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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
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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 1-8547
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LINCORP HOLDINGS, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 23-2161279
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3900 Park Ave., Suite 102
Edison, NJ 08820
- ------------------------------- ---------------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number,
Including Area Code: (732) 494-9455
- ------------------------------- ---------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------------------------
Common Stock, par value $.01 per share NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not considered herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The Company's common stock, which is traded over the counter, had no
identifiable transactions during 2002 and through March 21, 2003. Based on the
last identifiable common stock transaction, the aggregate market value of the
Company's common stock held by non-affiliates of the registrant would be an
indeterminate nominal amount. On March 21, 2003, there were 1,730,559 shares of
registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
See Item 14 (c) for a listing of exhibits incorporated by reference.
LINCORP HOLDINGS, INC.
FORM 10-K
TABLE OF CONTENTS
PAGE
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PART I
Items 1 and 2. Business and Properties 1
Item 3. Legal Proceedings 2
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for Registrants Common Equity and Related
Stockholder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 7
PART III
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners
and Management 12
Item 13. Certain Relationships and Related Transactions 12
LINCORP HOLDINGS, INC.
FORM 10-K
TABLE OF CONTENTS
PAGE
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PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K 13
Signatures 18
Certification of Principal Executive Officer 20
Certification of Principal Financial Officer 21
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
RECENT DEVELOPMENTS
On July 23, 2001, Lincorp Holdings, Inc.'s (the "Company") parent company,
Wilmington Capital Management Inc. ("Wilmington"), formerly Unicorp Inc., sold
370,000 of the Company's common shares to two unrelated third parties. This
transaction reduced Wilmington's common stock ownership in the Company to
916,886 shares or 52.98%.
At the same time, Wilmington sold its rights and obligations to
approximately $168.9 million of the Company's principal and accrued interest
outstanding under several of its debt obligations to an unrelated party.
Wilmington continues to hold approximately $7.2 million of the Company's debt
obligations.
At December 31, 2002, the Company had approximately $176.1 million of
principal and accrued interest (the "Indebtedness") outstanding under its
various debt obligations. The Company is in payment default under several of the
debt obligations comprising the Indebtedness. The Indebtedness is secured by a
senior security interest in all of the Company's assets.
The Company's debt holders have waived substantially all interest owing by
the Company on its Indebtedness to them that would have otherwise accrued for
the twelve months ended December 31, 2002. The total interest waived was
approximately $10.9 million.
The Company's sources of funds during the year ended December 31, 2002,
and to date, have been primarily from its previously existing cash balances and
advances from Wilmington. Unless the Company's debt holders continue to defer in
realizing on the pledged collateral, the Company will be unable to continue as a
going concern. As of December 31, 2002, the Company's stockholders' deficit was
$179.9 million.
REAL ESTATE AND MORTGAGE LOAN TRANSACTIONS
During the fourth quarter of 1997, the Company made a $0.6 million secured
first mortgage loan to Republic Development Co. (the "Republic Mortgage Loan")
for the purpose of developing a commercial real estate property. This loan was
scheduled to mature May 19, 1998. To finance this loan, the Company borrowed
funds from Wilmington. The Wilmington borrowing was in the form of a $602,000
discounted note (the "Wilmington Republic Note") which matured on May 19, 1998
in the amount of $620,000 and is secured by the Republic Mortgage Loan.
The Republic Mortgage Loan was not repaid on May 19, 1998 and in November
1999, the Company foreclosed on the Republic Mortgage Loan and took possession
of the land. As of December 31, 2000, the Company reduced the carrying value of
the land to $300,000 which it believes is the current fair market value of the
land. The Wilmington Republic Note, which matured on May 19, 1998, was not
repaid by the Company as its payment was dependent upon collecting the Republic
Mortgage Loan. Wilmington has agreed to defer the collection of its note until
the land is sold.
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EMPLOYEES
The Company presently has no compensated employees.
ITEM 3. LEGAL PROCEEDINGS
(A) Joseph Frazier ("Frazier") has instituted three lawsuits in which
Lincorp Holdings, Inc., the Company's predecessors in interest, Greit Realty
Trust Company and Unicorp America Corporation (collectively the "Company"), and
other parties were named as defendants. All three actions arose from a series of
real estate-related transactions which began in 1978 with respect to property in
Bucks County, PA (the "Bucks Property"). More specifically, Frazier's
partnership used a mortgage as a vehicle pursuant to which Greit paid the
partnership $400,000 contemporaneously with entering into the agreement and gave
the partnership a Promissory Note in the amount of $850,000 which further
provided for nineteen annual payments of $10,000 each and a final installment of
$660,000. In return, the partnership assigned its rights in an Agreement of Sale
for the Bucks Property to Greit. The Company has not made any payment to the
partnership since 1992 and has a $730,000 unsecured liability recorded in its
financial statements.
In 1993, Frazier instituted an action in the Court of Common Pleas of
Philadelphia County asserting claims against the Company for fraud and breach of
contract, I.E., the failure to make certain payments due and owing to Frazier
and/or a general partnership in which he had an interest in connection with a
mortgage granted to Frazier's partnership by Greit. In 1997, Frazier instituted
a second action in the Court of Common Pleas of Philadelphia County alleging
fraudulent conveyancing of the Bucks Property by five separate parties,
including the Company. These actions have been consolidated with FRAZIER V.
ESTATE OF WRIGHT, an action previously filed in the Court of Common Pleas of
Philadelphia County by Frazier against his late partner and attorney, Bruce
Wright, alleging legal malpractice. The two actions against the Company were
dismissed for failure to join an indispensable party. The appellate court denied
Frazier's appeal of that dismissal as premature until judgment is entered in the
FRAZIER V. ESTATE OF WRIGHT case.
In 1998, Frazier instituted an action in the Court of Common Pleas of
Bucks County, PA asserting vague claims arising from the conveyance of the Bucks
Property, which remain pending against the Company. Frazier has asserted claims
against the Company and numerous other parties, including approximately 475
homeowners who currently reside on the Bucks Property. Frazier sought to eject
the homeowners from their homes and regain possession of the Bucks Property. The
Court has dismissed claims against the home-owners. Frazier still seeks damages
of $84 million from the Company and from other defendants. In 1999, the Company
moved to dismiss the Bucks County action on the grounds plaintiff's claim was
time-barred; the Court denied the Company's motion to dismiss, without prejudice
to renew such motions at a later date. After taking very little discovery in
this case, and after permitting the court-ordered discovery deadline to expire,
this year plaintiff attempted to open discovery. Many of the defendants and
various non-parties either objected to or moved to quash discovery, and the
Court responded by circumscribing plaintiff's right to take additional
discovery. The Court has set forth a schedule for the submission of summary
judgment and expert reports, and has stated that it expects to schedule the
trial in this
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matter for October of 2003. The Company is vigorously defending the claims that
have been asserted in the Bucks County action.
(B) A tax assessment (the "Assessment") has been made by the Commonwealth
of Massachusetts against a former wholly-owned subsidiary of the Company, which
was dissolved in July 1990. The Massachusetts Department of Revenue (the "MDR")
stated, in a notice dated February 15, 1992, that the amount due and owing was
$1.2 million and it is believed that additional interest and/or penalties have
been imposed with regard to the Assessment. On November 29, 1993, an Offer in
Settlement (the "Offer") was forwarded to the MDR with respect to the Assessment
which was rejected by the MDR on October 26, 1995, and there have been no
subsequent developments on this matter since that date. The ultimate outcome of
the Assessment cannot be determined at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded over the counter. During 2002 there
were no identifiable stock transactions.
On March 21, 2003, there were approximately 766 stockholders of record of
the Company's Common Stock. There were no dividends paid on the Company's Common
Stock in 2002 and 2001.
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2002 2001 2000 1999 1998
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA
Interest income .............................. $ -- $ -- $ -- $ -- $ 34
Interest expense ............................. (120) (122) (128) (109) (5,595)
Gain on sale of real estate assets ........... -- -- -- -- 135
Other income ................................. -- -- 83 3 --
Other expense ................................ (85) (70) (401) (237) (213)
------- ------- ------- ------- -------
Loss before income taxes ..................... (205) (192) (446) (343) (5,639)
Provision for (refund of) income taxes........ -- -- (11) (4) 22
------- ------- ------- ------- -------
Net loss ..................................... $ (205) $ (192) $ (435) $ (339) $(5,661)
======= ======= ======= ======= =======
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ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
AT OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------ ------------ ------------ ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Per share amounts
Basic loss per share of common stock
outstanding ................................. $ (0.12) $ (0.11) $ (0.25) $ (0.20) $ (3.27)
============ ============ ============ ============ =========
Weighted average shares of common stock
outstanding ................................. 1,731 1,731 1,731 1,731 1,731
============ ============ ============ ============ =========
BALANCE SHEET DATA
Total assets ..................................... $ 305 $ 311 $ 370 $ 652 $ 746
============ ============ ============ ============ =========
Other borrowed funds, excluding accrued interest . $ 97,154 $ 97,154 $ 97,154 $ 97,154 $ 97,154
============ ============ ============ ============ =========
Total stockholders' deficit ...................... $ (179,868) $ (179,663) $ (179,471) $ (179,036) $(178,697)
============ ============ ============ ============ =========
-5-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND GOING CONCERN
At December 31, 2002, the Company had approximately $176.1 million of
principal and accrued interest (the "Indebtedness") outstanding under its
various debt obligations. The Company is in payment default under several of the
debt obligations comprising the Indebtedness. The Indebtedness is secured by a
senior security interest in all of the Company's assets. See Note 5 to the
Company's Financial Statements.
During 2002, the Company's debt holders agreed to waive substantially all
interest owing by the Company on its Indebtedness to them that would otherwise
accrue for the twelve months ended December 31, 2002, which was approximately
$10.9 million.
The Company's sources of funds during the year ended December 31, 2002,
and to date, have been primarily from its previously existing cash balances and
advances from Wilmington. Unless the Company's debt holders continue to defer in
realizing on the pledged collateral, the Company will be unable to continue as a
going concern. As of December 31, 2002, the Company's stockholders' deficit was
$179.9 million.
RESULTS OF OPERATIONS
2002 COMPARED TO 2001
For the years ended December 31, 2002 and 2001, the Company had a net loss
of $0.2 million.
2001 COMPARED TO 2000
For the year ended December 31, 2001, the Company had a net loss of $.2
million compared to a net loss of $.4 million for the year ended December 31,
2000.
FINANCIAL POSITION
MATERIAL CHANGES SINCE DECEMBER 31, 2001
There were no significant changes in the Company's financial position
since December 31, 2001.
-6-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of the Company are set forth in Part IV on pages
F-1 to F-11 and incorporated herein by reference. See "Item 14. Exhibits,
Financial Statement Schedules and Reports on Form 8-K" for a complete list of
Financial Statements and Financial Statement Schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
a) On March 5, 2003, KPMG LLP ("KPMG") resigned as the independent public
accountants for Lincorp Holdings, Inc. (the "Company"). KPMG's reports on
the Company's financial statements for each of the years ended December
31, 2001 and 2000 contained a going concern qualification. The going
concern qualification was reported because as of December 31, 2001 and
2000 the Company was in default on several of its credit facilities, had
approximately $175 million of indebtedness and accrual interest and had a
net capital deficiency of approximately $179 million.
During the year ended December 31, 2001 and 2000 and through March 5,
2003, there were no disagreements with KPMG on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope
or procedure which, if not resolved to KPMG's satisfaction, would have
caused them to make reference to the subject matter in connection with
their report on the Company's financial statements for such years; and
there were no reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K.
b) On March 10, 2003, the Company engaged Postlethwaite & Netterville ("P&N")
to serve as the Company's independent public accountants for the year
ended December 31, 2002. The appointment of P&N was authorized by the
Company's Board of Directors.
During the years ended December 31, 2001 and 2000 and through March 5,
2003, the Company did not consult P&N with respect to the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the
Company's financial statements, or any other matters or reportable events
as set forth in Item 304(a)(1)(v) of Regulation S-K.
-7-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The term of each director is for one year and thereafter until his
successor shall have been elected and qualified. The Company's executive
officers are elected by, and serve at the discretion of the Board of Directors.
The following table sets forth certain information with respect to each
director and executive officer of the Company on March 21, 2003.
Service with
Name Age Position with Company Company from
- ---- --- --------------------- ------------
George S. Mann 70 Chairman of the Board (1) 1981
Ian G. Cockwell 55 Director (2) 1994
Ralph V. Marra 65 Director (1) 1994
Gordon Flatt 40 Director, Vice President and 1998
Chief Financial Officer (2)
Jack R. Sauer 50 President 1996
- ----------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
-8-
George S. Mann has served as Chairman of the Board since 1981, and as
President from 1989 through August, 1996. He served as Chairman of the Board of
Wilmington from 1983 until June 1990, and served as a Director until July 1998.
Ian G. Cockwell has been President of Westcliff Management Services Inc.
since prior to 1988. He is currently the Chairman of Wilmington. He has been a
Director of the Company since November 1994.
Ralph V. Marra has been Corporate Controller for SSR Realty Advisors, Inc.
since April 1998. Prior to that he was Director of Planning with New Plan
Reality Inc. from December 1997. From October 1994 through December 1997 he was
the Senior Managing Director of Grubb and Ellis Inc.
Gordon Flatt has been the Managing Director of The Coastal Corporation
since June 30, 2002. Prior to that he was President and Chief Investment Officer
of The Coastal Group since 1993. From September 1997 to April 2000 Gordon Flatt
was an Officer of Unicorp Inc. (new Wilmington). He has been the Vice President
and Chief Financial Officer of the Company since December 1998 and a Director
since July 2002.
Jack R. Sauer has been the President of the Company since August, 1996. He
is also the Vice President and Director of the Catalyst Group, Inc. since
February, 1990.
-9-
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than 10% of the Company's Common Stock to
file initial reports of ownership and reports of changes of ownership (Forms 3,
4 and 5) of the Company's Common Stock with the Securities and Exchange
Commission (the "SEC"). Officers, directors and beneficial owners of more than
10% of the Company's Common Stock are required by the SEC regulations to furnish
the Company with copies of such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company, all Section 16(a) filing
requirements applicable to its officers, directors and beneficial owners of more
than 10% of the Company's Common Stock, were complied with.
DIRECTORS REMUNERATION
Directors of the Company receive a fee of $600 for actual attendance at
each directors' or committee meeting. Where meetings of the Board or committees
thereof are held by telephone conference, directors receive a fee of $150. Fees
paid to all directors for attendance at the Board and committee meetings during
the year ended December 31, 2002, totaled $1,200.
DIRECTORS MEETING AND COMMITTEES
The Board of Directors of the Company held 4 meetings during the year
ended December 31, 2002. During the year, the directors attended between 25% and
75% of the meetings.
The Board of Directors has a standing Audit Committee which represents the
Board of Directors in its relations with the Company's independent accountants
and oversees the Company's compliance with operating procedures and policies.
This committee also approves the scope of the Company's financial statement
examinations, monitors the adequacy of the Company's internal controls and
reviews and monitors any other activity that the committee deems necessary or
appropriate. The Company does not have a standing Compensation or Nominating
Committee. The Executive Committee is authorized to act on behalf of the Board
of Directors between Board meetings and to have such powers and duties which may
lawfully be assigned to it under Delaware law.
The only Committee which held a meeting during the year ended December 31,
2002, was the Audit Committee which held one meeting.
-10-
ITEM 11. EXECUTIVE COMPENSATION
No executive officer of the Company, received any compensation for their
services during any of the years ended December 31, 2002, 2001 or 2000. However,
in each of 2002, 2001 and 2000, Lincorp Holdings, Inc. paid an unrelated company
$24,000 each year for accounting services. The president of that company is also
the president of Lincorp Holdings, Inc.
No compensation committee report or performance graph is included herein
because none of the executive officers draws any salary from the Company.
-11-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information concerning the shares of the Common
Stock beneficially owned by the individual directors, all directors and officers
of the Company as a group without naming them and each person who is known by
the Company to be the beneficial owner of more than five percent of the Common
Stock as of March 21, 2003. The address of each of the directors is c/o Lincorp
Holdings, Inc., 3900 Park Ave., Suite 102, Edison, NJ 08820. The address of
Wilmington Capital Management Inc. is P.O. Box 762, Suite 4400, BCE Place, 181
Bay Street, Toronto, Canada M5J 2T3.
Shares of
Common Stock
Beneficially
Name of Owned as of Percent of
Beneficial Owner March 21, 2003 Class
---------------- -------------- ----------
Wilmington Capital
Management Inc. (1) 916,886 52.98%
Ian G. Cockwell (1) 916,886 52.98%
All officers and directors 1,216,886 52.98%
as a group (1)
(1) The stockholdings indicated for Mr. Cockwell are all owned directly by
Wilmington Capital Management Inc. Mr. Cockwell disclaims beneficial
ownership of all such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Items 1 and 2 - Recent Developments and Real Estate and Mortgage Loan
Transactions.
-12-
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE
----
(a) (1) Financial Statements
Independent Auditors' Report for 2002..................... F-1
Independent Auditors' Report for 2001 and 2000............ F-2
Balance Sheets as of
December 31, 2002 and 2001.............................. F-3
Statements of Operations for the years ended
December 31, 2002, 2001, and 2000....................... F-4
Statements of Changes in Stockholders' Deficit for the
years ended December 31, 2002, 2001, and 2000........... F-5
Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000........................ F-6
Notes to Financial Statements............................. F-7
(2) All schedules have been omitted because they are not required or
because the required information is contained in the financial
statements or notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
PAGE
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3.1 Restated Certificate of Incorporation of the Company, *
as amended to date (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1987).
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3.2 By-Laws of the Company as amended to date (incorporated *
by reference to Exhibit 3.2 to the Company's Annual
Report Form 10-K for the year ended December 31, 1986).
10.01 Subscription and Purchase Agreement dated December *
31, 1987, between the Company and Unicorp (incorporated
by reference to Exhibit 2.2 to the Company's Current
Report Form 8-K dated January 14, 1988).
10.02 Letter Agreement re: Line of Credit dated November 30, *
1989, between Unicorp and the Company (incorporated by
reference to Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989).
10.03 Revolving Demand Note dated November 30, 1989, *
from the Company to Unicorp (incorporated by reference
to Exhibit 10.24 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
10.04 Consulting Agreement dated as of February 13, 1990, *
between the Company and Coscan Inc. (incorporated by
reference to Exhibit 10.27 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989).
10.05 Letter Agreement re: Operating Deficit Loan Agreement *
dated February 13, 1990, between the Company and Coscan
Inc. (incorporated by reference to Exhibit 10.28 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989).
10.06 Form of Promissory Note from the Company to Coscan Inc. *
(incorporated by reference to Exhibit 10.29 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989).
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10.07 Closing Agreement, dated as of July 23, 1990, among *
the Company, Coscan Colorado Inc. ("CCI"), Coscan
Colorado LHI Inc. and Coscan Commercial Limited
Partnership, a California Limited Partnership ("Coscan
California) (incorporated by reference to Exhibit 28.1
to the Company's Report on Form 8-K dated August 13,
1990).
10.08 Closing Agreement, dated as of July 23, 1990, among the *
Company, Coscan California Commercial Inc. ("CCC"),
Coscan California LHI Inc. and Coscan Commercial
Limited Partnership, a California Limited Partnership
("Coscan California) (incorporated by reference to
Exhibit 28.2 to the Company's Report on Form 8-K dated
August 13, 1990).
10.09 Agreement of Limited Partnership of Coscan Commercial, *
dated as of July 23, 1990 (incorporated by reference to
Exhibit 28.3 to the Company's Report on Form 8-K dated
August 13, 1990).
10.10 Agreement of Limited Partnership of Coscan Commercial, *
dated as of July 23, 1990 (incorporated by reference to
Exhibit 28.3 to the Company's Report on Form 8-K dated
August 13, 1990).
10.11 Letter Agreement, dated as of July 23, 1990, among CCI, *
CCC, the Company, Coscan Commercial and Coscan
California, regarding loans by CCI and CCC
(incorporated by reference to Exhibit 28.5 to the
Company's Report on Form 8-K dated August 13, 1990).
10.12 $24,000,000 Secured Revolving Credit Agreement, dated *
as of July 25, 1990 (the "Senior Credit Agreement"),
among the Company, Hees International Bancorp Inc.
("Hees"), National Bank of Canada ("NBC") and NBC, as
Agent (incorporated by reference to Exhibit 28.6 to the
Company's Report on Form 8-K dated August 13, 1990).
-15-
10.13 Amended and Restated Credit Agreement, dated as of *
July 25, 1990, between the Company and NBC
(incorporated by reference to Exhibit 28.7 to the
Company's Report on Form 8-K dated August 13, 1990).
10.14 Letter Agreement, dated July 25, 1990, between Unicorp *
and the Company regarding the revolving line of credit
from UCC to the Company (incorporated by reference to
Exhibit 28.8 to the Company's Report on Form 8-K dated
August 13, 1990).
10.15 Securities Pledge Agreement, dated as of July 25, 1990, *
by the Company in favor of Unicorp (incorporated by
reference to Exhibit 28.8 to the Company's Report on
Form 8-K dated August 13, 1990).
10.16 Lincorp Pledge Agreement, dated as of July 25, 1990, by *
Lincorp Inc. in favor of Unicorp (incorporated by
reference to Exhibit 28.10 to the Company's Report on
Form 8-K dated August 13, 1990).
10.17 Subsidiaries Pledge Agreement, dated as of July 25, 1990, *
by Unicorp Delaware I, Inc., Unicorp Delaware II, Inc.
and ITT Missouri Corp. in favor of Unicorp
(incorporated by reference to Exhibit 28.11 to the
Company's Report on Form 8-K dated August 13, 1990).
10.18 Security Agreement, dated as of July 25, 1990, by the *
Company in favor of Unicorp (incorporated by reference
to Exhibit 28.12 to the Company's Report on Form 8-K
dated August 13, 1990).
10.19 Agreement Relating to the Lincoln Savings Bank, FSB dated *
as of December 31, 1992, among the OTS, the Company and
certain other parties (incorporated by reference to
Exhibit A to the Company's Current Report on Form 8-K
dated January 20, 1993).
10.20 Trust Agreement dated as of January 20, 1993, among the *
OTS, the Company and certain other parties
(incorporated by reference to Exhibit B to the
Company's Current Report on Form 8-K dated January 20,
1993).
-16-
10.21 Consent Agreement dated March 4, 1994, among Unicorp, *
Union Holdings, Inc., Lincorp, Inc., the Company, Hees
International Bancorp, Inc., National Bank of Canada,
Anthony M. Frank, as trustee, the Lincoln Savings Bank,
FSB and Anchor Savings Bank FSB (incorporated by
referenced to Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1993).
10.22 Loan Modification Agreement dated as of September 28, *
1995, by and between Coscan, Inc. and the Company
(incorporated by reference to Exhibit B to the
Company's Report on Form 8-K dated September 28, 1995).
10.23 Loan Modification Agreement dated as of September 28, *
1995, by and between CCI and the Company (incorporated
by reference to Exhibit C to the Company's Report on
Form 8-K dated September 28, 1995.)
10.24 Agreement dated as of September 5, 1995,by and among *
CCI, the Company, Coscan Limited Partner Corporation,
CCC, Coscan California Limited Partner Corporation and
Coscan, Inc.
22 Subsidiaries of the Company.
99(i) Principal Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes
- Oxley Act of 2002.
99(ii) Principal Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes
- Oxley Act of 2002.
- ----------
* Incorporated by reference.
-17-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in Edison, New Jersey.
Dated: April 11, 2003
LINCORP HOLDINGS, INC.
By: s/ Jack R. Sauer
---------------------------
Jack R. Sauer
President
-18-
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
- ---- ----- ----
s/ George S. Mann Chairman of the April 11, 2003
- ------------------------- Board of Directors
George S. Mann
s/ Ian G. Cockwell Director April 11, 2003
- -------------------------
Ian G. Cockwell
s/ Ralph V. Marra Director April 11, 2003
- -------------------------
Ralph V. Marra
s/ Gordon Flatt Director April 11, 2003
- -------------------------
Gordon Flatt
s/ Jack Sauer President April 11, 2003
- -------------------------
Jack Sauer
-19-
CERTIFICATION
I, Jack R. Sauer, certify that:
1. I have reviewed this annual report on Form 10-K of Lincorp Holdings,
Inc.
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 11, 2003 /s/ Jack R. Sauer
-------------------------
Jack R. Sauer
President and
Chief Executive Officer
-20-
CERTIFICATION
I, Gordon Flatt, certify that:
1. I have reviewed this annual report on Form 10-K of Lincorp Holdings,
Inc.
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 11, 2003 /s/ Gordon Flatt
--------------------------
Gordon Flatt
Chief Financial Officer
-21-
Independent Auditors' Report
The Board of Directors and Stockholders
Lincorp Holdings, Inc.
We have audited the accompanying balance sheet of Lincorp Holdings, Inc.
("Company") as of December 31, 2002 and the related statements of operations,
changes in stockholders' deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of Lincorp Holdings, Inc. as of and for the
years ended December 31, 2001 and 2000, were audited by other auditors whose
report dated March 7, 2002, on those statements included an explanatory
paragraph that described the Company's net capital deficiency which raises
substantial doubt about the Company's ability to continue as a going concern as
discussed in Note 2 to the financial statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lincorp Holdings, Inc. as of
December 31, 2002 and the results of its operations and its cash flows for the
year ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in default on several of its credit
facilities and, at December 31, 2002, has $97.1 million of principal
indebtedness, and $78.4 million of accrued and unpaid interest. In addition, the
Company has a net capital deficiency of $179.9 million as of December 31, 2002.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. The Company's plans in regard to these matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Postlethwaite & Netterville
Baton Rouge, Louisiana
April 9, 2003
F-1
Independent Auditors' Report
The Board of Directors and Stockholders
Lincorp Holdings, Inc.:
We have audited the accompanying balance sheet of Lincorp Holdings, Inc.
("Company") as of December 31, 2001, and the related statements of operations,
changes in stockholders' deficit, and cash flows the years ended December 31,
2001 and 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lincorp Holdings, Inc. as of
December 31, 2001 and the results of its operations and its cash flows for the
years ended December 31, 2001 and 2000 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in default on several of its credit
facilities and, at December 31, 2001, has $97.1 million of principal
indebtedness, and $78.3 million of accrued and unpaid interest. In addition, the
Company has a net capital deficiency of $179.7 million as of December 31, 2001.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. The Company's plans in regard to these matters are also
described in Note 2. The 2001 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG LLP
New York, New York
March 7, 2002
F-2
LINCORP HOLDINGS, INC.
BALANCE SHEETS
December 31,
-----------------------
2002 2001
--------- ---------
(dollars in thousands)
ASSETS
Cash ............................................... $ 5 $ 11
Investment in real estate .......................... 300 300
--------- ---------
$ 305 $ 311
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt secured by real estate,
including accrued interest .................. $ 620 $ 620
Other borrowed funds, including accrued interest 175,535 175,426
Other liabilities ............................... 4,018 3,928
--------- ---------
180,173 179,974
--------- ---------
Commitments and contingent liabilities
Stockholders' deficit:
Preferred stock, Series A;
200 shares authorized;
no shares issued and outstanding ............ -- --
Preferred stock, $.01 par value;
10,000 shares authorized;
no shares issued and outstanding ............ -- --
Common stock, $.01 par value;
1,990,000 shares authorized;
1,730,559 shares issued and outstanding ..... 17 17
Capital contributed in excess of par value ..... 153,638 153,638
Accumulated deficit ............................ (333,523) (333,318)
--------- ---------
(179,868) (179,663)
--------- ---------
$ 305 $ 311
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
LINCORP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
Year ended December 31,
-------------------------------
2002 2001 2000
------- ------- -------
(in thousands, except
per share amounts)
Income:
Other income ................................ $ -- $ -- $ 83
------- ------- -------
Total income ........................... -- -- 83
------- ------- -------
Expense:
Interest expense ............................ 120 122 128
Write-down real estate asset ................ -- -- 311
General and administrative expense .......... 85 70 90
------- ------- -------
Total expense .......................... 205 192 529
------- ------- -------
Loss before income taxes .......................... (205) (192) (446)
Refund of income taxes ............................ -- -- (11)
------- ------- -------
Net loss .......................................... $ (205) $ (192) $ (435)
======= ======= =======
Basic loss per share of common stock outstanding .. $ (0.12) $ (0.11) $ (0.25)
======= ======= =======
Weighted average shares of common stock outstanding 1,731 1,731 1,731
======= ======= =======
The accompanying notes are an integral part of these financial statements.
F-4
LINCORP HOLDINGS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Capital
contributed
Common in excess Accumulated
stock of par value deficit
--------- ------------ -----------
(dollars in thousands)
Balances, December 31, 1999 ...... $ 17 $ 153,638 $(332,691)
Net loss ..................... -- -- (435)
--------- --------- ---------
Balances, December 31, 2000 ...... 17 153,638 (333,126)
Net loss ..................... -- -- (192)
--------- --------- ---------
Balances, December 31, 2001 ...... 17 153,638 (333,318)
Net loss ..................... -- -- (205)
--------- --------- ---------
Balances, December 31, 2002 ...... $ 17 $ 153,638 $(333,523)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-5
LINCORP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
Year ended December 31,
---------------------------
2002 2001 2000
----- ----- -----
(dollars in thousands)
OPERATING ACTIVITIES
Net loss ................................................ $(205) $(192) $(435)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Write-down real estate asset ...................... -- -- 311
Increase in other liabilities ..................... 90 24 44
Increase in interest payable ...................... 109 109 109
----- ----- -----
Net cash (used in) provided by operating activities (6) (59) 29
----- ----- -----
Net (decrease) increase in cash ......................... (6) (59) 29
Cash, beginning of year ................................. 11 70 41
----- ----- -----
Cash, end of year ....................................... $ 5 $ 11 $ 70
===== ===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes ...................................... $ -- $ -- $ --
===== ===== =====
Interest Expenses ................................. $ -- $ -- $ --
===== ===== =====
The accompanying notes are an integral part of these financial statements.
F-6
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - CHANGE IN OWNERSHIP AND DEBT HOLDERS
On July 23, 2001, Lincorp Holdings, Inc.'s (the "Company") parent company,
Wilmington Capital Management Inc. ("Wilmington"), formerly Unicorp Inc., sold
370,000 of the Company's common shares to two unrelated third parties. This
transaction reduced Wilmington's common stock ownership in the Company to
916,886 shares or 52.98%.
At the same, Wilmington sold its rights and obligations to approximately
$168.9 million of the Company's principal and accrued interest outstanding under
several of its debt obligations to an unrelated party. Wilmington continues to
hold approximately $7.2 million of the Company's debt obligations.
NOTE 2 - LIQUIDITY AND GOING CONCERN
At December 31, 2002, the Company had approximately $176.1 million of
principal and accrued interest (the "Indebtedness") outstanding under its
various debt obligations. The Company is in payment default under several of the
debt obligations comprising the Indebtedness. The Indebtedness is secured by a
senior security interest in all of the Company's assets.
During 2000, 2001 and 2002, the Company's debt holders agreed to waive
substantially all interest owing by the Company on its Indebtedness to them that
would otherwise accrue for these years. For each of the three years ended
December 31, 2002 the interest waived was approximately $10.9 million per year.
The Company's sources of funds during the year ended December 31, 2002,
and to date, have been primarily from its previously existing cash balances and
advances from Wilmington. Unless the Company's debt holders continue to defer
realizing on the pledged collateral, the Company will be unable to continue as a
going concern.
NOTE 3 - REAL ESTATE OPERATIONS
During the fourth quarter of 1997, the Company made a $0.6 million secured
first mortgage loan to Republic Development Co. (the "Republic Mortgage Loan")
for the purpose of developing a commercial real estate property. This loan was
scheduled to mature May 19, 1998. To finance this loan, the Company borrowed
funds from Wilmington. The Wilmington borrowing was in the form of a $602,000
discounted note (the "Wilmington Republic Note") which matured on May 19, 1998
in the amount of $620,000 and was secured by the Republic Mortgage Loan.
The Republic Mortgage Loan was not repaid on May 19, 1998 and in November
1999, the Company foreclosed on the Republic Mortgage Loan and took possession
of the land. As of December 31, 2000, the Company reduced the carrying value of
the land by $311,000 to $300,000 which it believes is the current fair market
value of the land. The
F-7
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
Wilmington Republic Note, which matured on May 19, 1998, was not repaid by the
Company as its payment was dependent upon collecting the Republic Mortgage Loan.
Wilmington has agreed to defer the collection of its note until the land is
sold.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of change in tax rates is recognized in income in the
period that includes the enactment date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENT IN REAL ESTATE
The investment in real estate is carried at estimated fair market value.
NOTE 5 - OTHER BORROWED FUNDS
The Company's other borrowed funds are as follows:
December 31,
-----------------------
2002 2001
-------- --------
(dollars in thousands)
PRINCIPAL
Senior secured revolving credit facility (a) ..... $ 10,261 $ 10,261
Subordinated term loan (b) ....................... 65,000 65,000
Junior line of credit (c) ........................ 20,494 20,494
MSLL Note (d) .................................... 1,399 1,399
-------- --------
97,154 97,154
Accrued interest ................................. 78,381 78,272
-------- --------
$175,535 $175,426
======== ========
F-8
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
(a) This debt facility, of which $2.5 million is held by Wilmington, expired
in August 1991 and the Company has made no interest payments on this
facility since its expiration.
(b) This $65 million facility matured in August 1997, and calls for
interest-only payments at a fixed rate of 11.4 %, payable semi-annually.
The term loan includes convenants, among others, that require the
maintenance of a minimum level of tangible net worth and limit aggregate
levels of additional indebtedness. As a result of the losses incurred by
the Company, it was not in compliance with the above covenants and it has
not paid its semi-annual interest payment since August 1991.
(c) In November 1989, the Company entered into an agreement that provided the
Company with a line of credit in the aggregate amount of $30 million
(amended to $25 million on July 25,1990) due on demand with an interest
rate of prime plus 3.5% and a standby fee of one quarter of one percent of
the unused portion of the commitment.
(d) This note with Wilmington matures June 30, 2005, and has an interest rate
of 6.38%.
During 2002 and 2001, the weighted average amount of total principal debt
outstanding was $97.2 million. There is no weighted average interest cost
for 2002 and 2001 due to the debt holders waiver of interest discussed in
Note 2. The maximum amount of borrowed principal funds outstanding at any
one time during 2002 and 2001 was approximately $97.2 million.
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments"
requires entities to disclose the fair value of on and off-balance sheet
financial instruments. In view of the financial position of the Company at
December 31, 2002, management has determined it is not practicable to
estimate the fair value of debt and other borrowed funds.
NOTE 6 - INCOME TAXES
Set forth below is an analysis of the Company's refund for income taxes
for the years ended December 31, 2002, 2001 and 2000.
2002 2001 2000
-------- -------- --------
(dollars in thousands)
Current provision (refund):
State and local income taxes ..... $ -- $ -- $ (11)
======== ======== ========
F-9
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
A reconciliation of the total benefit for income taxes to amounts computed
by applying the federal tax rate to the net loss is as follows:
2002 2001 2000
----- ----- -----
(dollars in thousands)
Computed at statutory rate .............. $ (72) $ (67) $(152)
State and local income tax benefit ...... (2) (2) (4)
Change in valuation allowance ........... 74 69 145
----- ----- -----
Refund of income taxes .................. $ -- $ -- $ (11)
===== ===== =====
The Company records deferred income taxes on the tax effect of changes in
temporary differences. Deferred tax assets are subject to a valuation allowance
if their realization is less than 50% probable. The accompanying balance sheets
reflect no deferred tax assets or liabilities as of December 31, 2002 and 2001.
NOTE 7 - LEGAL PROCEEDINGS
(A) Joseph Frazier ("Frazier") has instituted three lawsuits in which
Lincorp Holdings, Inc., the Company's predecessors in interest, Greit Realty
Trust Company and Unicorp America Corporation (collectively the "Company"), and
other parties were named as defendants. All three actions arose from a series of
real estate-related transactions which began in 1978 with respect to property in
Bucks County, PA (the "Bucks Property"). More specifically, Frazier's
partnership used a mortgage as a vehicle pursuant to which Greit paid the
partnership $400,000 contemporaneously with entering into the agreement and gave
the partnership a Promissory Note in the amount of $850,000 which further
provided for nineteen annual payments of $10,000 each and a final installment of
$660,000. In return, the partnership assigned its rights in an Agreement of Sale
for the Bucks Property to Greit. The Company has not made any payment to the
partnership since 1992 and has a $730,000 unsecured liability recorded in its
financial statements.
In 1993, Frazier instituted an action in the Court of Common Pleas of
Philadelphia County asserting claims against the Company for fraud and breach of
contract, I.E., the failure to make certain payments due and owing to Frazier
and/or a general partnership in which he had an interest in connection with a
mortgage granted to Frazier's partnership by Greit. In 1997, Frazier instituted
a second action in the Court of Common Pleas of Philadelphia County alleging
fraudulent conveyancing of the Bucks Property by five separate parties,
including the Company. These actions have been consolidated with FRAZIER V.
ESTATE OF WRIGHT, an action previously filed in the Court of Common Pleas of
Philadelphia County by Frazier against his late partner and attorney, Bruce
Wright, alleging legal malpractice. The two actions against the Company were
F-10
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
dismissed for failure to join an indispensable party. The appellate court
squashed Frazier's appeal of that dismissal as premature until judgment is
entered in the FRAZIER V. ESTATE OF WRIGHT case.
In 1998, Frazier instituted an action in the Court of Common Pleas of
Bucks County, PA asserting vague claims arising from the conveyance of the Bucks
Property, which remain pending against the Company. Frazier has asserted claims
against the Company and numerous other parties, including approximately 475
homeowners who currently reside on the Bucks Property. Frazier sought to eject
the homeowners from their homes and regain possession of the Bucks Property. The
Court has dismissed claims against the home-owners. Frazier still seeks damages
of $84 million from the Company and from other defendants. In 1999, the Company
moved to dismiss the Bucks County action on the grounds plaintiff's claim was
time-barred; the Court denied the Company's motion to dismiss, without prejudice
to renew such motions at a later date. After taking very little discovery in
this case, and after permitting the court-ordered discovery deadline to expire,
this year plaintiff attempted to open discovery. Many of the defendants and
various non-parties either objected to or moved to quash discovery, and the
Court responded by circumscribing plaintiff's right to take additional
discovery. The Court has set forth a schedule for the submission of summary
judgment and expert reports, and has stated that it expects to schedule the
trial in this matter for October of 2003. The Company is vigorously defending
the claims that have been asserted in the Bucks County action.
(B) A tax assessment (the "Assessment") has been made by the Commonwealth
of Massachusetts against a former wholly-owned subsidiary of the Company, which
was dissolved in July 1990. The Massachusetts Department of Revenue (the "MDR")
stated, in a notice dated February 15, 1992, that the amount due and owing was
$1.2 million and it is believed that additional interest and/or penalties have
been imposed with regard to the Assessment. On November 29, 1993, an Offer in
Settlement (the "Offer") was forwarded to the MDR with respect to the Assessment
which was rejected by the MDR on October 26, 1995, and there have been no
subsequent developments on this matter since that date. The ultimate outcome of
the Assessment cannot be determined at this time.
F-11
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT NAME
- ----------- -------------
22 Subsidiaries of the Company
99(i) Principal Executive Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes
- Oxley Act of 2002.
99(ii) Principal Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes
- Oxley Act of 2002.