MASTER AGREEMENT
GENESIS HEALTH VENTURES, INC.
THIS MASTER AGREEMENT is made as of the 27th day of November, 2000, by
and among GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation ("GHV"),
MERIDIAN HEALTHCARE, INC., a Pennsylvania corporation ("Meridian Healthcare"),
VOLUSIA MERIDIAN LIMITED PARTNERSHIP, a Maryland limited partnership ("Volusia
Meridian"), WYNCOTE HEALTHCARE CORP., a Pennsylvania corporation ("Wyncote
Healthcare"), PHILADELPHIA AVENUE ASSOCIATES, a Pennsylvania limited partnership
("Philadelphia Associates"), and GERIATRIC AND MEDICAL SERVICES, INC., a New
Jersey corporation, GERIATRIC AND MEDICAL COMPANIES, INC., a Delaware
corporation (collectively, "Geriatric") and EDELLA STREET ASSOCIATES, a
Pennsylvania limited partnership ("Edella"), and ELDERTRUST, a Maryland real
estate investment trust ("ET"), ELDERTRUST OPERATING LIMITED PARTNERSHIP, a
Delaware limited partnership ("ETOP"), ET SUB-MERIDIAN LIMITED PARTNERSHIP,
L.L.P., a Virginia limited liability partnership ("ET-Meridian 7"), ET
SUB-XXXXXXXXXXX LIMITED PARTNERSHIP, L.L.P., a Virginia limited liability
partnership ("ET-Xxxxxxxxxxx"), ET SUB-WINDSOR I, L.L.C., a Delaware limited
liability company and ET SUB-WINDSOR II, L.L.C., a Delaware limited liability
company (collectively "ET-Windsor"), ET SUB-PHILLIPSBURG I, L.L.C., a Delaware
limited liability company ("ET-Phillipsburg"), ET SUB-HIGHGATE, L.P., a
Pennsylvania limited partnership ("ET-Highgate") and ET SUB-WILLOWBROOK LIMITED
PARTNERSHIP, L.L.P., a Virginia limited partnership ("ET-Willowbrook").
W I T N E S S E T H :
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WHEREAS, the Genesis Entities (as hereinafter defined) filed for
protection under Chapter 11 of the bankruptcy laws of the United States under
the Bankruptcy Proceeding (as hereinafter defined); and
WHEREAS, ET-Meridian 7 is indebted to Meridian Healthcare pursuant to
the terms and provisions of the Meridian 7 Note (as hereinafter defined); and
WHEREAS, Volusia Meridian is indebted to ETOP pursuant to the terms and
provisions of the Coquina Place Loan Documents (as hereinafter defined); and
WHEREAS, Wyncote Healthcare is indebted to ETOP pursuant to the terms
and provisions of the Oaks Loan Documents (as hereinafter defined); and
WHEREAS, Philadelphia Associates is indebted to ETOP pursuant to the
terms and provisions of the Mifflin Loan Documents (as hereinafter defined); and
WHEREAS, the GHV Affiliate Tenants (as hereinafter defined) are the
tenants of the GHV Facilities, and such GHV Affiliate Tenants desire to assume
the obligations under the GHV Facility Leases (as hereinafter defined) and to
have the ET Affiliate Landlords waive any default thereunder resulting from the
filing of the Bankruptcy Proceeding as more particularly set forth herein; and
WHEREAS, Geriatric is the tenant under a certain lease with
ET-Xxxxxxxxxxx and the owner of that certain Adjacent Liberty Court Property (as
hereinafter defined), and Geriatric has agreed to transfer the Adjacent Liberty
Court Property to ET-Xxxxxxxxxxx and ET-Xxxxxxxxxxx has agreed to extend the
term of Geriatric's lease for the entire facility (including the Adjacent
Liberty Court Property), as more fully described hereafter; and
WHEREAS, an affiliate of GHV has an interest in Genesis New England (as
hereinafter defined), which is the tenant under each of the New England Leases
(as hereinafter defined), certain terms of which are to be modified, as
described hereafter; and
WHEREAS, an affiliate of GHV has an interest in Lake Washington (as
hereinafter defined), which is indebted to ETOP pursuant to the terms and
provisions of the Harbor Place Loan Documents (as hereinafter defined), certain
terms of which are to be modified, as described hereafter; and
WHEREAS, ET-Windsor has agreed to sell to GHV, and GHV has agreed to
purchase from ET-Windsor, the Windsor Property (as hereinafter defined); and
WHEREAS, Geriatric is the tenant under a certain lease with
ET-Phillipsburg with respect to the Phillipsburg Property (as hereinafter
defined), and Geriatric and ET-Phillipsburg have agreed to make certain repairs
and improvements to the Phillipsburg Property, and to modify certain provisions
of the Phillipsburg Lease (as hereinafter defined), as more fully described
hereafter; and
WHEREAS, Geriatric is the tenant under a certain lease with ET-Highgate
with respect to Highgate (as hereinafter defined), and Geriatric and ET-Highgate
have agreed to rectify certain non-monetary defaults resulting from occupancy
deficiencies at Highgate; and
WHEREAS, Edella is the tenant under a certain lease with ET-Willowbrook
with respect to Willowbrook (as hereinafter defined), and Edella and
ET-Willowbrook have agreed to modify certain provisions of the Willowbrook Lease
(as hereinafter defined) so that the rent to be paid thereunder will be based
upon a minimum rent rather than a percentage rent; and
WHEREAS, GHV is the guarantor of each of the GHV Facility Leases, the
New England Leases, the Oaks Loan, the Mifflin Court Loan, the Coquina Place
Loan and the Harbor Place Loan, under guaranty agreements with, as appropriate,
ETOP and the ET Affiliate Landlords (the "Guaranties"); and
WHEREAS, GHV, as guarantor under the Guaranties, desires to accept and
reissue its obligations under the Guaranties to guaranty the Guarantied Leases
and the GHV Loans (as such terms are hereinafter defined); and
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WHEREAS, the Genesis Entities and the ElderTrust Entities desire to
restructure, confirm and/or modify each of the transactions described above
pursuant to the terms and conditions set forth below, and GHV, as guarantor, is
amenable to all such modifications as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions of Certain Terms. For all purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"Adjacent Liberty Court Property" means the land owned by Geriatric
located adjacent and connecting to the assisted living facility owned by
ET-Xxxxxxxxxxx, upon which Geriatric has constructed certain improvements which
benefit ET-Xxxxxxxxxxx'x property.
"Agreement" means this document entitled "Master Agreement - Genesis
Health Ventures, Inc.", all exhibits and schedules attached hereto or made a
part hereof (which are deemed to be a part hereof) and all amendments to this
Agreement which are agreed to in writing and signed by the parties hereto.
"Bankruptcy Court" means United States Bankruptcy Court for the
District of Delaware.
"Bankruptcy Proceeding" means that the bankruptcy case in connection
with certain petition filed by the Genesis Entities on June 22, 2000, with the
Bankruptcy Court under Case No. 00-2842 (PJW) seeking protection under Chapter
11 of the bankruptcy laws of the United States.
"Business Day" means a day on which national banking associations are
open for the transaction of business in Philadelphia, Pennsylvania.
"Closing" or "Closing Date" means the date which is five (5) business
days after the parties hereto have satisfied all of the requirements and
obligations of the Genesis Entities and the ET Entities hereunder, such date in
no event being later than January 31, 2001.
"Coquina Place Loan Documents" means a certain Loan Agreement dated as
of January 30, 1998, with respect to the operation of a facility known as
Coquina Place in Ormond Beach, Volusia County, Florida, and all loan documents
executed in connection therewith, including, without limitation, a certain
promissory note dated as of January 30, 1998, in the original principal amount
of $4,577,000.00, as amended or modified through the Execution Date, and
relating to a loan from ETOP to Volusia Meridian (the "Coquina Place Loan").
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"DIP Lenders" means those certain lenders who are parties to that
certain Revolving Credit and Guaranty Agreement dated as of June 22, 2000,
involving GHV and other related parties.
"ElderTrust IP Property" means all rights to the use of the name
"ElderTrust", along with any marks, trademarks, signs, logos and other elements
of intellectual property used in connection with the name "ElderTrust" as more
fully described on Exhibit "C."
"ET Affiliate Landlords" means those affiliates of ET and ETOP listed
on Exhibit "B-1" that are lessors on the GHV Facility Leases and the New England
Leases.
"ET Entities" means ET, ETOP, ET Meridian 7, ET Xxxxxxxxxxx and the ET
Affiliate Landlords.
"ET Lenders" means all lenders to the ET Entities from whom consent is
required to complete the transaction contemplated herein, including without
limitation Deutsche Bank, X.X. Xxxxxx, Massachusetts Housing Finance Authority,
Xxxxx Xxxxx and the Xxxxxxx County Industrial Development Authority.
"Execution Date" means the date on which this Agreement has been fully
executed by all parties hereto.
"Financeable Lease Terms" means the agreement of the parties to modify
the applicable GHV Facility Lease in connection with a refinancing of the
applicable GHV Facility, by incorporating or modifying provisions required by a
lender in connection with such a refinancing, which are generally and reasonably
consistent with similar terms contained in the Lopatcong Lease.
"Genesis Entities" means GHV, Meridian Healthcare, Volusia Meridian,
Wyncote Healthcare, Philadelphia Associates, the GHV Affiliate Tenants and
Geriatric.
"Genesis New England" means Genesis ElderCare Partnership of New
England, Limited Partnership, a Massachusetts limited partnership, a joint
venture comprised of an affiliate of GHV and an unrelated third party.
"GHV Affiliate Tenants" means those affiliates of GHV listed on Exhibit
"B-2" that are lessees on the GHV Facility Leases.
"GHV Facility" or "GHV Facilities" mean the facilities listed on
Exhibit "A-1" which are the subject of lease agreements between ET Affiliate
Landlords and GHV Affiliate Tenants (the "GHV Facility Leases").
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"GHV Loans" means the loans from ETOP to the borrowers under the loans
evidenced and secured by the Coquina Place Loan Documents, the Harbor Place Loan
Documents, the Mifflin Court Loan Documents and the Oaks Loan Documents.
"Guarantied Leases" means the GHV Facility Leases and the New England
Leases.
"Harbor Place Loan Documents" means a certain Loan Agreement dated as
of January 30, 1998, with respect to the operation of a facility known as Harbor
Place in Melbourne, Brevard County, Florida, and all loan documents executed in
connection therewith, including, without limitation, a certain promissory note
dated as of January 30, 1998, in the original principal amount of $4,728,000.00,
and a certain promissory note dated as of February 25, 1998, in the original
principal amount of $100,000.00, as amended or modified through the Execution
Date, and relating to a loan from ETOP to Lake Washington (the "Harbor Place
Loan").
"HSR" means the Xxxx-Xxxxx-Xxxxxx Antitrust Act of 1976, as amended
from time to time, and as may hereafter be amended.
"Highgate" means that certain GHV Facility located in Paoli,
Pennsylvania that is the subject of a lease agreement between ET-Highgate, as
lessor, and Geriatric, as lessee, dated as of January 30, 1998 (the "Highgate
Lease").
"Lake Washington" means Lake Washington, Ltd., a Florida limited
partnership, a joint venture comprised of an affiliate of GHV and an unrelated
third party.
"Law" or "Laws" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order, permit, licensing or other
requirement.
"Liability" or "Liabilities" shall mean any direct or indirect
liability, claim, lien, order, loss, obligation or responsibility, accrued or
unaccrued, contingent or otherwise, whether or not of a kind required by
generally accepted accounting principles to be set forth on a financial
statement or the notes thereto due or allegedly due to, or mandated by, any and
all third parties, including without limitation any government, governmental
body or agency, however arising.
"Liberty Court" means that certain GHV Facility that is the subject of
a lease agreement between ET-Xxxxxxxxxxx, as lessor, and Geriatric, as lessee,
dated as of January 30, 1998 (the "Liberty Court Lease").
"Lopatcong" means that certain GHV Facility located in Lopatcong, New
Jersey that is the subject of a lease agreement between ET-Sub-Lopatcong,
L.L.C., as lessor, and a GHV Affiliate Tenant, as lessee, dated as of January
30, 1998 (the "Lopatcong Lease").
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"Meridian 7 Note" means that certain promissory note dated as of
September 3, 1998, in the original principal amount of $8,500,000.00, pursuant
to which ET-Meridian 7 is indebted to Meridian Healthcare.
"Mifflin Court Loan Documents" means a certain Loan Agreement dated as
of January 30, 1998, with respect to the operation of a facility known as
Mifflin Court in Cumru Township, Berks County, Pennsylvania, and all loan
documents executed in connection therewith, including, without limitation, a
certain promissory note dated as of January 30, 1998, in the original principal
amount of $5,164,000.00, as amended or modified through the Execution Date, and
relating to a loan from ETOP to Philadelphia Associates (the "Mifflin Court
Loan").
"Minimum Rent Structure" means a lease rental structure based on the
payment of a minimum specified rent, calculated and determined on a basis
consistent with that contained in the Lopatcong Lease.
"New England Facilities" are those facilities listed on Exhibit "A-3"
which are the subject of lease agreements between ET Affiliate Landlords and
Genesis New England (the "New England Leases").
"Oaks Loan Documents" means a certain Loan Agreement dated as of
January 30, 1998, with respect to the operation of a facility known as the Oaks
in Cheltenham Township, Xxxxxxxxxx County, Pennsylvania, and all loan documents
executed in connection therewith, including, without limitation, a certain
promissory note dated as of January 30, 1998, in the original principal amount
of $5,380,000.00, with a current outstanding principal balance of $5,033,085.99,
as amended or modified through the Execution Date, and relating to a loan from
ETOP to Wyncote Healthcare (the "Oaks Loan").
"Order Date" means the date on which the Bankruptcy Court issues its
"Order" approving the transactions described herein.
"Orphan Liens" are those liens and encumbrances on certain of the GHV
Facilities listed on Exhibit "D" which are to be released in accordance with the
terms of this Agreement.
"Phillipsburg" means that certain facility located on the Phillipsburg
Property that is the subject of a lease agreement between ET-Phillipsburg, as
lessor, and Geriatric, as lessee, dated as of January 30, 1998 (the
"Phillipsburg Lease").
"Phillipsburg Improvements" means those certain improvements described
on Exhibit "E" attached hereto and made a part hereof, which are to be made to
the Phillipsburg Property.
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"Phillipsburg Property" means those two (2) certain parcels along with
the improvements thereon, including a certain geriatric care facility, having an
address of 000 Xxxxxx Xxxxxx, and located in Phillipsburg, New Jersey.
"Willowbrook" means that certain facility located on the Willowbrook
Property that is the subject of a lease agreement between ET-Willowbrook, as
lessor, and Edella, as lessee, dated as of January 30, 1998 (the "Willowbrook
Lease").
"Willowbrook Property" means that certain land and improvements located
in Clarks-Summit, Pennsylvania, on which land and improvements Edella operates
an assisted living facility known as "Willowbrook".
"Windsor Property" means those two (2) certain parcels (one fee owned
and one ground leased) along with the improvements thereon, including an office
building and clinic/training facility, located in Windsor, Connecticut.
"Year Eight Adjustment" means, with regard to the Liberty Court Lease,
(a) an adjustment to the minimum rent for the lease year commencing on January
31, 2006 calculated as the greater of (i) the minimum rent in effect for the
prior lease year, increased by one-half of the annual increase in the consumer
price index (as defined in the Liberty Court Lease), or (ii) the market rent
calculated by requiring a coverage ratio of 1.15, when comparing the adjusted
net operating income (after allowance of a five percent (5%) management fee and
capital expenditures) for the twelve month period ending as of January 31, 2006
to the rent; and (b) for each year thereafter, the minimum rent calculated under
(a) above will remain subject to the adjustment for that year and each following
year based on one-half of the increase in the consumer price index.
2. Meridian 7 Note. Upon the Closing Date, in consideration for the reductions
in the loan balances on the GHV Loans as described herein, Meridian Healthcare
will assign to ETOP the Meridian 7 Note. Immediately prior to any such
assignment, ET-Meridian shall cure any existing delinquencies or defaults under
the Meridian 7 Note from June 2000 (e.g., delinquent interest payments), which
shall be as a set-off against the outstanding accrued interest due and owing
under portions of the Coquina Place Loan, Oaks Loan and/or Mifflin Loan. The
parties agree that as of January 1, 2001, if that were the Closing Date, the
product of the set-off will result in a payment to the ET Entities of Three
Hundred Thirty Six Thousand Two Hundred Eighty-Three Dollars ($336,283.00), and
that for each day beyond January 1, 2001, that the Closing Date moves to, the
amount of such payment will increase by One Thousand Four Hundred Sixty-Seven
and 70/100 Dollars ($1,467.70).
3. Coquina Place Loan Documents. Upon the Closing Date, ETOP and Volusia
Meridian shall execute an amendment to the Coquina Place Loan Documents, and any
other appropriate documentation, for purposes of achieving the following
results: (a) the outstanding principal balance of the Coquina Place Loan will be
reduced to $1,400,000.00 (i.e., reduced by $3,477,000 as an offset from the
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Meridian 7 Note, reduced by $150,000 as consideration for the Adjacent Liberty
Court Property and increased by $450,000 as consideration for the Windsor
purchase), (b) the interest rate will be set to nine and one-half percent (9.5%)
per annum with interest only to be payable monthly until maturity, (c) the term
of the loan will be extended to June 30, 2002, with an extension through July
31, 2002, if Volusia Meridian (i) is diligently pursuing the closing of
committed financing, (ii) elects such extension by notice in writing, provided
to ETOP at least fifteen (15) days in advance, and (iii) reimburses ETOP for any
fees and expenses (excluding any prepayments of principal) required to be paid
by ETOP by the applicable ET Lender holding a security interest in the Coquina
Place Loan, (d) that certain asset transfer agreement dated as of January 30,
1998, between Volusia Meridian and ETOP will be terminated, and (e) the cure as
of the Closing Date of those existing defaults under the Coquina Place Loan
which are set forth on Exhibit "F" attached hereto and made a part hereof (as
such shall be agreed to and updated by the parties prior to Closing) to be cured
as of the Closing Date (with the remaining defaults in the third column to be
handled after the Closing Date). In conjunction with the Closing, all other
defaults as to which ETOP has notice or knowledge, as of the Execution Date and
through the Closing Date, are to be waived forever, including any right to file
a proof of claim in connection with the Bankruptcy Proceeding against Volusia
Meridian (and GHV with respect to the guaranty executed as part of the Coquina
Place Loan), subject to compliance by Volusia Meridian with its obligations
under the Coquina Place Loan Documents as modified in this Agreement, but
excluding delinquent interest which is being incorporated into the set-off
described in Section 2 above. The amendment and the other appropriate
documentation contemplated in this Paragraph 3 shall be in a form satisfactory
to both ETOP and Volusia Meridian, and their respective counsel.
4. Oaks Loan Documents. Upon the Closing Date, ETOP and Wyncote Healthcare
shall execute an amendment to the Oaks Loan Documents, and any other appropriate
documentation, for purposes of achieving the following results: (a) the
outstanding principal balance of the Oaks Loan will be reduced to $3,500,085.99
(i.e., reduced by $2,133,000 as an offset from the Meridian 7 Note and increased
by $600,000 as consideration for the Windsor purchase), (b) the interest rate
will be set to nine percent (9.0%) per annum with interest only to be payable
monthly until maturity, (c) the term of the loan will be extended to June 30,
2002, with an extension through July 31, 2002, if Wyncote Healthcare (i) is
diligently pursuing the closing of committed financing, (ii) elects such
extension by notice in writing, provided to ETOP at least fifteen (15) days in
advance, and (iii) reimburses ETOP for any fees and expenses (excluding any
prepayments of principal) required to be paid by ETOP by the applicable ET
Lender holding a security interest in the Oaks Loan, (d) that certain asset
transfer agreement dated as of January 30, 1998, between Wyncote Healthcare and
ETOP will be terminated, (e) further advances under the Oaks Loan Documents need
not and will not be made, and (f) the cure as of the Closing Date of those
existing defaults under the Oaks Loan which are set forth on Exhibit "F"
attached hereto and made a part hereof (as such shall be agreed to and updated
by the parties prior to Closing) to be cured as of the Closing Date (with the
remaining defaults in the third column to be handled after the Closing Date). In
conjunction with the Closing, all other defaults as to which ETOP has notice or
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knowledge, as of the Execution Date and through the Closing Date, are to be
waived forever, including any right to file a proof of claim in connection with
the Bankruptcy Proceeding against Wyncote Healthcare (and GHV with respect to
the guaranty executed as part of the Oaks Loan), subject to compliance by
Wyncote Healthcare with its obligations under the Oaks Loan Documents as
modified in this Agreement; provided, however, that excluded from such waiver is
delinquent interest which is being incorporated into the set-off described in
Section 2 above. The amendment and the other appropriate documentation
contemplated in this Paragraph 4 shall be in a form satisfactory to both ETOP
and Wyncote Healthcare, and their respective counsel.
5. Mifflin Loan Documents. Upon the Closing Date, ETOP and Philadelphia
Associates shall execute an amendment to the Mifflin Court Loan Documents, and
any other appropriate documentation, for purposes of achieving the following
results: (a) the outstanding principal balance of the Mifflin Court Loan will be
reduced to $2,474,000.00 (i.e., reduced by $2,890,000 as an offset from the
Meridian 7 Note and increased by $200,000 as consideration for the Windsor
purchase), (b) the interest rate will be set to nine and one-half percent (9.5%)
per annum with interest only to be payable monthly until maturity, (c) the term
of the loan will be extended to June 30, 2002, with an extension through July
31, 2002, if Philadelphia Associates (i) is diligently pursuing the closing of
committed financing, (ii) elects such extension by notice in writing, provided
to ETOP at least fifteen (15) days in advance, and (iii) reimburses ETOP for any
fees and expenses (excluding any prepayments of principal) required to be paid
by ETOP by the applicable ET Lender holding a security interest in the Mifflin
Loan, (d) that certain asset transfer agreement dated as of January 30, 1998,
between Philadelphia Associates and ETOP will be terminated, and (e) the cure as
of the Closing Date of those existing defaults under the Mifflin Loan which are
set forth on Exhibit "F" attached hereto and made a part hereof (as such shall
be agreed to and updated by the parties prior to Closing) to be cured as of the
Closing Date (with the remaining defaults in the third column to be handled
after the Closing Date). In conjunction with the Closing, all other defaults as
to which ETOP has notice or knowledge, as of the Execution Date and through the
Closing Date, are to be waived forever, including any right to file a proof of
claim in connection with the Bankruptcy Proceeding against Philadelphia
Associates (and GHV with respect to the guaranty executed as part of the Mifflin
Loan), subject to compliance by Philadelphia Associates with its obligations
under the Mifflin Loan Documents as modified in this Agreement; provided,
however, that excluded from such waiver is delinquent interest which is being
incorporated into the set-off described in Section 2 above. The amendment and
the other appropriate documentation contemplated in this Paragraph 5 shall be in
a form satisfactory to both ETOP and Philadelphia Associates, and their
respective counsel.
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6. Harbor Place Loan Documents.
6.1. Upon the Closing Date, ETOP and Lake Washington shall execute an
amendment to the Harbor Place Loan Documents, and any other appropriate
documentation, for purposes of achieving the following results: (i) a fee for
extending the term of the loan in the amount of Twenty-Four Thousand One Hundred
Forty Dollars ($24,140.00) shall be paid at the Closing, (ii) the interest rate
will be set to ten percent (10.0%) per annum with interest only to be payable
monthly until maturity, (iii) principal payments will be made monthly to the
extent of one half of excess cash, if any, after payment of operating expenses,
management fee, interest and an amount to be agreed upon by the parties for
capital expenditures, (iv) the term of the loan will be extended to May 31,
2002, (v) that certain asset transfer agreement dated as of January 30, 1998,
between Lake Washington and ETOP will be terminated, and (vi) the waiver in
perpetuity of all defaults resulting solely from the filing of the Bankruptcy
Proceeding by GHV as guarantor of the Harbor Place Loan. The amendment and the
other appropriate documentation contemplated in this Paragraph 6.1 shall be in a
form satisfactory to both ETOP and Lake Washington, and their respective
counsel.
6.2. Notwithstanding the foregoing in Paragraph 6.1 above, the parties
acknowledge and agree that Lake Washington is joint venture between a GHV Entity
and an unrelated third party, and that a GHV Entity does not currently control
Lake Washington. As a result, the failure to execute and deliver the documents
referenced in Paragraph 6.1 above as of the Closing Date shall not constitute a
default hereunder and should such failure arise, the parties shall be proceed
with Closing as if the provisions of this Paragraph 6 were not part of this
Agreement, and the rights and remedies of the parties to the Harbor Place Loan
Documents shall remain as existed prior to the execution of this Agreement.
6.3. ETOP hereby consents to the acquisition by Meridian Healthcare of
the interest of X. Xxxxxxx, X.X. in both Lake Washington and Lake Manor, Inc.
GHV, through its applicable affiliate, agrees to use commercially reasonable
efforts to obtain control of Lake Washington to complete the transaction
contemplated in this Paragraph 6.
6.4. If GHV, though its applicable affiliate, obtains such requested
approvals on or before the Closing Date hereunder, then ETOP shall be obligated
to complete closing under this Paragraph 6.
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7. Willowbrook.
7.1. At Closing, ET-Willowbrook and Edella will execute and deliver a
first amendment to the Willowbrook Lease which shall provide for: (i) the annual
rent payable from and after the Closing Date will be calculated as if the rent
paid for the previous twelve (12) month period was reduced by an amount equal to
Three Hundred Forty-Five Thousand Dollars ($345,000.00); and (ii) conversion of
the Willowbrook Lease to a Minimum Rent Structure. The first amendment to the
Willowbrook Lease contemplated in Paragraph 7.1 shall be in a form satisfactory
to both ET-Willowbrook and Edella, and their respective counsel.
7.2. Upon the refinancing of Willowbrook, ET-Willowbrook and Edella
will execute and deliver another amendment to the Willowbrook Lease to
incorporate the Financeable Lease Terms. The amendment to the Willowbrook Lease
contemplated by this Paragraph 7.2 shall be in a form satisfactory to both
ET-Willowbrook and Edella, and their respective counsel. This Paragraph 7.2
shall survive the Closing hereunder.
8. New England Leases.
8.1. At Closing, ETOP will cause the applicable ET Affiliate Landlords,
to execute and deliver a letter and such other appropriate documents for the
purpose of waiving in perpetuity of all defaults resulting solely from the
filing of the Bankruptcy Proceeding by GHV as guarantor of each of the New
England Leases.. The letter and other appropriate documents contemplated in this
Paragraph 8.1 shall be in a form satisfactory to both the applicable ET
Affiliate Landlords and Genesis New England, and their respective counsel.
9. Liberty Court Modifications.
9.1. Upon the Closing Date, Geriatric and ET-Xxxxxxxxxxx shall execute
an amendment to the Liberty Court Lease, and such other appropriate documents,
for the purposes of achieving the following results: (a) expanding the demised
premises to include the Adjacent Liberty Court Property, (b) extending the term
of the lease for an additional ten (10) years to expire on January 30, 2018, (c)
except as set forth in clause (d) below, providing annual rent to increase by
one-half of the annual increase in the consumer price index from year to year
through the end of the term on January 30, 2018, and (d) providing for the Year
Eight Adjustment on the minimum rent. Geriatric shall cure as of the Closing
Date any delinquencies or defaults under the Liberty Court Lease which are set
forth on Exhibit "F" attached hereto and made a part hereof (as such shall be
agreed to and updated by the parties prior to Closing) to be cured as of the
Closing Date (with the remaining defaults in the third column to be handled
after the Closing Date). In conjunction with the Closing, all other defaults as
to which ETOP has notice or knowledge, as of the Execution Date and through the
Closing Date, are to be waived forever, including any right to file a proof of
claim in connection with the Bankruptcy Proceeding against Geriatric under the
Liberty Court Lease (and GHV with respect to the guaranty executed as part of
the Liberty Court Lease) subject to compliance by Geriatric with its obligations
under the Liberty Court Lease as modified in this Agreement. The amendment and
the other appropriate documentation contemplated in this Paragraph 9.1 shall be
in a form satisfactory to both ET-Xxxxxxxxxxx and Geriatric, and their
respective counsel.
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9.2. At Closing, Geriatric shall execute and deliver to ET-Xxxxxxxxxxx
in recordable form a special warranty deed, in a form acceptable to Geriatric
and ET-Xxxxxxxxxxx, which shall convey the Adjacent Liberty Court Property to
ET-Xxxxxxxxxxx, in consideration for a $150,000 reduction in the Coquina Place
Loan. In addition, Geriatric will deliver to ET-Xxxxxxxxxxx an indemnity against
environmental claims on the Adjacent Liberty Court Property. Both the deed and
the indemnity contemplated in this Paragraph 9.2 shall be in forms satisfactory
to both ET-Xxxxxxxxxxx and Geriatric, and their respective counsel.
9.3. Upon the refinancing of Liberty Court, ET-Xxxxxxxxxxx and
Geriatric will execute and deliver another amendment to the Liberty Court Lease
to incorporate the Financeable Lease Terms. The amendment to the Liberty Court
Lease contemplated in this Paragraph 9.3 shall be in a form satisfactory to both
ET-Xxxxxxxxxxx and Geriatric, and their respective counsel. This Paragraph 9.3
shall survive Closing hereunder.
10. Lease Assumptions, Releases, Assignments and Waivers.
10.1. In connection with the Bankruptcy Proceeding, GHV will, and will
cause through its position as owner, managing member, general partner or sole
shareholder, each of the GHV Affiliate Tenants to assume as of the Closing Date
the obligations under the leases for each of GHV Facilities (including the
Liberty Court Lease, as modified, but specifically excluding the operating
leases at Windsor which GHV shall terminate as of the Closing Date), and take
all reasonable action, including, if necessary and appropriate, the filing of
adversary proceedings in the Bankruptcy Proceeding, against the holders of the
Orphan Liens to obtain the releases of the Orphan Liens.
10.2. Upon the Closing Date, GHV will cause its applicable GHV
Affiliate Tenant, and ETOP will cause its applicable ET Affiliate Landlord, to
make such payments, if any, and to enter into such documents as may be
appropriate, to cure those existing defaults which are set forth on Exhibit "F"
attached hereto and made a part hereof (as such shall be agreed to and updated
by the parties prior to Closing) to be cured as of the Closing Date (with the
remaining defaults in the third column to be handled after the Closing Date)
with respect to the facilities leased by the applicable GHV Affiliate Tenant. In
conjunction with the Closing, all other defaults as to which ETOP has notice or
knowledge, as of the Execution Date and through the Closing Date, are to be
waived forever, including any right to file a proof of claim in connection with
the Bankruptcy Proceeding against the applicable GHV Affiliate Tenants (and GHV
with respect to the guaranty executed as part of such leases), subject to
compliance by the particular GHV Affiliate Tenant with its obligations under the
applicable GHV Facility Lease as modified in this Agreement.
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10.3 In connection with the Bankruptcy Proceeding, GHV will reissue its
obligations under each of the Guarantees of the GHV Loans and the Guarantied
Leases as of the Closing Date.
10.4. The applicable ET Entities shall use reasonable efforts to obtain
the consents of all ET Lenders to exclude a requirement for preparation and
delivery of audited financial statements from any mortgage, deed of trust or
other loan document affecting a GHV Facility.
11. ElderTrust IP Property. The parties acknowledge that GHV was a co-sponsor of
the initial public offering of ETOP. Since GHV existed prior to ETOP, GHV filed
the appropriate documentation to obtain the ElderTrust IP Property, which was
intended to be transferred promptly to ETOP after its formation. Since this was
never accomplished, the parties have agreed to the following:
11.1. In connection with the Bankruptcy Proceeding, GHV will, and will
cause through its position as owner, managing member, general partner or sole
shareholder, each of the GHV Affiliate Tenants to secure the right either (a) to
transfer at the Closing all of the Genesis Entities' interest in the ElderTrust
IP Property, or (b) to process to completion any pending applications in
connection with the ElderTrust IP Property and then immediately upon obtaining
the necessary approvals, transfer to ET all of the Genesis Entities' interest in
the ElderTrust IP Property, in each case, based upon governing trademark rules
and regulations. In connection with the transfer set forth in this Paragraph
11.1, ETOP agrees to assume all financial obligations with respect to the
completion of the transfer of all of the Genesis Entities' interest in the
ElderTrust IP Property, and the Genesis Entities will reasonably cooperate with
ETOP without cost or expense to the Genesis Entities, provided that ETOP shall
not be responsible for the payment of any internal costs of the Genesis Entities
for the cooperation with ETOP or for the review of transfer materials by counsel
to the Genesis Entities.
11.2. If Section 11.1(a) applies, then upon the Closing Date GHV and
any appropriate affiliates will execute such documents as are necessary to
transfer the ElderTrust IP Property to ET.
12. Phillipsburg.
12.1. Upon the Closing Date, Geriatric and ET-Phillipsburg shall enter
into a lease amendment, approved by GHV as guarantor, in a form acceptable to
both Geriatric and ET-Phillipsburg, for purposes of achieving the following
results: (A) effective as of the Closing Date, annual minimum rent for the
period beginning on the Closing Date will be reduced by $400,000.00; and (B) (i)
Geriatric shall be responsible for coordinating the repair and completion of the
Phillipsburg Improvements, in the order of priority enumerated on Exhibit "E"
and based upon the scope of work outlined in that certain property condition
report dated May 11, 2000, prepared by EMG, up to a cost not to exceed Five
Hundred Thousand Dollars ($500,000.00), in the aggregate (the "Phillipsburg
Improvement Cap"), (ii) the cost of the Phillipsburg Improvements up to the
Phillipsburg Improvement Cap shall be split equally between Geriatric and
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ET-Phillipsburg, pursuant to the procedures described in Sections 12.2 and
Section 12.3 below, (iii) to the extent that the cost of completing certain of
the Phillipsburg Improvements exceeds the Phillipsburg Improvement Cap, then
Geriatric shall have no obligation to complete the remaining Phillipsburg
Improvements unless ET-Phillipsburg, at its sole cost and expense, requests that
Geriatric have such additional work performed and advances sufficient sums to
Geriatric in advance to complete such work, and (iv) once the Phillipsburg
Improvement Cap has been expended with respect to the completion of the
Phillipsburg Improvements, and whether or not all of the Phillipsburg
Improvements have been completed, ET-Phillipsburg shall have no further direct
claim against, and hereby waives any such direct claim it may have against,
Geriatric (or any other Genesis Entity) with respect to the physical condition
of Phillipsburg and that the physical condition which exists after the
Phillipsburg Improvement Cap has been expended shall constitute the baseline
condition of Phillipsburg which Geriatric is required to maintain under the
Phillipsburg Lease. (The parties acknowledge that there is no intent for
ET-Phillipsburg to waive any right of contribution or indemnity which it may
have against Geriatric in connection with any third party claims.) In no event
will the cost of the Phillipsburg Improvements include costs incurred by either
Geriatric (or any other Genesis Entity) or ET-Phillipsburg (or any other ET
Entity) for overhead, supervision or other oversight and management costs in
connection with the performance of the work.
12.2. In connection with the funding of the Phillipsburg Improvements,
Geriatric shall provide ET-Phillipsburg with copies of all contractor draw
requests and supporting documentation delivered by the general contractor to
Geriatric in connection with the construction of the Phillipsburg Improvements
for review and approval, and ET-Phillipsburg and Geriatric shall each fund
one-half of the cost of each approved draw request within ten (10) days after
the receipt of such materials from Geriatric. If ET-Phillipsburg fails to pay
its proportionate share of such draw request as required under this Paragraph
12.2, with time being of the essence, then Geriatric shall be permitted to set
off such amounts against the payment of any rent due under the Phillipsburg
Lease. To the extent that ET-Phillipsburg disputes any part of the draw request,
then such disputed amount shall be funded both by Geriatric and ET-Phillipsburg
into an escrow account held by ET-Phillipsburg and Geriatric until such dispute
is resolved pursuant to the terms and conditions of the construction contract.
12.3. Geriatric shall initiate the process to commence the Phillipsburg
Improvements promptly after the Closing Date (taking into account appropriate
weather conditions) and shall diligently pursue the completion of such work
within six (6) months thereafter (subject to delays for events beyond
Geriatric's control). The priorities for elements of the work shall be in the
order set forth on Exhibit "E", and are to be performed to the extent the
Phillipsburg Improvement Cap has not been exhausted. Geriatric shall provide
ET-Phillipsburg with the opportunity to participate in the oversight of the
Phillipsburg Improvements as follows: (a) ET-Phillipsburg shall work with
Geriatric to determine the scope of the work to be performed by the general
contractor to the extent that the Phillipsburg Improvements enumerated herein
require refinement, which scope shall be subject to the review and approval of
both Geriatric and ET-Phillipsburg; (b) ET-Phillipsburg shall review and
promptly approve with Geriatric any bids submitted for the completion of the
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Phillipsburg Improvements and shall jointly select with Geriatric a general
contractor to perform and/or supervise the work; (c) ET-Phillipsburg shall
review and approve with Geriatric any regulatory applications prior to
submission, if required, to any governmental or quasi-governmental authority;
and (d) ET-Phillipsburg shall be notified of and participate in the final walk
through inspection of the project after the Phillipsburg Improvements are
substantially completed to prepare a final punchlist for the general contractor,
which punchlist shall be reviewed and approved by both Geriatric and
ET-Phillipsburg. Time shall be of the essence in this Paragraph 12.3.
12.4 Commencing on the day following substantial completion of the
Phillipsburg Improvements and ending on December 31, 2001, Geriatric and
ET-Phillipsburg shall each have the right to request the other to consider the
sale of their respective interests in Phillipsburg to a third party free and
clear of the lease and for a price and with terms agreeable to ETOP. Each party
will negotiate in good faith in reaching agreement on a reasonable price and
other terms, it being understood that all sales proceeds, net of transaction
costs, will be payable to ET-Phillipsburg without payment to Geriatric for the
leasehold estate. If no notice is received by the other in exercise of this
right by December 31, 2001, the right described will terminate on that date. In
all cases, a sale arising under the terms of this Paragraph 12.4 must close on
or before June 15, 2002.
12.5. Geriatric shall have the right, upon nine (9) months prior notice
to ET-Phillipsburg, to terminate the Phillipsburg Lease effective on or after
December 31, 2002. In connection therewith, Geriatric shall be permitted to send
notice to ET-Phillipsburg on or before March 31, 2002, so that the Phillipsburg
Lease can terminate as of December 31, 2002, if Geriatric so chooses, or such
later date as is appropriate.
12.6. Upon the refinancing of Phillipsburg, ET-Phillipsburg and
Geriatric will execute and deliver another amendment to the Phillipsburg Lease
to incorporate the Financeable Lease Terms. The amendment to the Phillipsburg
Lease contemplated in this Paragraph 12.6 shall be in a form satisfactory to
both ET-Phillipsburg and Geriatric, and their respective counsel. This Paragraph
12.6 shall survive Closing hereunder.
13. Windsor.
13.1. Upon the Order Date, ET-Windsor and GHV, or any designated
assignee of GHV, shall execute a certain asset transfer agreement with respect
to the Windsor Property (the "Windsor Transfer Agreement"). The Windsor Transfer
Agreement contemplated in this Paragraph 13.1 shall be in a form satisfactory to
both ET-Windsor and GHV, and their respective counsel, consistent with the
concept of a transfer by ET-Windsor of the Windsor Property on the Closing Date,
in "as is, where is" condition, with no assurances or warranties other than as
set forth in Section 16.3 hereof as to affirmative acts of ET-Windsor adversely
affecting title to the Windsor Property.
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13.2. The consideration to be paid for the Windsor Property shall be
One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00), which shall be
paid through the increase in debt (and not in cash), as follows: (a) an increase
of Four Hundred Fifty Thousand Dollars ($450,000.00) to the principal balance of
the Coquina Place Loan, (b) an increase of Six Hundred Thousand Dollars
($600,000.00) to the principal balance of the Oaks Loan, and (c) an increase of
Two Hundred Thousand Dollars ($200,000.00) to the principal balance of the
Mifflin Loan.
13.3. The Windsor Transfer Agreement shall provide, among other things,
for: (a) a release of any Genesis Entity that holds a leasehold interest in the
Windsor Property from ET-Windsor, (b) an assignment to GHV, or any designated
assignee of GHV, of any claims or causes of action that ET-Windsor and ETOP may
have against any prior title holder of Windsor, any existing or prior tenants or
occupants of Windsor, and any entity performing any work on the Windsor
Property, and (c) ET-Windsor to indemnify, defend and hold harmless GHV and its
officers, directors, employees, agents, parents, successors and assigns ("GHV
Indemnitees"), from and against any and all demands, claims, actions or causes
of action, assessments, expenses, costs, damages, losses and liabilities
(including attorneys' fees and other charges) which may at any time be asserted
against or suffered by any GHV Indemnitee, whether before or after the date of
the Closing, as a result of, on account of or arising from (i) the failure of
ET-Windsor to perform any of its obligations under this Section 13, or the
breach by ET-Windsor of any of its representations and warranties made herein
with regard to the Windsor Property, (ii) events, contractual obligations, acts
or omissions of ET-Windsor that occurred in connection with the ownership of the
Windsor Property prior to the Closing which were knowing acts or omissions of
ET-Windsor, did not involve a default by the lessee of the Windsor Property
under its lease and would customarily be the responsibility of a landlord in a
"triple net" lease, or (iii) damage to property or injury to or death of any
person that is not covered by the insurance required of the lessee of the
Windsor Property under the terms of its lease, or any claims for any debts or
obligations occurring on or about or in connection with the Windsor Property or
any portion thereof or with respect to the operation of the Windsor Property at
any time or times subsequent to the Closing which would result in a lien on the
Windsor Property if not resolved, were the result of the knowing act or omission
of ET-Windsor, did not involve a default by the lessee of the Windsor Property
under its lease, and would customarily be the responsibility of a landlord in a
"triple net" lease. The indemnity contained in this subsection shall survive the
Closing for a period of one (1) year from the Closing Date.
14. Highgate.
14.1. Pursuant to Section 5.8(e) of that certain Loan Agreement between
Xxxxxxx County Industrial Development Authority and Senior Lifechoice of Paoli,
L.P., dated as of August 1, 1994, as amended (the "CCIDA Agreement") and the
Highgate Lease, the borrower under the CCIDA Agreement is required to fund into
a reserve fund certain amounts for the failure during any quarter to achieve
occupancy requirements of at least seventy-three (73) residential units at
Highgate (the "Highgate Residency Covenant"). Section 7.6 of the Highgate Lease
outlines the obligations of Geriatric concerning the CCIDA Agreement.
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(a) The parties acknowledge that the Highgate Residency
Covenant has not been satisfied for the first quarter of calendar year 2000 and
Geriatric represents that it has heretofore funded approximately Eighty Thousand
Dollars ($80,000.00) for the failure to achieve the occupancy requirements
during the first quarter of calendar year 2000 ("Geriatric's Deposit").
(b) The parties acknowledge that the Highgate Residency
Covenant has not been satisfied for the second quarter of calendar year 2000 and
that Geriatric did not make the deposit required under the CCIDA Agreement.
ET-Highgate hereby represents that it has heretofore funded approximately One
Hundred Twenty Thousand Dollars ($120,000.00) for the failure to achieve the
occupancy requirements during the second quarter of calendar year 2000 ("ET's
Second Quarter Deposit").
(c) The parties acknowledge that the Highgate Residency
Covenant has not been satisfied for the third quarter of calendar year 2000,
that a further reserve deposit will be required to be made for the third quarter
of calendar year 2000 in the approximate amount of One Hundred Sixty Thousand
Dollars ($160,000), which ET-Highgate will make since Geriatric will not ("ET's
Third Quarter Deposit", which together with ET's Second Quarter Deposit
constitute the "ET Base Deposits").
(d) In addition, further deposits may be required for the
fourth quarter of calendar year 2000 ("ET's Fourth Quarter Deposit") and for one
or more quarters of calendar year 2001 (collectively, including, as appropriate,
ET's Fourth Quarter Deposit, the "ET Additional Deposits"), which ET-Highgate
may, at its option, make if Geriatric does not.
14.2. On or before Closing, ET-Highgate will make ET's Third Quarter
Deposit.
14.3. Upon the Closing Date, Geriatric and ET-Highgate shall execute an
amendment to the Highgate Lease for the purposes of achieving the following
results:
(a) ET-Highgate shall fund ET's Fourth Quarter Deposit if
required under the CCIDA Agreement if Geriatric does not; and
(b) ET-Highgate will have the right, but not the obligation to
make one or more ET Additional Deposits; and
(c) until such time as Sections14.3(e) or 14.3(f) applies,
Geriatric will be required to make additional payments to ET-Highgate in an
amount determined by multiplying the ET Base Deposits by an annual interest rate
of ten and one-quarter percent (10.25%), calculated from the date of execution
of this Agreement but payable on the Closing Date and the first business day of
each calendar month thereafter, and further prorated as to the actual number of
days covered by each payment; and
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(d) until such time as Sections 14.3(e) or 14.3(f) applies, to
the extent that ET-Highgate makes any ET Additional Deposits, Geriatric will
make additional payments to ET-Highgate, calculated from the date such deposit
is made by ET-Highgate and payable on the first business day of each calendar
month thereafter, in an amount determined by multiplying each ET Additional
Deposit by an annual interest rate of fifteen and one-quarter percent (15.25%),
prorated as to the actual number of days covered by each payment; and
(e) to the extent that any ET Base Deposit or ET Additional
Deposit is refunded to ET-Highgate, the payments described in Paragraphs 14.3(c)
and (d) above shall be proportionately reduced or eliminated, as is appropriate;
and
(f) if the Highgate Residency Requirement is satisfied for two
(2) consecutive calendar quarters, and all of the Geriatric Deposit, the ET Base
Deposits and the ET Additional Deposits have been refunded to ET-Highgate,
ET-Highgate will refund to Geriatric the Geriatric Deposit; provided, however,
that if all of the Geriatric Deposit, the ET Base Deposits and the ET Additional
Deposits have not been refunded to ET-Highgate as a result of a default by
ET-Highgate under the CCIDA Agreement or related documents, which default is
unrelated to the performance by or status of Geriatric under the Highgate Lease,
then Geriatric shall be entitled to an immediate set-off against all rent due
under the Highgate Lease until Geriatric has received a credit equal to the
Geriatric Deposit; and
(g) if the Highgate Residency Requirements are not satisfied
as of any one of the following dates: December 31, 2000, or March 31, 2001, or
June 30, 2001, or September 30, 2001, then from the first such date that such
requirements are not satisfied, ET-Highgate shall have the continuing right
throughout the balance of the calendar year 2001 to terminate the Highgate
Lease. If ET-Highgate determines to terminate the Highgate Lease, then
ET-Highgate shall provide Geriatric with not less than sixty (60) days prior
written notice; provided, however, that ET-Highgate shall be permitted at the
same time to request that Geriatric continue its operations for a further period
of up to sixty (60) days during which period Geriatric will continue to
cooperate in the transition of operation to a new operator of the facility. Upon
the date that the Lease is to terminate, Geriatric shall turn over possession of
Highgate to ET-Highgate, Geriatric and ET-Highgate shall prorate appropriate
obligations, and neither party shall have any further liability under the
Highgate Lease and such shall not constitute a default under any other GHV
Facility Lease; and
(h) if as of December 31, 2001, or as of any subsequent date
on which the Highgate Residency Requirement is determined, ET-Highgate shall not
have terminated the Highgate Lease and the Highgate Residency Requirement shall
not have been achieved, then the parties agree that such failure to satisfy the
Highgate Residency Requirement will constitute a default under the Highgate
Lease, thereby entitling ET-Highgate to exercise its remedies thereunder;
provided, however, that a default of the Highgate Lease which relates to the
failure to satisfy the Highgate Residency Requirement as outlined in this
Section 14.3(h) shall not constitute a default under any other GHV Facility
Lease; and
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(i) All amounts payable under this Section 14.3 will be
treated as additional rent under the Highgate Lease.
14.4. The amendment contemplated in Paragraph 14.1 above shall be in a
form satisfactory to both ET-Highgate and Geriatric, and their respective
counsel.
15. Representations and Warranties of the Genesis Entities. The Genesis Entities
executing this Agreement, on behalf of themselves and such of the Genesis
Entities as are not signatories to this Agreement, as of the Execution Date
represent and warrant to ET Entities that the following is true and complete and
shall reaffirm the truthfulness to the extent applicable as of the Closing Date:
15.1 Title. Geriatric is the legal owner of the Adjacent Liberty Court
Property. As of the Closing Date, Geriatric will convey the Adjacent Liberty
Court Property to the applicable ET Affiliate Landlord, free and clear of any
liens, judgments and encumbrances. Each of the applicable GHV Affiliate Tenants
is the legal holder of the leasehold estate in the applicable GHV Facility, free
and clear of any liens, judgments and encumbrances caused or created by the
applicable GHV Affiliate.
15.2 Authority. Each of the Genesis Entities signing this Agreement has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby subject to approval by the Bankruptcy Court and
the DIP Lenders. Each of the Genesis Entities not signing this Agreement
(excluding the joint venture entities who require the consent of the other
partner) has the full power and authority to enter into the documents required
by the applicable provisions of this Agreement, subject only to the approval of
the Bankruptcy Court and the DIP Lenders.
15.3 Organization, Existence and Authorization of the Genesis Entities.
All of the Genesis Entities and Genesis New England are entities, duly
organized, validly existing and in good standing under the Laws of the
particular states of formation and the states in which such entities are
operating. The execution, delivery and performance by the Genesis Entities of
this Agreement (excluding the joint venture entities who require the consent of
the other partner), have been duly authorized by all necessary actions and do
not contravene or constitute a default or require the further consent of any
person under any provision of Law (except for the consent of the Bankruptcy
Court and the DIP Lenders), or of the organization documents of the Genesis
Entities (excluding the joint venture entities who require the consent of the
other partner), or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Genesis Entities or to which any of their
properties are subject. The execution, delivery and performance by the Genesis
Entities of this Agreement (excluding the joint venture entities who require the
consent of the other partner) requires no action by or in respect of, or filing
with, any governmental body, agency or official, and no third-party consents are
required to consummate this transaction, except that the same require the
consent and approval of the Bankruptcy Court and the DIP Lenders.
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15.4 Reaffirmation of Representations and Warranties. Each of the
Genesis Entities which is a party to any of the GHV Loans hereby represents and
warrants that as of the date of this Agreement, those of the representations and
warranties contained in the GHV Loans as are more particularly set forth on
Exhibit "G" attached hereto and made a part hereof, shall be true and correct.
15.5 Additional Consents and Approvals. Except for approval of the
Bankruptcy Court (which will require the consent of the various creditor and
lending groups) and the DIP Lenders, and excluding Lake Washington, the Genesis
Entities are not aware of any other necessary consents that would be the subject
of Section 17.2(e) hereof.
16. Representations and Warranties of the ET Entities.
16.1. Each of the ET Entities represents and warrants to the Genesis
Entities, as of the Execution Date, as follows: (a) the ET Entities are
entities, duly organized, validly existing and in good standing under the Laws
of the particular state of its formation and the states in which such entities
are operating; (b) the execution, delivery and performance of this Agreement are
within the power of the ET Entities, subject to receipt of consent from the ET
Lenders; (c) the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action and do not contravene or
constitute a default or require the further consent of any person under any
provision of applicable law or regulation or of their articles of incorporation
or bylaws or of any agreement, judgment, injunction, order, decree or other
instrument binding upon it or to which its assets are subject, subject to
receipt of consent from the ET Lenders; (d) the execution, delivery and
performance by the ET Entities of this Agreement require no action by or in
respect of, or filing with, any governmental body, agency or official; and (e)
this Agreement has been duly executed by, and constitutes a valid and binding
agreement of, the ET Entities enforceable in accordance with its terms, subject
to receipt of consent of the ET Lenders.
16.2. Each of the ET Entities represents and warrants to the Genesis
Entities, as of the Closing Date, as follows: (a) the ET Entities are entities,
duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation and the states in which such entities are operating,
(b) the execution, delivery and performance of this Agreement are within the
power of the ET Entities, have been duly authorized by all necessary corporate
action and do not contravene or constitute a default or require the further
consent of any person under any provision of applicable law or regulation or of
their articles of incorporation or bylaws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it or to which its
assets are subject, (c) the execution, delivery and performance by the ET
Entities of this Agreement require no action by or in respect of, or filing
with, any governmental body, agency or official, and (d) this Agreement has been
duly executed by, and constitutes a valid and binding agreement of, the ET
Entities enforceable in accordance with its terms, subject to receipt of consent
of the ET Lenders.
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16.3 Title. ET-Windsor is the legal owner of the fee and leasehold
interests in the Windsor Property, as applicable. As of the Closing Date,
ET-Windsor will convey the fee portion of the Windsor Property and, if requested
by GHV or its assignee assign or terminate the ground leased portion of the
Windsor Property, to GHV or its assignee, free and clear of any liens and
judgments, and encumbrances created by or on behalf of ET-Windsor. ET-Windsor
shall have no obligation to remove encumbrances which were in existence as of
the date it acquired title to the Windsor Property.
16.4 Financial Statements; Solvency. The ET financial statements for
the third quarter of 2000 are attached hereto as Exhibit "H" (the "ET Financial
Statements"). Based on the ET Financial Statements, the ET Entities are solvent
and there has been no material adverse change since the issuance of the ET
Financial Statements which adversely affects the solvency of the ET Entities. At
Closing, the ET Entities shall deliver a certificate certifying that (i) there
has been no material adverse change in the ET Financial Statements through the
Closing Date and that the ET Entities are solvent, and (ii) the ET Entities have
not entered into the transactions contemplated hereby in anticipation of seeking
relief under the Bankruptcy Code.
16.5 Litigation. There are no actions, suits or proceedings pending,
affecting, or to their knowledge , unless previously disclosed in writing to the
Genesis Entities, threatened against the ET Entities, or any of them, before any
Court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if determined adversely to the ET
Entities, or any of them, would have a material adverse effect on (i) the
financial condition, properties or operation of the ET Entities or any of them,
or (ii) the legality, validity or enforceability of this Agreement, the
transactions contemplated herein, or any of the other documents and instruments
to be executed pursuant hereto.
17. Conditions.
17.1 Conditions to Obligations of the ET Entities. The obligation of
the ET Entities to complete the transactions contemplated hereunder is subject
to the timely satisfaction of the following conditions any one or more of which
may be waived in whole or in part by the ET Entities:
(a) Representations and Warranties. The representations and
warranties of the Genesis Entities set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date.
(b) Performance of Obligations of the Genesis Entities. The
Genesis Entities shall have performed all agreements required to be performed by
them under this Agreement prior to or on the Closing Date.
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(c) No Violations. The completion of the transaction
contemplated hereunder shall not violate any order or decree of any court or
governmental body having competent jurisdiction.
(d) Multicare/ElderTrust Closing. Approval for this
transaction as well as that certain transaction affecting affiliates of ETOP and
affiliates of The Multicare Companies, Inc. (collectively, "Multicare") with
respect to three (3) assisted living facilities known as: (i) Berkshire Commons,
(ii) Lehigh Commons and (iii) Sanatoga Commons (the "Multicare Transactions"),
shall have been obtained from the Bankruptcy Court and the DIP Lenders. The ET
Entities shall have the right, at their sole and absolute discretion, not to
complete Closing hereunder if Multicare is not prepared or able to complete
closing with respect to each of the Multicare Transactions, or if the Genesis
Entities are not prepared or able to complete any of the transactions
contemplated in this Master Agreement.
(e) Other Necessary Consents. The ET Entities shall have
received all consents necessary to the consummation of the transactions
contemplated by this Agreement (including, without limitation, the ET Lenders).
17.2 Conditions to Obligation of the Genesis Entities. The obligation
of the Genesis Entities to complete the transactions contemplated herein is
subject to the satisfaction of the following conditions any one or more of which
may be waived in whole or in part by all the Genesis Entities:
(a) Representations and Warranties. The representations and
warranties of the ET Entities set forth in this Agreement shall be true and
correct as of the Closing Date.
(b) Performance of Obligations of the ET Entities. The ET
Entities shall have performed all agreements required to be performed by them
under this Agreement prior to or on the Closing Date.
(c) No Violations. The completion of the transaction
contemplated herein shall not violate any order or decree of any court or
governmental body having competent jurisdiction.
(d) Multicare/ElderTrust Closing. Approval for this
transaction as well as the Multicare Transactions shall have been obtained from
the Bankruptcy Court as well as from the DIP Lenders. The Genesis Entities shall
have the right, at their sole and absolute discretion, not to complete Closing
hereunder if any of the ET Entities are not prepared or able to complete closing
with respect to the Multicare Transactions or any of the transactions
contemplated in this Master Agreement.
-22-
(e) Other Necessary Consents. The Genesis Entities shall have
received all governmental or other third party consents or other actions
necessary to the consummation of the transactions contemplated by this Agreement
(including, without limitation, the DIP Lenders).
17.3. Bankruptcy Court Approval. This Agreement is conditioned on and
shall not be enforceable unless and until the Bankruptcy Court issues an order
(the "Order") authorizing the transactions contemplated in this Agreement, and
any applicable appeal period has expired without institution of an appeal. Upon
full execution of this Agreement, the Genesis Entities will use reasonable
efforts promptly to obtain the Order and the ET Entities shall execute such
documents and perform such other acts as may be reasonably requested by the
Genesis Entities in connection therewith. If, after application by the Genesis
Entities, the Bankruptcy Court decides not to issue the Order, then this
Agreement shall terminate and be of no force and effect, and neither party shall
have any liability to the other hereunder.
17.4 Xxxx-Xxxxx-Xxxxxx. Promptly after the Execution Date, the parties
hereto will cooperate to file, if determined to be necessary, the notification
and report form required by the HSR. To the extent that the parties determine
that compliance with HSR is required, then Closing will not occur prior to
expiration of the appropriate waiting periods as required by the HSR. The
ElderTrust Entities and the Genesis Entities agree to split the filing fee
required in connection with the submission of the application required under
HSR.
18. Default. If either party shall fail or refuse to perform pursuant to the
terms hereof, including, without limitation, execution and delivery of the any
of the documents required herein, then such parties shall have the sole option
of either (i) terminating this Agreement, or (ii) suing the other party for
specific performance.
19. Indemnification.
19.1. Indemnification by the Genesis Entities. The Genesis Entities and
GHV shall jointly and severally indemnify, defend, save and hold the ET Entities
and their shareholders, officers, directors, employees, agents and affiliates
and their respective successors and assigns, as the case may be (collectively,
"ET Indemnitees") harmless from and against all demands, claims, allegations,
assertions, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious; asserted against,
imposed upon, resulting to, required to be paid by, or incurred by any ET
Indemnitees, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for: (a) a material breach
of any representation or warranty made by any of the Genesis Entities and GHV in
this Agreement, in any certificate or document furnished pursuant hereto by a
Genesis Entity or GHV or any ancillary agreement to which a Genesis Entity or
GHV is or is to become a party; or (b) a material breach or nonfulfillment of
any covenant or agreement made by a Genesis Entity or GHV in or pursuant to this
Agreement and in any ancillary agreement to which such Genesis Entity or GHV is
or is to become a party.
-23-
19.2. Indemnification by the ET Entities. The ET Entities shall jointly
and severally indemnify, defend, save and hold the Genesis Entities and GHV and
their partners, shareholders, members, officers, directors, employees, agents
and affiliates and their respective successors and assigns, as the case may be
(collectively, "Genesis Indemnitees") harmless from and against any and all
demands, claims, actions or causes of action, assessments, losses, damages,
deficiencies, liabilities, costs and expenses (including reasonable legal fees,
interest, penalties, and all reasonable amounts paid in investigation, defense
or settlement of any of the foregoing and whether or not any such demands,
claims, allegations, etc., of third parties are meritorious, asserted against,
imposed upon, resulting to, required to be paid by, or incurred by any Genesis
Indemnitees, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for: (a) a material breach
of any representation or warranty made by any of the ET Entities in this
Agreement, in any certificate or document furnished pursuant hereto by an ET
Entity or any ancillary agreement to which any of the ET Entities is a party; or
(b) a material breach or nonfulfillment of any covenant or agreement made by the
ET Entities in or pursuant to this Agreement and in any ancillary agreement to
which any of the ET Entities is a party.
19.3. Survival. The indemnifications set forth in this Paragraph 19
shall be effective as of the Closing Date and shall survive Closing hereunder
for a period of one (1) year from the Closing Date.
20. Miscellaneous.
20.1. No Third Party Rights. Nothing in this Agreement shall be
construed to give any person or entity other than the Genesis Entities and the
ET Entities any legal or equitable right, remedy or claim under this Agreement,
and this Agreement shall be for the sole and exclusive benefit of the Genesis
Entities, the ET Entities, their successors and permitted assigns hereunder.
20.2. Expenses. Each party acknowledges and agrees that it will equally
share in the costs associated with: (a) recording any deeds, mortgages or
amendments to loan documents contemplated hereunder, (b) recording any
amendments to any memoranda of leases as contemplated hereunder, and (c)
obtaining title insurance. Each party shall pay its respective expenses
separately incurred in connection with obtaining any due diligence materials
(e.g., environmental studies, surveys, judgment and lien searches, etc.), and
the costs of their respective counsel. In addition, each party represents to the
other that neither has dealt with any real estate broker, dealer or salesman in
connection with the subject transaction, and each shall and hereby agrees to
indemnify, defend, and hold the other harmless from and against any loss, damage
or claim resulting from a breach of such representation.
-24-
20.3. Press Release. GHV, on behalf of itself and the other Genesis
Entities, and ET, on behalf of itself and the other ET Entities, shall consult
with one another in advance concerning the form and substance of any press
release relating to this Agreement or the transactions contemplated hereby;
provided, however, that this obligation shall not prohibit any party hereto from
making any disclosure which is necessary to fulfill such party's disclosure
obligations imposed by law or regulation. Without limiting the generality of the
foregoing, GHV, on behalf of itself and the other Genesis Entities, acknowledges
that (a) ET intends to file a copy of this Agreement as an exhibit to a Form 8-K
to be filed by ET with the Securities and Exchange Commission and (b) this
Agreement will be referred to and described in such Form 8-K, as well as in ET
proxy statements and other periodic reports of ET and any registration
statements filed by ET with the SEC.
20.4. Description Headings. The headings of the Paragraphs and Sections
of this Agreement are inserted for convenience only and shall not constitute a
part hereof.
20.5. Cooperation. Each party hereto shall take such further action,
and execute such additional documents as may be reasonably required by any other
party hereto in order to consummate the transactions contemplated by this
Agreement.
20.6. Binding Effect; Assignment. This Agreement shall be binding upon
and shall inure to the benefit for and be enforceable by each of the parties,
and their successors and permitted assigns. This Agreement shall not be assigned
by the ET Entities without the consent of the Genesis Entities or by the Genesis
Entities without the consent of the ET Entities. Notwithstanding the foregoing,
the ET Entities shall be permitted to assign any or all of its rights under this
agreement to an affiliate or subsidiary of the ET Entities.
20.7. Notice. All notices, demands, requests or communications required
or permitted to be given pursuant to this Agreement shall be in writing and
shall be deemed to have been properly given or served and shall be effective
upon delivery by a nationally recognized overnight delivery service, or upon the
date of receipt of hand delivery which is received any Business Day on or before
5:00 P.M. in the location of receipt or on the next Business Day after receipt
if received by facsimile after 5:00 P.M. on any Business Day, or upon the date
of receipt of a facsimile which is received any Business Day on or before 5:00
P.M. in the location of receipt or on the next Business Day after receipt if
received by facsimile after 5:00 P.M. on any Business Day, provided that a hard
copy is sent in accordance with one of the foregoing methods. Any such notice,
demand, request or communication if given shall be addressed as follows:
-25-
if to the ET Entities: c/o ElderTrust Operating Partnership
000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx Xxxxxx, XX 00000
Attention: D. Xxx XxXxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esquire
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Genesis Entities: c/o Genesis Health Ventures, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx Xxxxxx, XX 00000
Attention: Law Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Weil, Gotshal & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx, Esquire
Telephone: 000-000-0000
Facsimile: 000-000-0000
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
-26-
20.8. Integration; Amendment and Modification. This Agreement and the
Exhibits and other documents delivered pursuant thereto contains the entire
understanding among the parties, all prior negotiations between the parties are
merged by this Agreement and the attached documents and there are no promises,
agreements, conditions, undertakings, warranties or representations, oral or
written, express or implied, between them other than as herein set forth. No
change or modification of this Agreement shall be valid unless the same is in
writing and signed by the parties hereto. No waiver of any of the provisions of
this Agreement, or any other agreement referred to herein, shall be valid unless
in writing and signed by the party against whom it is sought to be enforced.
20.9. Conflicts. In the event of a conflict between this Agreement and
any Exhibits, the provisions of the particular Exhibit shall control and
prevail.
20.10. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart hereof shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
20.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
20.12. Invalidity. If any provision or part of any provision of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions or the remaining part of any effective provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality or unenforceability.
20.13. Time of the Essence. Time is of the essence of this Agreement.
If any time period or date ends on a day or time which is a weekend, legal
holiday or bank holiday, such period shall be extended to the same time on the
next Business Day.
20.14. Judicial Interpretation. Should any provision of this Agreement
require judicial interpretation, it is agreed that the court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against one party by reason of the rule of construction
that a document is to be construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that the agents of all
parties have participated in the preparation of this Agreement.
20.15. Further Assurances. The Genesis Entities and the ET Entities
executing this Agreement agree for themselves (and further agree to cause any
non-signatory Genesis Entities and ET Entities, respectively, including Genesis
New England) to execute and deliver such further documents as are necessary or
desirable to implement and accomplish the agreements and terms of this
Agreement.
-27-
20.16 Negation of Partnership. Nothing contained in this Agreement
shall be deemed to create a partnership or joint venture between the ET Entities
and the Genesis Entities, between the ET Entities and GHV, or between the ET
Entities and any other person or party, or cause any of the parties to be liable
or responsible in any way for the actions, liabilities, debts or obligations of
the other parties, or of any other person or party.
20.17 Advice of Counsel. Each party to this Agreement represents and
warrants to the other that it has consulted with counsel of its own choosing in
negotiating, executing and delivering this Agreement and all other documents and
instruments executed in connection herewith, that each has read this Agreement,
and all of such other documents, inclusive of each of the provisions contained
therein, and that they and all of them are aware of the context and legal effect
of the same, and that they have voluntarily, and without coercion or duress of
any kind, entered into this Agreement and all such other documents.
-28-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
THE GENESIS ENTITIES:
GENESIS HEALTH VENTURES, INC.,
a Pennsylvania corporation,
on behalf of itself and all of its
affiliates and subsidiaries set forth in this Agreement
By: /s/ Xxxxxx X. Xxxxx, Xx.
------------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Executive V.P. and CFO
THE ET ENTITIES / ELDERTRUST:
ELDERTRUST OPERATING LIMITED
PARTNERSHIP, a Delaware limited
partnership, on behalf of itself
and all of its affiliates and
subsidiaries set forth in this
Agreement
By: /s/ D. Xxx XxXxxxxx
------------------------------------------
Name: D. Xxx XxXxxxxx
Title: President & Chief Executive Officer
-29-
CONSENT OF GUARANTOR
Genesis Health Ventures, Inc., a Pennsylvania corporation
("Guarantor"), it is capacity as a guarantor of any of the leases or loans
referred to or described in the Master Agreement to which this Consent is
attached, hereby confirms that the modifications of any such instruments shall
not affect any obligations of Guarantor pursuant to the guaranties which will be
reissued as of the Closing Date.
IN WITNESS WHEREOF, Guarantor shall executed this Consent as of the
27th day of November, 2000.
GENESIS HEALTH VENTURES, INC.,
a Pennsylvania corporation
By: /s/ Xxxxxx X. Xxxxx, Xx.
-------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Executive V.P. and CFO
-30-
INDEX OF EXHIBITS
Exhibit "A-1" - List of GHV Facilities
Exhibit "A-2" - List of New England Facilities
Exhibit "B-1" - List of ET Affiliate Landlords
Exhibit "B-2" - List of GHV Affiliate Tenants
Exhibit "C" - ElderTrust IP Property
Exhibit "D" - List of Orphan Liens
Exhibit "E" - List of Phillipsburg Improvements
Exhibit "F" - List of Delinquencies or Defaults to be cured
under the applicable loan documents
Exhibit "G" - List of Warranties and Representations regarding
GHV Loans
Exhibit "H" - Third Quarter Financial Statements of ET
EXHIBIT "A-1"
LIST OF FACILITIES LEASED FROM AFFILIATES OF ET AFFILIATE LANDLORDS
A. Initial Properties.
1. Heritage Xxxxx
2 Highgate at Paoli Pointe
3. Lopatcong Center
4. Phillipsburg
5. Pleasant View
6. Liberty Court (Xxxxxxxxxxx)
7. Riverview Ridge
8. Willowbrook
B. "Meridian 7" Properties.
1. Westfield Center
2. Voorhees Center
3. Multi-Med Center
4. Severna Park Center
5. Corsica Hills Center
6. La Plata Center
7. Heritage Center
C. Non-Center Leases.
1. Salisbury Medical Office Building -- three (3) leases
2. Windsor Clinic and Training Facility
3. Windsor Office Building
4. NeighborCare Lease at DCMH
5. NeighborCare Lease at POB I
EXHIBIT "A-2"
LIST OF FACILITIES LEASED TO
GENESIS ELDERCARE PARTNERSHIP OF NEW ENGLAND, LP
FROM ET AFFILIATE LANDLORDS
1. Heritage at Cleveland Circle
2. Heritage at Xxxxxx Court
3. Heritage at North Andover
4. Cabot Park Village
EXHIBIT "B-1"
LIST OF ET AFFILIATE LANDLORDS
A. Initial Properties.
1. Heritage Xxxxx, Agawam, MA: ET Sub-Heritage Xxxxx L.L.C.,
a Delaware limited liability company.
2. Xxxxxxxx xx Xxxxx Xxxxxx, Xxxxxxx Xxxxxx, XX:
ET Sub-Highgate, L.P., a Pennsylvania limited partnership.
0. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX: ET Sub-Lopatcong, L.L.C.,
a Delaware limited liability company.
4. Phillipsburg Care Center, Phillipsburg, NJ:
ET Sub-Phillipsburg, L.L.C., a Delaware limited liability
company.
0. Xxxxxxxx Xxxx, Xxxxxxx, XX: ET Sub-Pleasant View, L.L.C.,
a Delaware limited liability company.
0. Xxxxxxx Xxxxx (Xxxxxxxxxxx), Xxxxxxxxxxxx, XX:
ET Sub-Xxxxxxxxxxx Limited Partnership, L.L.P., a Virginia
limited liability partnership.
7. Riverview Ridge, Xxxxxx-Xxxxx, PA: ET Sub-Riverview Ridge
Limited Partnership, L.L.P., a Virginia limited liability
partnership.
8. Willowbrook, Clarks Summit, PA: ET Sub-Willowbrook Limited
Partnership, L.L.P., a Virginia limited liability
partnership.
B. "Meridian 7".
1. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxx, XX:
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia
limited liability partnership.
2. Voorhees Center, Voorhees, Camden County, NJ:
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia
limited liability partnership.
3. Multi-Med Center, Towson, Baltimore County, MD:
ET Sub-Meridian Limited artnership, L.L.P., a Virginia
limited liability partnership.
4. Severna Park Center, Severna Park, Anne Arundel County, MD:
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia
limited liability partnership.
5. Corsica Hills Center, Centerville, Queen Anne's County, MD:
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia
limited liability partnership.
0. Xx Xxxxx Xxxxxx, XxXxxxx, Xxxxxxx Xxxxxx, XX:
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia
limited liability partnership.
7. Heritage Center, Dundalk, Baltimore County, MD:
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia
limited liability partnership.
C. Non-Center Leases
1. Salisbury Medical Office Building -- three (3) leases,
Salisbury, MD: ET Sub-SMOB, L.L.C., a Delaware limited
liability company.
2. Windsor Office Building, Windsor, CT: ET Sub-Windsor I,
L.L.C., a Delaware limited liability company.
3. Windsor Clinic and Training Facility, Windsor, CT:
ET Sub-Windsor II, L.L.C., a Delaware limited liability
company.
4. NeighborCare Xxxxx xx XXXX, Xxxxxx Xxxx, XX: ET Sub-DCMH
Limited Partnership, L.L.P., a Virginia limited liability
partnership.
5. NeighborCare Lease at POB I, Upland, PA: ET Sub-POB I, L.L.C.,
a Virginia limited liability company.
D. New England Leases
1. Heritage at Cleveland Circle: ET Sub-Cleveland Circle, L.L.C.,
a Delaware limited liability company.
2. Heritage at Xxxxxx Court: ET Sub-Vernon Court, L.L.C.,
a Delaware limited liability company.
3. Heritage at North Andover: ET Sub-Heritage Andover, L.L.C.,
a Delaware limited liability company.
4. Cabot Park Village: ET Sub-Cabot Park, L.L.C., a Delaware
limited liability company.
EXHIBIT "B-2"
LIST OF GHV AFFILIATE TENANTS
A. Initial Properties.
1. Heritage Xxxxx, Agawam, MA: Genesis Health Ventures of
Massachusetts, Inc., a Pennsylvania corporation.
2. Highgate at Paoli Pointe, Xxxxxxx County, PA: Geriatric and
Medical Services, Inc., a New Jersey corporation.
0. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX: Geriatric and Medical
Services, Inc., a New Jersey corporation.
4. Phillipsburg, Phillipsburg, NJ: Geriatric and Medical
Services, Inc., a New Jersey corporation.
5. Xxxxxxxx Xxxx, Xxxxxxx, XX: XxXxxxxx Health Care Centers,
Inc., a New Hampshire corporation.
6. Liberty Court (Rittenhouse), Philadelphia, PA: Geriatric and
Medical Services, Inc., a New Jersey corporation.
7. Riverview Ridge, Xxxxxx-Xxxxx, PA: Genesis Health Ventures of
Xxxxxx-Xxxxx, Inc., a Pennsylvania corporation.
8. Willowbrook, Clarks Summit, PA: Edella Street Associates,
a Pennsylvania limited partnership.
B. "Meridian 7".
1. Westfield Center, Westfield, NJ: Meridian Healthcare, Inc.,
a Pennsylvania corporation.
2. Voorhees Center, Voorhees, NJ: Meridian Healthcare, Inc.,
a Pennsylvania corporation.
3. Multi-Med Center, Towson, MD: Meridian Healthcare, Inc.,
a Pennsylvania corporation.
4. Severna Park Center, Severna Park, MD: Meridian Healthcare,
Inc., a Pennsylvania corporation.
5. Corsica Hills Center, Centerville, MD: Meridian Healthcare,
Inc., a Pennsylvaniacorporation.
0. Xx Xxxxx Xxxxxx, Xx Xxxxx, XX: Meridian Healthcare, Inc.,
a Pennsylvania corporation.
7. Heritage Center, Dundalk, MD: Meridian Healthcare, Inc.,
a Pennsylvania corporation.
C. Non-Center Leases
1. Salisbury Medical Office Building -- three (3) leases, Salisbury, MD:
(a) Genesis Immediate Med Center, Inc., n/k/a Genesis ElderCare
Physician Services, Inc., a Pennsylvania corporation
(b) Genesis ElderCare Rehabilitation Services, Inc., a
Pennsylvania corporation
(c) Genesis Physician Services, Inc., n/k/a Genesis ElderCare
Physician Services, Inc., a Pennsylvania corporation
2. NeighborCare Lease at DCMH, Drexel Hill, PA: Delco Apothecary, Inc.,
a Pennsylvania corporation, d/b/a NeighborCare.
3. NeighborCare Lease at POB I, Upland, PA: Delco Apothecary, Inc.,
a Pennsylvania corporation, d/b/a NeighborCare.
EXHIBIT "C"
LIST OF ELDERTRUST IP PROPERTY
All right, title and interest in and to the application for registration, name
and service xxxx of ElderTrust.
EXHIBIT "D"
LIST OF ORPHAN LIENS
Coquina Place, Volusia County, Florida
1. Mechanics' (Construction) Lien in favor of Southern Oaks Ground
Covering, Inc., dated October 9, 1999 and recorded October 20, 1999 in
Official Records Book 4486, page 3573 of the Public Records of Volusia
County, Florida, with an unpaid balance of $3,602.56.
Harbor Place, Brevard County, Florida
None
The Oaks, Cheltenham Township, Xxxxxxxxxx County, Pennsylvania
1. $200,000 Open-End Mortgage from Wyncote Healthcare Corp. to Chapter
Ltd. Partnership, dated August 8, 1991, recorded August 16, 1991 in
Mortgage Book 6747 page 1288.
Mifflin, 000 Xxxxxxxxxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxxxx
None.
Xxxxxxxxxxx (Existing Parcel), Philadelphia County, Pennsylvania
1. Xxxxxxx Xxxxxxxx vs. Geriatric & Medical Services, Common Pleas Court,
Case No. Aug. 96-3194, Default Judgment entered January 21, 1998, in
the amount of $10,000.00.
Xxxxxxxxxxx (Additional Parcel), 0000-00 Xxxxxxx Xxxxxx & 000-00 X. 00xx Xxxxxx,
Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx
1. Commonwealth of Pennsylvania vs. Geriatric & Medical Service, Common
Pleas Court, Case No. 97-421, Default Judgment entered May 6, 1997, in
the amount of $929.61.
2. Xxxx Xxxxxxxx vs. Geriatric & Medical Services, Inc., Common Pleas
Court, Case No. Apr 95-1866, Motor Vehicle Arbitration Finding entered
June 26, 1996, in the amount of $26,138.29.
3. Xxxxx Supply Co., Inc. vs. Geriatric & Medical Services, Common Pleas
Court, Case No. Oct 96-1315, Writ of Execution entered October 17,
1996, in the amount of $25,831.66.
4. Xxxxxxx Xxxxxxxx vs. Geriatric & Medical Services, Common Pleas Court,
Case No. Aug. 96-3194, Default Judgment entered January 21, 1998, in
the amount of $10,000.00.
5. Legal Services Trust vs. Geriatric and Medical Corporation, U.S.
District Court, Case No. 96-7452, Civil Action Judgment entered July 1,
1997, in the amount of $5,076.00.
6. Legal Services Trust vs. Geriatric and Medical Corporation, U.S.
District Court, Case No. 96-7451, Civil Action Judgment entered July
17, 1997, in the amount of $5,474.00.
7. Retail Wholesale & Dept. Store Union Local 1034 vs. Geriatric & Medical
Companies, Inc., U.S. District Court, Case No. 96-3234, Civil Action
Judgment entered July 24, 1996, in the amount of $181,352.00.
8. Commonwealth of Pennsylvania vs. Xxxxx Xxxxxxx, Common Pleas Court,
Case No. Mar 94-3846, Miscellaneous Lien entered March 29, 1994, in the
amount of $365.79.
9. Corestates Bank Delaware vs. Xxxxx Xxxxxxx, Municipal Court, Case No.
SC 96-1-22 17530, Small Claim Default Judgment entered February 22,
1996, in the amount of $6,235.45.
EXHIBIT "E"
LIST OF PHILLIPSBURG IMPROVEMENTS
The Phillipsburg Improvements shall be completed in the order listed below to
ensure that the most important items are addressed first. The items and
estimated costs are based on that certain Property Condition Report by EMG dated
May 11, 2000 (the "EMG Report"). The scope of each item shall be defined as
described in the EMG Report.
Repair Item Estimated Cost Cumulative Cost
--------------------------------------------------------------------------------
Asbestos abatement 96,000 96,000
Lead abatement 48,000 144,000
Reconstruct south wall 65,000 209,000
New roof on 1900 section 45,000 254,000
Rafter and soffit repair 20,000 274,000
Fascia and gutter repair 10,000 284,000
Point and clean brick veneer 6,000 290,000
Caulk and seal exterior walls 35,000 325,000
Remove ext. doors and replace 18,000 343,000
with windows
Replace window units 8,000 351,000
Electrical upgrade 8,000 359,000
ADA accessibility 14,630 373,630
Fire suppression system 12,000 385,630
Repair interior water damage 4,000 389,630
Asphalt repair 4,250 393,880
Asphalt overlay 12,600 406,480
EXHIBIT "F"
LIST OF DELINQUENCIES OR DEFAULTS TO BE CURED OR WAIVED
====================================================================================================================================
1 2 3
------------------------------------------------------------------------------------------------------------------------------------
Property(1) Waived To Be Cured by Closing To Be Cured After Closing
------------------------------------------------------------------------------------------------------------------------------------
Heritage Xxxxx Tenant quarterly statements Verify payment of past due
through 6/30/00. water and sewer bills per
June 13, 2000 notice.
------------------------------------------------------------------------------------------------------------------------------------
Audited annual Tenant
statements for 1998 and 1999.
------------------------------------------------------------------------------------------------------------------------------------
Willowbrook Tenant quarterly statements Real estate taxes of None
through 6/30/00. $27,447.50 paid by ETOP
for Tenant.
------------------------------------------------------------------------------------------------------------------------------------
Audited annual Tenant
statements for 1998 and 1999.
------------------------------------------------------------------------------------------------------------------------------------
Riverview Ridge Tenant quarterly statements None Audited annual Tenant
through 6/30/00. statements for 1998
and 1999.
------------------------------------------------------------------------------------------------------------------------------------
Highgate None Occupancy reserve funding None
as agreed upon in Section 14
of this Master Agreement.
------------------------------------------------------------------------------------------------------------------------------------
Real estate taxes of
$8,914.98 paid by ETOP
for Tenant.
------------------------------------------------------------------------------------------------------------------------------------
Pleasant View Tenant quarterly statements None None
through 6/30/00.
------------------------------------------------------------------------------------------------------------------------------------
Audited annual Tenant
statements for 1998 and 1999.
====================================================================================================================================
====================================================================================================================================
1 2 3
------------------------------------------------------------------------------------------------------------------------------------
Property Waived To Be Cured by Closing To Be Cured After Closing
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxxx Tenant quarterly statements Failure to receive electrical Final release of liens
(Liberty Court) through 6/30/00. permit for recent expansion. from general and major
subcontractors for recent
expansion.
------------------------------------------------------------------------------------------------------------------------------------
Audited annual Tenant Building
statements for 1998 and 1999. encroachment onto
right-of-way.
------------------------------------------------------------------------------------------------------------------------------------
Commencement of Satisfy judgments on
construction of recent adjacent Geriatric and
expansion without Landlord's Medical Services land.
consent.
------------------------------------------------------------------------------------------------------------------------------------
Satisfy $10,000
judgment on the
original Xxxxxxxxxxx
property.
------------------------------------------------------------------------------------------------------------------------------------
Certificate of occupancy
------------------------------------------------------------------------------------------------------------------------------------
Current license
------------------------------------------------------------------------------------------------------------------------------------
Record drawings
------------------------------------------------------------------------------------------------------------------------------------
Certificate of
substantial completion
------------------------------------------------------------------------------------------------------------------------------------
Lopatcong Tenant quarterly statements Certification of all
through 6/30/00. required quarterly reports
from December 31, 1999
through June 30, 2000.
------------------------------------------------------------------------------------------------------------------------------------
Audited annual Tenant Immediate repair
statements for 1998 and 1999. documentation for XX
Xxxxxx financing.
------------------------------------------------------------------------------------------------------------------------------------
$8,000 in financial reporting
charges assessed on May 22, 2000.
------------------------------------------------------------------------------------------------------------------------------------
Phillipsburg Tenant quarterly statements None Completing the repairs
through 6/30/00. and environmental remediation
as agreed upon in Section
12 of this Master Agreement.
------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
1 2 3
------------------------------------------------------------------------------------------------------------------------------------
Property Waived To Be Cured by Closing To Be Cured After Closing
------------------------------------------------------------------------------------------------------------------------------------
Audited annual Tenant
statements for 1998 and 1999.
------------------------------------------------------------------------------------------------------------------------------------
"Xxxxxxxx 0" Xxxx Paying all personal property Audited 1999 financial
taxes due statements of Meridian
Healthcare, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Certified quarterly and
year-to-date statements
of the property operations
(on an individual property
basis) for each quarter
dating back to the
December 31, 1998 quarter.
------------------------------------------------------------------------------------------------------------------------------------
Unaudited quarterly
income statements and
balance sheet of Tenant
for each quarter dating
back to December 31, 1998.
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Center Unaudited quarterly income None Certified quarterly and
statements and balance sheet of year-to-date statements of
Tenant for each quarter dating the property operations (on
back to December 31, 1998. an individual property
basis) for each quarter
dating back to the December
31, 1998 quarter.
------------------------------------------------------------------------------------------------------------------------------------
Delaware County None Payment of all rent due; None
Memorial Hospital currently estimated to be
("DCMH") Medical $9,808.56.
Office Building ("MOB") -
Neighborcare Suite
====================================================================================================================================
====================================================================================================================================
1 2 3
------------------------------------------------------------------------------------------------------------------------------------
Property Waived To Be Cured by Closing To Be Cured After Closing
------------------------------------------------------------------------------------------------------------------------------------
Harbor Place Previous late payments Placing the Limited None
Partnership (Borrower) back
in good standing with the
State of Florida.
------------------------------------------------------------------------------------------------------------------------------------
Debt maturity
------------------------------------------------------------------------------------------------------------------------------------
Coquina Place Previous late payments Release of landscape Consent by Lot 2
contractor mechanics lien owner to a 7.8 foot
with Southern Oaks Ground building encroachment.
Covering Inc. in the amount
of $3,602.56.
------------------------------------------------------------------------------------------------------------------------------------
Debt maturity
------------------------------------------------------------------------------------------------------------------------------------
Oaks Previous late payments $200,000 Open-End None
Mortgage from Wyncote
Healthcare Corp. to Chapter
Ltd. Partnership, dated
August 8, 1991, recorded
August 16, 1991 in
Mortgage Book 6747
page 1288.
------------------------------------------------------------------------------------------------------------------------------------
Debt maturity
------------------------------------------------------------------------------------------------------------------------------------
Mifflin Previous late payments $20,250,000 Mortgage and None
Fixture Filing and Security
Agreement by and between
Philadelphia Avenue
Associates and Home Fed
Bank, dated May 14, 1990
and recorded in Volume
2139 page 1831.
------------------------------------------------------------------------------------------------------------------------------------
Debt maturity
====================================================================================================================================
EXHIBIT "G"
LIST OF WARRANTIES AND REPRESENTATIONS UNDER GHV LOANS
Each of the Genesis Entities which is a party to any of the GHV Loans hereby
represents and warrants as of the date of this Agreement that it has no
knowledge of any matter that would have a material adverse effect on the
collateral for the GHV Loans or on the GHV Loans.
EXHIBIT "H"
THIRD QUARTER FINANCIAL STATEMENTS OF ET
--------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Xxxx One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] 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: 001-13807
---------
ElderTrust
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 00-0000000
---------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or
organization)
000 Xxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxxx, XX 00000
---------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(000) 000-0000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check xxxx 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.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at November 10, 2000
------------------------------------- --------------------------------
Common shares of beneficial interest, 7,119,000
$0.01 par value per share
Exhibit index is located on page 37
ELDERTRUST
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
Page
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999......................................................... 1
Condensed Consolidated Statements of Operations for the three
and nine months ended September 30, 2000 and 1999......................... 2
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999.................................. 3
Notes to Unaudited Condensed Consolidated Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 34
PART II: OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.................................................... 35
Item 6. Exhibits and Reports on Form 8-K................................................... 35
SIGNATURES........................................................................................... 36
EXHIBIT INDEX........................................................................................ 37
i
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
ELDERTRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
September 30, December 31,
2000 1999
------------- ------------
ASSETS
Assets:
Real estate properties, at cost $165,719 $165,206
Less - accumulated depreciation (14,565) (10,180)
Land 16,693 16,655
-------- --------
Net real estate properties 167,847 171,681
Real estate loans receivable, net of allowance of $18,106 and $0, respectively 30,540 48,646
Cash and cash equivalents 2,925 3,605
Restricted cash 7,633 7,194
Accounts receivable, net 373 629
Accounts receivable from unconsolidated entities 2,073 1,068
Prepaid expenses 412 1,000
Investment in and advances to unconsolidated entities, net of allowance of
$1,187 and $0, respectively 19,714 31,129
Other assets, net of accumulated amortization and depreciation of $2,673 and
$2,148, respectively 1,471 1,530
-------- --------
Total assets $232,988 $266,482
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank credit facility $38,977 $39,670
Accounts payable and accrued expenses 1,380 1,535
Accounts payable to unconsolidated entities 872 13
Mortgages and bonds payable 108,141 109,005
Notes payable to unconsolidated entities 1,032 1,079
Other liabilities 3,482 3,751
-------- --------
Total liabilities 153,884 155,053
-------- --------
Minority interest 5,736 7,989
Shareholders' Equity:
Preferred shares, $.01 par value; 20,000,000 shares authorized; none
outstanding -- --
Common shares, $.01 par value; 100,000,000 shares authorized; 7,119,000 shares
issued and outstanding 71 71
Capital in excess of par value 119,106 119,106
Distributions in excess of earnings (45,809) (14,747)
Note receivable from former officer for common shares sold, net -- (990)
-------- --------
Total shareholders' equity 73,368 103,440
-------- --------
Total liabilities and shareholders' equity $232,988 $266,482
======== ========
See accompanying notes to unaudited condensed consolidated
financial statements.
1
ELDERTRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenues:
Rental revenues $4,692 $4,662 $14,058 $13,884
Interest, net of amortization of deferred loan
origination costs 491 1,350 2,801 4,368
Interest from unconsolidated equity investees 771 959 2,482 2,850
Other income 37 51 155 90
-------- -------- -------- --------
Total revenues 5,991 7,022 19,496 21,192
-------- -------- -------- --------
Expenses:
Property operating expenses 244 277 852 848
Interest expense, including amortization of
deferred finance costs 3,561 3,422 10,448 9,578
Depreciation 1,458 1,439 4,399 4,332
General and administrative 649 564 2,661 2,026
Bad debt expense 15 -- 20,282 --
Separation agreement expenses -- -- -- 2,800
-------- -------- -------- --------
Total expenses 5,927 5,702 38,642 19,584
-------- -------- -------- --------
Net income (loss) before equity in losses of
unconsolidated entities, minority interest and
extraordinary items 64 1,320 (19,146) 1,608
Equity in losses of unconsolidated entities, net (688) (657) (9,570) (1,877)
Minority interest 40 (46) 1,926 13
-------- -------- -------- --------
Net income (loss) before extraordinary item (584) 617 (26,790) (256)
Extraordinary item:
Extinguishment of debt -- (1,296) -- (1,296)
Minority interest in extraordinary item -- 86 -- 86
-------- -------- -------- --------
Net loss ($584) ($593) ($26,790) ($1,466)
======== ======== ======== ========
Basic and diluted weighted average number of common
shares outstanding 7,119 7,201 7,119 7,206
======== ======== ======== ========
Net income (loss) per share before extraordinary item
- basic and diluted ($0.08) $0.09 ($3.76) ($0.04)
======== ======== ======== ========
Net loss per share - basic and diluted ($0.08) ($0.08) ($3.76) ($0.20)
======== ======== ======== ========
See accompanying notes to unaudited condensed consolidated
financial statements.
2
ELDERTRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine months ended
September 30,
-------------------------
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($26,790) ($1,466)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 4,999 5,707
Provision for bad debts 20,282 --
Extraordinary loss on extinguishment of debt -- 1,296
Non-cash separation expense from debt forgiveness to officer -- 2,600
Minority interest and equity in losses from unconsolidated entities 7,644 1,778
Net changes in assets and liabilities:
Accounts receivable and prepaid expenses (932) 2,735
Accounts payable and accrued expenses 704 421
Other 440 (105)
-------- --------
Net cash provided by operating activities 6,347 12,966
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate loans receivable -- (5,096)
Payments received on real estate loans receivable -- 4,247
Capital expenditures (112) (1,656)
Proceeds from collection on advances to unconsolidated entities 659 720
Net increase in reserve funds and deposits - restricted cash (887) (2,610)
Other -- 161
-------- --------
Net cash used in investing activities (340) (4,234)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred financing fees (484) (2,004)
Borrowings under Credit Facility -- 9,518
Payments under Credit Facility (693) (23,790)
Proceeds from mortgages payable -- 32,695
Payments on mortgages and bonds payable (864) (11,218)
Payments on notes payable -- (3,000)
Distributions to shareholders (4,272) (7,885)
Distributions to minority interests (327) (562)
Repurchases of common shares -- (424)
Prepayment penalty on mortgage loan -- (1,157)
Other (47) (95)
-------- --------
Net cash used in financing activities (6,687) (7,922)
-------- --------
Net increase (decrease) in cash and cash equivalents (680) 810
Cash and cash equivalents, beginning of period 3,605 2,272
-------- --------
Cash and cash equivalents, end of period $2,925 $3,082
======== ========
Supplemental cash flow information:
Cash paid for interest $9,957 $8,484
See accompanying notes to unaudited condensed consolidated
financial statements.
3
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of ElderTrust and its consolidated subsidiaries ("ElderTrust" or the "Company")
have been prepared assuming the Company will continue as a going concern. As
discussed in Note 2, Genesis Health Ventures, Inc. ("Genesis"), the Company's
principal tenant, The Multicare Companies, Inc., a 43.6% owned consolidated
subsidiary of Genesis, ("Multicare") and several of their subsidiaries have
filed for reorganization under the provisions of Chapter 11 of the Bankruptcy
Reform Act of 1978 ("Bankruptcy Code"). In addition, the Company has a working
capital deficit of $59.1 million at September 30, 2000, resulting primarily from
the classification of its bank credit facility (the "Credit Facility") with an
outstanding balance of $39.0 million at September 30, 2000 as current based on
its maturity date of June 30, 2001, the classification of two bonds payable
totaling $20.0 million at September 30, 2000 as current based on the Company's
failure since June 30, 2000 to meet the minimum net worth and interest coverage
requirements under guarantee agreements relating to the underlying mortgages and
the classification of one mortgage payable with an outstanding balance of $2.8
million at September 30, 2000 as current based on the bankruptcy filing by
Genesis. The Company also continued not to meet the minimum tangible net worth,
the minimum net asset value and the interest coverage ratio requirements under
the Credit Facility at September 30, 2000.
The interim condensed consolidated financial statements do not include
all of the footnotes for complete financial statements. The December 31, 1999
condensed consolidated balance sheet was derived from audited financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation of the financial statements for the interim periods
presented have been included. Operating results for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the full fiscal year ending December 31, 2000. Certain amounts
included in the unaudited condensed consolidated financial statements as of and
for the three and nine months ended September 30, 1999 have been reclassified
for comparative purposes.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended December 31, 1999 included in the Company's
Form 10-K filed with the Securities and Exchange Commission.
2. Certain Significant Risks and Uncertainties
Genesis and Multicare Bankruptcy Filings
On June 22, 2000, Genesis and Multicare announced that they had filed
for Chapter 11 bankruptcy protection following debt restructuring discussions
with their senior lenders.
4
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
Approximately 70% of the Company's consolidated assets at September 30,
2000 consisted of real estate properties leased to or managed by subsidiaries of
Genesis and loans on real estate properties made to consolidated and
unconsolidated subsidiaries of Genesis or Multicare. Revenues recorded by the
Company for the nine months ended September 30, 2000 in connection with these
leases and loans totaled $12.9 million, or 66% of the Company's total revenues.
In addition, certain unconsolidated entities of the Company, accounted for under
the equity method, also lease properties to these entities and recognized
revenues of $9.7 million for the same period. The Company's investments in and
advances to such unconsolidated entities totaled $16.2 million at September 30,
2000.
Included in the Company's consolidated assets at September 30, 2000 are
$19.5 million in loans to wholly-owned subsidiaries of Multicare. These loans
are secured by real estate and 20% of the principal balance is guaranteed by
Multicare. The loans have a weighted average annual interest rate of 10.5%.
ElderTrust also has $14.8 million in loans to wholly-owned subsidiaries of
Genesis. These loans are secured by real estate and a 100% guarantee by Genesis.
The loans have a weighted average annual interest rate of 9.3%.
As a result of the Genesis and Multicare bankruptcy filings, the
borrowers ceased making interest payments to the Company during June 2000. It is
not expected that the borrowers on these loans will be permitted to make further
interest payments to the Company unless such payments are approved by the
bankruptcy court. During the bankruptcy reorganization process, the Company will
retain its security position in the collateral underlying the loans. Ultimate
recovery under the loans is dependent upon the value of the assets securing the
loans, which may be determined by the bankruptcy court. To the extent the loan
balance exceeds such collateral, recovery of the difference will be dependent on
the general unsecured creditors' recovery on their prepetition claims. See Note
3 for discussion of the allowance for loan losses recorded by the Company in
relation to these loans.
In addition, a tenant in bankruptcy has the ability to reject executory
contracts, including leases, to which they are a party. In the period before a
lessee elects whether to assume or reject a lease, lessees in bankruptcy are
required to continue to make lease payments. If Genesis rejects one or more of
the leases, the Company would be required to re-lease, operate or sell the
property subject to the rejected leases. Any such alternative may significantly
decrease the Company's cash flow and could significantly and adversely affect
its financial condition and results of operations. If the Company were required
to operate one or more of the properties, it may have insufficient cash flow to
do so. Alternatively, a debtor may assume a lease, in which case it is required
to continue making lease payments.
5
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
As Genesis and Multicare are not currently permitted to make interest
payments to ElderTrust under bankruptcy filing rules, the Company's cash flow
has been significantly reduced. As a result, the Company has suspended further
distributions to its shareholders. The Company believes the distributions made
to shareholders to-date during 2000 will be sufficient to satisfy its REIT
distribution requirements for 2000. The Company believes that it can continue to
meet its debt service requirements after giving effect to this reduction in cash
flow; however, any further reduction in cash flow would significantly and
adversely affect the Company's ability to continue to meet its debt service
requirements and could further significantly and adversely affect its financial
condition and results of operations.
Liquidity
The Company has a working capital deficit of $59.1 million at September
30, 2000, resulting primarily from the classification of the Credit Facility
with an outstanding balance of $39.0 million at September 30, 2000 as current
based on its maturity date of June 30, 2001, the classification of two bonds
payable totaling $20.0 million at September 30, 2000 as current based on the
Company's failure since June 30, 2000 to meet the minimum net worth and interest
coverage requirements under guarantee agreements relating to the underlying
mortgages and the classification of one mortgage payable with an outstanding
balance of $2.8 million at September 30, 2000 as current based on the bankruptcy
filing by Genesis. The Company also continued not to meet the minimum tangible
net worth, the minimum net asset value and the interest coverage ratio
requirements under the Credit Facility at September 30, 2000. If the Company is
unable to pay-off or obtain replacement financing of the Credit Facility by June
30, 2001, or is unable to negotiate a further extension of the current Credit
Facility at that time, or the Company is unable to obtain waivers of the failed
covenants or a forbearance agreement from the lender, the bank could exercise
its right to foreclose on the collateral securing the Credit Facility. If the
Company is unable to obtain waivers of the failed covenants under the bonds and
mortgage payable or a forbearance agreement from the lenders, the lenders could
exercise their rights to accelerate the related indebtedness or foreclose on the
underlying collateral immediately. Foreclosure by the lenders would have a
significant adverse affect on the Company's ability to continue its operations.
The unaudited financial statements do not include adjustments, if any,
to reflect the possible effects on the recoverability and classification of
recorded assets or the amounts and classification of liabilities that may result
from the outcome of the uncertainties related to the matters discussed above
under "Genesis and Multicare Bankruptcy Filings" and "Liquidity."
6
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Real Estate Loans Receivable
The following is a summary of real estate loans receivable (dollars in
thousands):
Stated Scheduled Balance at Balance at
Type of Interest Maturity September 30, December 31,
Property Loan Rate Date 2000 1999
--------------------------------------- ------------- ---------- ---------- ------------- -------------
Harbor Place Melbourne, FL Term 9.5% 6/2000 $ 4,828 $ 4,828(1)
Mifflin Shillington, PA Term 9.5% 6/2000 5,164 5,164(2)
Coquina Place Ormond Beach, FL Term 9.5% 6/2000 4,577 4,577(2)
Lehigh Macungie, PA Term 10.5% 6/2000 6,665 6,665(2)
Berkshire Reading, PA Term 10.5% 6/2000 6,167 6,167(2)
Oaks Wyncote, PA Construction 9.0% 1/2001 5,033 5,033(2)
Montchanin Wilmington, DE Construction 10.5% 8/2000 9,496 9,496(3)
Sanatoga Pottstown, PA Construction 10.5% 1/2001 6,716 6,716(2)
------- -------
48,646 48,646
Allowance for credit losses (18,106) -
------- -------
$30,540 $48,646
======= =======
---------------
(1) This loan went into default on June 22, 2000 when the loan was not repaid
by the borrower upon its maturity. Genesis is the manager of the facility.
(2) These loans went into default on June 22, 2000 when the borrowers ceased
making interest payments to the Company. See Note 2.
(3) This loan went into default on August 1, 2000 when the loan was not repaid
upon its maturity.
The unfunded portion of the Company's construction loan commitments
amounted to $347,000 and $352,000 at September 30, 2000 and December 31, 1999,
respectively. Due to certain defaults by the borrowers under the loan
agreements, the Company believes it is no longer obligated to provide any
further funding.
The Company previously was obligated, or had an option, to purchase and
leaseback, upon the maturity of the related loan or the facility reaching
stabilized occupancy, the eight assisted living facilities underlying the term
and construction loans. The Company believes it is no longer bound by the
purchase and leaseback obligations contained in seven of the loan documents
because the borrowers have, from time to time, not complied with all loan
provisions. The Company did not exercise its option to purchase the remaining
facility, Montchanin, upon its August 1, 2000 maturity date. The Company has
declared this loan, with a principal balance of $9.5 million at September 30,
2000, in default and is pursuing its remedies to collect the amounts due.
The four term loans secured by the Mifflin, Coquina Place, Lehigh and
Berkshire facilities, with a principal balance of $8.9 million at September 30,
2000, net of allowance for credit losses, matured on June 28, 2000. In addition,
the loan secured by the Sanatoga facility went into default as a result of the
bankruptcy filing by Genesis. Due to the Chapter 11 bankruptcy filings by
Genesis and Multicare, the Company is prohibited from pursuing collection on
these loans.
7
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
In addition, the Company had one loan in the amount of $4.8 million
with an annual interest rate of 9.50%, secured by the Harbor Place facility, to
an entity in which Genesis accounts for its investment using the equity method
of accounting, which was not included in the June 22, 2000 bankruptcy filing.
This loan matured on June 22, 2000. The Company has declared this loan in
default and this transaction's resolution is currently under negotiation with
the borrower and Genesis, the property manager. Due to certain defaults by the
borrower under the loan agreement, a default interest rate, which equals 2% plus
the stated interest rate, is being assessed on this loan.
As previously disclosed, the Company, Genesis and Multicare have been
discussing a proposed restructuring of the loans and other relationships among
the parties. These discussions are continuing. Any restructuring is subject to
approval by the Boards of the Company, Genesis and Multicare and the bankruptcy
court. No assurance can be given that the proposed restructuring will be
completed.
Based on the Company's assessment of the collateral value underlying
the loans as compared to the net book value of the loans, the Company recorded
an allowance for credit losses of $18.1 million during the nine months ended
September 30, 2000.
4. Investments in Unconsolidated Entities
The Company has several investments in entities in which the
controlling interest is owned by Mr. D. Xxx XxXxxxxx, Xx., the Company's
President, Chief Executive Officer and Chief Financial Officer. Xx. XxXxxxxx
owns all of the voting interest in ET Capital Corp., representing a 5% equity
interest. Xx. XxXxxxxx also owns a 1% general partner interest in ET
Sub-Meridian, LLP and a 1% managing member interest in ET Sub-Xxxxxx Court, LLC,
ET Sub-Cabot Park, LLC and ET Sub-Cleveland Circle, LLC, through a limited
liability company of which he is the sole member. As the Company also has an
option to acquire Xx. XxXxxxxx'x 1% managing interest in ET Sub-Xxxxxx Court,
LLC for a nominal amount, this company is consolidated into the Company's
condensed consolidated financial statements at September 30, 2000.
8
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
Summary combined financial information as of and for the nine months
ended September 30, 2000 for these unconsolidated entities is as follows
(dollars in thousands):
ET ET Sub- ET
Sub-Meridian, ET Capital Cabot Sub-Cleveland
LLP Corp. Park, LLC Circle, LLC Total
------------- ---------- --------- -------------- --------
Current assets $310 $535 $126 $135 $1,106
Real estate properties (1) 103,912 - 16,695 13,782 134,389
Notes receivable - 4,409 - - 4,409
Other assets 1,301 - 541 513 2,355
Total assets 105,523 4,944 17,362 14,430 142,259
Current liabilities 2,174 640 679 739 4,232
Long-term debt (2) 105,757 9,291 16,769 13,584 145,401
Total deficit (4,116) (4,988) (355) (119) (9,578)
Rental revenue 7,350 - 1,232 1,088 9,670
Interest income, ElderTrust (3) - 477 - - 477
Interest income, other 19 256 30 28 333
Interest expense, ElderTrust (3) 1,605 591 412 238 2,846
Interest expense, other 4,950 - 621 555 6,126
Depreciation/amortization 2,634 118 420 346 3,518
Bad debt expense - 7,800 - - 7,800
Net loss (1,863) (7,860) (215) (47) (9,985)
Percent ownership 99% 95% 99% 99%
---------------
(1) Includes properties under capital lease.
(2) Includes capital lease obligations.
(3) Includes ElderTrust and its unconsolidated subsidiaries.
As of September 30, 2000, ET Capital Corp. ("ET Capital") owned a $7.8
million second trust mortgage note executed by AGE Institute of Florida, which
it acquired from Genesis during 1998. This note is secured by a second lien on
11 Florida skilled nursing facilities owned by AGE Institute of Florida and a
second lien on accounts receivable and other working capital assets. The
facilities are managed by subsidiaries of Genesis. This note matures on
September 30, 2008 with payments of interest only, at a fixed annual rate of 13%
due quarterly until the note is paid in full. The borrower ceased making
interest payments to ET Capital during the quarter ended June 30, 2000.
In June 2000, the senior lender on the $40.0 million first trust
mortgage to the AGE Institute of Florida notified ET Capital that the borrower
was in default of the first trust mortgage due to a default by Genesis, the
guarantor, under an amendment to the loan agreement and that no forbearance or
waiver of such default has been granted. Additionally, the senior lender is
seeking recovery from ET Capital of an interest payment totaling approximately
$250,000 received by ET Capital from the AGE Institute of Florida in April 2000,
for the quarter ended March 31, 2000.
9
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
The AGE Institute of Florida has been working to obtain replacement
financing of the $40.0 million first trust mortgage loan. If the AGE Institute
of Florida is unable to refinance the $40.0 million first trust loan, or is
otherwise unable to reach acceptable extension terms with the senior lender, the
senior lender may take actions to recover its investment in such first trust
loan. ET Capital has no control over the actions of the senior lender and such
actions could be unfavorable to ET Capital.
Management of ET Capital has determined, based on a decrease in the
underlying cash flows generated by the properties securing the note, the value
of the underlying collateral may not be sufficient to satisfy the borrowers'
obligation under the note. As a result, a bad debt allowance of $7.8 million was
recorded by ET Capital during the nine months ended September 30, 2000. The
Company recorded 95% of this loss based on its 95% equity interest in ET
Capital, which reduces its investment and advances to ET Capital.
ET Capital's long-term debt includes two demand promissory notes
payable to the Company aggregating $5.9 million at September 30, 2000 in
connection with the above second mortgage transaction. These notes bear interest
at a weighted average rate of 12.1% per annum with interest only payable
quarterly. ET Capital ceased making interest payments to the Company during the
quarter ended June 30, 2000. Management of the Company has determined that these
notes are fully impaired at September 30, 2000. The Company recorded an
impairment loss of $1.2 million against the remaining balance of these notes
during the nine months ended September 30, 2000.
As of September 30, 2000, ET Sub-Meridian owns the leasehold and
purchase option rights to seven skilled nursing facilities located in Maryland
and New Jersey, which it purchased from Genesis for $35.5 million in cash and
issuance of $8.5 million in term loans during September 1998. The purchase
options are exercisable by ET Sub-Meridian in September 2008 for a cash exercise
price of $66.5 million. The $8.5 million promissory note bears interest at an
annual rate of 8.0% for the first year, 9.0% for the second year and 10.0% for
remainder of the term of the note, with interest payable monthly through
September 3, 2003. The note is guaranteed by the Company and may be in default
due to ET Sub-Meridian's failure to make a principal payment of $3.0 million due
on September 3, 1999. However, ET Sub-Meridian and the Company believe that
Genesis agreed to extend the principal payment due on September 3, 1999 until
the maturity date of September 3, 2003. The Company, ET Sub-Meridian and Genesis
are working to resolve the dispute. Any agreement reached by the parties will be
subject to bankruptcy court approval. The Company does not have sufficient cash
available to satisfy the guarantee if it were required to do so.
ET Sub-Meridian, whose ownership of the facilities is in the form of a
capital lease, subleased the facilities to Genesis for an initial ten-year
period with a ten-year renewal option. The nominal property owner has encumbered
the properties with mortgage loan financing. These loans are in default as a
result of the Genesis bankruptcy filing. The Company is assisting the nominal
owner in obtaining waivers of these defaults.
10
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Credit Facility
At September 30, 2000, the Company had $39.0 million outstanding under
the Credit Facility. The interest rate on borrowings outstanding under the
Credit Facility at September 30, 2000 was 9.44%, 2.75% over one-month LIBOR.
There were no borrowings under the $5.75 million revolving credit portion of the
Credit Facility at September 30, 2000. Any such borrowings are subject to prior
approval from the issuing bank.
The Company is currently seeking a waiver for its failure to meet the
minimum tangible net worth, minimum net asset value and minimum interest
coverage ratio requirements under the Credit Facility at September 30, 2000 and
June 30, 2000, principally resulting from the bad debt charges recorded on real
estate loans receivable (see Note 3), investments in and advances to
unconsolidated entities (see Note 4) and a note receivable from a former officer
of the Company and certain other assets (see Note 7) during the second quarter
of 2000.
On January 3, 2000, the term of the Credit Facility was extended from
January 1, 2000 to June 30, 2001 through an amendment which also reduced
borrowings available under the Credit Facility to $45.4 million. The Company
paid financing fees and other related costs of approximately $484,000 for the
nine months ended September 30, 2000, primarily in connection with the January
3, 2000 amendment to the Credit Facility. Unamortized deferred financing costs
in connection with the Credit Facility and mortgages payable aggregated
approximately $1.4 million at September 30, 2000. Deferred financing costs of
$464,000 were amortized during the nine months ended September 30, 2000 and
included as a component of interest expense.
11
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Loss Per Share
The following table sets forth the computation of basic and diluted
loss per share for the periods indicated (in thousands, except per share data):
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- ---------------------------
2000 1999 2000 1999
------ ------ -------- ---------
Net loss available for basic and diluted loss
per share ($584) ($593) ($26,790) ($1,466)
====== ====== ======== =========
Weighted average common shares outstanding for
basic and diluted net loss per share 7,119 7,201 7,119 7,206
====== ====== ======== =========
Basic and diluted net loss per share ($0.08) ($0.08) ($3.76) ($0.20)
====== ====== ======== =========
The effect of outstanding share options is antidilutive and thus not
reflected in the determination of weighted average common shares outstanding for
the diluted net loss per share calculation. The operating partnership units are
not included in the determination of weighted average common shares outstanding
since they are not considered to be common share equivalents as they are
redeemable for cash at the Company's discretion.
7. Other Charges
During the second quarter of 2000, the Company recorded bad debt
charges of approximately $990,000 related to a note receivable from a former
officer of the Company.
In addition, the Company wrote-off $682,000 of costs incurred in
connection with property due diligence for investment transactions that were not
completed because of adverse conditions in the capital markets and the June 22,
2000 Chapter 11 filings of Genesis and Multicare. These write-offs are included
as a component of general and administrative expenses.
8. NYSE Listing Criteria
On September 22, 2000, ElderTrust announced that it had been notified
by the New York Stock Exchange ("NYSE") that is has fallen below the continued
listing criteria relating to total market capitalization and minimum share
value.
Under the market capitalization requirement, the Company's market
capitalization must meet or exceed $15 million. Under the NYSE rules, the NYSE
may grant a period of up to 18 months ending February 10, 2002 during which the
Company would need to meet the requirement. The Company has formally requested
that this time period be granted and has submitted a business plan to the NYSE
to demonstrate its ability to achieve compliance with this standard. If the plan
is accepted, the Company will be subject to quarterly monitoring by the NYSE in
the interim period. The Company has not been notified by the NYSE if the plan
has been accepted.
12
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
Under the minimum share value requirement, the Company's shares must
trade at a value exceeding $1 for thirty consecutive trading days. As a result
of the notification, the Company must meet this requirement by the later of
either its next annual meeting, currently scheduled for May 2001, or March 20,
2001 to retain its listing.
9. Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure the instrument at
fair value. The accounting for changes in the fair value of a derivative depends
on the intended use of the derivative and the resulting designation. SFAS No.
133 and subsequent amendments, SFAS No. 137 and SFAS No. 138, are effective for
the Company on January 1, 2001. The Company does not expect the adoption of
Statement 133 to have a material adverse impact on the Company's financial
condition or results of operations because the Company does not use derivative
instruments other than interest rate cap agreements.
13
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains certain forward-looking statements with respect to
results of operations and financial condition of ElderTrust and its consolidated
subsidiaries (collectively, "ElderTrust" or the "Company"). In general, these
statements are identified by the use of forward-looking words or phrases,
including "intended," "will," "should," "could," "may," "continues,"
"continued," "estimate," "estimated," "expects," "expected," "believes,"
"anticipates" and "anticipated" or the negative or variations thereof or similar
terminology. These statements are not guarantees of the Company's future
performance and are subject to risks and uncertainties, and other important
factors that could cause the Company's actual performance or achievements to be
materially different from those expressed or implied by these forward-looking
statements. These risks, uncertainties and factors include, but are not limited
to:
o the ability of Genesis Health Ventures, Inc. ("Genesis"), the
Company's principal tenant, and The Multicare Companies, Inc., a
43.6% owned consolidated subsidiary of Genesis, ("Multicare") to
resume making loan payments and continue making lease payments to the
Company;
o the outcome of the Genesis and Multicare bankruptcy proceedings;
o the Company's ability to pay-off or refinance its bank credit
facility (the "Credit Facility) when it becomes due on June 30, 2001;
o the Company's ability to cure its failure to meet debt covenants or
obtain waivers from its lenders;
o the NYSE acceptance of the Company's business plan;
o interest rates;
o availability, terms and use of capital;
o general economic, business and regulatory conditions;
o federal and state government regulation;
o changes in Medicare and Medicaid reimbursement programs; and
o competition.
Refer to the Company's annual report on Form 10-K for the year ended
December 31, 1999 for a discussion of these and other factors which management
believes may impact the Company. The forward-looking statements included herein
represent the Company's judgment as of the date of this Form 10-Q and should be
read in conjunction with the unaudited condensed consolidated financial
statements and notes thereto appearing elsewhere in this report. Although the
Company believes that the expectations reflected in these forward-looking
statements are reasonable, there can be no assurance that such expectations will
prove to be correct. All subsequent written and oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by the
cautionary statements. The Company disclaims, however, any intent or obligation
to update its forward-looking statements.
14
General
The Company is a self-managed and self-administered real estate
investment trust ("REIT") that invests principally in senior housing and other
healthcare facilities, including skilled nursing facilities, assisted and
independent living facilities and medical office and other buildings. The
Company conducts primarily all of its operations through ElderTrust Operating
Limited Partnership (the "Operating Partnership"), of which ElderTrust is the
sole general partner. The Company's consolidated assets consist primarily of the
assets of the Operating Partnership and its consolidated subsidiaries. As of
September 30, 2000, skilled nursing, assisted and independent living facilities
comprised approximately 93% of the Company's consolidated investments in real
estate properties and loans. Approximately 70% of the Company's consolidated
assets at September 30, 2000 consisted of real estate properties leased to or
managed by subsidiaries of Genesis and loans on real estate properties made to
consolidated and unconsolidated subsidiaries of Genesis or Multicare.
On June 22, 2000, Genesis and Multicare announced that they had filed
for Chapter 11 bankruptcy protection following debt restructuring discussions
with their senior lenders.
The accompanying unaudited condensed consolidated financial statements
of ElderTrust and its consolidated subsidiaries have been prepared assuming the
Company will continue as a going concern. As previously discussed, Genesis, the
Company's principal tenant, and Multicare have filed for reorganization under
the provisions of Chapter 11 of the Bankruptcy Reform Act of 1978 ("Bankruptcy
Code"). In addition, the Company has a working capital deficit of $59.1 million
at September 30, 2000, resulting primarily from the classification of its bank
credit facility (the "Credit Facility") with an outstanding balance of $39.0
million at September 30, 2000 as current based on its maturity date of June 30,
2001, the classification of two bonds payable totaling $20.0 million at
September 30, 2000 as current based on the Company's failure since June 30, 2000
to meet the minimum net worth and interest coverage requirements under guarantee
agreements relating to the underlying mortgages and the classification of one
mortgage payable with an outstanding balance of $2.8 million at September 30,
2000 as current based on the bankruptcy filing by Genesis. The Company also
continued not to meet the minimum tangible net worth, the minimum net asset
value and the interest coverage ratio requirements under the Credit Facility at
September 30, 2000. The unaudited financial statements do not include
adjustments, if any, to reflect the possible effects on the recoverability and
classification of recorded assets or the amounts and classification of
liabilities that may result from the outcome of the uncertainties related to the
foregoing matters.
15
Revenues recorded by the Company for the nine months ended September
30, 2000 in connection with leases and loans to Genesis and Multicare totaled
$12.9 million, or 66% of the Company's total revenues. In addition, certain
unconsolidated entities of the Company, accounted for under the equity method,
also lease properties to these entities and recognized revenues of $9.7 million
for the same period. The Company's investments in and advances to such
unconsolidated entities totaled $16.2 million at September 30, 2000.
As a result of these relationships, the Company's revenues and ability
to meet its obligations depends, in significant part, upon:
o the ability of Genesis and entities in which Genesis accounts for its
investment using the equity method of accounting ("Genesis Equity
Investees") to meet their lease and loan obligations;
o the outcome of the Genesis and Multicare bankruptcy proceedings; and
o the revenues derived from, and the successful operation of, the
facilities leased to or managed by Genesis or Genesis Equity
Investees.
Included in the Company's consolidated assets at September 30, 2000 are
$19.5 million in loans to wholly-owned subsidiaries of Multicare. These loans
are secured by real estate and 20% of the principal balance is guaranteed by
Multicare. The loans have a weighted average annual interest rate of 10.5%.
ElderTrust also has $14.8 million in loans to wholly-owned subsidiaries of
Genesis. These loans are secured by real estate and a 100% guarantee by Genesis.
The loans have a weighted average annual interest rate of 9.3%.
The four term loans secured by the Mifflin, Coquina Place, Lehigh and
Berkshire facilities, with a principal balance of $8.9 million at September 30,
2000, net of allowance for credit losses, matured on June 28, 2000. In addition,
the loan secured by the Sanatoga facility went into default as a result of the
bankruptcy filing by Multicare. Due to the June 22, 2000 Chapter 11 bankruptcy
filings by Genesis and Multicare, the Company is prohibited from pursuing
collection on these loans.
As previously disclosed, the Company, Genesis and Multicare have been
discussing a proposed restructuring of the loans and other relationships among
the parties. These discussions are continuing. Any restructuring is subject to
approval by the Boards of the Company, Genesis and Multicare and the bankruptcy
court. No assurance can be given that the proposed restructuring will be
completed.
As a result of the Genesis and Multicare bankruptcy filings, the
borrowers ceased making interest payments to the Company during June 2000. It is
not expected that the borrowers on these loans will be permitted to make further
interest payments to the Company unless such payments are approved by the
16
bankruptcy court. During the bankruptcy reorganization process, the Company will
retain its security position in the collateral underlying the loans. Ultimate
recovery under the loans is dependent upon the value of the assets securing the
loans, which may be determined by the bankruptcy court. To the extent the loan
balance exceeds such collateral, recovery of the difference will be dependent on
the general unsecured creditors' recovery on their prepetition claims. Based on
the Company's assessment of the collateral value underlying the loans as
compared to the net book value of the loans, the Company recorded an allowance
for credit losses of $18.1 million during nine months ended September 30, 2000.
In addition, a tenant in bankruptcy has the ability to reject executory
contracts, including leases, to which they are a party. In the period before a
lessee elects whether to assume or reject a lease, lessees in bankruptcy are
required to continue to make lease payments. If Genesis rejects one or more of
the leases, the Company would be required to re-lease, operate or sell the
property subject to the rejected leases. Any such alternative may significantly
decrease the Company's cash flow and could significantly and adversely affect
its financial condition and results of operations. If the Company were required
to operate one or more of the properties, it may have insufficient cash flow to
do so. Alternatively, a debtor may assume a lease, in which case it is required
to continue making lease payments.
As Genesis and Multicare are not currently permitted to make interest
payments to ElderTrust under bankruptcy filing rules, the Company's cash flow
has been significantly reduced. As a result, the Company has suspended further
distributions to its shareholders. The Company believes the distributions made
to shareholders to date during 2000 will be sufficient to satisfy its REIT
distribution requirements for 2000. The Company believes that it can continue to
meet its debt service requirements after giving effect to this reduction in cash
flow; however, any further reduction in cash flow would significantly and
adversely affect the Company's ability to continue to meet its debt service
requirements and could further significantly and adversely affect its financial
condition and results of operations.
The Company has a working capital deficit of $59.1 million at September
30, 2000, resulting primarily from the classification of the Credit Facility
with an outstanding balance of $39.0 million at September 30, 2000 as current
based on its maturity date of June 30, 2001, the classification of two bonds
payable totaling $20.0 million at September 30, 2000 as current based on the
Company's failure since June 30, 2000 to meet the minimum net worth and interest
coverage requirements under guarantee agreements relating to the underlying
mortgages and the classification of one mortgage payable with an outstanding
balance of $2.8 million at September 30, 2000 as current based on the bankruptcy
filing by Genesis. The Company also continued not to meet the minimum tangible
net worth, the minimum net asset value and the interest coverage ratio
requirements under the Credit Facility at September 30, 2000. If the Company is
unable to pay-off or obtain replacement financing of the Credit Facility by June
30, 2001, or is unable to negotiate a further extension of the current Credit
Facility at that time, or the Company is unable to obtain waivers of the failed
covenants or a forbearance agreement from the lender, the bank could exercise
its right to foreclose on the collateral securing the Credit Facility. If the
17
Company is unable to obtain waivers of the failed covenants under the bonds and
mortgage payable or a forbearance agreement from the lenders, the lenders could
exercise their rights to accelerate the related indebtedness or foreclose on the
underlying collateral immediately. Foreclosure by the lenders would have a
significant adverse affect on the Company's ability to continue its operations.
The Company has incurred indebtedness to acquire its assets and may
incur additional short and long-term indebtedness, and related interest expense,
from time to time. The Company has unfunded construction loan commitments at
September 30, 2000 of approximately $347,000 which, if required, it expects to
fund with cash flows from operations and funds available under the Credit
Facility. Due to certain defaults by the borrowers under the loan agreements,
the Company believes it is no longer obligated to provide any further funding.
The Company also was obligated, or had an option, to purchase eight assisted
living facilities underlying term or construction loans, which will generally be
leased back to the sellers pursuant to long-term leases. As previously
disclosed, the Company is currently negotiating with Genesis and Multicare to
restructure seven of these relationships. The Company did not exercise its
option to purchase the remaining facility upon its August 1, 2000 maturity date.
See "Liquidity and Capital Resources."
Substantially all of the Company's revenues are currently derived from
rents received under long-term leases of healthcare-related real estate.
The Company has incurred operating and administrative expenses, which
principally include compensation expense for its executive officers and other
employees, office rental and related occupancy costs.
The Company is self-administered and managed by its executive officers
and staff, and has not engaged a separate advisor or paid an advisory fee for
administrative or investment services, although the Company has engaged legal,
accounting, tax and financial advisors as needed from time to time.
The primary non-cash expenses of the Company are the depreciation of
its healthcare facilities, amortization of its deferred loan origination costs
and deferred financing costs.
Investments in Equity Investees
The Company's Equity Investees represent entities in which the
controlling interest is owned by Mr. D. Xxx XxXxxxxx, the Company's President,
Chief Executive Officer and Chief Financial Officer. As a result, the Company
records its investments in, and results of operations from, these entities using
the equity method of accounting in the unaudited condensed consolidated
financial statements included herein.
18
ET Capital Corp.
The Company has a nonvoting 95% equity interest in ET Capital. The
remaining voting 5% equity interest in ET Capital is owned by Xx. XxXxxxxx. As
of September 30, 2000, ET Capital owned a $7.8 million second trust mortgage
note executed by AGE Institute of Florida, which it acquired from Genesis during
1998. This note is secured by a second lien on 11 Florida skilled nursing
facilities owned by AGE Institute of Florida and a second lien on accounts
receivable and other working capital assets. The facilities are managed by
subsidiaries of Genesis. This note matures on September 30, 2008 with payments
of interest only, at a fixed annual rate of 13% due quarterly until the note is
paid in full. ET Capital recorded interest income on the note of $256,000 and
$769,000 during the nine months ended September 30, 2000 and 1999, respectively.
The borrower ceased making interest payments to ET Capital during the quarter
ended June 30, 2000.
In September 1999, the senior lender on the $40.0 million first trust
mortgage to the AGE Institute of Florida, which is guaranteed by Genesis,
notified the borrower that it was in default of the loan due to the borrowers'
failure to meet certain financial covenants. In November 1999, ET Capital
notified the borrower that it was in default of the $7.8 million second trust
mortgage loan held by ET Capital because of the default in the $40.0 million
first trust mortgage loan. Subsequently, the senior lender extended the maturity
date of the first mortgage trust loan from September 30, 1999 to March 28, 2000
to permit the AGE Institute of Florida time to obtain refinancing of the loan. A
letter agreement dated December 22, 1999 made certain modifications and defined
certain rights of the senior lender and ET Capital related to their respective
loans to the AGE Institute of Florida.
In June 2000, the senior lender on the $40.0 million first trust
mortgage to the AGE Institute of Florida notified ET Capital that the borrower
was in default of the first trust mortgage due to a default by Genesis, the
guarantor, under an amendment to the loan agreement and that no forbearance or
waiver of such default has been granted. Additionally, the senior lender is
seeking recovery from ET Capital of an interest payment totaling approximately
$250,000 received by ET Capital from the AGE Institute of Florida in April 2000,
for the quarter ended March 31, 2000.
The AGE Institute of Florida has been working to obtain replacement
financing of the $40.0 million first trust mortgage loan. If the AGE Institute
of Florida is unable to refinance the $40.0 million first trust loan, or is
otherwise unable to reach acceptable extension terms with the senior lender, the
senior lender may take actions to recover its investment in such first trust
loan. ET Capital has no control over the actions of the senior lender and such
actions could be unfavorable to ET Capital.
19
Management of ET Capital has determined, based on a decrease in the
underlying cash flows generated by the properties securing the note, the value
of the underlying collateral may not be sufficient to satisfy the borrower's
obligation under the note. As a result, a bad debt allowance of $7.8 million was
recorded by ET Capital during the nine months ended September 30, 2000. The
Company recorded 95% of this loss based on its 95% equity interest in ET
Capital, which reduces its investment and advances to ET Capital.
ET Capital's long-term debt includes two demand promissory notes
payable to the Company aggregating $5.9 million at September 30, 2000 in
connection with the above second mortgage transaction. These notes bear interest
at a weighted average rate of 12.1% per annum with interest only payable
quarterly. ET Capital ceased making interest payments to the Company during the
quarter ended June 30, 2000. Management of the Company has determined that these
notes are fully impaired at September 30, 2000.
In addition to the AGE Institute of Florida second trust mortgage note
and related notes payable to the Company, ET Capital has notes receivable
aggregating $4.4 million at September 30, 2000 from two of the Company's Equity
Investees and one of the Company's consolidated subsidiaries. These loans mature
at various dates from April 2008 to December 2011 and bear interest at 14% per
annum with interest and principal payable monthly. ET Capital has loans payable
to the Company aggregating $3.4 million, bearing interest at 15% and maturing at
various dates from April 2008 to December 2011.
The Company recorded $591,000 and $966,000 in interest income for the
nine months ended September 30, 2000 and 1999, respectively, on the notes
receivable from ET Capital. The Company also recorded a loss of $7.5 million and
income of $176,000 related to its equity interest in ET Capital's results of
operations for the nine months ended September 30, 2000 and 1999, respectively.
In addition, the Company recorded an impairment loss of $1.2 million on the
remaining balance of the notes receivable from ET Capital issued in connection
with the above second mortgage note transaction. See Note 4 of the Company's
unaudited condensed consolidated financial statements included herein.
ET Sub-Meridian Limited Partnership, L.L.P.
The Company has a 99% limited partnership interest in ET Sub-Meridian.
The 1% general partner interest is owned by a limited liability company of which
Xx. XxXxxxxx is the sole member. ET Sub-Meridian owns the leasehold and purchase
option rights to seven skilled nursing facilities located in Maryland and New
Jersey, which it purchased from Genesis for $35.5 million in cash and issuance
of $8.5 million in term loans during September 1998. The $8.5 million promissory
note bears interest at an annual rate of 8.0% for the first year, 9.0% for the
second year and 10.0% for remainder of the term of the note, with interest
payable monthly through September 3, 2003. The note is guaranteed by the
Company. The purchase options are exercisable by ET Sub-Meridian in September
2008 for a cash exercise price of $66.5 million. ET Sub-Meridian subleased the
facilities to Genesis for an initial ten-year period with a ten-year renewal
option. Genesis has guaranteed the subleases.
20
Genesis has declared ET Sub-Meridian in default of the $8.5 million
loan based on the fact that a principal payment of $3.0 million due on September
3, 1999 was not made. However, ET Sub-Meridian and the Company believe that
Genesis agreed to extend the principal payment due on September 3, 1999 until
the maturity date of September 3, 2003. The Company, ET Sub-Meridian and Genesis
are working to resolve the dispute. Any agreement reached by the parties will be
subject to bankruptcy court approval. The Company does not have sufficient cash
available to satisfy the guarantee if it were required to do so.
As part of the transaction, the Company agreed to indemnify the
property owners for any loss of deferral of tax benefits prior to August 31,
2008 due to a default under a sublease or if a cure of a default by the Genesis
subsidiary leasing the facilities resulted in a taxable event to the owners. The
Company also agreed to indemnify Genesis for any amounts expended by Genesis
under the back-up indemnity provided by Genesis to the current owners for the
same loss.
The Company recorded a loss of $1.8 million related to its equity
interest in ET Sub-Meridian's results of operations for each of the nine months
ended September 30, 2000 and 1999. ET Sub-Meridian has real estate investments
and long-term debt of $103.9 million and $105.8 million, respectively, at
September 30, 2000. See Note 4 of the Company's unaudited condensed consolidated
financial statements included herein. At September 30, 2000, ET Sub-Meridian had
a $17.6 million subordinated demand loan bearing interest at 12% per annum
payable to the Company in connection with the above transaction. The Company
recorded $1.6 million in interest income on this loan during each of the nine
months ended September 30, 2000 and 1999.
ET Sub-Heritage Andover, LLC
ET Sub-Xxxxxx Court, LLC
ET Sub-Cabot Park, LLC
ET Sub-Cleveland Circle, LLC
The Company, through four limited liability companies (ET Sub-Heritage
Andover, LLC, ET Sub-Xxxxxx Court, LLC, ET Sub-Cabot Park, LLC, and ET
Sub-Cleveland Circle, LLC), has member interests in three assisted living
facilities and one independent living facility, which it acquired during
December 1998 from an unrelated third party. A Genesis Equity Investee leases
each of the facilities.
The Company is the sole member of ET Sub-Heritage Andover, LLC, which,
accordingly, is consolidated into the Company's unaudited condensed consolidated
financial statements at September 30, 2000. In each of the remaining three
limited liability companies, the Company has a 99% member interest. The 1%
managing member interest in these three companies is owned by a limited
liability company of which Xx. XxXxxxxx is the sole member. The Company
currently has the option to acquire the 1% managing member interest in ET
Sub-Xxxxxx Court, LLC from Xx. XxXxxxxx. The option exercise price is $3,200. As
the Company has the ability to acquire the 1% managing member interest in ET
Sub-Xxxxxx Court, LLC for a nominal amount, this company is consolidated into
the Company's unaudited condensed consolidated financial statements at September
30, 2000.
21
Three of these limited liability companies have subordinated demand
loans in the aggregate amount of $5.1 million with the Company at September 30,
2000, bearing interest at 12% per annum. The Company recorded $286,000 and
$285,000 in interest income for the nine months ended September 30, 2000 and
1999, respectively, in connection with the demand loans, aggregating $3.1
million at September 30, 2000, payable to the Company by the two unconsolidated
limited liability companies. Additionally, three of the limited liability
companies have loans payable to ET Capital aggregating $4.4 million at September
30, 2000, maturing at various dates from April 2008 to December 2011 and bearing
interest at 14% per annum with interest and principal payable monthly.
The Company recorded aggregate losses of $259,000 and $298,000 related
to its equity interest in ET-Sub-Cabot Park, LLC's and ET Sub-Cleveland Circle,
LLC's results of operations for the nine months ended September 30, 2000 and
1999, respectively. These two entities have real estate investments and
aggregate long-term debt of $30.5 million and $30.4 million, respectively, at
September 30, 2000. See Note 4 of the Company's unaudited condensed consolidated
financial statements included herein.
Results of Operations
Three months ended September 30, 2000 compared with the three months
ended September 30, 1999
Revenues
Rental revenues of $4.7 million were generated for each of the three
months ended September 30, 2000 and 1999.
Interest income of $491,000, net of amortization of deferred loan costs
of $10,000, was earned for the three months ended September 30, 2000. This
represented a 63.6% decrease from $1.4 million for the corresponding period in
1999. This decrease was primarily comprised of a $883,000 decrease in interest
earned on term and construction loans, resulting primarily from the non-receipt
of third quarter 2000 interest due from Genesis and Multicare subsidiaries that
were part of the June 22, 2000 Genesis and Multicare bankruptcy filings and a
$34,000 decrease in interest earned on a note receivable from a former officer
resulting from the non-receipt of third quarter 2000 interest due from the
former officer, partially offset by lower amortization of deferred loan costs of
$72,000.
22
Interest from unconsolidated equity investees of $771,000 was earned
during the three months ended September 30, 2000. This represented a 19.6%
decrease from $959,000 for the corresponding period in 1999. This decrease
resulted primarily from ET Capital not making its third quarter 2000 interest
payment to the Company on its note payables related to the AGE Institute of
Florida second mortgage held by ET Capital that is in default.
Expenses
Interest expense, which included amortization of deferred financing
costs of $155,000, was $3.6 million for the three months ended September 30,
2000. This represented a 4.1% increase in interest expense from $3.4 million for
the corresponding period in 1999. This increase was primarily due to higher
interest expense on third-party debt of $433,000 resulting from the refinancing
of eleven properties during the last half of 1999 at higher interest rates and a
higher interest rate on the variable-rate Credit Facility, partially offset by a
decrease in amortization of deferred financing costs of $294,000. During the
last half of 1999, the Company completed refinancings of $41.2 million on seven
properties with a fixed weighted average interest rate of 8.37% and $30.0
million on four properties with a variable interest rate of 3.00% over one-month
LIBOR. Approximately $55.1 million of the debt proceeds were used to pay down
the Company's outstanding Credit Facility, with a variable interest rate of
1.80% to 2.75% over one-month LIBOR during 1999, and approximately $10.4 million
was used to pay-off an existing mortgage with an effective interest rate of
7.81%. The weighted average interest rate on outstanding third-party debt
increased from 7.9% at September 30, 1999 to 8.8% at September 30, 2000. The
Company's interest expense increased as a result of an increase in the one-month
LIBOR from 5.38% at June 30, 1999 to 6.69% at September 30, 2000. The Company's
interest rate on the Credit Facility was 9.44% at September 30, 2000 compared to
8.13% at September 30, 1999. The Company's interest rate on its variable rate
mortgages was 9.69% at September 30, 2000.
General and administrative expenses were $649,000 for the three months
ended September 30, 2000. This represented a 15.1% increase from $564,000 for
the corresponding period in 1999. This increase was primarily a result of third
quarter legal fees incurred in connection with the June 22, 2000 Chapter 11
filings of Genesis and Multicare.
An extraordinary loss of $1.2 million, net of a minority interest
benefit of $86,000, was recorded during the three months ended September 30,
1999 in connection with the prepayment of an existing mortgage loan.
23
Nine months ended September 30, 2000 compared with the nine months
ended September 30, 1999
Revenues
Rental revenues of $14.1 million were generated for the nine months
ended September 30, 2000. This represented a 1% increase from $13.9 million for
the corresponding period in 1999.
Interest income of $2.8 million, net of amortization of deferred loan
costs of $137,000, was earned for the nine months ended September 30, 2000. This
represented a 35.9% decrease from $4.4 million for the corresponding period in
1999. This decrease was primarily comprised of a $1.3 million decrease in
interest earned on term and construction loans, resulting primarily from the
non-receipt of June through September 2000 interest due from the Genesis and
Multicare subsidiaries which were part of the June 22, 2000 bankruptcy filings
as well as the 1999 sale of a construction loan receivable to a commercial bank,
partially offset by additional funding of one construction loan during 1999, a
$138,000 decrease in interest earned on a note receivable from a former officer
resulting from the 1999 cancellation of indebtedness payable by the former
officer to the Company of $2.6 million and a $70,000 decrease in interest earned
on a third party receivable which was paid in 1999. During the nine months ended
September 30, 2000, the Company recorded interest income of $1.5 million on
loans to Genesis and Multicare subsidiaries that were part of the June 22, 2000
Genesis and Multicare bankruptcy filings. The recorded interest income on these
loans represented interest payments for the period from January 2000 through May
2000. Interest payments on these loans, with an aggregate principal balance of
$34.3 million prior to allowance for credit losses, ceased beginning with the
June 2000 payment.
Interest from unconsolidated equity investees of $2.5 million was
earned during the nine months ended September 30, 2000. This represented a 12.9%
decrease from $2.9 million for the corresponding period in 1999. This decrease
resulted primarily from ET Capital not making its second or third quarter 2000
interest payment to the Company on its note payables related to the AGE
Institute of Florida second mortgage transaction.
Expenses
Interest expense, which included amortization of deferred financing
costs of $464,000, was $10.4 million for the nine months ended September 30,
2000. This represented a 9.1% increase in interest expense from $9.6 million for
the corresponding period in 1999. This increase was primarily due to higher
interest expense on third-party debt of $1.6 million resulting from the
refinancing of eleven properties during the last half of 1999 at higher interest
rates and a higher interest rate on the variable-rate Credit Facility partially
offset by a decrease in amortization of deferred financing costs of $743,000.
24
During the last half of 1999, the Company completed refinancings of $41.2
million on seven properties with a fixed weighted average interest rate of 8.37%
and $30.0 million on four properties with a variable interest rate of 3.00% over
one-month LIBOR. Approximately $55.1 million of the debt proceeds were used to
pay down the Company's outstanding Credit Facility, with a variable interest
rate of 1.80% to 2.75% over one-month LIBOR during 1999, and approximately $10.4
million was used to pay-off an existing mortgage with an effective interest rate
of 7.81%. The weighted average interest rate on outstanding third-party debt
increased from 7.9% at September 30, 1999 to 8.8% at September 30, 2000. The
Company's interest expense increased as a result of the increase in the interest
rate on the Credit Facility in June 1999 from a margin of 1.80% to 2.75% over
one-month LIBOR and an increase in the one-month LIBOR from 5.38% at September
30, 1999 to 6.69% at September 30, 2000. The Company's interest rate on the
Credit Facility was 9.44% at September 30, 2000 compared to 8.13% at September
30, 1999. The Company's interest rate on its variable rate mortgages was 9.69%
at September 30, 2000.
General and administrative expenses were $2.7 million for the nine
months ended September 30, 2000. This represented a 31.3% increase from $2.0
million for the corresponding period in 1999. This increase was primarily a
result of a second quarter 2000 write-off of $682,000 of costs incurred in
connection with property due diligence for investment transactions that were not
completed because of adverse conditions in the capital markets and the June 22,
2000 Chapter 11 filings of Genesis and Multicare, as well as an increase in
third quarter 2000 legal fees incurred in connection with the June 22, 2000
Chapter 11 filings of Genesis and Multicare.
Bad debt expenses of $20.3 million were recorded during the nine months
ended September 30, 2000 resulting from impairment charges recorded on real
estate loans receivable of $18.1 million, investments in and advances to
unconsolidated entities of $1.2 million and a note receivable from a former
officer of the Company of $990,000 during the nine months ended September 30,
2000.
Separation agreement expenses of $2.8 million were recorded during the
nine months ended September 30, 1999 in connection with the resignation of a
former officer of the Company. These expenses were comprised of cancellation of
indebtedness payable by the former officer to the Company of $2.6 million and
$200,000 in costs payable to third parties in connection with a separation
agreement with the former officer.
See "Three months ended September 30, 2000 compared with the three
months ended September 30, 1999" for discussion of amounts recorded in
connection with an extraordinary loss associated with debt extinguishment.
The Company recorded aggregate losses of $9.6 million and $1.9 million
for the nine months ended September 30, 2000 and 1999, respectively, in
connection with its portion of the losses incurred by the Company's Equity
Investees. This increase is primarily due to the $7.8 million credit loss
recorded by ET Capital on the AGE Institute of Florida second mortgage
transaction during the second quarter of 2000.
25
Liquidity and Capital Resources
Net cash provided by operating activities was $6.3 million for the nine
months ended September 30, 2000 compared to $13.0 million for the corresponding
period in 1999. The decrease in net cash provided by operating activities is
primarily the result of net changes in assets and liabilities, a decrease in
interest revenue and an increase in interest expense.
Net cash used in investing activities was $340,000 for the nine months
ended September 30, 2000 compared to $4.2 million for the corresponding period
in 1999. Net cash used in investing activities for the nine months ended
September 30, 2000 principally included additional funding of reserve funds and
deposits of $887,000 and capital expenditures of $112,000 partially offset by
repayments of advances to unconsolidated entities of $659,000. Net cash used in
investing activities for the nine months ended September 30, 1999 principally
included funding of (a) $5.1 million in construction loans, (b) $2.6 million in
reserve funds and deposits and (c) $1.7 million in capital expenditures,
partially offset by $4.2 million in payments received on term and construction
loans receivable and $720,000 of proceeds received from unconsolidated entities.
Net cash used in financing activities was $6.7 million for the nine
months ended September 30, 2000 compared to $7.9 million for the corresponding
period in 1999. The decrease in net cash used in financing activities was
primarily due to a 1999 prepayment penalty on a mortgage loan of $1.2 million
During 2000, the Company had no new borrowings and continued repayment of
existing borrowings in 2000, while in 1999, debt repayments were partially
offset by new borrowings. Distributions to shareholders and minority interests
also decreased from 1999 to 2000.
At September 30, 2000, the Company's consolidated net real estate
investments in properties and loans aggregated $198.3 million. The Company has a
working capital deficit of $59.1 million at September 30, 2000, resulting
primarily from the classification of the Credit Facility with an outstanding
balance of $39.0 million at September 30, 2000 as current based on its maturity
date of June 30, 2001, the classification of two bonds payable totaling $20.0
million at September 30, 2000 as current based on the Company's failure since
June 30, 2000 to meet the minimum net worth and interest coverage requirements
under guarantee agreements relating to the underlying mortgages and the
classification of one mortgage payable with an outstanding balance of $2.8
million at September 30, 2000 as current based on the bankruptcy filing by
Genesis. The Company also continued not to meet the minimum tangible net worth,
the minimum net asset value and the interest coverage ratio requirements under
the Credit Facility at September 30, 2000. Cash and cash equivalents were $2.9
million and $3.6 million, at September 30, 2000 and December 31, 1999,
respectively.
26
As of September 30, 2000, the Company had shareholders' equity of $73.4
million and Credit Facility borrowings and mortgages and bonds payable to third
parties aggregating $147.1 million, which represents a debt to equity ratio of
2.01 to 1. This was an increase from the debt to equity ratio of 1.44 to 1 at
December 31, 1999. This increase was due primarily to a net decrease in
shareholder's equity of $30.1 million, which resulted from a net loss of $25.8
million and distributions to shareholders of $4.3 million for the nine months
ended September 30, 2000.
At September 30, 2000, the Company's third party indebtedness of $147.1
million consisted of $69.0 million in variable rate debt and $78.1 million in
fixed rate debt. The weighted average annual interest rate on this debt was
8.72%. Based on interest rates at September 30, 2000, quarterly debt service
requirements related to this debt approximate $3.9 million. In addition, the
Company has guaranteed an additional $8.5 million of indebtedness of ET
Sub-Meridian.
The unfunded portion of construction loan commitments made by the
Company were approximately $347,000 at September 30, 2000. Due to certain
defaults by the borrowers under the loan agreements, the Company believes it is
no longer obligated to provide any further funding.
The Company previously was obligated to purchase and leaseback, upon
the maturity of the related loan or the facility reaching stabilized occupancy,
five assisted living facilities (Mifflin, Coquina Place, Lehigh, Berkshire and
Harbor Place) securing term loans and two assisted living facilities (Oaks and
Sanatoga) securing construction loans made by the Company in January 1998. Of
these seven loans, which had an aggregate principal balance at September 30,
2000 of $21.0 million, net of allowance for credit losses, three loans, secured
by the Mifflin, Coquina Place and Oaks facilities, were made to wholly-owned
subsidiaries of Genesis, three loans, secured by the Lehigh, Berkshire and
Sanatoga facilities, were made to wholly-owned subsidiaries of Multicare and one
loan, secured by the Harbor Place facility, was made to a Genesis Equity
Investee. The Company believes it is no longer bound by the purchase and
leaseback obligations contained in the loan documents because the borrowers
have, from time to time, not complied with all loan provisions. The Company is
in discussions with Genesis and Multicare about a possible restructuring of
transactions between the companies.
The Company also had the option to purchase and leaseback one facility
from an unaffiliated company for $13.0 million upon maturity of the related
construction loan. The Company did not exercise its option to purchase this
facility upon the August 1, 2000 maturity date.
On January 3, 2000, the term of the Credit Facility was extended from
January 1, 2000 to June 30, 2001 through an amendment which also reduced
borrowings available under the Credit Facility to $45.4 million. At September
30, 2000, the Company had $39.0 million outstanding under the Credit Facility.
27
The Credit Facility contains various financial and other covenants,
including, but not limited to, minimum net asset value, minimum tangible net
worth, a total leverage ratio and minimum interest coverage ratio. The Company's
owned properties and properties underlying loans receivable with an aggregate
cost of $58.5 million, net of allowance for credit losses, are included in the
Credit Facility borrowing base and pledged as collateral at September 30, 2000.
The terms require the Company to make monthly payments of principal equal to
.22% of the outstanding balance on the first day of the prior calendar month. In
addition, the Company is required to pay a monthly facility fee in an amount
equal to .0625% of the outstanding balance. Re-borrowings are not permitted
after repayment, except for the $5.75 million revolving credit portion of the
Credit Facility. Any borrowings under the revolving credit portion of the Credit
Facility are subject to prior approval from the issuer and are restricted to
certain specified purposes, including dividend distributions. Dividend
distributions over the term of the loan are limited to $3.0 million plus 95% of
the Company's funds from operations, as defined by the National Association of
Real Estate Investment Trusts ("NAREIT") prior to January 1, 2000.
The Company is currently seeking a waiver for its failure to meet the
minimum tangible net worth, minimum net asset value and minimum interest
coverage ratio requirements under the Credit Facility at September 30, 2000 and
June 30, 2000, principally resulting from the bad debt charges recorded on real
estate loans receivable, investments in and advances to unconsolidated entities
and a note receivable from a former officer of the Company and certain other
assets during the second quarter of 2000.
Amounts outstanding under the Credit Facility bear interest at floating
rates ranging from 2.75% to 3.25% over one-month LIBOR, as determined by the
percentage of the Credit Facility outstanding as compared to the borrowing base.
The interest rate on borrowings outstanding under the Credit Facility at
September 30, 2000 was 9.44%, 2.75% over one-month LIBOR.
The Company paid financing fees and other related costs of
approximately $484,000 for the nine months ended September 30, 2000 primarily in
connection with the January 3, 2000 amendment to the Credit Facility.
Unamortized deferred financing costs in connection with the Credit Facility and
mortgages payable aggregated approximately $1.4 million at September 30, 2000.
Deferred financing costs of $464,000 were amortized during the nine months ended
September 30, 2000 and included as a component of interest expense.
The Company expects net cash provided by operations and funds available
under the Credit Facility to be sufficient to enable it to meet its short-term
cash flow requirements through December 31, 2000. Any further reduction in the
Company's cash flows relating to the bankruptcy filings of Genesis and Multicare
or otherwise, however, would adversely affect the Company's ability to meet its
debt service requirements and could further significantly and adversely affect
28
its financial condition and results of operations. The Credit Facility currently
matures on June 30, 2001. If the Company is unable to pay-off or obtain
replacement financing of the Credit Facility by June 30, 2001, or is unable to
negotiate a further extension of the current Credit Facility at that time, or
the Company is unable to obtain waivers of the failed covenants or a forbearance
agreement from the lender, the bank could exercise its right to foreclose on the
collateral securing the Credit Facility. The Company also failed to meet the
minimum net worth and interest coverage requirements under guarantee agreements
relating to two bonds payable totaling $20.0 million at September 30, 2000. If
the Company is unable to obtain waivers of the failed covenants under the bonds
payable or a forbearance agreement from the bondholders, the bondholders could
exercise their rights to accelerate the related indebtedness or foreclose on the
underlying collateral immediately. Foreclosure by the lenders would also have a
significant adverse affect on the Company's ability to continue its operations.
Future increases in interest rates, as well as any defaults by tenants on their
leases with the Company, also could adversely affect the Company's cash flow and
its ability to pay its obligations. See "Item 3. Quantitative and Qualitative
Disclosures About Market Risk."
To qualify as a REIT, the Company must distribute to its shareholders
each year at least 95% (90% for taxable years beginning after December 31, 2000)
of its net taxable income, excluding any net capital gain. If the Company is
unable to make required shareholder distributions, then the Company may be
unable to qualify as a REIT and be subject to federal income taxes. As Genesis
and Multicare are not permitted to make interest payments to ElderTrust during
the pendency of their bankruptcy filings, these filings have significantly
reduced the Company's cash flow. As a result, the Company has suspended further
quarterly distributions to its shareholders. The Company believes the
distributions made to shareholders to date during 2000 will be sufficient to
satisfy its REIT distribution requirements for 2000.
Facilities owned by the Company and leased to third parties under
percentage and minimum rent triple net leases require the lessee to pay
substantially all expenses associated with the operation of such facilities.
Facilities owned by the Company and subject to percentage and minimum rent
leases represent approximately 91% of the Company's investments in owned
facilities at September 30, 2000. As a result of these arrangements, the Company
does not believe it will be responsible for significant expenses in connection
with the facilities during the terms of the leases. However, there can be no
assurance the Company will not be responsible for significant expenses of its
leased properties in the event one or more of its lessees default on their
leases with the Company.
29
Funds from Operations
The White Paper on Funds from Operations approved by the Board of
Governors of NAREIT defines Funds from Operations (FFO) as net income (loss),
computed in accordance with generally accepted accounting principles, excluding
gains (or losses) from sales of properties, plus real estate related
depreciation and amortization and after comparable adjustments for the Company's
portion of these items related to unconsolidated partnerships and joint
ventures. In October 1999, NAREIT clarified the definition of FFO to include
both recurring and non-recurring results of operations, except those results
defined as "extraordinary items" under generally accepted accounting principles
and gains and losses from sales of depreciable property. This clarified
definition is effective for periods beginning January 1, 2000 and all prior
periods presented.
The Company believes that Funds from Operations is helpful to investors
as a measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of the Company to incur and
service debt, to make capital expenditures and to fund other cash needs. The
Company computes Funds from Operations using standards established by NAREIT
which may not be comparable to Funds from Operations reported by other REITs
that do not define the term using the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds from
Operations does not represent cash generated from operating activities using
generally accepted accounting principles and should not be considered as an
alternative to net income as an indication of the Company's financial
performance, or to cash flow from operating activities as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make cash distributions.
30
The following table presents the Company's Funds from Operations for
the periods presented below:
For the three months For the nine months ended
Ended September 30, September 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- -------------- ---------------
(in thousands)
Funds from Operations:
Net loss ($584) ($593) ($26,790) ($1,466)
Minority interest (40) (40) (1,926) (99)
--------------- --------------- -------------- ---------------
Net loss before minority interest (624) (633) (28,716) (1,565)
Adjustments:
Real estate depreciation and amortization:
Consolidated entities 1,463 1,517 4,522 4,477
Unconsolidated entities 1,122 1,122 3,366 3,367
Extraordinary loss on debt extinguishment - 1,296 - 1,296
--------------- --------------- -------------- ---------------
Funds from Operations before allocation to
minority interest 1,961 3,302 (20,828) 7,575
Less:
Funds from Operations allocable to minority
interest (133) (221) 1,396 (507)
--------------- --------------- -------------- ---------------
Funds from Operations attributable to the
common shareholders $1,828 $3,081 ($19,432) $7,068
=============== =============== ============== ===============
31
Summary Condensed Consolidated Financial Data of Genesis
As leases with and loans to Genesis represent a significant portion of
the Company's consolidated assets and revenues, the Company has included certain
summary condensed consolidated financial data of Genesis for the periods
discussed below. The summary condensed consolidated financial data of Genesis
was extracted from Genesis' quarterly report on Form 10-Q for the quarter ended
June 30, 2000 as filed with the Securities and Exchange Commission (the "SEC").
On June 22, 2000, Genesis and Multicare announced that they had filed
for Chapter 11 bankruptcy protection following debt restructuring discussions
with their senior lenders.
The Genesis financial data presented includes only the most recent
interim reporting period. The Company can make no representation as to the
accuracy and completeness of Genesis' public filings. It should be noted that
Genesis has no duty, contractual or otherwise, to advise the Company of any
events subsequent to such dates which might affect the significance or accuracy
of such information.
Genesis is subject to the information filing requirements of the
Securities and Exchange Act of 1934, as amended, and in accordance therewith, is
obligated to file periodic reports, proxy statements and other information with
the SEC relating to its business, financial condition and other matters. Such
reports, proxy statements and other information may be inspected at the offices
of the Commission at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, and should
also be available at the following Regional Offices of the Commission: 0 Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx, X.X. 00000, and 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, XX 00000. The SEC also maintains an Internet web site that contains
reports, proxy statements and other information regarding issuers, like Genesis,
that file electronically with the SEC. The address of that site is
xxxx://xxx.xxx.xxx.
32
The following table sets forth certain summary condensed consolidated
financial data for Genesis as of and for the periods indicated. Genesis
consolidates the results of Multicare, in which Genesis has a 43.6% interest.
The non-Genesis shareholders' remaining 56.4% in Multicare is recorded as
minority interest.
For the three months For the nine months
ended June 30, ended June 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- -------------- ---------------
(in thousands, except per share data)
Operations Data
------------------------------------------------------
Net revenues $615,851 $465,088 $1,807,578 $1,408,911
Operating income before restructuring and capital
costs (1) 20,242 60,430 123,129 183,794
Multicare joint venture restructuring charge - - 420,000 -
Depreciation and amortization 29,423 18,887 87,578 55,453
Lease expense 9,661 6,655 28,674 19,641
Interest expense, net 61,180 29,515 170,682 85,295
Income (loss) before income taxes, minority
interest, equity in net loss of unconsolidated
affiliates, extraordinary item and cumulative
effect of accounting change (80,022) 5,373 (583,805) 23,405
Income tax expense (benefit) (20,233) 2,901 (35,968) 10,851
Income (loss) before minority interest, equity in
net loss of unconsolidated affiliates,
extraordinary item and cumulative effect of
accounting change (59,789) 2,472 (547,837) 12,554
Minority interest 10,268 - 23,295 -
Equity in net loss of unconsolidated affiliates - (3,475) - (8,626)
Income (loss) before extraordinary item and
cumulative effect of accounting change (49,521) (1,003) (524,542) 3,928
Extraordinary item, net of tax - - - (2,100)
Cumulative effect of accounting change (3) - - (10,412) -
Net income (loss) (49,521) (1,003) (534,954) 1,828
Net loss available to common shareholders (2) ($60,937) ($5,858) ($566,051) ($12,740)
Per common share data:
Basic and diluted
Loss before extraordinary items and cumulative
effect of accounting change ($1.25) ($0.17) ($11.94) ($0.30)
Net loss ($1.25) ($0.17) ($12.16) ($0.36)
Weighted average shares common stock and
equivalents 48,641,154 35,371,499 46,542,614 35,268,910
---------------
(1) Capital costs include depreciation and amortization, lease expense and
interest expense.
(2) Net income (loss) reduced by preferred stock dividends.
(3) Cumulative effect of accounting change relates to October 1, 1999 adoption
of American Institute of Certified Public Accountant's Statement of Position
98-5 "Reporting on the Costs of Start-Up Activities," which requires start-up
costs to be expensed as incurred.
33
June 30, September 30,
-------------------- ------------------
2000 1999
-------------------- ------------------
(dollars in thousands)
Balance Sheet Data
--------------------------------------------------------
Working capital $555,793 $ 235,704
Total assets 3,447,554 2,429,914
Long-term debt 101,440 1,484,510
Liabilities subject to compromise 2,481,890 -
Shareholders' equity $ 71,258 $ 587,890
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company provides fixed rate mortgage loans to operators of
healthcare facilities as part of its normal operations. The Company also has
mortgages and bonds payable which bear interest at fixed rates. Changes in
interest rates generally affect the fair market value of the underlying fixed
interest rate loans receivable or payable, but not earnings or cash flows. Refer
to the Company's annual report on Form 10-K for the year ended December 31, 1999
for discussion of the market risk associated with these financial instruments.
The Company is exposed to market risks related to fluctuations in
interest rates on its Credit Facility and variable rate mortgages. The Company
utilizes interest rate cap agreements to limit the impact that interest rate
fluctuations have on its variable rate mortgages. Interest rate cap agreements
are used for hedging purposes rather than for trading purposes. The Company does
not utilize interest rate swaps, forward or option contracts on foreign
currencies or commodities, or any other type of derivative financial instrument,
other than interest rate cap agreements.
For variable rate debt, changes in interest rates generally do not
impact fair market value, but do affect future earnings and cash flows. The
weighted average interest rate on borrowings outstanding under the Credit
Facility and variable rate mortgages was 9.55% at September 30, 2000. Assuming
the Credit Facility and variable rate mortgage balances outstanding at September
30, 2000 of $69.0 million remains constant, each one percentage point increase
in interest rates from 9.55% at September 30, 2000 would result in an increase
in interest expense for the next twelve months of approximately $690,000, based
on the current interest rate terms. Amounts outstanding under the Credit
Facility bear interest at floating rates ranging from 2.75% to 3.25% over
one-month LIBOR, as determined by the percentage of the Credit Facility
outstanding as compared to the borrowing base. Variable rate mortgages bear
interest at 3.00% over one-month LIBOR.
The Company may borrow additional money with variable interest rates in
the future. Increases in interest rates, therefore, would result in increases in
interest expense, which could adversely affect the Company's cash flow and its
ability to pay its obligations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
34
PART II - OTHER INFORMATION
ITEM 3. Defaults Upon Senior Securities
Events of default have been declared under two bonds payable totaling
$20.0 million at September 30, 2000, which are guaranteed by the Company, based
on the Company's failure since June 30, 2000 to meet the minimum net worth and
interest coverage requirements under guarantee agreements relating to the
underlying mortgages. In addition, an event of default has occurred under one
mortgage payable with an outstanding balance of $2.8 million at September 30,
2000 based on the bankruptcy filing by Genesis. The Company also continued not
to meet the minimum tangible net worth, the minimum net asset value and the
interest coverage ratio requirements under the Credit Facility at September 30,
2000.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed with this report are listed in the exhibit index on
page 37.
(b) Reports on Form 8-K
On July 7, 2000, ElderTrust filed a Form 8-K addressing the June 22,
2000 Chapter 11 bankruptcy filings by Genesis and Multicare. The Form
8-K also described impairment charges on loans and other investments
anticipated to be recorded by ElderTrust during the quarter ended June
30, 2000 and announced the suspension of quarterly distributions to
shareholders and that certain events of default had been declared under
its Credit Facility and certain other outstanding indebtedness.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on November 13, 2000.
ELDERTRUST
/s/ D. Xxx XxXxxxxx, Xx.
----------------------------------------------------
D. Xxx XxXxxxxx, Xx.
President, Chief Executive Officer,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
36
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
11.1 Computation of basic and diluted loss per share for the three
and nine months ended September 30, 2000 and 1999.
27.1 Financial Data Schedule for the nine months ended September 30,
2000.
37
EXHIBIT 11.1
COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
The following calculation is submitted in accordance with requirements
of the Securities Exchange Act of 1934:
For the three months ended For the nine months
September 30, ended September 30,
---------------------------------- --------------------------------
2000 1999 2000 1999
----------- ------------- ------------- -------------
(amounts in thousands)
Net loss available for common
shareholders ($584) ($593) ($26,790) ($1,466)
=========== ============= ============= =============
Weighted average common
shares outstanding used in
calculating basic and
diluted net loss per
common share 7,119 7,201 7,119 7,206
=========== ============= ============= =============
Basic and diluted net loss per
common share ($0.08) ($0.08) ($3.76) ($0.20)
=========== ============= ============= =============
38
