<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 0-4408
RESOURCE AMERICA, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 72-0654145
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1521 Locust Street
Suite 400
Philadelphia, PA 19102
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (215) 546-5005
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of outstanding shares of each of the issuer's
classes of common stock, as of the latest practicable date:
23,373,551 Shares February 1, 2000
<PAGE>
RESOURCE AMERICA, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1999 (Unaudited)
and September 30, 1999.............................................................. 3
Consolidated Statements of Income (Unaudited)
Three Months Ended December 31, 1999 and 1998....................................... 4
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended December 31, 1999 and 1998....................................... 5
Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
Three Months Ended December 31, 1999................................................ 6
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended December 31, 1999 and 1998....................................... 7
Notes to Consolidated Financial Statements (Unaudited)
December 31, 1999................................................................... 8-14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................... 14-22
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................. 22-24
PART II OTHER INFORMATION
Item 5. Other Information ...................................................................... 25
Item 6. Exhibits and Reports on Form 8-K........................................................ 25
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
RESOURCE AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................... $ 47,206 $ 42,643
Accounts and notes receivable and other prepaid expenses............................ 23,719 18,977
Investments in real estate loans (less allowance for
possible losses of $1,555 and $1,405)............................................ 182,555 250,231
Investments in real estate ventures................................................. 17,614 18,159
Investments in leases and notes receivable (less allowance for
possible losses of $10,276 and $10,017).......................................... 471,916 401,461
Investment in Resource Asset Investment Trust....................................... 9,039 9,300
Property and equipment:
Oil and gas properties and equipment (successful efforts)........................ 79,927 78,923
Gas gathering and transmission facilities........................................ 15,867 18,061
Other............................................................................ 12,793 12,198
------------ -------------
108,587 109,182
Less - accumulated depreciation, depletion and amortization...................... (23,310) (21,213)
------------- --------------
Net property and equipment................................................. 85,277 87,969
Other assets (less accumulated amortization of $7,429 and $6,058)................... 105,855 72,647
------------ -------------
$ 943,181 $ 901,387
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Warehouse debt................................................................... $ 23,421 $ 15,291
Non recourse debt................................................................ 456,351 439,943
Senior debt...................................................................... 99,850 101,400
Other debt ...................................................................... 23,798 21,188
------------ --------------
Total debt................................................................. 603,420 577,822
Other liabilities:
Accounts payable................................................................. 15,988 16,751
Accrued liabilities.............................................................. 41,844 27,395
Estimated income taxes........................................................... 4,480 2,563
Deferred income taxes............................................................ 11,304 13,069
------------ -------------
Total liabilities.......................................................... 677,036 637,600
Commitments and contingencies....................................................... - -
Stockholders' equity
Preferred stock, $1.00 par value: 1,000,000 authorized shares .................. - -
Common stock, $.01 par value: 49,000,000 authorized shares....................... 244 244
Accumulated other comprehensive loss............................................. (1,873) (1,764)
Additional paid-in capital....................................................... 220,999 221,084
Less treasury stock, at cost..................................................... (16,839) (17,002)
Less loan receivable from Employee Stock Ownership Plan ......................... (1,480) (1,488)
Retained earnings................................................................ 65,094 62,713
------------ -------------
Total stockholders' equity................................................. 266,145 263,787
------------ -------------
$ 943,181 $ 901,387
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
-------------- -----------
(in thousands, except per share data)
<S> <C> <C>
REVENUES
Real estate finance....................................................................... $ 6,651 $ 10,001
Equipment leasing......................................................................... 14,451 4,406
Energy.................................................................................... 15,924 15,126
Interest and other........................................................................ 850 1,103
----------- -----------
37,876 30,636
COSTS AND EXPENSES
Real estate finance....................................................................... 734 478
Equipment leasing......................................................................... 2,241 2,033
Energy.................................................................................... 11,456 11,346
General and administrative................................................................ 1,850 988
Depreciation, depletion and amortization.................................................. 3,229 1,627
Interest.................................................................................. 11,901 3,995
Provision for possible losses............................................................. 1,858 537
----------- -----------
33,269 21,004
----------- -----------
Income from continuing operations before income taxes,
extraordinary item and cumulative effect of a change in accounting principle........... 4,607 9,632
Provision for income taxes................................................................ 1,570 3,456
----------- -----------
Income from continuing operations before extraordinary item
and cumulative effect of a change in accounting principle.............................. 3,037 6,176
Discontinued operations:
Loss from operations of subsidiary, net of taxes of $366............................... - (732)
----------- -----------
3,037 5,444
Extraordinary item, net of taxes of $63 and $150.......................................... 122 291
Cumulative effect of change in accounting principle, net of taxes of $369................. - (471)
----------- -----------
Net income................................................................................ $ 3,159 $ 5,264
=========== ===========
Net income per common share - basic:
From continuing operations............................................................. $ .13 $ .28
Discontinued operations................................................................ - (.03)
Extraordinary item..................................................................... .01 .01
Cumulative effect of a change in accounting principle.................................. - (.02)
----------- -----------
Net income per common share - basic....................................................... $ .14 $ .24
=========== ===========
Weighted average common shares outstanding................................................ 23,318 21,871
=========== ===========
Net income per common share - diluted:
From continuing operations............................................................. $ .13 $ .28
Discontinued operations................................................................ - (.03)
Extraordinary item..................................................................... - .01
Cumulative effect of a change in accounting principle.................................. - (.02)
----------- -----------
Net income per common share - diluted..................................................... $ .13 $ .24
=========== ===========
Weighted average common shares............................................................ 23,742 22,393
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
----------- -----------
(Unaudited)
(in thousands)
<S> <C> <C>
Net income................................................................................ $ 3,159 $ 5,264
Other comprehensive income (loss):
Unrealized loss on investment, net of taxes of $89 and $940............................ (172) (1,777)
Foreign currency translation adjustment, net of taxes of $40........................... 63 -
----------- -----------
(109) (1,777)
------------ ------------
Comprehensive income...................................................................... $ 3,050 $ 3,487
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Common stock Other Additional
-------------------------- Comprehensive Paid-In
Shares Amount Loss Capital
----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, October 1, 1999.................. 24,385,279 $ 244 $ (1,764) $ 221,084
Treasury shares issued.................... (106)
Issuance of common stock.................. 2,828 - 21
Other comprehensive income:
Net unrealized loss on investment...... (172)
Foreign currency translation
adjustments.......................... 63
Cash dividends ($.03 per share)...........
Repayment of ESOP Loan....................
Net income................................
- -------------------------------------------------------------------------------------------------------
Balance, December 31, 1999................ 24,388,107 $ 244 $ (1,873) $ 220,999
========== ========= ========== ===========
</TABLE>
[RESTUB]
<TABLE>
<CAPTION>
Treasury Stock ESOP Totals
------------------------- Loan Retained Stockholders'
Shares Amount Receivable Earnings Equity
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1999.................. (1,071,432) $ (17,002) $ (1,488) $ 62,713 $ 263,787
Treasury shares issued.................... 7,740 163 57
Issuance of common stock.................. 21
Other comprehensive income:
Net unrealized loss on investment...... (172)
Foreign currency translation
adjustments.......................... 63
Cash dividends ($.03 per share)........... (778) (778)
Repayment of ESOP Loan.................... 8 8
Net income................................ 3,159 3,159
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999................ (1,063,692) $ (16,839) $ (1,480) $ 65,094 $ 266,145
=========== =========== ========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
RESOURCE AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
-------------- -----------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................ $ 3,159 $ 5,264
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization............................................... 3,229 1,627
Amortization of discount on senior notes and deferred finance costs.................... 406 269
Amortization of initial direct costs................................................... 766 -
Provision for possible losses.......................................................... 1,858 537
Loss from operations of discontinued subsidiary........................................ - 732
Gain on asset dispositions............................................................. (1,257) (4,613)
Property impairments and abandonments.................................................. 381 -
Deferred income taxes.................................................................. (599) (975)
Accretion of discount.................................................................. (1,734) (2,946)
Collection of interest................................................................. 3,286 3,716
Extraordinary gain on debt extinguishment.............................................. (122) (291)
Cumulative effect of change in accounting principle.................................... - 471
Change in operating assets and liabilities:
Increase in accounts receivable and other assets....................................... (5,474) (7,130)
Increase in accounts payable and other liabilities..................................... 14,563 8,220
----------- -----------
Net cash provided by operating activities of continuing operations........................ 18,462 4,881
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment acquired for lease...................................................... (135,560) (39,703)
Capital expenditures...................................................................... (2,239) (4,571)
Principal payments on notes receivable.................................................... 68,841 -
Proceeds from sale of assets.............................................................. 23,752 33,306
Increase in other assets.................................................................. (4,223) (873)
Investments in real estate loans and ventures............................................. (1,389) (8,981)
Increase (decrease) in other liabilities.................................................. 372 (9,906)
Payments received in excess of revenue recognized on leases............................... 39,753 1,392
----------- -----------
Net cash used in investing activities of continuing operations............................ (10,693) (29,336)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in warehouse borrowings........................................................ 8,095 1,125
Non recourse borrowings................................................................... 208,219 25,300
Principal payments on non recourse borrowings............................................. (191,868) (25,524)
Other borrowings.......................................................................... 3,252 -
Principal payments on other borrowings.................................................... (1,996) (2,449)
Dividends paid............................................................................ (778) (739)
Increase in restricted cash............................................................... (27,132) -
Repayment of ESOP loan.................................................................... 8 -
Increase in other assets.................................................................. (807) (60)
Proceeds from issuance of stock........................................................... 78 322
----------- -----------
Net cash used in financing activities of continuing operations............................ (2,929) (2,025)
----------- -----------
Net cash used in discontinued operations.................................................. (217) (1,175)
----------- -----------
Effect of exchange rate changes on cash................................................... (60) -
Increase (decrease) in cash and cash equivalents.......................................... 4,563 (27,655)
Cash and cash equivalents at beginning of period.......................................... 42,643 77,025
----------- -----------
Cash and cash equivalents at end of period................................................ $ 47,206 $ 49,370
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 (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.
Certain reclassifications have been made to the consolidated financial
statements for the first quarter ended December 31, 1998 to conform with the
first quarter ended December 31, 1999. In addition, certain reclassifications
have been made to the consolidated financial statements for the first quarter
ended December 31, 1998 to reflect discontinued operations and the cumulative
effect of a change in an accounting principle.
The accounting policies followed by the Company are set forth in Note 1
to the Company's consolidated financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
Preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Other Assets
Included in other assets are intangible assets that consist primarily
of the excess of the acquisition cost over the fair value of the net assets of
businesses acquired (goodwill), contracts acquired through acquisitions recorded
at fair value on their acquisition dates and deferred financing costs. Goodwill
is being amortized on a straight-line basis over periods ranging from 15 to 30
years, contracts acquired are being amortized on a declining balance method
(except for the drilling program syndication network which is being amortized on
a straight-line basis) over their respective estimated lives, ranging from five
to 30 years, and deferred financing costs are being amortized over the terms of
the related loans (two to seven years). In addition, other assets includes
restricted cash which arose through a prefunding from the November 1999 term
securitization by the Company's leasing subsidiary.
Other assets at December 31, 1999 and September 30, 1999 were:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -----------
(Unaudited)
<S> <C> <C>
Goodwill.............................................................................. $ 47,144 $ 43,255
Contracts acquired (including syndication network).................................... 18,310 18,636
Restricted cash....................................................................... 27,357 225
Deferred financing costs.............................................................. 6,186 5,842
Net assets of discontinued operations................................................. 2,422 2,394
Net assets held for disposition....................................................... 850 850
Other................................................................................. 3,586 1,445
----------- -----------
$ 105,855 $ 72,647
=========== ===========
</TABLE>
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating the fair value of each class of financial instruments for which it is
practicable to estimate fair value.
For cash and cash equivalents, receivables and payables, the carrying
amounts approximate fair value because of the short maturity of these
instruments.
8
<PAGE>
For investments in real estate loans, because each loan is a unique
transaction involving a discrete property it is impractical to determine their
fair values. However, the Company believes the carrying amounts of the loans are
reasonable estimates of their fair value considering the nature of the loans and
the estimated yield relative to the risks involved.
The following table provides information of other financial instruments
as of December 31, 1999:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------ ----------
(in thousands)
<S> <C> <C>
Warehouse debt............................................................................ $ 23,421 $ 23,421
Securitized term facilities............................................................... 289,286 286,871
CP conduit facilities..................................................................... 100,536 100,536
Term facility............................................................................. 4,179 4,179
Real estate finance....................................................................... 22,875 22,875
Energy.................................................................................... 39,475 39,475
Senior debt............................................................................... 99,850 77,384
Other debt................................................................................ 23,798 23,798
----------- -----------
Totals................................................................................. $ 603,420 $ 578,539
=========== ===========
</TABLE>
Earnings Per Share
Earnings per share - basic is determined by dividing net income by the
weighted average number of common shares outstanding during the period. Earnings
per share - diluted is computed by dividing net income as adjusted by the sum of
the weighted average number of shares outstanding and dilutive potential common
shares issuable during the period. Dilutive potential common shares consist of
the excess of common shares issuable under the terms of various stock option and
warrant agreements over the number of such shares that could have been
reacquired (at the weighted average price of the Company's common stock during
the period) with the proceeds received from the exercise of the options and
warrants.
The computations of basic and diluted earnings per share for each
period were as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
---------- ---------
(in thousands)
<S> <C> <C>
Income from continuing operations before extraordinary item
and cumulative effect of a change in accounting principle............................. $ 3,037 $ 6,176
Loss from discontinued operations..................................................... - (732)
Extraordinary gain on early extinguishment of debt.................................... 122 291
Cumulative effect of a change in accounting principle................................. - (471)
--------- ----------
Net income............................................................................ 3,159 5,264
Minority interest in net income of subsidiary upon assumed option exercise............ (91) -
--------- ---------
Net income as adjusted................................................................ $ 3,068 $ 5,264
========= =========
Basic average shares of common stock outstanding...................................... 23,318 21,871
Dilutive effective of stock option and award plans.................................... 424 522
--------- ---------
Dilutive average shares of common stockholders........................................ 23,742 22,393
========= =========
</TABLE>
9
<PAGE>
NOTE 3 - CASH FLOW STATEMENTS
The Company considers temporary investments with a maturity at the date
of acquisition of 90 days or less to be cash equivalents.
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
----------- -----------
(in thousands)
<S> <C> <C>
Cash paid during the period for:
Interest............................................................................... $ 8,127 $ 288
Income taxes........................................................................... 482 6,246
</TABLE>
NOTE 4 - ACQUISITIONS
On August 31, 1999, the Company acquired all of the common stock of
Viking Resources Corporation in exchange for 1,243,684 shares of the Company's
common stock and the assumption of Viking Resources debt as described below.
Viking Resources is a company primarily involved in the energy finance business
through the syndication of oil and gas properties in the Appalachian Basin.
The Viking Resources acquisition was recorded under the purchase method
of accounting and, accordingly, the results of operations of Viking Resources
are included in the Company's consolidated financial statements commencing
September 1, 1999. The purchase price has been allocated to assets acquired and
liabilities assumed based on their fair market value at the date of acquisition
as summarized below (in thousands).
<TABLE>
<CAPTION>
<S> <C>
Estimated fair value of assets acquired................................................................... $ 48,289
Liabilities assumed....................................................................................... (19,910)
Common stock issued....................................................................................... (12,437)
------------
Net cash paid............................................................................................. $ (15,942)
============
</TABLE>
This acquisition was immaterial to the results of operations of the
Company, and therefore pro forma information is excluded.
On February 4, 1999, the Company acquired all of the common stock of
JLA Credit Corporation, in exchange for cash and assumption of JLA Credit debt.
The acquisition was recorded as a purchase and accordingly the results of JLA
Credits' operations are included in the Company's consolidated financial
statements from the date of acquisition. The purchase price has been allocated
to assets acquired and liabilities assumed based on their fair market values at
the date of acquisition as summarized below (in thousands).
<TABLE>
<CAPTION>
<S> <C>
Estimated fair value of assets acquired................................................................... $ 315,466
Debt issued............................................................................................... (142,997)
Debt assumed.............................................................................................. (147,534)
Amounts due seller........................................................................................ (6,673)
------------
Net cash paid............................................................................................. $ (18,262)
============
</TABLE>
10
<PAGE>
The following table reflects unaudited pro forma combined results of
operations of the Company and JLA presented as if the acquisition had taken
place on October 1, 1998:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998
------------------
(in thousands,
except per share amounts)
(unaudited)
<S> <C>
Revenues ................................................................................................. $ 40,908
Net income from continuing operations..................................................................... 7,832
Net income................................................................................................ 6,920
Net income per common share - basic:
Net income from continuing operations.................................................................. $ .36
Net income............................................................................................. $ .32
Net income per common share - diluted:
Net income from continuing operations.................................................................. $ .35
Net income............................................................................................. $ .31
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments to: (i) depreciation and
amortization expense attributable to allocation of the purchase price; (ii)
interest expense for additional borrowings; (iii) equipment leasing revenue as a
result of the purchase price allocation; and (iv) provision for income taxes to
reflect the above adjustments at the Company's tax rate. They do not purport to
be indicative of the results of operations which actually would have resulted
had the combination been consummated on October 1, 1998 or of future results of
operations of the consolidated entities.
NOTE 5 - INVESTMENTS IN REAL ESTATE LOANS
The Company primarily focuses its real estate activities on the
purchase of income producing commercial mortgages at a discount from both the
face value of such mortgages and the appraised value of the properties
underlying the mortgages. The Company records as income the accretion of a
portion of the difference between its cost basis in a commercial mortgage and
the sum of projected cash flows therefrom. Cash received by the Company for
payment on each mortgage is allocated between principal and interest. This
accretion of discount amounted to $1.7 million and $2.9 million during the three
months ended December 31, 1999 and 1998, respectively. As the Company sells
senior lien interests or receives funds from refinancings in such mortgages, a
portion of the cash received is employed to reduce the cumulative accretion of
discount included in the carrying value of the Company's investments in real
estate loans.
At December 31, 1999, the Company held real estate loans having
aggregate face values of $698.0 million, which were being carried at an
aggregate cost of $182.6 million, including cumulative accretion.
11
<PAGE>
The following is a summary of the changes in the carrying value of the
Company's investments in real estate loans for the three months ended December
31, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
------------ -----------
(in thousands)
<S> <C> <C>
Balance, beginning of period (commercial mortgage loans only)......................... $ 250,231 $ 188,651
New loans............................................................................. - 5,479
Additions to existing loans........................................................... 1,389 3,502
Provisions for possible losses........................................................ (150) (100)
Accretion of discount (net of collection of interest)................................. 1,734 2,946
Collections of principal.............................................................. (59,440) -
Cost of loans sold.................................................................... (11,209) (3,334)
----------- -----------
Balance, end of period (commercial mortgage loans only)............................... 182,555 197,144
Investments in residential mortgage loans
(less an allowance for possible losses of $326).................................... - 8,214
----------- -----------
Balance, end of period................................................................ $ 182,555 $ 205,358
=========== ===========
</TABLE>
The following is a summary of activity in the Company's allowance for
possible losses related to real estate loans for the for the three months ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
------------ -----------
(in thousands)
<S> <C> <C>
Balance, beginning of period.......................................................... $ 1,405 $ 1,191
Provision for possible losses...................................................... 150 100
Write-offs......................................................................... - -
----------- -----------
Balance, end of period................................................................ $ 1,555 $ 1,331
=========== ===========
</TABLE>
NOTE 6 - INVESTMENTS IN LEASES AND NOTES RECEIVABLE
Components of the investments in leases and notes receivable as of
December 31, 1999 and September 30, 1999, including residual values are as
follows:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -----------
(in thousands)
<S> <C> <C>
Total minimum lease payments receivable............................................... $ 514,848 $ 438,323
Initial direct costs, net of amortization............................................. 8,869 6,213
Unguaranteed residual................................................................. 37,934 31,207
Unearned lease income................................................................. (91,972) (79,231)
----------- -----------
Investments in leases................................................................. 469,679 396,512
Notes receivable...................................................................... 12,513 14,966
Allowance for possible losses......................................................... (10,276) (10,017)
----------- -----------
Investments in leases and notes receivable............................................ $ 471,916 $ 401,461
=========== ===========
</TABLE>
12
<PAGE>
A summary of activity in the Company's allowance for possible losses
related to direct financing leases and notes receivable for the three months
ended December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
------------ -----------
(in thousands)
<S> <C> <C>
Balance, beginning of period.......................................................... $ 10,017 $ 1,602
Provision for possible losses......................................................... 1,638 424
Write offs............................................................................ (1,379) (289)
----------- -----------
Balance, end of period................................................................ $ 10,276 $ 1,737
=========== ===========
</TABLE>
NOTE 7 - DEBT
Total debt consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -----------
(in thousands)
<S> <C> <C>
Warehouse debt
Equipment leasing.................................................................. $ 23,421 $ 15,291
Nonrecourse debt
Equipment leasing
Securitized term facilities...................................................... 289,286 219,979
CP conduit facilities............................................................ 100,536 93,213
Term facility.................................................................... 4,179 -
Real estate finance
Loan facilities.................................................................. - 58,901
Revolving credit facilities...................................................... 22,000 22,000
Other............................................................................ 875 875
Energy
Revolving and term bank loans.................................................... 39,475 44,975
----------- -----------
Total non recourse debt...................................................... 456,351 439,943
Senior debt........................................................................... 99,850 101,400
Other debt
Equipment leasing
Term loans..................................................................... 10,476 7,587
Seller financing............................................................... 7,489 7,725
Corporate.......................................................................... 5,833 5,876
----------- -----------
Total other debt............................................................. 23,798 21,188
----------- -----------
$ 603,420 $ 577,822
=========== ===========
</TABLE>
13
<PAGE>
NOTE 8 - OPERATING SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company operates in three principal industry segments - real estate
finance, equipment leasing and energy. Segment data for the three months ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
------------ -----------
(in thousands)
<S> <C> <C>
Revenues:
Real estate finance.............................................................. $ 6,651 $ 10,001
Equipment leasing................................................................ 14,451 4,406
Energy........................................................................... 15,924 15,126
Corporate........................................................................ 2,500 1,588
----------- -----------
$ 39,526 $ 31,121
=========== ===========
Operating Profit (Loss):
Real estate finance.............................................................. $ 4,451 $ 9,255
Equipment leasing................................................................ 1,091 1,725
Energy........................................................................... 1,286 2,267
Corporate........................................................................ (2,221) (3,615)
----------- -----------
$ 4,607 $ 9,632
=========== ===========
Identifiable Assets:
Real estate finance.............................................................. $ 202,703 $ 215,406
Equipment leasing................................................................ 530,324 41,125
Energy........................................................................... 144,488 98,077
Corporate........................................................................ 65,666 65,310
----------- -----------
$ 943,181 $ 419,918
=========== ===========
</TABLE>
Operating profit (loss) represents total revenues less costs
attributable thereto, including interest expense, provision for possible losses,
and less depreciation, depletion and amortization, but excludes general
corporate expenses. The information presented above does not eliminate
intercompany interest charges to the leasing segment by corporate of $1.7
million and $485,000 in the three months ended December 31, 1999 and 1998,
respectively.
NOTE 9 - PUBLIC OFFERING OF UNITS
In February 2000, the Company completed its amended registration
statement on Form S-1 with respect to the offering related to the Company's
pipeline operations. The Company's natural gas pipeline and gathering operations
were sold to a master limited partnership which sold 1.5 million common units to
the public. As the purchase price for the gathering systems, the master limited
partnership paid the Company $16.6 million (before expenses relating to the
acquisition, and issued to the Company 1,641,026 subordinated units constituting
a 51% limited partner interest in the master limited partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS WHICH SPEAK ONLY AS OF
THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE
RESULTS OF ANY REVISIONS TO FORWARD LOOKING STATEMENTS WHICH MAY BE MADE TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
14
<PAGE>
Overview of First Quarter of Fiscal 2000
The Company's gross revenues were $37.9 million in the first quarter of
fiscal 2000, an increase of $7.3 million (24%) from $30.6 million in the first
quarter of fiscal 1999. The increase in total revenues during the first quarter
of fiscal 2000 was primarily due to an increase of $10.1 million in the revenues
from the Company's leasing business to $14.5 million from $4.4 million in the
first quarter of fiscal 1999. This is primarily due to the acquisition of JLA
Credit and the growth of the leasing business. Real estate finance revenues were
$6.7 million in the first quarter of fiscal 2000, a decrease of $3.3 million
(33%) from $10.0 million in the first quarter of fiscal 1999. Real estate
finance and equipment leasing revenues, in the aggregatge, were 56% and 47% of
total revenues in the first quarter of fiscal 2000 and 1999, respectively.
The Company's revenues, expressed as a percentage of its total
revenues, were distributed across its operating segments as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
--------- --------
<S> <C> <C>
Energy ................................................................................. 42% 49%
Equipment leasing....................................................................... 38% 14%
Real estate finance..................................................................... 18% 33%
</TABLE>
The balance (2% and 4% for the three months ended December 31, 1999 and
1998, respectively) is attributable to corporate assets not allocated to a
specific operating segment, including cash and the common shares held in
Resource Asset Investment Trust. The Company anticipates that its energy
revenues, as a percentage of total revenues, will increase in fiscal 2000 as a
result of the acquisition of Viking Resources.
As of December 31, 1999, total assets were $943.2 million, an increase
of $41.8 million (5%) from assets of $901.4 million at September 30, 1999. The
Company's assets, expressed as a percentage of its total assets, were
distributed across its operating segments as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
----------- -------------
<S> <C> <C>
Real estate finance..................................................................... 21% 30%
Equipment leasing....................................................................... 56% 48%
Energy ................................................................................. 15% 15%
</TABLE>
The balance (8% as of December 31, 1999 and 7% as of September 30,
1999) represents corporate assets not attributable to a specific operating
segment, as referred to above.
15
<PAGE>
Results of Operations: Real Estate Finance
The following table sets forth certain information relating to the
revenue recognized and cost and expenses incurred in the Company's real estate
finance operations during the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
----------- -----------
(in thousands)
<S> <C> <C>
Revenues:
Interest........................................................................... $ 3,797 $ 3,716
Accreted discount.................................................................. 1,734 2,946
Fees............................................................................... 17 969
Gains on sales of senior lien interests............................................ - 2,370
Gains on sales of loans............................................................ 984 -
Loan payments in excess of carrying value and loans................................ 73 -
Net rental income.................................................................. 46 -
----------- -----------
$ 6,651 $ 10,001
=========== ===========
Costs and Expenses.................................................................... $ 734 $ 478
=========== ===========
</TABLE>
Prior to January 1, 1999, most of the transactions in which senior lien
interests were created were structured to meet the criteria under generally
accepted accounting principles for sales of those interests to the senior
lienors. Effective January 1, 1999, the Company made a strategic decision to
structure future transactions as financings rather than as sales, thereby
retaining the entire principal amount of its commercial mortgage loans
originated on its balance sheet. Thus, for most transactions that were completed
prior to January 1, 1999 (including two loans sold in fiscal 1999, referred to
below in note (i)), the Company recorded a gain on sale which is included in the
Company's revenues; refinancing proceeds received subsequent to that date are
not recordable as gains under generally accepted accounting principles. Despite
the decrease in revenues resulting from the foregoing change, the cash flows
available to the Company from its financing transactions, which were generally
based on the appraised value and the cash flows of the property underlying the
Company's commercial mortgage loans, are unaffected by these modifications. The
primary effect of this change in policy is a shift from the recognition of an
immediate gain upon the sale of a senior lien interest in a commercial mortgage
loan receivable to the recognition of interest income over the life of the loan
receivable.
Revenues from commercial mortgage loan acquisition and resolution
operations decreased to $6.7 million in the first quarter ended December 31,
1999, a decrease of $3.3 million (33%) from $10.0 million in the first quarter
ended December 31, 1998. The decrease was attributable to the following:
(i) A decrease of $2.4 million (100%) in gains from sales of senior lien
interests. The Company sold senior lien interests in two loans in the
first quarter ended December 31, 1998 resulting in proceeds of $5.7
million; no such gains were recognized in the quarter ended December
31, 1999.
(ii) In the first quarter ended December 31, 1999, proceeds of $10.0
million from the sale of one loan to Resource Asset resulted in a
gain of $984,000.
(iii) A decrease of $1.1 million (17%) in interest income, resulting from a
decrease of $1.2 million of accretion of discount. The average
accretion rate (accreted discount divided by the book value of average
loan balances) on commercial mortgage loans held decreased to 3% in
the quarter ended December 31, 1999 as compared to 6% in the quarter
ended December 31, 1998.
(iv) A decrease of $952,000 in fee income (98%) primarily resulting from a
one-time fee of $806,000 earned in the first quarter of fiscal 1999
for services rendered to an existing borrower in connection with the
operation, leasing and supervision of the collateral securing one of
the Company's loans. No such fees were earned during the quarter ended
December 31, 1999.
16
<PAGE>
During the three months ended December 31, 1999, the Company acquired
no loans as compared to the purchase and origination of two loans for a cost of
$5.5 million during the three months ended December 31, 1998. The two loans
acquired during the first quarter ended December 31, 1998 had outstanding
receivable balances of $4.0 million and $1.5 million, respectively.
Gains on sale of loans and senior lien interests in loans (if any) and
the amount of fees received (if any) vary from transaction to transaction and
there may be significant variations in the Company's gain on sale and fee income
from period to period.
As a consequence of the foregoing, the Company's yield (gross real
estate finance revenues, including gains resulting from refinancings, sales of
loans and sales of senior lien interests in loans, divided by the book value of
average loan balances) decreased to 12% in the first quarter ended December 31,
1999 as compared to 19% in the first quarter ended December 31, 1998.
Costs and expenses of the Company's real estate finance operations were
$734,000 in the first quarter ended December 31, 1999, an increase of $256,000
(54%) from $478,000 in the first quarter ended December 31, 1998. The increase
was primarily a result of increased compensation to existing employees.
As a result of the foregoing, the Company's gross operating profit from
real estate finance operations decreased to $5.9 million in the first quarter
ended December 31, 1999, as compared to $9.5 million in the same period in the
prior year.
Results of Operations: Equipment Leasing
The following table sets forth certain information relating to the
revenues recognized and costs and expenses incurred in the Company's equipment
leasing operations during the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
------------ -----------
(in thousands)
<S> <C> <C>
Revenues:
Small ticket leasing
Interest and fees................................................................ $ 13,765 $ 1,402
Gains on sales of leases......................................................... 280 2,244
Partnership management............................................................. 406 760
----------- -----------
$ 14,451 $ 4,406
=========== ===========
Costs and expenses:
Small ticket leasing............................................................... $ 1,893 $ 1,419
Partnership management............................................................. 348 614
----------- -----------
$ 2,241 $ 2,033
=========== ===========
</TABLE>
Through March 31, 1999, the Company structured a substantial part of
its lease financing transactions, other than warehouse revolving lines of credit
and certain financings relating to JLA Credit, to meet the criteria for
treatment as sales under generally accepted accounting principles. Thus, for all
such transactions completed through that date, the Company recorded gains on
sales. On April 1, 1999, the Company decided to alter the structure of its
future securitizations to retain leases that it securitizes as investments on
its balance sheet and record the related securitization indebtedness on its
balance sheet as debt for accounting purposes. The Company also modified its
existing $100.0 million commercial paper conduit facility so that it would
retain leases as investments and record related securitization indebtedness as
debt on its balance sheet. The primary effect of the change in securitization
structure and the modification of its commercial paper conduit facility is that
the Company will recognize income over the lives of the lease receivables it
securitizes or finances under its commercial paper conduit facilities rather
than recognize an immediate gain upon the sale of the lease receivables. The
Company's cash flow, which is influenced by the advance rates and discount rates
provided for by the commercial paper conduit facilities, was unaffected by these
modifications.
17
<PAGE>
The Company continued to experience growth in its leasing business
during the first quarter of fiscal 2000, originating 6,765 leases having a cost
of $135.6 million, as compared to 3,221 leases having a cost of $39.7 million
during the first quarter of fiscal 1999. This growth was further accelerated by
the JLA Credit acquisition on February 4, 1999. The results of operations of JLA
Credit are included in the Company's consolidated results of operations from
February 4, 1999. JLA Credit accounted for 848 leases having an approximate cost
of $40.0 million during the quarter ended December 31, 1999, which primarily
accounted for the average cost per lease increase to approximately $20,000 in
the quarter ended December 31, 1999 from $12,300 in the quarter ended December
31, 1998.
Interest and fee income totaled $13.8 million in the first quarter
ended December 31, 1999, of which $8.7 million was attributable to JLA Credit
and the balance to the increase in lease originations and the retention by the
Company of leases it securitized as assets on its balance sheet, as described
above. This is an increase of $12.4 million (882%) over the quarter ended
December 31, 1998.
Gains on sale of leases decreased to $280,000 in the first quarter of
fiscal 2000 from $2.2 million in the first quarter of fiscal 1999, a decrease of
$2.0 million (88%), for the reasons described above. However, the Company
currently has two sales facilities, one with IBM Credit and one with IBM Canada,
that relate to equipment leases generated through those companies. As a result
of the requirements of IBM Credit and IBM Canada, these facilities continue to
be structured in a way that requires the Company to treat transactions under the
facilities as sales for accounting purposes. All leases generated through IBM
Credit and IBM Canada must be sold to these facilities. The gains on sale of
leases in the quarter ended December 31, 1999 primarily relate to the IBM sales
facilities.
Equipment leasing costs and expenses increased $208,000 (10%) to $2.2
million in the first quarter ended December 31, 1999, as compared to $2.0
million in the quarter ended December 31, 1998. The increase was primarily a
result of the acquisition of JLA Credit ($775,000) offset by an increase in
initial direct costs capitalized ($2.9 million) due to the increase in lease
volume originations. In addition, expenses related to the Company's partnership
management business decreased $266,000 (43%) to $348,000 from $614,000 because
the Company managed fewer leases with a reduced staff in the quarter ended
December 31, 1999 as compared to the quarter ended December 31, 1998.
Results of Operations: Energy
On August 31, 1999, the Company acquired Viking Resources. Results of
operations include the operations of Viking Resources from September 1, 1999
and, accordingly, are not comparable to the similar period of the prior year.
The following tables set forth certain information relating to revenues
recognized and costs and expenses incurred, daily production volumes, average
sales prices, production costs as a percentage of oil and gas sales, and
production cost per equivalent unit in the Company's energy operations during
the periods:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
----------- -----------
(in thousands)
<S> <C> <C>
Revenues:
Production......................................................................... $ 5,461 $ 2,520
Well drilling...................................................................... 7,154 10,401
Well services...................................................................... 3,309 2,205
----------- -----------
$ 15,924 $ 15,126
=========== ===========
Cost and expenses:
Exploration and production......................................................... $ 2,383 $ 1,322
Well drilling...................................................................... 6,728 9,313
Well services...................................................................... 2,345 711
----------- -----------
$ 11,456 $ 11,346
=========== ===========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues (in thousands):
Gas(1)............................................................................. $ 4,415 $ 2,289
Oil................................................................................ 1,025 172
Production volumes (in thousands):
Gas (thousands of cubic feet ("mcf")/day)(1)....................................... 16,646 10,522
Oil (barrels ("bbls")/day)......................................................... 541 154
Average sale price:
Gas (per mcf)...................................................................... $ 2.88 $ 2.36
Oil (per bbl)...................................................................... $ 20.58 $ 12.15
</TABLE>
- ------------------
(1) Excludes sales of residual gas and sales to landowners.
Natural gas revenues were $4.4 million in the first quarter ended
December 31, 1999, an increase of $2.1 million (93%) from $2.3 million in the
first quarter of fiscal 1998 due to a 58% increase in production volumes and a
22% increase in the average sales price of natural gas. Oil revenues were $1.0
million in the first quarter of fiscal 2000, an increase of $853,000 (496%) from
$172,000 in the first quarter of fiscal 1999, due to a 251% increase in
production volumes and a 69% increase in the average sales price of oil during
the first quarter of fiscal 1999. Both gas and oil volumes continued to be
favorably impacted by the acquisition of The Atlas Group at the end of fiscal
1998 and Viking Resources in August 1999.
Without the addition of Viking Resources, gas and oil production
revenues would have been $3.1 million and $316,000 respectively, for the first
quarter of fiscal 2000, resulting in an overall increase of $965,000 (39%)
compared to the first quarter of fiscal 1999. Average daily gas production
volumes would have been 11,658 mcf for the first quarter of fiscal 2000, an 11%
increase compared to the first quarter of fiscal 1999. The average sales price
per mcf would have increased to $2.90. Average daily oil production would have
increased by three barrels (2%) over the first quarter of fiscal 1999, the
average sales price per barrel would have increased by $7.51 (62%).
Well drilling revenues and expenses in the first quarter ended December
31, 1999 represent the billings and costs associated with the completion of 37
wells for partnerships sponsored by Atlas America in the first quarter of fiscal
2000 as compared to 53 wells in the first quarter of fiscal 1999.
Well services revenues and related costs increased significantly as a
result of an increase in the number of wells operated due to the acquisition of
Viking Resources and the addition of wells drilled by Atlas America.
Production costs (excluding exploration costs of $514,000) increased
713,000 (62%) to $1.9 million in the first quarter ended December 31, 1999, as
compared to the same period in the prior year as a result of the acquisition of
the interests in producing properties referred to above.
Amortization of oil and gas property costs as a percentage of oil and
gas revenues was 27% in the first quarter ended December 31, 1999 compared to
24% in the first quarter ended December 31, 1998. The variance from period to
period was directly 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.
Results of Operations: Other Revenues, Costs and Expenses
Interest and other income decreased $253,000 (23%) to $850,000 in the
quarter ended December 31, 1999, as compared to the quarter ended December 31,
1998, primarily as a result of a substantial decrease in the Company's
uncommitted cash balances. The temporary investment of such balances during the
quarter ended December 31, 1999 decreased interest income by $313,000 as
compared to the quarter ended December 31, 1998.
19
<PAGE>
General and administrative expenses increased $862,000 (87%) to $1.9
million in the quarter ended December 31, 1999, as compared to $988,000 the
quarter ended December 31, 1998, primarily as a result of the hiring of
additional corporate staff and increases in the compensation of senior officers,
together with an increase in occupancy costs as the Company leased additional
office space to accommodate its increased staff.
Interest expense increased $7.9 million (198%) to $11.9 million in the
quarter ended December 31, 1999 as compared to $4.0 million in the quarter ended
December 31, 1998, primarily reflecting an increase in borrowings ($5.0 million)
as a result of the acquisition of JLA Credit and the decision by the Company on
April 1, 1999 to alter the structure of its future securitizations to retain
leases it securitizes as investments on its balance sheet and to record the
related securitization indebtedness on its balance sheet as debt.
Provision for possible losses increased $1.3 million (246%) to $1.9
million in the quarter ended December 31, 1999 as compared to $537,000 in the
quarter ended December 31, 1998. The increase was primarily the result of
increases in the provision for possible losses relating to equipment leasing
($1.2 million). The increased provision reflects the increase in lease
originations. In establishing the Company's allowance for possible losses in
connection with its real estate finance and equipment leasing operations, the
Company considers among other things, the historic performance of the Company's
loan or lease portfolios, industry standards and experience regarding losses in
similar loans or leases and payment history on specific loans and leases, as
well as general economic conditions in the United States, in the borrower's or
lessee's geographic area and in its specific industry.
The effective tax rate decreased to 34% in the quarter ended December
31, 1999 from 36% in the quarter ended December 31, 1998. The decrease resulted
from an increase in the generation of depletion for tax purposes due to the
Viking Resources acquisition and an increase in tax credits. These increases in
tax benefits were partially offset by an increase in state income taxes.
Liquidity and Capital Resources
During the past three fiscal years, the Company has derived its capital
resources from three main sources: public and private offerings of debt and
equity securities, lines of credit and purchase facilities extended by banks and
other institutional lenders with respect to equipment leasing and energy
operations, and sales of senior lien interests in or borrower refinancings of
commercial mortgage loans held in the Company's portfolio. The Company has
employed its available capital resources primarily in the expansion of its small
ticket leasing and real estate finance businesses. However, through its
acquisition of The Atlas Group and Viking Resources, the Company has
significantly expanded its oil and gas operations and, as a result, may direct
capital resources to oil and gas operations as other opportunities arise or as
the Company's oil and gas business develops.
The Company believes that its future growth and earnings will be
materially dependent upon its ability to continue to generate capital resources
from prior sources or to identify new sources. As a result of the continued
depressed price of the Company's common stock, the Company anticipates that
generating additional capital resources on terms similar to those available
during fiscal 1997 and 1998 may be restricted. Accordingly, the Company's
ability to generate continued growth in its real estate finance and equipment
leasing operations may be restricted, which could adversely affect the Company's
earnings potential.
Sources and (uses) of cash for the three months ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
------------ -----------
(in thousands)
<S> <C> <C>
Provided by operations................................................................ $ 18,462 4,881
Used in investing activities.......................................................... (10,693) (29,336)
Used in financing activities.......................................................... (2,929) (2,025)
Used in discontinued operations....................................................... (217) (1,175)
Effect of exchange rate changes on cash............................................... (60) -
----------- -----------
$ 4,563 $ (27,655)
=========== ===========
</TABLE>
20
<PAGE>
The Company had $47.2 million in cash and cash equivalents on hand at
December 31, 1999, as compared to $42.6 million at September 30, 1999. The
Company's ratio of earnings to fixed charges was 1.3 to 1.0 in the quarter ended
December 31, 1999 as compared to 2.2 to 1.0 in the quarter ended December 31,
1998.
The Company's cash provided by operating activities in the first
quarter of fiscal 2000 increased $13.6 million as compared to the first quarter
of fiscal 1999, primarily as a result of the following:
(i) a $4.7 million increase in net income from continuing operations before
non-cash items.
(ii) a $8.0 million decrease in net working capital
The Company's cash used in investing activities decreased $18.6 million
in the quarter ended December 31, 1999 as compared to the quarter ended December
31, 1998 as a result of the following:
(i) In small ticket leasing, cash used increased $65.9 million primarily as
a result of an increase of $95.9 million in cash used to acquire
equipment for lease and a decrease in proceeds from the sale of assets
($7.6 million) which was partially offset by an increase in payments in
excess of revenue recognized ($38.4 million).
(ii) In energy, cash used decreased $1.3 million as a result of the decrease
in the number of wells (16) participated in by the Company through
Atlas ($1.7 million).
(iii) In real estate finance, cash provided increased $71.3 million as a
result of an increase of $63.2 million in principal payments and
proceeds from the sale of loans, and a $7.6 million decrease in
investments in real estate loans and ventures.
The Company's cash flow used in financing activities increased $904,000
during the quarter ended December 31, 1999 as compared to the quarter ended
December 31, 1998. This increase resulted from a $27.3 million increase in the
Company's net borrowings, partially offset by an increase of $27.1 million in
restricted cash, which is held in the Company's securitization trusts.
Computer Systems and Year 2000 Issues
The "year 2000 issue" is the result of computer programs being written
using two digits, rather than four digits, to identify the year in a date field.
Any computer programs using such a system, and which have date sensitive
software, will not be able to distinguish between the year 2000 and the year
1900. This could result in miscalculations or an inability to process
transactions, send invoices or engage in similar normal business activities,
which could cause a disruption of business operations. The Company's year 2000
compliance review included assessing its information technology and
non-information technology systems (collectively, the "Systems"), contacting
third party vendors, customers and other suppliers regarding their year 2000
compliance, testing the Systems and remediating any problems.
The Company has year 2000 capable Systems for its real estate finance,
equipment leasing and energy operations.
The Company has communicated with all of its significant business
partners through a Vendor Readiness Survey to determine their Year 2000
compliance. Responses are evaluated as they are received to determine if
additional action is required to ensure compliance of the business partner. As
of December 31, 1999, all of the Company's principal business partners have
advised the Company that they are Year 2000 compliant or have initiated programs
that will render them Year 2000 compliant in a timely fashion.
As a result of its internal assessment and survey of its business
partners, the Company currently does not believe that Year 2000 matters will
have a material impact on its business, financial condition or results of
operations. To the extent that any of its business partners are materially
affected by Year 2000 problems, the Company intends to seek alternative firms
providing the same services that are Year 2000 compliant. In view of the
responses from its current business partners, the Company will identify
alternative firms on an as-needed basis. There can be no assurance, however,
that the Company would be able to make appropriate arrangements should the need
arise and, accordingly, it is uncertain whether or to what extent the Company
may be affected if problems with its business partners arise.
21
<PAGE>
The Company is aware of the potential for claims against it and other
companies for damages for products and services that were not Year 2000
compliant. Since the Company is neither a hardware manufacturer nor a software
developer, the Company believes that it does not have significant exposure to
liability for such claims.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table sets forth certain information regarding 37 of the
39 loans held in the Company's portfolio as of December, 1999. The presentation,
for each category of information, aggregates the loans by their maturity dates
for maturities occurring in each of the fiscal years 2000 through 2004 and
separately aggregates the information for all maturities arising after the 2004
fiscal year. The Company does not believe that these loans are sensitive to
changes in interest rates since (i) the loans are subject to forbearance or
other agreements that require all of the operating cash flow from the properties
underlying the loans, after debt service on senior lien interests, to be paid to
the Company and thus are not currently being paid based on the stated interest
rates of the loans; (ii) all senior lien interests are at fixed rates and are
thus not subject to interest rate fluctuation that would affect payments to the
Company; and (iii) each loan has significant accrued and unpaid interest and
other charges outstanding to which cash flow from the underlying property would
be applied even if cash flow were to exceed the interest rate, as originally
underwritten.
<TABLE>
<CAPTION>
Portfolio Loans, Aggregated by Maturity Dates,(1) For The First Quarter Ended December 31,
2000 2001 2002 2003 2004 Thereafter Totals
---------- ---------- ---------- ---------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding loan
receivable balances (to
the Company's interest) $19,241,333 $14,057,052 $38,786,404 $46,596,877 n/a $116,110,904 $234,792,570
Carried cost of loans
(fixed rate) $ 8,458,891 $ 4,211,194 $22,827,940 $11,303,090 n/a $ 78,328,967 $125,130,082
Average stated interest
rate (fixed rate) 12.30% 9.98% 9.73% 8.25% n/a 12.26%
Carried cost of loans
(variable rate) $ 792,594 $ 423,640 $ 1,378,048 $ 724,901 n/a $ 4,832,285 $ 8,151,468
Average interest payment
rate (2) (2) (2) (2) n/a (2)
Outstanding balance of
senior lien interests (3) $ 9,581,800 $ 7,174,468 $ 7,712,136 $21,030,777 n/a $209,035,251 $254,534,432
Average interest rate of
senior lien interests
(fixed rate) 8.44% 9.38% 9.45% 9.84% n/a 9.38%
</TABLE>
- ---------------
(1) Maturity dates of related forbearance agreement or Company's interest in
the loan.
(2) Pay rates are equal to the net cash flow from the underlying properties
after payments on senior lien interests and, accordingly, depend upon
future events not determinable as of the date hereof.
22
<PAGE>
(3) Maturity dates for senior lien interests are as follows:
<TABLE>
<CAPTION>
Maturity Date of Maturity Dates of
Company's Loans Senior Lien Interests Outstanding Balance
(Fiscal Year Ended (Fiscal Year Ended of Senior Lien Interests
September 30) September 30) at December 31, 1999
------------- ------------- --------------------
<S> <C> <C> <C>
2000 2000 $ 7,485,800
2002 2,096,000
2001 2000 2,000,000
2001 2,809,000
2007 2,365,468
2002 2003 5,312,136
2004 2,400,000
2003 2003 18,869,676
2006 2,161,101
2004 2004 None
Thereafter 2001 2,010,000
2003 3,563,973
2004 4,416,337
2008 142,246,486
2009 49,137,832
2010 5,653,418
2014 2,007,205
-------------
Total $ 254,534,432
=============
</TABLE>
The following table sets forth information concerning two of the 39
loans held in the Company's portfolio at December 31, 1999 that the Company
believes may be deemed to be interest rate sensitive.
<TABLE>
<CAPTION>
<S> <C> <C>
Outstanding receivable balance (to the
Company's interest)....................... $ 59,380,198 $ 40,388,946
Carried cost of loan........................ $ 13,536,336 $ 37,279,341
Stated interest rate........................ 10.647% Federal funds rate plus 87.5
basis points plus 200 basis
points default interest
Interest payment rate....................... Net cash flow from property Net cash flow from property
underlying loan underlying loan
Outstanding balance of senior lien
interests................................. $ 49,195,889 $ 58,950,000
Stated interest rate (senior lien interest). LIBOR plus 300 basis points LIBOR plus 250 basis points
(8.875% maximum rate)
Current interest payment rate (senior lien
interest)................................. 8.25% 8.75%
Maturity date (senior lien interest)........ 03/30/02 10/01/01
</TABLE>
23
<PAGE>
Interest Rate Risk and Hedging. Interest rate hedge agreements
outstanding at December 31, 1999 for Fidelity Leasing's commercial paper conduit
securitizations had an aggregate notional value of approximately $310.0 million,
required payments based on fixed rates ranging from 5.32% to 11.00% and had a
positive estimated fair market value of approximately $2.1 million.
Interest Rate Sensitivity. The table below provides information as of
December 31, 1999 about the Company's derivative financial instruments and other
financial instruments that are sensitive to changes in interest rates, including
interest rate swaps and debt obligations. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. For interest rate swaps, the table presents notional
amounts and weighted average interest rates by expected contractual maturity
dates. Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. Weighted average variable rates are based on LIBOR
as of December 31, 1999.
<TABLE>
<CAPTION>
Expected Maturity Date
-----------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Fixed rate...................... $ 95,497,170 $85,628,739 $50,841,434 $26,143,363 $12,170,651 $7,080,336 $277,361,692
Average interest rate........... 7.20% 7.64% 7.28% 6.65% 6.81% 6.74% 7.27%
Variable (commercial paper)..... $147,279,350 $86,423,575 $54,436,667 $26,841,181 $10,215,111 $1,078,153 $326,274,036
Average interest rate........... 7.10% 6.88% 6.87% 6.96% 6.81% 6.82% 6.98%
Interest Rate Derivatives:
Interest rate swaps:
Variable to fixed............... $108,291,396 $95,381,595 $61,835,846 $31,399,084 $12,051,547 $1,411,152 $310,310,620
Average pay rate................ 6.08% 6.16% 6.21% 6.23% 6.29% 6.27% 6.16%
Average receive rate............ 5.91% 5.94% 5.88% 5.82% 5.61% 5.69% 5.89%
</TABLE>
The following table sets forth certain information regarding the
Company's debt as of December 31, 1999, excluding debt relating to the Company's
equipment leasing operations discussed above. For further information regarding
the Company's 12% Notes and credit facilities, see Item 1 "Business-Sources of
Funds." The Company's interest-bearing assets are discussed above in this item.
<TABLE>
<CAPTION>
Expected Maturity Date
For the Fiscal Years Ended September 30,
----------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate - - - - $99,850,000 - $99,850,000
Average interest
rate - - - - 12.00% - -
Variable rate $10,332,000 $21,666,000 833,000 $34,477,000 - - $67,308,000
Average interest
rate 8.49% 8.31% 9.00% 8.75% - - -
</TABLE>
24
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
The Board of Directors of the Company adopted amended and restated
bylaws effective as of December 14, 1999. Among other changes, the amended
bylaws provide that a stockholder may bring a matter of business or nominations
for the election of directors before a meeting of stockholders only if the
stockholder has given written notice to the Company in proper form of such
matter not less than 90 days before the first anniversary date of the mailing
date of the Company's proxy solicitation materials for the previous year's
annual meeting of stockholders and, in the case of a special meeting of
stockholders, such business is within the purpose or purposes specified in the
notice of the meeting and the stockholder has given written notice to the
Company not less than 90 days prior to the date of the special meeting.
The chairman of a stockholders' meeting may refuse to acknowledge
the nomination of any person or the proposal of any business not made in
compliance with the foregoing procedure. Moreover, even if the nomination or
proposal is recognized, the effect of this bylaw provision is that persons named
as proxies on the form of proxy card to be mailed in connection with the
solicitation of proxies on behalf of the Company's Board of Directors in
connection with the annual meeting of stockholders will be authorized to vote in
their own discretion on any proposal as to which the Company has not received
written notice within the timeframe set forth in the bylaws.
ITEM 6. Exhibits And Reports On Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Company
3.2 Amended and Restated By-Laws of the Company
10.29 Employment Agreement between Scott F. Schaeffer and the Company
10.30 Employment Agreement between Daniel G. Cohen and the Company
10.31 Employment Agreement between Steven J. Kessler and the Company
10.32 Employment Agreement between Nancy J. McGurk and the Company
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
During the quarter for which this report is being filed, the Company
filed a current report on Form 8-K dated October 5, 1999 regarding a
meeting of institutional stockholders of the Company.
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: February 14, 2000 By: /s/ Steven J. Kessler
----------------- ---------------------
STEVEN J. KESSLER
Senior Vice President and
Chief Financial Officer
Date: February 14, 2000 By: /s/ Nancy J. McGurk
----------------- -------------------
NANCY J. McGURK
Vice President-Finance and
Chief Accounting Officer
25
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
RESOURCE AMERICA, INC.
RESOURCE AMERICA, INC., a corporation organized on February 9, 1966
under the name of S.M.T.R. Corp. in accordance with the General Corporation Law
of the State of Delaware and pursuant to Section 245 thereof hereby restates its
Certificate of Incorporation in its entirety, without amendment, as follows:
FIRST. The name of this corporation is Resource America, Inc. (the
"Corporation").
SECOND. The Corporation's registered office is located at 49 Bancroft
Mills, Unit P15, Wilmington, New Castle County, Delaware 19806. The name of the
Corporation's registered agent at said address is Andrew M. Lubin.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of capital stock which the
Corporation shall have authority to issue is fifty million (50,000,000), of
which forty-nine million (49,000,000) shall be shares of common stock (the
"Common Stock"), with a par value of one cent ($.01) per share, and one million
(1,000,000) shall be shares of preferred stock (the "Preferred Stock"), with a
par value of one dollar ($1.00) per share.
A statement of the designations of the authorized classes of stock or
of any series thereof, and the powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof, or of the authority of the Board of Directors to fix by resolution or
resolutions such designations and other terms not fixed by the Certificate of
Incorporation, is as follows:
1. The Preferred Stock may be issued in one or more series, from time
to time, with each such series to have such designation, powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation, subject to the limitations prescribed by
law and in accordance with the provisions hereof, the Board of Directors being
hereby expressly vested with the authority to adopt any such resolution or
resolutions. The authority of the Board of Directors with respect to each such
series shall include, but not be limited to the determination or fixing of the
following:
(i) The distinctive designation and number of shares
comprising such series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or decreased (but not
below the number of shares then outstanding) from time to time by like action of
the Board of Directors;
<PAGE>
(ii) The dividend rate of such series, the conditions and
times upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes of
stock or series thereof, or any other series of the same class, whether the
Corporation shall be required to pay such dividends on specified dates, if funds
are legally available for the payment thereof, or, whether the payment of such
dividends shall be entirely at the discretion of the Board of Directors, whether
such dividends shall be payable in cash or by the issuance of Common or
Preferred Stock of the Corporation, and whether dividends shall be cumulative or
non-cumulative;
(iii) Whether or not the shares of such series shall be
subject to redemption by the Corporation and the conditions thereof, and the
times, prices and other terms and provisions upon which the shares of the series
may be redeemed;
(iv) Whether or not the shares of the series shall be subject
to the operation of a retirement or sinking fund to be applied to the purchase
or redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof, and the terms and provisions relative to
the operation thereof;
(v) Whether or not the shares of the series shall be
convertible into or exchangeable for shares of any other class or classes, with
or without par value, or of any other series of the same class, and, if
provision is made for conversion or exchange, the times, prices, rates,
adjustments and other terms and conditions of such conversion or exchange;
(vi) Whether or not the shares of the series have voting
rights, in addition to the voting rights provided by law, and, if so, the terms
of such voting rights, and the number of votes per share;
(vii) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution, or upon distribution of
assets of the Corporation;
(viii) Any other powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof of the shares of such series, as the Board of Directors
may deem advisable and as shall not be inconsistent with the provisions of the
Certificate of Incorporation.
2. The holders of shares of the Preferred Stock of such series shall be
entitled to receive dividends, in accordance with the terms applicable to their
stock, out of funds legally available for the payment thereof, at the rate fixed
for such series and before any dividends, other than dividends payable without
distinction between Preferred Stock and Common Stock, shall be declared and paid
or set apart for payment on the Common Stock. In the event that holders of
2
<PAGE>
shares of Preferred Stock of any series shall have a preference over any other
class or series of stock with respect to dividends and in the event of default
in the payment of such dividends, holders of such series of Preferred Stock
shall be entitled to elect one or more directors to the Board of Directors of
the Corporation to represent the interests of such series until said event of
default shall have been cured, and appropriate provision therefor shall be made
by the Board of Directors in connection with the issuance of any series of
Preferred Stock entitled to such dividend.
3. Whenever, at any time, dividends of the then outstanding Preferred
Stock as may be required with respect to any series outstanding shall have been
paid or declared and set apart for payment on the then outstanding Preferred
Stock, and after complying with respect to any retirement or sinking fund or
funds for any series of Preferred Stock, the Board of Directors may, subject to
the provisions of the resolution or resolutions creating any series of Preferred
Stock, declare and pay dividends on the Common Stock, and the holders of shares
of the Preferred Stock shall not be entitled to share therein.
4. The holders of shares of the Preferred Stock of each series shall be
entitled upon liquidation or dissolution or upon the distribution of the assets
of the Corporation to such preferences as provided in the resolution or
resolutions creating such series of Preferred Stock, and no more, before any
distribution of the assets of the Corporation shall be made to the holders of
shares of Common Stock. Whenever the holders of the Preferred Stock shall have
been paid the full amounts to which they shall be entitled, the holders of
shares of the Common Stock shall be entitled to share ratably in all assets of
the Corporation remaining.
5. At all meetings of the stockholders of the Corporation, the holders
of shares of Common Stock shall be entitled to one vote for each share of Common
Stock held by them, and the holders of all shares of Preferred Stock, or any
series thereof, shall be entitled to such number of votes as shall be fixed by
resolution of the Board of Directors authorizing the issuance thereof; provided,
however, that the Board of Directors shall not be authorized to provide for the
issuance of any shares of capital stock of the Corporation except shares which
shall entitle the holders thereof to receive notice of and to vote at meetings
of the stockholders of the Corporation.
6. The Preferred Stock purchased, redeemed or converted pursuant to any
of the provisions of the resolution of the Board of Directors creating each
series, shall, at the discretion of the Board of Directors, be held in the
Treasury of the Corporation subject to reissuance, or shall, from time to time,
in the discretion of the Board of Directors, upon the filing and recording of
such certificate as may be in accordance with the laws of the State of Delaware,
be returned to the status of authorized and unissued shares of Preferred Stock,
in which event such shares shall no longer be part of the series created in
connection with the original issuance thereof.
7. No holder of the Common Stock or the Preferred Stock of the
Corporation shall be entitled as such, as a matter of right, to subscribe for,
or purchase any part of, any new or additional issue of stock of the Corporation
of any class or of any issue of securities convertible into stock, or of any
warrants or rights to purchase stock, whether now or hereafter authorized and
whether issued for money or for a consideration other than money.
3
<PAGE>
Subject to the provision of this Article FOURTH, upon such terms, in
such manner and under such conditions, in conformity with law, as may be fixed
by the Board of Directors, the Board of Directors shall have the power to issue
bonds, debentures, or other obligations, either convertible or non-convertible
into the Corporation's stock, and warrants and rights to purchase the
Corporation's stock.
8. All holders of capital stock of the Corporation shall be entitled to
receive, not less often than annually, periodic reports relating to the
financial condition and operations of the Corporation, which shall include
profit and loss statements and balance sheets prepared in accordance with sound
business and accounting practice.
FIFTH. It is hereby declared to be a proper purpose reasonably
calculated to benefit the stockholders for the Board of Directors to base the
response of the Corporation to any 'Acquisition Proposal' (as hereinafter
defined) on the Board of Directors' evaluation of what is in the best interests
of the Corporation, and for the Board of Directors, in evaluating what is in the
best interests of the Corporation, to consider:
1. the best interests of the stockholders, and for this purpose the
Board shall consider, among other factors, not only the consideration being
offered in the Acquisition Proposal in relation to the then current market
price, but also in relation to the then current value of the Corporation in a
freely negotiated transaction and in relation to the Board of Directors' then
estimate of the future value of the Corporation as an independent entity; and
2. such other factors as the Board of Directors determines to be
relevant, including, among other factors, the social, legal and economic effects
upon stockholders, employees, suppliers and customers of the Corporation and the
industry and business community as a whole.
The term "Acquisition Proposal" as used in this Article FIFTH shall mean any
proposal of any person (a) for a tender offer or exchange offer for any equity
security of the Corporation, (b) to merge or consolidate the Corporation with
another corporation, or (c) to purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation.
SIXTH. Subject to all applicable provisions of this Restated
Certificate of Incorporation and to all applicable provisions of the laws of
Delaware relating, inter alia, to stockholder approval, the Board of Directors
shall be authorized to effect the merger or consolidation of the Corporation
with another corporation or person or to sell, lease or exchange all or
substantially all of the property and assets of the Corporation, including its
goodwill and its corporate franchises, upon such terms and conditions and for
such consideration, which may be, in whole or in part, shares of stock in,
and/or of the securities of, any corporation or corporations, as the Board of
4
<PAGE>
Directors shall deem expedient and in the best interests of the Corporation;
provided, however, that regardless of any other provision of this Restated
Certificate of Incorporation, such power of the Board of Directors shall be
exercisable only when and as duly authorized by the affirmative vote of not less
than 66 2/3% of the aggregate voting power represented by all of the then issued
and outstanding shares of the Corporation with respect to all Acquisition
Proposals which have not previously been approved by at least the vote of
two-thirds of the members of the Board. Should any Acquisition Proposal have
been approved by the vote of two-thirds of the members of the then duly
constituted Board of Directors of the Corporation prior to the submission of
such Acquisition Proposal for approval by the stockholders of the Corporation,
the general provisions of applicable Delaware law respecting stockholder
approval of such proposed action shall be applicable.
The term "Acquisition Proposal" as used in this Article SIXTH shall
mean any proposal of any person (a) for a tender offer or exchange offer for any
equity security of the Corporation, (b) to merge or consolidate the Corporation
with another corporation, or (c) to purchase or otherwise acquire all or
substantially all of the property and assets of the Corporation, in any
situation wherein the laws of Delaware require such transaction to be submitted
to a vote of the stockholders of the Corporation or their approval thereof as a
condition of consummation. This Article SIXTH shall not be altered, amended or
repealed except by the affirmative vote of not less than 66 2/3% of the
aggregate voting power represented by all of the then issued and outstanding
shares of capital stock of the Corporation, given at a stockholders' meeting
duly called for that purpose upon a proposal adopted by the Board of Directors.
SEVENTH. The following additional provisions are in furtherance, and
not in limitation, of any power, privilege or purpose conferred or permitted by
law, this Restated Certificate or the Bylaws:
1. Except as otherwise expressly required by law or by other provisions
of this Restated Certificate of Incorporation or by the Bylaws, the Board of
Directors shall have and may exercise, transact, manage, promote and carry on
all the powers, authorities, businesses, objects and purposes of the
Corporation.
2. The election of Directors need not be by ballot unless the Bylaws of
the Corporation shall so provide.
3. The Bylaws of the Corporation may be made, altered, amended or
repealed by the Board of Directors.
4. The Board of Directors may fix from time to time the compensation of
its members.
5. The Corporation shall have power to indemnify such persons, in such
manner and under such circumstances to the full extent permitted by the law of
the State of Delaware.
5
<PAGE>
EIGHTH. The Corporation reserves the right to amend and repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by law.
NINTH. The capital of the Corporation will not be reduced under or by
reason of this restatement.
TENTH. No director of the Corporation shall be personally liable to the
Corporation or to the holders of Common or Preferred Stock of the Corporation
for monetary damages for breach of fiduciary duty as a director, except (i) for
any breach of the directors' duty of loyalty to the Corporation or the holders
of Common or Preferred Stock of the Corporation, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of Delaware, (iv)
for any transaction from which the director derived an improper benefit, or (v)
for any act or omission occurring prior to the date upon which this Article
TENTH became effective.
IN WITNESS WHEREOF, Resource America, Inc. has caused this Restated
Certificate of Incorporation to be executed by its duly authorized officers, and
caused its corporate seal to be affixed hereto this ________ day of January,
2000.
RESOURCE AMERICA, INC.
By:___________________________
6
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
RESOURCE AMERICA, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I: CORPORATE OFFICES.................................................1
1.1 REGISTERED OFFICE.................................................1
1.2 OTHER OFFICES.....................................................1
ARTICLE II: MEETINGS OF STOCKHOLDERS..........................................1
2.1 PLACE OF MEETINGS.................................................1
2.2 ANNUAL MEETING....................................................1
2.3 SPECIAL MEETING...................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................2
2.6 QUORUM............................................................2
2.7 ADJOURNED MEETING; NOTICE.........................................2
2.8 CONDUCT OF BUSINESS...............................................3
2.9 VOTING............................................................3
2.10 WAIVER OF NOTICE..................................................3
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...........4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.......4
2.13 PROXIES...........................................................5
2.14 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS...5
ii
<PAGE>
ARTICLE III: DIRECTORS........................................................6
3.1 POWERS...........................................................6
3.2 NUMBER OF DIRECTORS..............................................6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS..........6
3.4 RESIGNATION AND VACANCIES........................................7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.........................7
3.6 FIRST MEETINGS...................................................7
3.7 REGULAR MEETINGS.................................................7
3.8 SPECIAL MEETINGS; NOTICE.........................................8
3.9 QUORUM...........................................................8
3.10 WAIVER OF NOTICE.................................................8
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................8
3.12 FEES AND COMPENSATION OF DIRECTORS...............................9
3.13 APPROVAL OF LOANS TO OFFICERS....................................9
ARTICLE IV: COMMITTEES.......................................................9
4.1 COMMITTEES OF DIRECTORS..........................................9
ARTICLE V: OFFICERS.........................................................9
5.1 OFFICERS.........................................................9
5.2 APPOINTMENT OF OFFICERS.........................................10
5.3 SUBORDINATE OFFICERS............................................10
5.4 REMOVAL AND RESIGNATION OF OFFICERS.............................10
5.5 VACANCIES IN OFFICES............................................10
5.6 CHAIRMAN OF THE BOARD...........................................10
5.7 VICE CHAIRMAN OF THE BOARD......................................11
5.8 CHIEF EXECUTIVE OFFICER.........................................11
5.9 PRESIDENT.......................................................11
5.10 CHIEF OPERATING OFFICER.........................................11
5.11 VICE PRESIDENTS.................................................11
5.12 CHIEF FINANCIAL OFFICER.........................................12
5.13 SECRETARY.......................................................12
5.14 TREASURER.......................................................13
5.15 ASSISTANT SECRETARY.............................................13
5.16 REPRESENTATION OF SHARES OF OTHER CORPORATIONS..................13
iii
<PAGE>
ARTICLE VI: INDEMNITY.......................................................13
6.1 THIRD PARTY ACTIONS.............................................13
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION...................14
6.3 SUCCESSFUL DEFENSE..............................................14
6.4 PAYMENT OF EXPENSES IN ADVANCE..................................14
6.5 INDEMNITY NOT EXCLUSIVE.........................................15
6.6 INSURANCE INDEMNIFICATION.......................................15
6.7 THE CORPORATION.................................................15
6.8 EMPLOYEE BENEFIT PLANS..........................................15
6.9 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.....16
ARTICLE VII: RECORDS AND REPORTS.............................................16
7.1 MAINTENANCE OF RECORDS..........................................16
ARTICLE VIII: GENERAL MATTERS.................................................16
8.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS................16
8.2 SPECIAL DESIGNATION ON CERTIFICATES.............................16
8.3 LOST CERTIFICATES...............................................17
8.4 CONSTRUCTION; DEFINITIONS.......................................17
8.5 DIVIDENDS.......................................................17
8.6 FISCAL YEAR.....................................................17
8.7 SEAL............................................................18
8.8 TRANSFER OF STOCK...............................................18
8.9 STOCK TRANSFER AGREEMENTS.......................................18
8.10 REGISTERED STOCKHOLDERS.........................................18
ARTICLE IX: AMENDMENTS......................................................18
iv
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
RESOURCE AMERICA, INC.
----------------------
ARTICLE I
CORPORATE OFFICES
------------------
1.1 REGISTERED OFFICE
The registered office of the corporation shall be at 49 Bancroft Mills,
Unit 15, in the City of Wilmington, County of New Castle, State of Delaware.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
Annual meetings of the stockholders shall be held, each year, at the time
and on the day designated by resolution of the Board of Directors.
At the annual meeting, the stockholders shall elect one class of the board
of directors, consider reports of the affairs of the corporation and transact
such other business as may be properly brought before the meeting.
1
<PAGE>
2.3 SPECIAL MEETING
Special meetings of the stockholders for any purpose may be called by the
Chairman of the Board, President or Secretary, or by resolution of the
directors.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the corporation that the notice has been given shall be, in
the absence of fraud, prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business,
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is neither present nor represented at any such meeting
of the stockholders, then either (i) the Chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2
<PAGE>
2.8 CONDUCT OF BUSINESS
The Chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws.
Except as may be otherwise provided in the certificate of incorporation or
as may be otherwise required by applicable law, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder.
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, or as may be otherwise required by applicable law:
(i) in all matters other than the election of directors, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders;
(ii) directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors; and
(iii) where a separate vote by a class or classes or series is required,
the affirmative vote of the majority of shares of such class or classes or
series present in person or represented by proxy at the meeting shall be the act
of such class or classes or series.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of this Article
II, a written waiver thereof, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
3
<PAGE>
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required to be taken at any annual or special meeting of stockholders of a
corporation, or any action that may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior notice, and
without a vote if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is delivered to the corporation at its principal place of
business.
(iii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
4
<PAGE>
to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for the stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
A stockholder may bring a matter of business or nominations for the
election of directors before a meeting of stockholders only if: (a) such
business may otherwise be properly be brought before the meeting, (b) such
stockholder shall have given, and the corporation shall have received at its
principal executive offices addressed to the Secretary, written notice in proper
form of such matter not less than 90 days prior to the first anniversary date of
the mailing date of the corporation's proxy solicitation materials for the
previous year's annual meeting of stockholders, and (c) in the case of a special
meeting of stockholders, such business is within the purpose or purposes
specified in the notice of the meeting and such stockholder shall have given,
and the corporation shall have received at its principal executive offices
addressed to the Secretary, written notice in proper form of such matter not
less than 90 days prior to the date of the special meeting. To be in proper
form, a stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations, propose the business, and, as the case may be, the name and address
of the person or persons to be nominated or the nature of the business to be
proposed;
(ii) a representation that the stockholder is a holder of record of stock
of the corporation entitled to vote at such meeting and, if applicable, intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice or introduce the business specified in the notice;
(iii) if applicable, a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder;
5
<PAGE>
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be nominated,
or the matter been proposed, or intended to be proposed by the board of
directors; and
(v) if applicable, the consent of each nominee to serve as director of the
corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
ARTICLE III
DIRECTORS
-----------
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The authorized number of directors shall be nine (9). This number may be
changed by a duly adopted amendment or resolution of a majority of the board of
directors. The directors shall be divided into three classes, which shall be as
nearly equal in number as possible.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, each class of directors
shall be elected as set forth in Section 2.9(ii) at each annual meeting of
stockholders. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until the director's earlier resignation. At each succeeding annual
stockholder's meeting following such election, the respective successors of each
class shall be elected for three year terms.
Elections of directors need not be by written ballot.
6
<PAGE>
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention of
the secretary of the corporation. When one or more directors so resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Any vacancy among the board of directors or newly created directorship
position, occurring from any cause whatsoever, may be filled by a majority vote
of the remaining directors then in office, although less than a quorum or by a
sole remaining director. Any person elected to fill a vacancy shall hold office
until the next election of the class of directors for which such director has
been chosen and until such successor is elected and qualified.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
without notice, provided a quorum is present, immediately following the annual
meeting of stockholders.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
7
<PAGE>
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose may be called at
any time by the chairman of the board or the vice chairman of the board.
Notice of the time and place of any special meeting shall be delivered
personally or by telephone, first-class mail or facsimile to each director at
least two (2) days prior to such special meeting.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under this Article III, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the directors, or members
of a committee of directors, need be specified in any written waiver of notice
unless so required by the certificate of incorporation or these bylaws.
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
8
<PAGE>
3.12 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.13 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member.
ARTICLE V
OFFICERS
---------
5.1 OFFICERS
The officers of the corporation shall be a chairman of the board, vice
chairman of the board, president, a secretary, a chief operating officer, a
chief financial officer and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chief executive officer, one or more
9
<PAGE>
executive, senior or other vice presidents, one or more assistant vice
presidents, one or more assistant secretaries, one or more assistant treasurers,
and any such other officers as may be appointed in accordance with the
provisions of Section 5.3 of these bylaws. Any number of offices may be held by
the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with Sections 5.3 of these bylaws, shall be appointed by the board
of directors, subject to the rights, if any, of an officer under any contract of
employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the chief executive officer
to appoint, such other officers and agents as the business of the corporation
may require, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation may be filled by the
board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him or her
by the board of directors or as may be prescribed by these bylaws. The chairman
of the board shall be, ex officio, a member of all standing committees. If there
is no chief executive officer and no president, then the chairman of the board
shall also be the chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 5.8 of these bylaws.
10
<PAGE>
5.7 VICE CHAIRMAN OF THE BOARD
The vice chairman of the board shall preside at all meetings of the
stockholders and of the board of directors in the absence of the chairman of the
board. In the absence or disability of the chairman of the board, or in the
event that it is impractical for the chairman of the board to act personally, he
shall have the powers and duties of the chairman of the board. The vice chairman
of the board shall also have such other powers or duties as shall be assigned to
him by the board of directors.
5.8 CHIEF EXECUTIVE OFFICER
Subject to the supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the chief
executive officer shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. In the absence or nonexistence of a chairman of the board or
vice chairman of the board, the chief executive officer shall preside at
meetings of the board of directors and stockholders. The chief executive officer
shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.
5.9 PRESIDENT
In the absence of the chairman of the board, vice chairman of the board or
a chief executive officer, the president shall preside at all meetings of the
board of directors. The president shall have the general powers and duties of
management usually vested in the office of president of a corporation and shall
have such other powers and duties as may be prescribed by the board of directors
or these bylaws. In the absence or disability of the chairman of the board or
vice chairman of the board, or in the event that for any reason it is
impractical for the chairman of the board or vice chairman of the board to act
personally, the president shall have the powers and duties of chairman of the
board and vice chairman of the board.
5.10 CHIEF OPERATING OFFICER
The chief operating officer shall supervise the property, business and
affairs of the corporation, subject to the direction of the chief executive
officer, in accordance with the policies established by the board of directors
and subject to overall discretion, authority and responsibility of the board of
directors.
5.11 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
11
<PAGE>
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.12 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capitol
retained earnings, and shares.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all his or her transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or these bylaws.
5.13 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation, at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, or such other
place as the board of directors may direct, a share register, or a duplicate
share register, showing the names of all stockholders and their addresses, the
number and classes of shares held by each, the number and date of certificates
evidencing such shares, and the number and date of cancellation of every
certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
12
<PAGE>
5.14 TREASURER
The treasurer shall, in the absence of the chief financial officer or in
the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the chief financial officer and shall perform such other
duties and have such other powers as may be prescribed by the board of directors
or these bylaws.
5.15 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
5.16 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president, the
chief operating officer, any vice president, the chief financial officer, the
secretary or the assistant secretary of this corporation, or any other person
authorized by the board of directors or the president or a vice president, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VI
INDEMNITY
----------
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
13
<PAGE>
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection therewith.
6.4 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding by an individual who may be entitled to indemnification pursuant to
Sections 6.1 or 6.2 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that the individual is not entitled to be
indemnified by the corporation as authorized in this Article VI.
14
<PAGE>
6.5 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in their official
capacity and as to action in another capacity while holding such office.
6.6 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against the
person and incurred by the person in any such capacity or arising out of the
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.7 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation, the provisions of Section 6.4) with respect to the resulting
or surviving corporation as the person would have with respect to such
constituent corporation if its separate existence had continued.
6.8 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
15
<PAGE>
6.9 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as may be designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, minutes of the proceedings of the board of directors and
stockholders, and other records.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.2 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
16
<PAGE>
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.3 LOST CERTIFICATES
Except as provided in this Section 8.3, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue, or direct its transfer agent to issue, a new certificate of stock or
uncertificated shares in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate, or the owner's legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
8.4 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.5 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the General Corporation Law of Delaware or the certificate of incorporation, may
declare and pay dividends upon the shares of its capital stock. Dividends may be
paid in cash, in property, or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.6 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
17
<PAGE>
8.7 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.8 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.9 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.10 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
Except as otherwise set forth herein or as provided by the General
Corporation Law of Delaware, these bylaws may be altered, amended or repealed,
or new bylaws may be adopted by the affirmative vote of a majority of the
directors present at any regular or special meeting of the board of directors at
which a quorum is present.
18
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed on this ____ day of
October, 1999 by and between RESOURCE AMERICA, INC., a Delaware corporation
having its principal place of business at 1521 Locust Street, Philadelphia,
Pennsylvania 19102 ("RAI") and SCOTT F. SCHAEFFER ("Schaeffer").
BACKGROUND
A. Since 1995, Schaeffer has been an officer of RAI and currently he
serves as the Vice Chairman of RAI.
B. Schaeffer and RAI desire to formally set forth the terms, conditions
and agreements regarding Schaeffer's employment as Vice Chairman of RAI.
TERMS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and intending to be legally bound hereby, RAI and Schaeffer agree as
follows:
1. Employment. During the term of this Agreement, Schaeffer shall be
employed as the Vice Chairman of the Board of Directors of RAI.
2. Duties. Schaeffer shall report to and accept direction from the
Chairman of the Board and from the Board. Schaeffer shall serve RAI diligently
and to the best of his abilities, but Schaeffer shall be required to devote only
so much of his time and attention to the business of RAI as may be required to
fulfill his duties. It is recognized that Schaeffer in the past has
participated, and it is agreed that Schaeffer in the future may participate in
business endeavors separate and apart from RAI.
3. Term. Schaeffer's employment hereunder shall continue in full force
and effect for a period of three (3) years, unless sooner terminated in
accordance with the provisions hereof. Such term shall automatically extend so
that on any day that this Agreement is in effect, it shall have a then current
term of three (3) years. Such automatic extensions shall cease upon RAI's
written notice to Schaeffer of its election to terminate this Agreement at the
end of the three (3) year period then in effect.
<PAGE>
4. Compensation.
(a) Base Compensation. During the period of employment, RAI shall
pay to Schaeffer "Base Compensation" to be established by the Board, initially
in an amount equal to Four Hundred Twenty-Five Thousand Dollars ($425,000.00)
per annum base compensation which Schaeffer, under existing arrangements
approved by the Board, is to receive during calendar 1999 (the "Initial Level").
The Base Compensation will be payable in accordance with the general payroll
practices by which RAI pays its executive officers, and the historical practice
of RAI's compensation of Schaeffer. It is understood that RAI, through the
compensation committee of the Board, will review Schaeffer's performance on an
annual basis and increase or decrease (but in no event below the Initial Level)
such Base Compensation, based upon Schaeffer's performance.
(b) Incentive Compensation. During the period of employment
Schaeffer may receive incentive compensation in the form of cash bonus payments,
stock option grants and other forms of incentive compensation, based upon
Schaeffer's performance.
(c) Reimbursement of Expenses. RAI shall reimburse Schaeffer for
all reasonable expenses incurred by Schaeffer in the performance of his duties,
including (without limitation) expenses incurred during business-related travel.
5. Benefits.
Schaeffer shall be entitled to receive the following benefits from
RAI independent of any other benefits which Schaeffer may receive from RAI or
otherwise:
(a) Participation in Benefit Plans. Schaeffer will participate in
all employee benefit plans in effect during the term of Schaeffer's employment
hereunder.
(b) Temporary Disability. During any period that Schaeffer fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness Schaeffer shall continue to receive his full compensation at the rate
then in effect for such period until his employment is terminated pursuant to
paragraph 6(b) hereof.
2
<PAGE>
6. Termination.
Schaeffer's employment hereunder shall terminate as follows:
(a) Death. Schaeffer's employment shall terminate automatically
upon the death of Schaeffer.
(b) Disability. RAI may terminate this Agreement if Schaeffer
becomes disabled by reason of any physical or mental disability whatsoever for
more than two hundred forty (240) days in the aggregate during any calendar year
and the Board determines, that Schaeffer, by reason of such physical or mental
disability, is rendered unable to perform his duties and services hereunder (a
"Disability");
(c) Termination by Schaeffer for Cause. Schaeffer may terminate his
employment for cause upon thirty (30) days' prior written notice to RAI, with
opportunity to cure any condition reasonably susceptible of cure. For the
purposes of this paragraph 6(c), cause shall be deemed to exist if any of the
following shall occur: (i) without the written consent of Schaeffer, a
substantial change in the services or duties required of Schaeffer hereunder or
the imposition of any services or duties substantially inconsistent with, or in
diminution of Schaeffer's current position, services or duties, or status with
RAI; (ii) failure to continue Schaeffer's coverage under any RAI benefit plan as
required under paragraph 5(a) except pursuant to a change to a benefit plan that
applies to senior executives of RAI generally or is required by law or
regulation; or (iii) any material breach by RAI of any provision of this
Agreement;
(d) Termination by Schaeffer Without Cause. Schaeffer may terminate
this Agreement without cause upon one hundred eighty (180) days prior written
notice to RAI.
(e) Change of Control. Schaeffer may, in his discretion, terminate
his employment upon a Change in Control or Potential Change in Control by
sending a Notice of Termination.
(f) Termination by RAI. In accordance with paragraph 3 hereof, RAI
may terminate this Agreement at the end of the then current three (3) year term.
7. Effect of Termination.
(a) Death. Upon the termination of Schaeffer's employment pursuant
to paragraph 6(a) hereof due to Schaeffer's death, a death benefit shall be paid
to Schaeffer's estate equal to the total amount payable to Schaeffer under this
Agreement until expiration of the term then in effect, assuming that Schaeffer's
total compensation for each year would be equal to the Average Compensation. The
death benefit shall be paid in thirty-six (36) equal, consecutive monthly
installments, beginning the first month following the month in which Schaeffer
shall have died.
3
<PAGE>
(b) Disability. Upon the termination of Schaeffer's employment
pursuant to paragraph 6(b) hereof due to Schaeffer's disability, Schaeffer shall
be entitled to receive a monthly disability benefit equal to one twelfth (1/12)
of the product of (i) the Average Compensation, multiplied by (ii) seventy-five
percent (75%). The disability benefit described above shall be paid to
Schaeffer, beginning the first month following the termination pursuant to
paragraph 6(b). Schaeffer's disability benefit shall cease if he resumes his
employment with RAI on the terms provided in this Agreement. Disability payments
made under this paragraph shall not be reduced by any payments made directly to
Schaeffer by an insurance company.
(c) For Cause; Change of Control. Upon the termination of this
Agreement either (i) by Schaeffer for cause pursuant to paragraph 6(c) hereof,
(ii) by Schaeffer pursuant to paragraph 6(e) after a Change in Control or
Potential Change of Control or (iii) by RAI pursuant to section 6(f) hereof,
then RAI shall provide to Schaeffer the benefits described in Section 7(c)(1)
and 7(c)(2) below (the "Severance Benefits").
(1) Lump-Sum Severance Payment. In lieu of any further
compensation payments to Schaeffer for periods subsequent to the Date of
Termination, RAI shall pay to Schaeffer a lump sum severance payment, in cash,
without discount, equal to the sum of the total amount payable to Schaeffer
under this Agreement until expiration of the term then in effect, assuming that
Schaeffer's total compensation for each year would be equal to the Average
Compensation.
(2) Continued Benefits. For a thirty-six (36) month period
after the Date of Termination (the "Benefits Period"), RAI shall provide
Schaeffer with group term life insurance, health insurance, accident and
long-term disability insurance benefits (collectively, "Welfare Benefits")
substantially similar in all respects to those that Schaeffer was receiving
immediately prior to the Date of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in Control). During the
Benefits Period, Schaeffer shall be entitled to elect to change his level of
coverage and/or his choice of coverage options with respect to the Welfare
Benefits to be provided by RAI to Schaeffer to the same extent that actively
employed senior executives of RAI are permitted to make such changes.
(e) Vesting of Options. Upon any termination of this Agreement, the
vesting of all options to purchase securities of RAI granted to Schaeffer during
his employment with RAI shall be accelerated to the later of the effective date
of termination of this Agreement, or six months after the date such option was
granted, and any provision contained in the agreements under which such options
were granted that is inconsistent with such acceleration is hereby modified to
the extent necessary to provide for such acceleration; such acceleration shall
not apply to any option that by its terms would vest prior to the date provided
for in this paragraph 7(d).
4
<PAGE>
8. Gross-Up Payment.
(a) In the event that (i) Schaeffer becomes entitled to any
benefits or payments in connection with the termination of Schaeffer's
employment, whether pursuant to the terms of this Agreement or otherwise,
including without limitation the Severance Benefits (collectively, the "Total
Benefits"), and (ii) any of the Total Benefits will be subject to the Excise
Tax, RAI shall pay to Schaeffer an additional amount (the "Gross-Up Payment")
such that the net amount retained by Schaeffer, after deduction of any Excise
Tax on the Total Benefits and any federal, state and local income taxes, Excise
Tax, and FICA and Medicare withholding taxes upon the payment provided for by
this paragraph 8(a), shall be equal to the Total Benefits. For purposes of
determining whether any of the Total Benefits will be subject to the Excise Tax
and the amount of such Excise Tax, the amount of the Total Benefits that shall
be treated as subject to the Excise Tax shall be equal to the amount of the
Total Benefits reduced by the amount of such Total Benefits that, in the opinion
of tax counsel selected by Schaeffer, at RAI's expense and reasonably acceptable
to RAI ("Tax Counsel"), are not excess parachute payments (within the meaning of
Section 28OG(b)(1) of the Code).
(b) For purposes of this Section 8, Schaeffer shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Excise Tax is (or would be) payable and state
and local income taxes at the highest marginal rate of taxation in the state and
locality of Schaeffer's residence on the Date of Termination, net of the
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes (calculated by assuming that any reduction under Section
68 of the Code in the amount of itemized deductions allowable to Schaeffer
applies first to reduce the amount of such state and local income taxes that
would otherwise be deductible by Schaeffer). Except as otherwise provided
herein, all determinations required to be made under this Section 8 shall be
made by Tax Counsel.
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of Schaeffer's employment, Schaeffer shall repay to RAI, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax, federal, state and local income
taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment
being repaid by Schaeffer to the extent that such repayment results in a
reduction in Excise Tax, FICA and Medicare withholding taxes and/or a federal,
state or local income tax deduction) plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Schaeffer's employment (including by
reason of any payment the existence or amount of which cannot be determined at
5
<PAGE>
the time of the Gross-Up Payment), RAI shall make an additional Gross-Up Payment
to Schaeffer in respect of such excess (plus any interest, penalties or
additions payable by Schaeffer with respect to such excess) at the time that the
amount of such excess is finally determined.
9. Indemnification.
(a) If Schaeffer is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (herein a "proceeding"), by reason of
the fact that he is or was an employee (which term includes officer, director,
agent and any other capacity) of RAI or is or was serving at the request of RAI
as an employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as an employee or agent or in any other capacity while serving
as an employee or agent, Schaeffer shall be indemnified and held harmless by RAI
to the fullest extent authorized by applicable law, against all expense,
liability and loss (including, but not limited to, attorneys' fees, judgments,
fines, ERISA excise taxes and penalties and amounts paid or to be paid in
settlement) incurred or suffered by Schaeffer in connection therewith and such
indemnification shall continue as to Schaeffer after he has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
Schaeffer's heir, executors, and administrators; provided, however, that RAI
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by Schaeffer (other than a proceeding to
enforce this paragraph 9) only if such proceeding (or part thereof) was
authorized directly or indirectly by the Board of RAI. The right to
indemnification conferred in this paragraph shall be a contract right and shall
include the right to be, promptly upon request, paid by RAI the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that if the Business Corporation Law of the Commonwealth of
Pennsylvania requires the payment of such expenses incurred by an employee in
his capacity as an employee (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, payment shall be made only upon delivery to RAI of
an undertaking, by or on behalf of Schaeffer, to repay all amounts so advanced
if it shall ultimately be determined that such employee is not entitled to be
indemnified under this paragraph or otherwise.
(b) The indemnification provided by this paragraph shall not be
limited or exclude any rights, indemnities or limitations of liability to which
Schaeffer may be entitled, whether as a matter of law, under the Certificate of
Incorporation, By-laws of RAI, by agreement, vote of the stockholders or
disinterested directors of RAI or otherwise.
6
<PAGE>
(c) Schaeffer, in seeking indemnification under this Agreement (an
"Indemnitee"), shall give the other party or parties (the "Indemnitor") prompt
written notice of any claim, suit or demand that the Indemnitee believes will
give rise to indemnification under this Agreement; provided, however, that the
failure to give such notice shall not affect the liability of the Indemnitor
under this Agreement unless the failure to give such notice materially and
adversely affects the ability of the Indemnitor to defend itself against or to
cure or mitigate the damages. Except as hereinafter provided, the Indemnitor
shall have the right (without prejudice to the right of the Indemnitee to
participate at its expense through counsel of its own choosing) to defend and to
direct the defense against any such claim, suit or demand, at the Indemnitor's
expense and with counsel chosen jointly by Indemnitor and Indemnitee, and the
right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, without the Indemnitee's written consent, which
shall not be unreasonably withheld, settle or compromise any claim or consent to
any entry of judgment. The Indemnitee shall, at the Indemnitor's expense,
cooperate in the defense of any such claim, suit or demand. If the Indemnitor,
within a reasonable time after notice of a claim fails to defend the Indemnitee,
the Indemnitee shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnitor.
(d) Schaeffer will be covered during the entire term of this
Agreement by Officer and Director liability insurance in amounts and on terms
similar to that afforded to other executives and/or directors of RAI or its
affiliates, which such insurance shall be paid by RAI.
10. Definitions. Any terms not otherwise defined herein shall have the
following meaning:
(a) "Average Compensation" means the average of the three highest
amounts of annual total compensation received by Schaeffer during any of the
then current calendar year (on an annualized basis) and the then preceding eight
(8) calendar years.
(b) "Board" means the Board of Directors of RAI.
(c) A "Change in Control" means the occurrence of any of the
following events:
(1) RAI's shareholders approve (or, in the event no approval of
RAI's shareholders is required, RAI consummates) a merger, consolidation, share
exchange, division or other reorganization or transaction of RAI (a "Fundamental
Transaction") with any other corporation, other than a Fundamental Transaction
which would result in the voting securities of RAI outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
7
<PAGE>
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the combined voting power immediately after such Fundamental
Transaction of (i) RAI's outstanding securities, (ii) the surviving entity's
outstanding securities, or (iii) in the case of a division, the outstanding
securities of each entity resulting from the division;
(2) the shareholders of RAI approve a plan of complete,
liquidation or winding-up of RAI or an agreement for the sale or disposition (in
one transaction or a series of transactions) of all or substantially all of
RAI's assets; or
(3) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
RAI's shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Control Effort" means any acting together or undertaking
efforts to act together by any Person or Persons, excluding employee benefit
plans of RAI, who are, or seek in any direct or indirect manner to become, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act
or any successor provisions thereto), directly or indirectly, of securities of
RAI representing twenty-five percent (25%) or more of the combined voting power
of RAI's then outstanding securities.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(g) "Excise Tax" means any excise tax imposed under Section 4999 of
the Code or a similar provision that may later be enacted.
(h) "Notice of Termination" After a Potential Change in Control or
a Change in Control, Schaeffer may terminate this Agreement by sending a written
notice to RAI that shall (i) specify the date of termination (the "Date of
Termination") which shall not be more than sixty (60) days from the date such
Notice of Termination is given, (ii) indicate the specific provisions of this
Agreement that will apply upon such termination and (iii) set forth in
reasonable detail the facts and circumstances for the application of the
provisions indicated.
8
<PAGE>
(i) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
(j) "Potential Change in Control" means the occurrence of any of
the following:
(1) the Board approves a transaction described in Subsection
(2) of the definition of Change in Control contained in paragraph 10(c) hereof;
(2) the commencement of a proxy or other contest or effort to
effectuate a Change in Control; or
(3) a Control Effort.
(k) "RAI" means Resource America, Inc., a Delaware corporation and
any direct or indirect subsidiary of RAI by which Schaeffer is employed.
References to payments, benefits, privileges or other rights to be provided by
RAI or such subsidiary by which Schaeffer is employed, as the case may be, will
correspond to the corporate entity obligated to make payments or provide
benefits, privileges or other rights pursuant to employee benefit plans affected
by the provisions hereof, and in the absence of any such existing plans or
provisions, such reference shall be deemed to be to RAI. RAI shall also mean any
successor by merger or other business combination to more than one-half of the
assets or ownership of RAI.
11. Miscellaneous.
(a) Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect such validity, illegality or unenforceability shall
not affect any other provisions of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision(s) had never
been contained herein, provided that such invalid, illegal or unenforceable
provision(s) shall first be curtailed, limited or eliminated only to the extent
necessary to remove such invalidity, illegality or unenforceability with respect
to the applicable law as it shall then be applied.
(b) Modification of Agreement. This Agreement shall not be modified
by any oral agreement, either expressed or implied, and all modifications
thereof shall be in writing and signed by the parties hereto.
(c) Waiver. The waiver of any right under this Agreement by any of
the parties hereto shall not be construed as a waiver of the same right at a
future time or as a waiver of any other rights under this Agreement.
9
<PAGE>
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving affect to the principles of conflicts of laws.
(e) Notices. Any notice to be given pursuant to this Agreement
shall be sufficient if in writing and mailed by certified or registered mail,
postage-prepaid, to the addresses listed below, or to such other address as
either party may notify the other of in accordance with this section.
If to RAI:
Resource America, Inc.
1521 Locust Street, Suite 400
Philadelphia, PA 19102
If to Schaeffer:
Scott F. Schaeffer
1521 Locust Street, Suite 400
Philadelphia, PA 19102
(f) Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts or facsimile
counterparts, each of such duplicate original or counterpart or facsimile
counterpart shall be deemed to be an original and all taken together shall
constitute but one and the same instrument.
[INTENTIONALLY LEFT BLANK]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on the day first above written.
RESOURCE AMERICA, INC.
By:____________________________
SCOTT F. SCHAEFFER
_______________________________
11
<PAGE>
STATE OF PENNSYLVANIA :
:
COUNTY OF PHILADELPHIA :
On this ___ day of October, 1999, before me, the undersigned, a Notary
Public in and for said state personally appeared Edward E. Cohen and Scott F.
Schaeffer, on behalf of Resource America, Inc., a Delaware corporation, known to
me or proved to me to be the persons who executed the within instrument of
behalf of said corporation and acknowledged to me that they executed the same
for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
____________________________________
Notary Public
My Commission Expires:
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed on this 5th day of
October, 1999 by and between RESOURCE AMERICA, INC., a Delaware corporation
having its principal place of business at 1521 Locust Street, Philadelphia,
Pennsylvania 19102 ("RAI") and DANIEL G. COHEN ("Cohen").
BACKGROUND
A. Since 1997, Cohen has been an officer of RAI and currently he serves
as the President and Chief Operating Officer of RAI.
B. Cohen and RAI desire to formally set forth the terms, conditions and
agreements regarding Cohen's employment as President and Chief Operating Officer
of RAI.
TERMS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and intending to be legally bound hereby, RAI and Cohen agree as
follows:
1. Employment. During the term of this Agreement, Cohen shall be
employed as the President and Chief Operating Officer of RAI.
2. Duties. Cohen shall report to and accept direction from the
Chairman of the Board of Directors of RAI and from the Board. Cohen shall serve
RAI diligently and to the best of his abilities, but Cohen shall be required to
devote only so much of his time and attention to the business of RAI as may be
required to fulfill his duties. It is recognized that Cohen in the past has
participated, and it is agreed that Cohen in the future may participate in
business endeavors separate and apart from RAI.
3. Term. Cohen's employment hereunder shall continue in full force and
effect for a period of three (3) years, unless sooner terminated in accordance
with the provisions hereof. Such term shall automatically extend so that on any
day that this Agreement is in effect, it shall have a then current term of three
(3) years. Such automatic extensions shall cease upon RAI's written notice to
Cohen of its election to terminate this Agreement at the end of the three (3)
year period then in effect.
<PAGE>
4. Compensation.
(a) Base Compensation. During the period of employment, RAI shall
pay to Cohen "Base Compensation" to be established by the Board, initially in an
amount equal to Four Hundred Twenty-Five Thousand Dollars ($425,000.00) per
annum base compensation which Cohen, under existing arrangements approved by the
Board, is to receive during calendar 1999 (the "Initial Level"). The Base
Compensation will be payable in accordance with the general payroll practices by
which RAI pays its executive officers, and the historical practice of RAI's
compensation of Cohen. It is understood that RAI, through the compensation
committee of the Board, will review Cohen's performance on an annual basis and
increase or decrease (but in no event below the Initial Level) such Base
Compensation, based upon Cohen's performance.
(b) Incentive Compensation. During the period of employment Cohen
may receive incentive compensation in the form of cash bonus payments, stock
option grants and other forms of incentive compensation, based upon Cohen's
performance.
(c) Reimbursement of Expenses. RAI shall reimburse Cohen for all
reasonable expenses incurred by Cohen in the performance of his duties,
including (without limitation) expenses incurred during business-related travel.
5. Benefits.
Cohen shall be entitled to receive the following benefits from RAI
independent of any other benefits which Cohen may receive from RAI or otherwise:
(a) Participation in Benefit Plans. Cohen will participate in all
employee benefit plans in effect during the term of Cohen's employment
hereunder.
(b) Temporary Disability. During any period that Cohen fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness Cohen shall continue to receive his full compensation at the rate then
in effect for such period until his employment is terminated pursuant to
paragraph 6(b) hereof.
6. Termination.
Cohen's employment hereunder shall terminate as follows:
(a) Death. Cohen's employment shall terminate automatically upon
the death of Cohen.
2
<PAGE>
(b) Disability. RAI may terminate this Agreement if Cohen becomes
disabled by reason of any physical or mental disability whatsoever for more than
two hundred forty (240) days in the aggregate during any calendar year and the
Board determines, that Cohen, by reason of such physical or mental disability,
is rendered unable to perform his duties and services hereunder (a
"Disability");
(c) Termination by Cohen for Cause. Cohen may terminate his
employment for cause upon thirty (30) days' prior written notice to RAI, with
opportunity to cure any condition reasonably susceptible of cure. For the
purposes of this paragraph 6(c), cause shall be deemed to exist if any of the
following shall occur: (i) without the written consent of Cohen, a substantial
change in the services or duties required of Cohen hereunder or the imposition
of any services or duties substantially inconsistent with, or in diminution of
Cohen's current position, services or duties, or status with RAI; (ii) failure
to continue Cohen's coverage under any RAI benefit plan as required under
paragraph 5(a) except pursuant to a change to a benefit plan that applies to
senior executives of RAI generally or is required by law or regulation; or (iii)
any material breach by RAI of any provision of this Agreement;
(d) Termination by Cohen Without Cause. Cohen may terminate this
Agreement without cause upon one hundred eighty (180) days prior written notice
to RAI.
(e) Change of Control. Cohen may, in his discretion, terminate his
employment upon a Change in Control or Potential Change in Control by sending a
Notice of Termination.
(f) Termination by RAI. In accordance with paragraph 3 hereof, RAI
may terminate this Agreement at the end of the then current three (3) year term.
7. Effect of Termination.
(a) Death. Upon the termination of Cohen's employment pursuant to
paragraph 6(a) hereof due to Cohen's death, a death benefit shall be paid to
Cohen's estate equal to the total amount payable to Cohen under this Agreement
until expiration of the term then in effect, assuming that Cohen's total
compensation for each year would be equal to the Average Compensation. The death
benefit shall be paid in thirty-six (36) equal, consecutive monthly
installments, beginning the first month following the month in which Cohen shall
have died.
(b) Disability. Upon the termination of Cohen's employment pursuant
to paragraph 6(b) hereof due to Cohen's disability, Cohen shall be entitled to
receive a monthly disability benefit equal to one twelfth (1/12) of the product
of (i) the Average Compensation, multiplied by (ii) seventy-five percent (75%).
The disability benefit described above shall be paid to Cohen, beginning the
first month following the termination pursuant to paragraph 6(b). Cohen's
3
<PAGE>
disability benefit shall cease if he resumes his employment with RAI on the
terms provided in this Agreement. Disability payments made under this paragraph
shall not be reduced by any payments made directly to Cohen by an insurance
company.
(c) For Cause; Change of Control. Upon the termination of this
Agreement either (i) by Cohen for cause pursuant to paragraph 6(c) hereof, (ii)
by Cohen pursuant to paragraph 6(e) after a Change in Control or Potential
Change of Control or (iii) by RAI pursuant to section 6(f) hereof, then RAI
shall provide to Cohen the benefits described in Section 7(c)(1) and 7(c)(2)
below (the "Severance Benefits").
(1) Lump-Sum Severance Payment. In lieu of any further
compensation payments to Cohen for periods subsequent to the Date of
Termination, RAI shall pay to Cohen a lump sum severance payment, in cash,
without discount, equal to the sum of the total amount payable to Cohen under
this Agreement until expiration of the term then in effect, assuming that
Cohen's total compensation for each year would be equal to the Average
Compensation.
(2) Continued Benefits. For a thirty-six (36) month period
after the Date of Termination (the "Benefits Period"), RAI shall provide Cohen
with group term life insurance, health insurance, accident and long-term
disability insurance benefits (collectively, "Welfare Benefits") substantially
similar in all respects to those that Cohen was receiving immediately prior to
the Date of Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control). During the Benefits Period, Cohen shall be
entitled to elect to change his level of coverage and/or his choice of coverage
options with respect to the Welfare Benefits to be provided by RAI to Cohen to
the same extent that actively employed senior executives of RAI are permitted to
make such changes.
(3) Vesting of Options. Upon any termination of this Agreement,
the vesting of all options to purchase securities of RAI granted to Cohen during
his employment with RAI shall be accelerated to the later of the effective date
of termination of this Agreement, or six months after the date such option was
granted, and any provision contained in the agreements under which such options
were granted that is inconsistent with such acceleration is hereby modified to
the extent necessary to provide for such acceleration; such acceleration shall
not apply to any option that by its terms would vest prior to the date provided
for in this paragraph 7(d).
4
<PAGE>
8. Gross-Up Payment.
(a) In the event that (i) Cohen becomes entitled to any benefits or
payments in connection with the termination of Cohen's employment, whether
pursuant to the terms of this Agreement or otherwise, including without
limitation the Severance Benefits (collectively, the "Total Benefits"), and (ii)
any of the Total Benefits will be subject to the Excise Tax, RAI shall pay to
Cohen an additional amount (the "Gross-Up Payment") such that the net amount
retained by Cohen, after deduction of any Excise Tax on the Total Benefits and
any federal, state and local income taxes, Excise Tax, and FICA and Medicare
withholding taxes upon the payment provided for by this paragraph 8(a), shall be
equal to the Total Benefits. For purposes of determining whether any of the
Total Benefits will be subject to the Excise Tax and the amount of such Excise
Tax, the amount of the Total Benefits that shall be treated as subject to the
Excise Tax shall be equal to the amount of the Total Benefits reduced by the
amount of such Total Benefits that, in the opinion of tax counsel selected by
Cohen, at RAI's expense and reasonably acceptable to RAI ("Tax Counsel"), are
not excess parachute payments (within the meaning of Section 28OG(b)(1) of the
Code).
(b) For purposes of this Section 8, Cohen shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Excise Tax is (or would be) payable and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of Cohen's residence on the Date of Termination, net of the reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes (calculated by assuming that any reduction under Section 68 of the
Code in the amount of itemized deductions allowable to Cohen applies first to
reduce the amount of such state and local income taxes that would otherwise be
deductible by Cohen). Except as otherwise provided herein, all determinations
required to be made under this Section 8 shall be made by Tax Counsel.
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of Cohen's employment, Cohen shall repay to RAI, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax, federal, state and local income taxes
and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being
repaid by Cohen to the extent that such repayment results in a reduction in
Excise Tax, FICA and Medicare withholding taxes and/or a federal, state or local
income tax deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time of
the termination of Cohen's employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
5
<PAGE>
Payment), RAI shall make an additional Gross-Up Payment to Cohen in respect of
such excess (plus any interest, penalties or additions payable by Cohen with
respect to such excess) at the time that the amount of such excess is finally
determined.
9. Indemnification.
(a) If Cohen is made a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (herein a "proceeding"), by reason of the fact
that he is or was an employee (which term includes officer, director, agent and
any other capacity) of RAI or is or was serving at the request of RAI as an
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as an employee or agent or in any other capacity while serving as an
employee or agent, Cohen shall be indemnified and held harmless by RAI to the
fullest extent authorized by applicable law, against all expense, liability and
loss (including, but not limited to, attorneys' fees, judgments, fines, ERISA
excise taxes and penalties and amounts paid or to be paid in settlement)
incurred or suffered by Cohen in connection therewith and such indemnification
shall continue as to Cohen after he has ceased to be a director, officer,
employee or agent and shall inure to the benefit of Cohen's heir, executors, and
administrators; provided, however, that RAI shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by Cohen (other than a proceeding to enforce this paragraph 9) only if
such proceeding (or part thereof) was authorized directly or indirectly by the
Board of RAI. The right to indemnification conferred in this paragraph shall be
a contract right and shall include the right to be, promptly upon request, paid
by RAI the expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that if the Business Corporation Law of
the Commonwealth of Pennsylvania requires the payment of such expenses incurred
by an employee in his capacity as an employee (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, payment shall be made only upon
delivery to RAI of an undertaking, by or on behalf of Cohen, to repay all
amounts so advanced if it shall ultimately be determined that such employee is
not entitled to be indemnified under this paragraph or otherwise.
(b) The indemnification provided by this paragraph shall not be
limited or exclude any rights, indemnities or limitations of liability to which
Cohen may be entitled, whether as a matter of law, under the Certificate of
Incorporation, By-laws of RAI, by agreement, vote of the stockholders or
disinterested directors of RAI or otherwise.
6
<PAGE>
(c) Cohen, in seeking indemnification under this Agreement (an
"Indemnitee"), shall give the other party or parties (the "Indemnitor") prompt
written notice of any claim, suit or demand that the Indemnitee believes will
give rise to indemnification under this Agreement; provided, however, that the
failure to give such notice shall not affect the liability of the Indemnitor
under this Agreement unless the failure to give such notice materially and
adversely affects the ability of the Indemnitor to defend itself against or to
cure or mitigate the damages. Except as hereinafter provided, the Indemnitor
shall have the right (without prejudice to the right of the Indemnitee to
participate at its expense through counsel of its own choosing) to defend and to
direct the defense against any such claim, suit or demand, at the Indemnitor's
expense and with counsel chosen jointly by Indemnitor and Indemnitee, and the
right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, without the Indemnitee's written consent, which
shall not be unreasonably withheld, settle or compromise any claim or consent to
any entry of judgment. The Indemnitee shall, at the Indemnitor's expense,
cooperate in the defense of any such claim, suit or demand. If the Indemnitor,
within a reasonable time after notice of a claim fails to defend the Indemnitee,
the Indemnitee shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnitor.
(d) Cohen will be covered during the entire term of this Agreement
by Officer and Director liability insurance in amounts and on terms similar to
that afforded to other executives and/or directors of RAI or its affiliates,
which such insurance shall be paid by RAI.
10. Payments. RAI will make payments to Cohen described in this
Agreement within ten (10) business days after receiving written notice from
Cohen describing such payment, referring to the provision of this Agreement
under which such payment is claimed and certifying that all conditions for such
payment, as set forth in this Agreement, have been satisfied. The information so
furnished to RAI by Cohen shall be presumed to be correct, subject to rebuttal
by RAI after making payment. Failure by RAI to timely make payments in
accordance herewith shall entitle Cohen to liquidated damages in an amount equal
to two times the amount of such payment. The entire amount due (i.e., the
payment plus the liquidated damages of two times such payment) shall accrue
interest at the rate of 15% per annum until paid. RAI shall also pay, on demand
Cohen's legal fees and expenses incurred in connection with enforcement of this
Agreement
11. Definitions. Any terms not otherwise defined herein shall have the
following meaning:
(a) "Average Compensation" means the average of the three
highest amounts of annual total compensation received by Cohen during any of the
then current calendar year (on an annualized basis) and the then preceding eight
(8) calendar years.
7
<PAGE>
(b) "Board" means the Board of Directors of RAI.
(c) A "Change in Control" means the occurrence of any of the
following events:
(1) RAI's shareholders approve (or, in the event no approval of
RAI's shareholders is required, RAI consummates) a merger, consolidation, share
exchange, division or other reorganization or transaction of RAI (a "Fundamental
Transaction") with any other corporation, other than a Fundamental Transaction
which would result in the voting securities of RAI outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the combined voting power immediately after such Fundamental
Transaction of (i) RAI's outstanding securities, (ii) the surviving entity's
outstanding securities, or (iii) in the case of a division, the outstanding
securities of each entity resulting from the division;
(2) the shareholders of RAI approve a plan of complete,
liquidation or winding-up of RAI or an agreement for the sale or disposition (in
one transaction or a series of transactions) of all or substantially all of
RAI's assets; or
(3) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
RAI's shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Control Effort" means any acting together or undertaking
efforts to act together by any Person or Persons, excluding employee benefit
plans of RAI, who are, or seek in any direct or indirect manner to become, the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act
or any successor provisions thereto), directly or indirectly, of securities of
RAI representing twenty-five percent (25%) or more of the combined voting power
of RAI's then outstanding securities.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
8
<PAGE>
(g) "Excise Tax" means any excise tax imposed under Section 4999 of
the Code or a similar provision that may later be enacted.
(h) "Notice of Termination" After a Potential Change in Control or
a Change in Control, Cohen may terminate this Agreement by sending a written
notice to RAI that shall (i) specify the date of termination (the "Date of
Termination") which shall not be more than sixty (60) days from the date such
Notice of Termination is given, (ii) indicate the specific provisions of this
Agreement that will apply upon such termination and (iii) set forth in
reasonable detail the facts and circumstances for the application of the
provisions indicated.
(i) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
(j) "Potential Change in Control" means the occurrence of any of
the following:
(1) the Board approves a transaction described in Subsection
(2) of the definition of Change in Control contained in paragraph 10(c) hereof;
(2) the commencement of a proxy or other contest or effort to
effectuate a Change in Control; or
(3) a Control Effort.
(k) "RAI" means Resource America, Inc., a Delaware corporation and
any direct or indirect subsidiary of RAI by which Cohen is employed. References
to payments, benefits, privileges or other rights to be provided by RAI or such
subsidiary by which Cohen is employed, as the case may be, will correspond to
the corporate entity obligated to make payments or provide benefits, privileges
or other rights pursuant to employee benefit plans affected by the provisions
hereof, and in the absence of any such existing plans or provisions, such
reference shall be deemed to be to RAI. RAI shall also mean any successor by
merger or other business combination to more than one-half of the assets or
ownership of RAI.
12. Miscellaneous.
(a) Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect such validity, illegality or unenforceability shall
not affect any other provisions of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision(s) had never
been contained herein, provided that such invalid, illegal or unenforceable
9
<PAGE>
provision(s) shall first be curtailed, limited or eliminated only to the extent
necessary to remove such invalidity, illegality or unenforceability with respect
to the applicable law as it shall then be applied.
(b) Modification of Agreement. This Agreement shall not be modified
by any oral agreement, either expressed or implied, and all modifications
thereof shall be in writing and signed by the parties hereto.
(c) Waiver. The waiver of any right under this Agreement by any of
the parties hereto shall not be construed as a waiver of the same right at a
future time or as a waiver of any other rights under this Agreement.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving affect to the principles of conflicts of laws.
(e) Notices. Any notice to be given pursuant to this Agreement
shall be sufficient if in writing and mailed by certified or registered mail,
postage-prepaid, to the addresses listed below, or to such other address as
either party may notify the other of in accordance with this section.
If to RAI:
Resource America, Inc.
1521 Locust Street
Suite 400
Philadelphia, PA 19102
If to Cohen:
Daniel G. Cohen
1521 Locust Street; Ste. 400
Philadelphia, PA 19102
(f) Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts or facsimile
counterparts, each of such duplicate original or counterpart or facsimile
counterpart shall be deemed to be an original and all taken together shall
constitute but one and the same instrument.
[INTENTIONALLY LEFT BLANK]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on the date first above written.
RESOURCE AMERICA, INC.
By:____________________________
DANIEL G. COHEN
_______________________________
<PAGE>
STATE OF PENNSYLVANIA :
:
COUNTY OF PHILADELPHIA :
On this ___ day of October, 1999, before me, the undersigned, a Notary
Public in and for said state personally appeared Edward E. Cohen and Daniel G.
Cohen, on behalf of Resource America, Inc., a Delaware corporation, known to me
or proved to me to be the persons who executed the within instrument of behalf
of said corporation and acknowledged to me that they executed the same for the
purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
____________________________________
Notary Public
My Commission Expires:
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed on this ____ day of
October, 1999 by and between RESOURCE AMERICA, INC., a Delaware corporation
having its principal place of business at 1521 Locust Street, Philadelphia,
Pennsylvania 19102 ("RAI") and STEVEN J. KESSLER ("Kessler").
BACKGROUND
A. Since 1997, Kessler has been an officer of RAI and currently he
serves as the Senior Vice President and Chief Financial Officer of RAI.
B. Kessler and RAI desire to formally set forth the terms, conditions
and agreements regarding Kessler's employment as Senior Vice President and Chief
Financial Officer of RAI.
TERMS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and intending to be legally bound hereby, RAI and Kessler agree as
follows:
1. Employment. During the term of this Agreement, Kessler shall be
employed as the Senior Vice President and Chief Financial Officer of RAI.
2. Duties. Kessler shall report to and accept direction from the
Chairman of the Board of Directors of RAI and from the Board. Kessler shall
serve RAI diligently and to the best of his abilities.
3. Term. Kessler's employment hereunder shall continue in full force
and effect for a period of three (3) years, unless sooner terminated in
accordance with the provisions hereof. Such term shall automatically extend so
that on any day that this Agreement is in effect, it shall have a then current
term of three (3) years. Such automatic extensions shall cease upon RAI's
written notice to Kessler of its election to terminate this Agreement at the end
of the three (3) year period then in effect.
4. Compensation.
(a) Base Compensation. During the period of employment, RAI shall
pay to Kessler "Base Compensation" to be established by the Board, initially in
an amount equal to Three Hundred Thousand Dollars ($300,000.00) per annum base
compensation which Kessler, under existing arrangements approved by the Board,
is to receive during calendar 1999 (the "Initial Level"). The Base Compensation
will be payable in accordance with the general payroll practices by which RAI
pays its executive officers, and the historical practice of RAI's compensation
of Kessler. It is understood that RAI, through the compensation committee of the
<PAGE>
Board, will review Kessler's performance on an annual basis and increase or
decrease (but in no event below the Initial Level) such Base Compensation, based
upon Kessler's performance.
(b) Incentive Compensation. During the period of employment Kessler
may receive incentive compensation in the form of cash bonus payments, stock
option grants and other forms of incentive compensation, based upon Kessler's
performance.
(c) Reimbursement of Expenses. RAI shall reimburse Kessler for all
reasonable expenses incurred by Kessler in the performance of his duties,
including (without limitation) expenses incurred during business-related travel.
5. Benefits.
Kessler shall be entitled to receive the following benefits from
RAI independent of any other benefits which Kessler may receive from RAI or
otherwise:
(a) Participation in Benefit Plans. Kessler will participate in all
employee benefit plans in effect during the term of Kessler's employment
hereunder.
(b) Temporary Disability. During any period that Kessler fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness Kessler shall continue to receive his full compensation at the rate then
in effect for such period until his employment is terminated pursuant to
paragraph 6(b) hereof.
6. Termination.
Kessler's employment hereunder shall terminate as follows:
(a) Death. Kessler's employment shall terminate automatically upon
the death of Kessler.
(b) Disability. RAI may terminate this Agreement if Kessler becomes
disabled by reason of any physical or mental disability whatsoever for more than
two hundred forty (240) days in the aggregate during any calendar year and the
Board determines, that Kessler, by reason of such physical or mental disability,
is rendered unable to perform his duties and services hereunder (a
"Disability");
(c) Termination by Kessler for Cause. Kessler may terminate his
employment for cause upon thirty (30) days' prior written notice to RAI, with
opportunity to cure any condition reasonably susceptible of cure. For the
purposes of this paragraph 6(c), cause shall be deemed to exist if any of the
following shall occur: (i) without the written consent of Kessler, a substantial
change in the services or duties required of Kessler hereunder or the imposition
2
<PAGE>
of any services or duties substantially inconsistent with, or in diminution of
Kessler's current position, services or duties, or status with RAI; (ii) failure
to continue Kessler's coverage under any RAI benefit plan as required under
paragraph 5(a) except pursuant to a change to a benefit plan that applies to
senior executives of RAI generally or is required by law or regulation; or (iii)
any material breach by RAI of any provision of this Agreement;
(d) Termination by Kessler Without Cause. Kessler may terminate
this Agreement without cause upon one hundred eighty (180) days prior written
notice to RAI.
(e) Change of Control. Kessler may, in his discretion, terminate
his employment upon a Change in Control by sending a Notice of Termination.
(f) Termination by RAI. In accordance with paragraph 3 hereof, RAI
may terminate this Agreement at the end of the then current three (3) year term.
7. Effect of Termination.
(a) Death. Upon the termination of Kessler's employment pursuant to
paragraph 6(a) hereof due to Kessler's death, a death benefit shall be paid to
Kessler's estate equal to the total amount payable to Kessler under this
Agreement until expiration of the term then in effect, assuming that Kessler's
total compensation for each year would be equal to the Average Compensation. The
death benefit shall be paid in thirty-six (36) equal, consecutive monthly
installments, beginning the first month following the month in which Kessler
shall have died.
(b) Disability. Upon the termination of Kessler's employment
pursuant to paragraph 6(b) hereof due to Kessler's disability, Kessler shall be
entitled to receive a monthly disability benefit equal to one twelfth (1/12) of
the product of (i) the Average Compensation, multiplied by (ii) seventy-five
percent (75%). The disability benefit described above shall be paid to Kessler,
beginning the first month following the termination pursuant to paragraph 6(b).
Kessler's disability benefit shall cease if he resumes his employment with RAI
on the terms provided in this Agreement. Disability payments made under this
paragraph shall not be reduced by any payments made directly to Kessler by an
insurance company.
(c) For Cause; Change of Control. Upon the termination of this
Agreement either (i) by Kessler for cause pursuant to paragraph 6(c) hereof,
(ii) by Kessler pursuant to paragraph 6(e) after a Change in Control or (iii) by
RAI pursuant to section 6(f) hereof, then RAI shall provide to Kessler the
benefits described in Section 7(c)(1) and 7(c)(2) below (the "Severance
Benefits").
3
<PAGE>
(1) Lump-Sum Severance Payment. In lieu of any further
compensation payments to Kessler for periods subsequent to the Date of
Termination, RAI shall pay to Kessler a lump sum severance payment, in cash,
without discount, equal to the sum of the total amount payable to Kessler under
this Agreement until expiration of the term then in effect, assuming that
Kessler's total compensation for each year would be equal to the Average
Compensation.
(2) Continued Benefits. For a thirty-six (36) month period
after the Date of Termination (the "Benefits Period"), RAI shall provide Kessler
with group term life insurance, health insurance, accident and long-term
disability insurance benefits (collectively, "Welfare Benefits") substantially
similar in all respects to those that Kessler was receiving immediately prior to
the Date of Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control). During the Benefits Period, Kessler shall be
entitled to elect to change his level of coverage and/or his choice of coverage
options with respect to the Welfare Benefits to be provided by RAI to Kessler to
the same extent that actively employed senior executives of RAI are permitted to
make such changes.
(3) Vesting of Options. Upon any termination of this Agreement,
the vesting of all options to purchase securities of RAI granted to Kessler
during his employment with RAI shall be accelerated to the later of the
effective date of termination of this Agreement, or six months after the date
such option was granted, and any provision contained in the agreements under
which such options were granted that is inconsistent with such acceleration is
hereby modified to the extent necessary to provide for such acceleration; such
acceleration shall not apply to any option that by its terms would vest prior to
the date provided for in this paragraph 7(d).
4
<PAGE>
8. Gross-Up Payment.
(a) In the event that (i) Kessler becomes entitled to any benefits
or payments in connection with the termination of Kessler's employment, whether
pursuant to the terms of this Agreement or otherwise, including without
limitation the Severance Benefits (collectively, the "Total Benefits"), and (ii)
any of the Total Benefits will be subject to the Excise Tax, RAI shall pay to
Kessler an additional amount (the "Gross-Up Payment") such that the net amount
retained by Kessler, after deduction of any Excise Tax on the Total Benefits and
any federal, state and local income taxes, Excise Tax, and FICA and Medicare
withholding taxes upon the payment provided for by this paragraph 8(a), shall be
equal to the Total Benefits. For purposes of determining whether any of the
Total Benefits will be subject to the Excise Tax and the amount of such Excise
Tax, the amount of the Total Benefits that shall be treated as subject to the
Excise Tax shall be equal to the amount of the Total Benefits reduced by the
amount of such Total Benefits that, in the opinion of tax counsel selected by
Kessler, at RAI's expense and reasonably acceptable to RAI ("Tax Counsel"), are
not excess parachute payments (within the meaning of Section 28OG(b)(1) of the
Code).
(b) For purposes of this Section 8, Kessler shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Excise Tax is (or would be) payable and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of Kessler's residence on the Date of Termination, net of the reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes (calculated by assuming that any reduction under Section 68 of the
Code in the amount of itemized deductions allowable to Kessler applies first to
reduce the amount of such state and local income taxes that would otherwise be
deductible by Kessler). Except as otherwise provided herein, all determinations
required to be made under this Section 8 shall be made by Tax Counsel.
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of termination
of Kessler's employment, Kessler shall repay to RAI, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax, federal, state and local income
taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment
being repaid by Kessler to the extent that such repayment results in a reduction
in Excise Tax, FICA and Medicare withholding taxes and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the termination of Kessler's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
5
<PAGE>
Gross-Up Payment), RAI shall make an additional Gross-Up Payment to Kessler in
respect of such excess (plus any interest, penalties or additions payable by
Kessler with respect to such excess) at the time that the amount of such excess
is finally determined.
9. Indemnification.
(a) If Kessler is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (herein a "proceeding"), by reason of the fact
that he is or was an employee (which term includes officer, director, agent and
any other capacity) of RAI or is or was serving at the request of RAI as an
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as an employee or agent or in any other capacity while serving as an
employee or agent, Kessler shall be indemnified and held harmless by RAI to the
fullest extent authorized by applicable law, against all expense, liability and
loss (including, but not limited to, attorneys' fees, judgments, fines, ERISA
excise taxes and penalties and amounts paid or to be paid in settlement)
incurred or suffered by Kessler in connection therewith and such indemnification
shall continue as to Kessler after he has ceased to be a director, officer,
employee or agent and shall inure to the benefit of Kessler's heir, executors,
and administrators; provided, however, that RAI shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by Kessler (other than a proceeding to enforce this paragraph 9) only
if such proceeding (or part thereof) was authorized directly or indirectly by
the Board of RAI. The right to indemnification conferred in this paragraph shall
be a contract right and shall include the right to be, promptly upon request,
paid by RAI the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that if the Business Corporation Law
of the Commonwealth of Pennsylvania requires the payment of such expenses
incurred by an employee in his capacity as an employee (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, payment shall be made only
upon delivery to RAI of an undertaking, by or on behalf of Kessler, to repay all
amounts so advanced if it shall ultimately be determined that such employee is
not entitled to be indemnified under this paragraph or otherwise.
(b) The indemnification provided by this paragraph shall not be
limited or exclude any rights, indemnities or limitations of liability to which
Kessler may be entitled, whether as a matter of law, under the Certificate of
Incorporation, By-laws of RAI, by agreement, vote of the stockholders or
disinterested directors of RAI or otherwise.
6
<PAGE>
(c) Kessler, in seeking indemnification under this Agreement (an
"Indemnitee"), shall give the other party or parties (the "Indemnitor") prompt
written notice of any claim, suit or demand that the Indemnitee believes will
give rise to indemnification under this Agreement; provided, however, that the
failure to give such notice shall not affect the liability of the Indemnitor
under this Agreement unless the failure to give such notice materially and
adversely affects the ability of the Indemnitor to defend itself against or to
cure or mitigate the damages. Except as hereinafter provided, the Indemnitor
shall have the right (without prejudice to the right of the Indemnitee to
participate at its expense through counsel of its own choosing) to defend and to
direct the defense against any such claim, suit or demand, at the Indemnitor's
expense and with counsel chosen jointly by Indemnitor and Indemnitee, and the
right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, without the Indemnitee's written consent, which
shall not be unreasonably withheld, settle or compromise any claim or consent to
any entry of judgment. The Indemnitee shall, at the Indemnitor's expense,
cooperate in the defense of any such claim, suit or demand. If the Indemnitor,
within a reasonable time after notice of a claim fails to defend the Indemnitee,
the Indemnitee shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnitor.
(d) Kessler will be covered during the entire term of this
Agreement by Officer and Director liability insurance in amounts and on terms
similar to that afforded to other executives and/or directors of RAI or its
affiliates, which such insurance shall be paid by RAI.
10. Definitions. Any terms not otherwise defined herein shall have the
following meaning:
(a) "Average Compensation" means the average of the three highest
amounts of annual total compensation received by Kessler during any of the then
current calendar year (on an annualized basis) and the then preceding eight (8)
calendar years.
(b) "Board" means the Board of Directors of RAI.
(c) A "Change in Control" means the occurrence of any of the
following events:
(1) RAI's shareholders approve (or, in the event no approval of
RAI's shareholders is required, RAI consummates) a merger, consolidation, share
exchange, division or other reorganization or transaction of RAI (a "Fundamental
Transaction") with any other corporation, other than a Fundamental Transaction
which would result in the voting securities of RAI outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
7
<PAGE>
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the combined voting power immediately after such Fundamental
Transaction of (i) RAI's outstanding securities, (ii) the surviving entity's
outstanding securities, or (iii) in the case of a division, the outstanding
securities of each entity resulting from the division;
(2) the shareholders of RAI approve a plan of complete,
liquidation or winding-up of RAI or an agreement for the sale or disposition (in
one transaction or a series of transactions) of all or substantially all of
RAI's assets;
(3) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
RAI's shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board; or
(4) the commencement of a proxy or other contest or effort to
effectuate the events set forth in the foregoing subparagraphs (c)(1), (2) or
(3) above.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(f) "Excise Tax" means any excise tax imposed under Section 4999 of
the Code or a similar provision that may later be enacted.
(g) "Notice of Termination" After a Change in Control, Kessler may
terminate this Agreement by sending a written notice to RAI that shall (i)
specify the date of termination (the "Date of Termination") which shall not be
more than sixty (60) days from the date such Notice of Termination is given,
(ii) indicate the specific provisions of this Agreement that will apply upon
such termination and (iii) set forth in reasonable detail the facts and
circumstances for the application of the provisions indicated.
(h) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
(i) "RAI" means Resource America, Inc., a Delaware corporation and
any direct or indirect subsidiary of RAI by which Kessler is employed.
8
<PAGE>
References to payments, benefits, privileges or other rights to be provided by
RAI or such subsidiary by which Kessler is employed, as the case may be, will
correspond to the corporate entity obligated to make payments or provide
benefits, privileges or other rights pursuant to employee benefit plans affected
by the provisions hereof, and in the absence of any such existing plans or
provisions, such reference shall be deemed to be to RAI. RAI shall also mean any
successor by merger or other business combination to more than one-half of the
assets or ownership of RAI.
11. Miscellaneous.
(a) Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect such validity, illegality or unenforceability shall
not affect any other provisions of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision(s) had never
been contained herein, provided that such invalid, illegal or unenforceable
provision(s) shall first be curtailed, limited or eliminated only to the extent
necessary to remove such invalidity, illegality or unenforceability with respect
to the applicable law as it shall then be applied.
(b) Modification of Agreement. This Agreement shall not be modified
by any oral agreement, either expressed or implied, and all modifications
thereof shall be in writing and signed by the parties hereto.
(c) Waiver. The waiver of any right under this Agreement by any of
the parties hereto shall not be construed as a waiver of the same right at a
future time or as a waiver of any other rights under this Agreement.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving affect to the principles of conflicts of laws.
(e) Notices. Any notice to be given pursuant to this Agreement
shall be sufficient if in writing and mailed by certified or registered mail,
postage-prepaid, to the addresses listed below, or to such other address as
either party may notify the other of in accordance with this section.
If to RAI:
Resource America, Inc.
1521 Locust Street
Suite 400
Philadelphia, PA 19102
10
<PAGE>
If to Kessler:
Steven J. Kessler
1521 Locust Street; Ste. 400
Philadelphia, PA 19102
(f) Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts or facsimile
counterparts, each of such duplicate original or counterpart or facsimile
counterpart shall be deemed to be an original and all taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on October ___, 1999.
RESOURCE AMERICA, INC.
By:____________________________
STEVEN J. KESSLER
_______________________________
11
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is executed on this ____ day of
October, 1999 by and between RESOURCE AMERICA, INC., a Delaware corporation
having its principal place of business at 1521 Locust Street, Philadelphia,
Pennsylvania 19102 ("RAI") and N ANCY J. MCGURK ("McGurk").
BACKGROUND
A. Since 1989, McGurk has been an officer of RAI and currently she
serves as Vice President, Chief Accounting Officer and Treasurer of RAI.
B. McGurk and RAI desire to formally set forth the terms, conditions
and agreements regarding McGurk's employment Vice President, Chief Accounting
Officer and Treasurer of RAI.
TERMS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and intending to be legally bound thereby, RAI and McGurk agree as
follows:
1. Employment. During the term of this Agreement, McGurk shall be
employed as the Vice President, Chief Accounting Officer and Treasurer of RAI.
2. Duties. McGurk shall report to and accept direction from the
Chairman of the Board of Directors of RAI and from the Board. McGurk shall serve
RAI diligently and to the best of her abilities.
3. Term. McGurk's employment thereunder shall continue in full force
and effect for a period of three (3) years, unless sooner terminated in
accordance with the provisions hereof. Such term shall automatically extend so
that on any day that this Agreement is in effect, it shall have a then current
term of three (3) years. Such automatic extensions shall cease upon RAI's
written notice to McGurk of its election to terminate this Agreement at the end
of the three (3) year period then in effect.
4. Compensation.
(a) Base Compensation. During the period of employment, RAI shall
pay to McGurk "Base Compensation" to be established by the Board, initially in
an amount equal to One Hundred Fifty Thousand Dollars ($150,000.00) per annum
base compensation which McGurk, under existing arrangements approved by the
Board, is to receive during calendar 1999 (the "Initial Level"). The Base
Compensation will be payable in accordance with the general payroll practices by
which RAI pays its executive officers, and the historical practice of RAI's
<PAGE>
compensation of McGurk. It is understood that RAI, through the compensation
committee of the Board, will review McGurk's performance on an annual basis and
increase or decrease (but in no event below the Initial Level) such Base
Compensation, based upon McGurk's performance.
(b) Incentive Compensation. During the period of employment McGurk
may receive incentive compensation in the form of cash bonus payments, stock
option grants and other forms of incentive compensation, based upon McGurk's
performance.
(c) Reimbursement of Expenses. RAI shall reimburse McGurk for all
reasonable expenses incurred by McGurk in the performance of her duties,
including (without limitation) expenses incurred during business-related travel.
5. Benefits.
McGurk shall be entitled to receive the following benefits from RAI
independent of any other benefits which McGurk may receive from RAI or
otherwise:
(a) Participation in Benefit Plans. McGurk will participate in all
employee benefit plans in effect during the term of McGurk's employment
thereunder.
(b) Temporary Disability. During any period that McGurk fails to
perform her duties thereunder as a result of incapacity due to physical or
mental illness McGurk shall continue to receive her full compensation at the
rate then in effect for such period until her employment is terminated pursuant
to paragraph 6(b) hereof.
6. Termination.
McGurk's employment thereunder shall terminate as follows:
(a) Death. McGurk's employment shall terminate automatically upon
the death of McGurk.
(b) Disability. RAI may terminate this Agreement if McGurk becomes
disabled by reason of any physical or mental disability whatsoever for more than
two hundred forty (240) days in the aggregate during any calendar year and the
Board determines, that McGurk, by reason of such physical or mental disability,
is rendered unable to perform her duties and services thereunder (a
"Disability");
(c) Termination by McGurk for Cause. McGurk may terminate her
employment for cause upon thirty (30) days' prior written notice to RAI, with
opportunity to cure any condition reasonably susceptible of cure. For the
2
<PAGE>
purposes of this paragraph 6(c), cause shall be deemed to exist if any of the
following shall occur: (i) without the written consent of McGurk, a substantial
change in the services or duties required of McGurk thereunder or the imposition
of any services or duties substantially inconsistent with, or in diminution of
McGurk's current position, services or duties, or status with RAI; (ii) failure
to continue McGurk's coverage under any RAI benefit plan as required under
paragraph 5(a) except pursuant to a change to a benefit plan that applies to
senior executives of RAI generally or is required by law or regulation; or (iii)
any material breach by RAI of any provision of this Agreement;
(d) Termination by McGurk Without Cause. McGurk may terminate this
Agreement without cause upon one hundred eighty (180) days prior written notice
to RAI.
(e) Change of Control. McGurk may, in her discretion, terminate her
employment upon a Change in Control by sending a Notice of Termination.
(f) Termination by RAI. In accordance with paragraph 3 hereof, RAI
may terminate this Agreement at the end of the then current three (3) year term.
7. Effect of Termination.
(a) Death. Upon the termination of McGurk's employment pursuant to
paragraph 6(a) hereof due to McGurk's death, a death benefit shall be paid to
McGurk's estate equal to the total amount payable to McGurk under this Agreement
until expiration of the term then in effect, assuming that McGurk's total
compensation for each year would be equal to the Average Compensation. The death
benefit shall be paid in thirty-six (36) equal, consecutive monthly
installments, beginning the first month following the month in which McGurk
shall have died.
(b) Disability. Upon the termination of McGurk's employment
pursuant to paragraph 6(b) hereof due to McGurk's disability, McGurk shall be
entitled to receive a monthly disability benefit equal to one twelfth (1/12) of
the product of (i) the Average Compensation, multiplied by (ii) seventy-five
percent (75%). The disability benefit described above shall be paid to McGurk,
beginning the first month following the termination pursuant to paragraph 6(b).
McGurk's disability benefit shall cease if she resumes her employment with RAI
on the terms provided in this Agreement. Disability payments made under this
paragraph shall not be reduced by any payments made directly to McGurk by an
insurance company.
(c) For Cause; Change of Control. Upon the termination of this
Agreement either (i) by McGurk for cause pursuant to paragraph 6(c) hereof, (ii)
by McGurk pursuant to paragraph 6(e) after a Change in Control or (iii) by RAI
pursuant to section 6(f) hereof, then RAI shall provide to McGurk the benefits
described in Section 7(c)(1) and 7(c)(2) below (the "Severance Benefits").
3
<PAGE>
(1) Lump-Sum Severance Payment. In lieu of any further
compensation payments to McGurk for periods subsequent to the Date of
Termination, RAI shall pay to McGurk a lump sum severance payment, in cash,
without discount, equal to the sum of the total amount payable to McGurk under
this Agreement until expiration of the term then in effect, assuming that
McGurk's total compensation for each year would be equal to the Average
Compensation.
(2) Continued Benefits. For a thirty-six (36) month period
after the Date of Termination (the "Benefits Period"), RAI shall provide McGurk
with group term life insurance, health insurance, accident and long-term
disability insurance benefits (collectively, "Welfare Benefits") substantially
similar in all respects to those that McGurk was receiving immediately prior to
the Date of Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control). During the Benefits Period, McGurk shall be
entitled to elect to change her level of coverage and/or her choice of coverage
options with respect to the Welfare Benefits to be provided by RAI to McGurk to
the same extent that actively employed senior executives of RAI are permitted to
make such changes.
(3) Vesting of Options. Upon any termination of this Agreement,
the vesting of all options to purchase securities of RAI granted to McGurk
during her employment with RAI shall be accelerated to the later of the
effective date of termination of this Agreement, or six months after the date
such option was granted, and any provision contained in the agreements under
which such options were granted that is inconsistent with such acceleration is
thereby modified to the extent necessary to provide for such acceleration; such
acceleration shall not apply to any option that by its terms would vest prior to
the date provided for in this paragraph 7(d).
4
<PAGE>
8. Gross-Up Payment.
(a) In the event that (i) McGurk becomes entitled to any benefits
or payments in connection with the termination of McGurk's employment, whether
pursuant to the terms of this Agreement or otherwise, including without
limitation the Severance Benefits (collectively, the "Total Benefits"), and (ii)
any of the Total Benefits will be subject to the Excise Tax, RAI shall pay to
McGurk an additional amount (the "Gross-Up Payment") such that the net amount
retained by McGurk, after deduction of any Excise Tax on the Total Benefits and
any federal, state and local income taxes, Excise Tax, and FICA and Medicare
withholding taxes upon the payment provided for by this paragraph 8(a), shall be
equal to the Total Benefits. For purposes of determining whether any of the
Total Benefits will be subject to the Excise Tax and the amount of such Excise
Tax, the amount of the Total Benefits that shall be treated as subject to the
Excise Tax shall be equal to the amount of the Total Benefits reduced by the
amount of such Total Benefits that, in the opinion of tax counsel selected by
McGurk, at RAI's expense and reasonably acceptable to RAI ("Tax Counsel"), are
not excess parachute payments (within the meaning of Section 28OG(b)(1) of the
Code).
(b) For purposes of this Section 8, McGurk shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Excise Tax is (or would be) payable and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of McGurk's residence on the Date of Termination, net of the reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes (calculated by assuming that any reduction under Section 68 of the
Code in the amount of itemized deductions allowable to McGurk applies first to
reduce the amount of such state and local income taxes that would otherwise be
deductible by McGurk). Except as otherwise provided herein, all determinations
required to be made under this Section 8 shall be made by Tax Counsel.
(c) In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account thereunder at the time of termination
of McGurk's employment, McGurk shall repay to RAI, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax, federal, state and local income
taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment
being repaid by McGurk to the extent that such repayment results in a reduction
in Excise Tax, FICA and Medicare withholding taxes and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account thereunder at the time
of the termination of McGurk's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
5
<PAGE>
Gross-Up Payment), RAI shall make an additional Gross-Up Payment to McGurk in
respect of such excess (plus any interest, penalties or additions payable by
McGurk with respect to such excess) at the time that the amount of such excess
is finally determined.
9. Indemnification.
(a) If McGurk is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (herein a "proceeding"), by reason of the fact
that she is or was an employee (which term includes officer, director, agent and
any other capacity) of RAI or is or was serving at the request of RAI as an
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as an employee or agent or in any other capacity while serving as an
employee or agent, McGurk shall be indemnified and held harmless by RAI to the
fullest extent authorized by applicable law, against all expense, liability and
loss (including, but not limited to, attorneys' fees, judgments, fines, ERISA
excise taxes and penalties and amounts paid or to be paid in settlement)
incurred or suffered by McGurk in connection therewith and such indemnification
shall continue as to McGurk after she has ceased to be a director, officer,
employee or agent and shall inure to the benefit of McGurk's heir, executors,
and administrators; provided, however, that RAI shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by McGurk (other than a proceeding to enforce this paragraph 9) only
if such proceeding (or part thereof) was authorized directly or indirectly by
the Board of RAI. The right to indemnification conferred in this paragraph shall
be a contract right and shall include the right to be, promptly upon request,
paid by RAI the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that if the Business Corporation Law
of the Commonwealth of Pennsylvania requires the payment of such expenses
incurred by an employee in her capacity as an employee (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, payment shall be made only
upon delivery to RAI of an undertaking, by or on behalf of McGurk, to repay all
amounts so advanced if it shall ultimately be determined that such employee is
not entitled to be indemnified under this paragraph or otherwise.
(b) The indemnification provided by this paragraph shall not be
limited or exclude any rights, indemnities or limitations of liability to which
McGurk may be entitled, whether as a matter of law, under the Certificate of
Incorporation, By-laws of RAI, by agreement, vote of the stockholders or
disinterested directors of RAI or otherwise.
6
<PAGE>
(c) McGurk, in seeking indemnification under this Agreement (an
"Indemnitee"), shall give the other party or parties (the "Indemnitor") prompt
written notice of any claim, suit or demand that the Indemnitee believes will
give rise to indemnification under this Agreement; provided, however, that the
failure to give such notice shall not affect the liability of the Indemnitor
under this Agreement unless the failure to give such notice materially and
adversely affects the ability of the Indemnitor to defend itself against or to
cure or mitigate the damages. Except as hereinafter provided, the Indemnitor
shall have the right (without prejudice to the right of the Indemnitee to
participate at its expense through counsel of its own choosing) to defend and to
direct the defense against any such claim, suit or demand, at the Indemnitor's
expense and with counsel chosen jointly by Indemnitor and Indemnitee, and the
right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, without the Indemnitee's written consent, which
shall not be unreasonably withheld, settle or compromise any claim or consent to
any entry of judgment. The Indemnitee shall, at the Indemnitor's expense,
cooperate in the defense of any such claim, suit or demand. If the Indemnitor,
within a reasonable time after notice of a claim fails to defend the Indemnitee,
the Indemnitee shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnitor.
(d) McGurk will be covered during the entire term of this Agreement
by Officer and Director liability insurance in amounts and on terms similar to
that afforded to other executives and/or directors of RAI or its affiliates,
which such insurance shall be paid by RAI.
10. Definitions. Any terms not otherwise defined herein shall have the
following meaning:
(a) "Average Compensation" means the average of the three highest
amounts of annual total compensation received by McGurk during any of the then
current calendar year (on an annualized basis) and the then preceding eight (8)
calendar years.
(b) "Board" means the Board of Directors of RAI.
(c) A "Change in Control" means the occurrence of any of the
following events:
(1) RAI's shareholders approve (or, in the event no approval of
RAI's shareholders is required, RAI consummates) a merger, consolidation, share
exchange, division or other reorganization or transaction of RAI (a "Fundamental
Transaction") with any other corporation, other than a Fundamental Transaction
which would result in the voting securities of RAI outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
7
<PAGE>
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the combined voting power immediately after such Fundamental
Transaction of (i) RAI's outstanding securities, (ii) the surviving entity's
outstanding securities, or (iii) in the case of a division, the outstanding
securities of each entity resulting from the division;
(2) the shareholders of RAI approve a plan of complete,
liquidation or winding-up of RAI or an agreement for the sale or disposition (in
one transaction or a series of transactions) of all or substantially all of
RAI's assets;
(3) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
RAI's shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board; or
(4) the commencement of a proxy or other contest or effort to
effectuate the events set forth in the foregoing subparagraphs (c)(1), (2) or
(3) above.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(f) "Excise Tax" means any excise tax imposed under Section 4999 of
the Code or a similar provision that may later be enacted.
(g) "Notice of Termination" After a Change in Control, McGurk may
terminate this Agreement by sending a written notice to RAI that shall (i)
specify the date of termination (the "Date of Termination") which shall not be
more than sixty (60) days from the date such Notice of Termination is given,
(ii) indicate the specific provisions of this Agreement that will apply upon
such termination and (iii) set forth in reasonable detail the facts and
circumstances for the application of the provisions indicated.
(h) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
(i) "RAI" means Resource America, Inc., a Delaware corporation and
any direct or indirect subsidiary of RAI by which McGurk is employed. References
8
<PAGE>
to payments, benefits, privileges or other rights to be provided by RAI or such
subsidiary by which McGurk is employed, as the case may be, will correspond to
the corporate entity obligated to make payments or provide benefits, privileges
or other rights pursuant to employee benefit plans affected by the provisions
hereof, and in the absence of any such existing plans or provisions, such
reference shall be deemed to be to RAI. RAI shall also mean any successor by
merger or other business combination to more than one-half of the assets or
ownership of RAI.
11. Miscellaneous.
(a) Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect such validity, illegality or unenforceability shall
not affect any other provisions of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision(s) had never
been contained herein, provided that such invalid, illegal or unenforceable
provision(s) shall first be curtailed, limited or eliminated only to the extent
necessary to remove such invalidity, illegality or unenforceability with respect
to the applicable law as it shall then be applied.
(b) Modification of Agreement. This Agreement shall not be modified
by any oral agreement, either expressed or implied, and all modifications hereof
shall be in writing and signed by the parties hereto.
(c) Waiver. The waiver of any right under this Agreement by any of
the parties hereto shall not be construed as a waiver of the same right at a
future time or as a waiver of any other rights under this Agreement.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving affect to the principles of conflicts of laws.
(e) Notices. Any notice to be given pursuant to this Agreement
shall be sufficient if in writing and mailed by certified or registered mail,
postage-prepaid, to the addresses listed below, or to such other address as
either party may notify the other of in accordance with this section.
If to RAI:
Resource America, Inc.
1521 Locust Street
Suite 400
Philadelphia, PA 19102
9
<PAGE>
If to McGurk:
Nancy J. McGurk
2876 South Arlington Road
Akron, OH 44312
(f) Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts or facsimile
counterparts, each of such duplicate original or counterpart or facsimile
counterpart shall be deemed to be an original and all taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement on October ___, 1999.
RESOURCE AMERICA, INC.
By:____________________________
NANCY J. MCGURK
_______________________________
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 47,206
<SECURITIES> 9,039
<RECEIVABLES> 666,302
<ALLOWANCES> 11,831
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 108,587
<DEPRECIATION> 23,310
<TOTAL-ASSETS> 943,181
<CURRENT-LIABILITIES> 0
<BONDS> 603,420
244
0
<COMMON> 0
<OTHER-SE> 265,901
<TOTAL-LIABILITY-AND-EQUITY> 943,181
<SALES> 5,461
<TOTAL-REVENUES> 37,876
<CGS> 2,383
<TOTAL-COSTS> 33,269
<OTHER-EXPENSES> 3,229
<LOSS-PROVISION> 1,858
<INTEREST-EXPENSE> 11,901
<INCOME-PRETAX> 4,607
<INCOME-TAX> 1,570
<INCOME-CONTINUING> 3,037
<DISCONTINUED> 0
<EXTRAORDINARY> 122
<CHANGES> 0
<NET-INCOME> 3,159
<EPS-BASIC> .14
<EPS-DILUTED> .13
</TABLE>
