4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NO. 1-11480
GOLDEN EAGLE GROUP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0353755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 STANDIFER DRIVE
HUMBLE, TEXAS 77338
(Address of principal executive offices) (Zip Code)
(281) 446-2656
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's Common Stock, $.01 Par Value,
as of November 7, 1997 was 5,758,000.
Traditional Small Business Format: Yes No X
<PAGE>
GOLDEN EAGLE GROUP, INC.
FORM 10Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 3
Consolidated Statements of Income for the three
months and nine months ended September 30, 1997
and 1996 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 8
PART II. OTHER INFORMATION 12
Signatures 15
2
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Assets
September 30, December 30,
1997 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 170,778 $ 513,842
Accounts receivable, net of allowance of $547,800
and $564,000 9,523,435 8,721,219
Prepaid expenses 415,341 374,805
------------ ------------
Total current assets 10,109,554 9,609,866
Property and equipment, net of
accumulated depreciation 998,054 855,687
Deferred income taxes 341,802 552,891
Intangible assets , net of accumulated
amortization 4,178,018 4,173,973
------------ ------------
Total assets $ 15,627,428 $ 15,192,417
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 800,000 $ 400,000
Accounts payable 5,847,690 5,529,546
Accrued expenses 350,653 715,963
Obligations under capital leases,
current portion 47,541 38,395
------------ ------------
Total current liabilities 7,045,884 6,683,904
Long-term debt - 200,000
Obligations under capital leases, net of
current portion - 40,645
Deferred income taxes 31,896 31,896
------------ ------------
Total liabilities 7,077,780 6,956,445
------------ ------------
Stockholders' Equity:
Preferred stock, par value $.01,
1,000,000 shares authorized, none outstanding - -
Common stock, par value $.01, 10,000,000
shares authorized; 5,748,500 and 5,642,000
shares issued and outstanding 57,485 56,420
Additional paid-in capital 9,277,966 9,016,074
Stock subscriptions - 247,520
Accumulated deficit (785,803) (1,084,042)
------------ ------------
Total shareholders' equity 8,549,648 8,235,972
------------ ------------
Total liabilities and shareholders'
equity $ 15,627,428 $ 15,192,417
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $18,450,826 $ 15,483,927 $ 54,116,362 $ 48,883,757
Cost of sales 13,754,734 10,934,994 40,391,525 35,925,359
--------- --------- ---------- ----------
Gross profit 4,696,092 4,548,933 13,724,837 12,958,398
Selling, general and
administrative expenses 4,554,601 4,154,783 13,188,355 11,699,131
--------- --------- ---------- ----------
Operating income 141,491 394,150 536,482 1,259,267
Other income (expense) 3,731 (2,067) 19,949 (3,813)
--------- --------- --------- ---------
Income before income taxes 145,222 392,083 556,431 1,255,454
Income tax expense 96,997 8,231 258,192 8,294
--------- --------- --------- ---------
Net income $ 48,225 $ 383,852 $ 298,239 $ 1,247,160
========= ========= ========= =========
Net income per share $ 0.01 $ 0.07 $ 0.05 $ 0.22
Weighted average number of
shares 5,795,672 5,895,377 5,818,260 5,640,398
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1997 1996
----------- ------------
Cash flows from operating activities:
Net income $ 298,239 $ 1,247,162
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 467,785 399,365
Deferred income taxes 211,090 -
Gain on sale of equipment (662) (500)
Changes in operating assets net of effect
of acquisition:
Decrease (increase) in accounts
receivable, net (800,716) 256,046
Decrease (increase) in prepaid
expenses (40,536) (103,217)
Increase (decrease) in cash overdraft - (445,346)
Increase (decrease) in accounts
payable and accrued expenses (65,955) (810,415)
----------- ------------
Net cash provided by operating
activities 62,956 543,095
----------- ------------
Cash flows from investing activities:
Proceeds from sale of equipment 3,250 500
Acquisition of business, net of cash
acquired (155,033) (28,739)
Capital expenditures (450,675) (129,239)
----------- ------------
Net cash used in investing
activities (602,458) (157,478)
----------- ------------
Cash flows from financing activities:
Borrowings under notes payable and
line of credit 1,300,000 1,550,000
Issuance of common stock 27,937 288,844
Principal payments under capital lease
obligations (31,499) (30,581)
Payments under notes payable and line
of credit (1,100,000) (1,857,131)
Costs incurred in warrant exchange - (5,000)
----------- ------------
Net cash flows provided by (used in)
financing activities 196,438 (53,868)
----------- ------------
Net increase (decrease) in cash and
equivalents (343,064) 331,749
Cash and equivalents at beginning of period 513,842 396,812
----------- ------------
Cash and equivalents at end of period $ 170,778 $ 728,561
=========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
5
<PAGE>
GOLDEN EAGLE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Annual Report on
Form 10-K for the year ended December 31, 1996 as filed with the
Securities and Exchange Commission. The December 31, 1996 balance sheet
included herein was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. In the opinion of the Company, the accompanying unaudited
consolidated statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the nine months ended September
30, 1997 are not necessarily indicative of the results to be expected for
the full year.
2. INCOME TAXES
There is no provision for income tax for the nine months ended September
30, 1996 due to the valuation allowance on deferred tax assets.
3. PER SHARE DATA
Per share data is calculated based upon the weighted average number of
shares of common stock and dilutive stock options outstanding. See
Note 4.
4. PUBLIC WARRANTS
On June 20,1997 the Board of Directors voted to extend the expiration date
of the Company's 800,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") for six months to May 23, 1998. Each Warrant entitles the
registered holder thereof to purchase one share of Common Stock at a price
of $3.25 through May 23, 1998. With respect to their other
characteristics, the Warrants are described at length in the prospectus
filed with the Securities and Exchange Commission (File No. 33-49878-A)
dated November 24, 1992 and are subject to the provisions of the Warrants
and the warrant agency agreement between the Company and Continental Stock
Transfer & Trust Company.
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<PAGE>
5. SUBSEQUENT EVENTS
Effective October 31, 1997, the Company completed the acquisition of all
the outstanding stock of Columbia Shipping Group, Inc. ("CSG"), a
privately held New York based freight forwarder and customs broker with
additional offices in Chicago, Philadelphia, Los Angeles and San
Francisco. Pursuant to the terms of the stock purchase agreement, the CSG
Stockholders conveyed their CSG Stock to the Company in exchange for the
issuance of an aggregate of 598,718 shares of the Company's Common Stock,
$.01 par value, making of a note payable to a selling stockholder of
$1,083,333 and payment of an aggregate of $3,833,333 in cash.
The source of the cash consideration paid by the Company was a $3,833,333
term loan from the Company's principal bank. The term loan bears interest
at the bank's prime rate plus 1/2% and is to be repaid in quarterly
installments of principal and interest beginning January 27, 1998 with a
final payment due October 27, 2002.
In conjunction with the term loan, the Company replaced its existing line
of credit with the bank originally scheduled to expire May 31, 1998. The
new revolving loan commitment allows maximum borrowings up to $2,000,000
limited to 80% of the Company's eligible accounts receivable in excess of
outstanding indebtedness under the term loan. The revolving loan
commitment bears interest at the bank's prime rate plus 1/2% on all
outstanding advances and expires on October 27, 1998. The Company has
agreed to pay the bank a facility fee of $19,167 on the effective date of
the new agreement, October 27,1997, and will accrue additional facility
fees at a rate of .125% on the average daily un-borrowed amount under the
revolving credit commitment, payable semi-annually, in arrears.
The revolving loan commitment and term loan are collateralized by
substantially all of the Company's assets. Borrowings under the bank
revolving credit agreement were $800,000 at September 30, 1997.
The note payable to a former CSG stockholder bears interest at 10% per
annum and requires the payment of accrued interest at the end of each
month until November 1, 2005. The principal amount of the note is due and
payable in 16 quarterly payments beginning on February 1, 2002 and ending
on November 1, 2005. The note is subordinated to the Company's
indebtedness to the bank.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
Golden Eagle Group, Inc. ("GEGP" or the "Company"), through its
wholly-owned subsidiaries, is engaged in the business of providing
international transportation logistics and related services.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Revenue during the three months ended September 30, 1997, increased
approximately 19.2% or $2,966,899 to $18,450,826 from $15,483,927 during the
same period in 1996. Sales in the Miami branch have increased from approximately
$2.5M for the three months ended September 30, 1996 to approximately $5.0M for
the same period in 1997. The increase in Miami has been offset by a reduction in
project revenues in the Company's Houston branch. Due to the completion of
several projects at the end of the third quarter in 1996, Houston's revenues for
the three months ended September 30, 1997 are approximately $1.9M lower than the
same period in 1996. The remaining net increase is attributable to growth in the
remainder of the Company's locations.
Gross profit during the three months ended September 30, 1997, increased
approximately 3.2% or $147,159 to $4,696,092 from $4,548,933 for the same period
in 1996. The gross profit margin for the three months ended September 30, 1997
was 25.4% as compared to the 29.4% reported for the same period in 1996. The
reduction in margin is attributable to the reduction in project revenues
mentioned above. Project business, because of size and complexity, has routinely
offered more opportunities to negotiate better pricing and terms with vendors
than traditional forwarding business thus generating better margins. Thus the
decline in project revenues has caused a parallel decline in margin.
Selling, general and administrative expenses during the three months ended
September 30, 1997, increased $399,818 to $4,554,601 or approximately 9.6%, from
$4,154,783 in the same period in 1996. As a percentage of sales, selling,
general and administrative expenses decreased from 26.8% of sales for the three
months ended September 30, 1996 to 24.7% for the same period in 1997.
Approximately $289,000 of the increase is attributable to increased costs in the
Miami operations including lease cost of additional warehouse space and
additional labor charges required to service the increase in revenues. The
remainder is attributable to increased sales development costs incurred by the
corporate sales department, which the Company has charged with developing new
national account and project business.
The Company's operating and net income was $141,491 and $48,225,
respectively for the three months ended September 30, 1997, as compared to
operating and net income of $394,150
8
<PAGE>
and $383,852, respectively, for the three months ended September 30, 1996. The
Company recorded a provision for income taxes of $96,997 for the three months
ended September 30, 1997 as compared to $8,231 for the three months ended
September 30, 1996.
The provision in 1996 is related to only certain state income and
franchise taxes. Due to the existence of unrecorded net operating loss
carryforwards, the Company was not required to provide for federal income tax
expense for the three month period ended September 30, 1996. In the fourth
quarter of 1996, the Company recognized an income tax benefit and the
establishment of a net deferred tax related to a portion of the Company's unused
and unexpired net operating loss tax carryforwards. Hence, for the three months
ended September 30, 1997, the Company is now required to provide for federal
income tax.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
During the nine months ended September 30, 1997, revenues increased
$5,232,605, or 10.7%, to $54,116,362 from $48,883,757 for the nine months ended
September 30, 1996. Approximately $1.6M of the increase is directly attributable
to the addition of four branch offices in 1996 in conjunction with the Ryan
Freight Services ("RFS") asset purchase agreement. Results for the nine months
ended September 30, 1996 only include revenues of the RFS offices from the July
16, 1996 agreement date. The Company's Miami branch revenues increased
approximately $6.3M for the nine months ended September 30, 1997 as compared to
the same period in 1996. The Company attributes the increase to the rapid growth
rate the entire industry is experiencing on traffic to Latin America out of the
Miami gateway. The increase in Miami for the nine-month period has been
partially offset by reduction in Houston project revenue as described
previously. Project revenues in Houston decreased approximately $5.4M as
compared to the nine-month period ended September 30, 1996.
Gross profit increased approximately 5.9% or $766,439 to $13,724,837 for
the nine months ended September 30, 1997 from $12,958,398 for the same period in
1996. Approximately $418,500 of the increase is attributable to the addition of
the RFS offices as of July 1996. The remainder of the increase is directly
attributable to the period net increase in sales as described above. The gross
profit margin for the nine months ended September 30, 1997 was 25,4% as compared
to 26.5% for the same period in 1996. The decrease is attributable to the
reduction in project revenues for the nine months as discussed above.
Selling, general and administrative expenses increased $1,489,224 or
approximately 12.7% from $11,699,131 for the nine months ended September 30,
1996 to $13,188,355 for the nine months ended September 30, 1997. Selling,
general and administrative expenses, as a percentage of sales, increased
slightly from approximately 23.9% for the nine months ended September 30 1996 to
approximately 24.4% for the same period in 1997. Approximately $381,700 of the
increase, is directly attributable to the addition of RFS offices. Another,
approximately $520,000 of additional selling general and administrative cost is
attributable to the growth in the Miami branch including additional personnel
and new warehouse capacity. The remainder of the increase in selling, general
and administrative expenses is attributable to increased sales development costs
including the addition of the corporate sales department at the
9
<PAGE>
end of 1996, which the Company has charged with developing more national account
and project business.
The Company is reporting operating and net income of $536,482 and
$298,239, respectively for the nine months ended September 30, 1997, as compared
to operating and net income of $1,259,267 and $1,247,160, respectively for the
nine months ended September 30, 1996. For the nine months ended September 30,
1997, the Company recorded a provision for income taxes of $258,192. The
provision for income taxes of $8,294 for the nine months ended September 30,
1996 relates only to state income and franchise taxes and does not include
federal income tax due to the valuation allowance on deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of $3,063,670 as
compared to working capital of $2,925,962 at December 31, 1996. The Company's
primary sources of cash were generated from operations and a $2,000,000 line of
credit facility with a bank. Advances under the facility bear interest at the
bank's prime rate plus 1/2% and are due and payable on October 27, 1998.
Outstanding borrowings under the facility as of September 30, 1997 were
$800,000.
Cash flows provided by operating activities were $62,956 for the nine
months ended September 30, 1997, as compared to cash flows provided by operating
activities of $543,095 for the nine months ended September 30, 1996. The
reduction is primarily due to decrease in net income. Accounts receivable
increased $800,716 during the nine months ended September 30, 1997 primarily due
to the increase in sales in the Company's Miami operations.
The Company used cash flows in investing activities of $602,458 and
$157,478 for the nine months ended September 30, 1997 and 1996 respectively. The
Company's expenditures for facilities and equipment were $450,675 for the nine
months ended September 30, 1997 as compared to $129,239 in the same period in
1996. A majority of the Company's capital expenditures have been related to the
continued expansion of the Company's warehouse logistics control systems and
conversion of the Company's data network to frame relay.
At September 30, 1997, the Company had cash and equivalents of $170,778 as
compared to $513,842 at December 31, 1996 as a result of the activities
described above.
Effective October 31, 1997, the Company completed the acquisition of all
the outstanding stock of Columbia Shipping Group, Inc. ("CSG"), a privately held
New York based freight forwarder and customs broker with additional offices in
Chicago, Philadelphia, Los Angeles and San Francisco. Pursuant to the terms of
the stock purchase agreement, the CSG Stockholders conveyed their CSG Stock to
the Company in exchange for the issuance of an aggregate of 598,718 shares of
the Company's Common Stock, $.01 par value, making of a note payable to the
selling stockholders of $1,083,333 and payment of an aggregate of $3,833,333 in
cash.
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The source of the cash consideration paid by the Company was a $3,833,333
term loan from the Company's principal bank. The term loan bears interest at the
bank's prime rate plus 1/2% and is to be repaid in quarterly installments of
principal and interest beginning January 27, 1998 with a final payment due
October 27, 2002.
In conjunction with the term loan, the Company replaced its existing line
of credit with the bank originally scheduled to expire May 31, 1998. The new
revolving loan commitment allows maximum borrowings up to $2,000,000 limited to
80% of the Company's eligible accounts receivable in excess of outstanding
indebtedness under the term loan. The revolving loan commitment bears interest
at the bank's prime rate plus 1/2% on all outstanding advances and expires
October 27, 1998. The Company has agreed to pay the bank a facility fee of
$19,167 on the effective date of the new agreement, October 27,1997, and will
accrue additional facility fees at a rate of .125% on the average daily
un-borrowed amount under the revolving credit commitment, payable semi-annually,
in arrears.
The revolving loan commitment and term loan are collateralized by
substantially all of the Company's assets. Borrowings under the bank revolving
credit agreement were $800,000 at September 30, 1997.
The note payable to a former CSG stockholder bears interest at 10% per
annum and requires the payment of accrued interest at the end of each month
until November 1, 2005. The principal amount of the note is due and payable in
16 quarterly payments beginning on February 1, 2002 and ending on November 1,
2005. The note is subordinated to the Company's indebtedness to the bank.
The Company's primary financing needs relate to the expansion of its
business in existing markets. The Company believes that its present capital
resources, when combined with revenues generated from operations, are adequate
to fund its present level of operations.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward looking statements. Such
statements are typically punctuated by words or phrases such as "anticipate,"
"estimate," "projects," "should," "may," "management believes," and words or
phrases of similar import. Such statements are subject to certain risks,
uncertainties or assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected. Among the
key factors that may have a direct bearing on the Company's results of
operations and financial condition are: (i) competitive practices in the
industries in which the Company competes, (ii) the impact of current and future
laws and governmental regulations affecting the industry in general and the
Company's operations in particular, (iii) fuel and other costs of company's that
do the shipping for the Company that cannot be passed on to the Company's
customers, and (iv) political or economic strife in major markets to which the
Company's customers transport goods using the Company's services.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Effective October 31, 1997, the Company acquired all of
the outstanding capital stock (the "CSG Stock") of Columbia
Shipping Group, Inc., a Delaware corporation ("CSG"), pursuant
to the terms of the Stock Purchase and Sale Agreement (the
"Stock Purchase Agreement"), dated October 27, 1997. Pursuant
to Stock Purchase Agreement, the CSG Stockholders conveyed
their CSG Stock to the Company in exchange for the issuance of
an aggregate of 598,718 shares of the Company's Common Stock,
$.01 par value, making of a note payable to the selling
stockholders of $1,083,333 and payment of an aggregate of
$3,833,333 in cash to them. The amount of consideration paid
by the Company in exchange for the CSG Stock was determined
through arm's length negotiations between representatives of
the Company and CSG.
CSG is a privately held full-service freight forwarder
and customs broker with headquarters in New York City and
other offices in Chicago, Los Angeles, Philadelphia and San
Francisco.
The source of the cash consideration paid by the Company
was a $3,833,333 term loan from the Company's principal bank.
The term loan bears interest at the bank's prime rate plus
1/2% and is to be repaid in quarterly installments of
principal and interest beginning January 27, 1998 with a final
payment due October 27, 2002. The term loan is collateralized
by substantially all of the Company's assets.
The note payable to a former CSG stockholder bears
interest at 10% per annum and requires the payment of accrued
interest at the end of
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each month until November 1, 2005. The principal amount of the
note is due and payable in 16 quarterly payments beginning on
February 1, 2002 and ending on November 1, 2005. The note is
subordinated to the Company's indebtedness to the bank.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
1. STOCK PURCHASE AND SALE AGREEMENT, dated October 27, 1997,
by and among the Company, CSG and the CSG stockholders.
Exhibit C - Promissory note issued to former CSG
stockholder
Exhibit H - Consulting agreement with former CSG
stockholder
Exhibit J - Employment agreements
2. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Consolidated Financial Statements of Columbia Shipping
Group, Inc.:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of the years ended June 30,
1997 and 1996
Consolidated Statements of Operations for the years ended
June 30, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
June 30, 1997 and 1996
Notes to Consolidated Financial Statements
3. PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Financial Statements of the
Registrant and Columbia Shipping Group, Inc.:
Pro Forma Balance Sheet at September 30, 1997
Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1997
13
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Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1996
Notes to Consolidated Pro Forma Financial Statements
(b) REPORTS ON FORM 8-K:
None.
14
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLDEN EAGLE GROUP, INC.
Date: November 14, 1997 By: /s/ DONALD A. NODORFT
Donald A. Nodorft, Vice
President-Finance
(Principal Financial and
Accounting Officer)
15
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EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 1.
STOCK PURCHASE AND SALE AGREEMENT, DATED OCTOBER 27, 1997, BY AND
AMONG THE COMPANY, CSG AND THE CSG STOCKHOLDERS
16
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STOCK PURCHASE AND SALE AGREEMENT
BY AND AMONG:
GOLDEN EAGLE GROUP, INC.
("PURCHASER")
COLUMBIA SHIPPING GROUP, INC.
("COMPANY")
COLUMBIA SHIPPING, INC.,
COLUMBIA SHIPPING, INC. (WEST),
COLUMBIA SHIPPING, INC. (SFO),
COLUMBIA SHIPPING, INC. (CHICAGO)
AND FREIGHT EXPRESS INTERNATIONAL, INC.
("SELLER CORPORATIONS")
AND
LAWRENCE F. BAUER, MICHAEL MCADAM,
DAN MORREL
AND THE
COLUMBIA SHIPPING GROUP TRUST
("SELLERS" AND "SHAREHOLDERS")
17
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS......................................................21
1.1 Closing..............................................................21
1.2 Closing Date.........................................................21
1.3 Closing Date Balance Sheet...........................................22
1.4 Consulting Agreement.................................................22
1.5 Effective Date.......................................................22
1.6 Employment Agreements................................................22
1.7 Environmental Damages................................................22
1.8 Environmental Requirements...........................................22
1.9 Execution Date.......................................................23
1.10 Facilities...........................................................23
1.11 Financial Statements.................................................23
1.12 GAAP.................................................................23
1.13 GEGP Stock...........................................................23
1.14 Hazardous Materials..................................................23
1.15 Letter of Credit.....................................................23
1.16 Note.................................................................23
1.17 Purchase Price.......................................................24
1.18 Release..............................................................24
1.19 Seller Corporations..................................................24
1.20 Subject Stock........................................................24
ARTICLE II PURCHASE AND SALE OF SUBJECT STOCK..............................24
2.1 Purchase and Sale of Subject Stock...................................24
2.2 Consideration Payable to Sellers at Closing..........................24
2.3 Consideration to Purchaser...........................................25
2.4 Delivery of Purchaser Stock..........................................25
2.5 Employees............................................................25
2.6 Consulting Agreement.................................................26
2.7 No Solicitation......................................................26
2.8 Payment to Albion....................................................26
2.9 Lease Agreement with 138-01 Springfield Blvd. Realty Corp...........27
2.10 Change of Name of Columbia Shipping (Scranton).......................27
2.11 Allocations of the Purchase Price....................................27
2.12 Letter of Credit.....................................................27
ARTICLE III THE CLOSING.....................................................28
3.1 Conditions Precedent to Closing......................................28
3.2 The Closing..........................................................28
3.3 Items To Be Delivered At Closing.....................................29
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3.4 Further Assurances...................................................31
3.5 Preparation of the Closing Date Balance Sheet........................31
3.6 Corporate Matters....................................................31
3.7 Settlement Statements................................................31
3.8 Bonuses..............................................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES
BY THE SELLERS COMPANY AND WARRANTORS.......................................32
4.1 Due Organizations....................................................32
4.2 Stock Ownership......................................................32
4.3 Subsidiaries.........................................................33
4.4 Employment Agreements................................................33
4.5 Financial Statements.................................................33
4.6 Absence of Certain Changes...........................................33
4.7 Liabilities..........................................................34
4.8 Taxes................................................................35
4.9 Employee Benefit Plans...............................................35
4.10 No Conflict with Other Instruments...................................36
4.11 Title to Properties..................................................36
4.12 Patents and Intellectual Property....................................37
4.13 Delivery of Certain Documents........................................38
4.14 Bank Accounts........................................................39
4.15 Litigation...........................................................39
4.16 Insurance............................................................40
4.17 Licenses and Permits.................................................40
4.18 Accounts Receivable..................................................40
4.19 Inventory............................................................40
4.20 Validity of Agreement................................................40
4.21 Adverse Restrictions.................................................41
4.22 Untrue Statements....................................................41
4.23 Knowledge Defined....................................................41
4.24 Investment Representations...........................................41
ARTICLE V REPRESENTATIONS AND WARRANTIES BY THE PURCHASER..................42
5.1 Corporate Existence, etc..............................................42
5.2 Validity of Agreement.................................................42
5.3 No Conflict with Other Instruments....................................42
5.4 Other Purchaser Representations and Warranties........................42
ARTICLE VI NATURE OF STATEMENTS REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE SELLERS...................................43
ARTICLE VII INDEMNITY BY THE SELLERS AND PURCHASER.......................43
7.1 Sellers' General Indemnity............................................43
7.2 Purchaser's General Indemnity.........................................44
7.3 Notification and Defense of Claims or Actions.........................45
7.4 Insurance.............................................................46
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7.5 Tax Liability Defense................................................46
ARTICLE VIII ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND INDEMNITY.....47
8.1 Representations and Warranties........................................47
8.2 Obligation of Sellers to Indemnify, Defend and Hold Harmless..........48
8.3 Obligation of Purchaser to Indemnify, Defend and Hold Harmless........49
ARTICLE IX NONDISCLOSURE OF CONFIDENTIAL INFORMATION......................51
ARTICLE X MISCELLANEOUS..................................................51
10.1 Expenses.............................................................51
10.2 Environmental Audit..................................................51
10.3 Notices..............................................................51
10.4 Governing Law; Interpretation; Section Headings ....................53
10.5 Entire Agreement.....................................................53
10.6 Brokers..............................................................53
10.7 Arbitration..........................................................53
10.8 Public Announcements.................................................54
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STOCK PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is executed as of the 27th day of October, 1997 by and
among Golden Eagle Group, Inc., a Delaware corporation (hereinafter referred to
as "Purchaser") and Columbia Shipping Group, Inc., a Delaware corporation
(hereinafter referred to as "Company"), Columbia Shipping, Inc., a New York
corporation, Columbia Shipping, Inc. (West), a California corporation, Columbia
Shipping, Inc. (Chicago), an Illinois corporation, Columbia Shipping, Inc.
(SFO), a California corporation, and Freight Express International, Inc., a New
York corporation (herein referred to as "Seller Corporations") Lawrence F.
Bauer, Michael McAdam and Dan Morrel, individuals, and The Columbia Shipping
Group Trust (hereinafter referred to as "Sellers", "Shareholders" and/or
"Warrantors").
RECITALS
WHEREAS, Company currently operates a freight forwarding and brokering
business with offices located in New York (JFK Airport), Philadelphia, Chicago,
Los Angeles and San Francisco;
WHEREAS, the parties hereto desire that Purchaser acquire all of the
issued and outstanding shares of the Subject Stock (as hereinafter defined) of
the Company from the Sellers thereby vesting in Purchaser all of the ownership
rights in the Seller Corporations and the Company in exchange for the
consideration as hereinafter described; `
WHEREAS, the Shareholders as the sole owners of the Subject Stock desire
that Purchaser so acquire all of the Subject Stock; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
execution and delivery of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 CLOSING. The term "Closing" shall mean the events to take place on the
Closing Date pursuant to Article III.
1.2 CLOSING DATE. The term "Closing Date" shall mean October 27, 1997, or such
other date on which the closing shall occur as may be established by
agreement of the parties.
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1.3 CLOSING DATE BALANCE SHEET. The term "Closing Date Balance Sheet" shall
mean the balance sheet of Company as of September 30, 1997, prepared in
accordance with GAAP, consistently applied. In preparing the Closing Date
Balance Sheet, property, plant, machinery and equipment shall be valued at
its depreciated book value, consistent with Company's historical
depreciation policies, but any equipment which is reasonably determined by
the parties hereto to be unusable for its intended purchase will be marked
down to its disposal value, as is normal in GAAP accounting. Closing Date
Balance Sheet shall include the Statement of Operations and the Statement
of Cash Flow for the periods through September 30, 1997, all such
documents to be attached as EXHIBIT A.
1.4 CONSULTING AGREEMENT. The term "Consulting Agreement" shall mean the
Consulting Agreement between Purchaser and Lawrence Bauer, attached
hereto as EXHIBIT H to be executed at Closing.
1.5 EFFECTIVE DATE. The term "Effective Date" as used herein shall mean
October 1, 1997.
1.6 EMPLOYMENT AGREEMENTS. The term "Employment Agreements" shall mean the two
(2) Employment Agreements between Purchaser and Dan Morrel and Mike
McAdam, respectively, attached hereto as EXHIBIT J to be executed at
Closing.
1.7 ENVIRONMENTAL DAMAGES. The term "Environmental Damages" shall mean: any
cost, damages, expense, liability, obligation, or other responsibility or
damages arising from or under Environmental Requirements and consisting of
or relating to:
(i) any environmental matters or conditions (including on-site and
off-site contamination and regulation of chemical substances
or products);
(ii) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands,
losses, claims, demands and responses, investigations,
remediations, including, without limitation, reasonable
attorneys' fees and disbursements or inspection costs and
expenses (including without limitation, any of the above
arising under a theory of strict liability) arising under
Environmental Requirements;
(iii) financial responsibility under Environmental Requirements for
cleanup costs or corrective actions, including any
investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by
applicable Environmental Requirements (whether or not such
Cleanup has been required or requested by any governmental
authority or any other person or entity) and for any natural
resource damages; or
(iv) any other compliance, corrective, investigative, or remedial
measures required under Environmental Requirements.
1.8 ENVIRONMENTAL REQUIREMENTS. The term "Environmental Requirements" shall
mean all federal, state or local laws (whether under common law, statute,
rule or regulation), permits, licenses, and any other requirements of any
federal, state or local governmental
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authority relating to the protection of human health or the environment or
to any Hazardous Materials. Such laws including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act,
Resource Conservation and Recovery Act, Clean Water Act, Clean Air Act,
Hazardous Materials Transportation Act, Toxic Substance Control Act, and
their state and local counterparts as amended from time to time.
1.9 EXECUTION DATE. The term "Execution Date" as used herein shall mean the
date shown in the opening paragraph of this Agreement as the date of this
Agreement.
1.10 FACILITIES. The term "Facilities" shall mean the offices, warehouses and
administration buildings, and all other real property and related
facilities which are owned or leased by Company.
1.11 FINANCIAL STATEMENTS. The term "Financial Statements" as used herein shall
mean the audited financial statements for the years ending June 30, 1996
and 1997 inclusive of Balance Sheets as of each respective fiscal year and
income statements for each respective fiscal year, all prepared in
accordance with GAAP consistently applied, attached hereto as EXHIBIT B.
1.12 GAAP. The term "GAAP" shall mean generally accepted accounting principles
as published and practiced in the United States.
1.13 GEGP STOCK. The term "GEGP Stock" shall mean shares of Golden Eagle Group,
Inc. as traded under the symbol GEGP on the NASDAQ exchange.
1.14 HAZARDOUS MATERIALS. The term "Hazardous Materials" as used herein shall
mean materials that, because of their quantity, concentration or physical,
chemical or infectious characteristics, may cause or pose a present or
potential hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or
otherwise handled. "Hazardous Materials" shall include, but is not limited
to, any and all hazardous or toxic substances, materials or wastes as
defined, listed or that become regulated as a "hazardous waste,"
"hazardous substance," pollutant or contaminant.
1.15 LETTER OF CREDIT. The term "Letter of Credit" shall mean a Letter of
Credit in the amount of $350,000.00 obtained by Sellers prior to Closing
from SunTrust Bank outlining the ability to be drawn upon by Purchaser per
the terms of this Agreement and the Letter of Credit in order to secure
payment of tax obligations of the Company or Seller Corporations for the
time period prior to the Closing Date, as attached hereto as EXHIBIT D and
the respective terms and conditions contained therein, and elsewhere in
this Agreement. The cost of such Letter of Credit shall be apportioned
between Sellers and Purchaser according to the amount of money paid the
Internal Revenue Service due to audits.
1.16 NOTE. The term "Note" shall mean that certain promissory note with an even
date to this Agreement, in the amount of One Million Eighty-Three Thousand
Three Hundred Thirty-
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Three Dollars ($1,083,333.00) with Purchaser as "Maker" and Sellers as
"Payee", attached hereto as EXHIBIT C.
1.17 PURCHASE PRICE. The term "Purchase Price" shall mean the consideration to
be delivered by Purchaser to the Shareholders pursuant to Sections 2.2 and
2.4.
1.18 RELEASE. The term "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
migration, dumping or disposing into the environment or any other act or
omission constituting a release as defined in or subject to regulation by
the Environmental Requirements (as herein defined).
1.19 SELLER CORPORATIONS. The term "Seller Corporations" shall mean all
corporations or other legal entities, including but not limited to
Columbia Shipping, Inc., a New York corporation, Columbia Shipping, Inc.
(Chicago), an Illinois corporation, Columbia Shipping, Inc. (West), a
California corporation, Columbia Shipping, Inc. (SFO), a California
corporation, and Freight Express International, Inc., a New York
corporation, in which the Sellers, or any entity in which the Sellers had,
within the prior twelve (12) months, any ownership interest, and which has
transferred the ownership of any assets and/or liabilities to the Company
in the past twelve (12) months. This term shall not apply to Columbia
Shipping, Inc. (Scranton), or to any other corporation owned by Sellers
which is unrelated to the Company's business as transferred to Purchaser
hereinunder.
1.20 SUBJECT STOCK. The term "Subject Stock" shall mean Two Thousand Five
Hundred (2,500) shares of the common stock of the Company with no par
value representing all of the issued and outstanding shares of stock and
all issued and redeemed capital of the Company.
ARTICLE II
PURCHASE AND SALE OF SUBJECT STOCK
2.1 PURCHASE AND SALE OF SUBJECT STOCK. In exchange for the consideration
specified herein and subject to the terms and conditions of this
Agreement, at the Closing Date, the Sellers shall as of the Effective
Date, sell, transfer and deliver to Purchaser, and Purchaser agrees to
purchase from the Sellers, all of Sellers's right, title and interest in
and to, the Subject Stock, and all right, title and interest Sellers may
have to acquire any capital stock of Company.
2.2 CONSIDERATION PAYABLE TO SELLERS AT CLOSING. In consideration of the
purchase of the Subject Stock, Purchaser shall pay or deliver the
following (the "Purchase Price"):
(a) o To Seller, Lawrence F. Bauer, the sum of
$3,090,220.00
o To Seller, Mike McAdam, the sum of $363,766.00
o To Seller, Dan Morrel, the sum of $379,347.00
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Such sums to be paid in cash by Wire Transfer within three (3)
business days of funding to Purchaser.
(b) To Seller, Lawrence F. Bauer, delivery of the Note as attached
hereto as EXHIBIT C.
2.3 CONSIDERATION TO PURCHASER. In consideration for the Purchase Price, the
Sellers shall deliver the following to Purchaser:
(a) At the Closing, certificates representing the Subject Stock
duly and properly endorsed or with irrevocable stock powers
duly and properly executed and attached and a release of all
right, title and interest Shareholders may have to acquire any
capital stock of the Company or any Seller Corporations; and
(b) The Letter of Credit, in order to secure payment of any tax
obligations of Company or Seller Corporations.
2.4 DELIVERY OF PURCHASER STOCK. As further consideration of the purchase,
Purchaser shall (immediately following Closing),formally request from the
Purchaser's transfer agent the delivery of Five Hundred Ninety Eight
Thousand Seven Hundred Eighteen (598,718) shares of GEGP Stock ("Purchaser
Stock") to be delivered prior to the end of calendar year 1997, as
provided in EXHIBIT E hereto, which shall bear a restrictive legend for
two (2) years from the Closing Date.
2.5 EMPLOYEES.
(a) The Purchaser shall employ Dan Morrel and Mike McAdam per the
terms and conditions as contained in the Employment Agreements
attached hereto as EXHIBIT J for each of the respective
individuals, such Employment Agreements to be executed at
Closing.
(b) The Purchaser will extend at will employment offers, or
continue at will employment, upon terms acceptable to
Purchaser, in its sole discretion, to current Company or
Seller Corporations employees: Pete Gardner (JFK), Mike
Hall (Philadelphia) and Mary Grimshaw (Chicago). The
Purchaser may extend employment offers, or continue
employment, upon terms acceptable to the Purchaser in its
sole discretion, to certain other employees of the
Company. The determination of which employees will be
offered employment shall be at the sole discretion of the
Purchaser. Should Purchaser choose to offer employment to
any Company employee, solely for the purposes of vacation
benefit calculations Purchaser shall recognize years of
service with the Company or any Seller Corporations
including accrued vacation for the current year. However,
no more than one (1) week of previously earned and unused
vacation (including personal leave/sick leave) may be
carried over into the employment with Purchaser. Any
former employee of the Company or Seller Corporations
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employed by Purchaser and having ninety (90) days of
combined employment with Company and/or Purchaser shall be
eligible to participate in the 401K Plan of GEGP at the
next occurring plan entrance date. Should Purchaser choose
to offer employment to any Company or Seller Corporations
employee, they may be given a one time but ongoing
adjustment to salary equal to the difference in health care
benefit costs between the different plans of Sellers and
Purchaser on date of Closing.
(c) It is expressly understood and agreed that the Purchaser's
agreement of employment to the individuals referred to in
Section 2.5(b) shall not constitute any contract,
commitment or understanding (expressed or implied) on the
part of the Purchaser to establish or to continue any
employment relationship with any of such individuals for
any fixed term or duration or on any specific terms or
conditions (including salary and benefits) other than those
which the Purchaser, in its sole discretion, may establish,
and any such employment by any of such individuals with the
Purchaser after the Closing shall be "at will" and may be
terminated by the Purchaser at any time, except for those
offered employment under Section 2.5(a) above. The
employment by the Purchaser of any of such individuals
shall not be a condition to the closing of the transactions
contemplated by this Agreement.
2.6 CONSULTING AGREEMENT. The Purchaser shall contract with Lawrence Bauer as
independent contractor per the terms and conditions contained in the
Consulting Agreement attached hereto as EXHIBIT H, such Consulting
Agreement to be executed at Closing.
2.7 NO SOLICITATION. Sellers agree that for a period of two (2) years from the
Closing Date, Sellers will not solicit, either directly or indirectly, the
employment of any person or employee, who is then, or within two (2) years
prior to the Closing Date was an employee of the Sellers, Seller
Corporations, or any affiliate, or of the Purchaser or any affiliate,
without the prior written consent of the Purchaser or any of its
affiliates unless such solicitation is on behalf of or for the benefit of
the Purchaser.
2.8 PAYMENT TO ALBION. Purchaser and Sellers hereby acknowledge an amount due
to Albion from Purchaser as a result of this Agreement. Purchaser
represents and warrants that they have dealt with no broker other than
Albion in connection with the Purchase of the Company as herein provided,
and Purchaser agrees to indemnify and hold Sellers harmless from and
against any expense, loss, damage or liability, including reasonable
attorney's fees, sustained by reason of any claim of any party for
brokers' commissions, finders fees or similar compensation. Furthermore,
Sellers represent and warrant that they have dealt with no broker, or
other third party including but not limited to Albion, in relation to the
sale of the Company as herein provided, Sellers agree to indemnify and
hold Purchaser harmless from and against any expense, loss, damage or
liability, including reasonable attorney's fees, sustained by reason of
any claim of any party for brokers' commissions, finders fees or similar
compensation.
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2.9 LEASE AGREEMENT WITH 138-01 SPRINGFIELD BLVD. REALTY CORP. Purchaser
hereby agrees to lease from 138-01 Springfield Blvd. Realty Corp., and
138-01 Springfield Blvd. Realty Corp. agrees to lease to Purchaser, and
Sellers agree to cause 138-01 Springfield Blvd. Realty Corp. to so lease
to Purchaser, the property located at 138-01 and 138-13 Springfield Blvd.,
Jamaica, New York ("Premises") effective on the Closing Date per the terms
of the Lease Agreement attached hereto as EXHIBIT K. Sellers and 138-01
Springfield Blvd. Realty Corp. hereby additionally agree that all
contracts and related revenues generated by the Premises or with regard to
use of the Premises leased thereunder whether currently in place or
acquired during the term of the lease, , including but not limited to the
rental revenue for the lease of radio towers located thereon, shall be for
the sole benefit of Purchaser. 138-01 Springfield Blvd. Realty Corp. joins
this Agreement for the sole purpose of agreeing to the terms and
conditions of this paragraph, the representations and warranties contained
in 4.1, 4.11 and 4.20 and the execution of the Lease Agreement.
2.10 CHANGE OF NAME OF COLUMBIA SHIPPING (SCRANTON). Columbia Shipping, Inc.
(Scranton), a Pennsylvania corporation, hereby agrees to change the
Columbia Shipping, Inc. (Scranton) corporate name to "CSI International",
or a different name, not deceptively similar to "Columbia Shipping", on or
before the Closing Date. Certified copies of the Shareholder and Board of
Directors Resolutions, and the Amendment to the Articles of Incorporation
approving the name change of Columbia Shipping, Inc. (Scranton) as filed
with the appropriate governmental agencies are attached hereto as EXHIBIT
L. Furthermore, Columbia Shipping, Inc. (Scranton) hereby agrees from the
Closing Date forward, not to use any trade name, trademark, service mark
or other intellectual property of the Company, and Sellers hereby agree to
indemnify and hold harmless Purchaser from any and all claims, demands,
causes of action and damages asserted by any third party which in any way
result from such use, or are founded in any manner on the prior
relationship between Company, Seller Corporations and any Shareholders of
Company, Seller Corporations or Columbia Shipping, Inc. (Scranton).
Columbia Shipping, Inc. (Scranton) joins this Agreement for the sole
purpose of agreeing to the terms and conditions of this paragraph and the
representations and warranties contained in 4.1 and 4.20.
2.11 ALLOCATIONS OF THE PURCHASE PRICE. The parties agree to be bound by the
allocation for all federal, state and local tax purposes as described in
SCHEDULE 2.11 hereto. The parties agree to submit any form required by law
in accordance with this allocation.
2.12 LETTER OF CREDIT. All fees incurred to establish and maintain the Letter
of Credit shall be pro-rated among the parties with Purchaser paying fees
in proportion to that amount of the credit not used for tax liabilities
and Shareholder, Lawrence F. Bauer, paying fees in proportion to that
amount of the credit used to pay for said tax liabilities. Lawrence F.
Bauer shall present a notice of payment due to Purchaser upon termination
of the Letter of Credit or whenever a payment is made to the Internal
Revenue Service regardless of whether the payment is made by Bauer
personally or through the Letter of Credit and said payment shall be due
within seven (7) days upon receipt of said notice. The Letter of
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Credit shall be interpreted and construed in accordance with the laws of
the State of Florida.
ARTICLE III
THE CLOSING
3.1 CONDITIONS PRECEDENT TO CLOSING. The obligation of the Purchaser and
Sellers to complete the sale and purchase shall be subject to the
following conditions for Closing:
(a) No material adverse change in the Company's or Seller
Corporations' assets or business affecting the value thereof
after Execution Date but prior to the Closing Date, except as
provided herein.
(b) Delivery to Purchaser of a certificate of the President of
Company that neither the Company nor the Sellers are aware of
any event that with reasonable time or circumstance could
constitute a material adverse change to the business of
Company or Seller Corporations or their value, to be attached
as part of the certificate required as SCHEDULE 3.3 hereof.
(c) The Company's net equity on June 30, 1997, and on the Closing
Date is not less than $2,285,276.00 per the audited financials
as of June 30, 1997 performed by Karlins, Fuller, Arnold &
Klodosky, Certified Public Accountants, and the subsequent
Closing Date Balance Sheet presented by Sellers.
(d) All obligations outstanding for Company, inclusive of pension
plans, customs investigations and taxing authorities having
been paid in full by Sellers, and
(e) Any schedules not provided at the execution of this Agreement,
shall have been provided prior to Closing.
(f) Full satisfaction of the Purchaser's lender, Texas Commerce
Bank, in its sole and unfettered discretion, as to all items
of due diligence, this Agreement, any Exhibits and Schedules
hereto or any other documents or issues of relevance they find
material to the contemplated transaction and their funding
thereof on behalf of Purchaser.
3.2 THE CLOSING. The Closing of the transactions provided by this Agreement
will take place at the offices of Stibbs & Burbach, P.C., located at 10077
Grogan's Mill Road, Suite 540, The Woodlands, TX 77380, at 10:00 a.m. on
the Closing Date, or at such other date and time as the parties hereto
shall agree in writing. Failure to consummate the transactions
contemplated by this Agreement on the date and time and at the place
selected pursuant to this Section 3.2 shall not result in the termination
of this Agreement and shall not relieve any party to this Agreement of any
obligation hereunder.
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3.3 ITEMS TO BE DELIVERED AT CLOSING. At the Closing and subject to the
terms and conditions herein contained:
(a) The Sellers will deliver the following to Purchaser:
(i) all documents, certificates and materials required per
Sections 2.3, 3.1(b), 3.5 and 3.6.
(ii) a certificate of the President of the Company, dated
the Closing Date, certifying that the representations
and warranties contained herein are true and correct
and that the Sellers, Company and Seller Corporations
have performed and complied with all agreements and
conditions required by this Agreement to be performed
and complied with by the Sellers prior to or at the
Closing to be attached as part of SCHEDULE 3.3 hereof;
(iii) an opinion dated the Closing Date of Sellers' counsel in
form and substance satisfactory to the Purchaser to be
attached as part of SCHEDULE 3.3 hereof;
(iv) current certificates from the appropriate authorities
showing that the Company and Seller Corporations are
in good standing in all respects and that all
required tax reports have been filed and all taxes
shown thereon or otherwise claimed to be owing have
been paid in full to be attached as part of SCHEDULE
3.3 hereof. The Company, which was incorporated on
April 25, 1997, for the sole purpose of consolidating
the Seller Corporations, with the only activities the
Company since its establishment being the
consolidation of said Seller Corporations, and the
effectuation of the purchase and sale herein. No tax
returns for the Company are due, and hence none have
been filed;
(v) a copy of the Company and Seller Corporations'
Articles of Incorporation and Bylaws, if not
delivered prior to Closing, to be attached as
SCHEDULE 4.1, per Section 4.1 hereof, and all of the
resolutions adopted by their Boards of Directors and
Shareholders relating to the transactions
contemplated by this Agreement, and a certificate
dated the Closing Date certifying all documents
referenced herein to be complete, correct and in full
force and effect by the Secretary or an Assistant
Secretary of the respective corporation to be
attached as part of SCHEDULE 3.3 hereof; and
(vi) The Letter of Credit
(vii) A file stamped copy of lien release documents showing
full and final release of the following liens of record
prior to Closing with regard to Seller Corporations:
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(A) lien on property of Columbia Shipping, Inc., in
favor of Citibank N.A. dated July 21, 1992 in the
records of the Secretary of State of New York
(File #152879 with continuation dated March 7,
1997, under File #541820); and
(B) lien on property of Columbia Shipping, Inc.
(Chicago) in favor of Northern Trust Bank/O'Hare
N.A. dated September 19, 1995, in the records of
the Secretary of State of Illinois (File
#3448353).
(b) The Purchaser will deliver:
(i) to Sellers, cash in the amount provided in Section
2.2(a) hereof.
(ii) to Sellers, the Note as provided in Section 2.2(b)
hereof.
(iii) to Albion, as required by Section 2.9, the consideration
agreed to between Purchaser and Albion.
(c) Both Purchaser and Sellers will deliver:
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(i) three fully executed originals of the Employment
Agreements, one each to be retained by the Purchaser and
the respective employee.
(ii) three fully executed originals of the Consulting
Agreement, one each to be retained by the Purchaser and
the Consultant.
3.4 FURTHER ASSURANCES. The parties will, from time to time, after the Closing
and at the other's request, execute, acknowledge and deliver to the other
party such other instruments of conveyance and transfer and take such
other actions and execute and deliver such other documents, certifications
and further assurances as the party may reasonably request in order to
meet the requirements of the terms and conditions of this Agreement.
3.5 PREPARATION OF THE CLOSING DATE BALANCE SHEET. The Closing Date Balance
Sheet shall be prepared by Company as provided herein and in Section 1.4
delivered to Purchaser on the Closing Date, and attached as part of
EXHIBIT A hereto.
3.6 CORPORATE MATTERS. On the Closing Date, Shareholders shall deliver to
Purchaser all of the corporate seals of the Company and Seller
Corporations. On the Closing Date, Shareholders shall deliver to Purchaser
the resignation of all officers and directors of the Company and Seller
Corporations, and will take or cause to be taken all such actions as may
be reasonably required by Purchaser with regard to corporate acts of the
Company and Seller Corporations.
3.7 SETTLEMENT STATEMENTS. On the Closing Date, Sellers shall furnish
Purchaser with an estimated accounting (the "Preliminary Settlement
Statement") to be attached as Schedule 3.7 hereto, showing the estimated
amount of adjustments, if any, to the Purchase Price subject to being
finally adjusted by December 31, 1997, as hereinafter provided. An
estimated credit due Sellers shall increase the Purchase Price paid at
Closing by that amount, and an estimated credit due Purchaser shall reduce
the Purchase Price paid at Closing by that amount. Within forty-five (45)
days after Closing or with reasonable extensions thereto, Sellers shall
provide to Purchaser, for Purchaser's concurrence, an accounting (the
"Post Closing Adjustment") of the actual amounts of any adjustments.
Purchaser shall have the right for fifteen (15) days after the receipt of
the Post Closing Adjustment to audit and take exception to such
adjustments. Any disagreements shall be resolved on a best efforts basis
by Sellers and Purchaser. By December 31, 1997, those credits agreed upon
by Purchaser and Sellers shall be netted one against the other and the
final settlement amount shall be paid in cash in U.S. Dollars by the party
owing it, or via wire transfer as directed in writing by the receiving
party. If the Post Closing Adjustment has not been agreed upon within the
time period set forth herein, either party, with such expense to be shared
equally by Sellers and Purchaser, may cause an independent certified
public accounting firm mutually acceptable to both parties, to audit or
otherwise review the Post Closing Adjustment with complete access to all
work papers used in determining the Post Closing Adjustment. The
accounting firm so selected shall within thirty (30) days of such request
deliver to Sellers and Purchaser a written report resolving
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any disputed matters, and its determination will be conclusive and binding
upon the parties.
3.8 BONUSES. Purchaser agrees to pay to Seller Corporation employees bonuses
in the amount of $119,300.00 on or before December 12, 1997. The employees
entitled to bonuses and the amount thereof shall be determined by the
Sellers in their sole discretion. Sellers reserve the right to increase
the amount of total bonuses paid and such additional amount shall be paid
by Sellers to Purchaser prior to the payment of the bonuses to the
employees.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY THE SELLERS
COMPANY AND WARRANTORS
The Sellers, Company, and Warrantors jointly and severally, hereby
represent and warrant to Purchaser as follows:
4.1 DUE ORGANIZATIONS. The Company, Seller Corporations (including
Columbia Shipping, Inc. (Scranton) and 138-01 Springfield Blvd. Realty
Corp.) are corporations duly organized, validly existing and in good
standing under the laws of respective states and incorporation and are
duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to carry their
business in the places and in the manner as now conducted. The Company
and Seller Corporations have full power and lawful authority to carry
on their business as it is now being conducted and to own and operate
its assets, properties and business. True and complete copies of the
Articles of Incorporation and all amendments thereto to date of the
Company and Seller Corporations (certified by the Secretary of State
of the state of incorporation) and of the by-laws of the Company and
Seller Corporations as amended to date are attached hereto as SCHEDULE
4.1.
4.2 STOCK OWNERSHIP. On the Closing Date, Company and Seller Corporations will
have no issued and outstanding capital stock of any class or any other
securities, bearing voting or other equity whether or not contingent,
which is not owned by Sellers or the Company, except as set forth in this
paragraph. All of the issued and outstanding shares of the Subject Stock
of the Company or Seller Corporations are validly issued and outstanding,
fully paid and nonassessable. There are no outstanding subscriptions,
options, warrants, calls, commitments, obligations or agreements (voting
or otherwise) relating to any of the authorized or outstanding capital
stock of the Company or Seller Corporations. The Sellers own of record all
of the issued and outstanding shares of the Company and the Company owns
all of the issued and outstanding shares of the Seller Corporations free
and clear of all liabilities, liens, encumbrances, options, conditional
sale or title retention agreements, restrictions, pledges or other
burdens. In purchasing the Subject Stock, Purchaser shall acquire
indirectly all of assets, including physical assets on hand as of the
Closing Date, all cash in bank accounts, Company's and Seller
Corporations' capital stock, and all trademarks, designs, prototypes,
patents, business systems, customer lists and goodwill of Company and
Seller Corporations. The Sellers, Company and Seller
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Corporations have full legal right, power and authority to enter into this
Agreement. Columbia Shipping, Inc. (Scranton) is not owned by the Company.
4.3 SUBSIDIARIES. The Company has no subsidiaries and does not directly or
indirectly, own or control any capital stock, bonds or other securities
of, or have any proprietary interest in, any corporation, association,
partnership, firm or business organization or enterprise, except as set
forth in SCHEDULE 4.3 as attached hereto. For purposes of this Article IV
the term "Company" shall include any subsidiary of Company. Columbia
Shipping, Inc. (Scranton) is not owned by the Company
4.4 EMPLOYMENT AGREEMENTS. The Company has no employment, compensation or
similar type of agreement with any officer or employee. Any exception to
the foregoing being set forth in SCHEDULE 4.4 as attached hereto.
4.5 FINANCIAL STATEMENTS:
(a) Attached hereto as EXHIBIT B are the Financial Statements of
Company, and as EXHIBIT A the Closing Date Balance Sheet of the
Company. The Financial Statements and the Closing Date Balance
Sheet have been prepared in accordance with GAAP as at the dates
and for the period covered thereby, and fairly present the
financial condition and results of operations of the Company as
at the date and for the period then ended and include no change
in the application of accounting principles. The stockholders
compensation disclosed in EXHIBIT B represents all monetary
compensation paid to the Shareholders for the year presented.
(b) Company has made and kept books, records, and accounts, which, in
reasonable detail, accurately and fairly reflect its operations and
activities and all transactions concerning and all dispositions and
acquisitions of its assets.
4.6 ABSENCE OF CERTAIN CHANGES. Since the date of the documents attached as
EXHIBIT A hereto there has not been:
(a) any materially adverse change in the condition (financial or
otherwise) or in the properties, assets or liabilities, business or
prospects of the Company or Seller Corporations, except normal and
usual changes in the ordinary course of business, none of which has
been materially adverse and all of which in the aggregate have not
been materially adverse;
(b) any declaration, setting aside, or payment of any dividend or
other distribution on or in respect of the capital stock of the
Company or Seller Corporations or any direct or indirect
redemption, purchase or other acquisition of any of such stock or
any issuance of any shares of such stock, or any granting or
entering into of any option or commitment relating to any of such
stock, except that the Sellers have issued 59.130 shares of the
Company to the Columbia Shipping Group Trust for the benefit of
certain employees of the Company;
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(c) any increase in the compensation or rate of compensation or
commissions payable or to become payable by the Company or Seller
Corporations to any of its directors, officers, employees, or
consultants, or any hiring of any employee at a salary in excess
of $100 per month, or any payment or accrual of any bonus,
profit-sharing or other extraordinary compensation to any
director, officer, employee or consultant, or any change in any
then existing bonus, profit-sharing, pension, retirement or other
similar plan, agreement or arrangement or any adoption of or
entering into of any new bonus, profit-sharing, pension, stock
option, retirement, group life or health insurance or other
similar plan, agreement or arrangement, except that the Company
and/or Seller Corporations have hired certain employees to
replace other certain employees who have left their respective
employment positions, as set forth in SCHEDULE 4.6A.;
(d) any change in the accounting methods or practices followed by the
Company or Seller Corporations or any change in depreciation or
amortization policies or rates heretofore adopted;
(e) any debt, obligation or liability (whether absolute or contingent)
incurred by the Company or Seller Corporations (whether or not
outstanding at present) except (i) current liabilities incurred in
the ordinary course of business and (ii) obligations or liabilities
entered into or incurred in connection with the execution of this
Agreement, any of which are set forth in SCHEDULE 4.6B hereto if
individually over $2,000.00;
(f) any sale, lease, abandonment or other disposition by the Company
or Seller Corporations of any interest in real property or, other
than in the ordinary course of business, of any machinery,
equipment or other operating properties, or any sale,
encumbrance, lien, assignment, transfer, license, or other
disposition by the Company of any patent, trademark, trade name,
brand name, copyright (or pending application for any patent),
trademark or copyright), invention, process, know-how, formula,
pattern, design, trade secret or interest thereunder or other
intangible asset except that (i) Seller Corporation, Columbia
Shipping, Inc. (New York), has transferred the real property
located at 138-01 and 138-13 Springfield Blvd., Jamaica, New York
to the 138-01 Springfield Blvd. Realty Corp. on June 30, 1997;
and (ii) Columbia Shipping, Inc. (Scranton) will remain with
Sellers, Lawrence Bauer, and other shareholders, or sold and
transferred to individuals or entities not a party to this
agreement; or
(g) any employment dispute, labor trouble, strike, or any other
occurrence, event or condition of any similar or dissimilar
character affecting the employees of the Company or Seller
Corporations which materially and adversely affects or may
materially and adversely affect the condition (financial or
otherwise) or the assets, liabilities, business or properties of the
Company.
4.7 LIABILITIES. Except as incurred in the ordinary course of business, the
Company or Seller Corporations have no liabilities or commitments of any
nature (absolute, accrued, contingent or otherwise) matured or unmatured
except as the Sellers has disclosed to the
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Purchaser via a true and complete schedule (SCHEDULE 4.7 hereto) setting
forth, as of the date of the documents attached hereto in EXHIBIT A and as
of the Closing Date, all liabilities, debts or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, including, without limitation, liabilities, debts or
obligations on account of taxes or other governmental charges, or
penalties, interest or fines thereon or in respect thereof. The Sellers do
not know or have any reasonable grounds to know of any basis for any
assertion against the Company or Seller Corporations or any of their
property of any liability, debt or obligation of any nature or in any
amount not disclosed on SCHEDULE 4.7 and not fully reflected or reserved
against in the Financial Statements and Closing Date Balance Sheet in
EXHIBIT A. Sellers must disclose to Purchaser prior to Closing, any such
liabilities or commitments incurred between the Execution Date and Closing
Date, whether or not incurred in the ordinary course of business, if
greater than $2,000.00.
4.8 TAXES. The Company and Seller Corporations have prepared and filed all tax
returns (federal, state, foreign, and local) required to be filed by them
prior to the Closing Date and will prepare and file the June 30, 1997
return and the stub return through September 30, 1997, relating to taxes
of any nature to which the Company, Seller Corporations or their
businesses and its subsidiaries are subject, including income, franchise
and sales taxes and all taxes shown to be due and payable on such returns
or on any assessments received by the Company or Seller Corporations and
all other taxes of any nature (federal, state, foreign and local) due and
payable by the Company or Seller Corporations on or before the date herof
have been paid. The income tax returns of the Company or Seller
Corporations are not under audit by the federal or state taxing
authorities and have not been so audited except to the extent noted in the
Letter of Credit. No assessment has been made with respect to any tax
return of the Company or Seller Corporations, except as noted for in the
Letter of Credit. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any
tax or deficiency of any nature against the Company nor suits, nor any
other actions, proceedings, investigations or claims now pending or
threatened against the Company or Seller Corporations in respect to any
tax or assessment, or any matters under discussion with any federal,
state, foreign or local authority relating to any such taxes or
assessments, or any claims for additional taxes or assessments asserted by
any such authority. The provisions made for taxes on the Financial
Statements in EXHIBIT A are sufficient for the payment of all unpaid taxes
of any nature imposed by any authority (including any interest or
penalties) on the Company or Seller Corporations accrued for or applicable
to the period noted therein and all years and periods prior thereto. All
tax returns are true, complete and accurate in all material respects.
4.9 EMPLOYEE BENEFIT PLANS. All employee benefit plans (including pension
plans and employee stock ownership plans), arrangements or understandings,
whether formal or informal, if any, as fully set forth in SCHEDULE 4.9 are
fully funded and the Company and Seller Corporations have no liability
with respect thereto arising out of any state of facts occurring on or
prior to the date hereof; all such plans, arrangements and understandings
are in compliance in all material respects with all applicable laws and no
action is required to be taken with respect thereto as a result of the
transactions contemplated by the termination of any material change in
such plans, arrangements and understandings
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and will not change in any respect obligations, if any, of the Company or
Seller Corporations with respect thereto. It is agreed and understood that
the Company and any Seller Corporations profit sharing plan will be
terminated and any and all costs associated with such termination shall be
borne by Sellers. Purchaser agrees to cooperate with Sellers and execute
any and all documents required to properly terminate said plan.
4.10 NO CONFLICT WITH OTHER INSTRUMENTS. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
will not (i) result in any breach of any of the terms or conditions of, or
constitute a default under, the Articles of Incorporation or By-laws of
the Company or Seller Corporations or any commitment, mortgage, loan
agreement, note, bond, debenture, deed of trust, contract, agreement,
license or other instrument or obligation to which the Company or Seller
Corporations are now a party or by which its properties or assets may be
bound or affected; or (ii) result in any violation of any law, or any rule
or regulation of any administrative agency or governmental body or any
order, injunction or decree of any court, administrative agency or
governmental body.
4.11 TITLE TO PROPERTIES. The Seller Corporations have set forth a true and
complete schedule (SCHEDULE 4.11 hereto) of all the properties, interests
in properties, assets and leasehold estates, real and personal, reflected
in the Financial Statements in EXHIBIT A and those acquired thereafter.
The Company (including but not limited to 138-01 Springfield Blvd. Realty
Corp.) has good and marketable title to all the properties, interests in
properties, assets and leasehold estates, real and personal, set forth in
SCHEDULE 4.11, free and clear of all mortgages, liens, pledges,
conditional sales agreements, changes, easements, covenants, assessments,
charges, restrictions or encumbrances except as set forth in SCHEDULE
4.11. All leases of real property under which the Company purports to be a
lessee are valid, binding and in full force and effect. The plants,
structures, equipment and other properties owned or used by the Company
are in good operating condition and repair. All such plants, structures,
equipment and other properties and their use conform in all material
respects to all applicable laws, including local, state, and federal
environmental regulations and laws, building and zoning laws or ordinances
and regulations, and no notice of any violation of such laws or ordinances
and regulations, and no notice of any violation of such laws or ordinances
and regulations relating to such assets and their use have been received
by the Company. The Company has all easements and rights of ingress and
egress and for utilities and services necessary for all operations
conducted by the Company. Neither the whole nor any portion of any real
property owned or occupied by the Company has been condemned or otherwise
taken by any public authority, nor does the Sellers or Company know or
have reasonable grounds to believe that any such condemnation or taking is
threatened or planned.
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4.12 PATENTS AND INTELLECTUAL PROPERTY. The Company has delivered to the
Purchaser a true and complete schedule (Schedule 4.12 hereto) setting
forth all patents, inventions, trademarks, trade names, brand names or
copyrights, owned or used by or licensed to or by the Company, together
with a summary description and full information in respect of the filing,
registration or issuance or the status thereof, inclusive of all trade
secrets deemed owned or used by or licensed to or by the Company. All of
such patents, inventions, trademarks, trade names, brand names,
copyrights, pending applications, trade secrets and licenses are valid and
in good standing and will not be adversely effected by the transactions
contemplated hereby; no patent application or patent of the Company is
involved in any interference proceeding, and no trademark, trade name, or
brand name nor any application therefore, is involved in any opposition or
cancellation proceeding. No licenses, sub-licenses, covenants or
agreements have been granted or entered into by the Company, or Seller
Corporations in respect of such patents, inventions, trademarks, trade
names, brand names, copyrights, applications or licenses, except those
described in Schedule 4.12. The Company validly owns, is validly licensed
under, or has legal right to use all patents, patent applications,
trademarks, trade names, brand names, inventions, processes, know-how,
trade secrets and copyrights which are necessary or useful for the conduct
of its business as now conducted, and all such rights are valid and in
good standing, and free and clear of all liens and encumbrances of any
nature whatsoever and have not been challenged in nay way or involved in
any interference, opposition or cancellation proceedings. To the knowledge
of Sellers, the operations of the Company, and Seller Corporations of
machinery, equipment and processes, the use of the products of the
company, and Seller Corporations by its customers for the purpose for
which sold, and the use or publication by the Company of its patents,
trademarks, trade names, brand names and advertising, technical or other
literature do not involve infringement or claimed infringement of any
patent, trademark, trade name or copyright. No current or former
stockholder, director, officer, employee, or consultant of the Company
owns, directly or indirectly, in whole or in part, any inventions or
patents, trademarks, trade names, brand names, or copyrights or
applications therefor which the Company or any Seller Corporations is
presently using or the use of which is necessary or useful for the
business of the Company as now conducted or has made any invention not
assigned to the Company which is necessary or useful for he business of
the Company as now conducted or which, as an extension, improvement,
change, modification or addition, relates to any operation of the Company.
The Company or Sellers do not know or have any reasonable grounds to
believe that there exists any new developments with respect to the
operations of the Company or Seller Corporations or any new or improved
materials, products, processes or methods useful in connection with the
business of the Company or Seller Corporations as now conducted which may
materially adversely affect the condition (financial or otherwise) or the
properties, assets, liabilities, business or prospects of the Company. No
officer, director, stockholder or Seller Corporations has entered into any
agreement regarding know-how, trade secrets, assignment of rights
inventions, or prohibition or restriction of competition or solicitation
of customers, or any other similar restrictive agreement or covenant,
whether written or oral, with any person, firm, association, corporation
or business organization or enterprise other than the Company or Seller
Corporations, which would have a material adverse effect on the business
or property rights of the Company.
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4.13 DELIVERY OF CERTAIN DOCUMENTS. SCHEDULE 4.13 sets forth a true and
complete schedule listing and briefly describing all of the contracts,
agreements, leases, licenses, plans, arrangements or commitments to which
the Company or Seller Corporations are a party or by which they or any of
the Company's assets or properties is in any way bound or obligated as
follows:
(a) all contracts, agreements or commitments in respect of the sale of
products or services, supplies or other products or utilities except
those entered into in the ordinary course of business involving
payments or receipts by the Company or Seller Corporations of less
than $5,000 per year or terminable by the Company of Seller
Corporations within thirty (30) days without penalty;
(b) all sales, agency, consultant or distributorship agreements or
franchises or legally enforceable commitments or obligations with
respect thereto;
(c) all collective bargaining agreements, union agreements, employment
agreements, consulting agreements or agreements providing for the
services of an independent contractor;
(d) all profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements, arrangements
or commitments, whether or not legally binding, and all agreements
with any present or former officer, director or stockholder of the
Company;
(e) all contracts, agreements, legally enforceable commitments, licenses
or sub-licenses relating to patents, trademarks, trade names,
copyrights, inventions, processes, know-how, formulae or trade
secrets;
(f) all leases or other contracts, agreements or legally enforceable
commitments relating to or affecting real property;
(g) all loan or credit agreements, indenture, guarantees (other than
endorsements made for collection), mortgages, pledges, condition
sales or other title retention agreements, and all equipment
financing obligations, lease and lease-purchase agreements; and
(h) all contracts, agreements, arrangements or legally enforceable
commitments, whether or not fully performed, relating to the
issuance of capital stock, bonds or other securities of the Company
or relating to the acquisition by the Company of any substantial
part of its business or assets.
All of such contracts, agreements, leases, licenses and commitments
are valid, binding and in full force and effect in accordance with
their terms and conditions and there is no existing default
thereunder or conditions which with the passage of time or notice or
both might constitutes such a default by any part thereto and those
contract, agreements, leases, licenses and commitments to which
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the Company is a party or is in any way affected or bound will not
be breached by or give any other party a right of termination as a
result of the transactions contemplated by this Agreement. The
Company or Seller Corporations are not bound by any oral or written
contract, agreement, lease, license, plan, assignment or commitment
of the type described in this SECTION 4.13 other than those
described in SCHEDULE 4.13. Copies of all of the documents (or in
the case of oral commitments, descriptions of the material terms
thereof) described in SCHEDULE 4.13 have been delivered by the
Sellers to the Purchaser and are true and complete and include all
amendments, supplements or modifications thereto.
4.14 BANK ACCOUNTS. SCHEDULE 4.14 contains a true and complete list showing:
(a) the name of each bank in which the Company or Seller Corporations
has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto; and
(b) the names of all persons, firms or corporations, if any, holding
general or special powers of attorney from the Company or Seller
Corporations and a summary statement of the terms thereof; and
(c) the name of each bank or other lending institution at which the
Company or any Seller Corporations have current credit or a credit
facility and the names of all persons authorized to execute notes,
agreements or other instruments relating to the borrowing of money
or the extension of credit from or by such banks or lending
institutions.
(d) the guarantees, if any, given by Company and any Seller
Corporations.
4.15 LITIGATION. There are no suits, actions, claims, inquiries, legal,
administrative or arbitration proceedings pending, investigations by any
private or governmental body, or claims threatened against or affecting
the Company the Seller Corporations or properties, assets or business, or
to which the Company or Seller Corporations are or might become a party,
or which question the validity or legality of the transactions
contemplated hereby. The Company or Seller Corporations know of no basis
or grounds for any such suit, action, claim, inquiry, investigation or
proceedings. There is no outstanding order, writ, injunction or decree of
any court, governmental agency or arbitration tribunal against or
affecting the Company, Seller Corporations, or their properties, assets or
business except as set forth in SCHEDULE 4.15 hereof.
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4.16 INSURANCE. SCHEDULE 4.16 contains a list of all insurance policies
(specifying the insurer, the amount of the coverage, the type of
insurance, and the policy number) maintained by the Company and Seller
Corporations on their properties, assets, business and personnel and the
claim history for the past four (4) years with regard to each policy. The
Company has delivered to the Purchaser true and correct copies of all
policies, including all endorsements thereon, referred to in such
schedule. The Company and Seller Corporations are not in default with
respect to any provision contained in such insurance policies, nor has it
failed to give any notice or present any claim thereunder in timely
fashion. All such policies are in full force and effect and Company and
Seller Corporations are a named insured for all such policies except as
otherwise set forth in SCHEDULE 4.16.
4.17 LICENSES AND PERMITS. The Company and Seller Corporations have all
licenses and permits (federal, sate and local) necessary to conduct its
business, and such licenses and permits are in full force and effect. No
violations are or have been recorded in respect of such licenses or
permits and no proceeding is pending or threatened seeking the revocation
or limitation of any of such licenses or permits. The Company and Seller
Corporations have complied in all material respects with all laws, rules,
regulations, and orders applicable to its business, and all rules,
regulations and orders respecting the distribution and sale of products
and services of the Company and Seller Corporations.
4.18 ACCOUNTS RECEIVABLE. All notes and accounts receivable of the Company and
Seller Corporations shown in the financial statements of EXHIBIT A and all
notes and accounts receivable acquired by the Company and Seller
Corporations subsequent to the date of the documents attached as EXHIBIT A
hereto and prior to the date hereof, have arisen in the ordinary course of
business and have been collected or are collectible in the aggregate
recorded amounts thereof, less the applicable reserves with respect
thereto reflected on the Financial Statements attached in EXHIBIT A
hereto. Company and Seller Corporations agree to furnish Purchaser with a
current list of all receivables and an aging scheduled therefore.
4.19 INVENTORY. All inventory reflected in the Closing Date Balance Sheet at
the date thereof was, and all inventory to be reflected on the Closing
Date Balance Sheet (except to the extent in each case of reserves
reflected thereon) is and will be, of a quality and quantity reasonably
usable and salable in the ordinary course of business as of the Closing
Date and all such inventory will be reflected on the Closing Date Balance
Sheet with adequate provisions or adjustment for excess inventory,
slow-moving inventory and inventory obsolescence at the lower of cost or
market value using the FIFO method of valuation in accordance with GAAP,
consistently applied. All customer owned inventory in the possession of
Company or Seller Corporations, is properly controlled and accounted for,
with any losses having been reported to the customer.
4.20 VALIDITY OF AGREEMENT. This Agreement has been duly authorized, approved
and adopted by all requisite corporate action by the Board of Directors of
the Company, Seller Corporations (including but not limited to Columbia
Shipping, Inc. (Scranton) and 138-01 Springfield Blvd. Realty Group) and
has been duly and validly executed and delivered by the Company, Seller
Corporations (including but not limited to Columbia Shipping, Inc.
(Scranton) and 138-01 Springfield Blvd. Realty Group) and is the legal,
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valid and binding obligation of the Company, Sellers (including but not
limited to Columbia Shipping, Inc. (Scranton) and 138-01 Springfield Blvd.
Realty Corp.). The resolutions of the respective Boards of Directors and
Shareholders approving such sale are attached hereto as SCHEDULE 3.3.
4.21 ADVERSE RESTRICTIONS. The Company, Sellers and Seller Corporations are not
a party to any agreement or instrument or subject to any restriction in
its Articles of Incorporation or Bylaws or subject to any judgment or
injunction, or decree, order, or rule or regulation, which materially and
adversely affect the condition (financial or otherwise), or the
properties, assets, liabilities, business or prospects of the Company.
4.22 UNTRUE STATEMENTS. This Agreement, the schedules hereto, the Financial
Statements of the Company and all other documents and information
furnished by the Company to the Purchaser and its representatives pursuant
hereto do not and will not include any untrue statement of a material fact
or, to the knowledge of the Company or Sellers, omit to state any material
fact necessary to make the statements made and to be made not misleading.
4.23 KNOWLEDGE DEFINED. For purposes of Articles 4, 5 and 6, "knowledge" of a
party shall mean the knowledge of any officer or manager responsible for
the subject matter of the particular representation and warranty or
knowledge which could have been acquired by such persons, after reasonable
inquiry under the circumstances with subordinates.
4.24 INVESTMENT REPRESENTATIONS. Each of the Shareholders represent and warrant
that the Purchaser Stock being acquired hereunder will be acquired for his
own account and without a view for distribution or resale and that none of
the Shareholders has any contract, undertaking, agreement or arrangement
to sell or otherwise transfer or dispose of any Purchaser Stock or any
portion thereof to any person or entity. Each of the Shareholders has had
the opportunity to discuss the transactions contemplated hereby with
Purchaser and has had the opportunity to obtain such information
pertaining to Purchaser as has been requested, including but not limited
to filings made by Purchaser with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended. Each of the
Shareholders is an "accredited investor" within the meaning of Regulation
D promulgated under the Securities Act of 1933, as amended, and has such
knowledge and experience in business or financial matters that it is
capable of evaluating the merits and risks of an investment in the
Purchaser Stock. Each of the Shareholders hereby represent that he can
bear the economic risk of losing his investment in the Purchaser Stock and
has adequate means for providing for his current financial needs and
contingencies.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES BY THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
5.1 CORPORATE EXISTENCE, ETC. The Purchaser is a corporation duly organized,
validly existing and in good standing in all material respects under the
laws of the State of Delaware.
5.2 VALIDITY OF AGREEMENT. The execution and delivery of this Agreement by the
Purchaser and the performance of the transactions contemplated hereby have
been duly and validly authorized by its Board of Directors (attached as
SCHEDULE 5.2 hereto). This Agreement has been duly executed and delivered
by the Purchaser and is a legal, valid and binding obligation of the
Purchaser. Purchaser has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and to perform its
obligations under this Agreement.
5.3 NO CONFLICT WITH OTHER INSTRUMENTS. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
will not (i) result in any breach of any of the terms and conditions of,
or constitute a default under, the Articles of Incorporation or Bylaws of
Purchaser or any commitment, mortgage, loan agreement, note, bond,
debenture, deed of trust, contract, agreement, license or other instrument
or obligation to which Purchaser is now a party or by which its properties
or assets may be bound or affected; or (ii) result in any violation of any
law, or any rule or regulation of any administrative agency or
governmental body or any order, injunction or decree of any court,
administrative agency or governmental body.
5.4 OTHER PURCHASER REPRESENTATIONS AND WARRANTIES. Purchaser's stock is
traded on the NASDAQ market and there are no trading restrictions and/or
suspensions, investigations, warnings, or violations of any kind, in
effect, threatened or pending, of any NASDAQ, Federal Exchange Commission
or securities laws, rules or regulations. Purchaser is not insolvent or
bankrupt. Purchaser has not in the last twelve (12) months or is not in
the process of or contemplating the sale of all or any portion of the
Purchaser, its business, properties or assets, or the purchase of any
business, properties or assets other than the Company herein except as
noted in a separate schedule attached herewith.
To the extent such may have a material impact on this Agreement, there are
no suits, actions, claims, inquiries, legal, administrative or arbitration
proceedings pending, investigations by any private or governmental body,
or claims threatened against or affecting the Purchaser or properties,
assets or business, or to which the Purchaser is or might become a party,
or which question the validity or legality of the transactions
contemplated hereby or the financial viability of the Purchaser. The
Purchaser knows of no basis or grounds for any such suit, action, claim,
inquiry, investigation or proceedings. There is no outstanding order,
writ, injunction or decree of any court, governmental
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agency or arbitration tribunal against or affecting the Purchaser; or its
properties, assets or business except as set forth in a separate Schedule
attached herewith.
The Purchaser has filed and complied with all licenses and permits
(federal, state and local) necessary to conduct its business and such
licenses and permits are in full force and effect. No violations are or
have been recorded in respect of such licenses or permits and no
proceeding is pending or threatened seeking revocation or limitation of
any such licenses or permits. The Purchaser has complied in all material
respects with all laws, rules, regulations, and orders applicable to its
business and all rules, regulations and orders respecting the distribution
and sale of products and services of the Purchaser.
The Purchaser maintains all necessary insurance policies for all aspects
of the business.
The Purchaser has filed all tax returns (federal, state, foreign and
local) required to be filed by it relating to taxes of any nature to which
the Purchaser or their businesses or subsidiaries are subject, including
income. Franchise and sales taxes, and all taxes shown to be due and
payable on such returns, or on any assessments received by the Purchaser,
and all other taxes of any nature due and payable by the Purchaser on or
before the date hereof have been paid. The tax returns of the Purchaser
and/or any tax period of the Purchaser are not under audit by the federal,
state or local taxing authorities and have not been audited except to the
extent provided in a separate Schedule attached herewith. No assessment
has been made with respect to any tax return of the Purchaser except as
noted in a separate Schedule attached herewith. There are no actions,
proceedings, investigations or claims now pending or threatened against
the Purchaser in respect to any tax matters.
ARTICLE VI
NATURE OF STATEMENTS REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE SELLERS
All statements of fact contained in any written statement (including
financial statements), certificate, schedule or other document delivered
by or on behalf of the Company, Seller Corporations, Sellers, Warrantors
or Purchaser pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed representations and
warranties of the Company, Seller Corporations, Sellers, Warrantors and
Purchaser.
ARTICLE VII
INDEMNITY BY THE SELLERS AND PURCHASER
7.1 SELLERS' GENERAL INDEMNITY. Sellers and their successors and assigns
covenant and agree to indemnify and save and hold harmless the Purchaser
from and against any loss, cost or expense (includes reasonable attorneys
fees and costs of litigation) arising out of or resulting from and to pay
the Purchaser on demand the full amount of any and all sums which the
Purchaser becomes obligated to pay on account of:
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(a) any inaccuracy in any representation or the breach of any
representation, warranty, covenant or agreement made by the Company,
Seller Corporations or the Sellers hereunder or pursuant hereto;
(b) any liability, debt or obligation, or any contract, agreement,
commitment or undertaking of, or claim against the Company, which
would result in a breach of a representation or warranty as provided
herein;
(c) any liability, obligation or claim against the Company for personal
injury or property damage arising out of any Company activities on
or prior to the Closing Date;
(d) any federal, state or local tax liability with respect to the
Company arising out of the transactions contemplated hereby arising
out of Company activities on or prior to the Closing Date;
(e) any claim, cost, expense or liability of any kind with regard to an
event that occurred on or prior to the Closing Date arising out of
any employee benefit plan covering employees of the Company; or
(f) any liability, debt or obligation arising out of any occurrence on
or prior to Closing Date which shall be the sole responsibility of
Sellers.
The Purchaser shall have the right to offset against any monies owed to
Sellers, only to the extent (i) any single item exceeds $10,000.00, or
(ii) an accumulation of items exceeds in total $100,000.00, any amounts
due as a result of this indemnity. In the event such items exceed the
above cumulative amount, Sellers shall be responsible for and Purchaser
maintains his right of offset for any and all amounts from the first
dollar of loss, cost, or expense. Purchaser agrees not to exercise its
right of offset until sixty (60) days after written notification to
Sellers claiming indemnification under this Agreement. This right of
offset shall be subject to the notification and defense of claims
requirements as hereinunder provided. This right of offset shall only
apply for a period of four (4) years from the date hereof.
7.2 PURCHASER'S GENERAL INDEMNITY. Purchaser and their successors and assigns
covenant and agree to indemnify and save and hold harmless the Sellers
from and against any loss, cost or expense (includes reasonable attorneys
fees and costs of litigation) arising out of or resulting from and to pay
the Sellers on demand the full amount of any and all sums which the
Sellers become obligated to pay on account of:
(a) any inaccuracy in any representation or the breach of any
representation, warranty, covenant or agreement made by the
Purchaser hereunder or pursuant hereto;
(b) any liability, debt or obligation, or any contract, agreement,
commitment or undertaking of, or claim against the Sellers, which
would result in a breach of a representation or warranty by
Purchaser as provided herein;
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(c) any liability, obligation or claim against the Company for personal
injury or property damage arising out of any Company activities
after the Closing Date;
(d) any federal, state or local tax liability with respect to the
Company arising out of the transactions contemplated hereby arising
out of Company activities after the Closing Date;
(e) any claim, cost, expense or liability of any kind with regard to an
event that occurred after the Closing Date arising out of any
employee benefit plan covering employees of the Company; or
(f) any liability, debt or obligation arising out of any occurrence
after the Closing Date which shall be the sole responsibility of
Purchaser.
7.3 NOTIFICATION AND DEFENSE OF CLAIMS OR ACTIONS.
(a) As used in this Section, any party seeking indemnification
pursuant to this Section or Section 8.2 is referred to as an
"Indemnified Party" and any party from whom indemnification is
sought pursuant to the Section is referred to as an "Indemnity
Obligor". An Indemnified Party which proposes to assert the
right to be indemnified under this Article shall, pursuant to
this notice provisions of this Agreement, submit a written demand
for indemnification setting forth in summary form the facts as
then known which form the basis for the claim for indemnification.
(b) With respect to claims based on actions by third parties, an
Indemnified Party shall, within twenty (20) days (or earlier if
required under applicable law to respond earlier) after the
receipt of notice of the commencement of any claim or proceeding
against it in respect of which a claim for indemnification is to
be made against an Indemnity Obligor, notify the Indemnity
Obligor in writing of the commencement of such proceeding,
enclosing a copy of all papers served; provided, however, that
the failure to so notify the Indemnity Obligor of any such
proceeding shall not relieve the Indemnity Obligor from any
liability which it may have to the Indemnified Party, except to
the extent that the Indemnity Obligor is materially prejudiced
thereby. Thereafter, the Indemnified Party shall deliver to the
Indemnity Obligor, within twenty (20) days after receipt by the
Indemnified Party, copies of all further notices relating to such
claim.
(c) If a third-party claim is made for which an Indemnified Party is
entitled to indemnification pursuant to this Article, the
Indemnity Obligor will be entitled to participate in the defense
of such claim and, if it so chooses, and provided that it
acknowledges its obligation to indemnify the Indemnified Party,
to assume primary responsibility for the defense of such claim
with counsel selected by the Indemnity Obligor and not reasonably
objected to by the Indemnified Party. Should the Indemnity
Obligor assume the defense of such claim, the Indemnity Obligor
will not be liable to the Indemnified Party for any legal
expenses
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subsequently incurred by the Indemnified Party in connection with the
defense of such claim.
(d) If the Indemnity Obligor assumes the defense of a third-party
claim as set forth in Section (c) then (i) in no event will an
Indemnified Party admit any liability with respect to, or settle,
compromise or discharge, any such claim without the Indemnity
Obligor's prior written consent and (ii) each Indemnified Party
shall be entitled to participate in, but not control, the defense
of such claim with its own counsel at its own expense. If the
Indemnity Obligor does not assume the defense of any such claim,
an Indemnified Party may defend such claim in a manner as it may
deem appropriate (including, but not limited to, settling such
claim, after giving forty-five (45) days prior written notice of
such settlement to the Indemnity Obligor, on such terms as the
Indemnified Party may deem appropriate).
(e) In the event that any claim for indemnification is made with respect
to any third-party claim pursuant to Article 7 or 8, (i) the party
assuming primary responsibility for the defense of such claim shall
at all times keep the other party informed as tot he status of such
claim and (ii) the party not primarily responsible for the defense
of such claim shall cooperate fully with the other party in
connection with such defense.
7.4 INSURANCE. The total amount of any indemnity payment owed by any Indemnity
Obligor to any Indemnified Party shall be reduced by the net proceeds
received by the Indemnified Party from insurance (other than insurance
that constitutes self insurance or similar insurance or that involves
retrospective or similar premiums), provided, however, this limitation
shall not apply to any action or omission that constitutes fraud or
criminal conduct under applicable state or federal law.
7.5 TAX LIABILITY DEFENSE. Notwithstanding anything contained hereinabove, it
is expressly understood that Sellers bear the obligation of the direction
and cost of defending any and all claims or lawsuits relating to tax
liability of Company and/or the Seller Corporations, which liability has
arisen prior to the Closing Date. Sellers shall keep Purchaser informed as
to the status of all such pending tax matters. Purchaser acknowledges that
after the Closing Date herein, Purchaser will be in possession of all
Company and Seller Corporations documents, including but not limited to,
all tax related documents, and agrees to timely provide Sellers with any
and all documents required to defend any and all tax matters, cooperate
with Sellers in all respects in the defense of said tax matters and
execute any and all documents necessary to settle or resolve in any way
said tax matters as they may pertain to matters prior to the Closing Date.
Purchaser shall not correspond or communicate directly or indirectly with
any taxing authorities in regard to any liabilities which occurred prior
to the Closing Date with regard to tax matters impacting the Sellers,
specifically in regard to the tax matters Sellers are defending against,
but also in regard to any tax matters whether they are under investigation
or not.
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ARTICLE VIII
ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND INDEMNITY
8.1 REPRESENTATIONS AND WARRANTIES: As an inducement to Purchaser to enter
into this Agreement, Sellers, Company, Seller Corporations, and Warrantors
represent and warrant to Purchaser and its successors and
assigns, as follows:
(a) Seller Corporations' and the Company's assets, properties
and operations are now and at all times have been in
compliance with all applicable Environmental Requirements.
There has been and is no Release or threatened Release of
any Hazardous Material at, on, under, in or from any of the
Facilities which relate to any of the Company's or Seller
Corporations' operations and activities at the Facilities
or otherwise. The Company or Seller Corporations have not
received any notice of alleged, actual or potential
responsibility of, or any claim, suit, proceeding or other
action regarding the presence, Release or threatened
Release of any Hazardous Material at any location, whether
at the Facilities or otherwise, which Hazardous Materials
were allegedly manufactured, used, generated, processed,
treated, stored, disposed or otherwise handled at or
transported from the Facilities or otherwise.
(b) The Company or Seller Corporations have not received any
notice of any proceeding, claim, suit or other action by
any person alleging any actual or threatened injury or
damage to any person, property, natural resource or the
environment arising from or relating to the presence,
Release or threatened Release of any Hazardous Materials
at, or under, in or from the Facilities or in connection
with any operations or activities thereat, or at, on,
under, in or from any other property which proceeding,
claim, suit or other action, if determined adversely to the
Company or Seller Corporations, could reasonably be
expected to have a material adverse effect. Neither the
Facilities nor any operations or activities thereat is or
has been subject to any proceeding, claim, suit or other
action, order or mortgage, encumbrance, security interest
or lien relating to any applicable Environmental
Requirements.
(c) There are no underground storage tanks presently located at
the Facilities and there has been no Release of any
Hazardous Materials from any underground storage tanks or
related piping at the Facilities for which release any
government authority may require remediation. There are no
PCB's located at, on or in the Facilities and there is no
asbestos or asbestos-containing material located at, on or
in the Facilities.
(d) The Company and Seller Corporations have delivered to the
Purchaser true, complete and correct copies or results of
any and all reports, studies, analyzes, tests or monitoring
in the possession of or initiated by the Company or Seller
Corporations pertaining to the existence of Hazardous
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Materials and to any environmental concerns relating to any
facilities, sites or real property owned, leased, operated,
used or controlled by the Company or Seller Corporations or
their predecessors in interest, or concerning compliance
with or liability under any Environmental Requirements.
(e) No portion of the assets of the Company or Seller Corporations
contain wetlands as defined by any Environmental Requirements.
8.2 OBLIGATION OF SELLERS TO INDEMNIFY, DEFEND AND HOLD HARMLESS:
(a) Sellers, Seller Corporations and Company and their successors,
and assigns, agree to save, indemnify, defend, reimburse, and
hold harmless:
(i) Purchaser; and
(11) the directors, officers, shareholders,
employees, partners, agents, contractors,
subcontractors, experts, licensees, affiliates,
lessees, mortgagees, trustees, successors,
assignees, and invitees of Purchaser, from and
against any and all "Environmental Damages"
(including costs of cleanup containment or other
remediation) arising from or in connection with:
(a) (i) (A) the ownership, operation, or condition at
any time on or prior to the Closing Date of the
Facilities; or (B) any Hazardous Materials or other
contaminants that were present on the Facilities at any
time on or prior to the Closing Date; or (ii) (A) any
Hazardous Materials or other contaminants, wherever
located, that were, or were allegedly, generated,
transported, stored, treated, released, or otherwise
handled by Sellers, Company or Seller Corporations or by
any other person for whose conduct they are or may be
held responsible at any time on or prior to the Closing
Date, or (B) any activities with regard to Hazardous
Materials that were, or were allegedly, conducted by
Sellers, Company or Seller Corporations or by any other
person for whose conduct they are or may be held
responsible; or
(b) any bodily injury (including illness, disability,
and death, and regardless of when any such bodily injury
occurred, was incurred, or manifested itself), personal
injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real
property), or other damage or to any person, including
any employee or former employee of Sellers, Company
Seller Corporations or any other person for whose
conduct they are or may be held responsible, in any way
arising from or allegedly arising from any activities
with regard to Hazardous Materials
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conducted or allegedly conducted with respect to the
Facilities or the operation of the Company or Seller
Corporations prior to the Closing Date, or from
Hazardous Materials that was (i) present or suspected to
be present on or before the Closing Date on or at the
Facilities (or present or suspected to be present on any
other property, if such Hazardous Material emanated or
allegedly emanated from any of the Facilities and was
present or suspected to be present on any of the
Facilities on or prior to the Closing Date) or (ii)
released or allegedly released by Sellers, Company or
Seller Corporations or any other person for whose
conduct they are or may be held responsible, at any time
on or prior to the Closing Date,
Purchaser will be entitled to control any Cleanup, any
related proceeding, and, any other proceeding with
respect to which indemnity may be sought under this
Section 8.2.
(b) This obligation shall include, but not be limited to, the
burden and expense of defending all claims, suits, and
administrative proceedings (with counsel reasonable
approved by the indemnified parties), even if such claims,
suits, or proceedings are groundless, false, or fraudulent,
and conducting all negotiations of any description, and
paying and discharging, when and as the same become due,
any and all judgments, penalties, or other sums due against
such indemnified persons. Purchaser, at its sole expense,
may employ additional counsel of its choice to associate
with counsel representing Sellers.
(c) The obligations of Sellers in this Section 8.2 shall survive
the expiration or termination of this Agreement.
8.3 OBLIGATION OF PURCHASER TO INDEMNIFY, DEFEND AND HOLD HARMLESS:
(a) Purchaser and their successors, and assigns, agree to save,
indemnify, defend, reimburse, and hold harmless:
(i) Sellers; and
(ii) the partners, agents, contractors,
subcontractors, experts, licensees, affiliates,
lessees, mortgagees, trustees, successors,
assignees, and invitees of Sellers, from and
against any and all "Environmental Damages"
(including costs of cleanup containment or other
remediation) arising from or in connection with:
(a) (i) (A) the ownership, operation, or condition at
any time after the Closing Date of the Facilities; or
(B) any Hazardous Materials or other contaminants that
become present on the Facilities at any
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time after the Closing Date; or (ii) (A) any Hazardous
Materials or other contaminants, wherever located, that
become, or were allegedly, generated, transported,
stored, treated, released, or otherwise handled by
Purchaser or by any other person for whose conduct they
are or may be held responsible at any time after the
Closing Date, or (B) any activities with regard to
Hazardous Materials that were, or were allegedly,
conducted by Purchaser or by any other person for whose
conduct they are or may be held responsible any time
after the Closing Date; or
(b) any bodily injury (including illness, disability,
and death, and regardless of when any such bodily injury
occurred, was incurred, or manifested itself), personal
injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real
property), or other damage or to any person, including
any employee or former employee of Purchaser or any
other person for whose conduct they are or may be held
responsible, in any way arising from or allegedly
arising from any activities with regard to Hazardous
Materials conducted or allegedly conducted with respect
to the Facilities or the operation of the Purchaser
after the Closing Date, or from Hazardous Materials that
was (i) present or suspected to be present after the
Closing Date on or at the Facilities (or present or
suspected to be present on any other property, if such
Hazardous Material emanated or allegedly emanated from
any of the Facilities and was present or suspected to be
present on any of the Facilities after the Closing Date)
or (ii) released or allegedly released by Purchaser or
any other person for whose conduct they are or may be
held responsible, at any time after the Closing Date,
Purchaser will be entitled to control any Cleanup, any
related proceeding, and, any other proceeding with
respect to which indemnity may be sought under this
Section 8.3.
(b) This obligation shall include, but not be limited to, the
burden and expense of defending all claims, suits, and
administrative proceedings (with counsel reasonable
approved by the indemnified parties), even if such claims,
suits, or proceedings are groundless, false, or fraudulent,
and conducting all negotiations of any description, and
paying and discharging, when and as the same become due,
any and all judgments, penalties, or other sums due against
such indemnified persons. Sellers, at their sole expense,
may employ additional counsel of their choice to associate
with counsel representing Purchaser.
(c) The obligations of Purchaser in this Section 8.3 shall survive
the expiration or termination of this Agreement.
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ARTICLE IX
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
The Sellers recognize and acknowledge that they have and will have access
to certain confidential information of the Company and Purchaser, such as lists
of customers and costs, that are valuable, special and unique assets of its
business. The Sellers agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of the
Purchaser. In the event of a breach or threatened breach by the Sellers of the
provisions of this Article IX, the Purchaser or the Company or Seller
Corporations shall be entitled to an injunction restraining the Sellers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Purchaser or the Company from pursuing any
other remedies, at law or in equity available to them. To the extent Purchaser
obtains such confidential information with regard to Sellers, or Sellers'
entities not transferred to Purchaser per the terms of this Agreement, Purchaser
agrees to the same confidentiality requirements.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES. Each of the parties will pay all costs and expenses of its
performance of and compliance with this Agreement.
10.2 ENVIRONMENTAL AUDIT. Purchaser may, at its sole option, prior to Closing,
conduct a complete environmental audit of the Facilities being acquired
and/or leased from Sellers. Purchaser will not be required to close this
transaction should such audit disclose any material problem or potential
problem, if the estimated cost to remedy said problem exceeds $100,000.00.
Notwithstanding the extent of any problem or potential problem found,
Sellers shall remain fully responsible for any expenditures required to
remedy the problem or potential problem as provided hereinabove.
10.3 NOTICES. All notices, requests, demands and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally, via facsimile
transmission or mailed first-class, postage prepaid, registered or
certified mail as follows:
(a) If to the Purchaser:
Golden Eagle Group, Inc.
120 Standifer Drive
Humble, TX 77338
Attention: Pat Weston, President
Fax: (281) 446-4896
With a copy to:
Stibbs & Burbach, P.C.
10077 Grogan's Mill Road, Suite 540
The Woodlands, Texas 77380
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(b) If to the Company:
Columbia Shipping Group, Inc.
138-01 Springfield Blvd.
Jamaica, New York 11413
Attention: President
(c) If to the Shareholders or Sellers:
Mr. Larry Bauer
4425 Waters Edge Lane
Sanibel, FL 33957
and copy to:
John Serpico, Esq.
Serpico & Ehrlich Attorneys
105 Court Street, Suite 500
Brooklyn, New York 11201
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10.4 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS: This Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of Texas without regard to its conflict of laws principles. The
section headings contained herein are for purposes of convenience only,
and shall not be deemed to constitute a part of this Agreement or to
affect the meaning or interpretation of this Agreement in any way. This
Agreement is performable in Harris County, Texas, and therefore the
parties agree that venue for any dispute under this Agreement is proper in
that county, and all parties hereto agree to submit to the jurisdiction of
any court of competent jurisdiction in Harris County, Texas.
10.5 ENTIRE AGREEMENT. This Agreement and the schedules hereto set forth the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby, and supersede all prior agreements,
arrangements and understandings related to the subject matter hereof. No
representation, promise, inducement or statement of intention has been
made by any party hereto which is not embodied in this Agreement, or in
the exhibits or schedules hereto or the written statements, certificates,
or other documents delivered pursuant hereto or in connection with the
transactions contemplated hereby, and no party hereto shall be bound by or
liable for any alleged representation, promise, inducement or statement of
intention not so set forth. All the terms, provisions, covenants,
representations, warranties and conditions of this Agreement shall be
binding upon, and inure to the benefit of and be enforceable by the
parties hereto and their respective successors. This Agreement may be
amended, modified, superseded or canceled, and any of the terms,
provisions, covenants, representations, warranties or conditions hereof
may be waived, only by a written instrument executed by all parties
hereto, or, in the case of a waiver, by the party waiving compliance. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right to enforce the same.
No waiver by any party of any condition, or of the breach of any term,
provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further of continuing waiver of
any such condition or breach or a waiver of any other condition or of the
breach of any other term, provision, covenant, representation or warranty.
10.6 BROKERS. Except as provided in Section 2.5 hereof, no broker or finder has
acted for the Sellers or the Purchaser in connection with this Agreement
or the transactions contemplated by this Agreement, and therefore, no
brokers or finders fees are due any third person.
10.7 ARBITRATION. Purchaser, Company, Seller Corporations and Sellers shall use
their best efforts to settle any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, but, if after sixty
(60) days, the parties are not able to agree on any settlement, such
controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration to be held in Harris
County, Texas in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by
the Arbitrator(s) may be entered in any court having jurisdiction thereof.
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10.8 PUBLIC ANNOUNCEMENTS. The parties hereto will agree upon the timing and
content of the initial press release to be issued describing this
Agreement and will not make any public announcement thereof prior to
reaching such agreement, and under no circumstances before the Closing
Date, unless required to do so by applicable law or regulations (in which
event, however, the party so required to make such announcement will
endeavor in advance to inform the other party regarding the reason for and
content of such required announcement). To the extent reasonably requested
by any party, each party will hereafter consult with and provide
reasonable cooperation to the others in connections with the issuance of
further press releases or other public documents describing this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"PURCHASER" "COMPANY"
GOLDEN EAGLE GROUP, INC. COLUMBIA SHIPPING GROUP, INC.
By: Patrick H. Weston, President By: Lawrence F. Bauer, President
138-01 SPRINGFIELD BLVD.
REALTY GROUP "SHAREHOLDERS AND SELLERS"
Lawrence F. Bauer
COLUMBIA SHIPPING, INC. Michael McAdam
(SCRANTON)
Dan Morrel
"SELLER CORPORATIONS"
THE COLUMBIA SHIPPING
COLUMBIA SHIPPING, INC. GROUP TRUST
COLUMBIA SHIPPING, INC. (WEST)
COLUMBIA SHIPPING, INC. (SFO)
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COLUMBIA SHIPPING, INC. (CHICAGO)
FREIGHT EXPRESS INTERNATIONAL, INC.
<PAGE>
SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit A - Closing Date Balance Sheet and Financials
Exhibit B - Audited Financial Statements for June 30, 1996
and June 30, 1997
Exhibit C - Note
Exhibit D - Letter of Credit
Exhibit E - Schedule for Delivery of GEGP Stock
Exhibit H - Consulting Agreements
Exhibit J - Employment Agreements
Exhibit K - Lease Agreement
Exhibit L - Amendment to Articles of Incorporation
for Columbia Shipping, Inc. (Scranton)
SCHEDULES
Schedule 2.11 - Tax Allocation
Schedule 3.3 - Certificate, Opinion of Counsel and
Resolutions of Company and Seller
Corporations as to Corporate Matters
Schedule 3.7 - Preliminary Settlement Statement
Schedule 4.1 - Certified Articles of Incorporation,
Amendments and Bylaws of Company and Seller
Corporations
Schedule 4.3 - Listing of Company Subsidiaries
Schedule 4.4 - Existing Employment Agreements
Schedule 4.6A - Recent Changes In Employees
Schedule 4.6B - Listing of Changes in Liabilities
Schedule 4.7 - Listing of Liabilities
Schedule 4.9 - Listing of Employee Benefit Plans
Schedule 4.11 - Listing of Properties, Assets and
Leasehold Estates
Schedule 4.12 - Listing of Patents and Intellectual
Property
Schedule 4.13 - Listing of Contracts, Agreements, etc.
Schedule 4.14 - Listing of Bank Accounts
Schedule 4.15 - Litigation
Schedule 4.16 - Insurance Policies
Schedule 5.2 - Purchaser Board Resolution Approving
Purchase
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EXHIBIT C
PROMISSORY NOTE
$1,083,333.00 October 27, 1997
FOR VALUE RECEIVED, GOLDEN EAGLE GROUP, INC., a Delaware corporation
having an address at 120 Standifer Drive, Humble, Texas 77338 (the "Maker"),
promises to pay to LAWRENCE BAUER, residing at 4425 Waters Edge Lane, Sanibel,
Florida 33975, (hereinafter referred to as the "Payee"), at such address of the
Payee or such other place as may be designated in writing by the holder of this
Note, the principal sum of One Million Eighty-Three Thousand Three Hundred
Thirty-Three Dollars ($1,083,333.00), together with interest at the rate of ten
percent (10%) per annum.
THE PRINCIPAL AMOUNT of this Note is due and payable by 16 quarterly
payments of $67,708.31 beginning on February 1, 2002, and ending on November 1,
2005, as per the Amortization Schedule attached.
INTEREST shall be paid commencing on November 1, 1997, and monthly
thereafter on the first day of each month, as per the Amortization Schedule
attached.
The payments shall be made to Payee at 4425 Waters Edge Lane, Sanibel,
Florida 33975.
The indebtedness evidenced by this instrument is subordinated to the
Senior Debt (as defined in the Subordination Agreement below referred to)
pursuant to, and to the extent provided in, the Subordination Agreement dated
effective as of October 27, 1997, by the maker hereof and payees named herein in
favor of Texas Commerce Bank National Association referred to in such
Subordination Agreement.
At the option of the holder, this Note and the entire unpaid indebtedness
represented hereby shall become immediately due and payable without notice or
demand upon the occurrence at any time of a default in any payment (beyond any
cure or grace period, if any) due hereunder (which is not cured thirty (30) days
after notice thereof).
If this Note is not fully paid upon maturity, whether as regularly
scheduled or through acceleration, the unpaid balance shall thereafter bear
interest until fully paid computed at the rate of the lesser of (i) twenty
percent (20%) per annum or (ii) the maximum rate allowed by law to be charged to
the Maker, and payable on demand. Payee shall be entitled to enforce any and all
rights under the Obligations.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest permitted to be charged to the Maker under applicable
law, but if, notwithstanding, interest in excess of the maximum rate shall be
paid hereunder, such excess shall be deemed a mistake in calculation and
canceled automatically and, if theretofore paid, shall be either refunded to the
Maker or credited against the principal balance of this Note.
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In the event this Note is placed in the hands of an attorney for
collection or if collected by suit or through the probate court, or through
bankruptcy proceedings, then the Maker shall pay, in addition to all other
amounts due and owing hereunder, the reasonable attorney's fees and all other
costs of collection of the Payee.
This Note shall be secured by a Collateral Assumption and Assignment of
Lease and Escrow Receipt Agreement of even date hereof (the "Obligations") among
the Payee and Maker and SERPICO & EHRLICH as Escrow Agent. This Note and the
holder hereof are entitled to all of the benefits and security provided by or
referred to in the Obligations.
Purchaser shall execute any and all documents necessary to secure this
agreement as referenced above and in the form attached herein and marked as
Exhibit "A".
The Maker hereby (i) waives demand, presentment for payment, notice of
non-payment, protest, notice of protest and all other notice; and (ii) consents
to any extension of postponement of time of this Note and to any other
indulgence with respect hereto without notice.
The Maker shall have the right, at Maker's option, to prepay this Note in
whole or in part. Prepayment of this Note shall be applied to the unpaid
installments of principal in the reverse order of their scheduled maturities.
The Borrower shall give to the Payee five (5) days prior notice of its intent to
prepay. Notice of prepayment having been given to the Payee as aforesaid, the
principal amount specified in such notice shall become due and payable on such
prepayment date.
The Maker agrees that any suit, action or proceeding with respect to this
Note, any amendment or any replacement hereof, and any transactions relating
thereto, may be brought by the Payee in the state courts of, or the Federal
courts in, the State of New York, and the Maker hereby irrevocably consents and
submits to the jurisdiction of such courts for the purpose of any such suit,
action or proceeding. The Maker hereby waives, and agrees not to assert against
the Payee, by way of motion, as a defense or proceeding, (a) any claim that the
Maker is not personally subject to the jurisdiction of the above-named courts or
that the Maker's property is exempt, or immune from execution or attachment,
either prior to judgment or in aid of execution; and (b) to the extent permitted
by applicable law, any claim that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or proceeding is
improper or that this Note or any amendment or any replacement hereof may not be
enforced in or by such courts.
If any installment of principal is not paid within fifteen (15) days after
the date on which it is due, Maker shall pay to the holder hereof upon demand an
amount equal to five percent (5%) of such unpaid installment to defray the
expense incurred by the holder hereof in handling and processing such delinquent
payment.
MAKER expressly reserves the right to offset for a period of four (4)
years from the date hereof any amount of principal and/or interest it may owe
Payee hereunder against any and all amounts that Payee may, for any reason, owe
Maker pursuant to the indemnification provisions of a Stock Purchase and Sale
Agreement, dated October 27, 1997, between the Maker, Payee and other parties.
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The terms, warranties and agreements herein contained shall bind and inure
to the benefit of the respective parties hereto, and their respective legal
representatives, successors and assigns.
If any provision of this Agreement is found to be void and unenforceable
by a court of competent jurisdiction, the remaining provisions of this Agreement
shall nevertheless be binding upon the parties with the same effect as through
the void or unenforceable part had been severed and deleted.
This agreement embraces the entire transaction between the parties, and
there have been no representations, warranties, or conditions other than those
herein or therein set forth.
This Note is not assignable in whole or in part by Payee for a period of
four (4) years from the date hereof.
This Note shall be interpreted and construed in accordance with the laws
of the State of New York.
This Note may not be changed or terminated orally.
WITNESS:
GOLDEN EAGLE GROUP, INC.
By: Patrick H. Weston, President
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EXHIBIT H
CONSULTING AGREEMENT
This Agreement is made and entered into on the 27th day of October, 1997,
by and among Lawrence Bauer, an individual residing in Lee County, Florida
(hereinafter referred to as "Consultant"), and Golden Eagle Group, Inc., a
Delaware corporation with its principal place of business in Houston, Harris
County, Texas (hereinafter referred to as "GEGP").
WITNESSETH
WHEREAS, GEGP is purchasing the stock of Columbia Shipping Group, Inc.
(hereinafter the "Company");
WHEREAS, Consultant is a former employee of the Company and GEGP desires
to utilize the services of Consultant in support of maximizing their purchase of
the Company's assets in exchange for the consideration provided herein; and
WHEREAS, Consultant possesses certain skills and expertise of value to
GEGP in maximizing their purchase of the Company's business and Consultant
desires to provide consulting services to GEGP in exchange for the consideration
provided herein;
NOW THEREFORE, in consideration of the covenants set forth herein, and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
I.
GEGP hereby engages and otherwise contracts with Consultant to serve as
its Independent Consultant, and Consultant hereby accepts such contract with
GEGP, for a term of one (1) year beginning on October 1, 1997 (hereinafter the
"Beginning Date") and ending at the close of business on September 30, 1998
(hereinafter the "Ending Date"). This Agreement may be extended for an
additional one (1) year period by mutual written consent of both parties.
Subject to the non-competition provisions of Section XI, and the
non-solicitation provisions of Section XII and confidentiality provisions of
Section VIII, GEGP may terminate this Agreement for (i) a material and repeated
acts shown to be in bad faith relative to the GEGP business by the Consultant,
(ii) indictment for a felony against the Consultant, or (iii) malfeasance in the
conduct of the Consultant's duties, including the commission of fraud,
embezzlement, theft or other acts involving dishonesty. If this Agreement is
terminated as provided by GEGP, the Consultant shall be entitled to only his
earned compensation through the date of such termination, and GEGP shall have no
further obligations to the Consultant.
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II.
During the terms of his consultation pursuant to this Agreement, the
Consultant shall diligently and faithfully serve GEGP and devote time, energy,
and experience to the advancement of GEGP's interest and to such further duties,
consistent with his training, experience, and abilities, as may be assigned to
him by GEGP.
III.
During the time of his consultation pursuant to this Agreement, GEGP shall
pay Consultant as compensation for his services hereunder, $10,000.00 per month.
Consultant shall be paid on a monthly basis at the end of each month for the
prior month's services.
IV.
In the event of termination of this Agreement as provided herein, GEGP
agrees to pay Consultant for the pro-rated share for the number of days worked
in the prior month per Section III hereof.
V.
The Consultant shall, at all times be, and hold himself out to the public
as, an independent consultant working on behalf of GEGP. The Consultant is not
an agent, employee, subcontractor, servant, or franchisee of GEGP and Consultant
shall not claim any rights arising from employee status. GEGP shall not be
responsible for and shall not pay employment taxes relating to the Consultant's
performance of his obligations or duties under this Agreement. The Consultant
has the sole discretion to determine the manner in which the work called for
hereunder is to be performed and GEGP shall have no right to control the details
of the manner in which the Consultant performs his obligations or duties under
this Agreement. Nothing contained in this Agreement shall authorize the
Consultant to assume or create any obligation, duty or responsibility
whatsoever, expressed or implied, on behalf, or in the name of, GEGP or to bind
GEGP in any manner whatsoever.
VI.
GEGP's financial obligations to the Consultant shall be limited to payment
of the Consultant's fees listed in Sections III and IV; however, GEGP agrees to
pay the Consultant the amount of reasonable and necessary costs or expenses
incurred by the Consultant when acting as GEGP's consultant pursuant to this
Agreement, including the Consultant's reasonable and necessary travel expenses,
or other reasonable and necessary out-of-pocket expenses. GEGP's obligation to
pay the Consultant's reasonable and necessary costs or expenses under this
Agreement is limited to reimbursing the Consultant for reasonable and necessary
costs or expenses documented by receipts or similar items, providing written
consent of an officer of GEGP is obtained prior to the Consultant incurring such
reasonable and necessary costs or expenses.
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VII.
Neither of the parties shall have the right to assign this Agreement, or
any obligations hereunder, without the prior written consent of the other party.
VIII.
During the term of this Agreement, Consultant may receive confidential
information of a technical and/or commercial nature relating to GEGP's products,
methodologies, processes, services, technology and/or business operations, the
Consultant shall hold any and all such information in trust and shall not use
said information for any reason other than as provided for by this Agreement for
the sole and exclusive benefit of GEGP. Additionally, Consultant shall hold any
and all information of a technical and/or commercial nature relating to the
products, methodologies, processes, services, technology and/or business
operations in trust and shall not use said information for any reason other than
as provided for by this Agreement for the sale and exclusive benefit GEGP,
whether such information was obtained prior to or after the date of said
agreement. The Consultant shall never divulge any such information to a
third-party without the prior written consent of GEGP, unless ordered to do so
by a court of competent jurisdiction and law. It is expressly agreed that these
provisions shall survive the termination of the Agreement.
IX.
Notices and other communications permitted or required hereunder shall be
in writing. Unless specifically stated otherwise herein, such notices shall be
deemed received when (i) delivered by hand in person, receipt thereof being
acknowledged in writing, (ii) telex, cable or telegraph answer back is received
by the sending party from the receiving party's machine, (iii) the date of
signature for receipt by the party of certified, registered or mail delivered by
courier, or (iv) receipt by the sending party of a reply telefax confirming
receipt by the receiving party of the telefax sent by the sending party. The
respective addresses of the parties for the foregoing permitted modes of
notification shall be as follows:
If to Consultant:
Lawrence Bauer
4425 Waters Edge Lane
Sanibel, Florida 33957
If to GEGP:
120 Standifer Dr
P. O. Box 60185 AMF
Houston, TX 77205
Phone: (713) 446-2656 Fax: (713) 446-4896
Telex: 170575 170576
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X.
The Agreement formed hereby is made under, and shall be construed and
interpreted in accordance with the substantive laws of the State of Florida as
in effect on the date hereof, without regard to the otherwise applicable Texas
choice of law rules or principles. Consultant hereby submits to the jurisdiction
of the state and federal courts in the State of Florida.
XI.
For five (5) years from the date of this Agreement, Consultant's
consulting agreement with GEGP, Consultant will not, unless acting pursuant
hereto or with the prior written consent of the board of directors of GEGP,
directly or indirectly own, manage, operate, join, control, finance or
participate in the ownership, management, operations, control or financing of,
or be connected as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with or use or permit his name to be
used in connection with, any business or enterprise engaged in any business
engaged in by GEGP, its parent company or its affiliates, including, without
limitation any freight forwarding or brokerage services with the sole exception
of Consultant's ownership in CSI International, Inc. for so long as Consultant
remains a shareholder therein, such operations remain only in Scranton,
Pennsylvania and so long as CSI does not operate within 200 miles of an office
of GEGP, its successors, assigns or any affiliates. The area to be covered by
the non-competition covenant shall be any city where GEGP currently, or at any
time during the period covered by this non-competition provision, has an
operation/office; provided, however, nothing in this Agreement shall preclude
Consultant's ownership of up to five percent (5%) of the debt or equity
securities of any publicly traded company within or without said area. To the
extent, under applicable law, the provisions of this covenant not to compete are
found to be invalid or unenforceable, such unenforceability or invalidity shall
be ineffective to the extent these provisions may be modified or limited to
remedy such invalidity or unenforceability, allowing the provisions agreed to
herein to remain in effect to the fullest extent available under applicable law.
XII.
Consultant agrees for five (5) years from the date of this Agreement
Consultant will not call on or solicit, either directly or indirectly, any
person, firm, corporation or other entity or employee who is or which at the
time of such termination was, or within two (2) years prior to the termination
of this Agreement had been, a customer or employee of GEGP or any of its
affiliates.
XIII.
This Agreement constitutes the entire understanding and agreement between
GEGP and the Consultant. The terms of this Agreement may not be modified or
otherwise altered unless the modification or other alteration is agreed to in a
writing signed by an authorized officer of GEGP and the Consultant.
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the Beginning Date.
Lawrence Bauer
GOLDEN EAGLE GROUP, INC.
By: Patrick H. Weston, President
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EXHIBIT J
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this the
27th day of October, 1997 by and between GOLDEN EAGLE GROUP, INC., a Delaware
corporation, or a subsidiary thereof ("Company") and MIKE MCADAM, an individual
residing in Suffolk County, New York ("Employee").
WHEREAS, Employee desires to be employed by the Company upon the terms
and conditions hereinafter set forth; and
WHEREAS, the Company desires to employ Employee upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
1.1 EMPLOYMENT TERM. The employment term of this Agreement (the
"Employment Term") shall commence effective October 1, 1997 and shall
continue until and end on September 30, 2000, unless terminated prior
thereto in accordance with Section 9 hereof.
1.2 DUTIES AND RESPONSIBILITIES.
(a) During the Employment Term, Employee shall serve as Vice
President-JFK Area, and shall report to either the President of the
Company, or Senior Vice President of the Company, as determined in
the sole discretion of the Company. Employee shall perform all
duties and accept all responsibilities incidental to such position
or as may be assigned to him by the Company. The place of employment
shall be the New York City, New York area or other area mutually
agreed to by Employee and Company.
(b) Employee represents and covenants to the Company that he
is not subject or a party to any employment agreement,
non-competition covenant, non-disclosure agreement or any similar
agreement, covenant, understanding or restriction which would
prohibit Employee from executing this Agreement and performing his
duties and responsibilities hereunder, or which would in any manner,
directly or indirectly, limit or affect the duties and
responsibilities which may now or in the future be assigned to
Employee by the Company or the scope of assistance which he may now
or in the future provide to Company and its other subsidiaries or
affiliates.
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(c) Employee shall at all times comply with policies and
procedures adopted by Company for employees of Company and its
parent company and affiliates, including, without limitation, the
procedures and policies adopted by Company regarding conflicts of
interest, except to the extent, if any, that such policies conflict
with the express provisions of this Agreement, in which case, the
terms of this Agreement shall govern.
1.3 EXTENT OF SERVICE. During the Employment Term, Employee agrees
to use his best efforts to carry out his duties and responsibilities under
Section 1.2 hereof and to devote his full professional time, attention and
energy thereto. Employee further agrees not to work either on a part-time
or independent contracting basis for any other business or enterprise
during his employment with Company without the prior written consent of
the President of the Company.
1.4 BASE COMPENSATION. For all the services rendered by Employee
hereunder, the Company shall pay Employee an annual salary at the rate of
$150,000.00 per year, with increases, if any, as approved by the President
of the Company in his sole discretion.
All amounts are less withholding required by law or agreed to by
Employee, payable in installments at such times as the Company customarily
pays its other Employees (but in any event no less often than monthly).
Said amounts shall be prorated for any partial year should this Agreement
be terminated before the expiration of its term.
1.5 BENEFITS. Employee and his dependents shall be entitled to
participate in Company's group medical, dental, disability and life
insurance plans. Employee shall be entitled to participate in Company's
401(k) Plan at the next occurring plan entrance date, including any profit
sharing contributions that may be authorized by Company's Board of
Directors and subject to any and all plan eligibility requirements.
Employee's tenure while an employee of Columbia Shipping, Inc. or an
affiliate thereof will apply for the calculation of vacation benefits, but
only for such calculations. In the case of disability of Employee creating
the inability to fully perform his duties and responsibilities hereunder
to the fullest extent required by the Company with reasonable
accommodation by reason of illness, injury or incapacity, the Company
agrees to pay to Employee his salary under this Agreement for a period of
ninety (90) days after the onset of such disability, after which such
payments will end, and benefits will be dictated by the Company's
long-term disability benefits plan. .
1.6 BONUS. Employee will be entitled to participate in an annual
bonus program similar to that offered to other management of the Company.
An annual bonus of ten percent (10%) of the pre-tax, net profits of the
combined (DAHER Golden Eagle and Columbia Shipping) JFK and Philadelphia
operations in excess of a base amount consisting of the 1998 fiscal year
budget (agreed upon by Company management) for pre-tax net profits for the
combined JFK and Philadelphia operations, less ten percent (10%), will be
paid to Employee.
1.7 TAXATION. Employee alone, and not the Company, shall be
responsible for the payment of all federal, state and local taxes in
respect of the payments to be made and
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benefits to be provided under this Agreement or otherwise (except to the
extent withheld by the Company).
1.8 TOTALITY OF BENEFITS. The benefits described in Section 1 of
this Agreement represent all compensatory benefits to which the Employee
is entitled.
2. EXPENSES. Employee shall be reimbursed for the reasonable business
expenses incurred by him in connection with his performance of services
hereunder during the Employment Term upon presentation of an itemized account
and written proof of such expenses in accordance with Company's policies
relating to reimbursement of expenses.
3. AUTOMOBILE. The Company will provide Employee with an automobile or car
allowance in accordance with the Company Policy as may be from time to time
amended .Employee shall be allowed to retain the vehicle previously provided by
Columbia Shipping, Inc. or its affiliate until such time in the Company's sole
discretion the automobile shall need to be replaced, which at such time the
Company may either (i) provide for a car allowance equal to the cost of
providing, operating, and maintaining (including but not limited to insurance,
gas, parking and repairs) a replacement vehicle of comparable make, style and
model in the current model year; or (ii) furnish a Company automobile of a
comparable make, style and model in the current model year to replace the
currently issued automobile.
4. DEVELOPMENTS. All developments (including inventions, whether
patentable or otherwise), trade secrets, discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company or any of its affiliates (the "Developments") which
Employee, either by himself or in conjunction with any other person or persons
(but only to the extent that Employee has an interest in the developments
acknowledged by Employer in writing), has conceived, made, developed, acquired
or acquired knowledge of during his employment by the Company, shall become and
remain the sole and exclusive property of the Company. Employee hereby assigns,
transfers and conveys, and agrees to so assign, transfer and convey, all of his
right, title and interest in and to any and all such Developments. At any time
and from time to time, upon the request and at the expense of the Company,
Employee will execute and deliver any and all instruments, documents and papers,
give evidence and do any and all other acts which, in the opinion of counsel for
the Company, are or may be necessary or desirable to document such transfer or
to enable the Company to file and prosecute applications for and to acquire,
maintain and enforce any and all patents, trademark registrations or copyrights
under United States or foreign law with respect to any such Developments or to
obtain any extension, validation, re-issue, continuance or renewal of any such
patent, trademark or copyright. The Company will be responsible for the
preparation of any such instruments, documents and papers and for the
prosecution of any such proceedings and will reimburse Employee for all
reasonable expenses incurred by him in compliance with the provisions of this
Section.
5. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that by
reason of his employment by and service to the Company, he has had, and will
continue to have, access to confidential information of the Company and its
subsidiaries and affiliates, including, without limitation, information and
knowledge pertaining to products, inventions, innovations, designs, ideas,
plans, trade secrets, proprietary information, manufacturing, packaging,
advertising, distribution and sales methods and systems, sales and profit
figures, price lists, customer and
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client lists, including potential customers, customer account information, and
relationships with dealers, distributors, wholesalers, customers, clients,
suppliers and others with whom they have had or will have business dealings
("Confidential Information"). Employee acknowledges that such Confidential
Information is a valuable and unique asset and covenants that he will not,
either during or after the term of this Agreement, disclose any such
Confidential Information to any person for any reason whatsoever (except as his
duties may require) without the prior written authorization of the Company's
board of directors; provided, however, the following information shall not be
deemed part of the confidential information restricted hereby: (i) any
information in the possession or within the knowledge of Employee prior to
disclosure of the same by Company, (ii) any information that has been, is now or
may hereafter be in the public domain, (iii) any information that has been or
hereafter is obtained by Employee from a party having the right to disclose such
information without violation of any contract or covenant in favor of Company,
and (iv) any information that Employee may be required to disclose pursuant to
legal process. Employee shall return all such Confidential Information and any
copies thereof to Company immediately upon termination of Employee's employment,
whether voluntary or involuntary.
6. NON-COMPETITION.
(a) COVENANT NOT TO COMPETE. Neither the Employee nor
any affiliate or entity controlled by the Employee, will, at
any time during the three (3) year period from the date of
this Agreement (the "Noncompetition Period"), without
Company's prior written consent, directly or indirectly (or
encourage any employees of Company or any of its subsidiaries
to), engage in, have any interest (financial or otherwise), in
, manage, or operate any or in any other manner advise or
assist any person, firm, corporation, partnership, business or
other entity (whether as director, officer, employee, agent,
representative, security holder, consultant or otherwise) that
engages in any business competitive with the business carried
on by Company as of the Closing Date, within any state of the
United States or any country or territory outside of the
United States in which Company does business (a "Competitive
Business"). Notwithstanding the foregoing, the Employee shall
be permitted (i) to acquire an ownership interest, directly or
indirectly, of not more than five percent of the outstanding
securities of any corporation which is engaged in a
Competitive Business and which is listed on any recognized
securities exchange or traded in the over the counter market
in the United States, (ii) subject to obtaining the prior
written consent of Company, to accept an appointment as a
non-executive director of such corporation or (iii) to become
a stockholder in, or accept an appointment as, a non-executive
director of another corporation engaged in a Competitive
Business, provided that such investment or appointment is of a
totally passive nature and does not involve the Employee
devoting time to the management of such corporation.
(b) ENFORCEMENT OF COVENANT NOT TO COMPETE.
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(i) If any of the provisions of or covenants
contained in Section 6 is hereafter construed to be
invalid or unenforceable in any jurisdiction, the same
shall not affect the remainder of such provisions or the
enforceability thereof in any other jurisdiction, which
shall be given full effect, without regard to the
invalidity or unenforceability in such other
jurisdiction. If any of the provisions of or covenants
contained in Section 6 is held to be unenforceable in
any jurisdiction because of the duration or geographical
scope thereof, the parties agree that the court making
such determination shall have the power to reduce the
duration or geographical scope of such provision or
covenant, and, in its reduced form, said provision or
covenant shall be enforceable; PROVIDED, HOWEVER, that
the determination of such court shall not affect the
enforceability of Section 6 in any other jurisdiction.
(ii) The parties recognize that the remedy at law for
breach of the provisions and agreements of Section 6 is
inadequate and, notwithstanding any other provisions of
this Agreement, Company shall be entitled, in addition
to such other remedies as it may have, to a temporary
restraining order and preliminary and permanent
injunctive relief to enjoin any breach or threatened
breach of Section 6 without proof of any actual damages
that have been or may have been caused to them by such
breach.
(c) TERMINATION OF COVENANT NOT TO COMPETE.
(i) If this Agreement is terminated by the Company pursuant
to Section 9(a) the provisions and covenants of Section
6 shall survive such termination of this Agreement and
shall continue for the remainder of the Noncompetition
Period.
(ii) The provisions and covenants of Section 6 shall
terminate upon the termination of this Agreement by
Company pursuant to Sections 9(b) UNLESS Company elects
(by delivery of written notice to the Employee) to pay
to the Employee, throughout the remainder of the
Noncompetition Period, in which case the provisions and
covenants of Section 6 shall continue in full force and
effect for so long as Company continues to pay the
Employee such salary (but in no event longer than the
Noncompetition Period).
7. NO SOLICITATION. Employee agrees that for two (2) years after
termination of Employee's employment by the Company (whether such termination is
during or after the Employment Term), Employee will not solicit, either directly
or indirectly, any person, firm, corporation or other entity or employee who or
which at the time of such termination was, or within two years prior to
Employee's termination of employment had been, a customer or employee of the
Company or any of its affiliates with respect to the activities prohibited by
Section 6 thereof.
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8. EQUITABLE RELIEF. Employee acknowledges that the restrictions contained
in Sections 4, 5, 6 and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates, that the Company would
not have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in irreparable
injury to the Company. Employee also acknowledges that the Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any such violation, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. Employee agrees that in the event of any such
violation, an action may be commenced by the Company for any such preliminary
and permanent injunctive relief and other equitable relief in any court of
competent jurisdiction in the State of New York or any other court of competent
jurisdiction. Employee hereby waives any objections on the grounds of improper
jurisdiction or venue to the commencement of an action in the State of New York
and agrees that effective service of process may be made upon him by overnight
courier under the Notice provision contained in Section 13 hereof. In the event
that any of the provisions of Sections 4, 5, 6 and 7 hereof should ever be
adjudicated to exceed the time, geographic, product or other limitations
permitted by applicable law in any jurisdiction, then such provisions shall be
deemed reformed in such jurisdiction to the maximum time, geographic, product or
other limitations permitted by applicable law.
9. TERMINATION.
(a) FOR CAUSE. Subject to the noncompetition, no
solicitation and confidentiality requirement of this
Agreement, Company may terminate this Agreement for cause. As
used in this Agreement "cause" shall mean (i) excessive
absenteeism by the Employee not related to an illness, (ii)
indictment for a felony against the Employee, (iii)
malfeasance in the conduct of the Employee's duties, including
the commission of fraud, embezzlement, theft or other acts
involving dishonesty, (iv) substance abuse on the part of the
Employee or (v) material and repeated acts shown to be in bad
faith relative to Company's business by the Employee. If this
Agreement terminated for cause by Company, the Employee shall
be entitled to only his salary plus accrued vacation pay
through the date of such termination, and Company shall have
no further obligations to the Employee.
(b) DISABILITY. Subject to the noncompetition, no
solicitation and confidentiality requirements of this
Agreement, in the event that Employee is unable fully to
perform his duties and responsibilities hereunder to the full
extent required by the Company with reasonable accommodation,
by reason of illness, injury or incapacity for ninety (90)
days, during which time he shall continue to be compensated as
provided.
c) DEATH. This Agreement shall terminate upon the
death of the Employee.
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10. SURVIVAL. Notwithstanding the termination of this Agreement by reason
of Employee's disability under Section 9(b) hereof, or for cause under Section
9(a) hereof, his obligations under Section 4, 5, 6 and 7 hereof shall survive
and remain in full force and effect for the periods therein provided, and the
provisions for equitable relief against Employee in Section 8 hereof shall
continue in force.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CONFLICT OF
LAWS PROVISIONS.
12. LITIGATION EXPENSES. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
13. NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or sent by overnight
courier, as follows (provided that notice of change of address shall be deemed
given only when received):
If to the Company, to:
Golden Eagle Group, Inc.
120 Standifer Drive
Humble, Texas 77338
Attention: President
With required copies to:
Mr. John H. Stibbs, Jr.
Stibbs, & Burbach, P.C.
10077 Grogan's Mill Road, Suite 540
The Woodlands, Texas 77380
If to Employee, to:
Mike McAdam
7 Dexter Court
Hayppauge, New York 11788
or to such other names or addresses as the Company or Employee, as the case may
be, shall designate by Notice to each other person entitled to receive notices
in the manner specified in this Section.
14. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT.
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(a) This Agreement supersedes all prior agreements and sets forth
the entire understanding among the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended or
terminated except upon written amendment approved by the board of
directors of the Company and executed on its behalf by a duly authorized
officer. Without limitation, nothing in this Agreement shall be construed
as giving Employee any right to be retained in the employ of the Company
beyond the expiration of the Employment Term, and Employee specifically
acknowledges that he shall be an employee-at-will of the Company
thereafter, and thus subject to discharge by the Company with or without
cause and without compensation of any nature.
(b) Employee acknowledges that from time to time, Company may
establish, maintain and distribute employee manuals or handbooks or
personnel policy manuals, and officers or other representatives of the
Company may make written or oral statements relating to personnel policies
and procedures. Such manuals, handbooks and statements are intended only
for general guidance. No policies, procedures or statements of any nature
by or on behalf of Company (whether written or oral, and whether or not
contained in any employee manual or handbook or personnel policy manual),
and no acts or practices of any nature, shall be construed to modify this
Agreement or to create express or implied obligations of any nature to
Employee.
(c) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
respective heirs, executors, administrators, legal representatives,
successors and assigns of the parties hereto, except that the duties and
responsibilities of Employee hereunder are of a personal nature and shall
not be assignable or delegatable in whole or in part by Employee.
15. SEVERABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
16. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon the Company
or Employee by this Agreement is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in
equity. No delay or omission by the Company or Employee in exercising any right,
remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof, and any such right, remedy or power may be exercised by the
Company or Employee from time to time and as often as may be deemed expedient or
necessary by the Company or Employee in his sole discretion.
17. MISCELLANEOUS. All section headings are for convenience only and shall
not define or limit the provisions of this Agreement. This Agreement may be
executed in several counterparts, each of which is an original. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
dates indicated below and it is effective as of the date indicated in the
opening paragraph hereof.
GOLDEN EAGLE GROUP, INC.
By: Patrick H. Weston, President
By: Mike McAdam, Employee
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this the
27th day of October, 1997 by and between GOLDEN EAGLE GROUP, INC., a Delaware
corporation, or a subsidiary thereof ("Company") and DAN MORREL, an individual
residing in Lake County, Illinois ("Employee").
WHEREAS, Employee desires to be employed by the Company upon the terms
and conditions hereinafter set forth; and
WHEREAS, the Company desires to employ Employee upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
1.1 EMPLOYMENT TERM. The employment term of this Agreement (the
"Employment Term") shall commence effective October 1, 1997 and shall
continue until and end on September 30, 2000, unless terminated prior
thereto in accordance with Section 9 hereof.
1.2 DUTIES AND RESPONSIBILITIES.
(a) During the Employment Term, Employee shall serve as Vice
President-Chicago Area, and shall report to either the President of
the Company, or Senior Vice President of the Company, as determined
in the sole discretion of the Company. Employee shall perform all
duties and accept all responsibilities incidental to such position
or as may be assigned to him by the Company. The place of employment
shall be the Chicago, Illinois area or other area mutually agreed to
by Employee and Company.
(b) Employee represents and covenants to the Company that he
is not subject or a party to any employment agreement,
non-competition covenant, non-disclosure agreement or any similar
agreement, covenant, understanding or restriction which would
prohibit Employee from executing this Agreement and performing his
duties and responsibilities hereunder, or which would in any manner,
directly or indirectly, limit or affect the duties and
responsibilities which may now or in the future be assigned to
Employee by the Company or the scope of assistance which he may now
or in the future provide to Company and its other subsidiaries or
affiliates.
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(c) Employee shall at all times comply with policies and
procedures adopted by Company for employees of Company and its
parent company and affiliates, including, without limitation, the
procedures and policies adopted by Company regarding conflicts of
interest, except to the extent, if any, that such policies conflict
with the express provisions of this Agreement, in which case, the
terms of this Agreement shall govern.
1.3 EXTENT OF SERVICE. During the Employment Term, Employee agrees
to use his best efforts to carry out his duties and responsibilities under
Section 1.2 hereof and to devote his full professional time, attention and
energy thereto. Employee further agrees not to work either on a part-time
or independent contracting basis for any other business or enterprise
during his employment with Company without the prior written consent of
the President of the Company.
1.4 BASE COMPENSATION. For all the services rendered by Employee
hereunder, the Company shall pay Employee an annual salary at the rate of:
(a) $100,000 per year, for the period from October 1,
1997 through September 30, 1998;
(b) $110,000 per year, for the period from October 1,
1998 through September 30, 1999; and
(c) 120,000 per year, for the period from October 1,
1999 through September 30, 2000.
All amounts are less withholding required by law or agreed to by
Employee, payable in installments at such times as the Company customarily
pays its other Employees (but in any event no less often than monthly).
Said amounts shall be prorated for any partial year should this Agreement
be terminated before the expiration of its term.
1.5 BENEFITS. Employee and his dependents shall be entitled to
participate in Company's group medical, dental, disability and life
insurance plans. Employee shall be entitled to participate in Company's
401(k) Plan at the next occurring plan entrance date, including any profit
sharing contributions that may be authorized by Company's Board of
Directors and subject to any and all plan eligibility requirements.
Employee's tenure while an employee of Columbia Shipping, Inc. or an
affiliate thereof will apply for the calculation of vacation benefits, but
only for such calculations. In the case of disability of Employee creating
the inability to fully perform his duties and responsibilities hereunder
to the fullest extent required by the Company with reasonable
accommodation by reason of illness, injury or incapacity, the Company
agrees to pay to Employee his salary under this Agreement for a period of
ninety (90) days after the onset of such disability, after which such
payments will end, and benefits will be dictated by the Company's
long-term disability plan.
1.6 BONUS. Employee will be entitled to participate in an annual
bonus program similar to that offered to other management of the Company.
An annual bonus of ten percent (10%) of the pre-tax, net profits of the
combined (DAHER Gold Eagle and Columbia Shipping) Chicago operations in
excess of a base amount consisting or the
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1998 fiscal year budget (agreed upon by Company management) for pre-tax
net profits for the combined Chicago operations, less ten percent (10%),
will be paid to Employee.
1.7 TAXATION. Employee alone, and not the Company, shall be
responsible for the payment of all federal, state and local taxes in
respect of the payments to be made and benefits to be provided under this
Agreement or otherwise (except to the extent withheld by the Company).
1.8 TOTALITY OF BENEFITS. The benefits described in Section 1 of
this Agreement represent all compensatory benefits to which the Employee
is entitled.
2. EXPENSES. Employee shall be reimbursed for the reasonable business
expenses incurred by him in connection with his performance of services
hereunder during the Employment Term upon presentation of an itemized account
and written proof of such expenses in accordance with Company's policies
relating to reimbursement of expenses.
3. AUTOMOBILE. The Company will provide Employee with an automobile or car
allowance in accordance with the Company Policy as may be from time to time
amended. Employee shall be allowed to retain the vehicle previously provided by
Columbia Shipping, Inc. or its affiliate until such time in the Company's sole
discretion the automobile shall need to be replaced, which at such time the
Company may either (i) provide for a car allowance equal to the cost of
providing, operating, and maintaining (including but not limited to insurance,
as, parking and repairs) a replacement vehicle of comparable make, style and
model in the current model year; or (ii) furnish a Company automobile of a
comparable make, style and model in the current model year to replace the
currently issued automobile.
4. DEVELOPMENTS. All developments (including inventions, whether
patentable or otherwise), trade secrets, discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company or any of its affiliates (the "Developments") which
Employee, either by himself or in conjunction with any other person or persons
(but only to the extent that Employee has an interest in the developments
acknowledged by Employer in writing), has conceived, made, developed, acquired
or acquired knowledge of during his employment by the Company, shall become and
remain the sole and exclusive property of the Company. Employee hereby assigns,
transfers and conveys, and agrees to so assign, transfer and convey, all of his
right, title and interest in and to any and all such Developments. At any time
and from time to time, upon the request and at the expense of the Company,
Employee will execute and deliver any and all instruments, documents and papers,
give evidence and do any and all other acts which, in the opinion of counsel for
the Company, are or may be necessary or desirable to document such transfer or
to enable the Company to file and prosecute applications for and to acquire,
maintain and enforce any and all patents, trademark registrations or copyrights
under United States or foreign law with respect to any such Developments or to
obtain any extension, validation, re-issue, continuance or renewal of any such
patent, trademark or copyright. The Company will be responsible for the
preparation of any such instruments, documents and papers and for the
prosecution of any such proceedings and will reimburse Employee for all
reasonable expenses incurred by him in compliance with the provisions of this
Section.
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5. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that by
reason of his employment by and service to the Company, he has had, and will
continue to have, access to confidential information of the Company and its
subsidiaries and affiliates, including, without limitation, information and
knowledge pertaining to products, inventions, innovations, designs, ideas,
plans, trade secrets, proprietary information, manufacturing, packaging,
advertising, distribution and sales methods and systems, sales and profit
figures, price lists, customer and client lists, including potential customers,
customer account information, and relationships with dealers, distributors,
wholesalers, customers, clients, suppliers and others with whom they have had or
will have business dealings ("Confidential Information"). Employee acknowledges
that such Confidential Information is a valuable and unique asset and covenants
that he will not, either during or after the term of this Agreement, disclose
any such Confidential Information to any person for any reason whatsoever
(except as his duties may require) without the prior written authorization of
the Company's board of directors; provided, however, the following information
shall not be deemed part of the confidential information restricted hereby: (i)
any information in the possession or within the knowledge of Employee prior to
disclosure of the same by Company, (ii) any information that has been, is now or
may hereafter be in the public domain, (iii) any information that has been or
hereafter is obtained by Employee from a party having the right to disclose such
information without violation of any contract or covenant in favor of Company,
and (iv) any information that Employee may be required to disclose pursuant to
legal process. Employee shall return all such Confidential Information and any
copies thereof to Company immediately upon termination of Employee's employment,
whether voluntary or involuntary.
6. NON-COMPETITION.
(a) COVENANT NOT TO COMPETE.
Neither the Employee nor any affiliate or entity controlled by
the Employee, will, at any time during the three (3) year
period from the date of this Agreement (the "Noncompetition
Period"), without Company's prior written consent, directly or
indirectly (or encourage any employees of Company or any of
its subsidiaries to), engage in, have any interest (financial
or otherwise), in , manage, or operate any or in any other
manner advise or assist any person, firm, corporation,
partnership, business or other entity (whether as director,
officer, employee, agent, representative, security holder,
consultant or otherwise) that engages in any business
competitive with the business carried on by Company as of the
Closing Date, within any state of the United States or any
country or territory outside of the United States in which
Company does business (a "Competitive Business."
Notwithstanding the foregoing, the Employee shall be permitted
(i) to acquire an ownership interest, directly or indirectly,
of not more than five percent of the outstanding securities of
any corporation which is engaged in a Competitive Business and
which is listed on any recognized securities exchange or
traded in the over the counter market in the United States,
(ii) subject to obtaining the prior written consent of
Company, to accept an appointment as a non-executive director
of such corporation or (iii) to become a stockholder in, or
accept an appointment as, a non-executive director of another
corporation engaged in a Competitive
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Business, provided that such investment or appointment is of a
totally passive nature and does not involve the Employee
devoting time to the management of such corporation.
(b) ENFORCEMENT OF COVENANT NOT TO COMPETE.
(i) If any of the provisions of or covenants
contained in Section 6 is hereafter construed to be
invalid or unenforceable in any jurisdiction, the same
shall not affect the remainder of such provisions or the
enforceability thereof in any other jurisdiction, which
shall be given full effect, without regard to the
invalidity or unenforceability in such other
jurisdiction. If any of the provisions of or covenants
contained in Section 6 is held to be unenforceable in
any jurisdiction because of the duration or geographical
scope thereof, the parties agree that the court making
such determination shall have the power to reduce the
duration or geographical scope of such provision or
covenant, and, in its reduced form, said provision or
covenant shall be enforceable; PROVIDED, HOWEVER, that
the determination of such court shall not affect the
enforceability of Section 6 in any other jurisdiction.
(ii) The parties recognize that the remedy
at law for breach of the provisions and agreements of
Section 6 is inadequate and, notwithstanding any other
provisions of this Agreement, Company shall be entitled,
in addition to such other remedies as it may have, to a
temporary restraining order and preliminary and
permanent injunctive relief to enjoin any breach or
threatened breach of Section 6 without proof of any
actual damages that have been or may have been caused to
them by such breach.
(c) TERMINATION OF COVENANT NOT TO COMPETE.
(i) If this Agreement is terminated by the
Company pursuant to Section 9(a) the provisions and
covenants of Section 6 shall survive such termination of
this Agreement and shall continue for the remainder of
the Noncompetition Period.
(ii) The provisions and covenants of Section 6 shall
terminate upon the termination of this Agreement
by Company pursuant to Sections 9(b) UNLESS Company
elects (by delivery of written notice to the Employee)
to pay to the Employee, throughout the remainder of the
Noncompetition Period, in which case the provisions and
covenants of Section 6 shall continue in full force and
effect for so long as Company continues to pay the
Employee such salary (but in no event longer than the
Noncompetition Period).
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7. NO SOLICITATION. Employee agrees that for two (2) years after
termination of Employee's employment by the Company (whether such termination is
during or after the Employment Term), Employee will not solicit, either directly
or indirectly, any person, firm, corporation or other entity or employee who or
which at the time of such termination was, or within two years prior to
Employee's termination of employment had been, a customer or employee of the
Company or any of its affiliates with respect to the activities prohibited by
Section 6 thereof.
8. EQUITABLE RELIEF. Employee acknowledges that the restrictions contained
in Sections 4, 5, 6 and 7 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates, that the Company would
not have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in irreparable
injury to the Company. Employee also acknowledges that the Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any such violation, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. Employee agrees that in the event of any such
violation, an action may be commenced by the Company for any such preliminary
and permanent injunctive relief and other equitable relief in any court of
competent jurisdiction in the State of Illinois or any other court of competent
jurisdiction. Employee hereby waives any objections on the grounds of improper
jurisdiction or venue to the commencement of an action in the State of Illinois
and agrees that effective service of process may be made upon him by overnight
courier under the Notice provision contained in Section 13 hereof. In the event
that any of the provisions of Sections 4, 5, 6 and 7 hereof should ever be
adjudicated to exceed the time, geographic, product or other limitations
permitted by applicable law in any jurisdiction, then such provisions shall be
deemed reformed in such jurisdiction to the maximum time, geographic, product or
other limitations permitted by applicable law.
9. TERMINATION.
(a) FOR CAUSE. Subject to the noncompetition, no
solicitation and confidentiality requirement of this
Agreement, Company may terminate this Agreement for cause. As
used in this Agreement "cause" shall mean (i) excessive
absenteeism by the Employee not related to an illness, (ii)
indictment for a felony against the Employee, (iii)
malfeasance in the conduct of the Employee's duties, including
the commission of fraud, embezzlement, theft or other acts
involving dishonesty, (iv) substance abuse on the part of the
Employee or (v) material and repeated acts shown to be in bad
faith relative to Company's business by the Employee. If this
Agreement terminated for cause by Company, the Employee shall
be entitled to only his salary plus accrued vacation pay
through the date of such termination, and Company shall have
no further obligations to the Employee.
(b) DISABILITY. Subject to the noncompetition, no
solicitation and confidentiality requirements of this
Agreement, in the event that Employee is unable fully to
perform his duties and responsibilities hereunder to the full
extent required by the Company with reasonable accommodation,
by reason of illness, injury or incapacity for ninety (90)
days, during which time he shall continue to be compensated as
provided.
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c) DEATH. This Agreement shall terminate upon the
death of the Employee.
10. SURVIVAL. Notwithstanding the termination of this Agreement by reason
of Employee's disability under Section 9(b) hereof, or for cause under Section
9(a) hereof, his obligations under Section 4, 5, 6 and 7 hereof shall survive
and remain in full force and effect for the periods therein provided, and the
provisions for equitable relief against Employee in Section 8 hereof shall
continue in force.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
UNDER THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO ANY CONFLICT OF
LAWS PROVISIONS.
12. LITIGATION EXPENSES. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable costs, expenses and attorney's fees from the other party.
13. NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or sent by overnight
courier, as follows (provided that notice of change of address shall be deemed
given only when received):
If to the Company, to:
Golden Eagle Group, Inc.
120 Standifer Drive
Humble, Texas 77338
Attention: President
With required copies to:
Mr. John H. Stibbs, Jr.
Stibbs, & Burbach, P.C.
10077 Grogan's Mill Road, Suite 540
The Woodlands, Texas 77380
If to Employee, to:
Dan Morrel
511 Thorndale Drive
Buffalo Grove, Illinois 60089
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or to such other names or addresses as the Company or Employee, as the case may
be, shall designate by Notice to each other person entitled to receive notices
in the manner specified in this Section.
14. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT.
(a) This Agreement supersedes all prior agreements and sets forth
the entire understanding among the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended or
terminated except upon written amendment approved by the board of
directors of the Company and executed on its behalf by a duly authorized
officer. Without limitation, nothing in this Agreement shall be construed
as giving Employee any right to be retained in the employ of the Company
beyond the expiration of the Employment Term, and Employee specifically
acknowledges that he shall be an employee-at-will of the Company
thereafter, and thus subject to discharge by the Company with or without
cause and without compensation of any nature.
(b) Employee acknowledges that from time to time, Company may
establish, maintain and distribute employee manuals or handbooks or
personnel policy manuals, and officers or other representatives of the
Company may make written or oral statements relating to personnel policies
and procedures. Such manuals, handbooks and statements are intended only
for general guidance. No policies, procedures or statements of any nature
by or on behalf of Company (whether written or oral, and whether or not
contained in any employee manual or handbook or personnel policy manual),
and no acts or practices of any nature, shall be construed to modify this
Agreement or to create express or implied obligations of any nature to
Employee.
(c) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
respective heirs, executors, administrators, legal representatives,
successors and assigns of the parties hereto, except that the duties and
responsibilities of Employee hereunder are of a personal nature and shall
not be assignable or delegatable in whole or in part by Employee.
15. SEVERABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
16. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon the Company
or Employee by this Agreement is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in
equity. No delay or omission by the Company or Employee in exercising any right,
remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof, and any such right, remedy or power may be exercised by the
Company or Employee from time to time and as often as may be deemed expedient or
necessary by the Company or Employee in his sole discretion.
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17. MISCELLANEOUS. All section headings are for convenience only and shall
not define or limit the provisions of this Agreement. This Agreement may be
executed in several counterparts, each of which is an original. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
dates indicated below and it is effective as of the date indicated in the
opening paragraph hereof.
GOLDEN EAGLE GROUP, INC.
By: Patrick H. Weston, President
By: Dan Morrel, Employee
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EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 2.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
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COLUMBIA SHIPPING GROUP, INC.
COMBINED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
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C O N T E N T S
PAGE
Report of Independent Accountants ......................................2
Combined Balance Sheets.................................................3
Combined Statements of Operations.......................................4
Combined Statements of Stockholders' Equity ............................5
Combined Statements of Cash Flows.......................................6
Notes to Combined Financial Statements...............................7-10
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Report of Independent Accountants
To the Stockholders and Board of Directors of
Columbia Shipping Group, Inc.
We have audited the accompanying combined balance sheets of Columbia Shipping
Group, Inc. and affiliates as of June 30, 1997 and 1996 and the related combined
statements of operations, stockholders' equity, and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit 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 combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall combined financial statements
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Columbia
Shipping Group, Inc. and affiliates at June 30, 1997 and 1996, and the results
of their combined operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
Karlins Fuller Arnold & Klodosky, P.C.
Houston, Texas
September 19, 1997
86
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
COMBINED BALANCE SHEETS
June 30, June 30,
1997 1996
-------- ----------
ASSETS
--------
CURRENT ASSETS
Cash $ 774,744 $ 816,872
Accounts receivable, trade, less allowance
for doubtful accounts of $100,000 and $41,000
at June 30, 1997 and 1996, respectively 4,350,887 3,694,042
--------- ---------
Total Current Assets 5,125,631 4,510,914
--------- ---------
PLANT AND EQUIPMENT, NET 462,002 527,793
---------- -----------
OTHER ASSETS
Cost in excess of net assets acquired, net 17,600 14,400
Other assets 12,348 14,589
----------- ------------
29,948 28,989
----------- ------------
Total Assets $5,617,581 $5,067,696
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $2,307,083 $ 1,898,040
Accrued expenses 929,820 412,227
Deferred income tax 74,388 106,776
----------- -----------
Total Current Liabilities 3,311,291 2,417,043
--------- ---------
DEFERRED INCOME TAX 21,014 27,305
----------- ------------
Total Liabilities 3,332,305 2,444,348
--------- ---------
STOCKHOLDERS' EQUITY
Common stock 44,000 44,000
Additional paid-in capital 153,800 153,800
Retained earnings 2,087,476 2,425,548
--------- ---------
Total Stockholders' Equity 2,285,276 2,623,348
--------- ---------
Total Liabilities and Stockholders' Equity $5,617,581 $5,067,696
========== ==========
The accompanying notes are an integral part of these financial statements.
87
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997 AND 1996
June 30, June 30,
1997 1996
---------- ----------
SALES $33,424,946 $33,037,937
COST OF SALES 27,933,265 28,171,263
---------- ----------
Gross Profit 5,491,681 4,866,674
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,980,456 4,843,489
----------- ------------
OPERATING INCOME 511,225 23,185
------------ -------------
OTHER INCOME (EXPENSE)
Rent income 94,440 76,330
Interest income 45,696 22,633
Other income (expense), net 6,735 19,909
Interest expense (12,410 (38,384)
------------ ------------
134,461 80,488
----------- ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 645,686 103,673
PROVISION FOR INCOME TAXES 722,490 96,891
------------ ------------
COMBINED NET INCOME (LOSS) $ (76,804) $ 6,782
============ =============
The accompanying notes are an integral part of these financial statements.
88
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- ---------- --------- -------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1995 ............ $39,000 $153,800 $ 2,418,766 $ 2,611,566
COMMON STOCK ISSUANCE ............. 5,000 -- -- 5,000
NET INCOME, FOR THE YEAR ENDED
JUNE 30, 1996 ................ -- -- 6,782 6,782
------- -------- ----------- -----------
BALANCE, JUNE 30, 1996 ............ 44,000 153,800 2,425,548 2,623,348
CAPITAL DISTRIBUTION OF REAL ESTATE -- -- (261,268) (261,268)
NET LOSS, FOR THE YEAR ENDED
JUNE 30, 1997 ................ -- -- (76,804) (76,804)
------- -------- ----------- -----------
BALANCE, JUNE 30, 1997 ............ $44,000 $153,800 $ 2,087,476 $ 2,285,276
======= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
89
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (76,804) $ 6,782
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 93,299 90,111
Deferred income taxes (38,679) 47,982
Accounts receivable, net (656,845) (371,352)
Other assets 1,241 6,485
Accounts payable, trade 409,043 36,366
Accrued expenses 517,593 131,727
--------- --------
Net cash provided (used in) by operating activities 248,848 (51,899)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (290,976) (49,538)
--------- ---------
Net cash used in investing activities (290,976) (49,538)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock - 5,000
-------- ---------
Net cash provided by financing activities - 5,000
-------- ---------
Net decrease in cash and cash equivalents (42,128) (96,437)
Cash and cash equivalents at beginning of year 816,872 913,309
--------- ---------
Cash and cash equivalents at end of year $ 774,744 $ 816,872
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
90
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
Columbia Shipping Group, Inc. ("the Company") is a worldwide freight
forwarders handling merchandise shipped to and from the United States.
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of:
Columbia Shipping, Inc; Columbia Shipping, Inc. (West); Columbia Shipping,
Inc. (Chicago) and Freight Express International. All significant
intercompany balances and transactions have been eliminated. Subsequent
to June 30, 1997, Columbia Shipping Group, Inc. was formed with the
stockholders of the combining companies exchanging their stock for stock
in the Company. This transaction is in contemplation of the acquisition
by Golden Eagle Group, Inc. (Note 9).
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
PLANT AND EQUIPMENT AND DEPRECIATION
Depreciation of plant and equipment is provided over the estimated useful
lives of the respective assets, principally on the straight-line basis.
Expenditures for additions, major renewals and betterments are capitalized
and expenditures for maintenance and repairs are charged to earnings as
incurred.
When properties are retired or otherwise disposed of, the cost thereof and
the applicable accumulated depreciation are removed from the respective
accounts and the resulting gain or loss is reflected in earnings.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Assets to be Disposed of" is applicable
to the Company in fiscal years 1997 and 1996. This statement requires that
long-lived assets and certain intangibles to be held and used by the Company
be reviewed for impairment. This pronouncement did not have a material impact
on the financial statements of the Company.
REVENUE RECOGNITION
The Company earns forwarding commissions and brokerage fees on ocean and air
shipments. Forwarding commissions are determined on a standard rate per
shipment and brokerage fees are determined as a percent of the freight bills
charged by the common carriers.
AMORTIZATION
The cost in excess of net assets of businesses acquired at their respective
acquisition dates are amortized on a straight-line basis over primarily 5
years. On an annual basis, the Company assesses the carrying value in order
to determine whether an impairment has occurred, taking into account both
historical and forecasted results of operations.
INCOME TAXES
The Company reflects income taxes based on the liability method of accounting
which requires the recognition of deferred tax assets and liabilities which
are determined based on the differences between the financial statement and
tax basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
91
<PAGE>
CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less from the date of purchase to be cash equivalents.
92
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Supplemental Disclosures of Cash Flow Information for the years ended June
30, 1997 and 1996 is as follows:
1997 1996
------- -------
Cash payments for interest $ 12,410 $38,384
Cash payments for income taxes $146,997 $84,679
Supplemental schedule of noncash investing and financing activities:
For the year ended June 30, 1997, in contemplation of the proposed
acquisition of the Company (Note 9), the office and warehouse facility for
the New York facility (amounting to $261,268) was distributed to the
stockholders of Columbia Shipping, Inc.
MAJOR CUSTOMERS
The Company had revenues from five customers that represented 20% and 29% of
total revenue for the years ended June 30, 1997 and 1996, respectively.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
Land $ - $ 67,908
Buildings - 401,835
Office equipment 1,815,314 1,574,753
Transportation equipment 262,530 256,375
Leasehold improvements 142,313 142,313
---------- ----------
2,220,157 2,443,184
Accumulated depreciation and amortization 1,758,155 1,915,391
--------- ---------
$ 462,002 $ 527,793
========== ==========
Depreciation and amortization expense $ 93,299 $ 90,111
=========== ==========
</TABLE>
Fully depreciated assets still in service amounted to $1,185,612 and
$1,137,053 at June 30, 1997 and 1996, respectively.
3. DEBT
The Company has a bank line of credit available with maximum borrowings
allowed of $600,000. Outstanding borrowings bear interest at prime plus
0.25%. This note is collateralized by substantially all of the Company's
assets and the personal guarantee of the two stockholders of Columbia
Shipping, Inc., and expires in December, 1997. As of June 30, 1997 and 1996,
there were no outstanding borrowings under this note.
93
<PAGE>
4. RELATED PARTY TRANSACTIONS
Related party transactions and balances with parties related by common
ownership are as follows:
1997 1996
--------- --------
Accounts Receivable, trade $ 48,640 $ 23,197
Revenues $145,800 $163,345
94
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
5. INCOME TAXES
The components of the provision for income taxes are as follows:
1997 1996
-------- -------
Current $761,168 $55,930
Deferred (38,678) 40,961
-------- -------
$722,490 $96,891
======== =======
The significant components of the net deferred tax asset (liability) at
June 30, 1997 and 1996 are as follows:
1997 1996
-------- --------
Plant and equipment $(21,014) $ (27,306)
Accrued liabilities (74,388) (106,775)
------- --------
$(95,402) $(134,081)
======== =========
The provision for federal income taxes differs from that computed by
applying federal statutory rates to income before federal income tax
expense, as indicated in the following analysis:
1997 1996
---- ----
Expected tax provision at 34% 34% 34%
Income not subject to tax due to net operating
loss in Columbia Shipping, Inc., (West) (13) (7)
Non deductible expenses 1 66
Additional income tax attributable to tax returns
subject to audit 92 -
--- ----
114% 93%
=== ===
Columbia Shipping, Inc., (West) has net operating loss carryforwards of
approximately $110,000 and $370,000 at June 30, 1997 and 1996,
respectively, for federal income tax purposes available to offset future
taxable income, expiring, if not used, periodically through the year 2010.
FINANCIAL INSTRUMENTS
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
accounts receivable. The Company had cash balances of $138,758, $143,124
and $158,491 at June 30, 1997, with various financial institutions, which
is in excess of the federally insured limit of $100,000. At June 30, 1996,
no cash balances were in excess of federally insured limits.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's
customer base and their diverse industries and geographic areas.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, cash equivalents, accounts receivable,
accounts payable, and accrued liabilities approximate fair value because
of the short maturity of these items.
95
<PAGE>
PROFIT SHARING EXPENSE
The Company has a profit-sharing (defined contribution) retirement plan
covering substantially all employees with one year of service. The amount
of contribution to the plan is determined annually by each company's Board
of Directors. The amount expensed for the years ended June 30, 1997 and
1996 amounted to $110,171 and $111,953, respectively.
96
<PAGE>
COLUMBIA SHIPPING GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
8. COMMON STOCK
The Common Stock for the companies are as follows:
Columbia Shipping, Inc. - no par value; 200 shares authorized, 100 issued
and outstanding Columbia Shipping, Inc. (Chicago) - $1 par value; 3,000
shares authorized, issued and outstanding Columbia Shipping, Inc. (West) -
$1 par value, 100,000 shares authorized, 3,000 issued and outstanding
Freight Express International, Inc. - no par value; 200 shares authorized,
issued and outstanding
9. SUBSEQUENT EVENT
In July, 1997, the Company has entered into an agreement to which Golden
Eagle Group, Inc. would acquire the Company. The transaction is
anticipated to take the form of a merger, with an anticipated purchase
price of $6.3 million in a combination of cash, debt and common stock. The
acquisition is subject to various conditions including negotiation and
execution of a definitive agreement and completion of due diligence.
97
<PAGE>
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 3.
PRO FORMA FINANCIAL INFORMATION
98
<PAGE>
GOLDEN EAGLE GROUP AND SUBSIDIARIES AND
COLUMBIA SHIPPING GROUP, INC.
PRO FORMA FINANCIAL STATEMENTS
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying unaudited pro forma condensed consolidated balance sheet as of
September 30, 1997 presents the consolidated financial position of Golden Eagle
Group, Inc. ("the Company") and Columbia Shipping Group, Inc. ("CSG") assuming
the acquisition of CSG had occurred on that date. The unaudited pro forma
condensed consolidated statements of operations for the twelve months ended
December 31, 1996 and the nine months ended September 30, 1997 reflect the
acquisition as if it had occurred on January 1, 1996.
The terms of the CSG acquisition, treated as a purchase for financial reporting
purposes, provided for Golden Eagle Group to purchase all of the issued and
outstanding common stock of CSG through the issuance of 598,718 shares of the
Company's Common Stock, $.01 par value, the payment of $3,833,333 in cash (the
"Cash Consideration") and the making of a promissory note payable to a selling
stockholder in the amount of $1,083,333.
The source of the Cash Consideration paid by the Company was a $3,833,333 term
loan from the Company's principal bank. The term loan bears interest at the
bank's prime rate plus 1/2% and is to be repaid in quarterly installments of
principal and interest beginning January 27, 1998 with a final payment due
October 27, 2002. The term loan is collateralized by substantially all of the
Company's assets.
The note payable to a former CSG stockholder bears interest at 10% per annum and
requires the payment of accrued interest at the end of each month until November
1, 2005. The principal amount of the note is due and payable in 16 quarterly
payments beginning on February 1, 2002 and ending on November 1, 2005. The note
is subordinated to the Company's indebtedness to the bank.
The pro forma financial information does not purport to be indicative of the
results which would have actually have been obtained had the acquisition been
completed as of the assumed dates and for the periods presented or which may be
obtained in the future. The pro forma adjustments described in the notes to the
pro forma condensed consolidated balance sheet and condensed consolidated
statement of operations reflect the preliminary estimated allocation of the
purchase price to net assets and is subject to final determination.
99
<PAGE>
GOLDEN EAGLE GROUP, INC./COLUMBIA SHIPPING GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
(9/30/97) (6/30/97)
Golden Columbia
Eagle Shipping Pro Forma Consolidated
Group Group Adjustments Pro Forma
---------- ----------- ------------ -----------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash ............................... $ 171 $ 775 $ $ 946
Accounts receivable,
trade less
allowance for doubtful
accounts ........................ 9,523 4,352 13,875
Other current assets ............... 415 415
------- ------ -------- --------
TOTAL CURRENT ASSETS ............... 10,109 5,127 15,236
------- ------ -------- --------
PLANT AND EQUIPMENT, at
cost ............................... 3,772 2,220 (200) (a) 5,792
Less accumulated
depreciation .................... (2,774) (1,758) (4,532)
and amortization
DEFERRED INCOME TAXES .............. 342 342
INTANGIBLE ASSETS
Goodwill ........................... 4,178 6 3,912(a) 8,096
Other assets ....................... 23 23
======= ====== ======== ========
TOTAL ASSETS ....................... $ 15,627 $5,618 $3,712 $ 24,957
======= ====== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable ....................... $ 800 $ $ $ 800
Current portion of
long-term debt ..................... 767(a) 767
Obligations under capital
leases ............................. 48 48
Deferred income tax s/t ............ 74 74
Accounts payable, trade
and
accrued liabilities ............. 6,198 3,237 (266)(a) 9,169
------- ------ -------- --------
TOTAL CURRENT LIABILITIES .......... 7,046 3,311 501 10,858
------- ------ -------- --------
LONG-TERM DEBT
Note payable, bank ................. 3,067(a) 3,067
Note Payable, seller ............... 1,083(a) 1,083
Obligations under capital
leases ............................. 21 21
Deferred income taxes .............. 32 32
------- ------ -------- --------
TOTAL LIABILITIES .................. 7,078 3,332 4,651 15,061
------- ------ -------- --------
STOCKHOLDERS' EQUITY
Common stock ....................... 57 44 (38)(a) 63
Additional paid-in
capital ............................ 9,278 154 1,187 (a) 10,619
Retained earning
(deficit) .......................... (786) 2,088 (2,088)(a) (786)
------- ------ -------- --------
TOTAL STOCKHOLDERS' EQUITY ......... 8,549 2,286 (939) 9,896
------- ------ -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ............ $ 15,627 $ 5,618 $ 3,712 $ 24,957
======= ====== ======== ========
</TABLE>
100
<PAGE>
GOLDEN EAGLE GROUP / COLUMBIA SHIPPING GROUP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(9/30/97) (9/30/97)
Golden Columbia Pro forma Consolidated
Eagle Group Shipping Group Adjustments Pro forma
----------- -------- --------- -----------
<S> <C> <C> <C> <C>
Sales ................................................ $ 54,116 $ 26,537 $ $ 80,653
Cost of sales ........................................ 40,391 22,648 63,039
----------- -------- --------- -----------
Gross profit ........................................ 13,725 3,889 0 17,614
Selling, general and administrative expenses .......... 13,189 3,564 73(c) 16,826
(54)(d) (54)
(292)(e) (292)
90(f) 90
136(g) 136
(67)(h) (67)
----------- -------- --------- -----------
13,189 3,564 (114) 16,639
----------- -------- --------- -----------
Operating income ..................................... 536 325 114 975
----------- -------- --------- -----------
Other income (expense)
Gain (loss) on retirement of assets ............... 2 0 2
Interest income ................................... 39 39
Rent income ....................................... 71 71
Other income (expense) ............................ 49 49
Interest expense .................................. (37) (6) (327)(b) (370)
Foreign currency gain (loss) ...................... 55 (2) 53
----------- -------- --------- -----------
20 151 (327) (156)
----------- -------- --------- -----------
Income before provision for income taxes ............. 556 476 (213) 819
Provision for income taxes ......................... 258 410 (301)(i) 367
----------- -------- --------- -----------
Net income ........................................... $ 298 $ 66 $ 88 $ 452
=========== ======== ========= ===========
Net income per share ................................. $ 0.05 $ 0.07
=========== ===========
Weighted average number of shares .................... 5,818,260 598,718 6,416,978
=========== ======== ========= ===========
</TABLE>
101
<PAGE>
GOLDEN EAGLE GROUP/COLUMBIA SHIPPING GROUP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(12/31/96) (12/31/96)
Golden Columbia Pro forma Consolidated
Eagle Group Shipping Group Adjustments Pro forma
----------- -------- --------- -----------
<S> <C> <C> <C> <C>
Sales ................................................. $ 66,506 $ 33,232 $ $ 99,738
Cost of sales ......................................... 49,238 28,053 77,291
----------- -------- --------- -----------
Gross profit ........................................ 17,268 5,179 0 22,447
Selling, general and admininstrative expenses ......... 15,956 4,913 98(k) 20,967
(86)(l) (86)
(390)(m) (390)
120(n) 120
182(o) 182
(90)(p) (90)
----------- -------- --------- -----------
15,956 4,913 (186) 20,703
----------- -------- --------- -----------
Operating income ...................................... 1,312 266 186 1,744
----------- -------- --------- -----------
Other income (expense)
Gain (loss) on retirement of assets ................ 2 0 2
Interest income .................................... 35 35
Rent income ........................................ 85 85
Other income (expense) ............................. 22 14 36
Interest expense ................................... (98) (25) (427)(j) (550)
Foreign currency gain (loss) ....................... 55 0 55
----------- -------- --------- -----------
(19) 109 (427) (337)
----------- -------- --------- -----------
Income before provision for income taxes .............. 1,293 375 (261) 1,407
Provision for income taxes .......................... (431) 411 (351)(q) (371)
----------- -------- --------- -----------
Net income ............................................ $ 1,724 $ (36) $ 90 $ 1,778
=========== ======== ========= ===========
Net income per share .................................. $ 0.29 $ 0.27
========= ===========
Weighted average number of shares ..................... 5,947,697 598,718 6,546,415
=========== ========= ===========
</TABLE>
102
<PAGE>
NOTES TO CONSOLIDATED PRO FORMA
FINANCIAL STATEMENTS
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated balance
sheet as of September 30, 1997 presents the consolidated financial
position of Golden Eagle Group and Columbia Shipping Group assuming
the acquisition occurred on such date. The unaudited pro forma
condensed consolidated statement of operations for the nine months
ended September 30, 1997 and the year ended December 31, 1996
reflect the merger as if it had been consummated at the beginning of
1996.
In the transaction, Golden Eagle Group acquired all of the issued
and outstanding stock of Columbia Shipping Group for 598,718 shares
of Golden Eagle common stock, $3,833,333 in cash and a promissory
note to a selling stockholder of $1,083,333.
The historical balance sheet used in the preparation of the pro
forma consolidated financial statement has been derived from the
Company's unaudited financial statements as of September 30, 1997.
The historical statements of operations for the nine months and
twelve months for CSG have been derived from its audited statements
of operations for the years ended June 30, 1997and1996 and from the
unaudited statements of operations for the three months ended
September 30, 1997.
2. UNAUDITED PRO FORMA ADJUSTMENTS
BALANCE SHEET AS OF SEPTEMBER 30, 1997
(a) SUMMARY OF ACQUISITION:
Cost in excess of net assets of business
acquired (goodwill) $3,912
Elimination of capital structure of
Columbia Shipping Group
Representing its net assets:
Common stock $44
Additional paid-in capital 154
Retained earnings 2,088 2,286
---------------
6,198
Writedown of acquired computer system to
salvage value (200)
Reversal of accrued tax liability subject
to escrow
Agreement and offset rights with seller 600
------
$6,598
======
103
<PAGE>
ACQUISITION FINANCED BY:
Note payable, bank
Current portion 767
Long-term portion 3,067
Note payable, seller 1,083
Common stock (598,718 at $.01 par value $ 6
Additional paid-in capital (share value
$2.25) 1,341 1,347
--------
Other acquisition costs:
Accrued acquisition costs 334
======
$6,598
======
INCOME STATEMENT FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1997:
(b) To record interest expense on additional borrowings:
Bank note of $3,833 at 9% $246
Seller note of $1,083 at 10% 81
-------
$327
(c) To record amortization of goodwill resulting from the
acquisition based on an estimated 40 year amortizable life for
$73.
(d) To revise benefit plans expense to conform to Golden Eagle's
plans, reflecting a $54 reduction.
(e) To eliminate compensation payments to CSG shareholder under
consulting agreement, a $292 reduction.
(f) To record payments under consultancy agreement with former
shareholder, increase of $90.
(g) To replace depreciation on building not included in acquisition
with triple net lease cost on NYK facility, an increase cost of
$136.
(h) To eliminate non-renewed redundant leases in Los Angeles, San
Francisco and Chicago, a reduction of $67.
(i) To eliminate income tax provision subject to escrow and offset
agreements and replace with provision for current period
earnings only, a reduction of $301.
INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 1996:
(j) To record interest expense on additional borrowings:
Bank note of $3,833 at 9% $319
Seller note of $1,083 at 10% 108
-------
$427
(k) To record amortization of goodwill resulting from the
acquisition based on an estimated 40 year amortizable life for
$98.
105
<PAGE>
(l) To revise benefit plans expense to conform to Golden Eagle's
plans, reflecting a $86 reduction.
(m) To eliminate compensation payments to CSG shareholder under
consulting agreement, a $390 reduction.
(n) To record payments under consultancy agreement with former
shareholder, increase of $120.
(o) To replace depreciation on building not included in acquisition
with triple net lease cost on NYK facility, an increase cost of
$182.
(p) To eliminate non-renewed redundant leases in Los Angeles, San
Francisco and Chicago, a reduction of $90.
(q) To eliminate income tax provision subject to escrow and offset
agreements and replace with provision for current period
earnings only, a reduction of $351
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FORM 10Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 170,778
<SECURITIES> 0
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0
0
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<CGS> 40,391,525
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</TABLE>
