SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2000
Balanced Care Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13845 25-1761898
---------------------------- -------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1215 Manor Drive, Mechanicsburg, PA 17055
------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 717-796-6100
Page 1 of 5 pages.
<PAGE>
Item 5. Other Events.
-------------
Balanced Care Corporation (the "Company") reported in its Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2000, as amended
(the "Form 10-Q"), that many of the facilities operated or managed by the
Company are leased under long-term operating leases with real estate investment
trusts, or REITs. These lease obligations for the next twelve months aggregate
approximately $13,000,000. As reported, the lease documents with all of the
REITs contain certain financial and/or performance covenants and other
restrictions which, unless waived in writing by the REIT, (i) require the
Company, on a consolidated basis, to meet certain financial covenants, such as a
tangible net worth covenant, a current ratio, a debt to equity ratio and/or
minimum cash requirements (measured on a quarterly and year end basis), (ii)
require the tenants, on a facility basis to meet certain rent coverage ratios
(measured on a quarterly and year end basis), (iii) require the Company and/or
the tenants to maintain certain escrow funds, (iv) limit, among other things,
the ability of the Company, certain of its subsidiaries and/or the tenants to
borrow additional funds, encumber assets, dispose of assets or engage in mergers
or other business combinations, (v) cross-default with certain of the Company's
other obligations and (vi) prohibit the Company and/or the tenants from
operating competing facilities within a designated radius of existing
facilities.
The Company reported that it believed that it was either in compliance with
or had obtained the necessary waivers with respect to these lease covenants with
the exception of certain covenants under its Meditrust REIT lease documents. The
Company reported that for the quarter ended September 30, 2000, (i) the Company,
as Guarantor, did not meet its current ratio covenant in connection with the
Potomac Point lease and (ii) seven of the twelve Outlook Pointe tenants
(Blytheville, Pocahontas, Kingsport, Lima, Xenia, Lewisburg and Potomac Point)
did not satisfy their respective rent coverage ratios. In addition, the Company,
as developer, did not complete the Outlook Pointe at Chesterfield facility
financed by Meditrust by the substantial completion date due to the abandonment
of the project by the general contractor. The Company has entered into a
completion agreement with the surety for the Chesterfield project, and received
the final certificate of occupancy for the facility on November 30, 2000.
As reported, the Company requested that Meditrust waive the foregoing
conditions in writing. Although historically
Page 2 of 5 pages.
<PAGE>
Meditrust agreed to provide the necessary waivers at the Company's request,
Meditrust stated that it would only provide the current waivers if the Company
agreed to certain conditions, including the waiver by the Company of certain
rights.
On November 15, 2000, the Company received written notices of events of
default from Meditrust with respect to the failure to meet the financial
covenants and to complete construction of the Chesterfield facility. In
addition, the Meditrust notices stated that Meditrust had elected to apply the
cash collateral deposits from nine of the twelve Outlook Pointe facilities in
the aggregate amount of $1,187,988.14 towards the repayment of two promissory
notes made by TC Realty Holding Company in favor of Meditrust in the aggregate
principal amount of $1,420,000, which notes had a maturity date of October 1,
2000 (collectively, the "TC Realty Notes"). The proceeds from the TC Realty
Notes were used to provide working capital for the Xenia and Lima Outlook Pointe
facilities. Meditrust also elected to apply the cash collateral deposits from
two more of the twelve Outlook Pointe facilities in the aggregate amount of
$174,897.50 towards the prepayment of a promissory note made by Black Box
Holding Company in favor of Meditrust in the principal amount of $362,225, which
note has a maturity date of January 30, 2001 (the "Black Box Note", and together
with the TC Realty Notes, collectively, the "Notes"). The proceeds from the
Black Box Note were used to provide working capital for the Lewisburg Outlook
Pointe facility. Subject to the terms and conditions of certain Working Capital
Assurance Agreements executed by the Company in favor of Meditrust, the Company
is obligated to advance such amounts as are necessary to ensure that the
obligations under the Notes are paid in a timely fashion. Meditrust may seek
payment from the Company for the outstanding principal balance of the TC Realty
Notes in the aggregate amount of $232,011.86, together with any unpaid interest
or costs, at any time.
The November 15 written notices from Meditrust also stated that
Meditrust elected to apply the cash collateral from the remaining Outlook Pointe
facility in the amount of $108,821.49 towards the prepayment of a promissory
note made by the Company and IPC Advisors S.a.r.l. in favor of Meditrust in the
principal amount of $7,811,054, which note has a maturity date of April 3, 2001.
Although the Company continues to pursue these matters and hopes that a
resolution can be reached with Meditrust, there can be no assurance that
Meditrust will
Page 3 of 5 pages.
<PAGE>
waive these covenants or obligations, or that Meditrust will not exercise the
remedies available to it. If Meditrust does not provide the requested waivers,
the cross-default provisions in the Meditrust leases may result in
cross-defaults under substantially all of the Company's other financing
obligations.
Item 7. Financial Statements and Exhibits.
----------------------------------
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
None.
Page 4 of 5 pages.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Balanced Care Corporation
Date: November 20, 2000 By: /s/ Clint T. Fegan
-----------------------------
Clint T. Fegan
Chief Financial Officer
Page 5 of 5 pages.
