<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
-------------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
----------------- ------------------
Commission file number 0-4408
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RESOURCE AMERICA, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 72-0654145
------------------------------ --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1521 Locust Street, Philadelphia, Pennsylvania 19102
-----------------------------------------------------
(Address of principal executive offices)
(215) 546-5005
---------------------------
(Issuer's telephone number)
-------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 678,549
-------------
<PAGE> 2
<TABLE>
RESOURCE AMERICA, INC.
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheet (Unaudited) March 31, 1995, and
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 & 2
Consolidated Statement of Operations (Unaudited) - Three
Months and Six Months Ended March 31, 1995, and 1994 . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows (Unaudited) - Six
Months Ended March 31, 1995, and 1994. . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . 5 - 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
March 31, 1995, and September 30, 1994
==============================================================================================================================
<CAPTION>
March 31, September 30,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 619,897 $ 2,597,556
Accounts and notes receivable . . . . . . . . . . . . . . . . . . 986,449 1,136,656
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,436 135,614
Prepaid expenses and other current assets . . . . . . . . . . . . 287,784 115,345
------------ ------------
Total Current Assets . . . . . . . . . . . . . . . 2,033,566 3,985,171
PROPERTY AND EQUIPMENT
Oil and gas properties and equipment
(successful efforts) . . . . . . . . . . . . . . . . . . . . . . 28,942,525 28,682,497
Gas gathering and transmission facilities . . . . . . . . . . . . 1,510,496 1,485,323
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076,162 1,018,609
------------ ------------
31,529,183 31,186,429
Less - accumulated depreciation, depletion,
and amortization . . . . . . . . . . . . . . . . . . . . . . . . (18,459,977) (17,841,564)
------------ ------------
Net Property and Equipment . . . . . . . . . . . 13,069,206 13,344,865
INVESTMENTS IN REAL ESTATE LOANS . . . . . . . . . . . . . . . . . . . 22,119,215 9,783,436
RESTRICTED CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556,982 5,768,439
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,144,231 1,913,771
----------- ------------
$39,923,200 $34,795,682
=========== ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
1
<PAGE> 4
<TABLE>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
March 31, 1995, and September 30, 1994
===============================================================================================================================
<CAPTION>
March 31, September 30,
1995 1994
------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade . . . . . . . . . . . . . . . . . . . . . $ 482,556 $ 739,777
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 183,196 160,807
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . 297,175 265,833
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . - 100,000
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 -
Current portion of long-term debt . . . . . . . . . . . . . . . . 88,000 88,000
------------ ------------
Total Current Liabilities . . . . . . . . . . . . 3,550,927 1,354,417
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,564,093 8,627,014
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 833,000 674,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 1,000,000
authorized, none issued . . . . . . . . . . . . . . . . . . . . - -
Common stock, $.01 par value, 3,500,000
authorized shares, 817,912 issued and
outstanding shares (including 139,363
and 131,402 treasury shares) at March 31,
1995, and September 30, 1994, respectively . . . . . . . . . . . 8,179 8,179
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 19,161,420 19,136,420
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 8,852,895 7,979,509
Less cost of treasury shares . . . . . . . . . . . . . . . . . . . (2,533,040) (2,437,437)
Less loan receivable from ESOP . . . . . . . . . . . . . . . . . . (514,274) (546,420)
------------ ------------
Total Stockholders' Equity . . . . . . . . . . . . . . 24,975,180 24,140,251
------------ ------------
$39,923,200 $34,795,682
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Three Months and Six Months Ended March 31, 1995, and 1994
====================================================================================================================================
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
---------------------------- ---------------------------
1995 1994 1995 1994
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Oil and gas production . . . . . . . . . . . . . . . . . . . . . . $ 820,390 $ 718,750 $1,661,646 $1,477,605
Gas gathering and transmission . . . . . . . . . . . . . . . . . . 98,821 85,864 197,040 183,900
Well services . . . . . . . . . . . . . . . . . . . . . . . . . . 247,902 283,386 514,822 577,294
Real estate finance . . . . . . . . . . . . . . . . . . . . . . . 1,768,868 388,693 2,456,649 701,032
Financial services . . . . . . . . . . . . . . . . . . . . . . . . 74,253 69,948 170,732 213,162
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 57,332 19,898 92,906 25,456
---------- ------------ ---------- ----------
3,067,566 1,566,539 5,093,795 3,178,449
COSTS AND EXPENSES
Production and transmission . . . . . . . . . . . . . . . . . . . 413,826 347,898 809,840 658,633
Well services . . . . . . . . . . . . . . . . . . . . . . . . . . 196,821 207,833 405,448 424,104
Real estate finance . . . . . . . . . . . . . . . . . . . . . . . 203,715 60,722 358,626 109,056
Financial services . . . . . . . . . . . . . . . . . . . . . . . . 45,277 58,423 95,052 106,688
Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,063 152,390 59,958 302,596
General and administrative . . . . . . . . . . . . . . . . . . . . 737,288 530,745 1,116,863 900,702
Depreciation and amortization . . . . . . . . . . . . . . . . . . 337,424 336,604 680,049 642,911
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319,536 5,172 539,626 11,489
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 1,521 (511) 308
---------- ------------ ---------- ----------
2,273,132 1,701,308 4,064,951 3,156,487
---------- ------------ ---------- ----------
INCOME (LOSS) FROM OPERATIONS . . . . . . . . . . . . . . . . . . 794,434 (134,769) 1,028,844 21,962
OTHER INCOME (EXPENSE)
Gain on sale of property . . . . . . . . . . . . . . . . . . . . . (2,291) 2,390 (1,458) 2,390
---------- ------------ ---------- ----------
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . 792,143 (132,379) 1,027,386 24,352
Benefit (provision) for income taxes. . . . . . . . . . . . . . . . . . (119,000) 56,000 (154,000) 119,000
---------- ------------ ---------- ----------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . $ 673,143 $ (76,379) $ 873,386 $ 143,352
========== ============ ========== ==========
NET INCOME (LOSS) PER COMMON SHARE . . . . . . . . . . . . . . . . . . $ .88 $ (.11) $ 1.16 $ .20
========== ============ ========== ==========
Weighted average common shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,200 707,500 751,400 707,700
========== ============ ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RESOURCE AMERICA, INC., AND SUBSIDIARIES
Six Months Ended March 31, 1995, and 1994
<CAPTION>
============================================================================================================
Six Months
Ended March 31,
-----------------------------
1995 1994
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 873,386 $ 143,352
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 680,049 642,911
Amortization of discount on senior note . . . . . . . . . . . . 5,625 -
Property impairments and abandonments . . . . . . . . . . . . . 19,000 263,824
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 159,000 (119,000)
(Gain) loss on sale of properties . . . . . . . . . . . . . . . 1,458 (2,391)
Change in operating assets and liabilities:
Decrease in accounts receivable . . . . . . . . . . . . . . . 150,207 298,823
Increase in prepaid expenses and other current assets . . . . (172,439) (103,513)
Increase (decrease) in accounts payable . . . . . . . . . . . (257,221) 90,596
Increase (decrease) in other current liabilities . . . . . . . (46,269) 2,187
Increase in inventory . . . . . . . . . . . . . . . . . . . . (3,822) (5,217)
Increase in other assets . . . . . . . . . . . . . . . . . . . (300,592) (292,525)
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . 1,108,382 919,047
INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (457,847) (236,554)
Proceeds from sale of properties . . . . . . . . . . . . . . . . . 84,911 46,537
(Increase) decrease in other assets . . . . . . . . . . . . . . . (12,854) 112,748
Increase in investments in real estate loans . . . . . . . . . . . (12,335,779) (1,063,797)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . (12,721,569) (1,141,066)
FINANCING ACTIVITIES:
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 2,500,000 -
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 -
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . 31,074 -
Decrease in restricted cash . . . . . . . . . . . . . . . . . . . 5,211,457 -
Principal payments on long-term debt . . . . . . . . . . . . . . . (11,400) (10,070)
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . (95,603) (6,890)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . 9,635,528 (16,960)
DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . (1,977,659) (238,979)
CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . 2,597,556 761,804
------------ -----------
CASH AT MARCH 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 619,897 $ 522,825
============ ===========
</TABLE>
<TABLE>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accounting policies: Cash includes highly liquid investments with a maturity
of three months or less.
Interest: Cash paid during the first six months of 1995 for:
Interest $471,392
Federal income taxes 95,000
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 1 - MANAGEMENT'S OPINION REGARDING INTERIM FINANCIAL STATEMENTS
In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair statement of the results of operations
for the interim period included herein have been made.
The accounting policies followed by the Company are set forth in Note
1 to the Company's consolidated financial statements for the fiscal year ended
September 30, 1994, included in the Company's Annual Report on Form 10-KSB.
NOTE 2 - TRANSACTIONS WITH RELATED PARTIES
During the first quarter of fiscal 1995, the Company acquired limited
partners' interests in various oil and gas partnerships for which the Company
served as the general partner. The aggregate purchase price of these
acquisitions was $178,000.
A law firm in which an officer of the Company holds "of counsel" status
provides legal services to the Company. The Company believes that such
services are provided on terms no less favorable to the Company than those
which would be obtainable from third parties providing similar services.
The Company holds real estate loans with respect to fourteen
properties owned by third parties. These properties are managed by a
corporation in which an officer of the Company is an officer and minority
shareholder. Management fees payable under the management agreements (which
the Company believes are competitive with fees charged by unrelated persons in
the areas in which the properties are located) are subordinated to receipt by
the Company of minimum required debt service payments under the loans.
Accordingly, the Company believes that the agreements are on terms more
favorable to the Company than those which could be obtained from third parties
providing similar services.
The Company maintains depository and investment accounts in a bank
subsidiary of State Bancshares, Inc., in which the Chairman and the President
of the Company serve as directors. The Chairman's wife is a director and
executive officer of State Bancshares, Inc. The Company holds 5,000 shares of
State Bancshares' 8% Series E convertible preferred stock at a cost of
$100,000. The Company also borrowed $2,500,000 from Jefferson Bank, a
subsidiary of State Bancshares, Inc., during the first quarter of fiscal 1995.
The Company believes that the terms of the loan are no less favorable to the
Company or the bank than those which would be obtainable from unrelated
financial institutions.
5
<PAGE> 8
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 3 - DEBT
LONG-TERM
Long-term debt consists of the following:
<CAPTION>
March 31, September 30,
1995 1994
-------------- ---------------
<S> <C> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,861 $ 265,262
Employee Stock Ownership loan payable to a bank, 20
equal semiannual installments of $32,143 and quarterly
payments of interest at 84% of the prime rate through
July 1996, at which time the rate converts to 1/2%
above the prime rate through 2003 . . . . . . . . . . . . . . . . 514,274 546,419
9.5% senior secured note payable, interest due semi-
annually, principal due May 2004 . . . . . . . . . . . . . . . . . 7,908,333 7,903,333
Loan guarantee, interest due monthly, principal due
December 2004 (referred to below) . . . . . . . . . . . . . . . . 1,975,625 -
------------- ---------------
10,652,093 8,715,014
Less amounts payable in one year . . . . . . . . . . . . . . . . . 88,000 88,000
-------------- --------------
$ 10,564,093 $ 8,627,014
============== ==============
</TABLE>
The long-term debt maturing over the next five years is as follows:
1996 - $88,000; 1997 - $91,000; 1998 - $94,000; 1999 - $97,000; and 2000 -
$101,000.
The senior secured note payable is collateralized by substantially all
of the Company's oil and gas properties. Certain credit agreements require the
Company to comply with certain restrictive covenants. At March 31, 1995, the
Company was in compliance with such covenants.
The loan guarantee results from a transaction which closed in December
1994, pursuant to which the Company purchased for $1,650,000 a note and
mortgage in the original principal amount of $3,000,000 which were resold to an
insurance company for $2,000,000. In connection with the resale, the Company
guaranteed that the holder would receive a return of the $2,000,000 invested
plus a specified rate of interest. The Company treated the sale and guaranty
transaction, for accounting purposes, as a loan to the Company.
SHORT-TERM
Short-term debt consists of a note payable to a bank (see Note 2)
which bears interest at 1% above the prime rate, secured by various real estate
loans held by the Company due January 18, 1996.
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 4 - FORMATION OF LIMITED PARTNERSHIPS
In 1989 and 1990, the Company sponsored two pipeline income program
limited partnerships (the "1989 Program" and "1990 Program") which purchased
pipeline systems from the Company.
The Company had guaranteed that the limited partners in these programs
would receive cash distributions during each of the first two years of the
operation of the programs equal to 12% of their capital contributions to the
programs. To the extent that cash flow to the programs was less than 12%, the
Company contributed sufficient capital to allow the guaranteed distributions to
the limited partners to be made. The Company believes the amount contributed
for such distributions ($693,000), for which it is entitled to be repaid on a
preferential basis upon termination of the programs, will be realized upon
final disposition of the pipelines.
The limited partners in both programs have the right to sell their
interests in the programs to the Company following the fifth anniversary of the
respective program's closing at a price equal to 4.5 times the cash flow per
unit during the fifth year of partnership operations, subject to a maximum sale
price of $50,000 per unit. The limited partners may also cause the sale of the
pipelines after the fifth year of the respective partnership's operations.
During the first half of fiscal 1995, in accordance with the terms of the 1989
Pipeline Income Program limited partnership agreement, the Company fully
satisfied its obligation to repurchase units tendered by limited partners of
the Program by repurchasing 20 units, out of a total of 91 units available, for
a total cost of $240,000. Similar offers will be made during fiscal 1996 to
limited partners in the 1990 Pipeline Income Program to repurchase their
interests in that program. The Company cannot now predict the cost per unit,
nor the number of units out of a total of 57 available, that will be
repurchased.
NOTE 5 - INVESTMENTS IN REAL ESTATE LOANS
At March 31, 1995, the Company held real estate loans having an
aggregate face value of $43,446,000, which were being carried at an aggregate
cost of $22,119,215.
Investments in Real Estate Loans at March 31 consists of:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ ------------
<S> <C> <C>
Mortgage note, face value of $4,389,000, secured
by residential real estate located in Philadelphia, PA,
interest at 2% over the yield of one-year United States
Treasury securities, due July 31, 1998 . . . . . . . . . . . . . . $ - $ 1,330,198
Subordinated wraparound note, face value of $4,500,000,
secured by residential real estate located in Pittsburgh,
PA, interest at 14.5%, due October 31, 1998 . . . . . . . . . . . 2,025,114 2,025,114
Mortgage note, face value of $1,080,000, secured
by residential real estate located in Philadelphia, PA,
interest at 12%, due October 31, 1998 . . . . . . . . . . . . . . 489,281 467,280
</TABLE>
7
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
<TABLE>
<S> <C> <C>
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 October 31,
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999,256 985,364
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 . . . . . . . . . . . . . . . . . . . . . . . 804,977 803,977
Mortgage note, face value of $4,234,000, secured
by commercial real estate located in Pittsburgh, PA,
interest at 10.6%, due October 31, 1998 . . . . . . . . . . . . . 1,104,483 1,072,606
Mortgage note, face value of $4,629,000, secured
by commercial real estate located in Alexandria, VA,
interest at 1/2% over the Maryland National Bank
prime rate, due October 31, 1998 . . . . . . . . . . . . . . . . . 2,223,793 2,132,921
Wraparound note, face value of $12,000,000 consisting
of a first mortgage held by the Company of $9,000,000
secured by commercial real estate located in Washington,
D.C., and a $3,000,000 second mortgage held by an
unrelated party, interest at 12%, due November 30,
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 -
Mortgage note, face value of $1,211,000, secured
by residential real estate located in Philadelphia, PA,
interest at 3% over the Federal Home Loan Bank of
Pittsburgh rate, due September 2, 1999 . . . . . . . . . . . . . . 448,906 350,000
Mortgage note, face value of $900,000, secured by
commercial real estate located in Washington, D.C.,
interest at 1 1/2% over the First Union National
Bank rate, due September 30, 1999 . . . . . . . . . . . . . . . . 862,956 -
Mortgage notes, face value of $1,485,000, secured
by residential real estate located in Philadelphia, PA,
interest at 2% over the Mellon Bank prime rate, due
October 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 1,346,609 -
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 . . . . . . . . . . . . . . . . . . . . . . . . . 849,647 -
</TABLE>
8
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
<TABLE>
<S> <C>
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
December 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . 1,650,000 -
Note, face value of $3,559,000, secured by an unrecorded
deed on real estate located in Philadelphia, PA, interest
at 2% over the yield of one-year United States Treasury
securities, due February 1, 2002 . . . . . . . . . . . . . . . . . 820,000 -
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 . . . . . . . . . . . . . . 494,193 615,976
-------------- --------------
$ 22,119,215 $ 9,783,436
============== ==============
</TABLE>
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
A comparison of the Company's revenues, daily production volumes, and
average sales prices follows:
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- -----------------------
REVENUES (in thousands) 1995 1994 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gas $ 675 $ 613 $1,376 $1,252
Oil 131 85 262 198
PRODUCTION VOLUMES
-----------------------------------------------------------------------------------------
Gas (Mcf/day) 3,167 2,721 3,175 2,822
Oil (Bbls/day) 89 69 87 73
AVERAGE SALES PRICE
--------------------------------------------------------------------------------------
Gas (per Mcf) $ 2.37 $ 2.50 $ 2.38 $ 2.44
Oil (per Bbl) 16.24 13.74 16.55 14.95
</TABLE>
Natural gas revenues increased 10% for the quarter and six months
ended March 31, 1995, compared to the same periods a year ago. Production
volumes increased 16% for the quarter and 13% for the six months. Production
volumes in the Company's Ohio fields of operation increased 35% for the quarter
and 28% for the six months compared to the same periods of the prior year, as a
result of the acquisition of additional interests in existing wells from
limited partners and other third parties. The Company spent $623,000 in the
fourth quarter of fiscal 1994 and $178,000 in the first quarter of fiscal 1995
to acquire these interests. The Company also participated in the drilling of
two wells and one well during fiscal 1994 and the first two quarters of fiscal
1995, respectively, which have recently begun production. The Company intends
to participate in the drilling of additional wells during the remainder of
fiscal 1995. Production volumes in the Company's New York fields of operation
were down 11% for the quarter and 12% for the six months ended March 31, 1995,
due to the natural decline in production from existing wells. The net increase
in total natural gas volumes was partially offset by a decrease in the average
price received by the Company--gas prices fell 5% for the quarter and 2% for
the six months ended March 31, 1995, compared to the same periods a year ago.
Oil revenues increased 54% for the quarter and 33% for the six months
ended March 31, 1995, compared to the same periods a year ago. Production
volumes increased 31% for the quarter and 20% for the six months ended March
31, 1995, as a result of the acquisitions mentioned above. The average price
received for oil increased 18% for the quarter and 11% for the six months ended
March 31, 1995.
The Company's revenues have been and will continue to be affected by
changes in oil and gas prices. The Company is unable to control or accurately
predict these changes in prices. The Company's proved developed reserves are
predominantly natural gas.
Gas gathering and transmission revenues increased 15% for the quarter
and 7% for the six months ended March 31, 1995, from the same periods a year
ago. This increase resulted from the repurchase of limited partnership
interests in a pipeline operated by the Company (see Note 4).
Well services revenues decreased 13% for the quarter and 11% for the
six months ended March 31, 1995, as compared to the same periods a year ago, as
a result of a decrease in the number of wells operated for limited partners.
10
<PAGE> 13
Real estate finance revenues represent interest earned on real estate
loans owned by the Company. Through fiscal 1994, the Company had invested
$9,783,000 in nine loans (see Note 5). During the second quarter and six
months of fiscal 1995, the Company invested $8,000,000 in one loan and
$12,985,000 in five loans, respectively. In addition, the Company added
$199,000 and $259,000 to existing loans in the quarter and six months ended
March 31, 1995. Revenues in the second quarter of fiscal 1995 include
approximately $900,000 in fees and expense reimbursements in connection with
the $8,000,000 loan which was closed this quarter. All of the loans were
purchased at a discount to the original face value. The Company intends to
pursue similar real estate investment opportunities as they become available to
the extent allowed by the Company's investment capability.
Financial services revenues increased 6% for the quarter and decreased
20% for the six months ended March 31, 1995, as compared to the prior periods.
The six month decrease was the result of reduced financial reporting services
provided to certain real estate partnerships.
Interest income increased substantially for the quarter and six months
ended March 31, 1995, as compared to the prior periods. This increase was due
to higher average funds invested, resulting from the temporary investment of
funds borrowed.
COSTS AND EXPENSES
Production and transmission expenses increased 19% for the quarter and
23% for the six months ended March 31, 1995. These increases were primarily
attributable to the acquisition of limited partners' interests in oil and gas
partnerships for which the Company serves as the general partner and increased
workover costs in the Company's Ohio fields of operation. Production costs as
a percentage of oil and gas revenues rose from 47% to 49% and from 43% to 47%
for the quarter and six months ended March 31, 1995, as compared to similar
periods of the prior year.
Real estate finance expenses rose significantly for both the quarter
and six months ended March 31, 1995, as compared to the same periods a year
ago. These increases are the result of higher legal and personnel costs
associated with the growth of the Company's real estate financing activities.
Exploration costs decreased significantly for both the quarter and six
months ended March 31, 1995, as compared to the same periods a year ago due to
property impairments of approximately $264,000 in the prior year versus $19,000
in the current year.
General and administrative expenses increased 39% in the quarter and
24% in the six months ended March 31, 1995, as compared to the same periods of
the prior year. These increases are a result of the payment of incentive
compensation and a reduction in administrative fees earned. Administrative
fees charged to wells operated by the Company represent a direct reduction to
the Company's general and administrative expense. The number of wells operated
by the Company has decreased as compared to the prior year as a result of the
liquidation of some partnerships in which the Company earned fees associated
with its duties as general partner.
Depreciation and amortization consists primarily of amortization of
oil and gas properties. Amortization of oil and gas properties as a percentage
of oil and gas revenues decreased from 34% to 28% in the second quarter of
fiscal 1995, and from 31% to 28% for the six months ended March 31, 1995,
compared to the same periods in the prior year. This variance is attributable
to changes in the Company's oil and gas reserve quantities, product prices, and
fluctuations in the depletable cost basis of oil and gas properties.
11
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $1,978,000 during the six
months ended March 31, 1995, primarily due to the acquisition of real estate
loans (see Note 5).
Cash provided by operating activities increased $189,000, or 21%,
during the first half of fiscal 1995, as compared to the prior year. This
increase was primarily the result of an increase in net income for fiscal 1995
as compared to fiscal 1994.
The Company invested $12,985,000 in the acquisition of five real
estate loans and advanced $259,000 on existing loans held by the Company during
the first half of fiscal 1995 as compared to the investment of $1,064,000 in
the acquisition of one real estate loan during the similar prior period. As a
result, the Company's cash used in investing activities increased $11,581
during the first quarter of fiscal 1995, as compared to the prior year.
The Company's cash flow provided by financing activities increased
$9,652,000 during the first half of fiscal 1995 as compared to the prior year.
During the first half of fiscal 1995, the Company (i) sold a $2,000,000 note,
(ii) borrowed $2,500,000, and (iii) obtained the release for corporate
investment purposes of $5,157,000 in previously restricted cash serving as
partial collateral security for the Company's $8,000,000 senior secured note.
In order to complete these transactions, the Company has pledged substantially
all of its energy and real estate assets as collateral (see Note 3).
The Company's capital spending is predominantly discretionary--the
ultimate level of spending will depend on, among other things, the Company's
assessment of investment opportunities in the energy and real estate finance
industries. In energy, the Company will seek to add to its reserve base
through selected acquisition of producing properties and further development of
the Company's mineral interests. In real estate, the Company will continue to
expand its real estate loan portfolio as, and when, economically attractive
opportunities become available. To the extent required by its capital
investments, the Company will seek new financing or additional sources of
funding.
12
<PAGE> 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit No. Description
---------- -----------
11.1 Calculation of Primary and Fully Diluted Earnings
per Share
19.1 Wrap-Around Deed of Trust Note Between Washington
Properties Limited Partnership and RAI Financial, Inc.
19.2 Warrant to Purchase 40,000 Shares of Common Stock of
Resource America, Inc., Issued to Physicians
Insurance Company of Ohio
27 Financial Data Schedule
b) Reports on Form 8-K:
There were no Reports on Form 8-K filed by the Company for the
quarter ending March 31, 1995.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RESOURCE AMERICA, INC.
(Registrant)
Date May 12, 1995 By /s/ Michael L. Staines
-------------------- -------------------------
Michael L. Staines
Senior Vice President
and Secretary
Date May 12, 1995 By /s/ Nancy J. McGurk
-------------------- -------------------------
Nancy J. McGurk
Vice President -
Finance and Treasurer
14
<PAGE> 1
<TABLE>
CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE
Earnings per common share and common share equivalent are determined
by dividing net income by the weighted average number of common shares and
common share equivalents outstanding during each period. Common share
equivalents consist of common shares issuable upon the exercise of stock
options, provided the effect is dilutive, less common shares assumed to have
been purchased with the proceeds therefrom. Provided below is a table
reconciling common stock outstanding to common stock and common stock
equivalents used to compute earnings per share:
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
----------------------- ---------------------
Primary 1995 1994 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 680,100 701,900 683,800 701,000
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options and warrants 81,100 5,600 67,600 6,700
-------- -------- -------- --------
761,200 707,500 751,400 707,700
======= ======= ======= =======
Fully Diluted(a)
-------------
Weighted average number of common
shares outstanding 680,100 701,900 683,800 701,000
Assuming exercise of options and
warrants reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options and warrants 88,200 10,800 82,700 10,800
-------- -------- -------- --------
768,300 712,700 766,500 711,800
======= ======= ======= =======
<FN>
(a) This calculation is submitted in accordance with Securities Exchange Act
of 1934 Release no. 9083 although not required by footnote 2 to paragraph
14 of APB Opinion no. 15 because it results in dilution of less than 3%.
</TABLE>
15
<PAGE> 1
WRAP-AROUND DEED OF TRUST NOTE
------------------------------
$12,000,000.00 Dated: January 18, 1995
FOR VALUE RECEIVED, the undersigned, WASHINGTON PROPERTIES LIMITED
PARTNERSHIP, ("MAKER") promises to pay to the order of RAI FINANCIAL, INC.,
("PAYEE"), the principal sum of Twelve Million Dollars ($12,000,000.00) lawful
money of the United States of America, together with interest from November 30,
1994, until paid, at the rate and on the terms set forth herein, as follows:
1.0 LOAN. This Note evidences a Wrap-Around loan (the
"LOAN") from Payee to Maker of even date herewith, which Loan is more fully
described in that certain commitment letter from Payee to Maker dated December
9, 1994 and accepted by Maker on December 13, 1994, as amended by the Agreement
of even date herewith, (the "COMMITMENT LETTER"). The Loan includes and
encompasses Maker's indebtedness to Payee (the "SENIOR INDEBTEDNESS") in the
amount of Nine Million Dollars ($9,000,000) and Maker's indebtedness to The
Metropolitan Fund: Dover Pension Investors - 1986 (the "MetFund Indebtedness")
in the amount of Three Million Dollars ($3,000,000). Payments hereunder shall
be applied by Payee to the Senior Indebtedness and the MetFund Indebtedness and
no payments on account of the MetFund Indebtedness other than payments
hereunder are required of Maker.
2.0 INTEREST RATE. Interest shall accrue daily on the
unpaid principal balance hereof at the interest rate of twelve percent (12%)
per annum (the "INTEREST ACCRUAL RATE"). The daily interest charges shall be
determined by multiplying the highest amount of principal outstanding on that
day by the Interest Accrual Rate, and dividing the product thereof by 360.
3.0 ADDITIONAL INTEREST.
3.1 For any calendar year in which (i) all
interest accrued under this Note shall have been paid in full through the end
of such calendar year, (ii) all interest on the CAT Subordinated Loan (as
defined in Section 8 of the Commitment Letter) has been paid and (iii) all
reserves required by Payee have been fully funded, then Maker shall pay to
Payee, as additional interest hereunder, twenty five percent (25%) of all
amounts remaining from the gross rentals from the property owned by Maker and
located at 1301 Connecticut Avenue, Washington, D.C. (the "PROPERTY") after the
payment of usual, customary and reasonable operating (but not capital)
expenditures incurred in the operation and management of the Property ("NET
CASH FLOW"). Additional interest calculated pursuant to this paragraph shall
be due and payable on or before January 31 of the calendar year subsequent to
the calendar year for which such additional interest is calculated.
<PAGE> 2
3.2 Maker will pay to Payee, as additional
interest hereunder, that portion of the proceeds from a sale of the Property or
refinancing of this Note less the costs of sale or refinancing ("PROCEEDS")
equal to twenty five percent (25%) of all such Proceeds in excess of the sum of
(i) the then outstanding balance of this Note, (ii) any other "Permitted Liens"
described in Section 8.0 of the Commitment Letter and (ii) Maker's original
invested capital of $2,600,000, less any portion thereof which shall have been
redeemed prior thereto (including $375,000 paid to David Feldman on the date
hereof).
4.0 PAYMENT TERMS.
4.1 All principal due hereunder, together with
any accrued and unpaid interest, shall be payable on November 30, 1998 (the
"MATURITY DATE"). At Maker's option, Maker may extend the Maturity Date for
one additional two (2) year period (that is until November 30, 2000), pursuant
to the terms and conditions of Section 6.0 of the Commitment Letter. As set
forth in the Commitment Letter, Maker's option to extend the Maturity Date is
subject to certain conditions, including without limitation: (i) Maker
providing Payee written notice of its intention to extend the Maturity Date at
least sixty (60) days, but not greater than one hundred and twenty (120) days
prior to November 30, 1998 and (ii) Maker paying to Payee a fee (the "EXTENSION
FEE") of two percent (2%) of the then outstanding balance hereunder
(representing 1% per year for each year of the extension), payable at the time
Maker gives notice to Payee of the exercise of its option to extend the
Maturity Date.
4.2 If the Maturity Date is extended, the
Interest Accrual Rate and the Minimum Interest Rate (as defined in paragraph
10.1 hereof) will be adjusted by the difference between the prime rate of
interest on the Maturity Date and the prime rate of interest on November 17,
1994. For the purposes of this paragraph, the term "prime rate of interest"
shall mean the rate of interest advertised by Citibank, N.A., or a successor
thereto, as its prime rate. Notwithstanding anything contained herein to the
contrary, the Interest Accrual Rate and the Minimum Interest Rate will not be
adjusted below the respective rates now in effect.
4.3 Interest, calculated at the Interest Accrual
Rate hereof, will be payable, in arrears, on the first day of each calendar
month, commencing January 1, 1995.
5.0 NON-RECOURSE. This Note shall be non-recourse as
to principal and interest, and Maker's liability hereunder shall be enforceable
only out of any collateral now or hereafter mortgaged, pledged or assigned in
writing by Maker or any other Obligor to Payee. No deficiency or other
personal judgment, nor any order or decree of specific performance, shall be
sought
- 2 -
<PAGE> 3
against Maker, its partners, principals, or their heirs, personal
representatives, successors and assigns. If any judgment, order or decree is
rendered pursuant to an action or proceeding on this Note, the judgment index
and docket will be noted, if feasible, to reflect that such judgment or decree
is limited as set forth herein. Notwithstanding the forgoing or anything else
in the Note to the contrary, Maker shall be fully and personally liable for
failure to perform its obligations under the Note other than the obligation to
pay principal and interest, including without limitation (i) for damages
relating to toxic or hazardous wastes, waste products or substances on or about
any property pledged or mortgaged to Payee to secure the Note, (ii) for fraud
or misrepresentation, (iii) for negligence, or (iv) for misapplication of funds
or other misconduct.
6.0 PLACE FOR PAYMENT. The principal and interest
shall be payable at Payee's office, 1521 Locust Street; Suite 700,
Philadelphia, Pennsylvania 19102, or at such other place as Payee, from time to
time, may designate.
7.0 PREPAYMENT. Maker may not prepay, in whole or in
part, the principal sum hereof without the prior written consent of Payee. Any
prepayment which is permitted by Payee shall not relieve Maker of the
obligations to pay interest or principal as and when such interest or principal
would otherwise fall due, or of any obligations hereunder. Any partial
prepayment shall be applied in the inverse order of maturity of payments due
hereunder.
8.0 SECURITY. In addition to all rights, interests
and remedies provided for elsewhere in this Note, repayment of this Note is
secured in part by and Payee is hereby granted a security interest in the
following:
8.1 A first priority wrap-around deed of trust on
the Property;
8.2 A first priority assignment of rents and
leases generated from the Property;
8.3 A first priority lien and security interest
in all of Maker's personal property, and all Maker's machinery, property,
plant, equipment, furniture, furnishings, insurance proceeds located on or used
in connection with the operation of the Property; and
8.4 A pledge of all of the stock of Dupont Circle
Investments, Inc., the sole limited partner of Maker.
The above collateral (the "COLLATERAL") and all
other property of Maker now or hereafter in Payee's possession shall secure the
payment of the principal of and interest on, and
- 3 -
<PAGE> 4
all other obligations of Maker to Payee under this Note and any renewals,
extensions and modifications hereof, and all other indebtedness, liabilities,
and obligations of every kind and nature of Maker to Payee however created,
arising or evidenced, direct or indirect, absolute or contingent, joint or
several, now or hereafter existing, due or due to become due, and however
owned, held or acquired by Payee.
Payee is hereby granted a lien on and security
interest in any amounts which may be owing from time to time by Payee to Maker
in any capacity, including, without limitation, any deposit or reserve held by
Payee with respect to the Loan. Payee may at any time, at its option and after
five (5) days advance written notice, appropriate and apply any or all property
of Maker in Payee's possession toward the payment of this Note and of any and
all obligations of Maker to Payee. The failure to list additional security
herein shall in no way affect, diminish, limit or waive any of Payee's rights,
interests, or remedies hereunder or under any other agreement or with respect
to any other security now or hereafter pledged or given to Payee.
9.0 INCORPORATION OF AGREEMENT TERMS. All of the
agreements, conditions, covenants, terms, provisions and stipulations contained
in any deed of trust and in other agreements and security documents (including
but not limited to any assignments of rents and leases, security agreements,
financing statements and the Commitment Letter (the "AGREEMENTS") which are to
be kept and performed by Maker or any other party obligated to Payee pursuant
to any of the Agreements (each, an "OBLIGOR" and collectively, the "OBLIGORS")
are hereby made a part of this Note to the same extent and with the same force
and effect as if they were fully set forth herein, and Maker covenants and
agrees to keep and perform them, or cause them to be kept and performed,
strictly in accordance with their terms.
10.0 EVENTS OF DEFAULT. The following shall constitute
Events of Default hereunder:
10.1 Failure of Maker or any other Obligor to pay
any installment of principal or interest, or any other sum, within ten (10)
days from the date when it is due under this Note or any of the Agreements
after notice thereof from Payee, which notice need not be written. PROVIDED,
HOWEVER; failure of Maker to pay, when due, the interest set forth in paragraph
2.0 hereof shall not constitute a default hereunder if, and only if, Maker pays
to Payee the greater of: (i) interest on the then outstanding balance hereunder
calculated at the annual rate of eight and thirty four one hundredths percent
(8.34%), (the "MINIMUM INTEREST RATE"), or such other Minimum Interest Rate
that may result pursuant to an extension of the Maturity Date pursuant to
Section 4.2 of this Note; or (ii) the sum of (A) all amounts remaining from the
gross rentals from the Property (as
- 4 -
<PAGE> 5
defined in the Commitment Letter) after payment of usual, customary and
reasonable operating (but not capital) expenditures incurred in the operation
and management of such Property ("NET CASH FLOW"), less only (B) interest paid
to Commercial Asset Trust I pursuant to the CAT Subordinated Loan (as defined
in Section 8.0 of the Commitment Letter); and FURTHER, PROVIDED, that if
Borrower is unable to pay the Extension Fee when due, such fee may be accrued
and added to the then outstanding balance hereof.
10.2 Nonperformance of, or noncompliance by Maker
or any other Obligor with, any of the agreements, terms, conditions, covenants,
provisions or stipulations contained in this Note or any of the Agreements
which nonperformance or noncompliance is not cured within ten (10) days after
written notice thereof.
10.3 Maker or any other Obligor shall voluntarily
suspend transaction of its business, shall dissolve, shall not generally pay
its debts as they mature, shall make a general assignment for the benefit of
creditors, or shall file or have filed against Maker or any other Obligor, or
the property of Maker or any other Obligor, any petition for reorganization or
liquidation under the United States Bankruptcy Code or under any other state or
federal law for the relief of debtors, or a receiver, trustee or custodian
shall be appointed for Maker or any other Obligor.
10.4 Entry of judgment against, issuance of
attachment or garnishment or filing of a lien against Maker or any other
Obligor which has not been released, discharged or bonded against within thirty
(30) days thereafter.
10.5 Payee, in its sole but reasonable discretion,
determines that it is insecure with respect to the Collateral or the ability of
Maker or any other Obligor to perform all of its obligations hereunder and
under the Agreements.
10.6 Transfer, encumbrance or assignment of
majority or effective control of Maker or any partner of Maker.
11.0 LATE PAYMENT; INCREASED INTEREST; LATE CHARGE;
ACCELERATION. If any payment due hereunder is not paid within ten (10) days of
the date upon which such payment is due, then until such amount is paid, the
entire unpaid balance of this Note shall bear interest at a rate equal to two
percent (2%) per annum higher than the rate otherwise applicable hereunder (the
"DEFAULT RATE"). In addition, if any payment due hereunder is not paid within
ten (10) days after the date on which payment is due, a late charge ("LATE
CHARGE") of five percent (5%) of such delinquent payment shall be immediately
due and payable. Any
- 5 -
<PAGE> 6
interest calculated at the Default Rate or Late Charges must be paid on demand
and are NOT subject to the forbearance set forth in paragraph 10.1 hereof.
It being further understood, however, that in the
event of any default hereunder, or in the performance of any of the agreements,
conditions, covenants, terms, provisions or stipulations contained herein, or
in the Agreements, or upon the occurrence of any Event of Default hereunder,
then Payee, in its sole discretion and without notice to Maker, may declare
immediately due and payable (i) the entire unpaid balance of principal, (ii)
interest accrued thereon (at the rate applicable hereunder to the date of
default and thereafter at the Default Rate) and (iii) all other sums due by
Maker hereunder or under the Agreements. Notwithstanding anything herein to
the contrary, payment of such amounts may be enforced and recovered in whole or
in part at any time by one or more of the remedies provided to Payee in this
Note, in the Agreements, at law or in equity. In such case Payee may also
recover all costs of suit and other expenses in connection therewith, together
with attorneys' fees actually incurred but in no event less than one percent
(1%) of the total amount then due to Payee hereunder, together with interest on
any judgment obtained by Payee at the Default Rate (including but not limited
to interest at the Default Rate from and after the date of any sheriff's or
trustee's sale) until actual payment is made to Payee of the full amount due
Payee.
12.0 CONFESSION OF JUDGMENT. MAKER HEREBY IRREVOCABLY
AUTHORIZES AND EMPOWERS THE PROTHONOTARY, CLERK OF COURT, OR ANY ATTORNEY OF
ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO
IMMEDIATELY OR HEREAFTER APPEAR AT ANY TIME FOR THE UNDERSIGNED MAKER AFTER
DEFAULT HEREUNDER, TO WAIVE THE ISSUANCE AND SERVICE OF PROCESS AND THEREIN TO
CONFESS OR ENTER JUDGMENT AGAINST ANY MAKER FOR THE ENTIRE UNPAID PRINCIPAL
BALANCE OF THIS NOTE AND ALL OTHER SUMS PAID BY PAYEE TO OR ON BEHALF OF ANY
MAKER PURSUANT TO THE TERMS OF THIS NOTE OR THE AGREEMENTS, AND ALL ARREARAGES
OF INTEREST THEREON, TOGETHER WITH COSTS OF SUIT, AND OTHER EXPENSES IN
CONNECTION THEREWITH, TOGETHER WITH ATTORNEYS' FEES ACTUALLY INCURRED BUT IN NO
EVENT LESS THAN ONE PERCENT (1%) OF THE TOTAL AMOUNT DUE BY MAKER TO PAYEE.
THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT
SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF BUT SHALL CONTINUE FROM TIME TO
TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE HEREUNDER.
THE REMEDIES OF PAYEE AS PROVIDED HEREIN, OR IN THE AGREEMENTS, SHALL BE
CUMULATIVE AND CONCURRENT, AND MAY BE PURSUED SINGULARLY, SUCCESSIVELY, OR
TOGETHER AT THE SOLE DISCRETION OF PAYEE, AND MAY BE EXERCISED AS OFTEN AS
OCCASION THEREFOR SHALL OCCUR; AND THE FAILURE TO EXERCISE ANY SUCH RIGHT OR
REMEDY SHALL IN NO EVENT BE CONSTRUED AS A WAIVER OR RELEASE THEREOF.
- 6 -
<PAGE> 7
13.0 WAIVER AND RELEASE. Maker hereby waives and
releases all errors, defects and imperfections in any proceedings instituted by
Payee under the terms of this Note or the Agreements, as well as all benefit
that might accrue to Maker by virtue of any present or future laws exempting
any property, real or personal, securing this Note or the Agreements, or any
part of the proceeds arising from any sale of such property, from attachment,
levy, or sale under execution, or providing for any stay of execution,
homestead exemption, exemption from civil process, or extension of time for
payment and Maker agrees that any real or personal property that may be levied
upon pursuant to a judgment obtained by virtue hereof, in any writ of execution
issued thereon, may be sold upon any such writ in whole or in part in any order
desired by Payee. Maker hereby consents to immediate execution of any
judgment.
Maker hereby waives presentment for payment,
demand, notice of demand, notice of nonpayment or dishonor, protest and notice
of protest of this Note, and all other notices in connection with the delivery,
acceptance, performance, default or enforcement of the payment of this Note,
and agrees that the liability of Maker shall not be affected in any manner by
any indulgence, extension of time, renewal, waiver or modification granted or
consented to by Payee.
14.0 JURISDICTION; WAIVER OF JURY TRIAL. As an
independent covenant, Maker waives a jury trial and the right thereto in any
action or proceeding between Maker and Payee, whether hereunder or otherwise.
Maker hereby consents to the non-exclusive jurisdiction of the Courts of the
Commonwealth of Pennsylvania and the United States District Court for the
Eastern District of Pennsylvania, in any and all actions or proceedings arising
hereunder or pursuant hereto, and further consents that any process or notice
in connection therewith may be served by certified mail, return receipt
requested, or personal service, within or without the Commonwealth of
Pennsylvania irrevocably.
15.0 WAIVER BY PAYEE. Payee shall not be deemed, by
any act of omission or commission, to have waived any of its rights or remedies
hereunder unless such waiver is in writing and signed by Payee, and then only
to the extent specifically set forth in writing. A waiver by Payee with
respect to one event shall not be construed as continuing or as a bar to or
waiver of any right or remedy with respect to a subsequent event.
16.0 RESPECTING INTEREST. In the event that the
interest provisions hereof or in any of the Agreements shall result in an
effective rate of interest which, for any period of time, exceeds the limit of
any usury or other law applicable to the loan evidenced hereby, then Payee, in
its sole discretion and without notice to Maker or any other Obligor may (i)
apply all sums in excess of those lawfully collectible as interest for the
- 7 -
<PAGE> 8
period in question toward repayment of outstanding principal immediately upon
receipt of such moneys by Payee with the same force and effect as if Maker had
specifically designated such extra sums to be so applied to principal or (ii)
reduce or limit the collection of any interest to such sums which shall not
result in any payment of interest in excess of that lawfully collectable.
Maker agrees that in determining whether or not any interest payable under this
Note exceeds the highest rate permitted by law, any non-principal payment,
including without limitation late charges, shall be deemed to the extent
permitted by law to be an expense, fee, premium or penalty, rather than
interest.
17.0 SEVERABILITY. If any one or more of the
provisions contained in this Note or in the Agreements 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
Note or the Agreements, but this Note and the Agreements shall be construed as
if such provision had never been contained herein or therein, and Payee may, at
its option and without notice to Maker, declare immediately due and payable the
entire unpaid balance of principal with accrued interest thereon and all other
sums due hereunder or under the Agreements.
18.0 AMENDMENT OR MODIFICATION. The provisions of this
Note may be changed only by a written agreement signed by Maker and Payee.
19.0 GOVERNING LAW. This instrument shall be governed
by and construed according to the laws of the Commonwealth of Pennsylvania.
20.0 TERMINOLOGY. Whenever used, the singular number
shall include the plural, the plural the singular, the use of any gender shall
be applicable to all genders, and the words "Payee", "Maker" or "Obligor"
shall be deemed to include their respective heirs, personal representatives,
successors and assigns. The term "Payee" shall be deemed to include the Payee
specifically named herein as "Payee" or any subsequent holder or assignee of
this Note.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
duly executed this Note, under seal, the day and year first above written.
<TABLE>
<S> <C>
WASHINGTON PROPERTIES
LIMITED PARTNERSHIP
Witness:
/s/ Daniel O'C. Tracy, Jr. By: /s/ Peter V. Savage (SEAL)
- - - - -------------------------- --------------------
Peter Savage, General Partner
and consented to
By: DUPONT CIRCLE
INVESTMENTS, INC.,
sole limited partner
By: /s/ Hymie Snipelisky (SEAL)
----------------------
Attest: /s/ Peter V. Savage Hymie Snipelisky,
--------------------- Authorized Agent
</TABLE>
- 9 -
<PAGE> 1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
VOID AFTER 5:00 P.M. PHILADELPHIA TIME ON DECEMBER 19, 2004 OR IF NOT A
BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT
FOLLOWING BUSINESS DAY.
WARRANT TO PURCHASE
40,000
SHARES OF COMMON STOCK
OF
RESOURCE AMERICA, INC.
This Certifies that, for good and valuable consideration, Physicians
Insurance Company of Ohio, and its registered, permitted assigns (collectively,
the "Warrantholder"), is entitled to purchase from Resource America, Inc., a
corporation incorporated under the laws of the State of Delaware (the
"Company"), subject to the terms and conditions hereof, at any time or after
9:00 A.M., Philadelphia time, on December 19, 1994, and before 5:00 P.M.,
Philadelphia time, on December 19, 2004 (or, if such day is not a Business Day,
at or before 5:00 P.M., Philadelphia time, on the next following Business Day),
the number of fully paid and non-assessable shares of Common Stock of the
Company stated above at the Exercise Price (as defined herein). The Exercise
Price and the number of shares purchasable hereunder are subject to adjustment
from time to time as provided in Article III hereof.
ARTICLE I
SECTION 1.01. DEFINITION OF TERMS. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) BUSINESS DAY: A day other than a Saturday, Sunday or other
day on which banks in the Commonwealth of Pennsylvania are authorized by law to
remain closed.
(b) COMMON STOCK: Common stock, $.01 par value per share, of the
Company.
(c) COMMON STOCK EQUIVALENTS: Securities that are convertible
into or exercisable for shares of Common Stock.
(d) EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
(e) EXERCISE PRICE: $9.50 per Warrant Share, as such price may be
adjusted from time to time pursuant to Article III hereof.
<PAGE> 2
(f) EXPIRATION DATE: 5:00 P.M., Philadelphia time, on December
19, 2004 or if such day is not a Business Day, the next succeeding day which is
a Business Day.
(g) HOLDER: Any person owning or having a right to acquire
Warrant Shares or any assignee thereof.
(h) NASD: National Association of Securities Dealers, Inc. and
NASDAQ: NASD Automatic Quotation System.
(i) PERSON: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(j) PIGGYBACK REGISTRATION: See Article IV.
(k) REGISTERED SECURITIES: Any Registrable Securities which
have been included in an effective Registration Statement pursuant to the terms
of Article IV hereof.
(l) REGISTRABLE SECURITIES: Any Warrant Shares issued to
Physicians Insurance Company of Ohio and/or its designees or transferees as
permitted under Section 6.02 and/or other securities that may be or are issued
by the Company upon exercise of this Warrant, including those which may
thereafter be issued by the Company in respect of any such securities by means
of any stock splits, stock dividends, recapitalizations, reclassifications or
the like, and as adjusted pursuant to Article III hereof; provided, however,
that as to any particular security contained in Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such Registration Statement; or (ii) they shall have been
sold to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act; or (iii) they shall have been sold, assigned or otherwise
transferred except as permitted by Section 6.02 below.
(m) REGISTRATION STATEMENT: Any registration statement of the
Company filed or to be filed with the Securities and Exchange Commission which
covers any of the Registrable Securities pursuant to the provisions of this
Warrant, including all amendments (including post-effective amendments) and
supplements thereto, all exhibits thereto and all material incorporated therein
by reference.
(n) SECURITIES ACT: The Securities Act of 1933, as amended.
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<PAGE> 3
(o) TRANSFER: See Section 6.02.
(p) WARRANT: This Warrant and all other warrants that may be
issued in its or their place, together evidencing the right to purchase an
aggregate of 40,000 shares of Common Stock as the same may be adjusted pursuant
to this Warrant.
(q) WARRANTHOLDER: The person(s) or entity(ies) to whom this
Warrant is originally issued, or any successor in interest thereto, or any
assignee or transferee thereof, in whose name this Warrant is registered upon
the books to be maintained by the Company for that purpose.
(r) WARRANT SHARES: Common Stock, Common Stock Equivalents and
other securities purchased or purchasable upon exercise of the Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
SECTION 2.01. DURATION OF WARRANT. The Warrantholder may exercise
this Warrant at any time and from time to time after 9:00 A.M., Philadelphia
time, on December 19, 1994, and before 5:00 P.M., Philadelphia time, on the
Expiration Date. If this Warrant is not exercised on the Expiration Date, it
shall become void, and all rights hereunder shall thereupon cease.
SECTION 2.02. EXERCISE OF WARRANT.
(a) The Warrantholder may exercise this Warrant, in whole or in
part, by presentation and surrender of this Warrant to the Company at its
principal corporate office or at the office of its stock transfer agent, if
any, with the Subscription Form annexed hereto duly executed and accompanied by
payment of the full Exercise Price for each Warrant Share to be purchased.
(b) Upon receipt of this Warrant with the Subscription Form fully
executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, the Company
shall cause to be issued certificates for the total number of whole shares of
Common Stock for which this Warrant is being exercised (adjusted to reflect the
effect of the anti-dilution provisions contained in Article III hereof, if any,
and as provided in Section 2.04 hereof) in such denominations as are requested
for delivery to the Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder. The Warrantholder shall be deemed to be the
holder of record of the shares of Common Stock
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<PAGE> 4
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Warrantholder. At
the time this Warrant is exercised, the Company may require the Warrantholder
to make such representations, and may place such legends on certificates
representing the Warrant Shares, as may be reasonably required in the opinion
of counsel to the Company to permit the Warrant Shares to be issued in
compliance with the Securities Act.
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased under this
Warrant, the Company shall execute a new warrant in the form of this Warrant
for the balance of such Warrant Shares and deliver such new warrant to the
Warrantholder.
(d) The Company shall pay any and all stock transfer and similar
taxes which may be payable in respect of the issue of any Warrant Shares to the
Holder of the Warrant being exercised.
SECTION 2.03. RESERVATION OF SHARES. The Company hereby agrees that
at all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company from time to time issuable upon exercise of this Warrant.
All such shares shall be validly issued, fully paid and nonassessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights.
SECTION 2.04. FRACTIONAL SHARES. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in receipt of such fraction of a share to which the Warrantholder
would otherwise be entitled.
-4-
<PAGE> 5
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
SECTION 3.01. MECHANICAL ADJUSTMENTS.
(a) If at any time prior to the exercise of this Warrant in full,
the Company shall (i) declare a dividend or make a distribution on the Common
Stock payable in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares;
(iii) combine, reclassify or recapitalize its outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised in full immediately prior to such event, it or he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this Paragraph 3.01(a) shall be
made immediately after the record date, in the case of a dividend or
distribution, or the effective date, in the case of a subdivision, combination,
reclassification or recapitalization, to allow the purchase of such aggregate
number and kind of shares.
(b) If at any time prior to the exercise of this Warrant in full,
the Company shall (i) issue or sell any Common Stock or Common Stock
Equivalents without consideration or for consideration per share less than the
Exercise Price in effect immediately prior to the date of such issuance or sale
(other than issuances of securities upon the exercise of options granted under
the Company's currently existing stock option plans or upon the exercise of
other currently outstanding options) or (ii) fix a record date for the issuance
of subscription rights, options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase Common Stock (or Common Stock
Equivalents) at a price (or having an exercise or conversion price per share)
less than the Exercise Price in effect
-5-
<PAGE> 6
immediately prior to the record date described below, the Exercise Price shall
be adjusted so that the Exercise Price shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of such
sale or issuance (which date in the event of distribution to shareholders shall
be deemed to be the record date set by the Company to determine shareholders
entitled to participate in such distribution) by a fraction, the numerator of
which shall be (i) the number of shares of Common Stock outstanding on the date
of such sale or issuance, plus (ii) the number of additional shares of Common
Stock which the aggregate consideration received by the Company upon such
issuance or sale (plus the aggregate of any additional amount to be received by
the Company upon the exercise of such subscription rights, options or warrants)
would purchase at such current Exercise Price per share of the Common Stock;
and the denominator of which shall be (i) the number of shares of Common Stock
outstanding on the date of such issuance or sale, plus (ii) the number of
additional shares of Common Stock offered for the subscription or purchase (or
into which the Common Stock Equivalents so offered are exercisable or
convertible). Any adjustments required by this paragraph 3.01(b) shall be made
immediately after such issuance or sale or record date, as the case may be.
Such adjustments shall be made successively whenever such event shall occur.
To the extent that shares of Common Stock (or Common Stock Equivalents) are not
delivered after the expiration of such subscription rights, options or
warrants, the Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the issuance of such
rights, options or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or Common Stock Equivalents) actually
delivered.
(c) If at any time prior to the exercise of this Warrant in full,
the Company shall fix a record date for the issuance or distribution to all
holders of the Common Stock (including any such distribution to be made in
connection with a consolidation or merger in which the Company is to be the
continuing corporation) of evidences of its indebtedness, any other securities
of the Company or any cash, property or other assets (excluding a combination,
reclassification or recapitalization referred to in Section 3.01(a), regular
cash dividends or cash distributions paid out of net profits legally available
therefor and in the ordinary course of business or subscription rights, options
or warrants for Common Stock or Common Stock Equivalents (excluding those
referred to in Section 3.01(b) (any such non-excluded event being herein called
a "Special Dividend")), (i) the Exercise Price shall be decreased immediately
after the record date for such Special Dividend to a price determined by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the Exercise Price in effect on such
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<PAGE> 7
record date less the fair market value (as determined by the Company's Board of
Directors) of the evidences of indebtedness, securities or property, or other
assets issued or distributed in such Special Dividend applicable to one share
of Common Stock or of such subscription rights or warrants applicable to one
share of Common Stock and the denominator of which shall be such Exercise Price
then in effect and (ii) the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock subject to
purchase immediately before such Special Dividend by a fraction, the numerator
of which shall be the Exercise Price in effect immediately before such Special
Dividend and the denominator of which shall be the Exercise Price in effect
immediately after such Special Dividend. Any adjustment required by this
Section 3.01(c) shall be made successively whenever such a record date is fixed
and in the event that such distribution is not so made, the Exercise Price
shall again be adjusted to be that in effect immediately prior to such record
date.
(d) If at any time prior to the exercise of this Warrant in full,
the Company shall make a distribution to all holders of the Common Stock or
stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Exercise Price or the number of
Warrant Shares purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as
provided in this Article III, and the Company shall reserve, for the life of
the Warrant, such securities of such subsidiary or other corporation; provided,
however, that no adjustment in respect of dividends or interest on such stock
or other securities shall be made during the term of this Warrant or upon its
exercise.
(e) (i) If at any time prior to the exercise of this Warrant
in full, the Company shall issue securities upon the exercise of options,
warrants or other Common Stock Equivalents granted under any stock option plan
of the Company (except with respect to up to 2,000 shares of Common Stock
issuable in connection with the Company's existing stock option plan) created
after the date of the issuance of this Warrant, then, in addition to the
adjustment in Exercise Price required by Section 3.01(b) hereof, if any, the
aggregate number of shares of Common Stock issuable hereunder shall be
increased to that number of shares which is in the same ratio to the number of
shares issuable prior to the exercise giving rise to the need for adjustment
hereunder
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<PAGE> 8
as the number of shares of Common Stock outstanding immediately prior to the
exercise giving rise to the need for adjustment hereunder is to the number of
shares of Common Stock outstanding immediately after such exercise.
(ii) Except in the case of a transaction requiring an
adjustment pursuant to Section 3.01(e)(i) above, whenever the Exercise Price
payable upon exercise of this Warrant is adjusted pursuant to paragraph (a),
(b) or (c) of this Section 3.01, the Warrant Shares shall simultaneously be
adjusted by multiplying the number of Warrant Shares initially issuable upon
exercise of each Warrant by the Exercise Price in effect on the date thereof
and dividing the product so obtained by the Exercise Price, as adjusted.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($.05) in such price; provided, however, that any adjustments which by reason
of this paragraph (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.01 shall be made to the nearest cent or the nearest one-hundredth of
a share, as the case may be. Notwithstanding anything in this Section 3.01 to
the contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
(g) In the event that at any time, as a result of any adjustment
made pursuant to Section 3.01(a), the Warrantholder shall become entitled to
receive any shares of capital stock of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3.01(a) or this Section 3.01(g).
(h) In the case of an issue of additional Common Stock or Common
Stock Equivalents for cash, the consideration received by the Company therefor
before deducting therefrom any discount or commission or other expenses paid by
the Company for any underwriting of, or otherwise in connection with, the
issuance thereof, shall be deemed to be the amount received by the Company
therefor. The term "issue" shall include the sale or other disposition of
shares held by or on account of the Company or in the treasury of the Company
but until so sold or otherwise disposed of such shares shall not be deemed
outstanding.
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<PAGE> 9
SECTION 3.02. NOTICES OF ADJUSTMENT. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver forthwith to the Warrantholder a certificate signed by an
officer of the Company setting forth the adjusted number of shares purchasable
upon the exercise of this Warrant and the Exercise Price of such shares after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which adjustment was made.
SECTION 3.03. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in
Section 3.01 of this Warrant, no adjustment in respect of any cash dividends
shall be made during the term of this Warrant or upon the exercise of this
Warrant.
SECTION 3.04. PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than a subdivision or combination of
the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in case of any consolidation or merger of the Company with or
into another corporation (other than merger with a subsidiary in which the
Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in the
case of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, the Company shall, as a condition precedent to such transaction cause
such successor or purchasing corporation, as the case may be, to execute with
the Warrantholder an agreement granting the Warrantholder the right thereafter,
upon payment of the Exercise Price in effect immediately prior to such action,
to receive upon exercise of this Warrant the kind and amount of shares and
other securities and property which he would have owned or have been entitled
to receive after the happening of such reclassification, change, consolidation,
merger, sale or conveyance had this Warrant been exercised immediately prior to
such action. Such agreement shall provide for adjustments in respect of such
shares of stock and other securities and property, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Article III. In the event that in connection with any such reclassification,
capital reorganization, change, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution of payment, in whole or in part, for, or of, a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Article III. The provisions of this
Section 3.04
- 9 -
<PAGE> 10
shall similarly apply to successive reclassifications, capital reorganizations,
consolidations, mergers, sales or conveyances.
SECTION 3.05. FORM OF WARRANT AFTER ADJUSTMENTS. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant, as initially issued.
ARTICLE IV
REGISTRATION UNDER THE SECURITIES ACT
SECTION 4.01. PIGGYBACK REGISTRATION RIGHTS.
(a) If at any time prior to the Expiration Date, the Company
proposes to register any of its stock or other securities under the Securities
Act in connection with the public offering of such securities solely for cash
(other than a registration relating solely to (i) the sale of securities to
participants in a Company stock option plan, stock purchase plan, savings or
similar plan, or (ii) the sale of securities as part of an acquisition, merger
or exchange of stock or a registration on any form which does not include
substantially the same information as would be included in a Registration
Statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give the Holder of Registrable Securities written notice
of such registration. Upon the written request of the Holder given within
twenty (20) days after mailing of such notice by the Company in accordance with
Section 7.08, the Company shall use its best efforts, subject to the provisions
of Section 4.03, to cause to be registered under the Securities Act all of the
Registrable Securities that each Holder has requested to be registered;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 4.01(a) without obligation to
any holder.
(b) The Company is obligated to effect only two (2) such
registrations of Registrable Securities under this Section 4.01.
SECTION 4.02. EXPENSES OF PIGGYBACK REGISTRATION. The holder
of Registrable Securities shall bear an equitable portion of all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to all registrations pursuant to this
Section 4.02 including, without limitation, all registration, filing, and
qualification fees, printing and accounting fees relating or apportionable
- 10 -
<PAGE> 11
thereto, disbursements of counsel and underwriting discounts and commissions
relating to the Registrable Securities.
SECTION 4.03. UNDERWRITING REQUIREMENTS. In connection with
any offering involving an underwriting of shares of the Company's capital
stock, the Company shall not be required under Section 4.01 to include any of
the Holders' securities in such underwriting unless they accept the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company.
SECTION 4.04. DELAY OF REGISTRATION. No Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Warrant.
ARTICLE V
OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER
SECTION 5.01. NO RIGHTS AS SHAREHOLDER; NOTICE TO WARRANTHOLDER.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or his, her or its transferee the right to vote or to receive
dividends or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as a shareholder of the Company.
SECTION 5.02. WARRANTHOLDER RIGHTS IN OFFERING. The Warrantholder
shall have the right to participate in any rights offering which may be
undertaken by the Company prior to the Expiration Date, on a pro rata basis
with the holders of the Company's Common Stock (including oversubscription
rights), as if the Warrantholder had exercised this Warrant prior to any such
offering. For the purposes of this Section 5.02, each share into which this
Warrant may be converted shall be deemed to be an outstanding share of the
Company's Common Stock.
SECTION 5.03. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall,
in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
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<PAGE> 12
ARTICLE VI
SPLIT-UP, COMBINATION
EXCHANGE AND TRANSFER OF WARRANTS
SECTION 6.01. SPLIT-UP, COMBINATION, EXCHANGE AND TRANSFER OF
WARRANTS. Subject to the provisions of Section 6.02 hereof, this Warrant may
be split up, combined or exchanged for another warrant or warrants containing
the same terms to purchase a like aggregate number of Warrant Shares. If the
Warrantholder desires to split up, combine or exchange this Warrant, he, she or
it shall make such request in writing delivered to the Company and shall
surrender to the Company this Warrant and any other Warrants to be so split up,
combined or exchanged. Upon any such surrender for split up, combination or
exchange, the Company shall execute and deliver to the person entitled thereto
a Warrant or Warrants, as the case may be, as so requested. The Company shall
not be required to effect any split up, combination or exchange which will
result in the issuance of a Warrant entitling the Warrantholder to purchase
upon exercise a fraction of a share of Common Stock or a fractional Warrant.
The Company may require such Warrantholder to pay a sum sufficient to cover any
expenses of the Company (including fees of counsel to the Company), and any tax
or governmental charge that may be imposed, in connection with any split up,
combination or exchange of Warrants.
SECTION 6.02. RESTRICTIONS ON TRANSFER. Neither this Warrant nor the
Warrant Shares may be disposed of or encumbered (any such action, a "Transfer")
other than to an affiliate of the Warrantholder, except with the written
consent of the Company which consent shall not be unreasonably withheld and
except, in all cases, including a Transfer to an affiliate, in accordance with
and subject to the provisions of the Securities Act and the rules and
regulations promulgated thereunder. If at the time of a Transfer, a
registration statement is not in effect to register this Warrant or the Warrant
Shares, the Company may require the Warrantholder to make such representations,
and may place such legends on certificates representing this Warrant, as may be
reasonably required in the opinion of counsel to the Company to permit a
Transfer without such registration. The Company may require any Warrantholder
requesting a transfer to pay a sum sufficient to cover the expenses of the
Company (including fees of counsel to the Company), and any tax or governmental
charge that may be imposed.
- 12 -
<PAGE> 13
ARTICLE VII
OTHER MATTERS
SECTION 7.01. SUCCESSORS AND ASSIGNS. All the covenants and
provisions of this Warrant by or for the benefit of the Company shall bind and
inure to the benefit of its successors and assigns hereunder.
SECTION 7.02. NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Warrant enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Warrantholder
in this Warrant or otherwise conflicts with the provisions hereof. The rights
granted to the Warrantholder hereunder do not in any way conflict with and are
not inconsistent with the rights granted to holders of the Company's securities
under any other agreements.
SECTION 7.03. INTEGRATION/ENTIRE AGREEMENT. This Warrant is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertaking, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Warrants. This Warrant supersedes all prior
agreements, and understandings between the parties with respect to such subject
matter.
SECTION 7.04. AMENDMENTS AND WAIVERS. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver of or consents to departure from the provisions hereof
may not be given unless the Company has obtained the written consent of the
Warrantholders whose Warrants entitle them to purchase a majority of the
outstanding Warrant Shares.
SECTION 7.05. COUNTERPARTS. This Warrant may be executed in any
number of counterparts, and by the parties hereto in separate counterparts,
each of which so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 7.06. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Ohio.
- 13 -
<PAGE> 14
SECTION 7.07. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
SECTION 7.08. NOTICE. Any notices or certificates by the Company to
the Warrantholder and by the Warrantholder to the Company shall be deemed
delivered if in writing and delivered in person or by registered mail (return
receipt requested) to the Warrantholder addressed to it at 13515 Yarmouth
Drive, N.W. Pickerington, OH 43147, or, if the Warrantholder has designated, by
notice in writing to the Company, any other address, to such other address; and
if to the Company, addressed to it at: Resource America, Inc., 1521 Locust
Street, Suite 700, Philadelphia, Pennsylvania 19102, or, if the Company has
designated, by notice in writing to the Warrantholder, any other address, to
such other address.
The Company may change its address by written notice to the
Warrantholder and the Warrantholder may change its address by written notice to
the Company.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 19th day of December, 1994.
<TABLE>
<S> <C>
Attest: RESOURCE AMERICA, INC.
By: Scott F. Schaeffer By: Michael L. Staines
------------------------- ---------------------------
Scott F. Schaeffer, Michael L. Staines,
Assistant Secretary Senior Vice President
</TABLE>
[CORPORATE SEAL]
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000083402
<NAME> RESOURCE AMERICA
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 619,897
<SECURITIES> 0
<RECEIVABLES> 986,449
<ALLOWANCES> 0
<INVENTORY> 139,436
<CURRENT-ASSETS> 2,033,566
<PP&E> 31,529,183
<DEPRECIATION> 18,459,977
<TOTAL-ASSETS> 39,923,200
<CURRENT-LIABILITIES> 3,550,927
<BONDS> 0
<COMMON> 8,179
0
0
<OTHER-SE> 24,967,001
<TOTAL-LIABILITY-AND-EQUITY> 39,923,200
<SALES> 1,661,646
<TOTAL-REVENUES> 5,093,795
<CGS> 809,840
<TOTAL-COSTS> 4,064,951
<OTHER-EXPENSES> 1,458
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 539,626
<INCOME-PRETAX> 1,027,386
<INCOME-TAX> 154,000
<INCOME-CONTINUING> 873,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 873,386
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
