Item 1. BUSINESS.
General
Resurgence Properties Inc. and its subsidiaries and sub-partnership (the "Company") are engaged in diversified real estate activities, including the ownership, operation and management of retail, office, industrial/warehouse and residential real estate, and investments in mortgage loans on real estate and land.
The Company is managed and administered by Wexford Management LLC, a Connecticut limited liability company ("Wexford" or the "Manager"). Wexford Management Corp., formerly Concurrency Management Corp., a Delaware corporation ("Concurrency"), assigned all of its rights and obligations under the Wexford Management Agreement (as defined under "-- Wexford Management Agreement") to Wexford, effective January 1, 1996. In this Form 10-K, unless the context otherwise requires, all references to "Wexford" or the "Manager" for periods prior to such assignment shall refer to Concurrency and for periods subsequent to such assignment shall refer to Wexford. See "--Wexford Management Agreement" and "Certain Relationships and Related Transactions --Wexford Management Agreement".
Background
The Company was incorporated on March 24, 1994, as a wholly-owned subsidiary of Liberte Investors (formerly Lomas & Nettleton Mortgage Investors), a business trust organized under the laws of the Commonwealth of Massachusetts ("Liberte"). In connection with the First Amended Plan of Reorganization, dated December 14, 1993, as modified ("Liberte's Plan of Reorganization"), of Liberte filed with the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"), Liberte transferred to the Company most of its assets and the Company assumed certain of Liberte's obligations, including its indebtedness under its bank credit facilities, and the holders of subordinated indebtedness received all of the shares of Resurgence's common stock, par value $.01 per share (the "Common Stock"), in exchange for such indebtedness.
Plan of Liquidation
On April 24, 1997, the Board of Directors approved a plan of complete liquidation and dissolution of the Company (the "Plan") which was approved by a majority vote of the shareholders on September 26, 1997. The key features of the Plan are: (1) the cessation of all business activities, other than those in furtherance of the Plan; (2) the sale or disposition of all of the Company's assets; (3) the satisfaction of all outstanding liabilities; (4) the payment of liquidation distributions to shareholders in complete redemption of the Common Stock; and (5) the authorization of the filing of Articles of Dissolution. Through March 15, 1998, the Company has made distributions of $52,000,000 ($5.20 per share of Common Stock) since adoption of the Plan. The Company made a distribution of $25,000,000 ($2.50 per share) prior to the adoption of the Plan. The amount and timing of any liquidation distributions will depend upon a variety of factors including, but not limited to, the actual proceeds from the sale of any of the Company's assets, the ultimate settlement amounts of the Company's liabilities and obligations, actual costs incurred in connection with carrying out the Plan, including management fees and administrative costs during
the liquidation period, and the timing of the liquidation and dissolution. Accruals totaling approximately $1,100,000 have been recorded as of July 1, 1997 for the estimated future costs of liquidating the Company which include, but are not limited to, costs of disposing of the Company's remaining assets and general and administrative costs through the estimated conclusion of liquidation. The Company believes that in addition to the costs and expenses associated with facilitating the plan, it will be necessary to set aside a Contingency Reserve in the amount of approximately $1,500,000. No liability has been accrued for such contingencies. Following the payment, satisfaction or other resolution of such contingencies, the Plan provides that any amounts remaining in the Contingency Reserve shall be distributed to the Company's stockholders.
Assets Under Management
The Company's primary objectives are to liquidate its assets in the shortest time period possible while realizing the maximum values for such assets and reduction of operating costs. Although the Company considers its assumptions and estimates as to the values and timing of such liquidations to be reasonable, the period of time to liquidate the assets and distribute the proceeds of such assets is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control.
The real estate assets under management at December 31, 1997 are summarized by type as follows:
ESTIMATED LIQUIDATION VALUE
Office Building (Illinois) $ 12,215,000 Industrial Complex (New Jersey) 4,518,000 Mortgage Note (Texas) 300,000 Land (California) 88,000 ------------ $ 17,121,000 ============
Subsequent to December 31, 1997, the Company sold the Industrial Complex and Land assets at its estimated liquidation values. As of March 15, 1998, total real estate assets under management was reduced to $12,515,000.
Wexford Management Agreement
General. Pursuant to a management agreement, dated as of May 4, 1994, as was amended on March 8, 1995, May 4, 1997, December 31, 1997 and March 6, 1998 (the Wexford Management Agreement") between the Company and Wexford, Wexford serves as portfolio manager and asset manager of the Company. Wexford became the Company's asset manager on September 12, 1994 (the "Notice Date"). Joseph M. Jacobs, the President, Chief Executive Officer, Treasurer and a director of the Company is the President and a member of Wexford. Robert Holtz a Vice President and Assistant Secretary of the Company, is a Senior Vice President and a member of Wexford. Jay L. Maymudes, the Chief Financial Officer, a Vice President and the Secretary of the Company, is the Chief Financial Officer and a member of Wexford. Charles E. Davidson, the Chairman of the Board and a director of the Company, is a member of Wexford. Wexford provides management and other services to third parties that are not related to the Company.
Services. As portfolio manager, Wexford's responsibilities have related to the identifying, analyzing, structuring, negotiation and closing of new investment opportunities for the Company. As asset manager, Wexford has agreed to make available Mr. Jacobs to serve as the Chief Executive Officer, President and a director of the Company and to provide to the Company such other officers and employees of Wexford to serve as officers or in other positions of the Company as may be requested. Wexford is responsible either directly or indirectly through sub-managers to manage, service, operate and administer the Company's assets in a diligent, careful and vigilant manner in accordance with industry standards and the Wexford Management Agreement. Responsibilities that may be undertaken by Wexford for the Company relate to possible acquisitions, dispositions and financings (including debt and equity financings). Wexford also has responsibilities relating to the collection of rents, charges, principal and interest with respect to the Company's assets as well as securing compliance with leases and mortgage loans which relate to properties or other assets owned by the Company.
Termination. The original term of the Wexford Management Agreement was scheduled to expire on May 4, 1997, however, pursuant to Amendment No. 2 to the Wexford Management Agreement, the Company and Wexford agreed to extend the expiration date of the Wexford Management Agreement to December 31, 1997. Pursuant to Amendment No. 4, the Wexford Management Agreement has been extended indefinitely on a month to month basis. Either the Company or Wexford may terminate the Agreement at any time for any reason on 30 days prior written notice.
Indemnification. Pursuant to the Wexford Management Agreement, the Company has agreed to indemnify Wexford and its direct or indirect officers, directors, stockholders, agents and employees from, with certain exceptions, losses of any and every kind or nature arising from or in any way connected with Wexford's performance of its obligations under the Wexford Management Agreement. Wexford has agreed to indemnify the Company and its direct or indirect officers, directors, stockholders, agents and employees from losses of any and every kind or nature arising from or in any way connected with (i) acts of Wexford or its officers, agents or employees outside the scope of Wexford's authority under the Wexford Management Agreement and (ii) the gross negligence, willful misconduct or material breach of the Wexford Management Agreement by Wexford or its officers, agents or employees.
Fees. Pursuant to the Wexford Management Agreement, the management fee (the "Wexford Management Fee") payable to Wexford was $1,916,000 in 1996 and $1,482,000 in 1997. The Management Fee for 1998 is $10,000 for January and $22,000 per month thereafter payable in advance on the first day of each calendar month.
Management Options. On May 4, 1994, the Company agreed to grant options (the "Management Options") to purchase an aggregate of 1,111,111 shares of Common Stock at an exercise price of $8.50 per share. The Management Options carried a cashless exercise feature pursuant to which the excess of the Market value of Common Stock underlying a Management Option over the exercise price thereof may be utilized upon exercise of other options by applying such excess upon cancellation to the exercise of such other options in lieu of cash payment of such exercise price. The number of shares of Common Stock beneficially owned by each recipient of Management Options were subject to the ownership limit provision contained in the Company's Charter. In connection with the adoption of
the Plan, in order to provide equivalent economic benefits to Management, which would be adversely impacted by facilitation of the Plan, the Management Options have been exchanged for Management Distributions. The Management Distributions are payable in the amount equal to ten percent of all distributions made to stockholders of the Company in excess of $8.50 per share.
Competition
In its ongoing effort to liquidate certain mortgage loans and real estate investments, the Company competes with commercial banks, savings and loan associations, mortgage bankers and other financial institutions that are seeking to sell their own portfolios of mortgage loans and foreclosed real estate.
Industry Segment
The business of the Company involves only one industry segment. The Company has no foreign operations and its business is not seasonal.
Employees
The Company does not have any employees. The Manager provides all of the administrative personnel required by the Company. See "-- Wexford Management Agreement" and "Certain Relationships and Related Transactions -- Wexford Management Agreement".
Year 2000 Compliance
The inability of computers, software and other equipment unitizing microprocessors to recognize and properly process date fields containing a 2 digit year is commonly referred to as the Year 2000 Compliance issue. As the year 2000 approaches, such systems may be unable to accurately process certain date-based information.
Because the Company is in the final stages of its liquidation, it has not undertaken any studies to determine whether its systems or those third parties with whom it does significant business are vulnerable to the Year 2000 Compliance issue. Management, however, believes that the Company will be liquidated before the Year 2000 Compliance issue could have a material impact on its financial position or operations.
Item 2.
Item 2. PROPERTIES.
Real Estate Assets
The following is a description of the Company's Real Estate Assets as of December 31, 1997:
NAME AND LOCATION GENERAL DESCRIPTION - ----------------- -------------------
Cross Creek Business Center Three story, 116,895 square foot office Deerfield, Illinois building constructed in 1987 and situated on 7.45 acres of land. The property was 90% leased. The property is subject to a mortgage with an outstanding principal balance of $4,701,009 at December 31, 1997. The building is located on a portion of closed landfill. The landfill is believed to be in compliance with all applicable laws and regulations. However, the landfill creates a perception of heightened environmental risk which limits the universe of purchasers.
Lawrenceville Industrial Campus 225,000 square foot, seven building, Lawrenceville, NJ industrial complex situated on 108 acres of land. This property was sold in January 1998 for net proceeds of $4,518,000.
P&V Enterprises Land 12 single family lots. These lots were Palmdale, California sold in February for net proceeds of $88,000.
Mortgage note secured by In connection with the sale of the Southridge Plaza Property Southridge Plaza Property the on Located in Denton, Texas April 28, 1997, the Company took back a promissory Note in the amount of $725,000 which is secured by a deed of trust to the Southridge Plaza Property. The note accrues interest at 4% per annum and matures at the later of three years from the date of the Note or a date which is six months after the date the Texas Natural Resources Conservation Commission (TNRCC) issues a Closure or No Further Action letter, but in no event later then May 1, 2003. The payment of this note is contingent upon the unreimbursed amount of environmental remediation work to be performed at the Southridge Plaza property.
nvironmental and Other Regulatory Matters
Under various federal, state and local laws and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's or operator's ability to sell such real estate or to borrow using such real estate as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility. Certain laws impose liability for release of asbestos into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with exposure to asbestos. In connection with its ownership and operation of the Company's assets, the Company, or Wexford, as the case may be, may be potentially liable for such costs.
The Company believes that generally its assets are in compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances.
Under the Americans with Disabilities Act ("ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. A determination that the Company is not in compliance with the ADA could result in the imposition of fines or an award of damages to private litigants. No assurances can be given as to the actual costs that the Company could incur in complying with the ADA.
Item 3.
Item 3. LEGAL PROCEEDINGS.
The Company is currently the Defendant in a pending litigation in which a claim has been made against the Company for $330,000 and is involved in certain legal proceedings arising in the ordinary course of its business. Although the ultimate disposition of these proceedings is not determinable, management does not believe that such claims or proceedings, individually or in the aggregate, will have a material adverse effect on its financial condition or operations.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY MATTERS.
The Company's Common Stock commenced trading on the NASDAQ SmallCap Market on January 23, 1995 under the symbol RPIA. Set forth below (rounded to the nearest $.01) are the high and low closing bid prices for the Common Stock since January 1, 1997, as reported by the NASDAQ/SmallCap Market. The prices reflect inter-dealer prices, without retail markup, markdown or commission and may not necessarily represent actual transactions.
Fiscal Year 1997 High Low ---------------- ---- ---
Fourth Quarter ................... $5.250 $1.500 Third Quarter .................... $7.250 $6.125 Second Quarter ................... $8.250 $6.000 First Quarter .................... $9.000 $8.125
As of March 1, 1998, there were 43 shareholders of record of the Common Stock. The Common Stock is traded through the Depository Trust Company, which lists broker-dealers and bank participants as owning shares of the Common Stock. As a consequence, the Company believes that the actual number of owners of the Common Stock is substantially in excess of 43. The Company has not paid any dividends with respect to its Common Stock through December 31, 1996. The Credit Agreement, which the Company was a party to through January 30, 1997, contained certain restrictions on the Company's ability to pay dividends. On January 30, 1997, the amount outstanding under the Credit Agreement was repaid and the Credit Agreement was cancelled. During 1997, the Company made distributions of $77,000,000 (7.70 per common share). See "Management's Discussion and Analysis of Financial Condition and Results of Operations --Liquidity and Capital Resources" and Note 5 of the Notes to Consolidated Financial Statements contained in Item 8 hereof.
Item 6.
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial data at the end of and for the periods indicated. The selected consolidated financial data for Liberte (the Company's predecessor) for the fiscal year ended June 30, 1993 and for the nine months ended March 31, 1994 have been derived from Liberte's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, respectively. Such selected financial data are included in the excerpts from the foregoing Form 10-K and 10-Q filed as Appendix I to this Form 10-K. The Company's selected consolidated statement of operations for the period from April 7, 1994 (commencement of operations) through December 31, 1994 and the years ended December 31, 1995, 1996 and 1997 and the selected consolidated balance sheet data as of April 7, 1994, December 31, 1994, 1995, 1996 and 1997 have been derived from the Company's consolidated financial statements which have been audited by the Company's independent auditors, Deloitte & Touche LLP. Those financial statements, other than the April 7, 1994, December 31, 1994 and 1995 balance sheet data, have been included elsewhere in this Form 10-K.
Item 7
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Company's primary objectives are to liquidate its assets in an efficient manner that optimizes the values for such assets and reduction of operating costs. The period of time to liquidate the assets and distribute the proceeds of the Company's assets is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control.
During 1997 the Company sold twenty properties realizing net proceeds of $76,153,000 which were used to pay dividends to Common Shareholders of $77,000,000 as follows:
Results of Operations - General
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996.
All significant fluctuations between 1997 and 1996 were due to the sale of a significant portion of the Company's properties during 1997 and the accrual of estimated costs of liquidating the Company.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
The Company experienced net income of $1,727,000 for the year ended December 31, 1996 compared to a net loss of $7,156,000 for 1995, primarily as a result of greater total revenues and lower total expenses, partially offset by a decline in the extraordinary gain resulting from purchases of interests in its Senior Debt for the year ended December 31, 1996 compared to 1995.
Total revenues increased $1,197,000 for the year ended December 31, 1996, primarily due to an increase of $2,248,000 in mortgage loan interest income as a result of the repayment of the Jersey Property Corp. pool of mortgages, an increase in the net gain from asset dispositions of $1,283,000 as a result of the sale of certain assets at net sales prices greater than their carrying value, an increase in other income of $931,000 primarily as a result of a settlement received in September 1996 from a lawsuit the Company instituted against a former tenant for default of their lease obligations and an increase in investment income of $106,000, partially offset by a decrease in revenues from its operating real estate properties of $3,371,000. This decrease in revenues is primarily due to the sale during 1996 of seven operating properties (Barrington Hills, Copper Creek Apartments, Cimmaron Plaza, Harbor Bay Business Park, Olympia Corners Shopping Center, Pike Plaza and Shoppes at Cloverplace).
Investment income for the year ended December 31, 1996 increased to $784,000 from $678,000 for the year ended December 31, 1995 primarily due to a greater amount of cash available for investment during the year ended December 31, 1996.
Total expenses decreased $8,366,000 for the year ended December 31, 1996 compared to the prior year, primarily as a result of the decrease in expenses associated with the seven operating properties that were sold in 1996, lower interest expense on the Senior Debt as a result of principal paydowns and debt purchases made during 1996, a reduction in expenses of non-income producing assets resulting from the sale of many of such assets during 1996, a decrease in general and administrative expenses and a decrease in write-downs for impairment of value.
General and administrative expenses decreased $426,000 for the year ended December 31, 1996 from the prior year, primarily due to a decrease in legal and consulting fees.
The extraordinary gain of $159,000 is a result of the Company's purchase of $8,075,000 face amount of Senior Debt for approximately $7,916,000 (net of closing costs) during 1996.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditor's Report
Consolidated Statement of Net Assets in Liquidation as of December 31, 1997
Consolidated Balance Sheet (going concern basis) as of December 31, 1996
Consolidated Statement of changes in Net Assets in Liquidation for the six months ended December 31, 1997
Consolidated Statements of Operations (going concern basis) for the six months ended June 30, 1997 and the years ended December 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity (going concern basis) for the six months ended June 30, 1997 and the years ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows (going concern basis) for the six months ended June 30, 1997 and the years ended December 31, 1996 and 1995
Notes to Consolidated Financial Statements
All financial statement schedules have been omitted either because the required information is not applicable or the information is shown in the consolidated financial statements or notes thereto.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of Resurgence Properties Inc.
We have audited the accompanying consolidated statements of net assets in liquidation of Resurgence Properties Inc. and subsidiaries (the "Company") as of December 31, 1997 and the related consolidated statement of changes in net assets in liquidation for the six months ended December 31, 1997. In addition, we have audited the accompanying consolidated balance sheet of the Company as of December 31, 1996 and the related statements of operations, shareholders' equity and cash flows for the six months ended June 30, 1997 and the years ended December 31, 1996 and 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with general accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note A to the consolidated financial statements, the Company's shareholders have approved a plan of complete liquidation and dissolution of the Company. As a result, the Company has changed its basis of accounting from the going concern basis to the liquidation basis effective July 1, 1997, under which the consolidated financial statements reflect assets at estimated net realizable amounts and liabilities at anticipated settlement amounts.
In our opinion, such consolidated financial statements present fairly, in all material respects, (1) the net assets in liquidation of the Company at December 31, 1997, (2) the changes in its net assets in liquidation for the six months ended December 31, 1997, (3) its financial condition at December 31, 1996 and (4) the results of its operations and its cash flows for the six months ended June 30, 1997 and the years ended December 31, 1996 and 1995 in conformity with generally accepted accounting principles on the bases described in the preceding paragraph.
/s/DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP
New York, New York March 13, 1998
See notes to consolidated financial statements
See notes to consolidated financial statements
See notes to consolidated financial statements
See notes to consolidated financial statements
See notes to consolidated financial statements
See notes to consolidated financial statements
RESURGENCE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts)
A. ORGANIZATION AND BASIS OF PRESENTATION
Resurgence Properties Inc. and its subsidiaries (the "Company") are engaged in diversified real estate activities. The Company was incorporated on March 25, 1994 and began its operations on April 7, 1994, when the Company succeeded to most of the assets of Liberte Investors ("Liberte") upon consummation of Liberte's bakruptcy plan ("the Plan of Reorganization"). The Company is managed and administered by Wexford Management LLC ("Wexford").
On April 24, 1997, the Board of Directors approved a plan of complete liquidation and dissolution of the Company (the "Plan") which was approved by a majority vote of the shareholders on September 26, 1997. The key features of the Plan are: (1) the cessation of all business activities, other than those in furtherance of the Plan; (2) the sale or disposition of all of the Company's assets: (3) the satisfaction of all outstanding liabilities; (4) the payment of liquidating distributions to shareholders in complete redemption of the Common Stock; and (5) the authorization of the filing of Articles of Dissolution. As a result of the adoption of the Plan, the Company adopted the liquidation basis of accounting effective July 1, 1997, whereby assets are valued at their estimated net realizable values and liabilities are stated at their estimated settlement amounts, and an accrual is recorded for the estimated costs of operating the Company until its liquidation. The valuation of assets and liabilities requires many estimates and assumptions by management and there are substantial uncertainties in carrying out the provisions of the Plan. The amount and timing of any liquidating distributions will depend upon a variety of factors including, but not limited to, the actual proceeds from the sale of any of the Company's assets, the ultimate settlement amounts of the Company's liabilities and obligations, actual costs incurred in connection with carrying out the Plan, including management fees and administrative costs during the liquidation period, and the timing of the liquidation and dissolution. Accruals totaling approximately $1,100 have been recorded as of July 1, 1997 for the estimated future costs of liquidating the Company which include, but are not limited to, costs of disposing the Company's remaining assets and general and administrative costs through the estimated conclusion of liquidation.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial statements contain the accounts of Resurgence Properties Inc. and its wholly owned subsidiaries, Resurgence TX LP, Inc., Resurgence TX GP, Inc., Resurgence Properties Texas, LP., West Side Mall Corp., Asten Associates Corp. and Jersey Property Corp. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Operating Real Estate Assets, Depreciation and Write-down for Impairment - Prior to the adoption of the liquidation basis of accounting (Note A), each operating real estate property was carried at the lower of cost less accumulated depreciation or fair value, net of closing costs. Expenditures directly related to the acquisition and improvement of real estate properties were capitalized at cost as land, buildings and improvements. Each property was evaluated periodically to ascertain that net carrying value does not exceed fair value as determined by management. A write-down for impairment was recognized when it is determined that the net carrying value of an asset exceeds its fair value. Facts considered in the evaluation are the estimated future cash flows, current occupancy levels, the prospects for the property and the economic situation in the region where the property is located. The amount of impairment was measured as the difference between net carrying value and fair value.
Buildings, improvements and equipment were depreciated over their estimated useful lives using the straight-line method. Tenant improvements were capitalized and amortized over the terms of the respective leases. Certain other costs associated with leasing the operating properties were capitalized and amortized over the periods benefited by the expenditures. Expenditures for recurring maintenance and repairs were expensed as incurred.
Assets Held for Sale - Prior to the adoption of the liquidation basis of accounting (Note A), foreclosed real estate, whether held for the production of income or held for sale, was recorded at the lower of cost or fair value, net of closing costs. Any excess of the recorded investment in the mortgage loan relating to such real estate over the fair value of the collateral was recognized as a loan loss in the current period to the extent that it is not offset against previously established allowances. Operating properties and mortgage loans under contract for sale were classified as assets held for sale.
Write-down for Possible Losses on Mortgage Loans and Assets Held for Sale - Prior to the adoption of the liquidation basis of accounting (Note A), the Company recorded write-downs for possible losses on mortgage loans and assets held for sale based on an evaluation of each real estate loan and each property acquired through foreclosure and held for sale. Consideration was given to the collectibility of the mortgage loans and to the estimated value of the collateral underlying a loan or of properties held.
Income Taxes - The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which requires the recognition of deferred tax liabilities and deferred tax assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities.
Cash and Cash Equivalents - All investments in money market instruments and U.S. Treasury notes have a maturity of three months or less at the time of purchase, are highly liquid and are considered to be cash equivalents.
Income Recognition - Rentals on operating real estate are recorded on the straight-line method over the effective lease term. Interest and other income are recorded on the accrual method of accounting as earned. The Company discontinues the accrual of interest income on mortgage loans when circumstances exist which cause the collection of such interest to be doubtful. Determination to discontinue accruing interest is made after a review by the Company's management of all relevant facts, including delinquency of principal and/or interest and the credit of the borrower. Mortgage loans classified as non-earning are mortgage loans on which the accrual of interest has been discontinued.
Net Income (Loss) Per Common Share - Net income (loss) per common share has been computed by adjusting net income (loss) for dividends on redeemable preferred stock, to arrive at earnings (loss) attributable to the common stockholders and then dividing such amount by the average number of common shares outstanding during the period. The redeemable preferred stock is not considered to be a common stock equivalent, as it cannot be converted into common shares.
Average common shares used in the computations of net income (loss) per common share for the six months ended June 30, 1997 and for the years ended December 31, 1996 and 1995 were 10,000,000. The effects of stock options as discussed in Note J are not considered in the computations, as their effect is antidilutive.
New Accounting Pronouncements - The Financial Accounting Standards Board has recently issued several new accounting pronouncements. Because the Company is in liquidation, Management does not believe these pronouncements will have any impact on its net assets in liquidation or the changes in those assets.
C. RESTRICTED CASH
The Company believes that in addition to the costs and expenses associated with facilitating the plan, it is necessary to set aside a Contingency Reserve of approximately $1,500. No liability has been accrued for such contingencies. Following the payment, satisfaction or other resolution of such contingencies, the Plan provides that any amounts remaining in the Contingency Reserve shall be distributed to the Company's stockholders.
D. REAL ESTATE ASSETS
Real estate assets at December 31, 1997 have been recorded at the estimated net realizable values in liquidation. No independent appraisals have been obtained on these assets. The estimated net realizable values have been determined based on actual sales subsequent to the balance sheet date, signed contracts, contract negotiations, internal analysis, inquiries or offers from prospective purchasers, inquiries of market professionals and expected selling costs and operating results through the anticipated disposal date.
Real estate assets at December 31, 1997 are summarized by type as follows:
The industrial complex and land were sold in January 1998 and February 1998, respectively, for net proceeds of $4,606.
E. OPERATING REAL ESTATE ASSETS
The following summarizes the net carrying value of the Company's Operating real estate assets at December 31, 1996 by type:
During 1997, the Company sold five operating properties (Greenway Village, Riverwood Plaza, Stuart Square, Southern Plaza and Home Center Village) for net cash proceeds of $25,668.
During 1996, the Company sold seven operating properties (Barrington Hills, Breighton-Copper Creek, Cimarron Plaza, Harbor Bay, Olympia Corners, Pike Plaza and Shoppes at Cloverplace), for net cash proceeds of $26,473.
F. ASSETS HELD FOR SALE
The following sets forth the Company's assets held for sale at December 31, 1996 by category:
During 1996, the Company acquired a tax lien on a seven building industrial complex located in Lawrenceville, New Jersey, for $3,256 (including closing costs). In October 1996, the Company obtained title to the property. During 1996, the Company sold various land assets for net proceeds of $3,089.
During 1997, the Company sold ABCO Plaza, Cortez Plaza, 1025 Vermont Avenue, Bayshore Club Apartments, Executive Airport, Southridge Plaza, Riverbend Shopping Center, Ramser-Newton Avenue and various land assets for net proceeds of $50,485.
G. SENIOR DEBT
Pursuant to the Plan, the Company assumed certain liabilities of Liberte, including the obligations of Liberte for the repayment of secured lenders. The Company, the secured lenders and Fleet National Bank of Massachusetts, formerly Shawmut Bank Connecticut, as administrative agent, were parties to the Secured Credit Agreement (the "Agreement"). Under the Agreement, the Company assumed and agreed to pay the secured lenders a total of $81,836 (the "Senior Debt") which included $6,000 payable to Liberte. At the option of the Company, the Senior Debt bore interest at either (a) LIBOR as defined plus 2% through March 31, 1996 and 2.5% thereafter, or (b) the alternate base rate, which is the higher of the corporate base rate or the federal funds effective rate plus 1/2%. The Company had the ability to select interest rates for various components of the Senior Debt for various
periods of time. At December 31, 1996, the interest rate was 8.25%. Interest payments were due based upon the period of time opted, but generally could be extended beyond three months. The Senior Debt was repayable in quarterly installments of $1,620 through September 30, 1998 plus a payment of $10,800 due on or before March 31, 1996 with a final payment of $41,876 on December 31, 1998. The Company could prepay without penalty or premium any portion of the outstanding balance.
Substantially all of the Company's assets were collateral for the Senior debt. The Agreement provided for certain covenants relating to asset and collateral coverage, debt ratios and net worth levels. Additionally, the agreement limited or restricted the Company's ability to acquire and dispose of assets, incur additional indebtedness, purchase its common stock and pay dividends or make other distributions on its common stock.
During 1996, the Company purchased participating interests in the Senior Debt in the principal amount of $8,075 for $7,916, and during 1995 the Company purchased participating interests in the Senior Debt in the principal amount of $13,353 for $12,514. The difference between the purchase price and the principal amount acquired, net of closing costs, was recorded as an extraordinary gain.
In January 1997, the Company repaid the entire outstanding balance of its Senior debt, including accrued interest, obtained lien releases on all of its collateralized assets and terminated the Agreement.
H. MORTGAGE NOTE PAYABLE
The Mortgage note payable represents a 9.75% per annum fixed rate nonrecourse, first mortgage note maturing on September 1, 1998 and collateralized by the Cross Creek Business Center.
I. REDEEMABLE PREFERRED STOCK
The Company has authorized 5,000,000 shares of serial preferred stock, par value $.01 per share, of which 300,000 shares have been designated Series I mandatorily redeemable preferred stock (the "Preferred Stock") and have been issued to Liberte. The Preferred Stock cannot be redeemed until after March 31, 1999, but must be redeemed upon the earlier to occur of i) April 1, 2001, ii) the merger or consolidation of the Company with another entity or iii) the sale of substantially all of its assets.
Dividends on the Preferred Stock are cumulative at an annual rate of $.095 per share and are payable quarterly. The Preferred Stock is redeemable at $1 per share and has a liquidation preference of $1 per share plus any dividends in arrears.
The preferred stockholders have certain rights which restrict the Company's ability to pay dividends or make other distributions on junior stock if the preceding four quarterly dividends on the Preferred Stock have not been paid in full or declared and set apart for payment. The preferred stockholders generally do not have any voting rights. The preferred stockholders may elect an additional director to the board if dividends are in arrears for 12 quarterly dividends or if the redemption at April 1, 2001 has not been paid in full.
J. AGREEMENTS WITH MANAGERS
On May 4, 1994, the Company entered into a Management Agreement, as amended, with Concurrency Management Corp. ("Concurrency"), which was assigned to Wexford Management LLC ("Wexford") as of January 1, 1996, pursuant to which Wexford serves as portfolio manager. The original term of the Wexford Management Agreement was scheduled to expire on May 4, 1997, however, the Board of Directors and Wexford agreed to an extension of the Management Agreement under a reduced fee arrangement through December 31, 1997. The extended Management Agreement provided for a fee payable to Wexford of $1,482 for the year ending December 31, 1997. For the year ended December 31, 1996 and 1995, Wexford was paid a Management Fee of $1,916 and $2,049, respectively. The Management Agreement was indefinitely extended during 1998 on a month to month basis subject to cancellation by either party for any reason upon 30 days prior written notice. The Management fee for 1998 is $10,000 for January and $22,000 per month thereafter. Certain officers of the Company are also officers of Wexford. Various unrelated property managers have been engaged to oversee daily property activities.
On May 4, 1994, the Company agreed to grant option (the "Management Option") to purchase an aggregate of 1,111,111 shares of Common Stock at an exercise price of $8.50 per share. The Management Options carried a cashless exercise feature pursuant to which the excess of the market value of the Common Stock underlying a Management Option over the exercise price thereof may be utilized upon exercise of other options by applying such excess upon cancellation to the exercise of such other options in lieu of cash payment of such exercise price. The number of shares of Common Stock beneficially owned by each recipient of Management Options were subject to the ownership limit provision contained in the Company's Charter.
Pursuant to the approved plan of liquidation, the Management Options were exchanged for Management Distributions. The Management Distributions are payable in the amount equal to ten percent of all distributions made to stockholders of the Company in excess of $8.50 per share. The Management Distribution compensation package was designed to provide the same economic benefits as the Management Options.
K. INCOME TAX
The Company files a consolidated federal income tax return including all its subsidiaries. At December 31, 1997, the Company had estimated net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $16.8 million, which expire in the years 2009 through 2012.
Following is a summary of the deferred tax asset as of December 31, 1997 and 1996:
It has not been established that it is more likely than not that the benefits of the deferred tax assets will be realized, accordingly a valuation allowance has been established in the entire amount of the deferred tax asset.
L. COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
Management believes that any costs relating to environmental risks or compliance with applicable environmental laws or regulations to which the Company may be subject will not have a material adverse effect on the Company's financial condition or results of operations.
Under the Americans with Disabilities Act ("ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants. Management estimates that the costs of making these modifications are immaterial and will be capitalized for financial reporting purposes. Because final regulations under the ADA have not yet been promulgated, the Company could incur additional costs of complying with the ADA.
M. WRITE-DOWNS FOR IMPAIRMENT OF VALUE AND LOAN LOSSES
Prior to adoption of the liquidation basis of accounting (Note A), the Company monitored the value of its assets to ascertain that the net carrying value of its assets were not in excess of fair value based on current information available to the Company. Write-downs were taken so as to reduce the net carrying value of these assets to amounts that in the Company's judgement reflect fair value. No independent appraisal of these assets occurred or was contemplated. The determination of fair value is based on future economic events which are inherently subjective.
Write-downs for impairment of value and loan losses charged to operations were as follows:
N. DIVIDENDS PAID
The following table summarizes the dividends paid to common shareholders during 1997:
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The names, ages and positions of the directors and executive officers of the Company are set forth below as of March 1, 1998. All directors are elected annually and hold office until their successors are elected and qualified, or until their earlier removal or resignation. All officers serve at the discretion of the Board of Directors.
Name Age Positions ---- --- ---------
Charles E. Davidson 44 Chairman of the Board and Director
Joseph M. Jacobs 45 Chief Executive Officer, President, Treasurer and Director
Karen M. Ryugo 1 & 2 38 Director
Vance C. Miller 1 & 2 64 Director
Lawrence Howard, M.D. 1 43 Director
Jeffrey A. Altman 1 & 2 31 Director
Robert Holtz 30 Vice President and Assistant Secretary
Jay L. Maymudes 37 Vice President, Chief Financial Officer and Secretary - -------- 1 Member of Compensation Committee 2 Member of Audit Committee
Charles E. Davidson has been a director of the Company and the Chairman of the Board of Directors of the Company since its formation in March 1994. Mr. Davidson also serves as Chairman of the Board of DLB Oil & Gas, Inc., a corporation engaged primarily in the exploration for and development of shallow crude oil and natural gas fields. Mr. Davidson is the managing principal of a number of private investment partnerships. From December 1985 to May 1994, Mr. Davidson was a general partner of Steinhardt Partners, L.P. and Institutional Partners, L.P., private investment funds. He is currently the Chairman and a member of Wexford.
Joseph M. Jacobs has been a director of the Company and the Chief Executive Officer, President and Treasurer of the Company since its formation in March 1994. From May 1994 through December 18, 1996, Mr. Jacobs was the President and sole stockholder of Concurrency, the previous asset manager and portfolio manager of the Company. Mr. Jacobs is the President and a member of Wexford, the current asset and portfolio manager of the Company. See "Certain Relationships and Related Transactions -- Wexford Management Agreement". From 1982 through May 1994, Mr. Jacobs was employed by, and since 1988 was the President of, Bear Stearns Real Estate Group, Inc., a firm engaged in all aspects of real estate. Bear Stearns Real Estate served as the Company's portfolio manager from February 7, 1994 to May 3, 1994.
Karen M. Ryugo has been a director of the Company since its formation in March 1994. She was also a Vice President and the Secretary of the Company from January 1995 until May 1997. Since May 1997, Ms. Ryugo has acted as an independent financial consultant. Ms. Ryugo was a Senior Vice President of Wexford from January 1995 through April 1997 and serves as a director of several private companies. From 1988 through December 1994, Ms. Ryugo was employed by Steinhardt Management Company, Inc., an investment management company, where she was responsible for analyzing special situations, including corporate restructurings and acquisitions.
Vance C. Miller has been a director of the Company since its formation in March 1994. Mr. Miller is also the President and Chairman of Vance C. Miller Interests and related entities and the Henry S. Miller Companies, diversified real estate investment companies, and a director of Pilgrims Pride Corporation, a processor of poultry. Mr. Miller has been a real estate developer, builder and manager of over $500 million in real estate projects since 1970.
Dr. Lawrence Howard, M.D. has been a director of the Company since its formation in March 1994. Dr. Howard is a founder of Presstek, Inc. (a public company) and has been a director since November 1987. Dr. Howard was Vice Chairman of Presstek from November 1992 to February 1996, Chief Executive Officer and Treasurer from June 1988 to June 1993, President from June 1988 to November 1992 and Vice President from October 1987 to June 1988. From March 1997 to the present, Dr. Howard has been a general partner of Hudson Ventures, L.P., a limited partnership that has qualified as a small business investment company. From July 1995 to March 1997, Dr. Howard was President of Howard Capital Partners, Inc., an investment and merchant banking firm. From July 1994 to July 1995, Dr. Howard was Senior Managing Director of Whale Securities Co. L.P., an NASD registered broker-dealer. From October 1992 through June 1994, Dr. Howard was President and Chief Executive Officer of LH Resources, Inc., a management and financial consulting firm.
Jeffrey A. Altman has been a director of the Company since April 1995. Mr. Altman is also the Chairman and Trustee of Value Property Trust. Since 1988, Mr. Altman has been an analyst at Franklin Mutual Advisors, Inc., formerly Heine Securities Corporation, a registered investment adviser.
Robert Holtz has been a Vice President and Assistant Secretary of the Company since its formation in March 1994. From May 1994 through December 18, 1996, he was a Vice President of Concurrency and since January 1996 a Senior Vice President and a member of Wexford. From 1989 through May 1994, Mr. Holtz was employed by, and since 1993 was a Vice President of, Bear Stearns Real Estate, where he was responsible for analysis, acquisitions and management of the assets owned by Bear Stearns Real Estate, and its clients.
Jay L. Maymudes has been the Chief Financial Officer and a Vice President of the Company since July 1994. He was also an Assistant Secretary of the Company until January 1995, when he became the Secretary. From July 1994 through December 18, 1996, Mr. Maymudes was the Chief Financial Officer and a Vice President of Concurrency and since January 1996, a Senior Vice President, Chief Financial Officer and Treasurer of Wexford. From December 1988 through June 1994, Mr. Maymudes was the Secretary and Treasurer, and since February 1990 was a Senior Vice President, of Dusco, Inc., a real estate investment adviser.
Steinhardt Partners L.P. and Institutional Partners L.P. who, together as a group, beneficially owned more than 10% of the Common Stock of the Company during the earlier part of 1995, failed to file on a timely basis their respective Forms 5 with respect to the sale on April 6, 1995 of all of the shares of Common Stock of the Company owned, by each of them.
Item 11.
Item 11. EXECUTIVE COMPENSATION.
The following table sets forth the long-term compensation paid by the Company to the Chief Executive Officer for services rendered in all capacities to the Company during the fiscal years ended December 31, 1997 and 1996:
Mr. Jacobs was not granted any Management Options during the years ended December 31, 1997, 1996 and 1995. Pursuant to the terms of the Wexford Management Agreement, the Company granted Mr. Jacobs and another executive officer of the Company in their capacity as officers of Wexford an aggregate of 555,555 Management Options during the year ended December 31, 1994 and another executive officer of the Company in his capacity as officer of Wexford 15,000 Management Options during the year ended December 31, 1995. Management Options underlying 17,719 shares were forfeited to Mr. Jacobs by certain employees of Wexford during the year ended December 31, 1996 as a result of their termination.
None of the Management Options were exercised by the Chief Executive Officer during the fiscal year ended December 31, 1997. In connection with the adoption of the plan of liquidation, all Management Options were exchanged for Management Distributions of which Mr. Jacobs is entitled to receive approximately 86.4% of all such management distributions. See "Business - - "Wexford Management Agreement".
Compensation of Directors
Each non-officer director of the Company, including the Chairman of the Board, receives director's fees at the rate of $15,000 per year, payable on a quarterly basis. Karen M. Ryugo, who served as a non-compensated officer of the Company until January 1995, has also been entitled to such fee. All directors are reimbursed for actual expenses reasonably incurred in connection with attendance at any meeting of the Board or committees of the Board in accordance with such guidelines as the Company may adopt from time to time.
Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors was given the responsibility of considering the Company's management agreement with Wexford. The Compensation Committee is also authorized to review and approve the remuneration arrangements for employees of the Company, if any, review any benefit plans for employees and select participants and approve awards under, and interpret and administer any employee benefit plans of the Company. Karen M. Ryugo, Dr. Lawrence Howard and Vance C. Miller are the members of the Compensation Committee.
Meetings Held and Action Taken
During 1997, the Board of Directors held three meetings and acted nine times by informal action. The Compensation Committee did not meet during 1997. All Directors participated in the three meetings.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors has been comprised of Karen M. Ryugo, Dr. Lawrence Howard and Vance C. Miller. Until January 1995, Ms. Ryugo was a non-compensated Vice President and the Secretary of the Company. In January 1995, Ms. Ryugo became a Vice President of Concurrency from January 1996 until May 1997, and she was a Senior Vice President of Wexford. In addition, although Joseph M. Jacobs is not a member of the Compensation Committee, as the President and controlling person of Wexford, he has discretionary authority with respect to the grant of Management Options to Wexford's officers and/or employees who, in some instances, are also officers of the Company and, accordingly, Mr. Jacobs performs certain of the functions traditionally reserved for compensation committees. Mr. Jacobs has a residual interest in any ungranted or terminated Management Options to the extent not granted to any other person, or granted to another person but not vested, prior to their expiration. See "Business --Wexford Management Agreement" and "Certain Relationships and Related Transactions --Wexford Management Agreement". Other than the foregoing, none of the members of the Compensation Committee has any relationship with other entities that would require disclosure concerning Compensation Committee Interlocks and Insider Participation.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information known to Resurgence with respect to beneficial ownership of the Common Stock as of March 1, 1998 (except as set forth in the footnotes thereto), by: (i) each person who beneficially owns 5% or more of the Common Stock, (ii) each of the Company's executive officers, (iii) each of the Company's directors, and (iv) all directors and officers as a group. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares of Common Stock as of a given date which such person has the right to acquire within 60 days after such date. For purposes of computing the percentage of outstanding shares of Common Stock held by each person or group of persons named below on a given date, any security which such person or persons has the right to acquire within 60 days after such date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing percentage ownership of any other person.
* Less than 1% of the outstanding Common Stock.
(1) Because shares of Common Stock may be deemed to be beneficially owned by more than one person or group of persons for purposes of Rule 13d-3 under the Exchange Act, each person or group of persons that may be deemed to be a beneficial owner is included on the table.
(2) As the managing members of Farallon Partners, L.L.C. ("FPLLC"), the general partner of each of Farallon Capital Partners, L.P., Farallon Capital Institutional Partners, L.P., Farallon Capital Institutional Partners II, L.P., Farallon Capital Institutional Partners III, L.P. and Tinicum Partners, L.P. (collectively, the "Farallon Partnerships"), Thomas F. Steyer, Fleur E. Fairman, David I. Cohen, Meridee A. Moore, Joseph F. Downes, Jason M. Fish, William F. Mellin, Stephen L. Millham, Andrew B. Fremder and Enrique H. Boilini may each be deemed to own beneficially for purposes of Rule 13d-3 under the Exchange Act the 1,140,700, 1,291,700, 776,600, 25,000 and 213,400 shares held, respectively, by each of such Farallon Partnerships. As the General Partner of each of the Farallon Partnerships, FPLLC may be deemed to own beneficially for purposes of Rule 13d-3 under the Exchange Act the 1,140,700, 1,291,700, 776,600, 25,000 and 213,400 shares held by each of the Farallon Partnerships. These shares are included in the listed ownership. By virtue of investment management agreements between Farallon Capital Management, L.L.C., a registered investment advisor, ("FCMLLC") and various managed accounts, FCMLLC has the authority to purchase, sell and trade in securities on behalf of such accounts and, therefore, may be deemed the beneficial owner of the 567,700 shares held in such accounts. As the managing members of FCMLLC each of Mr. Steyer, Mr. Cohen, Ms. Moore, Mr. Downes, Mr. Fish, Mr. Mellin, Mr. Millham, Mr. Fremder and Mr. Boilini may be deemed the beneficial owner of the 567,700 shares held in such accounts managed by FCMLLC, which shares are included in the listed ownership. FCMLLC and FPLLC and each managing member thereof disclaims any beneficial ownership of such shares. All of the above-mentioned entities and persons disclaim group attribution. The foregoing is based upon information furnished to the Company by the Farallon Partnerships and FCM LLC.
(3) Franklin Mutual Advisers, Inc. ("FMAI") is an investment adviser registered under the Investment Advisers Act of 1940. One or more of FMAI's advisory clients are the beneficial owners of 2,472,200 shares of the Company's common stock. Pursuant to investment advisory agreements with its advisory clients, FMAI has sole investment discretion and voting authority with respect to such securities. FMAI is a wholly-owned subsidiary of Franklin Resources, Inc. ("FRI"), a publicly held financial services corporation. Neither FMAI nor FRI has any interest in dividends or proceeds from the sale of such securities and each disclaims beneficial ownership of all the securities owned by FMAI's advisory clients. The foregoing is based upon information furnished to the Company by FMAI.
(4) See "Directors and Executive Officers of the Registrant" for a description of such person's position with or relationship to the Company.
(5) Includes 691,500 shares held by Wexford Capital Partners II, L.P., 308,500 shares held by Wexford Overseas Partners I, L.P. and 218,500 shares subject to an irrevocable proxy granted to Charles E. Davidson pursuant to which Mr. Davidson may vote all such shares (the "Proxy"). Mr. Davidson disclaims beneficial ownership of the 218,500 shares subject to the Proxy. As the President of the corporate general partners of the general partners of each of Wexford Capital Partners II, L.P. and Wexford Overseas Partners I, L.P. (the "Wexford Partnerships"), Mr. Davidson may be deemed to own beneficially for purposes of Rule 13d-3 under the Exchange Act the 691,500 and 308,500 shares held, respectively, by each of such Wexford Partnerships. The shares held by the Wexford Partnerships were acquired in a privately negotiated transaction. See "Certain Relationships and Related Transactions --Purchase of Common Stock". The foregoing is based upon information furnished to the Company by the Wexford Partnerships.
(6) Pursuant to separate services agreements, M.H. Davidson & Co., Inc. ("M.H. Davidson") has investment and voting discretion with respect to the 24,100 shares of Common Stock held by M.H. Davidson & Co., the 375,000 shares of Common Stock held by Davidson Kempner Partners, the 284,700 shares of Common Stock held by Davidson Kempner Endowment Partners, the 522,000 shares of Common Stock held by Davidson Kempner Institutional Partners, L.P. and the 61,400 shares of Common Stock held by Davidson Kempner International, Ltd. (the "Davidson Kempner Entities"). As principals of M.H. Davidson, Thomas L. Kempner, Jr., Marvin H. Davidson, Stephen M. Dowicz, Scott E. Davidson and Michael J. Leffell may be deemed to own beneficially for purposes of Rule 13d-3 under the Exchange Act the 1,267,400 shares held by the Davidson Kempner Entities. The foregoing is based upon information furnished to the Company by M.H. Davidson. Marvin H. Davidson and Scott E. Davidson are not related to Charles E. Davidson.
(7) Includes 900 shares held by Thomas L. Kempner Foundation and 1,400 shares held by an IRA account for the benefit of Thomas L. Kempner, Jr. As the President of Thomas L. Kempner Foundation Inc., Mr. Kempner may be deemed to own beneficially for purposes of Rule 13d-3 of the Exchange Act the 900 shares held by such foundation, but disclaims beneficial ownership of such shares. The foregoing is based upon information furnished to the Company by Mr. Kempner.
(8) Includes 25,000 shares of Common Stock beneficially owned by Mr. Jacobs' wife and subject to an irrevocable proxy held by Charles E. Davidson, as to which shares Mr. Jacobs disclaims beneficial ownership, and 25,000 shares of Common Stock subject to an irrevocable proxy held by Charles E. Davidson. See "Certain Relationships and Related Transactions -- Purchase of Common Stock".
(9) Includes 2,000 shares of Common Stock subject to an irrevocable proxy held by Charles E. Davidson. See "Certain Relationships and Related Transactions -- Purchase of Common Stock".
(10) Includes 2,500 shares of Common Stock subject to an irrevocable proxy held by Charles E. Davidson. See "Certain Relationships and Related Transactions -- Purchase of Common Stock".
(11) Represents shares of Common Stock subject to an irrevocable proxy held by Charles E. Davidson. See "Certain Relationships and Related Transactions -- Purchase of Common Stock".
The address of Thomas F. Steyer and the other individuals mentioned in footnote 2 above (other than Fleur E. Fairman and Enrique H. Boilini) is c/o Farallon Capital Management LLC, One Maritime Plaza, Suite 1325, San Francisco, California 94111. The address of Fleur E. Fairman is c/o Farallon Partners, L.L.C., One Maritime Plaza, Suite 1325, San Francisco, California 94111 and the address of Enrique H. Boilini is c/o Farallon Capital Management, L.L.C., 75 Holly Hill Lane, Greenwich, CT 06830. The address of Franklin Mutual Advisers, Inc. is 51 J.F.K. Parkway, Short Hills, New Jersey 07078; the address of Wexford Overseas Partners I, L.P. is c/o Hemisphere Management (Cayman) Limited, Zephyr House, P.O. Box 1561, Mary Street, George Town, Grand Cayman, Grand Cayman Islands, BWI; the address of Thomas L. Kempner, Jr. and the other individuals mentioned in footnote 6 above is c/o M.H. Davidson & Co., Inc., 885 Third Avenue, Suite 810, New York, NY 10022; and the business address of Charles E. Davidson, Wexford Capital Partners, L.P., and Joseph M. Jacobs is c/o Wexford Management LLC., 411 West Putnam Avenue, Greenwich, CT 06830.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Wexford Management Agreement
Pursuant to the Wexford Management Agreement, Wexford, was engaged to serve (either directly or indirectly through sub-managers) as portfolio manager and as asset manager of the Company. Joseph M. Jacobs, the President, Chief Executive Officer, Treasurer and a director of the Company, is the President and a member of Wexford. Charles E. Davidson, the Chairman of the Board and a director of the Company, is the Chairman and a member of Wexford. Robert Holtz, a Vice President and Assistant Secretary of the Company, is a Principal and a member of Wexford. Jay L. Maymudes, the Chief Financial Officer, a Vice President and the Secretary of the Company, is the Chief Financial Officer and a Principal of Wexford. See "Business -- Wexford Management Agreement". Wexford provides management and other services to third parties that are not related to the Company. Wexford was paid a Wexford Management Fee of $1,482,000, $1,916,000 and $2,049,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
Transactions with Director
During 1996, the Company paid $163,200 to a company controlled by Vance Miller, a member of the Board of Directors, in connection with serving as real estate broker on the sale of one property.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The consolidated financial statements and independent auditors' report thereon are set forth in Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules are omitted because they are not applicable.
3. Exhibits. See the Exhibit Index at page 84 of this Annual Report on Form 10-K.
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
RESURGENCE PROPERTIES INC.
By: /s/ J. L. Maymudes ------------------ Jay L. Maymudes Chief Financial Officer, Vice President and Secretary (Principal Financial and Accounting Officer) Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the 26 th day of March, 1998.
Signature Title --------- -----
By: /s/ Charles E. Davidson Chairman of the Board and Director ----------------------- Charles E. Davidson
By: /s/ Joseph M. Jacobs Chief Executive Officer, President, -------------------- Treasurer and Director Joseph M. Jacobs (Principal Executive Officer)
By: /s/ Karen M. Ryugo Director ------------------ Karen M. Ryugo
By: /s Vance C. Miller Director ------------------ Vance C. Miller
By: /s/ Lawrence Howard M.D. Director ------------------------ Lawrence Howard, M.D.
By: /s/ Jeffrey A. Altman Director --------------------- Jeffrey A. Altman
By: /s/ Jay L. Maymudes Chief Financial Officer, Vice President ------------------- and Secretary (Principal Financial and Jay L. Maymudes Accounting Officer)
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this Report:
Exhibit No. Description - ----------- -----------
2.1 First Amended Disclosure Statement, dated December 14, 1993, of Liberte Investors. Incorporated herein by reference to Exhibit 2.1 to registrant's registration statement on Form 10. *
2.2 First Amended Plan of Reorganization, dated December 14, 1993, of Liberte Investors. Incorporated herein by reference to Exhibit 2.2 to registrant's registration statement on Form 10. *
2.3 Modification, dated January 19, 1994, of the First Amended Plan of Reorganization of Liberte Investors. Incorporated herein by reference to Exhibit 2.3 to registrant's registration statement on Form 10. *
2.4 Confirmation Order, dated January 24, 1994. Incorporated herein by reference to Exhibit 2.4 to registrant's registration statement on Form 10. *
2.5 Order Amending Confirmation Order, dated April 4, 1994, with Second Modification of the First Amended Plan of Reorganization of Liberte Investors. Incorporated herein by reference to Exhibit 2.5 to registrant's registration statement on Form 10. *
3.1 Articles of Incorporation of the Registrant (including Certificate of Designation, Preference, Rights and Limitations of the Series I Preferred Stock). Incorporated herein by reference to Exhibit 3.1 to registrant's registration statement on Form 10. *
3.2 By-Laws of the Registrant. Incorporated herein by reference to Exhibit 3.2 to registrant's registration statement on Form 10. *
4.1 Stock Option Agreement, dated as of May 4, 1994, between the Registrant and Joseph M. Jacobs. Incorporated herein by reference to Exhibit 4.1 to registrant's registration statement on Form 10. *
4.2 Stock Option Agreement, dated as of May 4, 1994, between the Registrant and Robert Holtz. Incorporated herein by reference to Exhibit 4.2 to registrant's registration statement on Form 10. *
* Incorporated by reference.
Exhibit No. Description - ----------- -----------
4.3 Stock Option Agreement, dated April 1, 1995, between the Registrant and Jay L. Maymudes. Incorporated herein by reference to Exhibit 4.3 to Registrant's Registration Statement on Form S-1, as filed on July 26, 1995. *
10.1 Secured Credit Agreement, dated as of March 31, 1994, among the Registrant, the secured lenders listed in Schedule I thereto and Shawmut Bank Connecticut, National Association, as administrative agent (including Pledge, Security and Custodial Agreements and Guaranty (and addenda thereto). Incorporated herein by reference to Exhibit 10.1 to registrant's registration statement on Form 10. *
10.2 Collateral Agency Agreement, dated as of March 31, 1994. Incorporated herein by reference to Exhibit 10.2 to registrant's registration statement on Form 10. *
10.3 Asset Exchange Agreement, dated as of March 31, 1994, among the Registrant, ST Lending, Inc. and Lomas Management, Inc. Incorporated herein by reference to Exhibit 10.3 to registrant's registration statement on Form 10. *
10.4 Master Assignment between Liberte Investors and ST Lending, Inc. Incorporated herein by reference to Exhibit 10.4 to registrant's registration statement on Form 10. *
10.5 Master Assignment between Liberte Investors and the Registrant. Incorporated herein by reference to Exhibit 10.5 to registrant's registration statement on Form 10. *
10.6 Management Agreement between the Registrant and Concurrency Management Corp., dated as of May 4, 1994. Incorporated herein by reference to Exhibit 10.7 to registrant's registration statement on Form 10. *
10.7 Amendment to Management Agreement between the Registrant and Concurrency Management Corp., dated as of March 8, 1995. Incorporated herein by reference to Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. *
10.8 Form of Indemnification Agreement for officers and directors of the Registrant. Incorporated herein by reference to Exhibit 10.9 to Registrant's Registration Statement on Form 10. *
* Incorporated by reference.
Exhibit No. Description - ----------- -----------
10.9 Assignment of Management Agreement between Concurrency Management Corp. and Wexford Management LLC, effective January 1, 1996. *
21 Subsidiaries and Sub-Partnership of the Registrant.
* Incorporated by reference