UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Fee Required)
For the fiscal year ended September 30, 1995
Commission file number 0-4408
RESOURCE AMERICA, INC.
(Name of small business issuer in its charter)
Delaware 72-0654145
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1521 Locust Street, Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (215) 546-5005
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, par value $.01 per share
Name of each exchange on which registered:
The Company's Common Stock trades on the NASDAQ National
Market System under the symbol "REXI"
Check whether the issuer (l) filed all reports to be filed by Section 13
or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Parts II or
III of this Form 10-KSB or any amendment to this Form 10-KSB. (X)
State issuer's revenues for its most recent fiscal year: $11,448,068
On December 15, 1995, there were 664,636 shares of Common Stock
issued and outstanding. The aggregate market value of the voting stock
held by non-affiliates of the Registrant on that date was $10,457,088,
based upon the closing sale price on December 15, 1995.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended September 30, 1995 (the "Annual Report") (incorporated into
Parts I, II, and IV of this Form 10-KSB).
Portions of the Registrant's Proxy Statement dated January 29, 1996
(incorporated into Part III of this Form 10-KSB).
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
Resource America, Inc., (the "Company" or the "Registrant") was
organized under the laws of Delaware on February 9, 1966. Registrant
maintains its principal executive offices at 1521 Locust Street,
Philadelphia, Pennsylvania, 19102, and its telephone number is (215)
546-5005. Its energy and accounting operations are centered at 2876 South
Arlington Road, Akron, Ohio, 44312, and its telephone number is (216)
644-6626. Its equipment leasing operations are located at 7 East Skippack
Pike, Ambler, Pennsylvania, 19002, and its telephone number is (215)
619-2800. Unless the context otherwise requires, the term "Company" as
used herein refers to the Registrant and its wholly-owned subsidiaries
Resource Programs, Inc., St. Julien III Corporation, Resource Ventures,
Inc. (which was liquidated during the current fiscal year), Resource
Properties, Inc., Resource Properties II, Inc., Resource Properties III,
Inc., Resource Properties IV, Inc., Resource Properties V, Inc., Resource
Properties VI, Inc., Resource Properties VII, Inc., Resource Properties
VIII, Inc., Resource Properties IX, Inc., Resource Properties X, Inc.,
Resource Properties XI, Inc., Resource Properties XII, Inc., Resource
Properties XIII, Inc., Resource Properties XIV, Inc., Resource Properties
XV, Inc., Resource Properties XVI, Inc., RAI Financial, Inc., Rancho
Investments, Inc., Resource Leasing, Inc., Resource Energy, Inc.,
Resource Well Services, Inc., Resource GP, Inc. (which was liquidated
during the current fiscal year) and Fidelity Leasing Corp. (which was
acquired during the current fiscal year).
Information regarding the acquisition of Fidelity Leasing
Corporation is set forth in Note 8 to the Company's consolidated financial
statements of the Registrant's Annual Report, which is incorporated herein
by reference.
Information regarding the industry segments the Company operates
in is set forth in Note 9 to the Company's consolidated financial
statements of the Registrant's Annual Report, which is incorporated herein
by reference.
(b) BUSINESS OF ISSUER
Resource America, Inc. is a specialty-finance company involved in
the acquisition and management of income producing partnership related
assets principally in two industries: real estate finance and energy.
In real estate, the Company is currently focused on the purchase
at discount of income producing real estate mortgages in the $1 to $10
million range - a range that has been largely overlooked by the large
national and international financial institutions. The Company has been
able to purchase sixteen such mortgages representing a total mortgage
receivable in excess of $52 million at an aggregate cost of $18 million
from just such institutions. The Company has been able to generate
income from the recurring interest earned from ownership of the
mortgages as well as the gains realized from the restructuring of several
such mortgages. The Company intends to purchase at discount further
real estate loans with yields which are generally similar to those of the
Company's current mortgage portfolio. The Company has financed these
activities through use of internally generated cash and through borrowings
from an insurance company.
In energy, the Company produces, transports, and operates natural
gas and oil properties for its own account and that of investors. The
Company has interests in 767 wells, operating approximately 680 of those
wells (concentrated in the states of Ohio, New York and Pennsylvania),
and owns and/or operates approximately 310 miles of gas pipelines in its
producing fields in those states. Additionally, the Company holds mineral
rights under approximately 88,000 net acres. Through a subsidiary, the
Company provides well services to others.
<PAGE>
REAL ESTATE FINANCING
Additional material called for by this item is set forth in Note
10 "Management's Discussion and Analysis of Financial Condition and Results
of Operations" of the Registrant's Annual Report for the year ended
September 30, 1995, and is incorporated herein by reference.
Major Customers
As disclosed in Note 9 to the Company's consolidated financial
statements of the Registrant's Annual Report, which is incorporated herein by
reference, the Company had one borrower that accounted for at least 10% of
the Company's total revenues during fiscal 1995.
Competition
The real estate finance business is intensely competitive in all
of its aspects. Competition for the Company in the acquisition of
mortgage loans comes from individuals, investment partnerships, financial
investment companies, and public and private mortgage funds, among
others. Many of these entities possess greater financial resources than
the Company. While it is impossible for the Company to accurately
determine its comparative industry position with respect to its ability to
acquire additional mortgages, the Company does not believe its real estate
mortgage acquisition activities to be significant within the industry.
The Company's ability to add to its real estate mortgage portfolio
will depend on its success in funding the acquisition of such additional
mortgages. The Company will face competition in raising such funds in
the financial capital markets where it will have to compete for capital
based largely on the Company's overall financial performance and, more
specifically, the performance of the Company's real estate investment
portfolio.
ENERGY
Oil and Gas Well Operations
The Company operates approximately 680 wells on behalf of
limited partnerships of which it is also the general partner, and joint
ventures of which it is also the managing general partner, as well as for
its own account and for other third parties. The Company's activities
have been primarily located in the Appalachian Basin in Ohio, New York
and Pennsylvania. Natural gas produced from wells operated by the
Company is collected in gas gathering pipeline systems operated by the
Company and is sold to a number of customers such as gas brokers and
local utilities under a variety of contractual arrangements. Oil produced
from wells operated by the Company is sold at the well site to regional
oil refining companies at the prevailing spot price for Appalachian crude
oil.
During fiscal 1995, the Company acquired limited partners'
interests in and purchased wells from various oil and gas partnerships in
which the Company is the general partner for a total cost of $133,000.
Exploration and Development
The Company has, through limited partnerships and joint ventures
organized by it and for its own account, engaged in exploration and
development drilling. In such partnerships and joint ventures, the
Company acts as general contractor under specific drilling agreements, but
subcontracts drilling and certain other work to third parties. Drilling
has been on acreage held by the Company.<PAGE>
Pipeline Operation
The Company operates, on behalf of two limited partnerships of
which it is the general partner, and for its own account, various gas
gathering pipeline systems totaling approximately 310 miles in length.
Such pipeline systems are located in Ohio, New York and Pennsylvania.
Well Services
The Company provides a variety of well services to wells of which
it is the operator and to wells operated by independent third party
operators. Such services are provided at rates in conformance with
general industry standards.
Sources and Availability of Raw Materials
The Company contracts for drilling rigs and purchases tubular
goods necessary for the drilling and completion of wells from a
substantial number of drillers and suppliers, no one of which supplies a
significant portion of the Company's annual needs. During fiscal 1995, the
Company faced no shortage of such goods and services. The duration of
the current supply and demand situation cannot be predicted with any
degree of certainty due to numerous factors affecting the oil and gas
industry, including selling prices, demand for oil and gas, and
governmental regulations. The Company expects the current situation to
continue into fiscal 1996.
Major Customers
As disclosed in Note 9 to the Company's consolidated financial
statements of the Registrant's Annual Report, which is incorporated herein by
reference, the Company had one oil and gas customer that accounted for at least
10% of the Company's total revenues during fiscal 1995.
Competition
The oil and gas business is intensely competitive in all of its
aspects. The oil and gas industry also competes with other industries in
supplying the energy and fuel requirements of industrial, commercial, and
individual customers. Domestic oil and gas sales are also subject to
competition from foreign sources. Moreover, competition is intense for
the acquisition of leases considered favorable for the development of oil
and gas in commercial quantities. The Company's competitors include other
independent oil and gas companies, individual proprietors, and
partnerships. Many of these entities possess greater financial resources
than the Company. While it is impossible for the Company to accurately
determine its comparative industry position with respect to its provision
of products and services, the Company does not consider its oil and gas
operations to be a significant factor in the industry. The Company's
ability to increase its oil and gas reserves will depend upon (i) its
ability to develop its present oil and gas leases, (ii) its ability to
select and acquire suitable leases for future drilling, and (iii) its
ability to compete for the necessary capital, which will depend largely on
the success of its oil and gas development activities and the status of
income tax laws affecting oil and gas investments.
Markets
The availability of a ready market for oil and gas produced by the
Company will depend on a variety of factors beyond the Company's control
including, among other things, fluctuating supply and demand; the level of
domestic production by oil and gas companies; governmental regulation
concerning the production, sale, and transportation of oil and gas;
imports of crude oil and natural gas from foreign countries; and the
proximity, availability, and capacity of pipelines and other required
facilities. Currently, the supply of both crude oil and natural gas is
more than sufficient to meet projected demand in the United States. These
conditions have had, and may continue to have, a negative impact on the
Company through reduced demand and lower prices for its oil and gas
reserves (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Registrant's Annual Report, which is
incorporated herein by reference). <PAGE>
Governmental Regulation
The exploration, production, and sale of oil and natural gas are
subject to numerous state and federal laws and regulations. Such laws and
regulations govern a wide variety of matters, including the drilling and
spacing of wells, marketing, and pricing. Compliance with the laws and
regulations affecting the oil and gas industry generally increases the
Company's costs of doing business, and consequently affects its
profitability. Inasmuch as such regulations are frequently changing, the
Company is unable to predict the future cost or impact of complying with
such regulations. The Company is not aware of any violation of
environmental regulations pending against it which would have a material
effect on its operations or financial position, and the Company does not
expect to spend any material amounts during the next fiscal year in
connection with such environmental regulations.
In April 1992, the Federal Energy Regulatory Commission issued
Order 636, which generally requires the unbundling of transportation and
marketing of natural gas. As a result of Order 636, the Company has
experienced increased competition in the marketing of natural gas and
higher costs for services used by the Company in the production of natural
gas. Additionally, the Company believes Order 636 diminishes the previous
economic advantages and price premiums obtained by the Company due to its
proximity to Appalachian Basin reserves and major Northeast markets. The
Company cannot predict the effect of Order 636 in the future.
Employees
On September 30, 1995, the Company employed 60 persons, all of
whom are full-time.
ITEM 2. DESCRIPTION OF PROPERTY
Office Facilities
The Company owns its energy and accounting operations which is
located in Akron, Ohio. This location consists of a 9,600 square foot
office building and land.
The Company leases all of its other facilities. Within the state of
Pennsylvania, the Company has two offices, the executive and real estate
offices are located in Philadelphia, leased under an agreement with rents
of $50,000 per year through May 31, 2000. The equipment leasing operations
are located in Ambler, leased under an agreement with rents of $81,000 per
year through November 27, 2000.
The Company also has three other offices located in Ohio, New
York and California which house energy and equipment brokerage operations.
Rents paid for fiscal 1995 totalled $60,500.
INFORMATION CONCERNING RESERVES, PRODUCTION, WELLS, ACREAGE, AND
DRILLING ACTIVITIES
Introduction
The Company believes that it has satisfactory title to its
interests in developed oil and gas properties. The Company's developed
oil and gas properties are subject to customary royalty interests
generally contracted for in connection with the acquisition of the
properties, burdens incident to operating agreements, current taxes, and
easements and restrictions (collectively, "Burdens"). Presently, the
Company is current with respect to all such Burdens and it believes
that such Burdens do not materially detract from the value of its
properties or from the Company's interests therein or materially interfere
with their use in the operation of the Company's business.
<PAGE>
As is customary in the oil and gas industry in the case of
undeveloped properties, little or no investigation of title is made at the
time of acquisition (other than a preliminary review of local real estate
records). However, investigations are generally made and, in virtually
every case, a title opinion is obtained from local counsel before drilling
operations begin.
Significant Properties
At September 30, 1995, the Company had no individual interests
in an oil and gas property that accounted for more than 10% of the
Company's proved developed oil or gas reserves, including the Company's
interest in reserves owned by 41 partnerships.
Oil and Gas Reserve Information
An evaluation of the Company's estimated proved developed oil and
gas reserves as of September 30, 1995, was verified by E. E. Templeton &
Associates, Inc., an independent petroleum engineering firm. Factors
affecting changes in reserves are set forth and discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
of the Registrant's Annual Report, which is incorporated herein by reference.
Further information concerning net proved developed oil and gas reserves as of
September 30, 1995 and 1994, and the standardized measure of discounted future
net cash flows and changes therein, is set forth in Note 12 of Notes to
Consolidated Financial Statements of the Company of the Registrant's Annual
Report, which is incorporated herein by reference.
Reserves Reported to Other Agencies
The Company does not file any estimates of total proved net oil
and gas reserves with any other federal authority or agency.
Oil and Gas Production
The following table sets forth net quantities of oil and natural
gas produced, average sales prices, and average production (lifting) costs
per equivalent unit of production, for the periods indicated, including
its equity interests in the production of 41 partnerships, for the fiscal
years indicated. All production is from wells located in the United
States. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Registrant's Annual Report, which is
incorporated herein by reference.
<TABLE>
<CAPTION>
Production Average Sales Price Average Lifting Cost
Oil (bbls) Gas (mcf) per bbl per mcf per Equivalent mcf <F1>
<C> <C> <C> <C> <C> <C>
1995 36,420 1,198,245 $16.74 $2.31 $1.06
1994 34,002 1,161,685 $15.74 $2.45 $1.00
1993 30,788 1,178,727 $18.64 $2.39 $1.05
<FN>
<F1>
Oil production is converted to mcf equivalents at the rate of six mcf
per bbl (barrel).
</FN>
<PAGE>
Oil and Gas Wells
The following table sets forth information as of September 30,
1995 regarding the Company's productive oil and gas wells:
Number of Productive Wells
Gross (2) Net (2)
Oil Wells . . . . . . . . . . . . . . . . 186 36
Gas Wells. . . . . . . . . . . . . . . . 581 376
Total. . . . . . . . 767 412
(2) Includes the Company's equity interest in wells owned by 41
partnerships. Does not include royalty or overriding interest held by the
Company.
Acreage
The following table sets forth information with respect to the
Company's developed and undeveloped oil and gas acreage as of
September 30, 1995. The information in this table includes the Company's
equity interest in acreage owned by 41 partnerships.
</TABLE>
<TABLE>
<CAPTION>
Developed Acreage Undeveloped Acreage
Gross Net Gross Net
<S> <C> <C> <C> <C>
Arkansas . . . . . . . . . . . . . . . . 2,560 403
Kansas . . . . . . . . . . . . . . . . . 160 20
Louisiana. . . . . . . . . . . . . . . . 1,819 206
Mississippi. . . . . . . . . . . . . . . 40 3
New York . . . . . . . . . . . . . . . . 12,087 10,410 36,484 35,443
Ohio . . . . . . . . . . . . . . . . . . 36,091 28,218 11,470 10,431
Oklahoma . . . . . . . . . . . . . . . . 4,243 635
Pennsylvania . . . . . . . . . . . . . . 2,174 1,593
Texas. . . . . . . . . . . . . . . . . . 4,520 209
62,694 41,697 47,954 45,874
</TABLE>
The terms of the Company's oil and gas leases vary, depending
upon the location of the leased premises and the minimum remaining terms
of undeveloped leases, from less than one year to five years. Rentals of
approximately $18,100 were paid in fiscal 1995 to maintain leases on
such acreage in force.
<PAGE>
Drilling Activity
The following table sets forth information with respect to the
number of wells completed in Ohio and New York (the only areas in which
Company drilling activities occurred) at any time during fiscal 1995,
1994, and 1993, regardless of when drilling was initiated:
<TABLE>
<CAPTION>
Exploratory Wells Development Wells
Productive Dry Productive Dry
Gross Net Gross Net Gross Net Gross Net
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 3.0 .36 2.0 .36 1.0 .87 2.0 1.75
1994 2.0 .18 2.0 1.18 - - - -
1993 - - - - - - - -
</TABLE>
Present Activities
At December 22, 1995, no wells were in the process of being drilled.
Delivery Commitments
The Company is not obligated to provide any fixed quantities of oil
or gas in the future under existing contracts.
INFORMATION CONCERNING REAL ESTATE INVESTMENTS
As disclosed in Note 10 to the Company's consolidated financial
statements of the Registrant's Annual Report, which is incorporated herein by
reference, the Company holds real estate investments purchased at a discount.
The Company currently has no limitations or existing policies on
the percentage of assets which the Company may invest in such loans or
the types of investments the Company may make.
The Company has acquired the long term loans primarily for
current income but also, to a lesser extent, for capital gain purposes.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending as of September
30, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of fiscal 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Price Range of Common Stock
In response to the information called for by this item, the
material is set forth under the heading "Corporate Stock" of the Registrant's
Annual Report, which is incorporated herein by reference.
Approximate Number of Holders of Common Stock
In response to the information called for by this item, the
material is set forth under the heading "Corporate Stock" of the Registrant's
Annual Report, which is incorporated herein by reference.
Dividends
In response to the information called for by this item, the
material is set forth under the headings "Corporate Stock" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
the Registrant's Annual Report, which is incorporated herein by reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
In response to the information called for by this item, the
material is set forth under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of the Registrant's
Annual Report, which is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The consolidated financial statements of the Company, including
the Notes to Consolidated Financial Statements, are included in the
Registrant's Annual Report. The report of the Company's current independent
auditors with respect to the Company's consolidated financial statements is
included on page 2 of the Registrant's Annual Report. Each of the foregoing
items is incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS OF THE REGISTRANT
In response to the information called for by this item, the
material is set forth under the caption "Directors and Executive Officers"
of the Proxy Statement, and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
In response to the information called for by this item, the
material is set forth under the caption "Compensation of Executive
Officers and Directors" of the Proxy Statement, and is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
In response to the information called for by this item, the
material is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement, and is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to the information called for by this item, the
material is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement, and is incorporated
herein by reference.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-KSB:
1. Financial Statements
The following consolidated financial statements of the
Company contained on pages 3 through 22, inclusive, of the
Registrant's Annual Report are incorporated herein by
reference:
Consolidated Statement of Operations for years ended
September 30, 1995, and 1994.
Consolidated Balance Sheet at September 30, 1995, and
1994.
Consolidated Statement of Changes in Stockholders'
Equity for years ended September 30, 1995, and 1994.
Consolidated Statement of Cash Flows for years ended
September 30, 1995, and 1994.
Notes to Consolidated Financial Statements.
2. Exhibits
Exhibits marked with an asterisk are filed herewith. The
remainder of the exhibits have heretofore been filed with
the Commission and are incorporated herein by reference.
Exhibit No. Description
3.1 Restated Certificate of Incorporation.
Incorporated by reference to
Registrant's Form 10-K for fiscal year
ended September 30, 1983.
3.2 Bylaws, as amended. Incorporated by
reference to Registrant's Form 10-K for
fiscal year ended September 30, 1984.
10.1 1984 Key Employee Stock Option Plan.
Incorporated by reference
to Registrant's Form 10-K for fiscal year
ended September 30, 1984.
10.2 1989 Key Employee Stock Option Plan.
Incorporated by reference
to Registrant's Form 10-K for fiscal year
ended September 30, 1989.
10.3 Employee Stock Ownership Plan.
Incorporated by reference to
Registrant's Form 10-K for fiscal year ended
September 30, 1989.
<PAGE>
10.7 Incentive Stock Option Agreement with
Michael L. Staines dated
April 20, 1993. Incorporated by reference to
Registrant's Form 10-KSB for fiscal year
ended September 30, 1993.
10.8 Incentive Stock Option Agreement with Scott
Schaeffer dated April
20, 1993. Incorporated by reference to
Registrant's Form 10-KSB
for fiscal year ended September 30, 1993.
10.10 Incentive Stock Option Agreement with
Edward E. Cohen dated April
20, 1993. Incorporated by reference to
Registrant's Form 10-KSB
for fiscal year ended September 30, 1993.
10.11 Incentive Stock Option Agreement with
Nancy J. McGurk dated April
20, 1993. Incorporated by reference to
Registrant's Form 10-KSB
for fiscal year ended September 30, 1993.
10.12 Incentive Stock Option Agreement with
Michael L. Staines dated
April 20, 1993. Incorporated by reference to
Registrant's Form 10-
KSB for fiscal year ended September 30, 1993.
10.13 Promissory Note effective February 1, 1993,
between Society
National Bank and Resource America, Inc.
Incorporated by reference
to Registrant's Form 10-KSB for fiscal year
ended September 30,
1993.
10.14 Note Purchase Agreement Between Resource
America, Inc., and
Physicians Insurance Company of Ohio dated
May 25, 1994.
10.15 Warrant Agreement Between Resource
America, Inc., and Physicians
Insurance Company of Ohio dated May 25,
1994.
10.16 Wrap-Around Deed of Trust Note between
Washington Properties
Limited Partnership and RAI Financial, Inc
dated January 18, 1995.
10.17 Warrant to Purchase 40,000 shares of
Common Stock of Resource
America, Inc., issued to Physicians' Insurance
Company of Ohio
dated December 21, 1994.
10.18 Warrant to Purchase 49,275 shares of
Common Stock of Resource
America, Inc., issued to Physicians' Insurance
Company of Ohio
dated June 1, 1995.
<PAGE>
10.19 Warrant to Purchase 35,190 shares of
Common Stock of Resource
America, Inc., issued to Physicians' Insurance
Company of Ohio
dated June 20, 1995.
10.20* Stock Purchase Agreement between Resource
Leasing, Inc. and FML
Leasehold, Inc. and Fidelity Leasing Corp.
dated August 30, 1995.
11.1* Calculation of Primary and Fully Diluted
Earnings per Share.
13.1* Annual Report of Resource America, Inc.,
for the year ended
September 30, 1995.
22.1* List of Subsidiaries.
23.1* Consent of E. E. Templeton & Associates,
Inc.
27* Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fourth
quarter of fiscal 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RESOURCE AMERICA, INC. (Registrant)
By: /s/ Edward E. Cohen
December 29, 1995 President
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities indicated as of
December 29, 1995.
Signature Title
/s/ Edward E. Cohen Chairman of the Board and President of
Edward E. Cohen Resource America, Inc.
/s/ Michael L. Staines Senior Vice President, Secretary, and
Michael L. Staines Director of Resource America, Inc.
/s/ Carlos C. Campbell Director of Resource America, Inc.
Carlos C. Campbell
/s/ John R. Hart Director of Resource America, Inc.
John R. Hart
/s/ Andrew M. Lubin Director of Resource America, Inc.
Andrew M. Lubin
/s/ Alan D. Schreiber Director of Resource America, Inc.
Alan D. Schreiber
/s/ John S. White Director of Resource America, Inc.
John S. White
/s/ Nancy J. McGurk Vice President - Finance and Treasurer
Nancy J. McGurk Chief Accounting Officer) of Resource
America, Inc.
STOCK PURCHASE AGREEMENT
Between
RESOURCE LEASING, INC.
and
FML LEASEHOLD, INC.
Relating to the
Capital Stock of
FIDELITY LEASING CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE I - REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF THE STOCKHOLDER -1-
1.1 Organization -1-
1.2 Subsidiaries; Partnerships -2-
1.3 Authority -2-
1.4 Capital Structure -3-
1.5 Financial Statements -3-
1.6 Material Changes since June 30, 1995 -4-
1.7 Availability of Assets and Legality of Use -5-
1.8 Accounts Receivable -5-
1.9 Real Property and Leases -5-
1.10 Organizational Documents -6-
1.11 Material Contracts and Leases -6-
1.12 Insurance -6-
1.13 No Undisclosed Liabilities -7-
1.14 Litigation and Claims -7-
1.15 Tax Liabilities -7-
1.16 Employee Agreements -7-
1.17 Employee Relations -8-
1.18 Benefit Plans -8-
1.19 Conflicts; Sensitive Payments -9-
1.20 Corporate Name -10-
1.21 Trademarks and Proprietary Rights -10-
1.22 Brokers -10-
1.23 No Omissions -10-
ARTICLE II REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE BUYER
-11-
2.1 Organization -11-
2.2 Authority -11-
2.3 Investment -11-
2.4 Brokers -12-
2.5 No Omissions -12-
ARTICLE III - ADDITIONAL COVENANTS OF THE STOCKHOLDER AND THE BUYER
-12-
3.1 Non-Competition -12-
3.2 Use of Trademarks -13-
3.3 Section 338 Election -13-
3.4 Use of Name -13-
3.5 Additional Tax Information -14-
3.6 Certain Tax Matters -14-
3.7 Company Operation of the Partnerships -14-
3.8 Continuation of the Company's Severance Policy -15-
ARTICLE IV - ACTION PRIOR TO THE CLOSING DATE -15-
4.1 Confidential Nature of Information -15-
4.2 Accuracy of Representations and Warranties -15-
4.3 No Material Change in the Company -15-
4.4 No Public Announcement -16-
4.5 Declaration of Dividend -16-
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
BUYER -16-
5.1 No Misrepresentation or Breach of Covenants and Warranties -16-
5.2 No Changes in or Destruction of Property -16-
5.3 Approval of the Court -16-
5.4 Bank Accounts -17-
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
STOCKHOLDER -17-
6.1 No Misrepresentation or Breach of Covenants and Warranties -17-
6.2 Approval of the Court -17-
6.3 Company Confirmation -17-
ARTICLE VII - PURCHASE PRICE AND CLOSING -17-
7.1 Closing -17-
7.2 Purchase and Sale -18-
7.3 Deliveries by the Stockholder -19-
7.4 Deliveries of the Buyer -21-
ARTICLE VIII - TERMINATION -21-
8.1 Termination -21-
ARTICLE IX - SURVIVAL OF OBLIGATIONS; INDEMNIFICATION -21-
9.1 Survival of Obligations -21-
9.2 Indemnification -22-
ARTICLE X - MISCELLANEOUS -23-
10.1 Notices -23-
10.2 Governing Law -24-
10.3 Successors and Assigns -24-
10.4 Severability -24-
10.5 Expenses -24-
10.6 Titles and Headings -24-
10.7 Schedules -24-
10.8 Entire Agreement; Amendments and Waivers -25-
SCHEDULES
1.1 Jurisdictions of Qualification..................... 1
1.2 Subsidiaries and Partnerships...................... 1
1.3 Consents........................................... 2
1.5 Bank Accounts of the Company....................... 3
1.7 Assets............................................. 5
1.8 Accounts Receivable................................ 5
1.9 Real Property...................................... 5
1.11 Leases............................................. 6
1.12 Insurance.......................................... 6
1.14 Claims............................................. 6
1.15 Tax Procedures..................................... 6
1.16 Employment Agreements.............................. 7
1.17 Employee Compensation.............................. 7
1.19 Conflicts and Sensitive Payments................... 9
1.21 Trademarks and Proprietary Rights .................10
7.2 Syndications in Progress...........................17
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, made and entered into this ____
day of August, 1995 (the "AGREEMENT") by and among RESOURCE
LEASING, INC., a Delaware corporation (the "BUYER"), and FML
LEASEHOLD, INC., a Delaware corporation (the "STOCKHOLDER") and
FIDELITY LEASING CORPORATION, a Delaware corporation (the
"COMPANY"), all of the issued and outstanding capital stock (the
"STOCK") of which is owned by the Stockholder.
WITNESSETH:
WHEREAS, the Company is engaged in the business of equipment
leasing;
WHEREAS, the Stockholder desires to sell the Stock to the
Buyer pursuant to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Buyer desires to purchase the Stock from the
Stockholder on the terms and conditions set forth in this
Agreement,
NOW, THEREFORE, the Buyer and the Stockholder, in
consideration of the agreements, covenants and conditions contained
herein, hereby make the following representations and warranties,
give the following covenants and agree to be bound hereby as
follows:
ARTICLE I
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF THE STOCKHOLDER
As an inducement to the Buyer to enter into this Agreement and
to consummate the transactions contemplated herein, the Stockholder
represents and warrants to the Buyer and agrees as set forth in
this Article I. The representations and warranties of the
Stockholder are qualified by the information set forth in the
Schedules referred to in this Article I. Notwithstanding the
reference to any specific Schedule in any paragraph hereof, it is
understood and agreed that disclosure shall have been deemed to
have been made by the Stockholder for purposes hereof if any item
referred to is set forth on the specific Schedule, elsewhere in
this Agreement or in any other Schedule to this Agreement. Buyer
acknowledges and agrees that apart from the representations and
warranties of the Stockholder contained in this Agreement, the
Stockholder and representatives of the Stockholder have made no
further or additional representations or warranties.
1.1 A. ORGANIZATION. The Stockholder is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware and is duly qualified to transact business as
a foreign corporation and is in good standing as such in the
jurisdictions listed on Schedule 1.1 hereto, which are the only
jurisdictions in which the failure to so qualify would have a
material adverse effect on the business or financial condition of
the Company. Both the Company and the Stockholder have the
corporate power and authority and other authorizations necessary or
required in order for them to own or lease and operate their
respective properties and to carry on their businesses as now
conducted.
1.2 A. SUBSIDIARIES; PARTNERSHIPS. The Company owns all of the
outstanding shares of capital stock of First Radnor Equities, Inc.,
a Delaware corporation (the "SUBSIDIARY"). Except for the
Subsidiary and the interests of the Company in the partnerships
described on Schedule 1.2 hereto (the "PARTNERSHIPS"), none of the
Company, the Subsidiary or the Partnerships owns any interest in
any other corporation, partnership, joint venture or other entity.
Schedule 1.2 also correctly sets forth as to the Subsidiary and
each of the Partnerships, its form of organization, its
jurisdiction of incorporation or formation, its principal place of
business and the jurisdictions in which it is qualified to do
business; as to the Subsidiary, its authorized capitalization and
its shares of capital stock outstanding. The Subsidiary is a
corporation duly incorporated and each of the Partnerships is a
limited partnership validly existing and subsisting under the laws
of its jurisdiction of organization, with all requisite corporate
power, in the case of the Subsidiary, or partnership power, in the
case of each of the Partnerships, to own, lease, license and use
its properties and assets and to carry on the business in which it
is now engaged. The Subsidiary is duly qualified to do business in
the jurisdictions in which the property owned, leased or operated
by it or the business conducted by it makes such qualifications
necessary, and the absence of such qualification would have a
material adverse effect on the business or financial condition of
the Company.
1.3 A. AUTHORITY. Except for the Approval (as defined in Section 5.3
hereof), this Agreement and the transactions contemplated herein
have been duly approved by all necessary corporate action on the
part of the Stockholder and the Stockholder has the authority to
execute, deliver and perform its obligations under this Agreement.
This Agreement, when executed and delivered by the Stockholder and
assuming the due execution hereof by the Buyer, will constitute the
valid, legal and binding agreement of the Stockholder enforceable
in accordance with its terms. Except for the Approval or except as
described on Schedule 1.3 hereof, no consent, authorization,
approval, order, license, certificate or permit of or from or
declaration or filing with, any Federal, state, local or other
governmental authority or any court or other tribunal
(collectively, the "GOVERNMENTAL CONSENTS") is required in
connection with the execution, delivery or performance of this
Agreement by the Stockholder. Except as described on Schedule 1.3,
no consent of any affiliate of the Stockholder (other than the
approval of its shareholder which has been obtained) or of any
party to any, contract, agreement, instrument, lease, license,
arrangement or understanding to which either the Company or the
Subsidiary, any of the Partnerships or the Stockholder is a party,
or to which any of their respective properties or assets are
subject (the "STOCKHOLDER'S CONTRACTUAL CONSENTS"), is required for
the execution, delivery or performance of this Agreement by the
Stockholder. The execution, delivery and performance by the
Stockholder does not (if the Governmental Consents and the
Stockholder's Contractual Consents referred to in Schedule 1.3
hereof have been obtained prior to the Closing) (i) violate, result
in a breach of, conflict with or (with or without the giving of
notice or the passage of time or both) entitle any party to
terminate, modify or otherwise change, in any material respect, the
rights or obligations of the parties thereunder or call a default
under any such contract, agreement, instrument, lease, license,
arrangement, or understanding, (ii) violate or result in a material
breach of any term of the certificate of incorporation or other
organizational documents or by-laws of the Company, the Subsidiary,
or the Stockholder, or (iii) violate, result in a breach of or
conflict, in any material respect, with any law, rule, regulation,
order, judgment or decree binding the Company, the Subsidiary, or
the Stockholder, or to which any of their respective operations,
businesses, properties, or assets are subject.
1.4 A. CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 1,000 shares of common stock par value $1.00
per share, of which 100 shares are issued and outstanding (and none
of which is held by the Company as treasury stock). Except for
this Agreement, there are no agreements, arrangements, options,
warrants or rights or commitments of any character relating to the
issuance, sale, purchase or redemption of any shares of capital
stock of the Company. There is outstanding no security or other
investment convertible into or exchangeable for capital stock of
the Company or the Subsidiary. Each of such outstanding shares of
Stock and each outstanding share of capital stock of the Subsidiary
is validly authorized, validly issued, fully paid and
nonassessable, has not been issued and is not owned or held in
violation of any preemptive right; and is owned of record and
beneficially by the Stockholder, in the case of the Company and by
the Company, in the case of the Subsidiary, in each case free and
clear of any liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, voting trusts or
restrictions of any kind and the transfer and delivery of the Stock
to the Buyer by the Stockholder as contemplated by this Agreement
will be sufficient to transfer good and marketable record and
beneficial title and ownership to such Stock to the Buyer free and
clear of liens, claims, encumbrances and restrictions of any kind.
1.5 A. FINANCIAL STATEMENTS. The Stockholder has furnished to the
Buyer the audited consolidated balance sheets of the Company for
the years ended December 31, 1990, 1991, 1992, 1993 and 1994 and
the related statements of operations, statements of shareholder's
equity and statements of cash flows for the periods then ended,
including the notes thereto (the 1993 and 1994 statements are
collectively, defined as the "FINANCIAL STATEMENTS") and the
unaudited financial statements (balance sheet and profit and loss
statement) at and for the period ended June 30, 1995 (the "JUNE
30 BALANCE SHEET"). The Financial Statements and the June 30, 1995
Balance Sheet fairly present the respective financial positions of
the Company as of the respective dates thereof and the results of
operations for the respective periods covered thereby, and the
Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout all periods and in accordance with the books and records
of the Company and the Subsidiary. The Stockholder has furnished to
the Buyer the Partnerships' Federal tax returns as filed with the
Internal Revenue Service for the year ended December 31, 1994. In
addition, the Stockholder has furnished the audited financial
statements of the Partnership for the year ended December 31, 1994
(the "PARTNERSHIPS' FINANCIAL STATEMENTS"). To the best of the
Stockholder's knowledge, after due inquiry of the Company's senior
officers as identified on Schedule 1.5 (the "SENIOR OFFICERS"), the
Partnerships' Financial Statements fairly present the financial
position of the Partnerships as of December 31, 1994 and the
results of their operations for the year then ended in all material
respects as they affect the financial condition of the Company
after taking into account the portion of the Partnerships' net
assets that is derived by the Company.
There is set forth on Schedule 1.5 hereto a correct and
complete list of all (i) accounts, borrowing resolutions and
deposit boxes maintained by the Company or the Subsidiary at any
bank or other financial institution (ii) the names of the persons
authorized to sign or otherwise act with respect thereto, and (iii)
powers of attorney for the Company and the Subsidiary.
1.6 MATERIAL CHANGES SINCE JUNE 30, 1995. To the best of the
Stockholder's knowledge after due inquiry of the Company's Senior
Officers, since June 30, 1995, the business of the Company has been
operated only in the ordinary course and, whether or not in the
ordinary course of business other than as disclosed in this
Agreement or the Schedules referred to herein there has not been,
occurred or arisen (i) any material adverse change in the financial
condition of the Company from that shown on the June 30 Balance
Sheet; (ii) any damage or destruction in the nature of a casualty
loss, whether covered by insurance or not, to any property or
business of the Company; (iii) any amendment or termination of any
agreement other than in the ordinary course of business, or
cancellation or material reduction of any debt owing to the Company
or waiver or relinquishment of any right of material value to the
Company; or (iv) any other event or condition which materially and
adversely affects the results of operations or business, financial
condition or property of the Company.
1.7 A. AVAILABILITY OF ASSETS AND LEGALITY OF USE. Except as
specified in Schedule 1.7, the assets owned or leased by the
Company, the Subsidiary or, to the best of the Stockholder's
knowledge, after due inquiry of the Company's Senior Officers, the
Partnerships constitute all of the assets which are being used in
their businesses, and, to the best of the Stockholder's knowledge,
after due inquiry of the Company's Senior Officers, such assets are
in good and serviceable condition (normal wear and tear excepted)
and suitable for the uses for which intended and such assets and
their uses conform in all material respects to all applicable laws;
and except as specified in Schedule 1.7, each of the Company, the
Subsidiary and, to the best of the Stockholder's knowledge, after
due inquiry of the Company's Senior Officers, the Partnerships has
title to, or valid leasehold interests in, all of their respective
properties and assets, including those reflected on the June 30
Balance Sheet (other than those disposed of for fair value in the
ordinary course of business) free and clear of all liens,
mortgages, security interests, pledges, charges and encumbrances.
Notwithstanding the foregoing, the Stockholder's representations
set forth herein as they relate to the Partnerships are further
limited such that the inaccuracy of such representations would have
to represent a material adverse impact on the financial condition
of the Company in order to be considered a violation for purposes
of this Agreement.
1.8 A. ACCOUNTS RECEIVABLE. All accounts receivable
reflected on the June 30 Balance Sheet for the Company and not
collected at the date hereof, have arisen from bona fide
transactions in the ordinary course of the Company's business.
Except as set forth in Schedule 1.8, none of such receivables is
subject to counterclaims, set-offs or is in dispute and all of such
accounts are good and collectible in the ordinary course of
business at the aggregate recorded amounts thereof, subject to the
allowance for possible losses shown on such June 30 Balance Sheet.
1.9 A. REAL PROPERTY AND LEASES. Neither the Company nor
the Subsidiary owns any real property. Attached hereto as Schedule
1.9 are true, correct and complete copies of every lease or
agreement under which the Company or the Subsidiary is lessee or
sublessee of, or holds or operates, any real property or personal
property owned by any third party. Each of such leases and
agreements is in full force and effect and constitutes a legal,
valid and binding obligation of the Company or the Subsidiary and,
to the best of the Stockholder's knowledge, after due inquiry of
the Company's Senior Officers, the other parties thereto. Neither
the Company nor the Subsidiary is in default in any material
respect under any such lease or agreement nor, to the best of the
Stockholder's knowledge after due inquiry of the Company's Senior
Officers, has any event occurred which with the passage of time or
giving of notice or both would constitute such a default. Except
as set forth on Schedule 1.9, none of such leases or agreements
requires the consent of any party thereto to the transactions
contemplated by this Agreement.
1.10 A. ORGANIZATIONAL DOCUMENTS. The Company has
delivered to the Buyer (i) the Certificate of Incorporation and
Bylaws of the Company and the Subsidiary, as presently in effect,
certified by the Secretary of the Company, and (ii) the partnership
agreements and all amendments thereto, as presently in effect, of
each of the Partnerships (the "PARTNERSHIP AGREEMENTS") certified
by an officer of the Company. The stock ledgers and stock transfer
books and the minute book records of the Company and the Subsidiary
relating to all issuances and transfers of stock by the Company and
the Subsidiary and all formal proceedings of the Stockholder and
the Board of Directors of the Company and the Subsidiary since
their respective incorporations made available to the Buyer are the
original stock ledgers and stock transfer books and minute book
records of the Company and the Subsidiary or exact copies thereof.
1.11 A. MATERIAL CONTACTS AND LEASES. True, correct and
complete copies of every material contract, agreement, lease or
other obligation or commitment (including, without limitation,
those entered into in connection with the Company's lease brokerage
business) under which the Company, on its own behalf or as general
partner of any of the Partnerships, or the Subsidiary is the lessor
or sublessor have been made available to the Buyer and attached
hereto as Schedule 1.11 is in all material respects, to the best
knowledge of Stockholder after due inquiry of the Company's Senior
Officers, a true, correct and complete list of all leases currently
operated by the Partnerships. Each of such agreements and leases
is in full force and effect and constitutes a legal, valid and
binding obligation of the parties thereto and is enforceable in
accordance with its terms except as enforcement of such agreement
may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally. Neither the Company, nor
the Subsidiary, as the case may be, nor to the best of
Stockholder's knowledge after due inquiry of the Company's Senior
of Officers, the other parties to such agreements and leases are in
default under any such lease or agreement in any material respect
as it relates to the Company nor to the best of the knowledge of
the Stockholder after due inquiry of the Company's Senior Officers,
has any event occurred which with the passage of time or the giving
of notice or both would constitute such a material default.
Notwithstanding the foregoing, the Stockholder's representations
set forth herein as they relate to the Partnerships are further
limited such that the inaccuracy of such representations would have
to represent a material adverse impact on the financial condition
of the Company after taking into account the portion of the
Partnerships' lease revenue that is derived by the Company in order
to be considered a violation for purposes of this Agreement.
1.12 A. INSURANCE. Attached hereto as Schedule 1.12 is a list
and an accurate description of all policies of insurance that are
held or maintained by or for the benefit of the Company or the
Subsidiary as of the date hereof (including policy numbers, nature
of coverage, limits, deductibles, carriers, premiums and effective
and termination dates) The Company has complied with each of such
policies and has not failed to give any notice or present any known
claim thereunder. The Company has not received, and to the best of
the knowledge of the Stockholder after due inquiry of the Company's
Senior Officers, no event or omission within the control of the
Company has occurred which may cause it to receive notice that any
such policies will be cancelled or will be reduced in amount or
scope. True and complete copies of all such policies have been
delivered to the Buyer.
1.13 A. NO UNDISCLOSED LIABILITIES. Neither the Company nor
the Subsidiary is subject to any material liability (including
unasserted claims), absolute or contingent, which is not shown or
which is in excess of amounts shown or reserved for in the June 30
Balance Sheet other than liabilities of the same nature as those
set forth on the June 30 Balance Sheet and reasonably incurred in
the ordinary course of business after June 30, 1995.
1.14 A. LITIGATION AND CLAIMS. Except as set forth on
Schedule 1.14 hereto, there are no lawsuits, proceedings, claims,
governmental or other proceedings (formal or informal) or
investigations pending or, to the best of the Stockholder's
knowledge, after due inquiry of the Company's Senior Officers,
threatened with respect to the Company or the Subsidiary or either
of their respective businesses, properties or assets which may
reasonably be expected to have a material adverse effect on the
Company including, but not limited to claims alleging fraud or
misrepresentation in the sales or marketing of any interests in the
Partnerships.
1.15 A. TAX LIABILITIES. Schedule 1.15 sets forth a
correct description of the procedures followed with respect to all
payments by the Company to the Stockholder in connection with
taxes, including any amounts paid in 1995, the dates of such
payments and any amounts remaining to be paid in respect of any
period prior to the Closing Date. The amounts reflected as
liabilities for taxes on the June 30 Balance Sheet are sufficient
for the payment of all unpaid Federal, state, county, local and
foreign taxes of the Company and the Subsidiary accrued and
applicable to the period ended on such balance sheet date and all
years and periods prior thereto.
1.16 A. EMPLOYEE AGREEMENTS. Attached hereto as Schedule 1.16
is a true, correct and complete list of all employee benefit plans,
contracts, and arrangements, oral or written, including, but not
limited to, union contracts, employee benefit plans and severance
plans, whereunder the Company or the Subsidiary has any obligation
(other than the obligation to make current wage or salary payments
terminable on notice of 30 days or less or normal policies
concerning holidays, vacations and salary continuation during short
absence for illness or other reasons) to or on behalf of its
officers, employees or their beneficiaries or whereunder any of
such persons owes money to the Company or the Subsidiary.
1.17 A. EMPLOYEE RELATIONS. To the best of the Stockholder's
knowledge, after due inquiry of the Company's Senior Officers,
neither the Company nor the Subsidiary has engaged in any unfair
labor practice, unlawful employment practice or unlawful
discriminatory practice in the conduct of its respective
businesses. The Company and the Subsidiary have complied in all
material respects with all applicable laws, rules and regulations
relating to wages, hours and collective bargaining and have
withheld all amounts required to be withheld from the wages or
salaries of employees. Neither the Company nor the Subsidiary is
a party to or, to the best of the Stockholder's knowledge, after
due inquiry of the Company's Senior Officers, threatened with or,
to the best knowledge of the Stockholder, in danger of being a
party to any labor dispute which would materially interfere with
the conduct of their businesses. Set forth on Schedule 1.17 hereto
is the name and total annual compensation (including bonuses) paid
by the Company or the Subsidiary to current active employees during
the year ended December 31, 1994 and the annual compensation
payable for 1995.
1.18 A. BENEFIT PLANS. Schedule 1.16 contains a list of any
"employee pension benefit plan" or "employee welfare benefit plan"
within the meaning of Sections 3(1) and 3(2) of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA")
established or maintained by the Company or the Subsidiary to which
the Company or the Subsidiary has made any contributions in 1994 or
1995 (collectively the "EMPLOYEE BENEFIT PLANS"). Neither the
Company nor the Subsidiary is required, or was required within the
immediately preceding five years, to make any contribution to any
"multiemployer plan" within the meaning of Section 3(7) of ERISA.
Neither the Company nor the Subsidiary has any liability in respect
of any employee pension benefit plans established or maintained and
to which contributions are or were made by it to the Pension
Benefit Guaranty Corporation ("PBGC").
Schedule 1.16 also lists each deferred compensation plan,
bonus plan, stock option plan, employee stock purchase plan and any
other employee benefit plan, agreement, arrangement or commitment
not required under the preceding paragraph to be listed on Schedule
1.16 (other than normal policies concerning holidays, vacations and
salary continuation during short absences for illness or other
reasons) maintained by the Company or the Subsidiary.
Except as set forth on Schedule 1.16 to the best of the
Stockholder's knowledge, after due inquiry of the Company's Senior
Officers, (a) no employee pension benefit plan, as defined in
Section 3(2) of ERISA, maintained or contributed to by the Company
or the Subsidiary or in respect of which the Company or the
Subsidiary is considered an "employer" under Section 414 of the
Internal Revenue Code of 1986, as amended (the "CODE"), (i) has
incurred any "accumulated funding deficiency," as defined in
Section 412 of the Code (whether or not waived), or (ii) has
incurred any liability to PBGC, and (b) neither the Company nor the
Subsidiary has breached any of the responsibilities, obligations or
duties imposed on it by ERISA or the Code with respect to any
employee pension benefit plan or employee welfare benefit plan
maintained by it, which breach has given rise to, or may in the
future give rise to, an obligation to pay money, including the
obligation to make any required contribution to any employee
pension benefit plan for any plan year ending prior to the Closing
Date. There is no contribution due for any pension plan for the
year in which the Closing occurs. Except as set forth on Schedule
1.16, neither the Company nor any of its affiliates or, to the best
knowledge of the Stockholder after the inquiry of the Company's
Senior Officers, any "party in interest," as defined in Section
3(14) of ERISA, in respect of any such plan has engaged in any non
exempted prohibited transaction described in Sections 406 and 408
of ERISA or Section 4975 of the Code which would result in a
material adverse effect on the Company. Except as set forth on
Schedule 1.16, no reportable event, as defined in Section 4043 of
ERISA, has occurred with respect to any employee pension benefit
plan maintained or contributed to by the Company or the Subsidiary
or in respect of which the Company or the Subsidiary is an employer
under Section 414 of the Code; and none of such plans has been
terminated by the plan administrator thereof or by the PBGC.
Neither the Company nor the Subsidiary has incurred any unpaid
liability for any pension plan covered under ERISA.
To the best of the Stockholder's knowledge, after due inquiry
of the Company's Senior Officers, with respect to any employee
pension benefit plan or employee welfare benefit plan maintained by
the Company, no action, suit, grievance, arbitration or other
manner of litigation, or claim with respect to the assets of the
plan (other than the routine claims for benefits made in the
ordinary course of plan administration for which plan
administrative review procedures have not been exhausted) are
pending, threatened or imminent against or with respect to the
plan, the Company, the Subsidiary or fiduciary (as defined in ERISA
3(21)) of the plan (including any action, suit, grievance,
arbitration or other manner of litigation, or claim regarding
conduct which allegedly interferes with the attainment of rights
under the plan), and the Stockholder, after due inquiry of the
Company's Senior Officers has no knowledge of any facts which would
give rise to or could give rise to any action, suit, grievance,
arbitration or other manner of litigation, or claim.
1.19 A. CONFLICTS; SENSITIVE PAYMENTS. There are (a) no
material situations involving the interests of the Stockholder
(except as listed on Schedule 1.16 or Schedule 1.19) or to the best
of Stockholder's knowledge, after due inquiry of the Company's
Senior Officer, any officer or director of the Company or the
Subsidiary which may be generally characterized as a "conflict of
interest," including but not limited to, the leasing of property to
or from the Company or significant direct or indirect interests in
the business of competitors, suppliers or customers of the Company;
and (b) no situations involving illegal payments or payments of
doubtful legality from corporate funds of the Company or the
Subsidiary since January 1, 1993 to governmental officials or
others which may be generally characterized as a "sensitive
payment."
1.20 A. CORPORATE NAME. The Company owns and possesses, to
the exclusion of the Stockholder and its affiliates, all rights to
the use of the names Fidelity Leasing Corporation and First Radnor
Equities, Inc. including, but not limited to, the right to use such
names in advertising and neither the Company nor the Stockholder
has licensed either name to any party.
1.21 A. TRADEMARKS AND PROPRIETARY RIGHTS. All trademarks,
trade names, copyrights and applications therefor which are owned
or exclusively used or registered in the name of or licensed to the
Company or the Subsidiary are listed and briefly described on
Schedule 1.21, other than as specified on Schedule 1.21, no
proceedings have been instituted or are pending or, to the best of
the Stockholder's knowledge, after due inquiry of the Company's
Senior Officers, threatened which challenge the validity of the
ownership by the Company of any such trademarks, trade names,
copyrights or applications. The Company has not licensed anyone to
use any of the foregoing or any other technical know-how or other
proprietary rights of the Company and the Stockholder has no
knowledge of the infringing use of the any of such trademarks and
trade names or the infringement of any such copyrights by any
person except as set forth on Schedule 1.21. The Company owns all
trademarks, trade names, copyrights, processes and other technical
know-how and other proprietary rights now used in the conduct of
its business and has not received any notice of conflict with the
asserted rights of other except as specified in Schedule 1.21.
1.22 A. BROKERS. Neither the Company nor the Stockholder
has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the
transactions provided for in this Agreement. Neither the Company
nor the Stockholder has any agreement or obligation whatsoever with
entities other than the Buyer regarding any proposed acquisition of
the Company by any such entity and neither of them is engaged in
any negotiations with any such entity for any such acquisition.
1.23 A. NO OMISSIONS. None of the representations or
warranties of the Stockholder contained herein and, none of the
information contained in the Schedules referred to in this Article
I is false or misleading in any material respect or omits to state
a fact herein or therein, necessary to make the statements herein
or therein in the circumstances in which they were made not
misleading in any material respect.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE BUYER
As an inducement to the Stockholder to enter into this
Agreement and to consummate the transactions contemplated herein,
the Buyer represents and warrants to the Stockholder and agrees as
follows:
2.1 A. ORGANIZATION. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware.
2.2 A. AUTHORITY. This Agreement and the transactions
contemplated herein have been duly approved by all necessary
corporate action on the part of the Buyer. This Agreement, when
executed and delivered by the Buyer, and assuming due execution
hereof by the Stockholder will constitute the valid and binding
agreement of the Buyer enforceable in accordance with its terms.
Neither the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated herein, nor
compliance with nor fulfillment of the terms and provisions hereof,
will (i) conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under the
governing instruments of the Buyer, any instrument, mortgage,
agreement, judgment, order, award, decree or other restriction to
which the Buyer is a party or by which the Buyer is bound or any
statute or regulatory provisions affecting it or (ii) require the
approval, consent, or authorization of or any filing with or
notification to any Federal, state or local court, governmental
authority or regulatory body. The Buyer has full power and
authority to purchase the Stock pursuant to this Agreement and to
do and perform all acts and things required to be done by the Buyer
under this Agreement.
2.3 A. INVESTMENT. The Buyer (i) is an "accredited
investor" within the meaning of Rule 501 under the Securities Act
of 1933, as amended; (ii) has sufficient knowledge and experience
in the business of the Company so as to be able to evaluate the
risks and merits of its purchase of the Company; (iii) has had an
opportunity to discuss the Company's business, management and
financial affairs with the Company's management; and (iv) is
acquiring the Stock for its own account (and not for the account of
others) for investment and not with a view to the distribution
thereof. The Buyer will not sell or otherwise dispose of such
shares (whether pursuant to a liquidating dividend or otherwise)
without registration under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), or an exemption therefrom, and the Buyer
acknowledges that certificate or certificates representing such
shares contain a legend to the foregoing effect.
2.4 A. BROKERS. Neither the Buyer nor its
representatives has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account
of the transactions provided for in this Agreement.
2.5 A. NO OMISSIONS. None of the representations or
warranties of the Buyer contained herein and none of the other
information or documents furnished to the Stockholders or the
Company by the Buyer or its representatives in connection with this
Agreement is false or misleading in any material respect or omits
to state a fact herein or therein necessary to make the statements
herein or therein not misleading in any material respect; to the
best knowledge of the Buyer, there is no fact which adversely
affects, or in the future is likely to adversely affect, the
business or assets of the Buyer in any material respect which has
not been disclosed in writing to the Stockholder or the Company.
ARTICLE III
ADDITIONAL COVENANTS OF THE STOCKHOLDER AND THE BUYER
3.1 A. NON-COMPETITION.
(a) In furtherance of the sale of the Stock to the
Buyer, upon the consummation of the transactions contemplated
herein and more effectively to transfer and protect the business of
the Company, the Stockholder agrees that for a period ending on the
third anniversary of the date hereof, it will not (i) directly or
indirectly own, manage or operate an equipment lease brokerage
business anywhere in the Commonwealth of Pennsylvania and any other
state in which the Company presently conducts its business, that
sells to any of the Company's or Partnership's existing customers;
provided that ownership of not more than five percent (5%) of the
issued and outstanding shares of a class of securities of a
corporation, the securities of which are traded on a national
securities exchange or in the over-the-counter market, shall not be
deemed ownership of the issuer of such shares for the purposes of
this paragraph; or (ii) induce or attempt to persuade any employee
or agent of the Company to terminate such employment or agency
relationship in order to enter into any such relationship with the
Stockholder or any of its subsidiaries or affiliates or to enter
into any such relationship on behalf of any other business
organization in competition with the Company. Nothing contained
herein shall be deemed a restriction on the Stockholder's right to
merge with or be acquired by any entity engaged in the equipment
leasing business and no such merger or acquisition shall constitute
a breach hereunder.
(b) Without limiting the right of the Buyer and any
of its successors or assigns to pursue all other legal and
equitable rights available to them for violation of the covenant
set forth in Section 3.1(a) above by the Stockholder, it is agreed
that other remedies cannot fully compensate the Buyer and its
successors and assigns for such a violation and that the Buyer and
its successors and assigns shall be entitled to injunctive relief
to prevent violation or continuing violation hereof. It is the
intent and understanding of each party hereto that if, in any
action before any court or agency legally empowered to enforce this
covenant, any term, restriction, covenant or promise is found to be
unreasonable and for that reason unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.
3.2 A. USE OF TRADEMARKS. From the date hereof, neither
the Stockholder nor any stockholder, director, employee or officer
of the Stockholder shall have the right to use any of the
trademarks, trade names, or applications therefor heretofore
exclusively used or owned by the Company or to use any trademarks
or trade names similar thereto or designs imitative thereof except
as officers or agents of the Company in connection with its
business prior to the Closing. From the date hereof, neither the
Stockholder nor any stockholder, director, employee or officer of
the Stockholder shall have any right to use or to disclose, except
in the ordinary course of business of the Company, to any person,
firm or corporation other than the Buyer, its employees, agents and
representatives, any trade or business secrets or client lists or
other proprietary information of the Company.
3.3 A. SECTION 338 ELECTION. The Buyer and the
Stockholder shall elect to treat the sale of Stock pursuant to this
Agreement as a deemed taxable sale of all of the assets of the
Company to the Buyer pursuant to Section 338 (g) and 338(h)(10) of
the Code (the "ELECTIONS"). Both parties agree to cooperate fully
with each other with regard to such election and each of the Buyer
and the Stockholder shall take or cause to be taken by the Company
all actions necessary to file, on a timely basis, the election
prescribed pursuant to Temporary Treasury Regulation Section
1.338(h)(10)-IT. Neither the Buyer nor the Stockholder shall take,
or cause to be taken, any action in connection with the filing of
any tax return of the Company or otherwise which would be
inconsistent with or prejudice the Elections and shall take all
steps necessary to obtain comparable treatment, where applicable,
under state law.
3.4 A. USE OF NAMES. From the Closing Date, the
Stockholder and its successors, assigns and affiliates, shall not
use the names Fidelity Leasing Corporation and First Radnor
Equities, Inc. and, in the case of Fidelity Leasing Corporation and
for a period of five years from the Closing Date, any names similar
thereto which includes both the words Fidelity and any derivative
of lease without the approval of the Company which approval shall
not be unreasonably withheld provided, however, that the
Stockholder may use the name FML Leasehold, Inc.
3.5 A. ADDITIONAL TAX INFORMATION. The Stockholder agrees
to deliver promptly to the Buyer any copies of information in the
Stockholder's possession reasonably requested by the Buyer in
connection with any tax returns relating to the Company (whether
filed prior to the Closing or to be filed hereafter). The
Stockholder shall have access to such records of the Company as
shall reasonably be required to enable the Stockholder to prepare
any tax returns for periods ending on or before the Closing.
3.6 A. CERTAIN TAX MATTERS. The Stockholder shall pay all
Federal, state and local taxes, including without limitation,
income, profits, occupation, excise, property, sales, use and
franchise taxes and including interest and penalties on, based on,
measured by or with respect to the income, net worth or capital of
the Company (the "TAXES") for all taxable periods up to and
including the Closing Date.
Within thirty (30) days after the filing of any tax return
relating to the Company with respect to a tax period commencing
before the Closing Date, and ending after the Closing Date, the
Stockholder shall pay to the Buyer its appropriate share of such
Taxes in an amount equal to the Taxes, if any, that would have been
due if such tax period had ended on the Closing Date, less any
estimated taxes previously paid by the Stockholder or its
affiliates for such period or any taxes recorded as a liability in
calculating the "tangible net worth" of the Company under Section
7.2 hereof.
The Stockholder shall file, or cause the Company to file, all
tax returns required to be filed on or before the Closing Date with
respect to the Company (and amendments thereof) and all tax returns
(and amendments thereof) with respect to Taxes on income for tax
periods ending on or before the Closing Date. The Buyer shall file
or cause the Company to file, all tax returns required to be filed
after the Closing Date with respect to the Company, other than tax
returns with respect to Taxes for tax periods ending on or before
the Closing Date.
3.7 A. COMPANY OPERATION OF THE PARTNERSHIPS. From the
Closing Date, the Company agrees to operate and the Buyer agrees to
cause the Company to operate each of the Partnerships, as general
partner, in accordance with such Partnership's partnership
agreement and applicable law, and to operate in compliance with the
Company's obligations under each Partnership's partnership
agreement.
3.8 A. CONTINUATION OF THE COMPANY'S SEVERANCY POLICY.
The Buyer shall cause the Company to maintain its existing
severance policy for six (6) months following the Closing Date.
ARTICLE IV
ACTION PRIOR TO THE CLOSING DATE
The parties hereto agree to take the following actions between
the date hereof and the Closing Date:
4.1 A. CONFIDENTIAL NATURE OF INFORMATION. The Buyer
and the Stockholder agree that, in the event that the transactions
contemplated herein shall not be consummated, each will treat in
confidence all documents, materials and other information which it
shall have obtained during the course of the negotiations leading
to the execution of this Agreement, the investigation of the other
party hereto and the preparation of this Agreement and any other
documents relating hereto, and shall return to the other party all
copies of non-public documents and materials which have been
furnished in connection therewith.
4.2 A. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
Stockholder shall refrain from intentionally taking any action and
shall cause the Company to refrain from intentionally taking any
action which would render any representation and/or warranty
contained in Article I of this Agreement inaccurate at any time
between the date hereof and the Closing Date. The Stockholder will
promptly notify the Buyer of any lawsuits, claims, proceedings or
investigations that, to the knowledge of the Stockholder, may be
brought, asserted or commenced against the Company, the Subsidiary
or the Partnerships; their officers or directors, or the
Stockholder.
4.3 A. NO MATERIAL CHANGE IN THE COMPANY. Prior to the
Closing Date, the Stockholder shall not, without the prior written
approval of the Buyer, cause the Company to (i) make any material
change in the business or operations of the Company; (ii) make any
material change in the accounting policies applied in the
preparation of the financial statements referred to herein; (iii)
except as permitted by Section 4.5 hereof, declare any dividends on
its issued and outstanding shares of capital stock, or make any
other distribution of any kind in respect thereof; (iv) issue, sell
or otherwise distribute any authorized but unissued shares of its
capital stock or effect any stock split or reclassification of any
such shares or grant or commit to grant any option, warrant or
other rights to subscribe for or purchase or otherwise acquire any
shares of capital stock of the Company or any security convertible
or exchangeable for any such shares; (v) purchase or redeem any of
the capital stock of the Company; (vi) incur or be liable for
indebtedness to the Stockholder or any of its subsidiaries, or
affiliates other than in the ordinary course of business; (vii)
make any material change in the base compensation of officers or
key employees of the Company; (viii) enter into any contract,
license, franchise or commitment other than in the ordinary course
of business, or waive any rights of substantial value; or (ix)
enter into any other transaction affecting in any material respect
the business of the Company other than in the ordinary course of
business and in conformity with past practices, or as contemplated
by this Agreement.
4.4 A. NO PUBLIC ANNOUNCEMENT. Neither the Stockholder
nor the Buyer shall, without the approval of the other, make any
press release or other public announcements or filing concerning
the transactions contemplated by this Agreement, except as and to
the extent that any such party shall be so obligated by law, in
which case the other party shall be advised thereof and given an
opportunity to comment thereon.
4.5 A. DECLARATION OF DIVIDEND. The Buyer hereby
acknowledges and agrees that prior to the Closing Date, the
Stockholder shall cause the Company to declare a cash dividend (the
"Dividend") of One Million Six Hundred Forty Thousand Dollars
($1,640,000).
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement to purchase
and pay for the Stock shall, at the option of the Buyer, be subject
to the satisfaction, on or prior to the Closing Date, of the
following conditions:
5.1 A. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by the
Stockholder in the performance of any of its covenants and
agreements herein, each of the representations and warranties of
the Stockholder contained in this Agreement shall be true and
correct in all material respects on the Closing Date as though made
on the Closing Date and there shall have been delivered to the
Buyer a certificate or certificates to that effect, dated the
Closing Date and signed on behalf of the Stockholder by its
President.
5.2 A. NO CHANGES IN OR DESTRUCTION OF PROPERTY. There
shall have been, between the date hereof and the Closing Date no
material adverse change in the condition, financial or otherwise,
of the Company.
5.3 A. APPROVAL OF THE COURT. The Stockholder shall have
received the approval of the Commonwealth Court of Pennsylvania
(the "COURT") in the matter of Cynthia M. Maleski, Insurance
Commissioner of the Commonwealth of Pennsylvania v. Fidelity Mutual
Life Insurance Company, Case No. 1389M.D.-1992 of this Agreement
and the transactions contemplated hereby (the "APPROVAL").
5.4 A. BANK ACCOUNTS. Prior to the Closing Date, the
Stockholder shall have transferred all of its cash and marketable
securities used in the calculation of "tangible net worth" pursuant
to Section 7.2 hereof to Jefferson Bank and the terms of and
restrictions on such bank accounts shall be reasonably satisfactory
to the Buyer, in its sole discretion.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER
The obligations of the Stockholder under this Agreement to
deliver the Stock shall, at the option of the Stockholder, be
subject to the satisfaction, on or prior to the Closing Date, of
the following conditions:
6.1 A. NO MISREPRESENTATION OR BREACH OF
COVENANTS AND WARRANTIES. There shall have been no material breach
by the Buyer in the performance of any of its covenants and
agreements herein, each of the representations and warranties of
the Buyer contained or referred to in this Agreement shall be true
and correct in all material respects on the Closing Date as though
made on the Closing Date and there shall have been delivered to the
Stockholder a certificate or certificates to that effect, dated the
Closing Date and signed on behalf of the Buyer by its President.
6.2 A. APPROVAL OF THE COURT. The Stockholder shall have
received the Approval.
6.3 A. COMPANY CONFIRMATION. At the Closing, the Company
shall execute a counterpart to this Agreement confirming and agree
to be bound by the covenants contained in Section 3.7 and Section
7.2(b), and the provisions of Article IX.
ARTICLE VII
PURCHASE PRICE AND CLOSING
7.1 A. CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place
within five (5) business days of the Stockholder's receipt of the
Approval (the "CLOSING DATE").
7.2 A. PURCHASE AND SALE.
(a) Provided that the Approval occurs on or before
September 20, 1995, on the Closing Date, the Stockholder shall sell
to the Buyer the stock for a cash purchase price equal to Seven
Hundred Fifty Thousand Dollars ($750,000) plus an amount equal to
the Company's "tangible net worth," (the "PURCHASE PRICE") as of
August 31, 1995. If the Approval occurs on or after September 21,
1995, the "tangible net worth" component of the Purchase Price
shall be calculated as of the Closing Date but shall be reduced by
the greater of (i) Two Thousand Dollars ($2,000) per day for every
calendar day between August 31, 1995 and the Closing Date and (ii)
the difference between the "tangible net worth" on the Closing Date
and the "tangible net worth" on August 31, 1995. For purposes
hereof, "tangible net worth" shall mean the Company's total
shareholders' equity as determined based upon the Company's normal
year end accounting procedures (compatible with generally accepted
accounting principles), less the asset recorded for the Company's
Contractual Servicing Rights Under Partnership Management
Agreements, net of accumulated amortization, plus the liability
recorded for Deferred Income. Accrued fee income as of the Closing
Date for services provided with respect to each of the Partnerships
shall be calculated based on such fees being earned ratably during
the period since last received from each Partnership. The Company
will accrue as a liability incentive compensation due non-
Partnership reimbursed employees of the Company at the rate of 8/12
(or the percentage of the year through the Closing Date if the
Approval occurs after September 20, 1995) multiplied by the
employee's percentage bonus for the last year multiplied by the
employee's current base compensation. If the bonus is not paid to
the employee because the employee is no longer employed, the
Company will reimburse 100% of the liability with respect to such
employee to the Stockholder. If the bonus is not paid to the
employee for any other reason, the Company will reimburse 50% of
the liability to the Stockholder.
(b) In addition to the Purchase Price, the
Stockholder shall receive from the Company each month by the tenth
(10th) day of the month payment of the net revenues received by the
Company after the Closing for the prior month from any lease
brokerage transaction (the "LEASE BROKERAGE REVENUES") which (i)
has been awarded to the Company prior to the Closing Date and is
described on Schedule 7.2 or has been awarded hereafter prior to
the Closing Date; (ii) has been bid as of the Closing Date and is
awarded to the Company within ninety (90) days thereafter, or (iii)
is in progress as of the Closing Date and is described on Schedule
7.2 hereof (such Schedule shall be updated by the Stockholder as of
the Closing Date to include activity between the date hereof and
the Closing Date). For purposes of this Section 7.2(b), "net
revenues" shall mean gross revenues realized from such transactions
less any commissions payable in accordance with the Company's
historical practices and less, in the case of non-awarded lease
brokerage transactions described in (ii) and (iii) above, an
additional 2.5% of gross revenues. Nothing herein contained shall
in any way be construed to obligate the Company or the Buyer to
provide financing for any such syndication transaction. The Buyer
shall use its best efforts consistent with normal practice of the
Company to realize the Lease Brokerage Revenues from the Company's
lease brokerage transactions in progress on the Closing Date.
7.3 A. DELIVERIES BY THE STOCKHOLDER. At the Closing,
the Stockholder shall sell, assign, transfer and convey to the
Buyer all of the outstanding capital stock of the Company and shall
deliver, at the Closing the following:
(a) A certificate or certificates representing all of
the Stock, together with fully executed and witnessed stock powers
(in blank) attached thereto with signatures guaranteed by an
institution that is a participant in the Securities Transfer Agents
Medallion Program.
(b) An opinion dated the Closing Date hereof from
Obermayer, Rebmann, Maxwell & Hippel, counsel for the Stockholder,
in form and substance satisfactory to the Buyer and its counsel, to
the effect that:
(i) The Stockholder is a corporation validly
existing and in good standing under the laws of the State of
Delaware.
(ii) The Company is a corporation validly
existing and in good standing under the laws of the State of
Delaware; and the Company has full corporate power and authority to
own or lease and operate its properties and to carry on its
business as now conducted. The Company is duly qualified to do
business and is in good standing as a foreign corporation in the
Commonwealth of Pennsylvania. To the best of such counsel's
knowledge, the Company has no subsidiaries other than First Radnor
Equities, Inc., which is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
(iii) The authorized capital stock of the
Company consists of 1,000 shares of common stock, par value $1.00
per share, of which 100 shares have been issued and are outstanding
and are owned of record by the Stockholder; except for this
Agreement, and all of the issued and outstanding shares of common
stock of the Company as of the Closing are validly issued, fully
paid and nonassessable.
(iv) This Agreement and the transactions
contemplated herein have been duly approved by all necessary
corporate action of the Stockholder. This Agreement has been duly
and validly executed and delivered by the Stockholder and such
Agreement, assuming due execution by the Buyer, is the valid and
binding agreement of the Stockholder enforceable against the
Stockholder in accordance with its terms except as enforcement of
such agreement may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally.
(v) The Stockholder has full power and authority
to execute and deliver the Agreement and to perform its obligations
hereunder. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated herein, (a)
violates or conflicts with or results in the breach of the terms,
conditions or provisions of, or constitutes a default under, the
Certificate of Incorporation or the Bylaws of, the Stockholder or
the Company or any agreement or instrument known to such counsel to
which the Company or the Stockholder is a party or by which either
of them is bound or (b) requires the consent, approval or
authorization of or any filing with or notification to any Federal,
state or local court, governmental authority or regulatory body not
already obtained or made, as the case may be.
(vi) All of the Partnerships are validly
existing and in good standing under the laws of the states of their
respective formations; and the Partnerships have full partnership
power and authority to own or lease and operate their properties
and carry on their businesses as now conducted. The Company is the
duly authorized general partner of all the Partnerships in
accordance with the Partnership Agreements.
(vii) To the best of such counsel's knowledge
there is no action, suit, proceeding or investigation pending or
threatened against the Stockholder or the Company, other than
actions, suits, proceedings or investigations described in Schedule
1.14, Schedule 1.17 or Schedule 1.21 hereto, which might result in
a material adverse change in the properties, business or assets or
in the condition which questions the legality, validity or
propriety of this Agreement or of any action taken or to be taken
by the Stockholder pursuant to or in connection with this
Agreement.
(viii) The Stockholder is the lawful owner of
the Stock, to the best of such counsel's knowledge, free and clear
of all adverse claims, with unrestricted right and power to
transfer and deliver the Stock to the Buyer. The Stockholder has
executed and delivered to the Buyer such instruments as are
sufficient in form to vest good and marketable title to the Stock
in the Buyer free and clear of all adverse claims.
In giving such opinion, counsel for the Stockholder may rely,
as to matters of fact, upon certificates of officers of the
Company, and as to matters relating to the laws of any states other
than the States of Delaware and Pennsylvania, upon the opinions of
other counsel satisfactory to them, provided that such counsel
shall state that they believe that they are justified in relying
upon such certificates and opinions and deliver copies thereof at
the Closing.
(c) The resignations immediately prior to the Closing
of (i) each director of the Company and the Subsidiary and (ii)
each officer of the Company and the Subsidiary as requested by the
Buyer, however, any liability incurred under the Company's existing
severance policy as a result of such resignations shall be borne by
the Buyer.
7.4 A. DELIVERIES OF THE BUYER. At the Closing, the
Buyer shall deliver to the Stockholder an opinion of Ledgewood Law
Firm, P.C., counsel for the Buyer, in form and substance
satisfactory to the Stockholder and its counsel, to the effect that
(i) The Buyer is a corporation duly organized, validly existing and
in good standing under the laws State of Delaware; and (ii) this
Agreement and the transactions contemplated herein have been duly
approved by all necessary corporate action of the Buyer and such
Agreement, assuming due execution by the Stockholder, is the valid
and binding agreement of the Buyer enforceable against the Buyer in
accordance with its terms except as enforcement of such agreement
may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally.
In giving such opinion, counsel for the Buyer may rely, as to
matters of fact, upon certificates of officers of the Buyer.
ARTICLE VIII
TERMINATION
8.1 A. TERMINATION. This Agreement may be terminated
by the Buyer, if the Approval required by Section 5.3 hereof has
not been received by October 31, 1995, which date may be extended
by the Buyer, in its sole discretion, until December 31, 1995.
If this Agreement is terminated as set forth above, the
Stockholder shall pay all reasonable out-of-pocket and third party
expenses, including, but not limited to, attorneys' fees and third
party due diligence costs incurred by the Buyer in connection with
the transactions contemplated hereunder.
ARTICLE IX
SURVIVAL OF OBLIGATIONS; INDEMNIFICATION
9.1 A. SURVIVAL OF OBLIGATIONS. All representations
and warranties made herein by the Stockholder and its obligations
to be performed pursuant to the terms hereof, shall survive the
Closing hereunder and shall terminate one year after the Closing;
PROVIDED, that, (i) the representations and warranties contained in
Section 1.15 shall expire three years after the Closing, or with
respect to any dispute with the Internal Revenue Service, upon the
later to occur of the following (x) such dispute's final resolution
and the payment of all taxes, interest and penalties arising
therefrom and (y) the expiration of the applicable statute of
limitations; and (ii) the representations in Section 1.4 shall not
terminate.
9.2 A. INDEMNIFICATION. (a) The Stockholder agrees to
indemnify and hold harmless the Buyer, the Company and their
subsidiaries, affiliates, successors and assigns from and against
any and all (x) liabilities, losses, costs, deficiencies or damages
and any and all amounts paid in settlement ("LOSS") and (y)
reasonable attorneys' and accountants' fees and expenses, court
costs and all other reasonable out-of-pocket expenses ("EXPENSE"),
incurred by the Buyer or the Company, in investigating, preparing
or defending against any litigation, commenced or threatened, or
any claim asserted in good faith, in each case net of any insurance
proceeds received and retained by the Buyer or the Company in
connection with or arising from (i) any claim that the Stockholder
did not convey to the Buyer good and marketable title to all of the
issued and outstanding capital stock of the Company pursuant to
this Agreement, (ii) any breach by the Stockholder of any of its
covenants in, or failure of the Stockholder to perform any of its
obligations hereunder, or (iii) any breach of any warranty or the
inaccuracy of any representation of the Stockholder contained or
referred to in this Agreement or in any certificate delivered by or
on behalf of the Stockholder pursuant hereto.
(b) The Buyer and the Company agree to indemnify and
hold harmless the Stockholder and its successors and assigns from
and against any and all Loss and Expense incurred by the
Stockholder in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim asserted in good
faith in each case net of any insurance received and retained by
the Stockholder in connection with or arising from (i) any breach
by the Buyer or the Company of any of its covenants in, or any
failure of the Buyer or the Company to perform any of its
obligations under, this Agreement or (ii) any breach of any
warranty or the inaccuracy of any representation of the Buyer
contained or referred to in this Agreement or in any certificate
delivered by or on behalf of the Buyer pursuant hereto.
(c) No claim shall be made for indemnity pursuant to
this Section 9.2 until the aggregate amount of Loss and Expense
exceeds Thirty Thousand Dollars ($30,000), but if the aggregate
amount of such Loss exceeds such amount, the party responsible
therefor (an "INDEMNIFYING PERSON") shall be liable for all Loss
and Expense, including such initial Thirty Thousand Dollars
($30,000) amount to the person incurring such Loss or Expense (an
"INDEMNIFIED PERSON"). In no event shall the Stockholder's
obligations under this Section 9.2 exceed an aggregate of Eight
Hundred Thousand Dollars ($800,000).
(d) If any Indemnified Person has suffered or
incurred any Loss or Expense, the Indemnified Person shall so
notify the Indemnifying Person promptly in writing describing such
Loss or Expense, the amount thereof, if known, and the method of
computation of such Loss or Expense, all with reasonable
particularity and containing a reference to the provisions of this
Agreement or any certificate delivered pursuant hereto in respect
of which such Loss or Expense shall have occurred. If any action
at law or suit in equity is instituted by or against a third party
with respect to which an Indemnified Person intends to claim any
liability or expense as Loss or Expense under this Section 9.2,
such Indemnified Person shall promptly notify the Indemnifying
Person of such action or suit.
(e) An Indemnified Person shall have the right, but
not the obligation, to participate at its own expense in the
defense of any third party claim, action or suit with counsel of
its own choosing, but the Indemnifying Person shall be entitled to
control the defense unless the Indemnified Person has relieved the
Indemnifying Person from liability with respect to the particular
matter. In the event that the Indemnifying Person shall fail
timely to defend, contest or otherwise protect against such claim,
the Indemnified Person shall have the right, but not the
obligation, to defend, contest or otherwise protect against the
same or, on not less than thirty (30) days' written notice to the
Indemnifying Person, make any compromise or settlement thereof, and
such compromise or settlement shall be binding on the Indemnifying
Person for purposes of indemnification under this Article IX unless
the Indemnifying Person objects thereto within the thirty day
period aforesaid.
(f) Neither the Buyer nor the Company shall have the
right to set off against any Lease Brokerage Revenues due the
Stockholder in accordance with Section 7.2(b) hereof except only
with respect to any amounts both (i) owed to the Buyer by the
Stockholder as a result of the indemnification provided in this
Section 9.2 and (ii) paid out-of-pocket to third parties by the
Buyer or the Company.
ARTICLE X
MISCELLANEOUS
10.1 A. NOTICES. All notices or other
communications required or permitted hereunder shall be in writing
and shall be deemed given (a) three (3) days after having been sent
by certified or registered mail, return receipt requested, (b) one
(1) business day after having been sent by regional recognized
courier guarantying next business day delivery, or (c) upon
delivery if given by hand delivery against written receipt,
addressed as follows:
If to the Buyer:
Resource Leasing, Inc.
1521 Locust Street, 4th Floor
Philadelphia, PA 19102
ATTN: Freddie Kotek
If to the Stockholder:
FML Leasehold, Inc.
250 King of Prussia Road
Radnor, PA 19087
ATTN: President
10.2 A. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the provisions on conflicts of law.
10.3 A. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
10.4 A. SEVERABILITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never
been contained herein unless the deletion of such provision or
provisions would result in such a material change as to cause
enforcement of the terms hereof to be unreasonable.
10.5 A. EXPENSES. Each party hereto shall pay its own
expenses (including, without limitation, legal and accounting fees
and expenses) incident to its negotiation and preparation of this
Agreement and to its performance and compliance with the provisions
contained herein.
10.6 A. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
10.7 A. SCHEDULES. The Schedules to this Agreement shall
be construed with and read as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
10.8 A. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Schedules hereto, contains the entire
understanding of the parties hereto with regard to the subject
matter contained herein. The parties hereto, by mutual agreement
in writing, may amend, modify and supplement this Agreement. The
failure of any party hereto to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement
or any part hereof or the rights of such party thereafter to
enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
RESOURCE LEASING, INC.
Attest:___________________________ By:_____________________________
, Secretary Freddie Kotek, _____________
FML LEASEHOLD, INC.
Attest:_________________________By:___________________________
, Secretary Arthur W. Mullin, Vice
President
FIDELITY LEASING COMPANY
Attest:____________________ By:___________________________
, Secretary P. Donald Mooney, President
EXHIBIT 11.1
CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE
PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
Computation for Statement of Operations
<S> <C> <C>
Reconciliation of net income per statement of operations to amount used in primary 1995 1994
earnings per share computation:
Net income $2,714,127 $1,308,633
Add-Interest on short-term debt, net of tax effect, on application of assumed
proceeds from exercise of options and warrants in excess of 20% limitation 43,320 -
Net income, as adjusted $2,757,447 $1,308,633
Additional Primary Computation
Net income, as adjusted per primary computation above $2,757,447 $1,308,633
Additional adjustment to weighted average number of shares outstanding:
Weighted average number of shares outstanding 678,000 701,300
Add-Dilutive effect of outstanding options and warrants (as determined by
the application of the treasury stock method) 117,800 14,100
Weighted average number of shares outstanding 795,800 715,400
Primary earnings per share, as adjusted $3.47 $1.83
FULLY DILUTED EARNINGS PER SHARE
Computation for Statement of Operations
Reconciliation of net income per statement of operations to amount used in primary
earnings per share computation:
Income (loss) before extraordinary loss $2,714,127 $1,308,633
Add-Interest on short-term debt, net of tax effect, on application of assumed
proceeds from exercise of options and warrants in excess of 20% limitation 31,020 -
Net income, as adjusted $2,745,147 $1,308,633
Additional Primary Computation
Net income, as adjusted per primary computation above $2,745,147 $1,308,633
Additional adjustment to weighted average number of shares outstanding:
Weighted average number of shares outstanding 678,000 701,300
Add-Dilutive effect of outstanding options and warrants (as determined by
the application of the treasury stock method) 117,800 73,400
Weighted average number of shares outstanding 795,800 774,700
Primary earnings per share, as adjusted $3.45 $1.69
</TABLE>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Resource America, Inc.
We have audited the accompanying consolidated balance sheets of
Resource America, Inc., and subsidiaries as of September 30, 1995,
and 1994, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Resource America, Inc., and subsidiaries as of
September 30, 1995, and 1994 and the consolidated results of their
operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Cleveland, Ohio
November 23, 1995
<PAGE>
CONSOLIDATED BALANCE SHEET
Resource America, Inc.
Years Ended September 30, 1995 and 1994
1995 1994
ASSETS
Current Assets
Cash and cash equivalents $2,457,432 $2,597,556
Accounts and notes receivable 1,303,556 1,136,656
Inventory 128,488 135,614
Prepaid expenses and other current assets 34,557 115,345
Total current assets 3,924,033 3,985,171
Property and Equipment
Oil and gas properties and
equipment (successful efforts) 24,039,762 28,682,497
Gas gathering and transmission facilities 1,514,127 1,485,323
Other 1,072,243 1,018,609
26,626,132 31,186,429
Less accumulated depreciation,
depletion, and amortization (14,043,455) (17,841,564)
12,582,677 13,344,865
Investments in Real Estate Loans 17,991,415 10,385,587
Restricted Cash 904,409 5,768,439
Other Assets
(less accumulated amortization
of $907,722 and $857,182) 2,147,430 1,311,620
$37,549,964 $34,795,682
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $721,673 $739,777
Accrued liabilities 516,066 426,640
Accrued income taxes - 100,000
Current portion of long-term debt 91,000 88,000
Total current liabilities 1,328,739 1,354,417
Long-term Debt, net of current portion 8,522,682 8,627,014
Deferred Income Taxes 1,147,000 674,000
Commitments and Contingencies - -
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value,
1,000,000 authorized shares, none issued - -
Common Stock, $.01 par value 8,179 8,179
Additional paid-in capital 19,214,210 19,136,420
Retained earnings 10,532,719 7,979,509
Less treasury stock, at cost (2,721,437) (2,437,437)
Less loan receivable from ESOP (482,128) (546,420)
Total stockholders' equity 26,551,543 24,140,251
$37,549,964 $34,795,682
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statement of Operations
Resource America, Inc.
Years Ended September 30, 1995 and 1994
1995 1994
REVENUES
Real estate finance $6,114,258 $2,522,472
Oil and gas production 3,452,327 3,441,752
Gas gathering and transmission 382,638 354,566
Well services 973,242 1,153,306
Financial services 377,272 379,019
Interest 148,331 135,546
11,448,068 7,986,661
COSTS AND EXPENSES
Production and transmission 1,563,628 1,414,060
Well services 789,940 877,646
Financial services 174,994 208,762
Real estate 800,970 248,000
Exploration 229,962 634,734
General and administrative 2,119,187 1,708,008
Depreciation, depletion, and
amortization 1,334,956 1,346,602
Interest 1,091,027 310,332
Other - net (2,028) 22,274
8,102,636 6,770,418
Income from operations 3,345,432 1,216,243
OTHER INCOME (EXPENSE)
Loss on sale of property (1,305) (7,610)
Income before income taxes 3,344,127 1,208,633
Provision (benefit) for income taxes 630,000 (100,000)
Net income $2,714,127 $1,308,633
Net income per common share - primary $3.47 $1.83
Weighted average common shares outstanding 795,800 715,400
Net income per common share - fully diluted $3.45 $1.69
Weighted average common shares outstanding 795,800 774,700
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statement of Changes in Stockholders' Equity
Resource America, Inc.
Years Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Retained Treasury Stock ESOP Share Stockholders'
Shares Amount Capital Earnings Shares Amount Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993 817,912 $8,179 $19,036,420 $6,670,876 (115,545) $(2,243,374) $(610,711) $22,861,390
Treasury shares acquired (15,857) (194,063) (194,063)
Warrants issued 100,000 100,000
Repayment of ESOP loan 64,291 64,291
Net income 1,308,633 1,308,633
Balance, September 30, 1994 817,912 8,179 19,136,420 7,979,509 (131,402) (2,437,437) (546,420) 24,140,251
Treasury shares acquired (21,298) (284,000) (284,000)
Cash dividends (160,917) (160,917)
Warrants issued 77,790 77,790
Repayment of ESOP loan 64,292 64,292
Net income 2,714,127 2,714,127
Balance, September 30, 1995 817,912 $8,179 $19,214,210 $10,532,719 (152,700) $(2,721,437) $(482,128) $26,551,543
</TABLE>
<PAGE>
Consolidated Statement of Cash Flows
Resource America, Inc.
Years Ended September 30, 1995 and 1994
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,714,127 $1,308,633
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion, and amortization 1,334,956 1,346,602
Amortization of discount on senior note
and deferred finance costs 74,020 21,684
Deferred income taxes 473,000 (160,000)
Gain on dispositions and investments (1,727,227) (1,088,159)
Property impairments and abandonments 56,497 547,342
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable 81,084 (46,439)
Decrease in prepaid expenses and other
current assets 80,788 70,805
Increase (decrease) in accounts payable (291,272) 227,492
Increase (decrease) in accrued income taxes (100,000) 100,000
Accretion of discount (1,175,887) (346,151)
Increase in other current liabilities 50,494 300,804
(Increase) decrease in inventory 7,126 (24,147)
Net cash provided by operating activities 1,577,706 2,258,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, less cash acquired (876,535) -
Capital expenditures (817,139) (1,036,545)
Proceeds from sale of assets 10,348,220 2,156,881
Increase in other assets (59,452) (540,774)
Increase in investments in real estate loans (14,708,125) (3,097,812)
Net cash used in investing activities (6,113,031) (2,518,250)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 2,000,000 8,000,000
Dividends paid (160,917) -
(Increase) decrease in restricted cash 4,864,030 (5,046,728)
Increase in other assets - (642,425)
Principal payments on debt (4,523,912) (21,248)
Purchase of treasury stock (284,000) (194,063)
Short-term borrowings 2,500,000 -
Net cash provided by financing activities 4,395,201 2,095,536
Increase (decrease) in cash and cash equivalents (140,124) 1,835,752
Cash and cash equivalents at beginning of year 2,597,556 761,804
Cash and cash equivalents at end of year $2,457,432 $2,597,556
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Resource America, Inc.
September 30, 1995 and 1994
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Resource America, Inc., and its wholly owned subsidiaries ("the
Company") and its pro rata share of the assets, liabilities,
income, and expenses of partnerships in which the Company has an
interest. All material intercompany transactions have been
eliminated.
OIL AND GAS PROPERTIES
The Company follows the successful efforts method of accounting.
Accordingly, property acquisition costs, costs of successful
exploratory wells, all development costs, and the cost of support
equipment and facilities are capitalized. Costs of unsuccessful
exploratory wells are expensed when determined to be nonproductive.
The costs associated with drilling and equipping wells not yet
completed are capitalized as uncompleted wells, equipment, and
facilities. Geological and geophysical costs and the costs of
carrying and retaining undeveloped properties, including delay
rentals, are expensed as incurred. Production costs, overhead, and
all exploration costs other than costs of exploratory drilling are
charged to expense as incurred.
Unproved properties are assessed periodically to determine whether
there has been a decline in value, and if such decline is
indicated, a loss is recognized. The Company compares the carrying
value of its oil and gas producing properties to the estimated
future cash flow from such properties, less applicable income taxes
in order to determine whether the carrying value of such properties
should be reduced. No adjustment was necessary as of September 30,
1995, or 1994.
On an annual basis, the Company estimates the costs of future
dismantlement, restoration, reclamation, and abandonment of its gas
and oil producing properties. Additionally, the Company evaluates
the estimated salvage value of equipment recoverable upon
abandonment. At September 30, 1995, the Company's evaluation of
equipment salvage values was greater than or equal to the costs of
future dismantlement, restoration, reclamation, and abandonment.
DEPRECIATION, DEPLETION, AND AMORTIZATION
Proved developed oil and gas properties, which include intangible
drilling and development costs, tangible well equipment, and
leasehold costs, are amortized on the unit-of-production method
using the ratio of current production to the estimated aggregate
proved developed oil and gas reserves. The net book value of
producing properties is limited to the value of their future net
cash flow based on unescalated prices and costs less
a provision for estimated income taxes.<PAGE>
Depreciation of property and equipment,
other than oil and gas properties, is computed using the straight-line
method over the estimated economic lives, which range from 3 to 25 years.
Intangible assets consist primarily of contracts acquired through
acquisitions recorded at fair value on their acquisition dates and
the excess of the acquisition cost over the fair value of the net
assets of a business acquired (goodwill). The contracts are being
amortized on a declining balance method over their respective
estimated lives, ranging from 5 to 13 years. Goodwill is being
amortized on a straight-line basis over 15 years.
Cash and cash equivalents
The Company considers temporary investments with a maturity at the
date of acquisition of 90 days or less to be cash equivalents.
RESTRICTED CASH
The Company's restricted cash is invested in short-term
highly-liquid investments. Classified as a noncurrent asset, it
represents collateral for a portion of the Company's long-term
debt.
Supplemental disclosure of cash flow information:
1995 1994
Cash paid (refunded) during the year for:
Interest $1,103,527 $22,812
Income Taxes 254,981 (40,000)
LIMITED PARTNERSHIPS
A substantial portion of the Company's activities and revenues are
attributable to limited partnerships ("Partnerships") in which it
serves as general partner and assumes the customary rights and
obligations for the Partnerships. As the general partner in these
various limited partnerships, the Company is liable for partnership
liabilities and can be liable to limited partners if it breaches
its responsibilities with respect to the operations of the limited
partnerships.
The Company is entitled to receive management fees, reimbursement
for administrative costs, and to share in the Partnerships' revenue
and costs and expenses according to the respective Partnership
agreements. Such fees and reimbursements are recognized as income
and included in financial services revenue. Amounts reimbursed for
costs incurred as operator of a partnership property for the years
ended September 30, 1995, and 1994 were $119,000 and $178,000,
respectively, and have been offset against general and
administrative expense. The Company includes in its operations the
portion of the Partnerships' revenues and expenses applicable to
its interests therein.
<PAGE>
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the
estimated future tax effects attributable to temporary differences
between the financial statement and tax bases of assets and
liabilities and carryforwards utilizing enacted rates. Deferred
tax provision or benefit represents the change during the year in
the deferred tax asset and liability balances.
EARNINGS PER SHARE
Earnings per common share - primary 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 include shares issuable under the terms of various
stock option and warrant agreements (see Notes 3 and 6). Fully
diluted earnings per share reflect additional dilution related to
stock options and warrants due to the use in that computation of
the market price f the Company's shares at the end of the period,
which price is higher than the average price for the period.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 consolidated
financial statements to conform with the 1995 presentation.
NOTE 2 - TRANSACTIONS WITH RELATED PARTIES
The Company administers the activities of certain partnerships that
it sponsors (see Note 1). Well service revenues primarily represent
services provided to Partnerships and joint ventures managed by the
Company.
The Company acquired limited partners' interests in and purchased
wells from various oil and gas partnerships for which the Company
served as the general partner. The aggregate purchase price of
these acquisitions was $133,000 and $623,000 in 1995 and 1994,
respectively.
In accordance with industry practice, the Company charges each
producing well in the Partnerships and joint ventures a fixed
monthly overhead fee and a proportionate share of certain lease
operating expenses. These charges are to reimburse the Company for
certain operating and general and administrative expenses.
The Company has been engaged to provide financial reporting and
data processing services to certain real estate partnerships
sponsored by others. The general partners of such partnerships may
be deemed to be indirect affiliates or associates of an officer of
the Company. Financial services revenues include $25,000 and
$46,000 in 1995 and 1994, respectively, for the billings of these
services. Amounts due from these real estate partnerships amounted
to $27,600 at September 30, 1994.
<PAGE>
A law firm in which an officer of the Company holds "of counsel"
status provides legal services to the Company. The Company and its
subsidiaries paid the firm approximately $562,000 and $464,000
during 1995 and 1994 for legal services primarily related to the
purchase and restructuring of real estate loans and the placement
during fiscal 1994 of the $8,000,000 senior secured note referred
to in Note 3.
In addition, during 1994 the Company retained an individual who is
associated with the Chairman of the Company in other business
ventures, to perform due diligence services in connection with the
placement of the $8,000,000 senior secured note referred to in Note
3. The Company paid approximately $76,000 to this individual during
1994.
The Company holds real estate loans with respect to sixteen
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 are subordinated to receipt by the Company of minimum
required debt service payments under the loans.
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. During the first quarter of
fiscal 1995, the Company also borrowed $2,500,000 from Jefferson
Bank, a subsidiary of JeffBanks, Inc. The Company repaid this loan
in the third quarter of fiscal 1995 with long-term financing
obtained from an insurance company.
<PAGE>
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
September 30,
1995 1994
Mortgage note payable to a bank, secured by real
estate, monthly installments of approximately
$3,300 including interest at 3/4% above the
prime rate through May 2002 (rate of 9.5% at
September 30, 1995) $241,347 $265,262
Loan payable to a bank, secured by a certificate
of deposit, 20 equal semiannual installments of
$32,143 through February, 2003, and quarterly
payments of interest at 84% of the prime rate
through July 1996 (rate of 7.35% at
September 30, 1995), at which time the rate
converts to 1/2% above the prime rate through 2003
(See Note 6) 482,128 546,419
9.5% senior secured note payable, interest due
semi-annually, principal due May 2004 7,890,207 7,903,333
8,613,682 8,715,014
Less amounts payable in one year 91,000 88,000
$8,522,682 $8,627,014
The long-term debt maturing over the next five years is as follows:
1996 - $91,000; 1997 - $94,000; 1998 - $97,000; 1999 - $101,000;
and 2000 - $105,000.
In May 1994, the Company privately placed with an insurance company
at 9.5%, a senior secured note in the principal amount of
$8,000,000 together with an immediately exercisable detacable
warrant 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
warrant ($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 note is collateralized by
substantially all of the Company's oil and gas properties and
certain of the Company's Real Estate Loans (see Note 10). Among
other restrictions, the note agreement limits the payment of
dividends, requires the insurance company's consent to mergers and
the sale of substantial assets, limits the Company's incurring
additional indebtedness, and requires the maintenance of certain
financial ratios. At September 30, 1995 and 1994, the Company was
in compliance with such covenants.
<PAGE>
NOTE 4 - INCOME TAXES
The following table details the components of the Company's income
tax expense for the years 1995 and 1994.
1995 1994
Provision (benefit) for federal income tax
Deferred $473,000 $(160,000)
Current 157,000 60,000
$630,000 $(100,000)
A reconciliation between the statutory federal income tax rate and
the Company's effective federal income tax rate is as follows:
1995 1994
Statutory tax rate 34% 34%
Statutory depletion (4) (18)
Non-conventional fuel credits (1) (4)
Adjustment of prior year's accruals (3) (7)
Adjustment to valuation allowance for deferred
tax assets (7) (9)
Other - (4)
19% (8%)
The components of the net deferred tax liability are as follows:
September 30,
1995 1994
Deferred tax assets:
Statutory depletion carryforward $634,000 $1,300,000
Investment tax credit carryforwards
(less valuation allowance of $271,000 in 1994) 122,000 113,000
Alternative minimum tax credit carryforwards 221,000 268,000
Interest receivable 120,000 -
Other items, net - 25,000
1,097,000 1,706,000
Deferred tax liabilities:
Excess of tax over book depreciation,
depletion, and amortization (2,138,000) (2,311,000)
ESOP benefits (106,000) (69,000)
(2,244,000) (2,380,000)
Net deferred tax liability $(1,147,000) $(674,000)
<PAGE>
At September 30, 1995, the Company had a $122,000 investment tax
credit carryforward, and a $1,864,000 statutory depletion
carryforward available for federal income tax reporting purposes.
Additionally, the Company has an alternative minimum tax credit
carry over of $221,000 which can reduce regular income taxes in
future years.
The investment credit carryforward, if unused, will expire in
varying amounts from 1996 to 2001. There is no expiration date for
the utilization of statutory depletion carry overs and alternative
minimum tax credit carry overs.
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY
REPURCHASE OF COMMON STOCK
In 1993, the Board of Directors of the Company authorized
management to develop a definitive program to offer to purchase all
shares of its common stock held in accounts of fewer than 100
shares. The purpose of this offer was to reduce the relatively high
costs incurred by the Company in servicing its many stockholders
with small holdings. Management devised a plan to purchase such
shares at a price of $12.00 per share to holders of record as of
the close of business on July 15, 1994. Approximately 57,000 shares
were eligible for purchase under the plan. In September and
October, 1994, the Company purchased 13,901 and 3,267 shares held
in 386 and 89 accounts, respectively. In addition to the shares
acquired under the definitive program, in August, 1995, the Company
repurchased 13,076 shares in a private and unrelated transaction at
a cost of $183,000.
<PAGE>
NOTE 6 - EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN
During 1989, the Company established an Employee Stock Ownership
Plan ("ESOP"), to which it sold 60,000 newly-issued shares for
$1,200,000. The ESOP is a qualified non-contributory retirement
plan to acquire shares of the Company's common stock for the
benefit of all employees 21 years of age or older and who have
completed 1,000 hours of service for the Company. Contributions to
the ESOP are made at the discretion of the Board of Directors. The
ESOP borrowed the funds to purchase the shares under a seven year
bank term loan that was guaranteed by the Company. In February
1993, this loan was retired and refinanced by a loan from the
Company, which borrowed the funds for such loan from another bank
(see Note 3).
The stock purchased by the ESOP with the money borrowed is held by
the ESOP trustee in a "suspense account." On an annual basis, a
portion of the common stock is released from the "suspense account"
and allocated to participating employees. Any dividends on ESOP
shares are used to pay principal and interest on the loan. As of
September 30, 1995, there were 45,451 shares allocated to
participants and 8,570 suspense shares. Compensation expense
related to the plan is based upon principal and interest payments
to the bank less dividends paid to ESOP shares, such expense
amounted to $91,300 and $94,800 for the years ended September 30,
1995, and 1994, respectively.
The loan from the bank to the Company is payable in semiannual
installments through February 1, 2003. The loan from the Company to
the ESOP is payable on a quarterly basis through August 1, 1996.
Both the loan obligation and the unearned benefits expense (a
reduction in shareholders' equity) will be reduced by the amount of
any loan principal payments made by the Company and ESOP,
respectively.
EMPLOYEE SAVINGS PLAN
The Company has an Employee Retirement Savings Plan and Trust under
Section 401(k) of the Internal Revenue Code which allows employees
to defer up to 10% of their income on a pretax basis through
contributions to the savings plan. The Company matches up to 100%
of each employee's contribution. Included in general and
administrative expenses are $28,100 and $20,000 for the Company's
contributions for the years ended September 30, 1995, and 1994,
respectively.
<PAGE>
STOCK OPTIONS
Under the Company's 1984 Key Employee Stock Option Plan, officers
and certain key employees may be granted options to purchase shares
of stock at an option price of not less than the fair market value
on the date of the grant. The plan also provides for the grant of
Stock Appreciation Rights ("SAR's") to accompany the grant of
options. A right entitles the holder to benefit from market
appreciation in the Company's stock subject to the right between
the date of grant and the date of exercise without requiring any
payment on the part of the holder. Upon exercise of a right, the
holder is entitled to receive an amount of stock (or, at the
election of the Board of Directors, cash) equal in value to the
amount of such appreciation.
A total of 20,000 shares was originally reserved for issuance under
the plan. The exercise of SAR's on 16,000 shares has reduced the
number of shares reserved to 4,000, for which options were
outstanding at September 30, 1995, at an exercise price of $7.75
per share. To exercise any part of an option, an optionee must
remain in the continuous employment of the Company for one year after
the date of grant.
In January 1990, the stockholders approved the Resource America,
Inc., 1989 Key Employee Stock Option Plan ("Plan"). The Plan, for
which 70,000 shares have been reserved, provides for the issuance
of Incentive Stock Options and Non-qualified Stock Options
("Options") and SAR's. The Plan is administered by a Compensation
Committee ("Committee") of the Board of Directors consisting of at
least two members of the Board, neither of whom can receive Options
or SAR's under the Plan. The Committee may grant to eligible
employees Options to purchase shares or SAR's and, at its
discretion, may set terms and conditions required of a recipient as
a condition to his exercise of the Option or SAR. At September 30,
1995, Options for a total of 68,000 shares were outstanding at a
weighted-average exercise price of $8.09 per share.
Options under either plan become exercisable as to 25% of the
optioned shares each year after the date of grant, and expire not
later than ten years after grant.
A summary of the changes in shares under option for both plans
follows:
(number of shares)
Years ended September 30, 1995 1994
Outstanding, October 1 72,000 72,000
Outstanding, September 30 72,000 72,000
Exercisable, September 30 36,000 18,000
Available for grant, September 30 2,000 2,000
<PAGE>
NOTE 7 - FORMATION OF LIMITED PARTNERSHIPS
In 1990, the Company sponsored the Resource America 1990 Pipeline
Income Program ("1990 Program"), a limited partnership which
purchased a pipeline system from the Company.
The Company had guaranteed that the limited partners will receive
cash distributions during each of the first two years of the
operation of the 1990 Program equal to 12% of their capital
contributions to the 1990 Program. To the extent that cash flow to
the Program was less than 12%, the Company contributed sufficient
capital to the 1990 Program to allow the guaranteed distributions
to be made. The Company believes the amount contributed ($299,000),
for which it is entitled to be repaid on a preferential basis upon
termination of the 1990 Program, will be realized upon final
disposition of the pipeline.
In December 1989, the Company had a final closing on its Resource
America 1989 Pipeline Income Program ("1989 Program"). Similar to
the 1990 Program, the Company had guaranteed a 12% return on
invested capital to investors during the first two years of the
1989 Program's operations. The Company contributed sufficient
capital to the 1989 Program to allow the guaranteed distributions
to be made. The Company believes the amount contributed ($394,000),
for which it is entitled to be repaid on a preferential basis upon
termination of the 1989 Program, will be realized upon final
disposition of the pipeline.
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
pipeline after the fifth year of partnership operations.
In October 1994 and January 1995, in accordance with the terms of
the limited partnership agreements, the Company purchased 20 units
in the 1989 Program for a total cost of approximately $240,000. In
October 1995, the Company extended an offer to purchase 36 units in
the 1990 Program for approximately $9,700 per unit. In
November,1995, a total of four units were repurchased by the
Company at a total cost of approximately $38,000.
<PAGE>
NOTE 8 - ACQUISITION
Effective September 1, 1995, the Company acquired Fidelity Leasing
Corporation ("FLC"), an equipment leasing company, for $1,456,000
in cash (including related expenses) and assumed $312,000 in
liabilities. The acquisition was accounted for as a purchase and,
accordingly, FLC's assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. The
purchase price resulted in an excess of costs over net assets
acquired (goodwill) of approximately $558,000, which will be
amortized on a straight line basis over 15 years. FLC manages
seven equipment leasing partnerships.
The following pro forma results of operations give effect to the
above acquisition as though it had occurred on October 1, 1993:
(in thousand except per share amounts) 1995 1994
Revenue $13,473 $10,342
Net Income 2,865 1,664
Net Income per common share 3.60 2.33
The pro forma results of operations have been prepared for
comparative purposes only and do not purport to present actual
operating results had the acquisition been made at the beginning of
each year, or of results which may occur in the future.
<PAGE>
NOTE 9 - INDUSTRY SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company operates in two principal industry segments - real estate
and energy. Segment data for the years ended September 30, 1995,
and 1994 are as follows:
(in thousands of $) 1995 1994
Revenue:
Real estate $6,114 $2,522
Energy 4,808 4,950
Unidentified industries 378 379
Corporate 148 136
11,448 7,987
Depreciation, Depletion, and Amortization:
Real estate 37 37
Energy 1,208 1,221
Unidentified industries 46 47
Corporate 44 41
1,335 1,346
Operating Profit (Loss):
Real estate 4,444 1,819
Energy 804 179
Unidentified industries 136 116
Corporate (2,039) (898)
3,345 1,216
Identifiable Assets:
Energy 13,738 14,469
Real estate 18,225 10,489
Unidentified industries 1,043 101
Corporate 4,544 9,737
37,550 34,796
Capital Expenditures:
Real Estate 172 2
Energy 637 982
Unidentified industries - -
Corporate 8 53
$817 $1,037
Operating profit (loss) represents total revenueless operating
expenses, excluding interest and general corporate expenses. A
portion of executive salaries, included in their entirety in
general and administrative expenses on the Company's Consolidated
Statement of Operations, have been allocated to each segment based
on the time spent in each area of the business.
The Company's natural gas is sold under contract to various
purchasers. Gas sales to one purchaser individually approximated
15% and 16% of total revenues for the years ended September 30,
1995 and 1994, respectively. Interest and fees earned from one
borrower approximated 24% of total revenues for the year ended
September 30, 1995. <PAGE>
NOTE 10 - INVESTMENTS IN REAL ESTATE LOANS
At September 30, 1995 and 1994,the Company held real estate
loans having aggregate face values of $51,680,000 and $24,929,000,
respectively, which were being carried at aggregate costs of
$17,991,000 and $10,386,000, respectively. The following is a
summary of the changes in the carrying value of the Company's
investments in real estate loans for the years ended September 30,
1995 and 1994:
1995 1994
Balance, beginning of period $10,385,587 $7,072,888
New real estate loans 13,588,000 2,996,263
Additions to existing loans 1,299,696 717,525
Accretion of discount 1,175,886 602,151
Gains on sale of loan participations and
refinancings (revenue contribution) 1,728,531 1,095,769
Proceeds (cash):
Refinancings (2,555,285) (2,099,009)
Participations (7,631,000) -
Balance, end of period $17,991,415 $10,385,587
<TABLE>
<CAPTION>
Investments in Real Estate Loans at September 30 consists of:
September 30,
1995 1994
<S> <C> <S>
Property 001 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 $2,334,850 $2,189,589
Property 002 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 remaining face value due the Company of
$562,000 147,972 574,453
Property 003 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 remaining face value due the
Company of $479,000 189,347 833,305
<PAGE>
Property 004 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 $146,000 and a remaining face value due the Company of
$3,498,000 675,805 1,226,403
Property 005 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. In January 1995, the owner of the Property
refinanced the mortgage note with an unaffiliated party,
simultaneously paying the Company $934,000 toward principal and
interest on this loan - 1,352,925
The Company received a note,subordinated to the unaffiliated
party, face value of $3,559,000, secured by an unrecorded deed
on the same property and on the same terms in exchange for the
above referenced mortgage note 724,422 -
Property 006 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 remaining face value due the Company of
$1,370,000 424,749 1,102,015
Property 007 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
Property 008 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. In June 1995, the owner of the property refinanced the
mortgage note with an unaffiliated party, simultaneously paying the
Company $840,000 toward principal and interest on this loan - 2,132,921
The Company received a note, subordinated to the unaffiliated
party, face value of $4,165,000, secured by the same property
and on the same terms, in exchange for the above referenced
mortgage note 1,469,899 -
<PAGE>
Property 009 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., a note, face-value of $350,000, and a $3,000,000
second mortgage held by an unrelated party, interest at
12%, due November 30, 1998 9,252,716 -
Property 010 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
$227,000 and a remaining face value due the Company of $710,000
107,450 358,000
Property 011 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 $77,000 and a
remaining face value due the Company of $317,000 289,504 -
Property 012 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. In
August, 1995, the owner of the property refinanced the mortgage
note with an unaffiliated party, simultaneously paying the company
$655,000 toward principal and interest on this loan. The Company
now holds a note, subordinated to the unaffiliated party, face
value of $747,000, secured by the same property and on the same
terms 545,077 -
Property 013 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 $381,000 and a remaining
face value due the Company of $931,000 195,092 -
<PAGE>
Property 014 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. In September, 1995, the
Company sold a senior participation in this mortgage for $2,000,000
resulting in a gain of $499,000 and a remaining face value due the
Company of $975,000 295,608 -
Property 015 Subordinated wraparound note, face value of
$3,500,000, secured by residential real estate located in New
Concord, NC, interest at 12%, due August 25, 2000 146,765 -
Property 016 Subordinated wraparound note, face value of
$5,198,000, secured by real estate located in Rancho Cordova, CA,
interest at 8.5%, due December 31, 2019 702,963 -
$17,991,415 $10,385,587
</TABLE>
During June 1994, the Company received $2,099,000 including accrued
interest of $128,000 for a mortgage loan with a face value of
$3,435,000 and a carrying value, exclusive of interest, of
$976,000. This transaction resulted in a pre-tax gain of
$1,095,000, which is included in real estate finance revenues.
As referenced above, in June and September 1995, the Company sold
senior participations in seven and one real estate loans,
respectively, to an insuance company, pursuant to which the Company
agreed to replace any non-performing loan with a similar but
performing loan. In addition, the Company issued to the insurance
company warrants to purchase 40,000 and 84,465 shares of the
Company's common stock at the then market prices of $9.50 and
$11.75 per share, respectively. The value assigned to the warrants
($77,800) has been accounted for as paid-in capital.
Further, as referenced above, owners of three properties on which
the Company held mortgage notes refinanced those Notes with
unaffiliated parties. The Company received payments of principal
and interest on these mortgage notes as well as new notes,
subordinated to the new first mortgage notes placed on the
properties by the unaffiliated parties.<PAGE>
NOTE 11 - SUBSEQUENT EVENT
CASH DIVIDEND
On October 24, 1995, the Board of Directors of the Company approved
a dividend of $.25 per share of common stock payable on November
30, 1995 to holders of record as of November 17, 1995.
SPECIAL STOCKHOLDERS MEETING
On October 16, 1995, the Company's shareholders authorized an
amendment to the Certificate of Incorporation of the Company to
effect a division of the Company's Common Stock into two classes,
Class A Common Stock and Class B Common Stock. The Company's
existing Common Stock is designated as Class A Common Stock. Class
B Common Stock is currently reserved for issuance upon the exercise
of certain warrants held and yet to be issued under prior
commitment to Physician's Insurance Company of Ohio. This action
did not affect the number of authorized or outstanding shares of
Common or Preferred Stock. As a result, of the 3,500,000 shares of
Common Stock authorized, 2,500,000 shares is authorized as Class A
Common Stock and 1,000,000 shares is authorized as Class B Common
Stock, of which 665, 212 shares and zero shares, respectively, were
outstanding at that date. Class A Common Stock and Class B Common
Stock have the same relative rights in all matters except for the
election of directors.
At this same meeting, the shareholders also approved an amendment
to the Company's 1989 Key Employee Stock Option Plan to increase
the number of shares as to which options may be granted from 70,000
shares to 140,000 shares.
<PAGE>
NOTE 12 - SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
Results of operations for oil and gas
producing activities
Year Ended September 30,
(in thousands of $) 1995 1994
Revenues $3,452 $3,442
Production costs (1,502) (1,369)
Exploration expenses (230) (635)
Depreciation, depletion, and amortization (922) (977)
Income taxes - -
Results of operations for producing activities $798 $461
Capitalized costs related to oil and gas producing activities
The components of capitalized costs related to the Company's oil
and gas producing activities (less impairment reserve of $30,000 in
1995 and $49,954 in 1994) are as follows:
<TABLE>
1995 1994
<S> <C> <C>
Proved properties $22,416,417 $26,903,003
Unproved properties 649,962 703,317
Pipelines, equipment, and other interests 2,487,508 2,561,500
Total $25,553,887 $30,167,820
Accumulated depreciation, depletion, and amortization (13,589,493) (17,381,995)
Net capitalized costs $11,964,394 $12,785,825
</TABLE>
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
The costs incurred by the Company in its oil and gas activities
during 1995 and 1994 are as follows:
1995 1994
Property acquisition costs:
Unproved properties $ 5,373 $ 220
Proved properties 388,392 794,585
Exploration costs 217,941 144,334
Development costs 211,313 214,747
<PAGE>
OIL AND GAS RESERVE INFORMATION
The Company's estimates of net proved developed oil and gas
reserves and the present value thereof have been verified by E.E.
Templeton & Associates, Inc., an independent petroleum engineering
firm.
The Company's oil and gas reserves are located within the United
States. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting future net revenues
and the timing of development expenditures. The reserve data
presented represent estimates only and should not be construed as
being exact. In addition, the standardized measures of discounted
future net cash flows may not represent the fair market value of
the Company's oil and gas reserves or the present value of future
cash flows of equivalent reserves, due to anticipated future
changes in oil and gas prices and in production and development
costs and other factors for which effects have not been provided.
The standardized measure of discounted future net cash flows is
merely information provided for the financial statement user as a
common base for comparing oil and gas reserves of enterprises in
the industry.
Gas Oil
(mcf) (bbls)
Balance - September 30, 1993 10,465,818 261,824
Purchases of reserves in-place 2,835,913 53,111
Current additions - -
Sales of reserves in-place (1,865) (66)
Revisions to previous estimates (26,065) 15,992
Production (1,161,685) (34,002)
Balance - September 30, 1994 12,112,116 296,859
Purchases of reserves in-place 893,104 23,284
Current additions 430,330 3,641
Sales of reserves in-place (79,294) (628)
Revisions to previous estimates 624,471 14,423
Production (1,198,245) (36,420)
Balance - September 30, 1995 12,782,482 301,159
<PAGE>
Presented below is the standardized measure of discounted future
net cash flows and changes therein relating to proved developed oil
and gas reserves. The estimated future production is priced at
year-end prices. The resulting estimated future cash inflows are
reduced by estimated future costs to develop and produce the proved
developed reserves based on year-end cost levels. The future net
cash flows are reduced to present value amounts by applying a 10%
discount factor.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Future cash inflows $30,257,454 $30,334,494
Future production and development costs 15,199,823) (15,071,229)
Future income tax expense (1,260,450) (961,919)
Future net cash flows 13,797,181 14,301,346
Less 10% annual discount for estimated timing of cash flows (5,987,477) (6,340,083)
Standardized measure of discounted future net cash flows $7,809,704 $7,961,263
</TABLE>
The following table summarizes the changes in the standardized
measure of discounted future net cash flows from estimated
production of proved developed oil and gas reserves after income
taxes.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <S> <C> <S>
Balance, beginning of period $7,961,263 $7,281,849
Increase (decrease) in discounted future net cash flows:
Sales and transfers of oil and gas, net of related costs (1,869,399) (1,344,839)
Net changes in prices and production costs (186,722) (239,502)
Revisions of previous quantity estimates 417,560 69,501
Extensions, discoveries, and improved recovery less related costs 252,604 -
Purchases of reserves in-place 612,008 1,916,920
Sales of reserves in-place, net of tax effect (46,306) (1,425)
Accretion of discount 841,775 760,714
Net change in future income taxes (240,218) (131,190)
Other 67,139 (350,765)
Balance, end of period $7,809,704 $7,961,263
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS<PAGE>
INTRODUCTION
The Company's results of operations for the years ended September
30, 1995, and 1994 and its financial condition at September 30,
1995, are discussed in the following paragraphs and should be read
in conjunction with its consolidated financial statements.
RESULTS OF OPERATIONS
REVENUE
Real estate finance revenues represent interest and fees earned and
gains recognized on real estate loans owned by the Company. Real
estate finance revenues increased 142% to $6,114,000 in fiscal 1995
from $2,522,000 in fiscal 1994. This increase was attributable to
an increase in the average amount of real estate loans outstanding
and gains recognized on the sale of participations in loans held by
the Company. During 1995, the Company purchased seven real estate
loans, for a total cost of $13,588,000 as compared to three loans
for a total cost of $2,996,000 in fiscal 1994. The Company also
realized gains of $1,729,000 in connection with the sale of
participation interests in eight loans during fiscal 1995 as
compared to $1,096,000 on the refinancing of one loan in fiscal
1994.
Total oil and gas revenues remained constant for fiscal 1995 as
compared to the prior year. Gas revenues decreased 3% due to a 6%
decrease in the average price per mcf of natural gas produced
partially offset by a 3% increase in production volumes for the
year ended September 30, 1995, as compared to 1994. Oil revenues
increased by 14% due to a 6% increase in the average price per
barrel of production and a 7% increase in production volumes for
the year ended September 30, 1995, as compared to 1994.
The Company continues to experience normally declining production
from its properties located in New York State. This decline was
almost totally offset by the acquisition of additional well
interests in Ohio. In addition, the Company participated in the
drilling of three successful exploratory wells and recompleted one
successful developmental well during 1995. The impact on revenues
from these wells, however, will not be fully realized or reflected
on the Company's financial statements until fiscal year 1996.
A comparison of oil and gas sales, daily production volumes, and
average sales prices for the years indicated is as follows:
1995 1994
Sales (thousands)
Gas $ 2,762 $2,851
Oil 610 535
Production Volumes
Gas (mcf/day) 3,283 3,183
Oil (bbls/day) 100 93
Average Sales Prices
Gas (per mcf) $2.31 $2.45
Oil (per bbl) 16.74 15.74
<PAGE>
Gas gathering and transmission revenues increased 8% in 1995 over
the prior year. This increase resulted from the repurchase of
limited partnership interests in a pipeline operated by the Company
(see Note 7).
Well services revenues decreased 16% from fiscal 1994 to 1995 as a
result of a decrease in the number of wells operated for limited
partners.
Costs and expenses
Real estate finance expenses rose significantly in 1995 compared to
the prior year. This increase was the result of higher legal and
personnel costs associated with the expansion of the Company's real
estate financing activities.
A comparison of the Company's production costs as a percentage of
oil and gas sales, and the production cost per equivalent unit for
oil and gas for 1995 and 1994, is as follows:
Production Costs 1995 1994
As a % of sales 44% 40%
Gas (mcf) $1.06 $1.00
Oil (bbl) 6.36 6.01
Production and transportation costs increased 11% from fiscal 1994
to fiscal 1995. This
increase was due to the acquisition of limited partners' interests
in a pipeline and oil and gas partnerships for which the Company
serves as general partner, and increased workover costs in the
Company's Ohio fields of operation.
Exploration costs decreased significantly from the prior year due
to higher impairment and abandonment of non-producing properties
and dry hole costs in fiscal 1994. During 1995, the Company's
participation in two exploratory dry holes and lease impairments
totalled $56,000. During 1994, the Company's participation in two
exploratory dry holes and the determination that an exploratory
well drilled in a previous year was not capable of economic
production along with lease impairment totalled $547,000.
Depreciation, depletion, and amortization consist primarily of
amortization of costs relating to oil and gas properties.
Amortization of oil and gas property costs as a percentage of oil
and gas revenues was 27% in 1995 and 28% in 1994. The variance from
year to year is directly attributable to changes in the Company's
oil and gas reserve quantitis, product prices, and fluctuations in
the depletable cost basis of oil and gas properties.
<PAGE>
General and administrative expense increased 24% for the year ended
September 30, 1995. This increase was 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.
The increase in interest expense reflects an increase in
borrowings. In May 1994, the Company privately placed an $8,000,000
senior secured note with an insurance company (see Note 3). In
December, 1994, the Company borrowed $4,500,000 which was repaid in
June 1995 ($2,500,000) and September 1995 ($2,000,000).
LIQUIDITY AND CAPITAL RESOURCES
Sources and (uses) of cash for the two years ended September 30,
1995, are as follows:
(in thousands of $) 1995 1994
From operations $1,578 $ 2,258
Investing activities (6,113) (2,518)
Financing activities 4,395 2,096
$ (140) $1,836
The Company had $2,457,000 in cash and cash equivalents on hand at
September 30, 1995, down from $2,598,000 a year ago. The Company's
ratio of current assets to current liabilities was 2.9:1 on both
September 30, 1995 and 1994. Working capital at September 30,
1995, was $2,595,000, as compared to $2,631,000 at September 30,
1994.
Cash provided by operating activities decreased $681,000, or 30%,
during 1995, as compared to the prior year. This decrease wa
primarily the result of changes in net working capital.
The Company's cash used in investing activities increased
$3,595,000, or 143%, during 1995, as compared to the prior year,
the result of an increase in cash used to fund real estate
financing activities ($3,419,000).
Cash used for capital expenditures decreased $219,000, or 21%,
during 1995, due to a decrease in purchases of additional working
interests in wells operated by the Company.
<PAGE>
The Company's cash flow provided by financing activities increased
$2,300,000 during 1995, as compared to the prior year. During
fiscal 1995, the Company was able to release for corporate
investment purposes $4,864,000 in previously restricted cash which
served as partial collateral security for an $8,000,000 senior
note.
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 real estate
finance, energy and equipment leasing industries. In real estate,
the Company will continue to expand its mortgage portfolio as, and
when, economically attractive opportunities become available. 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. The Company has
recently entered the equipment leasing industry and will seek, and
expects to find, attractive opportunities with which to expand its
activities.
The Company's growth will be dependent upon the continued
availability of funds at satisfactory terms and rates which the
Company uses principally to finance acquisitions of real estate
loans. The Company may obtain required funds from a variety of
sources, including internal generation of funds, borrowings,
financings through the placement of notes and the sale of equity.
The Company has pursued a policy of expanding its real estate
finance activities, which focuses on the purchase of discounted
real estate mortgage loans. To provide funding for such
activities, in May, 1994, the Company sold an $8,000,000 senior
secured note to an insurance company. In December, 1994, a
mortgage held by the Company was refinanced which resulted in the
Company receiving cash substantially in excess of its investment.
In May, 1995, the insurance company committed to provide additional
funding through the purchase of participations in mortgages held or
to be acquired by the Company in a total amount of $10,000,000, of
which $2,369,000 remained available at September 30, 1995. During
fiscal 1995 the Company also received $2,429,000 through the
refinancing by conduits of three mortgages held by the Company.
In fiscal 1995, $161,000 or $.25 per share was paid in dividends.
The determination of the amount of future cash dividends, if any,
to be declared and paid is in the sole discretion of the Company's
Board of Directors and will depend on the various factors affecting
the Company's financial condition and other matters the Board of
Directors deems relevant.
<PAGE>
INFLATION AND CHANGES IN PRICES
Inflation affects the Company's operating expenses and increases in
those expenses may not be recoverable by increases in finance rates
chargeable by the Company. Inflation also affects interest rates
and movements in rates may adversely affect the Company's
profitability.
The Company's revenues and the value of its oil and gasproperties
have been and will continue to be affected by changes in oil and
gas prices. Oil and gas prices are subject to fluctuations which
the Company is unable to control or accurately predict.
ENVIRONMENTAL REGULATION
A continued trend to greater environmental and safety awareness and
increasing environmental regulation has resulted in higher
operating costs for the oil and gas industry and the Company. The
Company believes environmental and safety costs will continue to
increase in the future. To date, compliance with environmental laws
and regulations has not had a material impact on the Company's
capital expenditures, earnings, or competitive position. The
Company has not received any notices from any regulatory agency
regarding violations of environmental laws. The Company monitors
environmental laws and believes it is in compliance with applicable
environmental regulations. The Company is unable to predict the
impact of future laws and regulations on the Company's operations.
ACCOUNTING MATTERS
Upon the recommendation of the Audit Committee, approved by the
Board of Directors, Grant Thornton LLP served as the Company's
independent auditors during fiscal 1995 and 1994. It is not
expected that a representative of Grant Thornton LLP will be
present at the annual meeting.
CORPORATE STOCK
The Company's common stock is traded in the over-the-counter
market and appears on the NASDAQ National Market System under the
symbol "REXI." As of December 22, 1995, there were 664,636 shares
outstanding (excluding treasury shares) held of record by 821
holders of record. The following table sets forth the quarterly
high and low closing sale prices and dividends paid for the periods
indicated after such date.
1995 (Fiscal) High Low Dividends Paid
First Quarter $13.75 $11.75 $ -
Second Quarter 13.50 11.75 -
Third Quarter 15.25 11.75 -
Fourth Quarter 24.375 13.50 .25
1994(Fiscal) High Low Dividends Paid
First Quarter $9.75 $8.375 $ -
Second Quarter 9.50 8.25 -
Third Quarter 10.00 8.125 -
Fourth Quarter 13.50 9.125 -
<PAGE>
CORPORATE INFORMATION
DIRECTORS
CARLOS C. CAMPBELL (2) (3)
President of C.C. Campbell and Company (a management consulting
firm)
EDWARD E. COHEN (4)
Chairman of the Board and President
Resource America, Inc.
JOHN R. HART (1) (3)
President of Physicians Insurance Company
of Ohio
ANDREW M. LUBIN (1) (4)
President of Delaware Financial Group, Inc. (a private investment
firm)
ALAN D. SCHREIBER, M. D. (1) (2)
Founder and Chief Scientific Officer of
CorBec Pharmaceuticals, Inc.
MICHAEL L. STAINES
Senior Vice President and Secretary
Resource America, Inc.
JOHN S. WHITE (2) (3)
Chairman of the Board and Chief Executive Officer of DCC Securities
Corporation (a securities brokerage firm)
(1) Member, Audit Committee
(2) Member, Compensation Committee
(3) Member, Investment Committee
(4) Member, Nominating Committee
EXECUTIVE OFFICERS
EDWARD E. COHEN
Chairman of the Board and President
FREDDIE M. KOTEK
Senior Vice President
NANCY J. MCGURK
Vice President - Finance and Treasurer
SCOTT F. SCHAEFFER
Senior Vice President
JEFFREY C. SIMMONS
Vice President - Energy
MICHAEL L. STAINES
Senior Vice President and Secretary
<PAGE>
10-KSB
A copy of the Resource America, Inc., annual report on Form 10-KSB
as filed with the Securities and Exchange Commission is available
to stockholders by written request to the executive office.
ANNUAL MEETING
The Annual Meeting of Stockholders of the Company will be held on
Tuesday, March 12, 1996, at 9:00 a.m. at 1521 Locust Street -
Fourth Floor, Philadelphia, Pennsylvania, 19102.
SHARES LISTED
Over-the-Counter, NASDAQ National Market System
Symbol: REXI
EXECUTIVE OFFICES:
1521 Locust Street
Philadelphia, Pennsylvania 19102
(215) 546-5005
ENERGY OPERATIONS:
2876 South Arlington Road
Akron, Ohio 44312
(216) 644-6626
LEASING OPERATIONS:
7 East Skippack Pike
Suite 275
Ambler, Pennsylvania 19002
(215) 619-2800
REGISTERED OFFICE:
2317 Pennsylvania Avenue
Wilmington, Delaware 19806
(303) 654-6611
EXHIBIT 22.1
LIST OF SUBSIDIARIES
PERCENTAGE OWNED BY
RESOURCE AMERICA, INC., STATE OF
CORPORATE NAME OR WHOLLY OWNED SUBSIDIARY INCORPORATION
Resource Programs, Inc. 100% Delaware
St. Julien III Corp. 100% Pennsylvania
Resource Ventures, Inc. 100% Pennsylvania
Resource Properties, Inc. 100% Delaware
Resource Properties II, Inc. 100% Delaware
Resource Properties III, Inc. 100% Delaware
Resource Properties IV, Inc. 100% Delaware
Resource Properties V, Inc. 100% Delaware
Resource Properties VI, Inc. 100% Delaware
Resource Properties VII, Inc. 100% Delaware
Resource Properties VIII, Inc. 100% Delaware
Resource Properties IX, Inc. 100% Delaware
Resource Properties X, Inc. 100% Delaware
Resource Properties XI, Inc. 100% Delaware
Resource Properties XII, Inc. 100% Delaware
Resource Properties XIII, Inc. 100% Delaware
Resource Properties XIV, Inc. 100% Delaware
Resource Properties XV, Inc. 100% Delaware
Resource Properties XVI, Inc. 100% Delaware
Resource Energy, Inc. 100% Delaware
Resource Well Services, Inc. 100% Delaware
Resource GP, Inc. 100% Delaware
RAI Financial, Inc. 100% Delaware
Resource Investments, Inc. 100% Delaware
Resource Leasing, Inc. 100% Delaware
Fidelity Leasing Corp. 100% Delaware<PAGE>
EXHIBIT 23.1
E. E. TEMPLETON & ASSOCIATES, INC.
407 1/2 Second Street
Marietta, Ohio 45750
614-373-5046
November 15, 1995
Resource America, Inc.
Attention: Mr. Jeff Simmons
2876 South Arlington Road
Akron, Ohio 44312
Gentlemen:
We hereby consent to the use of our audit report dated November 15, 1995, on
reserves and revenue, as of October 1, 1995, from certain properties owned by
Resource America, Inc. in Resource America, Inc.'s Annual Report on form
10-K for the fiscal year ending September 30, 1995.
Very truly yours,
/s/ E. E. Templeton
- -------------------
E. E. Templeton & Associates, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 2,457,432
<SECURITIES> 0
<RECEIVABLES> 1,303,556
<ALLOWANCES> 0
<INVENTORY> 128,488
<CURRENT-ASSETS> 3,924,033
<PP&E> 26,626,132
<DEPRECIATION> 14,043,455
<TOTAL-ASSETS> 37,549,964
<CURRENT-LIABILITIES> 1,328,739
<BONDS> 8,522,682
<COMMON> 8,179
0
0
<OTHER-SE> 26,543,364
<TOTAL-LIABILITY-AND-EQUITY> 37,549,964
<SALES> 3,452,327
<TOTAL-REVENUES> 11,448,068
<CGS> 1,563,628
<TOTAL-COSTS> 8,102,636
<OTHER-EXPENSES> 1,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,091,027
<INCOME-PRETAX> 3,344,127
<INCOME-TAX> 630,000
<INCOME-CONTINUING> 2,714,127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,714,127
<EPS-PRIMARY> 3.47
<EPS-DILUTED> 3.45
</TABLE>
