EX 10.68
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is
made and entered into as of the 25th day of April,
1997, by and between EMERITUS CORPORATION (formerly
known as Assisted Living of America, Inc.), a
Washington corporation, with a place of business at
0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx
00000 ("Emeritus") and CAREMATRIX CORPORATION (formerly
known as The Xxxxxxxx Care Company), a Delaware
corporation, with a place of business at 000 Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 ("CareMatrix").
RECITALS :
WHEREAS, Emeritus and CareMatrix entered into that
certain Development Agreement dated June 9,1995 (the
"Tewksbury Development Agreement"), a copy of which is
attached hereto as Exhibit A, pursuant to which
CareMatrix agreed to rehabilitate an assisted living
community located in Tewksbury, Massachusetts (the
"Tewksbury Facility");
WHEREAS, Emeritus and CareMatrix entered into that
certain Management & Marketing Agreement dated June
9,1995 pursuant to which CareMatrix agreed to
establish, market and manage the Tewksbury Facility
(the "Tewksbury Management & Marketing Agreement"), a
copy of which is attached hereto as Exhibit B;
WHEREAS, Emeritus and CareMatrix entered into that
certain Equity Participation Agreement dated June 26,
1995 (the "Equity Participation Agreement"), a copy of
which is attached hereto as Exhibit C, pursuant to
which Emeritus and CareMatrix agreed that Emeritus
would receive eighty-five percent (85%) and CareMatrix
would receive fifteen percent (15%) of, among other
things, the Net Cash Flow, as defined in the Equity
Participation Agreement, and the proceeds from any
Capital Item, as defined in the Equity Participation
Agreement, from the Tewksbury Facility, in the manner
provided, and upon the terms and conditions set forth,
in the Equity Participation Agreement;
WHEREAS Emeritus and CareMatrix entered into that
certain Development Agreement dated as of November
7,1994 (the "Pikesville Development Agreement"), a copy
of which is attached hereto as Exhibit D, pursuant to
which CareMatrix agreed to develop a facility to be
located in Pikesville, Maryland (the "Pikesville
Facility").
WHEREAS Emeritus and CareMatrix entered into that
certain Management and Marketing Agreement dated as of
June 29,1995 (the "Pikesville Management and Marketing
Agreement"), a copy of which is attached hereto as
Exhibit E, pursuant to which CareMatrix agreed to
establish, market and manage the Pikesville Facility.
WHEREAS, Emeritus and CareMatrix entered into that
certain Management Agreement dated September 1,1994, a
copy of which is attached hereto as Exhibit F, pursuant
to which CareMatrix agreed to manage an assisted living
community (the "Carriage Hill Facility") located in
Bedford, Virginia (the "Carriage Hill Management
Agreement");
WHEREAS, as of the date hereof, approximately
Seventy-Five Thousand Four Hundred Ninety Dollars
($75,490) is due and owing to CareMatrix under the
Tewksbury Development Agreement, the Tewksbury
Management & Marketing Agreement and the Carriage Hill
Management Agreement;
WHEREAS, pursuant to that certain Limited
Liability Company
Agreement of Lakes Region Villages, L.L.C. (the "Lakes
Region Villages Agreement"), a copy of which is
attached hereto as Exhibit G, S Xxxxxxxx Lakes Region
Villages, Inc., a wholly-owned
subsidiary of CareMatrix Xxxxxxxx Lakes"), and Emeritus
formed a limited liability company ("Lakes Region
Villages"), in which Xxxxxxxx Lakes holds a fifty-one
percent (51%) membership interest and Emeritus holds a
forty-nine percent (49%) membership interest (the
"Emeritus Membership Interest");
WHEREAS, Lakes Region Villages purchased a
supportive sheltered care facility located in Franklin,
New Hampshire (the "Xxxxx Xxxxx Facility") and
simultaneously with such purchase, Emeritus made a loan
in the original principal amount of Six Hundred
Thousand Dollars ($600,000) to Xxxxxxxx Lakes, which
loan is evidenced by a promissory note, dated May 1,
1995, by Xxxxxxxx Lakes in favor of Emeritus (the
"Xxxxx Xxxxx Note"), a copy of which is attached hereto
as Exhibit H;
WHEREAS, in connection with the purchase, on an
installment sales basis, of the Xxxxx Xxxxx Facility,
Lakes Region Villages (i) executed a promissory note in
the amount of $1,100,000.00 payable to Xxxxx Xxxxx
Retirement Home, Inc. ("Retirement Home") and due and
payable on April 30, 1997 (the "Retirement Home Note"),
a copy of which is attached hereto as Exhibit I, (ii)
executed a promissory note in the amount of $749,331.49
payable to Xxxxxxxx Xxxxxxx, L.L.C. ("Xxxxxxx") and due
and payable April 30, 1997 (the "Xxxxxxx Note"), a copy
of which is attached hereto as Exhibit J, which Xxxxxxx
Note evidences Lakes Region Villages' assumption of an
outstanding loan with Horizon Bank (the "Horizon
Loan"), in the original principal amount of $800,000,
secured by a first mortgage on the Xxxxx Xxxxx
Facility, a copy of which is attached hereto as Exhibit
K, at its then current outstanding principal balance;
(iii) entered into a Business Lease and Agreement dated
May 1, 1995 with Retirement Home (the "Retirement Home
Agreement"), a copy of which is attached hereto as
Exhibit L, providing for the conveyance of the business
assets related to the Xxxxx Xxxxx Facility and an
interim lease thereof expiring April 30, 1997, and (iv)
entered into a Real Estate Lease and Agreement dated
May l,1995 with Xxxxxxx (the "Xxxxxxx Agreement"), a
copy of which is attached hereto as Exhibit M,
providing for the conveyance of the real estate related
to the Xxxxx Xxxxx Facility and an interim lease
thereof expiring April 30, 1997. Lakes Region Villages
holds a mortgage encumbering the real estate related to
the Xxxxx Xxxxx Facility to secure the obligations of
Retirement Home and Xxxxxxx under their respective
agreements, a copy of which is attached hereto as
Exhibit N. Lakes Region Villages and CareMatrix are
parties to a Management Agreement dated May l,1995 (the
"Xxxxx Xxxxx Management Agreement"), pursuant to which
CareMatrix manages the Xxxxx Xxxxx Facility, a copy of
which is attached hereto as Exhibit O. Emeritus has
executed a Guaranty dated May 1,1995 (the "Emeritus
Guaranty"), a copy of which is attached hereto as
Exhibit P, pursuant to which it has guaranteed the
performance and payment of the Retirement Home Note.
WHEREAS Emeritus is owner and holder (i) of an
aggregate principal amount of $2,000,000.00 of
Convertible Debentures of CareMatrix (the "Debentures")
the terms of which are governed by a Convertible
Debenture Agreement dated June 10, 1994 (the
"Convertible Debenture Agreement"), a copy of which are
attached hereto as Exhibit Q, and (ii) Warrants to
purchase 10,000 post-split shares of CareMatrix Common
Stock (the Warrants"), a copy of which are attached
hereto as Exhibit R, which Debentures and Warrants were
in part issued to Columbia-Pacific Group, Inc., an
affiliate of Emeritus, and later assigned to Emeritus.
Xxxxxx X. Xxxx ("Xxxx"), the Chief Executive Officer of
Emeritus, also hold warrants to purchase 10,000 post
split shares of CareMatrix Common Stock (the "Xxxx
Warrants"), a copy of which are attached hereto as
Exhibit S. Emeritus, Xxxx and CareMatrix are parties to
a Registration Rights Agreements dated June 10,1994
relating to the registration of the securities
described above (the "Registration Rights Agreement"),
a copy of which are attached hereto ss Exhibit T.
WHEREAS, CareMatrix assigned to Emeritus and
Emeritus assumed an and all of CareMatrix's rights,
obligations and liabilities under a certain Asset
Purchase Agreement (the "Green Xxxxxxx Agreement"), a
copy of which is attached hereto as Exhibit U, dated
July 31, 1995 with P. Xxxxx Xxxx and related entities
respecting certain senior living facilities in New
York,
2
Pennsylvania and Delaware known collectively as the
"Green Xxxxxxx Facilities".
WHEREAS, certain claims have been made against
CareMatrix and Emeritus by Xxxxxxx X. Xxxxxxx, a
partner of P. Xxxxx Xxxx, in the matter of Xxxxxxx X.
Xxxxxxx x. X. Xxxxx Xxxx X Xxxxxxx Allentown Personal
Care General Partnership Painted Post Partnership Unit
Partnership Salisbury General Partnership The Xxxxxxxx
Care Company and Emeritus Corporation Court of Common
Pleas, Xxxxx County, Pennsylvania, X.X. Xx. 00 XX
000000 (xxx "Xxxxxxx Lawsuit").
WHEREAS, CareMatrix and Emeritus acknowledge and
agree that the Tewksbury Development Agreement, the
Tewksbury Management & Marketing Agreement, the Equity
Participation Agreement, the Pikesville Development
Agreement, the Pikesville Management & Marketing
Agreement, the Carriage Hill Management Agreement, and
the Xxxxx Xxxxx Management Agreement, represent all of
the service agreements between the parties, which shall
be referred to herein, collectively, as the "Service
Agreements; and the Tewksbury Facility, the Xxxxx Xxxxx
Facility, the Pikesville Facility, the Carnage Hill
Facility, and the Green Xxxxxxx Facilities, shall be
referred to herein, collectively, as the "Facilities".
WHEREAS, CareMatrix and Emeritus desire to enter
into this Agreement to (i) acknowledge the termination
of the Service Agreements, (ii) to settle any and all
matters outstanding in connection with the Facilities,
and (iii) to ratify and confirm certain other
agreements and understandings between them, all as
specifically set forth herein.
NOW, THEREFORE, in consideration of the mutual
promises
contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, Emeritus and CareMatrix agree as
follows:
l. CONVERTIBLE DEBENTURES. Emeritus and
CareMatrix acknowledge and agree (i) that the
Convertible Debentures shall remain in effect in
accordance with the terms and provisions of the
Convertible Debenture Agreement, (ii) that the Warrants
and Xxxx Warrants shall remain in effect in accordance
with their terms and (iii) that the Registration Rights
Agreements shall remain in effect in accordance with
its terms.
2. TRANSFER OF MEMBERSHIP INTERESTS. Emeritus
agrees that promptly after the date hereof, it shall
transfer the entire Emeritus Membership Interest to an
entity designated by CareMatrix. Emeritus shall execute
such instruments of transfer, and such other
certificates as CareMatrix shall reasonably request to
effectuate such transfer, including, without
limitation, the documents, certificates and instruments
contemplated by Section 9.2(c) of the Lakes Region
Villages Agreement. The date on which such transfer is
consummated is referred to herein as the "Effective
Date." It is the parties' intention that the transfer
of such Emeritus Membership Interest shall constitute
the complete transfer and relinquishment by Emeritus to
CareMatrix of any and all of Emeritus' right, title and
interest in and related to the Xxxxx Xxxxx Facility.
3. PAYMENT AND SATISFACTION OF XXXXX XXXXX NOTE
AND OTHER OUTSTANDING OBLIGATIONS. On the Effective
Date, CareMatrix shall make a cash settlement payment
(the "Settlement Payment") to Emeritus in an amount
equal to the sum of (i) Four Hundred Nine Thousand
Eight Hundred Twenty-Eight Dollars ($409,828), plus
(ii) accrued but unpaid interest from the date hereof
through the Effective Date. The Settlement Payment
shall be full and complete satisfaction of all
outstanding obligations between the parties except as
specifically set forth herein. CareMatrix hereby waives
the sum of Seventy-Five Thousand Four Hundred Ninety
Dollars ($75,490) due and owing to it under the
Tewksbury Development Agreement, the Tewksbury
Management & Marketing Agreement and the Carriage Hill
3
Management Agreement.
4. INDEMNIFICATION RELATING TO OTHER XXXXX XXXXX
OBLIGATIONS. CareMatrix hereby indemnifies and holds
Emeritus harmless from any and all liabilities,
damages, losses, payments and expenses (including
reasonable attorneys fees) relating to or arising out
of the operation of the Xxxxx Xxxxx Facility, the
Retirement Home Note, the Xxxxxxx Note, the Retirement
Home Agreement, the Xxxxxxx Agreement, the Horizon
Loan, the Xxxxx Xxxxx Management Agreement, the
Emeritus Guaranty or any other documents, agreements or
obligations related to the Xxxxx Xxxxx Facility or its
operation or acquisition.
5. INDEMNIFICATION RELATING TO THE TEWKSBURY
PIKESVILLE CARRIAGE HILL AND GREEN XXXXXXX FACILITIES
OBLIGATIONS. Emeritus hereby indemnifies and holds
CareMatrix harmless from any and all liabilities,
damages, losses, payments and expenses (including
reasonable attorneys fees) relating to or arising out
of the operation of the Tewksbury Facility, the
Pikesville Facility, the Carriage Hill Facility, the
Green Xxxxxxx Facilities or any other documents,
agreements or obligations related to the Tewksbury
Facility the Pikesville Facility, the Carriage Hill
Facility, the Green Xxxxxxx Facilities or its operation
or acquisition, provided however, Emeritus'
indemnification obligation hereunder shall not be
deemed to include any claims, liabilities, damages
losses, payments or expenses relating to or arising out
of the Xxxxxxx Lawsuit.
6. RELEASE.
(a) As of the Effective Date, Emeritus
releases CareMatrix and all of its shareholders,
directors, officers, agents, affiliates, employees,
attorneys, successors and assigns (collectively, the
"CareMatrix Released Parties") from all liabilities,
actions, causes of action, claims, counterclaims,
defenses, offsets, charges, obligations and demands
whatsoever (whether known or unknown, direct or
indirect, contingent or non-contingent) at law, in
equity or otherwise (collectively, the "Claims")
against the CareMatrix Released Parties, which
Emeritus, its successors or assigns ever had, now have
or hereafter can, shall or may have for, upon, or by
reason or on accident of or in any way related to any
acts, omissions or circumstances occurring prior to or
as of the Effective Date, including, without
limitation, anything in connection with the Carriage
Hill Facility, the Tewksbury Facility, the Pikesville
Facility, the Xxxxx Xxxxx Facility, or the Green
Xxxxxxx Facilities, including without limitation, all
Claims arising out of, in connection with, or in any
way relating to (i) the Tewksbury and Pikesville
Development Agreements, (ii) the Tewksbury and
Pikesville Management and Marketing Agreements, (iii)
the Equity Participation Agreement, (iv) the
Convertible Debenture Agreement, the Warrant, the Xxxx
Warrant and the Registration Rights Agreement, (v)
Lakes Region Villages Agreement and the Xxxxx Xxxxx
Note, and (vi) the Carriage Hill Management Agreement;
provided however, this release shall not be deemed to
include any claims, liabilities, damages losses,
payments or expenses relating to or arising out of the
Xxxxxxx Lawsuit.
(b) As of the Effective Date, CareMatrix
releases Emeritus and all of its shareholders,
directors, officers, agents, affiliates, employees,
attorneys, successors and assigns (collectively, the
"Emeritus Released Parties") from all liabilities,
actions, causes of action, claims, counterclaims,
defenses, offsets, charges, obligations and demands
whatsoever (whether known or unknown, direct or
indirect, contingent or non-contingent) at law, in
equity or otherwise (collectively, the "Claims")
against the Emeritus Released Patties, which
CareMatrix, its successors or assigns ever had, now
have or hereafter can, shall or may have for, upon, or
by reason or on accident of or in any way related to
any acts, omissions or circumstances occurring prior to
or as of the Effective Date, including, without
limitation, anything in connection with the Carriage
Hill Facility, the Tewksbury Facility, the Pikesville
Facility or the Xxxxx Xxxxx Facility,
4
including without limitation, all Claims arising out
of, in connection with, or in any way relating to (i)
the Tewksbury and Pikesville Development Agreements,
(ii) the Tewksbury and Pikesville Management and
Marketing Agreements, (iii) the Equity Participation
Agreement, (iv) the Convertible Debenture Agreement,
the Warrant, the Xxxx Warrant and the Registration
Rights Agreement, (v) Lakes Region Village Agreement
and the Xxxxx Xxxxx Note and (vi) the Carriage Hill
Management Agreement.
7. ACKNOWLEDGMENT. The parties acknowledge that
the Service Agreements are terminated and of no further
force or effect.
8. REPRESENTATIONS AND WARRANTIES.
(a) Emeritus represents to CareMatrix as
follows:
(i) Emeritus is a corporation duly
organized, validly existing and in good standing under
the laws of the state of Washington.
(ii) The execution, delivery and
performance by Emeritus of this Agreement have been
duly authorized by Emeritus by any and all necessary
corporate action, and this Agreement has been duly
executed and delivered by an officer of Emeritus who is
duly authorized to effect such execution and delivery
on behalf of Emeritus.
(iii) This Agreement constitutes a
legal, valid and binding obligation of Emeritus
enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar
laws of general applicability relating to or affecting
creditors' rights or by general principles of equity.
(iv) To Emeritus' knowledge, no consent,
license, approval or authorization of, or filing,
registration or declaration with, or exemption by, any
governmental body, authority, bureau or agency is
required in connection with the execution, delivery or
performance by Emeritus of this Agreement.
(v) The execution, delivery and
performance of this Agreement by Emeritus does not and
will not violate Emeritus' articles of incorporation,
by-laws or, to Emeritus' knowledge, any law,
governmental regulation, judgment, order or decree
applicable to Emeritus.
(b) CareMatrix represents to Emeritus as
follows:
(i) CareMatrix is a corporation duly
organized, validly existing and in good standing under
the laws of the state of Delaware.
(ii) The execution, delivery and
performance by CareMatrix of this Agreement have been
duly authorized by CareMatrix by any and all necessary
corporate action, and this Agreement has been duly
executed and delivered by an officer of CareMatrix who
is duly authorized to effect such execution and
delivery on behalf of CareMatrix.
(iii) This Agreement constitutes a
legal, valid and binding obligation of CareMatrix
enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar
laws of general applicability relating to or affecting
creditors' rights or by general principles of equity.
5
(iv) To CareMatrix's knowledge, no
consent, license, approval or authorization of, or
filing, registration or declaration with, or exemption
by, any governmental body, authority, bureau or agency
is required in a connection with the execution,
delivery or performance by CareMatrix of this
Agreement.
(v) The execution, delivery and
performance of this Agreement by CareMatrix does not
and will not violate CareMatrix's articles of
incorporation, by-laws or, to CareMatrix's knowledge,
any law, governmental regulation, judgment, order or
decree applicable to CareMatrix.
9. NOTICE. All notices to be given hereunder
shall be given in writing, postage prepaid via
certified mail, return receipt requested, by overnight
courier, or by hand delivery, and addressed to the
parties as follows:
If to CareMatrix: CareMatrix Corporation
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
with a copy to: CareMatrix Corporation
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
If to Emeritus: Emeritus Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx
000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx Xxxx
with a copy to: Xxxxxxx Coie
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X.
Xxxxxxxxx, Esquire
Notices shall be considered received three days after
their placement in the U.S. mail or one day after their
mailing via overnight courier. Each party may, on
notice to the other party, designate further or
different addresses to which subsequent notices shall
be sent.
10. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. All of the terms,
covenants and conditions herein contained shall be for
and shall inure to the benefit of and shall bind the
respective parties hereto, and their officers, agents,
directors, shareholders, employees, heirs, executors,
administrators, personal or legal representatives,
successors and assigns, respectively.
(b) GOVERNING LAW. This Agreement shall be
governed by and construed and enforced in accordance
with the laws of The Commonwealth of Massachusetts.
(c) AMENDMENT. This Agreement may not be released,
discharged, changed or
6
modified in any manner, except by an instrument in
writing signed by each of the parties hereto.
(d) SEVERABILITY. If any of the provisions of this
Agreement shall be held invalid, such invalidity shall
not affect any other provision of this Agreement.
(c) CAPTIONS. The captions and headings used in
this Agreement are for convenience of reference only
and are not part of this Agreement.
(d) WAIVER. No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute, a
waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by
the party making the waiver.
(e) COSTS. Each party hereto shall be responsible
for all of the expenses incurred by it in connection
with the negotiation and execution of this Agreement
and any and all contemporaneous documents related
hereto.
(f) COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which shall be an
original, but all of which shall constitute one and the
same agreement.
(g) FURTHER ASSURANCES. The parties shall execute
and deliver such further instruments and do such
further acts and things as may be reasonably required
to carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
WITNESS: EMERITUS CORPORATION
/s/ Xxxxxxxx X. Xxxxxxx /s/ Xxxxx X.
Xxxxx
------------------------------- -----
-----------------------------
By: Xxxxxxxx X. Xxxxxxx By: Xxxxx X.
Xxxxx
Title: Secretary
WITNESS: CAREMATRIX
CORPORATION
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxxx
----------------------------- ----------
-------------------------
By: Xxxxxx X. Xxxxx By: Xxxxxxx
Title: V.P.
7
