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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 30, 1995 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________ [NO FEE REQUIRED]
Commission File number 0-24868
E & B MARINE INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-2430891
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Meadow Road 08818
EDISON, NEW JERSEY (Zip Code)
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(Address of principal executive offices)
Registrant's telephone number, including area code (908)-819-7400
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
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Common Stock,
$.001 par value
Indicate by a 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 as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by checkmark if disclosure of delinquent filers, pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X).
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<PAGE>
2
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value as of March 15, 1996..........................$10,060,666
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value, as of March 15, 1996....................3,943,594
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are incorporated by
reference herein and the Part of the Form 10-K into which the document is
incorporated:
None.
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3
PART I
ITEM 1. BUSINESS.
GENERAL
- -------
E&B Marine Inc. (the "Company") is engaged in the retail and mail-order
merchandising of a wide variety of marine supplies and apparel to the
recreational boating community. The Company currently operates 62 specialty
stores in 17 states. The Company currently plans to open five specialty stores
by June 1996, depending on the Company's assessment of demand and other factors.
The Company is one of the leading specialty merchandisers of marine supplies and
apparel in the United States.
The Company markets its products primarily to the recreational boating
community through specialty stores and catalogs, which it distributes to known
and prospective customers throughout the recreational boating community several
times each year. The Company's mail-order marketing program promotes its chain
of specialty stores which sell substantially the same marine products as are
offered through the Company's catalogs.
The Company offers over 14,000 brand-name and private label products.
Additionally, the Company fills special orders for non-stock merchandise to
serve its customers' needs. The Company currently operates under four store
names, E&B, E&B/Bliss ("Bliss"), E&B/Goldbergs' ("Goldbergs'") and E&B/Boatgear
("Boatgear") in order to promote regional awareness and consumer name
recognition. See "Item 2 - Properties" for more information concerning the
Company's retail locations. The "E&B" and "Bliss" symbols used by the Company in
its retail business are registered trademarks, and "E&B", "Bliss Marine" and
"Goldbergs' Marine" are registered trade names.
PRODUCTS
- --------
The Company markets and sells a broad range of marine supplies and apparel
primarily for the recreational boating community. The Company's specialty stores
and catalogs offer national brand-name and private label products with a
reputation for high quality and widespread consumer acceptance at low prices.
Generally, the products distributed by the Company are intended to serve
the aftermarket for boating supplies. The Company's product line includes
ship-to-shore VHF radios, depth-finders, global positioning systems and other
electronic equipment, life-saving and safety equipment, hardware, a wide
assortment of paints and varnishes, rope and chain, anchors and mooring
equipment, marine flotation products, pumps, sanitation equipment, galley
equipment, boating shoes, foul weather gear and other clothing, sailing supplies
and equipment, gift items, fishing accessories and related products. The Company
does not sell engines or boats, other than small outboard motors, inflatable
boats and dinghies.
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4
Some of the products sold by the Company are manufactured to its own
specifications. The Company's exclusive "SeaRanger", "SeaFit", "Bow t' Stern",
"Blue Water" and "North Atlantic Trading Co." product lines consist of products
manufactured domestically and internationally to the Company's specifications.
These product lines include private label electronics, rope, binoculars,
cleaners, foul weather gear and other accessories. The products are of high
quality and are sold at low prices made possible by direct sourcing.
The Company does not depend on any one supplier for any substantial part of
its product line, and believes that alternate sources of supply are available
for its products.
RETAIL AND MAIL ORDER OPERATIONS
- --------------------------------
The Company's marketing strategy emphasizes its low prices, shopping
convenience through accessible store locations and catalog mailings, the broad
selection of marine supplies and apparel, the general availability of products,
the high quality of the products, knowledgeable sales personnel and the prompt
shipment of orders.
The Company currently operates a chain of 62 specialty stores in 17 states
under the names E&B, Bliss, Goldbergs' and Boatgear (see "Item 2 - Properties"
below). The standard prototype, or "conventional", specialty stores total 51 out
of the 62 specialty stores. The total square footage of the Company's
conventional specialty stores ranges from 5,000 to 14,000; the average square
footage is approximately 9,000 per store. The Company's conventional specialty
stores carry over 7,000 brand-name and private label products which are tailored
to geographical and seasonal requirements.
The Company also has eleven stores with enlarged retail areas. The
Company's strategy is to utilize the increased square footage to enhance the
assortment in its current product lines with emphasis on the expansion of the
product offerings in the fishing equipment and accessories, and clothing
categories. These stores have approximately 9,000 products available for their
product mix with an average of 12,000 square feet of area.
The Company believes that the growth in its retail operations has been in
part attributable to the Company's mail-order marketing program. The Company's
catalogs are mailed throughout the United States and abroad several times each
year. The Company distributed over 2,500,000 mail-order catalogs in 1995. The
1996 master catalog consists of over 388 pages which picture and describe
approximately 10,300 products and indicate the Company's low prices.
<PAGE>
5
Each of the Company's E&B seasonal catalogs are published with a catalog
end date. However, the Company continues to receive orders for many months after
the catalog end date. These orders are processed, with price adjustments made to
reflect prices in effect in subsequent seasonal catalogs. The Company's
mail-order catalogs are printed and distributed by commercial printers which
produce similar publications for other mail-order merchandisers.
The Company's retail advertising primarily includes direct mail events,
circulars and catalogs. In addition to its mail-order and retail promotions, the
Company advertises in boating magazines and local media, participates in boat
shows and supports boating organizations and boating events.
It is the Company's policy to promote the prompt fulfillment of orders. The
Company currently provides seven days a week telephone service for mail order.
The Company processes all catalog orders received by mail or telephone and
replenishes inventories at the specialty stores from its Edison, New Jersey
office and distribution facility.
MERCHANDISING STRATEGY
- ----------------------
The Company's merchandising strategy emphasizes value for the consumer.
Value is delivered to the consumer by providing low prices with a guaranteed
competitor price matching policy, and shopping convenience through accessible
store locations and catalog mailings. Additionally, the broad selection and
general availability of high quality marine supplies and apparel coupled with
knowledgeable sales personnel and the prompt shipment of orders are all
important aspects of the Company's merchandising strategy.
A customer service optimization program has been installed, after extensive
testing and training of all users. This computer driven program reviews
historical sales data at each specialty store and, based on such data, forecasts
customer traffic at specified time intervals. This program improves customer
service at the specialty stores by allowing the Company to tailor sales
personnel schedules to customer shopping patterns.
A key component in the Company's merchandising strategy is its low-cost
operations. The Company believes its low-cost discipline provides it with a
competitive advantage which will continue to further its position as one of the
nation's leading specialty merchandisers of marine supplies and apparel.
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6
INVENTORIES AND PURCHASING
- --------------------------
It is the Company's goal to offer a broad selection of marine supplies and
apparel and to maintain adequate inventory levels of merchandise in its
specialty stores to support anticipated sales. Additional inventories are
maintained at the Company's distribution center in Edison, New Jersey to fill
mail and telephone orders generated by its catalogs and to replenish inventories
at the specialty retail stores.
The Company enjoys substantial purchasing power due to its sales volume and
is therefore able to obtain volume discounts from manufacturers, which allows it
to market its products at a discount. Point-of-sale terminals are located in all
stores to assist in daily sales analysis and inventory control on a Company-wide
basis.
Purchasing of the Company's products is performed by a staff of buyers and
rebuyers at the Company's administrative offices in Edison, New Jersey. Each
buyer is responsible for several of the Company's product categories. Two
software systems have been developed and enhanced to assist in maintaining
balanced inventory levels. A store replenishment system automatically
distributes inventory to the stores based upon current and historical trends. A
distribution replenishment system assists in reordering goods from vendors to
maintain proper inventory levels. Most vendor shipments are made directly to the
Company's distribution center, unless it is advantageous to do otherwise.
The Company increases inventories prior to its Spring and Summer selling
seasons, with the increase generally financed through short-term borrowings and
credit advanced by suppliers on normal trade terms. The Company believes that
maintaining adequate inventory levels is important to its continuing ability to
satisfy customer demands promptly.
CREDIT TERMS, RETURNS AND WARRANTIES
- ------------------------------------
Substantially all of the Company's sales are either for cash (including
checks) or charged under American Express, MasterCard, Visa and Discover credit
card plans. The Company introduced a private label E&B credit card in 1995. A
third party operates the card, granting credit to customers, and is fully
responsible for credit risk. The Company has a liberal return policy and assists
customers with warranty claims.
The Company's policy is to ship catalog orders for credit card sales only
after receiving credit authorization from the issuing bank. Customers are not
charged on their credit card until the merchandise is shipped. The Company's
exposure for non-payment of credit card bills is minimal since authorization is
obtained from the bank prior to billing the customer.
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7
EXPANSION, RELOCATION AND RENOVATION
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The Company's strategy is to open specialty stores when it believes that
demand in a particular location will support its operation. The Company opened
seven specialty stores in 1995. In 1996, a specialty store was opened in Somers
Point, New Jersey. Currently, the Company anticipates that it will open four
additional stores by June 1996, depending on the Company's assessment of demand
and other factors.
The Company has an ongoing program to remodel and relocate its specialty
stores. The Company believes that the updated presentation of merchandise
enhances sales. In the last five years, over 80% of its stores are new or have
been renovated or relocated. Three stores were relocated to what the Company
believes are more advantageous locations in 1995, and seven stores were
renovated to update their merchandise presentation. See "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations" below.
RECENT EVENTS
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Effective December 22, 1995, the Company amended its existing Credit
Agreement to increase its bank facility to $23,000,000 and extend its maturity
until May 31, 1998. The facility now consists of a $17,000,000 revolving line of
credit with the same terms and conditions as the prior $15,000,000 line (except
for the extension of the maturity) and a $6,000,000 term loan which replaced
existing term loans of $3,500,000 and $2,500,000. See "Item 7 - Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
below.
COMPETITION
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The Company considers the most significant competitive factors in its
retail business to be low prices, shopping convenience through accessible store
locations and catalog mailings, the variety and availability of products,
knowledgeable sales personnel, rapid and accurate fulfillment of orders and
prompt customer service. At present, the Company's principal competition is from
other marine retail store chains and mail-order merchandisers of marine products
and, to a lesser extent, from local and regional boat dealers. The Company
competes in certain markets with specialty stores similar to those of the
Company as well as with local marinas. In addition, with respect to sales of a
limited group of its products, the Company competes with large retailers and
mail-order vendors of general merchandise. Many of these retailers and
merchandisers generally have financial resources which are substantially greater
than those of the Company.
<PAGE>
8
The Company is currently operating in a highly competitive environment. The
Company believes that, in general, its price structure, including the guaranteed
competitor price matching policy, for the products it distributes compares
favorably with the majority of its competitors. While certain of the Company's
retail competitors discount their prices on certain items more than the Company
does, the Company believes that few of its retail competitors offer customer
services which are comparable to those of the Company in terms of speed,
convenience, reliability, knowledge of products or professionalism.
PERSONNEL
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As of March 16, 1996, the Company had approximately 885 employees, of whom
approximately 666 were employed in retail operations. On a full-time equivalent
basis, the Company employs approximately 618 persons. The Company increases its
retail personnel during the second and third quarters of each year to
accommodate seasonal fluctuations in customer demand. The Company's employees
are not covered by a collective bargaining agreement. The Company considers its
relationship with its employees to be good.
EXECUTIVE OFFICERS OF THE COMPANY
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The following sets forth for each current executive officer of the Company
(based upon information supplied by each of them) his name, age, positions with
the Company, principal occupation and business experience for the past five
years and prior service with the Company:
NAME POSITION WITH THE COMPANY AGE
---- ------------------------- ---
Kenneth G. Peskin Chairman of the Board and 56
Chief Executive Officer
James D. Peters President and
Chief Operating Officer 47
Walfrido A. Martinez Senior Vice President and 56
Chief Financial Officer
Robert G. Defonte Senior Vice President, Merchandising 45
and Secretary
Patrick J. Melli Senior Vice President, Inventory 51
Management and Information Services
Officers serve at the discretion of the Board of Directors.
<PAGE>
9
Kenneth G. Peskin has been Chairman of the Board and Chief Executive
Officer of the Company since November 1990. Prior to joining the Company, Mr.
Peskin was employed by Supermarkets General Corporation from 1965 through
September 1989. He was Chairman and Chief Executive Officer from June 1987 to
September 1989 and President and Chief Executive Officer of the Pathmark
Division from June 1986 to June 1987.
James D. Peters has been President and Chief Operating Officer of the
Company since July 1995. From 1990 to 1995, Mr. Peters was Senior Vice
President, Merchandising at Sportmart Inc. Prior to that, he was Vice President,
Merchandising at Things Remembered, a division of Cole National from 1984 to
1990.
Walfrido A. Martinez has been Senior Vice President of the Company since
March 1993 and Chief Financial Officer of the Company since March 1992. Mr.
Martinez joined the Company in April 1991 as Vice President, Controller and
Assistant Treasurer. From 1989 to 1991, Mr. Martinez served as Vice President
and Controller for Piser Industries Inc. Mr. Martinez joined the workout
management team of Crazy Eddie, Inc. as controller from August 1988 through May
1989. Prior to Crazy Eddie, Inc., Mr. Martinez served in a variety of positions
at B. Altman & Co. from 1962 through 1988, lastly as Vice President, Controller
and Chief Financial Officer.
Robert G. Defonte has been Senior Vice President, Merchandising of the
Company since July 1984, Secretary of the Company since December 1982 and served
as a Director of the Company from August 1983 until March 1989. From December
1982 to July 1984, he was a Vice President of the Company. He joined the Company
in 1974 and has served in various managerial capacities until his election to
his present positions.
Patrick J. Melli has been Senior Vice President, Inventory Management and
Information Services of the Company since March 1993. Mr. Melli had been Vice
President - Management Information Systems from February 1991 to March 1993 and
Director of Management Information Systems of the Company from October 1990 to
February 1991. In 1990, Mr. Melli was the Director of Circulation Systems
Development at the New York Daily News newspaper. Prior to that he was Director
of Management Information Systems with Crazy Eddie, Inc. from February 1987 to
January 1990, and prior to that was the Manager of Information Systems with the
Newark Star Ledger newspaper from March 1981 to November 1986.
<PAGE>
10
ITEM 2. PROPERTIES.
The Company maintains its administrative offices and distribution center in
Edison, New Jersey. The facility, which is leased, contains approximately
222,000 square feet of space of which approximately 33,000 square feet is office
space and the remainder is warehouse space. The lease on the Edison facility
expires on March 31, 1997 and the Company has two renewal options for periods of
two and three years. The Company currently subleases 10,000 square feet of
office space on a month to month basis.
All of the Company's specialty retail stores are in leased premises, with
the exception of the Perth Amboy, New Jersey store, which is owned by the
Company. The leases (after giving effect to various renewal options exercisable
by the Company) expire between 1996 and 2016. The Company expects to be able to
renegotiate the leases expiring in 1996 on commercially reasonable terms or to
relocate stores to new locations.
For additional information concerning the Company's leases at December 30,
1995, see Note 4 to the Notes to Consolidated Financial Statements included
herein under "Item 8 - Financial Statements and Supplementary Data." The Company
considers its administrative offices, distribution center and retail stores to
be adequate for the Company's operations.
The location of the Company's specialty retail stores by state are (unless
otherwise noted the following retail stores operate under the E&B name):
ALABAMA FLORIDA(con't) MASSACHUSETTS NEW YORK
- ------- -------------- ------------- --------
Mobile (3) Pensacola (3) Dedham (2) Cheektowaga
Pompano Beach Hyannis (2) Garden City (2)
CONNECTICUT Port Charlotte Seekonk (2) Huntington (2)
- ----------- Sarasota Woburn (2) New York (1)
Branford South Daytona Port Jefferson
Darien (2) St. Petersburg MICHIGAN West Islip (2)
Fairfield Tallahassee --------
Tampa Eastpointe OHIO
Grand Rapids ----
FLORIDA GEORGIA Taylor Mentor
- ------- ------- North Olmsted
Clearwater Doraville (3) MISSISSIPPI
Crystal River Savannah ----------- PENNSYLVANIA
Cutler Ridge Biloxi (3) ------------
Fort Myers ILLINOIS Philadelphia (1)
Fort Walton (3) -------- NEW HAMPSHIRE
Holiday Highland Park ------------- SOUTH CAROLINA
Hollywood Villa Park Portsmouth --------------
Jacksonville North Charleston
Jensen Beach MARYLAND NEW JERSEY
Lake Park -------- ---------- VIRGINIA
Melbourne Glen Burnie Eatontown ---------
Miami (West) Lanham Lodi Glen Allen
Orange Park Rosedale Mount Laurel Norfolk
Orlando Perth Amboy
Panama City (3) Somers Point WISCONSIN
Toms River ---------
Greenfield
(1) Operates under the E&B/Goldbergs' name.
(2) Operates under the E&B/Bliss name.
(3) Operates under the E&B/Boatgear name.
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11
PART II
ITEM 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") - National Market
System under the symbol EBMA. The Company's Common Stock commenced trading on
the NASDAQ - National Market System on September 28, 1994. Prior to September
28, 1994, the Company's Common Stock was listed on the Boston Stock Exchange,
and for the period December 13, 1993 through September 27, 1994, traded on the
NASDAQ - Small-Cap Market. On March 15, 1996, there were approximately 630
stockholders of record. No dividends have been paid or declared on the Common
Stock of the Company and the Company does not expect to pay any dividends on its
Common Stock in the foreseeable future. See Note 3 to the Notes to Consolidated
Financial Statements included herein under "Item 8 - Financial Statements and
Supplementary Data" regarding dividend restrictions.
MARKET PRICE RANGE COMMON STOCK PRICES
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1995 1994
HIGH LOW HIGH LOW
---- --- ---- ---
First Quarter 8 1/2 6 3/4 14 1/4 8 1/2
Second Quarter 7 3/4 5 1/4 11 1/2 9 1/4
Third Quarter 6 3/4 5 11 1/4 7 1/4
Fourth Quarter 6 1/4 3 1/4 8 3/4 5
On March 15, 1996, the closing sales price of the Company's Common Stock
was $7.00 per share as reported on the NASDAQ - National Market System.
<PAGE>
12
ITEM 6. SELECTED FINANCIAL DATA.
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
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(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
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FOR THE YEAR 1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Net sales $109,818 $101,752 $92,713 $87,647 $84,460
Gross profit 29,339 27,849 26,400 25,158 23,129
Non-cash compensation expense 369
Income (Loss) from operations 3,161 4,409 3,878 2,387 (827)
Income (Loss) before income
taxes and extraordinary
items 1,669 3,227 3,353 1,323 (2,328)
Income tax expense (benefit) 650 (2,500) (2,000) 432 -
Income (Loss) before
extraordinary items 1,019 5,727 5,353 891 (2,328)
Extraordinary items - - - 395 -
Net income (loss) 1,019 5,727 5,353 1,286 (2,328)
Per Share Amounts (1):
Income (Loss) before
extraordinary items $.29 $1.38 $1.34 $.24 $(.64)
Extraordinary items - - - .12 -
Net income (loss) .29 1.38 1.34 .36 (.64)
Dividends per share (2) - - - - -
Weighted average number
of shares outstanding 3,751 3,692 3,717 3,699 3,579
=================================================================================================================
AT THE END OF YEAR 1995 1994 1993 1992 1991
=================================================================================================================
Total assets $ 37,791 $ 33,993 $27,805 $25,210 $25,639
Working capital 18,327 13,047 4,814 4,587 5,987
Long-term obligations 15,631 11,963 7,667 12,542 16,560
Shareholders' equity (deficit) 12,134 10,378 4,520 (654) (2,040)
Cash flow from operations (3) (2,179) 1,871 4,038 2,653 (512)
Number of retail stores 61 55 49 46 46
=================================================================================================================
</TABLE>
(1) The Company effected a one-for-four reverse stock split on December 9,
1993. See Note 1 to the Notes to Consolidated Financial Statements included
herein under "Item 8 - Financial Statements and Supplementary Data."
(2) In accordance with the Company's credit agreement, the Company is
restricted from declaring and paying cash dividends. See Note 3 to the
Notes to Consolidated Financial Statements included herein under "Item 8 -
Financial Statements and Supplementary Data."
(3) See the Consolidated Statements of Cash Flows included herein under "Item 8
- Financial Statements and Supplementary Data."
<PAGE>
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
- ----------------------
Consolidated net sales in 1995 were $109,818,000 compared to $101,752,000
in 1994, an increase of 7.9 percent. Sales in 1994 increased 9.7 percent from
1993 sales of $92,713,000.
Retail store sales were $94,351,000 in 1995, an increase of 10.9 percent
from 1994 sales of $85,110,000. Retail store sales in 1994 increased 11.1
percent from 1993 retail store sales of $76,635,000.
Same store sales were $85,791,000 in 1995, an increase of 1.0 percent from
1994 same store sales of $84,962,000. Same store sales in 1994 increased 1.1
percent from 1993 same store sales. Same store sales represent stores which were
open during twelve month comparative periods. Fiscal year 1994 contained 53
weeks.
Mail-order sales were $15,467,000 in 1995, a decrease of 7.1 percent from
1994 sales of $16,642,000. Mail-order sales in 1994 increased 3.5 percent from
1993 sales of $16,078,000.
The 1995 sales growth from the prior year is principally attributable to
the Company's continued program of opening new stores and renovating or
relocating others. The Company opened seven new stores in 1995, renovated seven
and relocated three stores to what the Company believes are more advantageous
locations. The 1994 sales growth from the prior year is principally attributable
to new store openings and store relocations and renovations. The Company opened
six stores in 1994. Additionally, five stores were renovated and four stores
were relocated to what the Company believes are more advantageous locations.
Same store sales were largely affected by a large number of competitor retail
store openings in areas where the Company operates.
The Company's gross profit margin was 26.7, 27.4 and 28.5 percent in the
fiscal years ended 1995, 1994 and 1993, respectively. The decrease in margin in
1995 and 1994 from the respective prior year reflected increased sales of
merchandise with lower margins. Additionally, in 1995, the decreased margin
reflects the increased occupancy costs, which are included in cost of goods
sold, attributable to the opening of the new retail stores and the Company's
response to competitive pressures.
<PAGE>
14
Selling, general and administrative expenses in 1995 were $24,675,000, an
increase of $2,494,000 from 1994. 1994 selling, general and administrative
expenses increased $1,248,000 from 1993. Selling, general and administrative
expenses as a percentage of net sales were 22.5 percent in 1995, 21.8 percent in
1994 and 22.6 percent in 1993. The increase in selling, general and
administrative expenses in 1995 and 1994 from the prior years are principally
due to expenses relating to store relocations, renovations and new store
openings.
Interest expense was $1,492,000 in 1995, an increase of $310,000 from 1994.
Interest increased over the prior year due to increased interest rates and
increased debt. Interest expense in 1994 increased $320,000 from 1993. Although
the Company had lower borrowings in 1994, interest increased principally due to
amortization of premium relating to the Company's long-term debt in 1993.
Effective December 27, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
effects of adopting SFAS 109 were not material to the consolidated financial
statements at December 27, 1992. During the third quarters of 1994 and 1993, the
Company reduced the valuation allowance on the deferred tax asset by $2,500,000
and $2,000,000, respectively, attributable to the Company's strong operating
performance, resulting in an income tax benefit. At December 30, 1995, net
operating loss carryforwards available in future years are $8,300,000. Certain
net operating loss carryforwards of the Company will be limited for future
utilization as a result of a 1989 restructuring of the Company. See Note 6 to
the Notes to Consolidated Financial Statements.
FINANCIAL CONDITION
- -------------------
The ratio of current assets to current liabilities was 2.8 to 1.0 in 1995
compared to 2.1 to 1.0 in 1994. The ratio of debt to equity, which includes both
short-term and long-term debt, increased from 1994 due to lower income from
operations and the increase in debt used to finance new and renovated stores.
The Company's short-term and long-term debt totalled $16,371,000 at the end of
1995 compared to $13,245,000 at the end of 1994. The Company's credit facility
was recently amended (see "Credit Agreement" below).
CREDIT AGREEMENT
- ----------------
Effective June 6, 1994, the Company entered into a credit agreement with
United Jersey Bank ("UJB") for the purpose of refinancing all of its existing
bank and institutional debt and providing working capital. The credit agreement
provided for, among other things, a credit facility (the "New Facility") which
consists of (I) a $15,000,000 revolving credit facility, (ii) a $500,000 letter
of credit facility, (iii) a $3,500,000 term loan and (iv) a $500,000 equipment
loan facility.
<PAGE>
15
In 1995, the New Facility was amended to include an additional $2,500,000
secured loan facility due on March 15, 1996. On December 22, 1995, the New
Facility was further amended to provide for: (I) a $17,000,000 revolving credit
facility; (ii) a $6,000,000 term loan; both facilities carry a due date of May
31, 1998. The Company's $23,000,000 credit facility will be employed for working
capital and to further new store openings, renovations and relocations (see
"Retail Stores" below). The New Facility is collateralized on a first priority
basis by substantially all of the assets of the Company.
RETAIL STORES
- -------------
The Company operated 61 stores at December 30, 1995. Seven stores were
opened in 1995. Additionally, the Company relocated three stores, renovated
seven stores and closed one store. Currently, the Company anticipates that it
will open five new stores by June 1996 depending on the assessment of demand and
other factors.
The total square footage of the Company's stores range from 5,000 to
14,000; the average square footage is approximately 9,000 per store. 1996 stores
will be 8,000 to 9,000 square footage.
The Company's typical stores carry over 7,000 brand name and private label
products which are tailored to geographical and seasonal requirements. Larger
stores carry over 9,000 products. Additional products are available through the
mail-order catalog and special order departments. The Company's strategy is to
increase the assortment of marine products with special emphasis on fishing and
clothing categories.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's working capital at December 30, 1995 and December 31, 1994
was $18,327,000 and $13,047,000, respectively. The increase in working capital
was mainly attributable to the refinancing of the Company's bank debt in June
1994 (see "Credit Agreement" above) and increased inventory levels. The New
Facility provides the Company with increased available borrowing levels and
extended maturity dates. The Company increased its inventory as a result of
increases in its product assortment and to accommodate store openings. Inventory
levels will continue to increase as the number of retail stores expand (see
discussion above). Cash used in investing activities is primarily used for the
Company's retail store expansion and renovation program. Cash used in financing
activities reflects the payments on the revolving line of credit and debt
agreements.
<PAGE>
16
The Company believes that its working capital and credit facility will be
adequate to meet its 1996 identifiable working capital requirements including
principal payments on debt.
In 1995, total outstanding borrowings peaked at $18,508,000 and total
weighted average borrowings were $15,121,000 compared to $15,867,000 and
$12,140,000, respectively, in the prior year. The Company's $17,000,000 line of
credit is expected to be adequate to meet the peak seasonal requirements in
1996. See Note 3 to the Notes to Consolidated Financial Statements.
Cash flow from operations combined with its available line of credit of
$17,000,000 is also expected to provide the Company with necessary funds for
planned capital expenditures. These expenditures are estimated to be $3,000,000
in fiscal 1996 and primarily constitute expenditures for store relocations and
remodelings and the currently planned opening of five new retail stores.
At March 15, 1996, the Company had $14,041,000 outstanding under its
revolving line of credit. These borrowings occurred during the Company's low
sales period and during the time when the Company builds its inventory levels
for its peak selling seasons.
RECENTLY ISSUED ACCOUNTING STANDARDS
- ------------------------------------
The Company has not adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to Be Disposed Of" (SFAS 121). SFAS 121 was issued in March 1995 and is
effective for fiscal years beginning after December 15, 1995. The Company
believes that the adoption of this accounting standard will not have a material
effect on the Company's consolidated financial position or results of
operations. The Company has not adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-based Compensation" (SFAS 123). SFAS
123 was issued in October 1995 and is effective for financial statements for
fiscal years beginning after December 15, 1995. When adopted, certain
disclosures are required for fiscal years that begin after December 15, 1994.
SFAS 123 allows for alternative methods of accounting for stock-based
compensation arrangements with employees. The Company currently is undecided as
to what method of adoption it will utilize.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<PAGE>
17
E&B MARINE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NUMBER
-----------
Independent Auditors' Report 18
Consolidated Balance Sheets -- December 30, 1995
and December 31, 1994 19
Consolidated Statements of Operations --
Years Ended December 30, 1995, December 31, 1994
and December 25, 1993 20
Consolidated Statements of Shareholders' Equity (Deficit) --
Years Ended December 30, 1995,
December 31, 1994 and December 25, 1993 21
Consolidated Statements of Cash Flows --
Years Ended December 30, 1995, December 31, 1994
and December 25, 1993 22
Notes to Consolidated Financial Statements 23 - 35
SCHEDULES:
- ----------
All financial statement schedules have been omitted because they are
inapplicable or the information is provided in the financial statements,
including the notes thereto.
<PAGE>
18
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
E&B Marine Inc.:
We have audited the consolidated financial statements of E&B Marine Inc. and
subsidiaries as listed in the accompanying index. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of E&B Marine Inc. and
subsidiaries at December 30, 1995 and December 31, 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 30, 1995 in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for income taxes.
KPMG Peat Marwick LLP
Short Hills, New Jersey
February 15, 1996
<PAGE>
19
E&B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
Dollars in thousands, except per share amounts 1995 1994
================================================================================
ASSETS
Current assets:
Cash and cash equivalents $ 443 $ 719
Accounts receivable 522 501
Inventory 22,945 19,987
Prepaid expenses 1,650 802
Other current assets 2,793 2,690
- --------------------------------------------------------------------------------
Total current assets 28,353 24,699
Property, plant and equipment, net 5,549 4,569
Excess of cost over fair value of
assets acquired, net of accumulated
amortization of $801 and $730 in
1995 and 1994, respectively 2,041 2,112
Other assets 1,848 2,613
- --------------------------------------------------------------------------------
TOTAL ASSETS $37,791 $33,993
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 740 $ 1,282
Accounts payable 5,766 6,370
Accrued expenses 3,520 4,000
- --------------------------------------------------------------------------------
Total current liabilities 10,026 11,652
Revolving line of credit 10,168 9,427
Long-term debt, less current maturities 5,463 2,536
Shareholders' equity:
Common stock - par value $.001 per
share, authorized 10,000,000 and
30,000,000 shares in 1995 and
1994, respectively, issued
4,019,650 and 3,783,349 in 1995
and 1994, respectively 4 4
Additional paid-in capital 21,799 21,002
Accumulated deficit (7,481) (8,500)
Minimum pension liability
adjustment (104) -
Treasury stock - at cost (2,084) (2,084)
Value assigned to unearned compensation - (44)
- --------------------------------------------------------------------------------
Total shareholders' equity 12,134 10,378
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,791 $33,993
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
20
E&B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 AND DECEMBER 25, 1993
DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS 1995 1994 1993
================================================================================
Net sales $109,818 $101,752 $92,713
Cost of goods sold excluding
amortization and depreciation 80,479 73,903 66,313
- --------------------------------------------------------------------------------
Gross profit 29,339 27,849 26,400
Selling, general, and
administrative expenses 24,675 22,181 20,933
Depreciation and amortization 1,134 1,259 1,589
Non-cash compensation expense 369
- --------------------------------------------------------------------------------
Income from operations 3,161 4,409 3,878
Other income (337)
Interest expense 1,492 1,182 862
- --------------------------------------------------------------------------------
Income before income taxes 1,669 3,227 3,353
Income tax expense (benefit) 650 (2,500) (2,000)
- --------------------------------------------------------------------------------
Net income $ 1,019 $ 5,727 $ 5,353
================================================================================
Per share amounts:
Net income $.29 $1.38 $1.34
Weighted average number of
shares outstanding 3,751,000 3,692,000 3,717,000
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
21
E&B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 AND DECEMBER 25, 1993
- -----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
MINIMUM VALUE
COMMON STOCK ADDITIONAL PENSION TREASURY STOCK ASSIGNED
NUMBER PAID-IN ACCUMULATED LIABILITY NUMBER Mto UNEARNED
OF SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT OF SHARES AMOUNT COMPENSATION TOTAL
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 26, 1992 14,978,37 $150 $20,745 ($19,580) (168,351) ($1,747) ($222) ($654)
Net income 5,353 5,353
Earned compensation
related to ESOP 89 89
Issuance of common stock 83,800 1 66 67
Exercise of stock options 4,000 2 2
One-for-four reverse
stock split: Effective
December 9, 1993 (11,300,041) (147) 147 126,264 0
Repurchase of treasury
shares (37,500) (337) (337)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 25, 1993 3,766,133 4 20,960 (14,227) (79,587) (2,084) (133) 4,520
Net income 5,727 5,727
Issuance of common stock 4,576 16 16
Earned compensation related
to ESOP 89 89
Exercise of stock options 12,640 26 26
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 3,783,349 4 21,002 (8,500) (79,587) (2,084) (44) 10,378
Net income 1,019 1,019
Minimum pension
liability adjustment (104) (104)
Issuance of common stock 196,516 679 679
Earned compensation related
to ESOP 44 44
Exercise of stock options 39,785 118 118
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 30, 1995 4,019,650 $4 $21,799 ($7,481) ($104) (79,587) ($2,084) $0 $12,134
See accompanying notes to consolidated financial statements.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
22
E&B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 AND DECEMBER 25,1993
- --------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $1,019 $5,727 $5,353
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 1,134 1,259 1,589
Amortization of premium on debt (284)
Loss on disposal of fixed assets 9 29 42
Earned compensation related to ESOP 44 89 89
Decrease (increase) in deferred tax asset 650 (2,500) (2,000)
Change in assets and liabilities net of
non-cash transactions and acquisitions:
(Increase) decrease in accounts receivable (21) 31 351
Increase in inventory (2,958) (2,170) (1,822)
Increase in other current assets (103) (66) (59)
Increase in prepaid expenses (848) (238) (134)
Decrease (increase) in other assets 83 (242) 266
(Decrease) increase in accounts payable (604) 789 1,467
Decrease in accrued expenses (584) (837) (445)
Decrease in other liabilities (375)
- --------------------------------------------------------------------------------
Net cash (used in) provided by operating
activities (2,179) 1,871 4,038
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of property, plant and
equipment 4
Purchases of property, plant and equipment (2,020) 1,967) (973)
- --------------------------------------------------------------------------------
Net cash used in investing activities (2,020) (1,967) (969)
Cash flows from financing activities :
Borrowings under debt agreements 19,431 9,634 15,900
Payments of debt (16,305) (9,256) (18,842)
Stock, option and warrant transactions (net) 797 42 (268)
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 3,923 420 (3,210)
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (276) 324 (141)
Cash and cash equivalents at
beginning of year 719 395 536
- --------------------------------------------------------------------------------
Cash and cash equivalents at
end of year $443 $719 $395
- --------------------------------------------------------------------------------
Interest Paid $1,485 $1,117 $1,190
Income Taxes Paid $87 $79 $94
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
23
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - E&B Marine Inc. and subsidiaries (the "Company")
operate in one business segment, the retail and mail-order merchandising of a
wide variety of marine supplies and apparel to the recreational boating
community. The Company's stores are primarily located in the eastern and
southern United States and in the area of the Great Lakes. The Company's
business is highly seasonal and susceptible to weather conditions and generates
a significant portion of its annual sales and net income in the second and third
quarters, the primary boating season in the Company's markets. The Company does
not have any major customers and does not extend credit to its retail store or
mail-order customers. The Company does not depend on any one supplier for a
substantial part of its product line and believes that alternative sources of
supply are available for its products.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the ac counts of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
CASH and CASH EQUIVALENTS - Cash equivalents are considered, in general, to
be those se curities with maturities of three months or less when purchased.
INVENTORY - Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY, PLANT and EQUIPMENT - Property, plant and equipment and leasehold
improvements are carried at cost. Depreciation and amortization are computed
using the straight-line method. When assets are retired or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in operations for the period. The cost of
maintenance and repairs is charged to operations as incurred; significant
renewals and betterments are capitalized. Leasehold improvements are amortized
over the life of the lease including renewal options which are probable of
exercise, or the estimated useful lives of the related assets, whichever is
shorter. Properties under capital leases are amortized on a straight-line basis
over the related lease terms or the economic lives of the related assets, as
appropriate.
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED - The excess of cost over
fair value of assets acquired is being amortized over a 40-year period using the
straight-line method. The Company regularly assesses the recoverability of
unamortized amounts of the excess of cost over fair value of assets acquired
utilizing relevant cash flow and profitability information. The assessment of
the recoverability of unamortized amounts will be impacted if estimated future
operating cash flows are not achieved.
<PAGE>
24
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NET SALES - Net sales include all merchandise sold within the year less
sales returns.
RETAIL STORE EXPENSES - All pre-opening store expenses are expensed as
incurred and store closing expenses are recognized when a decision is made to
close a store.
INCOME TAXES - Effective December 27, 1992 the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The effects of adopting SFAS 109 were not material to the consolidated
financial statements at December 27, 1992. The Company utilizes the asset and
liability method of accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period of the event that
included the enactment date. A valuation allowance is provided when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
NET INCOME PER SHARE - Net income per share in 1995 is computed based on
the weighted average number of common shares and common equivalent shares
outstanding during the period in accordance with the modified treasury stock
method through the date the outstanding options and warrants exceeded 20 percent
of the Company's outstanding common stock, and in accordance with the treasury
stock method thereafter. Under such approach approximately 417,000 incremental
shares have been added to the weighted average number of shares outstanding, and
net interest has been reduced by an aggregate of approximately $198. Net income
per share in 1994 and 1993 is computed based on the weighted average number of
common shares and common equivalent shares outstanding during the period, in
accordance with the modified treasury stock method. Under such approach, in 1994
and 1993, respectively, approximately 750,000 and 830,000 incremental shares
have been added to the weighted average number of shares outstanding, and net
interest has been reduced by approximately $409 and $741.
REVERSE STOCK SPLIT - On December 9, 1993, the Company effected a
one-for-four reverse stock split. The par value of the Common Stock was reduced
from $0.01 to $0.001 per share. Accordingly, all per share and stock option data
have been restated to reflect the split.
<PAGE>
25
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
REPORTING YEAR - The Company and its subsidiaries utilize a 52-53 week
fiscal year ending on the last Saturday in the month of December. Fiscal year
1995 and 1993 contain 52 weeks; fiscal year 1994 contains 53 weeks.
USE OF ESTIMATES - In conformity with generally accepted accounting
principles, management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value Of Financial Instruments,"
requires disclosure of the fair value of certain financial instruments. Cash and
cash equivalents, accounts receivable, accounts payable and accrued expenses are
reflected in the consolidated financial statements at carrying value which
approximates fair value because of the short-term maturity of these instruments.
The carrying value of the Company's short- and long-term bank borrowings
approximates the fair value based on the current rates available to the Company
for similar instruments.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at:
Estimated
December 30, December 31, Useful Lives
1995 1994 (Years)
- --------------------------------------------------------------------------------
Land $ 100 $ 100
Building and improvements 474 474 10 - 35
Leasehold improvements 4,503 3,540 5 - 15
Furniture and equipment 7,795 8,222 3 - 7
Properties under capital leases 407 407 7
- --------------------------------------------------------------------------------
13,279 12,743
Less accumulated
depreciation and amortization 7,730 8,174
- --------------------------------------------------------------------------------
$ 5,549 $ 4,569
================================================================================
Accumulated amortization on properties under capital leases was $102 at December
30, 1995 and $44 at December 31, 1994.
<PAGE>
26
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
3. FINANCING OBLIGATIONS
Effective June 6, 1994, the Company refinanced all of its then existing
bank and institutional debt. In connection therewith, the Company entered into a
credit agreement with United Jersey Bank ("UJB"). The credit agreement provided
for, among other things, a credit facility (the "New Facility") which consisted
of (I) a $15,000 revolving credit facility, (ii) a $500 letter of credit
facility, (iii) a $3,500 term loan and (iv) a $500 equipment loan facility. In
1995, the New Facility was amended to include an additional $2,500 term loan
facility due March 15, 1996.
The $15,000 revolving credit line facility provided for in the New Facility
bears interest at a rate of 0.75 percent above the bank's prime rate. The
$15,000 revolving credit line facility imposes certain restrictions on the
borrowing base predicated on inventory levels, and is collateralized on a first
priority basis by substantially all of the assets of the Company. Prior to June
6, 1994, the effective date of the New Facility, the Company's revolving credit
line facility bore interest at a rate of one percent above the bank's prime
rate, matured on December 31, 1995 and required a 30-day clean-down period.
On December 22, 1995, the New Facility was further amended to include: (I)
a $17,000 revolving line of credit with the same terms and conditions as the
prior $15,000 line except for an extension of maturity; and (ii) a $6,000 term
loan with an interest rate of 1.5 percent per annum above the prime rate which
was used in part to repay the aforementioned $3,500 and $2,500 bank loans. Both
facilities have a due date of May 31, 1998.
At December 30, 1995 and December 31, 1994, the outstanding borrowings on
the revolving line of credit were $10,168 and $9,427, respectively. The rate of
interest at December 30, 1995 was 9.25 percent.
At December 30, 1995 and December 31, 1994, long-term debt consists of the
following:
December 30, December 31,
1995 1994
- --------------------------------------------------------------------------------
$3,500 term loan due December 31, 1997.
Interest is payable at 1.5 percent over
the bank's prime rate. $ - $3,500
Capital leases due on various maturity
dates. Interest is payable at various fixed
rates. 203 318
$6,000 term loan due May 31, 1998.
Interest is payable at 1.5 percent over
the bank's prime rate. As of December
30, 1995, the rate of interest was 10.0 percent. 6,000 -
- --------------------------------------------------------------------------------
6,203 3,818
Less current maturities 740 1,282
- --------------------------------------------------------------------------------
$5,463 $2,536
================================================================================
<PAGE>
27
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
3. FINANCING OBLIGATIONS (continued)
The New Facility is collateralized by substantially all assets of the
Company. The terms of the New Facility (including the revolver) include certain
restrictive covenants which provide, among other things, restrictions on the
payment of dividends, and require the Company to meet certain financial ratios
and amounts related to tangible net worth, debt and current ratio. In addition,
there are limitations on capital expenditures and incurring additional
indebtedness.
Minimum principal payments relating to the Company's long-term debt at December
30, 1995 are as follows:
FISCAL YEAR TOTAL
----------------------------------------------
1996 $ 740
1997 1,663
1998 3,800
----------------------------------------------
$6,203
==============================================
4. COMMITMENTS AND CONTINGENCIES
The Company leases stores and a warehouse facility under long-term lease
agreements. These leases are classified as operating leases and expire in
various years through 2005. They generally contain renewal options for periods
ranging from two to ten years. On June 16, 1986, the Company entered into a
five-year lease with four options totaling ten years for its Edison, New Jersey
warehouse and office facilities. The Company has exercised an option on the
Edison facility to extend the term of the lease to March 31, 1997.
<PAGE>
28
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
4. COMMITMENTS AND CONTINGENCIES (continued)
Rental expense for all operating leases was $6,202, $5,210 and $4,567 in
1995, 1994 and 1993, respectively. The following is a schedule of future minimum
lease payments, net of sublease income, for each of the next five years for
operating leases (with initial or remaining terms in excess of one year):
Minimum
Year Lease Payments
--------------------------------------------------------
1996 $7,315
1997 5,812
1998 5,071
1999 4,255
2000 2,423
The Company entered into employment agreements with its Chairman of the
Board and Chief Executive Officer and its President and Chief Operating Officer
for four- and five-year periods initially ending in January 1995 and March 1997,
respectively. Effective January 28, 1995, the Company's President and Chief
Operating Officer resigned his positions. In addition, effective January 28,
1995, the Chairman of the Board and Chief Executive Officer amended his
employment agreement. The amended agreement provides for, among other things, an
extended term through January 28, 1997 and the grant of options to purchase
75,000 shares of Common Stock at an exercise price of $7.50. In July 1995, the
Company entered into a three-year employment agreement with its new President
providing for a grant of 100,500 options at an exercise price of $5.50.
From time to time, the Company may be a party to various legal proceedings
relating to the conduct of its business. In management's judgement, the
consolidated financial position of the Company will not be affected materially
by the outcome of any current legal proceedings or other contingent liabilities
and commitments.
<PAGE>
29
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
5. PROFIT-SHARING AND PENSION PLANS
Effective April 1, 1985 the Company adopted the E&B Marine Inc. Employee
Stock Ownership Plan ("ESOP"). Under the Plan, the Company makes annual
contributions to the Trust for the benefit of eligible employees. The
contributions may be in the form of either cash or Common Stock of the Company.
The amount of the annual contribution is at the discretion of the Board of
Directors of the Company, except that the minimum amount must be sufficient to
enable the Trust to meet its current obligations to the Company. Expenses
relating to this plan were $44, $96 and $99 in 1995, 1994 and 1993,
respectively. The amount due from the ESOP, which is considered unearned
compensation, has been recorded as a separate reduction of shareholders' equity.
In December 1995, the Board of Directors of the Company amended the ESOP,
effective December 31, 1995. The amendment provided for no new entrants into the
ESOP after 1995, full vesting of all participants as of December 31, 1995 and
simplified the definition of compensation used in the allocation.
The Company's profit-sharing plan and trust was amended and restated in
1994. The amended plan includes a provision for a company match of elective
contributions made by plan participants; expenses totalled $164 and $78 in 1995
and 1994, respectively. The Company has not made any discretionary contributions
to the profit-sharing plan in the years 1995, 1994 and 1993.
In addition to the discretionary profit-sharing plan, a defined benefit
plan was adopted and be came effective June 1, 1985. The minimum benefit
contribution is calculated by the plan actuaries. The defined benefit plan
provides a retiree with the excess, if any, of amounts required under the
Company's pension formula over the value of the retiree's ESOP accounts
converted to an annual retirement annuity. In addition, the defined benefit plan
provides amounts necessary to cover a decrease, if any, in the value of the
common stock purchased under the special arrangement. The value of the common
stock is to be determined at the retirement date and computed to an annual
retirement annuity. The defined benefit plan was amended, effective January 28,
1994, so that no further benefits will accrue after that date. A curtailment
expense of approximately $96 was recorded in 1993. Statement of Financial
Accounting Standards No. 87 requires recognition of a minimum pension liability
to reflect the excess of accumulated benefits over the fair value of pension
plan assets for defined benefit plans. As a result, in fiscal 1995, the Company
recorded a minimum pension liability of $104.
<PAGE>
30
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
5. PROFIT-SHARING AND PENSION PLANS (continued)
The following table sets forth the funded status and amounts recognized by the
Company relating to the defined benefit plan as of December 30, 1995, December
31, 1994 and December 25, 1993:
1995 1994 1993
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation including
vested benefits of $1,957, $1,544 and $1,721
in 1995, 1994 and 1993, respectively. $2,110 $1,649 $1,823
- --------------------------------------------------------------------------------
Projected benefit obligation for services
rendered to date. 2,110 1,649 1,823
Less: Plan assets at fair value, primarily
common stocks and U.S. government bond
commingled funds with the custodian. 1,937 1,612 1,660
- --------------------------------------------------------------------------------
Projected benefit obligation in excess
of plan assets. 173 37 163
Deferred gain (loss) (104) 54 -
Additional minimum liability adjustment 104 - -
- --------------------------------------------------------------------------------
Accrued Pension Cost $ 173 $ 91 $ 163
- --------------------------------------------------------------------------------
Net pension cost for the fiscal years ended
1995, 1994 and 1993 include the following
components:
Future service cost - $ 35 $ 206
Interest cost on projected benefit obligation 134 131 139
Return on plan assets (355) 72 (116)
Net amortization and deferral 227 (204) 29
Curtailment expense - - 96
- --------------------------------------------------------------------------------
Net Pension Cost $ 6 $ 34 $ 354
================================================================================
Weighted average discount rate 7.25% 8.5% 7.5%
Rate of increase in future compensation levels N/A N/A N/A
Long-term rate of return on assets 8.0% 8.0% 7.5%
<PAGE>
31
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
6. INCOME TAXES
The Company had no current tax expense in 1995, 1994 and 1993 as a result
of the utilization of net operating loss carryforwards. In 1995, the Company
reduced its deferred tax asset and recognized $650 of deferred tax expense
primarily for utilization of net operating loss carryforwards against current
taxable income. During the third quarters of 1994 and 1993, the Company reduced
its valuation allowance on the deferred tax asset by $2,500 and $2,000,
respectively, attributable to the Company's strong operating performance,
resulting in a credit to income tax expense.
The components of deferred taxes at December 30, 1995 and December 31, 1994 are
as follows:
Deferred Tax Asset:
1995 1994
---- ----
Inventory $ 742 $ 732
Employee benefit accruals 261 339
Intangible asset, basis difference -- 120
Restructuring reserves 8 67
Net operating loss carryforwards 3,323 4,021
Other 20 75
Valuation allowance (504) (564)
------- -------
Deferred tax asset 3,850 4,790
------- -------
Deferred Tax Liability - excess of tax
over financial statement depreciation -- (290)
------- -------
Net Deferred Tax Asset $ 3,850 $ 4,500
======= =======
At December 30, 1995 and December 31, 1994, the net deferred tax asset is
classified as follows:
Other current assets $ 2,500 $ 2,500
Other assets 1,350 2,000
------- -------
$ 3,850 $ 4,500
======= =======
In order to fully realize the net deferred tax asset, the Company will need
to generate future taxable income of approximately $9,555. A portion of the net
deferred tax asset is attributable to net operating loss carryforwards ("NOLs")
which for federal income tax purposes expire during the years 2003 through 2006.
Although realization is not assured, management believes it is more likely than
not that the Company will realize the benefit of the NOLs before they begin to
expire. The amount of the net deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.
<PAGE>
32
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
6. INCOME TAXES (continued)
As of December 30, 1995, the Company had unused net operating loss
carryforwards of approximately $8,300 for tax reporting purposes. The
utilization of $3,100 of the tax loss carryforwards will be limited in
subsequent years as a result of the 1989 restructuring of the Company which
resulted in a change of control of the Company of greater than fifty percent.
The total tax loss carryforward subject to limitation represents annual tax
losses incurred prior to the beginning of the year 1989 and the tax loss
incurred for the period January 2, 1989 to March 3, 1989, the date of the change
in control.
The tax net operating loss carryforwards expire as follows:
Year of Tax
Expiration Reporting
---------------------------------------------
2003 $2,160
2004 600
2005 2,740
2006 2,800
---------------------------------------------
$8,300
=============================================
The Company is subject to the alternative minimum tax, which is approximately
$30 and $40 in 1995 and 1994, respectively. The alternative minimum tax is
capitalized as part of the net deferred assets in 1995 and 1994.
The effective income tax rate is different from the U.S. Federal Statutory rate
for the following reasons:
1995 1994 1993
- --------------------------------------------------------------------------------
Computed "expected" tax expense $ 568 $ 1,097 $ 1,140
Increase (reduction) in taxes resulting from:
State income taxes, net of federal
income tax benefit 100 193 96
Non-deductible amortization of goodwill 42 34 24
Debt premium amortization -- -- (96)
Change in valuation allowance (60) (3,824) (3,164)
- --------------------------------------------------------------------------------
$ 650 ($2,500) ($2,000)
================================================================================
<PAGE>
33
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
7. EMPLOYEE STOCK OPTION AND PURCHASE PLAN, WARRANTS and RELATED
MATTERS
As of January 26, 1983, the shareholders of the Company adopted a stock
option plan and a stock purchase plan. The stock option plan, as amended,
provides for 650,000 shares of common stock available for option thereunder. The
options are exercisable at varying dates not to exceed ten years from date of
grant. The stock purchase plan, as amended in 1991, makes available 50,000
shares of common stock which have been reserved for purchase by eligible
employees at 85 percent of fair market value. During 1995, 1994 and 1993, shares
issued under the stock purchase plan totalled 0, 4,576 and 12,200, respectively.
The stock purchase plan expired in 1994.
Transactions, restated to reflect the reverse stock split, relating to stock
options granted under the stock option plan are as follows:
Number of Shares
Under Option
- --------------------------------------------------------------------------------
Outstanding at December 26, 1992 ($2.00 - $15.00) 293,725
Granted ($3.00 - $4.75) 55,250
Exercised ($2.50) (1,000)
Cancelled ($2.375 - $15.00) (6,175)
- --------------------------------------------------------------------------------
Outstanding at December 25, 1993 ($2.00 - $15.00) 341,800
Granted ($9.50 - $10.00) 13,500
Exercised ($2.38 - $2.50) (800)
Cancelled ($2.50 - $10.00) (2,900)
- --------------------------------------------------------------------------------
Outstanding at December 31, 1994 ($2.00 - $15.00) 351,600
Granted ($5.25 - $7.50) 225,375
Exercised ($2.38 - $2.63) (26,785)
Cancelled ($2.38 - $9.50) (32,567)
- --------------------------------------------------------------------------------
Outstanding at December 30, 1995 ($2.00 - $15.00) 517,623
Exercisable at December 30, 1995 ($2.00 - $15.00) 230,220
================================================================================
<PAGE>
34
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
7. EMPLOYEE STOCK OPTION AND PURCHASE PLAN, WARRANTS AND RELATED
MATTERS (continued)
The Company has granted additional stock options and warrants to purchase
common stock. These options and warrants were issued during the period from 1988
through 1991. In November 1995, the Company announced an offer (the "Exchange
Offer") to exchange up to 181,531 shares of the Company's common stock for up to
1,032,418 warrants and options (other than the options issued under the
Company's 1983 Stock Option Plan). Pursuant to the Exchange Offer which closed
on December 1, 1995, the Company issued an aggregate of 176,575 shares of common
stock in exchange for 1,000,089 warrants and options. As a result of the
Exchange Offer, the Company incurred $369 in non-cash compensation expense.
Additionally, during 1995, the Company issued 19,941 shares of common stock for
proceeds of approximately $119.
At December 30, 1995 and December 31, 1994, the number of shares under
option/warrant other than under the Company's 1983 Stock Option Plan were 32,329
and 1,141,631, respectively, at exercise prices ranging from $8.44 to $11.15 and
$1.00 to $14.00, respectively.
In 1992, two former officers of the Company were issued 11,986 three-year
options at an exercise price of $2.00 and in 1994 these options were exercised.
In addition, warrants which were convertible into an aggregate of 141,086 shares
of common stock at an exercise price of $28.36 per share expired unexercised
effective April 7, 1993. During 1995, options held by a director to purchase
13,000 shares of common stock were exercised at an exercise price of $3.72.
8. OTHER INCOME
In 1988, a loan to a former officer, collateralized by 37,500 shares of
common stock, was fully reserved against due to uncertainties concerning
collectibility. In 1993, the Company and the former officer agreed that the
Company will retain the common stock in full satisfaction of the debt. The fair
market value of the common stock of $337 has been recorded as other income in
1993.
<PAGE>
35
E&B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands, except per share data)
(Continued)
9. QUARTERLY FINANCIAL DATA.
The following table sets forth certain unaudited quarterly financial
information:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
YEAR ENDED DECEMBER 30, 1995
- ----------------------------
Net sales $ 19,131 $ 42,780 $ 29,367 $ 18,540
Gross profit 4,196 13,054 8,370 3,719
Income (loss) before income taxes (1,879) 4,926 1,370 (2,748)
Income tax expense (benefit) (751) 1,972 549 (1,120)
Net income (loss) (1,128) 2,954 821 (1,628)
Net income (loss) per share (1) (0.30) 0.67 0.20 (0.43)
YEAR ENDED DECEMBER 31, 1994
- ----------------------------
Net sales $ 16,148 $ 39,845 $ 27,456 $ 18,303
Gross profit 3,500 12,129 7,938 4,282
Income (loss) before income taxes (1,790) 4,915 1,712 (1,610)
Income tax expense (benefit) -- -- (2,500) --
Net income (loss) (1,790) 4,915 4,212 (1,610)
Net income (loss) per share (1) (0.49) 1.11 0.96 (0.45)
(1) The sum of the four quarters' per share amounts do not agree to the
reported net income per share for the full year due to common stock
equivalents being included in the calculation in certain quarters and
excluded in other quarters when the effect is antidilutive.
<PAGE>
36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information concerning executive officers of the Company see "Executive
Officers of the Company" under Part I above. Certain biographical information
concerning the Directors of the Company is set forth below. Such information was
furnished by them to the Company.
Name Of Director Age Certain Biographical Information
- ---------------- --- --------------------------------
BRADFORD R. KLATT 41 President of Metropolis Equities, Inc., an
(Class C Director) investment firm, since June 1988 and
Partner of Roseland Property Company since
1993. Prior to that, Mr. Klatt served as a
Vice President of Goldman Sachs & Co., an
investment banking firm, from 1984 to 1988.
Director of the Company since April 1989.
RICHARD E. KROON 53 Managing Partner of the Sprout Group, a
(Class C Director) private equity firm, and President and
Chief Executive Officer of DLJ Capital
Corporation, the management company for the
Sprout Group, since 1981. Mr. Kroon is a
director of County Seat Holdings Inc.,
Loehmann's Holdings, Inc. and other private
companies. Director of the Company since
March 1989.
THEODORE A. PAMPERIN 55 Consultant and Chairman of American Catalog
(Class B Director) Partnerships since 1995. Mr. Pamperin was
Executive Vice President of Hanover Direct,
Inc., a direct mail company, from 1993 to
1995. Prior to that, Mr. Pamperin served as
Chairman of Tweeds, Inc., a direct mail
apparel catalog, from 1986 to 1992 and as
Executive Vice President and General
Manager of J. Crew Outfitter, a direct mail
apparel catalog, from 1981 through 1985.
Director of the Company since April 1989.
<PAGE>
37
Name Of Director Age Certain Biographical Information
- ---------------- --- --------------------------------
KENNETH G. PESKIN 56 Chairman of the Board and Chief Executive
(Class B Director) Officer of the Company since November 1990.
Prior to joining the Company, Mr. Peskin
was employed by Supermarkets General
Corporation from 1965 through September
1989. He was Chairman and Chief Executive
Officer from June 1987 to September 1989
and President and Chief Executive Officer
of the Pathmark Division from June 1986 to
June 1987.
WILLIAM V. ROBERTI 49 President and Chief Executive Officer of
(Class A Director) Plaid Clothing Group Inc. since May 1995.
Plaid Clothing Group filed for
reorganization under Chapter 11 of the
Federal Bankruptcy Codes on July 12, 1995.
Visiting Professor at Sacred Heart
University in Fairfield, Connecticut since
January 1995. Mr. Roberti served as
President and Chief Executive Officer of
Brooks Brothers, a men's and women's
specialty retailer, from January 1990 to
December 1994 and President and Chief
Operating Officer from May 1987 to January
1990. Prior to that, Mr. Roberti was
employed by Zale Corporation, a jewelry
specialty retailer, from 1984 to 1987. Mr.
Roberti is a director of Pivot Rules, a
privately held golf apparel company, and
Plaid Clothing Group, Inc. Director of the
Company since May 1993.
JOHN H. WEILAND 40 Group Vice President of C.R. Bard, Inc.
(Class B Director) since March 1996. Prior to that, Mr.
Weiland was Senior Vice President of The
North America Group, Dentsply International
Inc., a manufacturer of dental supplies,
from 1991 to March 1996. Prior to that, Mr.
Weiland served as President and Chief
Executive Officer of Pharmacia Diagnostics
Inc., from 1989 to 1991 and as Vice
President - General Manager of Baxter
International - Scientific Products
Division from 1988 to 1989. Mr. Weiland was
a White House Fellow from 1987 to 1988 and
Vice President East American Scientific
Products Division of Baxter Healthcare
Corporation prior to 1987. Director of the
Company since October 1986.
<PAGE>
38
Committees of the Board of Directors
The Board of Directors has an Audit Committee, whose members currently are
Bradford R. Klatt, William V. Roberti and John H. Weiland, and a Compensation
and Stock Option Committee, whose members currently are Richard E. Kroon,
Bradford R. Klatt and Theodore A. Pamperin. The Audit Committee is authorized to
review the results of auditors' examinations and make recommendations with
respect to accounting practices and procedures and internal controls. The
Compensation and Stock Option Committee is authorized to make recommendations to
the Board of Directors regarding compensation to be paid to key employees of the
Company, administers the Company's 1983 Stock Option Plan and determines the
persons who are eligible to receive options thereunder, the number of shares to
be subject to each option and the other terms and conditions upon which options
under such plan are granted and made exercisable.
Section 16(a) Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock. Officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the fiscal year ended December 30, 1995 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were met, except for the Trustees of General Electric
Pension Trust who reported a transaction one month late.
<PAGE>
39
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information concerning the compensation
during the fiscal years ended December 30, 1995, December 31, 1994, and December
25, 1993 to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company whose total annual salary and
bonus for the year ended December 30, 1995 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------ ------------
Options All Other
Fiscal Granted Compensation
Name And Principal Position Year (1) Salary Bonus (#) (2)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kenneth G. Peskin 1995 $257,716 -- 75,000 $ 172
Chairman of the Board and 1994 238,846 -- -- 398
Chief Executive Officer 1993 229,038 $115,000 -- 996
James D. Peters 1995 129,181 -- 100,500 --
President and 1994 (3) -- -- -- --
Chief Operating Officer 1993 (3) -- -- -- --
Walfrido A. Martinez 1995 120,625 -- 12,000 165
Senior Vice President and 1994 113,462 -- -- 383
Chief Financial Officer 1993 98,750 33,000 18,750 516
Robert G. Defonte 1995 148,500 -- 12,000 172
Senior Vice President, 1994 150,240 -- -- 398
Merchandising and Secretary 1993 143,625 45,705 12,500 768
Patrick J. Melli 1995 115,625 -- 12,000 161
Senior Vice President, 1994 109,615 -- -- 373
Inventory Management and 1993 97,500 33,000 17,500 504
Information Services
</TABLE>
(1) The 1994 fiscal year contains 53 weeks.
(2) Consists of contributions made by the Company on behalf of the executive
officers to the Employee Stock Ownership Plan.
(3) Mr. Peters was not an employee of the Company during this period.
<PAGE>
40
See "Employment Agreements" below for information concerning the Company's
Employment Agreement with its Chairman of the Board and its President.
The Company and its subsidiaries have a stock option plan, a profit sharing
plan, an employee stock ownership plan, a defined benefit plan, a bonus plan and
customary medical and group life insurance programs.
DIRECTOR COMPENSATION
- ---------------------
The Company pays an annual fee of $6,000 for directors (other than
employees) and a fee of $1,000 for each meeting of the Board of Directors of the
Company attended, together with reasonable travel and other expenses incurred in
connection with such attendance.
<PAGE>
41
The following table sets forth information concerning options granted during the
fiscal year ended December 30, 1995 to the executive officers named in the
Summary Compensation Table:
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 30, 1995
INDIVIDUAL GRANTS
-----------------
<TABLE>
<CAPTION>
% of Total Options
Options Granted to the
Granted Employees In Exercise Expiration Grant Date
Name And Principal Position (#) Fiscal Year Price Date Value (1)
- --------------------------- --- ----------- ----- ---- ---------
<S> <C> <C> <C> <C> <C>
Kenneth G. Peskin
Chairman of the Board and
Chief Executive Officer 75,000 (2) 33.3% $7.50 June 1, 2004 $125,250
James D. Peters
President and
Chief Operating Officer 100,500 (3) 44.6% $5.50 July 24, 2005 151,755
Walfrido A. Martinez
Chief Financial Officer,
Senior Vice President and
Controller 12,000 (4) 5.3% $7.50 Feb. 15, 2000 4,800
Robert G. Defonte
Senior Vice President,
Merchandising and Secretary 12,000 (4) 5.3% $7.50 Feb. 15, 2000 4,800
Patrick J. Melli
Senior Vice President, Inventory
Management and Information
Services 12,000 (4) 5.3% $7.50 Feb. 15, 2000 4,800
</TABLE>
(1) Options are valued using a Black-Scholes-based formula. However, options
will have no realizable value unless, and then only to the extent that, the
Common Stock price appreciates from the grant date to the exercise date.
(2) Exercisable in full on June 1, 2004, and subject to acceleration in 25,000
share annual installments for 1995, 1996 and 1997, contingent upon the
achievement of certain performance goals by the Company.
(3) Exercisable in five annual installments of 15,000 shares each commencing
July 24, 1996 as well as exercisable in three 8,500 share annual
installments for 1996, 1997 and 1998, contingent upon the achievement of
certain performance goals by the Company.
(4) Exercisable in full on November 15, 1999, and subject to acceleration
contingent upon the achievement of certain performance goals by the Company
for fiscal 1995.
<PAGE>
42
During the fiscal year ended December 30, 1995, Kenneth G. Peskin exchanged
25,000 options with an expiration date February 1, 2001 and an exercise price of
$14.00 for 3,264 shares as part of the "Exchange Offer" (see Note 7 to the
Consolidated Financial Statements). The following table sets forth information
concerning the number and value of options held by the executive officers named
in the Summary Compensation Table at December 30, 1995.
OPTION VALUES AT DECEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE OF THE UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS (#) IN-THE-MONEY OPTIONS (1)
--------------------------------- ------------------------
Name & Principal Position Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth G. Peskin
Chairman of the Board and
Chief Executive Officer 168,750 93,750 $253,125 $28,125
James D. Peters
President and
Chief Operating Officer 0 100,500 0 0
Walfrido A. Martinez
Senior Vice President and
Chief Financial Officer 13,875 23,125 4,688 1,875
Robert G. Defonte
Senior Vice President,
Merchandising and Secretary 16,250 20,750 10,000 2,500
Patrick J. Melli
Senior Vice President, Inventory
Management and Information
Services 14,500 22,500 5,844 1,813
</TABLE>
(1) In-the-money options are those where the fair market value of the
underlying Common Stock exceeds the exercise price of the option. The value
of in-the-money options is determined in accordance with regulations of the
Securities and Exchange Commission by subtracting the aggregate exercise
price of the option from the aggregate year-end value of the underlying
Common Stock.
RETIREMENT PLANS
- ----------------
The Company provides retirement benefits for employees of the Company and
its subsidiaries, including officers and directors who are employees, under
three plans: the Profit Sharing Plan (under Section 401(k) of the Code), the
Employee Stock Ownership Plan ("ESOP") and the Defined Benefit Plan.
<PAGE>
43
The compensation of the executive officers of the Company set forth in the
Summary Compensation Table above is the current covered compensation of such
executive officers under the Defined Benefit Plan. Messrs. Peskin, Peters,
Martinez, Defonte and Melli have three, none, three, ten and three credited
years of service under the Defined Benefit Plan, respectively. The following
table shows the estimated annual retirement benefit in the form of a life
annuity under the Defined Benefit Plan for employees retiring at age 65 whose
average annual compensation and years of participation at retirement would be in
the classifications shown. The amounts shown in the table do not take into
account the additional benefit determined by reference to Common Stock purchased
under the Profit Sharing Plan or the offset for benefits payable under the ESOP:
ESTIMATED ANNUAL RETIREMENT BENEFIT
-----------------------------------
Average Annual Years Of Service
----------------
Compensation 10 15 20 25
------------- -- -- -- --
$ 50,000 $ 7,500 $11,250 $15,000 $18,750
100,000 15,000 22,500 30,000 37,500
150,000 22,500 33,750 45,000 56,250
200,000 22,500 33,750 45,000 56,250
250,000 22,500 33,750 45,000 56,250
300,000 22,500 33,750 45,000 56,250
EMPLOYMENT AGREEMENTS
- ---------------------
By agreement dated as of January 28, 1995, the Company extended and amended
the employment agreement between the Company and Kenneth G. Peskin dated as of
February 26, 1991. As extended and amended, this agreement (the "Employment
Agreement") provides for, among other items, (I) the employment of Mr. Peskin as
the Company's Chairman and Chief Executive Officer until January 28, 1997 (with
automatic one-year extensions of the term effective as of each anniversary of
the date of the agreement unless either the Company or Mr. Peskin gives a notice
of non-extension at least ninety days prior to such anniversary), (ii) an annual
base salary for 1995 of $240,000 and annual base salaries thereafter to be
agreed upon by the Company and Mr. Peskin, (iii) the payment of an annual cash
bonus of 50% or more of base salary based upon the achievement by the Company of
certain performance goals for the applicable fiscal year, (iv) the grant to Mr.
Peskin of options to purchase up to 187,500 shares of Common Stock of the
Company at an exercise price of $2.00 per share, of which 168,750 are currently
vested, (v) the grant to Mr. Peskin of options to purchase up to 75,000 shares
of Common Stock of the Company at an exercise price of $7.50, vesting on June 1,
2004 but subject to accelerated vesting based upon the achievement by the
Company of certain performance goals during fiscal years 1995 through 1997, (vi)
the grant to Mr. Peskin of additional options to purchase shares of Common Stock
at an exercise price of $14.00 per share, with the number of shares subject to
these options to be determined
<PAGE>
44
in accordance with a formula set forth in the Employment Agreement, which
options were exchanged as part of the "Exchange Offer" (see Note 7 to the
Consolidated Financial Statements), (vii) certain rights of co-sale with respect
to sales of Common Stock held by certain stockholders of the Company, (viii)
certain severance payments to Mr. Peskin of up to one year's base salary and
bonus in the event of his death, disability or upon termination of the
employment of Mr. Peskin under certain circumstances, (ix) an agreement by Mr.
Peskin not to compete with the Company for up to one year following termination,
and (x) certain benefits for Mr. Peskin reasonably consistent with those offered
to similar executives by companies which are substantially of the same size and
economic condition as the Company.
The Company has an employment agreement with James D. Peters which provides
for, among other items (I) the employment of Mr. Peters as the President and
Chief Operating Officer of the Company for a three year period commencing in
July 1995 at an annual base salary of $230,000 and at annual base salaries
thereafter to be agreed upon by the Company and Mr. Peters, (ii) the payment of
cash bonuses of up to a maximum of 40% of base salary based upon the achievement
by the Company of certain performance goals and, (iii) the grant of options as
of July 24, 1995 to purchase up to 75,000 shares of Common Stock of the Company
at an exercise price of $5.50, with 15,000 of such options vesting annually for
five years starting on July 24, 1996 and, (iv) the grant of options as of July
24, 1995 to purchase up to 25,500 shares of common stock of the Company with
8,500 of such options vesting annually for three years provided the Company
achieves certain performance goals in each of the three years starting with
fiscal year 1996.
<PAGE>
45
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The stockholders (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge of the
Board of Directors of the Company, owned beneficially more than five percent of
any class of the outstanding voting securities of the Company as of January 1,
1996, each director and each executive officer named in the Summary Compensation
Table of the Company who beneficially owned shares of Common Stock and all
directors and executive officers of the Company as a group, and their respective
stockholdings as of such date (according to information furnished by them to the
Company), are set forth in the following table. Except as indicated in the
footnotes to the table, all of such shares are owned with sole voting and
investment power.
Shares of
Common Stock
Owned Beneficially
as of Percent
Name And Address January 1, 1996 Of Class
- ---------------- --------------- --------
Sprout Growth L.P. 760,854 (1) 19.3%
c/o Sprout Group
277 Park Avenue
New York, NY 10172
Sprout Capital V 628,753 (1) 16.0%
c/o Sprout Group
277 Park Avenue
New York, NY 10172
Trustees of General Electric
Pension Trust 395,944 10.0%
3003 Summer Street
P.O. Box 7900
Stamford, CT 06905
Kenneth G. Peskin 505,625 (2)(3) 12.3%
201 Meadow Road
Edison, NJ 08818
DLJ Capital Corporation 217,441 5.5%
c/o Sprout Group
277 Park Avenue
New York, NY 10172
<PAGE>
46
Shares of
Common Stock
Owned Beneficially
as of Percent
Name And Address January 1, 1996 Of Class
- ---------------- --------------- --------
Robert G. Defonte 19,651 (4) (5)
201 Meadow Road
Edison, NJ 08818
Bradford R. Klatt 15,996 (6) (5)
201 Meadow Road
Edison, NJ 08818
Richard E. Kroon 0 (7) (5)
c/o Sprout Group
277 Park Avenue
New York, NY 10172
Walfrido A. Martinez 14,047 (8) (5)
201 Meadow Road
Edison, NJ 08818
Patrick J. Melli 14,688 (9) (5)
201 Meadow Road
Edison, NJ 08818
Theodore A. Pamperin 18,626 (5)
201 Meadow Road
Edison, NJ 08818
William V. Roberti 2,500 (10) (5)
201 Meadow Road
Edison, NJ 08818
John H. Weiland 6,507 (5)
201 Meadow Road
Edison, NJ 08818
All Directors and Executive
Officers as Group (11 persons) 597,449 14.4%
<PAGE>
47
(1) Richard E. Kroon, director of the Company, is managing partner of the
general partner of Sprout Growth, L.P. and of Sprout Capital V. DLJ Growth
Associates and DLJ Associates V is a general partner of Sprout Growth, L.P.
and Sprout Capital V, respectively, and as such has shared voting and
dispositive power with respect to such shares. Does not include: 108,071
shares beneficially owned by Sprout Growth, Ltd., of which Mr. Kroon is
managing partner of the investment manager; 48,687 shares beneficially
owned by DLJ Venture Capital Fund II, L.P., of which Mr. Kroon is managing
partner of the general partner. Does not include 289,083 shares
beneficially owned by DLJ Capital Corporation, of which Mr. Kroon is
President and Chief Executive Officer (see footnote 13 below).
(2) Includes 168,750 shares issuable upon the exercise of presently exercisable
options.
(3) Does not include 25,000 shares held by the ESOP, with respect to which Mr.
Peskin and Mr. Martinez, as trustees, have shared voting and investment
power.
(4) Includes 16,250 shares issuable upon the exercise of presently exercisable
options.
(5) Less than one percent.
(6) Does not include 19,151 shares beneficially owned by Metropolis Two
Associates of which Mr. Klatt is a partner.
(7) Mr. Kroon disclaims beneficial ownership of the shares described in
Footnote 1 above, except for specific individual partnership interests.
(8) Includes 13,875 shares issuable upon the exercise of presently exercisable
options.
(9) Includes 14,500 shares issuable upon the exercise of presently exercisable
options.
(10) Consists of 2,500 shares issuable upon the exercise of presently
exercisable options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See "Item 11 - Executive Compensation - Employment Agreements."
<PAGE>
48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) 1. Financial Statements:
The consolidated financial statements of the Company and its subsidiaries
filed in this Annual Report on Form 10-K are listed in the attached Index to
Consolidated Financial Statements.
2. Financial Statement Schedules:
There are no consolidated financial statement schedules of the Company and
its subsidiaries required to be filed in this Annual Report on Form 10-K.
3. Exhibits:
The exhibits required to be filed as part of this Annual Report on Form
10-K are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K:
No current reports on Form 8-K were filed by the Company during the quarter
ended December 30, 1995.
* * *
Copies of the exhibits filed with this Annual Report on Form 10-K do not
accompany copies hereof for distribution to stockholders of the Company. The
Company will furnish a copy of any of such exhibits to any stockholder
requesting the same for a nominal charge to cover duplicating costs.
<PAGE>
49
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby appoint
Kenneth G. Peskin and Walfrido A. Martinez as attorneys-in-fact with full power
of substitution, severally, to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more amendments to the annual report which amendments may make such
changes in the report as the attorney-in-fact acting in the premises deems
appropriate and to file any such amendment to the report with the Securities and
Exchange Commission.
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.
Dated: March 29, 1996 E&B MARINE INC.
By /s/KENNETH G. PESKIN
------------------------
Kenneth G. Peskin
Chairman of the Board,
Director and
Chief Executive Officer
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 dates indicated.
Dated: March 29, 1996 By /s/KENNETH G. PESKIN
------------------------
Kenneth G. Peskin
Chairman of the Board,
Director and
Chief Executive Officer
Dated: March 29, 1996 By /s/WALFRIDO A. MARTINEZ
------------------------
Walfrido A. Martinez
Senior Vice President and
Chief Financial Officer
<PAGE>
50
Dated: March 29, 1996 By /s/BRADFORD R. KLATT
------------------------
Bradford R. Klatt
Director
Dated: March 29, 1996 By /s/RICHARD E. KROON
------------------------
Richard E. Kroon
Director
Dated: March 29, 1996 By /s/THEODORE A. PAMPERIN
------------------------
Theodore A. Pamperin
Director
Dated: March 29, 1996 By /s/WILLIAM V. ROBERTI
------------------------
William V. Roberti
Director
Dated: March 29, 1996 By /s/JOHN H. WEILAND
------------------------
John H. Weiland
Director
<PAGE>
51
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 30, 1995 0-24868
----------------- -------
E&B MARINE INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
-----------------
Exhibit
No. Name Of Exhibit Page
--- --------------- ----
3(a) Restated Certificate of Incorporation of the
Company, (incorporated by reference to Exhibit
3 to the Company's Quarterly Report on Form
10-Q for the Quarter ended July 1, 1995). --
3(b) Amendment and Restated By-Laws of the Company
(incorporated by reference to Exhibit 3(b) to
the Company's Annual Report on Form 10-K for
the year ended December 25, 1993). --
10(a)* 1983 Stock Option Plan of the Company, as
amended and restated as of June 20, 1995
(incorporated by reference to Exhibit 4(i) to
Registration Statement No. 33-61193). --
10(b)* Amended and Restated Profit Sharing Plan and
Trust, effective June 1, 1985, of the Company
(incorporated by reference to Exhibit 4 to
Registration Statement No. 2-99055). --
<PAGE>
52
Exhibit
No. Name Of Exhibit Page
--- --------------- ----
10(c) Common Stock Purchase Agreement dated as of
February 26, 1991 by and among the Company and
each of the Purchasers named on the signature
page thereto (incorporated by reference to
Exhibit 4(a) to the Company's Current Report
on Form 8-K dated February 26, 1991). --
10(d) Credit Agreement dated as of June 6, 1994 by
and among the Company, the subsidiaries of the
Company party thereto and United Jersey
Bank/Central, N.A. ("UJB") (incorporated by
reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 25, 1994). --
10(e) Security Agreement dated as of June 6, 1994
made by the Company and the subsidiaries of
the Company party thereto in favor of UJB and
United Jersey Leasing Company (the "Leasing
Company") (incorporated by reference to
Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June
25, 1994). --
10(f) Pledge Agreement dated as of June 6, 1994 made
by the Company in favor of UJB and the Leasing
Company (incorporated by reference to Exhibit
10(c) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 25,
1994). --
10(g) First Amendment dated as of September 12, 1994
to the Credit Agreement, Security Agreement
and Pledge Agreement by and among the Company,
the subsidiaries of the Company party thereto
and UJB (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 24,
1994). --
10(h) Second Amendment dated as of March 8, 1995 to
the Credit Agreement by and among the Company,
the subsidiaries of the Company party thereto
and UJB (incorporated by reference to Exhibit
10(j) to the Company's Annual Report on Form
10-K for the year ended December 31, 1994). --
10(i) Second Amendment dated as of March 8, 1995 to
the Mortgage and Security Agreement by and
among the Company, UJB and UJB Leasing
Corporation (incorporated by reference to
Exhibit 10(l) to the Company's Annual Report
on Form 10-K for the year ended December 31,
1994). --
<PAGE>
53
Exhibit
No. Name Of Exhibit Page
--- --------------- ----
10(j) Third Amendment dated as of October 27, 1995
to the Credit Agreement by and among the
Company, the subsidiaries of the Company party
thereto and UJB (incorporated by reference to
Exhibit 10.1 to the Company's Current Report
on Form 8-K dated October 30, 1995). --
10(k) Fourth Amendment dated November 13, 1995 to
the Credit Agreement by and among the Company,
the subsidiaries of the Company party thereto
and UJB. --
10(l) Fifth Amendment dated as of December 22, 1995
to the Mortgage and Security Agreement by and
among the Company, UJB and UJB Leasing
corporation. --
10(m) Third Amendment dated as of December 22, 1995
to the Mortgage and Security Agreement by and
among the Company, UJB and UJB Leasing
Corporation. --
10(n) Amended and Restated Term Note dated December
22, 1995 as of June 6, 1994 made by the
Company and certain subsidiaries of the
Company party thereto to the order of UJB. --
10(o)* Employment Agreement dated as of February 26,
1991 between the Company and Kenneth G. Peskin
(incorporated by reference to Exhibit 10(f) to
the Company's Current Report on Form 8-K dated
February 26, 1991). --
10(p)* Amendment No. 1 dated as of July 31, 1992 to
the Employment Agreement dated as of February
26, 1991 between the Company and Kenneth G.
Peskin (incorporated by reference to Exhibit
10(ii) to the Company's Annual Report on Form
10-K for the year ended December 26, 1992). --
10(q)* Amendment No. 2 dated as of January 28, 1995
to the Employment Agreement dated as of
February 26, 1991 between the Company and
Kenneth G. Peskin. (incorporated by reference
to Exhibit 10(q) to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1995). --
10(r)* Employment Agreement dated as of June 30, 1995
between the the Company and James Peters. --
<PAGE>
54
Exhibit
No. Name Of Exhibit Page
--- --------------- ----
21 Subsidiaries of the Company. --
23 Consent of KPMG Peat Marwick LLP. --
24 Power of Attorney (see "Power of Attorney" in
Form 10-K). --
- --------------------------------------------------------------------------------
* - Management contracts or compensatory plans or arrangements.
<PAGE>
E&B(R)
Marine Inc.
================================================================================
November 13, 1995
United Jersey Bank
335 Ridge Road
Dayton, New Jersey 08810
Attention: Mr. Robert Williams
- ---------
RE: Credit Agreement dated as of June 6, 1994, as
amended (the "Credit Agreement"), among United
Jersey Bank (the "Bank"), E&B Marine Inc.
(the "Company") and the Company's subsidiaries
----------------------------------------------
Ladies and Gentlemen:
Reference is made to Section 9.1(c) of the Credit Agreement.
Effective September 30, 1995, the minimum Debt Service Coverage
Ratio (as defined in the Credit Agreement) for the Third Quarter
1995 is hereby amended from 1.5:1.0 to 1.34:1.0.
Except as amended hereby, the Credit Agreement shall remain in full
force and effect in accordance with its terms.
Very truly yours,
E&B MARINE INC. (on behalf of
itself and its subsidiaries)
By: /s/ Walfrido A. Martines
--------------------------
Walfrido A. Martines
Senior Vice President and
Chief Financial Officer
Accepted and Agreed:
UNITED JERSEY BANK
By: /s/ Robert Williams
----------------------------
Robert Williams
Vice President ROBERT J. WILLIAMS
Vice President
[LOGO]
UNITED JERSEY BANK
ASSET BASED LENDING
335 Ridge Road
P.O. Box 1008
Dayton, NJ 08810
908 438-7141
Fax 908 438-7142
FIFTH AMENDMENT OF
CREDIT AGREEMENT
THIS FIFTH AMENDMENT OF CREDIT AGREEMENT (this "AMENDMENT"), dated as
of December 22, 1995, by and among E&B MARINE INC., a Delaware corporation,
CENTRAL MARINE SUPPLY INC., a New Jersey corporation, E & B MARINE SUPPLY, INC.,
a New Jersey corporation, E & B MARINE SUPPLY, INC., a Maryland corporation, E&B
MARINE SUPPLY (FLORIDA) INC., a Delaware corporation, JAMES BLISS & CO., INC., a
Massachusetts corporation, GOLDBERGS' MARINE DISTRIBUTORS, INC., a Delaware
corporation, SEA RANGER MARINE INC., a Delaware corporation and KRISTA
CORPORATION, a Delaware corporation (collectively, the "COMPANIES";
individually, a "COMPANY"), and UNITED JERSEY BANK (successor in interest to
United Jersey Bank/Central, N.A.) (the "BANK").
W I T N E S S E T H:
- - - - - - - - - -
A. The Companies and the Bank entered into a Credit Agreement
dated as of June 6, 1994, as amended by the First Amendment of Credit Agreement,
Security Agreement and Pledge Agreement dated as of September 12, 1994, the
Second Amendment of Credit Agreement dated as of March 8, 1995 (the "SECOND
AMENDMENT"), the Third Amendment of Credit Agreement dated as of October 27,
1995 and a letter agreement dated November 13, 1995 (collectively, and as
further amended, supplemented or otherwise modified, the "CREDIT AGREEMENT");
B. Pursuant to the Credit Agreement, the Bank (i) made a term
loan to the Companies in the principal amount of $3,500,000, (ii) made an
additional term loan to the Companies in the aggregate principal amount of
$1,850,000 in accordance with a term loan commitment in the principal amount of
$2,500,000 made available to the Companies under the Second Amendment, (iii)
agreed to make revolving credit loans to the Companies from time to time in an
aggregate principal amount at any one time outstanding not to exceed
$15,000,000, and (iv) agreed to provide certain other financial accommodations
to the Companies, all upon the terms and subject to the conditions set forth in
the Credit Agreement;
<PAGE>
C. The Companies have requested the Bank to (i) make
an additional term loan to the Companies in the principal amount of
$2,089,444.53, (ii) consolidate such additional term loan and the term loans
previously made by the Bank to the Companies and, in connection therewith,
conform and modify the terms of each term loan, (iii) increase the aggregate
principal amount of the revolving credit loans at any one time outstanding from
$15,000,000 to $17,000,000 and extend the maturity date thereof, and (iv)
otherwise modify certain terms of the Credit Agreement, all as more specifically
provided below in this Amendment; and
D. The Bank is willing to make the additional term loan to the
Companies and to modify the loans previously made to the Companies and certain
other terms of the Credit Agreement as requested by the Companies, all upon the
terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Capitalized terms used in this Amendment shall have the same
meanings given them in the Credit Agreement, unless otherwise defined herein.
2. Section 1 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"SECTION 1. AMOUNT AND TERMS OF TERM LOAN
-----------------------------
1.1 TERM LOAN. The Bank made a term loan to the Companies on
the Initial Funding Date in the principal amount of $3,500,000.00 (the
"FIRST TERM LOAN"). The outstanding principal balance of the First Term
Loan as of the Fifth Amendment Closing Date is $2,430,555.47. Pursuant
to a term loan commitment made available to the Companies on March 8,
1995 in the principal amount of $2,500,000.00 (the "SECOND AMENDMENT
COMMITMENT"), the Bank made a term loan to the Companies in the
aggregate principal amount of $1,850,000.00 (the "SECOND TERM LOAN").
The outstanding principal balance of the Second Term Loan as of the
Fifth Amendment Closing Date is $1,480,000.00. Subject to the terms and
conditions hereof, the Bank agrees to make an additional term loan to
the Companies on the Fifth Amendment Closing Date in the principal
amount of $2,089,444.53 (the "THIRD TERM LOAN"). Upon the disbursement
<PAGE>
of the Third Term Loan to the Companies, the aggregate principal amount
of the First Term Loan, the Second Term Loan and the Third Term Loan
(collectively, the "TERM LOAN") shall be $6,000,000. The Second
Amendment Commitment is hereby terminated.
1.2 AMENDED AND RESTATED TERM NOTE. The Term Loan made by the
Bank to the Companies pursuant to this Agreement shall be evidenced by
a promissory note of the Companies, substantially in the form of
EXHIBIT A.2 hereto (the "AMENDED AND RESTATED TERM NOTE"), with
appropriate insertions therein, payable to the order of the Bank and
representing the joint and several obligation of each Company to pay
the unpaid principal amount of the Term Loan, with interest thereon as
prescribed in subsection 5.1. The Amended and Restated Term Note
supersedes and replaces the Term Note dated June 6, 1994 in the
original principal amount of $3,500,000, executed by the Companies in
favor of the Bank, and the Second Term Note dated March 8, 1995, in the
original principal amount of $2,500,000, executed by the Companies in
favor of the Bank (collectively, the "EXISTING NOTES"). The Bank is
hereby authorized to record the amount of the Term Loan and the date
and amount of each payment or prepayment of principal thereof on the
schedule annexed to and constituting a part of the Amended and Restated
Term Note, and any such recordation shall constitute conclusive
evidence of the accuracy of the information so recorded in the absence
of manifest error, PROVIDED that failure by the Bank to make any such
recordation on the Amended and Restated Term Note shall not affect any
of the obligations of any Company under the Amended and Restated Term
Note, this Agreement or any other Credit Document. The Amended and
Restated Term Note shall (i) be dated the Fifth Amendment Closing Date
and be effective as of the Closing Date, (ii) bear interest, payable as
specified in subsection 5.1, for the period from the date thereof until
paid in full on the unpaid principal amount thereof from time to time
outstanding at the interest rate per annum specified in subsection 5.1,
(iii) obligate each Company, jointly and severally, to make principal
payments, payable in the amounts and on the dates specified in
subsection 1.3 and (iv) be stated to mature on May 31, 1998. The
original Existing Notes shall be returned to the Companies.
<PAGE>
1.3 PRINCIPAL PAYMENTS. The Companies shall make
installment payments to the Bank on account of the outstanding
principal amount of the Term Loan on each of the dates set forth below
in an amount set forth opposite the relevant date:
PRINCIPAL PAYMENT DATE AMOUNT
---------------------- ------
May 1, 1996 $ 150,000
June 1, 1996 150,000
July 1, 1996 150,000
August 1, 1996 150,000
May 1, 1997 400,000
June 1, 1997 400,000
July 1, 1997 400,000
August 1, 1997 400,000
May 31, 1998 3,800,000
Any portion of the principal amount of the Term Loan paid as required hereunder
may not be reborrowed.
1.4 THIRD TERM LOAN DISBURSEMENT. Not later than 2:00 p.m.
(eastern standard time) on the Fifth Amendment Closing Date, the Bank
shall make the amount of the Third Term Loan available to the Companies
by depositing the proceeds thereof in immediately available funds in
the account of the Companies with the Bank.
1.5 USE OF PROCEEDS. The proceeds of the First Term Loan have
been used to refinance prior Indebtedness of one or more of the
Companies and the proceeds of the Second Term Loan have been used to
finance the purchase and installation of leasehold improvements and the
purchase of Inventory in connection with the opening of, or conversion
of existing retail stores to, retail "super stores." The proceeds of
the Third Term Loan shall be used to finance the Companies' purchase of
Inventory and equipment for four new retail stores and additional
Inventory for existing retail stores, subject to the other terms and
conditions contained in this Agreement (including, without limitation,
Section 9 hereof)."
3. Subsection 2.1 of the Credit Agreement is hereby amended to
increase the maximum amount of the Revolving Loans Commitment from $15,000,000
to $17,000,000 (as such amount is reduced from time to time pursuant to
subsection 5.7 of the Credit Agreement).
<PAGE>
4. Clause (i) of paragraph 5.1(a) of the Credit Agreement
is hereby amended and restated in its entirety as follows:
"(i) the Term Loan shall bear interest as follows: (A) from
and including the Fifth Amendment Closing Date until December 31, 1997
at a variable rate per annum equal to 1 and 1/2% above the Floating
Base Rate and (B) from and including January 1, 1998 until the Term
Loan is paid in full at a variable rate per annum equal to 2% above the
Floating Base Rate;"
5. Subsection 5.2 of the Credit Agreement is hereby
amended to add the following after paragraph 5.2(b) thereof:
"(c) The Companies shall pay to the Bank an annual
facility fee in the amount of $5,000 until all of the Obligations are
paid in full. The annual facility fee shall be paid on the last
Business Day of the first month of each calendar year, commencing on
January 31, 1996.
(d) If any Company receives any Net Proceeds from the
sale or other disposition (whether by public offering or private
placement) of any Capital Stock or debt securities of any Company in
any transaction that occurs on or before December 31, 1997, then in
addition to any obligations of the Companies under subsection 5.7, the
Companies shall pay to the Bank a fee in an amount equal to 2% of the
amount of any prepayment required to be made pursuant to subsection 5.7
as a result of such transaction (or the amount required to be deposited
in a cash collateral account pursuant to subsection 5.7 as a result of
such transaction, plus the amount of any Working Capital Letter of
Credit Obligations respecting any Working Capital Letter of Credit
replaced pursuant to subsection 5.7 as a result of such transaction).
Nothing contained in this paragraph 5.2(d) shall be construed to permit
any such transactions which are otherwise prohibited under any
provision of this Agreement."
6. Paragraph 5.6(a) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"(a) The Companies may at any time and from time
to time prepay the Term Loan, in whole or in part, upon at
<PAGE>
least two Business Days' irrevocable notice to the Bank, which notice
shall specify the date and amount of prepayment, PROVIDED that if any
Company elects to prepay all or any part of the Term Loan on or before
December 31, 1997, such prepayment shall be accompanied by a prepayment
penalty in the amount of 1% of the principal amount prepaid.
Notwithstanding the foregoing, if the Companies are obligated to pay a
fee to the Bank in accordance with paragraph 5.2(d), then the Companies
shall have no obligation to pay any prepayment penalty pursuant to this
paragraph 5.6(a) as a result of a prepayment of the Term Loan with any
Net Proceeds that are subject to the fee provided for under paragraph
5.2(d). Following December 31, 1997, any prepayment of all or any part
of the Term Loan may be made without premium or penalty."
7. Paragraph 5.6(c) of the Credit Agreement is hereby amended to
delete(i) "or the Second Term Loan" after "Term Loan" in the eleventh line
thereof and (ii) ", the Second Term Loan" after "Term Loan" in the fifteenth
line thereof.
8. The first sentence of paragraph 5.7(c) of the Credit Agreement
is hereby amended and restated in its entirety as follows: "All mandatory
prepayments pursuant to paragraphs 5.7(a) and (b) shall be applied FIRST to the
installments of the Term Loan in the inverse order of their maturity, SECOND to
the Revolving Loans, and THIRD to the installments of the Equipment Loans in the
inverse order of maturity."
9. The first sentence of paragraph 5.7(f) of the Credit Agreement
is hereby amended and restated in its entirety as follows: "Each prepayment of
the Loans pursuant to this subsection 5.7 shall be accompanied by payment in
full of all accrued interest thereon to and including the date of such
prepayment, together with any additional amounts owing pursuant to subsection
5.10 and, (1) in the case of the Term Loan, any fee relating to the Term Loan
pursuant to paragraph 5.2(d), and (2) in the case of any Equipment Loan, any
prepayment penalty relating to such Equipment Loan pursuant to paragraph
5.6(b)."
10. Subsection 9.1 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
<PAGE>
"9.1 FINANCIAL CONDITION COVENANTS.
(a) CURRENT RATIO. Permit the Current Ratio on
the last day of any fiscal quarter of the Companies to be
less than 1.25 to 1.0.
(b) CONSOLIDATED TANGIBLE NET WORTH. Permit
Consolidated Tangible Net Worth as of the last day of each
of the Companies' fiscal quarters set forth below to be less
than the following:
FISCAL QUARTER AMOUNT
-------------- ------
Fourth Quarter 1995 $ 8,500,000
First Quarter 1996 7,500,000
Second Quarter 1996 11,000,000
Third Quarter 1996 12,000,000
Fourth Quarter 1996 10,500,000
First Quarter 1997 9,000,000
Second Quarter 1997 13,200,000
Third Quarter 1997 13,900,000
Fourth Quarter 1997 12,800,000
First Quarter 1998 11,300,000
(c) DEBT SERVICE COVERAGE RATIO. Permit the Debt
Service Coverage Ratio as of the last day of each of the Companies'
fiscal quarters set forth below, for the four fiscal quarters then
ended, to be less than the following:
FISCAL QUARTER RATIO
-------------- -----
Fourth Quarter 1995 1.5 to 1.0
First Quarter 1996 1.3 to 1.0
Second Quarter 1996 1.3 to 1.0
Third Quarter 1996 1.3 to 1.0
Fourth Quarter 1996 1.3 to 1.0
First Quarter 1997 1.3 to 1.0
Second Quarter 1997 1.3 to 1.0
Third Quarter 1997 1.5 to 1.0
Fourth Quarter 1997 1.5 to 1.0
First Quarter 1998 1.5 to 1.0
(d) CONSOLIDATED TOTAL LIABILITIES TO
CONSOLIDATED TANGIBLE NET WORTH. Permit the ratio of (a)
Consolidated Total Liabilities to (b) Consolidated Tangible
Net Worth as of the last day of each of the Companies'
<PAGE>
fiscal quarters set forth below to be less than the
following:
FISCAL QUARTER RATIO
-------------- -----
Fourth Quarter 1995 4.5 to 1.0
First Quarter 1996 5.2 to 1.0
Second Quarter 1996 3.2 to 1.0
Third Quarter 1996 2.7 to 1.0
Fourth Quarter 1996 2.8 to 1.0
First Quarter 1997 4.9 to 1.0
Second Quarter 1997 2.9 to 1.0
Third Quarter 1997 2.5 to 1.0
Fourth Quarter 1997 2.6 to 1.0
First Quarter 1998 4.3 to 1.0"
11. Subsection 9.8 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"9.8 CAPITAL EXPENDITURES. Directly or indirectly (by way of
the acquisition of the securities of a Person or otherwise) make or
commit to make any expenditures in respect of the purchase, Capital
Lease or other acquisition of fixed or capital assets (exclusive of
true operating leases respecting the premises leased by any Company),
except for such expenditures which do not exceed, in the aggregate for
all Companies at any time during each of the fiscal years of the
Companies set forth below, the amount set forth opposite such fiscal
year below:
FISCAL YEAR AMOUNT
----------- ------
1995 $3,000,000
1996 3,500,000
1997 4,500,000
1998 4,500,000
PROVIDED that no Default or Event of Default shall have occurred and be
continuing and no Default or Event of Default will occur after giving
effect to any such transaction."
12. Subsection 9.19 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
<PAGE>
"9.19 ADDITIONAL STORES. Acquire or open additional retail
stores, except that the Companies may open (but not acquire) not more
than 10 additional retail stores for all of the Companies in the
aggregate during each fiscal year of the Companies, PROVIDED that no
Default or Event of Default shall have occurred and be continuing and
no Default or Event of Default will occur after giving effect to any
such transaction."
13. The definitions set forth in subsection 11.1 of the
Credit Agreement are hereby amended as follows:
(a) The following definition is hereby added to
subsection 11.1:
"'AMENDED AND RESTATED TERM NOTE': as defined in
subsection 1.2."
(b) The definition of "BORROWING DATE" is hereby amended
to delete "subsection 1.9," before "subsection 2.3" on the second line
thereof.
(c) The definition of "COMMITMENTS" is hereby amended to
delete "the Term Loan Commitment, the Second Term Loan Commitment,"
before "the Revolving Loans Commitment" on the second line thereof.
(d) The definition of "CONSOLIDATED EBIDA" is hereby
deleted.
(e) The following definition is hereby added to
subsection 11.1:
"'CONSOLIDATED EBITDA': for any fiscal period,
Consolidated Net Income for such period before deduction for
(i) Consolidated Interest Expense for such period and (ii) the
aggregate amount of income tax expense, depreciation expense
and amortization expense for each of the Companies for such
period, all determined in accordance with GAAP."
(f) The definition of "DEBT SERVICE COVERAGE RATIO" is
hereby amended and restated in its entirety as follows:
"'DEBT SERVICE COVERAGE RATIO': at a particular
<PAGE>
date, the ratio of (a) Consolidated EBITDA to (b)
Consolidated Interest Expense PLUS Consolidated CMLTD."
(g) The following definition is hereby added to
subsection 11.1:
"'FIFTH AMENDMENT CLOSING DATE': December 22,
1995."
(h) The definition of "INSTALLMENT PAYMENT DATES" is
hereby amended and restated in its entirety as follows:
"'INSTALLMENT PAYMENT DATES': with respect to
each Equipment Loan, the last day of each calendar
month, commencing on the first such day to occur after
such Equipment Loan is made."
(i) The definition of "INTEREST PAYMENT DATE" is hereby
amended to delete ", the Second Term Loan" before "and the Revolving
Loans" on the second line thereof.
(j) The definition of "LOANS" is hereby amended to delete
"the Second Term Loan," before "the Revolving Loans" on the second line
thereof.
(k) The definition of "NOTES" is hereby amended and
restated in its entirety as follows:
"'NOTES': the collective reference to the Amended
and Restated Term Note, the Revolving Note and the
Equipment Notes."
(l) The definitions of "SECOND TERM LOAN", "SECOND
TERM LOAN CLOSING DATE", "SECOND TERM LOAN COMMITMENT",
"SECOND TERM LOAN MATURITY DATE", "SECOND TERM LOAN PERIOD"
and "SECOND TERM NOTE" are hereby deleted.
(m) The definition of "TERM NOTE" is hereby deleted.
(n) The following definition is hereby added to
subsection 11.1:
"'THIRD TERM LOAN': as defined in subsection
1.1."
<PAGE>
(o) The definition of "WORKING CAPITAL TERMINATION DATE" is
hereby amended to delete "April 30, 1997" and to add "May 31, 1998" in
lieu thereof.
14. Schedule IX to the Credit Agreement shall be amended
and restated in its entirety in the form of SCHEDULE 1 hereto.
15. Schedule I to the Credit Agreement and Schedules I and
II to the Security Agreement shall be amended and restated in
their entirety in the form of SCHEDULE 2 hereto.
16. In order to induce the Bank to enter into this
Amendment, each Company hereby represents and warrants to the
Bank that:
(a) no Default or Event of Default has occurred and is
continuing on and as of the date hereof;
(b) each of the Credit Documents, after giving effect to
this Amendment and the transactions contemplated hereby, continues to be in full
force and effect and to constitute the legal, valid and binding obligation of
each Company that is a party thereto, enforceable against each Company in
accordance with its terms;
(c) the representations and warranties made by each
Company in or pursuant to the Credit Documents, or which are contained in any
certificate, document or financial or other written statement furnished at any
time under or in connection herewith or therewith, are each true and correct in
all material respects on and as of the date hereof as though made as of such
date (unless any such representation or warranty speaks as of a particular date,
in which case it shall be deemed repeated as of such date);
(d) when the Credit Agreement dated as of June 6, 1994
was executed, the Companies each contemplated that the amount of the Loans could
be increased and that loans such as the Third Term Loan could be made, and that
any such increase or additional loan, if made, would be secured by the
Collateral;
(e) no Company has amended any of its Governing
Documents subsequent to the Closing Date, except as set forth on
SCHEDULE 3 hereto; and
<PAGE>
(f) the Inventory and Equipment (as defined in the
Security Agreement) of each Company is kept at the locations for such Company
set forth on SCHEDULE 2 hereto; when financing statements have been filed in the
offices in the jurisdictions listed on SCHEDULE 2 hereto, the Security Agreement
shall constitute a fully perfected first priority Lien on, and security interest
in, all right, title and interest of each Company in the Collateral described
therein, subject only to Permitted Liens.
17. This Amendment shall become effective upon the
satisfaction of the following conditions:
(a) the Bank shall have received a copy hereof, duly
executed and delivered on behalf of each Company;
(b) the Bank shall have received the Amended and Restated
Term Note, substantially in the form of EXHIBIT A.2 hereto, duly executed and
delivered on behalf of each Company;
(c) the Bank shall have received the Third Amendment of
Mortgage and Security Agreement, substantially in the form of EXHIBIT B hereto,
duly executed and delivered by E & B Marine Supply, Inc., a New Jersey
corporation (the "THIRD MORTGAGE AMENDMENT", and together with this Amendment
and the Amended and Restated Term Note, the "AMENDMENT DOCUMENTS");
(d) the Bank shall have received favorable opinions,
dated the Fifth Amendment Closing Date, of Haythe & Curley and Jamieson Moore
Peskin & Spicer, counsel to the Companies, in form and content reasonably
satisfactory to the Bank;
(e) the Bank shall have received an amendment fee in
the amount of $60,000;
(f) the Bank shall have received a copy of the
resolutions of the Board of Directors of each Company authorizing the execution,
delivery and performance of each Amendment Document to which it is a party and
the borrowings provided for herein certified by the Secretary or an Assistant
Secretary of such Company, as of the Fifth Amendment Closing Date, which
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the Fifth Amendment Closing Date;
(g) the Bank shall have received a certificate of the
<PAGE>
Secretary or an Assistant Secretary of each Company, dated the Fifth Amendment
Closing Date, as to the incumbency and signature of each officer signing each of
the Amendment Documents to which such Company is a party and any other
certificate or other document to be delivered pursuant thereto, together with
evidence of the incumbency of such Secretary or Assistant Secretary;
(h) the Bank shall have received a certificate of the
Secretary or an Assistant Secretary of each Company, dated the Fifth Amendment
Closing Date, certifying the Governing Documents of each Company;
(i) the Bank shall have received certificates attesting
to the good standing of each Company certified as of a recent date by the
Secretary of State of the State of incorporation of such Company and each State
where such Company is qualified to do business as a foreign corporation;
(j) (1) financing statements required to be filed under
any of the Security Documents in order to create, in favor of the Bank, a
perfected Lien against the Collateral thereunder with respect to which a Lien
may be perfected by a filing under the Uniform Commercial Code and not
previously delivered to the Bank shall have been delivered to the Bank duly
executed by each applicable Company and in proper form to be filed in each
office in each jurisdiction required in order to create in favor of the Bank a
perfected Lien on the respective Collateral described therein in the
jurisdictions listed on SCHEDULE 2 hereto having the priority purported to be
granted thereby; and (2) the Bank shall have received all necessary filing fees
and all taxes or other expenses related to such filings;
(k) the Bank shall have received the results of recent
searches, in form and substance reasonably satisfactory to the Bank and by a
Person reasonably satisfactory to the Bank, of (i) Uniform Commercial Code
filings which may have been filed with respect to personal property of each
Company (under the actual name of, and any tradenames used by, each Company) in
each jurisdiction in which each Company has personal property, (ii) upper and
lower court judgment filings which may have been filed against each Company in
each jurisdiction referred to in clause (i) above, and (iii) tax lien filings
which may have been filed against each Company in each jurisdiction referred to
in clause (i) above;
<PAGE>
(l) the Borrower shall have paid all expenses of the
Bank, including, without limitation, reasonable counsel fees, in connection with
the preparation, execution and delivery of this Amendment and all other
documents and instruments to be executed and delivered pursuant hereto or in
connection herewith, and the transactions contemplated hereby; and
(m) all legal and other matters in connection with this
Amendment and the transactions contemplated hereby shall be reasonably
satisfactory to the Bank and its counsel.
18. From and after the effectiveness hereof, and without limiting
the generality of the Credit Documents, the Obligations secured by the
Collateral pursuant to the Security Documents shall include, among other things,
the Obligations of the Companies in connection with the Term Loan, including,
without limitation, the Third Term Loan.
19. This Amendment may be executed in several counterparts, each of
which, when executed and delivered, shall be deemed an original, and all of
which together shall constitute one agreement.
20. This Amendment shall be governed by and construed and
interpreted in accordance with the laws of the State of New Jersey, without
giving effect to principles of conflicts law.
[continued on page 14]
<PAGE>
21. Except as amended and otherwise modified hereby and by the
other Amendment Documents, the Credit Agreement and the other Credit Documents
shall remain in full force and effect in accordance with their respective terms.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
E&B MARINE INC., a Delaware corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Senior Vice President and
Chief Financial Officer
CENTRAL MARINE SUPPLY INC., a New Jersey
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
E & B MARINE SUPPLY, INC., a New Jersey
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
<PAGE>
E & B MARINE SUPPLY, INC., a Maryland
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
E&B MARINE SUPPLY (FLORIDA) INC., a
Delaware corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
JAMES BLISS & CO., INC., a Massachusetts
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
<PAGE>
GOLDBERGS' MARINE DISTRIBUTORS, INC., a
Delaware corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
SEA RANGER MARINE INC., a Delaware
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
KRISTA CORPORATION, a Delaware
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
UNITED JERSEY BANK
By: /s/ BONNIE GERSHON
-----------------------------
Name: Bonnie Gershon
Title: Vice President
<PAGE>
THIRD AMENDMENT
OF
MORTGAGE AND SECURITY AGREEMENT
THIRD AMENDMENT OF MORTGAGE AND SECURITY AGREEMENT (this
"AMENDMENT"), dated as of December 22, 1995, by and among E & B MARINE SUPPLY,
INC., a New Jersey corporation ("MORTGAGOR"), and UNITED JERSEY BANK (successor
in interest to United Jersey Bank/Central, N.A.) (the "BANK") and UJB LEASING
CORPORATION (together with the Bank, "MORTGAGEE").
W I T N E S S E T H:
- - - - - - - - - -
A. Pursuant to the Mortgage and Security Agreement dated
as of June 6, 1994 executed by Mortgagor in favor of Mortgagee and recorded on
June 16, 1994 in the Middlesex County Clerk's Office in Book 4743, Page 107, as
amended by the First Amendment of Mortgage and Security Agreement dated as of
October 4, 1994 and the Second Amendment of Mortgage and Security Agreement
dated as of March 8, 1995 (as further amended, supplemented or otherwise
modified from time to time, the "MORTGAGE"), Mortgagor granted to Mortgagee a
lien on the Mortgaged Property (as defined in the Mortgage), all upon the terms
and conditions set forth therein;
B. Pursuant to the Fifth Amendment of Credit Agreement, dated
as of even date herewith, by and among Mortgagor, certain affiliates of
Mortgagor (together with Mortgagor, the "COMPANIES") and the Bank (the "LOAN
AMENDMENT"), the Bank has agreed to amend a certain Credit Agreement dated as of
June 6, 1994, as amended through the date hereof, by and among the Companies and
the Bank (together with the Fifth Amendment, and as further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
to, among other things, (i) make an additional term loan to the Companies in the
principal amount of $2,089,444.53 (the "FIFTH AMENDMENT TERM LOAN"), (ii)
increase the aggregate principal amount of the revolving credit loans at any one
time outstanding under the Credit Agreement from $15,000,000 to $17,000,000 (the
"REVOLVING LOAN INCREASE") and (iii) extend the maturity date of all of the
Loans and other financial accommodations made by the Bank prior to the date
hereof; and
C. It is a condition precedent to the obligation of the Bank
to enter into the Loan Amendment that Mortgagor shall have executed and
delivered to Mortgagee this Amendment.
<PAGE>
<PAGE>
NOW, THEREFORE, Mortgagor and Mortgagee agree as follows:
1. Capitalized terms used in this Amendment shall have the same
meanings given them in the Mortgage, unless otherwise defined herein.
2. Subsection 1(b) of the Mortgage is hereby amended to
delete "TWENTY-TWO MILLION and 00/100 DOLLARS ($22,000,000)" from
the seventh and eighth lines of such subsection and to insert in
lieu thereof the following: "TWENTY-THREE MILLION FIVE HUNDRED
THOUSAND and 00/100 DOLLARS ($23,500,000)."
3. The term "Obligations", as defined in subsection 1(b) of the
Mortgage, shall, without limiting the generality thereof, be deemed to include
all "Loans" (as defined in the Credit Agreement), including, without limitation,
the Fifth Amendment Term Loan and Revolving Loan Increase.
4. Except as amended hereby, the Mortgage shall remain in full force
and effect without further amendment or waiver.
5. This Amendment shall be governed by and construed in accordance with
the laws of the State of New Jersey, without giving effect to the principles of
conflicts of law. This Amendment may be executed in several counterparts, each
of which, when executed and delivered, shall be deemed an original, but all of
which together shall constitute one instrument.
MORTGAGOR HEREBY DECLARES AND ACKNOWLEDGES THAT MORTGAGOR HAS RECEIVED,
WITHOUT CHARGE, A TRUE COPY OF THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
ATTEST: E & B MARINE SUPPLY, INC., a
New Jersey corporation
/s/ ROBERT G. DEFONTE By: /s/ WALFRIDO A. MARTINEZ
- --------------------- -----------------------------
Secretary Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
<PAGE>
ATTEST: UNITED JERSEY BANK
By: /s/ BONNIE GERSHON
- --------------------- -----------------------------
Name: Bonnie Gershon
Title: Vice President
ATTEST: UJB LEASING CORPORATION
By: /s/ PETER C. PLATT
- --------------------- -----------------------------
Name: Peter C. Platt
Title: President
<PAGE>
STATE OF )
) ss.
COUNTY OF )
I CERTIFY that on December 22 , 1995, ROBERT G. DEFONTE personally came
before me, and this person acknowledged under oath, to my satisfaction, that:
(a) this person is the Secretary of E & B MARINE SUPPLY,
INC., a New Jersey corporation, the corporation named
in this document;
(b) this person is the attesting witness to the signing of
this document by the proper corporate officer who is
Walfrido A. Martinez, the Vice President and Chief
Financial Officer of the corporation;
(c) the document was signed and delivered by the
corporation as its voluntary act, duly authorized by a
proper resolution of its Board of Directors;
and
(d) this person signed this proof to attest to the truth of
these facts.
/s/ ROBERT G. DEFONTE
-----------------------------
Robert G. Defonte , Secretary
Sworn and subscribed to
before me this 22 day of
December, 1995.
/s/ JUDY RAPP
- -----------------------
Notary Public
<PAGE>
STATE OF )
) ss.
COUNTY OF )
I CERTIFY that on December , 1995,
-- ----------------------------------
personally came before me, and this person acknowledged under oath, to my
satisfaction, that:
(a) this person is the Assistant Cashier of UNITED JERSEY
BANK, the corporation named in this document;
(b) this person is the attesting witness to the signing of
this document by the proper corporate officer who is
Bonnie Gershon, the Vice President of the corporation;
(c) the document was signed and delivered by the
corporation as its voluntary act, duly authorized by a
proper resolution of its Board of Directors; and
(d) this person signed this proof to attest to the truth of
these facts.
-----------------------------
, Secretary
Sworn and subscribed to
before me this day of
December, 1995.
- -----------------------
Notary Public
<PAGE>
STATE OF )
) ss.
COUNTY OF )
I CERTIFY that on December , 1995,
-- ----------------------------------
personally came before me, and this person acknowledged under oath, to my
satisfaction, that:
(a) this person is the Secretary of UJB LEASING
CORPORATION, the corporation named in this document;
(b) this person is the attesting witness to the signing of
this document by the proper corporate officer who is
Peter C. Platt, the President of the corporation;
(c) the document was signed and delivered by the
corporation as its voluntary act, duly authorized by a
proper resolution of its Board of Directors; and
(d) this person signed this proof to attest to the truth of
these facts.
-----------------------------
, Secretary
Sworn and subscribed to
before me this day of
December, 1995.
- -----------------------
Notary Public
<PAGE>
Schedule 1
CREDIT AGREEMENT
SCHEDULE IX
1995 1996 1997 1998
----------- ----------- ----------- -----------
MID JAN 01/14 60% 01/13 60% 01/11 60% 01/10 60%
JAN M/E 01/28 60% 01/27 60% 01/25 60% 01/24 60%
MID FEB 02/11 60% 02/10 60% 02/08 60% 02/07 60%
FEB M/E 02/25 60% 02/24 60% 02/22 60% 02/21 60%
MID MAR 03/11 60% 03/09 60% 03/08 60% 03/07 60%
MAR M/E 04/01 60% 03/30 60% 03/29 60% 03/28 60%
MID APR 04/15 60% 04/13 60% 04/12 60% 04/11 60%
APR M/E 04/29 60% 04/27 60% 04/26 60% 04/25 60%
MID MAY 05/13 55% 05/11 55% 05/10 55% 05/09 55%
MAY M/E 05/27 50% 05/25 50% 05/24 50% 05/23 50%
MID JUN 06/10 45% 06/08 45% 06/07 45%
JUN M/E 07/01 45% 06/29 45% 06/28 45%
MID JUL 07/15 45% 07/13 45% 07/12 45%
JUL M/E 07/29 45% 07/27 45% 07/26 45%
MID AUG 08/12 45% 08/10 45% 08/09 45%
AUG M/E 08/26 45% 08/24 45% 08/26 45%
MID SEP 09/09 50% 09/07 50% 09/06 50%
SEP M/E 09/30 50% 09/28 50% 09/27 50%
MID OCT 10/14 50% 10/12 50% 10/11 50%
OCT M/E 10/28 55% 10/26 55% 10/25 55%
MID NOV 11/11 60% 11/09 60% 11/08 60%
NOV M/E 11/25 60% 11/23 60% 11/22 60%
MID DEC 12/09 60% 12/07 60% 12/06 60%
DEC M/E 12/30 60% 12/28 60% 12/27 60%
<PAGE>
Schedule 2
UCC Filing Jurisdictions
Filing Offices
Address of Retail Stores Name County and State*
- --------------------------------------------------------------------------------
1625 Walden Avenue James Bliss & Co. County Clerk,
Cheektowaga, NY 14225 Inc. Erie Co., NY
- --------------------------------------------------------------------------------
623 Stewart Avenue James Bliss & County Clerk,
Garden City, NY 11530 Co., Inc. Nassau Co., NY
- --------------------------------------------------------------------------------
90 W. Jericho Turnpike James Bliss & County Clerk,
Huntington Station, NY 11746 Co., Inc. Suffolk Co., NY
- --------------------------------------------------------------------------------
120 Allied Drive James Bliss & Clerk of the Town,
Dedham, MA 020206 Co., Inc. Dedham, MA
- --------------------------------------------------------------------------------
12 West 37th Street Goldberg's City Register,
New York, NY 10018 Marine, Inc. New York Co., NY
- --------------------------------------------------------------------------------
2404 Pass Road E&B Marine Chancery Clerk,
Biloxi, MS 39531 Supply, Inc. (a Harrison Co., MS
New Jersey Corp.)
- --------------------------------------------------------------------------------
33 Business Park Drive E&B Marine Clerk of the Town,
Branford, CT 06405 Supply, Inc. (a Branford, CT
New Jersey Corp.)
- --------------------------------------------------------------------------------
264 Heights Road James Bliss & Clerk of the Town,
Darien, CT 06820 Co., Inc. Darien, CT
- --------------------------------------------------------------------------------
1201 Kings Highway East E&B Marine Clerk of the Town,
Fairfield, CT 06430 Supply, Inc. (a Fairfield, CT
New Jersey Corp.)
- --------------------------------------------------------------------------------
Gas Light Square Shop Ctr. E&B Marine Charleston Co., SC
5641 Rivers Avenue Supply, Inc. (a Register of Mesne
No. Charleston, SC 29406 New Jersey Corp.) Conveyances,
Berkley Co., SC
- --------------------------------------------------------------------------------
Bellaire Cove Shop. Ctr. E&B Marine Supply Clerk of the
18891 US 19 North (Florida), Inc. Circuit Court,
Clearwater, FL 34624 Pinellas Co., FL
- --------------------------------------------------------------------------------
- ------------------
* Secretary of State of applicable state (except Georgia).
<PAGE>
Filing Offices
Address of Retail Stores Name County and State*
- --------------------------------------------------------------------------------
160 S.E. Highway 19 E&B Marine Supply Clerk of the
Crystal River, FL 34429 (Florida), Inc. Circuit Court,
Citrus Co., FL
- --------------------------------------------------------------------------------
2400 So. Ridgewood Ave. E&B Marine Supply Clerk of the
So. Daytona, FL 32119 (Florida), Inc. Circuit Court,
Volusia Co., FL
- --------------------------------------------------------------------------------
4350 Fowler Street E&B Marine Supply Clerk of the
Fort Myers, FL 33901 (Florida), Inc. Circuit Court,
Lee Co., FL
- --------------------------------------------------------------------------------
Mariner's Plaza E&B Marine Supply Clerk of the
220 Eglin Pkwy. N.E. (Florida), Inc. Circuit Court,
Ft. Walton Beach, FL 32548 Okaloosa Co., FL
- --------------------------------------------------------------------------------
Holiday Mall Shopping Ctr. E&B Marine Supply Clerk of the
3346 Highway 19 North (Florida), Inc. Circuit Court,
Holiday, FL 34691 Pasco Co., FL
- --------------------------------------------------------------------------------
3350 N. 28th Terrace E&B Marine Supply Clerk of the
Hollywood, FL 33020 (Florida), Inc. Circuit Court,
Broward Co., FL
- --------------------------------------------------------------------------------
5951 University Blvd. W. E&B Marine Supply Clerk of the
Jacksonville, FL 32216 (Florida), Inc. Circuit Court,
Duval Co., FL
- --------------------------------------------------------------------------------
Square One Shopping Ctr. E&B Marine Supply Clerk of the
3523 N.W. Federal Highway (Florida), Inc. Circuit Court,
Jensen Beach, FL 34957 Martin Co., FL
- --------------------------------------------------------------------------------
1401 Old Dixie Highway E&B Marine Supply Clerk of the
Lake Park, FL 33403 (Florida), Inc. Circuit Court,
Palm Beach Co., FL
- --------------------------------------------------------------------------------
1024 S. Harbor City Blvd. E&B Marine Supply Clerk of the
Melbourne, FL 32901 (Florida), Inc. Circuit Court,
Brevard Co., FL
- --------------------------------------------------------------------------------
Village Square South E&B Marine Supply Clerk of the
19407 South Dixie Highway (Florida), Inc. Circuit Court,
Miami, FL 33157 Dade Co., FL
- --------------------------------------------------------------------------------
8240 W. Flagler Street E&B Marine Supply Clerk of the
Miami, FL 33144 (Florida), Inc. Circuit Court,
Dade Co., FL
- --------------------------------------------------------------------------------
- ------------------
* Secretary of State of applicable state (except Georgia).
<PAGE>
Filing Offices
Address of Retail Stores Name County and State*
- --------------------------------------------------------------------------------
5135 Adanson Street E&B Marine Supply Clerk of the
Orlando, FL 32804 (Florida), Inc. Circuit Court,
Orange Co., FL
- --------------------------------------------------------------------------------
1388 W. 15th Street E&B Marine Supply Clerk of the
Panama City, FL 32401 (Florida), Inc. Circuit Court,
Bay Co., FL
- --------------------------------------------------------------------------------
618 New Warrington Road E&B Marine Supply Comptroller of
Pensacola, FL 32506 (Florida), Inc. Escambia,
Escambia Co., FL
- --------------------------------------------------------------------------------
Powerline Commerce Center E&B Marine Supply Clerk of the
1951 W. Copans Road (Florida), Inc. Circuit Court,
Pompano Beach, FL 33064 Broward Co., FL
- --------------------------------------------------------------------------------
3140 N. Tamiami Trail E&B Marine Supply Clerk of the
Sarasota, FL 34234 (Florida), Inc. Circuit Court,
Sarasota Co., FL
- --------------------------------------------------------------------------------
2000 - 34th Street N. E&B Marine Supply Clerk of the
St. Petersburg, FL 33713 (Florida), Inc. Circuit Court,
Pinellas Co., FL
- --------------------------------------------------------------------------------
1060 Fall River Avenue James Bliss & Clerk of the Town,
Seekonk, MA 02771 Co., Inc. Seekonk, MA
- --------------------------------------------------------------------------------
406 Washington Street James Bliss & Clerk of the City,
Woburn, MA 01801 Co., Inc. Woburn, MA
- --------------------------------------------------------------------------------
1166 Route 132 James Bliss & Clerk of the Town,
Hyannis, MA 02601 Co., Inc. Hyannis, MA
- --------------------------------------------------------------------------------
4305 N.E. Expressway E&B Marine Clerk of the
Doraville, GA 30340 Supply, Inc. (a Superior Court,
New Jersey Corp.) Dekalb Co., GA
- --------------------------------------------------------------------------------
7700 Abercorn Street E&B Marine Clerk of the
Savannah, GA 31406 Supply, Inc. (a Superior Court,
New Jersey Corp.) Chatham Co., GA
- --------------------------------------------------------------------------------
24931 Kelly Rd. E&B Marine Register of Deeds,
Eastpointe, MI 48021 Supply, Inc. (a Macomb Co., MI
New Jersey Corp.)
- --------------------------------------------------------------------------------
- ------------------
* Secretary of State of applicable state (except Georgia).
<PAGE>
Filing Offices
Address of Retail Stores Name County and State*
- --------------------------------------------------------------------------------
Burlington Sq. Shopping Ctr. E&B Marine Register of Deeds,
22311 Eureka Road Supply, Inc. (a Wayne Co., MI
Taylor, MI 48180 New Jersey Corp.)
- --------------------------------------------------------------------------------
Marty's Plaza E&B Marine County Clerk,
100 Route 17 Supply, Inc. (a Bergen Co., NJ
Lodi, NJ 07644 New Jersey Corp.)
- --------------------------------------------------------------------------------
1215 Route 73 E&B Marine County Clerk,
Mt. Laurel, NJ 08054 Supply, Inc. (a Burlington Co., NJ
New Jersey Corp.)
- --------------------------------------------------------------------------------
494 Market Street E&B Marine County Clerk,
Perth Amboy, NJ 08861 Supply, Inc. (a Middlesex Co., NJ
New Jersey Corp.)
- --------------------------------------------------------------------------------
K-Mart Plaza 213 Rt. 37 East E&B Marine County Clerk,
Toms River, NJ 08753 Supply, Inc. (a Ocean Co., NJ
New Jersey Corp.)
- --------------------------------------------------------------------------------
Parkside Market Place E&B Marine Clerk of the
10819 W. Broad Street Supply, Inc. (a Circuit Court,
Glen Allen, VA 23060 Maryland Corp.) Henrico Co., VA
- --------------------------------------------------------------------------------
5616 Virginia Beach Blvd. E&B Marine Clerk of the
Norfolk, VA 23502 Supply, Inc. (a Circuit Court,
Maryland Corp.) Independent City,
Norfolk Co., VA
- --------------------------------------------------------------------------------
7530 S. Ritchie Highway E&B Marine Clerk of the
Glen Burnie, MD 21061 Supply, Inc. (a Circuit Court,
Maryland Corp.) Anne Arundel Co.,
MD
- --------------------------------------------------------------------------------
8807 Annapolis Road E&B Marine Clerk of the
Lanham, MD 20706 Supply, Inc. (a Circuit Court,
Maryland Corp.) Prince George's
Co., MD
- --------------------------------------------------------------------------------
8302 Pulaski Highway E&B Marine Clerk of the
Rosedale, MD 21237 Supply, Inc. (a Circuit Court,
Maryland Corp.) Baltimore Co., MD
- --------------------------------------------------------------------------------
3747 Government Blvd. A-4 E&B Marine Judge of Probate,
Mobile, AL 36693 Supply, Inc. (a Mobile Co., AL
New Jersey Corp.)
- --------------------------------------------------------------------------------
- ------------------
* Secretary of State of applicable state (except Georgia).
<PAGE>
Filing Offices
Address of Retail Stores Name County and State*
- --------------------------------------------------------------------------------
1300 S. Columbus Boulevard Goldbergs' Prothonotary,
Philadelphia, PA 19147 Marine, Inc. Philadelphia
County, PA
- --------------------------------------------------------------------------------
1092 Post Road James Bliss & Clerk of the City,
Warwick, RI 02888 Co., Inc. Warwick, RI
- --------------------------------------------------------------------------------
311 Blanding Boulevard E&B Marine Supply Clerk of Circuit
Orange Park, FL 32073 (Florida), Inc. Court
Clay Co., FL
- --------------------------------------------------------------------------------
4265 Tamiami Trail, Suite M E&B Marine Supply Clerk of Circuit
Port Charlotte, FL 33952 (Florida), Inc. Court
Charlotte Co., FL
- --------------------------------------------------------------------------------
Capital West Shopping Center E&B Marine Supply Clerk of Circuit
42478 West Tennessee Street (Florida), Inc. Court
Tallahassee, FL 32304 Leon Co., Fl
- --------------------------------------------------------------------------------
3905 West Cypress Street E&B Marine Supply Clerk of Circuit
Tampa, FL 33607 (Florida), Inc. Court,
Hillsboro Co., FL
- --------------------------------------------------------------------------------
Crossroads Shopping Center Goldbergs' Marine Recorder Lake Co.,
229 Skokie Valley Road Distributors, IL
Highland Park, IL 60035 Inc.
- --------------------------------------------------------------------------------
Villa Oaks Shopping Center Goldbergs' Marine Recorder
300 West Roosevelt Road Distributors, DuPage Co., IL
Villa Park, IL 60181 Inc.
- --------------------------------------------------------------------------------
2454 - 28th Street, S.E. E&B Marine Register of Deeds
Grand Rapids, MI 49512 Supply, Inc. (a Kent Co., MI
New Jersey Corp.)
- --------------------------------------------------------------------------------
Lafayette Plaza Shopping Center E&B Marine Register of Deeds
775 Lafayette Road (U.S. Rte. 1) Supply, Inc. (a Rockingham Co., NH
Portsmouth, NH 03801 New Jersey Corp.)
- --------------------------------------------------------------------------------
Office Max Plaza Goldbergs' Marine County Clerk
Routes 35 and 36 Distributors, Monmouth Co., NJ
Eatontown, NJ 07724 Inc.
- --------------------------------------------------------------------------------
Nesconset Shopping Center Goldbergs' Marine County Clerk
5000 Nesconset Highway Distributors, Suffolk Co., NY
Port Jefferson Station, NY Inc.
11776
- --------------------------------------------------------------------------------
- ------------------
* Secretary of State of applicable state (except Georgia).
<PAGE>
Filing Offices
Address of Retail Stores Name County and State*
- --------------------------------------------------------------------------------
147 Sunrise Highway James Bliss & County Clerk
West Islip, NY 11795 Co., Inc. Suffolk Co., NY
- --------------------------------------------------------------------------------
Mentor Towne Center E&B Marine Recorder
9680 Mentor Avenue Supply, Inc. (a Lake Co., OH
Mentor, OH 44060 New Jersey Corp.)
- --------------------------------------------------------------------------------
24781 Lorain Road E&B Marine Recorder
North Olmsted, OH 44070 Supply, Inc. (a Cuyahoga Co., OH
New Jersey Corp.)
- --------------------------------------------------------------------------------
Greenfield Towne Center E&B Marine Register of Deeds
6102 West Layton Avenue Supply, Inc. (a Milwaukee Co., WI
Greenfield, WI 53220 New Jersey Corp.)
- --------------------------------------------------------------------------------
================================================================================
Address of Retail Warehouse Filing Offices
and Corporate Headquarters Name County and State*
================================================================================
201 Meadow Road E&B Marine Inc. County Clerk,
Edison, New Jersey 08818 Middlesex Co., NJ
- --------------------------------------------------------------------------------
================================================================================
* Secretary of State of applicable state (except Georgia).
<PAGE>
Schedule 3
1. Amendments to By-Laws of all of the subsidiaries of E&B Marine
to provide for a Board of Directors of such subsidiaries to be
not less than one (1) nor more than eight (8) persons.
2. Certificate of Merger of E&B Marine Supply, Inc., a New Jersey
corporation, and E&B Marine Supply, Inc., a Connecticut
corporation, dated May 18, 1995.
3. Certificate of Amendment of Restated Certificate of
Incorporation of E&B Marine Inc. dated June 20, 1995
decreasing the number of authorized shares of common stock.
<PAGE>
Exhibit A.2
AMENDED AND RESTATED TERM NOTE
------------------------------
$6,000,000 Edison, New Jersey
December 22, 1995
as of June 6, 1994
FOR VALUE RECEIVED, the undersigned, E&B Marine Inc., a Delaware
corporation, Central Marine Supply Inc., a New Jersey corporation, E & B Marine
Supply, Inc., a New Jersey corporation, E & B Marine Supply, Inc., a Maryland
corporation, E&B Marine Supply (Florida) Inc., a Delaware corporation, James
Bliss & Co., Inc., a Massachusetts corporation, Goldbergs' Marine Distributors,
Inc., a Delaware corporation, Sea Ranger Marine Inc., a Delaware corporation,
and Krista Corporation, a Delaware corporation (collectively, the "COMPANIES"),
hereby jointly and severally and unconditionally promise to pay to the order of
United Jersey Bank (the "BANK"), at its office located at 210 Main Street,
Hackensack, New Jersey 07602, in lawful money of the United States of America
and in immediately available funds, the principal amount of SIX MILLION DOLLARS
($6,000,000) in nine (9) installments to be paid on each of the dates set forth
below, each such installment to be in the amount set forth opposite the relevant
date:
PRINCIPAL PAYMENT DATE AMOUNT
---------------------- ------
May 1, 1996 $ 150,000
June 1, 1996 150,000
July 1, 1996 150,000
August 1, 1996 150,000
May 1, 1997 400,000
June 1, 1997 400,000
July 1, 1997 400,000
August 1, 1997 400,000
May 31, 1998 3,800,000
The undersigned further jointly and severally agree to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time as follows: (i) from and including the date hereof until December 31, 1997
at a variable rate per annum equal to 1 1/2% above the Floating Base Rate (as
defined below) and (ii) from and including January 1, 1998 until the principal
amount hereof is paid in full at a variable rate per annum equal to 2% above the
Floating Base Rate, as such rates of interest may be increased as provided in
Section 10 of the Credit Agreement referred to below. Interest shall be payable
in arrears on each Interest Payment Date, commencing on the first such date to
occur after the date hereof and upon
<PAGE>
payment (including prepayment) in full of the unpaid principal amount hereof.
The holder of this Note is authorized to endorse the date and amount of the Term
Loan, the date and amount of each payment or prepayment of principal with
respect thereto on the schedule annexed hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof,
which endorsements shall constitute conclusive evidence of the accuracy of the
information endorsed in the absence of manifest error, PROVIDED that failure by
the Bank to make any such endorsement on this Note or any error with respect to
such endorsement shall not affect the obligations of any Company under this
Note, the Credit Agreement or any other Credit Document.
For the purposes hereof, the "Floating Base Rate" shall mean the
floating rate of interest established from time to time by the Bank as its
"floating base rate". The Floating Base Rate is determined from time to time by
the Bank as a means of pricing some loans to its customers and is neither tied
to any external rate of interest or index, nor does it necessarily reflect the
lowest rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
This Note (i) is the Amended and Restated Term Note referred to in the
Credit Agreement dated as of June 6, 1994, as amended by the First Amendment of
Credit Agreement, Security Agreement and Pledge Agreement dated as of September
12, 1994, the Second Amendment of Credit Agreement dated as of March 8, 1995,
the Third Amendment of Credit Agreement dated as of October 27, 1995, a letter
agreement dated November 13, 1995 and the Fifth Amendment of Credit Agreement
dated as of the date hereof (collectively, and as further amended, supplemented
or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the
Companies and the Bank, (ii) is entitled to the benefits of the Credit
Agreement, (iii) is secured as provided in the Credit Agreement, (iv) is subject
to optional and mandatory prepayment in whole or in part as provided in the
Credit Agreement, PROVIDED that any prepayment hereof shall be accompanied by a
fee or prepayment penalty to the extent required by paragraph 5.2(d) or
paragraph 5.6(a) of the Credit Agreement, and (v) is subject to late charges as
provided in the Credit Agreement. Capitalized terms used herein but not
otherwise defined shall have the meanings given them in the Credit Agreement.
Upon the occurrence and during the continuance of any one or more of
the Events of Default specified in the Credit Agreement, all amounts then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided therein.
<PAGE>
This Note has been executed and delivered by the Companies and accepted
by the Bank in substitution and replacement for, but not in payment,
satisfaction or cancellation of the Indebtedness outstanding under, the
following: (i) the Term Note dated June 6, 1994, in the original principal
amount of $3,500,000, executed by the Companies in favor of the Bank, and (ii)
the Second Term Note dated March 8, 1995, in the original principal amount of
$2,500,000, executed by the Companies in favor of the Bank.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY.
E&B MARINE INC., a Delaware corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Senior Vice President and
Chief Financial Officer
CENTRAL MARINE SUPPLY INC., a New Jersey
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
E & B MARINE SUPPLY, INC., a New Jersey
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
<PAGE>
E & B MARINE SUPPLY, INC., a Maryland
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
E&B MARINE SUPPLY (FLORIDA) INC., a
Delaware corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
JAMES BLISS & CO., INC., a Massachusetts
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
GOLDBERGS' MARINE DISTRIBUTORS, INC., a
Delaware corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
<PAGE>
SEA RANGER MARINE INC., a Delaware
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
KRISTA CORPORATION, a Delaware
corporation
By: /s/ WALFRIDO A. MARTINEZ
-----------------------------
Name: Walfrido A. Martinez
Title: Vice President and Chief
Financial Officer
<PAGE>
SCHEDULE
TO NOTE
-------
PAYMENTS WITH RESPECT TO TERM LOAN
----------------------------------
Unpaid
Principal
Amount Of Balance Of
Term Term Notation
Date Loan Paid Loan Made By
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<PAGE>
OUTLINE OF EMPLOYMENT AGREEMENT
BETWEEN
E&B MARINE INC.
AND
JAMES PETERS
DUTIES: President and Chief Operating Officer, with duties and
responsibilities as normally defined.
LOCATION: Edison, New Jersey, or as mutually agreeable.
TERM: 3 years, starting on or about July 24, 1995.
BASE
COMPENSATION: $230,000 per year for first year, additional years as mutually
agreed in June of following year.
TRANSFER
PAYMENT: $25,000 upon starting employment. Additional $25,000 one year
later.
BONUS: 0-40% of base compensation and transfer payment based on targets
established by Board for E&B Executive team.
BENEFITS: Normal E&B benefits.
CAR: $5,760 ($480 per month) allowance plus gas and routine
maintenance.
EXPENSES: Based on E&B practice.
VACATION: 4 weeks per year.
RELOCATION: To cover up to 3 house hunting trips, moving expenses, temporary
living expenses and usual closing costs, per E&B policy.
STOCK OPTIONS: Options for 100,500 shares granted at date of employment. 75,000
vest at a rate of 15,000 per year. 25,500 (8,500 per year) vest
based upon achieving performance targets for fiscal 1996, 1997
and 1998.
A minimum of 50,000 shares will become vested in connection with
any merger or consolidation in which the Company is not the
surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined
immediately prior to such merger or consolidation) owning less
than a majority of the outstanding voting
<PAGE>
securities of the surviving corporation (determined immediately
following such merger or consolidation), any sale or transfer by
the Company of all or substantially all its assets or any tender
offer or exchange offer for or the acquisition, directly or
indirectly, by any person or group of all or a majority of the
then outstanding voting securities of the Company.
TERMINATION: Without Cause: one year's base compensation, subject to
mitigation. For Cause: no compensation. "Cause" shall mean that
the Executive has: willfully failed to perform his duties in any
material respect, including but not limited to the willful
failure to follow any instructions of the Board of Directors
consistent with the Executive's title and responsibilities
hereunder; acted fraudulently or dishonestly in some material
respect in his relations with the Company or committed any act
involving the misappropriation or conversion of Company funds; or
committed any crime involving an act of moral turpitude
including, but not limited to, fraud, larceny, embezzlement,
conversion or misappropriation of funds. "Cause" does not include
good faith efforts to perform duties or errors in judgment or
failure to achieve performance goals. Prior to a termination for
Cause the Board of Directors of the Company shall adopt a
resolution setting forth the circumstances constituting Cause
which have occurred and provide a copy of such resolution to the
Executive ("Default Notice"); within 10 days after such Default
Notice, the Executive shall have been afforded an opportunity to
respond to such resolution and the Board of Directors shall not
be reasonably satisfied with such response, or in the case of
failure to perform duties or in the case of an innocent
misappropriation or conversion of funds, the Executive, within 30
days after such Default Notice, shall not have remedied such
circumstances to the reasonable satisfaction of the Board of
Directors; and the Board of Directors shall have notified the
Executive in writing that the Executive's employment is
terminated for Cause.
NON-
COMPETITION: The Executive will not during the employment period and for one
year from the date his employment is terminated, directly or
indirectly engage in a Competitive Business (as hereinafter
defined), whether such engagement shall be as an officer,
director, owner, employee, partner or other participant in any
Competitive Business; assist others in engaging in any
Competitive Business; induce employees of the Company or its
subsidiaries or its affiliates to terminate their employment with
the Company or its subsidiaries or affiliates or engage in any
Competitive Business; or induce any supplier or customer of the
Company to terminate its relationship with the Company and the
Executive will refrain from taking any action with respect to the
customers and suppliers of the Company which would adversely
affect the Company's relationship with such customers or
suppliers. "Competitive Business" shall mean and
<PAGE>
include any business directly competing with the business of the
Company (or any subsidiary thereof) as the same as then being
conducted within any state in which the Company transacts
business; PROVIDED, FURTHER, HOWEVER, that nothing contained
shall prohibit the Executive from owning less than 2% of a class
of stock registered under the Securities Act of 1933, as amended.
Agreed:
/s/ KENNETH PESKIN 6/28/95
- ------------------------ ------------------------------
Kenneth Peskin Date
Chairman and Chief Executive Officer
E&B Marine Inc.
/s/ JAMES PETERS 6/30/95
- ------------------------ ------------------------------
James Peters Date
<PAGE>
Exhibit 21
E&B MARINE INC.
List of Subsidiaries
State of
Name Of Subsidiary Incorporation Doing Business As
- ------------------ ------------- -----------------
Central Marine Supply, Inc. New Jersey Central Marine Supply
E&B Marine Supply, Inc. New Jersey E&B Marine Supply
E&B Marine Supply, Inc. Maryland E&B Marine Supply
E&B Marine Supply
(Florida) Inc. Delaware E&B Marine Supply
Goldbergs' Marine Delaware Goldbergs' Marine
Distributors, Inc.
James Bliss & Co., Inc. Massachusetts Bliss
Sea Ranger Marine Inc. Delaware Sea Ranger
Krista Corporation Delaware E&B Marine
Accessory Centers
<PAGE>
Exhibit 23
Independent Auditors' Consent
The Board of Directors
E&B Marine Inc.:
We consent to incorporation by reference in the Registration Statements (Nos.
33-61193, 33- 42412, 33-42413, 2-91407, 2-91409 and 2-99055) on Form S-8 of E&B
Marine Inc. of our report dated February 15, 1996, relating to the consolidated
balance sheets of E&B Marine Inc. and subsidiaries as of December 30, 1995 and
December 31, 1994, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for each of the years in the
three-year period ended December 30, 1995, which report appears in the December
30, 1995 annual report on Form 10-K of E&B Marine Inc.
Our report refers to a change in the method of accounting for income taxes.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 28, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000716740
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 443
<SECURITIES> 0
<RECEIVABLES> 552
<ALLOWANCES> 0
<INVENTORY> 22945
<CURRENT-ASSETS> 28353
<PP&E> 13279
<DEPRECIATION> 7730
<TOTAL-ASSETS> 37791
<CURRENT-LIABILITIES> 10026
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 12130
<TOTAL-LIABILITY-AND-EQUITY> 37791
<SALES> 109818
<TOTAL-REVENUES> 109818
<CGS> 80479
<TOTAL-COSTS> 80479
<OTHER-EXPENSES> 26178
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1492
<INCOME-PRETAX> 1669
<INCOME-TAX> 650
<INCOME-CONTINUING> 1019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1019
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
