10-K 1 c27831_10-k.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------ FORM 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 ------------------------------------------------------ OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________ to______________________ Commission file number 1-8547 ------ LINCORP HOLDINGS, INC. -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 23-2161279 ------------------------------- --------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 3900 Park Ave., Suite 102 Edison, NJ 08820 ------------------------------- --------------------------------------- (Address of Principal Executive (Zip Code) Offices) Registrant's Telephone Number, Including Area Code: (732) 494-9455 ------------------------------- --------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------------------------- Common Stock, par value $.01 per share NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not considered herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| The Company's common stock, which is traded over the counter, had no identifiable transactions during 2002 and through March 21, 2003. Based on the last identifiable common stock transaction, the aggregate market value of the Company's common stock held by non-affiliates of the registrant would be an indeterminate nominal amount. On March 21, 2003, there were 1,730,559 shares of registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- See Item 14 (c) for a listing of exhibits incorporated by reference. LINCORP HOLDINGS, INC. FORM 10-K TABLE OF CONTENTS PAGE ---- PART I Items 1 and 2. Business and Properties 1 Item 3. Legal Proceedings 2 Item 4. Submission of Matters to a Vote of Security Holders 3 PART II Item 5. Market for Registrants Common Equity and Related Stockholder Matters 4 Item 6. Selected Financial Data 4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 8. Financial Statements and Supplementary Data 7 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 7 PART III Item 10. Directors and Executive Officers of the Registrant 8 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 12 Item 13. Certain Relationships and Related Transactions 12 LINCORP HOLDINGS, INC. FORM 10-K TABLE OF CONTENTS PAGE ---- PART IV Item 14. Exhibits, Financial Statements and Reports on Form 8-K 13 Signatures 18 Certification of Principal Executive Officer 20 Certification of Principal Financial Officer 21 PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES RECENT DEVELOPMENTS On July 23, 2001, Lincorp Holdings, Inc.'s (the "Company") parent company, Wilmington Capital Management Inc. ("Wilmington"), formerly Unicorp Inc., sold 370,000 of the Company's common shares to two unrelated third parties. This transaction reduced Wilmington's common stock ownership in the Company to 916,886 shares or 52.98%. At the same time, Wilmington sold its rights and obligations to approximately $168.9 million of the Company's principal and accrued interest outstanding under several of its debt obligations to an unrelated party. Wilmington continues to hold approximately $7.2 million of the Company's debt obligations. At December 31, 2002, the Company had approximately $176.1 million of principal and accrued interest (the "Indebtedness") outstanding under its various debt obligations. The Company is in payment default under several of the debt obligations comprising the Indebtedness. The Indebtedness is secured by a senior security interest in all of the Company's assets. The Company's debt holders have waived substantially all interest owing by the Company on its Indebtedness to them that would have otherwise accrued for the twelve months ended December 31, 2002. The total interest waived was approximately $10.9 million. The Company's sources of funds during the year ended December 31, 2002, and to date, have been primarily from its previously existing cash balances and advances from Wilmington. Unless the Company's debt holders continue to defer in realizing on the pledged collateral, the Company will be unable to continue as a going concern. As of December 31, 2002, the Company's stockholders' deficit was $179.9 million. REAL ESTATE AND MORTGAGE LOAN TRANSACTIONS During the fourth quarter of 1997, the Company made a $0.6 million secured first mortgage loan to Republic Development Co. (the "Republic Mortgage Loan") for the purpose of developing a commercial real estate property. This loan was scheduled to mature May 19, 1998. To finance this loan, the Company borrowed funds from Wilmington. The Wilmington borrowing was in the form of a $602,000 discounted note (the "Wilmington Republic Note") which matured on May 19, 1998 in the amount of $620,000 and is secured by the Republic Mortgage Loan. The Republic Mortgage Loan was not repaid on May 19, 1998 and in November 1999, the Company foreclosed on the Republic Mortgage Loan and took possession of the land. As of December 31, 2000, the Company reduced the carrying value of the land to $300,000 which it believes is the current fair market value of the land. The Wilmington Republic Note, which matured on May 19, 1998, was not repaid by the Company as its payment was dependent upon collecting the Republic Mortgage Loan. Wilmington has agreed to defer the collection of its note until the land is sold. -1- EMPLOYEES The Company presently has no compensated employees. ITEM 3. LEGAL PROCEEDINGS (A) Joseph Frazier ("Frazier") has instituted three lawsuits in which Lincorp Holdings, Inc., the Company's predecessors in interest, Greit Realty Trust Company and Unicorp America Corporation (collectively the "Company"), and other parties were named as defendants. All three actions arose from a series of real estate-related transactions which began in 1978 with respect to property in Bucks County, PA (the "Bucks Property"). More specifically, Frazier's partnership used a mortgage as a vehicle pursuant to which Greit paid the partnership $400,000 contemporaneously with entering into the agreement and gave the partnership a Promissory Note in the amount of $850,000 which further provided for nineteen annual payments of $10,000 each and a final installment of $660,000. In return, the partnership assigned its rights in an Agreement of Sale for the Bucks Property to Greit. The Company has not made any payment to the partnership since 1992 and has a $730,000 unsecured liability recorded in its financial statements. In 1993, Frazier instituted an action in the Court of Common Pleas of Philadelphia County asserting claims against the Company for fraud and breach of contract, I.E., the failure to make certain payments due and owing to Frazier and/or a general partnership in which he had an interest in connection with a mortgage granted to Frazier's partnership by Greit. In 1997, Frazier instituted a second action in the Court of Common Pleas of Philadelphia County alleging fraudulent conveyancing of the Bucks Property by five separate parties, including the Company. These actions have been consolidated with FRAZIER V. ESTATE OF WRIGHT, an action previously filed in the Court of Common Pleas of Philadelphia County by Frazier against his late partner and attorney, Bruce Wright, alleging legal malpractice. The two actions against the Company were dismissed for failure to join an indispensable party. The appellate court denied Frazier's appeal of that dismissal as premature until judgment is entered in the FRAZIER V. ESTATE OF WRIGHT case. In 1998, Frazier instituted an action in the Court of Common Pleas of Bucks County, PA asserting vague claims arising from the conveyance of the Bucks Property, which remain pending against the Company. Frazier has asserted claims against the Company and numerous other parties, including approximately 475 homeowners who currently reside on the Bucks Property. Frazier sought to eject the homeowners from their homes and regain possession of the Bucks Property. The Court has dismissed claims against the home-owners. Frazier still seeks damages of $84 million from the Company and from other defendants. In 1999, the Company moved to dismiss the Bucks County action on the grounds plaintiff's claim was time-barred; the Court denied the Company's motion to dismiss, without prejudice to renew such motions at a later date. After taking very little discovery in this case, and after permitting the court-ordered discovery deadline to expire, this year plaintiff attempted to open discovery. Many of the defendants and various non-parties either objected to or moved to quash discovery, and the Court responded by circumscribing plaintiff's right to take additional discovery. The Court has set forth a schedule for the submission of summary judgment and expert reports, and has stated that it expects to schedule the trial in this -2- matter for October of 2003. The Company is vigorously defending the claims that have been asserted in the Bucks County action. (B) A tax assessment (the "Assessment") has been made by the Commonwealth of Massachusetts against a former wholly-owned subsidiary of the Company, which was dissolved in July 1990. The Massachusetts Department of Revenue (the "MDR") stated, in a notice dated February 15, 1992, that the amount due and owing was $1.2 million and it is believed that additional interest and/or penalties have been imposed with regard to the Assessment. On November 29, 1993, an Offer in Settlement (the "Offer") was forwarded to the MDR with respect to the Assessment which was rejected by the MDR on October 26, 1995, and there have been no subsequent developments on this matter since that date. The ultimate outcome of the Assessment cannot be determined at this time. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -3- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded over the counter. During 2002 there were no identifiable stock transactions. On March 21, 2003, there were approximately 766 stockholders of record of the Company's Common Stock. There were no dividends paid on the Company's Common Stock in 2002 and 2001. ITEM 6. SELECTED FINANCIAL DATA

-4- ITEM 6. SELECTED FINANCIAL DATA, CONTINUED

-5- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND GOING CONCERN At December 31, 2002, the Company had approximately $176.1 million of principal and accrued interest (the "Indebtedness") outstanding under its various debt obligations. The Company is in payment default under several of the debt obligations comprising the Indebtedness. The Indebtedness is secured by a senior security interest in all of the Company's assets. See Note 5 to the Company's Financial Statements. During 2002, the Company's debt holders agreed to waive substantially all interest owing by the Company on its Indebtedness to them that would otherwise accrue for the twelve months ended December 31, 2002, which was approximately $10.9 million. The Company's sources of funds during the year ended December 31, 2002, and to date, have been primarily from its previously existing cash balances and advances from Wilmington. Unless the Company's debt holders continue to defer in realizing on the pledged collateral, the Company will be unable to continue as a going concern. As of December 31, 2002, the Company's stockholders' deficit was $179.9 million. RESULTS OF OPERATIONS 2002 COMPARED TO 2001 For the years ended December 31, 2002 and 2001, the Company had a net loss of $0.2 million. 2001 COMPARED TO 2000 For the year ended December 31, 2001, the Company had a net loss of $.2 million compared to a net loss of $.4 million for the year ended December 31, 2000. FINANCIAL POSITION MATERIAL CHANGES SINCE DECEMBER 31, 2001 There were no significant changes in the Company's financial position since December 31, 2001. -6- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Financial Statements of the Company are set forth in Part IV on pages F-1 to F-11 and incorporated herein by reference. See "Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K" for a complete list of Financial Statements and Financial Statement Schedules. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE a) On March 5, 2003, KPMG LLP ("KPMG") resigned as the independent public accountants for Lincorp Holdings, Inc. (the "Company"). KPMG's reports on the Company's financial statements for each of the years ended December 31, 2001 and 2000 contained a going concern qualification. The going concern qualification was reported because as of December 31, 2001 and 2000 the Company was in default on several of its credit facilities, had approximately $175 million of indebtedness and accrual interest and had a net capital deficiency of approximately $179 million. During the year ended December 31, 2001 and 2000 and through March 5, 2003, there were no disagreements with KPMG on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to KPMG's satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Company's financial statements for such years; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. b) On March 10, 2003, the Company engaged Postlethwaite & Netterville ("P&N") to serve as the Company's independent public accountants for the year ended December 31, 2002. The appointment of P&N was authorized by the Company's Board of Directors. During the years ended December 31, 2001 and 2000 and through March 5, 2003, the Company did not consult P&N with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, or any other matters or reportable events as set forth in Item 304(a)(1)(v) of Regulation S-K. -7- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The term of each director is for one year and thereafter until his successor shall have been elected and qualified. The Company's executive officers are elected by, and serve at the discretion of the Board of Directors. The following table sets forth certain information with respect to each director and executive officer of the Company on March 21, 2003.

---------- (1) Member of the Executive Committee. (2) Member of the Audit Committee. -8- George S. Mann has served as Chairman of the Board since 1981, and as President from 1989 through August, 1996. He served as Chairman of the Board of Wilmington from 1983 until June 1990, and served as a Director until July 1998. Ian G. Cockwell has been President of Westcliff Management Services Inc. since prior to 1988. He is currently the Chairman of Wilmington. He has been a Director of the Company since November 1994. Ralph V. Marra has been Corporate Controller for SSR Realty Advisors, Inc. since April 1998. Prior to that he was Director of Planning with New Plan Reality Inc. from December 1997. From October 1994 through December 1997 he was the Senior Managing Director of Grubb and Ellis Inc. Gordon Flatt has been the Managing Director of The Coastal Corporation since June 30, 2002. Prior to that he was President and Chief Investment Officer of The Coastal Group since 1993. From September 1997 to April 2000 Gordon Flatt was an Officer of Unicorp Inc. (new Wilmington). He has been the Vice President and Chief Financial Officer of the Company since December 1998 and a Director since July 2002. Jack R. Sauer has been the President of the Company since August, 1996. He is also the Vice President and Director of the Catalyst Group, Inc. since February, 1990. -9- COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act requires the Company's officers and directors and persons who own more than 10% of the Company's Common Stock to file initial reports of ownership and reports of changes of ownership (Forms 3, 4 and 5) of the Company's Common Stock with the Securities and Exchange Commission (the "SEC"). Officers, directors and beneficial owners of more than 10% of the Company's Common Stock are required by the SEC regulations to furnish the Company with copies of such forms that they file. To the Company's knowledge, based solely on the Company's review of the copies of such reports received by the Company, all Section 16(a) filing requirements applicable to its officers, directors and beneficial owners of more than 10% of the Company's Common Stock, were complied with. DIRECTORS REMUNERATION Directors of the Company receive a fee of $600 for actual attendance at each directors' or committee meeting. Where meetings of the Board or committees thereof are held by telephone conference, directors receive a fee of $150. Fees paid to all directors for attendance at the Board and committee meetings during the year ended December 31, 2002, totaled $1,200. DIRECTORS MEETING AND COMMITTEES The Board of Directors of the Company held 4 meetings during the year ended December 31, 2002. During the year, the directors attended between 25% and 75% of the meetings. The Board of Directors has a standing Audit Committee which represents the Board of Directors in its relations with the Company's independent accountants and oversees the Company's compliance with operating procedures and policies. This committee also approves the scope of the Company's financial statement examinations, monitors the adequacy of the Company's internal controls and reviews and monitors any other activity that the committee deems necessary or appropriate. The Company does not have a standing Compensation or Nominating Committee. The Executive Committee is authorized to act on behalf of the Board of Directors between Board meetings and to have such powers and duties which may lawfully be assigned to it under Delaware law. The only Committee which held a meeting during the year ended December 31, 2002, was the Audit Committee which held one meeting. -10- ITEM 11. EXECUTIVE COMPENSATION No executive officer of the Company, received any compensation for their services during any of the years ended December 31, 2002, 2001 or 2000. However, in each of 2002, 2001 and 2000, Lincorp Holdings, Inc. paid an unrelated company $24,000 each year for accounting services. The president of that company is also the president of Lincorp Holdings, Inc. No compensation committee report or performance graph is included herein because none of the executive officers draws any salary from the Company. -11- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table below sets forth information concerning the shares of the Common Stock beneficially owned by the individual directors, all directors and officers of the Company as a group without naming them and each person who is known by the Company to be the beneficial owner of more than five percent of the Common Stock as of March 21, 2003. The address of each of the directors is c/o Lincorp Holdings, Inc., 3900 Park Ave., Suite 102, Edison, NJ 08820. The address of Wilmington Capital Management Inc. is P.O. Box 762, Suite 4400, BCE Place, 181 Bay Street, Toronto, Canada M5J 2T3. Shares of Common Stock Beneficially Name of Owned as of Percent of Beneficial Owner March 21, 2003 Class ---------------- -------------- ---------- Wilmington Capital Management Inc. (1) 916,886 52.98% Ian G. Cockwell (1) 916,886 52.98% All officers and directors 1,216,886 52.98% as a group (1) (1) The stockholdings indicated for Mr. Cockwell are all owned directly by Wilmington Capital Management Inc. Mr. Cockwell disclaims beneficial ownership of all such shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Items 1 and 2 - Recent Developments and Real Estate and Mortgage Loan Transactions. -12- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K PAGE ---- (a) (1) Financial Statements Independent Auditors' Report for 2002..................... F-1 Independent Auditors' Report for 2001 and 2000............ F-2 Balance Sheets as of December 31, 2002 and 2001.............................. F-3 Statements of Operations for the years ended December 31, 2002, 2001, and 2000....................... F-4 Statements of Changes in Stockholders' Deficit for the years ended December 31, 2002, 2001, and 2000........... F-5 Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000........................ F-6 Notes to Financial Statements............................. F-7 (2) All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto. (b) Reports on Form 8-K None. (c) Exhibits PAGE ---- 3.1 Restated Certificate of Incorporation of the Company, * as amended to date (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987). -13- 3.2 By-Laws of the Company as amended to date (incorporated * by reference to Exhibit 3.2 to the Company's Annual Report Form 10-K for the year ended December 31, 1986). 10.01 Subscription and Purchase Agreement dated December * 31, 1987, between the Company and Unicorp (incorporated by reference to Exhibit 2.2 to the Company's Current Report Form 8-K dated January 14, 1988). 10.02 Letter Agreement re: Line of Credit dated November 30, * 1989, between Unicorp and the Company (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.03 Revolving Demand Note dated November 30, 1989, * from the Company to Unicorp (incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.04 Consulting Agreement dated as of February 13, 1990, * between the Company and Coscan Inc. (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.05 Letter Agreement re: Operating Deficit Loan Agreement * dated February 13, 1990, between the Company and Coscan Inc. (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.06 Form of Promissory Note from the Company to Coscan Inc. * (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). -14- 10.07 Closing Agreement, dated as of July 23, 1990, among * the Company, Coscan Colorado Inc. ("CCI"), Coscan Colorado LHI Inc. and Coscan Commercial Limited Partnership, a California Limited Partnership ("Coscan California) (incorporated by reference to Exhibit 28.1 to the Company's Report on Form 8-K dated August 13, 1990). 10.08 Closing Agreement, dated as of July 23, 1990, among the * Company, Coscan California Commercial Inc. ("CCC"), Coscan California LHI Inc. and Coscan Commercial Limited Partnership, a California Limited Partnership ("Coscan California) (incorporated by reference to Exhibit 28.2 to the Company's Report on Form 8-K dated August 13, 1990). 10.09 Agreement of Limited Partnership of Coscan Commercial, * dated as of July 23, 1990 (incorporated by reference to Exhibit 28.3 to the Company's Report on Form 8-K dated August 13, 1990). 10.10 Agreement of Limited Partnership of Coscan Commercial, * dated as of July 23, 1990 (incorporated by reference to Exhibit 28.3 to the Company's Report on Form 8-K dated August 13, 1990). 10.11 Letter Agreement, dated as of July 23, 1990, among CCI, * CCC, the Company, Coscan Commercial and Coscan California, regarding loans by CCI and CCC (incorporated by reference to Exhibit 28.5 to the Company's Report on Form 8-K dated August 13, 1990). 10.12 $24,000,000 Secured Revolving Credit Agreement, dated * as of July 25, 1990 (the "Senior Credit Agreement"), among the Company, Hees International Bancorp Inc. ("Hees"), National Bank of Canada ("NBC") and NBC, as Agent (incorporated by reference to Exhibit 28.6 to the Company's Report on Form 8-K dated August 13, 1990). -15- 10.13 Amended and Restated Credit Agreement, dated as of * July 25, 1990, between the Company and NBC (incorporated by reference to Exhibit 28.7 to the Company's Report on Form 8-K dated August 13, 1990). 10.14 Letter Agreement, dated July 25, 1990, between Unicorp * and the Company regarding the revolving line of credit from UCC to the Company (incorporated by reference to Exhibit 28.8 to the Company's Report on Form 8-K dated August 13, 1990). 10.15 Securities Pledge Agreement, dated as of July 25, 1990, * by the Company in favor of Unicorp (incorporated by reference to Exhibit 28.8 to the Company's Report on Form 8-K dated August 13, 1990). 10.16 Lincorp Pledge Agreement, dated as of July 25, 1990, by * Lincorp Inc. in favor of Unicorp (incorporated by reference to Exhibit 28.10 to the Company's Report on Form 8-K dated August 13, 1990). 10.17 Subsidiaries Pledge Agreement, dated as of July 25, 1990, * by Unicorp Delaware I, Inc., Unicorp Delaware II, Inc. and ITT Missouri Corp. in favor of Unicorp (incorporated by reference to Exhibit 28.11 to the Company's Report on Form 8-K dated August 13, 1990). 10.18 Security Agreement, dated as of July 25, 1990, by the * Company in favor of Unicorp (incorporated by reference to Exhibit 28.12 to the Company's Report on Form 8-K dated August 13, 1990). 10.19 Agreement Relating to the Lincoln Savings Bank, FSB dated * as of December 31, 1992, among the OTS, the Company and certain other parties (incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K dated January 20, 1993). 10.20 Trust Agreement dated as of January 20, 1993, among the * OTS, the Company and certain other parties (incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K dated January 20, 1993). -16- 10.21 Consent Agreement dated March 4, 1994, among Unicorp, * Union Holdings, Inc., Lincorp, Inc., the Company, Hees International Bancorp, Inc., National Bank of Canada, Anthony M. Frank, as trustee, the Lincoln Savings Bank, FSB and Anchor Savings Bank FSB (incorporated by referenced to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.22 Loan Modification Agreement dated as of September 28, * 1995, by and between Coscan, Inc. and the Company (incorporated by reference to Exhibit B to the Company's Report on Form 8-K dated September 28, 1995). 10.23 Loan Modification Agreement dated as of September 28, * 1995, by and between CCI and the Company (incorporated by reference to Exhibit C to the Company's Report on Form 8-K dated September 28, 1995.) 10.24 Agreement dated as of September 5, 1995,by and among * CCI, the Company, Coscan Limited Partner Corporation, CCC, Coscan California Limited Partner Corporation and Coscan, Inc. 22 Subsidiaries of the Company. 99(i) Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. 99(ii) Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. ---------- * Incorporated by reference. -17- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in Edison, New Jersey. Dated: April 11, 2003 LINCORP HOLDINGS, INC. By: s/ Jack R. Sauer --------------------------- Jack R. Sauer President -18- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. NAME TITLE DATE ---- ----- ---- s/ George S. Mann Chairman of the April 11, 2003 ------------------------- Board of Directors George S. Mann s/ Ian G. Cockwell Director April 11, 2003 ------------------------- Ian G. Cockwell s/ Ralph V. Marra Director April 11, 2003 ------------------------- Ralph V. Marra s/ Gordon Flatt Director April 11, 2003 ------------------------- Gordon Flatt s/ Jack Sauer President April 11, 2003 ------------------------- Jack Sauer -19- CERTIFICATION I, Jack R. Sauer, certify that: 1. I have reviewed this annual report on Form 10-K of Lincorp Holdings, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 11, 2003 /s/ Jack R. Sauer ------------------------- Jack R. Sauer President and Chief Executive Officer -20- CERTIFICATION I, Gordon Flatt, certify that: 1. I have reviewed this annual report on Form 10-K of Lincorp Holdings, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 11, 2003 /s/ Gordon Flatt -------------------------- Gordon Flatt Chief Financial Officer -21- Independent Auditors' Report The Board of Directors and Stockholders Lincorp Holdings, Inc. We have audited the accompanying balance sheet of Lincorp Holdings, Inc. ("Company") as of December 31, 2002 and the related statements of operations, changes in stockholders' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Lincorp Holdings, Inc. as of and for the years ended December 31, 2001 and 2000, were audited by other auditors whose report dated March 7, 2002, on those statements included an explanatory paragraph that described the Company's net capital deficiency which raises substantial doubt about the Company's ability to continue as a going concern as discussed in Note 2 to the financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lincorp Holdings, Inc. as of December 31, 2002 and the results of its operations and its cash flows for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in default on several of its credit facilities and, at December 31, 2002, has $97.1 million of principal indebtedness, and $78.4 million of accrued and unpaid interest. In addition, the Company has a net capital deficiency of $179.9 million as of December 31, 2002. These matters raise substantial doubt about the Company's ability to continue as a going concern. The Company's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Postlethwaite & Netterville Baton Rouge, Louisiana April 9, 2003 F-1 Independent Auditors' Report The Board of Directors and Stockholders Lincorp Holdings, Inc.: We have audited the accompanying balance sheet of Lincorp Holdings, Inc. ("Company") as of December 31, 2001, and the related statements of operations, changes in stockholders' deficit, and cash flows the years ended December 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lincorp Holdings, Inc. as of December 31, 2001 and the results of its operations and its cash flows for the years ended December 31, 2001 and 2000 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in default on several of its credit facilities and, at December 31, 2001, has $97.1 million of principal indebtedness, and $78.3 million of accrued and unpaid interest. In addition, the Company has a net capital deficiency of $179.7 million as of December 31, 2001. These matters raise substantial doubt about the Company's ability to continue as a going concern. The Company's plans in regard to these matters are also described in Note 2. The 2001 financial statements do not include any adjustments that might result from the outcome of this uncertainty. KPMG LLP New York, New York March 7, 2002 F-2 LINCORP HOLDINGS, INC. BALANCE SHEETS

The accompanying notes are an integral part of these financial statements. F-3 LINCORP HOLDINGS, INC. STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements. F-4 LINCORP HOLDINGS, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

The accompanying notes are an integral part of these financial statements. F-5 LINCORP HOLDINGS, INC. STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements. F-6 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - CHANGE IN OWNERSHIP AND DEBT HOLDERS On July 23, 2001, Lincorp Holdings, Inc.'s (the "Company") parent company, Wilmington Capital Management Inc. ("Wilmington"), formerly Unicorp Inc., sold 370,000 of the Company's common shares to two unrelated third parties. This transaction reduced Wilmington's common stock ownership in the Company to 916,886 shares or 52.98%. At the same, Wilmington sold its rights and obligations to approximately $168.9 million of the Company's principal and accrued interest outstanding under several of its debt obligations to an unrelated party. Wilmington continues to hold approximately $7.2 million of the Company's debt obligations. NOTE 2 - LIQUIDITY AND GOING CONCERN At December 31, 2002, the Company had approximately $176.1 million of principal and accrued interest (the "Indebtedness") outstanding under its various debt obligations. The Company is in payment default under several of the debt obligations comprising the Indebtedness. The Indebtedness is secured by a senior security interest in all of the Company's assets. During 2000, 2001 and 2002, the Company's debt holders agreed to waive substantially all interest owing by the Company on its Indebtedness to them that would otherwise accrue for these years. For each of the three years ended December 31, 2002 the interest waived was approximately $10.9 million per year. The Company's sources of funds during the year ended December 31, 2002, and to date, have been primarily from its previously existing cash balances and advances from Wilmington. Unless the Company's debt holders continue to defer realizing on the pledged collateral, the Company will be unable to continue as a going concern. NOTE 3 - REAL ESTATE OPERATIONS During the fourth quarter of 1997, the Company made a $0.6 million secured first mortgage loan to Republic Development Co. (the "Republic Mortgage Loan") for the purpose of developing a commercial real estate property. This loan was scheduled to mature May 19, 1998. To finance this loan, the Company borrowed funds from Wilmington. The Wilmington borrowing was in the form of a $602,000 discounted note (the "Wilmington Republic Note") which matured on May 19, 1998 in the amount of $620,000 and was secured by the Republic Mortgage Loan. The Republic Mortgage Loan was not repaid on May 19, 1998 and in November 1999, the Company foreclosed on the Republic Mortgage Loan and took possession of the land. As of December 31, 2000, the Company reduced the carrying value of the land by $311,000 to $300,000 which it believes is the current fair market value of the land. The F-7 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS Wilmington Republic Note, which matured on May 19, 1998, was not repaid by the Company as its payment was dependent upon collecting the Republic Mortgage Loan. Wilmington has agreed to defer the collection of its note until the land is sold. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of change in tax rates is recognized in income in the period that includes the enactment date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENT IN REAL ESTATE The investment in real estate is carried at estimated fair market value. NOTE 5 - OTHER BORROWED FUNDS The Company's other borrowed funds are as follows: December 31, ----------------------- 2002 2001 -------- -------- (dollars in thousands) PRINCIPAL Senior secured revolving credit facility (a) ..... $ 10,261 $ 10,261 Subordinated term loan (b) ....................... 65,000 65,000 Junior line of credit (c) ........................ 20,494 20,494 MSLL Note (d) .................................... 1,399 1,399 -------- -------- 97,154 97,154 Accrued interest ................................. 78,381 78,272 -------- -------- $175,535 $175,426 ======== ======== F-8 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS (a) This debt facility, of which $2.5 million is held by Wilmington, expired in August 1991 and the Company has made no interest payments on this facility since its expiration. (b) This $65 million facility matured in August 1997, and calls for interest-only payments at a fixed rate of 11.4 %, payable semi-annually. The term loan includes convenants, among others, that require the maintenance of a minimum level of tangible net worth and limit aggregate levels of additional indebtedness. As a result of the losses incurred by the Company, it was not in compliance with the above covenants and it has not paid its semi-annual interest payment since August 1991. (c) In November 1989, the Company entered into an agreement that provided the Company with a line of credit in the aggregate amount of $30 million (amended to $25 million on July 25,1990) due on demand with an interest rate of prime plus 3.5% and a standby fee of one quarter of one percent of the unused portion of the commitment. (d) This note with Wilmington matures June 30, 2005, and has an interest rate of 6.38%. During 2002 and 2001, the weighted average amount of total principal debt outstanding was $97.2 million. There is no weighted average interest cost for 2002 and 2001 due to the debt holders waiver of interest discussed in Note 2. The maximum amount of borrowed principal funds outstanding at any one time during 2002 and 2001 was approximately $97.2 million. SFAS No. 107 "Disclosures about Fair Value of Financial Instruments" requires entities to disclose the fair value of on and off-balance sheet financial instruments. In view of the financial position of the Company at December 31, 2002, management has determined it is not practicable to estimate the fair value of debt and other borrowed funds. NOTE 6 - INCOME TAXES Set forth below is an analysis of the Company's refund for income taxes for the years ended December 31, 2002, 2001 and 2000. 2002 2001 2000 -------- -------- -------- (dollars in thousands) Current provision (refund): State and local income taxes ..... $ -- $ -- $ (11) ======== ======== ======== F-9 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS A reconciliation of the total benefit for income taxes to amounts computed by applying the federal tax rate to the net loss is as follows: 2002 2001 2000 ----- ----- ----- (dollars in thousands) Computed at statutory rate .............. $ (72) $ (67) $(152) State and local income tax benefit ...... (2) (2) (4) Change in valuation allowance ........... 74 69 145 ----- ----- ----- Refund of income taxes .................. $ -- $ -- $ (11) ===== ===== ===== The Company records deferred income taxes on the tax effect of changes in temporary differences. Deferred tax assets are subject to a valuation allowance if their realization is less than 50% probable. The accompanying balance sheets reflect no deferred tax assets or liabilities as of December 31, 2002 and 2001. NOTE 7 - LEGAL PROCEEDINGS (A) Joseph Frazier ("Frazier") has instituted three lawsuits in which Lincorp Holdings, Inc., the Company's predecessors in interest, Greit Realty Trust Company and Unicorp America Corporation (collectively the "Company"), and other parties were named as defendants. All three actions arose from a series of real estate-related transactions which began in 1978 with respect to property in Bucks County, PA (the "Bucks Property"). More specifically, Frazier's partnership used a mortgage as a vehicle pursuant to which Greit paid the partnership $400,000 contemporaneously with entering into the agreement and gave the partnership a Promissory Note in the amount of $850,000 which further provided for nineteen annual payments of $10,000 each and a final installment of $660,000. In return, the partnership assigned its rights in an Agreement of Sale for the Bucks Property to Greit. The Company has not made any payment to the partnership since 1992 and has a $730,000 unsecured liability recorded in its financial statements. In 1993, Frazier instituted an action in the Court of Common Pleas of Philadelphia County asserting claims against the Company for fraud and breach of contract, I.E., the failure to make certain payments due and owing to Frazier and/or a general partnership in which he had an interest in connection with a mortgage granted to Frazier's partnership by Greit. In 1997, Frazier instituted a second action in the Court of Common Pleas of Philadelphia County alleging fraudulent conveyancing of the Bucks Property by five separate parties, including the Company. These actions have been consolidated with FRAZIER V. ESTATE OF WRIGHT, an action previously filed in the Court of Common Pleas of Philadelphia County by Frazier against his late partner and attorney, Bruce Wright, alleging legal malpractice. The two actions against the Company were F-10 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS dismissed for failure to join an indispensable party. The appellate court squashed Frazier's appeal of that dismissal as premature until judgment is entered in the FRAZIER V. ESTATE OF WRIGHT case. In 1998, Frazier instituted an action in the Court of Common Pleas of Bucks County, PA asserting vague claims arising from the conveyance of the Bucks Property, which remain pending against the Company. Frazier has asserted claims against the Company and numerous other parties, including approximately 475 homeowners who currently reside on the Bucks Property. Frazier sought to eject the homeowners from their homes and regain possession of the Bucks Property. The Court has dismissed claims against the home-owners. Frazier still seeks damages of $84 million from the Company and from other defendants. In 1999, the Company moved to dismiss the Bucks County action on the grounds plaintiff's claim was time-barred; the Court denied the Company's motion to dismiss, without prejudice to renew such motions at a later date. After taking very little discovery in this case, and after permitting the court-ordered discovery deadline to expire, this year plaintiff attempted to open discovery. Many of the defendants and various non-parties either objected to or moved to quash discovery, and the Court responded by circumscribing plaintiff's right to take additional discovery. The Court has set forth a schedule for the submission of summary judgment and expert reports, and has stated that it expects to schedule the trial in this matter for October of 2003. The Company is vigorously defending the claims that have been asserted in the Bucks County action. (B) A tax assessment (the "Assessment") has been made by the Commonwealth of Massachusetts against a former wholly-owned subsidiary of the Company, which was dissolved in July 1990. The Massachusetts Department of Revenue (the "MDR") stated, in a notice dated February 15, 1992, that the amount due and owing was $1.2 million and it is believed that additional interest and/or penalties have been imposed with regard to the Assessment. On November 29, 1993, an Offer in Settlement (the "Offer") was forwarded to the MDR with respect to the Assessment which was rejected by the MDR on October 26, 1995, and there have been no subsequent developments on this matter since that date. The ultimate outcome of the Assessment cannot be determined at this time. F-11 EXHIBIT INDEX EXHIBIT NO. DOCUMENT NAME ----------- ------------- 22 Subsidiaries of the Company 99(i) Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. 99(ii) Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

LINCORP HOLDINGS INC 10-K