<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT AND FORM 10-K
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED
DECEMBER 31, 1995 COMMISSION FILE NUMBER 0-11656
THE WENDT-BRISTOL HEALTH
SERVICES CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 22-1807533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TWO NATIONWIDE PLAZA, SUITE 760 43215
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NO.: (614) 221-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
Name of each exchange on which
Title of Each Class registered
------------------- --------------------------------
<S> <C>
Common Stock, par value $.01 per share American Stock Exchange
Common Stock Purchase Warrants Same as above
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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
filing requirements for the past 90 days. Yes X No ___
On April 2, 1996, the aggregate market value of the voting stock of
The Wendt-Bristol Health Services Corporation held by non-affiliates of the
Registrant was approximately $2,592,000 based upon the closing price for such
Common Stock on said date as reported by the American Stock Exchange. On such
date, there were 5,736,020 shares of Common Stock of the Registrant and 414,538
Common Stock Purchase Warrants outstanding.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained 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
DOCUMENTS INCORPORATED BY REFERENCE:
See Part IV, Item 14(a)3
<PAGE> 2
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 *
PART I
ITEM 1. BUSINESS
The Company's business is in the health care industry. It is
engaged in the ownership and operation of three nursing homes
(one specializing in the care of persons with Alzheimer's and
related syndromes), the operation of three retail pharmacies
and a Medicare-certified home health care agency. It is the
general partner in charge of administration and operation of
an outpatient diagnostic and radiology center owned by a
limited partnership; this diagnostic center, which serves the
medical community generally, provides state of the art
diagnostic imaging techniques, including magnetic resonance
imaging (MRI), CT Scans, Ultrasound, X-ray, Mammography, and
3-D imaging. The Company's primary activities are carried on
in the state of Ohio, principally in Columbus.
As used herein, "Company", unless the context otherwise
requires, includes the subsidiaries of the Company, among
which is The Wendt-Bristol Company ("W-B"), and other
affiliates of the Company. W-B and its predecessors have been
in the health care industry since 1903.
NURSING HOMES. The Company owns and operates two nursing homes
in Columbus, Ohio (147 beds and 75 beds) and leases the
premises and operates one nursing home in Springfield, Ohio
(100 beds). All nursing homes provide skilled care, one
specializing in the care of persons with Alzheimer's and
related syndromes.
The Alzheimer Patient Care Center, located in Columbus, Ohio,
opened in October, 1994. It is a 75-bed skilled long-term
facility that also contains a geriatric day care center and a
physician office for geriatric assessment. The Medicaid
reimbursement program of the State of Ohio is applicable to
costs incurred by some of the persons receiving care in the
facility. Approximately 35% (as of March, 1996) are private
pay patients. In April 1993, the Company obtained mortgage
financing (insured by the U.S. Department of Housing and Urban
Development) in the amount of approximately $3,200,000 subject
to periodic draws to cover 90% of the cost of construction of
the facility; closing on the permanent long-term mortgage
occurred in the second quarter of 1995. In November 1993, the
Wendt-Bristol Diagnostics Company ("Diagnostics"), which is a
subsidiary of the Company, acquired the remaining one-half
interest in the Alzheimer's entity that was owned by an
unrelated third party, thereby gaining 100% ownership (see
Note 1B of the Notes to Consolidated Financial Statements
herein).
---------------------------------
* Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an
exhibit to this Form 10-K or otherwise filed with the
Securities and Exchange Commission. Each such statement is
qualified in its entirety by such reference.
I-1
<PAGE> 3
ITEM 1. BUSINESS (CONTINUED)
MEDICAL AND RELATED SERVICES. During February 1987, W-B formed
Diagnostics as a subsidiary for the purpose of establishing
outpatient medical diagnostic imaging centers. The first, and
to date the only, such center was financed through the
formation of a limited partnership, Wendt-Bristol Diagnostics
Company L.P. (the "Partnership"), of which Diagnostics is the
general partner and currently receives 50% of the profits in
addition to management fees. The center opened in April 1988
in Columbus, Ohio. The center specializes in state of the art
diagnostic imaging techniques, including magnetic resonance
imaging (MRI), CT Scans, Ultrasound, X-ray, Mammography, and
3-D imaging. The center is currently in the process of
remodeling to provide a suite that will accommodate a new
angiography/fluoroscopy unit expected in the second quarter of
1996. Additionally, bone densitometry is being added to the CT
unit. Physicians in the Telequest Network provide radiology
services to the partnership via telecommunications technology.
Telequest is a consortium of six leading academic radiology
centers in the United States. Telequest represents this
country's first nationwide sub-specialty radiology network and
is dedicated to implementing products and services that
enhance the overall quality and efficiency of the radiology
services.
The consortium consists of the following institutions:
Bowman Gray School of Medicine
Brigham & Womens Hospital - Boston
Emory University Hospital - Atlanta
University of California, San Francisco
University of Pennsylvania Medical Center
University of Washington, Seattle
In addition, Diagnostics, through one of its subsidiaries,
constructed the Alzheimer's and related syndromes facility
referred to above. Diagnostics was engaged in a public
offering of its common shares which commenced in October 1993.
On or about May 15, 1994, sales efforts related to the common
shares ceased pending the approval of The National Association
of Securities Dealers ("NASD") as it related to the
participation of a NASD member firm. As a result of this delay
and the need for an amended filing with the Securities and
Exchange Commission, the offering was terminated. Prior to the
termination, 162,530 common shares had been sold; half of such
shares were newly issued and the other half were sold by
Wendt-Bristol as selling shareholder. See Notes 2 and 3 of
Notes to Consolidated Financial Statements.
The Company is also engaged in the business of providing
Medicare-certified home health care services through its
wholly-owned subsidiary, Wendt-Bristol Home Health Care
Company, which was incorporated in May 1985 and has attained
JCAHO (Joint Commission on Accreditation of Healthcare
Organizations) certification. Wendt-Bristol Home Health Care
Company employs or contracts with nurses and nurses aides,
social workers and therapists of all kinds to provide home
health care services in the greater Franklin County, Ohio area
and, in 1994, in the Springfield, Ohio area. The Company also
provides a physical therapy clinic in its Springfield facility
serving residents and outpatients.
In August 1985, 1275 Olentangy River Road Limited Partnership
was formed. W-B has been the sole general partner of this
partnership which owned and operated a medical office building
in Columbus, Ohio until it was sold (see Notes 1B and 5 of
Notes to Consolidated Financial Statements).
I-2
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED)
PHARMACIES. The Company operates three retail pharmacies. Two
of the pharmacies are located in Columbus and one in Canal
Winchester. The pharmacies sell pharmaceuticals and medical
supplies and equipment, health and beauty aids and other
sundries. It also sells and rents durable medical equipment
and provides enteral therapy services.
EMPLOYEES: LABOR RELATIONS. The Company has approximately 450
employees at February 28, 1996. Non-professional employees of
one of its nursing homes located in Columbus, Ohio, are
covered by a collective bargaining agreement through February,
1997. The Company considers its relations with its employees
and the union to be good.
PATENTS AND TRADEMARKS. The Company owns registered
trademarks, including "the Best of Health!", which are
utilized in connection with the marketing of Company services
and products.
INDUSTRY SEGMENTS. The operations of the Company and its
subsidiaries fall within two industry segments: Nursing homes;
and Medical services and other. Additional information about
each of the industry segments, for the respective periods
indicated, follows:
Financial information by industry segments for the years ended
December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
Revenues/sales to unaffiliated
customers:
<S> <C> <C> <C>
Nursing homes $ 12,604,828 $ 9,791,822 $ 9,307,388
Medical services and other 8,251,370 9,695,240 10,180,567
Operating income or (loss):
Nursing homes 857,040 851,359 1,154,642
Medical services and other 508,625 (146,093) (368,377)
Identifiable assets:
Nursing homes 12,353,302 11,860,805 8,018,088
Medical services and other 10,454,023 14,647,236 15,901,602
Depreciation expense:
Nursing homes 365,780 259,175 221,209
Medical services and other 536,912 883,419 920,339
Capital expenditures:
Nursing homes 178,880 2,614,683 1,413,245
Medical services and other 968,133 200,925 183,014
</TABLE>
REGULATION OF THE HEALTH CARE INDUSTRY. The Company must
comply with extensive federal, state and local government
regulations applicable to the health care industry and the
pharmacy business.
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<PAGE> 5
ITEM 1. BUSINESS (CONTINUED)
Nursing homes and home health care businesses are subject to
federal and state government regulation, including the
necessity of obtaining and maintaining a license or
certificate. There are also licensing requirements for nurses
and other professional staff of the nursing home and/or home
health care agency. The operations of nursing homes are also
affected by the Medicare/Medicaid conditions of participation
and other relevant federal and local laws. Several activities
of nursing homes and home health care agencies are also
regulated, including, but not limited to, release of medical
records, patient confidentiality rights and the dispensing of
drugs. In addition, there are federal and state requirements
as to patient rights. Failure to abide by these requirements
could lead to decertification and loss of reimbursement,
private enforcement rights by the patient, and other
sanctions.
The State of Ohio currently licenses nursing homes which are
privately owned and operated. A private owner cannot operate a
nursing home without a license. In addition to licensure
requirements, in the case of long-term care facilities the
Ohio Department of Health, the Ohio Department of Human
Services, and the United States Department of Health and Human
Services are the principal regulatory agencies to whose
jurisdiction the Company is subject.
The Company remains in good standing with all requisite
agencies.
REQUIREMENT OF OBTAINING A CERTIFICATE OF NEED. Under the
current Certificate of Need ("CON") law, there is a moratorium
on the approval of new nursing home beds until June 30, 1997.
The establishment of new nursing home beds (after June 30,
1997) and the relocation of nursing home beds requires a CON.
New health care facilities, including diagnostic centers,
located in metropolitan statistical areas are required to be
licensed beginning March 31, 1996, but do not have to obtain a
CON. Diagnostic centers located in rural areas still require a
CON until May 1, 1997. In addition to the foregoing, there is
a separate requirement to file a notice of intent with the
Director of Health and the local health care agency 60 days
prior to "the establishment of a new health care facility."
The acquisition of an existing health care facility that does
not involve a change in the number of beds, by service, or the
number or type of health services does not require a CON or
the filing of a notice of intent.
CON review is required until May 1, 1997 for the purchase of
medical equipment costing $2 million or more. The cost of
purchasing medical equipment is the sum of (1) the greater of
its fair market value or the cost of its lease or purchase and
(2) the cost of installation and any other activities
essential to the acquisition of the equipment and its
placement into service.
Acquisition of an MRI is not reviewable (unless the cost is $2
million or more), but does require filing a notice of intent
with the Director of Health and the local health care agency
60 days prior to the purchase.
New construction or renovation of a nursing home costing $2
million or more requires a CON. A CON is not required for
other capital expenditures. Capital expenditures of $2 million
or more on behalf of a health care facility in connection with
the provision of a health service do require filing a notice
of intent with the Director of Health and the local health
agency 60 days prior to obligating the capital expenditure.
PHARMACIES. There are substantial federal laws and regulations
which impact the pharmacy business. Federal laws include the
Federal Food, Drug and Cosmetic Act, the Federal Trade
Commission Act, the Consumer Product Safety Act, the Poison
Prevention Packaging Act, and the Hazardous Substances Act.
I-4
<PAGE> 6
ITEM 1. BUSINESS (CONTINUED)
States generally require that pharmacies and pharmacists be
licensed or registered by applicable state agencies. In
addition, there are state laws and regulations issued pursuant
thereto governing aspects of retail pharmacy operations,
including (i) who may write and dispense prescriptions, (ii)
how prescriptions must be filled, (iii) how prescription drugs
and controlled substances must be stored and safeguarded, (iv)
when generic drugs may be substituted, and (v) the uses for
which certain drugs may be prescribed. These laws are
generally designed to insure the identity, strength, quality
and purity and to regulate the packaging, labeling and
dispensing of drugs. Regulations are issued by an
administrative body in each state, typically a pharmacy board.
These agencies are empowered to impose sanctions, including
license or registration revocations for noncompliance. In
addition, each pharmacy and pharmacist is bound by standards
of professional practice. The Company has not experienced, nor
does it expect to experience, any difficulties in compliance
with regulations promulgated by these agencies.
LEGISLATION. The Company also may be affected, directly or
indirectly, by legislation affecting medical cost
reimbursements. In recent years, Congress has enacted
legislation aimed at controlling the cost to certain patients
of medical products and services through the regulation of the
primary federal and state reimbursement programs: Medicare, a
federal program for certain elderly or disabled patients and
certain patients suffering from end stage renal disease, and
Medicaid, a jointly sponsored federal and state program which
focuses on assisting certain qualified recipients.
Legislative proposals to regulate or control health care costs
and to institute a national health insurance program have been
made from time to time and are currently receiving further
consideration. Because these proposals vary, their potential
effect on the health care industry also vary. If, in the
future, legislation or regulations were to be adopted that
would significantly reduce governmental reimbursement rates or
rates charged to private-pay patients, such legislation or
regulations could have a material adverse effect on the
Company. Because a significant portion of all nursing home
revenues on an industry-wide basis are derived from the
federal and state governments, the Company and the industry as
a whole will continue to be affected by changes in government
programs and regulations.
MANUFACTURE OF MEDICAL EQUIPMENT. Until October 1991, the
Company was also engaged in the business of manufacturing
durable medical equipment and furniture through its Healthcare
Division located in Passaic, New Jersey.
On October 1, 1991, the Company sold all of the assets (other
than the real estate and plant thereon) of its Healthcare
Division to a wholly-owned subsidiary of Graham-Field Health
Products, Inc., pursuant to an Agreement dated August 31,
1991, between the Company and Graham-Field, Inc., as amended
on October 1, 1991.
To permit the disposition of the Healthcare Division, the New
Jersey Department of Environmental Protection and Energy (the
"Department") issued its Administrative Consent Order and the
Company posted $150,000 in favor of the Department to be used,
if necessary, to reimburse clean-up expenditures.
The Department had determined that the Passaic, New Jersey,
real estate of the Company did not completely comply with
applicable New Jersey laws and regulations pertaining to the
environment. The contamination in question had resulted
primarily from underground tanks, long abandoned by prior
owners of the site, and the contents thereof. All of such
tanks have been removed by the Company. In part the
contamination was also attributable to the method, initiated
by prior operators, of disposal of solvents.
I-5
<PAGE> 7
ITEM 1. BUSINESS (CONTINUED)
In March 1992 the Company submitted to the Department a
proposed clean-up plan formulated by the Company's special
counsel and its environmental engineering firm (collectively
the "environmental engineering firm"). The Department in April
1993 accepted a part of the Company's proposed plan and
proposed its own plan in lieu of that part of the Company's
plan that was not acceptable. The Company's environmental
engineering firm recommended against acceptance of the
Department's proposals.
In May 1993 the Company submitted an amended plan. In January
1994 the Department accepted a part of the Company's amended
plan and proposed its own plan in lieu of that part of the
Company's amended plan that was not acceptable.
The Company's environmental engineering firm concluded that
the additional work that the Department was requiring was both
unwarranted and burdensome. In February 1994 the Department
agreed to conduct a more detailed analysis of the
aforementioned amended plan submitted by the Company and in
December 1995 granted a conditional approval of the plan with
a two-year monitoring period. The estimated costs to complete
the plan are approximately $160,000.
The Company has incurred total costs of $972,000 related to
environmental matters in New Jersey, of which $413,213 was
spent in the five fiscal (calendar) years ended December 31,
1995. For further information, see Note 12A of Notes to
Consolidated Financial Statements.
PRIVATE SALE OF STOCK. Reference is hereby made to Note 2 of
Notes to Consolidated Financial Statements.
SECURITIZATION OF ACCOUNTS RECEIVABLE. Reference is hereby
made to Note 5 of Notes to Consolidated Financial Statements
herein.
ITEM 2. PROPERTIES
The Company leases approximately 7,200 square feet of space in
a downtown Columbus, Ohio, office building which serves as the
Company's and W-B's general offices.
Three pharmacies operated by W-B are located in leased
premises in Ohio: two in Columbus (4,000 square feet and 3,300
square feet) and one in Canal Winchester (4,000 square feet).
In addition, a warehouse (3,200 square feet) is leased in
Columbus, Ohio to store durable medical equipment used at the
pharmacies.
The facilities of the Wendt-Bristol Diagnostics Company L.P.
consist of an 8,000 square foot two-story building in
Columbus, Ohio, which serves as its general offices and
diagnostic and radiology center; such owned facilities are
subject to mortgage indebtedness in the amount of $712,500 at
April 1, 1996. See Note 15 of Notes to Consolidated Financial
Statements.
The nursing homes of the Company consist of one owned 147-bed
home in Columbus, Ohio, subject to mortgage indebtedness in
the amount of $2,944,000, one owned 75-bed Alzheimer's and
related syndromes center subject to mortgage indebtedness of
$3,174,000 (each indebtedness at April 1, 1996) and one leased
100-bed home in Springfield, Ohio. The lease expires in July,
2015. Reference is hereby made to Item 3. I. herein. In
November, 1994 the Company acquired approximately 2 acres of
land adjacent to the Alzheimer's center for approximately
$144,000. The property is subject to mortgage indebtedness in
the amount of $61,000 at April 1, 1996.
I-6
<PAGE> 8
ITEM 2. PROPERTIES (CONTINUED)
The present aggregate annual rentals of all leases referred to
are approximately $550,000 and their terms have expiration
dates ranging through July 2015.
The Company believes that the facilities described or referred
to above are adequate and sufficient for its present needs and
requirements.
The Company owns land and a plant located in Passaic, N.J.,
which were formerly used by its Healthcare Division
(manufacturer of durable medical equipment), which was sold on
October 1, 1991. This property was leased to the purchaser at
the time of the transaction. See Item 1. Business.
ITEM 3. LEGAL PROCEEDINGS
I. ETHAN ALLEN CARE CENTER, INC.
American Health Care Centers, Inc. ("AHCC") has filed a
complaint for Declaratory Judgment action against Ethan
Allen Care Center, Inc. ("EACC") on June 26, 1995 in the
Court of Common Pleas, Clark County, Ohio (Case No.
95-CV-0326). EACC is a subsidiary of W-B. AHCC is the
landlord under a lease with EACC for its nursing home
facility doing business as Bristol House of Springfield.
AHCC seeks a Declaration that EACC is in default of the
lease and seeks the right to repurchase the license for
the nursing home. AHCC has filed a Motion for Summary
Judgment and EACC is currently conducting its discovery in
order to respond to the Motion. Such response date, as
amended, is June 28, 1996. EACC is presently current on
its rent obligation but is disputing the late rent charges
imposed under the lease.
Although not directly subject to this complaint, the
Company is seeking payment of a receivable related to a
Share Transfer Agreement with AHCC. Such amounts became
due in February 1996, one year after final settlement of
certain State of Ohio Medicaid receivables, as provided in
the Agreement.
II. INSURANCE COMMISSIONER OF THE COMMONWEALTH OF
PENNSYLVANIA, AS THE STATUTORY LIQUIDATOR FOR CORPORATE
LIFE INSURANCE COMPANY (UNAFFILIATED THIRD PARTY)
On February 20, 1995, the Company entered into a Stock
Exchange Agreement (the "Agreement") with the Insurance
Commissioner of the Commonwealth of Pennsylvania, as the
Statutory Liquidator (the "Statutory Liquidator") of
Corporate Life Insurance Company ("CLIC"). Under the terms
of this Agreement, the Company exchanged its 30,000
preferred shares in Life Holdings, Inc. for 2,000,000
shares of the Company's common stock held by the Statutory
Liquidator and 300,000 shares of the common stock of
Diagnostics held by the Statutory Liquidator. Under the
terms of that Agreement, the Company agreed to purchase
the additional 500,000 shares of common stock held by the
Statutory Liquidator for a price of $.80 per share, as
well as the remaining 45,000 additional shares of common
stock of Diagnostics for a price of $5.00 per share. The
Company has not yet been able to meet its commitment to
purchase the foregoing shares.
The Statutory Liquidator caused a Writ of Summons in the
Commonwealth Court of Pennsylvania (Case No. 509-MD-1995)
to be served on the Company indicating in its entirety
that Statutory Liquidator has commenced an unspecified
action against the Company. As of this date the Company is
not aware of any additional filings in connection with
this action, although counsel for the Statutory Liquidator
has advised the Company that the Statutory Liquidator
intends to seek performance in the action for the amounts
due it from the Company.
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<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS (CONTINUED)
II. INSURANCE COMMISSIONER OF THE COMMONWEALTH OF
PENNSYLVANIA, AS THE STATUTORY LIQUIDATOR FOR CORPORATE
LIFE INSURANCE COMPANY (UNAFFILIATED THIRD PARTY)
(CONTINUED)
Management desires to obtain a third party purchaser for
the Company's shares.
Additionally, as a result of a Federal investigation of
the activities of CLIC, the Company has been requested to
furnish documents and information in its files related to
transactions with CLIC and Life Holdings, Inc. The Company
is cooperating fully.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1995, no matters were submitted
to a vote of security holders.
I-8
<PAGE> 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) Price Range of Common Stock
The high and low trade prices for the Company's Common
Stock and Common Stock Purchase Warrants as reported by
the American Stock Exchange for the periods indicated are
as follows:
<TABLE>
<CAPTION>
AMEX SYMBOL WMD WMD.WS
YEAR COMMON STOCK WARRANTS
---- ------------ --------
1995 HIGH LOW HIGH LOW
---- ---- --- ---- ---
<S> <C> <C> <C> <C> <C>
1st Quarter 1/2 5/16 1/2 1/16
2nd Quarter 3/4 7/16 No Trades
3rd Quarter 11/16 7/16 1/4 1/4
4th Quarter 9/16 3/8 1/8 1/64
1994
----
1st Quarter 15/16 11/16 9/16 1/4
2nd Quarter 13/16 5/8 7/8 5/16
3rd Quarter 3/4 1/2 11/16 3/16
4th Quarter 11/16 3/8 7/8 9/16
</TABLE>
(b) Approximate Number of Equity Security Holders
The number of holders of record for each class of equity
securities of the Company as of April 2, 1996 was as
follows:
<TABLE>
<CAPTION>
NUMBER OF HOLDERS
TITLE OF CLASS OF RECORD (1)
-------------- -------------
<S> <C>
Common Stock, par value $.01
per share ("Common Stock") 1,149
Common Stock Purchase Warrants 203
</TABLE>
(1) The number of stockholders of record includes shares
held in "nominee" or "street" name.
(c) Dividends
No cash dividends have been declared or paid by the Company.
PRIVATE SALE OF STOCK
Reference is hereby made to Note 2 of Notes to Consolidated
Financial Statements.
II-1
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
INCOME STATEMENT DATA
Revenues:
<S> <C> <C> <C> <C> <C>
Net sales $ 2,709 $ 3,694 $ 3,686 $ 4,450 $ 4,973
Service income 18,147 15,793 15,802 16,124 14,524
----------- ----------- ----------- ----------- -----------
20,856 19,487 19,488 20,574 19,497
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales 1,920 2,554 2,630 3,033 3,268
Selling, general and administrative
expenses, net 16,668 15,085 14,930 16,205 15,626
----------- ----------- ----------- ----------- -----------
18,588 17,639 17,560 19,238 18,894
----------- ----------- ----------- ----------- -----------
Operating income before depreciation
and special charges 2,268 1,848 1,928 1,336 603
----------- ----------- ----------- ----------- -----------
Depreciation 902 1,143 1,142 1,070 903
Special charges -- -- -- -- 522
----------- ----------- ----------- ----------- -----------
902 1,143 1,142 1,070 1,425
----------- ----------- ----------- ----------- -----------
Operating income (loss) 1,366 705 786 266 (822)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Minority interest in earnings of
consolidated subsidiary and limited
partnerships, net (172) (53) (31) (26) (597)
Interest expense (1,050) (1,390) (1,210) (1,123) (969)
Gain on sale of stock of subsidiaries -- 135 355 997
Gain (loss) on sale of assets -- 726 71 (40) (11)
Other, net 21 136 38 178 265
----------- ----------- ----------- ----------- -----------
(1,201) (446) (777) (14) (1,312)
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes 165 259 9 252 (2,134)
(Provision) benefit for income taxes 52 (55) (247) (18) 403
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing operations 217 204 (238) 234 (1,731)
Gain on sale of discontinued operations -- -- -- -- 512
Loss from discontinued operations -- -- -- -- (2,311)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 217 $ 204 $ (238) $ 234 $ (3,530)
=========== =========== =========== =========== ===========
Per share data:
Income (loss) from continuing operations $ 0.04 $ 0.03 $ (0.03) $ 0.04 $ (0.30)
Loss from discontinued operations
net of income taxes -- -- -- -- (0.32)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 0.04 $ 0.03 $ (0.03) $ 0.04 $ (0.62)
=========== =========== =========== =========== ===========
Weighted average shares 6,131,770 8,153,382 7,889,512 5,786,643 5,668,397
BALANCE SHEET DATA (AT YEAR END)
Working capital (deficiency) $ (5,340) $ (4,236) $ (2,145) $ (2,005) $ (2,440)
Total assets 22,807 26,508 23,920 24,576 22,063
Long-term debt and lease
obligations, net of
current portion 7,881 7,965 9,249 9,816 8,253
Shareholders' equity 4,543 7,200 6,964 6,248 4,028
</TABLE>
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<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY OF CONSOLIDATED FINANCIAL RESULTS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Operations (In thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Net sales $ 2,709 $ 3,694 $ 3,686
Service income 18,147 15,793 15,802
-------- -------- --------
Total revenues $ 20,856 $ 19,487 $ 19,488
======== ======== ========
Operating income $ 1,366 $ 705 $ 786
Percent of revenues 6.5 3.6 4.0
Net income (loss) $ 217 $ 204 $ (238)
Percent of revenues 1.0 1.0 (1.2)
Per common share $ .04 $ .03 $ (.03)
</TABLE>
NOTE: Reference should be made to the Notes to Consolidated
Financial Statements herein.
FINANCIAL CONDITION
Management believes that the Company's financial condition
continues to be strengthened through the concentration of
efforts to develop its Health Care Services business. The
disposition of the retail liquor store and lounge operations
in Florida effective January 1995 was another step in focusing
the Company into the health services industry. As a result of
the emphasis on health services, rather than manufacture or
distribution, Management believes that the Company has
established a focused growth plan that is evidenced by the 23%
increase in operating earnings before depreciation from
$1,848,000 in 1994 to $2,268,000 in 1995. It should also be
noted that the 1995 figures include the results of the
Alzheimer's Center which opened in October, 1994. This
special-needs facility had initial costs that had to be
absorbed approximating $325,000 in 1995. The facility reached
full capacity in the fourth quarter of 1995 and made its
initial contribution toward profits in the fourth quarter; it
is expected to favorably impact the Company's 1996 earnings
and cash flows.
The balance sheet currently reflects the balloon mortgage
payment due of approximately $1,640,000, all classified as
current, relating to the New Jersey property leased by the
purchaser of its former manufacturing division. The mortgage
was initially due on October 1, 1995; after obtaining an
extension from the lender, the Company currently has a
commitment to refinance the loan with an anticipated closing
date set for April 1996.
Working capital decreased approximately $1,104,000 during the
year ended December 31, 1995. Current assets decreased
$1,402,000 and current liabilities decreased $298,000 at
December 31, 1995 as compared to December 31, 1994. The
decrease in current assets was due mostly from declines in
cash ($146,000) restricted cash ($244,000), and miscellaneous
receivables ($2,523,000) offset by an increase in trade
receivables ($1,752,000). The increase in trade receivables
and approximately $665,000 of the decrease in other
receivables are attributable to the termination of the
accounts receivable securitization program. Also relating to
the decrease in other receivables was the collection of a
$1,700,000 receivable in January, 1995, related to the 1994
sale of a medical office building in which the Company was the
general partner in a limited partnership. Current liabilities
decreased approximately $298,000, due mostly from declines in
securitization advances ($479,000), current portion of
long-term debt ($691,000), and federal
II-3
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
income taxes payable ($220,000) partially offset by increases
in other accrued expenses ($859,000) and taxes other than
federal income taxes ($334,000). The decrease in
securitization program advances is caused by the termination
of the receivable financing program while most of the decrease
in current portion of long-term debt was caused by the
mortgage payoff of the medical office building. The increase
in other accrued expenses is due mostly from the Company
accruing for the purchases of treasury stock ($400,000) and
shares of Diagnostics Company stock ($225,000) pursuant to an
agreement with the State of Pennsylvania (see Notes 1B and 2).
The increase in taxes other than federal income taxes consists
mostly of an increase in payroll taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced anticipated adverse cash flow in 1995
related to the startup of the Alzheimer's Center as a result
of the need for staffing at disproportionate levels during the
period of orderly introduction of patients to the facility as
well as delays in Medicaid reimbursement. The facility has
reached capacity and attained profitability in the fourth
quarter of 1995. With anticipated rate increases and
operational efficiencies, management believes the facility
will generate profits during all of 1996.
The Company replaced its CT Scan unit with an upgraded
state-of-the-art model in the fourth quarter of 1995 at the
Diagnostic and Radiology Center operated by a limited
partnership of which a subsidiary is general partner. The new,
upgraded unit is capable of significantly higher speed and
additional imaging procedures. The Center is also installing
additional imaging techniques such as angiography and
fluoroscopy in the second quarter of 1996. The costs of such
additional equipment, approximately $745,000, will be financed
through the Partnership by favorable vendor financing
programs.
The Company continues to restructure its financing to obtain
more funds for working capital needs. Subsequent to year-end,
the Company re-financed most of its equipment, obtaining a
$1,700,000 note payable over 60 months, thereby reducing
monthly payments by approximately $25,000 per month and
infusing approximately $677,000 of working capital into the
Company. See Note 15 to the financial statements.
The Company also refinanced the mortgage at its Diagnostic
Center, obtaining a 10-year fixed rate at 9.41% while
providing funds of approximately $229,000. These funds are to
be used for working capital related to the expansion of
modalities at the facility.
The accounts receivable securitization program was terminated
in 1995 through an Action filed by the Company (see Note 15C).
The Company is currently reviewing proposals to replace this
financing program; it is anticipated that a replacement
program will be finalized in the second quarter. As a result
of this transition, the Company has experienced cash flow
difficulties from time to time but has maintained good working
relationships with its vendors.
Management further believes the present resources available,
the accounts receivable financing program indicated above, as
well as profitable operations will meet anticipated
requirements for the operations of the business. There are no
further material commitments for capital expenditures.
II-4
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS 1995-1994
Consolidated revenues from operations for the year ended
December 31, 1995 increased approximately $1,369,000 or 7.0%
over 1994. Net sales declined approximately $985,000 as
compared to the previous year, due mostly to the disposition
of the liquor operations effective as of January 1, 1995 (see
Note 11B). Service revenues increased approximately $2,354,000
or 14.9% over the same period in 1994. The increase is
primarily attributable to the newly-opened Alzheimer's Center
($2,650,000) offset by a decline in volume in Home Health
Care.
Cost of sales decreased approximately $634,000 for the year as
compared to 1994, primarily from the disposition of the liquor
operations. Gross margin for the year ended December 31, 1995
was 29.1% as compared to 30.9% for the comparable period in
1994.
Selling, general and administrative expenses increased
approximately $1,583,000 for the year ended December 31, 1995
as compared to 1994, primarily attributable to costs
associated to the Alzheimer's Center partially offset by the
disposition of the liquor operations.
Operating income increased approximately $660,000 or 93.6% for
the year ended December 31, 1995 as compared to the same
period in 1994. The increase is mostly attributable to
increases at the Diagnostics Center and the Alzheimer's
Center.
Interest expense decreased approximately $340,000 as compared
to 1994, primarily from reduced borrowings related to the
termination of the securitization program.
Inflation has not had a significant effect on the net sales
and revenues of the Company. While inflation has caused some
increases in costs, there have been corresponding increases in
selling prices and service fees, neither of which have been
significant.
RESULTS OF OPERATIONS 1994-1993
Consolidated revenues from operations for the year ended
December 31, 1994 were relatively stable compared to 1993,
decreasing approximately $1,000. Net sales were also stable
when comparing 1994 to 1993, increasing approximately $8,000
over the previous year while service revenues decreased $9,000
from 1993.
Services revenues had declined approximately $353,000 for the
year ended December 31, 1994 primarily due to the termination,
during May, 1993, of a management agreement with a family
medical practice whose results for the first five months are
included in the 1993 revenue figures. A subsidiary of the
company continued to provide billing services to the medical
practice through June 1995. Revenues in the Home Health Care
subsidiary declined by approximately $185,000, due mostly from
a decrease in Home Health visits for 1994. Offsetting the
decline in revenues, the nursing home revenues increased by
approximately $484,000 partly from existing homes ($311,000)
and partly due to the October, 1994 opening of the Alzheimer's
Center ($173,000).
Cost of sales for the year ended December 31, 1994 decreased
approximately $76,000 or 3.0% as compared to 1993, resulting
in an increased gross margin of 30.9% in 1994 vs 28.7% in
1993.
Selling, general, and administrative expenses increased
approximately $155,000 or 1.0% over 1993. The increase in
expenses was mainly attributable to the startup of the
Alzheimer's Center in October, 1994. Excluding the Alzheimer's
facility, selling, general, and administrative expenses
declined by approximately $233,000 or 1.6% when comparing 1994
to 1993.
II-5
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS 1994-1993 (CONTINUED)
Interest expense increased approximately $180,000 or 14.9% for
1994 as compared to 1993. The increase was due primarily to
higher interest costs on the accounts receivable
securitization program and interest expense in the fourth
quarter on the newly opened Alzheimer's Center.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the list of financial statement schedules included in Part
IV, Item 14 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING \
AND FINANCIAL DISCLOSURE
None.
II-6
<PAGE> 16
[LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
The Wendt-Bristol Health Services Corporation
Columbus, Ohio
We have audited the 1995, 1994 and 1993 consolidated financial
statements and related schedules of The Wendt-Bristol Health Services
Corporation and Subsidiaries listed in Item 14(a)(1) and (2) of the annual
report on Form 10-K of The Wendt-Bristol Health Services Corporation for the
years ended December 31, 1995, 1994 and 1993. 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 generally accepted auditing
standards. 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 that 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 consolidated financial position of The
Wendt-Bristol Health Services Corporation and Subsidiaries at December 31, 1995
and 1994 and the consolidated results of their operations and their cash flows
for the three years then ended in conformity with generally accepted accounting
principles. Further, it is our opinion that the schedules referred to above
present fairly, in all material respects, the information set forth therein in
compliance with the applicable accounting regulations of the Securities and
Exchange Commission.
HAUSSER & TAYLOR
Columbus, Ohio
April 16, 1996
II-7
<PAGE> 17
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 35,825 $ 182,042
------------ ------------
Restricted cash (Note 4) 163,962 407,616
------------ ------------
Receivables (Note 5):
Trade, net of allowance for doubtful accounts of
$340,000 in 1995 and $250,000 in 1994 2,678,551 926,085
Notes receivable - current 49,920 80,710
Miscellaneous 858,032 3,380,655
------------ ------------
3,586,503 4,387,450
Inventories 489,042 586,395
Prepaid expenses and other current assets 549,774 663,590
------------ ------------
Total current assets 4,825,106 6,227,093
------------ ------------
PROPERTY, PLANT AND EQUIPMENT (Notes 6 and 7) 19,531,862 19,259,407
Less accumulated depreciation and amortization (5,243,057) (4,974,847)
------------ ------------
14,288,805 14,284,560
------------ ------------
INVESTMENTS AND OTHER ASSETS
Investment in preferred stock, at cost (Notes 2 and 12C) -- 3,000,000
Notes and other receivables, net of current portion 395,912 644,084
Notes receivable from officers and related parties (Notes 11B and 11C) 863,509 242,112
Life insurance premiums receivable (Note 11D) 758,795 300,789
Excess of cost over assets of businesses and subsidiaries
acquired, less accumulated amortization 637,729 507,540
Deferred charges 776,622 871,162
Other assets 260,847 430,701
------------ ------------
3,693,414 5,996,388
------------ ------------
Total assets $ 22,807,325 $ 26,508,041
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
II-8
<PAGE> 18
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
CURRENT LIABILITIES
<S> <C> <C>
Securitization program advances (Note 5) $ -- $ 478,500
Accounts payable 2,836,474 3,003,115
Accrued expenses and other liabilities:
Salaries and wages 451,718 356,238
Taxes, other than federal income taxes 1,315,508 981,895
Interest 87,520 117,046
Stock purchase agreement payable (Notes 1B and 2) 625,000 --
Other 1,987,634 1,753,861
Long-term obligations classified as current (Notes 7 and 15) 2,760,789 3,451,989
Federal income taxes payable (Note 9) 100,000 320,000
------------ ------------
Total current liabilities 10,164,643 10,462,644
LONG-TERM OBLIGATIONS LESS AMOUNTS
CLASSIFIED AS CURRENT (Notes 7 and 15) 7,880,566 7,964,568
------------ ------------
Total liabilities 18,045,209 18,427,212
------------ ------------
MINORITY INTERESTS 219,541 881,282
------------ ------------
CONTINGENCIES AND COMMITMENTS (Notes 5, 7, 8 and 12)
STOCKHOLDERS' EQUITY (Notes 2 and 10)
Common stock, $.01 par, authorized 12,000,000 shares;
issued 8,243,480 shares in 1995 and 8,240,730 in 1994 82,435 82,407
Capital in excess of par 10,274,974 10,311,509
Retained earnings (deficit) (2,872,818) (3,089,543)
------------ ------------
7,484,591 7,304,373
Treasury stock, at cost, 2,523,722 shares in 1995 and
45,486 shares in 1994 (2,942,016) (104,826)
------------ ------------
4,542,575 7,199,547
------------ ------------
Total liabilities and stockholders' equity $ 22,807,325 $ 26,508,041
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
II-9
<PAGE> 19
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES
Net sales $ 2,708,955 $ 3,693,912 $ 3,686,304
Service income 18,147,243 15,793,150 15,801,651
------------ ------------ ------------
20,856,198 19,487,062 19,487,955
------------ ------------ ------------
COSTS AND EXPENSES
Cost of sales 1,920,118 2,554,002 2,629,851
Selling, general and administrative expenses 16,667,723 15,085,200 14,930,291
------------ ------------ ------------
18,587,841 17,639,202 17,560,142
------------ ------------ ------------
OPERATING INCOME BEFORE
DEPRECIATION 2,268,357 1,847,860 1,927,813
------------ ------------ ------------
DEPRECIATION 902,692 1,142,594 1,141,548
------------ ------------ ------------
OPERATING INCOME 1,365,665 705,266 786,265
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Minority interests in earnings, net of tax (171,701) (52,856) (30,440)
Interest expense, net (Notes 5 and 7) (1,050,226) (1,389,997) (1,209,984)
Gain on sale of stock of subsidiaries (Notes 2 and 3) -- 135,101 354,712
Gain on sale of assets -- 726,273 71,110
Other, net 21,008 135,671 37,801
------------ ------------ ------------
(1,200,919) (445,808) (776,801)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 164,746 259,458 9,464
INCOME TAX BENEFIT (EXPENSE) (Note 9) 51,979 (55,340) (247,600)
------------ ------------ ------------
NET INCOME (LOSS) $ 216,725 $ 204,118 $ (238,136)
============ ============ ============
INCOME (LOSS) PER COMMON SHARE
(Note 1) $ 0.04 $ 0.03 $ (0.03)
============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,131,770 8,153,382 7,889,512
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
II-10
<PAGE> 20
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON CAPITAL IN RETAINED TREASURY
STOCK EXCESS OF PAR EARNINGS STOCK TOTAL
----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 77,380 $ 9,362,596 $(3,055,525) $ (136,745) $ 6,247,706
Treasury stock acquired (4,900 shares) (5,830) (5,830)
Shares contributed to Retirement Plan
(4,249 shares) 6,039 6,039
Warrants exercised for common stock 27 3,723 3,750
Shares issued (500,000) in exchange for
retirement of $1,000,000 debt (Note 2) 5,000 945,190 950,190
Net loss (238,136) (238,136)
----------- ------------ ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1993 82,407 10,311,509 (3,293,661) (136,536) 6,963,719
Shares contributed to Retirement Plan
(8,448 shares) 13,066 13,066
Shares exchanged (45,000) for shares (10,000)
of Diagnostic Company 18,644 18,644
Net income 204,118 204,118
----------- ------------ ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1994 82,407 10,311,509 (3,089,543) (104,826) 7,199,547
Shares contributed to Retirement Plan
(21,764 shares) (40,257) 50,157 9,900
Warrants exercised for common stock 28 3,722 3,750
Treasury stock acquired (2,500,000 shares)
(Note 2 ) (2,887,347) (2,887,347)
Net income 216,725 216,725
----------- ------------ ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1995 $ 82,435 $ 10,274,974 $(2,872,818) $ (2,942,016) $ 4,542,575
=========== ============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
II-11
<PAGE> 21
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 216,725 $ 204,118 $ (238,136)
----------- ----------- -----------
Adjustments required to reconcile net income
(loss) to net cash provided by operating
activities:
Amortization, depreciation and other, net 920,606 1,156,801 1,161,661
Provision for losses on notes and accounts
receivable 105,528 111,647 174,847
(Gain) loss on sale of assets -- (726,273) (71,110)
Life insurance premium reserve (376,000) -- --
Costs associated with acquisition of minority
interest in limited partnership 151,950 -- --
Gain on sale of stock of subsidiary -- (135,101) (354,712)
Minority interest in earnings of consolidated
subsidiaries 171,701 52,856 30,440
Changes in assets and liabilities:
Receivables:
Sale (purchase) of receivables (1,354,048) -- 1,488,936
Other changes 314,009 (435,478) (167,190)
Inventories (29,350) 47,269 32,191
Prepaid expenses and other current assets 130,423 (182,615) (85,815)
Accounts payable 3,693 1,137,403 (496,142)
Accrued expenses and other liabilities 716,346 229,816 (448,220)
Federal income taxes payable (220,000) 100,000 220,000
Deferred charges and other 23,607 (231,790) (145,415)
----------- ----------- -----------
Total adjustments 558,465 1,124,535 1,339,471
----------- ----------- -----------
Net cash provided by operations 775,190 1,328,653 1,101,335
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of subsidiary stock -- -- (210,000)
Purchase of minority interest from limited
partners (250,000) -- --
Collection of miscellaneous receivable 1,700,000 -- --
Proceeds from sale of property, plant and
equipment and investments -- 275,000 312,285
Decrease in notes receivable 278,962 67,087 71,243
Receipts from (disbursements to) related parties
and former affiliates, net (184,390) (96,622) 79,120
Utilization of (deposit to) restricted cash 243,654 72,484 (330,100)
Capital expenditures (504,321) (771,549) (450,539)
----------- ----------- -----------
Net cash provided by (used in) investing
activities 1,283,905 (453,600) (527,991)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
II-12
<PAGE> 22
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Distributions to limited partners, net (143,842) (238,878) (338,942)
Treasury stock transferred, net -- -- 209
Purchase of common stock of subsidiary (2,000) -- --
Proceeds from stock offering -- 128,655 932,436
Proceeds from warrants exercised 3,750 -- 3,750
Principal payments on long-term obligations (1,589,240) (940,052) (976,898)
Proceeds from borrowing on long-term obligations 4,520 93,944 255,474
Net reductions under line of credit agreements -- -- (838,843)
Net advances from (payments to)
securitization program (478,500) (46,500) 525,000
----------- ----------- -----------
Net cash used in financing activities (2,205,312) (1,002,831) (437,814)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (146,217) (127,778) 135,530
CASH - Beginning of period 182,042 309,820 174,290
----------- ----------- -----------
CASH - End of period $ 35,825 $ 182,042 $ 309,820
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the years for:
Interest, net of amount capitalized and interest
income $ 1,060,226 $ 1,360,602 $ 1,269,921
Income taxes $ 252,593 $ 25,656 $ 9,929
</TABLE>
Supplemental Disclosures of Noncash
Investing and Financing Activity (Note 17)
The accompanying notes are an integral part of the financial statements.
II-13
<PAGE> 23
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
A. PRINCIPLES OF CONSOLIDATION
The primary business of The Wendt-Bristol Health Services
Corporation and its subsidiaries (the "Company") is to provide
health care services. Through subsidiaries and limited
partnerships, The Wendt-Bristol Company ("W-B"), itself a
subsidiary, operates three nursing homes, a home health care
delivery service, and a diagnostics center featuring
fixed-site magnetic resonance imaging ("MRI"), CT Scan,
Sonography and other modalities. Additionally, the Company
operates retail pharmacy locations in Ohio and is the landlord
of a non-related manufacturing building (see Note 12A).
The consolidated financial statements include the accounts of
all companies of which The Wendt-Bristol Health Services
Corporation or a wholly-owned subsidiary has majority
ownership or management control. All material intercompany
transactions have been eliminated in consolidation.
B. ACQUISITIONS AND DISPOSITIONS OF SUBSIDIARIES OR PARTNERSHIP
INTERESTS
During 1994, the Company, as general partner of a limited
partnership, sold the assets of a partnership which owned a
rental medical office building. In 1995, the Company purchased
the limited partnership interests for cash of $250,000. The
purchase price in excess of the limited partnership's book
basis approximating $151,000 has been expensed in the
Consolidated Statement of Operations and included in the
caption "Other, net".
During March 1995, the Company acquired 345,000 common shares
in a subsidiary of the Company (Wendt-Bristol Diagnostic
Company "Diagnostics") for approximately $744,000. The
purchase of these additional common shares has increased the
Company's ownership to approximately 83%. The acquisition cost
exceeded the underlying equity in net assets ("goodwill") by
$148,103. See Note 1H for further discussion with respect to
amortization.
During 1994, the Company sold 17,400 common shares of its
holdings in Diagnostics resulting in a gain of $46,744.
Further, the Company has expensed previously deferred
operating costs due to the termination of the offering, see
Note 3, and recognized a gain for the increase in their share
of the equity of Diagnostics as a result of the dilution of
the minority shareholders. Dilution has occurred due to shares
being sold at values in excess of book value. The combined
amounts total $135,101 and are included in the Consolidated
Statements of Operations in the caption "Gain on sale of stock
of subsidiaries".
In November 1993, Diagnostics purchased a one half (50%)
interest in its subsidiary Health America, Inc. for $210,000
which had been sold in May 1992. As a result of this
transaction, Diagnostics owns 100% of Health America, Inc. The
purchase price was allocated to excess of cost over assets of
businesses and subsidiaries acquired. Additionally, during
1993, the Company sold 95,513 common shares of its holdings in
Diagnostics pertaining to two different public offerings
resulting in a gain of $354,712 which is included in the
Consolidated Statements of Operations in the caption "Gain on
sale of stock of subsidiaries". See further discussion in Note
2.
II-14
<PAGE> 24
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (CONTINUED)
C. STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company
considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash. No such
investments were purchased during 1995, 1994 or 1993.
D. CONCENTRATIONS OF CREDIT RISK
Credit risk associated with cash balances in excess of
federally-insured amounts is minimized by using several
accounts at major financial institutions.
E. ACCOUNTS RECEIVABLE
During February 1993, the Company and certain of its
subsidiaries entered into a three-year financing agreement
involving the sale of their accounts receivable. The agreement
provided for the Company's sale of its health care trade
accounts receivable, subject to various terms and conditions,
with limited recourse, with the Company continuing to service
the accounts. A sale was recorded when the health care
accounts receivable were transferred to the purchaser, net of
contractual allowances. Such sales are not included in the
Consolidated Statement of Operations and no gain or loss
arises in the transaction. The agreement terminated in 1995
through an action filed by the Company and the Company is
currently evaluating several alternatives to replace this
receivable financing program. The resolution of a dispute in
this matter is discussed in Note 15C.
Certain receivables from the Company's medical services
segment are due from third party payors, including Medicare,
Medicaid and commercial insurance carriers, under contractual
arrangements by which payment may be at a discount from billed
charges, as is customary within the health care industry. The
Company estimates and records allowances for such discounts to
billed charges to recognize revenues based on amounts expected
to be recovered.
A significant portion of the income earned by the nursing
homes is related to services provided to Medicaid patients.
The income reported for the nursing homes is based on cost
reports filed with the State of Ohio and such reports are
subject to audit and adjustment by Medicaid auditors.
F. INVENTORIES
Inventories are stated at the lower of cost or market,
determined on the first-in, first-out basis. Inventories at
December 31, 1995 and 1994 were $489,042 and $586,395,
respectively. Inventories at December 31, 1995 consist of
retail pharmaceuticals, durable medical equipment and supplies
while the December 31, 1994 inventory also included the liquor
inventory from the Florida operations (see Note 11B).
G. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation
for financial reporting purposes is computed using principally
the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are amortized over
the primary lease term or the life of the related improvement,
whichever period is shorter. Expenditures for major renewals
and betterments that extend the useful lives of property,
plant and equipment are capitalized. Expenditures for
maintenance and repairs are charged to operations as incurred.
II-15
<PAGE> 25
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (CONTINUED)
H. EXCESS OF COST OVER ASSETS OF BUSINESSES AND SUBSIDIARIES
ACQUIRED
Costs of acquired businesses in excess of the value of net
assets (i.e., goodwill) are amortized over periods ranging
from 20 to 40 years, except for goodwill associated with the
manufacturing real estate, which is being amortized over the
estimated remaining life of the building. Amortization expense
for the years ended December 31, 1995, 1994, and 1993,
amounted to approximately $17,900, $14,200, and $20,200,
respectively. Accumulated amortization at December 31, 1995,
1994 and 1993, was $141,100, $123,200, and $109,000,
respectively. At December 31, 1994, goodwill consists of an
amount applicable to the manufacturing real estate and
purchase of a 50% interest of Health America, Inc. At December
31, 1995 it also included an amount applicable to the purchase
of shares of Diagnostics Company (see Note 1B).
I. DEFERRED CHARGES
The Company has included in deferred charges costs that are
being amortized over future periods. They are predominantly
costs associated with financing, costs incurred for staff
training and other pre-opening items prior to admittance of
patients at the new Alzheimer's facility and a rent adjustment
to properly recognize rental income on the leased
manufacturing facility.
J. 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 these
estimates.
K. INCOME (LOSS) PER SHARE
Per share amounts were computed using the weighted average
number of shares outstanding during each period. The common
stock equivalents (stock options and warrants) outstanding
would be anti-dilutive for all years presented.
L. INCOME TAXES
The Company utilizes the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes" (see Note 9).
M. FAIR VALUE
On January 1, 1995, the Company adopted SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments", which
requires the disclosure of the fair market value of all
financial instruments for which it deems practicable to
estimate fair value (See Note 18).
II-16
<PAGE> 26
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (CONTINUED)
N. STOCK BASED COMPENSATION
The Company utilizes the provisions of Accounting Principles
Board No. 25, "Accounting for Stock Issued to Employees" (see
Note 10). The Financial Accounting Standards Board ("FASB")
Statement No. 123, "Accounting for Stock-Based Compensation",
will be effective for the Company's year beginning January 1,
1996. The FASB requires disclosure of new employee stock
options in the form of a note to the financial statements
based on their fair value at the date of grant. Such
disclosure is not expected to be significant to the users of
these financial statements.
NOTE 2. PRIVATE COMMON STOCK TRANSACTIONS
On February 27, 1995, the Company, pursuant to a certain Stock
Exchange Agreement (the "Agreement") by and between the
Company and the Insurance Commissioner of the Commonwealth of
Pennsylvania, as Statutory Liquidator (the "Statutory
Liquidator") for Corporate Life Insurance Company ("CLIC") and
successor to CLIC, agreed to sell to the Statutory Liquidator
thirty thousand (30,000) preferred shares (par value $100 per
share or a total of $3,000,000) owned by the Company in Life
Holdings, Inc., in exchange for two million (2,000,000) shares
of the Company's common stock and three hundred thousand
(300,000) shares of common stock of Wendt-Bristol Diagnostics
Company ("Diagnostics"), a majority-owned consolidated
subsidiary of the Company, owned by CLIC. The closing of the
transaction contemplated by the Agreement occurred on March 2,
1995. The value assigned to (i) the Company's 2,000,000 common
shares of $2,481,091 ($1.24 per share) and (ii) the
Diagnostics 300,000 common shares of $518,909 ($1.73 per
share) equal $3,000,000. The Company's common shares have been
included in Treasury Stock on the accompanying balance sheet
for 1995; while Diagnostic's common shares are recorded as an
additional investment in a consolidated subsidiary, which is
eliminated in consolidation except for goodwill.
In addition, as part of the transaction contemplated by the
Agreement, the Company or its designee agreed to purchase from
the Statutory Liquidator, within ninety (90) days, subject to
extension, five hundred thousand (500,000) additional shares
of common stock of the Company for a price of $.80 per share,
and forty-five thousand (45,000) additional shares of common
stock of Diagnostics for a price of $5.00 per share.
In total this additional obligation of $625,000 has been
included in stock purchase agreement payable with resulting
increases in Treasury stock of the Company of $400,000 and
$225,000 recorded as a further increase in the investment in a
consolidated subsidiary which is eliminated in consolidation
except for goodwill. The $625,000 payable remains unpaid at
April 15, 1996, see Note 16D for further discussion.
Upon the consummation of payment for the additional Company
500,000 common shares and 45,000 common shares of Diagnostics,
the Company will have reacquired all shares previously issued
and/or sold in transactions with CLIC. These transactions
included:
II-17
<PAGE> 27
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. PRIVATE COMMON STOCK TRANSACTIONS (CONTINUED)
(i) During 1992, the sale and issuance by the Company to
CLIC of 3,000,000 common shares of the Company for
$3,000,000 and sale by the Company to CLIC of 250,000
(which was increased to 300,000 shares upon issuance
of a stock dividend to all holders) common shares of
Diagnostics for $1,000,000 such shares being paid for
by delivery by CLIC to the Company of 1,000,000
shares (of the aforementioned 3,000,000 shares) of
common stock of the Company.
(ii) During 1993, $1,000,000 of subordinated debt was
liquidated by issuing 500,000 shares of common stock
of the Company at $2.00 per share to CLIC that was
the holder of such debt.
(iii) The purchase, by CLIC, of an additional 45,000 shares
of Diagnostics common stock during its public
offering. See Note 3.
NOTE 3. SALE OF STOCK OF SUBSIDIARIES
WENDT-BRISTOL DIAGNOSTICS COMPANY ("DIAGNOSTICS")
In September 1993, Diagnostics updated certain information and
filed a second Preliminary Regulation A Offering Circular with
the Securities and Exchange Commission ("SEC") for the sale of
up to 807,900 shares of common stock of which 553,950 shares
were being sold by Diagnostics and the balance sold by a
wholly-owned subsidiary of the Company.
As of December 31, 1994 and 1993 gains of approximately
$46,700 and $354,700, respectively, have been recorded as a
result of the sale of 17,400 and 95,513 shares, respectively,
of Diagnostics by W-B through the two public offerings. During
1994, the offering was terminated and related offering costs
were charged against gain on sale of stock of subsidiary (see
Item 1. Business). No shares were sold in 1995.
At December 31, 1995, 1994 and 1993, the Company owns, through
its wholly owned subsidiary, approximately 83%, 54% and 55%,
respectively, after retroactively adjusting for the effects of
a 20% stock dividend in shares of the common stock of
Diagnostics to all its stockholders, except Wendt-Bristol
Company, which waived its right to receive the stock dividend.
See Notes 1B and 2 concerning Wendt-Bristol Company's
acquisition of approximately 29% additional shares of
Diagnostics.
NOTE 4. RESTRICTED CASH
The Company has restricted cash of $163,962 and $407,616, at
December 31, 1995 and 1994, respectively. The amounts in a
bank trust account were $163,962 at December 31, 1995 and
$150,000 at December 31, 1994. These restricted assets were
set aside to satisfy the New Jersey Department of
Environmental Protection and Energy in connection with the
reimbursement of clean-up expenses at the leased manufacturing
facility located in Passaic, New Jersey. See Item 1. Business
and Note 12A.
II-18
<PAGE> 28
WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. RESTRICTED CASH (CONTINUED)
The remainder of the restricted cash in 1994 relates to an
escrow fund maintained by the mortgage agent for the HUD
financing of the Alzheimer's facility (see Note 7). HUD
requirements provide for the establishment of funds to be used
for expected initial operating deficits for the initial
fifteen months of operation. The balance was approximately
$258,000 at December 31, 1994 and was utilized in 1995.
NOTE 5. RECEIVABLES
The following schedule states current receivables by specific
groups as indicated at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Receivables:
Trade (net of allowance for doubtful
accounts) - (a) $2,678,551 $ 926,085
---------- ----------
Notes receivable - current:
Others 49,920 80,710
---------- ----------
Miscellaneous receivables:
Sale of building - (b) -- 1,700,000
Securitization program reserves - (c) -- 664,858
Medicaid settlements 73,666 525,691
Medicare settlements 289,232 251,000
Others - (d) 495,134 239,106
---------- ----------
Total 858,032 3,380,655
---------- ----------
Total current receivables $3,586,503 $4,387,450
========== ==========
</TABLE>
(a) During February, 1993, the Company and certain of its
subsidiaries entered into a three-year financing arrangement
to sell, with limited recourse, its health care trade accounts
receivable. This agreement terminated in 1995. See additional
discussion in Notes 1E and 15C. Cash proceeds from the sale of
these receivables amounted to approximately $7,932,000 in 1995
and $9,261,000 in 1994. Uncollected sold receivable balances
were approximately $1,496,000 at December 31, 1994. Accounts
receivable balances at December 31, 1995 have been reinstated
on the balance sheet as the financing arrangement had
terminated. Trade receivables as shown in the 1994
Consolidated Balance Sheet are exclusive of the receivable
interests sold under this program. Program fees and costs are
included in "interest expense, net" approximating 20% per
annum in the Consolidated Statement of Operations. Such sales
are not included in the Consolidated Statement of Operations
and no gain or loss arise from these transactions.
Additionally, the purchaser advanced funds approximating
$478,500 at December 31, 1994, that were in excess of
purchased receivables. As consideration for advances totaling
$325,000, the Company granted a two-year option, which expired
February, 1995 without being exercised, to the purchaser to
purchase 10,000 common shares of Diagnostics in its portfolio
for $4 per share.
II-19
<PAGE> 29
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. RECEIVABLES (CONTINUED)
(b) During September, 1994, a limited partnership (of which the
Company is general partner) entered into an agreement to sell
its owned medical office building. At that time, the agreement
included numerous buyer/seller contingencies. On December 29,
1994 the Company concluded the agreement to sell and recorded
the transaction resulting in a gain for which the Company's
share is approximately $450,000, which has been included in
the 1994 Consolidated Statement of Operations. The receivable
of $1,700,000 was collected in January, 1995.
(c) In connection with the securitization program above, the third
party purchasing the receivables held reserves as additional
collateral for the receivables purchased from the Company.
These cash reserves were released in full upon termination of
the securitization program.
(d) The 1995 balance consists mostly (approximately $340,000) of a
receivable due from the former owner of two of the nursing
homes regarding adjustments to the final purchase price of the
transaction.
(e) Total interest income for the years ended December 31, 1995,
1994 and 1993, amounted to $133,719, $53,323 and $73,839,
respectively, and is netted against interest expense in the
accompanying Consolidated Statements of Operations.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 and 1994
and the estimated useful lives used in computing depreciation
are as follows:
<TABLE>
<CAPTION>
Estimated
December 31, Useful Lives
1995 1994 (in years)
---- ---- ----------
<S> <C> <C> <C>
Land and improvements $ 1,615,349 $ 1,615,349 30
Buildings and improvements 11,606,280 11,506,511 3-40
Machinery and equipment 6,310,233 6,137,547 3-14
------------ -----------
19,531,862 19,259,407
Accumulated depreciation
and amortization (5,243,057) (4,974,847)
------------ -----------
$ 14,288,805 $14,284,560
============ ===========
</TABLE>
Included in property, plant and equipment at December 31, 1995
and 1994 are land, buildings and improvements of $4,427,021
and $4,294,266 with accumulated depreciation and amortization
of $948,851 and $841,862, respectively, leased to the
purchaser of its former manufacturing division (see Note 12A).
Depreciation and amortization expense for the years ended
December 31, 1995, 1994 and 1993 was $902,692, $1,142,594 and
$1,141,548, respectively.
II-20
<PAGE> 30
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. LONG-TERM OBLIGATIONS
At December 31, 1995 and 1994, long-term obligations are as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Construction mortgage loan at 8.875% $ -- $3,018,074
8.875% mortgage, payable in monthly
installments including interest through
December, 2034 3,176,074 --
9% mortgage, payable in monthly installments
including interest through June, 2027 2,948,694 2,964,648
8.25% mortgage, payable in monthly
installments including interest through
February 2002, refinanced April, 1996
(see Note 15) 431,674 501,670
Variable rate mortgage - interest at 7.5% at
December 31, 1994, paid in full in
January, 1995 -- 777,893
11.26% mortgage, payable in monthly
installments plus interest through September
1995, with any remaining balance due
October 1, 1995, extended to April 1, 1996 at
10%. Company has received a commitment
letter from another lender to refinance the
mortgage. Anticipated closing date is
April, 1996 1,639,556 1,766,959
Variable rate mortgage - interest at 10.5% at
December 31, 1995 and 1994, payable in
monthly installments through December, 1997 69,996 102,083
7.9% to 21% notes payable in monthly
installments including interest, through
December, 2002, collateralized by equipment,
a portion subsequently refinanced in March,
1996 (see Note 15) 2,162,653 2,222,088
Advances due under accounts receivable
securitization program of which $157,509 is
due on a 9% note payable in monthly
installments April through June, 1996 174,445 --
</TABLE>
II-21
<PAGE> 31
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. LONG-TERM OBLIGATIONS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Capitalized lease obligations (see Note 8) 38,263 63,142
----------- -----------
10,641,355 11,416,557
Less:
Current installments 2,760,789 3,451,989
----------- -----------
Long-term portion $ 7,880,566 $ 7,964,568
=========== ===========
</TABLE>
CONSTRUCTION MORTGAGE LOAN
In April 1993, the Company commenced the construction of an
Alzheimer's Patient Care Center (the "Center") located in
Columbus, Ohio. The total costs for the Center were
approximately $3,550,000. The Company obtained a financing
commitment to partially pay for the cost of constructing the
Center from the U.S. Department of Housing and Urban
Development ("HUD"). The permanent financing obtained was for
approximately $3,200,000, at an interest rate of 8.875% and
monthly payment terms for 40 years. Amortization commenced
during 1995 and the balance due at December 31, 1995 is
$3,176,074.
OTHER
Aggregate future principal maturities of long-term debt and
capital lease obligations are as follows: 1996 - $2,760,789,
1997 - $804,544, 1998 - $233,419, 1999 - $235,838, 2000 -
$247,865, and thereafter - $6,358,900. Included in the current
portion of $2,760,789 is the balloon payment on the 10%
mortgage payable of $1,639,556. The Company has a lender's
commitment letter to refinance the remaining balance and
anticipates a closing in April 1996.
All land and real estate is collateralized by the mortgages
payable.
The Company incurred interest expense, exclusive of
capitalized construction interest of $162,730 in 1994 and
$22,642 in 1993, in the amount of $1,183,945, $1,443,320 and
$1,283,823, in 1995, 1994 and 1993, respectively.
COMMITMENTS
The Company is obtaining additional imaging techniques such as
angiography and fluoroscopy in the second quarter of 1996. The
cost of such equipment, approximating $745,000, will be
financed by a favorable vendor financing program.
NOTE 8. LEASE COMMITMENTS
With the exception of the medical diagnostic center which is
owned by a limited partnership, and the two Columbus, Ohio
nursing homes, the Company leases all of the locations used in
its businesses under leases expiring on dates ranging through
July 2015.
II-22
<PAGE> 32
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. LEASE COMMITMENTS (CONTINUED)
As of December 31, 1995, minimum annual rental commitments
under noncancelable leases amount to:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
------ ------
<S> <C> <C>
1996 $ 511,739 $18,205
1997 425,207 9,530
1998 312,602 9,530
1999 $ 296,650 8,736
2000 290,036 -
Thereafter 4,429,469 -
---------- -------
$6,265,703 46,001
==========
Less amounts representing
interest (7,738)
-------
$38,263
=======
</TABLE>
In addition, the Company remains contingently liable for
certain leases on locations that have been sold. These
contingent leases include payments aggregating $565,000 over
the next five years.
Rental expense included in the Consolidated Statements of
Operations for the years ended December 31, 1995, 1994 and
1993, was approximately $564,000, $656,000 and $688,000,
respectively, net of annual sublease income of $20,180,
$18,100 and $9,400, respectively. Amortization of assets
recorded under capital leases is included in depreciation
expense.
NOTE 9. INCOME TAXES
The Company utilizes the provisions of SFAS No. 109 which
requires the use of the liability method of accounting for
deferred income taxes. As a result, the Company has recognized
a deferred tax liability, a deferred tax asset and a valuation
allowance against the deferred tax assets. The components of
these consolidated deferred tax items at December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
Assets:
<S> <C> <C>
Net operating loss carryforwards $1,846,800 $1,957,100
Investment tax credit carryforwards 28,400 28,400
Bad debt allowance 101,000 113,900
Other 24,000 21,000
---------- ----------
2,000,200 2,120,400
Less: valuation allowance 300,000 400,000
---------- ----------
1,700,200 1,720,400
---------- ----------
</TABLE>
II-23
<PAGE> 33
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Liabilities:
Depreciation and amortization 572,000 530,500
Costs capitalized in connection
with acquisitions 908,000 930,840
Gain on sale of assets -- 154,000
Other 50,800 10,200
---------- ----------
1,530,800 1,625,540
---------- ----------
Net deferred tax asset $ 169,400 $ 94,860
========== ==========
</TABLE>
These deferred tax assets and liabilities have been offset for
balance sheet presentation. This amount is included in the
balance sheet caption "Other Assets". Management has
recognized a deferred tax benefit of $74,540 in 1995 and
$94,860 in 1994 by a reduction in the valuation allowance for
the expected utilization of net operating losses during the
carryforward period. Management has utilized the provisions of
SFAS No. 109 that allows for consideration of tax planning
strategies associated with real estate. These strategies
encompass a possible sale and leaseback of such real estate to
preclude the expiration of net operating losses without
realization of a tax benefit. Realization of the deferred tax
asset is dependent on generating sufficient taxable income
including use of management's tax planning strategies prior to
the expiration of the loss carryforwards. Although realization
is not assured, management believes it is more likely than not
that a significant amount of the deferred tax asset will be
realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if
either the current estimates of future tax income are reduced
or management would be unable to effect an expected sale and
leaseback of real estate. Both of these conditions are
currently necessary for consideration in the evaluation of the
realizability of the deferred tax assets and estimated
valuation allowance.
Net operating losses available for tax purposes at December
31, 1995 are approximately $4,714,000, expiring $22,000 in
2003, $1,149,000 in 2004, $152,000 in 2005, $2,672,000 in
2006, $336,000 in 2008 and $383,000 in 2009. Investment tax
credits available for tax purposes at December 31, 1995 are
approximately $28,400 expiring at various dates from 1996 to
2000.
Also, the Company has available $717,000, at December 31,
1995, of net operating loss carryforwards acquired in its
acquisition of a wholly-owned subsidiary. Such net operating
losses expire in 2004 to 2005 and can only be used to offset
taxable income generated by that subsidiary. During 1995, as a
result of taxable income in this subsidiary, the company
utilized net operating loss carryforwards in the amount of
$285,000. There was no taxable income in 1994 and 1993.
As discussed in Note 3, the Company had previously sold a
portion of its interest in Diagnostics and, as a result,
Diagnostics began to file its income tax returns as a separate
company. During 1993 and 1994, Diagnostics generated taxable
income and, as a result, incurred current tax expense in the
amounts of $112,500 in 1994 and $231,200 in 1993. Diagnostics
has no significant temporary differences that give rise to
deferred tax assets or liabilities at December 31, 1995, 1994
and 1993.
During 1995, see Note 3, the Company acquired additional
common shares in Diagnostics, thereby allowing for its
inclusion in the consolidated tax return of the Company.
II-24
<PAGE> 34
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES (CONTINUED)
For the years ended December 31, 1995, 1994 and 1993 a
reconciliation of the statutory rate and effective rate for
the provision for income taxes consists of the following based
on amounts that do not include minority interests:
<TABLE>
<CAPTION>
NOT INCLUDING
DIAGNOSTICS DIAGNOSTICS
(PERCENTAGE) (PERCENTAGE)
------------ ------------
<S> <C> <C>
DECEMBER 31, 1995
Federal statutory rate 34.0 34.0
Minority interests (8.1) (8.2)
State and local income taxes, net of federal
tax benefit 1.3 1.1
Tax effect of permanent differences (26.0) 2.0
Valuation allowance (43.6) --
----- ----
Effective rate (42.4) 28.9
===== ====
DECEMBER 31, 1994
Federal statutory rate 34.0 34.0
Minority interests (39.5) --
State and local income taxes, net of federal
tax benefit 11.3 2.7
Tax effect of permanent differences 15.4 0.6
Tax credits and other 9.3 (0.7)
Valuation allowance (56.4) --
----- ----
Effective rate (25.9) 36.6
===== ====
DECEMBER 31, 1993
Federal statutory rate 34.0 34.0
Minority interests (9.9) --
State and local income taxes, net of federal
tax benefit 2.2 1.1
Tax effect of permanent differences 9.0 0.2
Tax credits and other (0.3) --
Valuation allowance (36.3) --
----- ----
Effective rate (1.3) 35.3
==== ====
</TABLE>
II-25
<PAGE> 35
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES (CONTINUED)
The expense (benefit) for income taxes consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal:
Without Diagnostics
Current expense $ -- $ -- $ --
Deferred benefit (74,540) (94,860) --
Diagnostics
Current expense -- 100,000 220,000
State:
Without Diagnostics
Current expense 7,006 37,700 16,400
Diagnostics
Current expense 15,555 12,500 11,200
--------- --------- ---------
Total tax expense (benefit) $ (51,979) $ 55,340 $ 247,600
========= ========= =========
</TABLE>
The principal differences between the income or loss reported
for financial reporting purposes and the income or loss
reported for federal income tax purposes results from (i)
accelerated depreciation methods being utilized for tax
purposes, (ii) inventory capitalization methods required for
tax purposes, (iii) reserving for doubtful accounts receivable
and certain other reserves, and (iv) costs capitalized in
connection with certain acquisitions for financial reporting
purposes and not for tax purposes.
NOTE 10. STOCKHOLDERS' EQUITY
COMMON STOCK
See Note 2 for reacquisition of 2,500,000 shares of Common
Stock.
WARRANTS
At December 31, 1995, there were 414,538 warrants outstanding.
Each warrant, as a result of a November 1990 amendment, is
exercisable for two and three quarters (2-3/4) shares of The
Wendt-Bristol Health Services Corporation common stock. The
Company has reserved 1,139,980 shares for such issue. The
exercise price of $3.75 per warrant is the equivalent of $1.36
per share. Other terms of the warrants remain the same as when
originally issued in 1986, including the anti-dilution
provisions, except that the expiration date had been extended
to May 1, 1996, and the redemption feature has been removed.
On April 15, 1996, the Board of Directors extended the
expiration date of the warrants to May 1, 1997.
II-26
<PAGE> 36
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. STOCKHOLDERS' EQUITY (CONTINUED)
Also, as a result of the November 1990 amendment, upon
exercise of existing warrants, in addition to the common
shares to be received upon such exercise, each warrant holder
will receive, upon registration under the Securities Act of
1933, a newly-created Series II warrant which was to expire in
May 1997 and extended by the Board of Directors to May 1998 on
April 15, 1996, which enables the warrant holder upon exercise
of the Series II warrant to purchase 2 shares of common stock
at $3.00 per share.
STOCK OPTIONS
The Company has previously adopted a qualified employee
incentive stock option plan (the "Plan"). The Plan provides
for 250,000 common shares to be made available for options
granted to eligible officers, directors and employees. The
options may be granted for a term not to exceed ten years
(five years with respect to a 10% shareholder) and are not
transferable or assignable. The exercise price of all options
must be at least equal to the fair market value of the common
stock at the date of grant, or 110% of such fair market value
with respect to any optionee who is a 10% shareholder of the
Company.
In November, 1990 the Board of Directors granted options
totaling 120,000 shares to certain officers and key employees.
Such options were exercisable at a price of $1.125 per share
and have expired as of December 31, 1995. During 1991, options
for 30,000 shares were granted to outside directors at a price
of $.75 per share. Subsequent to the grant, options for 10,000
of these shares were terminated due to the resignation of one
of the Directors and subsequently re-issued in 1992 to the
remaining two outside Directors with an exercise price of
$1.375. Beginning in 1992, 1,000 options were granted annually
to each outside Director upon his anniversary month as an
outside Director. As of December 31, 1995, 6,000 such options
were issued. In June, 1993 the Board of Directors granted
80,000 options to purchase shares at a price of $1.25 to
certain officers and key employees. Subsequent to the grant,
options to purchase 17,000 shares were terminated in 1995 due
to the death of one of the outside Directors. Upon election of
a replacement Director, options to purchase 10,000 shares at a
price of $.375 were granted to the new outside Director with
an expiration date of February 1, 2000.
No options were exercised in 1995, 1994 or 1993. There were
109,000 stock options outstanding at December 31, 1995 at
prices ranging from $.375 to $1.375 per share. At December 31,
1995 and 1994, options available for grant were 141,000 and
67,000, respectively.
NOTE 11. RELATED PARTY TRANSACTIONS
A. PARTNERSHIP OWNERSHIP
Certain officers and directors own, in the aggregate, less
than 10% of the outstanding limited partnership interests of
two limited partnerships of which subsidiaries of the Company
are the managing general partners. As further discussed in
Note 1B, one of these partnerships sold its owned rental
medical office building and has thereby concluded its rental
business activities. Subsequently, in 1995, the Company
acquired all of the limited partnership interests in this
partnership. See Note 1B.
II-27
<PAGE> 37
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS (CONTINUED)
B. SALE OF ASSETS TO A RELATED PARTY
Effective January 1, 1995, the Company sold the operating
assets of a subsidiary's retail liquor store and two lounges
in Florida to MHK Corp., a company owned by certain of its
officers and directors. The purchase price was equivalent to
the net book value of the net assets, with no gain or loss
recognized, totaling $574,949, as adjusted for certain 1995
transactions.
The purchase price is evidenced by a promissory note bearing
interest at 9%. The note accrues interest from the effective
date of the sale through June 30, 1996 at which time the total
accrued interest of $77,618 will be added to the original sale
price for a total amended principal sum of $652,567. The note
will be payable in monthly installments of $8,266 including
interest, from July 1, 1996 through June 1, 2006 with the
balance fully amortized.
This sale has been finalized before government approval for
transfer of the liquor licenses has been obtained. If such
transfer is not approved by the government, then the Company
shall be required to repurchase these assets or provide
similar benefits to MHK Corp. Management and MHK believe it is
more likely than not that the transfer of the licenses will be
achieved.
During 1995, the Company advanced an additional $62,777 which
was used for working capital. Subsequent to year-end through
April 4, 1996 an additional $9,874 was advanced.
At December 31, 1995, MHK Corp. had a balance outstanding for
previous advances, without interest totaling $146,944. At
April 15, 1996, the Company combined all advances to MHK Corp.
into a promissory note totaling $156,868 earning interest of
9% which accrues from July 1, 1996 until paid. The note will
be payable in monthly installments, including interest, of
$1,987 from July 1, 1996 through June 1, 2006 with the balance
fully amortized.
The notes receivable due from MHK Corp. are collateralized by
the assets of the two lounges and the retail liquor store. The
Company has received additional collateral in the form of a
security interest on real estate in Ohio, an assignment of the
lease and rents associated to that property as well as the
leasehold interest in a Florida property leased by MHK Corp.
and subleased to a third party, and a pledge of the common
stock of MHK Corp.
Management's current estimate of the business activities of
these Florida operations combined with the rental operations
is that they will earn sufficient cash flow to amortize the
notes. No further advances or support is expected by the
Company. If the notes are not being amortized, an allowance
for non collectibility will be considered absent other
remedies not considered at this time.
C. NOTES RECEIVABLE FROM OFFICERS AND RELATED PARTIES
At December 31, 1995 and 1994, MHK Corp. had outstanding notes
receivable balances totaling approximately $774,000 and
$122,000, respectively. Refer to Note 11B for the related
party transactions and applicable collateral for 1995
activity.
II-28
<PAGE> 38
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS (CONTINUED)
C. NOTES RECEIVABLE FROM OFFICERS AND RELATED PARTIES (CONTINUED)
At December 31, 1995 and 1994, the President and CEO of the
Company had outstanding Advances totaling approximately
$205,000 and $146,000, respectively. The President/CEO has
granted, to the Company, collateral to enhance the realization
of these Advances; however, the appropriate formal agreements
will be completed during the second quarter of 1996.
In addition, pursuant to a ten year lease entered into in
1985, the Company leased a warehouse facility from two of the
officers and directors of MHK Corp. Effective May 1, 1992, a
renewal option was exercised on the lease, extending its term
to 2005. In January 1996, the officers sold a portion of the
property and terminated the lease with the Company. The
remaining parcel is pledged as additional collateral toward a
note due the Company from the sale of the liquor operations
(see Note 11B).
D. LIFE INSURANCE PREMIUMS RECEIVABLE
The balance sheet includes $758,795 and $300,789 at December
31, 1995 and 1994 respectively, under the caption "Life
insurance premiums receivable". The Company, pursuant to
agreements, has purchased life insurance on the lives of
certain officers and key employees on a "split-dollar" basis.
The program is designed so that payments the Company makes on
behalf of each officer are collateralized by assignments of
the related life insurance policies (i.e., the accumulated
policy cash value, the policy death benefit, or a combination
thereof). The life insurance premiums receivables are
noninterest-bearing. The insured parties own the policies and,
with the consent of the Company, are permitted to borrow from
the cash surrender values of the policies. Under the
"split-dollar" agreements, the Company advances the premium
payments and upon the death of the insured would receive the
return of such advances from the death benefits or from cash
value (without termination of the policy) at such other times
(i.e. termination of employment) prior to the death of the
insured.
During 1995, the Company restored a $376,000 reserve that had
been recorded in 1991 to reduce life insurance premiums
receivable. Management believes the reserve is no longer
necessary due to the improvement in operations and increased
cash values over the last four years. The applicable officers
of the Company recognize these premiums receivable not
collateralized by the policy cash surrender values of $178,000
at December 31, 1995, are their personal responsibility if not
collected through the respective policies. The Company has
represented its intention and obligation to maintain the
policies. The individuals have agreed to provide additional
collateral, to the Company, by pledging common shares they own
in the Company to enhance the realization of these
receivables.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Various legal and environmental proceedings that have arisen
in the ordinary course of business are pending or settled
against the Company and its subsidiaries.
A. REAL ESTATE RELATED TO PREVIOUSLY SOLD DIVISION
In October 1991, the Company sold substantially all of the
assets (other than real estate) of its manufacturing division
located in New Jersey.
II-29
<PAGE> 39
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
A. REAL ESTATE RELATED TO PREVIOUSLY SOLD DIVISION (CONTINUED)
As part of that transaction, the buyer entered into a lease on
the physical facilities which initially included a purchase
option. The buyer is responsible for taxes, maintenance, and
insurance costs. Rental income has been recorded on a
straight-line basis over the term of the lease.
During September 1994, the buyer/tenant instituted arbitration
proceedings against the Company. The Company and the tenant
settled in June 1995. The settlement agreement provides (a) a
revised term of ten years for the lease commencing January 1,
1995, (b) monthly rental of $28,000 for the first five years
and $30,000 for the remaining five years, (c) identification
of approximately $200,000 in repairs, of which the tenant has
paid $40,000, (d) tenant's option to renew for an additional
two years at $10,000 per month; if option not exercised, the
tenant is obligated to pay $10,000 per month in the eleventh
year despite the fact that premises are vacated and (e) tenant
abandoned its option to purchase the premises as well as any
role in the Company's compliance with the environmental laws
of the State of New Jersey.
As a result of compliance with the State of New Jersey
environmental laws and in connection with the sale of the
division, the Company is in the process of a clean-up of
contamination caused by prior ownership whereby the property
had been contaminated by leaking underground storage tanks and
the discharge of certain industrial fluids into the sewage
system. The Company spent approximately $61,000, $52,000 and
$22,000 related to the clean-up during the years ended
December 31, 1995, 1994 and 1993, respectively. Costs
attributable to the project, incurred or accrued, have been
capitalized. The Company's consulting engineers have completed
a study of the contamination and have submitted a clean-up
plan to the appropriate State of New Jersey department. In
December 1995, the State of New Jersey granted a conditional
approval of the plan with a two year monitoring period. The
estimated costs to complete the plan are approximately
$160,000. Refer to Note 4 regarding restricted cash set aside
to satisfy the New Jersey Department of Environmental
Protection and Energy.
B. RENTAL AGREEMENT ON A NURSING HOME
The landlord of a nursing home facility filed a complaint for
Declaratory Judgment against a subsidiary of the Company
seeking a judgment that the subsidiary is in default of the
lease agreement and seeks the right to purchase the license of
the nursing home. The landlord has filed a Motion for Summary
Judgment and the subsidiary is currently conducting its
discovery in order to respond to the Motion. Such response
date, as amended, is June 28, 1996. The subsidiary is
presently current on its rent obligation but is disputing the
late rent charges imposed under the lease. Although not
directly subject to this complaint, the Company is seeking
payment of a receivable related to a Share Transfer Agreement
with the subsidiary of the Company. Such amounts became due in
February 1996, one year after final settlement of certain
State of Ohio Medicaid receivables, as provided in the
Agreement. See Item 3. Legal Proceedings for additional
discussion.
In the opinion of management, the ultimate costs and liability
to the Company and its subsidiaries as a result of this legal
proceeding will not be material.
II-30
<PAGE> 40
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
C. INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, AS
THE STATUTORY LIQUIDATOR FOR CORPORATE LIFE INSURANCE COMPANY
(UNAFFILIATED THIRD PARTY)
On February 20, 1995, the Company entered in a Stock-Exchange
Agreement with the Insurance Commissioner of the Commonwealth
of Pennsylvania, as the Statutory Liquidator of Corporate Life
Insurance Company (CLIC). Under the terms of that Agreement,
the Company agreed to purchase 500,000 shares of its common
stock held by the Statutory Liquidator for a price of $.80 per
share as well as 45,000 shares of Wendt-Bristol Diagnostics
Company common stock for a price of $5.00 per share. The
Company has not yet been able to meet its commitment to
purchase the foregoing shares. Management desires to obtain a
third party purchaser for the Company's shares. The Statutory
Liquidator caused a Writ of Summons in the Commonwealth Court
of Pennsylvania to be served on the Company indicating in its
entirety that the Statutory Liquidator has commenced an
unspecified action against the Company. Refer to Note 2 and
Item 3.
Additionally, as a result of a Federal investigation of the
activities of CLIC, the Company has been requested to furnish
documents and information in its files related to transactions
with CLIC and Life Holdings, Inc. The Company is cooperating
fully.
NOTE 13. INDUSTRY SEGMENT DATA
Industry segment data for years ended December 31, 1995, 1994
and 1993 included in Item 1 ("Industry Segments") of this
report is an integral part of these financial statements.
NOTE 14. RETIREMENT PLAN
The Company adopted, effective July 1, 1989, a retirement
plan, under Section 401(k) of the Internal Revenue Code,
covering substantially all employees with more than one year
of service. The plan provides for the Company to contribute,
on an annual basis, 10% of the employees' eligible deferred
compensation; such employer contribution is in the form of
Company common stock. The Company values the actual shares
transferred to the Plan from the treasury at the respective
December 31 market value. During 1995, 1994 and 1993, the
Company contributed 21,764, 8,448 and 4,249 shares, and
recorded an expense of $9,900, $6,336 and $4,249,
respectively.
NOTE 15. SUBSEQUENT EVENTS
A. On or about January 30, 1996, the Company borrowed the sum of
$300,000 (the "Loan") from Marvin D. Kantor, a director and
the Chairman of the Board of the Company. The Loan was
obtained to meet certain short-term working capital needs of
the Company. The Loan bears interest at 8.5% per annum, is
payable in twelve (12) monthly payments commencing February
1996 and ending January 1997 and is collateralized by a pledge
of the Company's common stock held in Wendt-Bristol
Diagnostics Company.
II-31
<PAGE> 41
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. SUBSEQUENT EVENTS (CONTINUED)
B. In February 1996, the Company transferred approximately
$480,000 of trade accounts payable to a promissory note with
interest at 8%. The note is due in monthly installments and
will be paid in its entirety in 1996.
C. On or about March 26, 1996, the Company favorably settled its
dispute with its former accounts receivable securitization
financier. Terms of the settlement include an adjustment for
interest which favorably impacted the fourth quarter by
$134,000 and the establishment of a note due to the financier
approximating $157,500 payable in three equal installments
beginning April 1996.
D. On or about March 27, 1996, the Company, through several of
its subsidiaries, refinanced most of its equipment at the
nursing homes and Diagnostics Center with a finance company.
The total amount refinanced of $1,700,000 is on a secured note
and bears an interest rate of 12 1/8% payable over sixty
months. With the proceeds, the Company paid off existing debt
of approximately $1,023,000 and used the remainder for working
capital needs.
E. On or about April 1, 1996, the Company re-financed a mortgage
at the Diagnostics and Radiology Center, operated by a
partnership of which a subsidiary is general partner. The
mortgage of $712,500 bears a fixed rate of 9.41%, payable in
monthly installments through April, 2005, with any remaining
balance due on that date. Funds provided from the mortgage are
to be used for working capital related to the expansion of
modalities at the facility.
After taking into consideration the previously mentioned
financing transactions, aggregate future principal and
maturities of long-term debt and capital lease obligations are
as follows:
<TABLE>
<S> <C> <C>
1996 $2,350,306
1997 731,662
1998 495,555
1999 542,725
2000 598,663
Thereafter 6,966,300
</TABLE>
To facilitate analysis related to the effect on working
capital of the above transactions, the following proforma
working capital summary gives effect to these transactions as
though the transactions had occurred on December 31, 1995.
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------
Pro Forma
Historical Adjustments (A) Pro Forma
----------- --------------- ----------
<S> <C> <C> <C>
Current assets $ 4,825,100 $ 1,043,900 $ 5,869,000
Current liabilities 10,164,600 (435,400) 9,729,200
Working capital (5,339,500) 1,479,300 (3,860,200)
Increase in working capital 1,479,300
</TABLE>
(A) Pro forma adjustments reflect 1996 financing transactions indicated above.
II-32
<PAGE> 42
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. 1995 FOURTH QUARTER ADJUSTMENTS
A. During the fourth quarter 1995, the Company restored a loss
reserve of $376,000 pertaining to the Split-Dollar Life
Insurance Premiums receivable from officers of the Company.
This reserve was established in 1991 when the ability of the
Company to continue the monthly premium payments was
uncertain. Additionally, the officers have pledged collateral
to enhance the realization if necessary, see Note 11.
Management determined in the fourth quarter of 1995 this
reserve was no longer necessary due to the improvement in
operations and increased cash values. The $376,000 reversal of
the reserve is reflected as an offset to reduce Selling,
General, and Administrative expenses for the quarter.
B. During the fourth quarter 1995, management changed its
estimate for the useful life of specific medical equipment
from an original useful life of seven years to a remaining ten
year useful life based upon information obtained during
refinancing of this medical equipment regarding fair market
value of the equipment and future potential years of service
effective January 1, 1995. Based on this change in estimate
made effective January 1, 1995, a reduction of depreciation
expense and an almost equal decrease in minority interests in
earnings, net of tax totaling $197,000 was made in the fourth
quarter 1995. The net effect was to increase net income by
approximately $2,000.
C. During the fourth quarter 1995, management expensed $151,951
of additional costs associated with purchasing the limited
partners' interest of a limited partnership of which the
Company is the general partner. Management sold the
partnership assets in late 1994. In 1995, management committed
to pay this amount by purchasing the limited partners'
interest in the partnership. See further discussion in Note
1B.
D. During the fourth quarter 1995, management recorded a $625,000
stock purchase agreement payable for an additional 500,000
common shares of the Company's stock and 45,000 shares of
common stock of Wendt-Bristol Diagnostics Company stock. See
Notes 2 and 12C for further discussion. This transaction
recorded $625,000 of stock purchase agreement payable,
increase in treasury stock of $400,000, increase in excess of
cost of assets of businesses and subsidiaries acquired, less
amortization of $148,103 and a decrease of minority interest
of $76,897. Such transaction actually occurred in the first
quarter of 1995. The effect to the income statement for each
of the previous quarters is to increase (decrease) the
following consolidated statement of operations caption as
follows:
<TABLE>
<CAPTION>
Income Before Income Net
Quarter Income Taxes Taxes Income
------- ------------ ----- ------
<S> <C> <C> <C> <C>
1st $ 1,269 -- $ 1,269
2nd 3,780 (35,000) 38,780
3rd 2,822 (10,000) 12,822
</TABLE>
II-33
<PAGE> 43
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17. SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITY
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
NONCASH INVESTING AND
FINANCING ACTIVITY
Common stock of the Company
(2,000,000 shares) and common stock of
a subsidiary (300,000 shares) were
exchanged for 30,000 shares of preferred
stock, par value $100 per share, owned by
the Company in Life Holdings, Inc.
Decrease in investment in preferred
stock, at cost $(3,000,000)
Decrease in minority interest 512,653
Increase in treasury stock 2,487,347
The Company purchased common stock
(500,000 shares) of the Company for a
price of $.80 per share and common stock
of a subsidiary (45,000 shares) for a price
of $5.00 per share
Increase in accrued expenses and other
liabilities $ (625,000)
Increase in treasury stock 400,000
Increase in excess of cost of assets of
businesses and subsidiaries acquired,
less amortization 148,103
Decrease in minority interest 76,897
A subsidiary of the Company has sold
the operating assets, net of associated
liabilities to a related party in exchange
for an interest bearing note (Note 11B)
Increase in notes receivable from
officers, employees and related parties,
net of amounts payable:
Note arising in transaction $ 574,949
Other (55,936)
Decrease in accounts payable 48,624
Decrease in accrued expenses and
other liabilities 83,006
Decrease in trade and miscellaneous
receivables (4,668)
Decrease in inventories (126,703)
Decrease in prepaid expenses and other
current assets (38,409)
Decrease in property, plant and
equipment, net (240,079)
Decrease in deferred charges (500)
Decrease in other assets (240,284)
</TABLE>
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<PAGE> 44
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17. SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITY
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
A partnership, of which the Company is
the managing general partner, traded - in
a piece of equipment for a substantially
improved model, which was financed by
entering into an installment finance
agreement, which included a refinancing
of existing debt
Increase in equipment cost, net $ 642,692
Increase in long-term obligations (642,692)
A subsidiary of the Company incurred
costs for the construction of an
Alzheimer's and related syndromes
facility with draws against a HUD-
insured financing agreement
Increase in property, plant and
equipment $ -- $ 1,901,236 1,116,838
Increase in long-term obligations (166,826) (1,901,236) (1,116,838)
Increase in prepaid expenses and other
current assets 45,116
Decrease in accounts payable 121,710
A subsidiary of the Company purchased
equipment with a capital lease obligation
Increase in property, plant and
equipment $ 37,823
Increase in capital lease obligation (37,823)
A subsidiary of the Company purchased
land with a portion financed with a
bank note payable
Increase in land $ 105,000
Increase in note payable (105,000)
A partnership, of which the Company is
managing general partner, sold the land
and building and reduced related deferred
charges
Increase in miscellaneous receivable $ 1,700,000
Decrease in deferred charges (21,097)
Increase in accrued expenses, other (74,800)
Decrease in gain on sale of assets (621,860)
Decrease in property, plant and
equipment, net (982,243)
</TABLE>
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<PAGE> 45
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17. SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITY
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
A subsidiary of the Company, less than
100% owned, sold shares of common
stock; deferred offering costs have been
reduced against the gain on sale of
subsidiaries
Decrease gain on sale of stock of
subsidiary $ (88,357)
Decrease in deferred charges (61,643)
Decrease in minority interest 150,000
Common stock in treasury of the
Company was exchanged for common
stock of a subsidiary
Decrease in treasury stock $ (18,644)
Decrease in minority interest 18,644
A partnership, of which a subsidiary
of the Company is the managing general
partner refinanced a mortgage on its
Diagnostic and Radiology Center
building and has capitalized certain costs
relating to the transaction
Increase in deferred charges 9,735
Increase in long-term obligations (9,735)
The Company liquidated certain
subordinated debt by the issuance
of common stock to the holder of such
debt (Note 2)
Decrease in long-term obligations (1,000,000)
Increase in common stock 5,000
Increase in capital in excess of par 945,190
Decrease in deferred charges 49,810
</TABLE>
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<PAGE> 46
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standard Board ("FASB") Statement No.
107, "Disclosure about Fair Value of Financial Instruments",
is effective for the Company's year ended December 31, 1995.
The statement requires disclosure of fair value information
about financial instruments. For certain of the Company's
financial instruments including cash, receivables, accounts
and notes payable, and other accrued liabilities the carrying
amounts approximate fair value due to their short maturities.
For long-term non-current notes receivable and notes payable,
the Company believes the carrying value will approximate their
fair value.
At December 31, 1995, management believes the carrying amount
of these non-current receivables are not impaired and will be
realized in the normal course of business in accordance with
their contract terms. The fair value of debt is believed to be
approximately equal to their current carrying value based on
current market prices.
II-37
<PAGE> 47
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table and the text following the table set forth
certain information with respect to the Directors and Executive
Officers (being all of the Directors of the Company, except for
Dr. Penn and Mr. Levine) of the Company. Each Director serves
until the next Annual Meeting of Stockholders of the Company and
until his successor is elected and qualifies, unless such Director
resigns or dies prior thereto. Each Executive Officer serves at
the pleasure of the Board.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITIONS WITH COMPANY
---- --- ------------------------------
<S> <C> <C>
Marvin D. Kantor 67 Chairman of the Board, Director
Sheldon A. Gold 53 President, Treasurer, Chief Executive Officer,
Chief Financial and Accounting Officer,
Director, member of Audit Committee
Reed A. Martin 42 Executive Vice President, Chief Operating
Officer and Director
Harold T. Kantor 62 Vice Chairman of the Board, Director
Paul H. Levine 55 Director, member of Audit Committee
Gerald M. Penn 58 Director, member of Audit Committee
Charles R. Cicerchi 36 Vice President of Finance
</TABLE>
Marvin D. Kantor has been Chairman of the Board since May 1988;
prior to June 1993 he had also been President and Chief Executive
Officer of the Company and W-B since May 1988. In addition, he has
been the sole Director of W-B since 1990. He is a brother of
Harold T. Kantor.
Sheldon A. Gold is a certified public accountant and has been
President and Chief Executive Officer of the Company since June
1993. Prior thereto and since March 1992 he had been Vice Chairman
of the Board and since May 1988 he had been Executive Vice
President, Treasurer, and Chief Financial and Accounting Officer
of the Company. He again became Treasurer and Chief Financial and
Accounting Officer of the Company in July 1992. In addition, he
has been a Director of the Company since May 1988. He has also
been the President of W-B since June 1993, Executive Vice
President between 1979 and June 1993, a Director of W-B from 1979
to August 1990 (when Marvin D. Kantor became the sole director),
and Chief Financial and Accounting Officer of W-B since 1979.
Reed A. Martin, elected as a Director in May 1992, has since June
1993 been Executive Vice President and Chief Operating Officer,
since May 1991 he had been a Senior Vice President of the Company
supervising operations. Prior thereto he was General Manager of
the midwest wholesale medical supply operations of Foster Medical
Supply, Inc. which in April 1990 had acquired the wholesale
medical supply division of W-B. Mr. Martin had been the Operations
Manager of W-B in the period 1982-88 and thereafter until April
1990 he was Vice President and General Manager of W-B's wholesale
medical supply division. Mr. Martin is a son-in-law of Marvin D.
Kantor.
Harold T. Kantor has been Vice-Chairman since June 1993 and a
Director of the Company since May 1988. In addition, he has been
Vice President of W-B since October 1985 and a Director from 1979
to August 1990. He is a brother of Marvin D. Kantor.
III-1
<PAGE> 48
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (CONTINUED)
Paul H. Levine has been a Director since January, 1990. He is
President of Levine Asset Management, a registered investment
advisor. Mr. Levine is an attorney and a certified public
accountant and has been active in venture capital, investment
banking and financial consulting since 1972. He is also a Director
of Learning Technologies, Inc.
Dr. Gerald M. Penn, M.D., Ph.D., was elected as a director on
February 8, 1995 and serves on the audit and stock option
committees. Dr. Penn specializes in pathology, hematology and
immunopathology. He had been the medical director of Grant Medical
Center's Department of Laboratory Medicine and has served many
professional societies and boards including his current position
as secretary-treasurer of The Academy of Medicine of Columbus and
Franklin County.
Charles R. Cicerchi is a certified public accountant and has been
Vice President of Finance since joining the Company in September,
1994. Prior thereto, he was Controller of Speer Industries, a
mechanical contractor, where he was responsible for all accounting
and treasury functions from the period 1990 to 1994.
ITEM 11. EXECUTIVE COMPENSATION
GENERAL. The following table sets forth the total annual
compensation paid or accrued by the Company and its subsidiaries
to or for the account of (i) the President (the chief executive
officer) of the Company and (ii) for the Company's most highly
compensated executive officers other than the chief executive
officer who were serving as executive officers at December 31,
1995 and with respect each of whom such compensation exceeded
$100,000.
III-2
<PAGE> 49
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------- ------
SECURITIES
UNDERLYING
NAME AND OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) SARS (#) COMP. ($)**
------------------ ---- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sheldon A. Gold 1995 $140,000 * $ -
President, Chief 1994 140,000 * -
Executive Officer, 1993 136,192 * 11,649
Treasurer, and
Chief Financial and
Accounting Officer
Marvin D. Kantor 1995 127,404 * 65,028
Chairman of the 1994 127,404 * 59,609
Board 1993 125,000 * 59,609
Harold T. Kantor 1995 50,000 * 20,755
Vice Chairman of 1994 110,000 * 22,513
the Board 1993 110,000 25,000 16,947
</TABLE>
----------------
* Not applicable
** Includes life insurance premiums paid by the Company for
each of named persons (see Note 11 of the Notes to the
Consolidated Financial Statements herein). For the fiscal year
ended December 31, 1995, the amounts paid by the Company for
each of the named persons is:
<TABLE>
<CAPTION>
LIFE
NAME INSURANCE
---- ---------
<S> <C>
Marvin D. Kantor $65,028
Harold T. Kantor 20,755
</TABLE>
III-3
<PAGE> 50
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
OPTIONS. The following table sets forth information respecting the
grant by the Company of options to purchase shares of its Common
Stock and other information related to options granted by the
Company:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE VALUE ($)
---- ----------- ----------- ------ ---- ---------
<S> <C> <C> <C> <C> <C>
None
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END-# SHRS AT FY END-$
------------- -----------
SHARES
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
----------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Harold T. Kantor 0 0 25,000/0 0/0
</TABLE>
------------------
All options held by Mr. Harold T. Kantor were exercisable at
December 31, 1995. None were "in-the-money". American Stock
Exchange reported quotations for the Common Stock of the
Company on December 29, 1995, are: high, $.5625; low, $.4375;
and close, $.5625; such prices on April 2, 1996 are: high,
$.625; low, $.5625; and close, $.5625. The exercise price of
each of the options of Mr. Harold T. Kantor is $1.25 and the
options expire on June 3, 1998.
III-4
<PAGE> 51
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
STOCK OPTION PLAN. In 1983, the Company adopted an Incentive Stock
Option Plan which was amended in 1989 (as amended, the "Plan").
Pursuant to the Plan, the Company is authorized to grant stock
options to purchase up to 250,000 shares of Common Stock of the
Company, subject to anti-dilution provisions, to key personnel,
including eligible directors, officers and employees of the
Company. In the event that any option granted under the Plan shall
terminate prior to its exercise in full for any reason, then the
shares subject to the option not acquired by exercise of the
option shall be added to the shares otherwise available for the
grant of options under the Plan. Options granted under the Plan
may be those intended to qualify as "incentive stock options", as
defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or those not intended so to qualify. At
April 2, 1996, options to purchase an aggregate of 140,000 shares
of Common Stock of the Company, subject to anti-dilution
provisions, could still be granted under the Plan.
The Plan is currently administered by a Committee of the Board of
Directors of the Company consisting of Messrs. Levine and Penn,
which have the authority (except with respect to stock options to
Non-Employee Directors [as defined in the Plan, i.e., directors of
the Company who are not also employees of the Company, who have
served as directors for twelve consecutive full calendar months,
and who at the end of such period are continuing to serve as
directors] which are mandated by the Plan) to determine the
grantees of the options, whether options granted are to be
"incentive stock options" or non-incentive stock options except
that Non-Employee Directors must receive non-incentive stock
options, the number of shares to be covered by each option, the
time at which each option is exercisable, the method of payment,
and certain other provisions of the option. Options may be granted
for a term not to exceed 10 years (five years with respect to a
10% stockholder) and are not transferable or assignable other than
by will or the laws of descent and distribution.
An option may be exercised within twelve months after the death or
disability of the optionee, to the extent the option was
exercisable at the time of death or disability. The exercise price
of all options (other than non-incentive stock options granted to
persons other than Non-Employee Directors) must be at least equal
to the fair market value of shares of Common Stock of the Company
on the date of grant, or 110% of such fair market value with
respect to any optionee who is a 10% stockholder of the Company.
The Plan will terminate on April 25, 2001. The Board of Directors
of the Company may, however, terminate the Plan at any time prior
to such date. Termination of the Plan will not alter or impair,
without the consent of the optionee, any of the rights or
obligations under any option theretofore granted under the Plan.
The Plan provides that no option granted thereunder shall be
exercisable if the Company shall, at any time and in its sole
discretion, determine that (i) the listing upon any securities
exchange, registration or qualification under any state or federal
law of any shares otherwise deliverable upon such exercise, or
(ii) the consent or approval of any regulatory body of the
satisfaction of withholding tax or other withholding liabilities,
is necessary or appropriate in connection with such exercise. In
any of such events, the exercisability of the option is suspended
and is not effective unless and until such withholding, listing,
registration, qualification or approval shall have been effected
or obtained free of any conditions not acceptable to the Company
in its sole discretion, notwithstanding any termination of any
option or any portion of any option during the period when
exercisability has been suspended.
III-5
<PAGE> 52
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
The Plan also provides that the Board or, if so designated, the
Committee (of directors of the Company appointed to administer the
Plan) may require, as a condition to the right to exercise an
option, that the Company receive from the option holder, at the
time of any such exercise, the representation, warranties and
agreements to the effect that the shares acquired upon exercise of
such options are being purchased by the option holder only for
investment and without any present intention to sell or otherwise
distribute such shares and that the option holder will not dispose
of such shares in transactions which, in the opinion of counsel to
the Company, would violate the registration provisions of the
Securities Act of 1933 and the rules and regulations thereunder.
The certificates issued to evidence such shares will bear
appropriate legends summarizing such restriction on the
disposition thereof.
SPLIT-DOLLAR INSURANCE POLICIES. The following table sets forth
information as of December 31, 1995, concerning split-dollar
insurance policies on the lives of the named persons in the
Summary Compensation Table (1):
<TABLE>
<CAPTION>
INITIAL FACE INSURANCE PREMIUMS
AMOUNT OF ADVANCED IN EXCESS OF
NAME OF INSURED (2) POLICY ISSUED CASH VALUE (5)
------------------- ------ ------ --------------
<S> <C> <C> <C>
Marvin D. Kantor $1,500,000(3) 06/08/92 $414,000
Sheldon A. Gold 375,000(4) 09/11/86 62,000
Harold T. Kantor 350,000(3) 04/28/92 86,000 (6)
Harold T. Kantor 150,000(3) 06/28/93 -
</TABLE>
The Company, pursuant to split-dollar agreements, has purchased
life insurance on the lives of certain officers (including named
persons in the Summary Compensation Table) and key employees on a
"split-dollar" basis. The program is designed so that advances of
premium payments (the "advances") the Company makes on behalf of
each insured are collateralized by assignment of the related life
insurance policy (i.e., the accumulated policy cash value and the
policy death benefit).
The insured person owns the policy and, with the consent of the
Company, is permitted to borrow from the cash surrender value of
the policy.
Under the "split-dollar" agreements, the Company upon death or
other separation from service of the insured receives the return
of the advances from the death benefits or cash surrender value,
if any, of the policy, as the case may be.
-------------------------
(1) See footnote to the Summary Compensation Table for information
respecting Company premium payments for the fiscal year ended
December 31, 1995.
(2) The beneficiaries of all policies are the spouses or children
of the insured.
(3) Each of the policies are increasing death benefit policies
(through use of dividends) and have replaced a previous
universal life policy.
(4) The policy is of the universal life nature, whereby the cash
value is added to the face value at all times, including
death.
(5) Represents monies advanced by the Company in excess of cash
value available in the policies.
(6) Represents monies advanced for both policies held in excess of
cash value available in the policies.
III-6
<PAGE> 53
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Additionally, the insureds/officers of the Company have accepted
personal responsibility for these amounts to the extent they are
not recovered through the respective policies. The Company has
represented its intention and obligation to maintain the policies.
The individuals have enhanced the realization of these receivables
by pledging a portion of their common stock ownership in the
Company.
Section 401(k) Plan. Effective July 1, 1989, the Company
established a Plan and Trust (the "Plan") intended to comply with
the provisions of Section 401(k) of the Internal Revenue Code.
All full-time (as defined) employees of the Company and of its
subsidiaries (collectively referred to under this sub-caption as
the "Company") who were employees on July 1, 1989, and persons who
became employees thereafter and are continuously employed for one
year are eligible to participate in the Plan. Under the Plan, an
eligible employee who elects to participate defers a portion (the
"Portion") of his compensation, as defined, the Portion being up
to the maximum which will not cause the Plan to favor
Highly-Compensated Employees, as defined, or cause the Plan to
exceed the maximum amount allowable as a deduction to the company
under Section 404 of the Code. The Company contributes under the
Plan, for the account of such eligible employee, an amount equal
to the Portion; in substance the contribution is being made by the
eligible employee.
The Plan provides that the Company shall make a contribution
(which is in addition to the contribution referred to in the
preceding sentence and shall be in shares of Common Stock of the
Company) equal to 10% of the aggregate amount of all contributions
made by participants, except that for this purpose a maximum of
10% of the compensation of each participant is taken into account.
The Plan also provides that the Company may contribute a
discretionary amount to all participants out of its current or
accumulated Net Profit, as defined, for the applicable Fiscal
Year, as defined.
All contributions of the participant vest immediately.
Contributions of the Company vest in accordance with the number of
Years of Service, as defined, of the participant with vesting of
20% after one year of Service and thereafter increasing by 20%
increments for each Year so that after five years or more of
Service, the Company's contributions become fully vested.
Notwithstanding the foregoing, the Company's contributions fully
vest upon the retirement of a participant at his Normal Retirement
Date or Early Retirement Date, as defined; upon the death of a
participant before his Retirement Date, as defined, or certain
other termination of his employment; in the event of a
participant's Total and Permanent Disability, as defined, prior to
his Retirement Date, as defined, or other Disability, as defined,
prior to his Retirement Date or other termination of his
employment; or in the event that the Plan is terminated in whole,
or to the extent particular participants are affected thereby, in
part.
The Trustee under the Plan, Merrill Lynch Trust Company, invests
cash contributed or otherwise held under the Plan as it is
instructed by the employee participants, who have the discretion
of fund selection.
Distributions from the Plan are made on a participant's Normal
Retirement Date, Early Retirement Date, death, Total and Permanent
Disability, or the termination of employment for any reason other
than the foregoing. Advance distributions on account of hardship
may be made in limited circumstances as provided in the Plan.
Payment of vested amounts are made in accordance with directions
of the Committee, appointed by the Company to act under the Plan,
either in one lump sum payment or in annual cash installments over
a period not to exceed 10 years.
III-7
<PAGE> 54
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
During 1995, the Company has not made the contributions to the
401(k) plan on a timely basis. The IRS has presently instituted an
amnesty program for matters of this nature that the Company is
planning to utilize.
Compensation of Directors. Non-employee Directors of the Company
receive $650 for each meeting of the Board of Directors of the
Company which they attend and such Directors are also reimbursed
for any expenses incurred. In addition, beginning January 1, 1995
all non-employee directors are compensated $500 per month for
serving as director of the Company. No additional amounts are paid
for committee participation.
In addition, Non-Employee Directors have been granted stock
options under the Plan (see "Item 11. Executive Compensation -
Stock Option Plan") to purchase shares of Common Stock of the
Company. Non-Employee Directors are defined in the Plan as
Directors of the Company who are not also employees of the
Company, who have served as Directors for twelve consecutive full
months, and who at the end of such period are continuing to serve
as Directors. Each of William G. Brewer, Paul H. Levine, and
Michael R. Sussman received, pursuant to the forgoing provision of
the Plan, options on July 11, 1991, to purchase up to an aggregate
of 10,000 shares of the Common Stock of the Company at a price of
$.75 per share, subject to anti-dilution provisions of the Plan.
Mr. Sussman subsequently resigned as a Director of the Company
without having exercised any of his options and the options
thereupon lapsed. Each of Messrs. Brewer and Levine were granted
options on May 13, 1992, to purchase up to an aggregate of 5,000
shares of the Common Stock of the Company (this aggregate of
10,000 shares being equal to the number of shares with respect to
which Mr. Sussman had held options) at a price of $1.375 per
share, subject to anti-dilution provisions. Dr. Gerald M. Penn was
elected as a director in February, 1995 and was granted options on
February 1, 1995 to purchase up to an aggregate of 10,000 shares,
subject to anti-dilution provisions, at a price of $.375 per
share. The Plan also provides for a grant of additional stock
options to each Director who received an option ("initial option")
as hereinbefore described, each of such additional options to
provide for the purchase of an aggregate maximum of 1,000 shares
of Common Stock of the Company at a price per share equal to the
fair market value of the Common Stock of the Company on the date
of grant, subject to anti-dilution provisions, one of such
additional options to be granted on each successive anniversary of
the date of grant of the initial option, provided that such
Director continues on such anniversary to be a Non-Employee
Director. Pursuant to this provision of the Plan, each of Messrs.
Brewer and Levine received on July 11, 1992, options to purchase
an aggregate of 1,000 shares of the Common Stock of the Company at
a price of $1.375 per share, subject to anti-dilution provisions;
each of them received on July 11, 1993, options to purchase an
aggregate of 1,000 shares of the common stock of the Company at a
price of $1.0625 per share, subject to antidilution provisions;
and Messr. Levine received on July 11, 1994, options to purchase
an aggregate of 1,000 shares of the common stock of the Company at
a price of $.6875 per share, subject to antidilution provisions;
Messr. Levine received on July 11, 1995, options to purchase an
aggregate of 1,000 shares of common stock of the Company at a
price of $.4375 per share, subject to anti-dilution provisions;
Dr. Penn received on February 1, 1996, options to purchase an
aggregate of 1,000 shares of common stock of the Company at a
price of $.375 per share, subject to anti-dilution provisions.
Each of the stock options referred to in this paragraph are
exercisable commencing on the date of grant and ending on the
fifth anniversary of such date. None of the options referred to in
this paragraph has been exercised.
Mr. Brewer died in February 1994; under the provisions of the
Plan, Mr. Brewer's legatees could have exercised in whole or part
within twelve months of the date of death the aforementioned
options held by him on the date of death; none of such options
were exercised.
III-8
<PAGE> 55
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below presents as of April 2, 1996, certain information
(1) with respect to any person (including any "group" as that term
is used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended ) who is known to the Company to be the
beneficial owner of more than five percent of any class of the
Company's voting securities and (2) as to each class of equity
securities of the Company or any of its parents or subsidiaries,
other than directors' qualifying shares, beneficially owned by
each director and executive officer of the Company and by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE AND PERCENT
TITLE OF CLASS NAME BENEFICIAL OWNERSHIP (1) OF CLASS (2)
-------------- ---- ------------------------ ------------
<S> <C> <C> <C>
Common Stock Marvin D. Kantor 855,320 14.67%
Two Nationwide Plaza
Suite 760
Columbus, Ohio 43215
Common Stock Harold T. Kantor 247,475 (3) 4.24%
Common Stock Sheldon A. Gold 56,375 (4) -
Common Stock Reed A. Martin 30,064 (5) -
Common Stock Paul H. Levine 19,500 (6) -
Common Stock Dr. Gerald M. Penn 14,000 (7) -
Common Stock All Directors and 1,222,734 (8) 20.97%
Executive Officers
As a Group
(6 persons)
</TABLE>
-------------------
(1) The individuals named have direct ownership and sole voting
and investment power, except as otherwise indicated.
(2) Percent of class shown net of treasury shares (see (8)
below). Except as otherwise indicated, shares owned by the
individuals named represent less than 1% of the outstanding
shares of Common Stock of the Company.
(3) Includes 25,000 shares which Mr. Kantor may acquire by
exercising options granted to him under the Company's Stock
Option Plan.
(4) Includes 13,750 shares of Common Stock which Mr. Gold may
acquire by exercising Warrants.
(5) Includes 1,100 shares of Common Stock which Mr. Martin may
acquire by exercising Warrants and 25,000 shares of Common
Stock which he may acquire by exercising options granted to
him under the Company's Stock Option Plan.
-------------------
(Footnotes continued on following page)
III-9
<PAGE> 56
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MHK Corp., of which Marvin D. Kantor and Harold T. Kantor, and
Sheldon A. Gold are the sole shareholders, has incurred
indebtedness to the Company. The largest amount of such
indebtedness outstanding in 1995 was $773,638; 1994 was $121,818;
and 1993 was $94,400. On April 15, 1996, the amount of such
indebtedness, exclusive of interest, outstanding was $731,800.
Interest at 9% totaling $51,745 has been charged, through December
31, 1995, on indebtedness outstanding totaling $574,949. See Note
11B.
Effective January 1, 1995, the Company sold the operating assets
of a subsidiary's retail liquor store and two lounges in Florida
to MHK Corp. The purchase price was equivalent to the net book
value of the net assets which totaled $574,949 as adjusted for
certain 1995 transactions. A promissory note bears interest at 9%.
Additional advances were made in 1995 and 1996. (See Note 11B)
The President and CEO of the Company has incurred indebtedness to
the Company. The largest amount of such indebtedness outstanding
in 1995 was $204,975; 1994 was $146,454; and 1993 was $102,754. No
interest is paid or charged on such indebtedness. The
President/CEO has granted collateral to the Company to enhance the
realization of the indebtedness.
Pursuant to a ten-year lease entered into in 1985, the Company
leased a warehouse facility from the Kantors. Effective May 1,
1992, a renewal option was exercised on the leased warehouse
facility extending its term to 2005. During the extension, the
annual rent of $66,000 continued to be payable by the Company;
however, approximately $24,000 of the amount due annually applied
against the amount due the Company from MHK Corp. The Company also
collected annually approximately $18,500, through 1995, from a
sub-tenant of part of the premises. In May 1992, the Company
received a second mortgage on the warehouse facility as collateral
for the amount remaining due from MHK Corp. In January 1996, the
officers sold a portion of the property and terminated the lease
with the Company. The remaining parcel is pledged as additional
collateral toward a note due the Company from the sale of the
liquor operations (see Note 11B).
Certain executive officers and directors of the Company were
limited partners owning less than an aggregate 10% interest in
1275 Olentangy River Road Limited Partnership and certain
executive officers and directors of the Company were limited
partners owning less than an aggregate 10% interest in
Wendt-Bristol Diagnostics Company L.P. W-B was the general partner
of 1275 Olentangy River Road Limited Partnership which owned and
operated a medical office building in Columbus, Ohio. A subsidiary
of W-B is the general partner of Wendt-Bristol Diagnostics Company
L.P. which owns and operates an outpatient medical diagnostic
imaging center in Columbus, Ohio.
See also Note 11 of the Notes to Consolidated Financial
Statements.
------------------
(Footnotes continued from previous page)
(6) Includes 19,000 shares of Common Stock which Mr. Levine may
acquire by exercising options granted under the Company's
Stock Option Plan.
(7) Includes 11,000 shares of Common Stock which Dr. Penn may
acquire by exercising options granted under the Company's
Stock Option Plan.
(8) Includes 14,850 shares of Common Stock which may be acquired
by exercise of Warrants and 80,000 shares which may be
acquired by exercise of options granted under the Company's
Stock Option Plan.
III-10
<PAGE> 57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Form 10-K:
1. Financial Statements. The following financial statements are
included in Part II, Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors II-7
Consolidated Balance Sheets as of December
31, 1995 and 1994 II-8 and II-9
Consolidated Statements of Operations for
the years ended December 31, 1995, 1994
and 1993 II-10
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1995, 1994 and 1993 II-11
Consolidated Statements of Cash Flow for
the years ended December 31, 1995, 1994
and 1993 II-12 and II-13
Notes to Consolidated Financial Statements II-14 through II-37
</TABLE>
2. Financial Statement Schedules. The following financial
statement schedules for the years ended December 31, 1995, 1994
and 1993 are included in Part IV:
SCHEDULE PAGE
-------- ----
II. Valuation and Qualifying Accounts and
Reserves IV-5
All other schedules are omitted because they are not required,
inapplicable, or the information is otherwise shown in the Financial
Statements or Notes thereto.
3. Exhibits Filed Under Item 601 of Regulation S-K. (Numbers
assigned to the following correlate to those used in such Item
601).
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of registrant. Filed as
Exhibit B to the Company's Proxy Statement (June 27,
1988) and incorporated herein by reference pursuant to
Rule 411(c).
IV-1
<PAGE> 58
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
(a) Documents filed as part of this Form 10-K: (Continued)
3. Exhibits Filed Under Item 601 of Regulation S-K. (Numbers
assigned to the following correlate to those used in such
Item 601). (Continued)
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.2 By-Laws of the Company. Filed as Exhibit C to the
Company's Proxy Statement (June 27, 1988) and
incorporated herein by reference pursuant to Rule
411(c).
4.1 See Exhibits numbered Exhibit 3.1 and 3.2
4.2 Warrant Agreement, dated April 29, 1988, between
The Wendt-Bristol Company, Corna & Co., Inc. and
Mellon Securities Trust Company, as Warrant Agent.
Filed as Exhibit 4.2 to Registration Statement on
Form S-1 of The Wendt-Bristol Company (Reg. No.
33-8399, filed October 15, 1986) and incorporated
herein by reference to Rule 411(c).
4.3 Warrant Agreement, dated April 29, 1988, between
The Wendt-Bristol Company, Pittsburgh National
Bank, N.A., and The Fifth Third Bank, as Warrant
Agent. Filed as Exhibit 4.3 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1992 and incorporated herein by
reference pursuant to Rule 411(c).
9 Voting Trust Agreement, dated December 4, 1992,
between The Wendt-Bristol Health Services
Corporation, Corporate Life Insurance Company and
Marvin D. Kantor, as Voting Trustee. Filed as
Exhibit 9 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 and
incorporated herein by reference pursuant to Rule
411(c).
10.1 Employee Stock Option Plan, as amended. Filed as
Exhibit 28.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991,
and incorporated herein by reference pursuant to
Rule 411(c).
10.2 Temco National Corporation 401(k) Profit Sharing
Plan. Filed as Exhibit 28.2 to the Company's
Annual Report on Form 10-K for the Year Ended
December 31, 1991, and incorporated herein by
reference pursuant to Rule 411(c).
10.3 Sale and Subservicing Agreement, dated as of
February 5, 1993, among The Wendt-Bristol Company,
et al, NPF IV, Inc. and National Premier Financial
Services, Inc., relating to the health care
receivables securitization program. Filed as
Exhibit 28.6 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992,
and incorporated herein by reference pursuant to
Rule 411(c).
IV-2
<PAGE> 59
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
(a) Documents filed as part of this Form 10-K: (Continued)
3. Exhibits Filed Under Item 601 of Regulation S-K. (Numbers
assigned to the following correlate to those used in such
Item 601) (Continued)
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.4 Stock Purchase Agreement, dated June 4, 1993,
between The Wendt-Bristol Health Services
Corporation and Corporate Life Insurance Company.
Filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference
pursuant to Rule 411(c).
10.5 Installment Business Loan Note, dated January 30,
1996, between The Wendt-Bristol Company and Marvin
D. Kantor related to working capital loan.
10.6 Stock Pledge Agreement dated January 30, 1996,
between The Wendt-Bristol Company and Marvin D.
Kantor related to working capital loan.
10.7 Loan and Security Agreement, dated March 27, 1996,
between Wendt-Bristol Diagnostics Company, L.P.
and DVI Capital Company relating to equipment
financing.
10.8 Loan and Security Agreement, dated March 27, 1996,
between Health America, Inc. dba Wendt-Bristol
Center and DVI Capital Company relating to
equipment financing.
10.9 Loan and Security Agreement, dated March 27, 1996,
between American Care Center, Inc. dba Bristol
House of Columbus and DVI Capital Company relating
to equipment financing.
10.10 Loan and Security Agreement, dated March 27, 1996,
between Ethan Allen Care Center, Inc. dba Bristol
House of Springfield and DVI Capital Company
relating to equipment financing.
IV-3
<PAGE> 60
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
(a) Documents filed as part of this Form 10-K: (Continued)
3. Exhibits Filed Under Item 601 of Regulation S-K. (Numbers
assigned to the following correlate to those used in such
Item 601) (Continued)
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.11 Asset Purchase Agreement, dated April 15, 1996,
between Congress Liquors, Inc. and MHK Corp.
21 List of Subsidiaries
27 EDGAR Financial Data Schedule
(b) Reports on Form 8-K filed during last fiscal (calendar) quarter of
1995:
None
IV-4
<PAGE> 61
SCHEDULE II
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------- ---------- ---------- ------------- ---------
ADDITIONS
----------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1995
Reserve deducted from asset to
which it applies:
Allowance for doubtful trade (a)
accounts $250,000 $105,528 $ (c) 15,528 $340,000
======== ======== ============= ========
Valuation allowance for deferred
tax assets $400,000 $ - $ 100,000 $300,000
======== ======== ============= ========
December 31, 1994
Reserve deducted from asset to
which it applies:
Allowance for doubtful trade
accounts $224,353 $111,647 $ (a) 86,000 $250,000
======== ======== ============= ========
Valuation allowance for deferred
tax assets $531,480 $ - $ 131,480 $400,000
======== ======== ============= ========
December 31, 1993
Reserve deducted from asset to
which it applies:
Allowance for doubtful trade (a)
accounts $329,196 $174,847 $ (b) 276,690 $224,353
======== ======== ============= ========
Valuation allowance for deferred
tax assets $350,040 $181,440 $ - $531,480
======== ======== ============= ========
</TABLE>
Notes: (a) Write-off of uncollectible amounts
(b) Includes reserve of approximately $136,000 eliminated in
connection with a financing arrangement involving the
securitization of certain accounts receivable. See Note 5.
(c) Net of reserves of approximately $150,000 which are no longer
connected with a financing arrangement involving the
securitization of certain accounts receivable. See Note 5.
IV-5
<PAGE> 62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE WENDT-BRISTOL HEALTH SERVICES
CORPORATION
(Registrant)
By: /s/ Sheldon A. Gold
-------------------------------
April 17, 1996 Sheldon A. Gold
President
By: /s/ Charles R. Cicerchi
-------------------------------
April 17, 1996 Charles R. Cicerchi
Vice-President, Finance
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Marvin D. Kantor Chairman of the Board and
- --------------------------- Director April 17, 1996
Marvin D. Kantor
/s/ Harold T. Kantor Vice Chairman of the Board April 17, 1996
- --------------------------- and Director
Harold T. Kantor
/s/ Sheldon A. Gold President (Principal Executive April 17, 1996
- --------------------------- Officer and Principal Financial
Sheldon A. Gold and Accounting Officer) and
Director
/s/ Reed A. Martin Executive Vice President, Chief April 17, 1996
- --------------------------- Operating Officer and Director
Reed A. Martin
/s/ Paul H. Levine Director April 17, 1996
- ---------------------------
Paul H. Levine
/s/ Gerald M. Penn Director April 17, 1996
- ---------------------------
Gerald M. Penn
</TABLE>
IV-
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED INSTALLMENT BUSINESS LOAN NOTE
Due: January 20,1997 $300,000.00
Date: Effective as of January 30, 1996
PROMISE TO PAY: For value received, the undersigned, The Wendt-Bristol
Company, a Delaware corporation (the "Borrower"), promises to pay to the order
of Marvin D. Kantor (the "Lender"), at 1000 Urlin Avenue, Columbus, Ohio 43212
(or such other address as the Lender shall give notice of to the Borrower), the
sum of Three Hundred Thousand Dollars ($300,000.00), plus interest computed on
the basis of the actual number of days elapsed in a year of 365/366 days at the
rate of eight and one-half percent (8.5%) per annum (the "Note Rate") until
maturity, whether by acceleration or otherwise, and, upon the occurrence of an
Event of Default hereunder and during the continuance of such, the interest
rate per annum shall be 100 basis points above the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
The Borrower shall pay this sum in 12 consecutive monthly installments of
Twenty-five Thousand Dollars ($25,000.00) plus interest commencing February 20,
1996, and continuing on the twentieth (20) day of each month thereafter until
January 20, 1997, at which time the entire balance of unpaid principal plus
accrued interest shall be due and payable immediately. Each payment shall be
applied first to costs, if any, then to accrued interest, then to principal.
The Borrower may at any time prepay this Note, in whole or in part, without
premium or penalty, together with accrued interest on the amount of any such
prepayment.
SECURITY: To secure the payment of this Note, the Borrower has executed and
delivered to the Lender a certain Amended and Restated Stock Pledge Agreement
dated effective as of January 30, 1996 (the "Pledge Agreement").
RELATED DOCUMENTS: The terms of any other documents executed as part of the
loan evidenced by this Note are incorporated herein by reference.
Additional Terms and Conditions
-------------------------------
EVENTS OF DEFAULT: If any of the following events occurs:
1. The Borrower fails to pay any amount payable under this Note
within ten (10) days after the date any such payment is due;
Amended and Restated Installment Business Loan Note, dated effective as of
January 30, 1996
Lender: Marvin D. Kantor; Borrower: The Wendt-Bristol Company
Page 1 of 3 Pages
<PAGE> 2
2. The Borrower (a) fails to observe or perform any other term of
this Note; (b) fails to observe or perform any term of the Pledge Agreement;
(c) makes any materially incorrect or misleading representation, warranty, or
certificate to the Lender; or (d) makes any materially incorrect or misleading
representation in any financial statement or other information delivered to the
Lender;
3. The Borrower (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or trustee
for itself or for a substantial part of its assets; or (c) commences or
consents to any proceeding under any bankruptcy, reorganization, liquidation,
insolvency or similar laws of any jurisdiction;
4. A custodian, receiver or trustee is appointed for the Borrower
or for a substantial part of its assets without its consent and is not removed
within sixty (60) days after such appointment; or
5. Proceedings are commenced against the Borrower under any
bankruptcy, reorganization, liquidation, or similar laws of any jurisdiction,
and such proceedings remain undismissed for sixty (60) days after commencement;
or the Borrower consents to the commencement of those proceedings:
then this Note shall become due immediately, without notice, at the Lender's
option.
REMEDIES: If this Note is not paid at maturity, whether by acceleration or
otherwise, the Lender shall have all of the rights and remedies provided by any
law or agreement. The Borrower is liable to the Lender for all reasonable
costs and expenses of every kind incurred in the making or collection of this
Note, including, without limitation, reasonable attorneys' fees and court
costs. These costs and expenses shall include, without limitation, any costs or
expenses incurred by the Lender in any bankruptcy, reorganization, insolvency
or other similar proceeding.
WAIVER: Each endorser and any other party liable on this Note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
collateral securing this Note, to the addition of any party, and to the release
or discharge of, or suspension of any rights and remedies against, any person
who may be liable for the payment of this Note. No delay on the part of the
Lender in the exercise of any right or remedy shall operate as a waiver. No
single or partial exercise by the Lender of any right or remedy shall preclude
any other future exercise of it or the exercise of any other right or remedy.
No waiver or indulgence by the Lender of any default shall be effective unless
in writing and signed by the Lender, nor shall a waiver on one occasion be
construed as a bar to or waiver of that right on any future occasion.
MISCELLANEOUS: This Note shall be binding on the Borrower and its successors,
and shall inure to the benefit of the Lender, its successors and assigns. Any
reference to the Lender shall include any holder of this Note. This Note is
delivered in the State of Ohio and
Amended and Restated Installment Business Loan Note, dated effective as of
January 30, 1996
Lender: Marvin D. Kantor; Borrower: The Wendt-Bristol Company
Page 2 of 3 Pages
<PAGE> 3
governed by Ohio law. Section headings are for convenience of reference only
and shall not affect the interpretation of this Note. This Note and all
related loan documents embody the entire agreement between the Borrower and the
Lender regarding the terms of the loan evidenced by this Note, and supersede
all oral statements and prior writings relating to that loan. Any provision of
this Note which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
CONFESSION OF JUDGMENT: The Borrower irrevocably authorizes any
attorney-at-law, including any attorney-at-law employed or retained by the
Lender, to appear for the Borrower in any court of record in Franklin County,
Ohio (which the Borrower acknowledges to be the place where this Note was
made), or any other state or jurisdiction wherein the Borrower may then reside,
to (i) waive the issuing and service of process, (ii) confess judgment against
the Borrower in favor of the holder of this Note for the amount then due,
together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court. The Borrower waives any conflict of interest that any attorney-at-law,
including any attorney-at-law employed or retained by the Lender, may have in
confessing judgment hereunder and consents to the payment of a legal fee to any
attorney-at-law confessing judgment hereunder.
================================================================================
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT
TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A
COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE
AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
================================================================================
The Wendt-Bristol Company,
a Delaware corporation
By: /s/ Sheldon A. Gold
--------------------------------
Sheldon A. Gold, President
Amended and Restated Installment Business Loan Note, dated effective as of
January 30, 1996
Lender: Marvin D. Kantor; Borrower: The Wendt-Bristol Company
Page 3 of 3 Pages
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (the "Agreement") is
made effective as of January 30, 1996, by The Wendt-Bristol Company, a Delaware
corporation (the "Borrower"), in favor of Marvin D. Kantor (the "Lender").
BACKGROUND INFORMATION
----------------------
A. Borrower is the owner of 940,760 shares of the capital stock
of Wendt-Bristol Diagnostics Company, an Ohio corporation ("W- BDC"), evidenced
by Certificate Nos. D 0050 (for 437,675 shares), D 0051 (for 20,000 shares),
WBD 0287 (for 10,000 shares), and WBD 0326 (for 400), and certificate(s) for
472,685 shares that are currently held in "street name" that will be issued in
the name of Borrower as soon as possible by W-BDC's transfer agent.
B. Lender has agreed to make a loan to Borrower in the principal
amount of $300,000.00 (the "Loan"), which Loan is evidenced by an Amended and
Restated Installment Business Loan Note payable to the order of Lender executed
by Borrower, dated effective as January 30, 1996 (the "Note").
C. The execution of this Agreement and the delivery of the
Pledged Stock (as defined below) to Lender are conditions precedent to Lender's
obligation to make the Loan.
PROVISIONS
----------
NOW, THEREFORE, in consideration of the foregoing, in order to induce
Lender to make the Loan and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower hereby
agrees with Lender as follows:
SECTION 1. DEFINED TERMS. For purposes of this Agreement, in
addition to the terms defined elsewhere in this Agreement, the following terms
shall have the meanings set forth below:
"COLLATERAL" shall mean all property (whether described herein or not)
at any time pledged or required to be pledged to Lender hereunder,
including the Pledged Stock, and all payments to be made by W-BDC
pursuant thereto, income therefrom and proceeds thereof.
"PLEDGED STOCK" shall mean the 940,760 shares of the capital stock of
W-BDC owned by Borrower and evidenced by Certificate Nos. D 0050 (for
437,675 shares), D 0051 (for 20,000 shares), WBD 0287 (for 10,000
shares), and WBD 0326 (for 400), and certificate(s) for 472,685 shares
that are currently held in "street name" that will be issued in the
name of Borrower as soon as possible by
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 1 of 9 Pages
<PAGE> 2
W-BDC's transfer agent, together with all shares, certificates,
options, rights or other distributions issued as an addition to, in
substitution or in exchange for, or on account of, any such shares,
and all proceeds of all the foregoing, now or hereafter owned or
acquired by Borrower.
SECTION 2. Pledge.
(a) Borrower hereby pledges, assigns, hypothecates,
transfers and delivers to Lender the Pledged Stock and agrees to
pledge all additional shares of capital stock of W-BDC that Borrower
may hereafter acquire with respect thereto; and grants to Lender a
first lien on and security interest in (i) the Pledged Stock; (ii) all
certificates, shares, notes, obligations, distributions, securities
and other property issued or delivered from time to time in lieu of or
in substitution for or with respect to the Pledged Stock; (iii) all
present and future security and collateral for any of the foregoing;
and (iv) all payments or other proceeds under or with respect to any
of the foregoing, as collateral security for the due and punctual
payment and performance by Borrower of all its obligations and
liabilities, absolute or contingent, liquidated or unliquidated, now
existing or hereinafter incurred under, arising out of and in
connection with the Loan and the Note, whether for principal,
interest, fees, costs, expenses or otherwise (all the foregoing being
hereinafter called the "Obligations").
(b) Borrower shall deliver to Lender the certificate(s)
for the Pledged Stock and a stock transfer power(s) duly endorsed in
blank simultaneously herewith, in form and substance satisfactory to
Lender.
(c) So long as no Event of Default (as defined in Section
5 hereof) shall have occurred and be continuing at any time, Borrower
shall have the right to exercise all voting rights, and to receive and
retain all cash dividends and other cash payments, with respect to the
Pledged Stock. Upon the occurrence of, and during the continuation of,
an Event of Default, Lender, at Lender's option, may (i) receive any
such cash dividends and other cash payments, and (ii) have any part or
all of the Pledged Stock registered in its name or that of its
nominee, and Borrower hereby covenants that, upon Lender's request,
Borrower will cause W-BDC, the transfer agent or registrar of the
Pledged Stock to effect such registration. Immediately and without
further notice, upon the occurrence of, and during the continuance of,
an Event of Default, whether or not the Pledged Stock shall have been
registered in the name of Lender or its nominee, Lender or its nominee
shall have, with respect to the Pledged Stock, the right to exercise
all voting rights as to the Pledged Stock, all other corporate rights
and all conversion, exchange, subscription or other rights, privileges
or options pertaining thereto as if it were the absolute owner
thereof, including, without limitation, the right to exchange any or
all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer
thereof, or upon the exercise by such issuer of any right, privilege
or option pertaining to any of
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 2 of 9 Pages
<PAGE> 3
the Pledged Stock, and, in connection therewith, to deliver any of the
Pledged Stock to any committee, depository, transfer agent, registrar
or other designated agency upon such terms and conditions as it may
determine, all without liability except to account for property
actually received by it; provided, however, that (i) Lender shall have
no duty to exercise any of the aforesaid rights, privileges or options
and shall not be responsible for any failure to do so or delay in so
doing; and (ii) Lender may by written notice to Borrower relinquish,
either partially or completely in accordance with any terms or
conditions Lender may set forth in such notice, any or all voting
rights Lender may acquire pursuant to this Section 2(c).
SECTION 3. NOTICE TO W-BDC. Within five (5) days after the
execution of this Agreement, Borrower shall give notice of the pledge of the
Pledged Stock pursuant to this Agreement to W-BDC, such notice to be in the
form of the Notice of Pledge attached hereto as Exhibit A.
SECTION 4. DISTRIBUTIONS, ETC. If Borrower shall become
entitled to receive or shall receive, in connection with any of the Pledged
Stock, any Collateral, including, without limitation:
(a) stock certificates, including, without limitation,
any certificates representing a stock dividend or issued in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split,
spin-off or split-off;
(b) options, warrants or rights, whether as an addition
to, or in substitution or in exchange for, any of the Pledged Stock,
or otherwise; or
(c) dividends or distributions payable in money (subject
to the right of Borrower to receive and retain such dividends and
distributions in accordance with Section 2(c) hereof) or other
property, including securities issued by a person other than W-BDC:
then Borrower shall accept the same as Lender's agent and hold the same in
trust on behalf of and for the benefit of Lender, segregated from the other
assets of Borrower and deliver the same forthwith to Lender, in the exact form
received, with the endorsement of Borrower when necessary and/or appropriate
undated powers, duly executed in blank, to be held by Lender, subject to the
terms hereof, as additional collateral security for the Obligations. Any sums
paid upon or in respect of the Pledged Stock or Collateral upon the liquidation
or dissolution of W-BDC shall be paid over to Lender, as additional collateral
security for the Obligations. All sums of money and property so paid or
distributed in respect of the Pledged Stock or other Collateral which is
received by Borrower shall, until paid or delivered to Lender, be held by
Borrower in trust, segregated from the other assets of Borrower, as additional
collateral security for the Obligations.
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 3 of 9 Pages
<PAGE> 4
SECTION 5. EVENTS OF DEFAULT; REMEDIES.
(a) The occurrence of any of the following events shall
constitute an "Event of Default":
(i) Borrower shall default in the observance or
performance of any term, covenant or agreement contained
herein; or
(ii) an Event of Default, as such term is defined
in the Note, shall occur and be continuing after any
applicable grace or cure period.
(b) Upon the occurrence and during the continuance of any
Event of Default, Lender, without demand of performance or other
demand, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or
upon Borrower or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived), may
forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign,
give option or options to purchase, contract to sell or otherwise
dispose of and deliver said Collateral, or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange,
broker's board or at Lender's offices or elsewhere. Lender shall
apply the net proceeds of any such collection, recovery, receipt
appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the
care, safekeeping or otherwise of any and all of the Collateral,
including reasonable attorneys' fees and legal expenses, to the
payment of the Obligations in such order as Lender may elect, and only
after so paying over such net proceeds and after the payment by Lender
of any other amount required by any provision of law, need Lender's
account for the surplus, if any, to Borrower. Borrower agrees that,
to the extent permitted by law, Lender need not give more than ten
(10) days' notice of the time and place of any public sale or of the
time after which a private sale or other intended disposition is to
take place and that such notice is reasonable notification of such
matters. In addition to the rights and remedies granted to it in this
Agreement, the Note and in any other instrument or agreement securing,
evidencing or relating to any of the Obligations, Lender shall have
all the rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of Ohio. All waivers by
Borrower of rights (including rights to notice) and all rights and
remedies afforded Borrower herein, and all other provisions of this
Agreement, are expressly made subject to any applicable mandatory
provisions of law limiting, or imposing conditions (including
conditions as to reasonableness) upon, such waivers or the
effectiveness thereof or any such rights and remedies. Any sale or
other disposition of the Collateral shall be in compliance with all
provisions of applicable law (including applicable securities laws and
applicable provisions of the Uniform Commercial Code of the State of
Ohio).
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 4 of 9 Pages
<PAGE> 5
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower represents and warrants that:
(a) Borrower is the legal record and beneficial owner of
the Pledged Stock, subject to no pledge, lien, mortgage,
hypothecation, security interest, charge, option or other encumbrance
whatsoever, except as created by this Agreement;
(b) Borrower has full power, authority and legal right to
pledge, and grant a security interest in, the Pledged Stock and the
Collateral pursuant to this Agreement; and
(c) this Agreement has been duly executed and delivered
by Borrower and constitutes a legal, valid and binding obligation of
Borrower.
SECTION 7. COVENANTS OF BORROWER. Borrower covenants and
agrees that:
(a) Borrower will defend the right, title and security
interest of Lender in and to the Pledged Stock, the proceeds thereof
and all other Collateral against the claims and demands of all persons
whomsoever;
(b) Borrower will not sell, convey or otherwise dispose
of any of the Pledged Stock or any interest therein or create, incur
or permit to exist any pledge, mortgage, lien, charge, encumbrance or
any security interest whatsoever in, or with respect to, any of the
Pledged Stock or the proceeds thereof, other than that created hereby;
and
(c) Borrower will execute any and all documents
reasonably requested by Lender to continue, protect, perfect or
otherwise defend Lender's interest in and to the Collateral.
SECTION 8. SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 9. NO WAIVER; CUMULATIVE REMEDIES. Lender shall not by
any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder and no waiver shall be valid unless in writing,
signed by Lender, and then only to the extent therein set forth. A waiver by
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Lender would otherwise have on
any future occasion. No failure to exercise, nor any delay in exercising on
the part of Lender, any right, power or
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 5 of 9 Pages
<PAGE> 6
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
SECTION 10. WAIVERS, AMENDMENTS. None of the terms or provisions
of this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Lender and Borrower. This Agreement
and all obligations of Borrower hereunder shall be binding upon Borrower's
successors and assigns, and shall, together with the rights and remedies of
Lender hereunder, inure to the benefit of Lender and its successors and
assigns; provided, however, that neither Borrower nor Lender may assign this
Agreement without the prior written consent of the other.
SECTION 11. GOVERNING LAW. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the laws of the State of
Ohio applicable to agreements executed, delivered and performed within such
state.
SECTION 12. NOTICES. Notices from one party to another relating
to this Agreement shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address, telex number or
facsimile number as set forth below by any of the following means: (a)
hand-delivery; (b) registered or certified mail, postage prepaid, with return
receipt requested; (c) first class or express mail, postage prepaid; (d)
Federal Express, Purolator Courier or like overnight courier service; or (e)
facsimile, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communications of that type.
Notice made in accordance with this section shall be deemed delivered on
receipt if delivered by hand or wire transmission, on the third business day
after mailing if mailed by first class, registered or certified mail or on the
next business day after mailing or deposit with an overnight courier service if
delivered by express mail or overnight courier.
If to Borrower: The Wendt-Bristol Company
Attn: Sheldon A. Gold, President
Two Nationwide Plaza
280 North High Street, Suite 760
Columbus, Ohio 43215
If to Lender: Marvin D. Kantor
1000 Urlin Avenue, Apt. #919
Columbus, Ohio 43212
SECTION 13. CONTINUING SECURITY INTEREST. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the indefeasible payment and satisfaction in full
of all Obligations, (ii) be binding upon Borrower and Borrower's successors
and assigns, and (iii) inure, together with the rights and remedies of Lender
hereunder, to the benefit of Lender and its
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 6 of 9 Pages
<PAGE> 7
successors, transferees and assigns. Lender shall deliver to Borrower, upon
termination of this Agreement, such of the Pledged Stock and Collateral as
shall not have been sold or otherwise disposed of pursuant to this Agreement.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Agreement, effective as of January 30, 1996.
BORROWER:
The Wendt-Bristol Company,
a Delaware corporation
By: /s/ Sheldon A. Gold
-----------------------------
Sheldon A. Gold, President
Stock Pledge Agreement, effective as of January 30, 1996
The Wendt-Bristol Company to Marvin D. Kantor
Page 7 of 9 Pages
<PAGE> 8
ASSIGNMENT AND TRANSFER OF SHARES
BY THE WENDT-BRISTOL COMPANY
FOR VALUE RECEIVED, The Wendt-Bristol Company, a Delaware corporation,
hereby assigns and transfers unto __________________________ _________ shares
of the Capital Stock (the "Shares") of Wendt-Bristol Diagnostics Company (the
"Corporation"), standing in its name on the books of the Corporation and does
hereby irrevocably transfer the Shares on the books of the Corporation and does
hereby irrevocably constitute and appoint _________________________________
attorney to transfer the Shares on the books of the Corporation with the full
power of substitution in the premises.
Dated: January 30, 1996 The Wendt-Bristol Company,
a Delaware corporation
By: /s/ Sheldon A. Gold
-----------------------------
Title: President
--------------------------
<PAGE> 9
[Letter Head]
NOTICE OF PLEDGE
----------------
TO: Wendt-Bristol Diagnostics Company CERTIFIED MAIL
Attention: President
Two Nationwide Plaza
280 North High Street, Suite 280
Columbus, Ohio 43215
American Stock Transfer Company CERTIFIED MAIL AND
Attn: Isaac Kagan TELECOPIER
6201 15th Avenue, First Floor (718) 921-8334
Brooklyn, NY 11219
RE: Pledge of 940,760 Shares of Capital Stock of Wendt-Bristol
Diagnostics Company
Gentlemen:
You are hereby notified that the undersigned, The Wendt-Bristol
Company, has pledged the 940,760 Shares of the Capital Stock, each fully paid,
of Wendt-Bristol Diagnostics Company owned by it on the books and records of
Wendt-Bristol Diagnostics Company to Marvin D. Kantor, pursuant to the terms
and conditions of a certain Stock Pledge Agreement executed by the undersigned
in favor of Marvin D. Kantor, effective as of January 30, 1996. Such shares
are evidenced by Certificate Nos. D 0050 (for 437,675 shares), D 0051 (for
20,000 shares), WBD 0287 (for 10,000 shares), and WBD 0326 (for 400), and
certificate(s) for 472,685 shares that are currently held in "street name" to
be issued in the name of The Wendt-Bristol Company as soon as possible.
Pursuant to the Ohio Revised Code and the Uniform Commercial Code,
Marvin D. Kantor is deemed to have possession of the above described shares
from the time you receive this notice.
Please deem any instructions received from Marvin D. Kantor regarding
the exercise of any rights with respect to such Shares as if such instructions
were made by
-1-
TWO NATIONWIDE PLAZA * 280 N. HIGH ST. * SUITE 760 * COLUMBUS, OH 43215 *
(614) 221-6000 * FAX (614) 221-6168
<PAGE> 10
the undersigned to you, until further instruction, or notice that such Stock
Pledge Agreement has been terminated, from Marvin D. Kantor.
Very truly yours,
The Wendt-Bristol Company
By: /s/ Sheldon A. Gold
-------------------------
Sheldon A. Gold, President
Date: February 9, 1996
--
ACKNOWLEDGED:
/s/ Marvin D. Kantor
- -------------------------
Marvin D. Kantor
Date: February 9, 1996
--
P 832 103 476
CERTIFIED MAIL RECEIPT
[LOGO] No Insurance Coverage Provided
Do not use for International Mail
(See Reverse)
----------------------------------------
Sent to
American Stock Transfer
----------------------------------------
Street & No.
6201 15th Ave., 1st Floor
----------------------------------------
P.O., State & ZIP Code
Brooklyn NY 11219
----------------------------------------
Postage $ .32
----------------------------------------
Certified Fee 1.10
----------------------------------------
Special Delivery Fee
----------------------------------------
Restricted Delivery Fee
----------------------------------------
Return Receipt Showing
to Whom & Date Delivered 1.10
----------------------------------------
Return Receipt Showing to Whom,
Date, & Address of Delivery
========================================
TOTAL Postage
& Fees $ 2.52
========================================
Postmark or Date
----------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.7
LOAN AND SECURITY AGREEMENT
---------------------------
REFERENCE NO. 460-501
----------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
the date set forth below BETWEEN:
Secured Party: DVI CAPITAL COMPANY; and
-------------
Debtor: WENDT-BRISTOL DIAGNOSTICS COMPANY, L.P.
------- -----------------------------------------------------------
1. CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings:
a. ADVANCE. Advances of funds to the Debtor pursuant to
Section 2 hereof and Schedules which may be executed between Secured Party and
Debtor from time to time.
b. COLLATERAL. "Collateral" shall have the meaning set forth in
Section 2.2 hereof.
c. EVENT OF DEFAULT. Those events set forth in Section 9
hereof.
d. MONTHLY LOAN REPAYMENT. The amount set forth in any
Schedule executed in connection with any Advance under this Agreement.
e. SCHEDULE(S). Any and all or each (as the context shall
require) of the Loan and Collateral Schedules of the Debtor, to be executed by
the parties under this Agreement.
f. SECURED OBLIGATIONS. The payment of the principal and
interest as set forth in each and all of the Schedules, and the payment of all
additional amounts and other sums at any time due and owing under the Schedules
for this Agreement, and the performance and observance of all covenants and
conditions contained herein and therein.
g. SUPPLIER. The entity from whom the Debtor purchased the
Collateral including manufacturers, dealers, sellers and vendors.
2. PURPOSE OF FINANCING AND DESCRIPTION OF LOANS; GRANT OF SECURITY INTEREST;
Secured Party agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Debtor in an aggregate amount to be
determined by Secured Party in its sole and absolute discretion.
a. Debtor agrees that the proceeds of any Advance will be used
solely to refinance or acquire the Collateral as described in the Schedule
executed in connection with said advance.
b. The amount of any Advances to Debtor shall be set forth on
the Schedule executed in connection with said Advance.
c. The term of repayment of any Advance made under this
Agreement (the "Term") shall commence on the date set forth in the Schedule
executed in connection with said Advance and shall continue for the period set
forth in said Schedule, and for all extensions and renewals of such period.
d. Debtor shall pay to Secured Party the Monthly Loan
Repayment for each Advance in amounts and on the dates set forth in the
Schedule executed in connection with said Advance, whether or not Secured Party
has rendered an invoice to Debtor. Debtor agrees to pay the Monthly Loan
Repayment to Secured Party at the office of the Secured Party set forth below,
or to such entity and/or at such other place as Secured Party may from time to
time designate by notice to Debtor. Any other amounts required to be paid to
Secured Party under this Agreement are due upon Debtor's receipt of Secured
Party's invoice and will be payable as directed in the invoice. Payments under
this Agreement may be applied to the Debtor's then accrued Secured Obligations
in such order as Secured Party may choose.
e. The Advances shall not be subject to prepayment or
redemption in whole or in part prior to the expiration of the Term set forth in
the Schedule executed in connection with said Advance.
.1 GRANT OF SECURITY INTEREST. In consideration of the
Advances to be made by Secured Party to Debtor under this Agreement, and to
secure the payment and performance of the Secured Obligations, Debtor hereby
grants and assigns to Secured Party, its successors and assigns, a security
interest in the Collateral described in Section 2.2 below.
.2 COLLATERAL. All personal property consisting of
"equipment", and "proceeds" as defined in the California Commercial Code and
all furniture, fixtures and machinery or other property as described in any and
<PAGE> 2
all Schedule(s) executed pursuant to this Agreement, whether now owned or
hereafter acquired, and all substitutions, renewals or replacements of and
alterations, additions or improvements, if any, to such Collateral, together
with, in each and every case, all proceeds thereof. Each item of Collateral
shall secure not only the specific Advances made by Secured Party to Debtor as
set forth in any Schedule, but also all other present and future indebtedness
or obligations of Debtor to Secured Party of every kind and nature whatsoever.
Debtor warrants and agrees that the Collateral will be used primarily for
business or commercial purposes and that regardless of the manner of
affixation, the Collateral shall remain personal property and shall not become
part of the real estate. Debtor agrees to keep the Collateral at the locations
set forth in the Schedule(s) covering said Collateral and will not make any
change in the location of the Collateral within such state, and will not remove
the Collateral from such state without the prior written consent of Secured
Party.
3. TIME IS OF THE ESSENCE; LATE CHARGES. Time is of the essence in
this Agreement and if any Monthly Loan Repayment is not paid within the ten
(10) days after the due date thereof, Secured Party shall have the right to add
and collect, and Debtor agrees to pay:
a. A late charge on and in addition to, such Monthly Loan
Repayment equal to five percent (5%) of such Monthly Loan Repayment or a lesser
amount if established by any State or Federal statute applicable thereto; and
b. Interest on such Monthly Loan Repayment from thirty (30)
days after the due date until paid at the rate of eighteen (18%) per annum.
4. NO WARRANTIES. This Agreement is solely a financing agreement.
Debtor acknowledges that: The Collateral has or will have been selected and
acquired solely by Debtor for Debtor's purposes; Secured Party is not the
manufacturer, dealer, vendor or supplier of the Collateral; the Collateral is
of a size, design, capacity, description and manufacture selected by Debtor;
Debtor is satisfied that the Collateral is suitable and fit for its purposes;
and SECURED PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION
WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION,
MERCHANTABILITY, DESIGN OR OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE VALUE OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE
MATERIALS IN THE COLLATERAL OR WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER.
5. NO AGENCY. Debtor acknowledges and agrees that none of the
manufacturer, vendor, dealer or supplier, nor any salesman, representative, or
other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer,
dealer vendor or supplier is authorized to waive or alter any term or condition
of this Agreement, and no representation as to the Collateral or any other
matter by any manufacturer, dealer, vendor or supplier shall in any way affect
Debtor's duty to pay the Monthly Loan Repayment and perform his other
obligations as set forth in this Agreement.
6. INSURANCE AND RISK OF LOSS. All risk of loss of, damage to, or
destruction of the Collateral shall at all times be borne by Debtor. Debtor
will procure forthwith and maintain property and general liability insurance
with extended or combined additional coverage on the Collateral for the full
insurable value thereof for the life of this Agreement and any Schedule(s) plus
such other insurance as Secured Party may specify, and promptly deliver each
policy to Secured Party with a standard long form endorsement attached showing
Secured Party or assigns as additional insureds and loss payees. Each insurer
shall agree by endorsement upon such policy issued by it or by independent
instrument furnished to Secured Party and Debtor that it will give Secured
Party and Debtor thirty (30) days written notice before the policy in question
shall be materially altered or canceled. Secured Party's acceptance of
policies in lesser amounts or risks shall not be a waiver of Debtor's foregoing
obligation.
7. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party as follows:
a. Debtor is duly organized and existing under the laws of
the State of its formation without limit as to the duration of its existence,
and is authorized and in good standing to do business in said State; Debtor
has corporate powers and adequate authority, rights and franchises to own its
own property and to carry on its business as now conducted, and is duly
qualified and in good standing in each state in which the character of the
properties owned by it therein or the conduct of its business makes such
qualifications necessary; and Debtor has the corporate power and adequate
authority to make and carry out this Agreement.
b. The execution, delivery and performance of this Agreement
are duly authorized and do not, to the best of the Debtor's knowledge, require
the consent or approval of any governmental body or other regulatory authority;
are not in contravention of or in conflict with any law, regulation or any term
or provision of its articles of formation or bylaws, and this Agreement is a
valid and binding obligation of Debtor legally enforceable in accordance with
its terms.
c. The execution, delivery and performance of this Agreement
will not contravene or conflict with any agreement, indenture or undertaking to
which Debtor is a party or by which it or any of its property
2
<PAGE> 3
may be bound by or affected, and will not cause any lien, charge or other
encumbrance to be created or imposed upon any such property by reason thereof.
d. There is no material litigation or other proceeding
pending or threatened against or affecting Debtor, and it is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority. The balance sheets of Debtor and
the related profit and loss statements and other financial data as submitted in
writing by Debtor to Secured Party in connection with this Agreement, are true
and correct, and said balance sheets and profit and loss statements truly
represent the financial condition of Debtor as of the dates thereof.
e. Debtor has good and valid title to the Collateral which is
free from and will be kept free from all liens, claims, security interests and
encumbrances, except for the security interest granted hereby.
f. No financing statement covering the Collateral or any
proceeds thereof is on file in favor of anyone other than Secured Party, but if
such other financing statement is on file, it will be terminated or
subordinated.
g. All necessary action, including the filing of UCC-1
Financing Statements, has or will be made to give Secured Party a first
priority security interest in the Collateral. Debtor agrees to permit Secured
Party to pre-file any UCC-1 Financing Statement pursuant to California
Commercial Code Section 9402; provided that if Secured Party fails to make an
Advance with respect to the Collateral, Secured Party shall promptly release
the pre-filed UCC-1 Financing Statements.
8. DEBTOR'S AGREEMENTS. Debtor agrees:
a. To defend at Debtor's own cost and expense any action,
proceeding or claim affecting the Collateral.
b. To pay reasonable attorneys fees and other expenses
incurred by Secured Party in enforcing its rights in the event of Debtor's
default under this Agreement.
c. To pay promptly all taxes, assessments, license fees and
other public or private charges when levied or assessed against the Collateral
or this Agreement and this obligation shall survive the termination of this
Agreement, provided, however, that Debtor shall have the right, after notice to
the Secured Party, to contest in good faith the validity or amount of any such
taxes, assessments, fees and charges pursuant to appropriate proceedings
diligently prosecuted and during the pendency of such contest, to permit the
items so contested to remain unpaid.
d. That if a certificate of title is required or permitted by
law, Debtor shall obtain such certificate with respect to the Collateral,
showing the security interests of Secured Party thereon and in any event do
everything necessary or expedient to preserve or perfect the security interest
of Secured Party.
e. That Debtor will not misuse, fail to keep in good repair,
secrete, or without the prior written consent of Secured Party, and
notwithstanding Secured Party's claim to proceeds, sell, rent, lend, encumber
or transfer any of the Collateral. The Collateral shall be maintained in
accordance with the manufacturer's specifications and shall at all times be
eligible for the manufacturer's maintenance program.
f. That Secured Party may enter upon Debtor's premises or
wherever the Collateral may be located at any reasonable time to inspect the
Collateral and Debtor's books and records pertaining to the Collateral, and
Debtor shall assist Secured Party in making such inspection.
g. That the security interest granted by Debtor to Secured
Party shall continue effective irrespective of the payment of the Secured
Obligations, so long as there are any obligations of any kind, including
obligations under guaranties or assignments, owed by Debtor to Secured Party.
h. To mark and identify the Collateral with all information
and in such manner as Secured Party may request from time to time and replace
promptly any such markings or identifications which are removed, defaced or
destroyed.
i. To indemnify and hold Secured Party harmless from and
against all claims, losses, liabilities (including negligence, tort and strict
liability), damages, judgments, suits and all legal proceedings, and any and
all costs and expenses in connection therewith (including attorney's
fees)arising out of or in any manner connected with the manufacture, purchase,
financing, ownership, delivery, rejection, nondelivery, possession, use,
transportation, storage, operation, maintenance, repair, return or other
disposition of the Collateral or with this Agreement, including, without
limitation, claims for injury to, or death of, persons and for damage to
property, and give Secured Party prompt notice of such claims or liability.
j. That Debtor will not part with possession of or control
of or suffer or allow to pass out of its possession or control items of
Collateral or change the location of the Collateral or any part thereof from
the address shown in the appropriate Schedule without the prior written consent
of Secured Party.
3
<PAGE> 4
k. That Debtor shall not ASSIGN OR IN ANY WAY DISPOSE OF ALL
OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR SELL,
TRANSFER, PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL. DEBTOR'S INTEREST
IN THIS AGREEMENT AND THE COLLATERAL IS NOT ASSIGNABLE AND WILL NOT BE ASSIGNED
OR TRANSFERRED BY OPERATION OF LAW. CONSENT TO ANY OF THE FOREGOING PROHIBITED
ACTS APPLIES ONLY IN THE GIVEN INSTANCE AND IS NOT CONSENT TO SUBSEQUENT LIKE
ACT BY DEBTOR OR ANOTHER ENTITY.
9. EVENTS OF DEFAULT. Any of the following events or conditions
shall constitute an Event of Default hereunder:
a. Debtor's failure to pay any Monthly Loan Repayment or any
installment of the principal or interest within ten (10) days after the same is
due under any Schedule, whether at the due date thereof, or at the date fixed
for prepayment or by acceleration or otherwise;
b. Debtor's failure to observe or perform any material
covenant or material agreement to be observed or performed by Debtor under this
Agreement, any Schedule or any other instrument or agreement delivered by
Debtor to Secured Party in connection with this transaction; and such failure
continues for thirty (30) days after written notice thereof shall have been
given by the Secured Party to the Debtor;
c. Any representation or warranty made by Debtor herein or in
any report, certificate, financial or other statement furnished in connection
with this Agreement shall prove to be false or misleading in any material
respect; or
d. Debtor is adjudicated insolvent or a bankrupt, or ceases,
becomes unable, or admits in writing its inability, to pay its debts as they
mature, or makes a general assignment for the benefit of, or enters into any
composition or arrangement with, creditors; applies for or consents to the
appointment of a receiver, trustee or liquidator of it or of a substantial part
of its property, or authorizes such application or consent, or proceedings
seeking such appointment shall be instituted against it without such
authorization, consent or application and continues undismissed for a period of
60 calendar days; authorizes or files a voluntary petition in bankruptcy or
applies for or consents to the application of any bankruptcy, reorganization in
bankruptcy, arrangement, readjustments or debts, insolvency, dissolution,
moratorium or other similar laws of any jurisdiction, or authorizes such
application or consent, or proceedings to such end shall be instituted against
it without such authorization, application or consent and such proceedings
instituted against it shall continue undismissed for a period of 60 calendar
days; or
e. Secured Party, in good faith, believes the prospect of
payment or performance is impaired or in good faith believes the Collateral is
insecure;
f. Any agreement made by a guarantor, surety or endorser for
Debtor's default in any obligation or liability to Secured Party or any
guaranty obtained in connection with this transaction is terminated or
breached.
10. SECURED PARTY'S REMEDIES. Debtor agrees that when an Event of
Default has occurred and is continuing, Secured Party shall have the rights,
options, duties and remedies of a Secured Party and Debtor shall have the
rights and duties of a Debtor under the Uniform Commercial Code in effect in
each jurisdiction where the Collateral or any part thereof is located and,
without limiting the foregoing, Secured Party may exercise one or more or all,
and in any order, of the remedies hereinafter set forth:
a. By notice in writing to Debtor, declare the entire unpaid
principal balance due under ANY, EACH AND ALL Schedule(s) to be immediately due
and payable; and thereupon all such unpaid balance(s), together with all
accrued and unpaid interest thereon, shall be immediately due and payable;
b. Personally, or by agents or attorneys, take immediate
possession of the Collateral or any portion thereof and for that purpose pursue
the same wherever it may be found and enter any of the premises of Debtor with
or without notice, demand, process of law or legal procedure, and search for,
take possession of, remove, keep and store the same, or use, operate, or lease
the same until sold and otherwise exercise any and all of the rights and powers
of Debtor in respect thereof;
c. Either with or without taking possession and without
instituting any legal proceedings whatsoever (having first given notice of such
sale by mail to Debtor once at least 10 calendar days prior to the date of such
sale, and any other notice of such sale which may be required by law, if said
notice is sufficient), sell and dispose of the Collateral or any part thereof
at public auction(s) to the highest bidder, or at a private sale(s) in one lot
as an entirety or in several lots, and either for cash or for credit and on
such terms as Secured Party may determine, and at any place (whether or not it
is the location of the Collateral or any part thereof, designated in the notice
above referred to. Any such sale or sales may be adjourned from time to time
by announcement of the time and place appointed for such sale or sales, or for
such adjourned sales or sales without further notice, and Secured Party may bid
and become the purchaser at any such sale;
4
<PAGE> 5
d. Secured Party may proceed to protect and enforce this
Agreement and any Schedule(s) by suit or suits or proceedings in equity, at law
or in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained, or execution or aid of any power herein granted, or
for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Collateral, or any party thereof, or for the enforcement of any proper,
legal or equitable remedy available under applicable law.
e. Secured Party may require Debtor to assemble the
Collateral and return it to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
f. Debtor agrees to pay the Secured Party all expenses or
retaking, holding, preparing for sale, or selling the Collateral in addition to
attorneys' fees as set forth above.
11. ACCELERATION CLAUSE. In case of any sale of the Collateral, or any
part thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Agreement, the
outstanding principal due under any Schedule, if not previously due, the
interest accrued thereon and all other sums required to be paid by Debtor
pursuant to this Agreement shall at once become and be immediately due and
payable.
12. EXERCISE OF RIGHTS. No delay or omission of Secured Party in
the exercise of any right or power arising from any default shall act as a
waiver of or impair any such right or power or prevent its exercise during the
continuance of such default. No waiver by Secured Party of any such default,
whether such waiver be full or partial, shall extend to or be taken to affect
any subsequent default, nor shall it impair the rights resulting therefrom
except as may be otherwise provided therein. The giving, taking or enforcement
of any other or additional security, collateral, or guarantee for the payment
of the Secured Obligations shall not operate to prejudice, waive, or affect the
security of this Agreement or any rights, powers, or remedies hereunder, and
Secured Party shall not be required to look first to enforce or exhaust such
other additional security, collateral, or guarantees. All rights, remedies,
and options of Secured Party hereunder, or by law shall be cumulative.
13. ASSIGNMENT BY SECURED PARTY. SECURED PARTY MAY ASSIGN OR TRANSFER
THIS AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT NOTICE TO
DEBTOR. Any assignee of Secured Party shall have all of the rights but none of
the obligations, of Secured Party under this Agreement, and Debtor agrees that
it will not assert against any assignee of Secured Party any defense,
counterclaim or offset that Debtor may have against Secured Party.
14. NON-TERMINABLE AGREEMENT; OBLIGATIONS UNCONDITIONAL. This
Agreement cannot be canceled or terminated except as expressly provided herein.
Debtor hereby agrees that Debtor's obligation to pay all Secured Obligations
shall be absolute and unconditional and Debtor will not be entitled to any
abatement of Monthly Loan Repayments or other payments due under this Agreement
or any reduction thereof under circumstances or for any reason whatsoever.
Debtor hereby waives any and all existing and future claims, as offsets,
against any Monthly Loan repayments and other payments due under this Agreement
as and when due regardless of any offset or claim which may be asserted by
Debtor or on its behalf. The obligations and liabilities of Debtor hereunder
will survive the termination of this Agreement.
15. ADDITIONAL DOCUMENTS. In connection with and in order to provide
effective evidence of the security interest in the Collateral granted Secured
Party under this Agreement, Debtor will execute and deliver to Secured Party
such financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings of such
financing statements without Debtor's signature. Debtor further agrees to
furnish Secured Party:
a. On a timely basis, Debtor's future financial statements,
including Debtor's most recent annual report, balance sheet and income
statement, prepared in accordance with generally accepted accounting
principles, which reports, Debtor warrants, shall fully and fairly represent
the true financial condition of Debtor;
b. Any other financial information normally provided by
Debtor to the public; and
c. Such other financial data or information relative to this
Agreement and the Collateral, including, without limitation, copies of
Suppliers' proposals and purchase orders and agreements, listings of serial
numbers or other identification data and confirmations of such information, as
Secured Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, have acknowledged, and/or deliver to Secured
Party, record and file such other documents and notices as Secured Party deems
necessary or desirable to protect its interest in and rights under this
Agreement and Collateral. Debtor will pay for all filings, searches, title
reports, legal and other fees incurred by Secured Party in connection with any
documents to be provided by Debtor pursuant to this Agreement and any other
similar documents Secured Party may procure.
16. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. Whenever any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such parties, and all the covenants, promises, and agreements in
this Agreement contained by or on behalf of Debtor or Secured Party shall bind
and inure to the benefit of the respective successors and assigns of each party
whether so expressed or not.
5
<PAGE> 6
b. PARTIAL INVALIDITY. The enforceability or invalidity of
any provision(s) of this Agreement shall not render any other provision(s)
herein contained unenforceable or invalid.
c. COMMUNICATIONS. All communications provided for herein
shall be in writing and shall be deemed to have been given (unless otherwise
required by the specific provisions in respect of any matter) (i) when
addressed and delivered personally or (ii) three (3) calendar days following
deposit in the United States mail, registered or certified, postage prepaid,
and addressed to the address set forth beneath the respective parties'
signature lines below, or as to Debtor or Secured Party at such other address
as they may designate by notice duly given in accordance with this Section to
the other party.
d. COUNTERPART; GOVERNING LAW. This Agreement may be
executed, acknowledged, and delivered in any number of counterparts, each of
such counterparts constituting an original but all together only one Agreement.
This Agreement and any Schedule shall be construed and enforced in accordance
with and governed by the laws of the State of Ohio. Debtor agrees to submit to
the jurisdiction of the State and/or Federal Courts in Ohio.
e. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding or agreement between Secured Party and Debtor and there is no
understanding or agreement, oral or written, which is not set forth herein.
This Agreement may not be amended except by a writing signed by Secured Party
and Debtor and shall be binding upon and inure to the benefit of the parties
hereto, their permitted successors and assigns.
This Agreement is dated March 27, 1996.
------------------
DEBTOR: WENDT-BRISTOL DIAGNOSTICS COMPANY L.P.
ADDRESS: TWO NATIONWIDE PLAZA
280 NORTH HIGH STREET; SUITE 760
COLUMBUS, OH 43215
By: /s/ SHELDON A. GOLD
------------------------------------
Title: PRESIDENT
---------------------------------
SECURED PARTY: DVI CAPITAL COMPANY
6611 ROCKSIDE RD. #110
INDEPENDENCE, OH 44131
By: /s/ ALAN J. VELOTTA
------------------------------------
Title:
---------------------------------
6
<PAGE> 1
EXHIBIT 10.8
LOAN AND SECURITY AGREEMENT
---------------------------
REFERENCE NO. 461-501
----------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
the date set forth below BETWEEN:
Secured Party: DVI CAPITAL COMPANY; and
-------------
Debtor: HEALTH AMERICA, INC. DBA WENDT-BRISTOL CENTER
------- -----------------------------------------------------------
1. CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings:
a. ADVANCE. Advances of funds to the Debtor pursuant to
Section 2 hereof and Schedules which may be executed between Secured Party and
Debtor from time to time.
b. COLLATERAL. "Collateral" shall have the meaning set forth in
Section 2.2 hereof.
c. EVENT OF DEFAULT. Those events set forth in Section 9
hereof.
d. MONTHLY LOAN REPAYMENT. The amount set forth in any
Schedule executed in connection with any Advance under this Agreement.
e. SCHEDULE(S). Any and all or each (as the context shall
require) of the Loan and Collateral Schedules of the Debtor, to be executed by
the parties under this Agreement.
f. SECURED OBLIGATIONS. The payment of the principal and
interest as set forth in each and all of the Schedules, and the payment of all
additional amounts and other sums at any time due and owing under the Schedules
for this Agreement, and the performance and observance of all covenants and
conditions contained herein and therein.
g. SUPPLIER. The entity from whom the Debtor purchased the
Collateral including manufacturers, dealers, sellers and vendors.
2. PURPOSE OF FINANCING AND DESCRIPTION OF LOANS; GRANT OF SECURITY INTEREST;
COLLATERAL.
Secured Party agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Debtor in an aggregate amount to be
determined by Secured Party in its sole and absolute discretion.
a. Debtor agrees that the proceeds of any Advance will be used
solely to refinance or acquire the Collateral as described in the Schedule
executed in connection with said advance.
b. The amount of any Advances to Debtor shall be set forth on
the Schedule executed in connection with said Advance.
c. The term of repayment of any Advance made under this
Agreement (the "Term") shall commence on the date set forth in the Schedule
executed in connection with said Advance and shall continue for the period set
forth in said Schedule, and for all extensions and renewals of such period.
d. Debtor shall pay to Secured Party the Monthly Loan
Repayment for each Advance in amounts and on the dates set forth in the
Schedule executed in connection with said Advance, whether or not Secured Party
has rendered an invoice to Debtor. Debtor agrees to pay the Monthly Loan
Repayment to Secured Party at the office of the Secured Party set forth below,
or to such entity and/or at such other place as Secured Party may from time to
time designate by notice to Debtor. Any other amounts required to be paid to
Secured Party under this Agreement are due upon Debtor's receipt of Secured
Party's invoice and will be payable as directed in the invoice. Payments under
this Agreement may be applied to the Debtor's then accrued Secured Obligations
in such order as Secured Party may choose.
e. The Advances shall not be subject to prepayment or
redemption in whole or in part prior to the expiration of the Term set forth in
the Schedule executed in connection with said Advance.
.1 GRANT OF SECURITY INTEREST. In consideration of the
Advances to be made by Secured Party to Debtor under this Agreement, and to
secure the payment and performance of the Secured Obligations, Debtor hereby
grants and assigns to Secured Party, its successors and assigns, a security
interest in the Collateral described in Section 2.2 below.
<PAGE> 2
.2 COLLATERAL. All personal property consisting of
"equipment", and "proceeds" as defined in the California Commercial Code and
all furniture, fixtures and machinery or other property as described in any and
all Schedule(s) executed pursuant to this Agreement, whether now owned or
hereafter acquired, and all substitutions, renewals or replacements of and
alterations, additions or improvements, if any, to such Collateral, together
with, in each and every case, all proceeds thereof. Each item of Collateral
shall secure not only the specific Advances made by Secured Party to Debtor as
set forth in any Schedule, but also all other present and future indebtedness
or obligations of Debtor to Secured Party of every kind and nature whatsoever.
Debtor warrants and agrees that the Collateral will be used primarily for
business or commercial purposes and that regardless of the manner of
affixation, the Collateral shall remain personal property and shall not become
part of the real estate. Debtor agrees to keep the Collateral at the locations
set forth in the Schedule(s) covering said Collateral and will not make any
change in the location of the Collateral within such state, and will not remove
the Collateral from such state without the prior written consent of Secured
Party.
3. TIME IS OF THE ESSENCE; LATE CHARGES. Time is of the essence in
this Agreement and if any Monthly Loan Repayment is not paid within the ten
(10) days after the due date thereof, Secured Party shall have the right to add
and collect, and Debtor agrees to pay:
a. A late charge on and in addition to, such Monthly Loan
Repayment equal to five percent (5%) of such Monthly Loan Repayment or a lesser
amount if established by any State or Federal statute applicable thereto; and
b. Interest on such Monthly Loan Repayment from thirty (30)
days after the due date until paid at the rate of eighteen (18%) per annum.
4. NO WARRANTIES. This Agreement is solely a financing agreement.
Debtor acknowledges that: The Collateral has or will have been selected and
acquired solely by Debtor for Debtor's purposes; Secured Party is not the
manufacturer, dealer, vendor or supplier of the Collateral; the Collateral is
of a size, design, capacity, description and manufacture selected by Debtor;
Debtor is satisfied that the Collateral is suitable and fit for its purposes;
and SECURED PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION
WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION,
MERCHANTABILITY, DESIGN OR OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE VALUE OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE
MATERIALS IN THE COLLATERAL OR WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER.
5. NO AGENCY. Debtor acknowledges and agrees that none of the
manufacturer, vendor, dealer or supplier, nor any salesman, representative, or
other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer,
dealer vendor or supplier is authorized to waive or alter any term or condition
of this Agreement, and no representation as to the Collateral or any other
matter by any manufacturer, dealer, vendor or supplier shall in any way affect
Debtor's duty to pay the Monthly Loan Repayment and perform his other
obligations as set forth in this Agreement.
6. INSURANCE AND RISK OF LOSS. All risk of loss of, damage to, or
destruction of the Collateral shall at all times be borne by Debtor. Debtor
will procure forthwith and maintain property and general liability insurance
with extended or combined additional coverage on the Collateral for the full
insurable value thereof for the life of this Agreement and any Schedule(s) plus
such other insurance as Secured Party may specify, and promptly deliver each
policy to Secured Party with a standard long form endorsement attached showing
Secured Party or assigns as additional insureds and loss payees. Each insurer
shall agree by endorsement upon such policy issued by it or by independent
instrument furnished to Secured Party and Debtor that it will give Secured
Party and Debtor thirty (30) days written notice before the policy in question
shall be materially altered or canceled. Secured Party's acceptance of
policies in lesser amounts or risks shall not be a waiver of Debtor's foregoing
obligation.
7. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party as follows:
a. Debtor is duly organized and existing under the laws of
the State of its formation without limit as to the duration of its existence,
and is authorized and in good standing to do business in said State; Debtor
has corporate powers and adequate authority, rights and franchises to own its
own property and to carry on its business as now conducted, and is duly
qualified and in good standing in each state in which the character of the
properties owned by it therein or the conduct of its business makes such
qualifications necessary; and Debtor has the corporate power and adequate
authority to make and carry out this Agreement.
b. The execution, delivery and performance of this Agreement
are duly authorized and do not, to the best of the Debtor's knowledge, require
the consent or approval of any governmental body or other regulatory authority;
are not in contravention of or in conflict with any law, regulation or any term
or provision of its articles of formation or bylaws, and this Agreement is a
valid and binding obligation of Debtor legally enforceable in accordance with
its terms.
c. The execution, delivery and performance of this Agreement
will not contravene or conflict with any agreement, indenture or undertaking to
which Debtor is a party or by which it or any of its property may be bound by
or affected, and will not cause any lien, charge or other encumbrance to be
created or imposed upon any such property by reason thereof.
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<PAGE> 3
d. There is no material litigation or other proceeding
pending or threatened against or affecting Debtor, and it is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority. The balance sheets of Debtor and
the related profit and loss statements and other financial data as submitted in
writing by Debtor to Secured Party in connection with this Agreement, are true
and correct, and said balance sheets and profit and loss statements truly
represent the financial condition of Debtor as of the dates thereof.
e. Debtor has good and valid title to the Collateral which is
free from and will be kept free from all liens, claims, security interests and
encumbrances, except for the security interest granted hereby, except for
liens, security interests and encumbrances relating to the HUD Financing.
f. No financing statement covering the Collateral or any
proceeds thereof is on file in favor of anyone other than Secured Party, but if
such other financing statement is on file, it will be terminated or
subordinated, except for Financing Statements relating to the HUD financing.
g. All necessary action, including the filing of UCC-1
Financing Statements, has or will be made to give Secured Party a first
priority security interest in the Collateral. Debtor agrees to permit Secured
Party to pre-file any UCC-1 Financing Statement pursuant to California
Commercial Code Section 9402; provided that if Secured Party fails to make an
Advance with respect to the Collateral, Secured Party shall promptly release
the pre-filed UCC-1 Financing Statements.
8. DEBTOR'S AGREEMENTS. Debtor agrees:
a. To defend at Debtor's own cost and expense any action,
proceeding or claim affecting the Collateral.
b. To pay reasonable attorneys fees and other expenses
incurred by Secured Party in enforcing its rights in the event of Debtor's
default under this Agreement.
c. To pay promptly all taxes, assessments, license fees and
other public or private charges when levied or assessed against the Collateral
or this Agreement and this obligation shall survive the termination of this
Agreement, provided, however, that Debtor shall have the right, after notice to
the Secured Party, to contest in good faith the validity or amount of any such
taxes, assessments, fees and charges pursuant to appropriate proceedings
diligently prosecuted and during the pendency of such contest, to permit the
items so contested to remain unpaid.
d. That if a certificate of title is required or permitted by
law, Debtor shall obtain such certificate with respect to the Collateral,
showing the security interests of Secured Party thereon and in any event do
everything necessary or expedient to preserve or perfect the security interest
of Secured Party.
e. That Debtor will not misuse, fail to keep in good repair,
secrete, or without the prior written consent of Secured Party, and
notwithstanding Secured Party's claim to proceeds, sell, rent, lend, encumber
or transfer any of the Collateral. The Collateral shall be maintained in
accordance with the manufacturer's specifications and shall at all times be
eligible for the manufacturer's maintenance program.
f. That Secured Party may enter upon Debtor's premises or
wherever the Collateral may be located at any reasonable time to inspect the
Collateral and Debtor's books and records pertaining to the Collateral, and
Debtor shall assist Secured Party in making such inspection.
g. That the security interest granted by Debtor to Secured
Party shall continue effective irrespective of the payment of the Secured
Obligations, so long as there are any obligations of any kind, including
obligations under guaranties or assignments, owed by Debtor to Secured Party.
h. To mark and identify the Collateral with all information
and in such manner as Secured Party may request from time to time and replace
promptly any such markings or identifications which are removed, defaced or
destroyed.
i. To indemnify and hold Secured Party harmless from and
against all claims, losses, liabilities (including negligence, tort and strict
liability), damages, judgments, suits and all legal proceedings, and any and
all costs and expenses in connection therewith (including attorney's
fees)arising out of or in any manner connected with the manufacture, purchase,
financing, ownership, delivery, rejection, nondelivery, possession, use,
transportation, storage, operation, maintenance, repair, return or other
disposition of the Collateral or with this Agreement, including, without
limitation, claims for injury to, or death of, persons and for damage to
property, and give Secured Party prompt notice of such claims or liability.
j. That Debtor will not part with possession of or control
of or suffer or allow to pass out of its possession or control items of
Collateral or change the location of the Collateral or any part thereof from
the address shown in the appropriate Schedule without the prior written consent
of Secured Party.
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<PAGE> 4
k. That Debtor shall not ASSIGN OR IN ANY WAY DISPOSE OF ALL
OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR SELL,
TRANSFER, PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL. DEBTOR'S INTEREST
IN THIS AGREEMENT AND THE COLLATERAL IS NOT ASSIGNABLE AND WILL NOT BE ASSIGNED
OR TRANSFERRED BY OPERATION OF LAW. CONSENT TO ANY OF THE FOREGOING PROHIBITED
ACTS APPLIES ONLY IN THE GIVEN INSTANCE AND IS NOT CONSENT TO SUBSEQUENT LIKE
ACT BY DEBTOR OR ANOTHER ENTITY.
9. EVENTS OF DEFAULT. Any of the following events or conditions
shall constitute an Event of Default hereunder:
a. Debtor's failure to pay any Monthly Loan Repayment or any
installment of the principal or interest within ten (10) days after the same is
due under any Schedule, whether at the due date thereof, or at the date fixed
for prepayment or by acceleration or otherwise;
b. Debtor's failure to observe or perform any material
covenant or material agreement to be observed or performed by Debtor under this
Agreement, any Schedule or any other instrument or agreement delivered by
Debtor to Secured Party in connection with this transaction; and such failure
continues for thirty (30) days after written notice thereof shall have been
given by the Secured Party to the Debtor;
c. Any representation or warranty made by Debtor herein or in
any report, certificate, financial or other statement furnished in connection
with this Agreement shall prove to be false or misleading in any material
respect; or
d. Debtor is adjudicated insolvent or a bankrupt, or ceases,
becomes unable, or admits in writing its inability, to pay its debts as they
mature, or makes a general assignment for the benefit of, or enters into any
composition or arrangement with, creditors; applies for or consents to the
appointment of a receiver, trustee or liquidator of it or of a substantial part
of its property, or authorizes such application or consent, or proceedings
seeking such appointment shall be instituted against it without such
authorization, consent or application and continues undismissed for a period of
60 calendar days; authorizes or files a voluntary petition in bankruptcy or
applies for or consents to the application of any bankruptcy, reorganization in
bankruptcy, arrangement, readjustments or debts, insolvency, dissolution,
moratorium or other similar laws of any jurisdiction, or authorizes such
application or consent, or proceedings to such end shall be instituted against
it without such authorization, application or consent and such proceedings
instituted against it shall continue undismissed for a period of 60 calendar
days; or
e. Secured Party, in good faith, believes the prospect of
payment or performance is impaired or in good faith believes the Collateral is
insecure;
f. Any agreement made by a guarantor, surety or endorser for
Debtor's default in any obligation or liability to Secured Party or any
guaranty obtained in connection with this transaction is terminated or
breached.
10. SECURED PARTY'S REMEDIES. Debtor agrees that when an Event of
Default has occurred and is continuing, Secured Party shall have the rights,
options, duties and remedies of a Secured Party and Debtor shall have the
rights and duties of a Debtor under the Uniform Commercial Code in effect in
each jurisdiction where the Collateral or any part thereof is located and,
without limiting the foregoing, Secured Party may exercise one or more or all,
and in any order, of the remedies hereinafter set forth:
a. By notice in writing to Debtor, declare the entire unpaid
principal balance due under ANY, EACH AND ALL Schedule(s) to be immediately due
and payable; and thereupon all such unpaid balance(s), together with all
accrued and unpaid interest thereon, shall be immediately due and payable;
b. Personally, or by agents or attorneys, take immediate
possession of the Collateral or any portion thereof and for that purpose pursue
the same wherever it may be found and enter any of the premises of Debtor with
or without notice, demand, process of law or legal procedure, and search for,
take possession of, remove, keep and store the same, or use, operate, or lease
the same until sold and otherwise exercise any and all of the rights and powers
of Debtor in respect thereof;
c. Either with or without taking possession and without
instituting any legal proceedings whatsoever (having first given notice of such
sale by mail to Debtor once at least 10 calendar days prior to the date of such
sale, and any other notice of such sale which may be required by law, if said
notice is sufficient), sell and dispose of the Collateral or any part thereof
at public auction(s) to the highest bidder, or at a private sale(s) in one lot
as an entirety or in several lots, and either for cash or for credit and on
such terms as Secured Party may determine, and at any place (whether or not it
is the location of the Collateral or any part thereof, designated in the notice
above referred to. Any such sale or sales may be adjourned from time to time
by announcement of the time and place appointed for such sale or sales, or for
such adjourned sales or sales without further notice, and Secured Party may bid
and become the purchaser at any such sale;
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d. Secured Party may proceed to protect and enforce this
Agreement and any Schedule(s) by suit or suits or proceedings in equity, at law
or in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained, or execution or aid of any power herein granted, or
for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Collateral, or any party thereof, or for the enforcement of any proper,
legal or equitable remedy available under applicable law.
e. Secured Party may require Debtor to assemble the
Collateral and return it to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
f. Debtor agrees to pay the Secured Party all expenses or
retaking, holding, preparing for sale, or selling the Collateral in addition to
attorneys' fees as set forth above.
11. ACCELERATION CLAUSE. In case of any sale of the Collateral, or any
part thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Agreement, the
outstanding principal due under any Schedule, if not previously due, the
interest accrued thereon and all other sums required to be paid by Debtor
pursuant to this Agreement shall at once become and be immediately due and
payable.
12. EXERCISE OF RIGHTS. No delay or omission of Secured Party in
the exercise of any right or power arising from any default shall act as a
waiver of or impair any such right or power or prevent its exercise during the
continuance of such default. No waiver by Secured Party of any such default,
whether such waiver be full or partial, shall extend to or be taken to affect
any subsequent default, nor shall it impair the rights resulting therefrom
except as may be otherwise provided therein. The giving, taking or enforcement
of any other or additional security, collateral, or guarantee for the payment
of the Secured Obligations shall not operate to prejudice, waive, or affect the
security of this Agreement or any rights, powers, or remedies hereunder, and
Secured Party shall not be required to look first to enforce or exhaust such
other additional security, collateral, or guarantees. All rights, remedies,
and options of Secured Party hereunder, or by law shall be cumulative.
13. ASSIGNMENT BY SECURED PARTY. SECURED PARTY MAY ASSIGN OR TRANSFER
THIS AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT NOTICE TO
DEBTOR. Any assignee of Secured Party shall have all of the rights but none of
the obligations, of Secured Party under this Agreement, and Debtor agrees that
it will not assert against any assignee of Secured Party any defense,
counterclaim or offset that Debtor may have against Secured Party.
14. NON-TERMINABLE AGREEMENT; OBLIGATIONS UNCONDITIONAL. This
Agreement cannot be canceled or terminated except as expressly provided herein.
Debtor hereby agrees that Debtor's obligation to pay all Secured Obligations
shall be absolute and unconditional and Debtor will not be entitled to any
abatement of Monthly Loan Repayments or other payments due under this Agreement
or any reduction thereof under circumstances or for any reason whatsoever.
Debtor hereby waives any and all existing and future claims, as offsets,
against any Monthly Loan repayments and other payments due under this Agreement
as and when due regardless of any offset or claim which may be asserted by
Debtor or on its behalf. The obligations and liabilities of Debtor hereunder
will survive the termination of this Agreement.
15. ADDITIONAL DOCUMENTS. In connection with and in order to provide
effective evidence of the security interest in the Collateral granted Secured
Party under this Agreement, Debtor will execute and deliver to Secured Party
such financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings of such
financing statements without Debtor's signature. Debtor further agrees to
furnish Secured Party:
a. On a timely basis, Debtor's future financial statements,
including Debtor's most recent annual report, balance sheet and income
statement, prepared in accordance with generally accepted accounting
principles, which reports, Debtor warrants, shall fully and fairly represent
the true financial condition of Debtor;
b. Any other financial information normally provided by
Debtor to the public; and
c. Such other financial data or information relative to this
Agreement and the Collateral, including, without limitation, copies of
Suppliers' proposals and purchase orders and agreements, listings of serial
numbers or other identification data and confirmations of such information, as
Secured Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, have acknowledged, and/or deliver to Secured
Party, record and file such other documents and notices as Secured Party deems
necessary or desirable to protect its interest in and rights under this
Agreement and Collateral. Debtor will pay for all filings, searches, title
reports, legal and other fees incurred by Secured Party in connection with any
documents to be provided by Debtor pursuant to this Agreement and any other
similar documents Secured Party may procure.
16. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. Whenever any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such parties, and all the covenants, promises, and agreements in
this Agreement contained by or on behalf of Debtor or Secured Party shall bind
and inure to the benefit of the respective successors and assigns of each party
whether so expressed or not.
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b. PARTIAL INVALIDITY. The enforceability or invalidity of
any provision(s) of this Agreement shall not render any other provision(s)
herein contained unenforceable or invalid.
c. COMMUNICATIONS. All communications provided for herein
shall be in writing and shall be deemed to have been given (unless otherwise
required by the specific provisions in respect of any matter) (i) when
addressed and delivered personally or (ii) three (3) calendar days following
deposit in the United States mail, registered or certified, postage prepaid,
and addressed to the address set forth beneath the respective parties'
signature lines below, or as to Debtor or Secured Party at such other address
as they may designate by notice duly given in accordance with this Section to
the other party.
d. COUNTERPART; GOVERNING LAW. This Agreement may be
executed, acknowledged, and delivered in any number of counterparts, each of
such counterparts constituting an original but all together only one Agreement.
This Agreement and any Schedule shall be construed and enforced in accordance
with and governed by the laws of the State of Ohio. Debtor agrees to submit to
the jurisdiction of the State and/or Federal Courts in Ohio.
e. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding or agreement between Secured Party and Debtor and there is no
understanding or agreement, oral or written, which is not set forth herein.
This Agreement may not be amended except by a writing signed by Secured Party
and Debtor and shall be binding upon and inure to the benefit of the parties
hereto, their permitted successors and assigns.
This Agreement is dated March 27, 1996.
------------------
DEBTOR: HEALTH AMERICA, INC. DBA WENDT-BRISTOL CENTER
ADDRESS: TWO NATIONWIDE PLAZA
280 NORTH HIGH STREET; SUITE 760
COLUMBUS, OH 43215
By: /s/ SHELDON A. GOLD
------------------------------------
Title: PRESIDENT
---------------------------------
SECURED PARTY: DVI CAPITAL COMPANY
6611 ROCKSIDE RD. #110
INDEPENDENCE, OH 44131
By: /s/ ALAN J. VELOTTA
------------------------------------
Title:
---------------------------------
6
<PAGE> 1
EXHIBIT 10.9
LOAN AND SECURITY AGREEMENT
---------------------------
REFERENCE NO. 462-501
----------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
the date set forth below BETWEEN:
Secured Party: DVI CAPITAL COMPANY; and
-------------
Debtor: AMERICAN CARE CENTER, INC. dba BRISTOL HOUSE OF COLUMBUS
------- -----------------------------------------------------------
1. CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings:
a. ADVANCE. Advances of funds to the Debtor pursuant to
Section 2 hereof and Schedules which may be executed between Secured Party and
Debtor from time to time.
b. COLLATERAL. "Collateral" shall have the meaning set forth in
Section 2.2 hereof.
c. EVENT OF DEFAULT. Those events set forth in Section 9
hereof.
d. MONTHLY LOAN REPAYMENT. The amount set forth in any
Schedule executed in connection with any Advance under this Agreement.
e. SCHEDULE(S). Any and all or each (as the context shall
require) of the Loan and Collateral Schedules of the Debtor, to be executed by
the parties under this Agreement.
f. SECURED OBLIGATIONS. The payment of the principal and
interest as set forth in each and all of the Schedules, and the payment of all
additional amounts and other sums at any time due and owing under the Schedules
for this Agreement, and the performance and observance of all covenants and
conditions contained herein and therein.
g. SUPPLIER. The entity from whom the Debtor purchased the
Collateral including manufacturers, dealers, sellers and vendors.
2. PURPOSE OF FINANCING AND DESCRIPTION OF LOANS; GRANT OF
SECURITY INTEREST; COLLATERAL.
Secured Party agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Debtor in an aggregate amount to be
determined by Secured Party in its sole and absolute discretion.
a. Debtor agrees that the proceeds of any Advance will be used
solely to refinance or acquire the Collateral as described in the Schedule
executed in connection with said advance.
b. The amount of any Advances to Debtor shall be set forth on
the Schedule executed in connection with said Advance.
c. The term of repayment of any Advance made under this
Agreement (the "Term") shall commence on the date set forth in the Schedule
executed in connection with said Advance and shall continue for the period set
forth in said Schedule, and for all extensions and renewals of such period.
d. Debtor shall pay to Secured Party the Monthly Loan
Repayment for each Advance in amounts and on the dates set forth in the
Schedule executed in connection with said Advance, whether or not Secured Party
has rendered an invoice to Debtor. Debtor agrees to pay the Monthly Loan
Repayment to Secured Party at the office of the Secured Party set forth below,
or to such entity and/or at such other place as Secured Party may from time to
time designate by notice to Debtor. Any other amounts required to be paid to
Secured Party under this Agreement are due upon Debtor's receipt of Secured
Party's invoice and will be payable as directed in the invoice. Payments under
this Agreement may be applied to the Debtor's then accrued Secured Obligations
in such order as Secured Party may choose.
e. The Advances shall not be subject to prepayment or
redemption in whole or in part prior to the expiration of the Term set forth in
the Schedule executed in connection with said Advance.
.1 GRANT OF SECURITY INTEREST. In consideration of the
Advances to be made by Secured Party to Debtor under this Agreement, and to
secure the payment and performance of the Secured Obligations, Debtor hereby
grants and assigns to Secured Party, its successors and assigns, a security
interest in the Collateral described in Section 2.2 below.
.2 COLLATERAL. All personal property consisting of
"equipment", and "proceeds" as defined in the California Commercial Code and
all furniture, fixtures and machinery or other property as described in any and
<PAGE> 2
all Schedule(s) executed pursuant to this Agreement, whether now owned or
hereafter acquired, and all substitutions, renewals or replacements of and
alterations, additions or improvements, if any, to such Collateral, together
with, in each and every case, all proceeds thereof. Each item of Collateral
shall secure not only the specific Advances made by Secured Party to Debtor as
set forth in any Schedule, but also all other present and future indebtedness
or obligations of Debtor to Secured Party of every kind and nature whatsoever.
Debtor warrants and agrees that the Collateral will be used primarily for
business or commercial purposes and that regardless of the manner of
affixation, the Collateral shall remain personal property and shall not become
part of the real estate. Debtor agrees to keep the Collateral at the locations
set forth in the Schedule(s) covering said Collateral and will not make any
change in the location of the Collateral within such state, and will not remove
the Collateral from such state without the prior written consent of Secured
Party.
3. TIME IS OF THE ESSENCE; LATE CHARGES. Time is of the essence in
this Agreement and if any Monthly Loan Repayment is not paid within the ten
(10) days after the due date thereof, Secured Party shall have the right to add
and collect, and Debtor agrees to pay:
a. A late charge on and in addition to, such Monthly Loan
Repayment equal to five percent (5%) of such Monthly Loan Repayment or a lesser
amount if established by any State or Federal statute applicable thereto; and
b. Interest on such Monthly Loan Repayment from thirty (30)
days after the due date until paid at the rate of eighteen (18%) per annum.
4. NO WARRANTIES. This Agreement is solely a financing agreement.
Debtor acknowledges that: The Collateral has or will have been selected and
acquired solely by Debtor for Debtor's purposes; Secured Party is not the
manufacturer, dealer, vendor or supplier of the Collateral; the Collateral is
of a size, design, capacity, description and manufacture selected by Debtor;
Debtor is satisfied that the Collateral is suitable and fit for its purposes;
and SECURED PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION
WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION,
MERCHANTABILITY, DESIGN OR OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE VALUE OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE
MATERIALS IN THE COLLATERAL OR WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER.
5. NO AGENCY. Debtor acknowledges and agrees that none of the
manufacturer, vendor, dealer or supplier, nor any salesman, representative, or
other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer,
dealer vendor or supplier is authorized to waive or alter any term or condition
of this Agreement, and no representation as to the Collateral or any other
matter by any manufacturer, dealer, vendor or supplier shall in any way affect
Debtor's duty to pay the Monthly Loan Repayment and perform his other
obligations as set forth in this Agreement.
6. INSURANCE AND RISK OF LOSS. All risk of loss of, damage to, or
destruction of the Collateral shall at all times be borne by Debtor. Debtor
will procure forthwith and maintain property and general liability insurance
with extended or combined additional coverage on the Collateral for the full
insurable value thereof for the life of this Agreement and any Schedule(s) plus
such other insurance as Secured Party may specify, and promptly deliver each
policy to Secured Party with a standard long form endorsement attached showing
Secured Party or assigns as additional insureds and loss payees. Each insurer
shall agree by endorsement upon such policy issued by it or by independent
instrument furnished to Secured Party and Debtor that it will give Secured
Party and Debtor thirty (30) days written notice before the policy in question
shall be materially altered or canceled. Secured Party's acceptance of
policies in lesser amounts or risks shall not be a waiver of Debtor's foregoing
obligation.
7. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party as follows:
a. Debtor is duly organized and existing under the laws of
the State of its formation without limit as to the duration of its existence,
and is authorized and in good standing to do business in said State; Debtor
has corporate powers and adequate authority, rights and franchises to own its
own property and to carry on its business as now conducted, and is duly
qualified and in good standing in each state in which the character of the
properties owned by it therein or the conduct of its business makes such
qualifications necessary; and Debtor has the corporate power and adequate
authority to make and carry out this Agreement.
b. The execution, delivery and performance of this Agreement
are duly authorized and do not, to the best of the Debtor's knowledge, require
the consent or approval of any governmental body or other regulatory authority;
are not in contravention of or in conflict with any law, regulation or any term
or provision of its articles of formation or bylaws, and this Agreement is a
valid and binding obligation of Debtor legally enforceable in accordance with
its terms.
c. The execution, delivery and performance of this Agreement
will not contravene or conflict with any agreement, indenture or undertaking to
which Debtor is a party or by which it or any of its property may be bound by
or affected, and will not cause any lien, charge or other encumbrance to be
created or imposed upon any such property by reason thereof.
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d. There is no material litigation or other proceeding
pending or threatened against or affecting Debtor, and it is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority. The balance sheets of Debtor and
the related profit and loss statements and other financial data as submitted in
writing by Debtor to Secured Party in connection with this Agreement, are true
and correct, and said balance sheets and profit and loss statements truly
represent the financial condition of Debtor as of the dates thereof.
e. Debtor has good and valid title to the Collateral which is
free from and will be kept free from all liens, claims, security interests and
encumbrances, except for the security interest granted hereby, except for
liens, security interests and encumbrances relating to the HUD Financing.
f. No financing statement covering the Collateral or any
proceeds thereof is on file in favor of anyone other than Secured Party, but if
such other financing statement is on file, it will be terminated or
subordinated, except for Financing Statements relating to the HUD financing.
g. All necessary action, including the filing of UCC-1
Financing Statements, has or will be made to give Secured Party a first
priority security interest in the Collateral. Debtor agrees to permit Secured
Party to pre-file any UCC-1 Financing Statement pursuant to California
Commercial Code Section 9402; provided that if Secured Party fails to make an
Advance with respect to the Collateral, Secured Party shall promptly release
the pre-filed UCC-1 Financing Statements.
8. DEBTOR'S AGREEMENTS. Debtor agrees:
a. To defend at Debtor's own cost and expense any action,
proceeding or claim affecting the Collateral.
b. To pay reasonable attorneys fees and other expenses
incurred by Secured Party in enforcing its rights in the event of Debtor's
default under this Agreement.
c. To pay promptly all taxes, assessments, license fees and
other public or private charges when levied or assessed against the Collateral
or this Agreement and this obligation shall survive the termination of this
Agreement, provided, however, that Debtor shall have the right, after notice to
the Secured Party, to contest in good faith the validity or amount of any such
taxes, assessments, fees and charges pursuant to appropriate proceedings
diligently prosecuted and during the pendency of such contest, to permit the
items so contested to remain unpaid.
d. That if a certificate of title is required or permitted by
law, Debtor shall obtain such certificate with respect to the Collateral,
showing the security interests of Secured Party thereon and in any event do
everything necessary or expedient to preserve or perfect the security interest
of Secured Party.
e. That Debtor will not misuse, fail to keep in good repair,
secrete, or without the prior written consent of Secured Party, and
notwithstanding Secured Party's claim to proceeds, sell, rent, lend, encumber
or transfer any of the Collateral. The Collateral shall be maintained in
accordance with the manufacturer's specifications and shall at all times be
eligible for the manufacturer's maintenance program.
f. That Secured Party may enter upon Debtor's premises or
wherever the Collateral may be located at any reasonable time to inspect the
Collateral and Debtor's books and records pertaining to the Collateral, and
Debtor shall assist Secured Party in making such inspection.
g. That the security interest granted by Debtor to Secured
Party shall continue effective irrespective of the payment of the Secured
Obligations, so long as there are any obligations of any kind, including
obligations under guaranties or assignments, owed by Debtor to Secured Party.
h. To mark and identify the Collateral with all information
and in such manner as Secured Party may request from time to time and replace
promptly any such markings or identifications which are removed, defaced or
destroyed.
i. To indemnify and hold Secured Party harmless from and
against all claims, losses, liabilities (including negligence, tort and strict
liability), damages, judgments, suits and all legal proceedings, and any and
all costs and expenses in connection therewith (including attorney's
fees)arising out of or in any manner connected with the manufacture, purchase,
financing, ownership, delivery, rejection, nondelivery, possession, use,
transportation, storage, operation, maintenance, repair, return or other
disposition of the Collateral or with this Agreement, including, without
limitation, claims for injury to, or death of, persons and for damage to
property, and give Secured Party prompt notice of such claims or liability.
j. That Debtor will not part with possession of or control
of or suffer or allow to pass out of its possession or control items of
Collateral or change the location of the Collateral or any part thereof from
the address shown in the appropriate Schedule without the prior written consent
of Secured Party.
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k. That Debtor shall not ASSIGN OR IN ANY WAY DISPOSE OF ALL
OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR SELL,
TRANSFER, PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL. DEBTOR'S INTEREST
IN THIS AGREEMENT AND THE COLLATERAL IS NOT ASSIGNABLE AND WILL NOT BE ASSIGNED
OR TRANSFERRED BY OPERATION OF LAW. CONSENT TO ANY OF THE FOREGOING PROHIBITED
ACTS APPLIES ONLY IN THE GIVEN INSTANCE AND IS NOT CONSENT TO SUBSEQUENT LIKE
ACT BY DEBTOR OR ANOTHER ENTITY.
9. EVENTS OF DEFAULT. Any of the following events or conditions
shall constitute an Event of Default hereunder:
a. Debtor's failure to pay any Monthly Loan Repayment or any
installment of the principal or interest within ten (10) days after the same is
due under any Schedule, whether at the due date thereof, or at the date fixed
for prepayment or by acceleration or otherwise;
b. Debtor's failure to observe or perform any material
covenant or material agreement to be observed or performed by Debtor under this
Agreement, any Schedule or any other instrument or agreement delivered by
Debtor to Secured Party in connection with this transaction; and such failure
continues for thirty (30) days after written notice thereof shall have been
given by the Secured Party to the Debtor;
c. Any representation or warranty made by Debtor herein or in
any report, certificate, financial or other statement furnished in connection
with this Agreement shall prove to be false or misleading in any material
respect; or
d. Debtor is adjudicated insolvent or a bankrupt, or ceases,
becomes unable, or admits in writing its inability, to pay its debts as they
mature, or makes a general assignment for the benefit of, or enters into any
composition or arrangement with, creditors; applies for or consents to the
appointment of a receiver, trustee or liquidator of it or of a substantial part
of its property, or authorizes such application or consent, or proceedings
seeking such appointment shall be instituted against it without such
authorization, consent or application and continues undismissed for a period of
60 calendar days; authorizes or files a voluntary petition in bankruptcy or
applies for or consents to the application of any bankruptcy, reorganization in
bankruptcy, arrangement, readjustments or debts, insolvency, dissolution,
moratorium or other similar laws of any jurisdiction, or authorizes such
application or consent, or proceedings to such end shall be instituted against
it without such authorization, application or consent and such proceedings
instituted against it shall continue undismissed for a period of 60 calendar
days; or
e. Secured Party, in good faith, believes the prospect of
payment or performance is impaired or in good faith believes the Collateral is
insecure;
f. Any agreement made by a guarantor, surety or endorser for
Debtor's default in any obligation or liability to Secured Party or any
guaranty obtained in connection with this transaction is terminated or
breached.
10. SECURED PARTY'S REMEDIES. Debtor agrees that when an Event of
Default has occurred and is continuing, Secured Party shall have the rights,
options, duties and remedies of a Secured Party and Debtor shall have the
rights and duties of a Debtor under the Uniform Commercial Code in effect in
each jurisdiction where the Collateral or any part thereof is located and,
without limiting the foregoing, Secured Party may exercise one or more or all,
and in any order, of the remedies hereinafter set forth:
a. By notice in writing to Debtor, declare the entire unpaid
principal balance due under ANY, EACH AND ALL Schedule(s) to be immediately due
and payable; and thereupon all such unpaid balance(s), together with all
accrued and unpaid interest thereon, shall be immediately due and payable;
b. Personally, or by agents or attorneys, take immediate
possession of the Collateral or any portion thereof and for that purpose pursue
the same wherever it may be found and enter any of the premises of Debtor with
or without notice, demand, process of law or legal procedure, and search for,
take possession of, remove, keep and store the same, or use, operate, or lease
the same until sold and otherwise exercise any and all of the rights and powers
of Debtor in respect thereof;
c. Either with or without taking possession and without
instituting any legal proceedings whatsoever (having first given notice of such
sale by mail to Debtor once at least 10 calendar days prior to the date of such
sale, and any other notice of such sale which may be required by law, if said
notice is sufficient), sell and dispose of the Collateral or any part thereof
at public auction(s) to the highest bidder, or at a private sale(s) in one lot
as an entirety or in several lots, and either for cash or for credit and on
such terms as Secured Party may determine, and at any place (whether or not it
is the location of the Collateral or any part thereof, designated in the notice
above referred to. Any such sale or sales may be adjourned from time to time
by announcement of the time and place appointed for such sale or sales, or for
such adjourned sales or sales without further notice, and Secured Party may bid
and become the purchaser at any such sale;
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d. Secured Party may proceed to protect and enforce this
Agreement and any Schedule(s) by suit or suits or proceedings in equity, at law
or in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained, or execution or aid of any power herein granted, or
for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Collateral, or any party thereof, or for the enforcement of any proper,
legal or equitable remedy available under applicable law.
e. Secured Party may require Debtor to assemble the
Collateral and return it to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
f. Debtor agrees to pay the Secured Party all expenses or
retaking, holding, preparing for sale, or selling the Collateral in addition to
attorneys' fees as set forth above.
11. ACCELERATION CLAUSE. In case of any sale of the Collateral, or any
part thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Agreement, the
outstanding principal due under any Schedule, if not previously due, the
interest accrued thereon and all other sums required to be paid by Debtor
pursuant to this Agreement shall at once become and be immediately due and
payable.
12. EXERCISE OF RIGHTS. No delay or omission of Secured Party in
the exercise of any right or power arising from any default shall act as a
waiver of or impair any such right or power or prevent its exercise during the
continuance of such default. No waiver by Secured Party of any such default,
whether such waiver be full or partial, shall extend to or be taken to affect
any subsequent default, nor shall it impair the rights resulting therefrom
except as may be otherwise provided therein. The giving, taking or enforcement
of any other or additional security, collateral, or guarantee for the payment
of the Secured Obligations shall not operate to prejudice, waive, or affect the
security of this Agreement or any rights, powers, or remedies hereunder, and
Secured Party shall not be required to look first to enforce or exhaust such
other additional security, collateral, or guarantees. All rights, remedies,
and options of Secured Party hereunder, or by law shall be cumulative.
13. ASSIGNMENT BY SECURED PARTY. SECURED PARTY MAY ASSIGN OR TRANSFER
THIS AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT NOTICE TO
DEBTOR. Any assignee of Secured Party shall have all of the rights but none of
the obligations, of Secured Party under this Agreement, and Debtor agrees that
it will not assert against any assignee of Secured Party any defense,
counterclaim or offset that Debtor may have against Secured Party.
14. NON-TERMINABLE AGREEMENT; OBLIGATIONS UNCONDITIONAL. This
Agreement cannot be canceled or terminated except as expressly provided herein.
Debtor hereby agrees that Debtor's obligation to pay all Secured Obligations
shall be absolute and unconditional and Debtor will not be entitled to any
abatement of Monthly Loan Repayments or other payments due under this Agreement
or any reduction thereof under circumstances or for any reason whatsoever.
Debtor hereby waives any and all existing and future claims, as offsets,
against any Monthly Loan repayments and other payments due under this Agreement
as and when due regardless of any offset or claim which may be asserted by
Debtor or on its behalf. The obligations and liabilities of Debtor hereunder
will survive the termination of this Agreement.
15. ADDITIONAL DOCUMENTS. In connection with and in order to provide
effective evidence of the security interest in the Collateral granted Secured
Party under this Agreement, Debtor will execute and deliver to Secured Party
such financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings of such
financing statements without Debtor's signature. Debtor further agrees to
furnish Secured Party:
a. On a timely basis, Debtor's future financial statements,
including Debtor's most recent annual report, balance sheet and income
statement, prepared in accordance with generally accepted accounting
principles, which reports, Debtor warrants, shall fully and fairly represent
the true financial condition of Debtor;
b. Any other financial information normally provided by
Debtor to the public; and
c. Such other financial data or information relative to this
Agreement and the Collateral, including, without limitation, copies of
Suppliers' proposals and purchase orders and agreements, listings of serial
numbers or other identification data and confirmations of such information, as
Secured Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, have acknowledged, and/or deliver to Secured
Party, record and file such other documents and notices as Secured Party deems
necessary or desirable to protect its interest in and rights under this
Agreement and Collateral. Debtor will pay for all filings, searches, title
reports, legal and other fees incurred by Secured Party in connection with any
documents to be provided by Debtor pursuant to this Agreement and any other
similar documents Secured Party may procure.
16. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. Whenever any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such parties, and all the covenants, promises, and agreements in
this Agreement contained by or on behalf of Debtor or Secured Party shall bind
and inure to the benefit of the respective successors and assigns of each party
whether so expressed or not.
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b. PARTIAL INVALIDITY. The enforceability or invalidity of
any provision(s) of this Agreement shall not render any other provision(s)
herein contained unenforceable or invalid.
c. COMMUNICATIONS. All communications provided for herein
shall be in writing and shall be deemed to have been given (unless otherwise
required by the specific provisions in respect of any matter) (i) when
addressed and delivered personally or (ii) three (3) calendar days following
deposit in the United States mail, registered or certified, postage prepaid,
and addressed to the address set forth beneath the respective parties'
signature lines below, or as to Debtor or Secured Party at such other address
as they may designate by notice duly given in accordance with this Section to
the other party.
d. COUNTERPART; GOVERNING LAW. This Agreement may be
executed, acknowledged, and delivered in any number of counterparts, each of
such counterparts constituting an original but all together only one Agreement.
This Agreement and any Schedule shall be construed and enforced in accordance
with and governed by the laws of the State of Ohio. Debtor agrees to submit to
the jurisdiction of the State and/or Federal Courts in Ohio.
e. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding or agreement between Secured Party and Debtor and there is no
understanding or agreement, oral or written, which is not set forth herein.
This Agreement may not be amended except by a writing signed by Secured Party
and Debtor and shall be binding upon and inure to the benefit of the parties
hereto, their permitted successors and assigns.
This Agreement is dated March 27, 1996.
------------------
DEBTOR: AMERICAN CARE CENTER, INC. dba BRISTOL HOUSE OF COLUMBUS
ADDRESS: TWO NATIONWIDE PLAZA
280 NORTH HIGH STREET; SUITE 760
COLUMBUS, OH 43215
By: /s/ SHELDON A. GOLD
------------------------------------
Title: PRESIDENT
---------------------------------
SECURED PARTY: DVI CAPITAL COMPANY
6611 ROCKSIDE RD. #110
INDEPENDENCE, OH 44131
By: /s/ ALAN J. VELOTTA
------------------------------------
Title:
---------------------------------
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EXHIBIT 10.10.
LOAN AND SECURITY AGREEMENT
---------------------------
REFERENCE NO. 463-501
-------------
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
the date set forth below BETWEEN:
Secured Party: DVI Capital Company; and
-------------
Debtor: ETHAN ALLEN CARE CENTER, INC. DBA BRISTOL HOUSE OF SPRINGFIELD
------ ---------------------------------------------------------------
1. CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings:
a. ADVANCE. Advances of funds to the Debtor
pursuant to Section 2 hereof and Schedules which may be executed between
Secured Party and Debtor from time to time.
b. COLLATERAL. "Collateral" shall have the meaning
set forth in Section 2.2 hereof.
c. EVENT OF DEFAULT. Those events set forth in
Section 9 hereof.
d. MONTHLY LOAN REPAYMENT. The amount set forth in
any Schedule executed in connection with any Advance under this Agreement.
e. SCHEDULE(S). Any and all or each (as the context
shall require) of the Loan and Collateral Schedules of the Debtor, to be
executed by the parties under this Agreement.
f. SECURED OBLIGATIONS. The payment of the
principal and interest as set forth in each and all of the Schedules, and the
payment of all additional amounts and other sums at any time due and owing
under the Schedules for this Agreement, and the performance and observance of
all covenants and conditions contained herein and therein.
g. SUPPLIER. The entity from whom the Debtor
purchased the Collateral including manufacturers, dealers, sellers and vendors.
2. PURPOSE OF FINANCING AND DESCRIPTION OF LOANS; GRANT OF
SECURITY INTEREST; COLLATERAL.
Secured Party agrees, subject to the terms and
conditions of this Agreement, to make Advances to the Debtor in an aggregate
amount to be determined by Secured Party in its sole and absolute discretion.
a. Debtor agrees that the proceeds of any Advance
will be used solely to refinance or acquire the Collateral as described in the
Schedule executed in connection with said advance.
b. The amount of any Advances to Debtor shall be
set forth on the Schedule executed in connection with said Advance.
c. The term of repayment of any Advance made under
this Agreement (the "Term") shall commence on the date set forth in the
Schedule executed in connection with said Advance and shall continue for the
period set forth in said Schedule, and for all extensions and renewals of such
period.
d. Debtor shall pay to Secured Party the Monthly
Loan Repayment for each Advance in amounts and on the dates set forth in the
Schedule executed in connection with said Advance, whether or not Secured Party
has rendered an invoice to Debtor. Debtor agrees to pay the Monthly Loan
Repayment to Secured Party at the office of the Secured Party set forth below,
or to such entity and/or at such other place as Secured Party may from time to
time designate by notice to Debtor. Any other amounts required to be paid to
Secured Party under this Agreement are due upon Debtor's receipt of Secured
Party's invoice and will be payable as directed in the invoice. Payments under
this Agreement may be applied to the Debtor's then accrued Secured Obligations
in such order as Secured Party may choose.
e. The Advances shall not be subject to prepayment or
redemption in whole or in part prior to the expiration of the Term set forth in
the Schedule executed in connection with said Advance.
.1 GRANT OF SECURITY INTEREST. In consideration of
the Advances to be made by Secured Party to Debtor under this Agreement, and to
secure the payment and performance of the Secured Obligations, Debtor hereby
grants and assigns to Secured Party, its successors and assigns, a security
interest in the Collateral described in Section 2.2 below.
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.2 COLLATERAL. All personal property consisting of
"equipment", and "proceeds" as defined in the California Commercial Code and
all furniture, fixtures and machinery or other property as described in any and
all Schedule(s) executed pursuant to this Agreement, whether now owned or
hereafter acquired, and all substitutions, renewals or replacements of and
alterations, additions or improvements, if any, to such Collateral, together
with, in each and every case, all proceeds thereof. Each item of Collateral
shall secure not only the specific Advances made by Secured Party to Debtor as
set forth in any Schedule, but also all other present and future indebtedness
or obligations of Debtor to Secured Party of every kind and nature whatsoever.
Debtor warrants and agrees that the Collateral will be used primarily for
business or commercial purposes and that regardless of the manner of
affixation, the Collateral shall remain personal property and shall not become
part of the real estate. Debtor agrees to keep the Collateral at the locations
set forth in the Schedule(s) covering said Collateral and will not make any
change in the location of the Collateral within such state, and will not remove
the Collateral from such state without the prior written consent of Secured
Party.
3. TIME IS OF THE ESSENCE; LATE CHARGES. Time is of the
essence in this Agreement and if any Monthly Loan Repayment is not paid within
the ten (10) days after the due date thereof, Secured Party shall have the
right to add and collect, and Debtor agrees to pay:
a. A late charge on and in addition to, such Monthly
Loan Repayment equal to five percent (5%) of such Monthly Loan Repayment or a
lesser amount if established by any State or Federal statute applicable
thereto; and
b. Interest on such Monthly Loan Repayment from
thirty (30) days after the due date until paid at the rate of eighteen (18%)
per annum.
4. NO WARRANTIES. This Agreement is solely a financing
agreement. Debtor acknowledges that: The Collateral has or will have been
selected and acquired solely by Debtor for Debtor's purposes; Secured Party is
not the manufacturer, dealer, vendor or supplier of the Collateral; the
Collateral is of a size, design, capacity, description and manufacture selected
by Debtor; Debtor is satisfied that the Collateral is suitable and fit for its
purposes; and SECURED PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR
REPRESENTATION WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS,
CONDITION, MERCHANTABILITY, DESIGN OR OPERATION OF THE COLLATERAL, ITS FITNESS
FOR ANY PARTICULAR PURPOSE, THE VALUE OF THE COLLATERAL, THE QUALITY OR
CAPACITY OF THE MATERIALS IN THE COLLATERAL OR WORKMANSHIP IN THE COLLATERAL,
NOR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER.
5. NO AGENCY. Debtor acknowledges and agrees that none of
the manufacturer, vendor, dealer or supplier, nor any salesman, representative,
or other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer,
dealer vendor or supplier is authorized to waive or alter any term or condition
of this Agreement, and no representation as to the Collateral or any other
matter by any manufacturer, dealer, vendor or supplier shall in any way affect
Debtor's duty to pay the Monthly Loan Repayment and perform his other
obligations as set forth in this Agreement.
6. INSURANCE AND RISK OF LOSS. All risk of loss of,
damage to, or destruction of the Collateral shall at all times be borne by
Debtor. Debtor will procure forthwith and maintain property and general
liability insurance with extended or combined additional coverage on the
Collateral for the full insurable value thereof for the life of this Agreement
and any Schedule(s) plus such other insurance as Secured Party may specify, and
promptly deliver each policy to Secured Party with a standard long form
endorsement attached showing Secured Party or assigns as additional insureds
and loss payees. Each insurer shall agree by endorsement upon such policy
issued by it or by independent instrument furnished to Secured Party and Debtor
that it will give Secured Party and Debtor thirty (30) days written notice
before the policy in question shall be materially altered or canceled. Secured
Party's acceptance of policies in lesser amounts or risks shall not be a waiver
of Debtor's foregoing obligation.
7. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents
and warrants to Secured Party as follows:
a. Debtor is duly organized and existing under the
laws of the State of its formation without limit as to the duration of its
existence, and is authorized and in good standing to do business in said State;
Debtor has corporate powers and adequate authority, rights and franchises to
own its own property and to carry on its business as now conducted, and is duly
qualified and in good standing in each state in which the character of the
properties owned by it therein or the conduct of its business makes such
qualifications necessary; and Debtor has the corporate power and adequate
authority to make and carry out this Agreement.
b. The execution, delivery and performance of this
Agreement are duly authorized and do not, to the best of the Debtor's
knowledge, require the consent or approval of any governmental body or other
regulatory authority; are not in contravention of or in conflict with any law,
regulation or any term or provision of its articles of formation or bylaws, and
this Agreement is a valid and binding obligation of Debtor legally enforceable
in accordance with its terms.
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c. The execution, delivery and performance of this
Agreement will not contravene or conflict with any agreement, indenture or
undertaking to which Debtor is a party or by which it or any of its property
may be bound by or affected, and will not cause any lien, charge or other
encumbrance to be created or imposed upon any such property by reason thereof.
d. Except as noted in Item 5(b) (Page 10) of the
Form 10-Q for the period ending September 30, 1995 of Wendt-Bristol Health
Services Corp., there is no material litigation or other proceeding pending or
threatened against or affecting Debtor, and it is not in default with respect
to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority. The balance sheets of Debtor and the
related profit and loss statements and other financial data as submitted in
writing by Debtor to Secured Party in connection with this Agreement, are true
and correct, and said balance sheets and profit and loss statements truly
represent the financial condition of Debtor as of the dates thereof.
e. Debtor has good and valid title to the Collateral
which is free from and will be kept free from all liens, claims, security
interests and encumbrances, except for the security interest granted hereby.
f. No financing statement covering the Collateral or
any proceeds thereof is on file in favor of anyone other than Secured Party,
but if such other financing statement is on file, it will be terminated or
subordinated.
g. All necessary action, including the filing of
UCC-1 Financing Statements, has or will be made to give Secured Party a first
priority security interest in the Collateral. Debtor agrees to permit Secured
Party to pre-file any UCC-1 Financing Statement pursuant to California
Commercial Code Section 9402; provided that if Secured Party fails to make an
Advance with respect to the Collateral, Secured Party shall promptly release
the pre-filed UCC-1 Financing Statements.
8. DEBTOR'S AGREEMENTS. Debtor agrees:
a. To defend at Debtor's own cost and expense any
action, proceeding or claim affecting the Collateral.
b. To pay reasonable attorneys fees and other
expenses incurred by Secured Party in enforcing its rights in the event of
Debtor's default under this Agreement.
c. To pay promptly all taxes, assessments, license
fees and other public or private charges when levied or assessed against the
Collateral or this Agreement and this obligation shall survive the termination
of this Agreement, provided, however, that Debtor shall have the right, after
notice to the Secured Party, to contest in good faith the validity or amount of
any such taxes, assessments, fees and charges pursuant to appropriate
proceedings diligently prosecuted and during the pendency of such contest, to
permit the items so contested to remain unpaid.
d. That if a certificate of title is required or
permitted by law, Debtor shall obtain such certificate with respect to the
Collateral, showing the security interests of Secured Party thereon and in any
event do everything necessary or expedient to preserve or perfect the security
interest of Secured Party.
e. That Debtor will not misuse, fail to keep in good
repair, secrete, or without the prior written consent of Secured Party, and
notwithstanding Secured Party's claim to proceeds, sell, rent, lend, encumber
or transfer any of the Collateral. The Collateral shall be maintained in
accordance with the manufacturer's specifications and shall at all times be
eligible for the manufacturer's maintenance program.
f. That Secured Party may enter upon Debtor's
premises or wherever the Collateral may be located at any reasonable time to
inspect the Collateral and Debtor's books and records pertaining to the
Collateral, and Debtor shall assist Secured Party in making such inspection.
g. That the security interest granted by Debtor to
Secured Party shall continue effective irrespective of the payment of the
Secured Obligations, so long as there are any obligations of any kind,
including obligations under guaranties or assignments, owed by Debtor to
Secured Party.
h. To mark and identify the Collateral with all
information and in such manner as Secured Party may request from time to time
and replace promptly any such markings or identifications which are removed,
defaced or destroyed.
i. To indemnify and hold Secured Party harmless from
and against all claims, losses, liabilities (including negligence, tort and
strict liability), damages, judgments, suits and all legal proceedings, and any
and all costs and expenses in connection therewith (including attorney's
fees)arising out of or in any manner connected with the manufacture, purchase,
financing, ownership, delivery, rejection, nondelivery, possession, use,
transportation, storage, operation, maintenance, repair, return or other
disposition of the Collateral or with this Agreement, including, without
limitation, claims for injury to, or death of, persons and for damage to
property, and give Secured Party prompt notice of such claims or liability.
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<PAGE> 4
j. That Debtor will not part with possession of or
control of or suffer or allow to pass out of its possession or control items of
Collateral or change the location of the Collateral or any part thereof from
the address shown in the appropriate Schedule without the prior written consent
of Secured Party.
k. That Debtor shall not ASSIGN OR IN ANY WAY
DISPOSE OF ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR
SELL, TRANSFER, PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL. DEBTOR'S
INTEREST IN THIS AGREEMENT AND THE COLLATERAL IS NOT ASSIGNABLE AND WILL NOT BE
ASSIGNED OR TRANSFERRED BY OPERATION OF LAW. CONSENT TO ANY OF THE FOREGOING
PROHIBITED ACTS APPLIES ONLY IN THE GIVEN INSTANCE AND IS NOT CONSENT TO
SUBSEQUENT LIKE ACT BY DEBTOR OR ANOTHER ENTITY.
9. EVENTS OF DEFAULT. Any of the following events or
conditions shall constitute an Event of Default hereunder:
a. Debtor's failure to pay any Monthly Loan
Repayment or any installment of the principal or interest within ten (10) days
after the same is due under any Schedule, whether at the due date thereof, or
at the date fixed for prepayment or by acceleration or otherwise;
b. Debtor's failure to observe or perform any
material covenant or material agreement to be observed or performed by Debtor
under this Agreement, any Schedule or any other instrument or agreement
delivered by Debtor to Secured Party in connection with this transaction; and
such failure continues for thirty (30) days after written notice thereof shall
have been given by the Secured Party to the Debtor;
c. Any representation or warranty made by Debtor
herein or in any report, certificate, financial or other statement furnished in
connection with this Agreement shall prove to be false or misleading in any
material respect; or
d. Debtor is adjudicated insolvent or a bankrupt,
or ceases, becomes unable, or admits in writing its inability, to pay its debts
as they mature, or makes a general assignment for the benefit of, or enters
into any composition or arrangement with, creditors; applies for or consents to
the appointment of a receiver, trustee or liquidator of it or of a substantial
part of its property, or authorizes such application or consent, or proceedings
seeking such appointment shall be instituted against it without such
authorization, consent or application and continues undismissed for a period of
60 calendar days; authorizes or files a voluntary petition in bankruptcy or
applies for or consents to the application of any bankruptcy, reorganization in
bankruptcy, arrangement, readjustments or debts, insolvency, dissolution,
moratorium or other similar laws of any jurisdiction, or authorizes such
application or consent, or proceedings to such end shall be instituted against
it without such authorization, application or consent and such proceedings
instituted against it shall continue undismissed for a period of 60 calendar
days; or
e. Secured Party, in good faith, believes the
prospect of payment or performance is impaired or in good faith believes the
Collateral is insecure;
f. Any agreement made by a guarantor, surety or
endorser for Debtor's default in any obligation or liability to Secured Party
or any guaranty obtained in connection with this transaction is terminated or
breached.
10. SECURED PARTY'S REMEDIES. Debtor agrees that when an
Event of Default has occurred and is continuing, Secured Party shall have the
rights, options, duties and remedies of a Secured Party and Debtor shall have
the rights and duties of a Debtor under the Uniform Commercial Code in effect
in each jurisdiction where the Collateral or any part thereof is located and,
without limiting the foregoing, Secured Party may exercise one or more or all,
and in any order, of the remedies hereinafter set forth:
a. By notice in writing to Debtor, declare the
entire unpaid principal balance due under ANY, EACH AND ALL Schedule(s) to be
immediately due and payable; and thereupon all such unpaid balance(s), together
with all accrued and unpaid interest thereon, shall be immediately due and
payable;
b. Personally, or by agents or attorneys, take
immediate possession of the Collateral or any portion thereof and for that
purpose pursue the same wherever it may be found and enter any of the premises
of Debtor with or without notice, demand, process of law or legal procedure,
and search for, take possession of, remove, keep and store the same, or use,
operate, or lease the same until sold and otherwise exercise any and all of the
rights and powers of Debtor in respect thereof;
c. Either with or without taking possession and
without instituting any legal proceedings whatsoever (having first given notice
of such sale by mail to Debtor once at least 10 calendar days prior to the date
of such sale, and any other notice of such sale which may be required by law,
if said notice is sufficient), sell and dispose of the Collateral or any part
thereof at public auction(s) to the highest bidder, or at a private sale(s) in
one lot as an entirety or in several lots, and either for cash or for credit
and on such terms as Secured Party may determine, and at any place (whether or
not it is the location of the Collateral or any part thereof, designated in the
notice above referred to. Any such sale or sales may be adjourned from time to
time by announcement of the time and place appointed for such sale or sales, or
for such adjourned sales or sales without further notice, and Secured Party may
bid and become the purchaser at any such sale;
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d. Secured Party may proceed to protect and enforce
this Agreement and any Schedule(s) by suit or suits or proceedings in equity,
at law or in bankruptcy, and whether for the specific performance of any
covenant or agreement herein contained, or execution or aid of any power herein
granted, or for foreclosure hereunder, or for the appointment of a receiver or
receivers for the Collateral, or any party thereof, or for the enforcement of
any proper, legal or equitable remedy available under applicable law.
e. Secured Party may require Debtor to assemble the
Collateral and return it to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
f. Debtor agrees to pay the Secured Party all
expenses or retaking, holding, preparing for sale, or selling the Collateral in
addition to attorneys' fees as set forth above.
11. ACCELERATION CLAUSE. In case of any sale of the
Collateral, or any part thereof, pursuant to any judgment or decree of any
court or otherwise in connection with the enforcement of any of the terms of
this Agreement, the outstanding principal due under any Schedule, if not
previously due, the interest accrued thereon and all other sums required to be
paid by Debtor pursuant to this Agreement shall at once become and be
immediately due and payable.
12. EXERCISE OF RIGHTS. No delay or omission of Secured
Party in the exercise of any right or power arising from any default shall act
as a waiver of or impair any such right or power or prevent its exercise during
the continuance of such default. No waiver by Secured Party of any such
default, whether such waiver be full or partial, shall extend to or be taken to
affect any subsequent default, nor shall it impair the rights resulting
therefrom except as may be otherwise provided therein. The giving, taking or
enforcement of any other or additional security, collateral, or guarantee for
the payment of the Secured Obligations shall not operate to prejudice, waive,
or affect the security of this Agreement or any rights, powers, or remedies
hereunder, and Secured Party shall not be required to look first to enforce or
exhaust such other additional security, collateral, or guarantees. All rights,
remedies, and options of Secured Party hereunder, or by law shall be
cumulative.
13. ASSIGNMENT BY SECURED PARTY. SECURED PARTY MAY ASSIGN OR
TRANSFER THIS AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT
NOTICE TO DEBTOR. Any assignee of Secured Party shall have all of the rights
but none of the obligations, of Secured Party under this Agreement, and Debtor
agrees that it will not assert against any assignee of Secured Party any
defense, counterclaim or offset that Debtor may have against Secured Party.
14. NON-TERMINABLE AGREEMENT; OBLIGATIONS UNCONDITIONAL. This
Agreement cannot be canceled or terminated except as expressly provided herein.
Debtor hereby agrees that Debtor's obligation to pay all Secured Obligations
shall be absolute and unconditional and Debtor will not be entitled to any
abatement of Monthly Loan Repayments or other payments due under this Agreement
or any reduction thereof under circumstances or for any reason whatsoever.
Debtor hereby waives any and all existing and future claims, as offsets,
against any Monthly Loan repayments and other payments due under this Agreement
as and when due regardless of any offset or claim which may be asserted by
Debtor or on its behalf. The obligations and liabilities of Debtor hereunder
will survive the termination of this Agreement.
15. ADDITIONAL DOCUMENTS. In connection with and in order to
provide effective evidence of the security interest in the Collateral granted
Secured Party under this Agreement, Debtor will execute and deliver to Secured
Party such financing statements and similar documents as Secured Party
requests. Debtor authorizes Secured Party where permitted by law to make
filings of such financing statements without Debtor's signature. Debtor
further agrees to furnish Secured Party:
a. On a timely basis, Debtor's future financial
statements, including Debtor's most recent annual report, balance sheet and
income statement, prepared in accordance with generally accepted accounting
principles, which reports, Debtor warrants, shall fully and fairly represent
the true financial condition of Debtor;
b. Any other financial information normally provided
by Debtor to the public; and
c. Such other financial data or information relative
to this Agreement and the Collateral, including, without limitation, copies of
Suppliers' proposals and purchase orders and agreements, listings of serial
numbers or other identification data and confirmations of such information, as
Secured Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, have acknowledged, and/or deliver to Secured
Party, record and file such other documents and notices as Secured Party deems
necessary or desirable to protect its interest in and rights under this
Agreement and Collateral. Debtor will pay for all filings, searches, title
reports, legal and other fees incurred by Secured Party in connection with any
documents to be provided by Debtor pursuant to this Agreement and any other
similar documents Secured Party may procure.
16. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. Whenever any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such parties, and all the covenants, promises, and
agreements in this Agreement contained by or on behalf of Debtor or Secured
Party shall bind and inure to the benefit of the respective successors and
assigns of each party whether so expressed or not.
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<PAGE> 6
b. PARTIAL INVALIDITY. The enforceability or
invalidity of any provision(s) of this Agreement shall not render any other
provision(s) herein contained unenforceable or invalid.
c. COMMUNICATIONS. All communications provided for
herein shall be in writing and shall be deemed to have been given (unless
otherwise required by the specific provisions in respect of any matter) (i)
when addressed and delivered personally or (ii) three (3) calendar days
following deposit in the United States mail, registered or certified, postage
prepaid, and addressed to the address set forth beneath the respective parties'
signature lines below, or as to Debtor or Secured Party at such other address
as they may designate by notice duly given in accordance with this Section to
the other party.
d. COUNTERPART; GOVERNING LAW. This Agreement may
be executed, acknowledged, and delivered in any number of counterparts, each of
such counterparts constituting an original but all together only one Agreement.
This Agreement and any Schedule shall be construed and enforced in accordance
with and governed by the laws of the State of Ohio. Debtor agrees to submit to
the jurisdiction of the State and/or Federal Courts in Ohio.
e. ENTIRE AGREEMENT. This Agreement constitutes the
entire understanding or agreement between Secured Party and Debtor and there is
no understanding or agreement, oral or written, which is not set forth herein.
This Agreement may not be amended except by a writing signed by Secured Party
and Debtor and shall be binding upon and inure to the benefit of the parties
hereto, their permitted successors and assigns.
This Agreement is dated MARCH 27, 1996.
DEBTOR: ETHAN ALLEN CARE CENTER, INC. DBA BRISTOL HOUSE OF SPRINGFIELD
----------------------------------------------------------------
ADDRESS: TWO NATIONWIDE PLAZA
280 NORTH HIGH STREET; SUITE 760
COLUMBUS, OH 43215
By: SHELDON A. GOLD
Title: President
-------------------------------
SECURED PARTY: DVI Capital Company
6611 Rockside Rd. #110
Independence, OH 44131
By: ALAN J. VELOTTA
Title:
------------------------------
6
<PAGE> 1
Exhibit 10.11
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is made and entered
into this ____ day of April, 1996, to be effective as of January 1, 1995 (the
"Effective Date"), by and between Congress Liquors, Inc., a Florida corporation
(the "Seller"), and MHK Corp., an Ohio corporation, or its assignee (the
"Buyer").
BACKGROUND INFORMATION
----------------------
A. Seller is engaged in the business of retail sales of alcoholic
beverages through two cocktail lounges in Florida and one retail package store
adjacent to one of the lounges (the "Liquor Business").
B. The Buyer is a corporation, the shareholders, directors and
officers of which are the executive officers of Seller and its ultimate parent,
The Wendt-Bristol Health Services Corporation.
C. The Seller believes that it is not able to sell the Liquor Business
at an appropriate price, nor has the Seller been able to operate it profitably;
accordingly, Seller has arranged for Buyer to acquire the Liquor Business.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree as follows:
1. PURCHASE AND SALE. Based upon and subject to the terms and
conditions of this Agreement, Seller hereby agrees to sell and assign as of the
Effective Date and deliver on the Closing Date (as hereinafter defined) to
Buyer, and Buyer agrees to acquire and accept as hereinafter provided all the
Acquired Assets (as hereinafter defined), free and clear of all liabilities,
obligations, security interests, liens and encumbrances except for certain
liabilities and obligations to be assumed hereunder and encumbrances in favor
of Seller. The conveyance of the Acquired Assets shall be evidenced by
Seller's execution and delivery to Buyer of a Warranty Bill of Sale and
Assignment in substantially the same form as Exhibit A attached hereto.
The deliveries evidencing purchase and sale of the Acquired Assets, the
consummation of the other transactions contemplated hereby, the payment of the
Purchase Price (as hereinafter defined) and the delivery of other agreements,
instruments, certificates and other documents required hereby (the "Closing")
shall take place at the offices of Schottenstein, Zox & Dunn at a mutually
agreed upon date and time (the "Closing Date") but in no event later than April
____, 1996.
2. DEFINITION OF ACQUIRED ASSETS. As used herein, "Acquired Assets"
shall mean the following categories of assets as of the Effective Date:
<PAGE> 2
(a) EQUIPMENT. All tangible personal property, fixtures,
leasehold improvements, equipment, furniture, machines and other
equipment and supplies owned by Seller and located at the two
business locations of Seller that are identified on Exhibit B
along with the trade name of each business location and the trade
names "Congress Liquors," "The Duke" and "Plush Pony" and the
Florida Alcoholic Beverage License Number (the "Business
Locations") that are used by Seller in connection with the Liquor
Business (the "Equipment");
(b) INVENTORY. All inventories of food, liquor and other
perishables and goods, goods in transit, supplies and samples
used in connection with the Liquor Business (the "Inventory");
(c) CASH AND ACCOUNTS RECEIVABLE. All cash, cash equivalents of Seller
and all trade accounts, notes and other receivables pertaining to or
arising out of the Liquor Business, (the "Accounts Receivable");
(d) PREPAID EXPENSES AND DEPOSITS. All prepaid expenses and deposits with
third parties relating to the Liquor Business;
(e) INSURANCE; WORKERS COMPENSATION; UNEMPLOYMENT COMPENSATION.
All insurance policies and all workers compensation and unemployment
compensation deposits, experience rates and assignments thereof to the
extent Buyer elects to take assignment thereof;
(f) PERMITS, LICENSES AND OTHER ASSETS. Subject to appropriate
governmental approvals, all permits, licenses, consents, approvals,
registrations and authorizations of governmental authorities held by
Seller and all other assets of Seller not specifically referred to in
this Section 2 relating to the Liquor Business and used in the conduct
thereof specifically including the trade names and the two liquor
licenses described on Exhibit B ("Liquor Licenses"); and
(g) BOOKS AND RECORDS. All supply and vendor lists and all reports,
records, files, invoices and other instruments and documents or
copies thereof relating to the Acquired Assets and the Assumed
Liabilities.
3. PURCHASE PRICE. The total purchase price for the Acquired
Assets (the "Purchase Price") shall be Five Hundred Seventy Four Thousand Nine
Hundred Forty-nine Dollars ($574,949.00), which amount shall be evidenced by a
promissory note substantially in the form of Exhibit C. At Closing, Buyer
shall execute and deliver to Seller a Security Agreement, in the form of
Exhibit D granting Seller a security interest in, among other things, the
Acquired Assets. Attached as Exhibit E is a schedule computing the Purchase
Price as of the Effective Date. At closing, if the Buyer is not MHK Corp.,
then MHK Corp. shall execute and deliver to Seller a Guaranty and a Blanket
Security Agreement, in the form of Exhibits F and G. At closing, MHK Corp.
shall cause
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<PAGE> 3
to be executed and delivered to Seller, as additional collateral, a Mortgage
and Assignment of Rents with respect to certain real estate owned by Marvin D.
Kantor and Harold T. Kantor.
4. CONTRACTS ASSUMED AND ASSIGNED. Seller hereby agrees to sell and
assign as of the Effective Date and transfer and convey at the Closing to Buyer
all of Seller's right, title and interest in, to and under the following
contracts and agreements (the "Assigned Agreements"):
(a) REAL ESTATE LEASES. Seller's leasehold interest in each of the two
parcels of real estate for the Business Locations described on Exhibit B
("Real Estate Leases").
(b) EQUIPMENT LEASES. Seller's leasehold interest in any equipment used in
the Liquor Business.
(c) EQUIPMENT LOANS. Any term loans evidencing indebtedness related to or
associated with acquisition of Equipment used in the Liquor Business
("Equipment Loans").
(d) OTHER AGREEMENTS. Agreements by and between Seller and
employees, vendors, customers and other persons.
(e) SERVICE AGREEMENTS. Any service or maintenance agreements or warranties
relating to the Equipment.
The Assigned Agreements shall be transferred by Seller to Buyer by
execution and delivery of a Warranty Bill of Sale and Assignment in
substantially the same form as Exhibit A attached hereto. Buyer agrees to be
bound by all of the terms, covenants and conditions of Seller under the
Assigned Agreements and to keep and perform each and every term, covenant and
condition required to be kept and performed by Seller thereunder from and after
the Closing. Seller shall indemnify, defend and hold Buyer (and Buyer's
shareholders, directors, officers, employees and agents) harmless from and
against any and all liabilities or obligations accruing prior to the Effective
Date under or in connection with the Assigned Agreements, and Buyer shall
indemnify, defend and hold Seller (and Seller's shareholders, directors,
officers, employees and agents) harmless from and against any and all
liabilities or obligations which arise from the operation of the Liquor
Business after the Effective Date under or in connection with the Assigned
Agreements.
Each of Seller and Buyer agree to use their best efforts to obtain the
necessary consents and governmental approvals to effect the transfer of the
Acquired Assets and the benefits of the Assigned Agreements. The parties
recognize that as of the Closing Date such consents and governmental approvals
will not have been obtained. In the event that Seller and Buyer are unable to
obtain said consents and governmental approvals and such
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<PAGE> 4
failure materially frustrates the transfer of the Acquired Assets and the
benefits of the Assigned Agreements then Seller shall, in an equitable manner,
repurchase the Acquired Assets and/or provide similar benefits to those
obtainable under the Assigned Agreement, as the case may be.
5. LIABILITIES ASSUMED. Buyer hereby assumes as of the Effective
Date and agrees to pay, perform or discharge the following liabilities and
obligations of Seller (the "Assumed Liabilities") and no others, to the extent
the same shall not have been discharged on or prior to the Closing Date:
(a) SPECIFIC LIABILITIES. Those payables relating to the Liquor Business
incurred in the ordinary course of business prior to the Effective Date
(the "Accounts Payable");
(b) GENERAL LIABILITIES. Subject to the provisions of Section 5(c),
liabilities and obligations of Seller arising from and after the
Effective Date under the contracts, leases and agreements to be
transferred to Buyer pursuant to Section 4 and under all purchase
orders, customer commitments and old quotations or bids made in the
ordinary course of the Liquor Business between the date hereof and the
Effective Date and not in violation of Seller's covenants herein; and
(c) EXCLUDED LIABILITIES. Except as expressly provided in Section 5(a) and
(b) hereof, Buyer shall not assume or become liable for the payment or
performance of obligations, liabilities, debts, contracts or other
commitments of Seller of any kind whatsoever, known or unknown, now
existing or hereafter arising, fixed or contingent, for all of which
Seller shall remain obligated. Without limiting the effect of the
foregoing sentence, it is expressly agreed that Buyer shall not assume
or become liable for either of the following:
(i) any product liability, warranty or tort claims with respect to
products, goods or services sold by Seller before the Effective
Date; or
(ii) liabilities under the bulk sales act except to the extent that
such liabilities result from claims that are Assumed Liabilities.
6. REPRESENTATIONS OF SELLER. Seller hereby represents and warrants
that:
(a) DUE ORGANIZATION; POWER AND AUTHORITY. Seller is (i) a corporation
validly existing and in good standing under the laws of the State of
Florida; and (ii) entitled to and has all requisite power and authority
and all licenses or permits necessary to own or lease its properties,
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<PAGE> 5
to carry on the Liquor Business in the manner in which it is now
conducted and to consummate the transactions hereby contemplated.
(b) AUTHORIZATION. This Agreement has been duly authorized, executed and
delivered by Seller and, assuming due authorization, execution and
delivery by Buyer, constitutes a legal, valid and binding agreement
enforceable against Seller in accordance with its terms.
(c) TITLE TO ASSETS. Seller owns and has good and marketable title to all
of the Acquired Assets free and clear of all mortgages, liens, claims,
charges, options, pledges, security interests and restrictions and
encumbrances of any kind whatsoever, except those in favor of Seller's
lender and Buyer or its affiliates.
(d) TITLE TO LIQUOR LICENSES. Seller owns and has good and marketable title
to the two Liquor Licenses identified on Exhibit B free and clear of all
mortgages, liens, charges, options, pledges, security interests and
restrictions and encumbrances of any kind whatsoever except those in
favor of Seller or its affiliates, and no actions or proceedings are
pending or, to the best of Seller's knowledge, threatened with regard to
revocation of any of the foregoing licenses.
(e) ACQUIRED ASSETS. The Acquired Assets include all of the assets used by
Seller in the Liquor Business. All of the Acquired Assets are located at
the business locations set forth on Exhibit B.
(f) EQUIPMENT. No notice of any violation of any law, statute, ordinance
or regulation relating to any Equipment has been received by Seller,
except such as have been fully complied with.
The foregoing representations and warranties will be true and correct
on the Closing Date in the same manner and with the same effect as if given on
such date.
7. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants
to Seller as follows:
(a) DUE ORGANIZATION. Buyer is (i) a corporation validly existing and in
good standing under the laws of the State of Ohio; and (ii) entitled to
and has all requisite power and authority to consummate the transactions
hereby contemplated.
(b) AUTHORIZATION. This Agreement has been duly authorized, executed and
delivered by Buyer and, assuming due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding agreement
enforceable against Buyer in accordance with its terms.
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<PAGE> 6
(c) EQUIPMENT. The Equipment is being purchased "AS IS".
The foregoing representations and warranties will be true and correct
on the Closing Date in the same manner and with the same effect as if given on
such date.
8. ADDITIONAL COVENANTS. The parties hereto also agree as
follows:
(a) EXPENSES. Buyer shall bear its expenses and Seller shall bear its
expenses incurred in connection with the transactions contemplated by
this Agreement.
(b) NO WAIVER OR MODIFICATION. The failure, with or without intent, of any
party hereto to insist upon performance by any other party of any term
or provision of this Agreement in strict conformity with the terms hereof
shall not be treated as a waiver of the right of such party to insist
upon strict performance or be deemed a modification of any provision
hereof.
(c) REPRESENTATIONS SURVIVE CLOSING. The representations, warranties,
covenants and other agreements of Seller contained in this Agreement or
in any agreement, instrument or other document required hereby or
thereby, shall survive the execution of this Agreement and the
Closing of the transactions contemplated hereby.
(d) FURTHER ASSURANCES. Seller agrees, at any time, and from time to time,
after the Closing Date, upon the request of Buyer to do so, to execute,
acknowledge and deliver, or to cause to be done, executed, acknowledged
and delivered, all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be required for the better assigning,
transferring, conveying, and confirming to Buyer or to its successors
and assigns, or for the aiding, assisting and reducing to possession any
or all of the Acquired Assets or the assignment of the Assigned
Agreements as provided herein specifically including all actions
necessary for transferring the Liquor Licenses.
(e) AGREEMENT TO SUBORDINATE. Seller hereby agrees that if Buyer arranges
for working capital financing from a financial institution which
requires a first lien against any of the Acquired Assets, Seller agrees
to sign and deliver a customary form of a subordination agreement in
favor of the working capital lender.
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<PAGE> 7
9. INDEMNIFICATION.
(a) BUYER'S INDEMNIFICATION. It is understood and agreed that Buyer does
not assume and shall not be obligated to pay any liabilities of Seller
except as set forth in Section 5 of this Agreement. Seller hereby
agrees to indemnify and hold Buyer and its successors and assigns
harmless against:
(i) Any and all claims, liabilities and obligations of every kind and
description, contingent or otherwise, arising from or related to
the ownership of the Acquired Assets, or the operation of
the Liquor Business by Seller prior to the Effective Date,
including but not limited to, any and all claims, liabilities and
obligations arising or required to be performed prior to the
Effective Date or which affect the Acquired Assets being
transferred hereunder, except those liabilities described in
Section 5 of this Agreement.
(ii) Any and all damage or deficiency resulting from any
misrepresentations, breach of warranty or nonfulfillment of any
agreement on the part of Seller under this Agreement arising out
of events occurring prior to or on the Effective Date or from any
misrepresentation in or omission from this Agreement or any
certificate or other instrument furnished to Buyer pursuant to
this Agreement.
(iii) Any and all actions, suits, proceedings, damages, assessments,
judgments, costs and expenses including reasonable attorneys fees
incurred by Buyer as a result of Seller's failure or refusal to
compromise or defend and to satisfy fully any claims incident to,
or to otherwise fail to comply with, the foregoing provisions.
(b) SELLER'S INDEMNIFICATION. Buyer hereby agrees to indemnify and hold
Seller and its successors and assigns harmless against:
(i) Any and all claims, liabilities and obligations of every kind and
description, contingent or otherwise, arising from or related to
the ownership of the Acquired Assets, or the operation of
the Liquor Business by Buyer on or after the Effective Date.
(ii) Any and all damage or deficiency resulting from any
misrepresentations, breach of warranty or nonfulfillment of any
agreement on the part of Buyer under this Agreement arising out
of events occurring on or after the Effective Date or from
-7-
<PAGE> 8
any misrepresentation in or omission from this Agreement or any
certificate or other instrument furnished to Seller pursuant to
this Agreement.
(iii) Any and all actions, suits, proceedings, damages, assessments,
judgments, costs and expenses including reasonable attorneys fees
incurred by Seller as a result of Buyer's failure or refusal to
compromise or defend and to satisfy fully any claims incident to,
or to otherwise fail to comply with, the foregoing provisions.
(c) PROCEDURE. For purposes of enforcing Section 9 of this Agreement, the
term "indemnitor" shall refer to Seller in respect of Section 9(a) and
to Buyer in respect of Section 9(b) , and the term "indemnitee" shall
refer to Buyer in respect of Section 9(a) and to Seller in respect of
Section 9(b). If any claim is asserted against an indemnitee by a third
party and the claim is deemed by indemnitee to be covered by its right
of indemnification under this Section 9 ("Indemnified Matter"), the
following procedures shall apply:
(i) NOTICE. The indemnitor and indemnitee hereby agree to give each
other notice of any claim or liability for any Indemnified Matter
promptly upon obtaining knowledge hereof, but the failure to
provide such notice shall not affect the indemnitor's
obligations hereunder to any indemnitee.
(ii) DEFENSE. If any action, suit or proceeding is brought
against any indemnitee in connection with any Indemnified Matter,
the indemnitor may, and at the indemnitee's request shall, at the
indemnitor's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted or defended by
counsel selected by the indemnitor and reasonably acceptable to
the indemnitee and, in the event of any failure by the indemnitor
to so resist and defend, the indemnitor shall pay all costs and
expenses (including, without limitation, attorneys' fees and
expenses) incurred by such indemnitee in connection with such
action, suit or proceeding.
(iii) SETTLEMENT AFTER NOTICE. If an indemnitee shall, at its sole
option, deem it necessary or desirable, in the conduct of its
business, to settle or compromise any claim, demand, suit or
other proceeding against it, it may do so after first notifying
the indemnitor as provided above, and thereafter permit
indemnitor 14 days in which to settle or pay said Indemnified
Matter. After the passage of the 14-day period, the indemnitee
may pay,
-8-
<PAGE> 9
settle or compromise said amount in which case indemnitor shall
indemnify indemnitee.
10. TRANSITIONAL MANAGEMENT. The parties contemplate that the Closing
shall occur prior to the time that the State of Florida can process the
transfer of the Liquor Licenses. Therefore, pending such transfer Seller, for
no fee, shall operate the Liquor Business on behalf of, and as agent for,
Buyer.
11. MISCELLANEOUS.
(a) NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing or by telecopier or
other electronic facsimile and shall be deemed to have been duly given
or made when delivered by hand, or when deposited in the United States
mail, Registered or Certified, Return Receipt Requested, postage
prepaid, or, in the case of telecopier or other electronic facsimile
notice, when receipt confirmed by sender's electronic facsimile machine,
addressed as set forth below, or to such other address as may be
hereafter notified by the respective parties hereto:
To Seller: Sheldon A. Gold, President
The Wendt-Bristol Health Services Corporation
Two Nationwide Plaza
280 North High Street, Suite 760
Columbus, Ohio 43215
To Buyer: Marvin D. Kantor, President
MHK Corp.
1000 Urlin Avenue
Columbus, Ohio 43212
(b) SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
(c) ENTIRE AGREEMENT. This Agreement, all schedules and exhibits hereto and
all agreements and other information to be delivered by the parties
pursuant hereto or referred to herein, represent the entire
understanding and agreement between the parties hereto with respect to
the subject matter hereof and thereof, supersede all prior
-9-
<PAGE> 10
negotiations, discussions and undertakings between such parties, and
cannot be amended,, supplemented or changed orally, except by an
agreement in writing which makes specific reference to this Agreement or
the information delivered pursuant hereto, as the case may be, and which
is signed by the party against whom enforcement of any such amendment,
supplement or modification is sought.
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by both of the parties hereto.
(e) HEADINGS. The descriptive headings of the several sections of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
(f) GENDER. Wherever the context so requires, the use of words herein in
the masculine, feminine or neuter gender shall be construed to include
all of such genders.
(g) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.
(h) GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida. Each of
Seller and Buyer hereby consent to the jurisdiction of the courts of the
State of Florida.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the day and year first set forth above.
SELLER: BUYER:
CONGRESS LIQUORS, INC. MHK CORP.
By:_________________________ By: ______________________________
Sheldon A. Gold, President Marvin D. Kantor, President
<PAGE> 11
EXHIBIT LIST
------------
Exhibit A - Warranty Bill of Sale and Assignment
- ---------
Exhibit B - Business Locations
- ---------
<PAGE> 12
EXHIBIT A
WARRANTY BILL OF SALE AND ASSIGNMENT
------------------------------------
This Warranty Bill of Sale and Assignment is made and entered into this ____
day of April, 1996, to be effective as of January 1, 1995 (the "Effective
Date") by and between Congress Liquors, Inc., a Florida corporation, (the
"Seller"), and MHK Corp., an Ohio corporation (the "Buyer").
BACKGROUND INFORMATION
----------------------
A. The Seller and the Buyer have entered into an Asset Purchase Agreement on
the date hereof (the "Agreement"), providing, among other things, for the
transfer and sale to the Buyer of the Liquor Business and all of the assets and
properties of the Liquor Business of the Seller, all as more fully described in
the Agreement.
B. Pursuant to the terms of the Agreement, the Buyer has agreed to assume
only certain specified liabilities of the Seller.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:
PROVISIONS
----------
1. DEFINITIONS. Unless otherwise specified herein, all capitalized terms
shall have the respective meanings specified in the Agreement.
2. BILL OF SALE AND ASSIGNMENT. The Seller, in consideration of the
mutual covenants and agreements contained in the Agreement and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, does hereby irrevocably and unconditionally sell, transfer,
convey, assign and deliver to the Buyer all right, title and interest in and to
the Acquired Assets.
3. CONTRACTS ASSIGNED. Seller hereby sells, assigns, transfers and
conveys to Buyer, all of Seller's right, title and interest in, to and under
the Assigned Agreements.
4. INCORPORATION BY REFERENCE. All of the representations, warranties and
covenants of the Seller and the indemnification provisions set forth in the
Agreement are incorporated herein by reference as if fully restated herein.
5. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their heirs, successors and assigns and any
successors to their respective businesses by merger, consolidation, transfer of
assets or otherwise.
<PAGE> 13
6. MODIFICATION. This instrument may be modified only by a written
instrument executed by all of the parties hereto.
7. GOVERNING LAW. This Agreement shall be governed by and construed,
performed and enforced in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have caused this Warranty Bill of Sale
and Assignment to be duly executed on the day and year first above written.
SELLER: BUYER:
CONGRESS LIQUORS, INC. MHK CORP.
By:_________________________ By: ______________________________
Sheldon A. Gold, President Marvin D. Kantor, President
-2-
<PAGE> 14
EXHIBIT B
----------
Business Locations
------------------
Plush Pony
2028 S. Military Trail West Palm Beach, Florida
Liquor License #60-00486
The Duke - lounge and store
902 N. Dixie Highway
Lantana, Florida
Liquor License #60-00364
<PAGE> 1
EXHIBIT 21
THE WENDT-BRISTOL HEALTH SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE REGISTRANT
STATE OF OWNERSHIP OF
NAME INCORPORATION VOTING SECURITIES
---- ------------- -----------------
<S> <C> <C>
Consolidated Subsidiaries:
The Wendt-Bristol Company Delaware 100% by The Wendt-Bristol Health
("Wendt-Bristol") Services Corporation
Wendt-Bristol Home Health Ohio 100% by Wendt-Bristol
Care Company
Wendt-Bristol Diagnostics Ohio 83.2% by Wendt-Bristol
Company (1)
Wendt-Bristol Organizational Ohio 100% by Wendt-Bristol
L.P., Inc. (2)
1275 Olentangy River Road Ohio Wendt-Bristol is the sole general and
Limited Partnership (2) limited partner
Wendt-Bristol Diagnostics Delaware Wendt-Bristol Diagnostics Company is
Company L.P. (2) the sole general partner
Consolidated Medical Ohio 100% by Wendt-Bristol Home Health
Services, Inc. Care Company
CMSI Medco Limited Ohio Consolidated Medical Services is the
Partnership (2) (3) sole general partner
American Living Centers, Inc. Ohio 100% by Wendt-Bristol
American Care Center, Inc. Ohio 100% by American Living Centers, Inc.
dba Bristol House of Columbus
Ethan Allen Care Center, Inc. Ohio 100% by American Living Centers, Inc.
dba Bristol House of Springfield
Congress Liquors, Inc. Florida 100% by Wendt-Bristol
Health America, Inc. Ohio 100% by Wendt-Bristol Diagnostics
dba The Wendt-Bristol Center Company
American Hospital of Athens, Inc. (3) Ohio 100% by Health America, Inc.
</TABLE>
(1) See Item 1. Business - Medical and Related Services
(2) Limited partnership
(3) Inactive
IV-7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 199,787
<SECURITIES> 0
<RECEIVABLES> 3,018,551
<ALLOWANCES> 340,000
<INVENTORY> 489,042
<CURRENT-ASSETS> 4,825,106
<PP&E> 19,531,862
<DEPRECIATION> 5,243,057
<TOTAL-ASSETS> 22,807,325
<CURRENT-LIABILITIES> 10,164,643
<BONDS> 7,880,566
0
0
<COMMON> 82,435
<OTHER-SE> 4,460,140
<TOTAL-LIABILITY-AND-EQUITY> 22,807,325
<SALES> 2,708,955
<TOTAL-REVENUES> 20,856,198
<CGS> 1,920,118
<TOTAL-COSTS> 1,920,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,050,226
<INCOME-PRETAX> 164,746
<INCOME-TAX> (51,979)
<INCOME-CONTINUING> 216,725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 216,725
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
