be paid in arrears and shall be due and
payable on or before the fifteenth (15th) day of each month following the month
in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following
expenses incurred by it in the management of the business and properties of the
Facility:
(a) Salary and expenses (including, without limitation,
payroll taxes, costs of employee benefit plans, travel, insurance, and fidelity
bonds) of all personnel employed by the Manager (other than the Executive
Director, who will be paid by the Owner as set forth in Section 4.2 hereof) to
carry out all responsibilities detailed above.
(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of all of the Manager's home office personnel and overhead.
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4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed at the Facility by
the Owner, including, without limitation, all administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available to
the Manager as of the date such payments were due, shall be the responsibility
of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen
and food service equipment, linens, beds, furniture, clothing and all other
supplies and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
Facility, and any other litigation or proceedings to which the Owner is a party.
However, such fees shall not include those fees resulting from or arising out of
the gross negligence by the Manager and the Owner shall provide such necessary
funds to the Manager within ten (10) days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be
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paid on behalf of the Owner by the Manager, the Manager shall promptly notify
the Owner of the amount necessary to cure and the reason for such deficit and
the Owner shall provide such necessary funds to the Manager within ten (10) days
after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The Manager,
on behalf of the Owner, shall use reasonable efforts to collect (using legal
counsel approved by the Owner, if necessary) all sums due and owing to Owner in
connection with the operation of the Facility. The Manager and the Owner shall
deposit into such accounts all monies furnished by the Owner as working funds
and all receipts and monies arising from the operation of the Facility or
otherwise received by the Owner or by the Manager for or on the behalf of the
Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers.
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All dealings between the Owner and the Manager are at arms length as between
non-related parties.
7. Term and Termination.
7.1 Term. This Agreement shall continue for an initial term (the
"Initial Term") commencing on the date which is twelve (12) months prior to the
anticipated date (as mutually agreed to by the Owner and the Manager) for the
opening of the Facility and continue for a period of ten (10) years after the
date on which the Facility is opened for occupancy. The Owner and Manager agree
to execute a certificate setting forth the date on which the Initial Term
commences promptly after such opening. The Term of this Agreement shall be
automatically renewed for three (3) additional five (5) year terms (the "Renewal
Terms)", unless the Manager sends the Owner written notice no less than ninety
(90) days prior to the Initial Term or the then applicable Renewal Term, as the
case may be. The Initial Term and the Renewal Terms being collectively referred
to herein as the "Term".
7.2 Termination for Cause. Either party may terminate this
Agreement by delivering thirty (30) days written notice (a "Termination Notice")
to the other party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the
operation of the Facility;
(ii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iii) the breach by any party (the "Breaching Party") of
any other material provision in, or obligation imposed by, this Agreement which
violation shall have not been cured to the reasonable satisfaction of the other
party (the "Claiming Party") within thirty (30) days following the date on which
the Claiming Party delivers notice to the Breaching Party describing with
specificity both the claimed breach and the actions required to be taken in
order to cure the claimed breach; provided that in the event that the claimed
breach is not reasonably susceptible of being cured within thirty (30) days, the
cure period shall be extended for such additional time as may be reasonably
required, provided further that in the event that the Claiming Party delivers a
Termination Notice and the Breaching Party commences legal proceedings
contesting the termination within thirty (30) days following delivery of the
Termination Notice, then this Agreement shall not terminate unless and until a
final judicial resolution of such legal proceedings beyond the expiration of any
appeal period has been issued upholding said termination.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
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8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and complete
records. The Manager shall indemnify the Owner and hold it harmless of, from and
against all Costs incurred or suffered by the Owner as a result of any of the
Manager's fraud, willful misconduct, or gross negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies or to keep true, accurate and complete records.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v) (1) (i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
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13. Assignment. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert M. Kaufman, Chief Executive Officer
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: Chancellor of Deerfield Beach, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail or are hand delivered shall be deemed
received upon delivery or when delivery is refused to the office or address of
the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the
11
<PAGE>
property of the Manager. All financial management forms, documents and software
systems including, but not limited to, bookkeeping manuals, financial forms,
financial spreadsheets, database or word processing forms, financial accounting
packages and outcome information systems are and will remain the property of the
Manager. Upon termination of this Agreement, the Owner shall have the option to
purchase operational material belonging to the Manager, except for the financial
accounting packages and outcome information systems, at a mutually agreed upon
price.
18. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after the receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement substantially in the form attached hereto as
Exhibit A (the "Lease"), which Lease shall include, without limitation, a ten
(10) year initial term (with three (3) 5-year renewal terms) and rental payments
equal to the fair market value (which will be a negotiated percentage of total
project costs) as determined immediately prior to the initial term of the Lease
and immediately prior to any renewal terms.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: By: /s/ Jeffery P. Neterval
--------------------------- ------------------------------------
Name: Name: Jeffery P. Neterval
Title: Vice President
WITNESS: CHANCELLOR OF DEERFIELD
BEACH, INC.
By: By: /s/ Jeffery P. Neterval
--------------------------- ------------------------------------
Name: Name: Jeffery P. Neterval
Title: Vice President
12
CONSULTING AGREEMENT
(Deerfield Beach)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between Chancellor of Deerfield Beach, Inc., a Delaware corporation
(the "Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation
(the "Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facility located at Deerfield
Beach, Florida.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Twenty-Two Thousand Two Hundred Twenty-Two and 22/100 Dollars ($22,222.22) (the
"Consulting Fee), per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
service, delivered
2
<PAGE>
by a nationally recognized overnight delivery service, or mailed by registered
or certified mail (postage prepaid), return receipt requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. Chancellor of Deerfield Beach, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CHANCELLOR OF DEERFIELD BEACH, INC.
Presence of:
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: David B. Currie
Print Name: Title: Vice President
--------------------
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: David B. Currie
Print Name: Title: Vice President
--------------------
4
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
---------------------------------------
This First Amendment to Management Agreement (this "Amendment") is
entered into as of the 15th day of April, 1998, by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation (the "Manager"), and Chancellor of
Deerfield Beach, Inc. (the "Owner").
WHEREAS, reference is made to that certain Management Agreement dated
as of March 19, 1997 and entered into by and between the Manager and the Owner
(the "Management Agreement"); and
WHEREAS, the Manager and the Owner desire to revise the term of the
Management Agreement and include a right of termination of the Owner in the
event certain events do not occur after a "change in control" of the Manager as
described below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Manager and the Owner agree as
follows:
1. Capitalized terms used herein but not defined in this Amendment
shall have the same meanings given to them in the Management Agreement.
2. Section 7.1 (Term) of the Management Agreement is hereby deleted in
its entirety and the following is hereby substituted therefore:
"7.1 Term. This Agreement shall continue for a term (the "Term")
commencing on the date which is twelve (12) months prior to the anticipated date
(as mutually agreed to by the Owner and the Manager) for the opening of the
Facility and continue for a period of ten (10) years after the date on which the
Facility is opened for occupancy. The Owner and Manager agree to execute a
certificate setting forth the date on which the Term commences promptly after
such opening."
3. The following Section 7.4 is hereby inserted immediately after
Section 7.3 of the Management Agreement:
"7.4 Termination Upon Change of Control. The Owner shall have the right
to terminate this Agreement upon thirty (30) days written notice to the Manager
in the event that there has been a "change in control" of the Manager during the
Term and the Owner and the Manager have not executed the Lease (defined below)
in accordance with Section 18 below within the later to occur of (i) fifteen
(15) months following the receipt of the certificate of occupancy for the
Facility, or (ii) one (1) year following the "change of control" of the Manager.
For purposes of this provision, "change of control" shall mean with respect to
the Manager: (a) the transfer of all or substantially all of the assets of the
Manager; (b) the transfer of an equity interest in the Manager after which the
acquiror
<PAGE>
holds more than fifty (50%) percent of the voting power of all equity interests
in the Manager; (c) the merger, consolidation, or other reorganization of the
Manager with or into another entity, which results in a change of more than
fifty (50%) percent of the composition of the governing body of the Manager; or
(d) a change in the composition of the governing body of the Manager, other than
in the ordinary course of business, which results in the replacement of more
than fifty (50%) percent of the membership of such governing body, as a result
of one transaction or a series of related transactions."
Except as modified hereby all of the other terms and provisions of the
Management Agreement shall be unchanged and shall remain in full force and
effect.
EXECUTED under seal on this 15th day of April, 1998.
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
------------------------------------
Name: David B. Currie
Title: Vice President
CHANCELLOR OF DEERFIELD BEACH, INC.
By: /s/ David B. Currie
------------------------------------
Name: David B. Currie
Title: Vice President
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Garden City, New York described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 10
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Sear Brown Group, for
the Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from the Developer securing regulatory,
development and construction approvals for the Project and attendant
site improvements. The Owner and the Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection
of the Property and is satisfied as to the site characteristics and
other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
2
<PAGE>
surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
3
<PAGE>
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
4
<PAGE>
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that DiMella Schaffer and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
5
<PAGE>
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
6
<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
7
<PAGE>
Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
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Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
October 1, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02194, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 3rd day of March, 1998 and executed under seal.
WITNESS: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
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MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 26th day of
September 1997, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and Chancellor Senior Housing Group, Inc.,
a Delaware corporation, or its designee or assignee, with its principal place of
business at 197 First Avenue, Needham, Massachusetts 02194 (the "Owner").
WHEREAS, the Owner is the operator of a sixty-three (63) unit
assisted/independent living facility to be located in Merrillville, Indiana (the
"Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the rights of the Owner
under Section 2.1 of this Agreement to approve the hiring, disciplining and
termination of the Executive Director, the Assistant Administrator and Director
of Resident Services) all personnel
<PAGE>
involved in the administration and day-to-day operation of the Facility,
including, without limitation, management, resident assistance and other related
personnel, custodial, food service, cleaning, maintenance and other operational
personnel, and secretarial or bookkeeping personnel, each of whom, other than
the Executive Director (as hereinafter described), shall be employees of the
Owner; supervise the accounting, billing, purchasing and bill payment functions
for the Facility; establish systems of accounts and supervise the maintenance of
ledgers and other primary accounting records by the personnel of the Facility;
supervise the financial affairs of the Facility; establish and supervise the
implementation of operating and capital budgets, including those required to
establish reimbursement rates, if any, with respect to state or federal
entitlement programs as well as self-pay rates; prepare and maintain true,
complete and accurate records necessary for the preparation of such operating
budgets; determine which items of cost and expense properly relate to resident
care; establish and administer financial controls over the operation of the
Facility, develop and establish financial standards and norms by which the
income, costs and operations of the Facility may be evaluated; serve as advisor
and consultant in connection with policy decisions to be made by the Owner;
furnish reports to the Owner as the Owner may reasonably request and provide the
Owner with economic and statistical data in connection with or relative to the
operations of the Facility; represent the Facility in its day-to-day dealings
with creditors, residents, personnel, agents for collection, and insurers; act
as agent for the Owner in disbursing or collecting the funds of the Facility and
in paying the debts and fulfilling the obligations of the Facility; coordinate
and supervise a marketing plan for the Facility to insure that the Facility
obtains full occupancy as soon as possible and, after the Facility has achieved
full occupancy, assist in the development of an annual marketing plan and budget
to maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
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2.1 Employees. The Manager shall recruit, evaluate, select, and
hire a qualified and properly licensed Executive Director (provided, however,
that the wages, salaries and other compensation of the Executive Director shall
be the responsibility of the Owner as set forth in Section 4.2 hereof) who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees.
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager attempts to notify the Owner on a concurrent basis). The
Manager shall prepare and submit to the Owner any certificates of purchasing
expenses incurred for the Facility as may be reasonably requested.
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2.3 Collection of Accounts. The Manager shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of the Owner any and all moneys owing to the Owner from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner
the following financial reports:
(a) as soon as possible and not later than thirty (30) days after
the close of each calendar month, a balance sheet as of the end of the month and
a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month and showing
projected expenditures and projected revenues for such budget period; and (b)
such other budgets as may be reasonably required of the Owner under any
Financing Agreement or by regulatory authorities showing, inter alia, projected
ordinary and extraordinary expenditures and protected revenues for such budget
period.
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2.8 Insurance. The Manager shall obtain, at the Owner's expense,
on behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and
supervise the agreed upon marketing plan for the Facility during the fill-up
phase (the "Marketing Plan"). Monthly statistical census analysis reports will
be generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full occupancy.
For purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance
(this item may be provided by outside parties if economically feasible) and, to
the extent deemed feasible by the Manager and the Owner, the services of regular
Facility maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
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3. Management Fee. As compensation for the services to be rendered by the
Manager during the Term (as hereinafter defined), the Manager shall pay itself,
at its principal office as set forth in Section 18 (or at such other place as
the Manager may from time to time designate in writing), and at the times
hereinafter specified, a monthly management fee (the "Management Fee") equal to
(i) Ten Thousand ($10,000) Dollars per month until the opening of the Facility
for occupancy, (ii) the greater of Ten Thousand ($10,000) Dollars per month or
five (5%) percent of Net Revenues (as hereinafter defined) for the period
commencing on the opening of the Facility for occupancy through the last day of
the twelfth (12th) month following such date, and (iii) five (5%) percent of Net
Revenues for the period commencing on the first day of the month immediately
after the period described in the foregoing clause (ii) through the remainder of
the Term. The Management Fee will be paid in arrears and shall be due and
payable on or before the fifteenth (15th) day of each month following the month
in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following
expenses incurred by it in the management of the business and properties of the
Facility:
(a) Salary and expenses (including, without limitation,
payroll taxes, costs of employee benefit plans, travel, insurance, and fidelity
bonds) of all personnel employed by the Manager (other than the Executive
Director, who will be paid by the Owner as set forth in Section 4.2 hereof) to
carry out all responsibilities detailed above.
(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of all of the Manager's home office personnel and overhead.
4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed at the Facility by
the Owner, including, without limitation, all administrative, medical, resident
6
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assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available to
the Manager as of the date such payments were due, shall be the responsibility
of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen
and food service equipment, linens, beds, furniture, clothing and all other
supplies and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
Facility, and any other litigation or proceedings to which the Owner is a party.
However, such fees shall not include those fees resulting from or arising out of
the gross negligence by the Manager and the Owner shall provide such necessary
funds to the Manager within ten (10) days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be paid on behalf of the Owner by the Manager,
the Manager shall promptly notify the Owner of the amount necessary to cure and
the reason for such deficit and the Owner shall provide such necessary funds to
the Manager within ten (10) days after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the
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Owner on all notes, checks, money orders, insurance payments, and any other
instruments received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The Manager,
on behalf of the Owner, shall use reasonable efforts to collect (using legal
counsel approved by the Owner, if necessary) all sums due and owing to Owner in
connection with the operation of the Facility. The Manager and the Owner shall
deposit into such accounts all monies furnished by the Owner as working funds
and all receipts and monies arising from the operation of the Facility or
otherwise received by the Owner or by the Manager for or on the behalf of the
Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers. All dealings between the
Owner and the Manager are at arms length as between non-related parties.
7. Term and Termination.
7.1 Term. This Agreement shall continue for an initial term (the
"Initial Term") commencing on the date which is twelve (12) months prior to the
anticipated date (as mutually agreed to by the Owner and the Manager) for the
opening of the Facility and continue for a period of ten (10) years after the
date on which the Facility is opened for occupancy. The Owner and Manager agree
to execute a certificate setting forth the date on which the Initial Term
commences promptly after such opening. The Term of this Agreement shall be
automatically renewed for three
8
<PAGE>
(3) additional five (5) year terms (the "Renewal Terms)", unless the Manager
sends the Owner written notice no less than ninety (90) days prior to the
Initial Term or the then applicable Renewal Term, as the case may be. The
Initial Term and the Renewal Terms being collectively referred to herein as the
"Term".
7.2 Termination for Cause. Either party may terminate this
Agreement by delivering thirty (30) days written notice (a "Termination Notice")
to the other party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the
operation of the Facility;
(ii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iii) the breach by any party (the "Breaching Party") of
any other material provision in, or obligation imposed by, this Agreement which
violation shall have not been cured to the reasonable satisfaction of the other
party (the "Claiming Party") within thirty (30) days following the date on which
the Claiming Party delivers notice to the Breaching Party describing with
specificity both the claimed breach and the actions required to be taken in
order to cure the claimed breach; provided that in the event that the claimed
breach is not reasonably susceptible of being cured within thirty (30) days, the
cure period shall be extended for such additional time as may be reasonably
required, provided further that in the event that the Claiming Party delivers a
Termination Notice and the Breaching Party commences legal proceedings
contesting the termination within thirty (30) days following delivery of the
Termination Notice, then this Agreement shall not terminate unless and until a
final judicial resolution of such legal proceedings beyond the expiration of any
appeal period has been issued upholding said termination.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and complete
records. The Manager shall indemnify the Owner and hold it harmless of, from and
against all Costs incurred or suffered by the Owner as a result of any of the
Manager's fraud, willful misconduct, or gross negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies or to keep true, accurate and complete records.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v) (1) (i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in
9
<PAGE>
accordance with the above-mentioned section of the Act and regulations
promulgated pursuant thereto, make available to the Comptroller General, the
Secretary of Health and Human Services, and their duly authorized
representatives, a copy of this Agreement and access to the Manager's
10
<PAGE>
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
13. Assignment. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
11
<PAGE>
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert M. Kaufman, Chief Executive Officer
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: Chancellor Senior Housing Group, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail or are hand delivered shall be deemed
received upon delivery or when delivery is refused to the office or address of
the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, financial accounting packages and outcome information systems are and
will remain the property of the Manager. Upon termination of this Agreement, the
Owner shall have the option to purchase operational material belonging to the
Manager, except for the financial accounting packages and outcome information
systems, at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: By: /s/ Richard P. Zermani
-------------------------------- -------------------------------
Name: Name: Richard P. Zermani
Title: Vice President
WITNESS: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: By: /s/ Richard P. Zermani
-------------------------------- -------------------------------
Name: Name: Richard P. Zermani
Title: Vice President
13
ASSIGNMENT AGREEMENT
--------------------
THIS ASSIGNMENT AGREEMENT (this "Agreement") made this 19th day of
November, 1997, by and between Chancellor Senior Housing Group, Inc., a Delaware
corporation ("CSHG"), and Chancellor of Merrillville, Inc., a Delaware
corporation ("Chancellor").
W I T N E S S E T H
WHEREAS, CSHG has entered into that certain Management Agreement with
CareMatrix of Massachusetts, Inc. ("CareMatrix"), dated July 25, 1997 for the
management of a senior housing facility to be located in Merrillville, Indiana
(the "Management Agreement"); and
WHEREAS, CSHG desires to assign its rights and obligations under the
Management Agreement to Chancellor and Chancellor desires to assume such rights
and obligations.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. CSHG hereby assigns, sets over and transfers unto Chancellor to
have and to hold from and after the date hereof, all of the
right, title and interest of CSHG in, to and under the Management
Agreement, and Chancellor hereby accepts the within assignment
and assumes and agrees with CSHG, to perform and comply with and
to be bound by all of the terms, covenants, agreements,
provisions and conditions of the Management Agreement on the part
of CSHG thereunder to be performed on and after the date hereof,
in the same manner and with the same force and effect as if
Chancellor had originally executed the Management Agreement.
2. This Agreement (i) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, (ii) shall be governed by the laws of the Commonwealth
of Massachusetts, and (iii) may not be modified orally, but only
by a writing signed by each of CSHG and Chancellor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ Richard Zermani
------------------------------------
Richard Zermani
Vice President
CHANCELLOR OF MERRILLVILLE, INC.
By: /s/ Richard Zermani
------------------------------------
Richard Zermani
Vice President
ACKNOWLEDGED AND AGREED:
CAREMATRIX OF MASSACHUSETTS, INC.
By:
----------------------------------
Jeffrey Neterval
Vice President
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
This First Amendment to Management Agreement (this "Amendment") is
entered into as of the 15th day of April, 1998, by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation (the "Manager"), and Chancellor of
Merrillville, Inc. (the "Owner").
WHEREAS, reference is made to that certain Management Agreement dated
as of September 26, 1997 and entered into by and between the Manager and
Chancellor Senior Housing Group, Inc. (the "Management Agreement");
WHEREAS, reference is made to that certain Assignment Agreement dated
November 19, 1997 and entered into by and between Chancellor Senior Housing
Group, Inc., as Assignor, and the Owner, as Assignee, in which the Assignor
assigned its rights and obligations under the Management Agreement to the Owner;
WHEREAS, reference is made to that certain Lease Agreement dated as of
November 13, 1997 and entered into by and between Health Care REIT, Inc., as
Lessor, and Owner, as Lessee (the "Lease Agreement"); and
WHEREAS, the Manager and the Owner desire to revise the term of the
Management Agreement and include a right of termination of the Owner in the
event certain events do not occur after a "change in control" of the Manager as
described below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Manager and the Owner agree as
follows:
1. Capitalized terms used herein but not defined in this Amendment
shall have the same meanings given to them in the Management Agreement.
2. Section 7.1 (Term) of the Management Agreement is hereby deleted in
its entirety and the following is hereby substituted therefore:
"7.1 Term. This Agreement shall continue for a term (the "Term")
commencing on the date which is twelve (12) months prior to the anticipated date
(as mutually agreed to by the Owner and the Manager) for the opening of the
Facility and continue for a period of ten (10) years after the date on which the
Facility is opened for occupancy. The Owner and Manager agree to execute a
certificate setting forth the date on which the Term commences promptly after
such opening."
3. The following Section 7.4 is hereby inserted immediately after
Section 7.3 of the Management Agreement:
<PAGE>
"7.4 Termination Upon Change of Control. The Owner shall have the right
to terminate this Agreement upon thirty (30) days written notice to the Manager
in the event that there has been a "change in control" of the Manager during the
Term and the Owner has not assigned its interest, as lessee, in the Lease
Agreement dated November 13, 1997 and entered into by and between Health Care
REIT, Inc., as Lessor, and Owner, as Lessee (the "Lease Agreement") to the
Manager in accordance with Section 25.18 of the Lease Agreement within the later
to occur of (i) fifteen (15) months following the receipt of the certificate of
occupancy for the Facility, or (ii) one (1) year following the "change of
control" of the Manager. For purposes of this provision, "change of control"
shall mean with respect to the Manager: (a) the transfer of all or substantially
all of the assets of the Manager; (b) the transfer of an equity interest in the
Manager after which the acquiror holds more than fifty (50%) percent of the
voting power of all equity interests in the Manager; (c) the merger,
consolidation, or other reorganization of the Manager with or into another
entity, which results in a change of more than fifty (50%) percent of the
composition of the governing body of the Manager; or (d) a change in the
composition of the governing body of the Manager, other than in the ordinary
course of business, which results in the replacement of more than fifty (50%)
percent of the membership of such governing body, as a result of one transaction
or a series of related transactions."
Except as modified hereby all of the other terms and provisions of the
Management Agreement shall be unchanged and shall remain in full force and
effect.
EXECUTED under seal on this 15th day of April, 1998.
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
-------------------------------------
Name: Jeffrey P. Neterval
Title: Vice President
CHANCELLOR OF MERRILLVILLE, INC.
By: /s/ Jeffrey P. Neterval
-------------------------------------
Name: Jeffrey P. Neterval
Title: Vice President
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Old Saybrook, Connecticut described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 8.1
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Milone & MacBroom for
the Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from the Developer securing regulatory,
development and construction approvals for the Project and attendant
site improvements. The Owner and the Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection
of the Property and is satisfied as to the site characteristics and
other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
2
<PAGE>
surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
3
<PAGE>
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
4
<PAGE>
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Stein/Troost and their consulting engineers (the "Architect and Engineers")
have or will be retained by the Owner. The Owner represents and warrants to the
Developer that a true, accurate and complete copy of the Architectural Contract
is attached hereto as Exhibit "H" (the "Architect's Contract"). The Developer
shall not be responsible to the Owner, or any other party for any errors,
omissions, breaches or failures thereof, or any damages resulting from the acts
or omissions of the Architect and Engineers. At the Developer's option, the
Owner shall assign to the Developer all of its right, title and interest in the
Architect's Contract and any and all architectural, engineering and other
contracts with respect to the Project free of any claims other than outstanding
amounts owed under the Architect's Contract. In no event shall the Developer be
obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
5
<PAGE>
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
6
<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
7
<PAGE>
Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
8
<PAGE>
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
9
<PAGE>
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
December 31, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
10
<PAGE>
advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
11
<PAGE>
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02494, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
12
<PAGE>
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 1st day of September, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
13
<PAGE>
EXHIBITS A - I
Documents in Development Files
14
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 31st day
of December, 1997, between CCC of New Jersey, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain management and consulting services for the Company, and the Consultant
desires to be retained by the Company; and
WHEREAS, the Company is the Manager of that two hundred and ten (210)
licensed bed skilled nursing facility to be located in Park Ridge, New Jersey
(the "Facility") and the Consultant desire to set forth the terms and conditions
on which the Consultant shall be retained by and provide services to the Company
at the Facility.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon the request of the Company, certain management
and consulting services relating to the pre-opening marketing and management of
the Facility for the Company.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a monthly retainer of Ten
Thousand ($10,000) Dollars (the "Retainer"), payable on the first (1st) day of
each calendar month during the term of this Agreement.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
December 31, 1997 (the "Effective Date") and continue for a period of
twenty-four (24) months. Notwithstanding the foregoing, either the Company or
the Consultant may terminate this Agreement at any time after the Effective Date
for any reason by
<PAGE>
providing thirty (30) days prior written notice of such intention to terminate
to the other party.
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and is not and shall not be an employee of the
Company. Neither the Consultant nor the Company shall hold the Consultant out as
an agent, partner, officer, director, or other employee of the Company and the
Consultant further specifically disclaims any and all rights to an equity
interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
6. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
7. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
8. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
service, telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, addressed to:
2
<PAGE>
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. CCC of New Jersey, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02194 Needham, MA 02194
Attn: President Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex, and (d) on the date upon which the return receipt is signed or delivery
is refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
9. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
10. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
11. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
11.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
11.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
CCC OF NEW JERSEY, INC.
By: /s/ James M. Clary, III
-----------------------------------
Name: James M. Clary, III
Title: Vice President
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary, III
-----------------------------------
Name: James M. Clary, III
Title: Vice President
4
CONSULTING AGREEMENT
(Park Ridge/Princeton)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between CCC of New Jersey, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facilities located at
Princeton, New Jersey and Park Ridge, New Jersey.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Forty-Four Thousand Four Hundred Forty-Four and 44/100 Dollars ($44,444.44) (the
"Consulting Fee), per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
2
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
service, delivered
2
<PAGE>
by a nationally recognized overnight delivery service, or mailed by registered
or certified mail (postage prepaid), return receipt requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. CCC of New Jersey, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CCC OF NEW JERSEY, INC.
Presence of:
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Print Name: Name: David B. Currie
-------------------- Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Print Name: Name: David B. Currie
-------------------- Title: Vice President
4
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Southbury, Connecticut described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 4.5
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Bradford & Smith &
Son, for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Stein Toost and their consulting engineers (the "Architect and Engineers")
have or will be retained by the Owner. The Owner represents and warrants to the
Developer that a true, accurate and complete copy of the Architectural Contract
is attached hereto as Exhibit "H" (the "Architect's Contract"). The Developer
shall not be responsible to the Owner, or any other party for any errors,
omissions, breaches or failures thereof, or any damages resulting from the acts
or omissions of the Architect and Engineers. At the Developer's option, the
Owner shall assign to the Developer all of its right, title and interest in the
Architect's Contract and any and all architectural, engineering and other
contracts with respect to the Project free of any claims other than outstanding
amounts owed under the Architect's Contract. In no event shall the Developer be
obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
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(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
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Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
February 28, 2000.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02494, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 1st day of July, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 1st day of
August, 1998, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and The Cragganmore Associates Limited
Partnership, a Connecticut limited partnership, with its principal place of
business at 197 First Avenue, Needham, Massachusetts 02194 (the "Owner").
WHEREAS, the Owner is the operator of a ninety-two (92) unit assisted
living facility located at 58 Mulberry Street, Southington, Connecticut (the
"Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the rights of the Owner
under Section 2.1 of this Agreement to approve the hiring, disciplining and
termination of the Executive Director, the Assistant Administrator and Director
of Resident Services) all personnel involved in the administration and
day-to-day operation of the Facility,
<PAGE>
including, without limitation, management, resident assistance and other related
personnel, custodial, food service, cleaning, maintenance and other operational
personnel, and secretarial or bookkeeping personnel, each of whom, other than
the Executive Director (as hereinafter described), shall be employees of the
Owner; supervise the accounting, billing, purchasing and bill payment functions
for the Facility; establish systems of accounts and supervise the maintenance of
ledgers and other primary accounting records by the personnel of the Facility;
supervise the financial affairs of the Facility; establish and supervise the
implementation of operating and capital budgets, including those required to
establish reimbursement rates, if any, with respect to state or federal
entitlement programs as well as self-pay rates; prepare and maintain true,
complete and accurate records necessary for the preparation of such operating
budgets; determine which items of cost and expense properly relate to resident
care; establish and administer financial controls over the operation of the
Facility, develop and establish financial standards and norms by which the
income, costs and operations of the Facility may be evaluated; serve as advisor
and consultant in connection with policy decisions to be made by the Owner;
furnish reports to the Owner as the Owner may reasonably request and provide the
Owner with economic and statistical data in connection with or relative to the
operations of the Facility; represent the Facility in its day-to-day dealings
with creditors, residents, personnel, agents for collection, and insurers; act
as agent for the Owner in disbursing or collecting the funds of the Facility and
in paying the debts and fulfilling the obligations of the Facility; coordinate
and supervise a marketing plan for the Facility to insure that the Facility
obtains full occupancy as soon as possible and, after the Facility has achieved
full occupancy, assist in the development of an annual marketing plan and budget
to maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
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2.1 Employees. The Manager shall recruit, evaluate, select, and
hire a qualified and properly licensed Executive Director (provided, however,
that the wages, salaries and other compensation of the Executive Director shall
be the responsibility of the Owner as set forth in Section 4.2 hereof) who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees.
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager attempts to notify the Owner on a concurrent basis). The
Manager shall prepare and submit to the Owner any certificates of purchasing
expenses incurred for the Facility as may be reasonably requested.
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2.3 Collection of Accounts. The Manager shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of the Owner any and all moneys owing to the Owner from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after
the close of each calendar month, a balance sheet as of the end of the month and
a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month and showing
projected expenditures and projected revenues for such budget period; and (b)
such other budgets as may be reasonably required of the Owner under any
Financing Agreement or by regulatory authorities showing, inter alia, projected
ordinary and extraordinary expenditures and protected revenues for such budget
period.
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2.8 Insurance. The Manager shall obtain, at the Owner's expense,
on behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and
supervise the agreed upon marketing plan for the Facility during the fill-up
phase (the "Marketing Plan"). Monthly statistical census analysis reports will
be generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full occupancy.
For purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance
(this item may be provided by outside parties if economically feasible) and, to
the extent deemed feasible by the Manager and the Owner, the services of regular
Facility maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
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<PAGE>
3. Management Fee. As compensation for the services to be rendered
by the Manager during the Term (as hereinafter defined), the Manager shall pay
itself, at its principal office as set forth in Section 18 (or at such other
place as the Manager may from time to time designate in writing), and at the
times hereinafter specified, a monthly management fee (the "Management Fee")
equal to five percent (5%) of Net Revenues during the Term (as hereinafter
defined). The Management Fee will be paid in arrears and shall be due and
payable on or before the fifteenth (15th) day of each month following the month
in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following
expenses incurred by it in the management of the business and properties of the
Facility:
(a) Salary and expenses (including, without limitation,
payroll taxes, costs of employee benefit plans, travel, insurance, and fidelity
bonds) of all personnel employed by the Manager (other than the Executive
Director, who will be paid by the Owner as set forth in Section 4.2 hereof) to
carry out all responsibilities detailed above.
(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of all of the Manager's home office personnel and overhead.
4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed at the Facility by
the Owner, including, without limitation, all administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
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<PAGE>
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available to
the Manager as of the date such payments were due, shall be the responsibility
of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen
and food service equipment, linens, beds, furniture, clothing and all other
supplies and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
Facility, and any other litigation or proceedings to which the Owner is a party.
However, such fees shall not include those fees resulting from or arising out of
the gross negligence by the Manager and the Owner shall provide such necessary
funds to the Manager within ten (10) days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be paid on behalf of the Owner by the Manager,
the Manager shall promptly notify the Owner of the amount necessary to cure and
the reason for such deficit and the Owner shall provide such necessary funds to
the Manager within ten (10) days after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings
7
<PAGE>
and loan institution or institutions whose deposits are insured by the Federal
Savings and Loan Insurance Corporation ("FSLIC") as it deems necessary or
desirable. The Manager, on behalf of the Owner, shall use reasonable efforts to
collect (using legal counsel approved by the Owner, if necessary) all sums due
and owing to Owner in connection with the operation of the Facility. The Manager
and the Owner shall deposit into such accounts all monies furnished by the Owner
as working funds and all receipts and monies arising from the operation of the
Facility or otherwise received by the Owner or by the Manager for or on the
behalf of the Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose on any
of them any liability as partners or joint venturers. All dealings between the
Owner and the Manager are at arms length as between non-related parties.
7. Term and Termination.
7.1 Term. This Agreement shall commence on August 1, 1998 and
continue for a period of ten (10) years (the "Term").
7.2 Termination for Cause. Either party may terminate this
Agreement by delivering thirty (30) days written notice (a "Termination Notice")
to the other party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the
operation of the Facility;
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(ii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iii) the breach by any party (the "Breaching Party") of
any other material provision in, or obligation imposed by, this Agreement which
violation shall have not been cured to the reasonable satisfaction of the other
party (the "Claiming Party") within thirty (30) days following the date on which
the Claiming Party delivers notice to the Breaching Party describing with
specificity both the claimed breach and the actions required to be taken in
order to cure the claimed breach; provided that in the event that the claimed
breach is not reasonably susceptible of being cured within thirty (30) days, the
cure period shall be extended for such additional time as may be reasonably
required, provided further that in the event that the Claiming Party delivers a
Termination Notice and the Breaching Party commences legal proceedings
contesting the termination within thirty (30) days following delivery of the
Termination Notice, then this Agreement shall not terminate unless and until a
final judicial resolution of such legal proceedings beyond the expiration of any
appeal period has been issued upholding said termination.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and complete
records. The Manager shall indemnify the Owner and hold it harmless of, from and
against all Costs incurred or suffered by the Owner as a result of any of the
Manager's fraud, willful misconduct, or gross negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies or to keep true, accurate and complete records.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v) (1) (i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
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The provisions of this Section shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
13. Assignment. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert M. Kaufman, Chief Executive Officer
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cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: The Cragganmore Associates Limited Partnership
c/o CarePlex of Southington, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail or are hand delivered shall be deemed
received upon delivery or when delivery is refused to the office or address of
the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, financial accounting packages and outcome information systems are and
will remain the property of the Manager. Upon termination of this Agreement, the
Owner shall have the option to purchase operational material belonging to the
Manager, except for the financial accounting packages and outcome information
systems, at a mutually agreed upon price.
18. Lease Option/Obligation. The Owner hereby agrees that so long as the
Manager is not in default in the performance of any duty or any obligation
hereunder, the Manager shall have the option to lease the Facility at any time
during the term of this Agreement (including any extension thereof) by providing
the Owner with at least ninety (90) days prior written notice of such election.
Within thirty (30) days after the receipt of the Manager's notice to lease, the
parties shall enter into a lease agreement substantially in the form attached
hereto as Exhibit A (the "Lease"), which Lease shall include, without
limitation, a fifteen (15) year initial term (with three (3) 5-year renewal
terms) and rental payments equal to the fair market value (which will be a
negotiated percentage of total project costs) as determined immediately prior to
the initial term of the Lease and immediately prior to any renewal terms.
Notwithstanding the foregoing, in the event of a "change of control"
(defined below) of the Manager at any time during the Term of this Agreement,
the Manager shall have the obligation to lease the Facility pursuant to the
Lease (described above) upon the earlier to occur of (i) fifteen (15) months
following the receipt of the certificate of occupancy for the Facility, or (ii)
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fifteen (15) months following the "change of control" of the Manager. For
purposes of this provision, "change of control" shall mean with respect to the
Manager: (a) the transfer of all or substantially all of the assets of the
Manager; (b) the transfer of an equity interest in the Manager after which the
acquiror holds more than fifty (50%) percent of the voting power of all equity
interests in the Manager; (c) the merger, consolidation, or other reorganization
of the Manager with or into another entity, which results in a change of more
than fifty (50%) percent of the composition of the governing body of the
Manager; or (d) a change in the composition of the governing body of the
Manager, other than in the ordinary course of business, which results in the
replacement of more than fifty (50%) percent of the membership of such governing
body, as a result of one transaction or a series of related transactions.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: By: /s/ James M. Clary
------------------------------- ------------------------------------
Name: Name: James M. Clary
Title: Vice President
WITNESS: THE CRAGGANMORE ASSOCIATES
LIMITED PARTNERSHIP
By: CarePlex of Southington, Inc.,
Its general partner
By: By: /s/ James M. Clary
------------------------------- ------------------------------------
Name: Name: James M. Clary
Title: Vice President
12
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Chicago, Illinois described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 1.5
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Edward J. Malloy and
Associates, for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Warman, Olsen, Warman and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
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Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
October 1, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02194, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 22nd day of December, 1997 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
and 50 independent villas (the "Project") to be located in Venice, Florida
described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 19.04
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Brigham Surveryors for
the Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from the Developer securing regulatory,
development and construction approvals for the Project and attendant
site improvements. The Owner and the Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection
of the Property and is satisfied as to the site characteristics and
other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that O'Keefe Architects and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
September 30, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02494, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 24th day of December, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02494 (the "Developer"), and Chancellor Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project
(the "Project") to be located in Vernon Hills, Illinois described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 3
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Civil Tech, for the
Property, and will be subject to those easements, conditions,
contracts, rights, licenses, encroachments, restrictions and other
encumbrances resulting from the Developer securing regulatory,
development and construction approvals for the Project and attendant
site improvements. The Owner and the Developer each represents to the
other that it has reviewed or shall review the boundary survey and the
topographical survey of the Property and has made a physical inspection
of the Property and is satisfied as to the site characteristics and
other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Shesky Architects and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by July
1, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02494, Attention: President, or at such other address or addresses the
Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to David B. Currie, Esq. at
the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 31st day of March, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF ABINGTON, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Abington,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project to be
comprised of one hundred ten (110) units (the "Project") to be located in
Abington, Pennsylvania described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 3.65
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Pennoni Associates,
Inc., for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
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(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any
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of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
in
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compliance with its certificate of incorporation and bylaws and all applicable
laws of the State of Delaware.
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Dorsky, Hodgson & Partners and their consulting engineers (the "Architect
and Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect. At the Developer's
option, the Owner shall assign to the Developer all of its right, title and
interest in the Architectural Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architectural Contract. In no
event shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion and delivery of the Basic Plans, the Owner, the
Developer, the Architect and Engineers
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shall meet to review and approve the Basic Plans. The parties shall
initial the Basic Plans to indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
the "F F & E") required for the Project.
(b) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it
shall approve the F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(c) The F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
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Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a Punch-List (as hereinafter defined)
listing items requiring completion or correction, so long as such
conditions or Punch-List items do not prevent or prohibit occupancy as
determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of
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equipment and furnishings. The Developer will cause the applicable contractor to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, the Owner hereby waives and the Developer hereby disclaims all other
express and implied warranties of every kind or nature with respect to the
Project and the Personal Property, including, without limitation, waiving all
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
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ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
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Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
August 31, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
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(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
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Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Abington, Inc., 197 First Avenue, Needham, MA 02194,
Attention: Frederick R. Leathers, or at such other address or addresses
the Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to Jeffrey P. Neterval,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
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Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 31st day of August, 1998 and executed under seal.
Witness: CHANCELLOR OF ABINGTON, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- ------------------------------- ------------------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF CORDOVA, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Cordova, Inc.,
a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project to be
comprised of one hundred forty-eight units and twenty-four (24) villas (the
"Project") to be located in Cordova, Tennessee described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 14.73
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by W.H. Porter &
Associates dated December 18, 1997, for the Property, and will be
subject to those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Developer securing regulatory, development and construction approvals
for the Project and attendant site improvements. The Owner and the
Developer each represents to the other that it has reviewed or shall
review the boundary survey and the topographical survey of the Property
and has made a physical inspection of the Property and is satisfied as
to the site characteristics and other attributes in all material
respects.
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(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the
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Developer's obligations hereunder; provided, however that no transfer
or assignment of any of the foregoing shall occur which is prohibited
by applicable law or the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
in
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compliance with its certificate of incorporation and bylaws and all applicable
laws of the State of Delaware.
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Dorsky, Hodgson & Partners and their consulting engineers (the "Architect
and Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect. At the Developer's
option, the Owner shall assign to the Developer all of its right, title and
interest in the Architectural Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architectural Contract. In no
event shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion and delivery of the Basic Plans, the Owner, the
Developer, the Architect and Engineers
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shall meet to review and approve the Basic Plans. The parties shall
initial the Basic Plans to indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
the "F F & E") required for the Project.
(b) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it
shall approve the F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(c) The F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
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Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a Punch-List (as hereinafter defined)
listing items requiring completion or correction, so long as such
conditions or Punch-List items do not prevent or prohibit occupancy as
determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of
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equipment and furnishings. The Developer will cause the applicable contractor to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, the Owner hereby waives and the Developer hereby disclaims all other
express and implied warranties of every kind or nature with respect to the
Project and the Personal Property, including, without limitation, waiving all
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
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ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
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Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by July
15, 1998.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
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(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
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Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Cordova, Inc., 197 First Avenue, Needham, MA 02194,
Attention: Frederick R. Leathers, or at such other address or addresses
the Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
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Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 20th day of January, 1998 and executed under seal.
Witness: CHANCELLOR OF CORDOVA, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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<PAGE>
EXHIBITS A - I
Documents in Development Files
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF EASTON, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Easton, Inc.,
a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living and senior
housing project to be comprised of two hundred (200) units (the "Project") to be
located in Easton, Connecticut described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 26.8
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Milone & MacBroom,
Inc., for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
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(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the State of Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Stein/Troost and their consulting engineers (the "Architect and Engineers")
have or will be retained by the Owner. The Owner represents and warrants to the
Developer that a true, accurate and complete copy of the Architectural Contract
is attached hereto as Exhibit "H" (the "Architect Contract"). The Developer
shall not be responsible to the Owner, or any other party for any errors,
omissions, breaches or failures thereof, or any damages resulting from the acts
or omissions of the Architect. At the Developer's option, the Owner shall assign
to the Developer all of its right, title and interest in the Architectural
Contract and any and all architectural, engineering and other contracts with
respect to the Project free of any claims other than outstanding amounts owed
under the Architectural Contract. In no event shall the Developer be obligated
to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion and delivery of the Basic Plans, the Owner, the
Developer, the Architect and Engineers shall meet to review and approve
the Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the
5
<PAGE>
same, and make any necessary revisions. The Owner agrees that it will
not unreasonably withhold its approval of the Final Plans if they
conform in all material respects to the Basic Plans. The parties agree
to use their best efforts to reach a prompt and reasonable conclusion
concerning the acceptability of the Final Plans (and the Personal
Property, see Section 2.6). The parties shall initial the Final Plans
as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
the "F F & E") required for the Project.
(b) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it
shall approve the F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(c) The F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
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Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a Punch-List (as hereinafter defined)
listing items requiring completion or correction, so long as such
conditions or Punch-List items do not prevent or prohibit occupancy as
determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of equipment and furnishings.
The Developer will cause the applicable contractor to remedy any defect in
construction caused by poor workmanship or materials which are brought to its
attention by written notice within a period of one (1) year from the date of the
issuance of the Certificate of Occupancy. Aside from the foregoing, the Owner
hereby waives and the Developer hereby disclaims all other express and implied
warranties of every kind or nature with respect to the Project and the Personal
Property, including, without limitation, waiving all IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
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Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
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(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
February 28, 1999.
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(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
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Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Easton, Inc., 197 First Avenue, Needham,
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MA 02194, Attention: Frederick R. Leathers, or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
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Dated this 4th day of December, 1997 and executed under seal.
Witness: CHANCELLOR OF EASTON, INC.
By: /s/ Richard Zermani
- ------------------------------- ------------------------------------
Name: Name: Richard Zermani
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF FLOSSMOOR, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Flossmoor,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project (the
"Project") to be located in Flossmoor, Illinois described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately four
(4) acres of land as more fully described in Exhibit "A". Exhibit "A" and each
of the other Exhibits referred to in this Agreement shall be incorporated into
this Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Edmund M. Burke
Engineering, Ltd., for the Property, and will be subject to those
easements, conditions, contracts, rights, licenses, encroachments,
restrictions and other encumbrances resulting from the Developer
securing regulatory, development and construction approvals for the
Project and attendant site improvements. The Owner and the Developer
each represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that John Sheskey Associates and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
November 13, 1998.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Flossmoor, Inc., 197 First Avenue, Needham, MA 02194,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 31st day of March, 1998 and executed under seal.
Witness: CHANCELLOR OF FLOSSMOOR, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF FT. MYERS, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Ft. Myers,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project (the
"Project") to be located in Ft. Myers, Florida described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately five
(5) acres of land as more fully described in Exhibit "A". Exhibit "A" and each
of the other Exhibits referred to in this Agreement shall be incorporated into
this Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Duane Hall
Engineering, Inc., for the Property, and will be subject to those
easements, conditions, contracts, rights, licenses, encroachments,
restrictions and other encumbrances resulting from the Developer
securing regulatory, development and construction approvals for the
Project and attendant site improvements. The Owner and the Developer
each represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that O'Keefe Architects and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
February 15, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Ft. Myers, Inc., 197 First Avenue, Needham, MA 02194,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 6th day of March, 1998 and executed under seal.
Witness: CHANCELLOR OF FT. MYERS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF HAVERFORD, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Haverford,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project (the
"Project") to be located in Haverford, Pennsylvania described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 4.5
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by a surveyor selected by
the Owner for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that the Martin Architectural Group and their consulting engineers (the
"Architect and Engineers") have or will be retained by the Owner. The Owner
represents and warrants to the Developer that a true, accurate and complete copy
of the Architectural Contract is attached hereto as Exhibit "H" (the
"Architect's Contract"). The Developer shall not be responsible to the Owner, or
any other party for any errors, omissions, breaches or failures thereof, or any
damages resulting from the acts or omissions of the Architect and Engineers. At
the Developer's option, the Owner shall assign to the Developer all of its
right, title and interest in the Architect's Contract and any and all
architectural, engineering and other contracts with respect to the Project free
of any claims other than outstanding amounts owed under the Architect's
Contract. In no event shall the Developer be obligated to assume any of said
contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
December 31, 1998.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of
10
<PAGE>
said parties obtain from the Developer in the course of negotiations
for the transactions contemplated hereby (the "Confidential
Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
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Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Haverford, Inc., 197 First Avenue, Needham, MA 02194,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
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Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 12th day of March, 1998 and executed under seal.
Witness: CHANCELLOR OF HAVERFORD, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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<PAGE>
EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF MT. PROSPECT, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Mt. Prospect,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project (the
"Project") to be located in Mt. Prospect, Illinois described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 10.03
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Intech Consulting,
Inc. for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies
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and surveys, title reports, environmental assessments, appraisals and
other information regarding the Property or the Project which are in
the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
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ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Lucien Lagrange and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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<PAGE>
Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
9
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by August
15, 1998.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Mt. Prospect, Inc., 197 First Avenue, Needham, MA 02194,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 6th day of May, 1998 and executed under seal.
Witness: CHANCELLOR OF MT. PROSPECT, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- ------------------------------- ------------------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CAMBRIDGE HOUSE ASSOCIATES GENERAL PARTNERSHIP
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Cambridge House Associates
General Partnership, a New York general partnership, with an office at 197 First
Avenue, Needham, Massachusetts 02194 (the "Owner"), and is entered into for the
purpose of reducing to a formal writing all of the parties understandings with
respect to the development and construction of an assisted/independent living
project to be comprised of twenty-two (22) villas (the "Project") to be located
in Ossining, New York described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 10.33
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey for the Property, and will be subject to
those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Developer securing regulatory, development and construction approvals
for the Project and attendant site improvements. The Owner and the
Developer each represents to the other that it has reviewed or shall
review the boundary survey and the topographical survey of the Property
and has made a physical inspection of the Property and is satisfied as
to the site characteristics and other attributes in all material
respects.
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(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any
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of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
in
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compliance with its certificate of incorporation and bylaws and all applicable
laws of the State of Delaware.
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Dorsky, Hodgson & Partners and their consulting engineers (the "Architect
and Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect. At the Developer's
option, the Owner shall assign to the Developer all of its right, title and
interest in the Architectural Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architectural Contract. In no
event shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion and delivery of the Basic Plans, the Owner, the
Developer, the Architect and Engineers
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shall meet to review and approve the Basic Plans. The parties shall
initial the Basic Plans to indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
the "F F & E") required for the Project.
(b) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it
shall approve the F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(c) The F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
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Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a Punch-List (as hereinafter defined)
listing items requiring completion or correction, so long as such
conditions or Punch-List items do not prevent or prohibit occupancy as
determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of
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equipment and furnishings. The Developer will cause the applicable contractor to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, the Owner hereby waives and the Developer hereby disclaims all other
express and implied warranties of every kind or nature with respect to the
Project and the Personal Property, including, without limitation, waiving all
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
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ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
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Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
September 1, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
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(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
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Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Cambridge House Associates General Partnership., c/o Chancellor of
Ossining, Inc., 197 First Avenue, Needham, MA 02194, Attention:
Frederick R. Leathers, or at such other address or addresses the Owner
shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to Jeffrey P. Neterval,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
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Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 1st day of September, 1998 and executed under seal.
Witness: CAMBRIDGE HOUSE ASSOCIATES
GENERAL PARTNERSHIP
By: CHANCELLOR OF OSSINING, INC.
/s/ David B. Currie
- --------------------------- -----------------------------------
Name: Name: David B. Currie
Title: Vice President
By: CHANCELLOR OF OSSINING II, INC.
/s/ David B. Currie
- --------------------------- -----------------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- --------------------------- -----------------------------------
Name: Name: David B. Currie
Title: Vice President
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<PAGE>
EXHIBITS A - I
Documents in Development Files
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF PENNINGTON, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Pennington,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project (the
"Project") to be located in Pennington, New Jersey described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 7.39
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by gry Bowski Group,
P.C., for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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<PAGE>
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
4
<PAGE>
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that DiGiorgio Associates, Inc. and their consulting engineers (the "Architect
and Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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<PAGE>
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by August
31, 1998.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other
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advisors to whom disclosure is necessary in order to effectuate the
transactions contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
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Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Pennington, Inc., 197 First Avenue, Needham, MA 02494,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02494, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
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Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 26th day of September, 1997 and executed under seal.
Witness: CHANCELLOR OF PENNINGTON, INC.
By: /s/ Richard Zermani
- --------------------------- -------------------------------
Name: Name: Richard Zermani
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffery P. Neterval
- --------------------------- -------------------------------
Name: Name: Jeffery P. Neterval
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF STONEHAM, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Stoneham,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project (the
"Project") to be located in Stoneham, Massachusetts described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 2.5
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Meridian Engineering,
Inc., for the Property, and will be subject to those easements,
conditions, contracts, rights, licenses, encroachments, restrictions
and other encumbrances resulting from the Developer securing
regulatory, development and construction approvals for the Project and
attendant site improvements. The Owner and the Developer each
represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and
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surveys, title reports, environmental assessments, appraisals and other
information regarding the Property or the Project which are in the
Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any of the
foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
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<PAGE>
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that entering into this Agreement or performing their respective
obligations hereunder will not violate any other agreements or documents by
which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Developer represents that it is empowered and authorized
to execute, deliver and perform its obligations under this Agreement, and, upon
such execution and delivery and subject to the conditions subsequent set forth
in Section 5.1 herein, this Agreement shall be a valid, binding and legal
obligation of the Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws and all applicable
laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to the conditions subsequently set forth in Section 5.1
herein, this Agreement shall be the valid, binding and legal obligation of the
Owner, enforceable in accordance with its terms and in compliance with its
certificate of incorporation and bylaws and all applicable laws of the State of
Delaware.
4
<PAGE>
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Sheskey & Associates and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect's
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect and Engineers. At the
Developer's option, the Owner shall assign to the Developer all of its right,
title and interest in the Architect's Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architect's Contract. In no event
shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect and Engineers, which the Owner shall be obligated to
pay. The Developer neither assumes nor shall be obliged for any debts,
liabilities or obligations of the Owner or related to the Property or the
Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Project on the Property.
The Developer and the Architect and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer
and the Architect and Engineers shall have access to the Project for
all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect and Engineer's
completion and delivery of the Basic Plans, the Owner, the Developer,
and the Architect and Engineers shall meet to review and approve the
Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
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<PAGE>
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" required for the Project including, without
limitation, the furniture, furnishings and equipment (the "FF&E").
(b) In order to reduce the risk that the FF&E will be delivered prior
to the closing, the Owner covenants that it shall approve the FF&E as
soon as practicable but not later than approximately six (6) months
prior to the estimated date of Physical Completion (defined below).
(c) The FF&E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
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Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a punch-list listing items requiring
completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner,
in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "E". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect and Engineers, the general contractor and suppliers of equipment and
furnishings. The Developer will cause the applicable contractor to remedy any
defect in construction caused by poor workmanship or materials which are brought
to its attention by written notice within a period of one (1) year from the date
of the issuance of the
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Certificate of Occupancy. Aside from the foregoing, the Owner hereby waives and
the Developer hereby disclaims all other express and implied warranties of every
kind or nature with respect to the Project and the Personal Property, including,
without limitation, waiving all IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
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(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
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ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by March
23, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of the Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of
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said parties obtain from the Developer in the course of negotiations
for the transactions contemplated hereby (the "Confidential
Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
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Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Stoneham, Inc., 197 First Avenue, Needham, MA 02194,
Attention: James M. Clary, III, Esq., or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
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Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 12th day of December, 1997 and executed under seal.
Witness: CHANCELLOR OF STONEHAM, INC.
By: /s/ Jeffrey P. Neterval
- -------------------------- -----------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- -------------------------- -----------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
13
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR SENIOR HOUSING GROUP, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Senior Housing
Group, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Owner"), and is entered into for the purpose
of reducing to a formal writing all of the parties understandings with respect
to the development and construction of an assisted/independent living project to
be comprised of one hundred forty-eight (148) units and sixty-five (65) villas
(the "Project") to be located in Wellington, Florida described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately 28
acres of land as more fully described in Exhibit "A". Exhibit "A" and each of
the other Exhibits referred to in this Agreement shall be incorporated into this
Agreement by such reference as if fully set forth in this Agreement. The
Property shall be (i) free and clear of any and all encumbrances which would, in
the Developer's sole discretion, impair the construction or operation of the
Project except as set forth on Exhibit "B", and (ii) free of any hazardous
wastes or materials except as set forth on Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey to be prepared by Landmark Surveying and
Mapping, Inc., for the Property, and will be subject to those
easements, conditions, contracts, rights, licenses, encroachments,
restrictions and other encumbrances resulting from the Developer
securing regulatory, development and construction approvals for the
Project and attendant site improvements. The Owner and the Developer
each represents to the other that it has reviewed or shall review the
boundary survey and the topographical survey of the Property and has
made a physical inspection of the Property and is satisfied as to the
site characteristics and other attributes in all material respects.
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<PAGE>
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and the Owner's
Approvals (collectively, the "Approvals") and any other grants of
rights, permits, approvals, or licenses, which may be necessary to
complete the performance of the Developer's obligations hereunder;
provided, however that no transfer or assignment of any
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<PAGE>
of the foregoing shall occur which is prohibited by applicable law or
the respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 5.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
in
4
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compliance with its certificate of incorporation and bylaws and all applicable
laws of the State of Delaware.
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Dorsky, Hodgson & Partners and their consulting engineers (the "Architect
and Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect. At the Developer's
option, the Owner shall assign to the Developer all of its right, title and
interest in the Architectural Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architectural Contract. In no
event shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion and delivery of the Basic Plans, the Owner, the
Developer, the Architect and Engineers
5
<PAGE>
shall meet to review and approve the Basic Plans. The parties shall
initial the Basic Plans to indicate their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
the "F F & E") required for the Project.
(b) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it
shall approve the F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(c) The F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
6
<PAGE>
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a Punch-List (as hereinafter defined)
listing items requiring completion or correction, so long as such
conditions or Punch-List items do not prevent or prohibit occupancy as
determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of
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<PAGE>
equipment and furnishings. The Developer will cause the applicable contractor to
remedy any defect in construction caused by poor workmanship or materials which
are brought to its attention by written notice within a period of one (1) year
from the date of the issuance of the Certificate of Occupancy. Aside from the
foregoing, the Owner hereby waives and the Developer hereby disclaims all other
express and implied warranties of every kind or nature with respect to the
Project and the Personal Property, including, without limitation, waiving all
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
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ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
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Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees, or arising in or about the
Property at any time from the date of this Agreement until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by May
17, 1999.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
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(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information regarding the Project and the business affairs and
operations of the Developer which any of said parties obtain from the
Developer in the course of negotiations for the transactions
contemplated hereby (the "Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
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Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor Senior Housing Group, Inc., 197 First Avenue, Needham, MA
02194, Attention: Frederick R. Leathers, or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to Jeffrey P. Neterval,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
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Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 1st day of April, 1998 and executed under seal.
Witness: CHANCELLOR SENIOR HOUSING
GROUP, INC.
By: /s/ David B. Currie
- -------------------------- -----------------------------
Name: Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ David B. Currie
- -------------------------- -----------------------------
Name: Name: David B. Currie
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
DEVELOPMENT AGREEMENT
Between
CAREMATRIX OF MASSACHUSETTS, INC.
And
CHANCELLOR OF WESTLAKE, INC.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation, with an office at 197 First Avenue,
Needham, Massachusetts 02194 (the "Developer"), and Chancellor of Westlake,
Inc., a Delaware corporation, with an office at 197 First Avenue, Needham,
Massachusetts 02194 (the "Owner"), and is entered into for the purpose of
reducing to a formal writing all of the parties understandings with respect to
the development and construction of an assisted/independent living project to be
comprised of ninety-six (96) units (the "Project") to be located in Westlake,
Ohio described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
---------
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have or has good, record and
marketable title in fee simple to the Property consisting of approximately
eleven and one hundreth (11.1) acres of land as more fully described in Exhibit
"A". Exhibit "A" and each of the other Exhibits referred to in this Agreement
shall be incorporated into this Agreement by such reference as if fully set
forth in this Agreement. The Property shall be (i) free and clear of any and all
encumbrances which would, in the Developer's sole discretion, impair the
construction or operation of the Project except as set forth on Exhibit "B", and
(ii) free of any hazardous wastes or materials except as set forth on Exhibit
"C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will be
subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth
on Exhibit "B" (the "Existing Encumbrances"), to physical conditions
disclosed by a boundary survey prepared by The Western Reserve
Surveying Co. dated March 20, 1998, for the Property, and will be
subject to those easements, conditions, contracts, rights, licenses,
encroachments, restrictions and other encumbrances resulting from the
Developer securing regulatory, development and construction approvals
for the Project and attendant site improvements. The Owner and the
Developer each represents to the other that it has reviewed or shall
review the boundary survey and the topographical survey of the Property
and has made a physical inspection of
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the Property and is satisfied as to the site characteristics and other
attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner shall
provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys, title reports, environmental
assessments, appraisals and other information regarding the Property or
the Project which are in the Owner's possession, custody or control.
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as
set forth on Exhibit "D" which require the implementation of the
measures, if any, as set forth on Exhibit "D".
(d) Commencing on the date that the Developer commences construction in
accordance with the terms of this Agreement, the Owner shall provide
the Developer with full possession and complete control of the Property
for purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of Physical Completion (as hereinafter
defined), all state, federal, county and municipal land use approvals
and permits, licenses, easements, and utility agreements which are
necessary for the development, construction and opening of the Project
on the Property as set forth on Exhibit "E" (the "Developer's
Approvals"). The Developer covenants to diligently use its best efforts
to obtain all of the Developer's Approvals in an expeditious manner. In
the event that the Developer is unable to obtain the Developer's
Approvals, the Developer shall have no liability whatsoever to the
Owner, or any other party and at the Owner's or the Developer's option,
this Agreement shall be terminated without recourse to either party
hereto at law or in equity.
(b) The Owner represents that it shall use its best efforts to obtain,
prior to the date of Physical Completion, all state, federal, county
and municipal land use approvals and permits, licenses, easements, and
utility agreements which are necessary for the development,
construction and operation of the Project on the Property as set forth
on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Owner's Approvals
in an expeditious manner. In the event that the Owner is unable to
obtain the Owner's Approvals, the Owner shall have no liability
whatsoever to the Developer, or any other party and at the Owner's or
the Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
(c) For the sole purpose of permitting the Developer to construct the
Project, the Owner grants to the Developer, to the extent required by
the Developer in order that the purpose of this Agreement be
effectuated, the rights under the Developer's Approvals and
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the Owner's Approvals (collectively, the "Approvals") and any other
grants of rights, permits, approvals, or licenses, which may be
necessary to complete the performance of the Developer's obligations
hereunder; provided, however that no transfer or assignment of any of
the foregoing shall occur which is prohibited by applicable law or the
respective terms hereof.
Section 1.4 - Documentation. The Developer shall use its best efforts to obtain,
on behalf of the Owner, construction and permanent financing for the Property,
the Project, the Personal Property (as defined herein) and related development
costs (collectively, the "Project Loan") which shall be sufficient, together
with the Owner's equity contributions, if necessary (which shall in no event
exceed ten percent (10%) of the total costs to construct the Project in
accordance with the development budget), to pay the full amount of the total
costs to construct the Project in accordance with the development budget (the
"Projected Project Costs"). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the lender in
connection with the Project Loan. Such documentation shall include, but is not
limited to, all zoning and plan approvals, all utility letters indicating
positive availability of service, inventory of concessions made to and
agreements with any or all municipal bodies, site plans, title policies, and all
other regulatory body approvals. The Owner also covenants that it will, in a
timely manner, provide whatever financial or other information the lender might
reasonably require in connection with the Developer's applications for financing
for the construction of the Project and as required by such lender in connection
with the Project Loan.
Section 1.5 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the best of its
knowledge, all utility services required to construct and operate the Project
(including, without limitation, public water, sewer and electricity) are
currently available to the Property in the capacities required to operate the
Project. No work need be performed by or on behalf of the Developer to make such
utilities available to the Property for the construction or operation of the
Project, except for the matters, if any, set forth on Exhibit "D". Copies of
letters from the providers of such utility services confirming such availability
are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of the Developer. The Developer represents that it
is duly organized, validly existing and in good standing under the laws of the
state of the State of Delaware. The Developer represents that it is empowered
and authorized to execute, deliver and perform its obligations under this
Agreement, and, upon such execution and delivery and subject to the conditions
subsequent set forth in Section 5.1, this Agreement shall be valid, binding and
legal obligation of the Developer, enforceable in accordance with its terms and
in compliance with its certificate of incorporation and bylaws and all
applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of Delaware. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement,
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and upon such execution and delivery and subject to Section 5.1, this Agreement
shall be the valid, binding and legal obligation of the Owner, enforceable in
accordance with its terms and in compliance with its certificate of
incorporation and bylaws and all applicable laws of the State of Delaware.
ARTICLE II
Construction of the Project
---------------------------
Section 2.1 - Control of Construction. Subject to the express provisions
contained herein, it is the intention of the parties that the Owner shall have
sole, complete and absolute authority and discretion to decide any and all
issues pertaining to the construction of the Project, including, without
limitation, the expenditure of funds, the incurring of costs and all of the
other matters referred to herein.
Section 2.2 - Architectural and Engineering Services. The parties acknowledge
that Bowen and Associates and their consulting engineers (the "Architect and
Engineers") have or will be retained by the Owner. The Owner represents and
warrants to the Developer that a true, accurate and complete copy of the
Architectural Contract is attached hereto as Exhibit "H" (the "Architect
Contract"). The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect. At the Developer's
option, the Owner shall assign to the Developer all of its right, title and
interest in the Architectural Contract and any and all architectural,
engineering and other contracts with respect to the Project free of any claims
other than outstanding amounts owed under the Architectural Contract. In no
event shall the Developer be obligated to assume any of said contracts.
Section 2.3 - Other Professionals and General Assumed Obligations. The Owner
represents that it has not engaged any architects or any engineers, lawyers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under the
direction of the Developer and after consultation with the Owner,
prepare basic design plans (the "Basic Plans"). As a part of this
process, the Developer may engage engineers, including the site
engineers, to perform test borings and other soil testing at the
Property for purposes of properly locating the Property on the Project.
The Developer, the Architects and Engineers shall consult with the
Owner during the process of preparing the Basic Plans. The Developer,
Architect and the Engineers shall have access to the Project for all
such tests and surveys.
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(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion and delivery of the Basic Plans, the Owner, the
Developer, the Architect and Engineers shall meet to review and approve
the Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the Developer
shall direct the Architect and Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based
upon the Basic Plans. Within two (2) weeks after the completion of the
Final Plans and their delivery to the Owner, the parties will meet to
review and approve the same, and make any necessary revisions. The
Owner agrees that it will not unreasonably withhold its approval of the
Final Plans if they conform in all material respects to the Basic
Plans. The parties agree to use their best efforts to reach a prompt
and reasonable conclusion concerning the acceptability of the Final
Plans (and the Personal Property, see Section 2.6). The parties shall
initial the Final Plans as an indication of their approval of the same.
Section 2.5 - Construction. The Developer shall cause the Project to be
constructed in a good and workmanlike manner and in accordance with the Final
Plans, the Approvals, and all applicable laws subject to field changes and minor
design changes. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal property
contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
the "F F & E") required for the Project.
(b) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it
shall approve the F F & E as soon as practicable but not later than
approximately six (6) months prior to the estimated date of Physical
Completion (defined below).
(c) The F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also have the
right to make changes in the Final Plans and in the Personal Property if
required by any federal, state or local governmental authority having
jurisdiction over the Project or if required due to the unavailability of any
construction materials or the Personal Property. The Owner shall be notified of
any such changes or substitutions in the Personal Property, however, the Owner
shall have final authority to make all decisions with respect to such changes;
provided, that, such changes result in construction, space, design, personal
property, equipment and interior and exterior design comparable in overall
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design and quality to that shown on the Final Plans. Any change that results in
the loss or adjustment of square footage in the Project will require approval by
the Owner.
Section 2.8 - Commencement of Construction. Construction of the Project will
start within thirty (30) days after notification to the Developer by the Owner,
or as soon thereafter as weather and ground conditions permit.
Section 2.9 - Continuity of Construction. Construction, once undertaken, shall
proceed in a continuous and reasonably expeditious manner until Physical
Completion is achieved.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical Completion"
or "Physically Completed" shall mean the date on which the building and
improvements described and set forth in the Final Plans have been
completed and the Project shall have been approved for and received a
certificate for temporary or permanent occupancy by the local building
inspector, and by the State Fire Marshall in the event his or her
approval is required (the "Certificate of Occupancy"). Physical
Completion shall be deemed to have been achieved notwithstanding that
any of such officials or agencies have issued a Certificate of
Occupancy with conditions or a Punch-List (as hereinafter defined)
listing items requiring completion or correction, so long as such
conditions or Punch-List items do not prevent or prohibit occupancy as
determined by the Owner, in its sole discretion.
(b) The Developer will use its reasonable best efforts to notify the
Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the
Owner will diligently proceed to fulfill all other conditions necessary
for licensure and the Owner will apply in a timely manner for all
licenses and permits necessary to commence operation of the Project as
set forth on Exhibit "C-2". After such notice from the Developer, the
Owner, to the extent necessary to perform administrative activities
may, so long as it does not interfere with completion of construction,
enter upon the Property in an effort to coordinate initial licensure.
Section 2.11 - The Owner's Access. The Owner shall have access to the
construction site while construction is in progress.
Section 2.12 - Punch-List. If, at any time after the Project has been Physically
Completed, there shall exist any item or items requiring completion or
correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final Plans.
The parties shall make a Punch-List of the items requiring completion or
correction (the "Punch List"). Each item on the Punch-List shall be assigned a
reasonable value based upon the reasonable cost of completion or correction of
the same or such other value as may be required by the Owner's lender
("Punch-List Amount"). The Developer shall give its written undertaking to
complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties).
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Section 2.13 - Work and Warranties. Upon completion of construction, landscaping
and installation of the Personal Property, the Developer will assist in
obtaining any and all warranties and guarantees received from designers, the
Architect, the general contractor and suppliers of equipment and furnishings.
The Developer will cause the applicable contractor to remedy any defect in
construction caused by poor workmanship or materials which are brought to its
attention by written notice within a period of one (1) year from the date of the
issuance of the Certificate of Occupancy. Aside from the foregoing, the Owner
hereby waives and the Developer hereby disclaims all other express and implied
warranties of every kind or nature with respect to the Project and the Personal
Property, including, without limitation, waiving all IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be sufficient,
together with the Owner's equity contributions, to pay the full amount
of the costs to construct the Project in accordance with the
development budget.
The Owner and the Developer also contemplate that the Property and the
Project, together with all fixtures, furnishing, equipment, and
articles of personal property now owned or hereafter acquired by the
Owner which are or may be attached to or used in connection with the
Property or the Project, together with any and all replacements thereto
and substitutions therefor, and all proceeds thereof; and all present
and future rents, issues, leases, and profits of the Property and the
Project will serve as security for the payment obligations to any
lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial
obligations thereunder after the transfer of title to the Owner. The
Owner therefore, agrees to execute and deliver all commitments,
promissory notes, mortgages, collateral assignments, documents,
certificates, affidavits, and other writings required to be executed by
any lender in connection with such financing.
ARTICLE III
Fees
----
Section 3.1 - Development Fee. The price to be paid by the Owner to the
Developer for development, pre-marketing, design and other services rendered
pursuant to this Agreement is as set forth on Schedule A attached hereto, as the
same may be amended by mutual agreement of the parties from time to time.
Section 3.2 - Incentive Fee. In the event that the actual costs for the
development and construction of the Project are less than the Projected Project
Costs (such difference being referred to as the "Savings"), fifty percent (50%)
of the Savings shall be paid to the Developer as an incentive fee.
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ARTICLE IV
Additional Responsibilities of Parties
--------------------------------------
Section 4.1 - The Developer's Responsibilities. In addition to its obligations
elsewhere expressed in this Agreement, the Developer (subject to reimbursement)
shall have the following responsibilities:
(a) To obtain the necessary building permits and the Certificate of
Occupancy;
(b) To arrange for and coordinate the obtaining of all labor and
materials required to develop, construct and furnish the Project in
accordance with the Final Plans (except as otherwise expressly set
forth herein);
(c) To at all times, commencing with the date upon which construction
begins, carry the following types of insurance with an insurance
carrier or carriers acceptable to the Owner and the Owner's lender:
(i) Workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with
applicable law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for
any one accident or disaster; and property damage coverage limits of
not less than $100,000; all of which insurance shall name the Owner's
lender as an additional insured.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth
in subparagraphs (i) and (ii) hereof. Each of such policies shall, if
the insurance carriers so permit, contain a provision to the effect
that they may not be canceled except upon ten (10) days prior written
notice to the Owner and the Owner's lender.
(d) Upon Physical Completion, the Developer shall deliver to the Owner,
at the Owner's option, duly executed waivers of mechanic's liens signed
by each contractor and subcontractor which provided labor or materials
on the Project.
(e) To expeditiously pursue obtaining commitments for financing the
contemplated construction as provided herein.
(f) To pay for all professional and other staff personnel required for
the pre-opening and operation of the Project in sufficient time to
permit licensure by the applicable governmental agency(ies) at the date
of Physical Completion.
Section 4.2 - Indemnification. The Developer hereby agrees to indemnify and hold
the Owner harmless from all liabilities, claims, and demands for personal injury
or property damage arising out of or caused by any act or omission of the
Developer, its subcontractors, agents, or employees,
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or arising in or about the Property at any time from the date of this Agreement
until Physical Completion.
ARTICLE V
Contingencies
-------------
Section 5.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall, at the election of the Owner be contingent upon the occurrence
of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained by
October 15, 1998.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey,
satisfactory to the Developer, in its sole discretion, shall have been
obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or
which will prohibit or restrict the construction or operation of the
Project or which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Additional Due Diligence Regarding the Property. The Developer
shall have received due diligence information concerning the Property,
satisfactory to the Developer in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the
extent not currently available.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in
Section 1.1.
Section 5.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
ARTICLE VI
Additional Covenants of The Owner
---------------------------------
Section 6.1 - Confidentiality. The Owner, its partners, affiliates, agents, and
employees hereby agree:
(a) to maintain in the strictest confidence the identity of the
Developer; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Developer's
proprietary information, including, without limitation, financial
information, projects, copies of leases, real estate appraisals, and
other information
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regarding the Project and the business affairs and operations of the
Developer which any of said parties obtain from the Developer in the
course of negotiations for the transactions contemplated hereby (the
"Confidential Information");
(b) not to disclose, without the Developer's prior written consent
(except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties' own
agents, servants and employees, bankers, consultants and other advisors
to whom disclosure is necessary in order to effectuate the transactions
contemplated hereby; and
(c) to comply therewith for a period of one (1) year commencing on the
date of this Agreement.
Section 6.2 - Provision of Further Information. The Owner agrees to supply
complete financial information and any other data required in connection with
the construction or permanent financing for the Project and to execute, and
cause to execute, any and all documents which are required by the terms thereof.
Section 6.3 - Management Agreement. The Owner agrees that the Developer or its
nominee shall have the right to manage the Project beginning approximately one
hundred twenty (120) days prior to completion pursuant to the terms of a
Management Agreement, substantially in the form attached hereto as Exhibit "J".
ARTICLE VII
Concluding Provisions
---------------------
Section 7.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents and
warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and
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save the other harmless from any claim or demand for commission or other
compensation by any broker, finder or similar agent claiming to have been
employed by or on behalf of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign his rights
nor delegate its obligations under this Agreement to another entity or person
without the prior written consent of the Owner except that the Developer shall
have the right to assign this Agreement to, merge with or consolidate with an
"Affiliate" (defined herein as defined in the Securities and Exchange Act of
1934 and the regulations thereunder) in connection with a public offering,
merger or other transfer.
Section 7.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above and a copy therefore sent to
Chancellor of Westlake, Inc., 197 First Avenue, Needham, MA 02194,
Attention: Frederick R. Leathers, or at such other address or addresses
the Owner shall from time to time designate by notice to the Developer.
(b) In the event that notice is directed to the Developer, it shall be
sent to CareMatrix of Massachusetts, Inc., 197 First Avenue, Needham,
MA 02194, Attention: President, with a copy to James M. Clary, III,
Esq. at the same address; or at such other address or addresses as the
Developer shall from time-to-time designate by notice to the Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 7.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the
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validity or enforceability of this remaining portions so long as the material
purposes of this Agreement can be determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be effective as
of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
Dated this 26th day of June, 1998 and executed under seal.
Witness: CHANCELLOR OF WESTLAKE, INC.
By: /s/ Jeffrey P. Neterval
- -------------------------- -----------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
- -------------------------- -----------------------------
Name: Name: Jeffrey P. Neterval
Title: Vice President
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EXHIBITS A - I
Documents in Development Files
14
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 30th day of
October, 1998 and is between CCC OF NEW JERSEY, INC. ("Lessor"), a Delaware
corporation having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02494, and CAREMATRIX OF PRINCETON (ALF), INC. ("Lessee"), a
Delaware corporation, having its principal office at 197 First Avenue, Needham
Heights, Massachusetts 02494.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
-----------------------------------------------
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A-1 attached hereto (the
"Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines, and parking
areas and roadways appurtenant to such buildings and structures presently or
hereafter situated upon the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefiting any or all of the Land
and the Leased Improvements including, without implied limitation, under the
Service, Maintenance and Easement Agreement (as hereinafter defined);
(d) all equipment, machinery, building fixtures, and other items of
property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to the greatest
extent permitted by law, are hereby deemed by the parties hereto to constitute
real
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estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tangible Personal Property (as hereinafter defined) which are not permanently
affixed to or incorporated in the Leased Property (collectively, the
"Fixtures"); and
(e) the Lessor's Personal Property (as hereinafter defined);
RESERVING THEREFROM THE FOLLOWING IN FAVOR OF THE LESSOR DURING THE TERM OF THIS
LEASE:
(i) Access to the Leased Property at such reasonable times, and only to
the extent reasonably necessary, to repair, replace, renovate,
alter, and modify those portions of the Utility Systems (as
hereinafter defined), and the pipes, flues, conduits and other
appurtenances to the gas-fired hot water heating production
equipment, domestic hot water boiler equipment and air conditioning
production equipment which may now or hereafter be located within
the Facility and which are necessary for the full use and enjoyment
of the Skilled Nursing Facility (as hereinafter defined) and/or the
Medical Center (as hereinafter defined); and
(ii) The right to enter upon the Leased Property from time to time and
at any time as may be necessary in case of emergency to preserve
life and/or property located in the Skilled Nursing Facility and/or
the Medical Center.
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by the Lessor and
subject to: (i) the rights of parties in possession; (ii) the existing state of
title including all covenants, conditions, Liens (as hereinafter defined) and
other matters of record (including, without limitation, the matters set forth in
EXHIBIT B), subject further to the terms and conditions set forth in Section 3.4
herein; (iii) all applicable laws and (iv) all matters, whether or not of a
similar nature, which would be disclosed by an inspection of the Leased Property
or by an accurate survey thereof.
1.2 Term. The term of this Lease shall consist of: the "Initial Term",
which shall commence on October 30, 1998 (the "Commencement Date") and end on
October 29, 2013 (the "Expiration Date"); provided, however, that this Lease may
be sooner terminated as hereinafter provided. In addition, the Lessee shall have
the option(s) to extend the Term (as hereinafter defined) as provided for in
Section 1.3.
1.3 Extended Terms. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, the
Lessee is hereby granted the option to extend the Initial Term of this Lease for
three (3) additional periods (collectively, the "Extended Terms") as follows:
three (3) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on
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October 29, 2028. The Lessee's extension options shall be exercised by the
Lessee by giving written notice to the Lessor of each such extension at least
one hundred eighty (180) days, but not more than three hundred sixty (360) days,
prior to the termination of the Initial Term or the then current Extended Term,
as the case may be. The Lessee shall have no right to rescind any such notice
once given. The Lessee may not exercise its option for more than one Extended
Term at a time. During each effective Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect.
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
-------------------------------------
2.1 Definitions. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
Accounts: As defined in the UCC.
Accreditation Body: All Persons now or hereafter having or claiming
jurisdiction over the accreditation, certification, evaluation or operation of
the Facility.
Act: As defined in Section 11.4.
Additional Charges: As defined in Article 3.
Additional Debt Service Payments: All payments, other than the Debt
Service Rental Payments, due and payable under any Fee Mortgage Loan Documents,
including, without limitation, all reserves, deposits and other costs, expenses
and charges due and payable thereunder (including, without limitation, any other
costs, expenses and late charges incurred by the Lessor as a result of any
failure by Lessee to satisfy, on a timely basis, the obligations set forth under
Section 3.1 and Section 3.3), but, specifically excluding (i) any so-called
"balloon payments" due at the maturity of any loan evidenced by any Fee Mortgage
Loan Documents and all costs and expenses incurred in connection with any
refinancing thereof and (ii) any payments, reserves, deposits and other costs,
expenses and charges due and payable with respect to the SNF/CMC Land (and/or
any other real property owned by the Lessor), including, without limitation all
amounts due under the SNF Note and the CMC Note as such terms are defined under
the MMI Loan Documents.
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Additional Land: As defined in Section 9.3.
Additional Rent: As defined in Section 3.3.
Affiliate: With respect to any Person (i) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (ii) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares
or equity interests of such Person or (iii) any officer, director, employee,
general partner or trustee of such Person, or any other Person controlling,
controlled by, or under common control with, such Person (excluding trustees and
Persons serving in a fiduciary or similar capacity who are not otherwise an
Affiliate of such Person); provided, however, that notwithstanding the
foregoing, in no event shall any of the following entities be deemed to be an
Affiliate of the Lessee: (i) PhyMatrix Corp., a Delaware corporation and its
wholly-owned Subsidiaries and (ii) Sun Healthcare Group, Inc., a Delaware
corporation. For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests, membership interests or other equity interests.
ALF Conversion Date: As defined in the MMI Loan Documents.
Appurtenant Agreements: Collectively, all instruments, documents and
other agreements that now or hereafter create any utility, access or other
rights or appurtenances benefiting or relating to the Leased Property.
Assignment and Assumption Agreement: The Assignment and Assumption
Agreement dated August 7, 1998 by and among the Seller, the Lessor and MMI.
Award: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
Bankruptcy Code: Subsection 365(h) of the United States Bankruptcy
Code, 11 U.S.C. ss.365(h), as the same may hereafter be amended and including
any successor provision thereto.
Base Debt Service Rental Payments: As defined in Section 3.1.
Base Rent: As defined in Article 3.
Building: Collectively, the Facility, the Skilled Nursing Facility and
the Medical Center.
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Business Day: Any day which is not a Saturday or Sunday or a public
holiday under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property in order to provide a functionally new
facility that is needed or used to provide services not previously offered and
any expansion, construction, renovation or conversion or in order to (i)
increase the bed or unit capacity of the Facility, (ii) change the purpose for
which such beds or units are utilized and/or (iii) change the utilization of any
material portion of any of the Leased Improvements.
Capital Addition Cost: The cost of any Capital Addition made by the
Lessee whether paid for by the Lessee or the Lessor. Such cost shall include all
costs and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
Cash Flow: The Consolidated Net Income (or Consolidated Net Loss),
arising solely from the operation of the Leased Property, before federal and
state income taxes for any period plus (i) the amount of the provision for
depreciation and amortization actually deducted on the books of the applicable
Person for the purposes of computing such Consolidated Net Income (or
Consolidated Net Loss) for the period involved, plus (ii) Rent.
Casualty: As defined in Section 13.1.
Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Condemnation: With respect to the Leased Property or any interest
therein or right accruing thereto or use thereof (i) the exercise of any
Governmental Authority, whether by legal proceedings or otherwise, by a
Condemnor or (ii) a voluntary sale or transfer by the Lessor to any Condemnor,
either under threat of Condemnation or Taking or while legal proceedings for
Condemnation or Taking are pending.
Condemnor: Any public or quasi-public authority, or private corporation
or individual, having the power of condemnation.
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Consolidated and Consolidating: The consolidated and consolidating
accounts of the relevant Person and its Subsidiaries consolidated in accordance
with GAAP.
Consolidated Financials: For any fiscal year or other accounting period
for any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
Consultants: Collectively, the architects, engineers, inspectors,
surveyors and other consultants that are engaged from time to time by the Lessor
to perform services for the Lessor in connection with this Lease.
Consumer Price Index: The Consumer Price Index for Urban Wage Earners
and Clerical Workers, All Items-U.S. Cities Average (1982-84=100), published by
the Bureau of Labor Statistics, U.S. Department of Labor; provided, that, if the
compilation of the Consumer Price Index in its present form and calculated on
its present basis is discontinued or transferred to any other Governmental
Authority, then, the index most similar to the Consumer Price Index published by
the Bureau of Labor Statistics shall be used. If there is no such similar index,
a substitute index which is then generally recognized as being similar to the
Consumer Price Index shall be used, with such substitute index to be reasonably
selected by the Lessor and the Lessee.
Contracts: All agreements (including, without limitation, Resident
Agreements), contracts, (including without limitation, construction contracts,
subcontracts, and architects' contracts,) contract rights, warranties and
representations, franchises, and records and books of account benefiting,
relating to or affecting the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession, or
operation thereof, or the operation of any programs or services in conjunction
with the Leased Property and all renewals, replacement and substitutions
therefor, now or hereafter issued by or entered into with any Governmental
Authority or maintained or used by any member of the Leasing Group or entered
into by any member of the Leasing Group with any third Person.
Date of Taking: The date the Condemnor has the right to possession of
the property being condemned.
Debt Service: All payments due and payable under any promissory note
secured by a Fee Mortgage, including, without limitation, principal, interest,
additional interest and any other costs, expenses and late charges incurred by
the Lessor as a result of any failure by Lessee to satisfy, on a timely basis,
the obligations set forth under Section 3.1, but specifically excluding
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any so-called "balloon payments" due at the maturity thereof and all costs and
expenses incurred in connection with any refinancing thereof.
Debt Service Rental Payments: As defined in Section 3.1.
Deed: As defined in Section 18.3.
Documents: As defined in the UCC.
Encumbrance: As defined in Section 20.3.
Environmental Enforcement Actions: Collectively, all actions or orders
instituted, threatened or required by any Governmental Authority and all claims
made or threatened by any Person against Lessee or the Leased Property (or any
other occupant, prior occupant or prior owner thereof or any other Person),
arising out of or in connection with any of the Environmental Laws or the
assessment, monitoring, clean-up, containment, remediation or removal of, or
damages caused or alleged to be caused by, any Hazardous Substances (i) located
on or under the Leased Property, (ii) emanating from the Leased Property or
(iii) generated, stored, transported, utilized, disposed of, managed or released
by Lessee or any other occupant of the Leased Property.
Environmental Laws: Collectively, all Legal Requirements applicable to
(i) environmental conditions on, under or emanating from the Leased Property and
(ii) the generation, storage, transportation, utilization, disposal, management
or release (whether or not on, under or from the Leased Property) of Hazardous
Substances by the Lessee.
ERISA: The Employment Retirement Income Security Act of 1974, as
amended.
Event of Default: As defined in Article 16.
Expiration Date: As defined in Section 1.2.
Extended Terms: As defined in Section 1.3.
Facility: The 83-unit assisted living facility located on the Land
(together with related parking and other amenities), all as more particularly
shown as New Lot 3.07 on the Subdivision Plan.
Failure to Perform: As defined Article 16.
Fair Market Added Value: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by the Lessee had been
constructed.
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Fair Market Base Rent: As defined in SCHEDULE 3.1.
Fair Market Value of the Capital Addition: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
Fair Market Value of the Leased Property: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the Leased Property, and (a) assuming the same is unencumbered
by this Lease, (b) determined in accordance with the appraisal procedures set
forth in Section 18.2 or in such other manner as shall be mutually acceptable to
the Lessor and the Lessee (including, without limitation, as a negotiated
percentage of total project costs) and (c) not taking into account any reduction
in value resulting from any Lien to which the Leased Property is subject and
which Lien the Lessee or the Lessor is otherwise required to remove at or prior
to closing of the transaction. However, the positive or negative effect on the
value of the Leased Property attributable to the interest rate, amortization
schedule, maturity date, prepayment provisions and other terms and conditions of
any Lien on the Leased Property which is not so required or agreed to be removed
shall be taken into account in determining the Fair Market Value of the Leased
Property. The Fair Market Value of the Leased Property shall be determined as
the overall value based on due consideration of the "income" approach, the
"comparable sales" approach, and the "replacement cost" approach.
Fair Market Value of the Material Structural Work: The amount by which
the Fair Market Value of the Leased Property upon the completion of any
particular Material Structural Work exceeds the Fair Market Value of the Leased
Property just prior to the construction of the applicable Material Structural
Work.
Fee Mortgage: As defined in Section 20.3.
Fee Mortgage Loan Documents: Collectively, all documents, instruments
and agreements now or hereafter executed by the Lessor evidencing and/or
securing any loan secured by any Fee Mortgage, as the same may be amended,
modified or extended from time to time.
Fee Mortgagee: As defined in Section 20.3.
Financing Party: Any Person who is or may be participating with the
Lessor in any way in connection with the financing of any Capital Addition.
Fiscal Quarter: Each of the three (3) month periods commencing on
January 1st, April 1st, July 1st and October 1st.
Fiscal Year: The twelve (12) month period from January 1st to
December 31st.
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Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
General Intangibles: As defined in the UCC.
Governmental Authorities: Collectively, all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures, and
offices of any nature whatsoever of any government, quasi-government unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise and whether now or hereinafter in existence.
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by the Lessee, including,
without limitation, all revenues received or receivable for the use of, or
otherwise by reason of, all rooms, beds, units and other facilities provided,
meals served, services performed, space or facilities subleased or goods sold on
or from the Leased Property and further including, without limitation, except as
otherwise specifically provided below, any consideration received under any
subletting, licensing, or other arrangements with any Person relating to the
possession or use of the Leased Property and all revenues from all ancillary
services provided at or relating to the Leased Property; provided, however, that
Gross Revenues shall not include non-operating revenues such as interest income
or gain from the sale of assets not sold in the ordinary course of business and
shall not include the proceeds of any loan received by the Lessee; and provided,
further, that there shall be excluded or deducted (as the case may be) from such
revenues:
(i) contractual allowances (relating to any period during the Term of
this Lease and thereafter until the Rent hereunder is paid in full) for billings
not paid by or received from the appropriate Governmental Agencies or third
party payors,
(ii) allowances according to GAAP for uncollectible accounts,
(iii) all proper patient and/or resident billing credits and
adjustments according to GAAP relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and excise
taxes and any tax based upon or measured by said Gross Revenues which is added
to or made a part of the amount billed to the patient, resident or other
recipient of such services or goods, whether included in the billing or stated
separately,
(v) provider discounts for hospital or other medical facility
utilization contracts,
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(vi) the cost of any federal, state or local governmental program
imposed specially to provide or finance indigent patient and/or resident care
(other than Medicare, Medicaid and the like), and
(vii) deposits refundable to residents of the Facility.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee which is a wholly-owned subsidiary of the Guarantor,
Gross Revenues calculated for all purposes of this Lease shall include the Gross
Revenues of such Sublessee with respect to the premises demised under the
applicable Sublease (i.e., the Gross Revenues generated from the operations
conducted on such subleased portion of the Leased Property) and the rent
received or receivable from such Sublessee pursuant to such Subleases shall be
excluded from Gross Revenues for all such purposes. As to any other Sublease,
only the rental actually received by the Lessee from such non-Affiliate shall be
included in Gross Revenues.
Guarantor: CareMatrix Corporation, a Delaware corporation.
Guaranty: The Guaranty of even date executed by the Guarantor in favor
of the Lessor.
Hazardous Substances: Collectively, (a) any "hazardous material,"
"hazardous substance," "hazardous waste," "oil," "regulated substance," "toxic
substance," "restricted hazardous waste", "special waste" or words of similar
import as defined under any of the Environmental Laws; (b) asbestos in any form;
(c) urea formaldehyde foam insulation; (d) polychlorinated biphenyls; (e) radon
gas; (f) flammable explosives; (g) radioactive materials; (h) any chemical,
containment, solvent, material, pollutant or substance that may be dangerous or
detrimental to the Leased Property, the environment, or the health and safety of
the patients, residents and other occupants of the Leased Property or of the
owners or occupants of any other real property nearby the Leased Property and
(i) any substance, the generation, storage, transportation, utilization,
disposal, management, release or location of which, on, under or from the Leased
Property is prohibited or otherwise regulated pursuant to any of the
Environmental Laws.
Notwithstanding the foregoing, the term Hazardous Substances as defined
herein shall not include (i) pharmaceuticals and cleaning agents of the types
and in the quantities and concentrations normally stocked by health care
providers similar to the Facility, (ii) oil in de minimis amounts typically
associated with the use of certain portions of the Leased Property for driving
and parking motor vehicles or (iii) medical wastes generated at the Facility;
provided that the foregoing are used, stored, transported and/or disposed of in
accordance with all Legal Requirements.
Impositions: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all
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assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term), ground rents, water and sewer rents, water charges or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), transfer taxes and
recordation taxes imposed as a result of this Lease or any extensions hereof,
and all other governmental charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character in
respect of either or both of the Leased Property and the Rent (including all
interest and penalties thereon due to any failure in payment by the Lessee),
which at any time prior to, during or in respect of the Term hereof and
thereafter until the Leased Property is surrendered to the Lessor as required by
the terms of this Lease, may be assessed or imposed on or in respect of or be a
Lien upon (a) the Lessor or the Lessor's interest in the Leased Property, (b)
the Leased Property or any rent therefrom or any estate, right, title or
interest therein, or (c) any occupancy, operation, use or possession of, sales
from, or activity conducted on, or in connection with, the Leased Property or
the leasing or use of the Leased Property. Notwithstanding the foregoing,
nothing contained in this Lease shall be construed to require the Lessee to pay
(1) any tax based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on the Lessor or any other Person, except the Lessee
or its successors, (2) any net revenue tax of the Lessor or any other Person,
except the Lessee and its successors, (3) any tax imposed with respect to the
proceeds, or any portion thereof, received by the Lessor as a result of the
sale, exchange or other disposition by the Lessor of the Leased Property or the
proceeds thereof, except any sale, transfer, exchange or other disposition of
the Leased Property to the Lessee, or (4) except as expressly provided elsewhere
in this Lease, any principal or interest on any Encumbrance on the Leased
Property; provided, however, the provisos set forth in clauses (1) and (2) of
this sentence shall not be applicable to the extent that any tax, assessment,
tax levy or charge which the Lessee is obligated to pay pursuant to the first
sentence of this definition and which is in effect at any time during the Term
hereof is totally or partially repealed, and a tax, assessment, tax levy or
charge set forth in clause (1) or (2) is levied, assessed or imposed expressly
in lieu thereof. In computing the amount of any franchise tax or capital stock
tax which may be or become an Imposition, the amount payable by the Lessee shall
be equitably apportioned based upon all properties owned by the Lessor that are
located within the particular jurisdiction subject to any such tax.
Indebtedness: The total of all obligations of a Person, whether current
or long-term, which in accordance with GAAP would be included as liabilities
upon such Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include (i) all capital lease obligations and (ii)
all guarantees, endorsements (other than for collection of instruments in the
ordinary course of business), or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement contingent
or otherwise to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
Indemnified Parties: As defined in Section 12.2.
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Initial Appraisers: As defined in SCHEDULE 3.1.
Initial Term: As defined in Section 1.2.
Instruments: As defined in the UCC.
Insurance Requirements: All terms of any insurance policy required by
this Lease, all requirements of the issuer of any such policy with respect to
the Leased Property and the activities conducted thereon and the requirements of
any insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
Land: As defined in Article 1.
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
Lease Documents: Collectively, this Lease, the Guaranty, the Pledge
Agreement, the Security Agreement, the Permits Assignment and any and all other
instruments, documents, certificates or agreements now or hereafter (i) executed
or furnished by any member of the Leasing Group in connection with the
transactions evidenced by this Lease and/or any of the foregoing documents
and/or (ii) evidencing or securing any of the Lessee's obligations relating to
the Leased Property, including, without limitation, the Lessee's obligations
hereunder, as the same maybe amended from time to time.
Lease Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the Lessor's
obligations) under this Lease and the other Lease Documents.
Lease Year: A twelve-month period ending on October 31st of each year;
provided, that the first Lease Year shall begin on the Commencement Date and
shall end on October 31, 1999.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Group: Collectively, the Lessee, the Guarantor, any Sublessee
and any Manager.
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Legal Requirements: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and health-care, assisted living
and independent senior housing licensing statutes, ordinances, by-laws, codes,
rules and regulations), whether now or hereafter enacted, promulgated or issued
by any Governmental Authority affecting the Lessor, any member of the Leasing
Group or the Leased Property or the ownership, construction, development,
maintenance, management, repair, use, occupancy, possession or operation thereof
or the operation of any programs or services in connection with the Leased
Property, including, without limitation, any of the foregoing which may (i)
require repairs, modifications or alterations in or to the Leased Property, (ii)
in any way affect (adversely or otherwise) the use and enjoyment of the Leased
Property or (iii) require the assessment, monitoring, clean-up, containment,
removal, remediation or other treatment of any Hazardous Substances on, under or
from the Leased Property. Without limiting the foregoing, the term Legal
Requirements includes all Environmental Laws and shall also include all Permits
and Contracts issued or entered into by any Governmental Authority, and all
Permitted Encumbrances.
Lessee: As defined in the preamble of this Lease and its successors and
assigns.
Lessee's Election Notice: As defined in Section 14.3.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Lessor Entities: Collectively, Lessor and any other Affiliate of Lessor
which may now or hereafter be a party to any Related Party Agreement.
Lessor's Investment: The sum of (a) NINE MILLION FOUR HUNDRED EIGHTY-
SEVEN THOUSAND FIVE HUNDRED THIRTY-TWO DOLLARS ($9,487,532.00) plus (b) the
aggregate amount of all Subsequent Investments.
Lessor's Personal Property: The personal property located at, or used
in connection with the operation of, the Facility.
Lien: With respect to any real or personal property, any mortgage,
easement, restriction, lien, pledge, collateral assignment, hypothecation,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
Limited Parties: As defined in Section 11.5; provided, however, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
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Management Agreement: Any agreement, whether written or oral, between
the Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility.
Manager: Any Person who has entered into a Management Agreement with
the Lessee or any Sublessee.
Material Structural Work: Any (i) structural alteration, (ii)
structural repair or (iii) structural renovation to the Leased Property that
would require (a) the design and/or involvement of a structural engineer and/or
architect and/or (b) the issuance of a Permit.
Medical Center: The community medical center located on a portion of
the SNF/CMC Land, containing approximately 21,837 square feet and approximately
17,000 net rentable square feet.
MMI: Meditrust Mortgage Investments, Inc., a Delaware corporation.
MMI Loan: That certain loan in the original principal amount of NINE
MILLION FOUR HUNDRED EIGHTY-SEVEN THOUSAND FIVE HUNDRED THIRTY-TWO DOLLARS
($9,487,532.00) made by MMI to the Lessor and the Seller, as affected by the
Assignment and Assumption Agreement.
MMI Loan Documents: As defined in Section 24.14.
Monthly Deposit Date: As defined in Section 4.6.
Net Income (or Net Loss): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
Obligations: Collectively, the Lease Obligations and the Related Party
Obligations.
Officer's Certificate: A certificate of the Lessee signed on behalf of
the Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
Overdue Rate: On any date, a rate of interest per annum equal to the
greater of: (i) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (ii) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
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PBGC: Pension Benefit Guaranty Corporation.
Permits: Collectively, all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, agreements, contracts, contract rights,
franchises, interim licenses, permits and other authorizations of every nature
whatsoever required by, or issued under, applicable Legal Requirements
benefiting, relating or affecting the Leased Property or the construction,
development, maintenance, management, use or operation thereof, or the operation
of any programs or services in conjunction with the Leased Property and all
renewals, replacements and substitutions therefor, now or hereafter required or
issued by any Governmental Authority, Accreditation Body or Third Party Payor to
any member of the Leasing Group, or maintained or used by any member of the
Leasing Group, or entered into by any member of the Leasing Group with any third
Person.
Permits Assignment: The Collateral Assignment of Permits and Contracts
of even date granted by the Lessee to the Lessor.
Permitted Encumbrances: Collectively, those agreements, covenants and
Liens to which this Lease is expressly subject, whether presently existing, as
are listed on EXHIBIT B or which may hereafter be created in accordance with the
terms hereof.
Permitted Prior Security Interests: As defined in Section 6.1.
Person: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
Plans and Specifications: As defined in Section 13.1.
Pledge Agreement: The Stock Pledge Agreement of even date by and among
the Guarantor, the Lessee and the Lessor.
Primary Intended Use: The use of the Facility as an assisted living
facility with 83 units or such additional number of units as may hereafter be
permitted under this Lease, and such ancillary uses as are permitted by law and
may be necessary in connection therewith or incidental thereto.
Prime Rate: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
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Principal Place of Business: As defined in Section 10.1.
Proceeds: As defined in the UCC.
Purchase Option: As defined in Section 18.3.
Purchase Price: As defined in Section 18.3.
Receivables: Collectively, all (i) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (ii) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party,
whether now in existence or arising from time to time hereafter and whether or
not yet earned by performance, including, without limitation, obligations
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness.
Reference Bank: Fleet Bank of Connecticut, N.A.
Related Parties: Collectively, each Person that may now or hereafter be
a party to any Related Party Agreement other than the Lessor Entities.
Related Party Agreement: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation.
Related Party Default: The occurrence of a default or breach of
condition continuing beyond the expiration of any applicable notice and grace
periods, if any, under the terms of any Related Party Agreement.
Related Party Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, Lessor or any of the other Lessor Entities by Lessee or any other
member of the Leasing Group or any of their respective Affiliates; whether such
indebtedness, covenants, liabilities, obligations, agreements and/or
undertakings are direct or indirect, absolute or contingent, liquidated or
unliquidated, due or to become due, joint, several or joint and several, primary
or secondary, now existing or hereafter arising.
Rent: Collectively, the Base Rent, the Additional Rent, Additional
Charges and all other sums payable under this Lease and the other Lease
Documents.
Rent Adjustment Date: The first day of each Extended Term.
Rent Coverage Ratio: The ratio of Cash Flow for each applicable period
to the total of all Debt Service Rental Payments paid or payable during such
period or accrued for such period.
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Rent Insurance Proceeds: As defined in Section 13.8.
Rent Roll: As defined in Section 18.3.
Resident Agreements: Collectively, all Subleases now or hereafter
executed or entered into by or on behalf of any Person allowing such Person to
reside at the Facility, as the same may be amended from time to time, including,
without limitation, assignments of benefits and guarantees.
Retainage: As defined in Section 13.1.
Security Agreement: The Security Agreement of even date herewith by and
between the Lessee and the Lessor.
Seller: Mediplex of New Jersey, Inc., a Delaware corporation.
Service, Maintenance and Easement Agreement: The Service, Maintenance
and Easement Agreement dated as of March 15, 1996, by and between the Seller and
the Lessor, recorded in the Middlesex County Clerk's Office on April 2, 1996 in
Deed Book 4315 Page 28.
Service, Maintenance and Easement Payments: Collectively, all payments
due from the Lessee to the Lessor under the terms of the Service, Maintenance
and Easement Agreement and this Lease as set forth in Section 3.4 herein.
Skilled Nursing Facility: The 180-bed skilled nursing facility located
on a portion of the SNF/CMC Land known as The Forrestal Skilled Nursing &
Rehabilitation Center (together with related parking and other amenities).
SNF/CMC Land: The real property shown as New Lot 3.06 on the
Subdivision Plan, and more particularly described in EXHIBIT A-2 attached
hereto.
State: The state or commonwealth in which the Leased Property is
located.
Subdivision Plan: That certain plan entitled: "Final Subdivision Plan
Phase 1 & 2 of the Windrows At Princeton Forrestal Property of Trustees of
Princeton University," dated April 5, 1995, last revised September 18, 1995,
prepared by Van Note-Harvey Associates, P.C., Consulting Engineers, Planners,
and Land Surveyors, and filed with the Middlesex County Clerk's Office on April
2, 1996 as Map #4 File 1945.
Sublease: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements, room rentals, rentals of
other facilities of the Leased Property and all other occupancy agreements of
every kind and nature, whether oral or in writing, now in
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existence or subsequently entered into by the Lessee, encumbering or affecting
the Leased Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but excluding any resident of the Facility
under any Resident Agreement.
Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by the Lessor in connection with Capital Additions.
Subsidiary or Subsidiaries: With respect to any Person, any corporation
or other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
Surrounding Property: Any real property that abuts the Leased Property
or any portion thereof.
Taking: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
Tangible Net Worth: An amount determined in accordance with GAAP equal
to the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
Tangible Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by the Lessee and used in connection with the operation of the
Leased Property.
Term: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
Third Appraiser: As defined in SCHEDULE 3.1.
UCC: The Uniform Commercial Code as in effect from time to time in the
Commonwealth of Massachusetts.
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Unavoidable Delays: Delays due to strikes, lockouts, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto.
United States Treasury Securities: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
Unsuitable For Its Primary Intended Use: As used anywhere in this
Lease, the term "Unsuitable For Its Primary Intended Use" shall mean that, by
reason of Casualty, or a partial or temporary Taking by Condemnation, in the
good faith judgment of the Lessor, the Facility cannot be operated on a
commercially practicable basis for the Primary Intended Use, taking into
account, among other relevant factors, the number of usable beds and/or units
affected by such Casualty or partial or temporary Taking.
Utility Systems: Collectively, the domestic water, common water,
sanitary sewer, cable television, gas and electric lines, wires, flues, conduits
and utility lines, including all additions, substitutions and replacements
thereto, now or hereafter located in the Building.
Work: As defined in Section 13.1.
Work Certificates: As defined in Section 13.1.
2.2 Rules of Construction. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (a) references to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Lease or the
other applicable Lease Document, and shall not be limited to the particular text
or section or subsection in which such words appear; (b) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (c) references to the Lessor's attorneys
shall be deemed to include, without limitation, special counsel and local
counsel for the Lessor; (d) reference to attorneys' fees and expenses shall be
deemed to include all costs for administrative, paralegal and other support
staff; (e) references to Leased Property shall be deemed to include references
to all of the Leased Property and references to any portion thereof; (f)
references to the Lease Obligations shall be deemed to include references to all
of the Lease Obligations and references to any portion thereof; (g) references
to the Obligations shall be deemed to include references to all of the
Obligations and references to any portion thereof; (h) the term "including",
when following any general statement, will not be construed to limit such
statement to the specific items or matters as provided immediately following the
term "including" (whether or not non-limiting language such as "without
limitation" or "but not limited to" or words of similar import are also used),
but rather will be deemed to refer to all of the items or matters that could
reasonably fall within the broadest scope of the general statement; (i) any
requirement that financial statements be Consolidated in form shall apply only
to such financial statements as
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relate to a period during any portion of which the relevant Person has one or
more Subsidiaries; (j) all accounting terms not specifically defined in the
Lease Documents shall be construed in accordance with GAAP, (k) all exhibits
annexed to any of the Lease Documents as referenced therein shall be deemed
incorporated in such Lease Document by such annexation and/or reference, (l) all
references to any Fee Mortgage Loan Documents shall mean such Fee Mortgage Loan
Documents as may then be in force and effect and (m) all references to any Fee
Mortgagee shall mean the holder of any Fee Mortgage that is then in force and
effect.
ARTICLE 3
RENT
----
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures.
During the Initial Term, the Lessee will pay to the Lessor, in lawful money of
the United States of America, at the Lessor's address set forth herein or at
such other place or to such other Person as the Lessor from time to time may
designate in writing, a base rent (the "Base Rent") per annum that is equal to
the aggregate amount of Debt Service payments due and payable with respect to
each calendar year (the "Debt Service Rental Payments"), which Base Rent shall
be payable in arrears in consecutive monthly installments due on the first day
of each calendar month (subject to adjustment in accordance with any adjustment
to Debt Service), except with respect to the Base Rent due for the month of
October, 1998, which shall be due and payable concurrently with the execution
hereof; provided, however, that in the event that the terms of any promissory
note secured by any Fee Mortgage requires Debt Service from the Lessor to be
paid on any basis other than monthly in arrears, the Lessee's obligation to make
monthly payments of the Debt Service Rental Payments shall be adjusted
accordingly to coincide with the schedule of payments.
The Lessor reserves the right to refinance any Fee Mortgage now or
hereafter encumbering the Leased Property and no such refinancing will limit or
otherwise affect the Lessee's obligation to make the Debt Service Rental
Payments; provided, that (x) the terms and conditions of any such refinancing
reflect the terms and conditions that are then customary and prevailing for
commercial loan transactions secured by real property of similar value and
nature to the Leased Property and (y) the original principal amount of any such
refinancing does not exceed the then current Fair Market Value of the Leased
Property minus the Fair Market Added Value.
In the event that, during the Initial Term of this Lease, any
applicable Fee Mortgage Loan is paid in full and is not refinanced (so that no
Fee Mortgage Loan is then in effect), the Lessee shall continue to pay to the
Lessor, as the Base Rent due hereunder, an amount equal to the Debt Service
Rental Payments that were otherwise payable hereunder immediately prior to the
payment in full of the applicable Fee Mortgage, until such time, if any, prior
to the expiration of the Initial Term, that the Lessor obtains a new Fee
Mortgage Loan (in accordance with the terms hereof). From and after such time,
if any, that a new Fee Mortgage Loan is in effect, the Base
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Rent (and thus the Debt Service Rental Payments) due hereunder will be
calculated based upon the actual Debt Service due from the Lessor to the holder
of such Fee Mortgage.
On each Rent Adjustment Date, if no Fee Mortgage Loan is then in
effect, the Base Rent payable hereunder shall be adjusted so that the Lessee
shall continue to pay to the Lessor, as the Base Rent per annum due hereunder,
an amount equal to the lesser of (i) the then Fair Market Base Rent determined
in accordance with SCHEDULE 3.1 hereof, or (ii) the sum of (A) the Debt Service
Rental Payments payable (x) during the first Lease Year, if the applicable Rent
Adjustment Date occurs on the first day of the first Extended Term or (y) during
the last Lease Year of the immediately preceding Extended Term, if the
applicable Rent Adjustment Date occurs on the first day of the second or third
Extended Term plus (B) the product of (x) fifty (50%) percent multiplied by (y)
a fraction the numerator of which shall be the Consumer Price Index in effect on
the applicable Rent Adjustment Date minus the Consumer Price Index in effect on
the Commencement Date and the denominator of which shall be the Consumer Price
Index in effect on the Commencement Date, multiplied by (z) the Debt Service
Rental Payments payable (i) during the first Lease Year, if the applicable Rent
Adjustment Date occurs on the first day of the first Extended Term or (ii)
during the last Lease Year of the immediately preceding Extended Term, if the
applicable Rent Adjustment Date occurs on the first day of the second or third
Extended Term, until such time, if any, prior to the expiration of the Term,
that the Lessor obtains a new Fee Mortgage Loan (in accordance with the terms
hereof). Notwithstanding the foregoing, in no event shall the Base Rent due
hereunder as determined on any Rent Adjustment Date be less than the Base Rent
that was otherwise payable hereunder as of the date immediately prior to such
Rent Adjustment Date. From and after such time, if any, that a new Fee Mortgage
Loan is in effect (in accordance with the terms hereof), the Base Rent (and thus
the Debt Service Rental Payments) due hereunder shall be calculated based upon
the actual Debt Service due from the Lessor to the holder of such Fee Mortgage.
The Lessee will pay the Debt Service Rental Payments, in lawful money
of the United States of America, directly to the applicable Fee Mortgagee (at
the address that the Lessor or the Fee Mortgagee shall from time to time
designate in writing to the Lessee). If no Fee Mortgage Loan is then in effect,
the Lessee will pay to the Lessor, in lawful money of the United States of
America, at the Lessor's address set forth herein or at such other place or to
such other Person as the Lessor from time to time may designate in writing, the
Base Rent.
The Base Rent due and payable hereunder for any fractional month during
the Term shall be prorated accordingly.
3.2 Intentionally Omitted.
3.3 Additional Rent. In addition to the Base Rent due and payable
hereunder, the Lessee shall pay, as additional rent (the "Additional Rent") an
amount equal to the Additional Debt Service Payments then due and payable under
any applicable Fee Mortgage Loan Documents. The Additional Rent shall be due and
payable when and if the Additional Debt
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Service Payments are due and payable under the applicable Fee Mortgage Loan
Documents. The Lessee will pay the Additional Rent, in lawful money of the
United States of America, directly to the applicable Fee Mortgagee (at the
address that the Lessor or the Fee Mortgagee shall from time to time designate
in writing the Lessee).
Additional Rent due and payable hereunder for any fractional month
during the terms shall be prorated accordingly.
3.4 Service, Maintenance and Easement Agreement. This Lease is subject
to, and has the benefit of, all of the terms and conditions of the Service,
Maintenance and Easement Agreement, to the extent that the same relate to all or
any portion of the Leased Property. The Lessee shall pay and perform all of the
obligations imposed under the Service, Maintenance and Easement Agreement that
are imposed on the Lessor as owner of the Land and Facility; provided, however,
that the Lessee shall have no liability whatsoever with respect to the
obligations under the Service, Maintenance and Easement Agreement that are
imposed on the Lessor as owner of all or any portion of the SNF/CMC Land.
3.5 Additional Charges. Subject to the rights to contest as set forth
in Article 15, in addition to the Base Rent and Additional Rent, (a) the Lessee
will also pay and discharge as and when due and payable all Impositions, all
amounts, liabilities and obligations under the Appurtenant Agreements due from
or payable by the owner of the Leased Property, (including, without limitation,
the Service, Maintenance and Easement Payments), all amounts, liabilities and,
except as provided in Section 3.3, obligations under the Permitted Encumbrances
due from or payable by the owner of the Leased Property and all other amounts,
liabilities and obligations which the Lessee assumes or agrees to pay under this
Lease, and (b) in the event of any failure on the part of the Lessee to pay any
of those items referred to in clause (a) above, the Lessee will also promptly
pay and discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (the items referred to in clauses (a)
and (b) above being referred to herein collectively as the "Additional
Charges"), and the Lessor shall have all legal, equitable and contractual
rights, powers and remedies provided in this Lease, by statute or otherwise, in
the case of non-payment of the Additional Charges, as well as the Base Rent and
the Additional Rent. To the extent that the Lessee pays any Additional Charges
to the Lessor pursuant to any requirement of this Lease, the Lessee shall be
relieved of its obligation to pay such Additional Charges to any other Person to
which such Additional Charges would otherwise be due.
3.6 Net Lease. The Rent shall be paid absolutely net to the Lessor, so
that this Lease shall yield to the Lessor the full amount of the installments of
Base Rent, Additional Rent and Additional Charges throughout the Term, without
reduction abatement or offset, except as may be expressly provided herein.
3.7 No Lessee Termination or Offset.
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3.7.1 No Termination. Except as may be otherwise specifically and
expressly provided in this Lease, the Lessee, to the extent not prohibited by
applicable law, shall remain bound by this Lease in accordance with its terms
and shall neither take any action without the consent of the Lessor to modify,
surrender or terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent, nor
shall the respective obligations of the Lessor and the Lessee be otherwise
affected by reason of (a) any Casualty or any Taking of the Leased Property, (b)
the lawful or unlawful prohibition of, or restriction upon, the Lessee's use of
the Leased Property or the interference with such use by any Person (other than
the Lessor, except to the extent permitted hereunder) or by reason of eviction
by paramount title; (c) any claim that the Lessee has or might have against the
Lessor, (d) any default or breach of any warranty by the Lessor or any of the
other Lessor Entities under this Lease or any other Lease Document or any
Related Party Agreement, (e) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting the Lessor or any assignee or transferee of the Lessor or
(f) any other cause whether similar or dissimilar to any of the foregoing, other
than a discharge of the Lessee from any of the Lease Obligations as a matter of
law.
3.7.2 Waiver. The Lessee to the fullest extent not prohibited by
applicable law, hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law to
(a) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or (b) entitle the Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by the Lessee hereunder, except as
otherwise specifically and expressly provided in this Lease.
3.7.3 Independent Covenants. The obligations of the Lessor and the
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by the Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those instances
where the obligation to pay expressly survives the termination of this Lease) by
termination of this Lease other than by reason of an Event of Default.
3.8 Abatement of Rent Limited. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3, the Base Rent
shall be abated as follows: (a) in the case of such a partial Taking, Base Rent
then due during the Lease Year in which such Taking occurs shall be reduced to
equal the product of (i) the then current Base Rent multiplied by (ii) the
difference between one minus a fraction the numerator of which is the Award, the
denominator of which is the Fair Market Value of the Leased Property, and (b) in
the case of such a temporary Taking, by reducing the Base Rent for the period of
such a temporary Taking, by the net amount of the Award received by the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by the Lessor" shall mean the Award paid to the Lessor on account of
such Taking, minus all costs and
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expenses incurred by the Lessor in connection therewith, and minus any amounts
paid to or for the account of the Lessee to reimburse for the costs and expenses
of reconstructing the Facility following such Taking in order to create a viable
and functional Facility under all of the circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
------------------
4.1 Payment of Impositions.
4.1.1 Lessee To Pay. Subject to the provisions of Section 4.1.2 and
Article 15, the Lessee will pay or cause to be paid all Impositions before any
fine, penalty, interest or cost may be added for non-payment, such payments to
be made directly to the taxing authority where feasible, and the Lessee will
promptly furnish the Lessor copies of official receipts or other satisfactory
proof evidencing payment not later than the last day on which the same may be
paid without penalty or interest. Subject to the provisions of Article 15 and
Section 4.1.2, the Lessee's obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof. Notwithstanding the foregoing, if any Impositions
are not separately assessed against the Leased Premises and include all or any
portion of the SNF/CMC Land or any portion of the Building or other improvements
thereon not located on the Land, the Lessee shall pay to the Lessor, within ten
(10) days of receipt of an invoice from the Lessor, together with a copy of the
applicable bill from the Governmental Authority or other Person to whom the
Imposition is payable, the Lessee's pro-rata share of the applicable Imposition,
which for each Imposition, shall equal the amount of the Imposition multiplied
by a fraction, the numerator of which shall equal the area of the Land, and the
denominator of which shall equal (i) the area of the SNF/CMC Land or such
portion thereof affected by the applicable Imposition, plus (ii) the area of the
Land or such portion thereof affected by the applicable Imposition. If the
Lessee shall receive any invoices for Impositions covering any portion of the
SNF/CMC Land, the Lessee shall, within seven (7) days of receipt of such
invoice, deliver the same to the Lessor along with the Lessee' pro-rata share of
the Imposition set forth on such invoice calculated in accordance with the
immediately preceding sentence.
4.1.2 Installment Elections. If any Imposition that is assessed or
imposed against only the Leased Property (and no other real or personal property
not included in the Leased Property) may, at the option of the taxpayer,
lawfully be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), the Lessee may exercise the option to pay
the same (and any accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the Term
hereof (subject to the Lessee's right to
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contest pursuant to the provisions of Section 4.1.5 below) as the same
respectively become due and before any fine, penalty, premium, further interest
or cost may be added thereto.
4.1.3 Returns and Reports. The Lessor, at its expense, shall, to the
extent permitted by applicable law, prepare and file all tax returns and reports
as may be required by Governmental Authorities in respect of the Lessor's net
income, gross receipts, franchise taxes and taxes on its capital stock, and the
Lessee, at its expense, shall, to the extent permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by Governmental Authorities. The Lessor and
the Lessee shall, upon request of the other, provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports. In the event that
any Governmental Authority classifies any property covered by this Lease as
personal property, the Lessee shall file all personal property tax returns in
such jurisdictions where it may legally so file. The Lessor, to the extent it
possesses the same, and the Lessee, to the extent it possesses the same, will
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any portion of Leased Property so classified as
personal property. Where the Lessor is legally required to file personal
property tax returns, if the Lessee notifies the Lessor of the obligation to do
so in each year at least thirty (30) days prior to the date any protest must be
filed, the Lessee will be provided with copies of assessment notices so as to
enable the Lessee to file a protest.
4.1.4 Refunds. If no Lease Default shall have occurred and be
continuing, subject to the terms of any Fee Mortgage Loan Documents, any refund
due from any taxing authority in respect of any Imposition paid by the Lessee
shall be paid over to or retained by the Lessee. If a Lease Default shall have
occurred and be continuing, at the Lessor's or the Fee Mortgagee's option,
exercisable by written notice to the Lessee, such funds shall be paid over to
the Lessor or the Fee Mortgagee or shall be retained by the Lessor and, in any
such event, shall be applied toward the Obligations in accordance with the Lease
Documents and/or any Related Party Agreement.
4.1.5 Protest. Upon giving notice to the Lessor, at the Lessee's option
and sole cost and expense, and subject to compliance with the provisions of
Article 15 and the terms of any of the Fee Mortgage Loan Documents, the Lessee
may contest, protest, appeal, or institute such other proceedings as the Lessee
may deem appropriate to effect a reduction of any Imposition and the Lessor, at
the Lessee's cost and expense as aforesaid, shall fully cooperate in a
reasonable manner with the Lessee in connection with such protest, appeal or
other action; provided, however, that the Lessee's right to contest, protest,
appeal or take any such other action regarding any Imposition that includes the
SNF/CMC Land or any portion of the Building or other improvements thereon, shall
require the Lessor's prior written consent, which consent may not be
unreasonably withheld.
4.2 Notice of Impositions. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but
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the Lessor's failure to give any such notice shall in no way diminish the
Lessee's obligations hereunder to pay such Impositions.
4.3 Adjustment of Impositions. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between the Lessor and the Lessee, whether or not
such Impositions are imposed before or after such expiration or termination, and
the Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
4.4 Utilities.
4.4.1 Utility Services. During the Term, the Lessor shall provide those
utility and other services to the Facility when and as set forth in the Service,
Maintenance and Easement Agreement.
The Lessor shall not, except as specifically provided in this Section
4.4.1, be required to provide utility services, equipment or any other services,
of any nature or description, to the Lessee or the Leased Property.
4.4.2 Utility Charges. Lessee shall pay or cause to be paid all charges
for electricity, power, gas, oil, water and other utilities used in the Leased
Property during the Term, including, without implied limitation, all of the
Service, Maintenance and Easement Payments which relate to such charges.
4.5 Insurance Premiums. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee shall furnish the Lessor with evidence
satisfactory to the Lessor that all such premiums have been so paid prior to the
commencement of the Term and thereafter at least thirty (30) days prior to the
due date of each premium which thereafter becomes due. Notwithstanding the
foregoing, the Lessee may pay such insurance premiums to the insurer in monthly
installments so long as the applicable insurer is contractually obligated to
give the Lessor not less than a thirty (30) days notice of non-payment and so
long as no Lease Default has occurred and is continuing. In the event of the
failure of the Lessee either to comply with the insurance requirements in
Article 12, or to pay the premiums for such insurance, or to deliver such
policies or certificates thereof to the Lessor at the times required hereunder,
the Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, which premiums shall be a demand
obligation of the Lessee to the Lessor.
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4.6 Deposits.
4.6.1 Lessor's Option. At the option of the Lessor, which may be
exercised at any time, the Lessee shall, upon written request of the Lessor, on
the first day on the calendar month immediately following such request, and on
the first day of each calendar month thereafter during the Term (each of which
dates is referred to as a "Monthly Deposit Date"), pay to and deposit with the
Lessor a sum equal to one-twelfth (1/12th) of the Impositions to be levied,
charged, filed, assessed or imposed upon or against the Leased Property within
one (1) year after said Monthly Deposit Date and a sum equal to one-twelfth
(1/12th) of the premiums for the insurance policies required pursuant to Article
12 which are payable within one (1) year after said Monthly Deposit Date. If the
amount of the Impositions to be levied, charged, assessed or imposed or
insurance premiums to be paid within the ensuing one (1) year period shall not
be fixed upon any Monthly Deposit Date, such amount for the purpose of computing
the deposit to be made by the Lessee hereunder shall be estimated by the Lessor
with an appropriate adjustment to be promptly made between the Lessor and the
Lessee as soon as such amount becomes determinable. In addition, the Lessor may,
at its option, from time to time require that any particular deposit be greater
than one-twelfth (1/12th) of the estimated amount payable within one (1) year
after said Monthly Deposit Date, if such additional deposit is required in order
to provide to the Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment thereof, or to
make payment of any required insurance premiums not later than the due date
thereof.
4.6.2 Use of Deposits. The sums deposited by the Lessee under this
Section 4.6 shall be held by the Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of the Lessor, and shall be
deposited by the Lessor at such bank as the Lessor may, from time to time
select, and the Lessor shall not be liable to the Lessee or any other Person (a)
based on the Lessor's (or such bank's) choice of investment vehicles, (b) for
any consequent loss of principal or interest or (c) for any unavailability of
funds based on such choice of investment. Furthermore, the Lessor shall bear no
responsibility for the financial condition of, nor any act or omission by, the
Lessor's depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as no Lease
Default has occurred and is then continuing, and as long as no fact or
circumstance exists which, with the giving of notice and/or the passage of time,
would constitute a Lease Default. The Lessee shall give not less than ten (10)
days prior written notice to the Lessor in each instance when an Imposition or
insurance premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which the same may
be paid in order to comply with the requirements of this Lease. If the Lessor,
in violation of its obligations under this Lease, does not pay any Imposition or
insurance premium when due, for which a sufficient deposit exists, the Lessee
shall not be in default hereunder by virtue of the failure of the Lessor to pay
such Imposition or such insurance premium and the Lessor shall pay any interest
or fine assessed by virtue of the Lessor's failure to pay such Imposition or
insurance premium.
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4.6.3 Deficits. If for any reason any deposit held by the Lessor under
this Section 4.6 shall not be sufficient to pay an Imposition or insurance
premium within the time specified therefor in this Lease, then, within ten (10)
days after demand by the Lessor, the Lessee shall deposit an additional amount
with the Lessor, increasing the deposit held by the Lessor so that the Lessor
holds sufficient funds to pay such Imposition or premium in full (or in
installments as otherwise provided for herein), together with any penalty or
interest due thereon. The Lessor may change its estimate of any Imposition or
insurance premium for any period on the basis of a change in an assessment or
tax rate or on the basis of a prior miscalculation or for any other good faith
reason; in which event, within ten (10) days after demand by the Lessor, the
Lessee shall deposit with the Lessor the amount in excess of the sums previously
deposited with the Lessor for the applicable period which would theretofore have
been payable under the revised estimate.
4.6.4 Other Properties. If any Imposition shall be levied, charged,
filed, assessed, or imposed upon or against the Leased Property, and if such
Imposition shall also be a levy, charge, assessment, or imposition upon or for
any other real or personal property that does not constitute a part of the
Leased Property (other than Impositions against the SNF/CMC Land or any portion
of the Building, or any other improvement, on the SNF/CMC Land), then the
computation of the amounts to be deposited under this Section 4.6 shall be based
upon the entire amount of such Imposition and the Lessee shall not have the
right to apportion any deposit with respect to such Imposition.
4.6.5 Transfers. In connection with any assignment of the Lessor's
interest under this Lease, the original Lessor named herein and each successor
in interest shall have the right to transfer all amounts deposited pursuant to
the provisions of this Section 4.6 then in its possession to such assignee (as
the subsequent holder of the Lessor's interest in this Lease) and upon such
transfer, the original Lessor named herein or the applicable successor in
interest transferring the deposits shall thereupon be completely released from
all liability with respect to such deposits so transferred and the Lessee shall
look solely to said assignee, as the subsequent holder of the Lessor's interest
under this Lease, in reference thereto. The original Lessor named herein or the
applicable successor in interest transferring the deposits shall provide written
notice to the Lessee of such transfer.
4.6.6 Security. All amounts deposited with the Lessor pursuant to the
provisions of this Section 4.6 shall be held by the Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, the Lessor may, in its sole and absolute
discretion, apply said amounts towards payment or performance of such
Obligations.
4.6.7 Return. Upon the expiration or earlier termination of this Lease,
provided, that, all of the Lease Obligations have been fully paid and performed,
any sums then held by the Lessor under this Section 4.6 shall be refunded to the
Lessee; unless a Related Party Default has occurred, in which event such sums
may be applied toward the Obligations.
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4.6.8 Receipts. The Lessee shall deliver to the Lessor copies of all
notices, demands, claims, bills and receipts in relation to the Impositions and
insurance premiums immediately upon receipt thereof by the Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY
-----------------
5.1 Ownership of the Leased Property. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that, subject to the Permitted
Encumbrances, the Lessee has only the right to the exclusive possession and use
of the Leased Property upon the terms and conditions of this Lease.
5.2 Personal Property; Removal and Replacement of Personal Property.
5.2.1 Lessee To Equip Facility. The Lessee, at its sole cost and
expense, shall install, affix or assemble or place on the Leased Property,
sufficient items of Tangible Personal Property, in addition to the Lessor's
Personal Property, to enable the Leased Property to be operated, in accordance
with the requirements of this Lease for the Primary Intended Use, and such
Tangible Personal Property and replacements thereof, shall be at all times the
property of the Lessee.
5.2.2 Sufficient Personal Property. The Lessee shall maintain, during
the entire Term, the Tangible Personal Property and the Lessor's Personal
Property in good order and repair and shall provide at its expense all necessary
replacements thereof, as may be necessary in order to operate the Leased
Property in compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use. In addition, the Lessee shall (a) furnish all
necessary replacements of obsolete items of the Tangible Personal Property and
the Lessor's Personal Property during the Term, unless the Lessee provides the
Lessor with an explanation (reasonably acceptable to the Lessor) as to why such
Tangible Personal Property and/or the Lessor's Personal Property is no longer
required in connection with the operation of the Leased Property and (b) at
least once a year, and more frequently if requested by the Lessor, deliver to
the Lessor, a detailed inventory of all such Tangible Personal Property and the
Lessor's Personal Property.
5.2.3 Removal and Replacement; Lessor's Option to Purchase. The Lessee
shall not remove from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the fair market
value of which exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually or
ONE HUNDRED THOUSAND DOLLARS ($100,000.00) collectively, except if such Tangible
Personal Property is simultaneously suitably replaced or the Lessee provides the
Lessor with an explanation
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(reasonably satisfactory to the Lessor) as to why such Tangible Personal
Property is no longer required in connection with the operation of the Leased
Property. At its sole cost and expense, the Lessee shall restore the Leased
Property to the condition required by Article 8, including repair of all damage
to the Leased Property caused by the removal of the Tangible Personal Property,
whether effected by the Lessee or the Lessor. Upon the expiration or earlier
termination of this Lease, the Lessor shall have the option, which may be
exercised prior to or within sixty (60) days following such expiration or
termination, of (a) acquiring the Tangible Personal Property (pursuant to a bill
of sale and assignments of any equipment leases, all in such forms as are
reasonably satisfactory to the Lessor) upon payment of its book value (the
Lessee's cost, minus depreciation), but not in excess of its fair market value
or (b) requiring the Lessee to remove the Tangible Personal Property. If the
Lessor exercises its option to purchase the Tangible Personal Property, the
price to be paid by the Lessor shall be (i) reduced by the amount of all
payments due on any equipment leases or any other Permitted Prior Security
Interests assumed by the Lessor and (ii) applied to the Lease Obligations before
any payment to the Lessee. If the Lessor requires the removal of the Tangible
Personal Property, then all of the Tangible Personal Property that is not
removed by the Lessee within ten (10) days following such request shall be
considered abandoned by the Lessee and may be appropriated, sold, destroyed or
otherwise disposed of by the Lessor upon first giving notice thereof to the
Lessee, without any payment to the Lessee and without any obligation to account
therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
------------------------------
6.1 Security for Lessee's Obligations.
6.1.1 Security. In order to secure the payment and performance of all
of the Obligations, the Lessee agrees to provide or cause there to be provided,
among other things, the following security:
(a) a first lien and exclusive security interest in the Tangible
Personal Property and certain other Collateral as more particularly provided for
in the Security Agreement;
(b) a first lien and exclusive pledge of all of the capital stock of
the Lessee all as more particularly set forth in the Pledge Agreements. If any
Person other than the Lessee shall ever operate the Facility, a pledge of all
capital stock of, or partnership or other ownership interests, in such Person
shall also be provided pursuant to a pledge and security agreement substantially
similar to the Pledge Agreements; and
(c) a first lien and exclusive pledge and assignment of, and security
interest in, all Permits and Contracts, as more particularly provided for in the
Permits Assignment.
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Notwithstanding anything to the contrary set forth herein, in no event
shall the Lessee be required to grant to the Lessor any security interest in
Receivables; provided, however, upon any Lease Default or the expiration or
earlier termination of this Lease, the Lessee shall provide the Lessor with
copies of its books and records relating to Receivables, even if excluded from
the security granted to the Lessor, so as to facilitate continuity of patient
and/or resident care and billing.
6.1.2 Purchase-Money Security Interests and Equipment Leases.
Notwithstanding any other provision hereof regarding the creation of Liens, but
subject to Section 11.3.2, the Lessee may grant priority purchase money security
interests in items of Tangible Personal Property or lease Tangible Personal
Property from equipment lessors without the consent of the Lessor as long as the
total amount of the obligations of the Lessee outstanding in connection
therewith do not exceed ONE HUNDRED THOUSAND DOLLARS ($100,000) in the aggregate
and the Lessee may grant purchase money security interests in Tangible Personal
Property and lease Tangible Personal Property from equipment lessors in excess
of such limit, as long as, in each instance, (i) the secured party or equipment
lessor enters into an intercreditor agreement with, and satisfactory to, the
Lessor, pursuant to which, without limiting the foregoing, (x) the Lessor shall
be afforded the option of curing defaults and the option of succeeding to the
rights of the Lessee and (y) the Lessor's security interest in Tangible Personal
Property shall be subordinated to the security interest granted to such secured
party, (ii) all of the terms, conditions and provisions of the purchase money
security agreements or equipment leases evidencing the financing arrangement are
reasonably acceptable to the Lessor, (iii) promptly after the execution thereof,
the Lessee provides to the Lessor true and complete copies, as executed, of all
such purchase money security agreements and equipment leases (and all amendments
thereto) and (iv) no such purchase money security interest or equipment lease
shall be cross-defaulted or cross-collateralized with any other obligation.
Security interests granted by the Lessee in full compliance with the provisions
of this Section 6.1.2 are referred to as "Permitted Prior Security Interests."
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
---------------------
7.1 Condition of the Leased Property. The Lessee acknowledges receipt
and delivery of possession of the Leased Property and that the Lessee has
examined and otherwise has acquired knowledge of the condition of the Leased
Property prior to the execution and delivery of this Lease and has found the
same to be in good order and repair and satisfactory for its purposes hereunder.
The Lessee is leasing the Leased Property "AS-IS" in its present condition. The
Lessee waives any claim or action against the Lessor in respect of the condition
of the Leased Property. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED
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PROPERTY, EITHER AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS DESIGN
OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS RELATING
TO THE DESIGN, CONDITION AND/OR USE OF THE LEASED PROPERTY ARE TO BE BORNE BY
THE LESSEE. THE LESSEE HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF THE
LEASED PROPERTY, THE SUITABILITY OF THE LEASED PROPERTY FOR THE LESSEE'S
PURPOSES, AND THE COMPLIANCE OR NONCOMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL LAWS
AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor, at any time and from time to time
during the Term, the Lessee shall engage one (1) or more independent
professional consultants, engineers and inspectors, qualified to do business in
the State and acceptable to the Lessor to perform any environmental and/or
structural investigations and/or other inspections of the Leased Property and
the Facility as the Lessor may reasonably request in order to detect (a) any
structural deficiencies in the Leased Improvements or the utilities servicing
the Leased Property or (b) the presence of any condition that (i) may be harmful
or present a health hazard to the patients and/or residents and other occupants
of the Leased Property or (ii) constitutes a breach or violation of any of the
Lease Documents. In the event that the Lessor reasonably determines that the
results of such testing or inspections are unsatisfactory, within thirty (30)
days of notice from the Lessor, the Lessee shall commence such appropriate
remedial actions as may be reasonably requested by the Lessor to correct such
unsatisfactory conditions and, thereafter, shall diligently and continuously
prosecute such remedial actions to completion within the time limits prescribed
in this Lease or the other Lease Documents.
7.2 Use of the Leased Property; Compliance; Management.
7.2.1 Obligation to Operate. The Lessee shall continuously operate the
Leased Property in accordance with the Primary Intended Use and maintain its
qualifications for licensure and accreditation as required by all applicable
Legal Requirements and Insurance Requirements.
7.2.2 Permitted Uses. During the entire Term, the Lessee shall use the
Leased Property, or permit the Leased Property to be used, only for the Primary
Intended Use. The Lessee shall not use the Leased Property or permit the Leased
Property to be used for any other use without the prior written consent of the
Lessor, which consent may be withheld in the Lessor's sole and absolute
discretion.
7.2.3 Compliance With Insurance Requirements. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done which will
cause the cancellation of any insurance policy covering the Leased Property, nor
shall the Lessee, any Manager or any
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other Person sell or otherwise provide to any patients and/or residents, other
occupants or invitees therein, or permit to be kept, used or sold in or about
the Leased Property, any article which may be prohibited by any Legal
Requirement or by any of the Insurance Requirements. Furthermore, the Lessee
shall, at its sole cost and expense, take whatever other actions that may be
necessary to comply with and to insure that the Leased Property complies with
all Insurance Requirements.
7.2.4 No Waste. The Lessee shall not commit or suffer to be committed
any waste on, in or under the Leased Property, nor shall the Lessee cause or
permit any nuisance thereon.
7.2.5 No Impairment. The Lessee shall neither suffer nor permit the
Leased Property to be used in such a manner as (a) might reasonably tend to
impair the Lessor's title thereto or (b) may reasonably make possible a claim or
claims of adverse usage or adverse possession by the public or of implied
dedication of the Leased Property.
7.2.6 No Liens. Except as permitted pursuant to Section 6.1.2, the
Lessee shall not permit or suffer any Lien to exist on the Tangible Personal
Property and shall in no event cause, permit or suffer any Lien to exist with
respect to the Leased Property other than as set forth in Section 11.5.2.
7.3 Compliance with Legal Requirements. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee, at its sole cost and expense, will promptly (a) comply with, and shall
cause every other member of the Leasing Group to comply with, all Legal
Requirements relating to the use, operation, maintenance, repair and restoration
of the Leased Property, whether or not compliance therewith shall require
structural change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply with (in
all material respects), and shall cause every other member of the Leasing Group
to procure, maintain and comply with (in all material respects), all Contracts
and Permits necessary or desirable in order to operate the Leased Property for
the Primary Intended Use, and for compliance with all of the terms and
conditions of this Lease. Unless a Lease Default has occurred or any event has
occurred which, with the passage of time and/or the giving of notice would
constitute a Lease Default, the Lessee may, upon prior written notice to the
Lessor, contest any Legal Requirement to the extent permitted by, and in
accordance with, Article 15.
7.4 Management Agreements. From and after the Commencement Date,
neither the Lessee, nor any Sublessee (other than any Sublessee that is not an
Affiliate of the Lessee) shall enter into any Management Agreement, without the
prior written approval of the Lessor and the Fee Mortgagee (to the extent that
any such approval from any Fee Mortgagee is required under any Fee Mortgage Loan
Documents), in each instance, which approval from the Lessor shall not be
unreasonably withheld. The Lessee shall not, without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld, agree to or allow: (a) any change in the ownership or control of the
Manager to the extent that, pursuant to the
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Management Agreement, any such change is prohibited or subject to the Lessee's
approval, (b) the termination of any Management Agreement, except (i) if either
party thereto exercises any right to terminate the Management Agreement in
accordance with its terms (unrelated to an allegation of default) or (ii) in
connection with the exercise by the Lessee of any of its remedies under the
Management Agreement as a result of any default by the Manager thereunder), (c)
any assignment by the Manager of its interest under the Management Agreement or
(d) any material amendment of the Management Agreement. In addition, the Lessee
and every Sublessee (other than any Sublessee that is not an Affiliate of the
Lessee) shall, at their sole cost and expense, promptly and fully perform or
cause to be performed every covenant, condition, promise and obligation of the
licensed operator of the Leased Property under any Management Agreement.
Each Management Agreement shall provide that the Lessor shall be
provided notice of any defaults thereunder and, at the Lessor's option, an
opportunity to cure such default. The Lessee and any Sublessee (other than any
Sublessee that is not an Affiliate of the Lessee) shall furnish to the Lessor,
within three (3) days after receipt thereof, or after the mailing or service
thereof by the Lessee or such Sublessee, as the case may be, a copy of each
notice of default which the Lessee or such Sublessee shall give to, or receive
from any Person, based upon the occurrence, or alleged occurrence, of any
default in the performance of any covenant, condition, promise or obligation
under any Management Agreement.
Whenever and as often as the Lessee or any Sublessee (other than any
Sublessee that is not an Affiliate of the Lessee) shall fail to perform,
promptly and fully, at its sole cost and expense, any covenant, condition,
promise or obligation on the part of the licensed operator of the Leased
Property under and pursuant to any Management Agreement, the Lessor, or a
lawfully appointed receiver of the Leased Property, or, subject to the terms of
any applicable Fee Mortgage Loan Documents, any Fee Mortgagee may, at their
respective options (and without any obligation to do so), after five (5) days'
prior notice to the Lessee (except in the case of an emergency) enter upon the
Leased Property and perform, or cause to be performed, such work, labor,
services, acts or things, and take such other steps and do such other acts as
they may deem advisable, to cure such defaulted covenant, condition, promise or
obligation, and any amount so paid or advanced by the Lessor, such receiver or
such Fee Mortgagee and all costs and expenses reasonably incurred in connection
therewith (including, without limitation, attorneys' fees and expenses), shall
be a demand obligation of the Lessee to the Lessor, such receiver or such Fee
Mortgagee, and, such parties shall have the same rights and remedies for failure
to pay such costs on demand as for the Lessee's failure to pay any other sums
due hereunder.
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ARTICLE 8
REPAIRS; RESTRICTIONS
---------------------
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. The Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto which are under the Lessee's control in good order and
repair (whether or not the need for such repairs occurs as a result of the
Lessee's use, any prior use, the elements or the age of the Leased Property or
such private roadways, sidewalks and curbs or any other cause whatsoever) and,
subject to Articles 9, 13 and 14, the Lessee shall promptly, with the exercise
of all reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement of, or during, the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. In
addition, the Lessee, at its sole cost and expense, shall make all repairs,
modifications, replacements, renovations and alterations of the Leased Property
(and such private roadways, sidewalks and curbs) that are necessary to comply
with all applicable Legal Requirements and Insurance Requirements so that the
Leased Property can be legally operated for the Primary Intended Use. All
repairs, replacements, renovations, alterations, and modifications required by
the terms of this Section 8.1 shall be (a) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance Requirements and the
requirements of Article 9 hereof and any applicable Fee Mortgage Loan Documents,
using new materials well suited for their intended purpose and (b) consistent
with the operation of the Leased Property in a first class manner. The Lessee
will not take or omit to take any action the taking or omission of which might
materially impair the value or the usefulness of the Leased Property for the
Primary Intended Use. To the extent that any of the repairs, replacements,
renovations, alterations or modifications required by the terms of this Section
8.1 constitute Material Structural Work, the Lessee shall obtain the Lessor's
prior written approval (which approval shall not be unreasonably withheld) of
the specific repairs, replacements, renovations, alterations and modifications
to be performed by or on behalf of the Lessee in connection with such Material
Structural Work. Notwithstanding the foregoing, in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Material Structural
Work as may be necessary in order to address such emergency without the Lessor's
prior approval; provided, however; that the Lessee shall immediately thereafter
advise the Lessor and any Fee Mortgagee of such emergency and the nature and
scope of the Material Structural Work commenced and shall obtain the Lessor's
approval of the remaining Material Structural Work to be completed.
8.1.2 No Lessor Obligation. The Lessor shall not, under any
circumstances, be required to build or rebuild any improvements on the Leased
Property (or any private roadways, sidewalks
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or curbs appurtenant thereto or any other portion of the Building or Building
Systems, as that term is defined in the Service, Maintenance and Easement
Agreement), or to make any repairs, replacements, renovations, alterations,
restorations, modifications, or renewals of any nature or description to the
Leased Property (or any private roadways, sidewalks or curbs appurtenant thereto
or any other portion of the Building or Building Systems), whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto in connection with this Lease,
or to maintain the Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto or any other portion of the Building or Building Systems) in
any way.
8.1.3 Lessee May Not Obligate Lessor. Nothing contained herein nor any
action or inaction by the Lessor shall be construed as (a) constituting the
consent or request of the Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) giving the Lessee any right,
power or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion as
would permit the making of any claim against the Lessor for the payment thereof
or to make any agreement that may create, or in any way be the basis for, any
right, title or interest in, or Lien or claim against, the estate of the Lessor
in the Leased Property. Without limiting the generality of the foregoing, the
right, title and interest of the Lessor in and to the Leased Property shall not
be subject to liens or encumbrances for the performance of any labor or services
or the furnishing of any materials or other property furnished to the Leased
Property at or by the request of the Lessee or any other Person other than the
Lessor. The Lessee shall notify any contractor, subcontractor, laborer,
materialman or vendor providing any labor, services or materials to the Leased
Property of this provision.
8.2 Encroachments; Title Restrictions. If any of the Leased
Improvements shall, at any time, encroach upon any property, street or
right-of-way adjacent to the Leased Property, or shall violate the agreements or
conditions contained in any lawful restrictive covenant or other Lien now or
hereafter affecting the Leased Property, or shall impair the rights of others
under any easement, right-of-way or other Lien to which the Leased Property is
now or hereafter subject, then promptly upon the request of the Lessor, the
Lessee shall, at its sole cost and expense, subject to the Lessee's right to
contest the existence of any encroachment, violation or impairment as set forth
in Article 15, (a) obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment, violation
or impairment or (b) make such alterations to the Leased Improvements, and take
such other actions, as the Lessee in the good faith exercise of its judgment
deems reasonably practicable, to remove such encroachment, or to end such
violation or impairment, including, if necessary, the alteration of any of the
Leased Improvements. Notwithstanding the foregoing, the Lessee shall, in any
event, take all such actions as may be reasonably necessary in order to be able
to continue the operation of the Leased Improvements for the Primary Intended
Use substantially in the manner and to the extent that the Leased Improvements
were operated prior to the assertion of such encroachment, violation or
impairment and nothing contained herein shall limit the Lessee's obligations to
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operate the Leased Property in accordance with its Primary Intended Use. Any
such alteration made pursuant to the terms of this Section 8.2 shall be
completed in conformity with the applicable requirements of Section 8.1 and
Article 9. The Lessee's obligations under this Section 8.2 shall be in addition
to and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
-----------------
9.1 Lessor's Approval. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without limitation, any change in the
size, bed and/or unit capacity of the Facility), except as may be otherwise
expressly required pursuant to Article 8.
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
9.2.1 No Liens. The Lessee shall not be permitted to create any Lien on
the Leased Property in connection with any Capital Addition or Material
Structural Work. Without limiting the foregoing, nothing herein shall be
construed as constituting the permission of the Lessor for any mechanic,
materialman or subcontractor to file any Lien against the Leased Property, and
the Lessee agrees to secure the immediate removal of any such Lien purported to
be filed, by payment or otherwise as provided by law.
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work. If the Lessee desires to undertake any Capital Addition or
Material Structural Work, the Lessee shall submit to the Lessor in writing a
proposal setting forth in reasonable detail any proposed Capital Addition or
Material Structural Work and shall provide to the Lessor copies of, or
information regarding, the applicable plans and specifications, Permits,
Contracts and any other materials concerning the proposed Capital Addition or
Material Structural Work, as the case may be, as the Lessor may reasonably
request. Without limiting the generality of the foregoing, each such proposal
pertaining to any Capital Addition shall indicate the approximate projected cost
of constructing such Capital Addition, the use or uses to which it will be put
and a good faith estimate of the change, if any, in the Gross Revenues that the
Lessee anticipates will result from the construction of such Capital Addition.
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9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work. The Lessor shall have the options of: (a) denying permission
for the construction of the applicable Capital Addition or Material Structural
Work, (b) offering to finance the construction of the Capital Addition or
Material Structural Work pursuant to Section 9.3, (c) allowing the Lessee to pay
for or separately finance the construction of the Capital Addition or Material
Structural Work, subject to compliance with the terms and conditions of Section
9.2.1, Section 9.4, Section 13.1, all Legal Requirements and all other
requirements of this Lease and to such other terms and conditions as the Lessor
may in its discretion impose or (d) any combination of the foregoing. Unless the
Lessor notifies the Lessee in writing of a contrary election within forty-five
(45) days of the Lessee's request, the Lessor shall be deemed to have denied the
request for the Capital Addition or Material Structural Work.
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work. If the Lessor elects to offer financing for the proposed
Capital Addition or Material Structural Work, the provisions of Section 9.3
shall apply.
9.2.5 Legal Requirements; Quality of Work. All Capital Additions and/or
Material Structural Work shall be performed in full compliance with all
applicable Legal Requirements and shall be performed in a good and workmanlike
manner.
9.3 Capital Additions and Material Structural Work Financed by Lessor.
9.3.1 Lessee's Financing Request. The Lessee may request that the
Lessor provide or arrange financing for a Capital Addition or Material
Structural Work by providing to the Lessor such information about the Capital
Addition or Material Structural Work as he Lessor may reasonably request,
including, without limitation, all information referred to in Section 9.2 above.
The Lessee understands, however, that the Lessor shall be under no obligation to
agree to such request. Nevertheless, the Lessor shall use reasonable efforts to
notify the Lessee, within forty-five (45) days of receipt of such information,
as to whether the Lessor will finance the proposed Capital Addition or Material
Structural Work and, if so, the terms and conditions upon which it would do so,
including the terms of any amendment to this Lease (including, without
limitation, an increase in Base Rent to compensate the Lessor for the additional
funds advanced by it). The Lessee may withdraw its request by notice to the
Lessor at any time before such time as the Lessee accepts the Lessor's terms and
conditions. All advances of funds for any such financing shall be made in
accordance with the requirements and procedures applicable to Work under Section
13.1.
9.3.2 Lessor's General Requirements. If the Lessor agrees to finance
the proposed Capital Addition or Material Structural Work and the Lessee accepts
the Lessor's proposal therefor, in addition to all other items which the Lessor
or any applicable Financing Party may reasonably require, the Lessee shall
provide to the Lessor the following:
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(a) prior to any advance of funds, (i) any information, opinions,
certificates, Permits or documents reasonably requested by the Lessor or any
applicable Financing Party which are necessary to confirm that the Lessee will
be able to use the Capital Addition upon the completion thereof or the
applicable portion of the Facility upon the completion of the Material
Structural Work in accordance with the Primary Intended Use and (ii) evidence
satisfactory to the Lessor and any applicable Financing Party that all Permits
required for the construction and use of the Capital Addition or the applicable
portion of the Facility have been obtained, are in full force and effect and are
not subject to appeal, except only for those Permits which cannot in the normal
course be obtained prior to commencement or completion of the construction;
provided, that the Lessor and any applicable Financing Party are furnished with
reasonable evidence that the same will be available in the normal course of
business without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate and, if
requested, a certificate from the Lessee's architect, setting forth in
reasonable detail the projected (or actual, if available) Capital Addition Cost
or the cost of the Material Structural Work;
(c) bills of sale, instruments of transfer and other documents required
by the Lessor so as to vest title to the Capital Addition or the applicable
Material Structural Work in the Lessor free and clear of all Liens, and
amendments to this Lease and any recorded notice or memorandum thereof, duly
executed and acknowledged, in form and substance reasonably satisfactory to the
Lessor, providing for any changes required by the Lessor including, without
limitation, changes in the Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to the Lessor title to any
land acquired for the purpose of constructing the Capital Addition or the
applicable Material Structural Work ("Additional Land") free and clear of any
Liens except those approved by the Lessor;
(e) upon completion of the Capital Addition or the Material Structural
Work, a final as-built survey thereof reasonably satisfactory to the Lessor, if
required by the Lessor;
(f) during and following the advance of funds and the completion of the
Capital Addition or the Material Structural Work, endorsements to any
outstanding policy of title insurance covering the Leased Property satisfactory
in form and substance to the Lessor and any Financing Party (i) updating the
same without any additional exception except as may be reasonably permitted by
the Lessor, (ii) if applicable, including the Additional Land in the premises
covered by such title insurance policy and (iii) increasing the coverage thereof
by an amount equal to any amount paid by the Lessor for the Additional Land plus
the Fair Market Value of the Capital Addition or the Fair Market Value of the
Material Structural Work (except to the extent covered by the owner's policy of
title insurance referred to in subparagraph (g) below);
(g) simultaneous with the initial advance of funds, if appropriate, (i)
an owner's policy of title insurance insuring fee simple title to any Additional
Land conveyed to the Lessor
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pursuant to subparagraph (d) free and clear of all Liens except those approved
by the Lessor and (ii) a lender's policy of title insurance reasonably
satisfactory in form and substance to any applicable Financing Party;
(h) following the completion of the Capital Addition or the Material
Structural Work, if reasonably deemed necessary by the Lessor, an appraisal of
the Leased Property by an M.A.I. appraiser acceptable to the Lessor, which
states that the Fair Market Value of the Leased Property upon completion of the
Capital Addition or the Material Structural Work exceeds the Fair Market Value
of the Leased Property prior to the commencement of the construction of such
Capital Addition or Material Structural Work by an amount not less than one
hundred twenty-five percent (125%) of the Capital Addition Cost or the cost of
the Material Structural Work; and
(i) during or following the advancement of funds, prints of
architectural and engineering drawings relating to the Capital Addition or the
Material Structural Work and such other materials, including, without
limitation, endorsements to the title insurance policies (insuring the Lessor
and any applicable Financing Party with respect to the Leased Property)
contemplated by subsection (f) above, opinions of counsel, appraisals, surveys,
certified copies of duly adopted resolutions of the board of directors of the
Lessee authorizing the execution and delivery of the lease amendment and any
other documents and instruments as may be reasonably required by the Lessor and
any applicable Financing Party.
9.3.3 Payment of Costs. By virtue of making a request to finance a
Capital Addition or any Material Structural Work, whether or not such financing
is actually consummated, the Lessee shall be deemed to have agreed to pay, upon
demand, all costs and expenses reasonably incurred by the Lessor and any Person
participating with the Lessor in any way in the financing of the Capital
Addition or Material Structural Work, including, but not limited to (a) fees and
expenses of their respective attorneys, (b) all photocopying expenses, if any,
(c) the amount of any filing, registration and recording taxes and fees, (d)
documentary stamp taxes and intangible taxes and (e) title insurance charges and
appraisal fees.
9.4 General Limitations. Without in any way limiting the Lessor's
options with respect to proposed Capital Additions or Material Structural Work:
(a) no Capital Addition or Material Structural Work shall be completed that
could, upon completion, significantly alter the character or purpose or detract
from the value or operating efficiency of the Leased Property, or significantly
impair the revenue-producing capability of the Leased Property, or adversely
affect the ability of the Lessee to comply with the terms of this Lease, (b) no
Capital Addition or Material Structural Work shall be completed which would tie
in or connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless the Lessee shall have obtained the
prior written approval of the Lessor, which approval may be withheld in the
Lessor's sole and absolute discretion and (c) all proposed Capital Additions and
Material Structural Work shall be architecturally integrated and consistent with
the Leased Property.
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9.5 Non-Capital Additions. The Lessee shall have the obligation and
right to make repairs, replacements and alterations which are not Capital
Additions as required by the other Sections of this Lease, but in so doing, the
Lessee shall always comply with and satisfy the conditions of Sections 9.2.1,
9.2.5 and 9.4, mutatis, mutandis. The Lessee shall have the right, from time to
time, to make additions, modifications or improvements to the Leased Property
which do not constitute Capital Additions or Material Structural Work as it may
deem to be desirable or necessary for its uses and purposes, subject to the same
limits and conditions imposed under Sections 9.2.1, 9.2.5 and 9.4. The cost of
any such repair, replacement, alteration, addition, modification or improvement
shall be paid by the Lessee and the results thereof shall be included under the
terms of this Lease and become a part of the Leased Property, without payment
therefor by the Lessor at any time. Notwithstanding the foregoing, all such
additions, modifications and improvements which affect the structure of any of
the Leased Improvements, or which involve the expenditure of more than FIFTY
THOUSAND DOLLARS ($50,000.00), shall be undertaken only upon compliance with the
provisions of Section 13.1, all Legal Requirements and all other applicable
requirements of this Lease; provided, however, that in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such additions,
modifications and improvements as may be necessary in order to address such
emergency without the Lessor's prior approval, as long as the Lessee immediately
thereafter advises the Lessor of such emergency and the nature and scope of the
additions, modifications and improvements performed and obtains the Lessor's
approval of the remaining work to be completed.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
------------------------------
10.1 Representations and Warranties. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 Existence; Power; Qualification.
The Lessee is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. The Lessee has all requisite corporate
power to own and operate its properties and to carry on its business as now
conducted and as proposed to be conducted and is duly qualified to transact
business and is in good standing in each jurisdiction where such qualification
is necessary or desirable in order to carry out its business as presently
conducted and as proposed to be conducted;
10.1.2 Valid and Binding. The Lessee is duly authorized to make and
enter into all of the Lease Documents to which the Lessee is a party and to
carry out the transactions contemplated therein. All of the Lease Documents to
which the Lessee is a party have been duly
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executed and delivered by the Lessee, and each is a legal, valid and binding
obligation of the Lessee, enforceable in accordance with its terms.
10.1.3 Single Purpose. The Lessee is, and during the entire time that
this Lease remains in force and effect shall be, engaged in no business, trade
or activity other than the operation of the Leased Property for the Primary
Intended Use.
10.1.4 No Violation. The execution, delivery and performance of the
Lease Documents and the consummation of the transactions thereby contemplated
shall not result in any breach of, or constitute a default under, or result in
the acceleration of, or constitute an event which, with the giving of notice or
the passage of time, or both, could result in default or acceleration of any
obligation of any member of the Leasing Group under any of the Permits or
Contracts or any other contract, mortgage, lien, lease, agreement, instrument,
franchise, arbitration award, judgment, decree, bank loan or credit agreement,
trust indenture or other instrument to which any member of the Leasing Group is
a party or by which any member of the Leasing Group or the Leased Property may
be bound or affected and do not violate or contravene any Legal Requirement.
10.1.5 Consents and Approvals. Except as already obtained or filed, as
the case may be, no consent or approval or other authorization of, or exemption
by, or declaration or filing with, any Person and no waiver of any right by any
Person is required to authorize or permit, or is otherwise required as a
condition of the execution and delivery of any of the Lease Documents by any
member of the Leasing Group and the performance of such member's obligations
thereunder or as a condition to the validity (assuming the due authorization,
execution and delivery by the Lessor of the Lease Documents to which it is a
party).
10.1.6 No Liens or Insolvency Proceedings. Each member of the Leasing
Group is financially solvent and there are no actions, suits, investigations or
proceedings including, without limitation, outstanding federal or state tax
liens, garnishments or insolvency or bankruptcy proceedings, pending or, to the
best of the Lessee's knowledge and belief, threatened:
(a) against or affecting any member of the Leasing Group, which if
adversely resolved to such member of the Leasing Group, would materially
adversely affect the ability of any of the foregoing to perform their respective
obligations under the Lease Documents; or
(b) which may involve or affect the validity, priority or
enforceability of any of the Lease Documents, at law or in equity, or before or
by any arbitrator or Governmental Authority.
10.1.7 No Burdensome Agreements. The Lessee is not a party to any
agreement the terms of which now have, or, as far as can be reasonably foreseen,
may have, a material adverse affect on its respective financial condition or
business or on the operation of the Leased Property.
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10.1.8 Commercial Acts. The Lessee's performance of and compliance with
the obligations and conditions set forth herein and in the other Lease Documents
will constitute commercial acts done and performed for commercial purposes.
10.1.9 Adequate Capital, Not Insolvent. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
member of the Leasing Group:
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds and capital to carry on its business as
now conducted or as contemplated to be conducted (in accordance with the terms
of the Lease Documents);
(c) will own property having a value both at fair valuation and at
present fair salable value greater than the amount required to pay its debts as
they become due; and
(d) will not be rendered insolvent as determined by applicable law.
10.1.10 Not Delinquent. No member of the Leasing Group is delinquent or
claimed to be delinquent under any obligation for the payment of borrowed money.
10.1.11 No Affiliate Debt. The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether direct
or contingent) for borrowed money from the Guarantor (or any of its Affiliates)
or any Affiliate of the Lessee that is not fully subordinated to the Lease
Obligations pursuant to the Affiliated Party Subordination Agreement.
10.1.12 Taxes Current. Each member of the Leasing Group has filed all
federal, state and local tax returns which are required to be filed as to which
extensions are not currently in effect and have paid all taxes, assessments,
impositions, fees and other governmental charges (including interest and
penalties) which have become due pursuant to such returns or pursuant to any
assessment or notice of tax claim or deficiency received by each such member of
the Leasing Group. No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal, state or
local taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in excess of
those already paid.
10.1.13 Intentionally Omitted.
10.1.14 Pending Actions, Notices and Reports.
(a) There is no action or investigation pending or, to the best
knowledge and belief of the Lessee, threatened, anticipated or contemplated
(nor, to the knowledge of the Lessee, is there any reasonable basis therefor)
against or affecting any member of the Leasing Group (or any Affiliate thereof)
before any Governmental Authority which could prevent or hinder the
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consummation of the transactions contemplated hereby or call into question the
validity of any of the Lease Documents or any action taken or to be taken in
connection with the transactions contemplated thereunder or which in any single
case or in the aggregate might result in any material adverse change in the
business, prospects, condition, affairs or operations of any such member of the
Leasing Group or the Leased Property (including, without limitation, any action
to revoke, withdraw or suspend any Permit necessary or desirable for the
operation of the Leased Property in accordance with its Primary Intended Use and
any action to transfer or relocate any such Permit to a location other than the
Leased Property) or any material impairment of the right or ability of any such
member of the Leasing Group to carry on its operations as proposed to be
conducted or which may materially adversely impact reimbursement to any such
member of the Leasing Group for services rendered to beneficiaries of third
party payor programs.
(b) Neither the Facility nor any member of the Leasing Group has
received any notice of any claim, requirement or demand of any Governmental
Authority or any insurance body having or claiming any licensing, certifying,
supervising, evaluating or accrediting authority over the Leased Property to
rework or redesign the Leased Property, its professional staff or its
professional services, procedures or practices in any material respect or to
provide additional furniture, fixtures, equipment or inventory or to otherwise
take action so as to make the Leased Property conform to or comply with any
Legal Requirement.
10.1.15 Compliance with Legal Requirements. The Lessee has obtained all
Permits that are necessary or desirable to operate the Leased Property in
accordance with its Primary Intended Use and all such Permits are in full force
and effect.
10.1.16 Intentionally Omitted.
10.1.17 Intentionally Omitted.
10.1.18 Intentionally Omitted.
10.1.19 Rate Limitations. Except as disclosed on EXHIBIT C, the State
currently imposes no restrictions or limitations on rates which may be charged
to private pay patients and/or residents receiving services at the Facility.
10.1.20 Free Care. Except as disclosed on EXHIBIT D, there are no
Contracts, Permits or Legal Requirements which require that a percentage of
beds, slots or units in any program at the Facility be reserved for Medicaid or
Medicare eligible patients and/or residents or that the Facility provide a
certain amount of welfare, free or charity care or discounted or government
assisted patient and/or resident care.
10.1.21 No Proposed Changes. The Lessee has no actual knowledge of any
Legal Requirements which have been enacted, promulgated or issued within the
eighteen (18) months preceding the date of this Lease or any proposed Legal
Requirements currently pending in the
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State which may materially adversely affect rates at the Facility (or any
program operated in conjunction with the Facility) or may result in the
likelihood of increased competition at the Facility or the imposition of
Medicaid, Medicare, charity, free care, welfare or other discounted or
government assisted patients at the Facility or require that the Lessee or the
Facility obtain a certificate of need, Section 1122 approval or the equivalent,
which the Lessee or the Facility does not currently possess.
10.1.22 ERISA. No employee pension benefit plan maintained by any
member of the Leasing Group has any accumulated funding deficiency within the
meaning of the ERISA, nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor thereto) in
connection with any employee pension benefit plan (or other class of benefit
which the PBGC has elected to insure), and there have been no "reportable
events" (not waived) or "prohibited transactions" with respect to any such plan,
as those terms are defined in Section 4043 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 No Broker. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by the Lease Documents.
10.1.24 No Improper Payments. No member of the Leasing Group nor any of
their respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or property
to or for the private use of any government official, employee, agent or other
Person where either the payment or the purpose of such contribution, payment or
gifts is illegal under the laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any
purpose or has made any false or artificial entries on any of its books or
records for any reason;
(c) made any payments to any Person with the intention or understanding
that any part of such payment was to be used for any other purpose other than
that described in the documents supporting the payment; or
(d) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state or local, where such contribution would be in violation of
applicable law.
10.1.25 Nothing Omitted. Neither this Lease, nor any of the other Lease
Documents, nor any certificate, agreement, statement or other document,
including, without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be furnished to
the Lessor or its attorneys in connection with
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the transactions contemplated by the Lease Documents, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to prevent all statements contained herein and
therein from being misleading. There is no fact within the special knowledge of
the Lessee which has not been disclosed herein or in writing to the Lessor that
materially adversely affects, or in the future, insofar as the Lessee can
reasonably foresee, may materially adversely affect the business, properties,
assets or condition, financial or otherwise, of any member of the Leasing Group
or the Leased Property.
10.1.26 No Margin Security. The Lessee is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System). The Lessee is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
10.1.27 No Default. No event or state of facts which constitutes, or
which, with notice or lapse of time, or both, could constitute, a Lease Default
has occurred and is continuing.
10.1.28 Principal Place of Business. The principal place of business
and chief executive office of the Lessee is located at 197 First Avenue, Needham
Heights, Massachusetts 02494.
10.1.29 Intentionally Omitted.
10.1.30 Intellectual Property. The Lessee is duly licensed or
authorized to use all (if any) copyrights, rights of reproduction, trademarks,
trade-names, trademark applications, service marks, patent applications, patents
and patent license rights, (all whether registered or unregistered, U.S. or
foreign), inventions, franchises, discoveries, ideas, research, engineering,
methods, practices, processes, systems, formulae, designs, drawings, products,
projects, improvements, developments, know-how and trade secrets which are used
in or necessary for the operation of the Facility in accordance with its Primary
Intended Use, without conflict with or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in others.
10.1.31 Management Agreements. There is no Management Agreement in
force and effect as of the date hereof.
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of the Lessee, the representations and warranties contained in Sections
10.1.6, 10.1.7, 10.1.10, 10.1.14,
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10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.28, and in the second sentence of
Section 10.1.12, shall not constitute continuing representations and warranties
throughout the Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
-----------------------------
11.1 Status Certificates. At any time, and from time to time, upon
request from the Lessor, the Lessee shall furnish to the Lessor, within ten (10)
Business Days' after receipt of such request, an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the Lessor and any such prospective purchaser
or Fee Mortgagee.
11.2 Financial Statements; Reports; Notice and Information.
11.2.1 Obligation To Furnish. The Lessee will furnish and shall cause
to be furnished to the Lessor the following statements, information and other
materials:
(a) Annual Statements. Within ninety (90) days after the end of each of
their respective fiscal years, (i) a copy of the Consolidated Financials for
each of (x) the Lessee and (y) any Sublessee for the preceding fiscal year,
certified and audited by, and with the unqualified opinion of, independent
certified public accountants acceptable to the Lessor and certified as true and
correct by the Lessee or the applicable Sublessee, as the case may be (and,
without limiting anything else contained herein, the Consolidated Financials for
the Lessee and for each such Sublessee shall include a detailed balance sheet
for Leased Property as of the last day of such fiscal year and a statement of
earnings from the Leased Property for such fiscal year showing, among other
things, all rents and other income therefrom and all expenses paid or incurred
in connection with the operation of the Leased Property); (ii) separate
statements, certified as true and correct by the Lessee and each Sublessee,
stating whether, to the best of the signer's knowledge and belief after making
due inquiry, the Lessee or such Sublessee, as the case may be, is in default in
the performance or observance of any of the terms of this Lease or any of the
other Lease Documents and, if so, specifying all such defaults, the nature
thereof and the steps being taken to immediately remedy the same; (iii) a copy
of all letters from the independent certified accountants engaged to perform the
annual audits referred to above, directed to the management of the Lessee or any
Sublessee, as the case may be, regarding the existence of any reportable
conditions or material weaknesses and (iv) a statement certified as true and
correct by the Lessee setting forth all Subleases (excluding Resident
Agreements) as of the last day of such fiscal year, the respective areas demised
thereunder, the names of the Sublessees thereunder, the respective
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expiration dates of such Subleases, the respective rentals provided for therein,
and such other information pertaining to such Subleases as may be reasonably
requested by the Lessor.
(b) Monthly Statements of Lessee. Within twenty (20) days after the end
of each calendar month during the pendency of this Lease, (i) an unaudited,
detailed month and year to date income and expense statement for the Leased
Property which shall include a comparison to corresponding budget figures,
occupancy statistics (including the actual number of residents, the number of
units available and total resident days for such month) for the Facility and
patient mix breakdowns (for each patient day during such month classifying
patients by the type of care required and source of payment) for the Facility
and (ii) an express written calculation showing the compliance or
non-compliance, as the case may be, with the specific financial covenants set
forth in Section 11.3 for the applicable period, including, with respect to the
calculation of the Lessee's Rent Coverage Ratio, a schedule substantially in the
form attached hereto as EXHIBIT E.
(c) Quarterly Statements. Within twenty (20) days after the end of each
Fiscal Quarter, unaudited Consolidated Financials for the Lessee certified as
true and correct by the Lessee.
(d) Permits and Contracts. Promptly after the issuance or the execution
thereof, as the case may be, true and complete copies of (i) all Permits which
constitute operating licenses for the Facility issued by any Governmental
Authority having jurisdiction over health care and/or assisted living matters
and (ii) Contracts (involving payments in the aggregate in excess of $100,000
per annum).
(e) Contract Notices. Promptly after the receipt thereof, true and
complete copies of any notices, consents, terminations or statements of any kind
or nature relating to any of the Contracts (involving payments in the aggregate
in excess of $100,000 per annum) other than those issued in the ordinary course
of business.
(f) Permit or Contract Defaults. Promptly after the receipt thereof,
true and complete copies of all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in the ordinary course
of business), terminations and notices of any kind (other than those notices
that are furnished in the ordinary course of business) issued or provided to the
Lessee or any Sublessee that is an Affiliate of the Lessee by any Governmental
Authority, including, without limitation, any notices pertaining to any
delinquency in, or proposed revision of, the Lessee's or any such Sublessee's
obligations under the terms and conditions of any Permits or Contracts now or
hereafter issued by or entered into with any Governmental Authority and the
response(s) thereto made by or on behalf of the Lessee or any such Sublessee.
(g) Official Reports. Upon completion or filing thereof, complete
copies of all applications (other than those that are furnished in the ordinary
course of business), notices (other
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than those that are furnished in the ordinary course of business), statements,
annual reports, cost reports and other reports or filings of any kind (other
than those that are furnished in the ordinary course of business) provided by
the Lessee or any Sublessee that is an Affiliate of the Lessee to any
Governmental Authority with respect to the Leased Property.
(h) Other Information. With reasonable promptness, such other
information as the Lessor may from time to time reasonably request respecting
(i) the financial condition and affairs of each member of the Leasing Group and
the Leased Property and (ii) the licensing and operation of the Leased Property;
including, without limitation, audited financial statements, certificates and
consents from accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental Authority.
(i) Default Conditions. As soon as possible, and in any event within
five (5) days after the occurrence of any Lease Default, or any event or
circumstance which, with the giving of notice or the passage of time, or both,
could constitute a Lease Default, a written statement of the Lessee setting
forth the details of such Lease Default, event or circumstance and the action
which the Lessee proposes to take with respect thereto.
(j) Official Actions. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any Governmental Authority which
could have a material adverse effect on (i) any member of the Leasing Group to
perform any of its obligations under any of the Lease Documents or (ii) the
Leased Property.
(k) Audit Reports. Promptly after receipt, a copy of all audits or
reports submitted to any member of the Leasing Group by any independent public
accountant in connection with any annual, special or interim audits of the books
of any such member of the Leasing Group and, if requested by the Lessor, any
letter of comments directed by such accountant to the management of any such
member of the Leasing Group.
(l) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit or Provider
Agreement necessary for the operation of the Leased Property;
(ii) any loss, damage or destruction to or of the Leased
Property in excess of FIFTY THOUSAND DOLLARS ($50,000) (regardless of whether
the same is covered by insurance);
(iii) any material controversy involving the Lessee or any
Sublessee and (x) Facility administrator or Facility employee of similar stature
or (y) any labor organization; and
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(iv) any fact within the special knowledge of any member of
the Leasing Group, or any other development in the business or affairs of any
member of the Leasing Group, which may be materially adverse to the business,
properties, assets or condition, financial or otherwise, of any member of the
Leasing Group or the Leased Property.
(m) Responses To Inspection Reports. Within thirty (30) days after
receipt of an inspection report relating to the Leased Property from the Lessor,
a written response describing in detail prepared plans to address concerns
raised by the inspection report.
(n) Public Information. Upon the completion or filing, mailing or other
delivery thereof, complete copies of all financial statements, reports, notices
and proxy statements, if any, sent by any member of the Leasing Group (which is
a publicly held corporation) to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a publicly held corporation)
with any securities exchange or with the Securities Exchange Commission.
(o) Annual Budgets. At least thirty (30) days prior to the end of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall submit to the
Lessor a preliminary annual financial budget for the Facility for the next
Fiscal Year, a preliminary capital expenditures budget for the Facility for the
next Fiscal Year and a report detailing the capital expenditures made in the
then current Fiscal Year and on or before the end of the first month of each
Fiscal Year, the Lessee, any applicable Sublessee and/or any Manager shall
submit to the Lessor revised finalized versions of such budgets and report.
(p) Financial Information Required Under Any Fee Mortgage Loan
Documents. The Lessee shall provide to any Fee Mortgagee any information that is
required to be delivered to such Fee Mortgagee pursuant to any Fee Mortgage Loan
Documents respecting (i) the financial condition and affairs of each member of
the Leasing Group and the Leased Property and (ii) the licensing and operation
of the Leased Property; including, without limitation, audited financial
statements, certificates and consents from accountants and all other financial
and licensing/operational information.
11.2.2 Responsible Officer. Any certificate, instrument, notice, or
other document to be provided to the Lessor hereunder by any member of the
Leasing Group shall be signed by an executive officer of such member (in the
event that any of the foregoing is not an individual), having a position of Vice
President or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief financial
officer of such member.
11.2.3 No Material Omission. No certificate, instrument, notice or
other document, including without limitation, any financial statements furnished
or to be furnished to the Lessor pursuant to the terms hereof or of any of the
other Lease Documents shall contain any untrue
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statement of a material fact or shall omit to state any material fact necessary
in order to prevent all statements contained therein from being misleading.
11.2.4 Confidentiality. The Lessor shall afford any information
received pursuant to the provisions of the Lease Documents the same degree of
confidentiality that the Lessor affords similar information proprietary to the
Lessor; provided, however, that the Lessor does not in any way warrant or
represent that such information received from any member of the Leasing Group
shall remain confidential (and shall not be liable in any way for any subsequent
disclosure of such information by any Person that the Lessor has provided such
information in accordance with the terms hereof) and provided, further, that the
Lessor shall have the unconditional right to (a) disclose any such information
as the Lessor deems necessary or appropriate in connection with any sale,
transfer, conveyance, participation or assignment of the Leased Property or any
of the Lease Documents or any interest therein and (b) use such information in
any litigation or arbitration proceeding between the Lessor and any member of
the Leasing Group. Without limiting the foregoing, the Lessor may also utilize
any information furnished to it hereunder as and to the extent (i) counsel to
the Lessor determines that such utilization is necessary pursuant to 15 U.S.C.
77a-77aa or 15 U.S.C. 78a-78jj and the rules and regulations promulgated
thereunder, (ii) the Lessor is required or requested by any Governmental
Authority to disclose any such information and/or (iii) the Lessor is requested
to disclose any such information by any of its lenders or potential lenders. The
Lessor shall not be liable in any way for any subsequent disclosure of such
information by any Person to whom the Lessor provided such information in
accordance with the terms hereof. Nevertheless, in connection with any such
disclosure, the Lessor shall inform the recipient of any such information of the
confidential nature thereof. The Lessor shall observe any prohibitions or
limitations on the disclosure of any such information under applicable
confidentiality law or regulations, to the extent that the same are applicable
to such information, including, without limitation, any duly enacted "Patients'
Bill of Rights" or similar legislation, including such limitations as may be
necessary to preserve the confidentiality of the facility-patient/resident
relationship and the physician-patient privilege.
11.3 Financial Covenants. The Lessee covenants and agrees that,
throughout the Term and as long as the Lessee is in possession of the Leased
Property:
11.3.1 Rent Coverage Ratio of Lessee. For each fiscal quarter
commencing with the seventh fiscal quarter after the ALF Conversion Date, the
Lessee shall maintain a Rent Coverage Ratio equal to or greater than 1.2 to 1.
11.3.2 No Indebtedness. The Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to the
Lessor under the Lease Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business, (iv) Indebtedness created in
connection with any financing of any Capital Addition, provided, that each such
financing has been approved by the Lessor in accordance with the terms of
Article 9 hereof, (v) Indebtedness to any Affiliate, provided, that, such
Indebtedness is fully subordinated
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to the Lease Obligations pursuant to the Affiliated Party Subordination
Agreement and (vi) other Indebtedness of the Lessee in the aggregate amount not
to exceed TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) incurred, for the
exclusive use of the Leased Property, on account of purchase money indebtedness
or finance lease arrangements, each of which shall not exceed the fair market
value of the assets or property acquired or leased and shall not extend to any
assets or property other than those purchased or leased and purchase money
security interests in equipment and equipment leases which comply with the
provisions of Section 6.1.2.
11.3.3 No Guaranties. The Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
11.4 Affirmative Covenants. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 Maintenance of Existence. If the Lessee is a corporation, trust
or partnership, during the entire time that this Lease remains in full force and
effect, the Lessee shall keep in effect its existence and rights as a
corporation, trust or partnership under the laws of the state of its
incorporation or formation and its right to own property and transact business
in the State.
11.4.2 Materials. Except as provided in Section 6.1.2, the Lessee shall
not suffer the use in connection with any renovations or other construction
relating to the Leased Property of any materials, fixtures or equipment intended
to become part of the Leased Property which are purchased upon lease or
conditional bill of sale or to which the Lessee does not have absolute and
unencumbered title, and the Lessee covenants to cause to be paid punctually all
sums becoming due for labor, materials, fixtures or equipment used or purchased
in connection with any such renovations or construction, subject to the Lessee's
right to contest to the extent provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable Agreements.
The Lessee and the Leased Property and all uses thereof shall comply with (i)
all Legal Requirements, (ii) all Permits and Contracts, (iii) all Insurance
Requirements, (iv) the Lease Documents, (v) the Permitted Encumbrances, (vi) the
Appurtenant Agreements and (vii) the Fee Mortgage Loan Documents.
11.4.4 Books And Records. The Lessee shall cause to be kept and
maintained, and shall permit the Lessor, any Fee Mortgagee and their respective
representatives to inspect at all reasonable times, accurate books of accounts
in which complete entries will be made in accordance with GAAP reflecting all
financial transactions of the Lessee (showing, without
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limitation, all materials ordered and received and all disbursements, accounts
payable and accounts receivable in connection with the operation of the Leased
Property).
In addition and without limiting the foregoing or any other provision
set forth herein, the Lessee agrees to maintain such books and records and make
them available for inspection, audit, and copying in such manner and for such
time as required by applicable laws and responsible businesses practices. As a
subcontractor that may be subject to Section 1861(v) (1) (I) of the Social
Security Act (the "Act"), the Lessee shall, upon written request and in
accordance with the above-mentioned section of the Act and regulations
promulgated pursuant thereto, make available to the Comptroller General, the
Secretary of Health and Human Services, and their duly authorized
representatives, a copy of this Lease and access to the Lessee's books,
documents, and records necessary to verify the nature and extent of the costs of
services provided to the Lessor. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Lease is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Lease is not
subject to the Act. The Lessee agrees that if it carries out any of the duties
of this Lease through a subcontract with a related organization which
subcontract has a value or cost of TEN THOUSAND DOLLARS ($10,000) or more over a
twelve (12) month period, the Lessee will obtain an identical access requirement
in such subcontract.
11.4.5 Intentionally Omitted.
11.4.6 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager, as applicable, to maintain, experienced and competent
professional management with respect to its business and with respect to the
Leased Property. The Lessee, any Sublessee and any Manager shall conduct, in the
ordinary course, the operation of the Facility, and the Lessee and any such
Sublessee shall not enter into any other business or venture during the Term or
such time as the Lessee or any such Sublessee is in possession of the Leased
Property.
11.4.7 Address. The Lessee shall provide the Lessor thirty (30) days'
prior written notice of any change of its Principal Place of Business from its
current Principal Place of Business. The Lessee shall maintain all books and
records relating to its business, solely at its Principal Place of Business and
at the Leased Property. The Lessee shall not (a) remove any books or records
relating to the Lessee's business from either the Leased Property or the
Lessee's Principal Place of Business or (b) relocate its Principal Place of
Business until after receipt of a certificate from the Lessor, signed by an
officer thereof, stating that the Lessor has, to its satisfaction, obtained all
documentation that it deems necessary or desirable to obtain, maintain, perfect
and confirm the first priority security interests granted in the Lease
Documents.
11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease or the Affiliated Party
Subordination Agreement, any payments to be
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made by the Lessee to (a) any member of the Leasing Group (or any Affiliate of
any such member of the Leasing Group) or (b) any Affiliate of the Lessee, in
connection with any transaction between the Lessee and such Person, including,
without limitation, the purchase, sale or exchange of any property, the
rendering of any service to or with any such Person (including, without
limitation, all allocations of any so-called corporate or central office costs,
expenses and charges of any kind or nature) or the making of any loan or other
extension of credit or the making of any equity investment, shall be subordinate
to the complete payment and performance of the Lease Obligations; provided,
however, that, subject to any limitations set forth under any applicable Fee
Mortgage Loan Documents, all such subordinated payments may be paid at any time
unless: (x) after giving effect to such payment, the Lessee shall be unable to
comply with any of its obligations under any of the Lease Documents or (y) a
Lease Default has occurred and is continuing and has not been expressly waived
in writing by the Lessor or an event or state of facts exists, which, with the
giving of notice or the passage of time, or both, would constitute a Lease
Default.
11.4.9 Inspection. At reasonable times and upon reasonable notice, the
Lessee shall permit the Lessor, any Fee Mortgagee and their respective
authorized representatives (including, without limitation, the Consultants) to
inspect the Leased Property as provided in Section 7.1 above.
11.4.10 Additional Property. In the event that at any time during the
Term, the Lessee holds the fee title to or a leasehold interest in any real
property and/or personal property which is used as an integral part of the
operation of the Leased Property (but is not subject to this Lease), the Lessee
shall (i) provide the Lessor with prior notice of such acquisition and (ii)
shall take such actions and enter into such agreements as the Lessor shall
reasonably request in order to grant the Lessor a first priority mortgage or
other security interest in such real property and personal property, subject
only to the Permitted Encumbrances and other Liens reasonably acceptable to the
Lessor.
11.5 Additional Negative Covenants. The Lessee covenants and agrees
that, throughout the Term and such time as the Lessee remains in possession of
the Leased Property:
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in any of the Lease Documents, the Lessee shall not, without
the prior written consent of the Lessor, in each instance, which consent may be
withheld in the sole and absolute discretion of the Lessor:
(a) convey, assign, hypothecate, transfer, dispose of or encumber, or
permit the conveyance, assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial interest in this
Lease, its other assets or the Leased Property; provided, however, that this
restriction shall not apply to (i) the Permitted Encumbrances that may be
created after the date hereof pursuant to the Lease Documents; (ii) Liens
created in accordance with Section 6.1.2 against Tangible Personal Property
securing Indebtedness permitted under
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Section 11.3.2(v) relating to equipment leasing or financing for the exclusive
use of the Leased Property; (iii) the sale, conveyance, assignment,
hypothecation, lease or other transfer of any material asset or assets (whether
now owned or hereafter acquired), the fair market value of which equals or is
less than FIFTY THOUSAND DOLLARS ($50,000), individually, or TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000) collectively; (iv) without limitation as to amount,
the disposition in the ordinary course of business of any obsolete, worn out or
defective fixtures, furnishings or equipment used in the operation of the Leased
Property provided that the same are replaced with fixtures, furnishings or
equipment of equal or greater utility or value or the Lessee provides the Lessor
with an explanation (reasonably satisfactory to the Lessor) as to why such
fixtures, furnishings or equipment is no longer required in connection with the
operation of the Leased Property; (v) without limitation as to amount, any sale
of inventory by the Lessee in the ordinary course of business and (vi) subject
to the terms of the Pledge Agreement and the Affiliated Party Subordination
Agreement, distributions to the shareholders of the Lessee;
(b) permit the use of the Facility for any purpose other than the
Primary Intended Use; or
(c) liquidate, dissolve or merge or consolidate with any other Person.
11.5.2 No Liens. The Lessee will not directly or indirectly create or
allow to remain and will promptly discharge at its expense any Lien, title
retention agreement or claim upon or against the Leased Property (including the
Lessee's interest therein) or the Lessee's interest in this Lease or any of the
other Lease Documents, or in respect of the Rent, excluding (a) this Lease and
any permitted Subleases, (b) the Permitted Encumbrances, (c) Liens which are
consented to in writing by the Lessor, (d) Liens for those taxes of the Lessor
which the Lessee is not required to pay hereunder, (e) Liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either not yet due or being
contested in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of the Lessor pursuant to the provisions
of Article 20, (g) Liens for Impositions which are either not yet due and
payable or which are in the process of being contested in strict compliance with
the terms and conditions of Article 15 and (h) involuntary Liens caused by the
actions or omissions of the Lessor.
11.5.3 Limits on Affiliate Transactions. The Lessee shall not enter
into any transaction with any Affiliate, including, without limitation, the
purchase, sale or exchange of any property, the rendering of any service to or
with any Affiliate and the making of any loan or other extension of credit,
except in the ordinary course of, and pursuant to the reasonable requirements
of, the Lessee's business and upon fair and reasonable terms no less favorable
to the Lessee than would be obtained in a comparable arms'-length transaction
with any Person that is not an Affiliate.
11.5.4 Best Efforts To Maximize. The Lessee covenants that the
operation of the Facility shall be conducted in a manner consistent with the
prevailing standards and practices
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recognized in the health care and senior housing industry as those customarily
utilized by first class business operations. Subject to any applicable Legal
Requirements, the members of the Leasing Group shall use their best efforts to
maximize the Facility's Gross Revenues, and to that end, but without limiting
the foregoing, (a) a full staff of employees shall be maintained at the Facility
and (b) a maximum amount of space in the Facility shall be devoted to revenue
producing activities and only such part thereof shall be devoted for office,
storage and non-revenue producing purposes as shall be reasonably necessary.
11.5.5 No Default. The Lessee shall not commit any default or breach
under any of the Lease Documents.
11.5.6 Intentionally Omitted.
11.5.7 Intentionally Omitted.
11.5.8 ERISA. The Lessee shall not establish or permit any Sublessee to
establish any new pension or defined benefit plan or modify any such existing
plan for employees subject to ERISA, which plan provides any benefits based on
past service without the advance consent of the Lessor to the amount of the
aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. The Lessee will not waive, or
permit any sublessee or Manager which is an Affiliate to waive any debt or
claim, except in the ordinary course of its business.
11.5.10 Value of Assets. Except as disclosed in the financial
statements provided to the Lessor as of the date hereof, the Lessee will not
write up (by creating an appraisal surplus or otherwise) the value of any assets
of the Lessee above their cost to the Lessee, less the depreciation regularly
allowable thereon.
11.5.11 Changes in Fiscal Year and Accounting Procedures. The Lessee
shall not, without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the Lessor's reasonable discretion (a) change
its fiscal year or capital structure or (b) change, alter, amend or in any
manner modify, except in accordance with GAAP, any of its current accounting
procedures related to the method of revenue recognition, billing procedures or
determinations of doubtful accounts or bad debt expenses nor will the Lessee
permit any of its Subsidiaries to change its fiscal year or suffer or permit any
circumstance to exist in which any Subsidiary is not wholly-owned, directly or
indirectly, by the Lessee.
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ARTICLE 12
INSURANCE AND INDEMNITY
-----------------------
12.1 General Insurance Requirements. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall at its sole cost and expense keep the
Leased Property and the Tangible Personal Property and the Lessor's Personal
Property located thereon and the business operations conducted on the Leased
Property insured as set forth below.
12.1.1 Types and Amounts of Insurance. The Lessee's insurance shall
include the following:
(a) property loss and physical damage insurance on an all-risk basis
(with only such exceptions as the Lessor may in its reasonable discretion
approve) covering the Leased Property (exclusive of Land) for its full
replacement cost, which cost shall be reset once a year at the Lessor's option,
with an agreed-amount endorsement and a deductible not in excess of TEN THOUSAND
DOLLARS ($10,000.00). Such insurance shall include, without limitation, the
following coverages: (i) increased cost of construction, (ii) cost of
demolition, (iii) the value of the undamaged portion of the Facility and (iv)
contingent liability from the operation of building laws, less exclusions
provided in the normal "All Risk" insurance policy. During any period of
construction, such insurance shall be on a builder's-risk, completed value,
non-reporting form with permission to occupy;
(b) flood insurance (if the Leased Property or any portion thereof is
situated in an area which is considered a flood risk area by the U.S. Department
of Housing and Urban Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in limits reasonably
acceptable to the Lessor;
(c) boiler and machinery insurance (including related electrical
apparatus and components) under a standard comprehensive form, providing
coverage against loss or damage caused by explosion of steam boilers, pressure
vessels or similar vessels, now or hereafter installed on or exclusively serving
the Leased Property, in limits reasonably acceptable to the Lessor;
(d) earthquake insurance (if deemed necessary by the Lessor) in limits
and with deductibles reasonably acceptable to the Lessor;
(e) intentionally omitted;
(f) business interruption and/or rent loss insurance in an amount equal
to the annual Base Rent due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one year;
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(g) comprehensive general public liability insurance including
coverages commonly found in the Broad Form Commercial Liability Endorsements
with amounts not less than FIVE MILLION DOLLARS ($5,000,000) per occurrence with
respect to bodily injury and death and THREE MILLION DOLLARS ($3,000,000) for
property damage and with all limits based solely upon occurrences at the Leased
Property without any other impairment;
[(h) professional liability insurance in an amount not less than TEN
MILLION DOLLARS ($10,000,000) for each medical incident;]
(i) physical damage insurance on an all-risk basis (with only such
exceptions as the Lessor in its reasonable discretion shall approve) covering
the Tangible Personal Property for the full replacement cost thereof and with a
deductible not in excess of one percent (1%) of the full replacement cost
thereof;
(j) Workers' Compensation and Employers' Liability Insurance providing
protection against all claims arising out of injuries to all employees of the
Lessee or of any Sublessee (employed on the Leased Property or any portion
thereof) in amounts equal for Workers' Compensation, to the statutory benefits
payable to employees in the State and for Employers' Liability, to limits of not
less than ONE HUNDRED THOUSAND DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per employee for disease and FIVE HUNDRED
THOUSAND DOLLARS ($500,000) disease policy limit; and
(k) such other insurance as the Lessor from time to time may reasonably
require and also, as may from time to time be required by applicable Legal
Requirements and/or by any Fee Mortgagee.
12.1.2 Insurance Company Requirements. All such insurance required by
this Lease or the other Lease Documents shall be issued and underwritten by
insurance companies licensed to do insurance business by, and in good standing
under the laws of, the State and which companies have and maintain a rating of
A-X or better by A.M. Best Co.
12.1.3 Policy Requirements. Every policy of insurance from time to time
required under this Lease or any of the other Lease Documents (other than
worker's compensation) shall name the Lessor as owner, loss payee, secured party
(to the extent applicable) and additional named insured as its interests may
appear. If an insurance policy covers properties other than the Leased Property,
then the Lessor shall be so named with respect only to the Leased Property.
Each such policy, where applicable or appropriate, shall:
(a) include an agreed amount endorsement and loss payee, additional
named insured and secured party endorsements, in forms acceptable to the Lessor
in its sole and absolute discretion;
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(b) include mortgagee, secured party, loss payable and additional named
insured endorsements reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be canceled or materially
modified except upon thirty (30) days' prior written notice to the Lessor and
any Fee Mortgagee;
(d) be payable to the Lessor and any Fee Mortgagee notwithstanding any
defense or claim that the insurer may have to the payment of the same against
any other Person holding any other interest in the Leased Property;
(e) be endorsed with standard noncontributory clauses in favor of and
in form reasonably acceptable to the Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part of the insurer
against the Lessor, any Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be reasonably acceptable to the
Lessor and any Fee Mortgagee.
12.1.4 Notices; Certificates and Policies. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the expiration of any insurance
policy required hereunder, the Lessee shall deliver to the Lessor certificates
and evidence of insurance relating to all renewals and replacements thereof,
together with evidence, satisfactory to the Lessor, of payment of the premiums
thereon. The Lessee shall deliver to the Lessor original counterparts or copies
certified by the insurance company to be true and complete copies, of all
insurance policies required hereunder not later than the earlier to occur of (a)
thirty (30) days after the effective date of each such policy and (b) ten (10)
days after receipt thereof by the Lessee.
12.1.5 Lessor's Right to Place Insurance. If the Lessee shall fail to
obtain any insurance policy required hereunder by the Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such policy to
the Lessor, or if any insurance policy required hereunder (or any part thereof)
shall expire or be canceled or become void or voidable by reason of any breach
of any condition thereof, or if the Lessor determines that such insurance
coverage is unsatisfactory by reason of the failure or impairment of the capital
of any insurance company which wrote any such policy, upon demand by the Lessor,
the Lessee shall promptly obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured by the provisions
hereof, satisfactory to the Lessor, and, at its option, the Lessor may obtain
such insurance and pay the premium or premiums therefor; in which event, any
amount so paid or advanced by the Lessor and all costs and expenses incurred in
connection therewith (including, without limitation, attorneys' fees and
expenses), shall be a demand obligation of the Lessee to the Lessor, payable as
an Additional Charge.
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12.1.6 Payment of Proceeds. All insurance policies required hereunder
(except for general public liability, professional liability and workers'
compensation and employers liability insurance) shall provide that in the event
of loss, injury or damage, subject to the rights of any Fee Mortgagee, all
proceeds shall be paid to the Lessor alone (rather than jointly to the Lessee
and the Lessor). The Lessor is hereby authorized to adjust and compromise any
such loss with the consent of the Lessee or, following any Lease Default,
whether or not cured, without the consent of the Lessee, and to collect and
receive such proceeds in the name of the Lessor and the Lessee, and the Lessee
appoints the Lessor (or any agent designated by the Lessor) as the Lessee's
attorney-in-fact with full power of substitution, to endorse the Lessee's name
upon any check in payment thereof. Subject to the provisions of Article 13, such
insurance proceeds shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by the Lessor in collecting said insurance
proceeds, then toward payment of the Lease Obligations or any portion thereof,
then due and payable, in such order as the Lessor determines, and then in whole
or in part toward restoration, repair or reconstruction of the Leased Property
for which such insurance proceeds shall have been paid.
12.1.7 Irrevocable Power of Attorney. The power of attorney conferred
on the Lessor pursuant to the provisions of this Section 12.1, being coupled
with an interest, shall be irrevocable for as long as this Lease is in effect or
any Lease Obligations are outstanding, shall not be affected by any disability
or incapacity which the Lessee may suffer and shall survive the same. Such power
of attorney, is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power, and neither the
Lessor nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or willful misconduct.
12.1.8 Blanket Policies. Notwithstanding anything to the contrary
contained herein, the Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by the Lessee and its Affiliates;
provided, however, that the coverage afforded to the Lessor shall not be reduced
or diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 No Separate Insurance. The Lessee shall not, on the Lessee's own
initiative or pursuant to the request or requirement of any other Person, take
out separate insurance concurrent in form or contributing in the event of loss
with the insurance required hereunder to be furnished by the Lessee, or increase
the amounts of any then existing insurance by securing an additional policy or
additional policies, unless (a) all parties having an insurable interest in the
subject matter of the insurance, including the Lessor, are included therein as
additional insureds and (b) losses are payable under said insurance in the same
manner as losses are required to be payable under this Lease. The Lessee shall
immediately notify the Lessor of the taking out of any such separate insurance
or of the increasing of any of the amounts of the then existing insurance by
securing an additional insurance policy or policies.
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12.1.10 Assignment of Unearned Premiums. The Lessee hereby assigns to
the Lessor all rights of the Lessee in and to any unearned premiums allocable to
the Leased Property on any insurance policy required hereunder to be furnished
by the Lessee which may become payable or are refundable after the occurrence of
an Event of Default hereunder. In the event that this Lease is terminated for
any reason (other than the purchase of the Leased Property by the Lessee or the
expiration of this Lease at the end of the Term), the insurance policies
required to be maintained hereunder, including all right, title and interest of
the Lessee thereunder, shall become the absolute property of the Lessor.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence or
willful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Lessee hereby agrees to defend with counsel
acceptable to the Lessor, indemnify and hold harmless the Lessor and each of the
other Indemnified Parties from and against all damages, losses, claims,
liabilities, obligations, penalties, causes of action, costs and expenses
(including, without limitation, attorneys' fees, court costs and other expenses
of litigation) suffered by, or claimed or asserted against, the Lessor or any of
the other Indemnified Parties, directly or indirectly, based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property or any
business conducted therein, (b) any act, fault, omission to act or misconduct by
(i) any member of the Leasing Group, (ii) any Affiliate of the Lessee or (iii)
any employee, agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing parties, relating to, directly or indirectly,
the Leased Property, (c) any accident, injury or damage whatsoever caused to any
Person, including, without limitation, any claim of malpractice, or to the
property of any Person in or about the Leased Property or outside of the Leased
Property where such accident, injury or damage results or is claimed to have
resulted from any act, fault, omission to act or misconduct by any member of the
Leasing Group or any Affiliate of the Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any Lease Default,
(e) any claim brought or threatened against any of the Indemnified Parties by
any member of the Leasing Group or by any other Person on account of (i) the
Lessor's relationship with any member of the Leasing Group pertaining in any way
to the Leased Property and/or the transaction evidenced by the Lease Documents
and/or (ii) the Lessor's negotiation of, entering into and/or performing any of
its obligations and/or exercising any of its right and remedies under any of the
Lease Documents, (f) any attempt by any member of the Leasing Group or any
Affiliate of the Lessee to transfer or relocate any of the Permits to any
location other than the Leased Property and/or (g) the enforcement of this
indemnity. All amounts which become payable by the Lessee under this Section
12.2.1 shall be a demand obligation of the Lessee to the Lessor, payable as an
Additional Charge. The indemnity provided for in this Section 12.2.1 shall
survive any termination of this Lease. Notwithstanding anything to the contrary
contained in this Section 12.2.1, no payment for any indemnified claim brought
or threatened against any of the Indemnified Parties shall be due unless and
until the earlier to occur of (x) an agreement by the relevant parties to settle
the claim at issue or (y) a final decision is
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issued by a court of competent jurisdiction in favor of the applicable
Indemnified Parties and all appeal periods have lapsed or been exhausted.
12.2.2 Indemnified Parties. As used in this Lease the term "Indemnified
Parties" shall mean Lessor, any Fee Mortgagee and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
12.2.3 Limitation on Lessor Liability. Neither the Lessor nor any
Affiliate of the Lessor shall be liable to any member of the Leasing Group or
any Affiliate of any member of the Leasing Group, or to any other Person
whatsoever for any damage, injury, loss, compensation, or claim (including, but
not limited to, any claim for the interruption of or loss to any business
conducted on the Leased Property) based on, arising out of or resulting from any
cause whatsoever, including, but not limited to, the following: (a) repairs to
the Leased Property, (b) interruption in use of the Leased Property; (c) any
accident or damage resulting from the use or operation of the Leased Property or
any business conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or crime, (f)
the actions, omissions or misconduct of any other Person, (g) damage to any
property, or (h) any damage from the flow or leaking of water, rain or snow. All
Tangible Personal Property and the personal property of any other Person on the
Leased Property (including, without limitation, the Lessor's Personal Property)
shall be at the sole risk of the Lessee and the Lessor shall not in any manner
be held responsible therefor. Notwithstanding the foregoing, the Lessor shall
not be released from liability for any injury, loss, damage or liability
suffered directly by the Lessee to the extent caused directly by the gross
negligence or willful misconduct of the Lessor, its servants, employees or
agents acting within the scope of their authority on or about the Leased
Property or in regards to the Lease; provided, however, that in no event shall
the Lessor, its servants, employees or agents have any liability based on any
loss with respect to or interruption in the operation of any business at the
Leased Property or for any indirect or consequential damages.
12.2.4 Risk of Loss. During the Term of this Lease, the risk of loss or
of decrease in the enjoyment and beneficial use of the Leased Property in
consequence of any damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by the Lessor in
accordance with the provisions of Article 20) is assumed by the Lessee and, in
the absence of the gross negligence or willful misconduct as set forth in
Section 12.2.3, the Lessor shall in no event be answerable or accountable
therefor (except for the obligation to account for insurance proceeds and Awards
to the extent provided for in Articles 13 and 14) nor shall any of the events
mentioned in this Section entitle the Lessee to any abatement of Rent (except
for an abatement, if any, as specifically provided for in Section 3.8).
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ARTICLE 13
FIRE AND CASUALTY
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13.1 Restoration Following Fire or Other Casualty.
13.1.1 Following Fire or Casualty. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or casualty
(a "Casualty"), the Lessee shall give immediate written notice thereof to the
Lessor and any Fee Mortgagee and, subject to the terms of this Article 13 and
any applicable Fee Mortgage Loan Documents, the Lessee shall proceed with
reasonable diligence, in full compliance with all applicable Legal Requirements,
to perform such repairs, replacement and reconstruction work (referred to herein
as the "Work") to restore the Leased Property to the condition it was in
immediately prior to such damage or destruction and to a condition adequate to
operate the Facility for the Primary Intended Use and in compliance with Legal
Requirements and any applicable Fee Mortgage Loan Documents. All Work shall be
performed and completed in accordance with all Legal Requirements and the other
requirements of this Lease within one hundred twenty (120) days following the
occurrence of the damage or destruction plus a reasonable time to compensate for
Unavoidable Delays (including for the purposes of this Section, delays in
obtaining Permits and in adjusting insurance losses), but in no event beyond two
hundred seventy (270) days following the occurrence of the Casualty.
13.1.2 Procedures. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of FIFTY THOUSAND DOLLARS
($50,000) or in any structural damage to the Leased Property, regardless of the
extent of such structural damage, prior to commencing the Work, the Lessee shall
comply with the requirements of any applicable Fee Mortgage Loan Documents and
the following requirements:
(a) The Lessee shall furnish to the Lessor complete plans and
specifications for the Work (collectively, the "Plans and Specifications"), for
the Lessor's approval, in each instance, which approval shall not be
unreasonably withheld. The Plans and Specifications shall bear the signed
approval thereof by an architect, licensed to do business in the State,
reasonably satisfactory to the Lessor and shall be accompanied by a written
estimate from the architect, bearing the architect's seal, of the entire cost of
completing the Work, and to the extent feasible, the Plans and Specifications
shall provide for Work of such nature, quality and extent, that, upon the
completion thereof, the Leased Property shall be at least equal in value and
general utility to its value and general utility prior to the Casualty and shall
be adequate to operate the Leased Property for the Primary Intended Use;
(b) The Lessee shall furnish to the Lessor certified or photostatic
copies of all Permits and Contracts required by all applicable Legal
Requirements in connection with the commencement and conduct of the Work;
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(c) The Lessee shall furnish to the Lessor a cash deposit or a payment
and performance bond sufficient to pay for completion of and payment for the
Work in an amount not less than the architect's estimate of the entire cost of
completing the Work, less the amount of property insurance proceeds, if any,
then held by the Lessor and which the Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section 13.2;
(d) The Lessee shall furnish to the Lessor such insurance with respect
to the Work (in addition to the insurance required under Section 12.1 hereof) in
such amounts and in such forms as is reasonably required by the Lessee; and
(e) The Lessee shall not commence any of the Work until the Lessee
shall have complied with the requirements set forth in clauses (a) through (d)
immediately above, as applicable, and, thereafter, the Lessee shall perform the
Work diligently, in a good and workmanlike fashion and in good faith in
accordance with (i) the Plans and Specifications referred to in clause (a)
immediately above, (ii) the Permits and Contracts referred to in clause (b)
immediately above and (iii) all applicable Legal Requirements and other
requirements of this Lease; provided, however, that in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Work as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor and
any applicable Fee Mortgagee of such emergency and the nature and scope of the
Work performed and obtains the Lessor's approval of the remaining Work to be
completed.
13.1.3 Disbursement of Insurance Proceeds. Subject to the terms of any
applicable Fee Mortgage Loan Documents, if, as provided in Section 13.2, the
Lessor is required to apply any property insurance proceeds toward repair or
restoration of the Leased Property, then as long as the Work is being diligently
performed by the Lessee in accordance with the terms and conditions of this
Lease, the Lessor shall disburse such insurance proceeds from time to time
during the course of the Work in accordance with and subject to satisfaction of
the following provisions and conditions. The Lessor shall not be required to
make disbursements more often than at thirty (30) day intervals. The Lessee
shall submit a written request for each disbursement at least ten (10) Business
Days in advance and shall comply with the following requirements in connection
with each disbursement:
(a) Prior to the commencement of any Work, the Lessee shall have
received the Lessor's and any applicable Fee Mortgagee's written approval (to
the extent that any such approval from such Fee Mortgagee is required under any
applicable Fee Mortgage Loan Documents) of the Plans and Specifications (which
approval shall not be unreasonably withheld) and the Work shall be supervised by
an experienced construction manager with the consultation of an architect or
engineer qualified and licensed to do business in the State.
(b) Each request for payment shall be accompanied by (x) a certificate
of the architect or engineer, bearing the architect's or engineer's seal, and
(y) a certificate of the general
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contractor, qualified and licensed to do business in the State, that is
performing the Work (collectively, the "Work Certificates"), each dated not more
than ten (10) days prior to the application for withdrawal of funds, and each
stating:
(i) that all of the Work performed as of the date of the
certificates has been completed in compliance with the approved Plans and
Specifications, applicable Contracts and all applicable Legal Requirements;
(ii) that the sum then requested to be withdrawn has been paid
by the Lessee or is justly due to contractors, subcontractors, materialmen,
engineers, architects or other Persons, whose names and addresses shall be
stated therein, who have rendered or furnished certain services or materials for
the Work, and the certificate shall also include a brief description of such
services and materials and the principal subdivisions or categories thereof and
the respective amounts so paid or due to each of said Persons in respect thereof
and stating the progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all
sums previously withdrawn, does not exceed the cost of the Work insofar as
actually accomplished up to the date of such certificate;
(iv) that the remainder of the funds held by the Lessor will
be sufficient to pay for the full completion of the Work in accordance with the
Plans and Specifications;
(v) that no part of the cost of the services and materials
described in the applicable Work Certificate has been or is being made the basis
of the withdrawal of any funds in any previous or then pending application; and
(vi) that, except for the amounts, if any, specified in the
applicable Work Certificate to be due for services and materials, there is no
outstanding indebtedness known, after due inquiry, which is then due and payable
for work, labor, services or materials in connection with the Work which, if
unpaid, might become the basis of a vendor's, mechanic's, laborer's or
materialman's statutory or other similar Lien upon the Leased Property.
(c) The Lessee shall deliver to the Lessor satisfactory evidence that
the Leased Property and all materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if any, securing
indebtedness due to Persons (whose names and addresses and the several amounts
due them shall be stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the funds then being
requested, (ii) any Fee Mortgage and (iii) the Permitted Encumbrances. The
Lessor shall accept as satisfactory evidence of the foregoing lien waivers in
customary form from the general contractor and all subcontractors performing the
Work, together with an endorsement of its title insurance policy (relating to
the Leased Property) in form acceptable to the Lessor, dated as of the date of
the making of the then current disbursement, confirming the foregoing.
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(d) If the Work involves alteration or restoration of the exterior of
any Leased Improvement that changes the footprint of any Leased Improvement, the
Lessee shall deliver to the Lessor, upon the request of the Lessor, an
"as-built" survey of the Leased Property dated as of a date within ten (10) days
prior to the making of the first and final advances (or revised to a date within
ten (10) days prior to each such advance) showing no encroachments other than
such encroachments, if any, by the Leased Improvements upon or over the
Permitted Encumbrances as are in existence as of the date hereof.
(e) The Lessee shall deliver to the Lessor (i) an opinion of counsel
(satisfactory to the Lessor both as to counsel and as to the form of opinion)
prior to the first advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased Property have been obtained and
that the Leased Property, if repaired, replaced or rebuilt in accordance, in all
material respects, with the approved Plans and Specifications and such Permits,
shall comply with all applicable Legal Requirements and (ii) an architect's
certificate (satisfactory to the Lessor both as to the architect and as to the
form of the certificate) prior to the final advance, certifying that the Leased
Property was repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and complies with all
applicable Legal Requirements, including, without limitation, all Permits
referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any state of facts or
circumstance existing which, with the giving of notice and/or the passage of
time, would constitute any Lease Default.
The Lessor, at its option, may waive any of the foregoing requirements in whole
or in part in any instance. Upon compliance by the Lessee with the foregoing
requirements (except for such requirements, if any, as the Lessor may have
expressly elected to waive), and to the extent of (x) the insurance proceeds, if
any, which the Lessor may be required to apply to restoration of the Leased
Property pursuant to the provisions of this Lease and (y) all other cash
deposits made by the Lessee, the Lessor shall make available for payment to the
Persons named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%) as to all
hard costs of the Work (the "Retainage"). It is understood that the Retainage is
intended to provide a contingency fund to assure the Lessor that the Work shall
be fully completed in accordance with the Plans and Specifications and the
requirements of the Lessor. Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the Retainage shall be made
available for payment to those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any further
advance, in addition to the requirements set forth above, the Lessee shall
promptly deliver to the Lessor:
(i) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor, certifying that the
Work has been fully completed in a good and workmanlike manner in material
compliance with the Plans and Specifications and all Legal Requirements;
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(ii) an endorsement of its title insurance policy (relating to the
Leased Property) in form reasonably acceptable to the Lessor insuring the Leased
Property against all mechanic's and materialman's liens accompanied by the final
lien waivers from the general contractor and all subcontractors;
(iii) a certificate by the Lessee in form and substance reasonably
satisfactory to the Lessor, listing all costs and expenses in connection with
the completion of the Work and the amount paid by the Lessee with respect to the
Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all other
applicable Permits and Contracts (that have not previously been delivered to the
Lessor) issued by or entered into with any Governmental Authority with respect
to the Leased Property and the Primary Intended Use and by the appropriate Board
of Fire Underwriters or other similar bodies acting in and for the locality in
which the Leased Property is situated; provided, that within thirty (30) days
after completion of the Work, the Lessee shall obtain and deliver to the Lessor
a permanent certificate of occupancy for the Leased Property.
Upon completion of the Work and delivery of the documents required
pursuant to the provisions of this Section 13.1, the Lessor shall pay the
Retainage to the Lessee or to those Persons entitled thereto and if there shall
be insurance proceeds or cash deposits, other than the Retainage, held by the
Lessor in excess of the amounts disbursed pursuant to the foregoing provisions,
then provided that no Lease Default has occurred and is continuing, nor any
state of facts or circumstances which, with the giving of notice and/or the
passage of time would constitute a Lease Default, the Lessor shall pay over such
proceeds or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after
construction shall constitute a warranty or representation by the Lessor, or any
of its agents or Consultants, as to the technical sufficiency, adequacy or
safety of any structure or any of its component parts, including, without
limitation, any fixtures, equipment or furnishings, or as to the subsoil
conditions or any other physical condition or feature pertaining to the Leased
Property. All acts, including any failure to act, relating to the Lessor are
performed solely for the benefit of the Lessor to assure the payment and
performance of the Lease Obligations and are not for the benefit of the Lessee
or the benefit of any other Person.
13.2 Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pay For Work. In the event of any
Casualty, except as provided for in Section 13.2.2, but, subject to the terms of
any applicable Fee Mortgage Loan Documents, the Lessor shall release proceeds of
property insurance held by it to pay for the Work in accordance with the
provisions and procedures set forth in this Article 13, only if:
(a) all of the terms, conditions and provisions of Sections 13.1 and
13.2.1 are satisfied;
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(b) there does not then exist any Lease Default or any state of facts
or circumstance which, with the giving of notice and/or the passage of time,
would constitute such a Lease Default;
(c) The Lessee demonstrates to the Lessor's satisfaction that the
Lessee has the financial ability to satisfy the Lease Obligations during such
repair or restoration; and
(d) no Sublease material to the operation of the Facility immediately
prior to such damage or taking shall have been canceled or terminated, nor
contain any still exercisable right to cancel or terminate, due to such Casualty
if and to the extent that the income from such Sublease is necessary in order to
avoid the violation of any of the financial covenants set forth in this Lease or
otherwise to avoid the creation of an Event of Default.
13.2.2 Proceeds Not To Be Released. If, as the result of any Casualty,
the Leased Property is damaged to the extent it is rendered Unsuitable For Its
Primary Intended Use and if either: (a) the Lessee, after exercise of diligent
efforts, cannot within a reasonable time (not in excess of ninety (90) days)
obtain all necessary Permits in order to be able to perform all required Work
and to again operate the Facility for its Primary Intended Use within two
hundred seventy (270) days from the occurrence of the damage or destruction in
substantially the manner as immediately prior to such damage or destruction or
(b) such Casualty occurs during the last twenty-four (24) months of the Term and
would reasonably require more than nine (9) months to obtain all Permits and
complete the Work, then the Lessee may either (i) acquire the Land and all
improvements located thereon from the Lessor for a purchase price equal to the
greater of (x) the Lessor's Investment and (y) the Fair Market Value of the
Leased Property minus the Fair Market Added Value with the Fair Market Value and
the Fair Market Added Value to be determined as of the day immediately prior to
such Casualty and prior to any other Casualty which has not been fully repaired,
restored or replaced, in which event, the Lessee shall be entitled upon payment
of the full purchase price to receive all property insurance proceeds (less any
costs and expenses incurred by the Lessor in collecting the same), or (ii)
terminate this Lease, in which event, the Lessor shall be entitled to receive
and retain the insurance proceeds; provided, however, that the Lessee shall only
have such right of termination effective upon payment to the Lessor of all Rent
and other sums due under this Lease and the other Lease Documents through the
date of termination plus an amount, which when added to the sum of (1) the Fair
Market Value of the Leased Property as affected by all unrepaired or unrestored
damage due to any Casualty (and giving due regard for delays, costs and expenses
incident to completing all repair or restoration required to fully repair or
restore the same) plus (2) the amount of insurance proceeds actually received by
the Lessor (net of costs and expenses incurred by the Lessor in collecting the
same) equals (3) the Fair Market Value of the Leased Property minus the Fair
Market Added Value, with the Fair Market Value and the Fair Market Added Value
to be determined as of the day immediately prior to such Casualty and prior to
any other Casualty which has not been fully repaired. Any acquisition of the
Leased Property pursuant to the terms of this Section 13.2.2 shall be
consummated in accordance with the provisions of Article 18, mutatis, mutandis.
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13.2.3 Lessee Responsible for Short-Fall. If the cost of the Work
exceeds the amount of proceeds received by the Lessor from the property
insurance required under Article 12 (net of costs and expenses incurred by the
Lessor in collecting the same), the Lessee shall be obligated to contribute any
excess amount needed to repair or restore the Leased Property and pay for the
Work. Such amount shall be paid by the Lessee to the Lessor together with any
other property insurance proceeds for application to the cost of the Work.
13.3 Tangible Personal Property. All insurance proceeds payable by
reason of any loss of or damage to any of the Tangible Personal Property shall
be paid to the Lessor as secured party, subject to the rights of the holders of
any Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutandis.
13.4 Restoration of Certain Improvements and the Tangible Personal
Property. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (a) restore (i) all alterations and improvements to the
Leased Property made by the Lessee and (ii) the Tangible Personal Property or
(b) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 No Abatement of Rent. In no event shall any Rent abate as a result
of any Casualty.
13.6 Termination of Certain Rights. Any termination of this Lease
pursuant to this Article 13 shall cause any right of the Lessee to extend the
Term of this Lease, granted to the Lessee herein and any right of the Lessee to
purchase the Leased Property contained in this Lease to be terminated and to be
without further force or effect.
13.7 Waiver. The Lessee hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction to the Leased
Property due to any Casualty which the Lessee is obligated to restore or may
restore under any of the provisions of this Lease.
13.8 Application of Rent Loss and/or Business Interruption Insurance.
Subject to the applicable provisions of any Fee Mortgage Loan Documents, all
proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(a) if the Work has been promptly and diligently commenced by the
Lessee and is in the process of being completed in accordance with this Lease
and no fact or condition exists which constitutes, or which with the giving of
notice and/or the passage of time would constitute,
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a Lease Default, the Lessor shall each month pay to the Lessee out of the Rent
Insurance Proceeds a sum equal to that amount, if any, of the Rent Insurance
Proceeds paid by the insurer which is allocable to the rental loss and/or
business interruption for the preceding month minus an amount equal to the sum
of the Rent due hereunder for such month plus any Impositions relating to the
Leased Property then due and payable;
(b) if the Work has not been promptly and diligently commenced by the
Lessee or is not in the process of being completed in accordance with this
Lease, the Rent Insurance Proceeds shall be applied to any Rent then due, and,
to the extent sufficient therefor, an amount equal to Base Rent, Impositions and
insurance premiums payable for the next twelve (12) months, as reasonably
projected by the Lessor, shall be held by the Lessor as security for the Lease
Obligations and applied to the payment of Rent as it becomes due; and
(c) if such Rent Insurance Proceeds received by the Lessor (net of
costs and expenses incurred by the Lessor in collecting the same) exceed the
amounts required under clauses (a) and (b) above, the excess shall be paid to
the Lessee, provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such insurance proceeds towards the Lease Obligations or
hold such proceeds as security therefor.
13.9 Obligation To Account. Upon the Lessee's written request, which
may not be made not more than once in any three (3) month period, the Lessor
shall provide the Lessee with a written accounting of the application of all
insurance proceeds received by the Lessor.
ARTICLE 14
CONDEMNATION
------------
14.1 Parties' Rights and Obligations. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 Total Taking. If there is a permanent Taking of all or
substantially all of the Leased Property, this Lease shall terminate on the Date
of Taking.
14.3 Partial or Temporary Taking. If there is a permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use for a period
not likely to, or which does not, exceed two hundred and seventy (270) days. If,
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however, the Leased Property is thereby so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (a) the Lessee shall have the right to
restore the Leased Property, at its own expense, (subject to the right under
certain circumstances as provided for in Section 14.4 to receive the net
proceeds of an Award for reimbursement) to the extent possible, to substantially
the same condition as existed immediately before the partial or temporary Taking
or (b) the Lessee shall have the right to acquire the Leased Property from the
Lessor (i) upon payment of all Rent due through the date that the purchase price
is paid, for a purchase price equal to the greater of (x) the Lessor's
Investment or (y) the Fair Market Value of the Leased Property minus the Fair
Market Added Value, with the Fair Market Value and the Fair Market Added Value
to be determined as of the day immediately prior to such partial or temporary
Taking and (ii) in accordance with the terms and conditions set forth in Article
18; in which event, this Lease shall terminate upon payment of such purchase
price and the consummation of such acquisition. Notwithstanding the foregoing,
the Lessor may overrule the Lessee's election under clause (a) or (b) and
instead either (1) terminate this Lease as of the date when the Lessee is
required to surrender possession of the portion of the Leased Property so taken
or (2) compel the Lessee to keep the Lease in full force and effect and to
restore the Leased Property as provided in clause (a) above, but only if the
Leased Property may be operated for at least eighty percent (80%) of the
licensed unit capacity of the Facility if operated in accordance with its
Primary Intended Use. The Lessee shall exercise its election under this Section
14.3 by giving the Lessor notice thereof ("Lessee's Election Notice") within
sixty (60) days after the Lessee receives notice of the Taking. The Lessor shall
exercise its option to overrule the Lessee's election under this Section 14.3 by
giving the Lessee notice of the Lessor's exercise of its rights under Section
14.3 within thirty (30) days after the Lessor receives the Lessee's Election
Notice. If, as the result of any such partial or temporary Taking, this Lease is
not terminated as provided above, the Lessee shall be entitled to an abatement
of Rent, but only to the extent, if any, provided for in Section 3.8, effective
as of the date upon which the Leased Property is rendered Unsuitable For Its
Primary Intended Use.
14.4 Restoration. If there is a partial or temporary Taking of the
Leased Property and this Lease remains in full force and effect pursuant to
Section 14.3, the Lessee shall accomplish all necessary restoration and the
Lessor shall release the net proceeds of such Award to reimburse the Lessee for
the actual reasonable costs and expenses thereof, subject to all of the
conditions and provisions set forth in Article 13 as though the Taking was a
Casualty and the Award was insurance proceeds. If the cost of the restoration
exceeds the amount of the Award (net of costs and expenses incurred in obtaining
the Award), the Lessee shall be obligated to contribute any excess amount needed
to restore the Facility or pay for such costs and expenses. To the extent that
the cost of restoration is less than the amount of the Award (net of cost and
expenses incurred in obtaining the Award), the remainder of the Award shall be
retained by the Lessor and Rent shall be abated as set forth in Section 3.8.
14.5 Award Distribution. In the event the Lessee completes the purchase
of the Leased Property, as described in Section 14.3, the entire Award shall,
upon payment of the purchase price and all Rent and other sums due under this
Lease and the other Lease Documents, belong to the Lessee and the Lessor agrees
to assign to the Lessee all of the Lessor's rights
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thereto. In any other event, subject to any Fee Mortgage Loan Documents, the
entire Award shall belong to and be paid to the Lessor.
14.6 Control of Proceedings. Subject to the rights of any Fee Mortgagee
under any applicable Fee Mortgage Loan Documents, unless and until the Lessee
completes the purchase of the Leased Property as provided in Section 14.3, all
proceedings involving any Taking and the prosecution of claims arising out of
any Taking against the Condemnor shall be conducted, prosecuted and settled by
the Lessor; provided, however, that the Lessor shall keep the Lessee apprised of
the progress of all such proceedings and shall solicit the Lessee's advice with
respect thereto and shall give due consideration to any such advice. In
addition, the Lessee shall reimburse the Lessor (as an Additional Charge) for
all costs and expenses, including reasonable attorneys' fees, appraisal fees,
fees of expert witnesses and costs of litigation or dispute resolution, in
relation to any Taking, whether or not this Lease is terminated.
ARTICLE 15
PERMITTED CONTESTS
------------------
15.1 Lessee's Right to Contest. To the extent of the express references
made to this Article 15 in other Sections of this Lease, but, subject to the
applicable provisions of any applicable Fee Mortgage Loan Documents, the Lessee,
any Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use or
any Lien or claim relating to the Leased Property not otherwise permitted by
this Lease; provided, that (a) prior written notice of such contest is given to
the Lessor, (b) in the case of an unpaid Imposition, Lien or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from the Lessor and/or compliance by any applicable member of the
Leasing Group with the contested Legal Requirement or other matter may be
legally delayed pending the prosecution of any such proceeding without the
occurrence or creation of any Lien, charge or liability of any kind against the
Leased Property, (c) neither the Leased Property nor any rent therefrom would be
in any immediate danger of being sold, forfeited, attached or lost as a result
of such proceeding, (d) in the case of a Legal Requirement, neither the Lessor
nor any member of the Leasing Group would be in any immediate danger of civil or
criminal liability for failure to comply therewith pending the outcome of such
proceedings, (e) in the event that any such contest shall involve a sum of money
or potential loss in excess of FIFTY THOUSAND DOLLARS ($50,000), the Lessee
shall deliver to the Lessor an Officer's Certificate and opinion of counsel, if
the Lessor deems the delivery of an opinion to be appropriate, certifying or
opining, as the case may be, as to the validity of the statements set forth to
the effect set forth in clauses (b), (c) and (d), to the extent applicable, (f)
the Lessee shall give such cash security as may be demanded in good faith by the
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Lessor to insure ultimate payment of any fine, penalty, interest or cost and to
prevent any sale or forfeiture of the affected portion of the Leased Property by
reason of such non-payment or non-compliance, (g) if such contest is finally
resolved against the Lessor or any member of the Leasing Group, the Lessee shall
promptly pay, as Additional Charges due hereunder, the amount required to be
paid, together with all interest and penalties accrued thereon and/or comply
(and cause any Sublessee and any Manager to comply) with the applicable Legal
Requirement, and (h) no state of facts or circumstance exists which constitutes,
or with the passage of time and/or the giving of notice, could constitute a
Lease Default; provided, however, the provisions of this Article 15 shall not be
construed to permit the Lessee to contest the payment of Rent or any other sums
payable by the Lessee to the Lessor under any of the Lease Documents.
15.2 Lessor's Cooperation. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor or any Fee Mortgagee to any civil or criminal
liability, and, if reasonably requested by the Lessee or if the Lessor so
desires, the Lessor shall join as a party therein.
15.3 Lessee's Indemnity. The Lessee, as more particularly provided for
in Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
-------
16.1 Events of Default. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle the Lessor to exercise its
remedies hereunder and under any of the other Lease Documents:
(a) any failure of the Lessee to pay any amount due hereunder or under
any of the other Lease Documents within ten (10) days following the date when
such payment was due;
(b) any failure in the observance or performance of any other covenant,
term, condition or warranty provided in this Lease or any of the other Lease
Documents, other than the payment of any monetary obligation and other than as
specified in subsections (c) through (t) below (a "Failure to Perform"),
continuing for thirty (30) days after the giving of notice by the Lessor to the
Lessee specifying the nature of the Failure to Perform; except as to matters not
susceptible to cure within thirty (30) days, provided that with respect to such
matters, (i) the Lessee commences the cure thereof within thirty (30) days after
the giving of such notice by the Lessor to the Lessee, (ii) the Lessee
continuously prosecutes such cure to completion, (iii) such
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cure is completed within ninety (90) days after the giving of such notice by the
Lessor to the Lessee and (iv) such Failure to Perform does not impair the value
of, or the Lessor's rights with respect to, the Leased Property;
(c) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any of the other Lease Documents;
(d) if any representation, warranty or statement contained herein or in
any of the other Lease Documents proves to be untrue in any material respect as
of the date when made or at any time during the Term if such representation or
warranty is a continuing representation or warranty pursuant to Section 10.2;
(e) if the Lessee or the Guarantor shall (i) voluntarily be adjudicated
a bankrupt or insolvent, (ii) seek or consent to the appointment of a receiver
or trustee for itself or for the Leased Property, (iii) file a petition seeking
relief under the bankruptcy or other similar laws of the United States, any
state or any jurisdiction, (iv) make a general assignment for the benefit of
creditors, (v) make or offer a composition of its debts with its creditors or
(vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree appointing,
without the consent of the Lessee or the Guarantor, a receiver or trustee for
the Lessee or the Guarantor or for any of their respective property and such
order, judgment or decree shall remain in force, undischarged or unstayed, sixty
(60) days after it is entered;
(g) if a petition is filed against the Lessee or the Guarantor which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any other jurisdiction, and such petition is not dismissed within
sixty (60) days after it is filed;
(h) in the event that, without the prior written consent of the Lessor,
in each instance, which consent may be withheld by the Lessor in its sole and
absolute discretion, if any of the outstanding capital stock of the Lessee,
shall be, on any one or more occasions, directly or indirectly, sold, assigned,
hypothecated or otherwise transferred (whether by operation of law or
otherwise);
(i) the liquidation, dissolution or termination of existence of the any
member of the Lessee or the merger or consolidation of the Guarantor; provided,
however, that notwithstanding the foregoing, a merger or consolidation involving
the Guarantor shall not constitute an Event of Default so long as (i) the
surviving entity relating to such merger has a Tangible Net Worth equal to or
greater than the Tangible Net Worth of the Guarantor immediately prior to such
merger or consolidation, (ii) the Lessor receives at least fifteen (15) days
prior written notice of such merger and (iii) the Lessor receives such
assurances, estoppels, assumptions and confirmations that it reasonably requires
with respect to such merger or consolidation;
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(j) if, without the prior written consent of the Lessor, in each
instance, which consent may be withheld by the Lessor in its sole and absolute
discretion, the Lessee's or any Sublessee's interest in the Leased Property
shall be, directly or indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances), subleased, sold,
assigned, hypothecated or otherwise transferred (whether by operation of law or
otherwise);
(k) the occurrence of a default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, in
connection with the payment or performance of any other material obligation of
the Lessee or any Sublessee (other than any Sublessee that is not an Affiliate
of the Lessee), whether or not the applicable creditor or obligee elects to
declare the obligations of the Lessee or the applicable Sublessee under the
applicable agreement due and payable or to exercise any other right or remedy
available to such creditor or obligee, if such creditor's or obligee's rights
and remedies may involve or result in (i) the taking of possession of the Leased
Property or (ii) the assertion of any other right or remedy that, in the
Lessor's reasonable opinion, may impair the Lessee's ability punctually to
perform all of its material obligations under this Lease and the other Lease
Documents, may impair such Sublessee's ability punctually to perform all of its
obligations under its Sublease or may materially impair the Lessor's security
for the Lease Obligations; provided, however, that in any event, the election by
the applicable creditor or obligee to declare the obligations of the Lessee
under the applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee shall be an Event of Default
hereunder only if such obligations, individually or in the aggregate, are in
excess of ONE HUNDRED THOUSAND DOLLARS ($100,000);
(l) the occurrence of a Related Party Default;
(m) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any credit agreement, loan agreement or other agreement establishing a major
line of credit (or any documents executed in connection with such lines of
credit) on behalf of any member of the Leasing Group (other than any Sublessee
that is not an Affiliate of the Lessee) whether or not the applicable creditor
has elected to declare the indebtedness due and payable under such line of
credit or to exercise any other right or remedy available to it. For the
purposes of this provision, a major line of credit shall mean and include any
line of credit established in an amount equal to or greater than FIVE HUNDRED
THOUSAND DOLLARS ($500,000);
(n) except as a result of Casualty or a partial or complete
Condemnation, if the Lessee or any Sublessee ceases operation of the Facility
for a period in excess of thirty (30) days;
(o) if one or more judgments against the Lessee or any Sublessee (other
than any Sublessee that is not an Affiliate of the Lessee) or attachments
against the Lessee's interest or any such Sublessee's interest in the Leased
Property, which in the aggregate exceed ONE HUNDRED THOUSAND DOLLARS ($100,000)
or which may materially and adversely
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interfere with the operation of the Facility, remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty (30) days;
(p) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED THOUSAND
DOLLARS ($500,000) shall be rendered against any member of the Leasing Group and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such award or judgment or (ii) such award or judgment shall continue
unsatisfied and in effect for a period of ten (10) consecutive days without an
insurance company satisfactory to the Lessor (in its sole and absolute
discretion) having agreed to fund such award or judgment in a manner
satisfactory to the Lessor (in its sole and absolute discretion) and in either
case such award or judgment shall, in the reasonable opinion of the Lessor, have
a material adverse affect on the ability of any such member of the Leasing Group
to operate the Facility;
(q) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful operation of the Facility in
accordance with the Primary Intended Use or the loss of any Permit under any
other circumstances under which any such member of the Leasing Group is required
to cease the operation of the Facility in accordance with the Primary Intended
Use;
(r) any failure to maintain the insurance required pursuant to Section
12 of this Lease in force and effect at all times until the Lease Obligations
are fully paid and performed;
(s) the appointment of a temporary manager (or operator) for the Leased
Property by any Governmental Authority; or
(t) the entry of an order by a court with jurisdiction over the Leased
Property to close the Facility, to transfer one or more patients or residents
from the Facility as a result of an allegation of abuse or neglect or to take
any action to eliminate an emergency situation then existing at the Facility.
16.2 Remedies.
(a) If any Lease Default shall have occurred, the Lessor may at its
option terminate this Lease by giving the Lessee not less than ten (10) days'
notice of such termination, or exercise any one or more of its rights and
remedies under this Lease or any of the other Lease Documents, or as available
at law or in equity and upon the expiration of the time fixed in such notice,
the Term shall terminate (but only if the Lessor shall have specifically elected
by a written notice to so terminate the Lease) and all rights of the Lessee
under this Lease shall cease. Notwithstanding the foregoing, in the event of the
Lessee's failure to pay Rent, if such Rent remains unpaid beyond ten (10) days
from the due date thereof, the Lessor shall not be obligated to give ten (10)
days notice of such termination or exercise of any of its other rights and
remedies under this Lease, or the other Lease Documents, or otherwise available
at law or in equity, and the Lessor
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shall be at liberty to pursue any one or more of such rights or remedies without
further notice. No taking of possession of the Leased Property by or on behalf
of the Lessor, and no other act done by or on behalf of the Lessor, shall
constitute an acceptance of surrender of the Leased Property by the Lessee or
reduce the Lessee's obligations under this Lease or the other Lease Documents,
unless otherwise expressly agreed to in a written document signed by an
authorized officer or agent of the Lessor.
(b) To the extent permitted under applicable law, the Lessee shall pay
as Additional Charges all costs and expenses (including, without limitation,
attorneys' fees and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, the Lessee shall,
to the extent permitted under applicable law, if required by the Lessor so to
do, upon not less than ten (10) days' prior notice from the Lessor, immediately
surrender to the Lessor the Leased Property pursuant to the provisions of
Paragraph (a) of this Section and quit the same, and the Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove the Lessee and all other Persons and any
and all of the Tangible Personal Property from the Leased Property, subject to
the rights of any residents or patients of the Facility and any Sublessees who
are not Affiliates of any member of the Leasing Group and to any requirements of
applicable law, or the Lessor may claim ownership of the Tangible Personal
Property as set forth in Section 5.2.3 hereof or the Lessor may exercise its
rights as secured party under the Security Agreement. The Lessor shall use
reasonable, good faith efforts to relet the Leased Property or otherwise
mitigate damages suffered by the Lessor as a result of the Lessee's breach of
this Lease.
(d) In addition to all of the rights and remedies of the Lessor set
forth in this Lease and the other Lease Documents, if the Lessee shall fail to
pay any rental or other charge due hereunder (whether denominated as Base Rent,
Additional Rent, Additional Charges or otherwise) within ten (10) days after
same shall have become due and payable, then and in such event the Lessee shall
also pay to the Lessor (i) a late payment service charge (in order to partially
defray the Lessor's administrative and other overhead expenses) equal to two
hundred-fifty ($250) dollars and (ii) to the extent permitted by applicable law,
interest on such unpaid sum at the Overdue Rate; it being understood, however,
that nothing herein shall be deemed to extend the due date for payment of any
sums required to be paid by the Lessee hereunder or to relieve the Lessee of its
obligation to pay such sums at the time or times required by this Lease.
16.3 Damages. None of (a) the termination of this Lease pursuant to
Section 16.2, (b) the eviction of the Lessee or the repossession of the Leased
Property, (c) the failure or inability of the Lessor, notwithstanding reasonable
good faith efforts, to relet the Leased Property, (d) the reletting of the
Leased Property or (e) the failure of the Lessor to collect or receive any
rentals due upon any such reletting, shall relieve the Lessee of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, the
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Lessee shall forthwith pay to the Lessor all Rent due and payable with respect
to the Leased Property to and including the date of such termination,
repossession or eviction. Thereafter, the Lessee shall forthwith pay to the
Lessor, at the Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to occur
of termination, repossession or eviction, together with interest thereon at the
Overdue Rate to the date of payment, plus (y) the worth (calculated in the
manner stated below) of the amount by which the unpaid Rent for the balance of
the Term after the later to occur of the termination, repossession or eviction
exceeds the fair market rental value of the Leased Property for the balance of
the Term, plus (z) any other amount necessary to compensate the Lessor for all
damage proximately caused by the Lessee's failure to perform the Lease
Obligations or which in the ordinary course would be likely to result therefrom;
or
(ii) each payment of Rent as the same would have become due and payable
if the Lessee's right of possession or other rights under this Lease had not
been terminated, or if the Lessee had not been evicted, or if the Leased
Property had not been repossessed which Rent, to the extent permitted by law,
shall bear interest at the Overdue Rate from the date when due until the date
paid, and the Lessor may enforce, by action or otherwise, any other term or
covenant of this Lease. There shall be credited against the Lessee's obligation
under this clause (ii) amounts actually collected by the Lessor from another
tenant to whom the Leased Property may have actually been leased or, if the
Lessor is operating the Leased Property for its own account, the actual net cash
flow of the Leased Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 Lessee Waivers. If this Lease is terminated pursuant to Section
16.2, the Lessee waives, to the extent not prohibited by applicable law, (a) any
right of redemption, re-entry or repossession, (b) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
16.5 Application of Funds. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 Intentionally Omitted.
16.7 Lessor's Right to Cure. If the Lessee shall fail to make any
payment, or to perform any act required to be made or performed under this Lease
and to cure the same within
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the relevant time periods provided in Section 16.1, the Lessor, after five (5)
Business Days' prior notice to the Lessee (except in an emergency when such
shorter notice shall be given as is reasonable under the circumstances), and
without waiving or releasing any obligation or Event of Default, may (but shall
be under no obligation to) at any time thereafter make such payment or perform
such act for the account and at the expense of the Lessee, and may, to the
extent permitted by law, enter upon the Leased Property for such purpose and
take all such action thereon as, in the Lessor's opinion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of the Lessee.
All sums so paid by the Lessor and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, in each case, to the extent
permitted by law) so incurred shall be paid by the Lessee to the Lessor on
demand as an Additional Charge. The obligations of the Lessee and rights of the
Lessor contained in this Article shall survive the expiration or earlier
termination of this Lease.
16.8 No Waiver By Lessor. The Lessor shall not by any act, delay,
omission or otherwise (including, without limitation, the exercise of any right
or remedy hereunder) be deemed to have waived any of its right or remedies
hereunder or under any of the other Lease Documents unless such waiver is in
writing and signed by the Lessor, and then, only to the extent specifically set
forth therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant, representation or warranty of any of the Lease
Documents, nor shall such a waiver in any one instance or circumstances be
construed as a waiver of the same term, condition, covenant, representation or
warranty in any subsequent instance or circumstance. No such failure, delay or
waiver shall be construed as creating a requirement that the Lessor must
thereafter, as a result of such failure, delay or waiver, give notice to the
Lessee or any other Person that the Lessor does not intend to, or may not, give
a further waiver or to refrain from insisting upon the strict performance of the
terms, conditions, covenants, representations and warranties set forth in the
Lease Documents before the Lessor can exercise any of its rights or remedies
under any of the Lease Documents or before any Lease Default can occur, or as
establishing a course of dealing for interpreting the conduct of and agreements
between the Lessor and the Lessee or any other Person.
The acceptance by the Lessor of any payment that is less than payment
in full of all amounts then due under any of the Lease Documents at the time of
the making of such payment shall not: (a) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(b) constitute an accord and satisfaction or (c) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (i) as a novation of this Lease or any of the other Lease Documents,
(ii) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(iii) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable
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law; and to the maximum extent not prohibited by applicable law, the Lessor
hereby expressly waives the benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing.
16.9 Right of Forbearance. Whether or not for consideration paid or
payable to the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by the Lessee and all those claiming by, through or under the Lessee.
16.10 Cumulative Remedies. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of the
Lessor under each of the Lease Documents shall be separate and cumulative and
may be exercised concurrently or successively in the Lessor's sole and absolute
discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
---------------------------------------------------
17.1 Surrender. The Lessee shall, upon the expiration or prior
termination of the Term (unless the Lessee has concurrently purchased the Leased
Property in accordance with the terms hereof), vacate and surrender the Leased
Property to the Lessor in good repair and condition, in compliance with all
Legal Requirements, all Insurance Requirements, and in compliance with the
provisions of Article 8, except for: (a) ordinary wear and tear (subject to the
obligation of the Lessee to maintain the Leased Property in good order and
repair during the entire Term of the Lease), (b) damage caused by the gross
negligence or willful acts of the Lessor, and (c) any damage or destruction
resulting from a Casualty or Taking that the Lessee is not required by the terms
of this Lease to repair or restore.
17.2 Transfer of Permits and Contracts. In connection with the
expiration or any earlier termination of this Lease (unless the Lessee has
concurrently purchased the Leased Property in accordance with the terms hereof),
upon any request made from time to time by the Lessor, the Lessee shall (a)
promptly and diligently use its best efforts to (i) transfer and assign all
Permits and Contracts necessary or desirable for the operation of the Leased
Property in accordance with its Primary Intended Lease to the Lessor, any Fee
Mortgagee or any of their
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respective designees and/or (ii) arrange for the transfer or assignment of such
Permits and Contracts to the Lessor, any Fee Mortgagee or any such designee, all
to the extent the same may be transferred or assigned under applicable law and
(b) cooperate in every respect (and to the fullest extent possible) and assist
the Lessor, any Fee Mortgagee or any such designee in obtaining such Permits and
Contracts (whether by transfer, assignment or otherwise). Such efforts and
cooperation on the part of the Lessee shall include, without limitation, the
execution, delivery and filing with appropriate Governmental Authorities of any
applications, petitions, statements, notices, requests, assignments and other
documents or instruments requested by the Lessor, any Fee Mortgagee or any such
designee. Furthermore, the Lessee shall not take any action or refrain from
taking any action which would defer, delay or jeopardize the process of the
Lessor, any Fee Mortgagee or any such designee obtaining said Permits and
Contracts (whether by transfer, assignment or otherwise). Without limiting the
foregoing, the Lessee shall not seek to transfer or relocate any of said Permits
or Contracts to any location other than the Leased Property. The provisions of
this Section 17.2 shall survive the expiration or earlier termination of this
Lease.
The Lessee hereby appoints the Lessor as its attorney-in-fact, with
full power of substitution to take such actions, in the event that the Lessee
fails to comply with any request made by the Lessor hereunder, as the Lessor (in
its sole absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on the Lessor by
the provisions of this Section 17.2, being coupled with an interest, shall be
irrevocable until the Lease Obligations are fully paid and performed and shall
not be affected by any disability or incapacity which the Lessee may suffer and
shall survive the same. Such power of attorney is provided solely to protect the
interests of the Lessor and shall not impose any duty on the Lessor to exercise
any such power and neither the Lessor nor such attorney-in-fact shall be liable
for any act, omission, error in judgment or mistake of law, except as the same
may result from its gross negligence or willful misconduct.
17.3 No Acceptance of Surrender. Except at the expiration of the Term
in the ordinary course, no surrender to the Lessor of this Lease or of the
Leased Property or any interest therein shall be valid or effective unless
agreed to and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 Holding Over. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent and Additional
Rent payable at the time of such expiration or earlier termination of the Term;
(ii) all Additional Charges accruing during the month and (iii) all other sums,
if any, payable by the Lessee pursuant to the provisions of this Lease with
respect to the Leased Property. During such period of tenancy, the Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent
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given by law to tenants at sufferance, to continue its occupancy and use of the
Leased Property. Nothing contained herein shall constitute the consent, express
or implied, of the Lessor to the holding over of the Lessee after the expiration
or earlier termination of this Lease.
ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
-------------------------------
18.1 Purchase of the Leased Property. In the event the Lessee purchases
the Leased Property from the Lessor pursuant to Article 13 or Article 14 of this
Lease, the Lessor shall, upon receipt from the Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
the Lessee a bargain and sale deed with covenants only against acts of the
Lessor conveying the entire interest of the Lessor in and to the Leased Property
to the Lessee subject to all Legal Requirements, all of the matters described in
clauses (a), (b), (c), (e) and (g) of Section 11.5.2, Impositions, any Liens
created by the Lessee, any Liens created in accordance with the terms of this
Lease or consented to by the Lessee, the claims of all Persons claiming by
through or under the Lessee, any other matters assented to by the Lessee and all
matters for which the Lessee has responsibility under any of the Lease
Documents, but otherwise not subject to any other Lien created by the Lessor
from and after the Commencement Date (other than an Encumbrance permitted under
Article 20 which the Lessee elects to assume). The applicable purchase price
shall be paid in cash to the Lessor, or as the Lessor may direct, in federal or
other immediately available funds except as otherwise mutually agreed by the
Lessor and the Lessee. All expenses of such conveyance, including, without
limitation, title examination costs, standard (and extended) coverage title
insurance premiums, attorneys' fees incurred by the Lessor in connection with
such conveyance, recording and transfer taxes and recording fees and other
similar charges shall be paid by the Lessee.
18.2 Appraisal.
18.2.1 Designation of Appraisers. In the event that it becomes
necessary to determine the Fair Market Value of the Leased Property for any
purpose of this Lease, the party required or permitted to give notice of such
required determination shall include in the notice the name of a Person selected
to act as appraiser on its behalf. Within ten (10) days after receipt of any
such notice, the Lessor (or the Lessee, as the case may be) shall by notice to
the Lessee (or the Lessor, as the case may be) appoint a second Person as
appraiser on its behalf.
18.2.2 Appraisal Process. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto), shall, within forty-five (45) days after the
date of the notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value of the Leased Property as of
the relevant date (giving effect to the impact, if any, of inflation from the
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date of their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall have been
so appointed but only one such appraiser shall have made such determination
within fifty (50) days after the making of the Lessee's or the Lessor's request,
then the determination of such appraiser shall be final and binding upon the
parties. If two appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten per cent
(10%) of the lesser of such amounts, then the Fair Market Value of the Leased
Property shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the amounts so determined shall
exceed ten percent (10%) of the lesser of such amounts, then such two appraisers
shall have twenty (20) days to appoint a third appraiser, but if such appraisers
fail to do so, then either party may request the American Arbitration
Association or any successor organization thereto to appoint an appraiser within
twenty (20) days of such request, and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such appraiser
shall have been appointed within such twenty (20) days or within ninety (90)
days of the original request for a determination of Fair Market Value of the
Leased Property, whichever is earlier, either the Lessor or the Lessee may apply
to any court having jurisdiction to have such appointment made by such court.
Any appraiser appointed by the original appraisers, by the American Arbitration
Association or by such court shall be instructed to determine the Fair Market
Value of the Leased Property within thirty (30) days after appointment of such
Appraiser. The determination of the appraiser which differs most in terms of
dollar amount from the determinations of the other two appraisers shall be
excluded, and fifty percent (50%) of the sum of the remaining two determinations
shall be final and binding upon the Lessor and the Lessee as the Fair Market
Value of the Leased Property.
18.2.3 Specific Enforcement and Costs. This provision for determination
by appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law. The
Lessor and the Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
18.3 Lessee's Option to Purchase.
18.3.1 Conditions to Option. On the conditions (which conditions the
Lessor may waive, at its sole option, by notice to the Lessee at any time) that
(a) at the time of exercise of the Purchase Option and on the applicable
Purchase Option Date, there then exists no Lease Default, nor any state of facts
or circumstance which constitutes, or with the passage of time and/or the giving
of notice, would constitute a Lease Default and (b) the Lessee strictly complies
with the provisions of this Section 18.3, then the Lessee shall have the option
to purchase the Land and all of the improvements located thereon, at the price
and upon the terms hereinafter set forth (the "Purchase Option").
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18.3.2 Exercise of Option. The Purchase Option shall permit the Lessee
to purchase the Land and all of the improvements located thereon (a) on the last
day of the Initial Term or (b) on the last day of any Extended Term effectively
exercised by the Lessee (each of such dates are referred to herein as a
"Purchase Option Date") and shall be exercised by notice given by the Lessee to
the Lessor (the "Lessee's Purchase Option Notice") at least one hundred eighty
(180) days (but not more than two hundred seventy (270) days) prior to the
relevant Purchase Option Date. Once given, the Lessee shall have no right to
rescind the Lessee's Purchase Option Notice. In order to determine whether or
not to exercise the Purchase Option, the Lessee may request that the Lessor
provide to the Lessee (within 10 Business Days after any such request) a rent
roll (the "Rent Roll"), in form and substance reasonably acceptable to the
Lessee, (i) identifying each lease in effect relating to any portion of the
Land, (ii) attaching a true and correct copy of each such lease and (iii)
identifying the term of each such lease, the rent payable thereunder, the
security deposit and/or other deposits (if any) held by the landlord thereunder,
whether there are any defaults then existing thereunder, the date through which
rent has been paid thereunder and any other information reasonably requested by
the Lessee. From and after the date of the exercise of the Purchase Option in
accordance with the terms hereof, the Lessor shall not enter into any lease
relating to all or any portion of the Land without the Lessee's prior consent,
which consent may not unreasonably withheld.
18.3.3 Conveyance. If the Purchase Option is exercised by the Lessee in
accordance with the terms hereof, the Land and all improvements located thereon
shall be conveyed by a good and sufficient deed with covenants only against acts
of the Lessor (the "Deed") running to the Lessee or to such grantee as the
Lessee may designate by notice to the Lessor at least seven (7) days before the
Time of Closing. At the Closing, (a) the Lessor shall assign to the Lessee (or
the Lessee's nominee), and the Lessee (or such nominee) shall assume, all of the
Lessor's right, title and interest in all leases relating to the Land pursuant
to an Assignment and Assumption Agreement, in form and substance reasonably
acceptable to the Lessor and the Lessee (which Assignment and Assumption
Agreement shall include mutual indemnifications relating to the obligations of
the landlord under the leases being assigned and assumed), (b) the Lessor shall
deliver to the Lessee (or its nominee) an updated Rent Roll and (c) the Lessor
shall transfer to the Lessee (or its nominee) all security deposits and other
deposits held by the Lessor under the leases being assigned and assumed.
18.3.4 Calculation of Purchase Price. The price to be paid by the
Lessee for the acquisition of the Leased Property pursuant to this Purchase
Option (the "Purchase Price") shall be equal to the lesser of (a) an amount
equal to the Fair Market Value of the Leased Property minus the Fair Market
Added Value or (b) the sum of (i) the Lessor's Investment plus (ii) the product
of (x) fifty (50%) percent multiplied by (y) a fraction the numerator of which
shall be the Consumer Price Index in effect on the applicable Purchase Option
Date minus the Consumer Price Index in effect on the Commencement Date and the
denominator of which shall be the Consumer Price Index in effect on the
Commencement Date multiplied by (z) the Lessor's Investment. Notwithstanding the
foregoing, in no event shall the Purchase Price due hereunder be less than the
Lessor's Investment.
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18.3.5 Payment of Purchase Price. The Purchase Price shall be paid by
the Lessee at the Time of Closing by certified, cashier's, treasurer's or bank
check(s) or wire transfer pursuant to instructions received from the Lessor.
18.3.6 Place and Time of Closing. If the Purchase Option is exercised,
the closing shall occur and the Deed shall be delivered (the "Closing") at the
office of the Lessor at 12:00 o'clock noon (E.S.T.) on the applicable Purchase
Option Date (such time, as the same may be extended by mutual written agreement
of the Lessor and the Lessee, being hereinafter referred to as the "Time of
Closing"). It is agreed that time is of the essence of the Purchase Option.
18.3.7 Condition of Leased Property. The Leased Property is to be
purchased "AS IS" and "WHERE IS" as of the Time of Closing.
18.3.8 Quality of Title. If the Lessor shall be unable to give title or
to make conveyance, as stipulated in this Section 18.3, then, at the Lessor's
option, the Lessor shall use reasonable efforts to remove all defects in title
and the applicable Purchase Option Date and Time of Closing shall be extended
for period of thirty (30) days. The Lessor shall not be required to expend more
than FIFTY THOUSAND DOLLARS ($50,000) (inclusive of attorney's fees) in order to
have used "reasonable efforts."
18.3.9 Lessor's Inability to Perform. If at the expiration of the
extended time the Lessor shall have failed so to remove any such defects in
title, then all other obligations of all parties hereto under Section 18.3 shall
cease and Section 18.3 shall be void and without recourse to the parties hereto.
Notwithstanding the foregoing, the Lessee shall have the election, at either the
original or extended Purchase Option Date and Time of Closing, to accept such
title as the Lessor can deliver to the Leased Property in its then condition and
to pay therefor the Purchase Price without reduction, in which case the Lessor
shall convey such title; provided, that, in the event of such conveyance, if any
portion of the Leased Property shall have been taken by Condemnation prior to
the applicable Purchase Option Date and Time of Closing, the Lessor shall pay
over or assign to the Lessee at the Time of Closing, all Awards recovered on
account of such Taking, less any amounts reasonably expended by the Lessor in
obtaining such Awards, or, to the extent such Awards have not been recovered as
of the applicable Purchase Option Date and Time of Closing, the Lessor shall
assign to the Lessee all its rights with respect to any claim therefor.
18.3.10 Merger by Deed. The acceptance of the Deed by the Lessee or the
grantee designated by the Lessee, as the case may be, shall be deemed to be a
full performance and discharge of every agreement and obligation to be performed
by the Lessor contained or expressed in this Lease.
18.3.11 Use of Purchase Price to Clear Title. To enable the Lessor to
make conveyance as provided in this Section, the Lessor may, at the Time of
Closing, use the Purchase
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Price or any portion thereof to clear the title of any Lien, provided that all
instruments so procured are recorded contemporaneously with the Closing or
reasonable arrangements are made for a recording subsequent to the Time of
Closing in accordance with customary conveyancing practices.
18.3.12 Lessee's Default. If the Lessee delivers the Lessee's Purchase
Option Notice and fails to consummate the purchase of the Leased Property in
accordance with the terms hereof for any reason other than the Lessor's willful
and unexcused refusal to deliver the Deed, (a) the Lessee shall thereafter have
no further right to purchase the Leased Property pursuant to this Section,
although this Lease shall otherwise continue in full force and effect and (b)
the Lessor shall have the right to sue for specific performance of the Lessee's
obligations to purchase the Leased Property provided such suit for specific
performance is commenced within one (1) year after the applicable Purchase
Option Date on which such sale was supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
-------------------------
19.1 Subletting and Assignment. The Lessee may not, without the prior
written consent of the Lessor and any Fee Mortgagee (if any such consent from
the Fee Mortgagee is required under the Fee Mortgage Loan Documents), which
consent may be withheld in the Lessor's sole and absolute discretion, assign or
pledge all or any portion of its interest in this Lease or any of the other
Lease Documents (whether by operation of law or otherwise) or sublet all or any
part of the Leased Property. For purposes of this Section 19.1 the term "assign"
shall be deemed to include, but not be limited to, any one or more sales,
pledges, hypothecations or other transfers (including, without limitation, any
transfer by operation of law) of any of the capital stock of or partnership
interests in the Lessee or sales, pledges, hypothecations or other transfers
(including, without limitation, any transfer by operation of law) of the capital
or the assets of the Lessee. Any such assignment, pledge, sale, hypothecation or
other transfer made without the Lessor's consent shall be void and of no force
and effect.
19.2 Permitted Subleases. Notwithstanding the foregoing, the Lessee
shall have the right to enter into Resident Agreements without the prior consent
of the Lessor.
19.3 Attornment. The Lessee shall insert in each Sublease, other than
Resident Agreements, provisions to the effect that (a) such Sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of the Lessor hereunder, (b) in the event this Lease shall terminate
before the expiration of such Sublease, the Sublessee thereunder will, at the
Lessor's option, attorn to the Lessor and waive any right the Sublessee may have
to terminate the Sublease or to surrender possession thereunder, as a result of
the termination of this Lease and (c) in the event the Sublessee receives a
written notice from the Lessor stating that the Lessee is in default under this
Lease, the Sublessee shall thereafter be obligated to pay all rentals accruing
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under said Sublease directly to the Lessor or as the Lessor may direct. All
rentals received from the Sublessee by the Lessor shall be credited against the
amounts owing by the Lessee under this Lease.
19.4 Permitted Transfers. Notwithstanding anything to the contrary set
forth herein, the Lessee's legal or beneficial interest in this Lease or the
Leased Property and/or all of the outstanding capital stock of the Lessee may be
indirectly transferred in connection with (a) any merger of the Guarantor with
or into any other Person, (b) any sale of all or substantially all of the
Guarantor's assets to any other Person or (c) any transfer of all or
substantially all of the outstanding capital stock of the Guarantor to any other
Person; provided, that, in connection with (i) any such merger, the terms of
Section 16 (i) are satisfied and (ii) any such sale or transfer, the acquiring
Person (x) has a Tangible Net Worth equal to or greater than the Guarantor
immediately prior to such sale or transfer and (y) executes and delivers to the
Lessor, concurrently with such sale or transfer, a guaranty in form and
substance substantially similar to the Guaranty and an opinion, in form and
substance reasonably acceptable to the Lessor, rendered by counsel reasonably
acceptable to the Lessor, evidencing the due authorization and enforceability of
such guaranty.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
-------------------------------------------
20.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby with the fee estate in the Leased Property
by reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate in the Leased
Property.
20.2 Transfers By Lessor. If the original Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of the Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 Lessor May Grant Liens. Without the consent of the Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, the
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property or any interest therein ("Encumbrance"), whether to secure
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any borrowing or other means of financing or refinancing; provided, that, except
as may otherwise be expressly provided herein or in any Fee Mortgage Loan
Documents to which the Lessee is a party, the Lessee shall have no obligation to
make payments under such Encumbrances. The Lessee shall subordinate this Lease
to the lien of any such Encumbrance, on the condition that the beneficiary or
holder of such Encumbrance executes a non-disturbance agreement in conformity
with the provisions of Section 20.4. To the extent that any such Encumbrance or
any other Permitted Encumbrance consists of a mortgage or deed of trust on the
Lessor's interest in the Leased Property the same shall be referred to herein as
a "Fee Mortgage" and the holder thereof shall be referred to herein as a "Fee
Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (a) the
applicable Fee Mortgagee consents to this Lease and (b) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (i) the Lessee shall not be disturbed in peaceful enjoyment
of the Leased Property nor shall this Lease be terminated or canceled at any
time, except in the event that the Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein, (ii) the
Lessee's options to purchase the Leased Property pursuant to Articles 13, 14 and
18 of this Lease shall remain in force and effect pursuant to the terms hereof
and (iii) in the event that the Lessee elects its option to purchase the Leased
Property pursuant to this Lease and performs all of its obligations hereunder in
connection with any such election, the holder of the Fee Mortgage shall release
its Fee Mortgage upon payment by the Lessee of the purchase price required
hereunder, provided, that (1) such purchase price is paid to the holder of the
Fee Mortgage, in the event that the Indebtedness secured by the applicable Fee
Mortgage is equal to or greater than the purchase price or (2) in the event that
the purchase price is greater than the Indebtedness secured by the Fee Mortgage,
a portion of the purchase price equal to the Indebtedness secured by the Fee
Mortgage is paid to the Fee Mortgagee and the remainder of the purchase price is
paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall
(a) subordinate this Lease and all of the Lessee's rights and estate hereunder
to the Fee Mortgage held by such Fee Mortgagee and (b) agree that the Lessee
will attorn to and recognize such Fee Mortgagee or the purchaser at any
foreclosure sale or any sale under a power of sale contained in any such Fee
Mortgage as the Lessor under this Lease for the balance of the Term then
remaining. To effect the intent and purpose of the immediately preceding
sentence, the Lessee agrees to execute and deliver such instruments in
recordable from as are reasonably requested by the Lessor or the applicable Fee
Mortgagee; provided, however, that such Fee Mortgagee simultaneously executes,
delivers and records a written agreement of the type described in the preceding
paragraph.
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ARTICLE 21
LESSOR OBLIGATIONS
------------------
21.1 Quiet Enjoyment. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, the Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property throughout the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by the Lessee. No failure by the Lessor to comply with
the foregoing covenant shall give the Lessee any right to cancel or terminate
this Lease, or to fail to perform any other sum payable under this Lease, or to
fail to perform any other obligation of the Lessee hereunder. Notwithstanding
the foregoing, the Lessee shall have the right by separate and independent
action to pursue any claim it may have against the Lessor as a result of a
breach by the Lessor of the covenant of quiet enjoyment contained in this
Article 21.
21.2 Memorandum of Lease. The Lessor and the Lessee shall, promptly
upon the request of either, enter into a short form memorandum of this Lease, in
form suitable for recording under the laws of the State, in which reference to
this Lease and all options contained herein shall be made. The Lessee shall pay
all recording costs and taxes associated therewith.
21.3 Default by Lessor. The Lessor shall be in default of its
obligations under this Lease only if the Lessor shall fail to observe or perform
any term, covenant or condition of this Lease on its part to be performed and
such failure shall continue for a period of thirty (30) days after notice
thereof from the Lessee (or such shorter time as may be necessary in order to
protect the health or welfare of any patients and/or residents of the Facility
or to insure the continuing compliance of the Facility with the applicable Legal
Requirements), unless such failure cannot with due diligence be cured within a
period of thirty (30) days, in which case such failure shall not be deemed to
continue if the Lessor, within said thirty (30) day period, proceeds promptly
and with due diligence to cure the failure and diligently completes the curing
thereof. The time within which the Lessor shall be obligated to cure any such
failure shall also be subject to extension of time due to the occurrence of any
Unavoidable Delay.
21.4 Lessor Obligations Under the Service, Maintenance and Easement
Agreement. During the Term of this Lease, Lessor shall perform all of the
obligations under the Service, Maintenance and Easement Agreement which are
imposed upon the Lessor as owner of all or any portion of the SNF/CMC Land.
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ARTICLE 22
NOTICES
-------
Any notice, request, demand, statement or consent made hereunder or
under any of the other Lease Documents shall be in writing and shall be deemed
duly given if personally delivered, sent by certified mail, return receipt
requested, or sent by a nationally recognized commercial overnight delivery
service with provision for a receipt, postage or delivery charges prepaid, and
shall be deemed given when so personally delivered or postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
If to the Lessee: CareMatrix of Princeton (ALF), Inc.
197 First Avenue
Needham Heights, Massachusetts 02494
Attention: President
With a copies to: CareMatrix of Princeton (ALF), Inc.
197 First Avenue
Needham Heights, Massachusetts 02494
Attention: General Counsel
Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02494
Attention: General Counsel
If to the Lessor: CCC of New Jersey, Inc.
197 First Avenue
Needham Heights, Massachusetts 02494
Attention: President
With copies to: CCC of New Jersey, Inc.
197 First Avenue
Needham Heights, Massachusetts 02494
Attention: General Counsel
Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02494
Attention: General Counsel
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<PAGE>
or such other address as the Lessor or the Lessee shall hereinafter from time to
time designate by a written notice to the others given in such manner. Any
notice given to the Lessee by the Lessor at any time shall not imply that such
notice or any further or similar notice was or is required.
ARTICLE 23
ENVIRONMENTAL MATTERS
---------------------
23.1 Maintenance of Leased Property. The Lessee covenants that, as long
as this Lease shall remain in force and effect, the Lessee:
(a) shall not generate, store, transport, utilize, dispose of,
manage, release or locate, any Hazardous Substances on, under or from
the Leased Property in compliance with all applicable Environmental
Laws or permit the generation, storage, transportation, utilization,
disposal, management, release or threat of release, or location of any
Hazardous Substances on, under or from the Leased Property, but only in
compliance with all applicable Environmental Laws; and
(b) shall not permit any Lien arising under or related to any
of the Environmental Laws to attach to the Leased Property and remain
undischarged or not adequately bonded to the reasonable satisfaction of
the Lessor for more than sixty (60) days.
In addition to all other covenants contained herein, the Lessee agrees
that the Leased Property shall be maintained in compliance with the
Environmental Laws and in compliance with any provisions set forth under any Fee
Mortgage Loan Documents pertaining to the generation, storage, transportation,
utilization, management or release of hazardous Substances on, under or from the
Leased Property.
23.2 Notice of Environmental Conditions. The Lessee shall provide the
Lessor and any Fee Mortgagee with immediate written notice: (a) upon the Lessee
becoming aware of (i) the presence of, any release or any threat of release of
any Hazardous Substances on, under or from the Leased Property (whether or not
caused by the Lessee) and (ii) any Environmental Enforcement Action instituted
or threatened and (b) upon receipt by the Lessee of any notice relating to the
Leased Property or any Hazardous Substance allegedly originating on, under or
from the Leased Property, from any Governmental Authority pursuant to any of the
Environmental Laws.
23.3 The Lessee's Agreement To Take Remedial Actions. Upon the Lessee
becoming aware of the presence of, any release, or any threat of release of any
Hazardous Substances on, under or from the Leased Property caused by the Lessee,
its officers, agents, employees, Sublessees, licensees, concessionaires and/or
invitees or any other occupant of the
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Leased Property during the term of this Lease, the Lessee shall immediately take
all such actions to arrange for the assessment, monitoring, clean-up,
containment, removal, remediation or restoration of the Leased Property as are
required pursuant to any of the Environmental Laws or by any Governmental
Authority.
Upon the Lessee becoming aware of the presence of, any release, or any
threat of release of any Hazardous Substances on any Surrounding Property, but
only to the extent that the presence of any Hazardous Substances on the
Surrounding Property originated on, under or from the Leased Property and such
release or threat of release was caused by the Lessee, its officers, agents,
employees, Sublessees, licensees, concessionaires and/or invitees or any other
occupant of the Leased Property during the term of this Lease, the Lessee shall
immediately take all such actions to arrange for the assessment, monitoring,
clean-up, containment, removal, remediation or restoration of the Surrounding
Property, as are required pursuant to any of the Environmental Laws or by any
Governmental Authority.
23.4 The Lessor's Rights To Inspect The Leased Property and Take
Remedial Actions. So long as this Lease shall remain in force and effect, the
Lessor shall have the right, but not the obligation, to enter upon the Leased
Property, to expend funds to:
(a) cause one or more environmental assessments of the Leased
Property to be undertaken. Such environmental assessments may include,
without limitation, (i) detailed visual inspections of the Leased
Property, including, without limitation, all storage areas, storage
tanks, drains, dry wells and leaching areas, (ii) the taking of soil
and surface water samples, (iii) the performance of soil and ground
water analyses and (iv) the performance of such other investigations or
analyses as are necessary or appropriate and consistent with sound
professional environmental engineering practice in order for the Lessor
to obtain a complete assessment of the compliance of the Leased
Property and the use thereof with all Environmental Laws and to make a
determination as to whether there is any risk of contamination (x) to
the Leased Property resulting from Hazardous Substances originating on,
under or from any Surrounding Property or (y) to any Surrounding
Property resulting from Hazardous Substances originating on, under or
from the Leased Property;
(b) cure any breach of the conditions and covenants contained
in this Article 6;
(c) take any actions as are necessary to (i) prevent the
migration of Hazardous Substances on, under or from the Leased Property
to any other property, (ii) clean-up, contain, remediate or remove any
Hazardous Substances on, under or from any other property, which
Hazardous Substances originated on, under or from the Leased Property
or (iii) prevent the migration of any Hazardous Substances on, under or
from any other property to the Leased Property;
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<PAGE>
(d) comply with, settle or otherwise satisfy any Environmental
Enforcement Action (including, without limitation, the payment of any
fines or penalties imposed by any Governmental Authority); and
(e) correct or abate any environmental condition on or under
the Leased Property which could cause degradation, damage or injury to
the Leased Property, any Surrounding Property or any Person.
Any amounts paid or advanced by the Lessor (or any Fee Mortgagee) and
all costs and expenses incurred in connection with any action taken pursuant to
the terms of this Article 6 (including, without limitation, environmental
consultants' and experts' fees and expenses, reasonable attorneys' fees and
expenses, court costs and all costs of assessment, monitoring, clean-up,
containment, remediation, removal and restoration), shall be a demand obligation
of the Lessee to the Lessor, but only to the extent that such amounts paid or
advanced and cost and expenses incurred arose out of and/or relate to the
presence of, any release, or any threat of release of any Hazardous Substances
on, under or from the Leased Property caused by the Lessee, its officers,
agents, employees, Sublessees, licensees, concessionaires and/or invitees or any
other occupant of the Leased Property during the term of this Lease, and if such
sums are not paid within ten (10) days after demand, such sums shall thereafter
(to the extent permitted by applicable law) bear interest at the Overdue Rate
until the date of payment.
The Lessor (or any Fee Mortgagee), by making any such payment or
incurring any such costs, shall be subrogated to all rights of the Lessee or any
other occupant of the Leased Property to seek reimbursement from any Person,
including, without limitation, any prior owner or operator of the Leased
Property, who may be a "responsible party" under any of the Environmental Laws,
in connection with the presence of Hazardous Substances on, under or from the
Leased Property.
Any partial exercise by the Lessor (or any Fee Mortgagee) of any of the
rights and remedies set forth in this Article 23, including, without limitation,
any partial undertaking on the part of the Lessor (or such Fee Mortgagee) to
cure any failure by the Lessee or the Leased Property (or any other occupant) to
comply with any of the Environmental Laws, shall not obligate the Lessor (or
such Fee Mortgagee) to complete such actions taken or require the Lessor to
expend further sums to cure such non-compliance.
23.5 Environmental Indemnification. Without limiting any of the other
indemnity provisions set forth in this Lease, the Lessee shall and hereby agrees
to indemnify, exonerate, defend (with counsel acceptable to the Lessor) and hold
the Indemnified Parties harmless from and against any claim, liability, loss,
cost, damage or expense (including, without limitation, environmental
consultants' and experts' fees and expenses, reasonable attorneys' fees and
expenses, court costs and all costs of assessment, monitoring, clean-up,
containment, removal, remediation and restoration) arising out of or in
connection with (a) any breach of any of the conditions and covenants hereunder,
(b) the Lessor's exercise of any of its rights and remedies
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<PAGE>
hereunder or (c) the enforcement of the aforesaid indemnification agreement;
excluding, however, with respect to each Indemnified Party, any matters
resulting from the gross negligence or willful misconduct of such Indemnified
Party. Notwithstanding the foregoing, the Lessor shall have the option of
conducting its defense with counsel of the Lessor's choice, but at the expense
of the Lessee as aforesaid.
The matters covered by the foregoing indemnity with respect to any
property other than the Leased Property shall not include any costs incurred as
a result of the clean-up, containment, remediation or removal of Hazardous
Substances on, under or from such other property or the restoration thereof if
such Hazardous Substances did not originate on, under or from the Leased
Property. The Lessee acknowledges and agrees that its obligations pursuant to
the provisions hereof are in addition to any and all other legal liabilities and
responsibilities (at law or in equity) that the Lessee may otherwise have as an
"owner" or "operator" of the Leased Property or a "responsible party" within the
meaning of any of the Environmental Laws, as the case may be.
23.6 Survival. The Lessee's liability for a breach of the provisions of
this Article shall survive any termination of this Lease.
ARTICLE 24
MISCELLANEOUS PROVISIONS
------------------------
24.1 Broker's Fee Indemnification. The Lessee shall and hereby agrees
to indemnify, defend (with counsel reasonably acceptable to the Lessor) and hold
the Lessor harmless from and against any and all claims for premiums or other
charges, finder's fees, taxes, brokerage fees or commissions and other similar
compensation due in connection with any of the transactions contemplated by the
Lease Documents. Notwithstanding the foregoing, the Lessor shall have the option
of conducting its own defense against any such claims with counsel of the
Lessor's choice, but at the expense of the Lessee, as aforesaid. This
indemnification shall include, without limitation, all reasonable attorneys'
fees and expenses and court costs reasonably incurred by the Lessor in
connection with the defense against any such claims and the enforcement of this
indemnification agreement and shall survive the termination of this Lease.
24.2 No Joint Venture or Partnership. Neither anything contained in any
of the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
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24.3 Amendments, Waivers and Modifications. Except as otherwise
expressly provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (a) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (b) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the Fee
Mortgage Loan Documents, the Related Party Agreements, the Permits and/or the
Contracts. References herein and in the other Lease Documents to any of the
Lease Documents, the Management Agreements, the Fee Mortgage Loan Documents, the
Related Party Agreements, the Permits and/or the Contracts shall be deemed to
include any renewals, replacements, amendments, extensions, substitutions,
revisions, consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the
Lease Documents, whether express or implied, to any renewal, replacement,
amendment, extension, substitution, revisions, consolidation or modification of
any of the Lease Documents or any Management Agreement, Permit and/or the
Contract is not intended to constitute an agreement or consent by the Lessor to
any such renewal, replacement, amendment, substitution, revision, consolidation
or modification; but, rather as a reference only to those instances where the
Lessor may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification as the same may
be required pursuant to the terms, covenants and conditions of any of the Lease
Documents.
24.4 Captions and Headings. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 Time is of the Essence. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 Counterparts. This Lease may be executed in one or more
counterparts, each of which taken together shall constitute an original and all
of which shall constitute one and the same instrument.
24.7 Entire Agreement. This Lease and the other Lease Documents set
forth the entire agreement of the parties with respect to the subject matter.
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24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, THE LESSOR AND THE LESSEE HEREBY MUTUALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR
HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The
Lessee hereby certifies that neither the Lessor nor any of the Lessor's
representatives, agents or counsel has represented expressly or otherwise that
the Lessor would not, in the event of any such suit, action or proceeding seek
to enforce this waiver to the right of trial by jury and acknowledges that the
Lessor has been induced by this waiver (among other things) to enter into the
transactions evidenced by this Lease and the other Lease Documents and further
acknowledges that the Lessee (a) has read the provisions of this Lease, and in
particular, the paragraph containing this waiver, (b) has consulted legal
counsel, (c) understands the rights that it is granting in this Lease and the
rights that it waiving in this paragraph in particular and (d) makes the waivers
set forth herein knowingly, voluntarily and intentionally.
24.9 Successors and Assigns. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (a) upon the Lessee and the
Lessee's legal representatives and permitted successors and assigns and (b) the
Lessor and any other Person who may now or hereafter hold the interest of the
Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, the Lessee shall not assign any of its rights or
obligations hereunder or under any of the other Lease Documents without the
prior written consent of the Lessor, in each instance, which consent may be
withheld in the Lessor's sole and absolute discretion.
24.10 No Third Party Beneficiaries. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Indemnified Parties, the Lessee, the other members of
the Leasing Group and their respective permitted successors and assigns, and,
except as otherwise expressly set forth in any of the Lease Documents, nothing
contained therein shall confer upon any Person other than such parties any right
to insist upon or to enforce the performance or observance of any of the
obligations contained therein. Without limiting the foregoing, it is
acknowledged and agreed that for such time as any Fee Mortgage may remain in
effect, it is intended that the applicable Fee Mortgagee holding such Fee
Mortgage be a third party beneficiary of the terms and conditions set forth
under this Lease and, from and after the exercise by such Fee Mortgagee of its
rights an remedies under any Fee Mortgage (or any assignment of leases and rents
granted by the Lessor to such Fee Mortgagee) in accordance with the terms
thereto (so that such Fee Mortgage has succeeded to the interest of the Lessor
in the Leased Property and/or the Lease), such Fee Mortgagee shall be entitled
(subject to and in accordance with the terms of any applicable Fee Mortgage Loan
Documents) to enforce the terms and conditions of this Lease to the fullest
extent, and in all respects, as if such Fee Mortgagee were a party hereto.
Notwithstanding the foregoing, it is not intended that any of the terms and
conditions set forth herein expand or be deemed to expand the benefits, rights
and/or remedies of the Fee Mortgagee under the Fee Mortgage Loan Documents
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<PAGE>
beyond the terms and conditions set forth therein other than providing to such
Fee Mortgagee the Lessee's agreement to terms and conditions set forth in such
Fee Mortgage Loan Documents to the extent that such terms and conditions relate
to the Lessee and/or the Leased Property.. All conditions to the obligations of
the Lessor to advance or make available proceeds of insurance or Awards, or to
release any deposits held for Impositions or insurance premiums are imposed
solely and exclusively for the benefit of the Lessor, its successors and assigns
and any Fee Mortgagee. No other Person shall have standing to require
satisfaction of such conditions in accordance with their terms, and no other
Person shall, under any circumstances, be a beneficiary of such conditions, any
or all of which may be freely waived in whole or in part by the Lessor at any
time, if, in the Lessor's sole and absolute discretion, the Lessor deems it
advisable or desirable to do so.
24.11 Governing Law. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
The Lessee hereby consents to personal jurisdiction in the courts of
the State and the United States District Court for the District in which the
Leased Property is situated as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of or with respect to any of the
Lease Documents, the negotiation and/or consummation of the transactions
evidenced by the Lease Documents, the Lessor's relationship of any member of the
Leasing Group in connection with the transactions evidenced by the Lease
Documents and/or the performance of any obligation or the exercise of any remedy
under any of the Lease Documents and expressly waives any and all objections the
Lessee may have as to venue in any of such courts.
24.12 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents or
any application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any
of the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
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The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
24.13 Consents. In the event that the Lessor's consent is required by
the terms hereof or of any other Lease Document for any purpose whatsoever, it
is understood and agreed that (a) the Lessor's consent shall be subject to the
consent of any Fee Mortgagee to the extent that such consent from any Fee
Mortgage is required under the terms of the applicable financing documents
(which consent the Lessor shall seek to obtain) and (b) notwithstanding anything
to the contrary set forth herein, it shall not be deemed unreasonable for the
Lessor to withhold its consent in any given circumstance based upon the Lessor's
inability to obtain any required consent from any Fee Mortgagee.
24.14 MMI Loan. Without limiting the provisions of Section 24.13, in
the event of any conflict between the provisions hereof and the provisions of
any of the documents evidencing and/or securing the MMI Loan (collectively, the
"MMI Loan Documents"), the MMI Loan Documents shall control.
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE:
- -------- -------
CAREMATRIX OF PRINCETON
(ALF), INC., a Delaware corporation
By: /s/ Jeffery P. Neterval
- --------------------------- -------------------------------
Name: Name: Jeffery P. Neterval
Title: VP
WITNESS: LESSOR:
- -------- -------
CCC OF NEW JERSEY, INC., a
Delaware corporation
By: /s/ Jeffery P. Neterval
- --------------------------- -------------------------------
Name: Name: Jeffery P. Neterval
Title: VP
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EXHIBIT A-1
LEGAL DESCRIPTION OF THE LAND
-----------------------------
The land with the improvements thereon located in Plainsboro, Middlesex
County, New Jersey, described as follows:
Lot 3.07, containing 2.915 acres more or less, shown on a Plan entitled
"Final Subdivision Plan Phase I and II of the Windrows at Princeton Forrestal,
Property of Trustees of Princeton University, Plainsboro Twp., Middlesex Co.,
NJ, April 5, 1995", last revised 9/18/95, prepared by Van Note-Harvey
Associates, P.C., Consulting Engineers, Planners and Land Surveyors, 777
Alexander Road, Princeton, NJ, 08540, said Plan being filed in the Middlesex
County Clerk's Office on April 2, 1996 as Map No. 4, File 1945.
The above-described premises are also shown as Lot 3.07, in Block 3, on
Sheet 2, of the Plainsboro Twp. Tax Map.
<PAGE>
EXHIBIT A-2
LEGAL DESCRIPTION OF THE SNF/CMC LAND
-------------------------------------
The land with the improvements thereon located in Plainsboro, Middlesex
County, New Jersey, described as follows:
Lot 3.06, containing 6.710 acres more or less, shown on a Plan entitled
"Final Subdivision Plan Phase I and II of the Windrows at Princeton Forrestal,
Property of Trustees of Princeton University, Plainsboro Twp., Middlesex Co.,
NJ, April 5, 1995", last revised 9/18/95, prepared by Van Note-Harvey
Associates, P.C., Consulting Engineers, Planners and Land Surveyors, 777
Alexander Road, Princeton, NJ, 08540, said Plan being filed in the Middlesex
County Clerk's Office on April 2, 1996 as Map No. 4, File 1945.
The above-described premises are also shown as Lot 3.06, in Block 3, on
Sheet 2, of the Plainsboro Twp. Tax Map.
<PAGE>
EXHIBIT B
PERMITTED ENCUMBRANCES
----------------------
1. Conservation and Maintenance Easement recorded in Deed Book 3459 Page
278 and as amended by Agreement dated 3/15/96 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 876.
2. Utility Easement recorded in Deed Book 3622 Page 19, and as affected by
a certain Consent and Approval dated August 16, 1995 and recorded in
the Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page
576.
3. Agreements as recorded in Deed Book 3352 Page 810 and Deed Book 3470
Page 642, as amended by Deed Book 3598 Page 976 and Deed Book 3598 Page
982.
4. Right of Way Grant from Trustees of Princeton University, a New Jersey
corporation to New Jersey Bell Telephone Company dated April 28, 1987
and recorded with said Deeds at Book 3705, Page 872.
5. Terms and conditions as set forth in a certain Drainage Easement
between the Congregation of the Mission of St. Vincent De Paul in
Princeton, New Jersey (grantor), the Lessor and the Seller dated
1/13/96 and recorded in the Middlesex County Clerk's Office on 4/2/96
in Deed book 4314 Page 814. (Affects only appurtenant rights in said
Easement).
6. Terms and conditions as set forth in a certain Agreement between Gale &
Wentworth Princeton Partners, L.P., the Lessor and the Seller dated
2/15/96 and recorded in the Middlesex County Clerk's office on 4/2/96
in Deed Book 4315 Page 1. (Affects only appurtenant rights in said
Agreement)
7. Terms and conditions other than those set forth in paragraph 9(i) as
set forth in a certain Ingress, Egress and Regress Easement Agreement
between Forrestal Center Corporation, (grantor) and the Seller
(grantee) dated 3/15/96 and recorded in the Middlesex County Clerk's
office on 4/2/96 in Deed Book 4314 Page 716. (Affects only appurtenant
rights in said Agreement)
8. Declaration of Easements, Covenants, Conditions and Restrictions by the
Trustees of Princeton University, dated 3/28/96 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 601.
9. Terms and conditions as set forth in a certain Grant of Easement
(Sanitary Sewer) between the Trustees of Princeton University
(grantor), the Lessor and the Seller (grantees), dated 3/28/96 and
recorded in the Middlesex County Clerk's Office on 4/2/96 in Deed Book
4314 Page 831. (Affects only appurtenant rights in said Easement)
<PAGE>
10. The Service, Maintenance and Easement Agreement.
11. Terms and conditions as set forth in a certain Grant of Easement
(Drainage) between The Trustees of Princeton University (grantor), the
Seller and the Lessor (grantees) dated March 1996 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 792.
(Affects only appurtenant rights in said Easement)
12. Terms and conditions of Temporary Access Easement between Princeton
Forrestal Associates, The Lessor and The Seller dated 3/28/96 and
recorded in the Middlesex County Clerk's Office on 4/2/96 in Deed Book
4314 Page 854. (Affects only appurtenant rights in said Easement)
13. Inchoate or statutory liens for taxes not yet delinquent.
14. Resident Agreements now or hereafter in effect.
15. Any other matter of record as of the date hereof.
<PAGE>
EXHIBIT C
RATE LIMITATIONS
----------------
None
<PAGE>
EXHIBIT D
FREE CARE REQUIREMENTS
----------------------
None
<PAGE>
EXHIBIT E
CALCULATION OF RENT COVERAGE RATIO
----------------------------------
<PAGE>
SCHEDULE 3.1
CALCULATION OF FAIR MARKET BASE RENT
------------------------------------
For the purposes of Section 3.1, "Fair Market Base Rent" shall be as
reasonably determined by the Lessor to be the annual rental charge on a
so-called "triple net" basis (including without limitation Base Rent and
Additional Charges) as of the applicable Rent Adjustment Date, for new leases
then being negotiated or executed for comparable assisted living facilities in
the area surrounding Princeton, New Jersey for terms commencing on or about the
date of commencement of each Extension Term. In determining Fair Market Base
Rent, the Lessor shall take into consideration the size of the premises,
location of the premises, lease term, condition and location of the applicable
assisted living facility, services and amenities provided by the Lessor, rental
concessions and other comparable factors. Bona fide written offers to lease
comparable space received by the Lessor from third parties (at arm's length) may
be used by the Lessor as an indication of the Fair Market Base Rent.
The Lessor shall notify the Lessee of its determination of Fair Market
Base Rent within ten (10) days after the Lessor's receipt of the Lessee's notice
exercising its option to extend and the Lessor shall furnish data in support of
such determination. If the Lessor does not receive written notice from the
Lessee of the Lessee's disagreement with the Lessor's determination of the Fair
Market Base Rent within ten (10) days after the Lessee's receipt of said
determination, the Lessee shall be deemed to have accepted said determination by
the Lessor. If the Lessee disagrees with the Lessor's determination of the Fair
Market Base Rent, the Lessee shall have the right, by written notice given to
the Lessor within thirty (30) days after the Lessee has received notice of the
Lessor's determination, to request that such Fair Market Base Rent be determined
by appraisal in accordance with the provisions of this EXHIBIT 3.1. In such
event, the Fair Market Base Rent shall be determined by impartial MAI
appraisers, one to be chosen by the Lessor, one to be chosen by the Lessee
(collectively, the "Initial Appraisers"), and, if necessary, a third to be
selected as provided below. The Lessor and the Lessee shall each notify the
other of its selected appraiser within ten (10) days following giving of the
Lessee's request for appraisal as provided above. Each appraiser shall be
independent, have at least five (5) years experience with commercial properties
in the area, and be familiar with assisted living facilities and leases and
rents in Princeton, New Jersey (and the surrounding area) and experienced in
making real estate appraisals. The cost of each Initial Appraiser shall be paid
by the party selecting such Initial Appraiser. The appraisers shall render their
written appraisal of the Fair Market Base Rent for the applicable Extension Term
within thirty (30) days following the appointment of both such appraisers. If
the appraisals determined by the Initial Appraisers are less than five percent
(5%) apart (i.e., the higher appraisal is less than 105% of the lower
appraisal), then the Fair Market Base Rent shall be determined by taking the
average of the two appraisals. In the event that the appraisals determined by
the Initial Appraisers are five percent (5%) or more apart, the Initial
Appraisers shall promptly select a third appraiser who meets the same criteria
as required of the Initial Appraisers ("Third Appraiser"). The Third Appraiser
shall submit to the Lessor and the Lessee, within twenty-one (21) days after its
appointment, its written appraisal of the Fair Market Base Rent with respect to
the Leased Property as of the commencement date of the applicable Extension
Term, which appraisal shall be binding upon the Lessor and the Lessee. The cost
of the Third Appraiser shall be borne equally by the Lessor and the Lessee.
<PAGE>
F A C I L I T Y L E A S E A G R E E M E N T
CCC OF NEW JERSEY, INC.
as
Lessor
AND
CAREMATRIX OF PRINCETON (ALF), INC.
as
Lessee
Dated as of October 30, 1998
For Premises Located At
Plainsboro, New Jersey
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS.................................................1
1.1 Leased Property.................................................................................1
1.2 Term............................................................................................2
1.3 Extended Terms..................................................................................2
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION...........................................................3
2.1 Definitions.....................................................................................3
2.2 Rules of Construction..........................................................................19
ARTICLE 3 RENT...........................................................................................20
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures................................20
3.2 Intentionally Omitted..........................................................................21
3.3 Additional Rent................................................................................22
3.4 Service, Maintenance and Easement Agreement....................................................22
3.5 Additional Charges.............................................................................22
3.6 Net Lease......................................................................................22
3.7 No Lessee Termination or Offset................................................................23
3.7.1 No Termination........................................................................23
3.7.2 Waiver................................................................................23
3.7.3 Independent Covenants.................................................................23
3.8 Abatement of Rent Limited......................................................................23
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS..............................................24
4.1 Payment of Impositions.........................................................................24
4.1.1 Lessee To Pay.........................................................................24
4.1.2 Installment Elections.................................................................24
4.1.3 Returns and Reports...................................................................25
4.1.4 Refunds...............................................................................25
4.1.5 Protest...............................................................................25
4.2 Notice of Impositions..........................................................................26
4.3 Adjustment of Impositions......................................................................26
4.4 Utilities......................................................................................26
4.5 Insurance Premiums.............................................................................26
4.6 Deposits.......................................................................................27
4.6.1 Lessor's Option.......................................................................27
4.6.2 Use of Deposits.......................................................................27
4.6.3 Deficits..............................................................................28
4.6.4 Other Properties......................................................................28
4.6.5 Transfers.............................................................................28
4.6.6 Security..............................................................................28
(i)
<PAGE>
4.6.7 Return................................................................................28
4.6.8 Receipts..............................................................................29
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY..............................................................................29
5.1 Ownership of the Leased Property...............................................................29
5.2 Personal Property; Removal and Replacement of Personal Property................................29
5.2.1 Lessee To Equip Facility..............................................................29
5.2.2 Sufficient Personal Property..........................................................29
5.2.3 Removal and Replacement; Lessor's Option to Purchase..................................29
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS.................................................................30
6.1 Security for Lessee's Obligations..............................................................30
6.1.1 Security..............................................................................30
6.1.2 Purchase-Money Security Interests and Equipment Leases................................31
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS..........................................................................31
7.1 Condition of the Leased Property...............................................................31
7.2 Use of the Leased Property; Compliance; Management.............................................32
7.2.1 Obligation to Operate.................................................................32
7.2.2 Permitted Uses........................................................................32
7.2.3 Compliance With Insurance Requirements................................................32
7.2.4 No Waste..............................................................................33
7.2.5 No Impairment.........................................................................33
7.2.6 No Liens..............................................................................33
7.3 Compliance with Legal Requirements.............................................................33
7.4 Management Agreements..........................................................................33
ARTICLE 8 REPAIRS; RESTRICTIONS..........................................................................35
8.1 Maintenance and Repair.........................................................................35
8.1.1 Lessee's Responsibility.................................................................35
8.1.2 No Lessor Obligation....................................................................36
8.1.3 Lessee May Not Obligate Lessor..........................................................36
8.2 Encroachments; Title Restrictions..............................................................36
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS.................................................37
9.1 Lessor's Approval..............................................................................37
9.2 General Provisions as to Capital Additions and Certain Material Structural
Work...........................................................................................37
9.2.1 No Liens..............................................................................37
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work.......................................................................37
(ii)
<PAGE>
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work.......................................................................38
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work.......................................................................38
9.3 Capital Additions and Material Structural Work Financed by Lessor..............................38
9.3.1 Lessee's Financing Request............................................................38
9.3.2 Lessor's General Requirements.........................................................38
9.3.3 Payment of Costs......................................................................40
9.4 General Limitations............................................................................40
9.5 Non-Capital Additions..........................................................................41
ARTICLE 10 WARRANTIES AND REPRESENTATIONS.................................................................41
10.1 Representations and Warranties.................................................................41
10.1.1 Existence; Power; Qualification...................................................41
10.1.2 Valid and Binding.................................................................42
10.1.3 Single Purpose....................................................................42
10.1.4 No Violation......................................................................42
10.1.5 Consents and Approvals............................................................42
10.1.6 No Liens or Insolvency Proceedings................................................42
10.1.7 No Burdensome Agreements..........................................................43
10.1.8 Commercial Acts...................................................................43
10.1.9 Adequate Capital, Not Insolvent...................................................43
10.1.10 Not Delinquent....................................................................43
10.1.11 No Affiliate Debt.................................................................43
10.1.12 Taxes Current.....................................................................43
10.1.13 Intentionally Omitted.............................................................44
10.1.14 Pending Actions, Notices and Reports..............................................44
10.1.15 Compliance with Legal Requirements................................................44
10.1.16 Intentionally Omitted.............................................................44
10.1.17 Intentionally Omitted.............................................................44
10.1.18 Intentionally Omitted.............................................................44
10.1.19 Rate Limitations..................................................................45
10.1.20 Free Care.........................................................................45
10.1.21 No Proposed Changes...............................................................45
10.1.22 ERISA.............................................................................45
10.1.23 No Broker.........................................................................45
10.1.24 No Improper Payments..............................................................45
10.1.25 Nothing Omitted...................................................................46
10.1.26 No Margin Security................................................................46
10.1.27 No Default........................................................................46
10.1.28 Principal Place of Business.......................................................46
10.1.29 Intentionally Omitted.............................................................46
10.1.30 Intellectual Property.............................................................46
10.1.31 Management Agreements.............................................................47
10.2 Continuing Effect of Representations and Warranties............................................47
(iii)
<PAGE>
ARTICLE 11 FINANCIAL AND OTHER COVENANTS..................................................................47
11.1 Status Certificates............................................................................47
11.2 Financial Statements; Reports; Notice and Information..........................................47
11.2.1 Obligation To Furnish.............................................................47
11.2.2 Responsible Officer...............................................................51
11.2.3 No Material Omission..............................................................51
11.2.4 Confidentiality...................................................................51
11.3 Financial Covenants............................................................................52
11.3.1 Rent Coverage Ratio of Lessee.....................................................52
11.3.2 No Indebtedness...................................................................52
11.3.3 No Guaranties.....................................................................52
11.4 Affirmative Covenants..........................................................................52
11.4.1 Maintenance of Existence..........................................................52
11.4.2 Materials.........................................................................52
11.4.3 Compliance With Legal Requirements And Applicable
Agreements........................................................................53
11.4.4 Books And Records.................................................................53
11.4.6 Conduct of its Business...........................................................53
11.4.7 Address...........................................................................54
11.4.8 Subordination of Affiliate Transactions...........................................54
11.4.9 Inspection........................................................................54
11.4.10 Additional Property...............................................................54
11.5 Additional Negative Covenants..................................................................55
11.5.1 Restrictions Relating to Lessee...................................................55
11.5.2 No Liens..........................................................................55
11.5.3 Limits on Affiliate Transactions..................................................56
11.5.4 Best Efforts To Maximize..........................................................56
11.5.5 No Default........................................................................56
11.5.6 Intentionally Omitted.............................................................56
11.5.7 Intentionally Omitted.............................................................56
11.5.8 ERISA.............................................................................56
11.5.9 Forgiveness of Indebtedness.......................................................56
11.5.10 Value of Assets...................................................................57
11.5.11 Changes in Fiscal Year and Accounting Procedures..................................57
ARTICLE 12 INSURANCE AND INDEMNITY........................................................................57
12.1 General Insurance Requirements.................................................................57
12.1.1 Types and Amounts of Insurance....................................................57
12.1.2 Insurance Company Requirements....................................................59
12.1.3 Policy Requirements...............................................................59
12.1.4 Notices; Certificates and Policies................................................59
12.1.5 Lessor's Right to Place Insurance.................................................60
12.1.6 Payment of Proceeds...............................................................60
12.1.7 Irrevocable Power of Attorney.....................................................60
(iv)
<PAGE>
12.1.8 Blanket Policies..................................................................61
12.1.9 No Separate Insurance.............................................................61
12.1.10 Assignment of Unearned Premiums...................................................61
12.2 Indemnity......................................................................................61
12.2.1 Indemnification...................................................................61
12.2.2 Indemnified Parties...............................................................62
12.2.3 Limitation on Lessor Liability....................................................62
12.2.4 Risk of Loss......................................................................63
ARTICLE 13 FIRE AND CASUALTY..............................................................................63
13.1 Restoration Following Fire or Other Casualty...................................................63
13.1.1 Following Fire or Casualty........................................................63
13.1.2 Procedures........................................................................63
13.1.3 Disbursement of Insurance Proceeds................................................65
13.2 Disposition of Insurance Proceeds..............................................................68
13.2.1 Proceeds To Be Released to Pay For Work...........................................68
13.2.2 Proceeds Not To Be Released.......................................................68
13.2.3 Lessee Responsible for Short-Fall.................................................69
13.3 Tangible Personal Property.....................................................................69
13.4 Restoration of Certain Improvements and the Tangible Personal Property.........................70
13.5 No Abatement of Rent...........................................................................70
13.6 Termination of Certain Rights..................................................................70
13.7 Waiver.........................................................................................70
13.8 Application of Rent Loss and/or Business Interruption Insurance................................70
13.9 Obligation To Account..........................................................................71
ARTICLE 14 CONDEMNATION...................................................................................71
14.1 Parties' Rights and Obligations................................................................71
14.2 Total Taking...................................................................................71
14.3 Partial or Temporary Taking....................................................................71
14.4 Restoration....................................................................................72
14.5 Award Distribution.............................................................................72
14.6 Control of Proceedings.........................................................................72
ARTICLE 15 PERMITTED CONTESTS.............................................................................73
15.1 Lessee's Right to Contest......................................................................73
15.2 Lessor's Cooperation...........................................................................74
15.3 Lessee's Indemnity.............................................................................74
ARTICLE 16 DEFAULT........................................................................................74
16.1 Events of Default..............................................................................74
16.2 Remedies.......................................................................................77
16.3 Damages........................................................................................78
16.4 Lessee Waivers.................................................................................79
16.5 Application of Funds...........................................................................79
(v)
<PAGE>
16.6 Intentionally Omitted..........................................................................79
16.7 Lessor's Right to Cure.........................................................................79
16.8 No Waiver By Lessor............................................................................80
16.9 Right of Forbearance...........................................................................81
16.10 Cumulative Remedies............................................................................81
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER............................................81
17.1 Surrender......................................................................................81
17.2 Transfer of Permits and Contracts..............................................................81
17.3 No Acceptance of Surrender.....................................................................82
17.4 Holding Over...................................................................................82
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY................................................................83
18.1 Purchase of the Leased Property................................................................83
18.2 Appraisal......................................................................................83
18.2.1 Designation of Appraisers.........................................................83
18.2.2 Appraisal Process.................................................................83
18.2.3 Specific Enforcement and Costs....................................................84
18.3 Lessee's Option to Purchase. .................................................................84
18.3.1 Conditions to Option..............................................................84
18.3.2 Exercise of Option................................................................85
18.3.3 Conveyance........................................................................85
18.3.4 Calculation of Purchase Price.....................................................85
18.3.5 Payment of Purchase Price.........................................................86
18.3.6 Place and Time of Closing.........................................................86
18.3.7 Condition of Leased Property......................................................86
18.3.8 Quality of Title..................................................................86
18.3.9 Lessor's Inability to Perform.....................................................86
18.3.10 Merger by Deed....................................................................86
18.3.11 Use of Purchase Price to Clear Title..............................................86
18.3.12 Lessee's Default..................................................................87
ARTICLE 19 SUBLETTING AND ASSIGNMENT......................................................................87
19.1 Subletting and Assignment......................................................................87
19.2 Permitted Subleases............................................................................87
19.3 Attornment.....................................................................................87
19.4 Permitted Transfers............................................................................88
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR....................................................88
20.1 No Merger of Title.............................................................................88
20.2 Transfers By Lessor............................................................................88
20.3 Lessor May Grant Liens.........................................................................88
20.4 Subordination and Non-Disturbance..............................................................89
(vi)
<PAGE>
ARTICLE 21 LESSOR OBLIGATIONS.............................................................................90
21.1 Quiet Enjoyment................................................................................90
21.2 Memorandum of Lease............................................................................90
21.3 Default by Lessor..............................................................................90
21.4 Obligations Under Service, Maintenance and Easement Agreement..................................90
ARTICLE 22 NOTICES........................................................................................91
ARTICLE 23 ENVIRONMENTAL MATTERS..........................................................................92
23.1 Maintenance of Leased Property.................................................................92
23.2 Notice of Environmental Conditions.............................................................92
23.3 The Lessee's Agreement To Take Remedial Actions................................................92
23.4 The Lessor's Rights To Inspect The Leased Property and Take Remedial
Actions........................................................................................93
23.5 Environmental Indemnification..................................................................94
23.6 Survival.......................................................................................95
ARTICLE 24 MISCELLANEOUS PROVISIONS.......................................................................95
24.1 Broker's Fee Indemnification...................................................................95
24.2 No Joint Venture or Partnership................................................................95
24.3 Amendments, Waivers and Modifications..........................................................95
24.4 Captions and Headings..........................................................................96
24.5 Time is of the Essence.........................................................................96
24.6 Counterparts...................................................................................96
24.7 Entire Agreement...............................................................................96
24.8 WAIVER OF JURY TRIAL...........................................................................97
24.9 Successors and Assigns.........................................................................97
24.10 No Third Party Beneficiaries...................................................................97
24.11 Governing Law..................................................................................98
24.12 General........................................................................................98
24.13 Consents.......................................................................................99
24.14 MMI Loan.......................................................................................99
EXHIBIT A-1 LEGAL DESCRIPTION OF THE LAND
EXHIBIT A-2 LEGAL DESCRIPTION OF THE SNF/CMC LAND
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C RATE LIMITATIONS
EXHIBIT D FREE CARE REQUIREMENTS
EXHIBIT E CALCULATION OF RENT COVERAGE RATIO
SCHEDULE 3.1 CALCULATION OF FAIR MARKET BASE RENT
</TABLE>
(vii)
DEVELOPMENT AGREEMENT
Between
BELLEFAIR HOLDING COMPANY
And
CAREMATRIX OF MASSACHUSETTS, INC.
and
THE BENENSON CAPITAL COMPANY
and
SPECTRUM BELLEFAIR CORP.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between BelleFair
Holding Company, a New York general partnership, with an office at 115 Stevens
Avenue, Valhalla, New York 10595 ( "BHC"), and CareMatrix of Massachusetts,
Inc., a Delaware corporation having an office 197 First Avenue, Needham,
Massachusetts 02494, The Benenson Capital Company, a New York general
partnership, with an office at 708 3rd Avenue, New York, New York 10017 and
Spectrum BelleFair Corp., a New York corporation, with an office at 115 Stevens
Avenue, Valhalla, New York 10595 (collectively, the "Developers", and each
individually, a "Developer"), and is entered into for the purpose of reducing to
a formal writing all of the parties understandings with respect to the
development of Phase IV of that certain senior housing community (the "Project")
to be located in Rye Brook, New York described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Permits and Approvals.
The Developers represent that they shall use commercially reasonable
efforts to obtain all state, federal, county and municipal land use
approvals and permits, licenses, easements, and utility agreements
which are necessary for the development of the Project on the Property
(the "Approvals"). The Developers covenant to diligently use
commercially reasonable efforts to obtain all of the Developer's
Approvals in an expeditious manner. In the event that the Developers
are unable to obtain the Developer's Approvals, the Developers shall
have no liability whatsoever to BHC, or any other party and at BHC's or
any Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
Section 1.2 - Other Agreements. BHC and Developers each represents to the other
that neither entering into this Agreement nor performing their respective
obligations hereunder will violate any other agreements or documents by which
either may be bound.
Section 1.3 - Good Standing of the Developers. Each of the Developers represents
that it is duly organized, validly existing and in good standing under the laws
of its state of formation. Each Developer represents that it is empowered and
authorized to execute, deliver and perform its
<PAGE>
obligations under this Agreement, and, upon such execution and delivery and
subject to the conditions subsequent set forth in Section 4.1, this Agreement
shall be valid, binding and legal obligation of such Developer, enforceable in
accordance with its terms and in compliance with its certificate of
incorporation and bylaws or articles of organization and all applicable laws of
the state of its formation.
Section 1.4 - Good Standing of BHC. BHC represents that it is duly organized and
validly existing under the laws of the State of New York. BHC represents that it
is empowered and authorized to execute, deliver and perform its obligations
under this Agreement, and upon such execution and delivery and subject to
Section 4.1, this Agreement shall be the valid, binding and legal obligation of
BHC, enforceable in accordance with its terms and in compliance with its
articles of organization and partnership agreement and all applicable laws of
the State of New York.
ARTICLE II
Additional Responsibilities of the Developer
--------------------------------------------
Section 2.1 - Responsibilities. The Developers have performed and shall continue
to perform the following responsibilities (in addition to the responsibilities
outlined in Section 1.2(a) above) all of which shall be subject to the BHC's
approval, in connection with the development of the Project:
(a) Negotiate and execute on behalf of the owner of Phase IV, the
purchase agreement for the acquisition of the Property.
(b) Perform all due diligence in connection with the acquisition of the
Property.
(c) Assist BHC and the owner of Phase IV in arranging for acquisition
financing and Project financing.
(d) Prepare preliminary site planning and development work.
(e) Perform market analysis and feasibility studies for the Property.
(f) Oversee the hiring and supervision of all Project professionals.
(g) Develop a strategic marketing plan designed to meet the specific
needs of the Project.
ARTICLE III
Development Fee
---------------
-2-
<PAGE>
Section 3.1 - Amount of Development Fee. The price to be paid by BHC to the
Developers for development services rendered pursuant to this Agreement (the
"Development Fee") for the period from January 1, 1996 to February 28, 1998 is
One Million Two Hundred Eighty One Thousand Dollars ($1,281,000). Each of the
parties comprising the Developer shall receive one-third (1/3) of the
Development Fee in the amount of Four Hundred Twenty Seven Thousand Dollars
($427,000.00). The Development Fee is deemed earned as of the date of closing of
the financing for Phase IV and shall be payable from the financing proceeds for
Phase IV of the Project, as permitted by the len der.
ARTICLE IV
Contingencies
-------------
Section 4.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall be contingent upon the occurrence of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey
shall have been obtained by the owner of Phase IV which confirms that
there are no exceptions or conditions which would render title to the
Property unmarketable or which will prohibit or restrict the
construction or operation of the Project or which would prevent an
institutional lender from closing a construction or permanent mortgage
loan for the Project in the usual course of its business.
(c) Project Financing. Financing for the acquisition of Phase IV shall
have been obtained.
Section 4.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
ARTICLE V
Concluding Provisions
---------------------
Section 5.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 5.2 - Representations. None of the parties shall be bound by any
promises,
-3-
<PAGE>
representations, or agreements except as herein expressly set forth.
Section 5.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by BHC.
Section 5.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 5.5 - Brokers. BHC and each of the Developers represents and warrants to
the other that no broker or finder has acted on its behalf in connection with
this Agreement or the transactions contemplated hereby or referred to herein;
and each agrees to indemnify and hold and save the other harmless from any claim
or demand for commission or other compensation by any broker, finder or similar
agent claiming to have been employed by or on behalf of such party.
Section 5.6 - Assignment. None of the Developers shall have any right to assign
its rights nor delegate its obligations under this Agreement to another entity
or person without the prior written consent of BHC except that any of the
Developers shall have the right to assign this Agreement to, merge with or
consolidate with an "Affiliate" (defined herein as defined in the Securities and
Exchange Act of 1934 and the regulations thereunder) in connection with a public
offering, merger or other transfer.
Section 5.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to BHC, it shall be sent to it
at the address set forth above.
(b) In the event that notice is directed to any of the Developers, if
to The Benenson Capital Company, it shall be sent to 708 3rd Avenue,
New York, New York 10017, with a copy to Richard Kessler at the same
address; if to CareMatrix of Massachusetts, Inc., it shall be sent to
197 First Avenue, Needham, MA 02494, Attention: President, with a copy
to the General Counsel at the same address; if to Spectrum BelleFair
Corp, it shall be sent to 115 Stevens Avenue, Valhalla, New York 10595
or at such other address or addresses as any of the Developers shall
from time-to-time designated by notice to BHC and the other Developers.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 5.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this
-4-
<PAGE>
Agreement, or concerning the construction of the proposed Project or the
furnishing thereof shall be submitted to and determined by arbitration in
accordance with the rules of the American Arbitration Association then in
effect.
Section 5.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 5.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 5.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 5.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 5.13 - Effective Date. This Agreement shall be deemed to be effective
as of the date set forth below.
Section 5.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 5.15 - Governing Law. This Agreement shall be governed by the laws of
the State of Connecticut.
Dated as of the 1st day of January, 1998 and executed under seal.
Witness: BELLEFAIR HOLDING COMPANY
By: Spectrum Bellefair Corp.
By: /s/ Andrew N. Stark
--------------------------------------
Name: Name: Andrew N. Stark
Title: Secretary and Treasurer
Name:
-5-
<PAGE>
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Michael J. Zaccaro
-------------------------------------
Name: Name: Michael J. Zaccaro
Title: Vice President
Name:
-6-
<PAGE>
THE BENENSON CAPITAL COMPANY
By: THE CHARLES BENENSON FAMILY TRUST,
DECEMBER 19, 1972, as general Partner
By: /s/ Charles B. Benenson
-------------------------------------
Name: Name: Charles B. Benenson
Title:
Name:
-7-
<PAGE>
SPECTRUM BELLEFAIR CORP.
By: /s/ Andrew N. Stark
-------------------------------------
Name: Name: Andrew N. Stark
Title: Secretary and Treasurer
Name:
-8-
Exhibit 10.182
DEVELOPMENT AGREEMENT
Between
THE BELLEFAIR HOME & LAND COMPANY
And
CAREMATRIX OF MASSACHUSETTS, INC.
and
THE BENENSON CAPITAL COMPANY
and
SPECTRUM BELLEFAIR CORP.
<PAGE>
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between The BelleFair
Home and Land Company, a New York general partnership, with an office at 115
Stevens Avenue, Valhalla, New York 10595 (the "Owner"), and CareMatrix of
Massachusetts, Inc., a Delaware corporation having an office 197 First Avenue,
Needham, Massachusetts 02494, The Benenson Capital Company, a New York general
partnership, with an office at 708 3rd Avenue, New York, New York 10017 and
Spectrum BelleFair Corp., a New York corporation, with an office at 115 Stevens
Avenue, Valhalla, New York 10595 (collectively, the "Developers", and each
individually, a "Developer"), and is entered into for the purpose of reducing to
a formal writing all of the parties understandings with respect to the
development of Phases I through III of that certain senior housing community
(the "Project") to be located in Rye Brook, New York described below (the
"Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
---------------
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner has a valid fee interest in the
Property consisting of approximately 132 acres of land as more fully described
in Exhibit "A". Exhibit "A" and each of the other Exhibits referred to in this
Agreement shall be incorporated into this Agreement by such reference as if
fully set forth in this Agreement.
Section 1.2 - Permits and Approvals.
(a) The Developers represent that they shall use commercially
reasonable efforts to obtain all state, federal, county and municipal
land use approvals and permits, licenses, easements, and utility
agreements which are necessary for the development and construction of
the Project on the Property. The Developers covenant to diligently use
commercially reasonable efforts to obtain all of the Developer's
Approvals in an expeditious manner. In the event that the Developers
are unable to obtain the Developer's Approvals, the Developers shall
have no liability whatsoever to the Owner, or any other party and at
the Owner's or any Developer's option, this Agreement shall be
terminated without recourse to either party hereto at law or in equity.
(b) The Owner represents that it shall use commercially reasonable
efforts to obtain all state, federal, county and municipal land use
approvals and permits, licenses,
<PAGE>
easements, and utility agreements which are necessary for the
development, construction and operation of the Project on the
Property. The Owner covenants to diligently use commercially
reasonable efforts to obtain all of the Owner's Approvals in an
expeditious manner. In the event that the Owner is unable to obtain
the Owner's Approvals, the Owner shall have no liability whatsoever to
the Developers, or any other party and at the Owners or any
Developer's option, this Agreement shall be terminated without
recourse to either party hereto at law or in equity.
Section 1.3 - Documentation. The Owner shall use commercially reasonable efforts
to obtain construction and permanent financing for the Property, the Project,
the Personal Property (as defined herein) and related development costs
(collectively, the "Project Loan") which shall be sufficient, together with the
Owner's equity contributions, if necessary, to pay the full amount of the total
costs to construct the Project in accordance with the development budget. The
Owner represents that it has obtained a commitment for the financing of Phases
I, II and III of the Project from SwedBank which commitment includes funds
sufficient to pay development and construction management fees payable
hereunder.
Section 1.4 - Other Agreements. The Owner and the Developer each represents to
the other that neither entering into this Agreement nor performing their
respective obligations hereunder will violate any other agreements or documents
by which either may be bound.
Section 1.5 - Good Standing of the Developers. Each of the Developers represents
that it is duly organized, validly existing and in good standing under the laws
of its state of formation. Each Developer represents that it is empowered and
authorized to execute, deliver and perform its obligations under this Agreement,
and, upon such execution and delivery and subject to the conditions subsequent
set forth in Section 4.1, this Agreement shall be valid, binding and legal
obligation of such Developer, enforceable in accordance with its terms and in
compliance with its certificate of incorporation and bylaws or articles of
organization and all applicable laws of the state of its formation.
Section 1.6 - Good Standing of the Owner. The Owner represents that it is duly
organized and validly existing under the laws of the State of New York. The
Owner represents that it is empowered and authorized to execute, deliver and
perform its obligations under this Agreement, and upon such execution and
delivery and subject to Section 4.1, this Agreement shall be the valid, binding
and legal obligation of the Owner, enforceable in accordance with its terms and
in compliance with its articles of organization and partnership agreement and
all applicable laws of the State of New York.
ARTICLE II
Additional Responsibilities of the Developer
--------------------------------------------
Section 2.1 - Responsibilities. The Developers shall also have the following
responsibilities (in addition to the responsibilities outlined in Section 1.2(a)
above) all of which shall be subject to
-2-
<PAGE>
the Owners approval, in connection with the development of the Project:
(a) Negotiate and execute on behalf of the Owner, the purchase
agreement for the acquisition of the Property.
(b) Perform all due diligence in connection with the acquisition of the
Property.
(c) Assist the Owner in arranging for acquisition financing and Project
financing.
(d) Prepare preliminary site planning and development work.
(e) Perform market analysis and feasibility studies for the Property.
(f) Oversee the hiring and supervision of all Project professionals.
(g) Develop a strategic marketing plan designed to meet the specific
needs of the Project.
ARTICLE III
Development Fee
---------------
Section 3.1 - Amount of Development Fee. The price to be paid by the Owner to
the Developers for development services rendered pursuant to this Agreement (the
"Development Fee") for the period from January 1, 1996 to February 28, 1998 is
One Million Four Hundred Twenty Thousand Dollars ($1,420,000). Each of the
parties comprising the Developer shall receive one-third (1/3) of the
Development Fee in the amount of Four Hundred Seventy Three Thousand Three
Hundred Thirty Three and 33/100 Dollars ($473,333.33). The Development Fee is
deemed earned as of the date of closing of the financing from SwedBank for the
Project, and shall be payable at such closing or as otherwise permitted by such
lender.
ARTICLE IV
Contingencies
-------------
Section 4.1 - Required Occurrences. This Agreement and the undertakings of the
Developer shall be contingent upon the occurrence of each of the following:
(a) Approvals. All of the Approvals (to the extent then obtainable) and
current utility availability letters shall have been obtained.
(b) Title. An Owner's title insurance policy and Class A-2 ALTA survey
shall have been obtained by the Owner which confirms that there are no
exceptions or conditions
-3-
<PAGE>
which would render title to the Property unmarketable or which will
prohibit or restrict the construction or operation of the Project or
which would prevent an institutional lender from closing a
construction or permanent mortgage loan for the Project in the usual
course of its business.
(c) Project Financing. The Owner shall have obtained the Project
Financing as outlined in Section 1.3 of this Agreement.
Section 4.2 - Failure of Contingencies. In the event that any one or more of the
contingencies set forth in this Article is not satisfied, waived or deferred by
the parties in writing, within the period of time set forth above, then, upon
written notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
ARTICLE V
Concluding Provisions
---------------------
Section 5.1 - Entire Agreement. All prior understandings, letters of intent, and
agreements between the parties are merged in and superseded by this Agreement
(including all Exhibits hereto).
Section 5.2 - Representations. None of the parties shall be bound by any
promises, representations, or agreements except as herein expressly set forth.
Section 5.3 - Amendments. This Agreement may not be amended, waived, modified,
altered or changed in any respect whatsoever except by a further agreement, in
writing, executed by each of the parties and consented to by the Owner.
Section 5.4 - Joint Effort. The preparation of this Agreement has been a joint
effort of the parties, and the resulting document shall not be construed more
severely against one of the parties than the other.
Section 5.5 - Brokers. Each of the Owner and each of the Developers represents
and warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 5.6 - Assignment. None of the Developers shall have any right to assign
its rights nor delegate its obligations under this Agreement to another entity
or person without the prior written consent of the Owner except that any of the
Developers shall have the right to assign this Agreement to, merge with or
consolidate with an "Affiliate" (defined herein as defined in the Securities and
Exchange Act of 1934 and the regulations thereunder) in connection with a public
offering, merger or other transfer.
-4-
<PAGE>
Section 5.7 - Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be hand delivered or sent by registered
or certified mail, return receipt requested, or by Federal Express, and postage
prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be sent
to it at the address set forth above.
(b) In the event that notice is directed to any of the Developers, if
to The Benenson Capital Company, it shall be sent to 708 3rd Avenue,
New York, New York 10017, with a copy to Richard Kessler at the same
address; if to CareMatrix of Massachusetts, Inc., it shall be sent to
197 First Avenue, Needham, MA 02494, Attention: President, with a copy
to the General Counsel at the same address; if to Spectrum BelleFair
Corp, it shall be sent to 115 Stevens Avenue, Valhalla, New York 10595
or at such other address or addresses as any of the Developers shall
from time-to-time designate by notice to the Owner and the other
Developers.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 5.8 - Arbitration. Any dispute or controversy arising between the
parties involving the interpretation or application of any provisions of the
Agreement, or arising out of this Agreement, or concerning the construction of
the proposed Project or the furnishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 5.9 - Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
Section 5.10 - Successors. This Agreement shall be binding upon the parties
hereto, their respective heirs, executors, administrators, successors, and
assigns.
Section 5.11 - Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
Section 5.12 - Severability. The invalidity or unenforceability of one or more
of the phrases, sentences, provisions, clauses, Sections or Articles contained
in this Agreement shall not affect the validity or enforceability of this
remaining portions so long as the material purposes of this Agreement can be
determined and effectuated.
Section 5.13 - Effective Date. This Agreement shall be deemed to be effective
as of the date set forth below.
-5-
<PAGE>
Section 5.14 - No Offer. The delivery of an unexecuted copy of this Agreement
shall not be deemed an offer. No rights are to be conferred upon any party until
this Agreement has been executed and delivered to each party.
Section 5.15 - Governing Law. This Agreement shall be governed by the laws of
the State of Connecticut.
Dated as of the 1st day of January, 1998 and executed under seal.
Witness: THE BELLEFAIR HOME & LAND COMPANY
By: Spectrum Bellefair Corp.
By: /s/ Andrew N. Stark
--------------------------------------
Name: Name: Andrew N. Stark
Title: Secretary and Treasurer
Name:
-6-
<PAGE>
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Michael J. Zaccaro
-------------------------------------
Name: Name: Michael J. Zaccaro
Title: Vice President
Name:
-7-
<PAGE>
THE BENENSON CAPITAL COMPANY
By: THE CHARLES BENENSON FAMILY TRUST,
DECEMBER 19, 1972, as general Partner
By: /s/ Charles B. Benenson
-------------------------------------
Name: Name: Charles B. Benenson
Title:
Name:
-8-
EXHIBIT 21
CAREMATRIX OF MASSACHUSETTS, INC. (formerly CareMatrix Corporation) (Delaware
corporation) (in GA d/b/a Chancellor of ARI)
CMD SECURITIES CORP. (Delaware corporation)
CAREMATRIX OF AMBER LIGHTS, INC. (Delaware corporation)
CAREMATRIX OF AMETHYST ARBOR, INC. (Delaware corporation)
CAREMATRIX OF EMERALD SPRINGS, INC. (Delaware corporation)
CAREMATRIX OF DESERT AMETHYST, INC. (Delaware corporation)
CAREMATRIX OF THE INN AT THE AMETHYST, INC. (Delaware corporation)
CAREMATRIX OF DARIEN, INC. (Delaware corporation)
CAREMATRIX OF WESTFIELD COURT, INC.(Delaware corporation)
CAREMATRIX OF AVON, INC. (Delaware corporation)
CAREMATRIX OF WOODBRIDGE, INC. (Delaware corporation)
CAREMATRIX OF MILFORD, INC. (Delaware corporation)
CAREMATRIX OF HAMDEN, INC. (Delaware corporation)
CAREMATRIX OF RIDGEFIELD (SNF), INC. (Delaware corporation)
CAREMATRIX OF ORANGE, INC. (Delaware corporation)
BAILEY RETIREMENT CENTER, INC. (Florida corporation)
BAILEY RETIREMENT CENTER (DE), INC. (Delaware corporation)
CAREMATRIX OF LAUDERHILL I, INC. (Delaware corporation)
CAREMATRIX OF PALM BEACH GARDENS (SNF), INC. (Delaware corporation)
CAREMATRIX OF ARI, INC. (Delaware corporation)
CCC OF MARYLAND, INC. (Delaware corporation)
CAREMATRIX OF NEEDHAM, INC. (Delaware corporation) (Town of Needham d/b/a Avery
Manor and Avery Crossings)
STAN/OAK DEVELOPMENT CORP. (Delaware corporation)
CAREMATRIX OF DEDHAM, INC. (Delaware corporation)
STANDISH LAKES REGION VILLAGES, INC. (New Hampshire corporation)
AMA NEW JERSEY DEVELOPMENT, INC. (New Jersey corporation)
CAREMATRIX OF PRINCETON (SNF), INC. (Delaware corporation)
CAREMATRIX OF PRINCETON (ALF), INC. (Delaware corporation)
WESTBURY HOME OPERATING COMPANY, LLC (New York limited liability company)
ISLAND MANOR OPERATING COMPANY, LLC (New York limited liability company)
THE ISLANDIA COMMUNITY FOR SENIORS OPERATING COMPANY, LLC (New York limited
liability company)
SHIRLBART REAL ESTATE OPERATING COMPANY (New York limited liability company)
SOUTH SHORE ASSOCIATES, LLC (New York limited liability company)
ADLANDCO DEVELOPMENT CORPORATION (New Jersey corporation)
SENIORLAND COMPANY, LLC (New York limited liability company)
SHIRLBART REAL ESTATE OPERATING COMPANY, L.P. (Delaware limited partnership)
SHIRLBART REAL ESTATE OPERATING COMPANY GP, LLC (Delaware limited liability
company)
ISLAND MANOR OPERATING COMPANY, L.P. (Delaware limited partnership)
ISLAND MANOR OPERATING COMPANY GP, LLC (Delaware limited liability company)
SOUTH SHORE ASSOCIATES, L.P. (Delaware limited partnership)
SOUTH SHORE ASSOCIATES GP, LLC (Delaware limited liability company)
WESTBURY HOME OPERATING COMPANY, L.P. (Delaware limited partnership)
WESTBURY HOME OPERATING COMPANY GP, LLC (Delaware limited liability company)
THE ISLAND COMMUNITY FOR SENIORS OPERATING COMPANY, L.P. (Delaware limited
partnership)
THE ISLAND COMMUNITY FOR SENIORS OPERATING COMPANY GP, LLC (Delaware limited
liability company)
SENIORCARE GROUP, LTD. (New York corporation)
DOMINION VILLAGE OF WILLIAMSBURG GP, LLC (Delaware limited liability
DOMINION VILLAGE OF POQUOSON GP, LLC (Delaware limited liability company)
DOMINION VILLAGE OF CHESAPEAKE GP, LLC (Delaware limited liability company)
DOMINION VILLAGE AT WILLIAMSBURG, L.P.(Delaware limited partnership)
DOMINION VILLAGE AT POQUOSON, L.P. (Delaware limited partnership)
DOMINION VILLAGE AT CHESAPEAKE, L.P. (Delaware limited partnership)
CAREMATRIX OF PARK RIDGE (SNF), INC. (Delaware corporation)
CAREPLEX OF HOMESTEAD, INC. (Delaware corporation)
CAREPLEX OF MIAMI SHORES, INC. (Delaware corporation)
CAREMATRIX OF ANNAPOLIS, INC. (Delaware corporation)
CAREPLEX OF CRAGGANMORE, INC. (Delaware
corporation) LOWRY VILLAGE, INC. (Florida corporation)
CAREMATRIX OF PALM BEACH, INC. (Delaware corporation)
CAREMATRIX OF LAUDERHILL II, INC. (Delaware corporation)
CAREMATRIX OF RIDGEFIELD (ALF), INC. (Delaware corporation)
CAREMATRIX OF SAHARA LAKES, INC. (Delaware corporation)
CAREMATRIX OF CLEARFIELD, INC. (Delaware corporation)
PIEDMONT VILLAGES, INC. (North Carolina corporation)
DOMINION VILLAGES, INC. (Virginia corporation)
CAREMATRIX OF PIEDMONT VILLAGE AT NEWTON, INC. (Delaware corporation)
CAREMATRIX OF PIEDMONT VILLAGE AT STATESVILLE, INC. (Delaware corporation)
CAREMATRIX OF PIEDMONT VILLAGE AT YADKINVILLE, INC. (Delaware corporation)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
CareMatrix Corporation on Form S-8 (File Nos. 333-18103 and 333-34727) and on
Form S-3 (File Nos. 333-38111 and 333-38113) of our report dated February 15,
1999 on our audits of the financial statements and financial statement schedule
of CareMatrix Corporation as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998, which report is included in
this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 29, 1999
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<PP&E> 5,327,474 4,894,109 10,528,932
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<TOTAL-ASSETS> 232,048,480 210,268,343 108,201,513
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<INCOME-PRETAX> 11,036,934 6,682,224 3,436,161
<INCOME-TAX> 4,436,847 2,686,254 1,381,146
<INCOME-CONTINUING> 6,576,387 3,978,095 2,042,964
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 6,576,387 3,978,095 2,042,964
<EPS-PRIMARY> 0.38 0.23 0.12
<EPS-DILUTED> 0.38 0.23 0.12
</TABLE>
