UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 3, 1998
Commission File Number: 001-13807
ElderTrust
(Exact name of registrant as specified in its declaration of trust)
Maryland 23-2932973
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
101 East State Street, Suite 100, Kennett Square, Pennsylvania 19348
(Address of principal executive offices)
(zip code)
(610) 925-4200
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
On September 3, 1998, ElderTrust (the "Company"), through its
subsidiary, ElderTrust Operating Limited Partnership (the "Operating
Partnership"), acquired a 99% limited partnership interest in ET Sub-Meridian
Limited Partnership, L.P. ("ET Sub-Meridian"). The 1% general partner interest
is owned by a limited liability company of which Edward B. Romanov, Jr., the
Company's President and Chief Executive Officer, is the sole member.
ET Sub-Meridian was formed to acquire the leasehold and purchase option
rights to seven skilled nursing facilities located in Maryland and New Jersey
from Meridian Healthcare, Inc. ("Meridian Healthcare"), a wholly owned
subsidiary of Genesis Health Ventures, Inc. ("Genesis"). On September 3, 1998,
ET Sub-Meridian paid Meridian Healthcare $35.5 million in cash and $8.5 million
in the form of a five-year promissory note for these rights. The purchase
options are exercisable by ET Sub-Meridian in September, 2008 for a cash
exercise price of $66.53 million. ET Sub-Meridian has subleased the facilities
to Meridian Healthcare for an initial ten-year period with a ten-year renewal
exercisable by Meridian Healthcare. Genesis has guaranteed the Meridian
Healthcare subleases.
The Operating Partnership made a $1.98 million capital contribution in
ET Sub-Meridian in exchange for its 99% limited partnership interest and Mr.
Romanov contributed $20,000 for his 1% general partner interest. The Operating
Partnership also made an $18.5 million subordinated demand loan bearing interest
at 12.0% per annum to ET Sub-Meridian in connection with the transaction. These
funds were borrowed by the Operating Partnership under its Bank Credit Facility.
The current owners of the skilled nursing facilities provided $17.7 million of
additional financing to ET Sub-Meridian, representing the balance of funds used
by ET Sub-Meridian to consummate the transaction.
As part of the transaction, the Operating Partnership entered into an
Indemnification Agreement (the "Indemnification Agreement") in favor of the
current owners of the skilled nursing facilities and guaranteed the $8.5 million
promissory note of ET-Sub Meridian payable to Meridian Healthcare. Under the
Indemnification Agreement, the Operating Partnership agreed to indemnify the
current property owners for the loss of deferral of tax benefits in the event
that one or more of the facilities were foreclosed upon prior to August 31, 2008
due to a default under a Meridian Healthcare sublease or if a cure to a default
by Meridian Healthcare results in a taxable event to the owners. The Operating
Partnership also entered into an Indemnification Consent and Acknowledgment
Agreement in favor of Genesis, pursuant to which the Operating Partnership
agreed to indemnify Genesis against any amounts expended by Genesis under a
back-up indemnity provided by Genesis to the current owners against any such
loss of deferral to tax benefits or default resulting in a taxable event to the
owners.
ET Sub-Meridian is an unconsolidated subsidiary of the Operating
Partnership. Accordingly, the Company's investment, through the Operating
Partnership, in ET Sub-Meridian is accounted for using the equity method of
accounting.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements.
Supplemental financial information for Genesis is included in
the Company's Form 10-Q for the quarter ended June 30, 1998,
in accordance with Staff Accounting Bulletin No. 71.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit No. Description of Exhibit
10.1 Subordinated Promissory Note of ET
Sub-Meridian payable to the Operating
Partnership in the amount of $18.5 million
10.2 Agreement of Limited Partnership of ET
Sub-Meridian
10.3 Indemnification Agreement dated September 3,
1998 in favor of the persons and entities
listed on Exhibit B thereto
10.4 Indemnification Consent and Acknowledgment
Agreement dated September 3, 1998 between the
Operating Partnership and Genesis
10.5 Guarantee Agreement dated September 3, 1998
between Operating Partnership and ET
Sub-Meridian
10.6 Subordinated Promissory Note of ET
Sub-Meridian payable to Genesis in the amount
of $8.5 million
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELDERTRUST
(Registrant)
/s/ D. Lee McCreary, Jr.
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D. Lee McCreary, Jr.
Senior Vice President and
Chief Financial Officer
Date: September 18, 1998
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
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10.1 Subordinated Promissory Note of ET
Sub-Meridian payable to the Operating
Partnership in the amount of $18.5 million
10.2 Agreement of Limited Partnership of ET
Sub-Meridian
10.3 Indemnification Agreement dated September 3,
1998 in favor of the persons and entities
listed on Exhibit B thereto
10.4 Indemnification Consent and Acknowledgment
Agreement dated September 3, 1998 between the
Operating Partnership and Genesis
10.5 Guarantee Agreement dated September 3, 1998
between Operating Partnership and ET
Sub-Meridian
10.6 Subordinated Promissory Note of ET
Sub-Meridian payable to Genesis in the amount
of $8.5 million