- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934. For the quarterly period ended September 30, 1996.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934. for the transition period from ______ to ______ .
Commission file number: 0-26502
COMMUNITY CARE OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1823411
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3050 North Horseshoe Drive, Suite 260, Naples, Florida 34104
(Address of principal executive offices)
Registrant's telephone number, including area code: (941) 435-0085
N/A
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
As of October 31, 1996, there were outstanding 7,597,801 shares of common stock,
$.0025 par value, per share.
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<PAGE>
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheets.............................3
Consolidated Statements of Operations...................4
Consolidated Statement of Shareholders' Equity..........5
Consolidated Statements of Cash Flows...................6
Notes to Consolidated Financial Statements..............7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................15
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities...........................26
Item 5. Other Information.........................................26
Item 6. Exhibits and Reports on Form 8-K..........................27
Signatures...........................................29
Exhibit index........................................30
2
<PAGE>
<TABLE>
<CAPTION>
Community Care of America, Inc.
and Subsidiaries
Consolidated Balance Sheets
<S> <C> <C>
December 31, September 30,
1995 1996
----------- ----------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 2,485,000 $ 1,545,000
Accounts receivable net of allowance for
doubtful accounts and contractual
adjustments of $1,978,000, and
$3,248,000 at December 31, 1995
and September 30, 1996 12,934,000 16,993,000
Supplies inventory 1,534,000 1,795,000
Prepaid expenses and other current assets 3,662,000 4,122,000
--------- ---------
Total current assets 20,615,000 24,455,000
Property, plant and equipment, net of
accumulated depreciation 54,327,000 65,019,000
Notes receivable 2,533,000 -
Deposits 10,244,000 6,638,000
Excess of cost over fair value of net
assets acquired, net of accumulated
amortization of $139,000 and $337,000
at December 31, 1995 and September 30, 1996 3,299,000 15,756,000
Deferred financing costs 948,000 2,955,000
Other assets 1,324,000 1,798,000
--------- ---------
$ 93,290,000 $116,621,000
========== ===========
Liabilities and shareholders' equity Current liabilities:
Current maturities of long-term debt $ 1,258,000 $ 8,303,000
Accounts payable and accrued expenses 14,869,000 19,801,000
Put option contracts payable (219,798
shares outstanding) - 2,181,000
--------- ---------
Total current liabilities 16,127,000 40,285,000
Long-term debt, less current maturities 4,407,000 41,876,000
Other liabilities - 1,188,000
Deferred income taxes 9,334,000 5,169,000
Common stock subject to repurchase, 219,798
shares issued and outstanding at
December 31, 1995 2,181,000 -
Shareholders' equity:
Common stock, $.0025 par value; authorized 15,000,000 shares; issued and
outstanding 6,762,991 and 7,597,801 at December 31, 1995
and September 30, 1996 17,000 18,000
Additional paid-in capital 31,356,000 36,467,000
Deficit (132,000) (8,382,000)
---------- ---------
Total shareholders' equity 31,241,000 28,103,000
---------- ----------
$ 93,290,000 $116,621,000
========== ===========
See accompanying notes to consolidated financial statements.
3
</TABLE>
<TABLE>
<CAPTION>
Community Care of America, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1995 1996 1995 1996
----------- ---------- ----------- ------------
Operating revenues:
Net patient service revenues $ 25,638,000 $ 33,881,000 $ 64,336,000 $ 90,746,000
Other operating revenues 595,000 463,000 868,000 4,980,000
----------- ---------- ----------- ------------
Total operating revenues 26,233,000 34,344,000 65,204,000 95,726,000
----------- ---------- ----------- ------------
Operating expenses:
Facility operating expenses 20,566,000 27,459,000 51,559,000 74,890,000
Corporate administrative and general 1,116,000 1,154,000 3,393,000 3,713,000
Rent 1,853,000 2,188,000 4,458,000 6,041,000
Depreciation and amortization 540,000 640,000 1,540,000 1,926,000
Interest, net of interest income 895,000 1,360,000 2,666,000 3,280,000
Unusual charges - - - 19,185,000
----------- ---------- ----------- ------------
Total operating expenses 24,970,000 32,801,000 63,616,000 109,035,000
----------- ---------- ----------- ------------
Earnings (loss) before income taxes
and extraordinary item 1,263,000 1,543,000 1,588,000 (13,309,000)
Provision (benefit) for income taxes 386,000 586,000 476,000 (5,059,000)
----------- ---------- ----------- ------------
Earnings (loss) before extraordinary 877,000 957,000 1,112,000 (8,250,000)
Extraordinary item, net of income taxes (992,000) - (992,000) -
----------- ---------- ----------- ------------
Net earnings (loss) (115,000) 957,000 120,000 (8,250,000)
Dividends-preferred stock (82,000) - (408,000) -
----------- ---------- ----------- ------------
Net earnings (loss) applicable to common $ (197,000) $ 957,000 $ (288,000) $ (8,250,000)
=========== ========== =========== ============
Earnings (loss) per common share:
Before extraordinary item $ .15 $ 0.12 $ 0.17 $ (1.13)
Extraordinary item (0.19) - (0.24) -
=========== ========== =========== ============
Net earnings (loss) $ (0.04) $ 0.12 $ (0.07) $ (1.13)
=========== ========== =========== ============
Weighted average number of common and
common equivalent shares outstanding 5,323,281 7,597,801 4,129,354 7,313,144
=========== ========== =========== ============
See accompanying notes to consolidated financial statements.
4
</TABLE>
<TABLE>
<CAPTION>
Community Care of America, Inc.
and Subsidiaries
Consolidated Statement of Shareholders' Equity
<S> <C> <C> <C> <C>
Additional
Common Paid-In
Stock Capital Deficit Total
--------- ------------- ---------- ----------
Balance at December 31, 1995 $ 17,000 $31,356,000 $ (132,000) $ 31,241,000
Issuance of 615,012 shares
of common stock 1,000 5,111,000 - 5,112,000
Net loss - - (8,250,000) (8,250,000)
=========== =========== ============ ============
Balance at September 30, 1996
(unaudited) $ 18,000 $36,467,000 $(8,382,000) $ 28,103,000
=========== =========== ============ ============
See accompanying notes to consolidated financial statements.
5
</TABLE>
<TABLE>
<CAPTION>
Community Care of America, Inc.
and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
<S> <C> <C>
Nine Months Ended
September 30,
==========================
1995 1996
----------- ------------
(Unaudited) (Unaudited)
Net cash provided by (used in)
operating activities $ 1,418,000 $ (1,386,000)
Cash flows from investing activities:
Property, plant and equipment additions (4,649,000) (6,604,000)
Business acquisitions (7,351,000) (4,985,000)
Notes receivable (2,247,000) (75,000)
Deposits - (519,000)
Other assets (4,681,000) (571,000)
---------- ----------
Net cash used in investing activities (18,928,000) (12,754,000)
---------- ----------
Cash flows from financing activities:
Dividends on preferred stock (408,000) -
Principal reductions of long-term debt (11,825,000) (3,327,000)
Proceeds from long-term debt borrowings 12,271,000 18,505,000
Redemption of Preferred Stock (8,167,000) -
Proceeds from issuances of stock 27,630,000 162,000
Deferred financing costs (562,000) (2,140,000)
---------- ----------
Net cash provided by financing activities 18,939,000 13,200,000
---------- ----------
Increase (decrease) in cash and cash equivalents 1,429,000 (940,000)
Cash and cash equivalents, beginning of period 3,925,000 2,485,000
--------- ----------
Cash and cash equivalents, end of period $ 5,354,000 $ 1,545,000
========= ==========
Supplemental disclosures of cash flow information:
Interest paid $ 2,847,000 $ 3,554,000
Income taxes paid 3,400 32,000
See accompanying notes to consolidated financial statements.
6
</TABLE>
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(1) Basis of presentation
The interim unaudited consolidated financial statements of Community Care of
America, Inc. and subsidiaries (the "Company") presented herein have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10- Q and Regulation S-X
pertaining to interim financial statements. The interim financial statements
presented herein reflect all adjustments (consisting of normal recurring
adjustments) which, in the opinion of management, are considered necessary for a
fair presentation of the Company's financial condition as of September 30, 1996
and results of operations for the three and nine months ended September 30, 1996
and 1995. The Company's financial statements should be read in conjunction with
the Company's audited consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995. The results of operations for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the full year. Certain 1995 amounts have been reclassified to
conform with the 1996 presentation.
(2) Recent and Potential Acquisitions
Southern Care Transaction
On May 16, 1996, Southern Care Centers, Inc. ("Southern Care") was merged into a
subsidiary of the Company resulting in the subsidiaries of Southern Care
("Acquired Subsidiaries"), which leased five long-term care facilities in
Georgia and one long-term care facility in Louisiana, becoming indirect
wholly-owned subsidiaries of the Company. In addition, the Company became the
manager of a long-term care facility in Texas, owned by a former subsidiary of
Southern Care which was not acquired by the Company, under a Management
Agreement dated as of May 1, 1996. Additionally, the Company is providing
accounting, internal auditing, billing, accounts payable and certain other
services under an Agreement to Provide Accounting and Auditing Services and
Rural Healthcare Provider Network Services dated as of May 1, 1996 to a company
owned by the former shareholders of Southern Care which operates another
long-term care facility in Georgia.
Pursuant to the merger agreement, the former shareholders of Southern Care
received $2.7 million of cash and 568,888 shares of Common Stock of the Company.
In addition, the shareholders of Southern Care are entitled to receive, on or
before March 31, 1997, up to $2.0 million in Common Stock of the Company based
on the amount that the annualized contribution margin, on a consolidated basis
of the Acquired Subsidiaries for the year ended December 31, 1996, exceeds $4.4
million. Based on the current results of operations of the Acquired Facilities,
payment of such additional consideration is believed remote.
7
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(2) Recent and Potential Acquisitions (continued)
Southern Care Transaction (continued)
The merger agreement provides for the Company to file two shelf registration
statements under the Securities Act of 1933, as amended, covering the shares
issued and issuable in the merger and, upon request of the holders, to
"piggyback" such shares in certain registration statements filed by the Company.
On August 19, 1996, the shareholders of Southern Care demanded that the Company
file a registration statement to cover the shares issued to them in the
acquisition. The Company has 90 days following this date to prepare, file and
use its best efforts to have the registration of these shares declared effective
by the Securities and Exchange Commission. At this time, the Company intends to
delay the filing of this registration statement until after the due date.
Following the consummation of the transaction, the subsidiaries of Southern Care
acquired the five leased Georgia facilities and, in turn, sold those facilities
to Health and Retirement Properties Trust ("HRPT"). HRPT thereupon leased the
five Georgia facilities back to the Acquired Subsidiaries for an initial term
ending on December 31, 2003 and for up to two additional thirteen year terms,
each at the option of the Acquired Subsidiaries. After the first lease year,
rent is subject to increase based on year over year increases, if any, in net
patient revenues and non-inpatient revenues, each as defined in the master lease
agreement. The Louisiana facility will continue to be leased under the same
terms as the facility was being leased prior to the merger and will continue to
be accounted for as a capital lease.
The Company's total cost of the acquisition was approximately $8.4 million,
including legal, consulting and other direct costs. Such acquisition has been
accounted for by the purchase method and, accordingly, the results of operations
have been included in the Company's consolidated financial statements since the
date of acquisition. The purchase price allocation which follows is preliminary
and subject to resolution of certain issues.
<TABLE>
<S> <C>
Accounts receivable, net $ 536,000
Prepaid expenses and other current assets 217,000
Property, plant and equipment 4,550,000
Deposits 875,000
Excess of cost over fair value of net assets acquired 12,456,000
Accounts payable and accrued expenses (3,390,000)
Long-term debt (5,426,000)
Deferred income tax liability (1,393,000)
-----------
$ 8,425,000
===========
</TABLE>
8
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(2) Recent and Potential Acquisitions (continued)
Southern Care Transaction (continued)
Pursuant to the merger agreement, the purchase price is to be adjusted by the
extent to which current liabilities less current assets exceed $1,850,000. The
Company has calculated this difference as $1.5 million and has recorded such
amount as a current asset as of September 30, 1996. This calculation has been
disputed by the former shareholders of Southern Care. If the final purchase
price adjustment differs from the amount calculated by the Company, the Company
will record an adjustment to the excess of cost over fair value of net assets
acquired related to the acquisition.
The following unaudited pro forma consolidated results of operations assumes the
transaction described above occurred as of the beginning of the nine month
periods ended September 30, 1995 and 1996, after giving effect to certain
adjustments, including amortization of intangibles, increased rent expense,
elimination of certain non-recurring expenses and related income tax effects
and, including the effect of unusual charges recorded by the Company in the
second quarter of 1996 which were unrelated to the Southern Care acquisition.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1996
---- ----
<S> <C> <C>
Total operating revenues $75,730,000 $102,007,000
Net income (loss) before extraordinary item 671,000 (8,158,000)
Net loss (321,000) (8,158,000)
Net loss applicable to common stock (728,000) (8,158,000)
Net loss per common share (0.16) (1.08)
</TABLE>
Memorial Transaction
On April 29, 1996, the Company acquired (the "Initial Acquisition")
substantially all of the business and operations, including substantially all of
the personal property and all of the real property, of a 71-bed hospital located
in Hahira, Georgia, d/b/a Smith Hospital from Memorial Health Care, Inc. (the
"Seller"). The aggregate purchase price was $6.1 million, subject to certain
post-closing adjustments. The purchase price for the Initial Acquisition was
paid through the application of payments aggregating $2.25 million and an
unsecured $3.85 million promissory note (the "Smith Note") bearing interest at
the prime rate in effect at NationsBank of Florida, N.A. ("NationsBank") plus 1%
which matured on July 1, 1996, of which $3.0 million was outstanding as of
September 30, 1996 and October 31, 1996. Such outstanding balance is payable, at
the option of the Company, in either shares of Common Stock of the Company or by
the issuance of another promissory note, in the amount of $3.0 million plus
accrued interest, on terms and conditions acceptable to NationsBank.
9
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(2) Recent and Potential Acquisitions (continued)
Memorial Transaction (continued)
The Company also entered into a Purchase Option Agreement dated April 29, 1996
pursuant to which the Company was granted an option (the "Option") exercisable
until July 1, 1996, which entitled the Buyer, for an aggregate consideration
valued at approximately $23.2 million, to (1) purchase all the capital stock of
Memorial Hospital of Adel, Inc., ("Adel") which owns a 60-bed hospital, a 95-bed
long-term care facility and a home healthcare agency in Adel and Valdosta,
Georgia, (2) purchase substantially all of the assets, including the real estate
of Telfair County Hospital, Inc., comprising a 60-bed hospital in McCrae,
Georgia, known as "Telfair Hospital" and (3) obtain an assignment of a
management agreement (subject to obtaining a satisfactory assignment of the
agreement) for the management of a 45-bed hospital in Cochran, Georgia, known as
"Bleckley Hospital".
The Company did not exercise the Option on July 1, 1996, nor did it pay the
Smith Note when due on July 1, 1996.
In September, the parties entered into management agreements, effective July 1,
1996, (the "Management Agreements") to manage Adel and Telfair Hospitals and an
assignment agreement (the "Assignment Agreement") with respect to the Bleckley
Hospital management agreement. The Management Agreements and the Assignment
Agreement also contained an option (the "New Option"), exercisable until October
3, 1996, on substantially the same terms and conditions as the original Option,
for option consideration of $180,000 per month for each month that the New
Option was not exercised. The New Option expired unexercised on October 3, 1996
and option consideration of $360,000 has not been paid by the Company.
The parties have entered into discussion with respect to an extension of the New
Option, the Management Agreements and the Assignment Agreement through December
31, 1996 in exchange for option consideration of $180,000 per month for each
month that the New Option is not exercised. The discussion includes extending
the terms of the Smith Note and giving the Sellers the option to repurchase the
Smith Hospital for the unpaid balance of the Smith Note. The management fees
from the Management Agreements and the Assignment Agreement are to be paid to
the Company only upon exercise of the New Option, at which time these management
fees will be included in results of operations of the Company.
The Company is in various stages of negotiation with some, and is holding
discussions with other, institutional lenders towards securing the necessary
financing to complete the Memorial transaction (see Note 6). Should the parties
fail to complete the transactions contemplated above, the Company could incur a
charge to earnings of approximately $5.0 million, most likely in the fourth
quarter of 1996.
10
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(3) Unusual Charges and Statement of Financial Accounting Standards No. 121
(SFAS No. 121)
The Company incurred unusual charges aggregating $19.2 million (pre-tax) during
the second quarter of 1996 comprised of the following:
The Company recorded a $17.7 million pre-tax charge for closing certain
physician practices, primary care clinics and adult day care centers and
terminating the management agreements under which it had been managing nine
long-term care facilities in the state of Maine (see note 4). The components of
this charge include: $5.0 million reserve for potential forfeiture of a deposit
for an option to acquire the Maine facilities, $3.4 million for severance and
personnel reductions, $2.9 million for closing clinics and adult day care
centers and write-off of the related development costs, $1.7 million for real
estate and personal property lease terminations and asset write-downs, $4.0
million for uncollected management fees and other accounts receivables from the
divested businesses and $700,000 for estimated other exit costs. The $3.4
million charge for severance and personnel reductions primarily represents
severance costs associated with the elimination of 45 positions, including
senior management of the Company, physicians, field development and acquisition
personnel and administrative personnel. As of September 30, 1996, approximately
$2.4 million of the charge has not been utilized. The portion of the unutilized
amount expected to be expended by September 30, 1997 is included in current
liabilities on the Company's consolidated balance sheet as of September 30, 1996
with the remainder included in other liabilities.
During 1996, the Company closed its Aurora facility as a result of unfavorable
market conditions and, voluntarily withdrew its Toledo facility from the
Medicare and Medicaid programs resulting in a substantially idle facility.
Consequently, the Company evaluated its long-lived assets related to these
facilities for impairment in accordance with SFAS No. 121. The Company estimated
the undiscounted net cash flows from these facilities and ascertained that the
carrying value of the long-lived assets exceeded such undiscounted cash flows.
Accordingly, the Company compared the fair value of the assets based on the
present value of the estimated future cash flows for the facilities (which were
estimated based on the remaining useful lives of the assets, earnings history, a
discount rate commensurate with the risks involved and market conditions and
assumptions reflecting internal operating plans and strategies) with the
carrying value. Using this analysis, the Company determined that the fair value
of these facilities were less than the carrying value and, accordingly, recorded
a loss on impairment of approximately $1.5 million in the consolidated
statements of operations as part of unusual charges for the nine months ended
September 30, 1996.
11
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(4) Events Subsequent to September 30, 1996
On October 27, 1996, the Company reached a settlement agreement with the
entities for whom it had been managing nine long-term care facilities in Maine
("Sandy River Group"). The Company canceled these management agreements on
August 14, 1996. Under the terms of the settlement, the Company canceled and
forgave all amounts due to the Company, including any interest accrued thereon,
from the Sandy River Group. The Sandy River Group forgave and forfeited all
contractual rights due under various agreements with the Company. The effect of
this settlement is reflected on the the Company's consolidated balance sheet as
of September 30, 1996 and the results of operations for the nine month period
then ended. In connection with the termination, the Company, in the second
quarter of 1996, recorded a pre-tax charge to earnings of $9.7 million which is
included as part of the unusual charges in the statement of operations (see note
3).
In addition, the terms of the settlement agreement provide for the exercise of
the put options (the "Put Options") held by the shareholders of the Sandy River
Group and the former shareholders of the Maine Head Trauma Center, Inc. (the
"Shareholders"), which require the Company to the purchase 219,798 shares of
Common Stock of the Company from the Shareholders. The parties agreed that the
Shareholders may not demand payment of the $2.181 million put option until the
earlier of February 28, 1997 or the sale of all, or substantially all, of the
assets of the Company. Accordingly, the liability associated with the Put
Options is included in current liabilities on the Company's consolidated balance
sheet as of September 30, 1996.
(5) Deferred offering costs
On July 30, 1996, the Company's proposed public offering of 3.1 million shares
of its Common Stock was withdrawn. The Company determined that it would no
longer proceed with the offering because a price acceptable to the Company or
the proposed selling stockholders could not be obtained. In addition, the
Company has incurred costs related to a subsequently contemplated high yield
debt offering. The Company is still seeking additional capital and is pursuing
several different sources. Costs of the public offering and debt offering of
approximately $2.0 million are considered to have future value in obtaining
alternative capital financing. Such costs will be charged against the proceeds
of any equity capital, or deferred and amortized over the term of any debt
financing. If the Company is unable to obtain alternative financing, it may
incur a charge to earnings of up to $2.0 million as early as the fourth quarter
of 1996 related to these costs.
12
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(6) Compliance With Covenants and Restructuring of Debt Facilities
At September 30, 1996, the Company had a working capital deficit of $15.8
million. To date, the Company's major acquisitions have been financed
principally by Health and Retirement Properties Trust ("HRPT"). As of September
30, 1996, the Company was obligated to HRPT under installment notes with respect
to 17 facilities having an outstanding aggregate principal balance of
approximately $35.8 million and as a tenant under three master leases covering
30 facilities having an aggregate minimum rent of approximately $202 million
(subject to increases) during the remainder of their initial terms and first
renewal period. The master leases require the Company to maintain consolidated
tangible net worth of at least $5.0 million and a current ratio (ratio of
current assets to current liabilities) of at least one to one. While the
Company's consolidated tangible net worth was approximately $8.4 million at
September 30, 1996, its consolidated current ratio was .6 to 1 at September 30,
1996 and, accordingly, the Company was not in compliance with the current ratio
covenant. The Company has received a waiver of compliance with this covenant
from HRPT through November 29, 1996. HRPT has orally agreed to extend the waiver
period to December 27, 1996 provided at November 29, 1996 the Company is
otherwise in compliance with its obligations to HRPT including making the
payments referred to below on a timely basis. with the covenants, HRPT has
agreed to defer the payments of interest, principal, rent and other charges due
from the Company to HRPT under the installment notes and master lease agreements
on September 1 and October 1, 1996 until November 29, 1996. Interest accrues on
the amount of all such deferred payments from the date they were contractually
due through the date of their payment at a rate of 18% per annum. Certain debt
instruments with HRPT (aggregating approximately $30.9 million in principal
amount) have been modified to provide that interest only will be payable until
July 31, 1998, at which time principal will again become payable, with interest,
in installments. The notes and leases contain cross default provisions, such
that a default under any note or lease would entitle HRPT to accelerate payment
of all of such notes and terminate all of such leases (and, subject to
mitigation of damages, to receive future rents).
On August 1, 1996, the Company and NationsBank amended their Revolving Credit
and Reimbursement Agreement to provide for termination of the agreement on the
earlier of the assumption of additional indebtedness (as defined) or December
31, 1996. Consequently, the Company has classified the $14.3 million obligation
as a current liability as of September 30, 1996. The Company has unamortized
deferred financing costs associated with this credit facility of approximately
$260,000 as of September 30, 1996. The unamortized deferred costs at the time of
repayment will be charged to earnings in the period that the obligation is
repaid.
On April 29, 1996, in connection with the acquisition of Smith Hospital, the
Company executed an unsecured $3.85 million promissory note which matured on
July 1, 1996, bearing interest at the prime rate in effect with NationsBank plus
1%, of which $3.0 million plus accrued interest was outstanding as of September
30, 1996 and October 31, 1996. Such outstanding balance is payable, at the
option of the Company, in either shares of Common Stock of the Company or by the
issuance of another $3.0 million promissory note on terms and conditions
acceptable to NationsBank.
13
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
(6) Compliance With Covenants and Restructuring of Debt Facilities (continued)
On April 4, 1996, the Company borrowed $10.0 million from HRPT pursuant to an
11% promissory note to provide additional renovation, acquisition and general
working capital funding. No principal payments are required until the maturity
date of December 31, 2008 with interest payments made monthly. However, this
loan, together with a $2.6 million prepayment premium, must be prepaid from the
first proceeds of any equity or debt (or any combination thereof) issued by the
Company after August 30, 1996. The note is secured by all of the collateral
security which secure the Company's current obligations to HRPT and is subject
to cross default with other obligations to HRPT.
On October 9, 1996, the Company engaged Smith Barney, Inc. as the Company's
financial advisor to assist in evaluating strategic alternatives for raising
debt and/or equity capital and otherwise enhancing shareholder value, including
the possible sale of the Company. Independently, the Company is in various
stages of negotiation with some, and is holding discussions with other,
institutional lenders towards replacing the NationsBank credit facility and/or
securing the necessary financing to complete the Memorial transaction. The
Company is seeking to have these financings in place by December 25, 1996. If
the Company is successful in obtaining sufficient financing, on a timely basis,
it would be in compliance with the working capital maintenance covenant
contained in the master lease agreements with Health and Retirement Properties
Trust (compliance with which has been waived through November 29, 1996) and
default in the payment of the remaining $3.0 million balance due on the $3.85
million unsecured promissory note issued in connection with its purchase of
Smith Hospital and otherwise complete the Memorial transaction. This paragraph
contains forward-looking statements which are subject to a number of known and
unknown risks and uncertainties that could cause the achievement of the
Company's objectives to differ materially from those described or implied in the
forward-looking statements. These factors include, among other things, the
Company's ability to reach agreement with financing sources and complete
financing agreements to obtain sufficient financing on a timely and economically
feasible basis, changes in interest rates, changes in governmental healthcare
policies including any changes in Medicaid and Medicare, any actions that may be
taken by third parties prior to the time of achievement of such objectives and
changes in other general economic conditions. There can be no assurance that any
necessary funds will be available to the Company or, if available, the terms
thereof. There can be no assurance that any necessary funds will be available to
the Company or, if available, the terms thereof.
14
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
INTRODUCTION
As of September 30, 1996 after giving effect to the consummation of the
acquisition of Smith Hospital, the termination of its nine management agreements
in Maine and the closing of certain physician practices, clinics and adult day
care centers, the Company operated 54 licensed long-term care facilities with
4,426 licensed beds, two rural hospitals, three physician practices and four
clinics, one child day care center, two home healthcare agencies, and assisted
living with an aggregate of 119 units in six of the communities which the
Company serves.
The following provides a discussion of the Company's results of operations and
liquidity and capital resources and should be read in conjunction with the
consolidated financial statements of the Company and notes thereto included
elsewhere in this report.
RESULTS OF OPERATIONS
Three months ended September 30, 1996 compared to three months ended September
30, 1995:
Revenues increased by $8.1 million, or 31%, to $34.3 million in the third
quarter of 1996 from $26.2 million in the comparable 1995 period. This growth
was primarily attributable to the addition of nine long-term care facilities,
two clinics and a hospital acquired, managed or leased subsequent to September
30, 1995 which increased revenues by $6.8 million and an increase in revenue per
patient day due to an increased proportion of higher acuity patients and
additional ancillary services resulting in additional revenues of $3.1 million,
offset by a decrease in revenue of $1.8 million resulting from a decrease in
occupancy in the long-term care facilities. Long-term care facilities accounted
for 87.1% of total revenues in the 1996 period, a decrease from 93.4% in the
1995 period.
Net operating revenues per patient day for long-term care and assisted living
facilities increased 9.6% to $91.83 in the third quarter of 1996 from $83.76 in
the third quarter of 1995, primarily resulting from an increased proportion of
higher acuity patients. Medicare days as a percent of total days increased from
4.3% in the third quarter of 1995 to 4.9% in 1996. Medicare revenues from the
long-term care facilities as a percentage of total long-term care facilities'
revenues also increased from 14.9% in 1995 to 19.3% in 1996 primarily due to
additional ancillary services for the higher acuity patients. Occupancy rates
were 86.3% in the third quarter of 1996 compared to 88.1% in the third quarter
of 1995. Patient days from long-term care facilities increased 11.4% to 325,785
in 1996 from 292,503 in the third quarter of 1995 due to the facilities acquired
or leased subsequent to September 30, 1995.
Facility operating expenses increased by $6.9 million, or 33.5%, to $27.5
million in 1996 from $20.6 million in the third quarter of 1995 primarily as a
result of operations acquired subsequent to September 30, 1995, and also
increased as a percent of revenues to 80.0% in 1996 from 78.4% in the third
quarter of 1995. The 1995 period included management fees for 45 days for nine
managed
15
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
Three months ended September 30, 1996 compared to three months ended September
30, 1995:
facilities which contributed to the Company's higher operating margins in that
period. The payroll related component of facility operating expenses increased
by $4.0 million, or 29.2%, to $17.7 million from $13.7 million in 1995 due to
facilities acquired or leased subsequent to September 30, 1995, but decreased as
a percentage of revenues from 52.2% in the third quarter of 1995 to 51.6% in
1996.
Corporate administrative and general expenses increased by $38,000, or 3.4%, to
$1.2 million in 1996 from $1.1 million in the third quarter of 1995. The dollar
increase primarily resulted from additional operations, information systems,
finance, accounting and other personnel to support the growth of owned, leased
and managed facilities offset, in part, by the elimination of certain personnel
in conjunction with the restructuring of the Company. Corporate administrative
and general expenses as a percentage of revenues decreased to 3.4% in 1996 from
4.3% in the third quarter of 1995.
Rent expense increased by $335,000, or 18.1%, to $2.2 million in 1996 from $1.9
million in 1995. However, rent expense as a percentage of revenues decreased to
6.4% in 1996 from 7.1% in 1995. The dollar increase was primarily due to the
acquisition of leasehold interests in six facilities leased subsequent to
September 30, 1995, additional rental costs resulting from landlord financed
renovations and an increase in contingent rentals which are based on gross
revenue of certain leased facilities.
Depreciation and amortization expense increased by $100,000, or 18.5%, to
$640,000 in 1996 from $540,000 in 1995, but decreased to 1.9% of revenues in
1996 from 2.1% of revenues in 1995. The dollar increase was due to a $48,000
increase related to facilities acquired subsequent to September 30, 1995 and to
renovations of certain owned facilities. The percentage decrease was due to a
lower percentage of owned facilities to total facilities in 1996 than in 1995.
Net interest expense increased by $465,000, or 52.0%, to $1.4 million in the
third quarter of 1996 from $895,000 in the same period in 1995. Net interest
expense also increased as a percentage of revenues to 4.0% in 1996 from 3.4% in
the third quarter of 1995. The dollar and percentage increases were primarily
due to a net increase of $24.5 million of indebtedness to provide additional
renovation, acquisition and working capital funding.
Federal and state income tax expense was $586,000 in the third quarter computed
using an annualized effective tax rate of 38%. The tax provision for the same
period in 1995 was $386,000 based on an annualized effective tax rate of 30%
which was below the effective federal rate due to the use of loss carryforwards.
16
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
Three months ended September 30, 1996 compared to three months ended September
30, 1995:
The Company had $1.54 million of pre-tax earnings in the third quarter of 1996
compared to pre-tax earnings of $1.26 million in the third quarter of 1995. The
Company reported net earnings of $957,000, or $.12 per share in the third
quarter of 1996 compared to a net loss of $197,000, or $.04 per share, for the
same period in 1995. The loss in the third quarter of 1995 included an
extraordinary charge of $992,000, net of income tax.
Nine months ended September 30, 1996 compared to nine months ended September 30,
1995:
Unusual Charges During 1996
The Company incurred unusual charges aggregating $19.2 million (pre-tax) during
the second quarter of 1996 comprised of the following:
The Company recorded a $17.7 million pre-tax charge for closing certain
physician practices, primary care clinics and adult day care centers and
terminating the management agreements under which it had been managing nine
long-term care facilities in the state of Maine. The components of this charge
include: $5.0 million reserve for potential forfeiture of a deposit for an
option to acquire the Maine facilities, $3.4 million for severance and personnel
reductions, $2.9 million for closing clinics and adult day care centers and
write-off of the related development costs, $1.7 million for real estate and
personal property lease terminations and asset write-downs, $4.0 million for
uncollected management fees and other accounts receivables from the divested
businesses and $700,000 for estimated other exit costs. The $3.4 million charge
for severance and personnel reductions primarily represents severance costs
associated with the elimination of 45 positions, including senior management of
the Company, physicians, field development and acquisition personnel and
administrative personnel. As of September 30, 1996, approximately $2.4 million
of the charge has not been utilized. The portion of the unutilized amount
expected to be expended by September 30, 1997 is included in current liabilities
on the Company's consolidated balance sheet as of September 30, 1996 with the
remainder included in other liabilities.
During 1996, the Company closed its Aurora facility as a result of unfavorable
market conditions and, voluntarily withdrew its Toledo facility from the
Medicare and Medicaid programs resulting in a substantially idle facility.
Consequently, the Company evaluated its long-lived assets related to these
facilities for impairment in accordance with SFAS No. 121. The Company estimated
the undiscounted net cash flows from these facilities and ascertained that the
carrying value of the long-lived assets exceeded such undiscounted cash flows.
Accordingly, the Company compared the fair value of the assets based on the
present value of the estimated future cash flows for the facilities (which were
estimated based on the remaining useful lives of the assets, earnings history, a
discount rate commensurate with the risks involved and market conditions and
assumptions reflecting internal operating plans and strategies) with the
carrying value. Using this analysis, the Company
17
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
Nine months ended September 30, 1996 compared to nine months ended September 30,
1995:
determined that the fair value of these facilities were less than the carrying
value and, accordingly, recorded a loss on impairment of approximately $1.5
million in the consolidated statements of operations as part of unusual charges
for the nine months ended September 30, 1996. Revenues increased by $30.5
million, or 46.8%, to $95.7 million in the 1996 period from $65.2 million in the
1995 period. This growth was primarily attributable to the addition of
twenty-four facilities, two hospitals and three clinics acquired or leased at
various times from February 1, 1995 through May 16, 1996 increasing revenues by
$26.1 million. The remainder of the increase, $4.4 million, resulted from the
management of nine long-term care facilities (the agreements for which were
terminated by the Company on August 14, 1996), consulting related to nine
long-term care facilities and five hospitals (the agreements for which expired
during the second quarter of 1996) and from expanded network services from other
than long-term care. Long-term care facilities accounted for 86.1% of total
revenues in 1996, a decrease from 94.4% in 1995.
Net operating revenues per patient day for long-term care and assisted living
facilities increased 10.9% to $90.52 for the nine months ended September 30,
1996 from $81.62 in 1995, primarily resulting from an increase in ancillary
services for higher acuity patients. Medicare days as a percent of total days
decreased from 5.0% in 1995 to 4.8% in 1996 primarily the result a voluntary
withdrawal from participating in the Medicare program at the Company's Toledo,
Iowa facility. However, Medicare revenues from the long-term care facilities as
a percentage of total long-term care facilities' revenues increased from 16.1%
in 1995 to 18.1% in 1996, primarily due to additional ancillary services for the
higher acuity patients. Occupancy rates were 85.7% for the nine months ended
September 30, 1996 compared to 87.6% for the same period in 1995. Patient days
from long-term care facilities increased to 910,856, or 21.1%, in 1996 from
751,858 in 1995 due to the facilities acquired or leased at various times from
April 1, 1995 through May 16, 1996.
Facility operating expenses increased by $23.3 million, or 45.3%, to $74.9
million in the 1996 period from $51.6 million in the 1995 period primarily as a
result of operations acquired subsequent to March 31, 1995, but decreased as a
percent of revenues to 78.2% in 1996 from 79.0% in 1995. The improved margins
resulted primarily from the increase in the number of management contracts and
consulting agreements offset by a decrease in the margins from the same
community facilities and certain facilities acquired subsequent to March 31,
1996. The payroll related component of facility operating expenses increased by
$13.3 million, or 38.6%, to $47.7 million from $34.4 million in 1995, but
decreased as a percentage of revenues from 52.7% in 1995 to 49.8% in 1996.
Corporate administrative and general expenses increased by $320,000, or 9.4%, to
$3.7 million in 1996 from $3.4 million in 1995 but decreased as a percent of
revenues to 3.8% in 1996 from 5.2% in 1995. The dollar increase resulted
primarily from additional operations, information systems, finance, accounting
and other personnel to support the growth of owned, leased and managed
facilities.
18
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS (continued)
Nine months ended September 30, 1996 compared to nine months ended September 30,
1995:
Rent expense increased by $1.6 million, or 35.5%, to $6.0 million in 1996 from
$4.5 million in 1995. Rent expense as a percent of revenues decreased to 6.3% in
1996 from 6.8% in 1995. The dollar increase was primarily due to the acquisition
of leasehold interests in eleven facilities leased subsequent to June 30, 1995,
additional rental costs resulting from landlord financed renovations and an
increase in contingent rentals which are based on gross revenues of certain
leased facilities.
Depreciation and amortization expense increased by $386,000, or 25.0%, to $1.9
million in 1996 from $1.5 million in 1995, but decreased to 2.0% of revenues in
1996 from 2.3% of revenues in 1995. The dollar increase was due to a $237,000
increase related to facilities acquired subsequent to March 31, 1995 and to
renovations of certain owned facilities. The percentage decrease was due to a
lower percentage of owned facilities to total facilities in 1996 than in 1995.
Net interest expense increased by $614,000, or 23.0%, to $3.3 million in 1996
from $2.7 million in 1995. Net interest expense as a percent of revenues
decreased to 3.4% in 1996 from 4.1% in 1995. The dollar increase was primarily
due to a net increase of $24.5 million of indebtedness to provide additional
renovation, acquisition and working capital funding.
Federal and state income tax benefit was $5.1 million for the nine months ended
September 30, 1996 due to pre-tax losses of $13.3 million, using an annualized
effective tax rate of approximately 38%. The tax provision for the same period
in 1995 was $476,000 based on pre-tax earnings of $1.6 million using an
annualized effective tax rate of 30% which was below the effective federal rate
due to the utilization of loss carryforwards.
The early extinguishment of $15.4 million of long-term debt resulted in
extraordinary charges to earnings of $992,000, net of tax benefit of $404,000,
in the 1995 period. The extraordinary charge was comprised of $683,000 of
unamortized debt placement costs and $713,000 of prepayment penalties and
charges.
The Company had a $13.3 million pre-tax loss in 1996 compared to pre-tax
earnings of $1.6 million in 1995. The loss in the 1996 period included the
unusual charges of $19.2 million realized during the second quarter of 1996. The
Company had a $8.3 million net loss for the nine months ended September 30,
1996. For the same nine month period in 1995, the Company reported a net loss
applicable to common stock of $288,000.
19
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Potential Effects of Certain Transactions
Memorial Transaction
On April 29, 1996, the Company acquired (the "Initial Acquisition")
substantially all of the business and operations, including substantially all of
the personal property and all of the real property, of a 71-bed hospital located
in Hahira, Georgia, d/b/a Smith Hospital from Memorial Health Care, Inc. (the
"Seller"). The aggregate purchase price was $6.1 million, subject to certain
post-closing adjustments. The purchase price for the Initial Acquisition was
paid through the application of payments aggregating $2.25 million and an
unsecured $3.85 million promissory note (the "Smith Note") bearing interest at
the prime rate in effect at NationsBank of Florida, N.A. ("NationsBank") plus 1%
which matured on July 1, 1996, of which $3.0 million was outstanding as of
September 30, 1996 and October 31, 1996. Such outstanding balance is payable, at
the option of the Company, in either shares of Common Stock of the Company or by
the issuance of another promissory note, in the principal amount of $3.0 million
plus accrued interest, on terms and conditions acceptable to NationsBank.
The Company also entered into a Purchase Option Agreement dated April 29, 1996
pursuant to which the Company was granted an option (the "Option") exercisable
until July 1, 1996, which entitled the Buyer, for an aggregate consideration
valued at approximately $23.2 million, to (1) purchase all the capital stock of
Memorial Hospital of Adel, Inc., ("Adel") which owns a 60-bed hospital, a 95-bed
long-term care facility and a home healthcare agency in Adel and Valdosta,
Georgia, (2) purchase substantially all of the assets, including the real estate
of Telfair County Hospital, Inc., comprising a 60-bed hospital in McCrae,
Georgia, known as "Telfair Hospital" and (3) obtain an assignment of a
management agreement (subject to obtaining a satisfactory assignment of the
agreement) for the management of a 45-bed hospital in Cochran, Georgia, known as
"Bleckley Hospital".
The Company did not exercise the Option on July 1, 1996, nor did it pay the
Smith Note when due on July 1, 1996.
In September, the parties entered into management agreements, effective July 1,
1996, (the "Management Agreements") to manage Adel and Telfair Hospitals and an
assignment agreement (the "Assignment Agreement") with respect to the Bleckley
Hospital management agreement. The Management Agreements and the Assignment
Agreement also contained an option (the "New Option"), exercisable until October
3, 1996, on substantially the same terms and conditions as the original Option,
for option consideration of $180,000 per month for each month that the New
Option was not exercised. The New Option expired unexercised on October 3, 1996
and option consideration of $360,000 has not been paid by the Company.
20
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Potential Effects of Certain Transactions (continued)
Memorial Transaction (continued)
The parties have entered into discussion with respect to an extension of the New
Option, the Management Agreements and the Assignment Agreement through December
31, 1996 in exchange for option consideration of $180,000 per month for each
month that the New Option is not exercised. The discussion includes extending
the terms of the Smith Note and giving the Sellers the option to repurchase the
Smith Hospital for the unpaid balance of the Smith Note. The management fees
from the Management Agreements and the Assignment Agreement are to be paid to
the Company only upon exercise of the New Option, at which time these management
fees will be included in results of operations of the Company.
The Company is in various stages of negotiation with some, and is holding
discussions with other, institutional lenders towards securing the necessary
financing to complete the Memorial transaction. Should the parties fail to
complete the transactions contemplated above, the Company could incur a charge
to earnings of approximately $5.0 million, most likely in the fourth quarter of
1996.
Deferred Offering Costs
On July 30, 1996, the Company's proposed public offering of 3.1 million shares
of its Common Stock was withdrawn. The Company determined that it would no
longer proceed with the offering because a price acceptable to the Company or
the proposed selling stockholders could not be obtained. In addition, the
Company has incurred costs related to a subsequently contemplated high yield
debt offering. The Company is still seeking additional capital and is pursuing
several different sources. Costs of the public offering and debt offering of
approximately $2.0 million are considered to have future value in obtaining
alternative capital financing. Such costs will be charged against the proceeds
of any equity capital, or deferred and amortized over the term of any debt
financing. If the Company is unable to obtain alternative financing, it may
incur a charge to earnings of up to $2.0 million as early as the fourth quarter
of 1996 related to these costs.
Government Regulation
The Federal government and all states in which the Company operates regulate
various aspects of the Company's business. In particular, the operation of
long-term care facilities and the provision of healthcare services are subject
to Federal, state and local laws relating to, among other things, the adequacy
of medical care, distribution of pharmaceuticals, equipment, personnel,
operating policies, fire prevention and compliance with building codes.
Long-term care facilities are also subject to periodic inspection by
governmental and other authorities to assure continued compliance with various
standards, their continued licensing under state law and certification under the
Medicare and Medicaid programs. The failure to obtain or renew any required
regulatory approvals or licenses could adversely affect the Company's growth and
could prevent it from offering its existing or additional services.
21
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Government Regulation (continued)
Medicare certification is a critical factor contributing to the revenues and
profitability of a long-term care facility and, accordingly, is a key objective
of the Company's facility enhancement program. Such certification depends on a
favorable review of the Company's facilities by the Health Standards and Quality
Bureau of the United States Healthcare Financing Administration (HCFA). Any
suspension or delay in the administration of HCFA's survey and certification
program, as had been proposed by HCFA early in 1995, could delay Medicare
certification of the Company's facilities and adversely effect implementation of
the Company's facility enhancement program.
The Company believes that all of its facilities are in substantial compliance
with the various Medicare and Medicaid requirements and all are in substantial
compliance with other regulatory requirements applicable to them. However, in
the ordinary course of its business, the Company receives notices of
deficiencies for failures to comply with various regulatory requirements. The
Company reviews such notices and seeks to take appropriate corrective action. In
most cases, the Company and the reviewing agency have agreed upon the measures
to be taken to bring the facility into compliance. In some cases or upon
repeated violations, the reviewing agency has the authority to impose fines,
temporarily suspend admission of new patients to the facility, suspend or
decertify from participation in the Medicare or Medicaid programs and, in
extreme circumstances, revoke a facility's license. These actions could
adversely affect a facility's ability to continue to operate, the ability of the
Company to provide certain services and the facility's eligibility to
participate in the Medicare or Medicaid programs.
In March 1996, the Company's Toledo, Iowa long-term care facility voluntarily
withdrew from participating in the Medicare and Medicaid programs rather than
risk being decertified from participating in those programs. The Company's
Council Bluffs North facility, which had been terminated from participation in
the Medicare and Medicaid programs in March 1996, has been resurveyed and found
to be deficiency-free. The facility was recertified to participate in both the
Medicaid and Medicare programs on May 18, 1996 and July 17, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the nine months ended September 30,
1996 was $1.4 million compared to $1.4 million provided by operating activities
for the same period in 1995. Net cash used in operating activities in 1996
resulted primarily from the Company's net loss ($8.2 million), net of non-cash
unusual charges of $11.4 million and non-cash charges for depreciation and
amortization of $1.9 million, a decrease in accounts payable and accrued
expenses ($419,000), a net increase accounts receivable ($6.3 million),
inventories and other assets ($200,000) due primarily to the Company's
expansion.
22
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
The Company used net cash in investing activities totaling $12.8 million for the
nine months ended September 30, 1996 resulted primarily from property, plant and
equipment additions of $6.6 million, a $550,000 security deposit with respect to
a $10 million promissory note issued in April 1996 (as discussed below),
business acquisitions of $5.0 million and a net increase in other assets of
$600,000.
Net cash provided by financing activities was $13.2 million for the nine months
ended September 30, 1996 resulting from $18.5 million net proceeds from
long-term borrowings and $162,000 from issuance of 46,124 shares of common stock
upon exercise of stock options, offset in part by principal payments of $3.3
million on long-term debt and $2.1 million of deferred financing and offering
costs.
As of September 30, 1996, the Company had cash and cash equivalents of $1.5
million and, a working capital deficit of $15.8 million compared to working
capital of $4.5 million at December 31, 1995. The change in working capital was
primarily attributable to the inclusion of the revolving credit facility
discussed below as a current liability ($14.3 million), the note related to the
Smith Hospital acquisition ($3.0 million), the exercise of the of the put option
rights by the shareholders of the Sandy River Group and the former shareholders
of the Maine Head Trauma Center, Inc. as part of the settlement agreement which
resulted in the recognition of a current liability for the put option contracts
($2.181 million) and the assumption of negative working capital in connection
with the acquisition of Southern Care Centers, Inc. (approximately $1.5
million).
On August 1, 1996, the Company and NationsBank of Florida, N.A. ("NationsBank")
amended their Revolving Credit and Reimbursement Agreement to provide for
termination of the agreement on the earlier of the assumption of additional
indebtedness (as defined) or December 31, 1996. Consequently, the Company has
classified the $14.3 million obligation as a current liability as of September
30, 1996. The Company will need to obtain funds to repay NationsBank ($14.3
million) on or prior to December 31, 1996. The Company has unamortized deferred
financing costs associated with this credit facility of approximately $260,000
as of September 30, 1996, which will be charged to earnings in the period that
the obligation is repaid.
At September 30, 1996, the Company was obligated to Health and Retirement
Properties Trust ("HRPT") under installment notes with respect to 17 facilities
having an outstanding aggregate principal balance of approximately $35.8 million
and as a tenant under three master leases covering 30 facilities having an
aggregate minimum rent of approximately $202 million (subject to increases)
during the remainder of their initial terms and first renewal period. The master
leases require the Company to maintain consolidated tangible net worth of at
least $5.0 million and a current ratio (ratio of current assets to current
liabilities) of at least one to one. While the Company's consolidated tangible
net worth was approximately $8.4 million at September 30, 1996, its consolidated
current ratio was .6 to 1 at September 30, 1996 and, accordingly, the Company
was
23
<PAGE>
COMMUNITY CARE OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
not in compliance with the current ratio covenant. The Company has received a
waiver of compliance with this covenant from HRPT through November 29, 1996.
HRPT has orally agreed to extend the waiver period to December 27, 1996 provided
at November 29, 1996 the Company is otherwise in compliance with its obligations
to HRPT including making the payments referred to below on a timely basis. In
addition, to the waiver of compliance with the covenants, HRPT has agreed to
defer the payments of interest, principal, rent and other charges due from the
Company to HRPT under the installment notes and master lease agreements on
September 1 and October 1, 1996 until November 29, 1996. Interest accrues on the
amount of all such deferred payments from the date they are currently
contractually due through the date of their payment at a rate of 18% per annum.
Certain debt instruments with HRPT (aggregating approximately $30.9 million in
principal amount) have been modified to provide that interest only will be
payable until July 31, 1998, at which time principal will again become payable,
with interest, in installments. The notes and leases contain cross default
provisions, such that a default under any note or lease would entitle HRPT to
accelerate payment of all of such notes and terminate all of such leases (and,
subject to mitigation of damages, to receive future rents).
On April 4, 1996, the Company borrowed $10.0 million from HRPT pursuant to an
11% promissory note to provide additional renovation, acquisition and general
working capital funding. No principal payments are required until the maturity
date of December 31, 2008 with interest payments made monthly. However, this
loan, together with a $2.6 million prepayment premium, must be prepaid from the
first proceeds of certain equity or debt (or any combination thereof) issued by
the Company after August 30, 1996. The note is secured by all of the collateral
security which secure the Company's current obligations to HRPT and is subject
to cross default with other obligations to HRPT.
On April 29, 1996, in connection with the acquisition of Smith Hospital, the
Company executed an unsecured $3.85 million promissory note which matured on
July 1, 1996, bearing interest at the prime rate in effect with NationsBank plus
1%, of which $3.0 million plus accrued interest was outstanding as of September
30, 1996 and October 31, 1996. Such outstanding balance is payable, at the
option of the Company, in either shares of Common Stock of the Company or by the
issuance of another $3.0 million promissory note on terms and conditions
acceptable to NationsBank.
The Company has been seeking additional funds to satisfy its obligations to pay
NationsBank, meet the put option obligations to shareholders of the Sandy River
Group and the former shareholders of the Maine Head Trauma Center, Inc.,
complete the Memorial transaction which includes the repayment of the Smith Note
and satisfy its other working capital obligations including meeting the working
capital maintenance covenants contained in the master lease agreements with HRPT
from, among various means including, borrowings from commercial lenders,
financing obtained from sale-lease back transactions and the public and private
equity and debt capital markets. On October 9, 1996, the Company engaged Smith
Barney, Inc. as the Company's financial advisor to assist in evaluating
strategic alternatives for raising debt and/or equity capital and otherwise
enhancing shareholder value, including the possible sale of the Company.
Independently, the Company is in various stages of negotiation with some, and is
holding discussions with other, institutional lenders
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (continued)
towards replacing the NationsBank credit facility and/or securing the necessary
financing to complete the Memorial transaction. The Company is seeking to have
these financings in place by December 25, 1996. If the Company is successful in
obtaining sufficient financing, on a timely basis, it would be in compliance
with the working capital maintenance covenant contained in the master lease
agreements with Health and Retirement Properties Trust (compliance with which
has been waived through November 29, 1996) and default in the payment of the
remaining $3.0 million balance due on the $3.85 million unsecured promissory
note issued in connection with its purchase of Smith Hospital and otherwise
complete the Memorial transaction. This paragraph contains forward-looking
statements which are subject to a number of known and unknown risks and
uncertainties that could cause the achievement of the Company's objectives to
differ materially from those described or implied in the forward-looking
statements. These factors include, among other things, the Company's ability to
reach agreement with financing sources and complete financing agreements to
obtain sufficient financing on a timely and economically feasible basis, changes
in interest rates, changes in governmental healthcare policies including any
changes in Medicaid and Medicare, any actions that may be taken by third parties
prior to the time of achievement of such objectives and changes in other general
economic conditions. There can be no assurance that any necessary funds will be
available to the Company or, if available, the terms thereof.
25
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
Reference is made to Note 6 of the Notes to the Consolidated Financial
Statements contained in this Report for information concerning the Company's
default with the working capital maintenance covenant contained in the master
lease agreements with Health and Retirement Properties Trust (compliance with
which has been waived through November 29, 1996) and default in the payment of
the remaining $3.0 million balance due on a $3.85 million unsecured promisor
note, issued in connection with the Company's acquisition of Smith Hospital,
which note matured on July 1, 1996.
Such information is incorporated herein by reference.
Item 5. Other Information
In order to keep the stockholders and the investment community informed of the
Company's future plans, the Company and certain officers, directors or employees
of the Company, acting on behalf of the Company may make forward-looking
statements concerning, among other things, the Company's revenues, earnings,
capital expenditures, capital structure and other financial items, plans and
objectives and economic performance. Forward-looking statements may be made in
writing or orally. The Company's ability to do this has been fostered by the
Private Securities Litigation Reform Act of 1995 which provides a "safe harbor"
for forward-looking statements to encourage companies to provide prospective
information so long as those statements are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company believes it
is in the best interests of the Company and its stockholders to take advantage
of the "safe harbor" provisions of that Act. Among the factors that could cause
the Company's future actual results, performance or achievement to differ
materially from those described or implied in forward-looking statements
(including any that may be contained in this Report) are: (a) the Company's
ability to obtain, on a timely and economically feasible basis, the financing
required to (1) meet its various obligations (including those discussed in Notes
2, 4 and 6 of the Notes to the Consolidated Financial Statements contained in
this Report), (2) increase its working capital to eliminate its working capital
deficiencies ($15.8 million at September 30, 1996) to meet the working capital
maintenance covenant contained in the Company's master leases with Health and
Retirement Properties Trust (as discussed in Note 6 of the Notes to the
Consolidated Financial Statements contained in this Report), (3) avoid the
potential charges to earnings (as discussed in Notes 2 and 5 of the Notes to the
Consolidated Financial Statements contained in this Report), (4) fund capital
improvements and (5) fund the Memorial Transaction (as discussed in Note 2 of
the Notes to the Consolidated Financial Statements contained in this Report) and
any future acquisitions or other transactions that the Company may consider to
implement its strategy; (b) the Company's ability to successfully integrate
acquisitions and effectuate economies of scale and otherwise implement its
growth strategy; ( c) the Company's ability to retain qualified personnel; (d)
the continuation of third party payor programs, including Medicaid and Medicare,
at current benefits levels and reimbursement rates; (e) the Company's ability to
remain in compliance with the requirements for participation in such programs as
well as remain in compliance with the other government regulations to which it
is subject; (f) the level of, and the Company's ability to meet, competition;
(g) government climate towards healthcare
26
<PAGE>
PART II - OTHER INFORMATION (continued)
Item 5. Other Information (continued)
legislation; and (h) general economic conditions.
Many of these factors are discussed in greater detail elsewhere in this Report
and in the Company's Annual Report on Form 10-K for its latest fiscal year.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
------ -----------
4(a) Amendment dated August 30, 1996, to Revolving Credit and
Reimbursement Agreement dated August 7, 1995 among the
Company, various subsidiaries of the Company and NationsBank
of Florida, National Association
4(b) Third Allonge and Amendment to Promissory Note ($13,600,000)
dated July 16, 1996 between ECA Holdings, Inc. and Health
and Retirement Properties Trust
4(c) Third Allonge and Amendment to Promissory Note ($6,000,000)
dated July 16, 1996 between Community Care of Nebraska, Inc.
and Health and Retirement Properties Trust
4(d) Second Allonge and Amendment to Promissory Note ($2,045,000)
dated July 16, 1996 between Community Care of Nebraska,
Inc., W.S.T. Care, Inc., Quality Care of Lyons, Inc. and
Quality Care of Columbus, Inc. and Health and Retirement
Properties Trust
4(e) Allonge and Amendment to Promissory Note ($6,466,700) dated
July 16, 1996 between ECA Holdings, Inc. and Health and
Retirement Properties Trust
4(f) Second Allonge and Amendment to Promissory Note ($2,833,300)
dated July 16, 1996 between Community Care of Nebraska,
Inc., W.S.T. Care, Inc., Quality Care of Lyons, Inc. and
Quality Care of Columbus, Inc. and Health and Retirement
Properties Trust
27
<PAGE>
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K (continued)
(a) Exhibits (continued):
Number Description
------ -----------
10(a) Letter Agreement dated August 30, 1996 between HRPT and the
Company.
10(b Settlement Agreement dated October 27, 1996 among the
Company, CCA of Maine, Inc. and, among others, the entities
for whom the Company had managed long-term care facilities
in Maine known as the Sandy River Facilities.
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this report is filed, the Company filed
one Report on Form 8-K dated (date of earliest event reported) July
10, 1996 reporting under Item 5 the termination of the management
agreements with the Sandy River facilities, the completion of the
required analysis in connection with the adoption of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment
of Long-Lived Assets, the closing of certain existing physician
practices, primary care clinics and adult day care centers, the
corresponding unusual charges to earnings of $19.2 million, and the
delay of the closing of the acquisition of three hospitals and a
skilled nursing facility.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
COMMUNITY CARE OF AMERICA, INC.
(Registrant)
Date: November 14, 1996 By: /s/ Gary W. Singleton
Gary W. Singleton
President and
Chief Executive Officer
Date: November 14, 1996 By: /s/ David H. Fater
David H. Fater
Executive Vice President
and Chief Financial Officer
29
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
------ ----------- ----
4(a) Amendment dated August 30, 1996, to Revolving Credit and
Reimbursement Agreement dated August 7, 1995 among the
Company, various subsidiaries of the Company and NationsBank
of Florida, National Association .... .......................... 31
4(b) Third Allonge and Amendment to Promissory Note ($13,600,000)
dated July 16, 1996 between ECA Holdings, Inc. and Health
and Retirement Properties Trust ................................ 36
4(c) Third Allonge and Amendment to Promissory Note
($6,000,000) dated July 16, 1996 between Community Care of
Nebraska, Inc. and Health and Retirement Properties Trust ...... 38
4(d) Second Allonge and Amendment to Promissory Note ($2,045,000)
dated July 16, 1996 between Community Care of Nebraska,
Inc., W.S.T. Care, Inc., Quality Care of Lyons, Inc. and
Quality Care of Columbus, Inc. and Health and Retirement
Properties Trust ............................................... 40
4(e) Allonge and Amendment to Promissory Note ($6,466,700) dated
July 16, 1996 between ECA Holdings, Inc. and Health and
Retirement Properties Trust .................................... 42
4(f) Second Allonge and Amendment to Promissory Note ($2,833,300)
dated July 16, 1996 between Community Care of Nebraska,
Inc., W.S.T. Care, Inc., Quality Care of Lyons, Inc. and
Quality Care of Columbus, Inc. and Health and Retirement
Properties Trust ............................................... 44
10(a) Letter Agreement dated August 30, 1996 between HRPT and the
Company. ....................................................... 46
10(b) Settlement Agreement dated October 27, 1996 among the
Company, CCA of Maine, Inc. and, among others, the entities
for whom the Company had managed long-term care facilities
in Maine known as the Sandy River Facilities. .................. 49
27 Financial Data Schedule
30
Further Amendment and Consent Agreement to
Revolving Credit and Reimbursement Agreement
and Other Documents
THIS AMENDMENT AGREEMENT is made and entered into as of this 31st day of
July, 1996, by and among COMMUNITY CARE OF AMERICA, INC., a Delaware corporation
("CCA"), the following Subsidiaries of CCA: ECA HOLDINGS, INC., ECA PROPERTIES,
INC., COMMUNITY CARE OF NEBRASKA, INC., CCA OF MAINE, INC., W.S.T. CARE, INC.,
QUALITY CARE OF LYONS, INC., QUALITY CARE OF COLUMBUS, INC., CCA ACQUISITION I,
INC., GLENWOOD/SCC, INC., MARIETTA/SCC, INC., DUBLIN/SCC, INC., MACON/SCC,
INC.COLLEGE PARK/SCC, INC. AND LULING/SCC, INC. (the "Old Borrowers") and
COMMUNITY CARE OF GEORGIA, INC., a Delaware corporation (the "New Borrower";
together with the Old Borrowers, the "Borrowers"), COMMUNITY CARE OF AMERICA OF
ALABAMA, INC. and CCA OF MIDWEST, INC., as Guarantors, and NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH) (as successor to NationsBank of Florida, National
Association), as Agent and sole Lender ("NationsBank") under the Revolving
Credit and Reimbursement Agreement dated August 7, 1995 among the Borrowers (as
defined in the Agreement) and NationsBank.
W I T N E S S E T H:
WHEREAS, the Old Borrowers and NationsBank have entered into the Agreement
pursuant to which NationsBank as Lender has agreed to make revolving loans to
the Old Borrowers in the principal amount of up to $15,000,000 as evidenced by
the Notes (as defined in the Agreement); and
WHEREAS, as a condition to the making of the revolving loans pursuant to
the Agreement the Lenders have required that all Subsidiaries of CCA which are
not Borrowers guaranty payment of all Obligations of the Borrowers arising under
the Agreement; and
WHEREAS, the New Borrower desires to obtain working capital directly or
indirectly with the proceeds of Loans under the Loan Documents, which will
materially and directly benefit the New Borrower; and
NOW, THEREFORE, the Borrowers and NationsBank do hereby agree as follows:
1. Definitions. The term "Agreement" as used herein and in the other Loan
Documents (as defined in the Agreement) shall mean the Revolving Credit and
Reimbursement Agreement referred to above, as heretofore and hereby amended
and modified. Unless the context otherwise requires, all terms used herein
without definition shall have the definition provided therefor in the
Agreement.
2. Amendments to Agreement. Subject to the conditions hereof, the Agreement is
hereby amended, in addition to the amendments effected by Section 1 above,
as follows:
31
<PAGE>
(a) The definition of "Borrowers" in the Agreement and in each Exhibit
thereto is hereby amended to mean, collectively, the Old Borrowers (as
defined above in this Amendment) and the New Borrower (as defined
above in this Amendment).
(b) The definition of "Notes" in Section 1.01 of the Agreement is hereby
amended by deleting from such definition the reference "Exhibit
G-1996" and substituting in lieu thereof the reference "Exhibit
G-1996A".
(c) Exhibit G-1996 to the Agreement is deleted in its entirety and Exhibit
G- 1996A, in the form attached to this Amendment, is substituted in
lieu thereof.
3. Amendment to Guaranty and Subsidiary Security Agreement and Subsidiary
Consents.
(a) The definition of "Borrowers" as used in each Guaranty and Subsidiary
Security Agreement is hereby amended to mean, collectively, the Old
Borrowers and the New Borrower.
(b) Each Subsidiary of CCA that is not a Borrower that has delivered a
Guaranty to the Agent has joined in the execution of this Amendment
Agreement for the purpose of (i) agreeing to the amendments to the
Agreement and the other Loan Documents and (ii) confirming its
guarantee of payment of all the Obligations.
(c) The parties hereto agree that in the event any additional Guaranty or
Subsidiary Security Agreement shall be delivered after the date of
this Amendment, the description of the Borrowers as contained in the
forms of Guaranty and Subsidiary Security Agreement attached to the
Agreement shall be modified to give effect to the amendment effected
by this Section 3.
4. Amendments to Security Agreement and LC Account Agreement.
(a) Each of the definition of (i) "Borrowers" as used in the Security
Agreement and (ii) "Pledgors" as used in the LC Account Agreement are
hereby amended to mean, collectively, the Old Borrowers and the New
Borrower.
5. New Borrower Undertakings. The New Borrower acknowledges and agrees that it
is a party to and bound by, and shall observe, perform and fulfill all of
the obligations, undertakings and liabilities of any "Borrower" or
"Pledgor" under the Agreement, the Notes, the Security Agreement and the LC
Account Agreement to the same extent as if it were an original signatory
thereto. Without limiting the generality of the foregoing, the New Borrower
acknowledges and agrees that by its execution hereof, it is granting and
conveying to the Agent for the benefit of the Lenders a Lien upon and
security interest in certain of its property in which it now has or may
hereafter acquire an interest, pursuant to and as more particularly
described in the Security Agreement.
6. Representations and Warranties. The Borrowers (including the New Borrower)
hereby represents and warrants that:
(a) The representations and warranties made by or with respect to such
Borrower and its Subsidiaries in Article VII of the Agreement are true
on and as of the
32
<PAGE>
date hereof except that the financial statements referred to in Section
7.01(f) shall be those most recently furnished to each Lender pursuant
to Section 8.01(a) and (b);
(b) There has been no material change in the condition, financial or
otherwise, of CCA and its Subsidiaries since the date of the most
recent financial reports of CCA and its Subsidiaries received by each
Lender under Section 8.01 thereof, other than changes in the ordinary
course of business, none of which has been a material adverse change;
and
(c) The business and properties of CCA and its Subsidiaries are not, and
since the date of the most recent financial report of CCA and its
Subsidiaries received by each Lender under Section 8.01 thereof have
not been, adversely affected in any substantial way as the result of
any fire, explosion, earthquake, accident, strike, lockout,
combination of workers, flood, embargo, riot, activities of armed
forces, war or acts of God or the public enemy, or cancellation or
loss of any major contracts.
7. Conditions. This Amendment Agreement shall become effective upon
satisfaction of all of the following conditions:
(i) the Borrowers shall deliver or cause to be delivered to the Agent, the
following:
(a) four counterparts of this Amendment Agreement duly executed by
the Borrowers and consented to by each of the Subsidiaries that
is not a Borrower;
(b) a replacement Note in the form of Exhibit G-1996A attached
hereto, duly executed by the Borrowers and payable to the order
of NationsBank in the amount of the Total Revolving Credit
Commitment;
(c) an opinion of counsel for the Borrower and its Subsidiaries in
form and content acceptable to the Agent;
(d) the stock certificates evidencing ownership of the New Borrower,
with duly executed stock power in blank affixed thereto; and
(e) such other instruments and documents as the Agent may reasonably
request;
(ii) the Agent shall receive the written consent to this Amendment
Agreement of the Required Lenders; and
(iii)all instruments and documents incident to the consummation of the
transactions contemplated hereby shall be satisfactory in form and
substance to the Agent and its counsel; the Agent shall have received
copies of all additional agreements, instruments and documents which
it may reasonably request in connection therewith, including evidence
of the authority of CCA and its Subsidiaries to enter into the
transactions
33
<PAGE>
contemplated by this Amendment Agreement, such documents, when
appropriate, to be certified by appropriate corporate or governmental
authorities; and all proceedings of CCA and its Subsidiaries relating
to the matters provided for herein shall be satisfactory to the Agent
and its counsel.
8. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the
subject matter hereof, and supersedes any prior negotiations and agreements
among the parties relative to such subject matter. No promise, conditions,
representation or warranty, express or implied, not herein set forth shall
bind any party hereto, and no one of them has relied on any such promise,
condition, representation or warranty. Each of the parties hereto
acknowledges that, except as in this Amendment Agreement otherwise
expressly stated, no representations, warranties or commitments, express or
implied, have been made by any other party to the other. None of the terms
or conditions of this Amendment Agreement may be changed, modified, waived
or canceled orally or otherwise, except by writing, signed by all the
parties hereto, specifying such change, modification, waiver or
cancellation of such terms or conditions, or of any proceeding or
succeeding breach thereof.
9. Full Force and Effect of Agreement. Except as hereby specifically amended,
modified or supplemented, the Agreement and all of the other Loan Documents
are hereby confirmed and ratified in all respects and shall remain in full
force and effect according to their respective terms.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
BORROWERS:
COMMUNITY CARE OF AMERICA, INC.
ECA HOLDINGS, INC.
ECA PROPERTIES, INC.
COMMUNITY CARE OF NEBRASKA, INC.
CCA OF MAINE, INC.
W.S.T. CARE, INC.
QUALITY CARE OF LYONS, INC.
QUALITY CARE OF COLUMBUS, INC.
CCA ACQUISITION I, INC.
GLENWOOD/SCC, INC.
MARIETTA/SCC, INC.
DUBLIN/SCC, INC. MACON/SCC, INC.
COLLEGE PARK/SCC, INC. LULING, INC.
COMMUNITY CARE OF GEORGIA, INC.
WITNESS:
_______________________ By: /s/__David H. Fater_______
Name: David H. Fater
_______________________ Title: Executive Vice President and
Financial Officer of
EACH OF THE NAMED CORPORATIONS
GUARANTORS:
COMMUNITY CARE OF AMERICA OF
ALABAMA, INC.
CCA OF MIDWEST, INC.
By: /s/ David H. Fater_________
Name: David H. Fater
Title: Executive Vice President and
Chief Financial Officer
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Agent for the Lenders
By: /s/ Michael Sylvester
Name: Michael Sylvester
Title: Officer
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Lender
By: /s/ Michael Sylvester
Name: Michael Sylvester
Title: Officer
35
THIRD ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain Promissory Note in the original principal
amount of $13,600,000, dated December 30, 1993 as modified by an Allonge and
Amendment dated as of April 1, 1995 and an Allonge and Amendment dated as of May
10, 1996 (the "Original Note") , made by ECA Holdings, Inc., a Delaware
corporation ("Maker"), and payable to Health and Retirement Properties Trust
("Lender"). This Allonge and Amendment (this "Allonge") shall be and remain
attached to and shall constitute an integral part of the above described
Original Note from and after the date hereof (the Original Note as modified by
this Allonge being hereinafter referred to as the "Note"). Terms capitalized but
not otherwise defined herein shall have the meanings given to them,
respectively, in the Original Note.
The Original Note is hereby amended in the following particulars:
1. Paragraph 6 of the Original Note is amended in full to read as
follows:
6. Required Principal Payments. Commencing on January 31, 1996
and thereafter on the last day of each calendar month to and
including June 30, 1996, Maker shall make monthly payments of
principal and interest on this Note, each in the amount of One
Hundred Thirty-eight Thousand Two Hundred Forty and No/100
($138,240.00). Commencing on July 31, 1996 and thereafter on the
last day of each calendar month to and including June 30, 1998,
Maker shall pay accrued and unpaid interest only on the Note.
Commencing on July 31, 1998 and thereafter on the last day of
each calendar month until the Maturity Date, Maker shall make
monthly payments of principal and interest on this Note, each in
the amount of $137,745.93. The balance of all amounts advanced as
principal hereunder shall be due and payable on the Maturity
Date.
2. Paragraph 7(a) of the Original Note is amended in full to read as
follows:
7. Prepayment. (a) (i) In the event the option to renew those
certain leases variously dated as of December 30, 1993, November
1, 1994 and April 1, 1995, each as amended, between Lender as
landlord and Maker, as tenant with respect to certain real
property and improvements located in Colorado, Kansas, Iowa,
Missouri, Nebraska and Wyoming, for the First Extended Term (as
such term is defined therein) is not exercised on the terms set
forth in such leases, Lender, at its election by written notice
to Maker given on or prior to January 31, 2010, shall have the
right, in its sole discretion and for any reason or no reason, to
require the Maker to prepay this Note in full on December 31,
2010, together with interest and the Make-Whole Premium, and
other charges accrued and unpaid hereunder and/or under the Deeds
of Trust and the Security Instruments on such monthly payment
date.
(ii) In the event the option to renew those certain leases
variously dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.,
Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (collectively, the "SCC Subsidiaries"), as tenants
with respect to certain real property, related improvements and
personal property located in Georgia, for the First Extended Term
(as such term is defined therein) is not exercised on the terms
set forth in such leases, Lender, at its election by written
notice to Maker given on or prior to January 31, 2010, shall have
the right, in its sole discretion and for any reason or no
reason, to require the Maker to prepay this Note in full on
December 31, 2010, together with interest and the Make-Whole
Premium, and other charges accrued and unpaid hereunder and/or
under the Deeds of Trust and the Security Instruments on such
monthly payment date.
36
<PAGE>
Except as modified hereby, all the terms and conditions of the Original
Note are hereby ratified and confirmed. This Allonge may be signed in one or
more counterparts each of which taken together shall constitute one and the same
instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING LENDER,
DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS THERETO
(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 16th day of July, 1996.
Attest: ECA HOLDINGS, INC.
By: /s/ Fredric H. Aaron By: /s/ Tim J. Trybus
Name:Fredric H. Aaron Tim J. Trybus
Title: Assistant to Secretary Vice President
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President
37
THIRD ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain Promissory Note in the original principal
amount of $6,000,000, dated December 30, 1993 as modified by an Allonge and
Amendment dated as of April 1, 1995 and an Allonge and Amendment dated as of May
10, 1996 (the "Original Note") , made by COMMUNITY CARE OF NEBRASKA, INC., a
Delaware corporation ("Maker"), and payable to HEALTH AND RETIREMENT PROPERTIES
TRUST, a Maryland real estate investment trust ("Lender"). This Allonge and
Amendment (this "Allonge") shall be and remain attached to and shall constitute
an integral part of the above described Original Note from and after the date
hereof (the Original Note as modified by this Allonge being hereinafter referred
to as the "Note"). Terms capitalized but not otherwise defined herein shall have
the meanings given to them, respectively, in the Original Note.
The Original Note is hereby amended in the following particulars:
4.Paragraph 4 of the Original Note is amended in full to read as follows:
4. Required Principal Payments. Commencing on January 31, 1996 and
thereafter on the last day of each calendar month to and
including June 30, 1996, Maker shall make monthly payments of
principal and interest on this Note, each in the amount of Fifty
Thousand Three Hundred Fifty-two and No/100 ($50,352.00).
Commencing on July 31, 1996 and thereafter on the last day of
each calendar month to and including June 30, 1998, Maker shall
pay accrued and unpaid interest only on this Note. Commencing on
July 31, 1998 and thereafter on the last day of each calendar
month until the Maturity Date, Maker shall make monthly payments
of principal and interest on this Note, each in the amount of
$50,077.21. The balance of all amounts advanced as principal
hereunder shall be due and payable on the Maturity Date.
5.Paragraph 5(a) of the Original Note is amended in full to read as
follows:
5. Prepayment. (a)(i) In the event the option to renew those certain
leases variously dated as of December 30, 1993, November 1, 1994
and April 1, 1995, each as amended, between Lender as landlord
and ECA Holdings, Inc., a Delaware corporation, as tenant with
respect to certain real property and improvements located in
Colorado, Kansas, Iowa, Missouri, Nebraska and Wyoming, for the
First Extended Term (as such term is defined therein) is not
exercised on the terms set forth in such leases, Lender, at its
election by written notice to Maker given on or prior to January
31, 2010, shall have the right, in its sole discretion and for
any reason or no reason, to require the Makers to prepay this
Note in full on December 31, 2010, together with interest and the
MakeWhole Premium, and other charges accrued and unpaid hereunder
and/or under the Deeds of Trust and the Security Instruments on
such monthly payment date.
(ii) In the event the option to renew those certain leases variously
dated as of May 10, 1996, each as amended, between Lender as
landlord and Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC,
Inc., Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (collectively, the "SCC Subsidiaries"), as tenants
with respect to certain real property, related improvements and
personal property located in Georgia, for the First Extended Term
(as such term is defined therein) is not exercised on the terms
set forth in such leases, Lender, at its election by written
notice to Maker given on or prior to January 31, 2010, shall have
the right, in its sole discretion and for any reason or no
reason, to require the Maker to prepay this Note in full on
December 31, 2010, together with interest and the Make-Whole
Premium, and other charges accrued and unpaid hereunder and/or
under the Deeds of Trust and the Security Instruments on such
monthly payment date.
38
<PAGE>
Except as modified hereby, all the terms and conditions of the Original
Note are hereby ratified and confirmed. This Allonge may be signed in one or
more counterparts each of which taken together shall constitute one and the same
instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING LENDER,
DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS THERETO
(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 16th day of July, 1996.
Attest: COMMUNITY CARE OF NEBRASKA, INC.
By: /s/ Fredric H. Aaron By: /s/ Tim J. Trybus
Name:Fredric H. Aaron Tim J. Trybus
Title: Assistant to Secretary Vice President
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President
39
SECOND ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain Promissory Note in the original principal
amount of $2,045,000, dated April 1, 1995 as modified by an Allonge and
Amendment dated as of May 10, 1996 (the "Original Note"), made by COMMUNITY CARE
OF NEBRASKA, INC., a Delaware corporation, W.S.T. CARE, INC., a Nebraska
corporation, QUALITY CARE OF LYONS, INC., a Nebraska corporation and QUALITY
CARE OF COLUMBUS, INC., a Nebraska corporation (collectively, the "Makers") and
payable to HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate
investment trust ("Lender"). This Allonge and Amendment (this "Allonge") shall
be and remain attached to and shall constitute an integral part of the above
described Original Note from and after the date hereof (the Original Note as
modified by this Allonge being hereinafter referred to as the "Note"). Terms
capitalized but not otherwise defined herein shall have the meanings given to
them, respectively, in the Original Note.
A. The Original Note is hereby amended by amending Paragraph 4 thereof in
full to read as follows:
4. Required Payments. Commencing on July 1, 1998 and thereafter on
the last day of each calendar month until the Maturity Date, the
Makers shall make required monthly prepayments of the outstanding
principal, together with interest, of this Note in an amount
equal to an amortized portion of the principal amount hereof
based on a 25- year direct reduction amortization schedule. The
balance of all amounts advanced as principal hereunder shall be
due and payable on the Maturity Date.
B. The Original Note is hereby amended by amending Paragraph 5(a) thereof
in full to read as follows:
5. Prepayment. (a)(i) In the event the option to renew those certain
leases variously dated as of December 30, 1993, November 1, 1994
and April 1, 1995, each as amended, between Lender as landlord
and ECA Holdings, Inc., a Delaware corporation, as tenant with
respect to certain real property and improvements located in
Colorado, Kansas, Iowa, Missouri, Nebraska and Wyoming, for the
First Extended Term (as such term is defined therein) is not
exercised on the terms set forth in such leases, Lender, at its
election by written notice to Makers given on or prior to January
31, 2010, shall have the right, in its sole discretion and for
any reason or no reason, to require the Makers to prepay this
Note in full on December 31, 2010, together with interest and the
Make- Whole Premium, and other charges accrued and unpaid
hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases variously
dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.,
Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (collectively, the "SCC Subsidiaries"), as tenants
with respect to certain real property, related improvements and
personal property located in Georgia, for the First Extended Term
(as such term is defined therein) is not exercised on the terms
set forth in such leases, Lender, at its election by written
notice to Makers given on or prior to January 31, 2010, shall
have the right, in its sole discretion and for any reason or no
reason, to require the Makers to prepay this Note in full on
December 31, 2010, together with interest and the Make-Whole
Premium, and other charges accrued and unpaid hereunder and/or
under the Deeds of Trust and the Security Instruments on such
monthly payment date.
Except as modified hereby, all the terms and conditions of the Original
Note are hereby ratified and confirmed. This Allonge may be signed in one or
more counterparts each of which
40
<PAGE>
taken together shall constitute one and the same instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING LENDER,
DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS THERETO
(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 16th day of July, 1996.
COMMUNITY CARE OF NEBRASKA, INC.,
Attest: a Delaware corporation
By: /s/ Fredric H. Aaron By: /s/ Tim J. Trybus
Name:Fredric H. Aaron Tim J. Trybus
Title: Assistant to Secretary Vice President
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President
41
ALLONGE AND AMENDMENT OF PROMISSORY NOTE
Reference is made to that certain ECA Holdings Renovation Funding
Promissory Note in the original principal amount of $6,466,700, dated April 1,
1995 as modified by an Allonge and Amendment dated as of May 10, 1996 (the
"Original Note"), made by ECA HOLDINGS, INC., a Delaware corporation ("Maker"),
and payable to HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate
investment trust ("Lender"). This Allonge and Amendment (this "Allonge") shall
be and remain attached to and shall constitute an integral part of the above
described Original Note from and after the date hereof (the Original Note as
modified by this Allonge being hereinafter referred to as the "Note"). Terms
capitalized but not otherwise defined herein shall have the meanings given to
them, respectively, in the Original Note.
A. The Original Note is hereby amended by amending Paragraph 4 thereof in
full to read as follows:
4. Required Payments. Commencing on July 1, 1998 and thereafter on
the last day of each calendar month until the Maturity Date, the
Maker shall make required monthly prepayments of the outstanding
principal, together with interest, of this Note in an amount
equal to an amortized portion of the principal amount hereof
based on a 25- year direct reduction amortization schedule. The
balance of all amounts advanced as principal hereunder shall be
due and payable on the Maturity Date.
B. The Original Note is hereby amended by amending Paragraph 5(a) thereof
in full to read as follows:
5. Prepayment. (a)(i) In the event the option to renew those certain
leases variously dated as of December 30, 1993, November 1, 1994
and April 1, 1995, each as amended, between Lender as landlord
and Maker as tenant with respect to certain real property and
improvements located in Colorado, Kansas, Iowa, Missouri,
Nebraska and Wyoming, for the First Extended Term (as such term
is defined therein) is not exercised on the terms set forth in
such leases, Lender, at its election by written notice to Maker
given on or prior to January 31, 2010, shall have the right, in
its sole discretion and for any reason or no reason, to require
the Maker to prepay this Note in full on December 31, 2010,
together with interest and the Make-Whole Premium, and other
charges accrued and unpaid hereunder and/or under the Deeds of
Trust and the Security Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases variously
dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.,
Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (collectively, the "SCC Subsidiaries"), as tenants
with respect to certain real property, related improvements and
personal property located in Georgia, for the First Extended Term
(as such term is defined therein) is not exercised on the terms
set forth in such leases, Lender, at its election by written
notice to Maker given on or prior to January 31, 2010, shall have
the right, in its sole discretion and for any reason or no
reason, to require the Maker to prepay this Note in full on
December 31, 2010, together with interest and the Make-Whole
Premium, and other charges accrued and unpaid hereunder and/or
under the Deeds of Trust and the Security Instruments on such
monthly payment date.
Except as modified hereby, all the terms and conditions of the Original
Note are hereby ratified and confirmed. This Allonge may be signed in one or
more counterparts each of which taken together shall constitute one and the same
instrument.
42
<PAGE>
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING LENDER,
DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS THERETO
(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 16th of July, 1996.
ECA HOLDINGS, INC., a Delaware
Attest: corporation
By: /s/ Fredric H. Aaron By: /s/ Tim J. Trybus
Name:Fredric H. Aaron Tim J. Trybus
Title: Assistant to Secretary Vice President
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President
43
SECOND ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain CCN Group Renovation Funding Promissory
Note in the original principal amount of $2,833,300 dated April 1, 1995 as
modified by an Allonge and Amendment dated as of May 10, 1996 (the "Original
Note"), made by COMMUNITY CARE OF NEBRASKA, INC., a Delaware corporation,
QUALITY CARE OF LYONS, INC., a Nebraska corporation, W.S.T. CARE, INC., a
Nebraska corporation, QUALITY CARE OF COLUMBUS, INC., a Nebraska corporation,
(collectively, the "Co- Makers"), and payable to HEALTH AND RETIREMENT
PROPERTIES TRUST, a Maryland real estate investment trust ("Lender"). This
Allonge and Amendment (this "Allonge") shall be and remain attached to and shall
constitute an integral part of the above described Original Note from and after
the date hereof (the Original Note as modified by this Allonge being hereinafter
referred to as the "Note"). Terms capitalized but not otherwise defined herein
shall have the meanings given to them, respectively, in the Original Note.
A. The Original Note is hereby amended by amending Paragraph 4 thereof in
full to read as follows:
4. Required Payments. Commencing on July 1, 1998 and thereafter on
the last day of each calendar month until the Maturity Date, the
Co-Makers shall make required monthly prepayments of the
outstanding principal, together with interest, of this Note in an
amount equal to an amortized portion of the principal amount
hereof based on a 25-year direct reduction amortization schedule.
The balance of all amounts advanced as principal hereunder shall
be due and payable on the Maturity Date.
B. The Original Note is hereby amended by amending Paragraph 5(a) thereof
in full to read as follows:
5.Prepayment. (a)(i) In the event the option to renew those certain
leases variously dated as of December 30, 1993, November 1, 1994
and April 1, 1995, each as amended, between Lender as landlord
and ECA Holdings, Inc., a Delaware corporation, as tenant with
respect to certain real property and improvements located in
Colorado, Kansas, Iowa, Missouri, Nebraska and Wyoming, for the
First Extended Term (as such term is defined therein) is not
exercised on the terms set forth in such leases, Lender, at its
election by written notice to the Co-Makers given on or prior to
January 31, 2010, shall have the right, in its sole discretion
and for any reason or no reason, to require the Co- Makers to
prepay this Note in full on December 31, 2010, together with
interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the
Security Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases variously
dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.,
Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (collectively, the "SCC Subsidiaries"), as tenants
with respect to certain real property, related improvements and
personal property located in Georgia, for the First Extended Term
(as such term is defined therein) is not exercised on the terms
set forth in such leases, Lender, at its election by written
notice to the Co-Makers given on or prior to January 31, 2010,
shall have the right, in its sole discretion and for any reason
or no reason, to require the Co- Makers to prepay this Note in
full on December 31, 2010, together with interest and the
Make-Whole Premium, and other charges accrued and unpaid
hereunder
44
<PAGE>
and/or under the Deeds of Trust and the Security Instruments on
such monthly payment date.
Except as modified hereby, all the terms and conditions of the Original
Note are hereby ratified and confirmed. This Allonge may be signed in one or
more counterparts each of which taken together shall constitute one and the same
instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING LENDER,
DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO
(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST,
LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 16th day of July, 1996.
COMMUNITY CARE OF NEBRASKA, INC.,
Attest: a Delaware corporation
By: /s/ Fredric H. Aaron By: /s/ Tim J. Trybus
Name:Fredric H. Aaron Tim J. Trybus
Title: Assistant to Secretary Vice President
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President
45
August 30, 1996
Community Care of America, Inc.
3050 N. Horseshoe Drive, #260
Naples, FL 33942
Attn.:
Mr. David Fater
Chief Financial Officer
Gentlemen:
During the past few days we have had discussions concerning plans of
Community Care of America, Inc. and its subsidiaries (collectively, "CCA") to
acquire certain hospitals, to raise debt or equity capital to fund those
acquisitions, and to repay certain indebtedness due Health and Retirement
Properties Trust ("HRP") and others. Because of the timing of the acquisition
expenditures and the fund raising activities, CCA has requested that HRP make
modifications in the existing loan and lease requirements between CCA and HRP.
After considering these requests and, at your request, conferring with CCA's
investment bankers, HRP is willing to make certain modifications to the existing
loan and lease requirements, as follows:
1. Compliance with the CCA working capital covenant contained in the lease and
loan documentation will be waived to November 29, 1996.
2. Payments of interest, principal, rent and charges due from CCA to HRP under
the loan and lease documentation on or about September 1 and October 1,
1996 may be deferred to November 29, 1996. Interest shall accrue on the
amount of all such deferred payments from the date they are currently
contractually due through the date of their payment at the overdue rate of
18% per annum. All such deferred payments together with interest thereon
will be due and payable on the earlier of i) November 29, 1996, or ii) the
date CCA completes any debt or equity issuance.
3. Among the obligations currently due from CCA to HRP is a certain loan
evidenced by a note dated as of March 29, 1996 in the original principal
amount of $10 million. The documentation of this loan permits HRP to
require prepayments, together with a prepayment premium, on or after
January 1, 1997, from the prepayment premium, on or after January 1, 1997,
from the proceeds received by CCA from certain sales of equity or debt
securities. The terms of this loan are hereby modified as follows:
46
<PAGE>
Community Care of America, Inc.
August 30, 1996
Page 2
(i)This loan, together with the prepayment premium, shall be prepaid from
the first proceeds of any equity or debt (or any combination thereof)
issued by CCA after the date hereof.
(ii)The prepayment premium is hereby fixed as the greater of i) the amount
due as of the date of prepayment as calculated under the current contract;
or ii) $2,600,000.
4. All loan and lease documentation between CCA and HRP shall remain in full
force and effect, as specifically modified hereby, and are hereby ratified
and confirmed. The modifications set forth herein do not constitute a
waiver or modification of any term, condition or covenant of such loan and
lease documentation other than as expressly set forth herein, and shall not
prejudice any rights which HRP may now or hereafter have under or in
connection with such loan or lease documentation.
5. CCA acknowledges that immediately prior to its acceptance of this letter,
it is obligated to pay all indebtedness and obligations arising under its
loan and lease documentation with HRP, and that it has no right of set-off,
counterclaim or defense with respect thereto. In consideration of HRP's
agreements contained herein, CCA does hereby release and forever discharge
HRP and its affiliates, officers, directors, agents, attorneys, employees,
successors and assigns, of and from all manner of actions, causes of
action, suits, judgments, claims and demands whatsoever, in law or in
equity, which have arisen from the beginning of time up and including the
date hereof, whether arising in connection with the transactions
contemplated hereby or by the loan or lease documentation, or otherwise.
6. THE DECLARATION OF TRUST ESTABLISHING HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY
FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT
NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER SHAREHOLDER,
EMPLOYEE OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS
DEALING WITH HRP IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
47
<PAGE>
Community Care of America, Inc.
August 30, 1996
Page 3
The modifications set forth herein shall be effective upon their acceptance
by CCA on or before 5:00 p.m., E.D.T. on Tuesday, September 3, 1996. If these
modifications are acceptable to CCA please sign and return a copy hereof to be
undersigned via FAX on September 3 with original via FEDEX for delivery
thereafter.
Very truly yours,
/s/ Barry M. Portnoy
Barry M. Portnoy
Managing Trustee
ACCEPTED
COMMUNITY CARE OF AMERICA, INC.
By__/s/ Gary Singleton
Gary Singleton
Chief Executive Officer
By__/s/ David H. Fater
David H. Fater
Chief Financial Officer
ECA HOLDINGS, INC.
ECA PROPERTIES, INC.
CCA ACQUISITION I, INC.
MARIETTA/SCC, INC.
GLENWOOD/SCC, INC.
DUBLIN/SCC, INC.
MACON/SCC, INC.
COLLEGE PARK/SCC, INC.
COMMUNITY CARE OF NEBRASKA, INC.
W.S.T. CARE, INC.
QUALITY CARE OF LYONS, INC.
QUALITY CARE OF COLUMBUS, INC.
By:____/s/ David H. Fater
Name:David H. Fater
Title:CFO
By signing above the foregoing officers certify that this action has been duly
authorized.
48
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT made and entered into as of the _27th day of
October, 1996 by and among DAVID L. FRIEDMAN of Boulder, Colorado, MICHAEL C.
TYLER, of Camden, Maine, MICHAEL B. PRIOR, of Portland, Maine, DANIEL J.
MAGUIRE, of Harpswell, Maine (referred to collectively as the "Individuals");
BIRCH GROVE MANAGEMENT COMPANY, INC., a Maine corporation, CEDAR RIDGE
MANAGEMENT, INC., a Maine corporation, CEDAR RIDGE NURSING CARE CENTER
ASSOCIATES, a Maine limited partnership, HARBOR HILL LIMITED LIABILITY COMPANY,
a Maine limited liability company, HOMEWOOD LIMITED PARTNERSHIP, a Maine limited
partnership, NURSING ADMINISTRATORS, INC., a Maine corporation, OAK GROVE
MANAGEMENT COMPANY, INC., a Maine corporation, PINE POINT NURSING CARE CENTER,
INC., a Maine corporation, RIVERRIDGE MANAGEMENT, INC., a Maine corporation,
RIVER RIDGE ASSOCIATES, a Maine general partnership, SANDY RIVER DEVELOPMENT,
INC., a Maine corporation, SANDY RIVER GROUP, a Maine corporation, SPRINGBROOK
ASSOCIATES, a Maine general partnership, SPRINGBROOK MANAGEMENT, INC., a Maine
corporation, SRG/HOMEWOOD, INC., a Maine corporation, SRG/WINDWARD GARDENS,
INC., a Maine corporation, THE WILLOWS MANAGEMENT COMPANY, INC., a Maine
corporation, WILSON STREAM MANAGEMENT, INC., a Maine corporation, WINDWARD
GARDENS LIMITED PARTNERSHIP, a Maine limited partnership, WOODFORD PARK NURSING
CARE CENTER, INC., a Maine corporation (collectively the "SRG Entities") and
SANDY RIVER HEALTH SYSTEM LLC, a Maine limited liability company, as agent for
the SRG Entities ("SRHS"), and COMMUNITY CARE OF AMERICA, INC., a Delaware
corporation with its principal place of business in Naples, Florida ("CCA") and
CCA OF MAINE, INC., a Delaware corporation with its principal place of business
in Naples, Florida ("CCA Maine") and CCA acting on behalf of MEDICAL SUPPLY OF
AMERICA and REHAB AMBASSADORS, such entities being affiliates of CCA
W I T N E S S E T H :
WHEREAS, Leon Bresloff, Mary Bayer, Richard Boisvert, Christine Boisvert,
David Sylvester, Sara Sylvester, Eleanor Goldberg and D. Wayne Silby, High
Valley Group, Inc. and Elder Solutions, Inc. (collectively the "Minority
Holders") and the Individuals entered into a certain Purchase Option Agreement
with CCA and CCA Maine dated June 23, 1995 (the "Option Agreement"); and
WHEREAS, CCA Maine entered into ten Management Agreements, all dated June
23, 1995, with certain of the Individuals and of the SRG Entities with respect
to Woodford Park Nursing Care Center, Pine Point Nursing Care Center, Marshwood
Nursing Care Center, RiverRidge, Springbrook Nursing Care Center, Sandy River
Nursing Care Center, Cedar Ridge Nursing Care Center, Sedgewood Commons, Harbor
Hill and Windward Gardens, all nursing homes owned by certain of the SRG
Entities, as well as a letter of intent dated August 14, 1995 with respect to
The Willows, Oak Grove and Birch Grove (collectively the "Facilities") (such
Management Agreements are referred to collectively herein as the "Management
Agreements"); and
WHEREAS, CCA Maine sent the SRG Entities a written notice on July 14, 1996
stating its intention to terminate the Management Agreements; and
WHEREAS, CCA and/or CCA Maine have entered into a number of other written
agreements with certain of the Individuals, Minority Holders and/or SRG
Entities, more particularly described on Exhibit A attached hereto and made a
part hereof (collectively the "Miscellaneous Agreements"); and
WHEREAS, certain of the SRG Entities commenced suit, for injunctive and
other relief, in
49
<PAGE>
Superior Court, Androscoggin County, in a civil action captioned Nursing
Administrators, Inc. v. Community Care of America, Inc., et al., Docket No.
CV-96-____ (the "Lawsuit"); and
WHEREAS, the parties to this Agreement have determined that it is in their
mutual best interests to terminate the Management Agreements, modify the Option
Agreement and terminate or continue certain of the Miscellaneous Agreements and
to enter into a comprehensive financial settlement of their mutual obligations,
all on the terms and conditions set forth in this Agreement; and
WHEREAS, as part of the consideration for this settlement, SRHS is assuming
the obligation to settle any claims owed by CCA to the SRG Entities;
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
Termination of Management Agreements. Subject to the terms and conditions
of this Agreement, the Management Agreements and the letter of intent dated
August 14, 1995 with respect to Birch Grove, Oak Grove and The Willows are
hereby terminated effective the date of this Agreement. At the closing of the
settlement described in this Agreement, CCA Maine shall assign to SRHS all
accrued, unpaid management fees under the Management Agreements by assignment in
form and substance similar to that attached hereto as Exhibit B.
Limited Continuation of Option Agreement. The time during which the option
granted by the Option Agreement may be exercised, as provided in Section 3 of
the Option Agreement, is hereby made to expire at the close of business on
January 2, 1997. In the event CCA Maine exercises the option granted in the
Option Agreement pursuant to the terms of the Option Agreement on or before
January 2, 1997, and notwithstanding anything to the contrary contained in the
Option Agreement, CCA of Maine (a) shall pay as an additional non-refundable
deposit $480,000 as a condition of, and at the time of, such exercise, in
immediately available funds paid by wire transfer to SRHS as agent and (b) shall
have a period of 30 days after exercise, subject to the next sentence, in which
to close on its purchase of the Facilities. In no event shall the Option
Agreement extend beyond 5:00 PM February 3, 1997, even if the option has been
exercised. The Option Agreement shall be deemed modified by this Section and by
other provisions of this Agreement specifically amending, changing or modifying
the Option Agreement. The Option Agreement shall be construed together with this
Agreement, and to the extent there are any inconsistencies between the Option
Agreement and this Agreement, this Agreement shall be controlling.
Miscellaneous Agreements. Exhibit A attached hereto identifies those of the
Miscellaneous Agreements which shall survive and those which shall be terminated
effective as of the date of this Agreement. As to those Miscellaneous Agreements
listed on Exhibit A that are to terminate effective the date of this Agreement,
neither party shall have further liability to the other. CCA and CCA Maine agree
that they shall continue to perform their respective obligations under those
Miscellaneous Agreements that shall survive the closing of the settlement
described in this Agreement. SRHS shall be responsible for and shall have the
benefit of all cost reports and exceptions to the Routine Cost Limitations
("RCLs"). CCA Maine shall send all work relating to 1995 Medicare RCLs ,
including all work papers, diskettes and other materials to SRHS and SRHS shall
complete the 1995 Medicare RCLs. In addition, any other agreements between CCA
and/or CCA Maine and Leon Bresloff and Mary Bayer are not affected by this
Agreement.
Offset of Claims. In consideration of CCA and CCA Maine waiving, canceling
and forgiving all amounts due (including any interest accrued thereon) by
certain of the SRG Entities with respect to the Facilities and more particularly
described on Exhibit C attached hereto and made a part hereof (collectively the
"Working Capital Lines"), the SRG Entities and the Individuals, for themselves
and their successors and assigns, hereby forever waive and relinquish
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all claims against CCA and CCA Maine asserted in the Lawsuit, but not including
those obligations of CCA and CCA Maine undertaken, continued or modified
pursuant to this Agreement. In consideration of the foregoing waiver and
relinquishment by certain of the SRG Entities of all claims against CCA and CCA
Maine asserted in the Lawsuit, but not including those obligations of CCA and
CCA Maine undertaken, continued or modified pursuant to this Agreement, CCA and
CCA Maine, for themselves and their successors and assigns, do hereby waive,
cancel and forgive all amounts due under the Working Capital Lines (including
any interest accrued thereon). Upon executing this Settlement Agreement, CCA
Maine hereby authorizes and directs its attorney John P. Doyle, Jr. to execute
and to deliver to those SRG Entities that are liable on the Working Capital
Lines discharges and UCC-3 terminations of all mortgages and financing
statements securing the Working Capital Lines. CCA and CCA Maine shall deliver
the original Working Capital Line promissory notes to SRHS as agent marked "paid
in full." CCA and CCA Maine shall provide such evidence as the SRG Entities
shall request showing that NationsBank of Florida, N.A., has consented to the
cancellation of the Working Capital Lines and the return of the collateral for
the same.
Modification of Stock Options and Put Option with Respect to the
Individuals and Minority Holders.
(a) With respect to the rights granted by CCA and CCA Maine to the
Individuals to acquire shares of common stock of CCA (the "Stock
Options") in and pursuant to those certain Stock Option Agreements
between each of the Individuals and CCA dated July 11, 1995,
(collectively the "Stock Option Agreements"), and notwithstanding any
provisions in the Stock Option Agreements to the contrary dealing with
the vesting of the Stock Options, CCA and CCA Maine agree that all of
the shares of the common stock of CCA subject to the Stock Options,
for a total of twenty thousand (20,000) shares, are as of the date of
this Agreement fully vested with respect to the Stock Options, and, as
to such twenty thousand (20,000) shares, the Stock Options shall be
nonforfeitable and immediately exercisable, and, upon exercise
thereof, all stock so acquired shall be freely tradeable.
(b) With respect to the rights granted by CCA and CCA Maine under Section
9(j) of the Option Agreement to require the purchase of common stock
of CCA previously issued to each of the Individuals and the Minority
Holders in connection with the payment of the deposit under Section
8(a) of the Option Agreement (the "Put Option") covering the shares of
CCA common stock held by the Individuals, such Put Option shall
continue in full force and effect, as modified by this Section, and
CCA hereby agrees that it is liable with respect to the Put Option.
Without regard to any limitations as to percentages of such stock to
be put or as to dates for such puts, all shares of stock under the Put
Option are hereby exercised and CCA acknowledges and agrees to such
exercise. The Individuals agree they shall not demand payment for the
stock hereby put to CCA until the earlier to occur of (i) February 28,
1997 or (ii) the sale of all or substantially all of the assets of CCA
or the sale of a majority of the issued and outstanding shares of
stock of CCA to a third party, or the merger of CCA with or into
another entity, or any similar type of transaction (each, a "Sale
Transaction"). If the sale of CCA is structured as a stock-for-stock
transaction, the Individuals and Minority Holders hereby agree to
accept, in lieu of cash, shares of stock in the acquiring entity in an
amount that results in the Individuals and Minority Holders receiving
stock in the acquiring entity of a market value on the date of closing
equal to the value of the shares in CCA held by the Individuals and
Minority Holders at the price under the Put Option, and provided that
the stock of the acquiring entity is fully registered and freely
tradeable upon issuance to the Individuals and Minority Holders.
Continuation and Extension of Put Rights with Respect to Maine Head Trauma
Center. The put options granted to the Individuals in the Stock Purchase
Agreement (the "MHTC Agreement") among CCA, CCA Maine, Maine Head Trauma Center,
Inc. and the Individuals
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and others dated as of November 1, 1995 (the "MHTC Put Options") shall continue
in full force and effect, and the dates contained in Section 2.1(j) of the MHTC
Agreement governing the period during which the MHTC Put Options may be
exercised are hereby changed as follows: The shares subject to the First Put
Period (as defined in the MHTC Agreement) and the Second Put Period (as defined
in the MHTC Agreement) are hereby exercised and shall be paid at the same time
as those Put Option rights set forth in Section 5(b) above and the MHTC
Agreement shall be deemed to be amended accordingly. The Put Option price shall
be as provided in the MHTC Agreement.
Appointment of Agent with Respect to Put Option. The holders of the rights
described in Sections 5 and 6 above hereby irrevocably appoint James N. Broder,
Esquire, Curtis Thaxter Stevens Broder & Micoleau, One Canal Plaza, Portland,
Maine 04412 as agent to hold the shares of stock to be tendered under Sections 5
and 6 and to deliver the certificates evidencing said shares upon tender of
payment as required hereunder. In the event CCA fails to make payment of or to
otherwise perform under this Agreement, CCA agrees that such holders shall be
entitled to recover from CCA their reasonable legal fees and expenses in
addition to any other damages incurred by reason of CCA's said failure. CCA
waives any conflict of interest arising from Mr. Broder's serving as escrow
agent under this Section and releases Mr. Broder from all liability except for
that arising from his intentional tortious acts.
Additional Consideration for Settlement. The consideration for the
Settlement described herein shall be the mutual offset described in Section 4
above. In addition, CCA and CCA Maine agree jointly and severally to pay to
SRHS, as agent for the SRG Entities and the Individuals, including, without
limitation, David L. Friedman, without offset or deduction, $50,000 in
immediately available funds, as follows: $25,000 on or before November 15, 1996,
and $25,000 on the earlier to occur of (i) February 28, 1997, or (ii) the
closing of a Sale Transaction, in payment of legal fees and expenses paid or
accrued by the SRG Entities and the Individuals, including David L. Friedman,
between September 15, 1996 and the closing of this Agreement.
Rehab Ambassadors. CCA represents and warrants to the SRG Entities and the
Individuals that One Hundred Twenty Thousand Dollars ($120,000.00) previously
paid to CCA in July or August 1996 was applied on that date to the account of
Rehab Ambassadors, an affiliate of CCA. Provided the $120,000 payment was made
to Rehab Ambassadors, the SRG Entities agree that they shall continue to use the
services of Rehab Ambassadors, except that the SRG Entities shall have the right
to terminate Rehab Ambassadors severally on thirty (30) days notice. In
addition, Rehab Ambassadors will be treated the same as other trade payables,
i.e., shall be paid no sooner or later than any other accounts payable of the
SRG Entities. The amounts owing to Rehab Ambassadors as of August 31, 1996 are
as shown on Exhibit D hereto and are hereby confirmed by CCA and Rehab
Ambassadors.
Office Lease. SRHS shall enter into a Sublease with CCA Maine in form and
substance similar to that attached hereto as Exhibit E. The rent payable by SRHS
shall be the rent payable by CCA Maine to Dead River Properties, the Landlord
under the Lease. The Sublease shall be for an initial term expiring on February
14, 1997 with the right to extend for additional six month terms. CCA and CCA
Maine acknowledge that all furniture, fixtures, machinery and equipment located
on the premises described in the Sublease belong to SRHS. Any additions,
accessions, modifications or substitutions to such equipment are hereby
transferred, sold and conveyed to SRHS.
Continuation of Workers Compensation Program. The SRG Entities agree to
continue utilizing the workers compensation program currently covering the SRG
Entities' employees until the end of the current policy term, which is March 31,
1997.
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No Amounts Owed to Medical Supply. CCA and CCA Maine acknowledge and
confirm that none of the SRG Entities and none of the Individuals owes any sums
whatsoever to Medical Supply of America, an affiliate of CCA.
Representations and Warranties of CCA and CCA Maine. CCA and CCA Maine
jointly and severally warrant and represent to the Individuals and the SRG
Entities as follows:
a. Each of CCA and CCA Maine is a validly created corporation in good
standing under the laws of Delaware and has been authorized by all
necessary corporate action to execute and deliver this Agreement and
to complete the transactions described herein. Certified corporate
resolutions to that effect will be delivered to SRHS within 5 days of
execution of this Agreement.
b. Neither CCA nor CCA Maine is required to obtain the consent of any
party in order to enter into this Agreement and to perform its
respective obligations hereunder.
c. Except for the Lawsuit, there is no litigation pending or threatened,
nor any proceeding before any other court or tribunal either pending
or threatened against CCA or CCA Maine that would have a material
adverse effect upon the performance by CCA or CCA Maine of their
respective obligations under this Agreement.
d. Except for an assignment in favor of NationsBank of Florida, N.A., CCA
Maine is the holder of the promissory notes, security agreements, and
all other documents and instruments evidencing or securing the Working
Capital Lines, has not assigned or transferred the Working Capital
Lines, and has the right to discharge and terminate the same as
required by the terms of this Agreement. NationsBank of Florida N.A.
has consented to the terms of this Settlement Agreement.
Representations and Warranties by the SRG Entities. The SRG Entities
jointly and severally warrant to CCA and CCA Maine as follows:
a. Each of the SRG Entities is a validly created corporation, general
partnership, limited partnership or limited liability company, as the
case may be, in good standing under the laws of Maine and has been
authorized by all necessary corporate action to execute and deliver
this Agreement and to complete the transactions described herein.
b. None of the SRG Entities is required to obtain the consent of any
party in order to enter into this Agreement and to perform its
respective obligations hereunder.
c. Except for the Lawsuit, there is no litigation pending or threatened,
nor any proceeding before any other court or tribunal either pending
or threatened against any of the SRG Entities that would have a
material adverse affect upon the performance by the SRG Entities of
their respective obligations under this Agreement.
Indemnification by CCA and CCA of Maine. CCA and CCA Maine, and their
respective successors and assigns, shall jointly and severally indemnify and
defend the SRG Entities, the Individuals, and their respective successors,
assigns, heirs and personal representatives from and against any and all
liability, costs, damages, and claims arising from or in any way related to (i)
all claims, demands and liabilities by or in favor of Rehab Ambassadors arising
from or in any way related to the $120,000 payment referred to in Section 9
above, including whether or not such payment was in fact received by Rehab
Ambassadors, (ii) all claims, demands and liabilities (including fines) that may
be imposed upon or asserted against the SRG Entities by reason of operational
matters within the Facilities arising from actions or omissions of CCA Maine or
any affiliates between August 15, 1995 and August 14, 1996 and (iii) any breach
of the representations and warranties set forth in Section 13 above. Upon the
happening of any event covered by this indemnity, CCA and CCA Maine shall pay
the amount of such loss upon
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demand. This indemnity shall also cover all costs associated with collection or
enforcement of this indemnity, including reasonable attorneys' fees. This
indemnity shall continue in full force and effect for a period of six (6) years
from the closing of this settlement.
Indemnification by SRG Entities. The SRG Entities and their respective
successors and assigns, shall jointly and severally indemnify and defend CCA,
CCA Maine, and their respective successors and assigns, from and against any and
all liability, costs, damages, and claims arising from or in any way related to
(i) any breach of the representations and warranties set forth in Section 14
above, and (ii) any claims by the Minority Holders arising from the settlement
described in this Agreement, except with respect to continuing obligations of
CCA or CCA Maine to certain of the Minority Holders as described in Sections 3,
5 and 6 above. This indemnity shall also cover all costs associated with
collection or enforcement of this indemnity, including reasonable attorneys'
fees. This indemnity shall continue in full force and effect for a period of six
(6) years from the closing of this settlement.
Closing. The closing of the settlement described in this Agreement shall
take place on October 27, 1996. At the closing:
a. CCA shall execute and deliver original termination statements and
mortgage discharges releasing all of the mortgages and all of the
UCC-1 financing statements covering the Facilities, in form for proper
recording and filing at the appropriate public office.
b. CCA Maine shall execute and deliver the Assignment with respect to
unpaid management fees, the form of which is attached hereto as
Exhibit B.
c. CCA Maine and SRHS shall execute the Sublease, the form of which is
attached hereto as Exhibit E.
d. The parties shall execute such other and further documents as shall be
necessary to complete the settlement described in this Agreement.
Release by CCA and CCA of Maine. CCA and CCA of Maine, for themselves and
their respective successors and assigns, hereby remise, release and forever
discharge and, by these presents, do, for themselves and for their agents and
representatives, hereby remise, release and forever discharge the SRG Entities,
the Individuals and the Facilities and their respective heirs, successors,
agents, attorneys, personal representatives and assigns of and from all claims,
debts, demands, actions, causes of action, covenants, contracts, controversies,
agreements, promises, doings, omissions, variances, damages, executions, claims,
rights, liabilities, suits, dues, sums and sums of money, accounts, reckonings,
presentments, liens and any other claim of whatsoever kind or nature, whether
known or unknown, of every name and nature, either at law or in equity or
otherwise, which CCA and CCA Maine, or either of them, ever had, now have or
which may result in the future from the existing or past state of things, from
the beginning of time to the date of closing specified in Section 17 above,
arising from, or in any way relating to, the Management Agreements, the Option
Agreement (except as provided below), and those Miscellaneous Agreements listed
on Exhibit A attached hereto that are being terminated pursuant to this
Agreement, as well as the Lawsuit. This release shall not cover or apply to any
obligations of the SRG Entities or the Individuals under this Agreement,
including, without limitation, the indemnities set forth in Section 16 above, or
under the Option Agreement as it has been modified by this Agreement, all of
which obligations shall continue in full force and effect.
Release by the Individuals and the SRG Entities. The Individuals and the
SRG Entities, for themselves and their respective heirs, successors and assigns,
hereby remise, release and forever discharge and, by these presents, do, for
themselves and for their agents and representatives, hereby remise, release and
forever discharge CCA and CCA Maine and their respective successors, assigns,
agents and attorneys of and from all claims, debts, demands, actions, causes
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of action, covenants, contracts, controversies, agreements, promises, doings,
omissions, variances, damages, executions, claims, rights, liabilities, suits,
dues, sums and sums of money, accounts, reckonings, presentments, liens and any
other claim of whatsoever kind or nature, whether known or unknown, of every
name and nature, either at law or in equity or otherwise, which the Individuals
and the SRG Entities, or any of them, ever had, now have or which may result in
the future from the existing or past state of things, from the beginning of time
to the date of closing specified in Section 17 above, arising from, or in any
way relating to, the Management Agreements, the Option Agreement (except as
provided below), and those Miscellaneous Agreements listed on Exhibit A attached
hereto that are being terminated pursuant to this Agreement, as well as the
Lawsuit. This release shall not cover or apply to (i) any obligations of CCA or
CCA Maine under this Agreement, including, without limitation, the indemnities
set forth in Section 15 above and under the Option Agreement, Stock Option
Agreement and MHTC Agreement, as they have been modified by this Agreement, all
of which obligations shall continue in full force and effect, or to (ii) any
liability of CCA or CCA Maine arising from operation of the Facilities, other
than the third party reimbursement or other financial obligations that have been
addressed by this Agreement. The parties' intent is that this release shall not
cover obligations owed by CCA and CCA Maine as Manager to patients and with
respect to day-to-day operations of the Facilities.
Further Assurances. The parties to this Agreement agree that they shall
perform all such further acts and execute all such further documents as may be
necessary or required in order to complete the transactions described in this
Agreement.
Miscellaneous. Time is of the essence. This Agreement sets forth the entire
Agreement of the parties and supersedes all prior agreements and understandings,
whether oral or written. No modification or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing and executed by
all parties hereto. All notices, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given to the
recipient if mailed by certified mail, postage-prepaid, or if by sent by hand
delivery or by reputable overnight delivery service, address to the recipient at
the following addresses:
If to CCA and CCA Maine:
3050 North Horseshoe Drive
Suite 260
Naples, Florida 33942
with a copy to:
Michael Blass, Esquire
Blass & Driggs
461 Fifth Avenue, 19th Floor
New York, New York 10017
If to any of the SRG Entities or Individuals:
c/o Sandy River Development
183 Middle Street
P.O. Box 110
Portland, Maine 04112
with a copy to:
James N. Broder, Esquire
Curtis Thaxter Stevens Broder & Micoleau LLC
One Canal Plaza--P.O. Box 7320
Portland, Maine 04112
Any party may change addresses by providing written notice of such change to the
other parties hereto. All representations and warranties made by the parties in
this Agreement shall survive
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<PAGE>
the delivery of this Agreement shall continue in full force and effect. This
Agreement shall be binding upon and shall inure the benefit of the parties and
their respective successors, assigns, heirs and personal representatives. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. The representations, warranties and indemnities contained in
Sections 13, 14, 15 and 16 of this Agreement shall survive the closing of the
settlement described herein. This Agreement shall be construed under the laws of
the State of Maine. Section headings used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first written above.
WITNESS:
COMMUNITY CARE OF AMERICA, INC.
_________________________________ By:/s/Michael Blass
Name: Michael Blass
Title:Director
CCA OF MAINE, INC.
_________________________________ By:/s/Michael Blass
Name: Michael Blass
Title:Director
MEDICAL SUPPLY OF AMERICA
BY: COMMUNITY CARE OF AMERICA, INC.,
By its duly authorized agent
_________________________________ By:/s/Michael Blas
Name: Michael Blass
Title:Director
REHAB AMBASSADORS
BY: COMMUNITY CARE OFAMERICA, INC.,
its duly authorized agent
_________________________________ By:/s/Michael Blass
Name: Michael Blass
Title:Director
CEDAR RIDGE MANAGEMENT, INC.
________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
BIRCH GROVE MANAGEMENT COMPANY, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
CEDAR RIDGE NURSING CARE
CENTER ASSOCIATES
BY: SANDY RIVER GROUP, its
General Partner
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
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HARBOR HILL LIMITED LIABILITY COMPANY
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
HOMEWOOD LIMITED PARTNERSHIP
BY:SEDGEWOOD LIMITED LIABILITY
COMPANY, its General Partner
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
NURSING ADMINISTRATORS, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
OAK GROVE MANAGEMENT COMPANY, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
PINE POINT NURSING CARE CENTER,INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
RIVER RIDGE MANAGEMENT, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
RIVER RIDGE ASSOCIATES
BY:SANDY RIVER GROUP, its
General Partner
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
SANDY RIVER DEVELOPMENT, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
SANDY RIVER GROUP
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
SPRINGBROOK ASSOCIATES
BY:SANDY RIVER GROUP, its
General Partner
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
SPRINGBROOK MANAGEMENT, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
SRG/HOMEWOOD, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
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SRG/WINDWARD GARDENS, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
THE WILLOWS MANAGEMENT COMPANY, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
WILSON STREAM MANAGEMENT, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
WINDWARD GARDENS LIMITED
PARTNERSHIP
BY:WINDWARD GARDENS LIMITED
LIABILITY COMPANY, its General Partner
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
WOODFORD PARK NURSING CARE
CENTER, INC.
_________________________________ By:_/s/David L. Friedman
David L. Friedman, its President
SANDY RIVER HEALTH SYSTEM LLC
_________________________________ By:/s/David L. Friedman
David L. Friedman, its President
_________________________________ /s/David L. Friedman
David L. Friedman
________________________________ /s/ Michael C. Tyler
Michael C. Tyler
________________________________ /s/ Michael B. Prior
Michael B. Prior
_______________________________ /s/ Daniel J. Maguire
Daniel J. Maguire
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LIMITED JOINDER
The undersigned, being all of the Minority Holders identified above, hereby join
in this Settlement Agreement for the purpose of agreeing to the provisions of
Sections 5(b), 6 and 7 above, as applicable.
WITNESS:
________________________________ /s/ Leon Bresloff
Leon Bresloff
_________________________________ /s/ Mary Bayer
Mary Bayer
________________________________ /s/ D. Wayne Silby
D. Wayne Silby
________________________________ /s/ Richard Boisvert
Richard Boisvert
________________________________ /s/ Christine Boisvert
Christine Boisvert
_________________________________ /s/ Eleanor Goldberg
Eleanor Goldberg
_________________________________ /s/ David Sylvester
David Sylvester
_________________________________ /s/ Sarah Sylvester
Sarah Sylvester
HIGH VALLEY GROUP, INC.
_________________________________ By:______________________________
ELDER SOLUTIONS, INC.
_________________________________ By:______________________________
_________________________________ /s/ Anne Hess
Anne Hess
_________________________________ /s/ Terri-Lee Brown
Terri-Lee Brown
_________________________________ /s/ Judith Smith
Judith Smith
_________________________________ /s/ Robert Gass
Robert Gass
_________________________________ /s/ Marc Sarkady
Marc Sarkady
_________________________________ /s/ Peter Troast
Peter Troast
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SETTLEMENT AGREEMENT--LIST OF EXHIBITS
Exhibit A: Miscellaneous Agreements.
Exhibit B: Form of Assignment of unpaid management fees.
Exhibit C: List of Working Capital Lines.
Exhibit D: Rehab Ambassadors Payables.
Exhibit E: Form of Sublease.
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EXHIBIT A
MISCELLANEOUS AGREEMENTS
MISCELLANEOUS AGREEMENTS BEING TERMINATED:
1. Side letter to David L. Friedman from CCA and CCA Maine dated June 23,
1995 re depreciation recapture.
2. Side letter between Harbor Hill Limited Liability Company and CCA
dated June 23, 1995, as amended, re Harbor Hill start-up.
3. Side letter between CCA and David L. Friedman dated June 23, 1995 re
automobile leases.
4. Consulting Agreement dated July 10, 1995 between CCA and Sandy River
Development, Inc.
5. Services Agreement dated June 23, 1995 between CCA Maine and Sandy
River Development, Inc.
6. Development Agreement term sheet dated June 30, 1995 between CCA and
Sandy River Development, Inc.
7. Replacement Promissory Note in the original principal amount of
$21,846.61 dated July 12, 1991 made by River ridge Management, Inc. in
favor of Amethyst E.G. Mountfort Revocable Trust and endorsed to CCA
Maine.
8. Replacement Promissory Note in the original principal amount of
$21,704.31 dated August 6, 1991 made by River ridge Management, Inc.
in favor of Amethyst E.G. Mountfort Revocable Trust and endorsed to
CCA Maine.
9. Replacement Promissory Note in the original principal amount of
$14,470.20 dated August 2, 1991 made by River ridge Management, Inc.
in favor of Christine Boisvert and endorsed to CCA Maine.
10. Replacement Promissory Note in the original principal amount of
$14,564.40 dated July 15, 1991 made by River ridge Management, Inc. in
favor of Christine Boisvert and endorsed to CCA Maine.
11. Replacement Promissory Note in the original principal amount of $8,000
dated August 4, 1992 made by River ridge Management, Inc. in favor of
Christine Boisvert and endorsed to CCA Maine.
12. Replacement Promissory Note in the original principal amount of
$12,000 dated August 7, 1992 made by River ridge Management, Inc. in
favor of David L. Friedman and endorsed to CCA Maine.
13. Side letter to David Fater from David Friedman dated August 10, 1995
re Owner Entities' working capital loans.
14. Non-Competition Agreements of various dates between CCA Maine and
Richard Boisvert and Christine Boisvert, Sara Sylvester, David
Sylvester, Eleanor Goldberg, David
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Friedman, Michael Tyler, Michael Prior, Daniel Maguire and Sandy River
Development, Inc.
MISCELLANEOUS AGREEMENTS CONTINUING IN FULL FORCE AND EFFECT:
1. The MHTC Agreement and all documents and instruments executed in
connection therewith, as modified by this Agreement.
2. The Stock Options, as modified by this Agreement.
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EXHIBIT B
ASSIGNMENT
KNOW ALL PERSONS BY THESE PRESENTS, that CCA OF MAINE, INC., a Delaware
corporation with a place of business in Naples, Florida (the "Assignor"), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, hereby grants, transfers, assigns, sets over and delivers to SANDY
RIVER HEALTH SYSTEM LLC, a Maine limited liability company with a place of
business in Portland, Maine (the "Assignee"), all accrued, unpaid management
fees due to assignor under those certain Management Agreements dated June 23,
1995 with Assignor as manager with respect to Woodford Park Nursing Care Center,
Pine Point Nursing Care Center, Marshwood Nursing Care Center, RiverRidge,
Springbrook Nursing Care Center, Sandy River Nursing Care Center, Cedar Ridge
Nursing Care Center, Sedgewood Commons, Harbor Hill and Windward Gardens.
This Assignment is the assignment referred to in Section 1 of that certain
Settlement Agreement by and among Assignor, Assignee and others. This Assignment
is subject to and shall be construed consistently with such Settlement
Agreement.
IN WITNESS WHEREOF, CCA of Maine, Inc. has caused this Assignment to be
executed by _____________________________, its ________________, thereunto duly
authorized, this _27____ day of October, 1996.
WITNESS: CCA OF MAINE, INC.
________________________________ By:/s/ Michael Blass
Its:Director
Print Name: Michael Blass
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EXHIBIT C
LIST OF WORKING CAPITAL LINES
OUTSTANDING LINE AMOUNT
NAME OF FACILITY FACE AMOUNT OF AS OF August 14, 1996
---------------- -------------- ---------------------
Windward Gardens Limited Partnership $145,000 $
Revolver
Windward Gardens Term Note $200,000 $
Homewood Limited Partnership Revolver $450,000 $
Nursing Administrators, Inc. Revolver $325,000 $
Springbrook Management Revolver $350,000 $ *
RiverRidge Management Revolver $570,000 $ *
Cedar Ridge Management Revolver $225,000 $ *
Pine Point Nursing Care Center, Inc. $150,000 $
Revolver
Wilson Stream Management Revolver $200,000 $
Woodford Park Nursing Care Center, Inc. $300,000 $
Revolver
* Includes principal amount of SRG land loans with respect to land adjacent to
these Facilities.
To be agreed upon
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EXHIBIT D
SUMMARY
ACCOUNTS PAYABLE DUE TO
REHAB AMBASSADORS
AS OF AUGUST 31, 1996
Sandy River Nursing Care Center $
Marshwood Nursing Care Center $
Springbrook Nursing Care Center $
Pine Point Nursing Care Center $
Woodford Park Nursing Care Center $
TOTAL: $
To be agreed upon.
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EXHIBIT E
SUBLEASE
SUBLEASE made this __27____ day of October, 1996, by and between CCA OF
MAINE, INC., a Delaware corporation with a place of business in Portland, Maine
("Landlord") and SANDY RIVER HEALTH SYSTEM LLC, a Maine limited liability
company with a place of business in Portland, Maine ("Tenant")
W I T N E S S E T H:
WHEREAS, Landlord is tenant under that certain Lease dated November 14,
1995 (the "Prime Lease") with Dead River Company, acting by and through its
division, Dead River Properties, as Landlord (the "Prime Landlord") with respect
to approximately 3,838 square feet of office space in Prime Landlord's building
known as Atlantic Place and located at Darling Avenue and Foden Road, South
Portland, Maine; and
WHEREAS, Landlord wishes to sublease such space to Tenant upon the terms
and conditions contained in this Sublease and in the Prime Lease;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Premises Subleased.Landlord subleases to Tenant, and Tenant subleases
from Landlord, the entire space leased to Landlord by Prime Landlord
under the terms of the Prime Lease, with all rights in common with
others in common areas in Prime Landlord's building (collectively the
"Premises").
2. Term; Right to Renew. The term of this Sublease shall be for six
months beginning on the date of this Lease and ending on February ___,
1997. Provided Tenant is not in default under this Sublease, Tenant
may renew this Sublease for successive terms, each of six months'
duration, upon the terms and conditions contained herein, provided
Tenant gives written notice to Landlord of Tenant's election to renew
at least sixty (60) days before the end of the then-current term.
3. Rent. Tenant covenants and agrees to pay rent during the term in the
amount of ___(same as prime lease)___________________ Dollars
($__________) per month, payable in advance on the first day of each
month during the term. Rent for partial months shall be prorated.
4. Utilities. Tenant shall pay all charges for gas, electricity, lights,
heat, water, sewer and telephone or other communication service used,
rendered or supplied to the Premises.
5. Use of Premises. Tenant shall use the Premises only for the purposes
allowed in Section 4.1 of the Prime Lease.
6. Maintenance and Repair. Tenant acknowledges that the Premises are in
reasonable condition as of the date of this Sublease. Tenant shall at
all times maintain the Premises in the same order and repair as they
are in at the commencement of the term, reasonable use and wear and
damage by fire or other casualty only excepted; shall keep all
fixtures and equipment in the Premises, including without limitation
all heating, plumbing, electrical and mechanical fixtures and
equipment in the same operating condition as they are in on the date
of this Sublease, reasonable use and wear and damage by fire or
casualty only excepted. At the end of the term, Tenant shall surrender
the Premises to Landlord in the same condition as they were in on the
date of this Sublease, reasonable use and wear and damage by fire or
other casualty only excepted. Tenant shall make no alterations or
modifications to the Premises without the Landlord's written consent,
which consent shall not be unreasonably withheld.
66
<PAGE>
7. Insurance. Tenant shall maintain a policy of general liability
insurance insuring Landlord and Tenant, said policy to be in the
amounts required of the tenant under the Prime Lease. The policy shall
name Landlord as an additional insured.
8. Indemnification. Except for claims arising before the date of this
Lease, and except for claims arising at any time due in whole or in
part to Landlord's negligence or wilful acts, Tenant shall indemnify
and hold Landlord harmless from and against any and all claims for
injury to persons or damage to property in or about the Premises or
arising in any way from the use or condition of the Premises, and
against any costs or damages which Landlord may incur by reason of the
assertion of any such claims.
9. Assignment and Subletting. Tenant shall not assign this Sublease or
sublet the Premises or any part thereof without the prior written
consent of Landlord, which consent shall not be unreasonably withheld.
Landlord represents and warrants to Tenant that Landlord has received
all approvals from Prime Landlord that are necessary in order for
Landlord to enter into this Sublease.
10. Damage or Destruction by Fire, Eminent Domain or Casualty. In the
event that the Premises or any part thereof shall be taken by eminent
domain or shall be so damaged or destroyed by fire or unavoidable
casualty, that the Premises are thereby rendered untenantable, then
either Landlord or Tenant may terminate this Sublease upon written
notice to the other and the rent shall be prorated as of the date of
such termination.
11. Tenant's Property. All property of every kind of Tenant's or Tenant's
employees or invitees which may be on the Premises during the term or
any occupancy by Tenant thereof, shall be at the sole risk and hazard
of Tenant.
12. Default. If Tenant shall default in the performance of any of its
obligations hereunder, and such default is not cured within fifteen
(15) days of the date of a written notice from Landlord if the default
is a failure to pay rent, or thirty (30) days from the date of a
written notice from Landlord in the case of other defaults, including
any default under the Prime Lease, or if Tenant shall file or have
filed against it a petition in bankruptcy or if an assignment shall be
made by Tenant for the benefit of creditors, then in any of such cases
Landlord may lawfully, immediately and at any time thereafter, without
further notice or demand, and without prejudice to any other remedies,
terminate this Sublease by written notice addressed to Tenant at the
Premises, and upon such mailing this Sublease shall terminate.
13. Successors and Assigns; Incorporation of the Prime Lease. The
provisions of this Sublease shall be binding upon and inure to the
benefit of the respective successors and assigns of Landlord and
Tenant. The Prime Lease is incorporated herein by reference and a copy
of the Prime Lease is attached hereto as Exhibit A. Tenant shall abide
by all terms and conditions of the Prime Lease.
14. Settlement Agreement. This Sublease is the Sublease referred to in
Section 10 of that certain Settlement Agreement dated as of October
___, 1996 by and among Landlord, Tenant and others, and shall be
subject to and construed consistently with, such Settlement Agreement.
67
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Sublease as of
the date first above written.
WITNESS: CCA OF MAINE, INC., Landlord
_________________________________ By:/s/ Michael Blass
Its:Director
SANDY RIVER HEALTH SYSTEM
LLC, Tenant
________________________________ By:______________________________
Its Member
68
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000945772
<NAME> Community Care of America, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,545,000
<SECURITIES> 0
<RECEIVABLES> 20,241,000
<ALLOWANCES> 3,248,000
<INVENTORY> 1,795,000
<CURRENT-ASSETS> 24,455,000
<PP&E> 69,927,000
<DEPRECIATION> 4,908,000
<TOTAL-ASSETS> 116,621,000
<CURRENT-LIABILITIES> 40,285,000
<BONDS> 0
0
0
<COMMON> 18,000
<OTHER-SE> 28,085,000
<TOTAL-LIABILITY-AND-EQUITY> 116,621,000
<SALES> 0
<TOTAL-REVENUES> 95,726,000
<CGS> 0
<TOTAL-COSTS> 109,035,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,280,000
<INCOME-PRETAX> (13,309,000)
<INCOME-TAX> (5,059,000)
<INCOME-CONTINUING> (8,250,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,250,000)
<EPS-PRIMARY> (1.13)
<EPS-DILUTED> 0.00
</TABLE>
