<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1995
------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
-------------- -------------
Commission file number 0-4408
---------------------------------
RESOURCE AMERICA, INC.
------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 72-0654145
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1521 Locust Street, Philadelphia, Pennsylvania 19102
-------------------------------------------------------
(Address of principal executive offices)
(215) 546-5005
--------------------------------
(Issuer's telephone number)
----------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 678,549
----------------------
<PAGE> 2
RESOURCE AMERICA, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) June 30, 1995, and
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 & 2
Consolidated Statement of Operations (Unaudited) - Three
Months and Nine Months Ended June 30, 1995, and 1994 . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows (Unaudited) - Nine
Months Ended June 30, 1995, and 1994. . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . 5 - 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
June 30, 1995, and September 30, 1994
================================================================================
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 2,960,623 $ 2,597,556
Accounts and notes receivable . . . . . . . . . . . . . . . . . . 886,245 1,136,656
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,621 135,614
Prepaid expenses and other current assets . . . . . . . . . . . . 254,983 115,345
----------- -----------
Total Current Assets . . . . . . . . . . . . . . . 4,241,472 3,985,171
PROPERTY AND EQUIPMENT
Oil and gas properties and equipment
(successful efforts) . . . . . . . . . . . . . . . . . . . . . . 28,951,450 28,682,497
Gas gathering and transmission facilities . . . . . . . . . . . . 1,510,496 1,485,323
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,093,425 1,018,609
----------- -----------
31,555,371 31,186,429
Less - accumulated depreciation, depletion,
and amortization . . . . . . . . . . . . . . . . . . . . . . . . (18,748,041) (17,841,564)
----------- -----------
Net Property and Equipment . . . . . . . . . . . 12,807,330 13,344,865
INVESTMENTS IN REAL ESTATE LOANS . . . . . . . . . . . . . . . . . . . 17,577,784 9,783,436
RESTRICTED CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,885,170 5,768,439
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,803,007 1,913,771
----------- -----------
$38,314,763 $34,795,682
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
June 30, 1995, and September 30, 1994
================================================================================
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade . . . . . . . . . . . . . . . . . . . . . $ 447,600 $ 739,777
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 202,964 160,807
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 265,833
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . 87,817 100,000
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . - -
Current portion of long-term debt . . . . . . . . . . . . . . . . 88,000 88,000
----------- -----------
Total Current Liabilities . . . . . . . . . . . . 906,381 1,354,417
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,561,075 8,627,014
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 890,000 674,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 1,000,000
authorized, none issued . . . . . . . . . . . . . . . . . . . . - -
Common stock, $.01 par value, 3,500,000
authorized shares, 817,912 issued and
outstanding shares (including 139,363
and 131,402 treasury shares) at June 30,
1995, and September 30, 1994, respectively . . . . . . . . . . . 8,179 8,179
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 19,214,210 19,136,420
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 9,782,232 7,979,509
Less cost of treasury shares . . . . . . . . . . . . . . . . . . . (2,533,040) (2,437,437)
Less loan receivable from ESOP . . . . . . . . . . . . . . . . . . (514,274) (546,420)
----------- -----------
Total Stockholders' Equity . . . . . . . . . . . . . . 25,957,307 24,140,251
----------- -----------
$38,314,763 $34,795,682
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Three Months and Nine Months Ended June 30, 1995, and 1994
================================================================================
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
-------------------------------- -----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Oil and gas production . . . . . . . $ 823,400 $ 802,936 $2,485,046 $2,280,541
Gas gathering and transmission . . . 98,061 83,502 295,101 267,402
Well services. . . . . . . . . . . . 225,124 276,120 739,946 853,414
Real estate finance. . . . . . . . . 1,983,164 1,477,067 4,439,813 2,178,099
Financial services . . . . . . . . . 127,766 64,597 298,498 277,759
Interest . . . . . . . . . . . . . . 9,178 21,077 102,084 46,533
------------ ----------- ----------- -----------
3,266,693 2,725,299 8,360,488 5,903,748
COSTS AND EXPENSES
Production and transmission. . . . . 369,147 343,830 1,178,987 1,002,463
Well services. . . . . . . . . . . . 186,399 219,206 591,847 643,310
Real estate finance. . . . . . . . . 296,215 51,784 654,841 160,840
Financial services . . . . . . . . . 45,799 53,611 140,851 160,299
Exploration. . . . . . . . . . . . . 45,651 287,018 105,609 589,614
General and administrative . . . . . 511,965 451,424 1,628,828 1,352,126
Depreciation and amortization. . . . 365,399 356,605 1,045,448 999,516
Interest . . . . . . . . . . . . . . 304,651 85,971 844,277 97,460
Other - net . . . . . . . . . . . . (3,121) 3,315 (3,632) 3,623
------------ ----------- ----------- -----------
2,122,105 1,852,764 6,187,056 5,009,251
------------ ----------- ----------- -----------
INCOME FROM OPERATIONS . . . . . . . . 1,144,588 872,535 2,173,432 894,497
OTHER INCOME
Gain on sale of property . . . . . . 2,749 - 1,291 2,390
------------ ----------- ----------- -----------
Income before income taxes . . . . . . 1,147,337 872,535 2,174,723 896,887
Benefit (provision) for income taxes . (218,000) 161,000 (372,000) 280,000
------------ ----------- ----------- -----------
NET INCOME . . . . . . . . . . . . . $ 929,337 $ 1,033,535 $ 1,802,723 $ 1,176,887
============ ============ ============ ===========
NET INCOME PER COMMON SHARE . . . . . . $ 1.17 $ 1.46 $ 2.39 $ 1.66
============ ============ =========== ==========
Weighted average common shares
outstanding . . . . . . . . . . . . . . 794,300 707,100 753,100 707,500
============ ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Nine Months Ended June 30, 1995, and 1994
================================================================================
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
---------------------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,802,723 $ 1,176,887
Adjustments to reconcile net income to net cash. . . . . .
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 1,045,448 999,516
Amortization of discount on senior note. . . . . . . . . 8,749 -
Property impairments and abandonments. . . . . . . . . . 38,500 529,253
Deferred income taxes. . . . . . . . . . . . . . . . . . 216,000 (280,000)
Gain on dispositions and investments . . . . . . . . . . (1,231,027) (1,098,159)
Change in operating assets and liabilities:
Decrease in accounts receivable. . . . . . . . . . . . 250,411 219,790
(Increase) decrease in prepaid expenses and
other current assets . . . . . . . . . . . . . . . . . (139,638) 52,300
Increase (decrease) in accounts payable. . . . . . . . (292,177) 93,571
Increase (decrease) in other current liabilities . . . (155,859) 152,204
Increase in inventory. . . . . . . . . . . . . . . . . (4,007) (13,352)
(Increase) decrease in other assets. . . . . . . . . . 23,918 (553,338)
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . 1,563,041 1,278,672
INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . (632,686) (404,566)
Proceeds from sale of properties and investments . . . . . 5,790,905 2,148,246
Increase in other assets . . . . . . . . . . . . . . . . . (32,107) (209,189)
Increase in investments in real estate loans . . . . . . . (12,142,822) (1,912,297)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . (7,016,710) (377,806)
FINANCING ACTIVITIES:
Short-term borrowings. . . . . . . . . . . . . . . . . . . 2,500,000 -
Long-term borrowings . . . . . . . . . . . . . . . . . . . 2,000,000 8,000,000
Decrease in other assets . . . . . . . . . . . . . . . . . 46,612 -
(Increase) decrease in restricted cash . . . . . . . . . . 3,883,268 (5,169,437)
Principal payments on debt . . . . . . . . . . . . . . . . (2,517,541) (15,549)
Purchase of treasury stock . . . . . . . . . . . . . . . . (95,603) (6,890)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . 5,816,736 2,808,124
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . 363,067 3,708,990
CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . 2,597,556 761,804
------------ -----------
CASH AT JUNE 30 . . . . . . . . . . . . . . . . . . . . . . . $ 2,960,623 $ 4,470,794
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accounting policies: Cash includes highly liquid investments with a maturity of three months or less.
Cash paid during the first nine months of 1995 for interest: $987,591
Cash paid during the first nine months of 1995 for federal income taxes: 168,182
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 1 - MANAGEMENT'S OPINION REGARDING INTERIM FINANCIAL STATEMENTS
In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair statement of the results of operations
for the interim period included herein have been made.
The accounting policies followed by the Company are set forth in Note
1 to the Company's consolidated financial statements for the fiscal year ended
September 30, 1994, included in the Company's Annual Report on Form 10-KSB.
NOTE 2 - TRANSACTIONS WITH RELATED PARTIES
During the first quarter of fiscal 1995, the Company acquired limited
partners' interests in various oil and gas partnerships for which the Company
served as the general partner. The aggregate purchase price of these
acquisitions was $178,000.
A law firm in which an officer of the Company holds "of counsel"
status provides legal services to the Company. The Company believes that such
services are provided on terms no less favorable to the Company than those
which would be obtainable from third parties providing similar services.
The Company holds real estate loans with respect to fourteen
properties owned by third parties. These properties are managed by a
corporation in which an officer of the Company is an officer and minority
shareholder. Management fees payable under the management agreements (which
the Company believes are competitive with fees charged by unrelated persons in
the areas in which the properties are located) are subordinated to receipt by
the Company of minimum required debt service payments under the loans.
Accordingly, the Company believes that the agreements are on terms more
favorable to the Company than those which could be obtained from third parties
providing similar services.
The Company maintains depository and investment accounts in a bank
subsidiary of JeffBanks, Inc., in which the Chairman of the Company serves as a
director. The Chairman's wife is a director and executive officer of
JeffBanks, Inc. The Company holds 5,000 shares of JeffBanks' 8% Series E
convertible preferred stock with a book cost of $100,000 and a current market
value of $150,000. During the first quarter of fiscal 1995, the Company
borrowed $2,500,000 from Jefferson Bank, a subsidiary of JeffBanks, Inc. which
was repaid in the second quarter of fiscal 1995. The Company believes that
the terms of the loan were no less favorable to the Company or the bank than
those which would be obtainable from unrelated financial institutions.
5
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
-------------- ---------------
<S> <C> <C>
Mortgage note payable to a bank, secured by real
estate, monthly installments of approximately $4,000
including interest at 3/4% above the prime rate through
May 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 247,719 $ 265,262
Employee Stock Ownership loan payable to a bank, 20
equal semiannual installments of $32,143 and quarterly
payments of interest at 84% of the prime rate through
July 1996, at which time the rate converts to 1/2%
above the prime rate through 2003 . . . . . . . . . . . . . . . . 514,274 546,419
9.5% senior secured note payable, interest due semi-
annually, principal due May 2004 . . . . . . . . . . . . . . . . . 7,910,832 7,903,333
Loan guarantee, interest due monthly, principal due
December 2004 (referred to below) . . . . . . . . . . . . . . . . 1,976,250 -
------------ -------------
10,649,075 8,715,014
Less amounts payable in one year . . . . . . . . . . . . . . . . . 88,000 88,000
------------ -------------
$ 10,561,075 $ 8,627,014
============ =============
</TABLE>
The long-term debt maturing over the next five years is as follows:
1996 - $88,000; 1997 - $91,000; 1998 - $94,000; 1999 - $97,000; and 2000 -
$101,000.
In May 1994, the Company privately placed an $8,000,000 senior secured
note and immediately exercisable detachable warrants with an insurance company.
The warrants grant the holder the right to purchase, at any time through May
24, 2004, 160,000 shares, subject to adjustment, of the Company's common stock
at an exercise price of $9.50 per share. The value assigned to the warrants
($100,000) has been accounted for as paid-in capital, resulting in a discount
which is being amortized on a straight-line basis over the life of the note.
The senior secured note payable is collateralized by substantially all
of the Company's oil and gas properties and certain of the Company's real
estate loans. Certain credit agreements require the Company to comply with
certain restrictive covenants. At June 30, 1995, the Company was in compliance
with such covenants.
The loan guarantee results from a transaction which closed in December
1994, pursuant to which the Company purchased for $1,650,000 a note and
mortgage in the original principal amount of $3,000,000 which were resold to an
insurance company for $2,000,000. In connection with the resale, the Company
guaranteed that the holder would receive a return of the $2,000,000 invested
plus a specified rate of interest, and in addition issued to the holder
warrants to purchase 40,000 shares of the Company's common stock at a price of
$9.50 per share, the market price of the Company's common stock at that time.
The Company treated the sale and guaranty transaction, for accounting purposes,
as a loan to the Company.
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 4 - FORMATION OF LIMITED PARTNERSHIPS
In 1989 and 1990, the Company sponsored two pipeline income program
limited partnerships (the "1989 Program" and "1990 Program") which purchased
pipeline systems from the Company.
The Company had guaranteed that the limited partners in these programs
would receive cash distributions during each of the first two years of the
operation of the programs equal to 12% of their capital contributions to the
programs. To the extent that cash flow to the programs was less than 12%, the
Company contributed sufficient capital to allow the guaranteed distributions to
the limited partners to be made. The Company believes the amount contributed
for such distributions ($693,000), for which it is entitled to be repaid on a
preferential basis upon termination of the programs, will be realized upon
final disposition of the pipelines.
The limited partners in both programs have the right to sell their
interests in the programs to the Company following the fifth anniversary of the
respective program's closing at a price equal to 4.5 times the cash flow per
unit during the fifth year of partnership operations, subject to a maximum sale
price of $50,000 per unit. The limited partners may also cause the sale of the
pipelines after the fifth year of the respective partnership's operations.
During the first half of fiscal 1995, in accordance with the terms of the 1989
Pipeline Income Program limited partnership agreement, the Company fully
satisfied its obligation to repurchase units tendered by limited partners of
the Program by repurchasing 20 units, out of a total of 91 units available, for
a total cost of $240,000. Similar offers will be made during fiscal 1996 to
limited partners in the 1990 Pipeline Income Program to repurchase their
interests in that program. The Company cannot now predict the cost per unit,
nor the number of units out of a total of 57 available, that will be
repurchased.
NOTE 5 - INVESTMENTS IN REAL ESTATE LOANS
At June 30, 1995, the Company held real estate loans having an
aggregate face value of $43,446,000, which were being carried at an aggregate
cost of $17,577,784.
Investments in Real Estate Loans at June 30 consists of:
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
-------------- ---------------
<S> <C> <C>
Subordinated wraparound note, face value of $4,500,000,
secured by residential real estate located in Pittsburgh,
PA, interest at 14.5%, due October 31, 1998 . . . . . . . . . . . $2,025,114 $2,025,114
Mortgage note, face value of $1,080,000, secured
by residential real estate located in Philadelphia, PA,
interest at 12%, due October 31, 1998. In June 1995, the
Company sold a senior participation in this mortgage for
$600,000, resulting in a gain of $100,000 and a face value
due the Company of $480,000 . . . . . . . . . . . . . . . . . . . 130,680 467,280
</TABLE>
7
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
<TABLE>
<S> <C> <C>
Mortgage note, face value of $1,312,000, secured
by residential real estate located in Philadelphia, PA,
interest at 2 1/2% over the monthly national median
annualized cost of funds for SAIF-insured institutions as
announced by the Federal Deposit Insurance Corporation,
due October 31, 1998. In June 1995, the Company sold a
senior participation in this mortgage for $896,000, resulting
in a gain of $209,000 and a face value due the Company of
$416,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,204 803,977
Mortgage note, face value of $4,234,000, secured
by commercial real estate located in Pittsburgh, PA,
interest at 10.6%, due October 31, 1998. In June 1995,
the Company sold a senior participation in this mortgage for
$840,000, resulting in a gain of $416,000 and a face value due
the Company of $3,394,000 . . . . . . . . . . . . . . . . . . . . 636,110 1,072,606
Mortgage note, face value of $4,629,000, secured
by commercial real estate located in Alexandria, VA,
interest at 1/2% over the Maryland National Bank
prime rate, due October 31, 1998 . . . . . . . . . . . . . . . . . - 2,132,921
Note, face value of $4,116,000, relating to real
estate located in Alexandria, VA, interest at 1/2%
over the Maryland National Bank prime rate, due
October 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . 1,422,812 -
Wraparound note, face value of $12,000,000 consisting
of a first mortgage held by the Company of $9,000,000
secured by commercial real estate located in Washington,
D.C., and a $3,000,000 second mortgage held by an
unrelated party, interest at 12%, due November 30,
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 -
Mortgage note, face value of $1,211,000, secured
by residential real estate located in Philadelphia, PA,
interest at 3% over the Federal Home Loan Bank of
Pittsburgh rate, due September 2, 1999. In June 1995,
the Company sold a senior participation in this mortgage for
$600,000, resulting in a gain of $226,000 and a face
value due the Company of $611,000 . . . . . . . . . . . . . . . . 99,032 350,000
Mortgage note, face value of $900,000, secured by
commercial real estate located in Washington, D.C.,
interest at 1 1/2% over the First Union National
Bank rate, due September 30, 1999. In June 1995,
the Company sold a senior participation in this mortgage for
$685,000, resulting in a gain of $76,000 and a face
value due the Company of $215,000 . . . . . . . . . . . . . . . . 267,639 -
</TABLE>
8
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
<TABLE>
<S> <C> <C>
Mortgage notes, face value of $1,485,000, secured
by residential real estate located in Philadelphia, PA,
interest at 2% over the Mellon Bank prime rate, due
October 31, 1999 . . . . . . . . . . . . . . . . . . . . . . 1,370,819 -
Mortgage notes, face value of $1,962,000, secured
by residential real estate located in Philadelphia, PA,
varying interest rates from 9 1/2% to 14.5%, due
December 2, 1999. In June 1995, the Company sold a
senior participation in this mortgage for $1,160,000,
resulting in a gain of $380,000 and a face value due the
Company of $802,000 . . . . . . . . . . . . . . . . . . . . 150,890 -
Mortgage note, face value of $3,000,000, secured by
commercial real estate located in Pasadena, CA, interest
at 2.75% over the average cost of funds to FSLIC-
insured savings and loan associations, 11th District
(but not less than 5.5% nor greater than 15.5%), due
May 1, 2001 . . . . . . . . . . . . . . . . . . . . . . . . 1,671,695 -
Mortgage note, face value of $4,389,000, secured
by residential real estate located in Philadelphia, PA,
interest at 2% over the yield of one-year United States
Treasury securities, due July 31, 1998 . . . . . . . . . . . - 1,330,198
Note, face value of $3,559,000, secured by an unrecorded
deed on real estate located in Philadelphia, PA, interest
at 2% over the yield of one-year United States Treasury
securities, due February 1, 2002 . . . . . . . . . . . . . . . 724,422 -
Mortgage note, face value of $1,798,000, secured by
residential real estate located in Margate, NJ, interest
at the Chase Manhattan Bank prime rate (but not less
than 9% nor greater than 15.5%), due January 1,
2003. In June 1995, the Company sold a senior participation
in this mortgage for $685,000, resulting in a gain of $92,000
and a face value due the Company of $1,113,000 . . . . . . . . 409,171 985,364
Note, face value of $1,776,000, secured by a judgment
lien, relating to real estate located in St. Cloud, MN,
interest at 10%, due December 31, 2014 . . . . . . . . . . . . 489,196 615,976
------------ -----------
$ 17,577,784 $ 9,783,436
============ ===========
</TABLE>
As referenced above, in June 1995, the Company sold senior participations in
seven real estate loans to an insurance company, pursuant to which the Company
guaranteed that the insurance company would receive a return of its investment
plus a specified rate of interest. In addition, the Company issued to the
insurance company warrants to purchase 84,465 shares of the Company's common
stock at the then market price of $11.75 per share.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
A comparison of the Company's revenues, daily production volumes, and
average sales prices follows:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- -----------------------
REVENUES (in thousands) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gas $ 610 $ 656 $1,986 $1,908
Oil 190 130 452 327
PRODUCTION VOLUMES
-----------------------------------------------------------------------------------------
Gas (Mcf/day) 2,914 2,819 3,088 2,819
Oil (Bbls/day) 119 97 98 81
AVERAGE SALES PRICE
-----------------------------------------------------------------------------------------
Gas (per Mcf) $ 2.30 $ 2.56 $ 2.36 $ 2.48
Oil (per Bbl) 17.58 14.63 16.96 14.82
</TABLE>
Natural gas revenues decreased 7% for the quarter and increased 4% for
the nine months ended June 30, 1995, compared to the same periods a year ago.
Production volumes increased 4% for the quarter and 10% for the nine months.
Production volumes in the Company's Ohio fields of operation increased 17% for
the quarter and 24% for the nine months compared to the same periods of the
prior year, as a result of the acquisition of additional interests in existing
wells from limited partners and other third parties. The Company spent
$623,000 in the fourth quarter of fiscal 1994 and $178,000 in the first quarter
of fiscal 1995 to acquire these interests. The Company also participated in
the drilling of three successful wells during fiscal 1994 and the first three
quarters of fiscal 1995 which have recently begun production. The Company
intends to participate in the drilling of additional wells during the remainder
of fiscal 1995 in both Ohio and New York. Production volumes in the Company's
New York fields of operation were down 26% for the quarter and 16% for the nine
months ended June 30, 1995, due to the natural decline in production from
existing wells. The net increase in total natural gas volumes was offset by a
decrease in the average price received by the Company--gas prices fell 10% for
the quarter and 5% for the nine months ended June 30, 1995, compared to the
same periods a year ago.
Oil revenues increased 46% for the quarter and 38% for the nine months
ended June 30, 1995, compared to the same periods a year ago. Production
volumes increased 22% for the quarter and 21% for the nine months ended June
30, 1995, as a result of the acquisitions mentioned above. The average price
received for oil increased 20% for the quarter and 14% for the nine months
ended June 30, 1995.
The Company's revenues have been and will continue to be affected by
changes in oil and gas prices. The Company is unable to control or accurately
predict these changes in prices. The Company's proved developed reserves are
predominantly natural gas.
Gas gathering and transmission revenues increased 17% for the quarter
and 10% for the nine months ended June 30, 1995, from the same periods a year
ago. This increase resulted primarily from the repurchase of limited
partnership interests in a pipeline operated by the Company (see Note 4).
Well services revenues decreased 18% for the quarter and 13% for the
nine months ended June 30, 1995, as compared to the same periods a year ago, as
a result of a decrease in the number of wells operated for limited partners.
10
<PAGE> 13
Real estate finance revenues represent interest earned and gains
recognized on real estate loans owned by the Company. Through fiscal 1994, the
Company had invested $9,783,000 in nine loans (see Note 5). During the first
six months of fiscal 1995, the Company invested $12,985,000 in five loans. In
addition, the Company added $508,000 and $767,000 to existing loans in the
quarter and nine months ended June 30, 1995, respectively. By selling
participation interests in seven loans during the third quarter of fiscal 1995,
the Company received $5,431,000 in cash and recognized $1,230,000 in gains.
The Company intends to pursue similar real estate investment opportunities as
they become available to the extent allowed by the Company's investment
capability.
Financial services revenues increased 98% for the quarter and 7% for
the nine months ended June 30, 1995, as compared to the prior period. The
increase for the quarter was the result of a delay in timing of financial and
tax reporting services provided to certain oil and gas partnerships as compared
to the prior year.
Interest income decreased for the quarter and increased for the nine
months ended June 30, 1995, as compared to the prior periods. These
fluctuations are due to changes in the amount of funds temporarily invested.
COSTS AND EXPENSES
Production and transmission expenses increased 7% for the quarter and
18% for the nine months ended June 30, 1995. These increases were primarily
attributable to the acquisition of limited partners' interests in oil and gas
partnerships for which the Company serves as the general partner and increased
workover costs in the Company's Ohio fields of operation. Production costs as
a percentage of oil and gas revenues were constant at 42% for the quarter and
increased from 42% to 46% for the nine months ended June 30, 1995, as compared
to similar periods of the prior year.
Real estate finance expenses rose significantly for both the quarter
and nine months ended June 30, 1995, as compared to the same periods a year
ago. These increases are the result of higher legal and personnel costs
associated with the growth of the Company's real estate activities.
Exploration costs decreased significantly for both the quarter and
nine months ended June 30, 1995, as compared to the same periods a year ago due
to property impairments of approximately $529,000 in the prior year versus
$38,500 in the current year.
General and administrative expenses increased 13% in the quarter and
20% in the nine months ended June 30, 1995, as compared to the same periods of
the prior year. These increases are a result of the payment of incentive
compensation and a reduction in administrative fees earned. Administrative
fees charged to wells operated by the Company represent a direct reduction to
the Company's general and administrative expense. The number of wells operated
for third parties by the Company has decreased as compared to the prior year as
a result of the liquidation of some partnerships in which the Company earned
fees associated with its duties as general partner.
Depreciation and amortization consists primarily of amortization of
oil and gas properties. Amortization of oil and gas properties as a percentage
of oil and gas revenues decreased from 33% to 31% in the third quarter of
fiscal 1995, and from 32% to 29% for the nine months ended June 30, 1995,
compared to the same periods in the prior year. This variance is attributable
to changes in the Company's oil and gas reserve quantities, product prices, and
fluctuations in the depletable cost basis of oil and gas properties.
11
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
Funds provided by operations and funds borrowed under long-term and
short-term debt have been the principal sources of working capital during the
past two fiscal years. Total funds provided increased $284,000 or 22%. The
increase in funds provided are primarily attributable to an increase in net
income for fiscal 1995 as compared to the prior year.
The Company invested $12,985,000 in the acquisition of five real
estate loans and advanced $767,000 on existing loans held by the Company during
the first nine months of fiscal 1995 as compared to the investment of
$1,168,000 during the similar prior period. In addition, participation
interests were sold in seven loans generating $5,431,000 in cash for the
Company. As a result, the Company's cash used in investing activities
increased $6,639,000 during the first nine months of fiscal 1995, as compared
to the prior year.
The Company's cash flow provided by financing activities increased
$3,009,000 during the first nine months of fiscal 1995 as compared to the prior
year. This increase was a result of the sale of a $2,000,000 note and the
release for corporate investment purposes of $3,925,000 in previously
restricted cash serving as partial collateral security for the Company's
$8,000,000 senior secured note. In order to complete these transactions, the
Company has pledged substantially all of its energy and real estate assets and
certain of its real estate loans as collateral (see Note 3).
The Company's capital spending is predominantly discretionary--the
ultimate level of spending will depend on, among other things, the Company's
assessment of investment opportunities in the energy and real estate finance
industries. In energy, the Company will seek to add to its reserve base
through selected acquisition of producing properties and further development of
the Company's mineral interests. In real estate, the Company will continue to
expand its real estate loan portfolio as, and when, economically attractive
opportunities become available. To the extent required by its capital
investments, the Company will seek new financing or additional sources of
funding.
12
<PAGE> 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Warrant to Purchase 49,275 Shares of Common Stock of Resource
America, Inc., Issued to Physicians Insurance Company of Ohio
dated June 1, 1995
10.2 Warrant to Purchase 35,190 Shares of Common Stock of Resource
America, Inc., Issued to Physicians Insurance Company of Ohio
dated June 20, 1995
11.1 Calculation of Primary and Fully Diluted Earnings per Share
27 Financial Data Schedule
</TABLE>
b) Reports on Form 8-K:
There were no Reports on Form 8-K filed by the Company for the
quarter ending June 30, 1995.
13
<PAGE> 16
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.
RESOURCE AMERICA, INC.
(Registrant)
Date August 11, 1995 By /s/ Michael L. Staines
---------------------------- --------------------------------------
Michael L. Staines
Senior Vice President and Secretary
Date August 11, 1995 By /s/ Nancy J. McGurk
----------------------------- --------------------------------------
Nancy J. McGurk
Vice President - Finance and Treasurer
14
<PAGE> 1
Exhibit 10.1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
VOID AFTER 5:00 P.M. PHILADELPHIA TIME ON JUNE 1, 2005 OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
WARRANT TO PURCHASE
49,275
SHARES OF COMMON STOCK
OF
RESOURCE AMERICA, INC.
This Certifies that, for good and valuable consideration, Physicians
Insurance Company of Ohio, and its registered, permitted assigns (collectively,
the "Warrantholder"), is entitled to purchase from Resource America, Inc., a
corporation incorporated under the laws of the State of Delaware (the
"Company"), subject to the terms and conditions hereof, at any time or after
9:00 A.M., Philadelphia time, on June 1, 1995, and before 5:00 P.M.,
Philadelphia time, on June 1, 2005 (or, if such day is not a Business Day, at
or before 5:00 P.M., Philadelphia time, on the next following Business Day),
the number of fully paid and non-assessable shares of Common Stock of the
Company stated above at the Exercise Price (as defined herein). The Exercise
Price and the number of shares purchasable hereunder are subject to adjustment
from time to time as provided in Article III hereof.
ARTICLE I
Section 1.01. Definition of Terms. As used in this Warrant, the following
capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other day on which
banks in the Commonwealth of Pennsylvania are authorized by law to remain
closed.
(b) Common Stock: Common Stock, $.01 par value per share, of the Company.
(c) Common Stock Equivalents: Securities that are convertible into or
exercisable for shares of Common Stock.
(d) Exchange Act: The Securities Exchange Act of 1934, as amended.
(e) Exercise Price: $11.75 per Warrant Share, as such price may be adjusted
from time to time pursuant to Article III hereof.
<PAGE> 2
(f) Expiration Date: 5:00 P.M., Philadelphia time, on June 1, 2005 or if
such day is not a Business Day, the next succeeding day which is a Business
Day.
(g) Holder: Any person owning or having a right to acquire Warrant Shares
or any assignee thereof.
(h) NASD: National Association of Securities Dealers, Inc. and NASDAQ:
NASD Automatic Quotation System.
(i) Person: An individual, partnership, joint venture, corporation, trust,
unincorporated organization or government or any department or agency thereof.
(j) Piggyback Registration: See Article IV.
(k) Registered Securities: Any Registrable Securities which have been
included in an effective Registration Statement pursuant to the terms of
Article IV hereof.
(l) Registrable Securities: Any Warrant Shares issued to Physicians
Insurance Company of Ohio and/or its designees or transferees as permitted
under Section 6.02 and/or other securities that may be or are issued by the
Company upon exercise of this Warrant, including those which may thereafter be
issued by the Company in respect of any such securities by means of any stock
splits, stock dividends, recapitalizations, reclassifications or the like, and
as adjusted pursuant to Article III hereof; provided, however, that as to any
particular security contained in Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a Registration Statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such Registration Statement; or (ii) they shall have been sold to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act; or (iii) they shall have been sold, assigned or otherwise transferred
except as permitted by Section 6.02 below.
(m) Registration Statement: Any registration statement of the Company filed
or to be filed with the Securities and Exchange Commission which covers any of
the Registrable Securities pursuant to the provisions of this Warrant,
including all amendments (including post-effective amendments) and supplements
thereto, all exhibits thereto and all material incorporated therein by
reference.
(n) Securities Act: The Securities Act of 1933, as amended.
-2-
<PAGE> 3
(o) Transfer: See Section 6.02.
(p) Warrant: This Warrant and all other warrants that may be issued in its
or their place, together evidencing the right to purchase an aggregate of
49,275 shares of Common Stock as the same may be adjusted pursuant to this
Warrant.
(q) Warrantholder: The person(s) or entity(ies) to whom this Warrant is
originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose.
(r) Warrant Shares: Common Stock, Common Stock Equivalents and other
securities purchased or purchasable upon exercise of the Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.01. Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after 9:00 A.M., Philadelphia time,
on June 1, 1995, and before 5:00 P.M., Philadelphia time, on the Expiration
Date. If this Warrant is not exercised on the Expiration Date, it shall become
void, and all rights hereunder shall thereupon cease.
Section 2.02. Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, in whole or in part, by
presentation and surrender of this Warrant to the Company at its principal
corporate office or at the office of its stock transfer agent, if any, with the
Subscription Form annexed hereto duly executed and accompanied by payment of
the full Exercise Price for each Warrant Share to be purchased.
(b) Upon receipt of this Warrant with the Subscription Form fully executed
and accompanied by payment of the aggregate Exercise Price for the Warrant
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates for the total number of whole shares of Common Stock
for which this Warrant is being exercised (adjusted to reflect the effect of
the anti-dilution provisions contained in Article III hereof, if any, and as
provided in Section 2.04 hereof) in such denominations as are requested for
delivery to the Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder. The Warrantholder shall be deemed to be the
holder of record of the shares of Common Stock
-3-
<PAGE> 4
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Warrantholder. At
the time this Warrant is exercised, the Company may require the Warrantholder
to make such representations, and may place such legends on certificates
representing the Warrant Shares, as may be reasonably required in the opinion
of counsel to the Company to permit the Warrant Shares to be issued in
compliance with the Securities Act.
(c) In case the Warrantholder shall exercise this Warrant with respect to
less than all of the Warrant Shares that may be purchased under this Warrant,
the Company shall execute a new warrant in the form of this Warrant for the
balance of such Warrant Shares and deliver such new warrant to the
Warrantholder.
(d) The Company shall pay any and all stock transfer and similar taxes which
may be payable in respect of the issue of any Warrant Shares to the Holder of
the Warrant being exercised.
Section 2.03. Reservation of Shares. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of shares of Common Stock or other shares of capital stock
of the Company from time to time issuable upon exercise of this Warrant. All
such shares shall be validly issued, fully paid and nonassessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights.
Section 2.04. Fractional Shares. The Company shall not be required to issue
any fraction of a share of its capital stock in connection with the exercise of
this Warrant, and in any case where the Warrantholder would, except for the
provisions of this Section 2.04, be entitled under the terms of this Warrant to
receive a fraction of a share upon the exercise of this Warrant, the Company
shall, upon the exercise of this Warrant and receipt of the Exercise Price,
issue the largest number of whole shares purchasable upon exercise of this
Warrant. The Company shall not be required to make any cash or other
adjustment in receipt of such fraction of a share to which the Warrantholder
would otherwise be entitled.
Section 2.05. Adjustment Upon Reorganization of the Company. If at any time
prior to the exercise of this Warrant in full, a reorganization of the Company
occurs and two classes of common stock are created that have substantially
identical rights and preferences except for voting and conversion rights, with
such difference as to voting rights being that Class A Common Stock
-4-
<PAGE> 5
will be entitled to elect directors in proportion to the number of outstanding
Class A shares (relative to the number of Class B shares) except that Class A
will be entitled to one less director than Class B, this Warrant shall
immediately and without further action convert into a Warrant entitling the
Warrantholder to purchase the same number of shares of the Class A Common
Stock as are represented hereby and this Warrant shall thereafter cease to
represent the right to purchase shares of Common Stock. The form of this
Warrant need not be changed because of any such adjustment described in this
Section 2.05, and Warrants theretofore or thereafter issued may continue to
express the same price, number and other terms as are stated in this
Warrant, as initially issued.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be subject
to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01. Mechanical Adjustments.
(a) If at any time prior to the exercise of this Warrant in full, the
Company shall (i) declare a dividend or make a distribution on the Common Stock
payable in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class); (ii) subdivide, reclassify or recapitalize
its outstanding Common Stock into a greater number of shares; (iii) combine,
reclassify or recapitalize its outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of its capital stock by reclassification of
its Common Stock (including any such reclassification in connection with a
consolidation or a merger in which the Company is the continuing corporation),
the Exercise Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it or he would have owned upon such
exercise and been entitle to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Paragraph 3.01(a) shall be made immediately after the record
date, in the case of a dividend or distribution, or the effective date, in the
case of a subdivision, combination, reclassification or recapitalization, to
allow the purchase of such aggregate number and kind of shares.
-5-
<PAGE> 6
(b) If at any time prior to the exercise of this Warrant in full, the
Company shall (i) issue or sell any Common Stock or Common Stock Equivalents
without consideration or for consideration per share less than the Exercise
Price in effect immediately prior to the date of such issuance or sale (other
than issuances of securities upon the exercise of options granted under the
Company's currently existing stock option plans or upon the exercise of other
currently outstanding options) or (ii) fix a record date for the issuance of
subscription rights, options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase Common Stock (or Common Stock
Equivalents) at a price (or having an exercise or conversion price per share)
less than the Exercise Price in effect immediately prior to the record date
described below, the Exercise Price shall be adjusted so that the Exercise
Price shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such sale or issuance (which date in
the event of distribution to shareholders shall be deemed to be the record date
set by the Company to determine shareholders entitled to participate in such
distribution) by a fraction, the numerator of which shall be (i) the number of
shares of Common Stock outstanding on the date of such sale or issuance, plus
(ii) the number of additional shares of Common Stock which the aggregate
consideration received by the Company upon such issuance or sale (plus the
aggregate of any additional amount to be received by the Company upon the
exercise of such subscription rights, options or warrants) would purchase at
such current Exercise Price per share of the Common Stock; and the denominator
of which shall be (i) the number of shares of Common Stock outstanding on the
date of such issuance or sale, plus (ii) the number of additional shares of
Common Stock offered for the subscription or purchase (or into which the Common
Stock Equivalents so offered are exercisable or convertible). Any adjustments
required by this paragraph 3.01(b) shall be made immediately after such
issuance or sale or record date, as the case may be. Such adjustments shall be
made successively whenever such event shall occur. To the extent that shares
of Common Stock (or Common Stock Equivalents) are not delivered after the
expiration of such subscription rights, options or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights, options or warrants been
made upon the basis of delivery of only the number of shares of Common Stock
(or Common Stock Equivalents) actually delivered.
(c) If at any time prior to the exercise of this Warrant in full, the
Company shall fix a record date for the issuance or distribution to all holders
of the Common Stock (including any such distribution to be made in connection
with a consolidation or merger in which the Company is to be the continuing
-6-
<PAGE> 7
corporation) of evidences of its indebtedness, any other securities of the
Company or any cash, property or other assets (excluding a combination,
reclassification or recapitalization referred to in Section 3.01(a), regular
cash dividends or cash distributions paid out of net profits legally available
therefor and in the ordinary course of business or subscription rights, options
or warrants for Common Stock or Common Stock Equivalents (excluding those
referred to in Section 3.01(b) (any such non-excluded event being herein called
a "Special Dividend")), (i) the Exercise Price shall be decreased immediately
after the record date for such Special Dividend to a price determined by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the Exercise Price in effect on such record date less the fair
market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock or
of such subscription rights or warrants applicable to one share of Common Stock
and the denominator of which shall be such Exercise Price then in effect and
(ii) the number of shares of Common Stock subject to purchase upon exercise of
this Warrant shall be increased to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Special Dividend by a fraction, the numerator of which shall be the Exercise
Price in effect immediately before such Special Dividend and the denominator of
which shall be the Exercise Price in effect immediately after such Special
Dividend. Any adjustment required by this Section 3.01(c) shall be made
successively whenever such a record date is fixed and in the event that such
distribution is not so made, the Exercise Price shall again be adjusted to be
that in effect immediately prior to such record date.
(d) If at any time prior to the exercise of this Warrant in full, the
Company shall make a distribution to all holders of the Common Stock or stock
of a subsidiary or securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the Exercise Price or the number of Warrant
Shares purchasable upon the exercise of this Warrant, each Warrantholder, upon
the exercise hereof at any time after such distribution, shall be entitled to
receive from the Company, such subsidiary or both, as the Company shall
determine, the stock or other securities to which such Warrantholder would have
been entitled if such Warrantholder had exercised this Warrant immediately
prior thereto, all subject to further adjustment as provided in this Article
III, and the Company shall reserve, for the life of the Warrant, such
securities of such subsidiary or other corporation; provided, however, that no
adjustment in respect of dividends or interest on such stock or other
securities shall be made during the term of this Warrant or upon its exercise.
-7-
<PAGE> 8
(e) (i) If at any time prior to the exercise of this Warrant in full, the
Company shall issue securities upon the exercise of options, warrants or other
Common Stock Equivalents granted under any stock option plan of the Company
(except with respect to up to 2,000 shares of Common Stock issuable in
connection with the Company's existing stock option plan) created after the
date of the issuance of this Warrant, then, in addition to the adjustment in
Exercise Price required by Section 3.01(b) hereof, if any, the aggregate number
of shares of Common Stock issuable hereunder shall be increased to that number
of shares which is in the same ratio to the number of shares issuable prior to
the exercise giving rise to the need for adjustment hereunder as the number of
shares of Common Stock outstanding immediately prior to the exercise giving
rise to the need for adjustment hereunder is to the number of shares of Common
Stock outstanding immediately after such exercise.
(ii) Except in the case of a transaction requiring an adjustment pursuant
to Section 3.01(e)(i) above, whenever the Exercise Price payable upon exercise
of this Warrant is adjusted pursuant to paragraph (a), (b) or (c) of this
Section 3.01, the Warrant Shares shall simultaneously be adjusted by
multiplying the number of Warrant Shares initially issuable upon exercise of
each Warrant by the Exercise Price in effect on the date thereof and dividing
the product so obtained by the Exercise Price, as adjusted.
(f) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($.05)
in such price; provided, however, that any adjustments which by reason of this
paragraph (f) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
3.01 shall be made to the nearest cent or the nearest one-hundredth of a share,
as the case may be. Notwithstanding anything in this Section 3.01 to the
contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
(g) In the event that at any time, as a result of any adjustment made
pursuant to Section 3.01(a), the Warrantholder shall become entitled to receive
any shares of capital stock of the Company other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of any Warrant
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Section 3.01(a) or this Section 3.01(g).
-8-
<PAGE> 9
(h) In the case of an issue of additional Common Stock or Common Stock
Equivalents for cash, the consideration received by the Company therefor
before deducting therefrom any discount or commission or other expenses paid by
the Company for any underwriting of, or otherwise in connection with, the
issuance thereof, shall be deemed to be the amount received by the Company
therefor. The term "issue" shall include the sale or other disposition of
shares held by or on account of the Company or in the treasury of the Company
but until so sold or otherwise disposed of such shares shall not be deemed
outstanding.
Section 3.02. Notices of Adjustment. Whenever the number of Warrant Shares
or the Exercise Price is adjusted as herein provided, the Company shall prepare
and deliver forthwith to the Warrantholder a certificate signed by an officer
of the Company setting forth the adjusted number of shares purchasable upon the
exercise of this Warrant and the Exercise Price of such shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which adjustment was made.
Section 3.03. No Adjustment for Dividends. Except as provided in Section
3.01 of this Warrant, no adjustment in respect of any cash dividends shall be
made during the term of this Warrant or upon the exercise of this Warrant.
Section 3.04. Preservation of Purchase Rights in Certain Transactions. In
case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than a subdivision or combination of
the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in case of any consolidation or merger of the Company with or
into another corporation (other than merger with a subsidiary in which the
Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in the
case of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, the Company shall, as a condition precedent to such transaction cause
such successor or purchasing corporation, as the case may be, to execute with
the Warrantholder an agreement granting the Warrantholder the right thereafter,
upon payment of the Exercise Price in effect immediately prior to such action,
to receive upon exercise of this Warrant the kind and amount of shares and
other securities and property which he would have owned or have been entitled
to receive after the happening of such reclassification, change, consolidation,
merger, sale or conveyance had this Warrant been exercised immediately prior to
such action. Such agreement shall
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provide for adjustments in respect of such shares of stock and other
securities and property, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article III. In the event
that in connection with any such reclassification, capital reorganization,
change, consolidation, merger, sale or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution of payment, in
whole or in part, for, or of, a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Article III. The provisions of this Section 3.04 shall
similarly apply to successive reclassifications, capital reorganizations,
consolidations, mergers, sales or conveyances.
Section 3.05. Form of Warrant After Adjustments. The form of this Warrant
need not be changed because of any adjustments in the Exercise Price or the
number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued.
ARTICLE IV
REGISTRATION UNDER THE SECURITIES ACT
Section 4.01. Demand Registration Rights.
(a) If the Company shall receive, at any time after the date hereof and
while the Company is a reporting company as defined in the Exchange Act, a
written request (the "Request") from the Warrantholder that the Company file a
Registration Statement under the Securities Act covering the registration of
the shares of Registrable Securities that are the subject of the Request (a
"Demand Registration"), then the Company shall, subject to the limitations of
Section 4.02, use its best efforts to effect as soon as practicable the
registration under the Securities Act in accordance with Subsection 4.02(a)
hereof, of all Registrable Securities which the Warrantholder requests be
registered within ninety (90) days of the Company's receipt of the Request.
(b) If the Warrantholder intends to distribute the Registerable Securities
covered by the Request by means of an underwriting, the Warrantholder shall so
advise the Company as a part of the Request. In such event, the Warrantholder
shall (together with the Company as provided in Section 4.02(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting which underwriters shall include a regional or
national underwriting
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firm which is a member in good standing of the National Association of
Securities Dealers, Inc.
(c) Notwithstanding the foregoing, if the Company shall furnish to the
Warrantholders a certificate, signed in good faith by the President of the
Company, stating that the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it therefore essential to defer
the filing of such registration statement, the Company shall have the right to
defer such filing for a period ending on the one hundred eightieth day after
the Company's receipt of the Request.
Section 4.02. Obligations of the Company. Whenever required under this
Warrant to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration Statement with respect to
such Registrable Securities and use its best efforts to cause such Registration
Statement to become effective, and, upon the request of the Warrantholder keep
such Registration Statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement.
(c) Furnish to Warrantholder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registered Securities owned by it.
(d) Use its best efforts to register and qualify the Registered Securities
under such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Warrantholder, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten public offering, enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
with the manager underwriter of such
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offering. The Warrantholder into and perform its obligations under such
agreement.
(f) Notify the Warrantholder in the event the Company has delivered
preliminary or final prospectuses to the Warrantholder and, after having done
so, such prospectus is amended to comply with the requirements of the
Securities Act. Upon such notification, the Warrantholder shall immediately
cease making offers of Registered Securities and return all prospectuses to the
Company. The Company shall promptly provide the Warrantholders with revised
prospectuses and, following receipt of the revised prospectuses, the
Warrantholder shall be free to resume making offers of the Registered
Securities.
(g) Furnish, at the request of the Warrantholder on the date that such
Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Warrant, if such securities are
being sold through underwriters, on the date that the Registration Statement
with respect to such securities become effective, (i) an opinion, dated such
date, of the counsel representing the Company for the customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Warrantholder and (ii) the letter dated such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the
Warrantholder.
Section 4.03. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Warrant with
respect to the Registrable Securities of the Warrantholder that shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities as shall
be required to effect the registration.
Section 4.04. Expenses of Demand Registration. All expenses (including
underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Subsection 6.01,
including (without limitation) all registration, filing and qualification fees,
printing and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of counsel for the
Warrantholder shall be borne by the Warrantholder.
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<PAGE> 13
Section 4.05. Piggyback Registration Rights.
(a) If at any time prior to the Expiration Date, the Company proposes to
register any of its stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely to (i) the sale of securities to
participants in a Company stock option plan, stock purchase plan, savings or
similar plan, or (ii) the sale of securities as part of an acquisition, merger
or exchange of stock or a registration on any form which does not include
substantially the same information as would be included in a Registration
Statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give the Holder of Registrable Securities written notice
of such registration. Upon the written request of the Holder given within
twenty (20) days after mailing of such notice by the Company in accordance with
Section 7.08, the Company shall use its best efforts, subject to the provisions
of Section 4.03, to cause to be registered under the Securities Act all of the
Registrable Securities that each Holder has requested to be registered;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 4.01(a) without obligation to
any holder.
(b) The Company is obligated to effect only two (2) such registrations of
Registrable Securities under this Section 4.05.
Section 4.06. Expenses of Piggyback Registration. The holder of Registrable
Securities shall bear an equitable portion of all expenses incurred in
connection with any registration, filing or qualification of Registrable
Securities with respect to all registrations pursuant to Section 4.05
including, without limitation, all registration, filing, and qualification
fees, printing and accounting fees relating or apportionable thereto,
disbursements of counsel and underwriting discounts and commissions relating to
the Registrable Securities.
Section 4.07. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 4.05 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by the Company, and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company.
Section 4.08. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any
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<PAGE> 14
controversy that might arise with respect to the interpretation or
implementation of this Warrant.
ARTICLE V
OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER
Section 5.01. No Rights as Shareholder; Notice to Warrantholder. Nothing
contained in this Warrant shall be construed as conferring upon the
Warrantholder or his, her or its transferee the right to vote or to receive
dividends or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as a shareholder of the Company.
Section 5.02. Warrantholder Rights in Offering. The Warrantholder shall
have the right to participate in any rights offering which may be undertaken by
the Company prior to the Expiration Date, on a pro rata basis with the holders
of the Company's Common Stock (including oversubscription rights), as if the
Warrantholder had exercised this Warrant prior to any such offering. For the
purposes of this Section 5.02, each share into which this Warrant may be
converted shall be deemed to be an outstanding share of the Company's Common
Stock.
Section 5.03. Lost, Stolen, Mutilated or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall,
in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
ARTICLE VI
SPLIT-UP, COMBINATION
EXCHANGE AND TRANSFER OF WARRANTS
Section 6.01. Split-Up, Combination, Exchange and Transfer of Warrants.
Subject to the provisions of Section 6.02 hereof, this Warrant may be split up,
combined or exchanged for another warrant or warrants containing the same terms
to purchase a like aggregate number of Warrant Shares. If the Warrantholder
desires to split up, combine or exchange this Warrant, he, she or it shall make
such request in writing delivered to the Company and shall surrender to the
Company this Warrant and any other Warrants to be so split up, combined or
exchanged. Upon any such surrender for split up, combination or exchange, the
Company
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<PAGE> 15
shall execute and deliver to the person entitled thereto a Warrant or Warrants,
as the case may be, as so requested. The Company shall not be required to
effect any split up, combination or exchange which will result in the issuance
of a Warrant entitling the Warrantholder to purchase upon exercise a fraction
of a share of Common Stock or a fractional Warrant. The Company may require
such Warrantholder to pay a sum sufficient to cover any expenses of the Company
(including fees of counsel to the Company), and any tax or governmental charge
that may be imposed, in connection with any split up, combination or exchange
of Warrants.
Section 6.02. Restrictions on Transfer. Neither this Warrant nor the
Warrant Shares may be disposed of or encumbered (any such action, a "Transfer")
other than to an affiliate of the Warrantholder, except with the written
consent of the Company which consent shall not be unreasonably withheld and
except, in all cases, including a Transfer to an affiliate, in accordance with
and subject to the provisions of the Securities Act and the rules and
regulations promulgated thereunder. If at the time of a Transfer, a
registration statement is not in effect to register this Warrant or the Warrant
Shares, the Company may require the Warrantholder to make such representations,
and may place such legends on certificates representing this Warrant, as may be
reasonably required in the opinion of counsel to the Company to permit a
Transfer without such registration. The Company may require any Warrantholder
requesting a transfer to pay a sum sufficient to cover the expenses of the
Company (including fees of counsel to the Company), and any tax or governmental
charge that may be imposed.
ARTICLE VII
OTHER MATTERS
Section 7.01. Successors and Assigns. All the covenants and provisions of
this Warrant by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder.
Section 7.02. No Inconsistent Agreements. The Company will not on or after
the date of this Warrant enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Warrantholder
in this Warrant or otherwise conflicts with the provisions hereof. The rights
granted to the Warrantholder hereunder do not in any way conflict with and are
not inconsistent with the rights granted to holders of the Company's securities
under any other agreements.
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<PAGE> 16
Section 7.03. Integration/Entire Agreement. This Warrant is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertaking, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Warrants. This Warrant supersedes all prior
agreements, and understandings between the parties with respect to such subject
matter.
Section 7.04. Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver of or consents to departure from the provisions hereof
may not be given unless the Company has obtained the written consent of the
Warrantholders whose Warrants entitle them to purchase a majority of the
outstanding Warrant Shares.
Section 7.05. Counterparts. This Warrant may be executed in any number of
counterparts, and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
Section 7.06. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Ohio.
Section 7.07. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
Section 7.08. Notice. Any notices or certificates by the Company to the
Warrantholder and by the Warrantholder to the Company shall be deemed delivered
if in writing and delivered in person or by registered mail (return receipt
requested) to the Warrantholder addressed to it at 13515 Yarmouth Drive, N.W.
Pickerington, OH 43147, or, if the Warrantholder has designated, by notice in
writing to the Company, any other address, to such other address; and if to the
Company, addressed to it at: Resource America, Inc., 1521 Locust Street, Suite
700, Philadelphia, Pennsylvania 19102, or, if the Company has designated, by
notice in writing to the Warrantholder, any other address, to such other
address.
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<PAGE> 17
The Company may change its address by written notice to the Warrantholder and
the Warrantholder may change its address by written notice to the Company.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under
its corporate seal as of the 2nd day of June, 1995.
Attest: RESOURCE AMERICA, INC.
By: /s/ SCOTT F. SCHAEFFER By: /s/ MICHAEL L. STAINES
-------------------------- ---------------------------
Scott F. Schaeffer, Michael L. Staines,
Assistant Secretary Senior Vice President
[CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 10.2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
VOID AFTER 5:00 P.M. PHILADELPHIA TIME ON JUNE 20, 2005 OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
WARRANT TO PURCHASE
35,190
SHARES OF COMMON STOCK
OF
RESOURCE AMERICA, INC.
This Certifies that, for good and valuable consideration, Physicians
Insurance Company of Ohio, and its registered, permitted assigns (collectively,
the "Warrantholder"), is entitled to purchase from Resource America, Inc., a
corporation incorporated under the laws of the State of Delaware (the
"Company"), subject to the terms and conditions hereof, at any time or after
9:00 A.M., Philadelphia time, on June 20, 1995, and before 5:00 P.M.,
Philadelphia time, on June 20, 2005 (or, if such day is not a Business Day,
at or before 5:00 P.M., Philadelphia time, on the next following Business Day),
the number of fully paid and non-assessable shares of Common Stock of the
Company stated above at the Exercise Price (as defined herein). The Exercise
Price and the number of shares purchasable hereunder are subject to adjustment
from time to time as provided in Article III hereof.
ARTICLE I
SECTION 1.01. DEFINITION OF TERMS. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) BUSINESS DAY: A day other than a Saturday, Sunday or other day
on which banks in the Commonwealth of Pennsylvania are authorized by law to
remain closed.
(b) COMMON STOCK: Common Stock, $.01 par value per share, of the
Company.
(c) COMMON STOCK EQUIVALENTS: Securities that are convertible
into or exercisable for shares of Common Stock.
(d) EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
(e) EXERCISE PRICE: $11.75 per Warrant Share, as such price may
be adjusted from time to time pursuant to Article III hereof.
<PAGE> 2
(f) EXPIRATION DATE: 5:00 P.M., Philadelphia time, on June 20,
2005 or if such day is not a Business Day, the next succeeding day which is a
Business Day.
(g) HOLDER: Any person owning or having a right to acquire Warrant
Shares or any assignee thereof.
(h) NASD: National Association of Securities Dealers, Inc. and
NASDAQ: NASD Automatic Quotation System.
(i) PERSON: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(j) PIGGYBACK REGISTRATION: See Article IV.
(k) REGISTERED SECURITIES: Any Registrable Securities which have
been included in an effective Registration Statement pursuant to the terms of
Article IV hereof.
(l) REGISTRABLE SECURITIES: Any Warrant Shares issued to
Physicians Insurance Company of Ohio and/or its designees or transferees as
permitted under Section 6.02 and/or other securities that may be or are issued
by the Company upon exercise of this Warrant, including those which may
thereafter be issued by the Company in respect of any such securities by means
of any stock splits, stock dividends, recapitalizations, reclassifications or
the like, and as adjusted pursuant to Article III hereof; provided, however,
that as to any particular security contained in Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such Registration Statement; or (ii) they shall have been
sold to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act; or (iii) they shall have been sold, assigned or otherwise
transferred except as permitted by Section 6.02 below.
(m) REGISTRATION STATEMENT: Any registration statement of the
Company filed or to be filed with the Securities and Exchange Commission which
covers any of the Registrable Securities pursuant to the provisions of this
Warrant, including all amendments (including post-effective amendments) and
supplements thereto, all exhibits thereto and all material incorporated therein
by reference.
(n) SECURITIES ACT: The Securities Act of 1933, as amended.
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<PAGE> 3
(o) TRANSFER: See Section 6.02.
(p) WARRANT: This Warrant and all other warrants that may be
issued in its or their place, together evidencing the right to purchase an
aggregate of 35,190 shares of Common Stock as the same may be adjusted pursuant
to this Warrant.
(q) WARRANTHOLDER: The person(s) or entity(ies) to whom this
Warrant is originally issued, or any successor in interest thereto, or any
assignee or transferee thereof, in whose name this Warrant is registered upon
the books to be maintained by the Company for that purpose.
(r) WARRANT SHARES: Common Stock, Common Stock Equivalents and
other securities purchased or purchasable upon exercise of the Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
SECTION 2.01. DURATION OF WARRANT. The Warrantholder may exercise this
Warrant at any time and from time to time after 9:00 A.M., Philadelphia time,
on June 20, 1995, and before 5:00 P.M., Philadelphia time, on the Expiration
Date. If this Warrant is not exercised on the Expiration Date, it shall become
void, and all rights hereunder shall thereupon cease.
SECTION 2.02. EXERCISE OF WARRANT.
----------------------------------
(a) The Warrantholder may exercise this Warrant, in whole or in
part, by presentation and surrender of this Warrant to the Company at its
principal corporate office or at the office of its stock transfer agent, if
any, with the Subscription Form annexed hereto duly executed and accompanied by
payment of the full Exercise Price for each Warrant Share to be purchased.
(b) Upon receipt of this Warrant with the Subscription Form fully
executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, the Company
shall cause to be issued certificates for the total number of whole shares of
Common Stock for which this Warrant is being exercised (adjusted to reflect the
effect of the anti-dilution provisions contained in Article III hereof, if any,
and as provided in Section 2.04 hereof) in such denominations as are requested
for delivery to the Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder. The Warrantholder shall be deemed to be the
holder of record of the shares of Common Stock
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issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Warrantholder. At
the time this Warrant is exercised, the Company may require the Warrantholder
to make such representations, and may place such legends on certificates
representing the Warrant Shares, as may be reasonably required in the opinion
of counsel to the Company to permit the Warrant Shares to be issued in
compliance with the Securities Act.
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased under this
Warrant, the Company shall execute a new warrant in the form of this Warrant
for the balance of such Warrant Shares and deliver such new warrant to the
Warrantholder.
(d) The Company shall pay any and all stock transfer and similar
taxes which may be payable in respect of the issue of any Warrant Shares to the
holder of the Warrant being exercised.
SECTION 2.03. RESERVATION OF SHARES. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company from time to time issuable upon exercise of this Warrant.
All such shares shall be validly issued, fully paid and nonassessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights.
SECTION 2.04. FRACTIONAL SHARES. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in receipt of such fraction of a share to which the Warrantholder
would otherwise be entitled.
SECTION 2.05. ADJUSTMENT UPON REORGANIZATION OF THE COMPANY. If at
any time prior to the exercise of this Warrant in full, a reorganization of the
Company occurs and two classes of common stock are created that have
substantially identical rights and preferences except for voting and conversion
rights, with such difference as to voting rights being that Class A Common
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<PAGE> 5
Stock will be entitled to elect directors in proportion to the number of
outstanding Class A shares (relative to the number of Class B shares) except
that Class A will be entitled to one less director than Class B, this Warrant
shall immediately and without further action convert into a Warrant entitling
the Warrantholder to purchase the same number of shares of the Class A Common
Stock as are represented hereby and this Warrant shall thereafter cease to
represent the right to purchase shares of Common Stock. The form of this
Warrant need not be changed because of any such adjustment described in this
Section 2.05, and Warrants theretofore or thereafter issued may continue to
express the same price, number and other terms as are stated in this Warrant,
as initially issued.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
SECTION 3.01. MECHANICAL ADJUSTMENTS.
-------------------------------------
(a) If at any time prior to the exercise of this Warrant in full,
the Company shall (i) declare a dividend or make a distribution on the Common
Stock payable in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares;
(iii) combine, reclassify or recapitalize its outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised in full immediately prior to such event, it or he
would have owned upon such exercise and been entitle to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this Paragraph 3.01(a) shall be
made immediately after the record date, in the case of a dividend or
distribution, or the effective date, in the case of a subdivision, combination,
reclassification or recapitalization, to allow the purchase of such aggregate
number and kind of shares.
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<PAGE> 6
(b) If at any time prior to the exercise of this Warrant in full,
the Company shall (i) issue or sell any Common Stock or Common Stock
Equivalents without consideration or for consideration per share less than the
Exercise Price in effect immediately prior to the date of such issuance or sale
(other than issuances of securities upon the exercise of options granted under
the Company's currently existing stock option plans or upon the exercise of
other currently outstanding options) or (ii) fix a record date for the issuance
of subscription rights, options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase Common Stock (or Common Stock
Equivalents) at a price (or having an exercise or conversion price per share)
less than the Exercise Price in effect immediately prior to the record date
described below, the Exercise Price shall be adjusted so that the Exercise
Price shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such sale or issuance (which date in
the event of distribution to shareholders shall be deemed to be the record date
set by the Company to determine shareholders entitled to participate in such
distribution) by a fraction, the numerator of which shall be (i) the number of
shares of Common Stock outstanding on the date of such sale or issuance, plus
(ii) the number of additional shares of Common Stock which the aggregate
consideration received by the Company upon such issuance or sale (plus the
aggregate of any additional amount to be received by the Company upon the
exercise of such subscription rights, options or warrants) would purchase at
such current Exercise Price per share of the Common Stock; and the denominator
of which shall be (i) the number of shares of Common Stock outstanding on the
date of such issuance or sale, plus (ii) the number of additional shares of
Common Stock offered for the subscription or purchase (or into which the Common
Stock Equivalents so offered are exercisable or convertible). Any adjustments
required by this paragraph 3.01(b) shall be made immediately after such
issuance or sale or record date, as the case may be. Such adjustments shall be
made successively whenever such event shall occur. To the extent that shares
of Common Stock (or Common Stock Equivalents) are not delivered after the
expiration of such subscription rights, options or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights, options or warrants been
made upon the basis of delivery of only the number of shares of Common Stock
(or Common Stock Equivalents) actually delivered.
(c) If at any time prior to the exercise of this Warrant in full,
the Company shall fix a record date for the issuance or distribution to all
holders of the Common Stock (including any such distribution to be made in
connection with a consolidation or merger in which the Company is to be the
continuing
-6-
<PAGE> 7
corporation) of evidences of its indebtedness, any other securities of the
Company or any cash, property or other assets (excluding a combination,
reclassification or recapitalization referred to in Section 3.01(a), regular
cash dividends or cash distributions paid out of net profits legally available
therefor and in the ordinary course of business or subscription rights, options
or warrants for Common Stock or Common Stock Equivalents (excluding those
referred to in Section 3.01(b) (any such non-excluded event being herein called
a "Special Dividend")), (i) the Exercise Price shall be decreased immediately
after the record date for such Special Dividend to a price determined by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the Exercise Price in effect on such record date less the fair
market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock or
of such subscription rights or warrants applicable to one share of Common Stock
and the denominator of which shall be such Exercise Price then in effect and
(ii) the number of shares of Common Stock subject to purchase upon exercise of
this Warrant shall be increased to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Special Dividend by a fraction, the numerator of which shall be the Exercise
Price in effect immediately before such Special Dividend and the denominator of
which shall be the Exercise Price in effect immediately after such Special
Dividend. Any adjustment required by this Section 3.01(c) shall be made
successively whenever such a record date is fixed and in the event that such
distribution is not so made, the Exercise Price shall again be adjusted to be
that in effect immediately prior to such record date.
(d) If at any time prior to the exercise of this Warrant in full,
the Company shall make a distribution to all holders of the Common Stock or
stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Exercise Price or the number of
Warrant Shares purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as
provided in this Article III, and the Company shall reserve, for the life of
the Warrant, such securities of such subsidiary or other corporation; provided,
however, that no adjustment in respect of dividends or interest on such stock
or other securities shall be made during the term of this Warrant or upon its
exercise.
-7-
<PAGE> 8
(e) (i) If at any time prior to the exercise of this Warrant
in full, the Company shall issue securities upon the exercise of options,
warrants or other Common Stock Equivalents granted under any stock option plan
of the Company (except with respect to up to 2,000 shares of Common Stock
issuable in connection with the Company's existing stock option plan) created
after the date of the issuance of this Warrant, then, in addition to the
adjustment in Exercise Price required by Section 3.01(b) hereof, if any, the
aggregate number of shares of Common Stock issuable hereunder shall be
increased to that number of shares which is in the same ratio to the number of
shares issuable prior to the exercise giving rise to the need for adjustment
hereunder as the number of shares of Common Stock outstanding immediately prior
to the exercise giving rise to the need for adjustment hereunder is to the
number of shares of Common Stock outstanding immediately after such exercise.
(ii) Except in the case of a transaction requiring an
adjustment pursuant to Section 3.01(e)(i) above, whenever the Exercise Price
payable upon exercise of this Warrant is adjusted pursuant to paragraph (a),
(b) or (c) of this Section 3.01, the Warrant Shares shall simultaneously be
adjusted by multiplying the number of Warrant Shares initially issuable upon
exercise of each Warrant by the Exercise Price in effect on the date thereof
and dividing the product so obtained by the Exercise Price, as adjusted.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($.05) in such price; provided, however, that any adjustments which by reason
of this paragraph (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.01 shall be made to the nearest cent or the nearest one-hundredth of
a share, as the case may be. Notwithstanding anything in this Section 3.01 to
the contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
(g) In the event that at any time, as a result of any adjustment
made pursuant to Section 3.01(a), the Warrantholder shall become entitled to
receive any shares of capital stock of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3.01(a) or this Section 3.01(g).
-8-
<PAGE> 9
(h) In the case of an issue of additional Common Stock or Common
Stock Equivalents for cash, the consideration received by the Company therefor
before deducting therefrom any discount or commission or other expenses paid by
the Company for any underwriting of, or otherwise in connection with, the
issuance thereof, shall be deemed to be the amount received by the Company
therefor. The term "issue" shall include the sale or other disposition of
shares held by or on account of the Company or in the treasury of the Company
but until so sold or otherwise disposed of such shares shall not be deemed
outstanding.
SECTION 3.02. NOTICES OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver forthwith to the Warrantholder a certificate signed by an
officer of the Company setting forth the adjusted number of shares purchasable
upon the exercise of this Warrant and the Exercise Price of such shares after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which adjustment was made.
SECTION 3.03. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in
Section 3.01 of this Warrant, no adjustment in respect of any cash dividends
shall be made during the term of this Warrant or upon the exercise of this
Warrant.
SECTION 3.04. PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than a subdivision or combination of
the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in case of any consolidation or merger of the Company with or
into another corporation (other than merger with a subsidiary in which the
Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in the
case of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, the Company shall, as a condition precedent to such transaction cause
such successor or purchasing corporation, as the case may be, to execute with
the Warrantholder an agreement granting the Warrantholder the right thereafter,
upon payment of the Exercise Price in effect immediately prior to such action,
to receive upon exercise of this Warrant the kind and amount of shares and
other securities and property which he would have owned or have been entitled
to receive after the happening of such reclassification, change, consolidation,
merger, sale or conveyance had this Warrant been exercised immediately prior to
such action. Such agreement shall
-9-
<PAGE> 10
provide for adjustments in respect of such shares of stock and other securities
and property, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article III. In the event that in connection
with any such reclassification, capital reorganization, change, consolidation,
merger, sale or conveyance, additional shares of Common Stock shall be issued
in exchange, conversion, substitution of payment, in whole or in part, for, or
of, a security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of Article III.
The provisions of this Section 3.04 shall similarly apply to successive
reclassifications, capital reorganizations, consolidations, mergers, sales or
conveyances.
SECTION 3.05. FORM OF WARRANT AFTER ADJUSTMENTS. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant, as initially issued.
ARTICLE IV
REGISTRATION UNDER THE SECURITIES ACT
SECTION 4.01. DEMAND REGISTRATION RIGHTS.
---------------------------------------------
(a) If the Company shall receive, at any time after the date hereof
and while the Company is a reporting company as defined in the Exchange Act, a
written request (the "REQUEST") from the Warrantholder that the Company file a
Registration Statement under the Securities Act covering the registration of
the shares of Registrable Securities that are the subject of the Request (a
"DEMAND REGISTRATION"), then the Company shall, subject to the limitations of
Section 4.02, use its best efforts to effect as soon as practicable the
registration under the Securities Act in accordance with Subsection 4.02(a)
hereof, of all Registrable Securities which the Warrantholder requests be
registered within ninety (90) days of the Company's receipt of the Request.
(b) If the Warrantholder intends to distribute the Registerable
Securities covered by the Request by means of an underwriting, the
Warrantholder shall so advise the Company as a part of the Request. In such
event, the Warrantholder shall (together with the Company as provided in
Section 4.02(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting which
underwriters shall include a regional or national underwriting
-10-
<PAGE> 11
firm which is a member in good standing of the National Association of
Securities Dealers, Inc.
(c) Notwithstanding the foregoing, if the Company shall furnish to
the Warrantholders a certificate, signed in good faith by the President of the
Company, stating that the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it therefore essential to defer
the filing of such registration statement, the Company shall have the right to
defer such filing for a period ending on the one hundred eightieth day after
the Company's receipt of the Request.
SECTION 4.02. OBLIGATIONS OF THE COMPANY. Whenever required under
this Warrant to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become effective, and, upon the request of the
Warrantholder keep such Registration Statement effective for up to one hundred
twenty (120) days.
(b) Prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement.
(c) Furnish to Warrantholder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registered
Securities owned by it.
(d) Use its best efforts to register and qualify the Registered
Securities under such other securities or Blue Sky laws of such jurisdictions
as shall be reasonably requested by the Warrantholder, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the manager underwriter of such
-11-
<PAGE> 12
offering. The Warrantholder into and perform its obligations under such
agreement.
(f) Notify the Warrantholder in the event the Company has delivered
preliminary or final prospectuses to the Warrantholder and, after having done
so, such prospectus is amended to comply with the requirements of the
Securities Act. Upon such notification, the Warrantholder shall immediately
cease making offers of Registered Securities and return all prospectuses to the
Company. The Company shall promptly provide the Warrantholders with revised
prospectuses and, following receipt of the revised prospectuses, the
Warrantholder shall be free to resume making offers of the Registered
Securities.
(g) Furnish, at the request of the Warrantholder on the date that
such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Warrant, if such securities are
being sold through underwriters, on the date that the Registration Statement
with respect to such securities become effective, (i) an opinion, dated such
date, of the counsel representing the Company for the customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Warrantholder and (ii) the letter dated such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the
Warrantholder.
SECTION 4.03. FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Warrant with respect to the Registrable Securities of the Warrantholder that
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration.
SECTION 4.04. EXPENSES OF DEMAND REGISTRATION. All expenses
(including underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Subsection 6.01,
including (without limitation) all registration, filing and qualification fees,
printing and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of counsel for the
Warrantholder shall be borne by the Warrantholder.
-12-
<PAGE> 13
SECTION 4.05. PIGGYBACK REGISTRATION RIGHTS.
------------------------------------------------
(a) If at any time prior to the Expiration Date, the Company
proposes to register any of its stock or other securities under the Securities
Act in connection with the public offering of such securities solely for cash
(other than a registration relating solely to (i) the sale of securities to
participants in a Company stock option plan, stock purchase plan, savings or
similar plan, or (ii) the sale of securities as part of an acquisition, merger
or exchange of stock or a registration on any form which does not include
substantially the same information as would be included in a Registration
Statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give the holder of Registrable Securities written notice
of such registration. Upon the written request of the Holder given within
twenty (20) days after mailing of such notice by the Company in accordance with
Section 7.08, the Company shall use its best efforts, subject to the provisions
of Section 4.03, to cause to be registered under the Securities Act all of the
Registrable Securities that each Holder has requested to be registered;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 4.01(a) without obligation to
any holder.
(b) The Company is obligated to effect only two (2) such
registrations of Registrable Securities under this Section 4.05.
SECTION 4.06. EXPENSES OF PIGGYBACK REGISTRATION. The holder
of Registrable Securities shall bear an equitable portion of all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to all registrations pursuant to Section
4.05 including, without limitation, all registration, filing, and qualification
fees, printing and accounting fees relating or apportionable thereto,
disbursements of counsel and underwriting discounts and commissions relating to
the Registrable Securities.
SECTION 4.07. UNDERWRITING REQUIREMENTS. In connection with
any offering involving an underwriting of shares of the Company's capital
stock, the Company shall not be required under Section 4.05 to include any of
the Holders' securities in such underwriting unless they accept the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company.
SECTION 4.08. DELAY OF REGISTRATION. No Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any
-13-
<PAGE> 14
controversy that might arise with respect to the interpretation or
implementation of this Warrant.
ARTICLE V
OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER
SECTION 5.01. NO RIGHTS AS SHAREHOLDER; NOTICE TO WARRANTHOLDER.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or his, her or its transferee the right to vote or to receive
dividends or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as a shareholder of the Company.
SECTION 5.02. WARRANTHOLDER RIGHTS IN OFFERING. The Warrantholder
shall have the right to participate in any rights offering which may be
undertaken by the Company prior to the Expiration Date, on a pro rata basis
with the holders of the Company's Common Stock (including oversubscription
rights), as if the Warrantholder had exercised this Warrant prior to any such
offering. For the purposes of this Section 5.02, each share into which this
Warrant may be converted shall be deemed to be an outstanding share of the
Company's Common Stock.
SECTION 5.03. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall,
in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
ARTICLE VI
SPLIT-UP, COMBINATION
EXCHANGE AND TRANSFER OF WARRANTS
SECTION 6.01. SPLIT-UP, COMBINATION, EXCHANGE AND TRANSFER OF WARRANTS.
Subject to the provisions of Section 6.02 hereof, this Warrant may be split up,
combined or exchanged for another warrant or warrants containing the same terms
to purchase a like aggregate number of Warrant Shares. If the Warrantholder
desires to split up, combine or exchange this Warrant, he, she or it shall make
such request in writing delivered to the Company and shall surrender to the
Company this Warrant and any other Warrants to be so split up, combined or
exchanged. Upon any such surrender for split up, combination or exchange, the
Company
-14-
<PAGE> 15
shall execute and deliver to the person entitled thereto a Warrant or Warrants,
as the case may be, as so requested. The Company shall not be required to
effect any split up, combination or exchange which will result in the issuance
of a Warrant entitling the Warrantholder to purchase upon exercise a fraction
of a share of Common Stock or a fractional Warrant. The Company may require
such Warrantholder to pay a sum sufficient to cover any expenses of the Company
(including fees of counsel to the Company), and any tax or governmental charge
that may be imposed, in connection with any split up, combination or exchange
of Warrants.
SECTION 6.02. RESTRICTIONS ON TRANSFER. Neither this Warrant nor the
Warrant Shares may be disposed of or encumbered (any such action, a "Transfer")
other than to an affiliate of the Warrantholder, except with the written
consent of the Company which consent shall not be unreasonably withheld and
except, in all cases, including a Transfer to an affiliate, in accordance with
and subject to the provisions of the Securities Act and the rules and
regulations promulgated thereunder. If at the time of a Transfer, a
registration statement is not in effect to register this Warrant or the Warrant
Shares, the Company may require the Warrantholder to make such representations,
and may place such legends on certificates representing this Warrant, as may be
reasonably required in the opinion of counsel to the Company to permit a
Transfer without such registration. The Company may require any Warrantholder
requesting a transfer to pay a sum sufficient to cover the expenses of the
Company (including fees of counsel to the Company), and any tax or governmental
charge that may be imposed.
ARTICLE VII
OTHER MATTERS
SECTION 7.01. SUCCESSORS AND ASSIGNS. All the covenants and provisions
of this Warrant by or for the benefit of the Company shall bind and inure to
the benefit of its successors and assigns hereunder.
SECTION 7.02. NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Warrant enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Warrantholder
in this Warrant or otherwise conflicts with the provisions hereof. The rights
granted to the Warrantholder hereunder do not in any way conflict with and are
not inconsistent with the rights granted to holders of the Company's securities
under any other agreements.
-15-
<PAGE> 16
SECTION 7.03. INTEGRATION/ENTIRE AGREEMENT. This Warrant is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertaking, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Warrants. This Warrant supersedes all prior
agreements, and understandings between the parties with respect to such subject
matter.
SECTION 7.04. AMENDMENTS AND WAIVERS. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver of or consents to departure from the provisions hereof
may not be given unless the Company has obtained the written consent of the
Warrantholders whose Warrants entitle them to purchase a majority of the
outstanding Warrant Shares.
SECTION 7.05. COUNTERPARTS. This Warrant may be executed in any number
of counterparts, and by the parties hereto in separate counterparts, each of
which so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 7.06. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Ohio.
SECTION 7.07. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
SECTION 7.08. NOTICE. Any notices or certificates by the Company to
the Warrantholder and by the Warrantholder to the Company shall be deemed
delivered if in writing and delivered in person or by registered mail (return
receipt requested) to the Warrantholder addressed to it at 13515 Yarmouth
Drive, N.W. Pickerington, OH 43147, or, if the Warrantholder has designated, by
notice in writing to the Company, any other address, to such other address; and
if to the Company, addressed to it at: Resource America, Inc., 1521 Locust
Street, Suite 700, Philadelphia, Pennsylvania 19102, or, if the Company has
designated, by notice in writing to the Warrantholder, any other address, to
such other address.
-16-
<PAGE> 17
The Company may change its address by written notice to the
Warrantholder and the Warrantholder may change its address by written notice to
the Company.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 20th day of June, 1995.
Attest: RESOURCE AMERICA, INC.
By:/s/Scott F. Schaeffer By:/s/Michael L. Staines
------------------------- -------------------------
Scott F. Schaeffer, Michael L. Staines,
Assistant Secretary Senior Vice President
[CORPORATE SEAL]
-17-
<PAGE> 1
Exhibit 11.1
CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE
Earnings per common share and common share equivalent are determined
by dividing net income by the weighted average number of common shares and
common share equivalents outstanding during each period. Common share
equivalents consist of common shares issuable upon the exercise of stock
options, provided the effect is dilutive, less common shares assumed to have
been purchased with the proceeds therefrom. Provided below is a table
reconciling common stock outstanding to common stock and common stock
equivalents used to compute earnings per share:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
------------------------- ----------------------
Primary 1995 1994 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 678,600 701,500 680,700 702,000
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options and warrants 115,700 5,600 72,400 5,600
-------- -------- -------- --------
794,300 707,100 753,100 707,600
======= ======= ======= =======
Fully Diluted(a)
-------------
Weighted average number of common
shares outstanding 678,600 701,600 680,700 701,900
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options and warrants 123,300 5,600 85,200 5,600
-------- -------- -------- --------
801,900 707,200 765,900 707,500
======= ======= ======= =======
<FN>
(a) This calculation is submitted in accordance with Securities Exchange
Act of 1934 Release no. 9083 although not required by footnote 2 to
paragraph 14 of APB Opinion no. 15 because it results in dilution of
less than 3%.
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 2,960,623
<SECURITIES> 0
<RECEIVABLES> 886,245
<ALLOWANCES> 0
<INVENTORY> 139,621
<CURRENT-ASSETS> 4,241,472
<PP&E> 31,555,371
<DEPRECIATION> 18,748,041
<TOTAL-ASSETS> 38,314,763
<CURRENT-LIABILITIES> 906,381
<BONDS> 10,561,075
<COMMON> 8,179
0
0
<OTHER-SE> 25,949,128
<TOTAL-LIABILITY-AND-EQUITY> 38,314,763
<SALES> 2,485,046
<TOTAL-REVENUES> 8,360,488
<CGS> 1,178,987
<TOTAL-COSTS> 6,187,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 844,277
<INCOME-PRETAX> 2,174,723
<INCOME-TAX> 372,000
<INCOME-CONTINUING> 1,802,723
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,802,723
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 2.39
</TABLE>
