<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the second quarterly period ended June 30, 1997
GIANT GROUP, LTD.
9000 Sunset Boulevard, 16th Floor, Los Angeles, California 90069
Registrant's telephone number: (310) 273-5678
Commission File Number: 1-4323
I.R.S. Employer Identification Number: 23-0622690
State of Incorporation: Delaware
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]
On August 8, 1997, the latest practicable date, there were 3,180,655
shares of common stock outstanding.
<PAGE> 2
GIANT GROUP, LTD.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited) -
Three and Six-Month Periods Ended June 30, 1996 and 1997 3
Consolidated Balance Sheets - December 31, 1996
and June 30, 1997 (Unaudited) 4
Consolidated Statements of Cash Flows (Unaudited) -
Six-Month Periods Ended June 30, 1996 and 1997 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURE 12
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
GIANT GROUP, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six-month periods ended June 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three-months ended Six-months ended
June 30 June 30
1996 1997 1996 1997
----------- ----------- ----------- -----------
($ in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenue:
Investment income $ 652 $ 649 $ 1,564 $ 1,348
Gains from sale of investments 1,955 51 2,486 92
Other income 5 4 14 9
----------- ----------- ----------- -----------
Total revenue 2,612 704 4,064 1,449
----------- ----------- ----------- -----------
Costs and expenses:
Co-ownership program -- 497 -- 890
General and administrative 1,057 1,224 1,988 2,358
Proxy contest and related legal 736 -- 736 --
Exchange Offer and related expenses 130 -- 518 --
Interest expense 1 77 32 78
Depreciation and amortization 97 175 177 341
----------- ----------- ----------- -----------
Total costs and expenses 2,021 1,973 3,451 3,667
----------- ----------- ----------- -----------
Gain on sale of investment in affiliate 3,197 -- 3,197 --
Equity in income (loss) of affiliate (168) 14 229 (129)
----------- ----------- ----------- -----------
Income (loss) before benefit
for income taxes 3,620 (1,255) 4,039 (2,347)
Benefit for income taxes (8,563) -- (8,563) --
----------- ----------- ----------- -----------
Net income (loss) $ 12,183 ($ 1,255) $ 12,602 ($ 2,347)
=========== =========== =========== ===========
Earnings (loss) per common share
and common equivalent share $ 2.33 ($ 0.39) $ 2.30 ($ 0.67)
=========== =========== =========== ===========
Weighted average common shares 5,266,000 3,191,000 5,508,000 3,490,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
GIANT GROUP, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------- -------
(Unaudited)
($ in thousands, except per share amounts)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $12,644 $ 3,290
Marketable securities 10,583 22,093
Income tax receivables 10,928 115
Note and other receivables 3,825 454
Assets held-for-sale 21,485 25,586
Prepaid expenses and other current assets 1,013 1,499
------- -------
Total current assets 60,478 53,037
Property and equipment, net 3,559 4,213
Investment in affiliate 2,926 2,797
Note receivable and other assets 2,084 2,853
------- -------
Total assets $69,047 $62,900
======= =======
LIABILITIES
Current liabilities
Note payable $10,500 $10,000
Accounts payable and other liabilities 1,033 766
Income taxes payable 3,362 3,362
Deferred income taxes 164 405
------- -------
Total current liabilities 15,059 14,533
Deferred income taxes 1,173 1,173
------- -------
Total liabilities 16,232 15,706
------- -------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized 2,000,000 shares,
none issued -- --
Class A Common stock, $.01 par value; authorized 5,000,000 shares,
none issued -- --
Common stock, $.01 par value; authorized 12,500,000 shares,
issued 7,266,000 shares at June 30 and December 31 73 73
Capital in excess of par value 36,767 36,767
Unrealized holding gains on marketable securities 246 610
Retained earnings 47,708 45,361
------- -------
84,794 82,811
Less common stock in treasury; 4,085,000 shares at June 30
and 3,626,000 at December 31, at cost 31,979 35,617
------- -------
Total stockholders' equity 52,815 47,194
------- -------
Total liabilities and stockholders' equity $69,047 $62,900
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
GIANT GROUP, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six-month periods ended
June 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
-------- --------
($ in thousands)
<S> <C> <C>
CASH FLOWS (USED) PROVIDED BY OPERATING ACTIVITIES:
Net income (loss) $ 12,602 ($ 2,347)
Adjustments to reconcile net income (loss) to net cash (used)
provided by operating activities:
Depreciation and amortization 177 341
Gain on sale of investments (2,486) (92)
Accretion of discounts on investments (213) (714)
Gain on sale of investment in affiliate (3,197) --
Equity in (income) loss of affiliate (229) 129
Changes in operating assets and liabilities:
(Increases) decreases in assets
Income tax receivables (8,977) 10,813
Note and other receivables 564 60
Prepaid expenses and other 153 (610)
Increases (decreases) in liabilities
Accounts payable and other liabilities 168 (267)
Income tax payable (259) --
-------- --------
Net cash (used) provided by operating activities (1,697) 7,313
-------- --------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Payment of short-term note payable -- (10,500)
Proceeds from refinancing -- 10,000
Purchases of assets held-for-sale -- (4,101)
Payments received on debt investment and short-term advance -- 1,843
Purchases of marketable securities (2,126) (16,474)
Sales of marketable securities 15,263 9,098
Proceeds from sale of affiliate's debt securities 15,620 --
Purchases of affiliate's debt securities -- (2,024)
Proceeds from sale of investment in affiliate 4,751 --
Purchases of property and equipment (133) (871)
-------- --------
Net cash provided (used) by investing activities 33,375 (13,029)
-------- --------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Proceeds from the exercise of stock options 2,025 --
Repayment of short-term borrowings (1,625) --
Purchase of treasury stock (13,348) (3,638)
-------- --------
Net cash used by financing activities (12,948) (3,638)
-------- --------
Increase (decrease) in cash and cash equivalents 18,730 (9,354)
Cash and cash equivalents:
Beginning of period 16,991 12,644
-------- --------
End of period $ 35,721 $ 3,290
======== ========
Supplemental disclosure of cash (paid) received for:
Income taxes ($ 459) $ 10,813
Interest (32) (78)
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with Form 10-Q instructions and in the
opinion of management contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of June 30, 1997, the results of operations for the three
and six-month periods ended June 30, 1996 and 1997 and cash flows for
the six-months ended June 30, 1996 and 1997. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of
the Company's 1996 Annual Report on Form 10-K. Certain 1996 amounts
have been reclassified to conform to the 1997 presentation. Operating
results for the three and six-month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the full
year. It is suggested that the accompanying consolidated financial
statements be read in conjunction with the financial statements and
notes in the Company's 1996 Annual Report on Form 10-K.
2. INVESTMENT IN AFFILIATE
GIANT's investment in Rally's of $2,797 and $2,926 at June 30,
1997 and December 31, 1996, respectively, represents approximately 15%
of Rally's outstanding common stock. At June 30, 1997, the Company
owned 3,137,000 shares of Rally's, the market value of which was
$8,235.
During the quarter ended June 30, 1997, the Company purchased
$2,224 face value of Rally's Senior Notes in the open market, which are
included in marketable securities.
On June 16, 1997, Checkers and Rally's announced that they had
ended talks for a proposed merger which was previously announced on
March 25, 1997.
Summarized financial information for Rally's is as follows:
<TABLE>
<CAPTION>
Operating results: Three-Months Ended Six-Months Ended
--------------------- -----------------------
6/30/96 6/29/97 6/30/96 6/29/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 47,357 $38,090 $ 89,269 $ 70,685
Pre-tax income (loss) from operations 2,413 1,806 (956) 2,821
Extraordinary gain, net of income taxes of $1,817 -- -- 4,522 --
Net income (loss) 111 92 949 (860)
GIANT's share of non-cash equity income
(loss) in Rally's net income (loss) (168) 14 229 (129)
</TABLE>
3. YACHT REFINANCE
On May 16, 1997, the Company signed an agreement to
refinance one of its luxury yachts available for sale under the
Co-Ownership Program. The term of the mortgage is twenty-six months
from the date of advancement of funds, which occurred on May 30, and is
subject to prepayment upon the transfer of an interest in the yacht,
which is collateral for this loan. The interest rate is prime plus one
half of one percent (0.50%). Interest is payable monthly in arrears. In
July, the loan was paid in full.
6
<PAGE> 7
GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
4. COMMITMENTS AND CONTINGENCIES
In January and February 1994, two putative class action
lawsuits were filed, purportedly on behalf of the shareholders of
Rally's in the United States District Court for the Western District of
Kentucky, against Rally's, GIANT, Burt Sugarman, certain Rally's
present and former officers and directors and its auditors. The
complaints allege defendants violated the Securities Exchange Act of
1934, as amended, among other claims, by issuing inaccurate public
statements about Rally's in order to arbitrarily inflate the price of
Rally's common stock, and seek unspecified damages, including punitive
damages. On April 15, 1994, Rally's filed a motion to dismiss and a
motion to strike. On April 5, 1995, the Court struck certain provisions
of the complaint but otherwise denied Rally's motion to dismiss. In
addition, the Court denied plaintiffs' motion for class certification;
the plaintiffs' renewed this motion, and, on April 16, 1996, the Court
certified the class. Two settlement conferences have been conducted but
have been unsuccessful. Discovery is now set to be completed in
September 1997. No trial date has been scheduled yet. Management is
unable to predict the outcome of this matter at the present time or
whether or not certain available insurance coverages will apply.
Rally's and the Company deny all wrong-doing and intend to defend
themselves vigorously in this matter.
In February 1996, Harbor commenced a derivative action,
purportedly on behalf of Rally's, against GIANT, Burt Sugarman, David
Gotterer, and certain of Rally's other officers and directors before
the Delaware Chancery Court. Harbor named Rally's as a nominal
defendant. Harbor claims that the directors and officers of both
Rally's and GIANT, along with GIANT, breached their fiduciary duties to
the public shareholders of Rally's by causing Rally's to repurchase
certain Rally's Senior Notes at an inflated price. Harbor seeks
"millions of dollars" in damages, along with rescission of the
repurchase transaction. In the fall of 1996, all defendants moved to
dismiss this action. On April 3, 1997, the Chancery Court denied
defendants' motion. GIANT denies all wrongdoing and intends to
vigorously defend itself in this action. It is not possible to predict
the outcome of this action at this time.
In February 1996, Michael Shores on behalf of himself and
purportedly all other stockholders of the Company commenced a putative
class action against the Company, and certain of the Company's current
and former directors, Burt Sugarman, David Gotterer, Terry Christensen
and Robert Wynn. The complaint, filed before the Los Angeles County
Superior Court, alleges that these directors breached their fiduciary
duties by adopting a stockholder rights plan, by causing GIANT to sell
certain Rally's Senior Notes back to Rally's, by causing GIANT to
repurchase certain amounts of its own Common Stock pursuant to its
stock repurchase program and by agreeing to the Exchange Offer. The
complaint claims that these actions were undertaken to entrench
management rather than for the benefit of the Company and its
stockholders. The complaint seeks unspecified damages, injunctive
relief and a recovery of attorneys' fees and costs. In February 1997,
defendants filed a motion to dismiss for failure to make a
pre-litigation demand on the Board of Directors to investigate the
plaintiffs' claim. The motion asks the court, in the alternative, to
stay the litigation to permit the Company to address plaintiffs' claims
internally. Argument on this motion is now set for September 3, 1997.
The Company denies all wrongdoing and intends to vigorously defend
itself in this action. It is not possible to predict the outcome of the
action at this time.
7
<PAGE> 8
GIANT GROUP, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
4. COMMITMENTS AND CONTINGENCIES (cont'd)
In October 1996, KCC filed a complaint, in the Los Angeles
County Superior Court, against Joseph Pike, NeoGen Investors, L.P.,
N.D. Management, Inc., NeoGen Holdings, L.P., Danco Laboratories, Inc.
and NeoGen Pharmaceutical, Inc. that states causes of action for fraud,
breach of fiduciary duty, fraudulent concealment, breach of contract,
unfair business practices and permanent and preliminary injunctive
relief and against the licensors of Mifepristone, Population Council
Inc. and Advances in Health Technology, Inc., on a declaratory relief
claim. The complaint seeks damages for the breach by Mr. Joseph Pike
and related entities of a July 24, 1996 agreement by which KCC agreed
to contribute $6,000, in return for a 26% equity interest in the entity
producing the abortion inducing drug, Mifepristone, in the United
States and other parts of the world ("NeoGen Agreement"). The licensors
of Mifepristone claim that their prior approval was necessary for the
July 24, 1996 NeoGen Agreement between KCC and Joseph Pike and the
other defendants. On February 19, 1997, the Pike defendants filed an
answer to the complaint, denying its material allegations and raising
affirmative defenses. On that date, certain defendants filed a
cross-complaint against KCC, GIANT, Burt Sugarman, and two of GIANT's
directors, Terry Christensen and David Malcolm alleging causes of
action for fraud, breach of contract, intentional interference with
prospective economic advantage, negligent interference with prospective
economic advantage and unfair business practices. Discovery is
on-going. Trial has been set for February 23, 1998.
In November 1996, Joseph Pike filed a complaint for defamation
against GIANT, KCC, Burt Sugarman, Terry Christensen, David Malcolm and
Does 1 through 50, in the San Diego County Superior Court. The
complaint seeks an unspecified amount of general, special and exemplary
damages. All defendants have answered the complaint, denying its
material allegations and raising several affirmative defenses. Trial
has been set for November 7, 1997. KCC, GIANT and the other defendants
deny all wrongdoing and intend to vigorously defend the action. It is
not possible to predict the outcome of the action at this time.
Since management does not believe that the previously
mentioned lawsuits, in which the Company is a defendant, contain
meritorious claims, management believes that the ultimate resolution of
the lawsuits will not materially and adversely affect the Company's
financial position or results of operations.
5. NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the FASB issued SFAS No. 128, "Earnings per
Share" (SFAS 128) and SFAS No. 129, "Disclosure of Information about
Capital Structure" (SFAS 129). SFAS 128 revises and simplifies the
computation for earnings per share and requires certain additional
disclosures. SFAS 129 requires additional disclosures regarding the
Company's capital structure. This additional disclosure will be adopted
as prescribed by SFAS 128 and 129. Management does not expect the
adoption of these standards to have a material effect on the Company's
financial position or the results of operations.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. (DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
RESULTS OF OPERATIONS FOR THE THREE AND SIX-MONTHS ENDED JUNE 30, 1997 VERSUS
THE COMPARABLE 1996 PERIOD
Total revenue for the three and six-month periods ended June 30, 1997
decreased by $1,908 to $704 and by $2,615 to $1,449, respectively. The decrease
in revenue resulted from lower gains on the sale of the Company's investments in
marketable securities, recorded in the three and six-month periods ended June
30, 1997 of $1,904 and $2,394, respectively.
During the six months ended June 30, 1997, The Ocean Group incurred
expenses of $1,014, including amortization of start-up costs of $124, in
operating The Co-Ownership Program, which was launched in February 1997.
Expenses consisted primarily of advertising of $285, crew and related expenses
of $245, repairs and maintenance of $148, management and professional fees of
$76 and provisions of $62. Currently, no Co-Ownership interests have been sold.
In 1997, general and administrative expenses for the three and
six-months ended June 30, 1997 and 1996 increased by $167 to $1,224 and by $370
to $2,358, respectively. For the current quarter, this increase is primarily due
to higher rent and office expenses of $91, both related to the Company's move
into its new office space and higher travel of $62. For the six months ended
June 30, 1997, the increase is primarily due to higher travel of $167, higher
rent and office expenses of $103, and higher salaries and benefits of $72.
Interest expense for the three and six-month periods ended June 30,
1997 and 1996 increased by $76 to $77 and by $46 to $78, respectively, primarily
due to the financing of one of the luxury yachts in the second quarter. Interest
expense for the prior six month period included $30 related to the Company's
9.25% Term Note, which was paid in February, 1996.
GIANT's investment in Rally's at June 30, 1997 and December 31, 1996,
represents approximately 15% of Rally's outstanding common stock. Rally's
reported a net income of $92 and a net loss $860 for the three and six-months
ended June 29, 1997 and a net income of $111 and $949 for the three and
six-months ended June 30, 1996. GIANT's non-cash equity in Rally's for the three
and six-months ended June 30, 1997 was income of $14 and a loss of $129 compared
to a loss of $168 and income of $229 for the comparable 1996 period. Rally's
current year to date operating results improved as a result of substantial
reductions in food, paper and labor costs as a percentage of sales, as compared
to last year. However, the positive effect of cost savings in the second quarter
was reduced as a result of higher advertising expenses and costs incurred
related to the proposed merger between Rally's and Checkers, which was
terminated in June 1997. Prior year to date net income included an extraordinary
income item of $4,522, net of tax, related to the early extinguishment of debt.
In addition, Giant's 1996 non-cash equity in Rally's earnings has been adjusted
to reflect the decrease in the Company's ownership percentage in Rally's due to
sale of Rally's common stock to CKE and Fidelity in May 1996.
The Company's consolidated financial statements reflect valuation
allowances of $4,848 and $4,796, at June 30, 1997 and December 31, 1996,
respectively, as it is not likely, as defined in SFAS No. 109 that these tax
benefits will be realized in the near future.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, marketable securities and income tax and
other receivables totaled $25,952 at June 30, 1997 compared with $37,980 at
December 31, 1996. At June 30, 1997 and December 31, 1996, the Company had
working capital of $38,504 and $45,419, respectively, and current ratios of
approximately 4 to 1. In addition, as of June 30, 1997 and December 31, 1996,
the Company owned 3,137,000 shares of Rally's common stock, having a market
value of $8,235.
At June 30, 1997 and December 31, 1996, the Company's consolidated
balance sheets included a liability of approximately $3,200 related to a
proposed assessment by the State of California made as a result of their audit
of the tax years 1989 through 1991. GIANT has vigorously disputed this
assessment and is awaiting the resolution.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. (CONT.) (DOLLARS IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
Net cash provided by operating activities for the six-months ended June
30, 1997 was $7,313 compared to cash used by operating activities of $1,697 for
the comparable period in 1996. This increase in cash provided by operating
activities was attributable to income tax refunds of $10,813 received related to
the realization of capital losses on the 1996 sales of Rally's common stock and
net operating loss carryback claim, lowered by cash used for the funding of the
Company's operations.
Net cash used by investing activities for the six-months ended June 30,
1997 was $13,029 compared to cash provided by investing activities of $33,375
for the comparable period in 1996. During the first three months of 1997, the
Company paid the remaining balance of $10,500 on the short-term note which
financed assets purchased in 1996 for The Co-Ownership Program. On May 16, 1997,
the Company signed an agreement to borrow $10,000. This loan is secured by one
of its luxury yachts. The term of the mortgage is twenty-six months from the
date of advancement of funds, which occurred on May 30, and is subject to
prepayment in the event of a transfer of an interest in this yacht. In July, the
loan was paid in full. The Company received principal payments of $1,843 on its
investment in Checkers 13% subordinated debt, including payment in full of the
1996 short-term advance. Finally, during the current year, the Company paid $871
for furniture and equipment and for leasehold improvements for its new office
space.
Net cash used by financing activities for the six-months ended June 30,
1997 was $3,638 compared to $12,948 for the comparable period in 1996. In 1997,
the Company, with the approval of the Board of Directors, purchased 459,000
shares of its own Common Stock at a cost of $3,638 compared to 1,465,000 shares
at a cost of $13,348 in 1996.
The Company's current liquidity is provided by cash and cash
equivalents, liquidation of marketable securities, cash received from note
receivables and investment income. Management believes that this liquidity, plus
the Company's capital resources and its ability to obtain financing at favorable
rates are sufficient for the Company to properly capitalize its current and
future business operations, as well as fund its on-going operating expenses.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements: Certain information included in this
document (as well as information included in oral statements or other written
statements made or to be made by the Company) contains statements that are
forward-looking, such as statements relating to plans for future activities.
Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made by or on behalf of the Company. These risks and uncertainties include, but
are not limited to, those relating to the development and implementation of the
Company's new business plan, the acceptance of the Company's Luxury Yacht
Co-Ownership Program, conditions affecting the luxury yacht business generally,
domestic and global economic conditions, activities of competitors, changes in
federal or state tax laws and of the administration of such laws.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding legal matters, see Note 4 of the Notes to
Consolidated Financial Statements on page 7 of this Form 10-Q and Item
3 "Legal Proceedings" as reported in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May 8, 1997.
The stockholders elected a Board of five directors, approved proposals
to amend the Company's 1985 Non-Qualified Stock Option Plan, the
Company's 1996 Employee Stock Option Plan and the Company's 1996 Stock
Option Plan Non-Employee Directors, approved the adoption of the 1997
Incentive Compensation Plan for Executive Officers and ratified the
appointment of Arthur Andersen LLP as the Company's independent
auditors.
Results of the voting in connection with each of the matters submitted
to the stockholders were as follows:
<TABLE>
<CAPTION>
For Against No Vote
--- ------- -------
<S> <C> <C> <C>
Board of Directors
------------------
Terry Christensen 2,351,339 - 412,851
David Gotterer 2,351,061 - 413,129
David Malcolm 2,351,061 - 413,129
Jeffery Rosenthal 2,351,361 - 412,829
Burt Sugarman 2,350,795 - 413,395
Amend Company's 1985 Non-Qualified Stock Option Plan 2,133,475 536,480 94,235
Amend Company's 1996 Employee Stock Option Plan 1,603,733 869,705 290,752
Amend Company's 1996 Stock Option Plan for Non- 1,648,429 835,078 280,683
Employee Directors
Adopt Company's 1997 Incentive Compensation Plan for
Executive officers 2,471,634 110,580 181,976
Ratify appointment of Arthur Andersen LLP as Company's
independent auditors 2,689,965 62,122 12,103
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Loan agreement ($10,000,000) between GIANT MARINE
GROUP, LTD. and debis Financial Services, Inc., dated
May 16, 1997.
10.2 Mortgage between GIANT MARINE GROUP, LTD. ("Owner")
and debis Financial Services, Inc. ("Mortgagee"),
dated May 16, 1997.
11. Statement re: Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the
second quarterly period ended June 30, 1997.
ITEMS 2, 3, AND 5 are not applicable.
11
<PAGE> 12
SIGNATURE
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.
GIANT GROUP, LTD. - Registrant
Date: August 8, 1997 By: /s/ BURT SUGARMAN
------------------------------------
Burt Sugarman
Chairman of the Board and Chief
Executive Officer
Date: August 8, 1997 By: /s/ PASQUALE A. AMBROGIO
------------------------------------
Pasquale A. Ambrogio
Controller
12
<PAGE> 1
EXHIBIT 10.1
[DEBIS FINANCIAL SERVICES, INC. LOGO]
LOAN AGREEMENT
(VESSEL FINANCING)
US$10,000,000.00 DATE: 16 MAY 1997
For value received, GIANT MARINE GROUP, LTD., a DELAWARE corporation
whose principal place of business is 9000 SUNSET BOULEVARD, 16TH FLOOR, LOS
ANGELES, CA 90069 as Borrower (herein referred to as "Borrower"), promises
to pay to the order of DEBIS FINANCIAL SERVICES, INC., a Delaware corporation
("Lender"), at its principal place of business at 201 MERRITT, 7 SUITE 700,
NORWALK, CONNECTICUT 06856, U.S.A., or at such other place as may be designated
in writing, all in lawful money of the United States of America, the principal,
interest and other sums specified below on the terms set forth below.
1. PRINCIPAL AMOUNT
The principal amount owing on this Loan is TEN MILLION AND 00/100 IN
UNITED STATES DOLLARS (US$10,000,000.00).
2. INTEREST RATE
The interest rate on amount owing on this Loan shall be the Bank of
America Prime Loan Rate plus ONE HALF OF ONE PERCENT (0.50%) PER ANNUM. "Prime
Rate" is the Prime Commercial Rate of Bank of America from time to time in
effect, FULLY FLOATING. Interest begins to accrue on the date funds are
advanced on the Loan and continues to accrue until all amounts owing on the
Loan are fully paid. Interest is calculated on the basis of a 360-day year and
30-day month.
3. REPAYMENT
The term of this Loan is TWENTY-SIX (26) MONTHS from the date of
advancement of funds by Lender to Borrower on the Loan, SUBJECT TO REQUIRED
PREPAYMENT DUE TO THE TRANSFER OF AN INTEREST in the vessel, which is
collateral for this Loan ("Vessel Collateral"), as discussed hereafter.
Interest payments on the Loan are due from Borrower to Lender monthly
in arrears, with the date of the first payment being thirty (30) days after the
date of advancement of funds, and the date of the twenty-five (25) subsequent
monthly payment being the same date of the month for each of the twenty-five
(25) subsequent months thereafter.
The principal of the Loan and any other amounts then outstanding will
be repaid from Borrower to Lender in one lumpsum in the TWENTY-SIXTH (26TH)
month of the term of this Loan. The date of that payment will be the same date
of the month on which the interest payments have been made.
Borrower contemplates selling TWENTY-FIVE PERCENT (25%) interests in
the Vessel Collateral to third parties. IMMEDIATELY UPON THE CLOSING OF ANY
SALE OF AN INTEREST IN THE VESSEL COLLATERAL, BORROWER SHALL PAY TO LENDER AS A
PRINCIPAL REDUCTION ON ANY AMOUNT OUTSTANDING ON THIS LOAN THE FULL PURCHASE
PRICE (LESS CLOSING COSTS) of that interest.
4. VESSEL COLLATERAL
This Loan is secured by a vessel more particularly described in a DEED
OF COVENANTS AND FIRST STATUTORY MORTGAGE dated 16 MAY 1997, signed by
Borrower, and delivered to Lender (collectively referred to herein as
"Mortgage").
5. LATE CHARGE
If any payment is not received in full by Lender with then (10) days
after it is due, Borrower agrees to pay an amount equal to five percent (5.0%)
of the past due payment, or the maximum amount permitted under applicable law
if less, in addition to the full amount of the past due payment.
6. DEFAULT
On Borrower's failure to pay when due any amount required to be paid on
this Loan or on the occurrence of any other event identified as a default in
the Mortgage, after any applicable cure period, if any, Lender may, at its
option, declare that the full amount owing on this Loan is immediately due and
payable , and Borrower shall, in lieu of any late charge, and in addition to
the interest being paid pursuant to section 2 of this Loan, pay interest from
the date notice of default of acceleration is served upon it on the full amount
then outstanding at a monthly rate of two percent (2.0%) until all amounts due
on the Loan are paid in full.
7. TAXES
1
<PAGE> 2
All payments (whether of principal, interest, or otherwise) to be made
by the Borrower to the Lender hereunder shall be made free and clear of and
without deduction for any taxes, levies, duties, charges, fees, deductions or
withholdings of any nature now or hereinafter imposed. If at any time
applicable law requires the Borrower to make any such deduction or withholding,
the sum due from the Borrower shall be increased to the extent necessary to
ensure that the Lender receives an after tax sum equal to the sum which it
would have received after taxes had no such deduction or withholding been
required. Should any tax (other than a tax on Lender's income) be levied in
connection with this transaction by the Bahamas or any other government entity,
as between Borrower and Lender, Borrower will be responsible for that tax and
will indemnify and hold harmless Lender therefrom.
8. MISCELLANEOUS
Where necessary to properly give meaning to or to clarify the terms of
this Loan, this Loan is to be interpreted together with the Mortgage and any
other documents executed in connection with this Loan and the Mortgage.
Payments made on this Loan will be applied first to any accrued
interest and then to principal.
No delay or omission on the part of Lender in demanding payment or
exercising any right under this Loan shall operate as a waiver of payment or
any other right. Borrower waives presentment, demand, protest, and notice of
dishonor.
If there is more than one person or entity signing this Loan as
Borrower, the obligations under this Loan shall be joint and several.
In any action brought on this Loan, the prevailing party agrees to pay
all reasonable attorney fees and costs incurred in that action, whether at
trial, on appeal, or in any bankruptcy proceeding.
All or any part of the outstanding balance of this Loan may be prepaid
without penalty.
This Loan shall be governed by the laws of the state of Connecticut,
U.S.A. (excluding Connecticut's conflicts of law rules), and Borrower hereby
submits to the jurisdiction of the courts of that state, provided, however,
that Lender shall have the right, but not the obligation, to litigate in any
state or country in which Borrower or any of its assets may be located.
BORROWER: GIANT MARINE GROUP, LTD.
BY: /s/ BURT SUGARMAN
-------------------------------
BURT SUGARMAN, PRESIDENT
2
<PAGE> 1
EXHIBIT 10.2
DEBRIS LOGO
DEED OF COVENANTS
ARTICLE I
GRANT OF MORTGAGE AND VESSEL PARTICULARS
1. This Deed of Covenants ("Mortgage") dated _______ MAY 1997, is collateral
to secure that FIRST STATUTORY MORTGAGE dated _______ MAY 1997, both being made
and delivered by GIANT MARINE GROUP, LTD., a corporation incorporated under the
laws of the state of DELAWARE IN THE UNITED STATES OF AMERICA, whose principal
place of business is 9000 SUNSET BOULEVARD, 16TH FLOOR, LOS ANGELES, CA 90069
("Owner"), to DEBIS FINANCIAL SERVICES, INC., a Delaware corporation, with its
principal place of business at 201 MERRITT 7, SUITE 700, NORWALK, CONNECTICUT
06856 ("Mortgagee").
2. Owner is the sole owner of 100% of the whole 64/64ths shares in the vessel
hereinafter named and described and is justly indebted to Mortgagee, as
evidenced by that certain LOAN AGREEMENT dated 16 MAY 1997, in the principal
amount of TEN MILLION AND 00/100 IN UNITED STATES DOLLARS (US$10,000,000.00)
(which principal sum does not include interest, expenses and fees) ("Loan").
3. In consideration of the Mortgagee's extension of credit to Owner as
evidenced by the Loan, and for other good and valuable consideration, and to
secure payment and performance of the Loan, any extensions or renewals of the
Loan, and all obligations of Owner under this Mortgage, as it may be hereafter
supplemented or amended, Owner hereby mortgages to Mortgagee, its successors
and assigns, 100% of the whole of the vessel named below:
NAME PORT OFFICIAL NUMBER
KAHALANI NASSAU 723355
together with all masts, boilers, cables, engines, machinery, bowsprits, sails,
riggings, boats, anchors, chains, tackle, spare parts, apparel, furniture,
fittings, tools, pumps, equipment and supplies, and all other appurtenances,
accessories, additions, improvements, and replacements now or hereafter
belonging thereto, whether or not removed therefrom, all of which shall be
referred to herein as "Vessel."
4. The amount of the debt secured by this Mortgage is US$10,000,000.00,
together with interest, expenses and fees that may accrue pursuant to the Loan
and this Mortgage.
ARTICLE II
PARTICULAR COVENANTS OF OWNER
1. Owner is and shall continue to be a company duly incorporated and in good
standing under the laws of the STATE OF DELAWARE IN THE UNITED STATES OF
AMERICA and is entitled and has the power to own and operate the Vessel under
its own name and to register and maintain the Vessel on the BAHAMAS Register of
Ships. Owner shall at all times maintain the Vessel on the BAHAMAS Register of
Ships and comply with all requirements thereof.
2. All action necessary for the execution, delivery and validity of this
Mortgage, and of the Loan, has been taken, and no further consents or
authorizations are required. Owner shall continue to be authorized to do
business in any state or country wherein the nature of the Company's activities
requires it to be so authorized.
3. Owner lawfully owns and possesses all 64/64ths of the Vessel free from all
liens and encumbrances whatsoever and warrants that this Mortgage is and shall
remain a first prior, and preferred ship's mortgage and maritime lien against
the Vessel. Owner shall defend Mortgagee's first lien position, together with
owner's title to and right to possession of the Vessel for the benefit of
Mortgagee against all persons whomsoever. Owner shall not set up against
Mortgagee or any assignee of this Mortgage any claim of owner against Mortgagee
or its assignee under any past or future transaction. Owner shall do everything
necessary to establish and maintain this Mortgage as a first preferred mortgage
on the Vessel.
4. Owner will, at its own expense, cause to be carried and maintained on the
Vessel, insurance in such amounts, against such risk, in such form (including,
without limitation, a loss payable clause which shall be in favor of Mortgagee,
and a cancellation clause and designation of named assured, which shall include
Mortgagee), and with such insurance companies, underwriters or funds as shall be
in the reasonable judgment of Mortgagee necessary or advisable for the
protection of Mortgagee's interest in the Vessel; provided, however, that Owner
will in any event cause the following minimum insurance to be carried or
maintained.
(a) Marine Insurance on the Vessel in an amount at least equal to 115%
of the Loan or the full market value of the Vessel, whichever is greater,
covering the Vessel against all such usual marine risks as provided in the
American Institute Hull Clauses (June 2, 1977, as amended) including, without
limitation, the customary Inchmaree and four/fourths running down clause. While
laid up, the Vessel may, instead of the foregoing, be covered by all-risk port
insurance in the same amount which shall include coverage for mysterious
disappearance or theft;
1
<PAGE> 2
(b) Protection and indemnity insurance, as per Form SP23 or
equivalent, including, if engaged in towing, collision and liability coverage
for the towing vessel, in an amount not less than the full market value of the
Vessel.
(c) Additional Perils Insurance, including coverage against liability
for oil spills and other pollution; and
(d) Breach of Warranty Insurance for the full amount of the Loan, in
favor of Mortgagee.
Owner may substitute different forms for any of the above forms of insurance
if such substitute forms furnish at least equal coverage, and Owner may
eliminate from any such insurance any risk customarily covered thereunder if
such risk is insured under a separate but different form of policy furnishing
at least equal coverage. The deductible of any such insurance shall not exceed
five percent (5.0%) of the value of the Vessel. Copies of all policies or
certificates evidencing such insurance shall be given to Mortgagee for its
approval and retention at least ten (10) days prior to the effective date
thereof. All policies or certificates evidencing insurance required to be
carried and maintained by this Section 4 shall provide the underwriters shall
give at least thirty (30) days prior written notice to Mortgagee in the event
of cancellation.
The underwriters of the insurance referred to in this Section 4 shall make no
payments to Owner, nor shall Owner accept such payments, without the express
written permission of Mortgagee. Mortgagee may waive the terms of this
provision at its option.
On behalf of Mortgagee, Owner will make all proofs of loss and take all other
action necessary or appropriate to collect on insurance carried on the Vessel.
To that end, Mortgagee, at Owner's expense, will execute such claim papers and
other documents, take such action and furnish such information, as Owner may
reasonably request in writing, including tendering abandonment of the Vessel
to underwriters.
Owner will not commit any act, nor voluntarily suffer or permit any act to be
committed or omitted, whereby any insurance required to be carried and
maintained hereunder shall or may be suspended, impaired, or defeated; nor will
Owner operate the Vessel outside the navigational limits or cruising range
established under any insurance policy obtained by Owner, or otherwise use the
Vessel as any time when it is not covered by insurance. Owner will comply at
all times with any restrictions imposed by any insurance policies upon the
geographical area in which the Vessel may be operated.
Owner agrees to sign any additional documents which Mortgagee deems are
necessary to protect or perfect Mortgagee's interest in the Vessel and, for
that purpose, hereby makes Mortgagee its attorney-in-fact for signing
builder's certificates, manufacturer's statements of origin, title
certificates, or other documents necessary to effect the purpose of this
Mortgage without enhancing Mortgagee's position beyond this Mortgage. Mortgagee
is also hereby appointed Owner's attorney-in-fact as respects insurance claims
in excess of US$1,000,000.00, and Mortgagee, should it elect to exercise its
authority, shall have full power and authority to make, compromise, pursue, and
collect on any claim which could be made on insurance on the Vessel or
insurance provided pursuant to this Mortgage; provided, however, that Mortgagee
shall not act unreasonably as respects its exercise of that authority and shall
pay to Owner any amount it collects which is in excess of amounts owned
Mortgagee by Owner.
5. Owner shall operate or locate the Vessel only in such geographical areas as
are permitted by its required insurance carrier, and, on request of Mortgagee,
shall advise Mortgagee of the Vessel's location.
6. Owner shall not, without the prior written consent of Mortgagee: (a)
mortgage the Vessel or any interest in it, (b) charter the Vessel for any term
longer than ninety (90) consecutive days, (c) merge or consolidate with any
other corporation, or dissolve, (d) transfer responsibility for the Vessel's
operation and management to any entity, or (e) transfer any interest in the
Vessel if to do so would disqualify the Vessel from flying the Bahamas flag or
from being registered in the Bahamas. Owner hereby gives its irrevocable
consent to any action which may better secure to the Mortgagee the terms of
this clause (6). Should Owner transfer any ownership interest in the Vessel to
a third party, it will immediately notify debis of that transfer.
7. Owner shall maintain the Vessel, at its expense, in a seaworthy condition
fit for all its contemplated uses, shall make such repairs as are necessary to
keep the Vessel in as good a condition as it was in on delivery to Owner, and
shall not operate or navigate the Vessel in an unsafe or unsound manner or
otherwise expose the Vessel to undue risk of the sea.
8. Neither Owner nor any agent, master, or charterer of the Vessel has or
shall have any right, power, or authority to create, incur, or permit to
be placed or imposed upon the Vessel, any lien whatsoever other than the lien
of this Mortgage. Should any lien other than the lien of this Mortgage attach
to or be asserted against the Vessel, Owner will immediately act to discharge
and defend the same, and the failure of Owner to bond debis against the line or
secure the discharge of any lien within twenty (20) days of its attachment, or
to defend the assertion of a lien, will be deemed a breach of this Mortgage. A
provision that any charterer shall have not authority, right, or power to incur
liens against the Vessel, together with the provisions of paragraphs 8 and 11
of this Article II shall be included in any charter entered into on the Vessel.
9. Owner and any charterer of the Vessel shall place and keep prominently
in the pilot house, chartroom, or master's cabin (or elsewhere on the Vessel if
none of those places exist) any notice of this Mortgage if required by law, and
shall keep a proper copy of this Mortgage with the ship's papers and exhibit to
all persons having business with the Vessel and to Mortgagee on demand.
2
<PAGE> 3
10. Owner shall pay when due all taxes, assessments, governmental charges,
fines, and penalties lawfully imposed and promptly discharge any and all liens
whatsoever upon the Vessel. Owner shall at its own expense and at all times
maintain the Vessel in good repair and working order, making all proper
renewals and replacements of necessary equipment.
11. If the Vessel shall be libeled, attached, detained, seized, or levied upon
or taken into custody under process or under color of any authority, Owner
shall forthwith notify Mortgagee by telex or facsimile, confirmed by letter, and
forthwith discharge or release the Vessel therefrom.
12. Owner and any charterer of the Vessel shall and at all times afford
Mortgagee complete opportunity to inspect the Vessel and its papers as is
reasonable under the circumstances, and to examine Owner's or charterer's
related accounts and records as is reasonable under the circumstances, and
shall certify quarterly, if Mortgagee requests, that all wages and all other
claims whatsoever which might have given rise to a lien upon the Vessel, have
been paid.
13. From time to time, Owner shall execute and deliver such other and further
instruments and assurances as in the opinion of Mortgagee's counsel may be
required to subject the Vessel more effectively to the lien hereof, and to
effect sales as provided in paragraph 2(d) of Article III.
ARTICLE III
DEFAULT
1. The following are "Events of Default" under this Mortgage.
(a) Failure to timely pay the principal, interest, or any other amount
due under the Loan or this Mortgage.
(b) Breach of any provision of Article II of this Mortgage, and, in
particular, should the Vessel suffer any substantial damage or become a
constructive total loss; provided, however, that breaches of the following
provisions of Article II shall not be deemed a default until the passage of
twenty (20) days from the breach so as to give Owner an opportunity to cure the
breach; failure of Owner to remain a corporation in good standing pursuant to
paragraph 1 or to be authorized to do business pursuant to paragraph 2, failure
of Owner to make such repairs as are necessary to keep the Vessel in its
delivery condition pursuant to paragraph 7, failure of Owner to pay amounts due
pursuant to paragraph 10, and failure of Owner to make the quarterly
certifications which Mortgagee may request pursuant to paragraph 12;
(c) Any representation made by Owner being false or misleading in any
way; provided, however, with respect to any non-material representation, Owner
shall have twenty (20) days from Mortgagee's notification to Owner that it
considers the representation to be false or misleading within which to cure
before the false or misleading nature of the representation shall be considered
as Event of Default;
(d) Filing of any petition in bankruptcy by or against Owner, or
appointment of a receiver for Owner or any of Owner's property, or the taking
by any court of any action comparable thereto; provided, however, that if such
bankruptcy, receivership, or court taking is not the voluntary action of Owner,
Owner shall have thirty (30) days (or such further time as Mortgagee may
determine is warranted if Owner is taking reasonable steps which are likely to
secure dismissal) in which to obtain the dismissal of the proceeding before the
proceeding will be considered to be an Event of Default; and
(e) Entry of a final judgment against Owner, provided, however, that
Owner shall have thirty (30) days within which to discharge any judgment for
the payment of money and entry of a final judgment for the payment of money
shall not be an Event of Default unless Owner fails to pay or otherwise
discharge or bond the same within that thirty (30) day time period.
2. On the occurrence of an Event of Default, Mortgagee may:
(a) Declare all amounts owing on the Loan and this Mortgage to be
immediately due and payable;
(b) Collect any earned charter hire and freight monies relating to
services performed by the Vessel;
(c) Retake the Vessel with or without legal process at any time
wherever the same may be;
(d) After repossession, sell the Vessel, free from any claim by Owner
of any nature whatsoever, in the manner provided by law, provided that, to the
extent permitted by law, such sale may be public or private, without having the
Vessel present, and Mortgagee may become the purchaser; provided, however, that
Owner shall be entitled to ten (10) days notice of any sale, which obligation
will be fulfilled by Mortgagee's sending such notice by registered or certified
mail to Owner's last known address.
Mortgagee and its agent are hereby irrevocably appointed the true and lawful
attorneys of Owner in its name to make all necessary transfers of the Vessel on
its sale after repossession.
3. In the event that the Vessel shall be arrested or detained by an officer of
any court or by any other authority, Owner hereby authorizes Mortgagee, its
officers, representatives and appointees, in the name of Owner or of Mortgagee,
to receive or to take possession of the Vessel, to defend any action, and
discharge any lien.
4. Each and every power or remedy herein given to Mortgagee shall be
cumulative and in addition to all powers or remedies now or hereafter existing
in admiralty, in equity, at law or by statute, and may be exercised as often as
may be deemed expedient by Mortgagee. No delay or omission by Mortgagee shall
impair any right, power or remedy, and no waiver of any default shall waive any
other default. In any suit Mortgagee shall be entitled to obtain appointment of
a receiver for the Vessel
3
<PAGE> 4
and any earnings thereof, which receiver shall have full rights and powers to
use and operate the Vessel, and to obtain a decree ordering and directing the
sale and disposition thereof.
5. Mortgagee shall be entitled to collect from Owner any deficiency
remaining on the debt created by the Loan and this Mortgage after application
on that debt of the net proceeds from the sale or repossession of the Vessel.
Owner shall be entitled to any surplus, subject to set-off in favor of
Mortgagee for any other indebtedness of Owner. The sales price of the vessel
at any sale held to foreclose Mortgagee's interest therein shall conclusively
be deemed to be the fair value of the Vessel regardless of the circumstances
or who purchases the vessel, provided that the sale was commercially reasonable.
6. All advances and expenditures which Mortgagee in its discretion may
make for Vessel repairs, Vessel improvements for sale, safeguarding the
Vessel, Vessel insurance, payment of liens, taxes, penalties or other claims,
defense of suits, costs of repossession, or for any other purpose whatsoever
related to maintenance of the vessel, preservation of Mortgagee's security
interest, or sale of the vessel after repossession, shall be repaid by Owner
on demand with interest at the same rate as provided in the Loan and until so
paid shall be a debt due from owner to Mortgagee on demand. Mortgagee shall not
be obligated to make any such advances or expenditures, nor shall the making
thereof relieve Owner of any obligation or default with respect thereto.
ARTICLE IV
MISCELLANEOUS
1. All covenants, obligations and agreements of Owner herein contained
shall bind Owner, its successors and assigns, and shall inure to the benefit of
Mortgagee and its successors and assigns.
2. If any part of this Mortgage shall be judged invalid, then such partial
invalidity shall not cause this Mortgage as a whole to be invalid, and if any
provision hereof is held invalid in one or more of its applications, that
provision shall remain effective as to all valid applications of it.
3. To the extent required by BAHAMAS law, all provisions of this Mortgage
shall be governed by the maritime laws of the BAHAMAS. To the extent not so
required, this Mortgage shall be governed by the law of the state of
Connecticut, USA, excluding its principles of conflicts of laws.
4. Should Mortgagee or Owner bring and prevail in any action on this
Mortgage, it will be entitled to recover, in addition to its costs of
litigation, such amount as the court may award as reasonable attorneys fees,
whether at trial, on appeal, or in a proceeding in bankruptcy.
IN WITNESS WHEREOF, the Owner has caused this mortgage to be executed under its
Corporate Seal the date and year appearing first above.
OWNER, GIANT MARINE GROUP, LTD.
By: /s/ [SIG]
---------------------------
Burt Sugarman, President
THE CORPORATE SEAL OF GIANT MARINE GROUP, LTD.
WAS HEREUNTO AFFIXED BY /s/ [SIG]
----------------------
IN THE PRESENCE OF:
- ------------------------------)
WITNESS
On May 16, 1997, before me, the undersigned, a notary public, appeared BURT
SUGARMAN, personally known to me to be the person authorized to execute the
above Deed of Covenants, on behalf of GIANT MARINE GROUP, LTD. as Owner of the
Vessel.
WITNESS my hand and official seal.
/s/ [SIG]
- ----------------------------------
Notary Public
NOELLE SALERNO
COMM. #1008160
Notary Public -- California
LOS ANGELES COUNTY
My Comm. Expires OCT 31, 1997
<PAGE> 5
COUNTY OF LOS ANGELES )
) SS
STATE OF CALIFORNIA )
On the 16th day of May, 1997, before me NOELLE SALERNO personally appeared BURT
SUGARMAN -- personally known to me to be the person whose name is subscribed to
this instrument, and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
NOELLE SALERNO
COMM. # 1008160
Notary Public -- California
LOS ANGELES COUNTY
My Comm. Expires OCT 31, 1997
/s/ [SIG]
-------------------------------
NOTARY PUBLIC
<PAGE> 1
EXHIBIT 11
GIANT GROUP, LTD.
EARNINGS PER SHARE
for the three and six-month periods ended June 30, 1996 (3)
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, 1996 June 30, 1996
------------- -------------
($ In thousands, except per
share amounts)
<S> <C> <C>
Earnings applicable to common stock (3):
Net income for the period $ 12,183 $ 12,602
Income earned on investment of remaining proceeds
from exercise of stock options, after Company's
acquisition of common stock (1) 71 59
---------- ----------
$ 12,254 $ 12,661
========== ==========
Average weighted number of common shares and common equivalent shares:
Weighted average number of common shares outstanding 4,201,000 4,479,000
Additional shares assuming conversion of stock options (2) 1,065,000 1,029,000
---------- ----------
5,266,000 5,508,000
========== ==========
Earnings per common share and common equivalent shares $ 2.33 $ 2.30
========== ==========
</TABLE>
(1) Assuming funds were invested in U.S. government short-term obligations
earning interest at 5%.
(2) Reflects the 20% limit required by APB No. 15 for reacquisition of
shares. Excess proceeds from exercise of stock options have been
assumed to be invested in short-term government securities (see (1)).
(3) The calculation of earnings per share for 1997 can be made from
information presented in the consolidated statement of operations.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,290,000
<SECURITIES> 22,093,000
<RECEIVABLES> 569,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,037,000
<PP&E> 6,628,000
<DEPRECIATION> 2,415,000
<TOTAL-ASSETS> 62,900,000
<CURRENT-LIABILITIES> 14,533,000
<BONDS> 0
0
0
<COMMON> 73,000
<OTHER-SE> 47,121,000
<TOTAL-LIABILITY-AND-EQUITY> 62,900,000
<SALES> 0
<TOTAL-REVENUES> 1,449,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,667,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,000
<INCOME-PRETAX> (2,347,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,347,000)
<EPS-PRIMARY> (0.67)
<EPS-DILUTED> 0
</TABLE>
