0000950152-95-001802.txt : 19950815 0000950152-95-001802.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950152-95-001802 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE AMERICA INC CENTRAL INDEX KEY: 0000083402 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 720654145 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04408 FILM NUMBER: 95563333 BUSINESS ADDRESS: STREET 1: 1521 LOCUST STREET CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155465005 MAIL ADDRESS: STREET 1: 2876 SOUTH ARLINGTON ROAD CITY: AKRON STATE: OH ZIP: 44312 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCE EXPLORATION INC DATE OF NAME CHANGE: 19890214 FORMER COMPANY: FORMER CONFORMED NAME: SMTR CORP DATE OF NAME CHANGE: 19700522 10-Q 1 RESOURCE AMERICA 10-Q 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 ------------------------------ [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to -------------- ------------- Commission file number 0-4408 --------------------------------- RESOURCE AMERICA, INC. ------------------------------------------------------------------------ (Exact name of small business issuer as specified in its charter) Delaware 72-0654145 ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1521 Locust Street, Philadelphia, Pennsylvania 19102 ------------------------------------------------------- (Address of principal executive offices) (215) 546-5005 -------------------------------- (Issuer's telephone number) ---------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 678,549 ---------------------- 2 RESOURCE AMERICA, INC. INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet (Unaudited) June 30, 1995, and September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 & 2 Consolidated Statement of Operations (Unaudited) - Three Months and Nine Months Ended June 30, 1995, and 1994 . . . . . . . . . . . . . . 3 Consolidated Statement of Cash Flows (Unaudited) - Nine Months Ended June 30, 1995, and 1994. . . . . . . . . . . . . . . . . . . . . . 4 Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . 5 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3 PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEET (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES June 30, 1995, and September 30, 1994 ================================================================================
June 30, September 30, 1995 1994 ------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 2,960,623 $ 2,597,556 Accounts and notes receivable . . . . . . . . . . . . . . . . . . 886,245 1,136,656 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,621 135,614 Prepaid expenses and other current assets . . . . . . . . . . . . 254,983 115,345 ----------- ----------- Total Current Assets . . . . . . . . . . . . . . . 4,241,472 3,985,171 PROPERTY AND EQUIPMENT Oil and gas properties and equipment (successful efforts) . . . . . . . . . . . . . . . . . . . . . . 28,951,450 28,682,497 Gas gathering and transmission facilities . . . . . . . . . . . . 1,510,496 1,485,323 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,093,425 1,018,609 ----------- ----------- 31,555,371 31,186,429 Less - accumulated depreciation, depletion, and amortization . . . . . . . . . . . . . . . . . . . . . . . . (18,748,041) (17,841,564) ----------- ----------- Net Property and Equipment . . . . . . . . . . . 12,807,330 13,344,865 INVESTMENTS IN REAL ESTATE LOANS . . . . . . . . . . . . . . . . . . . 17,577,784 9,783,436 RESTRICTED CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,885,170 5,768,439 OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,803,007 1,913,771 ----------- ----------- $38,314,763 $34,795,682 =========== ===========
The accompanying notes are an integral part of these financial statements. 1 4 CONSOLIDATED BALANCE SHEET (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES June 30, 1995, and September 30, 1994 ================================================================================
June 30, September 30, 1995 1994 ------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade . . . . . . . . . . . . . . . . . . . . . $ 447,600 $ 739,777 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 202,964 160,807 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 265,833 Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . 87,817 100,000 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . - - Current portion of long-term debt . . . . . . . . . . . . . . . . 88,000 88,000 ----------- ----------- Total Current Liabilities . . . . . . . . . . . . 906,381 1,354,417 LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,561,075 8,627,014 DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 890,000 674,000 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $1.00 par value, 1,000,000 authorized, none issued . . . . . . . . . . . . . . . . . . . . - - Common stock, $.01 par value, 3,500,000 authorized shares, 817,912 issued and outstanding shares (including 139,363 and 131,402 treasury shares) at June 30, 1995, and September 30, 1994, respectively . . . . . . . . . . . 8,179 8,179 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 19,214,210 19,136,420 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 9,782,232 7,979,509 Less cost of treasury shares . . . . . . . . . . . . . . . . . . . (2,533,040) (2,437,437) Less loan receivable from ESOP . . . . . . . . . . . . . . . . . . (514,274) (546,420) ----------- ----------- Total Stockholders' Equity . . . . . . . . . . . . . . 25,957,307 24,140,251 ----------- ----------- $38,314,763 $34,795,682 =========== ===========
The accompanying notes are an integral part of these financial statements. 2 5 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES Three Months and Nine Months Ended June 30, 1995, and 1994 ================================================================================
Three Months Nine Months Ended June 30, Ended June 30, -------------------------------- ----------------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- REVENUES Oil and gas production . . . . . . . $ 823,400 $ 802,936 $2,485,046 $2,280,541 Gas gathering and transmission . . . 98,061 83,502 295,101 267,402 Well services. . . . . . . . . . . . 225,124 276,120 739,946 853,414 Real estate finance. . . . . . . . . 1,983,164 1,477,067 4,439,813 2,178,099 Financial services . . . . . . . . . 127,766 64,597 298,498 277,759 Interest . . . . . . . . . . . . . . 9,178 21,077 102,084 46,533 ------------ ----------- ----------- ----------- 3,266,693 2,725,299 8,360,488 5,903,748 COSTS AND EXPENSES Production and transmission. . . . . 369,147 343,830 1,178,987 1,002,463 Well services. . . . . . . . . . . . 186,399 219,206 591,847 643,310 Real estate finance. . . . . . . . . 296,215 51,784 654,841 160,840 Financial services . . . . . . . . . 45,799 53,611 140,851 160,299 Exploration. . . . . . . . . . . . . 45,651 287,018 105,609 589,614 General and administrative . . . . . 511,965 451,424 1,628,828 1,352,126 Depreciation and amortization. . . . 365,399 356,605 1,045,448 999,516 Interest . . . . . . . . . . . . . . 304,651 85,971 844,277 97,460 Other - net . . . . . . . . . . . . (3,121) 3,315 (3,632) 3,623 ------------ ----------- ----------- ----------- 2,122,105 1,852,764 6,187,056 5,009,251 ------------ ----------- ----------- ----------- INCOME FROM OPERATIONS . . . . . . . . 1,144,588 872,535 2,173,432 894,497 OTHER INCOME Gain on sale of property . . . . . . 2,749 - 1,291 2,390 ------------ ----------- ----------- ----------- Income before income taxes . . . . . . 1,147,337 872,535 2,174,723 896,887 Benefit (provision) for income taxes . (218,000) 161,000 (372,000) 280,000 ------------ ----------- ----------- ----------- NET INCOME . . . . . . . . . . . . . $ 929,337 $ 1,033,535 $ 1,802,723 $ 1,176,887 ============ ============ ============ =========== NET INCOME PER COMMON SHARE . . . . . . $ 1.17 $ 1.46 $ 2.39 $ 1.66 ============ ============ =========== ========== Weighted average common shares outstanding . . . . . . . . . . . . . . 794,300 707,100 753,100 707,500 ============ ============ =========== ==========
The accompanying notes are an integral part of these financial statements. 3 6 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) RESOURCE AMERICA, INC., AND SUBSIDIARIES Nine Months Ended June 30, 1995, and 1994 ================================================================================
Nine Months Ended June 30, --------------------------------- 1995 1994 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,802,723 $ 1,176,887 Adjustments to reconcile net income to net cash. . . . . . provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . 1,045,448 999,516 Amortization of discount on senior note. . . . . . . . . 8,749 - Property impairments and abandonments. . . . . . . . . . 38,500 529,253 Deferred income taxes. . . . . . . . . . . . . . . . . . 216,000 (280,000) Gain on dispositions and investments . . . . . . . . . . (1,231,027) (1,098,159) Change in operating assets and liabilities: Decrease in accounts receivable. . . . . . . . . . . . 250,411 219,790 (Increase) decrease in prepaid expenses and other current assets . . . . . . . . . . . . . . . . . (139,638) 52,300 Increase (decrease) in accounts payable. . . . . . . . (292,177) 93,571 Increase (decrease) in other current liabilities . . . (155,859) 152,204 Increase in inventory. . . . . . . . . . . . . . . . . (4,007) (13,352) (Increase) decrease in other assets. . . . . . . . . . 23,918 (553,338) ------------ ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . 1,563,041 1,278,672 INVESTING ACTIVITIES: Capital expenditures . . . . . . . . . . . . . . . . . . . (632,686) (404,566) Proceeds from sale of properties and investments . . . . . 5,790,905 2,148,246 Increase in other assets . . . . . . . . . . . . . . . . . (32,107) (209,189) Increase in investments in real estate loans . . . . . . . (12,142,822) (1,912,297) ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . (7,016,710) (377,806) FINANCING ACTIVITIES: Short-term borrowings. . . . . . . . . . . . . . . . . . . 2,500,000 - Long-term borrowings . . . . . . . . . . . . . . . . . . . 2,000,000 8,000,000 Decrease in other assets . . . . . . . . . . . . . . . . . 46,612 - (Increase) decrease in restricted cash . . . . . . . . . . 3,883,268 (5,169,437) Principal payments on debt . . . . . . . . . . . . . . . . (2,517,541) (15,549) Purchase of treasury stock . . . . . . . . . . . . . . . . (95,603) (6,890) ------------ ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . 5,816,736 2,808,124 INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . 363,067 3,708,990 CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . 2,597,556 761,804 ------------ ----------- CASH AT JUNE 30 . . . . . . . . . . . . . . . . . . . . . . . $ 2,960,623 $ 4,470,794 ============ =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Accounting policies: Cash includes highly liquid investments with a maturity of three months or less. Cash paid during the first nine months of 1995 for interest: $987,591 Cash paid during the first nine months of 1995 for federal income taxes: 168,182
The accompanying notes are an integral part of these financial statements. 4 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ NOTE 1 - MANAGEMENT'S OPINION REGARDING INTERIM FINANCIAL STATEMENTS In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results of operations for the interim period included herein have been made. The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements for the fiscal year ended September 30, 1994, included in the Company's Annual Report on Form 10-KSB. NOTE 2 - TRANSACTIONS WITH RELATED PARTIES During the first quarter of fiscal 1995, the Company acquired limited partners' interests in various oil and gas partnerships for which the Company served as the general partner. The aggregate purchase price of these acquisitions was $178,000. A law firm in which an officer of the Company holds "of counsel" status provides legal services to the Company. The Company believes that such services are provided on terms no less favorable to the Company than those which would be obtainable from third parties providing similar services. The Company holds real estate loans with respect to fourteen properties owned by third parties. These properties are managed by a corporation in which an officer of the Company is an officer and minority shareholder. Management fees payable under the management agreements (which the Company believes are competitive with fees charged by unrelated persons in the areas in which the properties are located) are subordinated to receipt by the Company of minimum required debt service payments under the loans. Accordingly, the Company believes that the agreements are on terms more favorable to the Company than those which could be obtained from third parties providing similar services. The Company maintains depository and investment accounts in a bank subsidiary of JeffBanks, Inc., in which the Chairman of the Company serves as a director. The Chairman's wife is a director and executive officer of JeffBanks, Inc. The Company holds 5,000 shares of JeffBanks' 8% Series E convertible preferred stock with a book cost of $100,000 and a current market value of $150,000. During the first quarter of fiscal 1995, the Company borrowed $2,500,000 from Jefferson Bank, a subsidiary of JeffBanks, Inc. which was repaid in the second quarter of fiscal 1995. The Company believes that the terms of the loan were no less favorable to the Company or the bank than those which would be obtainable from unrelated financial institutions. 5 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ NOTE 3 - LONG-TERM DEBT Long-term debt consists of the following:
June 30, September 30, 1995 1994 -------------- --------------- Mortgage note payable to a bank, secured by real estate, monthly installments of approximately $4,000 including interest at 3/4% above the prime rate through May 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 247,719 $ 265,262 Employee Stock Ownership loan payable to a bank, 20 equal semiannual installments of $32,143 and quarterly payments of interest at 84% of the prime rate through July 1996, at which time the rate converts to 1/2% above the prime rate through 2003 . . . . . . . . . . . . . . . . 514,274 546,419 9.5% senior secured note payable, interest due semi- annually, principal due May 2004 . . . . . . . . . . . . . . . . . 7,910,832 7,903,333 Loan guarantee, interest due monthly, principal due December 2004 (referred to below) . . . . . . . . . . . . . . . . 1,976,250 - ------------ ------------- 10,649,075 8,715,014 Less amounts payable in one year . . . . . . . . . . . . . . . . . 88,000 88,000 ------------ ------------- $ 10,561,075 $ 8,627,014 ============ =============
The long-term debt maturing over the next five years is as follows: 1996 - $88,000; 1997 - $91,000; 1998 - $94,000; 1999 - $97,000; and 2000 - $101,000. In May 1994, the Company privately placed an $8,000,000 senior secured note and immediately exercisable detachable warrants with an insurance company. The warrants grant the holder the right to purchase, at any time through May 24, 2004, 160,000 shares, subject to adjustment, of the Company's common stock at an exercise price of $9.50 per share. The value assigned to the warrants ($100,000) has been accounted for as paid-in capital, resulting in a discount which is being amortized on a straight-line basis over the life of the note. The senior secured note payable is collateralized by substantially all of the Company's oil and gas properties and certain of the Company's real estate loans. Certain credit agreements require the Company to comply with certain restrictive covenants. At June 30, 1995, the Company was in compliance with such covenants. The loan guarantee results from a transaction which closed in December 1994, pursuant to which the Company purchased for $1,650,000 a note and mortgage in the original principal amount of $3,000,000 which were resold to an insurance company for $2,000,000. In connection with the resale, the Company guaranteed that the holder would receive a return of the $2,000,000 invested plus a specified rate of interest, and in addition issued to the holder warrants to purchase 40,000 shares of the Company's common stock at a price of $9.50 per share, the market price of the Company's common stock at that time. The Company treated the sale and guaranty transaction, for accounting purposes, as a loan to the Company. 6 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ NOTE 4 - FORMATION OF LIMITED PARTNERSHIPS In 1989 and 1990, the Company sponsored two pipeline income program limited partnerships (the "1989 Program" and "1990 Program") which purchased pipeline systems from the Company. The Company had guaranteed that the limited partners in these programs would receive cash distributions during each of the first two years of the operation of the programs equal to 12% of their capital contributions to the programs. To the extent that cash flow to the programs was less than 12%, the Company contributed sufficient capital to allow the guaranteed distributions to the limited partners to be made. The Company believes the amount contributed for such distributions ($693,000), for which it is entitled to be repaid on a preferential basis upon termination of the programs, will be realized upon final disposition of the pipelines. The limited partners in both programs have the right to sell their interests in the programs to the Company following the fifth anniversary of the respective program's closing at a price equal to 4.5 times the cash flow per unit during the fifth year of partnership operations, subject to a maximum sale price of $50,000 per unit. The limited partners may also cause the sale of the pipelines after the fifth year of the respective partnership's operations. During the first half of fiscal 1995, in accordance with the terms of the 1989 Pipeline Income Program limited partnership agreement, the Company fully satisfied its obligation to repurchase units tendered by limited partners of the Program by repurchasing 20 units, out of a total of 91 units available, for a total cost of $240,000. Similar offers will be made during fiscal 1996 to limited partners in the 1990 Pipeline Income Program to repurchase their interests in that program. The Company cannot now predict the cost per unit, nor the number of units out of a total of 57 available, that will be repurchased. NOTE 5 - INVESTMENTS IN REAL ESTATE LOANS At June 30, 1995, the Company held real estate loans having an aggregate face value of $43,446,000, which were being carried at an aggregate cost of $17,577,784. Investments in Real Estate Loans at June 30 consists of:
June 30, September 30, 1995 1994 -------------- --------------- Subordinated wraparound note, face value of $4,500,000, secured by residential real estate located in Pittsburgh, PA, interest at 14.5%, due October 31, 1998 . . . . . . . . . . . $2,025,114 $2,025,114 Mortgage note, face value of $1,080,000, secured by residential real estate located in Philadelphia, PA, interest at 12%, due October 31, 1998. In June 1995, the Company sold a senior participation in this mortgage for $600,000, resulting in a gain of $100,000 and a face value due the Company of $480,000 . . . . . . . . . . . . . . . . . . . 130,680 467,280
7 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ Mortgage note, face value of $1,312,000, secured by residential real estate located in Philadelphia, PA, interest at 2 1/2% over the monthly national median annualized cost of funds for SAIF-insured institutions as announced by the Federal Deposit Insurance Corporation, due October 31, 1998. In June 1995, the Company sold a senior participation in this mortgage for $896,000, resulting in a gain of $209,000 and a face value due the Company of $416,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,204 803,977 Mortgage note, face value of $4,234,000, secured by commercial real estate located in Pittsburgh, PA, interest at 10.6%, due October 31, 1998. In June 1995, the Company sold a senior participation in this mortgage for $840,000, resulting in a gain of $416,000 and a face value due the Company of $3,394,000 . . . . . . . . . . . . . . . . . . . . 636,110 1,072,606 Mortgage note, face value of $4,629,000, secured by commercial real estate located in Alexandria, VA, interest at 1/2% over the Maryland National Bank prime rate, due October 31, 1998 . . . . . . . . . . . . . . . . . - 2,132,921 Note, face value of $4,116,000, relating to real estate located in Alexandria, VA, interest at 1/2% over the Maryland National Bank prime rate, due October 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . 1,422,812 - Wraparound note, face value of $12,000,000 consisting of a first mortgage held by the Company of $9,000,000 secured by commercial real estate located in Washington, D.C., and a $3,000,000 second mortgage held by an unrelated party, interest at 12%, due November 30, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 - Mortgage note, face value of $1,211,000, secured by residential real estate located in Philadelphia, PA, interest at 3% over the Federal Home Loan Bank of Pittsburgh rate, due September 2, 1999. In June 1995, the Company sold a senior participation in this mortgage for $600,000, resulting in a gain of $226,000 and a face value due the Company of $611,000 . . . . . . . . . . . . . . . . 99,032 350,000 Mortgage note, face value of $900,000, secured by commercial real estate located in Washington, D.C., interest at 1 1/2% over the First Union National Bank rate, due September 30, 1999. In June 1995, the Company sold a senior participation in this mortgage for $685,000, resulting in a gain of $76,000 and a face value due the Company of $215,000 . . . . . . . . . . . . . . . . 267,639 -
8 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ Mortgage notes, face value of $1,485,000, secured by residential real estate located in Philadelphia, PA, interest at 2% over the Mellon Bank prime rate, due October 31, 1999 . . . . . . . . . . . . . . . . . . . . . . 1,370,819 - Mortgage notes, face value of $1,962,000, secured by residential real estate located in Philadelphia, PA, varying interest rates from 9 1/2% to 14.5%, due December 2, 1999. In June 1995, the Company sold a senior participation in this mortgage for $1,160,000, resulting in a gain of $380,000 and a face value due the Company of $802,000 . . . . . . . . . . . . . . . . . . . . 150,890 - Mortgage note, face value of $3,000,000, secured by commercial real estate located in Pasadena, CA, interest at 2.75% over the average cost of funds to FSLIC- insured savings and loan associations, 11th District (but not less than 5.5% nor greater than 15.5%), due May 1, 2001 . . . . . . . . . . . . . . . . . . . . . . . . 1,671,695 - Mortgage note, face value of $4,389,000, secured by residential real estate located in Philadelphia, PA, interest at 2% over the yield of one-year United States Treasury securities, due July 31, 1998 . . . . . . . . . . . - 1,330,198 Note, face value of $3,559,000, secured by an unrecorded deed on real estate located in Philadelphia, PA, interest at 2% over the yield of one-year United States Treasury securities, due February 1, 2002 . . . . . . . . . . . . . . . 724,422 - Mortgage note, face value of $1,798,000, secured by residential real estate located in Margate, NJ, interest at the Chase Manhattan Bank prime rate (but not less than 9% nor greater than 15.5%), due January 1, 2003. In June 1995, the Company sold a senior participation in this mortgage for $685,000, resulting in a gain of $92,000 and a face value due the Company of $1,113,000 . . . . . . . . 409,171 985,364 Note, face value of $1,776,000, secured by a judgment lien, relating to real estate located in St. Cloud, MN, interest at 10%, due December 31, 2014 . . . . . . . . . . . . 489,196 615,976 ------------ ----------- $ 17,577,784 $ 9,783,436 ============ ===========
As referenced above, in June 1995, the Company sold senior participations in seven real estate loans to an insurance company, pursuant to which the Company guaranteed that the insurance company would receive a return of its investment plus a specified rate of interest. In addition, the Company issued to the insurance company warrants to purchase 84,465 shares of the Company's common stock at the then market price of $11.75 per share. 9 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES A comparison of the Company's revenues, daily production volumes, and average sales prices follows:
QUARTER ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, -------------------- ----------------------- REVENUES (in thousands) 1995 1994 1995 1994 ----------------------------------------------------------------------------------------- Gas $ 610 $ 656 $1,986 $1,908 Oil 190 130 452 327 PRODUCTION VOLUMES ----------------------------------------------------------------------------------------- Gas (Mcf/day) 2,914 2,819 3,088 2,819 Oil (Bbls/day) 119 97 98 81 AVERAGE SALES PRICE ----------------------------------------------------------------------------------------- Gas (per Mcf) $ 2.30 $ 2.56 $ 2.36 $ 2.48 Oil (per Bbl) 17.58 14.63 16.96 14.82
Natural gas revenues decreased 7% for the quarter and increased 4% for the nine months ended June 30, 1995, compared to the same periods a year ago. Production volumes increased 4% for the quarter and 10% for the nine months. Production volumes in the Company's Ohio fields of operation increased 17% for the quarter and 24% for the nine months compared to the same periods of the prior year, as a result of the acquisition of additional interests in existing wells from limited partners and other third parties. The Company spent $623,000 in the fourth quarter of fiscal 1994 and $178,000 in the first quarter of fiscal 1995 to acquire these interests. The Company also participated in the drilling of three successful wells during fiscal 1994 and the first three quarters of fiscal 1995 which have recently begun production. The Company intends to participate in the drilling of additional wells during the remainder of fiscal 1995 in both Ohio and New York. Production volumes in the Company's New York fields of operation were down 26% for the quarter and 16% for the nine months ended June 30, 1995, due to the natural decline in production from existing wells. The net increase in total natural gas volumes was offset by a decrease in the average price received by the Company--gas prices fell 10% for the quarter and 5% for the nine months ended June 30, 1995, compared to the same periods a year ago. Oil revenues increased 46% for the quarter and 38% for the nine months ended June 30, 1995, compared to the same periods a year ago. Production volumes increased 22% for the quarter and 21% for the nine months ended June 30, 1995, as a result of the acquisitions mentioned above. The average price received for oil increased 20% for the quarter and 14% for the nine months ended June 30, 1995. The Company's revenues have been and will continue to be affected by changes in oil and gas prices. The Company is unable to control or accurately predict these changes in prices. The Company's proved developed reserves are predominantly natural gas. Gas gathering and transmission revenues increased 17% for the quarter and 10% for the nine months ended June 30, 1995, from the same periods a year ago. This increase resulted primarily from the repurchase of limited partnership interests in a pipeline operated by the Company (see Note 4). Well services revenues decreased 18% for the quarter and 13% for the nine months ended June 30, 1995, as compared to the same periods a year ago, as a result of a decrease in the number of wells operated for limited partners. 10 13 Real estate finance revenues represent interest earned and gains recognized on real estate loans owned by the Company. Through fiscal 1994, the Company had invested $9,783,000 in nine loans (see Note 5). During the first six months of fiscal 1995, the Company invested $12,985,000 in five loans. In addition, the Company added $508,000 and $767,000 to existing loans in the quarter and nine months ended June 30, 1995, respectively. By selling participation interests in seven loans during the third quarter of fiscal 1995, the Company received $5,431,000 in cash and recognized $1,230,000 in gains. The Company intends to pursue similar real estate investment opportunities as they become available to the extent allowed by the Company's investment capability. Financial services revenues increased 98% for the quarter and 7% for the nine months ended June 30, 1995, as compared to the prior period. The increase for the quarter was the result of a delay in timing of financial and tax reporting services provided to certain oil and gas partnerships as compared to the prior year. Interest income decreased for the quarter and increased for the nine months ended June 30, 1995, as compared to the prior periods. These fluctuations are due to changes in the amount of funds temporarily invested. COSTS AND EXPENSES Production and transmission expenses increased 7% for the quarter and 18% for the nine months ended June 30, 1995. These increases were primarily attributable to the acquisition of limited partners' interests in oil and gas partnerships for which the Company serves as the general partner and increased workover costs in the Company's Ohio fields of operation. Production costs as a percentage of oil and gas revenues were constant at 42% for the quarter and increased from 42% to 46% for the nine months ended June 30, 1995, as compared to similar periods of the prior year. Real estate finance expenses rose significantly for both the quarter and nine months ended June 30, 1995, as compared to the same periods a year ago. These increases are the result of higher legal and personnel costs associated with the growth of the Company's real estate activities. Exploration costs decreased significantly for both the quarter and nine months ended June 30, 1995, as compared to the same periods a year ago due to property impairments of approximately $529,000 in the prior year versus $38,500 in the current year. General and administrative expenses increased 13% in the quarter and 20% in the nine months ended June 30, 1995, as compared to the same periods of the prior year. These increases are a result of the payment of incentive compensation and a reduction in administrative fees earned. Administrative fees charged to wells operated by the Company represent a direct reduction to the Company's general and administrative expense. The number of wells operated for third parties by the Company has decreased as compared to the prior year as a result of the liquidation of some partnerships in which the Company earned fees associated with its duties as general partner. Depreciation and amortization consists primarily of amortization of oil and gas properties. Amortization of oil and gas properties as a percentage of oil and gas revenues decreased from 33% to 31% in the third quarter of fiscal 1995, and from 32% to 29% for the nine months ended June 30, 1995, compared to the same periods in the prior year. This variance is attributable to changes in the Company's oil and gas reserve quantities, product prices, and fluctuations in the depletable cost basis of oil and gas properties. 11 14 LIQUIDITY AND CAPITAL RESOURCES Funds provided by operations and funds borrowed under long-term and short-term debt have been the principal sources of working capital during the past two fiscal years. Total funds provided increased $284,000 or 22%. The increase in funds provided are primarily attributable to an increase in net income for fiscal 1995 as compared to the prior year. The Company invested $12,985,000 in the acquisition of five real estate loans and advanced $767,000 on existing loans held by the Company during the first nine months of fiscal 1995 as compared to the investment of $1,168,000 during the similar prior period. In addition, participation interests were sold in seven loans generating $5,431,000 in cash for the Company. As a result, the Company's cash used in investing activities increased $6,639,000 during the first nine months of fiscal 1995, as compared to the prior year. The Company's cash flow provided by financing activities increased $3,009,000 during the first nine months of fiscal 1995 as compared to the prior year. This increase was a result of the sale of a $2,000,000 note and the release for corporate investment purposes of $3,925,000 in previously restricted cash serving as partial collateral security for the Company's $8,000,000 senior secured note. In order to complete these transactions, the Company has pledged substantially all of its energy and real estate assets and certain of its real estate loans as collateral (see Note 3). The Company's capital spending is predominantly discretionary--the ultimate level of spending will depend on, among other things, the Company's assessment of investment opportunities in the energy and real estate finance industries. In energy, the Company will seek to add to its reserve base through selected acquisition of producing properties and further development of the Company's mineral interests. In real estate, the Company will continue to expand its real estate loan portfolio as, and when, economically attractive opportunities become available. To the extent required by its capital investments, the Company will seek new financing or additional sources of funding. 12 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits:
Exhibit No. Description ----------- ----------- 10.1 Warrant to Purchase 49,275 Shares of Common Stock of Resource America, Inc., Issued to Physicians Insurance Company of Ohio dated June 1, 1995 10.2 Warrant to Purchase 35,190 Shares of Common Stock of Resource America, Inc., Issued to Physicians Insurance Company of Ohio dated June 20, 1995 11.1 Calculation of Primary and Fully Diluted Earnings per Share 27 Financial Data Schedule
b) Reports on Form 8-K: There were no Reports on Form 8-K filed by the Company for the quarter ending June 30, 1995. 13 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RESOURCE AMERICA, INC. (Registrant) Date August 11, 1995 By /s/ Michael L. Staines ---------------------------- -------------------------------------- Michael L. Staines Senior Vice President and Secretary Date August 11, 1995 By /s/ Nancy J. McGurk ----------------------------- -------------------------------------- Nancy J. McGurk Vice President - Finance and Treasurer 14 EX-10.1 2 RESOURCE AMERICA 10-Q EX-10.1 1 Exhibit 10.1 THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. VOID AFTER 5:00 P.M. PHILADELPHIA TIME ON JUNE 1, 2005 OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT FOLLOWING BUSINESS DAY. WARRANT TO PURCHASE 49,275 SHARES OF COMMON STOCK OF RESOURCE AMERICA, INC. This Certifies that, for good and valuable consideration, Physicians Insurance Company of Ohio, and its registered, permitted assigns (collectively, the "Warrantholder"), is entitled to purchase from Resource America, Inc., a corporation incorporated under the laws of the State of Delaware (the "Company"), subject to the terms and conditions hereof, at any time or after 9:00 A.M., Philadelphia time, on June 1, 1995, and before 5:00 P.M., Philadelphia time, on June 1, 2005 (or, if such day is not a Business Day, at or before 5:00 P.M., Philadelphia time, on the next following Business Day), the number of fully paid and non-assessable shares of Common Stock of the Company stated above at the Exercise Price (as defined herein). The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as provided in Article III hereof. ARTICLE I Section 1.01. Definition of Terms. As used in this Warrant, the following capitalized terms shall have the following respective meanings: (a) Business Day: A day other than a Saturday, Sunday or other day on which banks in the Commonwealth of Pennsylvania are authorized by law to remain closed. (b) Common Stock: Common Stock, $.01 par value per share, of the Company. (c) Common Stock Equivalents: Securities that are convertible into or exercisable for shares of Common Stock. (d) Exchange Act: The Securities Exchange Act of 1934, as amended. (e) Exercise Price: $11.75 per Warrant Share, as such price may be adjusted from time to time pursuant to Article III hereof. 2 (f) Expiration Date: 5:00 P.M., Philadelphia time, on June 1, 2005 or if such day is not a Business Day, the next succeeding day which is a Business Day. (g) Holder: Any person owning or having a right to acquire Warrant Shares or any assignee thereof. (h) NASD: National Association of Securities Dealers, Inc. and NASDAQ: NASD Automatic Quotation System. (i) Person: An individual, partnership, joint venture, corporation, trust, unincorporated organization or government or any department or agency thereof. (j) Piggyback Registration: See Article IV. (k) Registered Securities: Any Registrable Securities which have been included in an effective Registration Statement pursuant to the terms of Article IV hereof. (l) Registrable Securities: Any Warrant Shares issued to Physicians Insurance Company of Ohio and/or its designees or transferees as permitted under Section 6.02 and/or other securities that may be or are issued by the Company upon exercise of this Warrant, including those which may thereafter be issued by the Company in respect of any such securities by means of any stock splits, stock dividends, recapitalizations, reclassifications or the like, and as adjusted pursuant to Article III hereof; provided, however, that as to any particular security contained in Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement; or (ii) they shall have been sold to the public pursuant to Rule 144 (or any successor provision) under the Securities Act; or (iii) they shall have been sold, assigned or otherwise transferred except as permitted by Section 6.02 below. (m) Registration Statement: Any registration statement of the Company filed or to be filed with the Securities and Exchange Commission which covers any of the Registrable Securities pursuant to the provisions of this Warrant, including all amendments (including post-effective amendments) and supplements thereto, all exhibits thereto and all material incorporated therein by reference. (n) Securities Act: The Securities Act of 1933, as amended. -2- 3 (o) Transfer: See Section 6.02. (p) Warrant: This Warrant and all other warrants that may be issued in its or their place, together evidencing the right to purchase an aggregate of 49,275 shares of Common Stock as the same may be adjusted pursuant to this Warrant. (q) Warrantholder: The person(s) or entity(ies) to whom this Warrant is originally issued, or any successor in interest thereto, or any assignee or transferee thereof, in whose name this Warrant is registered upon the books to be maintained by the Company for that purpose. (r) Warrant Shares: Common Stock, Common Stock Equivalents and other securities purchased or purchasable upon exercise of the Warrant. ARTICLE II DURATION AND EXERCISE OF WARRANT Section 2.01. Duration of Warrant. The Warrantholder may exercise this Warrant at any time and from time to time after 9:00 A.M., Philadelphia time, on June 1, 1995, and before 5:00 P.M., Philadelphia time, on the Expiration Date. If this Warrant is not exercised on the Expiration Date, it shall become void, and all rights hereunder shall thereupon cease. Section 2.02. Exercise of Warrant. (a) The Warrantholder may exercise this Warrant, in whole or in part, by presentation and surrender of this Warrant to the Company at its principal corporate office or at the office of its stock transfer agent, if any, with the Subscription Form annexed hereto duly executed and accompanied by payment of the full Exercise Price for each Warrant Share to be purchased. (b) Upon receipt of this Warrant with the Subscription Form fully executed and accompanied by payment of the aggregate Exercise Price for the Warrant Shares for which this Warrant is then being exercised, the Company shall cause to be issued certificates for the total number of whole shares of Common Stock for which this Warrant is being exercised (adjusted to reflect the effect of the anti-dilution provisions contained in Article III hereof, if any, and as provided in Section 2.04 hereof) in such denominations as are requested for delivery to the Warrantholder, and the Company shall thereupon deliver such certificates to the Warrantholder. The Warrantholder shall be deemed to be the holder of record of the shares of Common Stock -3- 4 issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder. At the time this Warrant is exercised, the Company may require the Warrantholder to make such representations, and may place such legends on certificates representing the Warrant Shares, as may be reasonably required in the opinion of counsel to the Company to permit the Warrant Shares to be issued in compliance with the Securities Act. (c) In case the Warrantholder shall exercise this Warrant with respect to less than all of the Warrant Shares that may be purchased under this Warrant, the Company shall execute a new warrant in the form of this Warrant for the balance of such Warrant Shares and deliver such new warrant to the Warrantholder. (d) The Company shall pay any and all stock transfer and similar taxes which may be payable in respect of the issue of any Warrant Shares to the Holder of the Warrant being exercised. Section 2.03. Reservation of Shares. The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company from time to time issuable upon exercise of this Warrant. All such shares shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights. Section 2.04. Fractional Shares. The Company shall not be required to issue any fraction of a share of its capital stock in connection with the exercise of this Warrant, and in any case where the Warrantholder would, except for the provisions of this Section 2.04, be entitled under the terms of this Warrant to receive a fraction of a share upon the exercise of this Warrant, the Company shall, upon the exercise of this Warrant and receipt of the Exercise Price, issue the largest number of whole shares purchasable upon exercise of this Warrant. The Company shall not be required to make any cash or other adjustment in receipt of such fraction of a share to which the Warrantholder would otherwise be entitled. Section 2.05. Adjustment Upon Reorganization of the Company. If at any time prior to the exercise of this Warrant in full, a reorganization of the Company occurs and two classes of common stock are created that have substantially identical rights and preferences except for voting and conversion rights, with such difference as to voting rights being that Class A Common Stock -4- 5 will be entitled to elect directors in proportion to the number of outstanding Class A shares (relative to the number of Class B shares) except that Class A will be entitled to one less director than Class B, this Warrant shall immediately and without further action convert into a Warrant entitling the Warrantholder to purchase the same number of shares of the Class A Common Stock as are represented hereby and this Warrant shall thereafter cease to represent the right to purchase shares of Common Stock. The form of this Warrant need not be changed because of any such adjustment described in this Section 2.05, and Warrants theretofore or thereafter issued may continue to express the same price, number and other terms as are stated in this Warrant, as initially issued. ARTICLE III ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE AND OF EXERCISE PRICE The Exercise Price and the number and kind of Warrant Shares shall be subject to adjustment from time to time upon the happening of certain events as provided in this Article III. Section 3.01. Mechanical Adjustments. (a) If at any time prior to the exercise of this Warrant in full, the Company shall (i) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (ii) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (iii) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of its Common Stock (including any such reclassification in connection with a consolidation or a merger in which the Company is the continuing corporation), the Exercise Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrantholder shall be entitled to receive the aggregate number and kind of shares which, if this Warrant had been exercised in full immediately prior to such event, it or he would have owned upon such exercise and been entitle to receive by virtue of such dividend, distribution, subdivision, combination, reclassification or recapitalization. Any adjustment required by this Paragraph 3.01(a) shall be made immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. -5- 6 (b) If at any time prior to the exercise of this Warrant in full, the Company shall (i) issue or sell any Common Stock or Common Stock Equivalents without consideration or for consideration per share less than the Exercise Price in effect immediately prior to the date of such issuance or sale (other than issuances of securities upon the exercise of options granted under the Company's currently existing stock option plans or upon the exercise of other currently outstanding options) or (ii) fix a record date for the issuance of subscription rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase Common Stock (or Common Stock Equivalents) at a price (or having an exercise or conversion price per share) less than the Exercise Price in effect immediately prior to the record date described below, the Exercise Price shall be adjusted so that the Exercise Price shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of such sale or issuance (which date in the event of distribution to shareholders shall be deemed to be the record date set by the Company to determine shareholders entitled to participate in such distribution) by a fraction, the numerator of which shall be (i) the number of shares of Common Stock outstanding on the date of such sale or issuance, plus (ii) the number of additional shares of Common Stock which the aggregate consideration received by the Company upon such issuance or sale (plus the aggregate of any additional amount to be received by the Company upon the exercise of such subscription rights, options or warrants) would purchase at such current Exercise Price per share of the Common Stock; and the denominator of which shall be (i) the number of shares of Common Stock outstanding on the date of such issuance or sale, plus (ii) the number of additional shares of Common Stock offered for the subscription or purchase (or into which the Common Stock Equivalents so offered are exercisable or convertible). Any adjustments required by this paragraph 3.01(b) shall be made immediately after such issuance or sale or record date, as the case may be. Such adjustments shall be made successively whenever such event shall occur. To the extent that shares of Common Stock (or Common Stock Equivalents) are not delivered after the expiration of such subscription rights, options or warrants, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or Common Stock Equivalents) actually delivered. (c) If at any time prior to the exercise of this Warrant in full, the Company shall fix a record date for the issuance or distribution to all holders of the Common Stock (including any such distribution to be made in connection with a consolidation or merger in which the Company is to be the continuing -6- 7 corporation) of evidences of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a combination, reclassification or recapitalization referred to in Section 3.01(a), regular cash dividends or cash distributions paid out of net profits legally available therefor and in the ordinary course of business or subscription rights, options or warrants for Common Stock or Common Stock Equivalents (excluding those referred to in Section 3.01(b) (any such non-excluded event being herein called a "Special Dividend")), (i) the Exercise Price shall be decreased immediately after the record date for such Special Dividend to a price determined by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the Exercise Price in effect on such record date less the fair market value (as determined by the Company's Board of Directors) of the evidences of indebtedness, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock or of such subscription rights or warrants applicable to one share of Common Stock and the denominator of which shall be such Exercise Price then in effect and (ii) the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Special Dividend by a fraction, the numerator of which shall be the Exercise Price in effect immediately before such Special Dividend and the denominator of which shall be the Exercise Price in effect immediately after such Special Dividend. Any adjustment required by this Section 3.01(c) shall be made successively whenever such a record date is fixed and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be that in effect immediately prior to such record date. (d) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock or stock of a subsidiary or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the Exercise Price or the number of Warrant Shares purchasable upon the exercise of this Warrant, each Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company, such subsidiary or both, as the Company shall determine, the stock or other securities to which such Warrantholder would have been entitled if such Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Article III, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; provided, however, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. -7- 8 (e) (i) If at any time prior to the exercise of this Warrant in full, the Company shall issue securities upon the exercise of options, warrants or other Common Stock Equivalents granted under any stock option plan of the Company (except with respect to up to 2,000 shares of Common Stock issuable in connection with the Company's existing stock option plan) created after the date of the issuance of this Warrant, then, in addition to the adjustment in Exercise Price required by Section 3.01(b) hereof, if any, the aggregate number of shares of Common Stock issuable hereunder shall be increased to that number of shares which is in the same ratio to the number of shares issuable prior to the exercise giving rise to the need for adjustment hereunder as the number of shares of Common Stock outstanding immediately prior to the exercise giving rise to the need for adjustment hereunder is to the number of shares of Common Stock outstanding immediately after such exercise. (ii) Except in the case of a transaction requiring an adjustment pursuant to Section 3.01(e)(i) above, whenever the Exercise Price payable upon exercise of this Warrant is adjusted pursuant to paragraph (a), (b) or (c) of this Section 3.01, the Warrant Shares shall simultaneously be adjusted by multiplying the number of Warrant Shares initially issuable upon exercise of each Warrant by the Exercise Price in effect on the date thereof and dividing the product so obtained by the Exercise Price, as adjusted. (f) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($.05) in such price; provided, however, that any adjustments which by reason of this paragraph (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3.01 shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be. Notwithstanding anything in this Section 3.01 to the contrary, the Exercise Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (g) In the event that at any time, as a result of any adjustment made pursuant to Section 3.01(a), the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 3.01(a) or this Section 3.01(g). -8- 9 (h) In the case of an issue of additional Common Stock or Common Stock Equivalents for cash, the consideration received by the Company therefor before deducting therefrom any discount or commission or other expenses paid by the Company for any underwriting of, or otherwise in connection with, the issuance thereof, shall be deemed to be the amount received by the Company therefor. The term "issue" shall include the sale or other disposition of shares held by or on account of the Company or in the treasury of the Company but until so sold or otherwise disposed of such shares shall not be deemed outstanding. Section 3.02. Notices of Adjustment. Whenever the number of Warrant Shares or the Exercise Price is adjusted as herein provided, the Company shall prepare and deliver forthwith to the Warrantholder a certificate signed by an officer of the Company setting forth the adjusted number of shares purchasable upon the exercise of this Warrant and the Exercise Price of such shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which adjustment was made. Section 3.03. No Adjustment for Dividends. Except as provided in Section 3.01 of this Warrant, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. Section 3.04. Preservation of Purchase Rights in Certain Transactions. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or in case of any consolidation or merger of the Company with or into another corporation (other than merger with a subsidiary in which the Company is the continuing corporation and that does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in the case of any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety, the Company shall, as a condition precedent to such transaction cause such successor or purchasing corporation, as the case may be, to execute with the Warrantholder an agreement granting the Warrantholder the right thereafter, upon payment of the Exercise Price in effect immediately prior to such action, to receive upon exercise of this Warrant the kind and amount of shares and other securities and property which he would have owned or have been entitled to receive after the happening of such reclassification, change, consolidation, merger, sale or conveyance had this Warrant been exercised immediately prior to such action. Such agreement shall -9- 10 provide for adjustments in respect of such shares of stock and other securities and property, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article III. In the event that in connection with any such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution of payment, in whole or in part, for, or of, a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Article III. The provisions of this Section 3.04 shall similarly apply to successive reclassifications, capital reorganizations, consolidations, mergers, sales or conveyances. Section 3.05. Form of Warrant After Adjustments. The form of this Warrant need not be changed because of any adjustments in the Exercise Price or the number or kind of the Warrant Shares, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued. ARTICLE IV REGISTRATION UNDER THE SECURITIES ACT Section 4.01. Demand Registration Rights. (a) If the Company shall receive, at any time after the date hereof and while the Company is a reporting company as defined in the Exchange Act, a written request (the "Request") from the Warrantholder that the Company file a Registration Statement under the Securities Act covering the registration of the shares of Registrable Securities that are the subject of the Request (a "Demand Registration"), then the Company shall, subject to the limitations of Section 4.02, use its best efforts to effect as soon as practicable the registration under the Securities Act in accordance with Subsection 4.02(a) hereof, of all Registrable Securities which the Warrantholder requests be registered within ninety (90) days of the Company's receipt of the Request. (b) If the Warrantholder intends to distribute the Registerable Securities covered by the Request by means of an underwriting, the Warrantholder shall so advise the Company as a part of the Request. In such event, the Warrantholder shall (together with the Company as provided in Section 4.02(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting which underwriters shall include a regional or national underwriting -10- 11 firm which is a member in good standing of the National Association of Securities Dealers, Inc. (c) Notwithstanding the foregoing, if the Company shall furnish to the Warrantholders a certificate, signed in good faith by the President of the Company, stating that the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period ending on the one hundred eightieth day after the Company's receipt of the Request. Section 4.02. Obligations of the Company. Whenever required under this Warrant to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective, and, upon the request of the Warrantholder keep such Registration Statement effective for up to one hundred twenty (120) days. (b) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement. (c) Furnish to Warrantholder such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registered Securities owned by it. (d) Use its best efforts to register and qualify the Registered Securities under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Warrantholder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the manager underwriter of such -11- 12 offering. The Warrantholder into and perform its obligations under such agreement. (f) Notify the Warrantholder in the event the Company has delivered preliminary or final prospectuses to the Warrantholder and, after having done so, such prospectus is amended to comply with the requirements of the Securities Act. Upon such notification, the Warrantholder shall immediately cease making offers of Registered Securities and return all prospectuses to the Company. The Company shall promptly provide the Warrantholders with revised prospectuses and, following receipt of the revised prospectuses, the Warrantholder shall be free to resume making offers of the Registered Securities. (g) Furnish, at the request of the Warrantholder on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Warrant, if such securities are being sold through underwriters, on the date that the Registration Statement with respect to such securities become effective, (i) an opinion, dated such date, of the counsel representing the Company for the customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Warrantholder and (ii) the letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Warrantholder. Section 4.03. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Warrant with respect to the Registrable Securities of the Warrantholder that shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration. Section 4.04. Expenses of Demand Registration. All expenses (including underwriting discounts and commissions) incurred in connection with registrations, filings or qualifications pursuant to Subsection 6.01, including (without limitation) all registration, filing and qualification fees, printing and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of counsel for the Warrantholder shall be borne by the Warrantholder. -12- 13 Section 4.05. Piggyback Registration Rights. (a) If at any time prior to the Expiration Date, the Company proposes to register any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to (i) the sale of securities to participants in a Company stock option plan, stock purchase plan, savings or similar plan, or (ii) the sale of securities as part of an acquisition, merger or exchange of stock or a registration on any form which does not include substantially the same information as would be included in a Registration Statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give the Holder of Registrable Securities written notice of such registration. Upon the written request of the Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 7.08, the Company shall use its best efforts, subject to the provisions of Section 4.03, to cause to be registered under the Securities Act all of the Registrable Securities that each Holder has requested to be registered; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 4.01(a) without obligation to any holder. (b) The Company is obligated to effect only two (2) such registrations of Registrable Securities under this Section 4.05. Section 4.06. Expenses of Piggyback Registration. The holder of Registrable Securities shall bear an equitable portion of all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to all registrations pursuant to Section 4.05 including, without limitation, all registration, filing, and qualification fees, printing and accounting fees relating or apportionable thereto, disbursements of counsel and underwriting discounts and commissions relating to the Registrable Securities. Section 4.07. Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 4.05 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. Section 4.08. Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any -13- 14 controversy that might arise with respect to the interpretation or implementation of this Warrant. ARTICLE V OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER Section 5.01. No Rights as Shareholder; Notice to Warrantholder. Nothing contained in this Warrant shall be construed as conferring upon the Warrantholder or his, her or its transferee the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or of any other matter, or any rights whatsoever as a shareholder of the Company. Section 5.02. Warrantholder Rights in Offering. The Warrantholder shall have the right to participate in any rights offering which may be undertaken by the Company prior to the Expiration Date, on a pro rata basis with the holders of the Company's Common Stock (including oversubscription rights), as if the Warrantholder had exercised this Warrant prior to any such offering. For the purposes of this Section 5.02, each share into which this Warrant may be converted shall be deemed to be an outstanding share of the Company's Common Stock. Section 5.03. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may in its discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant. ARTICLE VI SPLIT-UP, COMBINATION EXCHANGE AND TRANSFER OF WARRANTS Section 6.01. Split-Up, Combination, Exchange and Transfer of Warrants. Subject to the provisions of Section 6.02 hereof, this Warrant may be split up, combined or exchanged for another warrant or warrants containing the same terms to purchase a like aggregate number of Warrant Shares. If the Warrantholder desires to split up, combine or exchange this Warrant, he, she or it shall make such request in writing delivered to the Company and shall surrender to the Company this Warrant and any other Warrants to be so split up, combined or exchanged. Upon any such surrender for split up, combination or exchange, the Company -14- 15 shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company shall not be required to effect any split up, combination or exchange which will result in the issuance of a Warrant entitling the Warrantholder to purchase upon exercise a fraction of a share of Common Stock or a fractional Warrant. The Company may require such Warrantholder to pay a sum sufficient to cover any expenses of the Company (including fees of counsel to the Company), and any tax or governmental charge that may be imposed, in connection with any split up, combination or exchange of Warrants. Section 6.02. Restrictions on Transfer. Neither this Warrant nor the Warrant Shares may be disposed of or encumbered (any such action, a "Transfer") other than to an affiliate of the Warrantholder, except with the written consent of the Company which consent shall not be unreasonably withheld and except, in all cases, including a Transfer to an affiliate, in accordance with and subject to the provisions of the Securities Act and the rules and regulations promulgated thereunder. If at the time of a Transfer, a registration statement is not in effect to register this Warrant or the Warrant Shares, the Company may require the Warrantholder to make such representations, and may place such legends on certificates representing this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit a Transfer without such registration. The Company may require any Warrantholder requesting a transfer to pay a sum sufficient to cover the expenses of the Company (including fees of counsel to the Company), and any tax or governmental charge that may be imposed. ARTICLE VII OTHER MATTERS Section 7.01. Successors and Assigns. All the covenants and provisions of this Warrant by or for the benefit of the Company shall bind and inure to the benefit of its successors and assigns hereunder. Section 7.02. No Inconsistent Agreements. The Company will not on or after the date of this Warrant enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Warrantholder in this Warrant or otherwise conflicts with the provisions hereof. The rights granted to the Warrantholder hereunder do not in any way conflict with and are not inconsistent with the rights granted to holders of the Company's securities under any other agreements. -15- 16 Section 7.03. Integration/Entire Agreement. This Warrant is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertaking, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Warrants. This Warrant supersedes all prior agreements, and understandings between the parties with respect to such subject matter. Section 7.04. Amendments and Waivers. The provisions of this Warrant, including the provisions of this sentence, may not be amended, modified or supplemented, and waiver of or consents to departure from the provisions hereof may not be given unless the Company has obtained the written consent of the Warrantholders whose Warrants entitle them to purchase a majority of the outstanding Warrant Shares. Section 7.05. Counterparts. This Warrant may be executed in any number of counterparts, and by the parties hereto in separate counterparts, each of which so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 7.06. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Ohio. Section 7.07. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. Section 7.08. Notice. Any notices or certificates by the Company to the Warrantholder and by the Warrantholder to the Company shall be deemed delivered if in writing and delivered in person or by registered mail (return receipt requested) to the Warrantholder addressed to it at 13515 Yarmouth Drive, N.W. Pickerington, OH 43147, or, if the Warrantholder has designated, by notice in writing to the Company, any other address, to such other address; and if to the Company, addressed to it at: Resource America, Inc., 1521 Locust Street, Suite 700, Philadelphia, Pennsylvania 19102, or, if the Company has designated, by notice in writing to the Warrantholder, any other address, to such other address. -16- 17 The Company may change its address by written notice to the Warrantholder and the Warrantholder may change its address by written notice to the Company. IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under its corporate seal as of the 2nd day of June, 1995. Attest: RESOURCE AMERICA, INC. By: /s/ SCOTT F. SCHAEFFER By: /s/ MICHAEL L. STAINES -------------------------- --------------------------- Scott F. Schaeffer, Michael L. Staines, Assistant Secretary Senior Vice President [CORPORATE SEAL] -17- EX-10.2 3 RESOURCE AMERICA 10-Q EX-10.2 1 EXHIBIT 10.2 THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. VOID AFTER 5:00 P.M. PHILADELPHIA TIME ON JUNE 20, 2005 OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT FOLLOWING BUSINESS DAY. WARRANT TO PURCHASE 35,190 SHARES OF COMMON STOCK OF RESOURCE AMERICA, INC. This Certifies that, for good and valuable consideration, Physicians Insurance Company of Ohio, and its registered, permitted assigns (collectively, the "Warrantholder"), is entitled to purchase from Resource America, Inc., a corporation incorporated under the laws of the State of Delaware (the "Company"), subject to the terms and conditions hereof, at any time or after 9:00 A.M., Philadelphia time, on June 20, 1995, and before 5:00 P.M., Philadelphia time, on June 20, 2005 (or, if such day is not a Business Day, at or before 5:00 P.M., Philadelphia time, on the next following Business Day), the number of fully paid and non-assessable shares of Common Stock of the Company stated above at the Exercise Price (as defined herein). The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as provided in Article III hereof. ARTICLE I SECTION 1.01. DEFINITION OF TERMS. As used in this Warrant, the following capitalized terms shall have the following respective meanings: (a) BUSINESS DAY: A day other than a Saturday, Sunday or other day on which banks in the Commonwealth of Pennsylvania are authorized by law to remain closed. (b) COMMON STOCK: Common Stock, $.01 par value per share, of the Company. (c) COMMON STOCK EQUIVALENTS: Securities that are convertible into or exercisable for shares of Common Stock. (d) EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. (e) EXERCISE PRICE: $11.75 per Warrant Share, as such price may be adjusted from time to time pursuant to Article III hereof. 2 (f) EXPIRATION DATE: 5:00 P.M., Philadelphia time, on June 20, 2005 or if such day is not a Business Day, the next succeeding day which is a Business Day. (g) HOLDER: Any person owning or having a right to acquire Warrant Shares or any assignee thereof. (h) NASD: National Association of Securities Dealers, Inc. and NASDAQ: NASD Automatic Quotation System. (i) PERSON: An individual, partnership, joint venture, corporation, trust, unincorporated organization or government or any department or agency thereof. (j) PIGGYBACK REGISTRATION: See Article IV. (k) REGISTERED SECURITIES: Any Registrable Securities which have been included in an effective Registration Statement pursuant to the terms of Article IV hereof. (l) REGISTRABLE SECURITIES: Any Warrant Shares issued to Physicians Insurance Company of Ohio and/or its designees or transferees as permitted under Section 6.02 and/or other securities that may be or are issued by the Company upon exercise of this Warrant, including those which may thereafter be issued by the Company in respect of any such securities by means of any stock splits, stock dividends, recapitalizations, reclassifications or the like, and as adjusted pursuant to Article III hereof; provided, however, that as to any particular security contained in Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement; or (ii) they shall have been sold to the public pursuant to Rule 144 (or any successor provision) under the Securities Act; or (iii) they shall have been sold, assigned or otherwise transferred except as permitted by Section 6.02 below. (m) REGISTRATION STATEMENT: Any registration statement of the Company filed or to be filed with the Securities and Exchange Commission which covers any of the Registrable Securities pursuant to the provisions of this Warrant, including all amendments (including post-effective amendments) and supplements thereto, all exhibits thereto and all material incorporated therein by reference. (n) SECURITIES ACT: The Securities Act of 1933, as amended. -2- 3 (o) TRANSFER: See Section 6.02. (p) WARRANT: This Warrant and all other warrants that may be issued in its or their place, together evidencing the right to purchase an aggregate of 35,190 shares of Common Stock as the same may be adjusted pursuant to this Warrant. (q) WARRANTHOLDER: The person(s) or entity(ies) to whom this Warrant is originally issued, or any successor in interest thereto, or any assignee or transferee thereof, in whose name this Warrant is registered upon the books to be maintained by the Company for that purpose. (r) WARRANT SHARES: Common Stock, Common Stock Equivalents and other securities purchased or purchasable upon exercise of the Warrant. ARTICLE II DURATION AND EXERCISE OF WARRANT SECTION 2.01. DURATION OF WARRANT. The Warrantholder may exercise this Warrant at any time and from time to time after 9:00 A.M., Philadelphia time, on June 20, 1995, and before 5:00 P.M., Philadelphia time, on the Expiration Date. If this Warrant is not exercised on the Expiration Date, it shall become void, and all rights hereunder shall thereupon cease. SECTION 2.02. EXERCISE OF WARRANT. ---------------------------------- (a) The Warrantholder may exercise this Warrant, in whole or in part, by presentation and surrender of this Warrant to the Company at its principal corporate office or at the office of its stock transfer agent, if any, with the Subscription Form annexed hereto duly executed and accompanied by payment of the full Exercise Price for each Warrant Share to be purchased. (b) Upon receipt of this Warrant with the Subscription Form fully executed and accompanied by payment of the aggregate Exercise Price for the Warrant Shares for which this Warrant is then being exercised, the Company shall cause to be issued certificates for the total number of whole shares of Common Stock for which this Warrant is being exercised (adjusted to reflect the effect of the anti-dilution provisions contained in Article III hereof, if any, and as provided in Section 2.04 hereof) in such denominations as are requested for delivery to the Warrantholder, and the Company shall thereupon deliver such certificates to the Warrantholder. The Warrantholder shall be deemed to be the holder of record of the shares of Common Stock -3- 4 issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder. At the time this Warrant is exercised, the Company may require the Warrantholder to make such representations, and may place such legends on certificates representing the Warrant Shares, as may be reasonably required in the opinion of counsel to the Company to permit the Warrant Shares to be issued in compliance with the Securities Act. (c) In case the Warrantholder shall exercise this Warrant with respect to less than all of the Warrant Shares that may be purchased under this Warrant, the Company shall execute a new warrant in the form of this Warrant for the balance of such Warrant Shares and deliver such new warrant to the Warrantholder. (d) The Company shall pay any and all stock transfer and similar taxes which may be payable in respect of the issue of any Warrant Shares to the holder of the Warrant being exercised. SECTION 2.03. RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company from time to time issuable upon exercise of this Warrant. All such shares shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights. SECTION 2.04. FRACTIONAL SHARES. The Company shall not be required to issue any fraction of a share of its capital stock in connection with the exercise of this Warrant, and in any case where the Warrantholder would, except for the provisions of this Section 2.04, be entitled under the terms of this Warrant to receive a fraction of a share upon the exercise of this Warrant, the Company shall, upon the exercise of this Warrant and receipt of the Exercise Price, issue the largest number of whole shares purchasable upon exercise of this Warrant. The Company shall not be required to make any cash or other adjustment in receipt of such fraction of a share to which the Warrantholder would otherwise be entitled. SECTION 2.05. ADJUSTMENT UPON REORGANIZATION OF THE COMPANY. If at any time prior to the exercise of this Warrant in full, a reorganization of the Company occurs and two classes of common stock are created that have substantially identical rights and preferences except for voting and conversion rights, with such difference as to voting rights being that Class A Common -4- 5 Stock will be entitled to elect directors in proportion to the number of outstanding Class A shares (relative to the number of Class B shares) except that Class A will be entitled to one less director than Class B, this Warrant shall immediately and without further action convert into a Warrant entitling the Warrantholder to purchase the same number of shares of the Class A Common Stock as are represented hereby and this Warrant shall thereafter cease to represent the right to purchase shares of Common Stock. The form of this Warrant need not be changed because of any such adjustment described in this Section 2.05, and Warrants theretofore or thereafter issued may continue to express the same price, number and other terms as are stated in this Warrant, as initially issued. ARTICLE III ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE AND OF EXERCISE PRICE The Exercise Price and the number and kind of Warrant Shares shall be subject to adjustment from time to time upon the happening of certain events as provided in this Article III. SECTION 3.01. MECHANICAL ADJUSTMENTS. ------------------------------------- (a) If at any time prior to the exercise of this Warrant in full, the Company shall (i) declare a dividend or make a distribution on the Common Stock payable in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class); (ii) subdivide, reclassify or recapitalize its outstanding Common Stock into a greater number of shares; (iii) combine, reclassify or recapitalize its outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of its Common Stock (including any such reclassification in connection with a consolidation or a merger in which the Company is the continuing corporation), the Exercise Price in effect at the time of the record date of such dividend, distribution, subdivision, combination, reclassification or recapitalization shall be adjusted so that the Warrantholder shall be entitled to receive the aggregate number and kind of shares which, if this Warrant had been exercised in full immediately prior to such event, it or he would have owned upon such exercise and been entitle to receive by virtue of such dividend, distribution, subdivision, combination, reclassification or recapitalization. Any adjustment required by this Paragraph 3.01(a) shall be made immediately after the record date, in the case of a dividend or distribution, or the effective date, in the case of a subdivision, combination, reclassification or recapitalization, to allow the purchase of such aggregate number and kind of shares. -5- 6 (b) If at any time prior to the exercise of this Warrant in full, the Company shall (i) issue or sell any Common Stock or Common Stock Equivalents without consideration or for consideration per share less than the Exercise Price in effect immediately prior to the date of such issuance or sale (other than issuances of securities upon the exercise of options granted under the Company's currently existing stock option plans or upon the exercise of other currently outstanding options) or (ii) fix a record date for the issuance of subscription rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase Common Stock (or Common Stock Equivalents) at a price (or having an exercise or conversion price per share) less than the Exercise Price in effect immediately prior to the record date described below, the Exercise Price shall be adjusted so that the Exercise Price shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of such sale or issuance (which date in the event of distribution to shareholders shall be deemed to be the record date set by the Company to determine shareholders entitled to participate in such distribution) by a fraction, the numerator of which shall be (i) the number of shares of Common Stock outstanding on the date of such sale or issuance, plus (ii) the number of additional shares of Common Stock which the aggregate consideration received by the Company upon such issuance or sale (plus the aggregate of any additional amount to be received by the Company upon the exercise of such subscription rights, options or warrants) would purchase at such current Exercise Price per share of the Common Stock; and the denominator of which shall be (i) the number of shares of Common Stock outstanding on the date of such issuance or sale, plus (ii) the number of additional shares of Common Stock offered for the subscription or purchase (or into which the Common Stock Equivalents so offered are exercisable or convertible). Any adjustments required by this paragraph 3.01(b) shall be made immediately after such issuance or sale or record date, as the case may be. Such adjustments shall be made successively whenever such event shall occur. To the extent that shares of Common Stock (or Common Stock Equivalents) are not delivered after the expiration of such subscription rights, options or warrants, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or Common Stock Equivalents) actually delivered. (c) If at any time prior to the exercise of this Warrant in full, the Company shall fix a record date for the issuance or distribution to all holders of the Common Stock (including any such distribution to be made in connection with a consolidation or merger in which the Company is to be the continuing -6- 7 corporation) of evidences of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a combination, reclassification or recapitalization referred to in Section 3.01(a), regular cash dividends or cash distributions paid out of net profits legally available therefor and in the ordinary course of business or subscription rights, options or warrants for Common Stock or Common Stock Equivalents (excluding those referred to in Section 3.01(b) (any such non-excluded event being herein called a "Special Dividend")), (i) the Exercise Price shall be decreased immediately after the record date for such Special Dividend to a price determined by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the Exercise Price in effect on such record date less the fair market value (as determined by the Company's Board of Directors) of the evidences of indebtedness, securities or property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock or of such subscription rights or warrants applicable to one share of Common Stock and the denominator of which shall be such Exercise Price then in effect and (ii) the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Special Dividend by a fraction, the numerator of which shall be the Exercise Price in effect immediately before such Special Dividend and the denominator of which shall be the Exercise Price in effect immediately after such Special Dividend. Any adjustment required by this Section 3.01(c) shall be made successively whenever such a record date is fixed and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be that in effect immediately prior to such record date. (d) If at any time prior to the exercise of this Warrant in full, the Company shall make a distribution to all holders of the Common Stock or stock of a subsidiary or securities convertible into or exercisable for such stock, then in lieu of an adjustment in the Exercise Price or the number of Warrant Shares purchasable upon the exercise of this Warrant, each Warrantholder, upon the exercise hereof at any time after such distribution, shall be entitled to receive from the Company, such subsidiary or both, as the Company shall determine, the stock or other securities to which such Warrantholder would have been entitled if such Warrantholder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Article III, and the Company shall reserve, for the life of the Warrant, such securities of such subsidiary or other corporation; provided, however, that no adjustment in respect of dividends or interest on such stock or other securities shall be made during the term of this Warrant or upon its exercise. -7- 8 (e) (i) If at any time prior to the exercise of this Warrant in full, the Company shall issue securities upon the exercise of options, warrants or other Common Stock Equivalents granted under any stock option plan of the Company (except with respect to up to 2,000 shares of Common Stock issuable in connection with the Company's existing stock option plan) created after the date of the issuance of this Warrant, then, in addition to the adjustment in Exercise Price required by Section 3.01(b) hereof, if any, the aggregate number of shares of Common Stock issuable hereunder shall be increased to that number of shares which is in the same ratio to the number of shares issuable prior to the exercise giving rise to the need for adjustment hereunder as the number of shares of Common Stock outstanding immediately prior to the exercise giving rise to the need for adjustment hereunder is to the number of shares of Common Stock outstanding immediately after such exercise. (ii) Except in the case of a transaction requiring an adjustment pursuant to Section 3.01(e)(i) above, whenever the Exercise Price payable upon exercise of this Warrant is adjusted pursuant to paragraph (a), (b) or (c) of this Section 3.01, the Warrant Shares shall simultaneously be adjusted by multiplying the number of Warrant Shares initially issuable upon exercise of each Warrant by the Exercise Price in effect on the date thereof and dividing the product so obtained by the Exercise Price, as adjusted. (f) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($.05) in such price; provided, however, that any adjustments which by reason of this paragraph (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3.01 shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be. Notwithstanding anything in this Section 3.01 to the contrary, the Exercise Price shall not be reduced to less than the then existing par value of the Common Stock as a result of any adjustment made hereunder. (g) In the event that at any time, as a result of any adjustment made pursuant to Section 3.01(a), the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 3.01(a) or this Section 3.01(g). -8- 9 (h) In the case of an issue of additional Common Stock or Common Stock Equivalents for cash, the consideration received by the Company therefor before deducting therefrom any discount or commission or other expenses paid by the Company for any underwriting of, or otherwise in connection with, the issuance thereof, shall be deemed to be the amount received by the Company therefor. The term "issue" shall include the sale or other disposition of shares held by or on account of the Company or in the treasury of the Company but until so sold or otherwise disposed of such shares shall not be deemed outstanding. SECTION 3.02. NOTICES OF ADJUSTMENT. Whenever the number of Warrant Shares or the Exercise Price is adjusted as herein provided, the Company shall prepare and deliver forthwith to the Warrantholder a certificate signed by an officer of the Company setting forth the adjusted number of shares purchasable upon the exercise of this Warrant and the Exercise Price of such shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which adjustment was made. SECTION 3.03. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 3.01 of this Warrant, no adjustment in respect of any cash dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. SECTION 3.04. PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or in case of any consolidation or merger of the Company with or into another corporation (other than merger with a subsidiary in which the Company is the continuing corporation and that does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in the case of any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety, the Company shall, as a condition precedent to such transaction cause such successor or purchasing corporation, as the case may be, to execute with the Warrantholder an agreement granting the Warrantholder the right thereafter, upon payment of the Exercise Price in effect immediately prior to such action, to receive upon exercise of this Warrant the kind and amount of shares and other securities and property which he would have owned or have been entitled to receive after the happening of such reclassification, change, consolidation, merger, sale or conveyance had this Warrant been exercised immediately prior to such action. Such agreement shall -9- 10 provide for adjustments in respect of such shares of stock and other securities and property, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article III. In the event that in connection with any such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution of payment, in whole or in part, for, or of, a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Article III. The provisions of this Section 3.04 shall similarly apply to successive reclassifications, capital reorganizations, consolidations, mergers, sales or conveyances. SECTION 3.05. FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant need not be changed because of any adjustments in the Exercise Price or the number or kind of the Warrant Shares, and Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued. ARTICLE IV REGISTRATION UNDER THE SECURITIES ACT SECTION 4.01. DEMAND REGISTRATION RIGHTS. --------------------------------------------- (a) If the Company shall receive, at any time after the date hereof and while the Company is a reporting company as defined in the Exchange Act, a written request (the "REQUEST") from the Warrantholder that the Company file a Registration Statement under the Securities Act covering the registration of the shares of Registrable Securities that are the subject of the Request (a "DEMAND REGISTRATION"), then the Company shall, subject to the limitations of Section 4.02, use its best efforts to effect as soon as practicable the registration under the Securities Act in accordance with Subsection 4.02(a) hereof, of all Registrable Securities which the Warrantholder requests be registered within ninety (90) days of the Company's receipt of the Request. (b) If the Warrantholder intends to distribute the Registerable Securities covered by the Request by means of an underwriting, the Warrantholder shall so advise the Company as a part of the Request. In such event, the Warrantholder shall (together with the Company as provided in Section 4.02(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting which underwriters shall include a regional or national underwriting -10- 11 firm which is a member in good standing of the National Association of Securities Dealers, Inc. (c) Notwithstanding the foregoing, if the Company shall furnish to the Warrantholders a certificate, signed in good faith by the President of the Company, stating that the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and it therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period ending on the one hundred eightieth day after the Company's receipt of the Request. SECTION 4.02. OBLIGATIONS OF THE COMPANY. Whenever required under this Warrant to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective, and, upon the request of the Warrantholder keep such Registration Statement effective for up to one hundred twenty (120) days. (b) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement. (c) Furnish to Warrantholder such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registered Securities owned by it. (d) Use its best efforts to register and qualify the Registered Securities under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Warrantholder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the manager underwriter of such -11- 12 offering. The Warrantholder into and perform its obligations under such agreement. (f) Notify the Warrantholder in the event the Company has delivered preliminary or final prospectuses to the Warrantholder and, after having done so, such prospectus is amended to comply with the requirements of the Securities Act. Upon such notification, the Warrantholder shall immediately cease making offers of Registered Securities and return all prospectuses to the Company. The Company shall promptly provide the Warrantholders with revised prospectuses and, following receipt of the revised prospectuses, the Warrantholder shall be free to resume making offers of the Registered Securities. (g) Furnish, at the request of the Warrantholder on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Warrant, if such securities are being sold through underwriters, on the date that the Registration Statement with respect to such securities become effective, (i) an opinion, dated such date, of the counsel representing the Company for the customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Warrantholder and (ii) the letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Warrantholder. SECTION 4.03. FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Warrant with respect to the Registrable Securities of the Warrantholder that shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration. SECTION 4.04. EXPENSES OF DEMAND REGISTRATION. All expenses (including underwriting discounts and commissions) incurred in connection with registrations, filings or qualifications pursuant to Subsection 6.01, including (without limitation) all registration, filing and qualification fees, printing and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of counsel for the Warrantholder shall be borne by the Warrantholder. -12- 13 SECTION 4.05. PIGGYBACK REGISTRATION RIGHTS. ------------------------------------------------ (a) If at any time prior to the Expiration Date, the Company proposes to register any of its stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to (i) the sale of securities to participants in a Company stock option plan, stock purchase plan, savings or similar plan, or (ii) the sale of securities as part of an acquisition, merger or exchange of stock or a registration on any form which does not include substantially the same information as would be included in a Registration Statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give the holder of Registrable Securities written notice of such registration. Upon the written request of the Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 7.08, the Company shall use its best efforts, subject to the provisions of Section 4.03, to cause to be registered under the Securities Act all of the Registrable Securities that each Holder has requested to be registered; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 4.01(a) without obligation to any holder. (b) The Company is obligated to effect only two (2) such registrations of Registrable Securities under this Section 4.05. SECTION 4.06. EXPENSES OF PIGGYBACK REGISTRATION. The holder of Registrable Securities shall bear an equitable portion of all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to all registrations pursuant to Section 4.05 including, without limitation, all registration, filing, and qualification fees, printing and accounting fees relating or apportionable thereto, disbursements of counsel and underwriting discounts and commissions relating to the Registrable Securities. SECTION 4.07. UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 4.05 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. SECTION 4.08. DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any -13- 14 controversy that might arise with respect to the interpretation or implementation of this Warrant. ARTICLE V OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER SECTION 5.01. NO RIGHTS AS SHAREHOLDER; NOTICE TO WARRANTHOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Warrantholder or his, her or its transferee the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or of any other matter, or any rights whatsoever as a shareholder of the Company. SECTION 5.02. WARRANTHOLDER RIGHTS IN OFFERING. The Warrantholder shall have the right to participate in any rights offering which may be undertaken by the Company prior to the Expiration Date, on a pro rata basis with the holders of the Company's Common Stock (including oversubscription rights), as if the Warrantholder had exercised this Warrant prior to any such offering. For the purposes of this Section 5.02, each share into which this Warrant may be converted shall be deemed to be an outstanding share of the Company's Common Stock. SECTION 5.03. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may in its discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant. ARTICLE VI SPLIT-UP, COMBINATION EXCHANGE AND TRANSFER OF WARRANTS SECTION 6.01. SPLIT-UP, COMBINATION, EXCHANGE AND TRANSFER OF WARRANTS. Subject to the provisions of Section 6.02 hereof, this Warrant may be split up, combined or exchanged for another warrant or warrants containing the same terms to purchase a like aggregate number of Warrant Shares. If the Warrantholder desires to split up, combine or exchange this Warrant, he, she or it shall make such request in writing delivered to the Company and shall surrender to the Company this Warrant and any other Warrants to be so split up, combined or exchanged. Upon any such surrender for split up, combination or exchange, the Company -14- 15 shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company shall not be required to effect any split up, combination or exchange which will result in the issuance of a Warrant entitling the Warrantholder to purchase upon exercise a fraction of a share of Common Stock or a fractional Warrant. The Company may require such Warrantholder to pay a sum sufficient to cover any expenses of the Company (including fees of counsel to the Company), and any tax or governmental charge that may be imposed, in connection with any split up, combination or exchange of Warrants. SECTION 6.02. RESTRICTIONS ON TRANSFER. Neither this Warrant nor the Warrant Shares may be disposed of or encumbered (any such action, a "Transfer") other than to an affiliate of the Warrantholder, except with the written consent of the Company which consent shall not be unreasonably withheld and except, in all cases, including a Transfer to an affiliate, in accordance with and subject to the provisions of the Securities Act and the rules and regulations promulgated thereunder. If at the time of a Transfer, a registration statement is not in effect to register this Warrant or the Warrant Shares, the Company may require the Warrantholder to make such representations, and may place such legends on certificates representing this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit a Transfer without such registration. The Company may require any Warrantholder requesting a transfer to pay a sum sufficient to cover the expenses of the Company (including fees of counsel to the Company), and any tax or governmental charge that may be imposed. ARTICLE VII OTHER MATTERS SECTION 7.01. SUCCESSORS AND ASSIGNS. All the covenants and provisions of this Warrant by or for the benefit of the Company shall bind and inure to the benefit of its successors and assigns hereunder. SECTION 7.02. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of this Warrant enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Warrantholder in this Warrant or otherwise conflicts with the provisions hereof. The rights granted to the Warrantholder hereunder do not in any way conflict with and are not inconsistent with the rights granted to holders of the Company's securities under any other agreements. -15- 16 SECTION 7.03. INTEGRATION/ENTIRE AGREEMENT. This Warrant is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertaking, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Warrants. This Warrant supersedes all prior agreements, and understandings between the parties with respect to such subject matter. SECTION 7.04. AMENDMENTS AND WAIVERS. The provisions of this Warrant, including the provisions of this sentence, may not be amended, modified or supplemented, and waiver of or consents to departure from the provisions hereof may not be given unless the Company has obtained the written consent of the Warrantholders whose Warrants entitle them to purchase a majority of the outstanding Warrant Shares. SECTION 7.05. COUNTERPARTS. This Warrant may be executed in any number of counterparts, and by the parties hereto in separate counterparts, each of which so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 7.06. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of Ohio. SECTION 7.07. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. SECTION 7.08. NOTICE. Any notices or certificates by the Company to the Warrantholder and by the Warrantholder to the Company shall be deemed delivered if in writing and delivered in person or by registered mail (return receipt requested) to the Warrantholder addressed to it at 13515 Yarmouth Drive, N.W. Pickerington, OH 43147, or, if the Warrantholder has designated, by notice in writing to the Company, any other address, to such other address; and if to the Company, addressed to it at: Resource America, Inc., 1521 Locust Street, Suite 700, Philadelphia, Pennsylvania 19102, or, if the Company has designated, by notice in writing to the Warrantholder, any other address, to such other address. -16- 17 The Company may change its address by written notice to the Warrantholder and the Warrantholder may change its address by written notice to the Company. IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under its corporate seal as of the 20th day of June, 1995. Attest: RESOURCE AMERICA, INC. By:/s/Scott F. Schaeffer By:/s/Michael L. Staines ------------------------- ------------------------- Scott F. Schaeffer, Michael L. Staines, Assistant Secretary Senior Vice President [CORPORATE SEAL] -17- EX-11.1 4 RESOURCE AMERICA 10-Q EX-11.1 1 Exhibit 11.1 CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE Earnings per common share and common share equivalent are determined by dividing net income by the weighted average number of common shares and common share equivalents outstanding during each period. Common share equivalents consist of common shares issuable upon the exercise of stock options, provided the effect is dilutive, less common shares assumed to have been purchased with the proceeds therefrom. Provided below is a table reconciling common stock outstanding to common stock and common stock equivalents used to compute earnings per share:
Three Months Nine Months Ended June 30, Ended June 30, ------------------------- ---------------------- Primary 1995 1994 1995 1994 ------- ------- ------- ------- ------- Weighted average number of common shares outstanding 678,600 701,500 680,700 702,000 Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants 115,700 5,600 72,400 5,600 -------- -------- -------- -------- 794,300 707,100 753,100 707,600 ======= ======= ======= ======= Fully Diluted(a) ------------- Weighted average number of common shares outstanding 678,600 701,600 680,700 701,900 Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants 123,300 5,600 85,200 5,600 -------- -------- -------- -------- 801,900 707,200 765,900 707,500 ======= ======= ======= ======= (a) This calculation is submitted in accordance with Securities Exchange Act of 1934 Release no. 9083 although not required by footnote 2 to paragraph 14 of APB Opinion no. 15 because it results in dilution of less than 3%.
15 EX-27 5 RESOURCE AMERICA 10-Q EX-27
5 9-MOS SEP-30-1995 OCT-01-1994 JUN-30-1995 2,960,623 0 886,245 0 139,621 4,241,472 31,555,371 18,748,041 38,314,763 906,381 10,561,075 8,179 0 0 25,949,128 38,314,763 2,485,046 8,360,488 1,178,987 6,187,056 0 0 844,277 2,174,723 372,000 1,802,723 0 0 0 1,802,723 2.39 2.39