SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended DECEMBER 31,1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from __________ to __________.
Commission file number 1-11480
GOLDEN EAGLE GROUP, INC.
(Exact name of registrant 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)
Registrant's telephone number, including area code 281-446-2656
Securities registered pursuant to Section 12 (b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, par value $.0l per share Boston Stock Exchange
NASDAQ Smallcap
Redeemable Common Stock Purchase Warrants Boston Stock Exchange
NASDAQ Smallcap
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the 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 [ ]
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant on March 16, 1998, computed by reference to the
price at which the stock was sold on that date: $3,587,033.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the registrant's Common Stock, par
value $.0l per share (the "Common Stock"), as of March 16, 1998 was 6,410,218.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
To the extent specified, Part III of this Form 10K incorporates
information by reference to the Registrant's definitive proxy statement
for the 1997 Annual Meeting of Shareholders.
<PAGE>
THE FOLLOWING TEXT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES
THERETO) APPEARING ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(A) BUSINESS DEVELOPMENT
Golden Eagle Group, Inc., a Delaware corporation (the "Company"), through its
wholly-owned subsidiaries, is engaged in the business of providing
international transportation logistics and related services. The Company
provides logistics services and international air and ocean freight forwarding,
primarily for shipments from Texas to Europe, the Middle East, the Far East,
Russia/CIS and Africa, from the Washington D.C. area to Europe and Asia and
shipments from Miami to Central and South America and the Caribbean, as well as
shipments from the Company's other facilities in the United States, and
incidental services such as packing, crating and warehousing. As a freight
forwarder, the Company plans and facilitates the shipment of goods and
merchandise from point of origination to destination by securing air or ocean
cargo space, arranging for delivery of goods to carriers and preparing shipping
and customs documentation. The Company is also a licensed customs broker.
The Company maintains its principal office in Houston and branch offices in
Miami, San Francisco, Los Angeles, Chicago, New York City, Washington D.C,
Baltimore, Phoenix, Denver, Dallas, Philadelphia and Laredo and services
overseas points of destination or origination through a network of
international freight forwarders who act as local agents for the Company.
In March 1994, the Company acquired all of the outstanding capital stock of
DAHER America through the merger of a newly formed subsidiary of the Company
into and with DAHER America, the ("Merger"). For accounting purposes, the
Merger is treated as if DAHER America acquired the Company and therefore,
effective March 1, 1994, the historical consolidated financial statements of
DAHER America are deemed to be the financial statements of the Company.
Accordingly, all financial information herein for periods prior to March 1,
1994 reflects only the financial results of DAHER America.
In furtherance of its expansion strategy, effective October 27, 1997, the
Company acquired all of the outstanding capital stock of Columbia Shipping
Group, Inc. ("CSG"), a privately held full-service regional freight forwarder
and customs broker with headquarters in New York City and facilities in Chicago,
Los Angeles, San Francisco and Philadelphia, hereinafter, referred
to as (the "Acquisition").
The Company, a successor to a business established in 1979, was incorporated in
Delaware on June 29, 1992. Unless the context requires otherwise, (i) all
information in "Item 1. Description of Business", "Item 9. Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act" and " Item 11. Security Ownership of Certain Beneficial Owners and
Management", gives effect to the Merger and Acquisition and (ii) the "Company"
refers to Golden Eagle Group, Inc. and its consolidated subsidiaries, including
DAHER America, Inc., World Trade Transport of Virginia, Inc. and Columbia
Shipping Group, Inc.
(B) BUSINESS OF ISSUER
OPERATIONS
Airfreight Forwarding. In its airfreight forwarding operations, the Company
prepares airway bills, collects through charges, provides handling services,
routes and traces shipments, investigates and settles claims, arranges for and
performs transfer services, provides shipping advice, prepares shipping and
customs documentation and furnishes various other incidental services. The types
of items shipped in the airfreight forwarding portion of the Company's business
are typically of an urgent nature where shippers realize the speed and/or
convenience of air freight delivery. The Company does not own or operate any
aircraft.
The Company consolidates consignments bound for locations for which it has a
significant volume of business into a single shipment. The amount, which the
Company charges its customers, is based upon the weight of the item to be
shipped. Typically, as the weight of a shipment increases, the cost per pound
charged by both commercial air carriers to the Company and by the Company to its
customers decreases. As a result, by consolidating the shipments of its
customers and presenting them to a commercial air carrier as a single shipment,
the Company is normally able to offer its customers a lower cost than they could
individually obtain and, as a general rule, realize a higher gross profit margin
on consolidated shipments than on unconsolidated shipments. The differential
between the rate charged to the Company by an air carrier and the rate which the
Company charges to its customers, plus fees for incidental services and a
commission paid to the Company by the commercial air carrier for utilizing its
services, represents the gross profit made by the Company in connection with
such shipments. In the case of unconsolidated shipments, the Company's income is
derived primarily from commissions paid by the air carrier. The Company monitors
the rates charged by commercial air carriers in the markets serviced by the
Company and adjusts, as it deems appropriate and consistent with competitive
factors, the rates it charges its customers to reflect changes in commercial air
carrier rates.
In a typical international consolidated air shipment, the Company's customers,
or non-affiliated commercial trucking companies ("common carriers"), deliver the
articles to be exported to one of the Company's offices. At such office, the
shipments are consolidated and are delivered by the Company's trucks or a hired
common carrier to a commercial air carrier for shipment. Upon arrival at the air
carrier's foreign destination, a local independent freight forwarder acting as
an agent for the Company takes delivery of the consolidated shipment and breaks
it down into its various components. These separate components are then either
picked up by the consignee or are delivered by an independent carrier to their
final destination at the consignee's expense.
The Company's liability to its customers for lost or damaged goods in
consolidated shipments is limited contractually to a maximum of $9.07 per pound
unless the shipper specifically requests excess valuation coverage or insurance
for the goods being shipped. In that event, the Company obtains insurance in the
amount by which the value of such goods exceeds such contractual limitation. The
air carriers utilized by the Company to make the actual shipment are liable to
the Company for a maximum of $9.07 per pound by international treaty. The
Company when acting solely as agent for an air carrier in connection with
unconsolidated shipments, generally does not have any contractual liability for
lost or damaged goods following delivery thereof to the air carrier. The Company
maintains insurance that it believes is adequate to protect itself against
losses attributable to lost or damaged shipments.
OCEAN FREIGHT FORWARDING. As an ocean freight forwarder, the Company acts as an
agent of the shipper or the consignee, obtains cargo space, coordinates delivery
of shipments to ocean carriers, prepares required shipping and customs
documentation, procures insurance, and furnishes other miscellaneous services,
such as inland transportation, packing, crating and warehousing.
The Company does not own or operate any ships.
An important aspect of the Company's ocean freight forwarding operations is its
consolidation activities. In connection with shipments between locations for
which the Company has a significant amount of business, the Company combines
shipments bound for a particular destination, determines the routing, selects
the direct carrier and renders each consolidated lot as a single shipment to the
direct carrier. Consolidated shipments are packed in containers furnished by the
carrier. At the distribution point, the Company's agent receives the
containerized shipment, breaks it into its component shipments and distributes
the individual shipments. Consolidation of shipments benefits the customer as it
permits the Company to offer more attractive rates to its customers and affords
greater security against damage or loss both during shipment and customs
clearance. The Company's consolidated shipments typically generate a higher
gross profit margin for the Company.
As an ocean freight forwarder, the Company's revenues are derived primarily from
commissions paid for procuring shipments to be carried by an ocean carrier and
from fees charged to customers for additional services provided by the Company,
such as preparing documentation, procuring insurance, packing, crating and
consultation. The commissions paid to the Company by shipping lines for using
their services are either fixed by the carrier or by shipping conferences of
which the carrier is a member. The fees charged by the Company to its customers
for additional services are determined by negotiation between the Company and
such customers.
AGENTS. The Company serves overseas points of destination or origination through
a network of local international freight forwarders who act as agents for the
Company. The services provided by the Company's agents, who are retained on both
an exclusive and non-exclusive basis, include receiving shipments and arranging
for their delivery for consignees, delivering outgoing shipments to carriers,
preparing and assisting in the processing of shipping and foreign customs
documentation and obtaining customers for the Company's services. The Company
has an agency agreement with Compagnie Daher, it's largest shareholder, whereby,
Compagnie Daher serves as its exclusive agent in France and Compagnie Daher
appointed the Company as its exclusive agent in the United States, other than
with respect to one of Compagnie Daher's existing accounts.
The Company believes that the use of agents in foreign countries may be
preferable in many instances to setting up Company offices in such locations,
because such agents are typically local international freight forwarders with
established infrastructures, existing relationships with customers and carriers
and familiarity with local customs and legal requirements.
CUSTOMS BROKERAGE. As a customs broker, the Company assists importers in
clearing their shipments through United States Customs by preparing required
customs documentation, providing for payment of duties on behalf of the
importer, arranging for required inspections by governmental agencies and
arranging for ultimate delivery of the shipment. The Company offers customs
brokerage services to all shippers and not just those using its ocean and
airfreight forwarding services. The Company is a member of the United States
Customs Automated Broker Interface program which permits the Company to clear
its customers' goods through United States Customs electronically, allowing the
customer to obtain its goods in a matter of hours rather than days.
The Company's revenues from its customs brokerage operations are derived from
the fees it charges its customers. The Company does not have a fixed fee
schedule for such services and the determinations of such fees are not
regulated. Instead, customs brokerage fees are based upon the complexity of the
transaction, the nature of the shipment, the value of the articles comprising
the shipment and the types of services required. The Company in certain
instances may advance customs duties or fees for its customers.
WAREHOUSING OPERATIONS. The Company offers regular warehousing in all of its
U.S. branch offices, except Philadelphia, as well as United States Customs
bonded warehousing in Miami and Laredo. In its bonded warehouse, the Company can
hold foreign merchandise on behalf of the customer until the customer is ready
to ship its merchandise for up to five years without the customer paying duties.
The Company's revenues from its warehousing operations are derived from fees it
charges to its customers.
CRATING, PACKING AND ANCILLARY SERVICES. The Company offers routine and custom
crating and packing services in all of its offices both in connection with its
ocean and airfreight forwarding business and independently of such activities.
Most crating and packing is performed in connection with the Company's freight
forwarding business. Rates for routine packing and crating are based upon the
number of items to be packed or crated and the type of packing or crating
required. Fees charged in connection with custom crating and packing are
determined by negotiation between the Company and its customers.
The Company operates a fleet of trucks in Miami, Washington, DC and Houston for
the purpose of delivering shipments to a carrier and providing for pick up of
merchandise for certain local customers. The Company is licensed to use its
trucks to transport bonded goods in Miami. Except for the foregoing, the Company
does not otherwise handle the transport of goods and merchandise itself and
consequently does not assume the liability for transport attributable to common
carriers.
The Company charges various fees for services ancillary to its freight
forwarding activities, such as preparing shipping documentation, investigating
and settling claims, performing transfer services, providing consulting services
and acting as a charter broker. Fees for ancillary services are determined by
negotiation or are set by the Company prior to the time such services are
provided.
EXPANSION STRATEGY
Since completion of its initial public offering in November 1992, the Company's
strategy has been to expand its operations through the establishment of
additional domestic regional offices. The acquisition of DAHER America, which
maintained its principal office in Houston and facilities in Los Angeles, San
Francisco, Chicago and New York City, accomplished part of this strategy. In
1993, as part of this strategy, the Company also opened a branch office in
Laredo. Since the Merger, the Company has also sought to further expand its
operations by combining DAHER America's expertise and additional capabilities in
Europe, the Middle East and Far East with the Company's expertise in Central and
South America, the Caribbean and Mexico.
In addition to the foregoing, during 1994 the Company adopted a strategy of
acquiring niche companies in the transportation logistics field, which not only
complement its existing business but also offer the opportunity for growth in
revenues and profitability. Pursuant to this strategy, in July 1995, the Company
acquired WTT, a regional Washington D.C. area forwarder and customs broker with
offices at Sterling, Virginia, Baltimore and at Dulles Airport.
In July 1996, the Company acquired certain assets of Ryan Freight Services, a
Dallas based freight forwarder with offices in Las Vegas, Phoenix, Dallas and
Denver. The Company subsequently closed the Las Vegas operation but has added
the remaining three locations to its service network.
In October 1997, the Company completed the acquisition of Columbia Shipping
Group, Inc., ("CSG"), a New York based freight forwarder and customs broker with
additional offices in Philadelphia, San Francisco, Los Angeles and Chicago. The
Philadelphia office is a new addition to the Company's service network. The
remaining locations add additional strength and service capabilities to existing
Company locations.
MARKETING
The Company effects approximately 9,000 transactions per month and has
approximately 2,000 customers, including multi-national manufacturers of office
and air conditioning equipment, consumer electronics and athletic footwear, as
well as companies involved in the oilfield and aeronautics industries, and
automobile dealerships, furniture manufacturers and building supply contractors.
The Company seeks to provide a high level of service to its customers, with
emphasis on reliability and responsiveness to customer needs.
The Company's largest customer, Amoco Production Company and related affiliates,
accounted for approximately 6.5%, 13.0% and 12.6% of the Company's consolidated
revenues for the years ended December 31, 1997, 1996 and 1995 respectively. The
decrease in revenues attributable to this customer is primarily due to
completion of several significant projects in 1996. Additionally, the CSG
acquisition in the fourth quarter of 1997 had a dilutive effect on the
percentage for 1997 as compared to 1996 and 1995. Although the Company has
signed a cooperative agreement with the customer, the agreement is not a binding
contract. The loss of this customer could have a material adverse effect on the
Company's present and proposed business activities. No other customer accounted
for more than 6% of the Company's revenue in 1997, 1996 and 1995.
In addition to its management team who are actively engaged in sales efforts,
the Company employs a full-time sales staff. In addition, the Company maintains
a customer service department, which the Company believes is a key factor in
obtaining and servicing customers.
COMPETITION
Freight forwarding and customs brokerage are intensely competitive and are
expected to remain so for the foreseeable future. The Company competes with a
large number of freight forwarding concerns in a highly fragmented industry,
some of which have greater financial resources and name recognition, more
experience, more offices and offer a broader variety of services than the
Company. The Company believes that price and quality of service, including
reliability, responsiveness, expertise, convenience and scope of operations are
the most competitive factors in the freight forwarding industry. The Company
believes that it competes effectively amongst its peers because it holds the
necessary licenses to offer a broader array of services than many freight
forwarders of comparable size and furnishes a high level of customer service.
GOVERNMENT REGULATION
The Company's airfreight forwarding business is subject to regulation, as an
indirect air cargo carrier, under the Federal Aviation Act by the Department of
Transportation (the "DOT"), the successor to the Civil Aeronautics Board. Part
296 of the DOT's Economic Aviation Regulations exempts airfreight forwarders
from most, but not all, of such act's requirements. The major provisions of the
act that remain applicable to the Company are subsection 403(b)(2) which forbids
solicitation of certain rebates; Section 404(a), which requires the Company to
provide safe service, equipment and facilities; Section 404(b), which prohibits
discrimination with respect to foreign air cargo transportation; Section 407(a),
which requires the keeping of certain accounts; Section 411, which prohibits
unfair or deceptive practices; and Section 415 which authorizes the DOT to
inquire into the Company's management for certain purposes. Additionally, as an
indirect air cargo carrier, the Company is required to maintain a security
program in accordance with Title 14 of the Code of Federal Regulations, Part
109, which requires certain security procedures be followed to protect the
safety of commercial aviation.
The Company is licensed as an ocean freight forwarder by the Federal Maritime
Commission (the "FMC") and is also authorized by the FMC under the names
"Bridgeport Shipping Lines" and "Dacom Line" to act as a Non-Vessel Operating
Common Carrier. The FMC prescribes qualifications for acting as a shipping
agent, including certain surety bonding requirements.
The Company is certified as an airfreight forwarder by the International Air
Transport Association ("IATA"), a voluntary association of airlines, which
prescribes certain operating procedures for airfreight forwarding companies when
acting as an agent for members of IATA. The majority of the Company's airfreight
forwarding business is conducted with airlines, which are IATA members.
The United States Customs Service of the Department of the Treasury licenses the
Company as a customs broker in each customs district in which it does business.
All customs brokers are required to maintain prescribed records and are subject
to periodic audits by the United States Customs Service.
The Company's facilities in Laredo, Texas and Miami, Florida are authorized by
the United States Customs Service as bonded warehouses. In addition, the Company
is designated by the United States Customs Service as a container freight
station in Miami which permits the Company to act as a transit station for cargo
held in bond. The Company is also authorized as a Customs House Cartman to
transport bonded goods to and from the Company's warehouse in Miami.
Although the Company is required to obtain certain permits and licenses and is
subject to certain regulations in connection with its operations, the Company is
not subject to rate regulations in any jurisdiction in which it currently does
business. The Company does not believe that current government regulation of its
business activities imposes significant economic restraint upon its existing
operations. However, the regulations of foreign governments may impose
significant barriers to expansion of the Company's business into new countries
in which it might desire to establish offices.
EMPLOYEES
At March 16, 1998, the Company employed approximately 300 full-time personnel.
The Company is not a party to any collective bargaining agreement and considers
its relations with its employees to be good.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's executive offices are located in a facility located near the
Houston Bush Intercontinental Airport consisting of approximately 10,000 square
feet of office space and 50,000 square feet of warehouse space. The facility is
leased pursuant to a lease expiring in December 2002. The annual rent under such
lease is $206,939 through December 1997 and increases at the rate of three
percent per year. The Company also leases approximately 25,000 square feet of
warehouse space and 5 acres of yard space of an adjacent facility on a
month-to-month basis.
The Company occupies an approximately 112,500 square foot facility located in
Miami, Florida. Such facility includes approximately 12,500 square feet of
office space, 90,000 square feet of regular warehouse space and 10,000 square
feet of bonded warehouse space. The term of the lease for such facility is seven
years and expires in September 1999. Rent under the lease ranges from $441,339
for the first year to $592,944 for the seventh year. The Company has an option
to renew such lease for an additional seven-year term, with rental increases of
four percent per year. The Company also leases approximately 34,300 square feet
of additional general warehouse space in the same commercial park under a
one-year lease expiring in July 1998.
The remaining branch offices of the Company are also located in leased
facilities. The terms of such leases expire commencing in 1997 through 2002. The
aggregate amount of the annual rental payments under such leases is currently
approximately $1,615,530.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to routine litigation incident to the operation of its
business. Some lawsuits to which the Company is party are covered by insurance
and are being defended by the Company's insurance carriers. The Company has
established reserves which management believes are adequate to cover any other
litigation losses that may occur.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Stockholders' Meeting under
the captions "Election of Directors" and "Section16(a) Information".
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock and Warrants are quoted on the NASDAO Small-Cap
Market under the symbols "GEGP" and "GEGPW", respectively, and are listed on
the Boston Stock Exchange under the symbols "GEG" and "GEGW", respectively. The
following table sets forth, for periods set forth below, the high and low bid
quotations for the Common Stock and the Warrants as reported by NASDAQ. The
NASDAQ quotations represent quotations between dealers without adjustments for
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
Common Stock Warrants
--------------------- ---------------------
High Low High Low
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1997
First Quarter .............. 3-3/16 2-1/2 1-1/8 3/8
Second Quarter ............. 3 1-7/8 9/16 1/16
Third Quarter .............. 2-1/2 2 5/16 3/16
Fourth Quarter ............. 3-3/8 1-3/4 1/2 1/16
1996
First Quarter .............. 4-1/8 1-15/16 1-5/8 5/8
Second Quarter ............. 4-1/2 3-1/2 1-7/8 1-3/8
Third Quarter .............. 5 3-1/8 2 1-1/4
Fourth Quarter ............. 4-1/2 2-3/4 1-3/4 7/8
</TABLE>
As of March 16, 1998 there were approximately 95 record holders of the
Company's Common Stock. The Company believes there are in excess of 300
beneficial owners of the Company's Common Stock.
The Company has not paid any cash dividends on its Common Stock and does not
currently intend to declare or pay cash dividends in the foreseeable future.
The Company intends to retain any earnings that may be generated to provide
funds for the operation and expansion of its business.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and the notes thereto included herein
in Item 8. The consolidated statement of income data set forth below with
respect to the fiscal years ended December 31, 1995, 1996 and 1997 and the
consolidated balance sheet data at December 31, 1996 and 1997 are derived from,
and are qualified by reference to, the audited consolidated financial statements
included in Item 8 of this report and should be read in conjunction with those
financial statements and notes thereto. The consolidated statement of income
data for the Company set forth below with respect to the years ended December
31, 1993 and 1994, and the consolidated balance sheet data for the Company at
December 31, 1993, 1994 and 1995 are derived from audited consolidated financial
statements of the Company.
THE COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1993 (1) 1994 (1) 1995 (2) 1996 1997 (3)
------------ ------------ ------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Income
Data:
Gross revenue ....... $ 33,209 $ 41,259 $ 52,450 $ 66,506 $ 83,799
Operating income .... (97) 369 1,061 1,312 714
Other income(expense) (27) (68) (131) (19) (56)
Income (loss) before
Income taxes ...... (124) 301 930 1,293 658
Net Income (loss) .... $ (124) $ 301 $ 930 $ 1,724 $ 529
------------ ------------ ------------ ------------ ------------
Income (loss) per
basic common share . $ (.04) $ .07 $ .19 $ .31 $ .09
</TABLE>
<PAGE>
THE COMPANY
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------
1993 (1) 1994 (1) 1995 (2) 1996 1997 (3)
------------ ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital ...... $ 515 $ 697 $ 1,494 $ 2,926 $ 4,395
Total assets ......... 4,339 9,430 13,607 15,192 25,921
Long-term debt,
including capitalized
lease and current
installments ........ 600 1,798 1,134 679 5,453
Shareholders' equity ... 907 3,850 5,979 8,236 10,161
</TABLE>
---------------------------
1) In March 1994, the Company acquired all of the outstanding capital stock of
DAHER America through the Merger of a newly formed subsidiary of the Company
into and with DAHER America. For accounting purposes, the Merger is treated
as if DAHER America acquired the Company and therefore, effective March 1,
1994, the historical consolidated financial statements of DAHER America are
deemed to be the financial statements of the Company. Accordingly, all
financial information herein for periods prior to March 1, 1994 reflects only
the financial results of DAHER America.
2) Effective July 31, 1995, the Company acquired all of the outstanding capital
stock of World Trade Transport of Virginia, Inc. ("WTT").
3) October 27, 1997, the Company acquired all of the outstanding capital stock
of Columbia Shipping Group, Inc. ("CSG").
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
Golden Eagle Group, Inc. and its wholly-owned subsidiaries are worldwide
freight forwarders, logistics specialists and customs brokers handling
merchandise shipped to and from the United States.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The Company's gross revenues increased $17,292,636 or approximately 26.0%
to $83,798,680 during the year ended December 31, 1997 from $66,506,044 for the
year ended December 31, 1996. Approximately 24.0% of the increase is
attributable to the acquisition of CSG in October 1997. An additional 9% of the
increase is attributable to having a full twelve months of sales in 1997
generated by the four offices acquired with the Pulk/Reedy acquisition in July
1996. The remainder is primarily due to increased sales in the Company's Miami,
Laredo and Los Angeles operations.
For the year ended December 31, 1997, gross profit increased $2,505,643 or
approximately 14.5% to $19,773,204 from $17,267,561 for the year ended December
31, 1996. Approximately 34% of the improvement is attributable to the CSG
acquisition while $418,289 or approximately 16.7% of the increase, is
attributable to a full twelve month period of revenues from the addition of the
aforementioned Pulk/Reedy offices. The remainder of the increase is primarily
due to an increase in sales in the Company's pre-existing service areas.
The Company's gross profit margin has decreased from approximately 26.0%
in 1996 to 23.6% in 1997. The decrease is attributable to the acquisition of CSG
with the aforementioned heavily weighted customs brokerage orientation.
Selling, general and administrative expenses increased approximately
19.5%, or $3,104,155 from $15,955,325 for the year ended December 31, 1996 to
$19,059,480 for the year ended December 31. 1997. As a percentage of gross
revenue, selling general and administrative costs decreased from 24.0% in 1996
to approximately 22.7% for the twelve months ended December 31, 1997. The
increase in selling, general and administrative expenses is primarily
attributable to the acquisition of CSG in October 1997 combined with the effect
having the four Pulk/Reedy offices for a full 12 months in 1997. The remainder
of the increase is directly related to the Company's increase in gross profit
mentioned above.
Interest expense increased $38,158 to $135,907 for the year ended December
31, 1997 as compared to $97,749 for the year ended December 31, 1996. The
increase in interest expense is attributable to the bank financing of the
acquisition of CSG in October 1997.
The Company had operating income and net income of $658,045 and $528,804,
respectively, for the year ended December 31, 1997 as compared to operating
income and net income of $1,292,849 and $1,723,566, respectively, for the year
ended December 31, 1996. The Company attributes the decline in operating income
to decreases in project revenues due to completion of those projects combined
with increases in sales and marketing costs. The sales and marketing costs have
not produced sufficient return to cover cost or replace the project revenues.
Results for the year ended December 31, 1997 include a provision for
federal income tax expense of $129,241 as compared to the year ended December
31, 1996 where, due to the existence of unrecorded and unexpired net operating
loss tax carryforwards, the Company was not required to provide for federal
income tax expense. In the fourth quarter of 1996 the Company recognized an
initial income tax benefit of $439,011 and the establishment of a net deferred
tax asset related to a portion of the Company's unused and unexpired net
operating loss tax carryforwards, hence, the Company is now required to provide
for income tax expense based on current operating results.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The Company's gross revenues increased $14,056,350 or approximately 26.8% to
$66,506,044 during the year ended December 31, 1996 from $52,449,694 for the
year ended December 31, 1995. Approximately 43.2% of the increase is
attributable to the acquisition of WTT in July 1995. 1995 results include only
five months of WTT sales whereas 1996 results include sales for the full twelve
months. An additional 9% of the increase is attributable to sales generated by
four new offices acquired with the Pulk/Reedy acquisition. The remainder is
primarily due to increased sales in the Company's Houston, Miami and Laredo
operations.
For the year ended December 31, 1996, gross profit increased approximately
32.6% to $17,267,561 from $13,025,045 for the year ended December 31, 1995.
$2,363,001 or approximately 55.7% of the increase, is attributable to the
addition of WTT operations resulting from the July 1995 acquisition. The
remainder of the increase is primarily due to increases in sales in the
aforementioned Company service areas. The Company's gross profit margin has
increased slightly from approximately 24.8% in 1995 to 26.0% in 1996. The
increase is attributable to the increase in logistics support services sold in
1996 whereby the Company is selling a higher volume of services with fewer
direct freight costs. A higher proportion of logistics service cost is employee
payroll cost that the Company classifies as a selling, general and
administrative expense.
Selling, general and administrative expenses increased approximately 33.4%, or
$3,991,687 from $11,963,637 for the year ended December 31, 1995 to $15,955,324
for the year ended December 31. 1996. As a percentage of sales, selling general
and administrative costs increased from approximately 22.8% in 1995 to
approximately 24.0% for the twelve months ended December 31, 1996. Approximately
$2,218,100 or 55.6% of the increase is directly attributable to the Company's
acquisition of WTT in July 1995. Additionally, the Pulk/Reedy acquisition
increased selling, general and administrative costs approximately $225,000 over
the last five months of 1996 ending December 31st. The remainder of the increase
is directly related to the Company's increase in gross profit mentioned above.
Interest expense decreased by 34.2% or $50,719 to $97,749 for the year
ended December 31, 1996 as compared to $148,468 for the year ended December 31,
1995. The reduction in interest expense is attributable to the retirement of
debt using cash flow from operations.
The Company had a net income of $1,723,567 for the year ended December 31,
1996 as compared to a net profit of $929,662 for the year ended December 31,
1995. There was no provision for income tax in either period as the Company had
unexpired net operating loss carryforwards of approximately $3,300,000 and
$4,140,000 at December 31, 1996 and 1995, respectively. For the year ended
December 31, 1996, the Company recognized an income tax benefit of $430,717 with
the establishment of a net deferred tax asset related to a portion of the
Company's unused and unexpired net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had working capital of $4,394,978 as
compared to working capital of $2,925,962 at December 31, 1996. The increase in
working capital is primarily attributable to the addition of CSG in October
1997.
The Company's primary source of cash was cash flow generated by
operations. In addition, the Company has a $2,000,000 line of credit facility
with its bank for working capital requirements. Advances under the facility bear
interest at the bank's prime rate plus 1% and are due and payable on October 28,
1998. The agreement is collateralized by accounts receivable of Daher Golden
Eagle and WTT. The Company had $500,000 borrowed under the facility at December
31, 1997.
Cash flows used in investing activities were $500,635 for the year ended
December 31, 1997, primarily representing the purchase of fixed assets.
Cash flows used in financing activities were $58,253 for the year ended
December 31, 1997. The Company used cash from operations and proceeds from the
exercise of certain bridge warrants and employee stock options to reduce
outstanding debt obligations during 1996. In January 1997 the Company repaid,
from available cash flows, the term note resulting from the WTT acquisition
originally scheduled to mature through June 1998.
At December 31, 1997, the Company had cash of $755,632 as compared to
$513,842 at December 31, 1996, as a result of the activities described above.
Effective October 27, 1997, the Company acquired all of the outstanding
capital stock of CSG, a privately held, full-service regional freight forwarder
and customs broker with headquarters in New York City. Pursuant to the terms of
the acquisition, the stockholders of CSG conveyed their capital stock in CSG to
the Company in exchange for the issuance of an aggregate of 598,718 shares of
Common Stock, issuance of a note payable to the sellers in the amount of
$1,083,333, the (`Seller Note"), and payment of an aggregate of $3,833,333 in
cash to them.
The source of the cash consideration paid by the Company was a $3,833,333
term loan from the Company's principal operating bank, payable in quarterly
installments of $191,667 plus interest at 9% through October 2002. The Seller
Note is payable to an individual in quarterly installments of $67,708 beginning
February 2002 and ending November 2005. Interest is payable monthly at 10%. The
Seller Note is subordinated to the bank indebtedness.
The Company's primary financing needs relate to the financing of its
business. The Company believes that its present capital resources, when combined
with revenues generated from operations, are adequate to fund its present level
of operations. However, the Company may require additional financing to
otherwise market and expand its business. The Company is not actively seeking
additional financing and there can be no assurance that when needed, financing
will be available on commercially reasonable terms or otherwise.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE (FAS 128) which requires the presentation of both
basic and diluted earnings per share. Basic earnings per share is calculated
based on the weighted-average number of common shares outstanding during the
year. Diluted earnings per share is based on the sum of the weighted-average
number of common shares outstanding plus common stock equivalents arising out of
stock options and warrants. Earnings per share information for all periods
presented have been restated to conform to the requirements of the standard.
RESIGNATION OF DIRECTOR
On March 17, 1998, William Goldfarb resigned from the Company's board of
directors.
YEAR 2000
The Company has reviewed its critical information systems for Year 2000
compliance and has initiated plans to remedy any deficiencies in a timely
manner. As a result of the review and action plan, the Company believes the cost
of such remedial corrective actions are not material to the Company's financial
position, results of operations or cash flows.
FORWARD LOOKING STATEMENTS
This Form 10-K 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 will compete, (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.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS.
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
TABLE OF CONTENTS
PAGES
------
Report of Independent Accountants .......................... F-1
Financial Statements:
Consolidated Balance Sheets ............................ F-2
Consolidated Statements of Operations .................. F-3
Consolidated Statements of Stockholders' Equity ........ F-4
Consolidated Statements of Cash Flows .................. F-5
Notes to Consolidated Financial Statements ............. F6-F15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Golden Eagle Group, Inc.
We have audited the accompanying consolidated balance sheets of Golden Eagle
Group, Inc. and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Golden Eagle
Group, Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
Miami, Florida
February 25, 1998
F-1
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH ....................................................... $ 755,632 $ 513,842
ACCOUNTS RECEIVABLE, TRADE, LESS ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $815,000 AND $564,000
AT DECEMBER 31, 1997 AND 1996, RESPECTIVELY .............. 14,457,569 8,721,219
PREPAID EXPENSES AND OTHER CURRENT ASSETS .................. 606,608 374,805
------------ ------------
TOTAL CURRENT ASSETS .................................. 15,819,809 9,609,866
------------ ------------
PROPERTY AND EQUIPMENT, NET .................................... 1,240,848 855,687
DEFERRED INCOME TAXES ................................................ 1,262,829 552,891
COST IN EXCESS OF NET ASSETS ACQUIRED, NET ..................... 7,597,284 4,173,973
------------ ------------
TOTAL ASSETS .......................................... $ 25,920,770 $ 15,192,417
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE AND CURRENT PORTION OF LONG-TERM DEBT .............. $ 1,266,660 $ 400,000
CURRENT OBLIGATIONS UNDER CAPITAL LEASES ......................... 27,801 38,395
ACCOUNTS PAYABLE, TRADE .......................................... 9,282,002 5,529,546
ACCRUED EXPENSES ................................................. 830,246 715,963
INCOME TAX PAYABLE ............................................... 18,122 0
------------ ------------
TOTAL CURRENT LIABILITIES ................................... 11,424,831 6,683,904
------------ ------------
LONG-TERM DEBT ................................................... 4,150,006 200,000
OBLIGATIONS UNDER CAPITAL LEASES ................................. 8,727 40,645
DEFERRED INCOME TAXES ............................................ 176,617 31,896
------------ ------------
TOTAL LIABILITIES ........................................... 15,760,181 6,956,445
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK, PAR VALUE $.01, 1,000,000 SHARES AUTHORIZED, NONE
OUTSTANDING .................................................... 0 0
COMMON STOCK, PAR VALUE $.01, 10,000,000 SHARES AUTHORIZED,
6,410,218 AND 5,642,000 SHARES ISSUED AND OUTSTANDING .......... 64,102 56,420
ADDITIONAL PAID-IN CAPITAL ....................................... 10,737,277 9,016,074
STOCK SUBSCRIPTIONS .............................................. 0 247,520
EMPLOYEE RECEIVABLE .............................................. (85,552) 0
ACCUMULATED DEFICIT .............................................. (555,238) (1,084,042)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY .................................. 10,160,589 8,235,972
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 25,920,770 $ 15,192,417
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Sales ........................................... $ 83,798,680 $ 66,506,044 $ 52,449,694
Duties .......................................... (6,693,333) (6,158,956) (5,155,540)
------------ ------------ ------------
Net sales ....................................... 77,105,347 60,347,088 47,294,154
Cost of sales ................................... 57,332,143 43,079,527 34,269,109
------------ ------------ ------------
Gross profit .............................. 19,773,204 17,267,561 13,025,045
Selling, general and administrative expenses .... 19,059,480 15,955,325 11,963,637
------------ ------------ ------------
Operating income ................................ 713,724 1,312,236 1,061,408
------------ ------------ ------------
Other income (expense):
Foreign exchange gain ....................... 58,768 55,156 6,936
Gain (loss) on sale of equipment ............ 3,487 1,552 (1,811)
Other income ................................ 17,973 21,654 11,597
Interest expense ............................ (135,907) (97,749) (148,468)
------------ ------------ ------------
(55,679) (19,387) (131,746)
------------ ------------
Income before income taxes ........................ 658,045 1,292,849 929,662
Income tax provision (benefit) .................... 129,241 (430,717) 0
------------ ------------ ------------
Net income ............................................ $ 528,804 $ 1,723,566 $ 929,662
============ ============ ============
Earnings per common share and common share equivalents:
Basic ............................................. $ .09 $ .31 $ .19
============ ============ ============
Diluted ........................................... $ .09 $ .29 $ .19
============ ============ ============
Weighted average number of shares used in computing
earnings per common share:
Basic ............................................. 5,858,925 5,504,049 4,842,342
============ ============ ============
Diluted ........................................... 5,903,937 5,947,697 4,867,363
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER OF COMMON PAID IN STOCK EMPLOYEE ACCUMULATED
SHARES STOCK CAPITAL SUBSCRIPTIONS RECEIVABLE DEFICIT TOTAL
--------- ------- ----------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ............... 4,507,000 $45,070 $ 7,541,980 $ 0 $ 0 $(3,737,271) $ 3,849,779
Issuance of stock for
acquisition ........................... 800,000 8,000 1,192,000 0 0 0 1,200,000
Net income ............................... 0 0 0 0 0 929,662 929,662
--------- ------- ----------- --------- -------- ----------- -----------
Balance, December 31, 1995 ............... 5,307,000 53,070 8,733,980 0 0 (2,807,609) 5,979,441
Issuance of stock commitment
for acquisition ....................... 0 0 0 105,000 0 0 105,000
Other stock issuances .................... 335,000 3,350 282,094 0 0 0 285,444
Other stock commitments .................. 0 0 0 142,520 0 0 142,520
Net income ............................... 0 0 0 0 0 1,723,567 1,723,567
--------- ------- ----------- --------- -------- ----------- -----------
Balance, December 31, 1996 ............... 5,642,000 56,420 9,016,074 247,520 0 (1,084,042) 8,235,972
Issuance of stock under
subscription .......................... 88,000 880 246,640 (247,520) 0 0 0
Issuance of stock
for acquisition ....................... 598,718 5,987 1,341,128 0 0 0 1,347,115
Exercise of options ...................... 81,500 815 133,435 0 (85,552) 0 48,698
Net income ............................... 0 0 0 0 0 528,804 528,804
--------- ------- ----------- --------- -------- ----------- -----------
Balance, December 31, 1997 ............... 6,410,218 $64,102 $10,737,277 $ 0 $(85,552) $ (555,238) $10,160,589
========= ======= =========== ========= ======== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................................................... $ 528,804 $ 1,723,567 $ 929,662
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .......................................... 430,117 385,117 343,598
Amortization of cost in excess of net assets acquired .................. 154,405 124,273 107,861
Deferred income taxes .................................................. 73,201 (520,995) 0
Loss (gain) on sale of equipment ....................................... (3,487) (1,552) 1,811
Other non-cash expenses ...................................................... 0 17,520 0
Changes in operating assets and liabilities, net of
effects of acquisition:
Accounts receivable, net .................................................. (729,986) (943,453) (683,536)
Prepaid expenses .......................................................... (289,295) (109,606) 121,688
Accounts payable, trade ................................................... 709,425 (224,613) 1,464,559
Accrued expenses .......................................................... (90,628) 422,184 (45,636)
Income tax payable ........................................................ 18,122 0 0
----------- ----------- -----------
Net cash provided by operating activities ................................. 800,678 872,442 2,240,007
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment ................................................ 12,181 12,716 1,200
Capital expenditures ........................................................... (572,174) (249,401) (314,236)
Acquisition of business, net of cash acquired .................................. 59,358 (28,739) (383,865)
----------- ----------- -----------
Net cash used in investing activities ..................................... (500,635) (265,424) (696,901)
----------- ----------- -----------
Cash flows from financing activities:
Cash overdraft ................................................................. 0 (445,346) 445,346
Borrowings under line of credit ................................................ 4,000,000 1,550,000 3,050,000
Payments under notes payable and line of credit ................................ (4,150,000) (1,977,489) (3,853,126)
Borrowings under note payable, principal shareholder ..................... 0 0 1,150,000
Payments under note payable, principal shareholder ....................... 0 0 (1,950,000)
Principal payments under capital lease obligations ....................... (42,503) (40,117) (94,610)
Common stock issuance .................................................... 134,250 427,964 0
Costs incurred in warrant exchange ............................................. 0 (5,000) 0
----------- ----------- -----------
Net cash used in financing activities ............................... (58,253) (489,988) (1,252,390)
----------- ----------- -----------
Net increase in cash ......................................................... 241,790 117,030 290,716
Cash, beginning of year ............................................................ 513,842 396,812 106,096
----------- ----------- -----------
Cash, end of year .................................................................. $ 755,632 $ 513,842 $ 396,812
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Golden Eagle Group, Inc. and its wholly-owned subsidiaries ("the Company") are
worldwide freight forwarders, logistics specialists and customs brokers handling
merchandise shipped to and from the United States.
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the Company and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT
Depreciation of property 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. Expenditures for normal 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 any resulting gain or loss is reflected in
earnings.
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 charges 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
primarily over 2 to 40 years. The Company continually assesses the
carrying value in order to determine whether an impairment has occurred,
taking into account both historical and forecasted results of operations.
F-6
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED:
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 bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
PER SHARE DATA
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
requires the presentation of both basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted-average
number of common shares outstanding during each year. Diluted earnings per
share is based on the sum of the weighted-average number of common shares
outstanding plus common stock equivalents arising out of stock options and
warrants. Earnings per share information for all prior periods have been
restated to conform to the requirements of the standard.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the years ended December 31, 1997, 1996 and 1995 for
interest amounted to $77,450, $102,527 and $138,733, respectively.
Supplemental schedule of noncash investing and financing activities:
1997:
The Company acquired Columbia Shipping Group, Inc. Refer to Note 2.
Long-term debt in the amount of $4,916,666 was incurred for the
acquisition of Columbia Shipping Group, Inc.
1996:
The Company acquired certain assets of Ryan Freight Services, Inc. Refer
to Note 2.
1995:
The Company acquired World Trade Transport of Virginia, Inc. Refer to Note
2.
Long-term debt in the amount of $1,000,000 was incurred for the
acquisition of World Trade Transport of Virginia, Inc.
MAJOR CUSTOMERS
The Company had revenues from five customers that represented 21%, 28% and
23% of total revenue for the years ended December 31, 1997, 1996 and 1995,
respectively.
F-7
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS COMBINATIONS:
Effective October 31, 1997, the Company purchased all of the outstanding
common 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 Company acquired the
shares of CSG in exchange for 598,718 shares of the Company's common
stock, a note payable to a selling stockholder in the amount of $1,083,333
and cash of $3,833,333.
The total consideration of approximately $6,500,000, including acquisition
costs, exceeded the fair value of the net assets acquired by $4,291,900.
Such amount has been included in goodwill and is being amortized over 40
years.
The note payable to a selling stockholder bears interest at 10% and
requires the payment of accrued interest monthly through November 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.
Effective July 16, 1996, the Company consummated an agreement to purchase
certain assets of Ryan Freight Services, Inc. of Dallas, Texas in exchange
for 30,000 shares of the Company's common stock. In conjunction with the
asset purchase agreement, the Company entered into a business acquisition
agreement with Mr. David Pulk and Mr. Ed Reedy, "Pulk/Reedy" whereby
120,000 shares of common stock and 110,000 non-qualified share options to
purchase common stock are contingently issuable based on future of
business generated by Pulk/Reedy.
The securities issued to Pulk/Reedy were escrowed pending certain
predetermined levels of business are generated by Pulk/Reedy through July
1997. Pulk/Reedy did not generate the predetermined levels of business and
thus no additional securities were issued.
For financial reporting purposes, the transaction was accounted for under
the purchase method. Goodwill, cost in excess of assets acquired, of
$42,260 was being amortized over a period of 20 years. As of January 1,
1997, the Company re-evaluated the goodwill amortization period associated
with Pulk/Reedy and reduced the period to a remaining life of two years.
Proforma results reflecting the acquisition have not been presented as
results would not be materially different from those historically
reported.
Effective July 31, 1995, the Company acquired all of the outstanding
capital stock of World Trade Transport of Virginia, Inc. ("WTT"), a
privately held full-service regional freight forwarder and customs broker.
Pursuant to the terms of the acquisition, the WTT stockholders conveyed
their WTT stock to the Company in exchange for the issuance of an
aggregate of 800,000 shares of the Company's common stock., $.01 par
value, and payment of an aggregate of $1,000,000 in cash to them.
The source of the cash consideration paid by the Company was originally a
$1,000,000 bridge loan from the Company's principal stockholder. This note
was subsequently repaid with long-term bank financing.
F-8
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS COMBINATIONS, CONTINUED:
The purchase price of WTT by the Company of approximately $2,584,000 was
comprised of the 800,000 shares issued valued at $1,200,000, cash in the
amount of $1,000,000 and acquisition costs of $384,000. The purchase price
was allocated to the estimated fair value of assets acquired and
liabilities assumed of $1,770,000 and $959,000, respectively, and resulted
in costs in excess of the estimated fair value of net assets acquired of
approximately $1,773,000, which is being amortized over 40 years on a
straight-line basis.
Unaudited proforma data giving effect to the CSG acquisition as if it had
been consummated as of the beginning of 1996 is presented below. The
proforma data has been prepared for comparative purposes only and does not
purport to be indicative of what would have occurred had the acquisitions
been made at that date or the results which may occur in the future.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 1996
-------- -------
Sales ..................................... $111,653 $99,544
Net income ................................ $ 667 $ 1,446
Net income per share ...................... $ .11 $ .26
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
Equipment and furniture .......................... $ 3,383,653 $ 2,748,089
Equipment under capital leases ................... 206,362 186,089
Leasehold improvements ........................... 552,512 422,232
----------- -----------
4,142,527 3,356,410
Accumulated depreciation and amortization ........ (2,901,679) (2,500,723)
----------- -----------
$ 1,240,848 $ 855,687
=========== ===========
Depreciation and amortization expense ............ $ 430,117 $ 385,117
=========== ===========
The original cost of fully depreciated assets still in service amounted to
$1,105,106 and $758,934 at December 31, 1997 and 1996, respectively.
F-9
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DEBT:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Note payable to bank, $100,000 payable quarterly through
June 1998. Interest payable monthly at prime plus 1% .............. $ 0 $600,000
Note payable to bank, line of credit .................................. 500,000 0
Note payable to bank, $191,667 payable quarterly plus interest at
9% through October 2002 ........................................... 3,833,333 0
Note payable to individual, $67,708 payable quarterly beginning
February 2002 and ending November 2005. Interest is payable monthly
beginning November 1997 at 10%. The note is
subordinated to the bank indebtedness ................................. 1,083,333 0
---------- --------
5,416,666 600,000
Current portion ....................................................... 1,266,660 400,000
---------- --------
Long-term portion ..................................................... $4,150,006 $200,000
========== ========
</TABLE>
During January 1997, the Company repaid the note payable to bank which was
scheduled to mature through June 1998. The Company also has a line of
credit available with maximum borrowings allowed up to $2,000,000 which
bear interest at prime plus 1% (8.5% at December 31, 1997). Aggregate
amounts available under the line of credit and the note payable are
limited to 80% of the Company's eligible accounts receivable. The line of
credit and note payable to bank are collateralized by substantially all of
the Company's assets and expires in October 1998.
5. COMMITMENTS:
The Company leases office equipment and office and warehouse space under
capital and operating leases that expire at various times through March
2003. Total rent expense for all operating leases for the years ended
December 31, 1997, 1996 and 1995 amounted to $1,917,526, $1,244,374 and
$1,244,785, respectively.
F-10
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. COMMITMENTS, CONTINUED:
Future minimum noncancelable payments, by year and in aggregate, related
to the capital and operating leases at December 31, 1997, are as follows:
CAPITAL OPERATING
------- ----------
1998 .............................................. $29,907 $1,615,530
1999 .............................................. 8,406 1,499,386
2000 .............................................. 0 866,090
2001 .............................................. 0 569,028
2002 .............................................. 0 537,560
------- ----------
Total minimum lease payments ...................... 38,313 $5,087,594
==========
Amount representing interest and executory costs .. 1,785
-------
Present value of net minimum lease payments ....... 36,528
Less current portion .................................... 27,801
-------
Long-term portion ....................................... $ 8,727
=======
During the fourth quarter of 1996, the Company recorded a charge of
$160,581 related to the termination of an employment contract with a
former executive officer. Under the agreement, the Company has reserved
for monthly payments due to the former executive officer of $11,000
through November 1997.
6. RELATED PARTY TRANSACTIONS:
Related party transactions and balances with the Company's principal
shareholder and other parties related through common ownership are as
follows:
1997 1996 1995
---------- ---------- ----------
Accounts receivable, trade .............. $ 491,399 $ 407,907 $ 366,665
Accounts payable, trade ................. $ 587,684 $ 302,981 $ 295,635
Revenues (1) ............................ $1,434,388 $1,258,685 $1,368,657
Expenditures (2) ........................ $1,347,810 $1,478,207 $ 957,857
Interest expense ........................ $ 0 $ 0 $ 79,652
(1) Freight forwarding revenues from related parties.
(2) Freight forwarding services provided by related parties.
F-11
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES:
The components income taxes are as follows:
1997 1996
--------- ---------
Current:
Federal ................................. $ 18,122 $ 0
State ................................... 37,918 90,278
--------- ---------
56,040 90,278
--------- ---------
Deferred:
Federal ....................................... 213,345 0
Change in valuation allowance .................... (140,144) (520,995)
--------- ---------
73,201 (520,995)
--------- ---------
Income tax provision (benefit) ................... $ 129,241 $(430,717)
========= =========
There is no provision for income tax for 1995 due to the existence of net
operating loss carryforwards and a reduction in the valuation allowance.
The income tax benefit in 1996 relates to the change in the valuation
allowance net of the provision for state income taxes.
The significant components of the net deferred tax assets at December 31,
1997 and 1996 are as follows:
1997 1996
----------- -----------
Allowance for doubtful accounts .................. $ 196,000 $ 203,000
Plant and equipment .............................. (7,000) (32,000)
Accrued liabilities .............................. 78,000 0
Net operating losses ............................. 803,212 1,193,000
Tax credit carryforwards ......................... 16,000 16,000
----------- -----------
1,086,212 1,380,000
Valuation allowance .............................. 0 (859,005)
----------- -----------
Net deferred tax asset ........................... $ 1,086,212 $ 520,995
=========== ===========
The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight of
available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In addition to the reduction in
valuation allowance in 1997 of $140,144, the Company reduced the valuation
allowance on certain net operating loss carryforwards in the amount of
approximately $720,000 which was credited to costs in excess of net assets
acquired.
The Company has net operating loss carryforwards of approximately
$2,300,000 and $3,300,000 at December 31, 1997 and 1996, respectively, for
federal income tax purposes available to offset future taxable income,
expiring, if not used, periodically through the year 2008. A portion of
the net operating loss carryforwards are subject to an annual limitation
of approximately $155,000. During 1997 and 1996, the Company utilized
approximately $669,000 and $1,293,000, respectively, of net operating loss
carryforwards.
F-12
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES, CONTINUED:
The Company also has investment tax credit carryforwards of approximately
$37,000 to reduce future income taxes, expiring, if not used, periodically
through the year 2001. The Company previously accounted for investment tax
credits by the flow-through method.
8. STOCK OPTIONS AND WARRANTS:
The Company's 1992 Stock Option Plan (the "Stock Option Plan") and
Directors Stock Option Plans (the "Directors Plans") (collectively, the
"Plans"), have been designed to serve as an incentive for retaining
qualified and competent employees and directors.
The Company's Board of Directors, or a committee thereof, administers and
interprets the Stock Option Plan and is authorized to grant options
thereunder to all eligible employees of the Company, including officers
and directors (whether or not employees) of the Company. The Stock Option
Plan provides for granting of both "incentive stock options" (as defined
in Section 422 of the Internal Revenue Code) and nonstatutory stock
options.
Options can be granted under the Stock Option Plan on such terms and at
such prices as determined by the Board, or a committee thereof, except
that the per share exercise price of options will not be less than the
fair market value of the Common Stock on the date of grant, and, in the
case of an incentive stock option granted to a 10% stockholder, the per
share exercise price will not be less than 110% of such fair market value.
The aggregate fair market value of the shares covered by incentive stock
options granted under the Plans that become exercisable by a grantee for
the first time in any calendar year is subject to a $100,000 limit.
Only non-employee Directors are eligible to receive options under the
Directors Plans. Pursuant to the initial Directors Plan established in
1992, 50,000 shares were authorized to be issued and were subsequently
issued in 1993. In 1994, a Directors Option Plan was established whereby
100,000 shares were authorized to be issued for future grants, whereby
non-employee directors are generally granted 7,500 options annually. All
matters relating to the Directors Plan are administered by a committee of
the Board of Directors consisting of two or more employee Directors,
including selection of participants, allotment of shares, determination of
price and other conditions of purchase.
Options granted under the Stock Option Plan will be exercisable after the
period or periods specified in the option agreement, and options granted
under the Directors Plans are exercisable six months after being granted.
Options granted under the Plans are not exercisable after the expiration
of ten years from the date of grant and are not transferable other than by
will or by the laws of descent and distribution. The Plans also authorize
the Company to make loans to optionees to enable them to exercise their
options.
F-13
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCK OPTIONS AND WARRANTS, CONTINUED:
The following table reflects the option activity for the year ended
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Options outstanding at beginning of year ......... 339,000 465,000 366,450
Granted ....................................... 233,002 49,000 157,500
Exercised ..................................... (81,500) (175,000) 0
Expired ....................................... (73,250) 0 (589,500)
-------------- -------------- --------------
Options outstanding at end of year ............... 417,252 339,000 465,000
-------------- -------------- --------------
Options exercisable at end of year ............... 287,250 339,000 355,500
============== ============== ==============
Price range of options outstanding at end of year $1.38 - $3.88 $1.38 - $3.88 $ 1.38 - $3.75
============== ============== ==============
Options available for future grants at end of year 310,248 0 194,500
============== ============== ==============
</TABLE>
At December 31, 1996, the weighted average exercise price of the outstanding
options is $2.21 and the weighted average remaining term is approximately six
years.
In addition, warrants to purchase 800,000 shares of the Company's common stock
at $3.25 per share are outstanding at December 31, 1997 which are exercisable
through May 1999.
In connection with a financing in 1992, warrants to purchase 87,500 shares of
common stock at $2.50 per share were issued of which 50,000 were exercised in
1996 and the remaining 37,500 shares expired in 1997.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") was issued
during 1995 and was effective for the year ended December 31, 1996. This
pronouncement establishes financial accounting and reporting standards for
stock-based employee compensation plans. In encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on new fair value accounting
rules. Companies that choose not to adopt the new fair value accounting rules
will be required to disclose proforma net income and earnings per share under
the new method. The Company has adopted the disclosure provisions of SFAS 123.
Had compensation costs for the Company's stock option plans been determined
based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed under SFAS 123 for 1997, 1996 and
1995, the Company's net income and basic earnings per share for those years
would have been reduced by approximately $50,000, $47,000 and $133,000, or $.01,
$.01 and $.03 per share, respectively. The fair value of the options granted
during 1997, 1996 and 1995 is estimated as $79,000, $74,000 and $133,000,
respectively on the dates of grant using the Black-Scholes option-pricing model
with the following assumptions: volatility of 40%-78%, expected dividends of 0,
risk-free interest rates of 5.3% to 7.4%, and terms of 3 to 10 years.
F-14
<PAGE>
GOLDEN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. OTHER STOCK ISSUANCES:
Effective August 12, 1996, the Company agreed to issue 160,000 shares of
Common Stock and pay $5,000 in expenses in exchange for warrants to
purchase common stock and warrants to purchase common stock warrants
issued to various underwriters in connection with the Company's initial
public offering in November 1992.
10. 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. At December 31, 1997 and 1996, the Company had cash
balances of $129,967 and $513,842, respectively, with financial
institutions, which is in excess of the federally insured limit of
$100,000. 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. The
Company recorded bad debt expenses of $49,000, $57,000 and $131,000 during
1997, 1996 and 1995, respectively. Additionally, the Company has write
offs, net of recoveries of $159,000 in 1997, recoveries, net of write offs
of $93,000 in 1996 and write offs, net of recoveries, of $109,000 in 1995.
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. The carrying amounts of long-term debt
approximate fair value because the interest rates on these instruments
change with market interest rates.
F-15
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE SECTION 16(A) OF THE EXCHANGE ACT.
The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Stockholders' Meeting under
the captions "Election of Directors" and "Section16(a) Information".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Stockholders' Meeting under
the captions "Compensation of Executive Officers", "Employment Agreements" and
"Options Granted to Executive Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Stockholders' Meeting under
the caption "Ownership of Management and Principal Stockholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Annual Stockholders' Meeting under
the caption "Certain Transactions with the Company."
<PAGE>
PART IV
ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(A) FINANCIAL SCHEDULES:
None
(B) EXHIBITS:
EXHIBIT DESCRIPTION
3(a) Certificate of Incorporation(l)
(b) By-laws(l)
4(a) Form of certificate evidencing shares of Common Stock(l)
(b) Revised form of Warrant Agency Agreement between the Company and
Continental Stock Transfer & Trust Company, with form of Common
Stock Purchase Warrant attached(l)
(c) Form of Underwriter's Non-Redeemable Warrant Purchase Agreement(l)
(d) Form of Underwriter's Common Stock Purchase Warrant(l)
10(a) Lease Agreement between the Company and Grand Central Corporation(l)
(b) Credit Agreement between Registrant and Texas Commerce Bank National
Association dated December 1, 1995(9)
(c) Stock Acquisition Agreement between the Company and William G.
Goldfarb, Carlos A. Macaluso and Gary M. Goldfarb(l)
(d) Employment Agreement between the Company and Carlos A.
Macaluso(l)(2)
(e) Amended 1992 Stock Option Plan(2)(3)(11)
(f) Agreement and Plan of Merger by and among the Company, GAC
Acquisition Corp., DAHER America and the stockholders of DAHER
America(4)
(g) Stockholders Agreement by and among the Company, the stockholders of
DAHER America and the GEG Stockholders(5)
(h) Lease dated January 1, 1993 between Tejas Properties and DAHER
America(6)
(i) Employment Agreement between the Company and Patrick H. Weston(2)(6)
<PAGE>
EXHIBIT DESCRIPTION
(j) Amendment to Employment Agreement between the Company and Carlos A.
Macaluso(2)(6)
(k) 1994 Directors Stock Option Plan(2)(3)(11)
(l) Agreement and Plan of Merger by and among the Company, WTT
Acquisition Corp. and the stockholders of World Trade Transport of
Virginia, Inc.(8)
(m) Employment Agreement between the Company, WTT Acquisition Corp. and
Henri R. Youngblood(2)(7)
(n) Employment Agreement between the Company, WTT Acquisition Corp. and
Jack P. Moore(2)(7)
(o) Employment Agreement between the Company, WTT Acquisition Corp. and
Michael C. Moore(2)(7)
(p) First Amendment to Credit Agreement between Registrant and Texas
Commerce Bank dated May 2, 1996(10)
(q) Business Acquisition Agreement dated July 16, 1996 between
Registrant and Mr. David Pulk and Mr. Ed Reedy ("Pulk/Reedy")(10)
(r) Amendment to Stockholders' Agreement for Golden Eagle Group, Inc.
dated December 12, 1996 between Registrant, Compagnie Daher, Patrick
Weston, Gary Goldfarb, William Goldfarb and Carlos Macaluso(10)
(s) Consulting Agreement dated December 12, 1996 between Registrant and
Gary M. Goldfarb(10)
(t) Credit Agreement between Registrant and Texas Commerce Bank National
Association dated October 27, 1997.
(v) Stock Purchase and Sale Agreement, dated October 27, 1997, between
Registrant, Columbia Shipping Groiup, Inc. ("CSG") and the CSG
stockholders(12)
(w) Promissory note issued by Registrant to former CSG stockholder(12)
(x) Consulting Agreement between Registrant and former CSG
stockholder(12)
(y) Employment Agreements between Registrant and Michael McAdam and Dan
Morrel(2)(12)
22 Subsidiaries of the Company
- -------------------------
(1) Incorporated by reference to the exhibit of the same number filed with
the Company's Registration Statement on Form S-18 (No. 33-49878-A)
(2) Management contract or compensation plan.
(3) Incorporated by reference to the exhibits to the Proxy Statement relating
to the Company's Annual Meeting of Stockholders held on November 11, 1994.
(4) Incorporated by reference to exhibits to the Company's Current Report on
Form 8-K for an Event occurring on March 9, 1994.
(5) Incorporated by reference to exhibits to the Company's Report on Form 8-K
for an Event occurring on March 9, 1994.
(6) Incorporated by reference to the exhibits filed with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1993.
(7) Incorporated by reference to exhibits to the Company's Current Report on
Form 8-K for an Event occurring on July 31, 1995.
(8) Incorporated by reference to exhibits to the Company's Current Report on
Form 8-K for an Event occurring on July 31, 1995.
(9) Incorporated by reference to the exhibits filed with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
(10) Incorporated by reference to the exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
(11) Incorporated by reference to the exhibits to the Proxy Statement relating
to the Company's Annual Meeting of Stockholders held on June 20,1997.
(12) Incorporated by reference to exhibits to the Company's Current Report on
Form 8-K for an Event occurring on October 31, 1997.
(C) REPORTS ON FORM 8-K:
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLDEN EAGLE GROUP, INC.
DATE: March 26, 1998 By:/s/ Patrick H. Weston
Patrick H. Weston, President and Chief
Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated:
DATE: March 26, 1998 /s/ Patrick M. Daher
Patrick M. Daher, Chairman of the Board
and Director
DATE: March 26, 1998 /s/ Patrick H. Weston
Patrick H. Weston, President, Chief
Executive Officer and Director (Principal
Executive Officer)
DATE: March 26, 1998 /s/ Carlos A. Macaluso
Carlos A. Macaluso. Executive Vice
President Sales and Marketing and Director
DATE: March 26, 1998 /s/ Donald A. Nodorft
Donald A. Nodorft. Vice
President-Finance and Chief Financial
Officer (Principal Financial and
Accounting Officer)
DATE: March 26, 1998 /s/ Keith Bates, Director
Keith Bates, Director
DATE: March 26, 1998 /s/ John F. Darden, Director
John F. Darden, Director
EXHIBIT (T) - CREDIT AGREEMENT BETWEEN REGISTRANT AND TEXAS COMMERCE BANK
NATIONAL ASSOCIATION DATED OCTOBER 27, 1997
CREDIT AGREEMENT
This Credit Agreement (the "AGREEMENT") is made and entered into effective
October 27, 1997 (the "EFFECTIVE DATE") by and among:
GOLDEN EAGLE GROUP, INC. ("GOLDEN EAGLE GROUP"), DAHER AMERICA, INC.
("Daher"), WORLD TRADE TRANSPORT OF VIRGINIA, INC. ("WORLD TRADE"), WTT
CUSTOMS HOUSE BROKERAGE, INC. ("WTT"), COLUMBIA SHIPPING, INC. ("COLUMBIA
SHIPPING"), COLUMBIA SHIPPING, INC. (WEST) ("COLUMBIA WEST"), COLUMBIA
SHIPPING, INC. (CHICAGO) ("COLUMBIA CHICAGO") and FREIGHT EXPRESS
INTERNATIONAL, INC. ("FREIGHT" and which with Golden Eagle Group, Daher,
World Trade, WTT, Columbia Shipping, Columbia West, and Columbia Chicago are
sometimes herein collectively called the "BORROWERS," and singly called a
"BORROWER");
DACOM LINE, INC. ("DACOM"), GOLDEN EAGLE INTERNATIONAL FORWARDING, INC.
("GOLDEN EAGLE INTERNATIONAL"), GOLDEN EAGLE CUSTOMS BROKERS, INC. ("GOLDEN
EAGLE CUSTOMS"), BRIDGEPORT SHIPPING LINES, INC. ("BRIDGEPORT"), COLUMBIA
SHIPPING, INC. (SFO) ("COLUMBIA SFO") and COLUMBIA SHIPPING GROUP, INC.
("COLUMBIA GROUP" and which with Dacom, Golden Eagle International, Golden
Eagle Customs and Bridgeport are sometimes herein collectively called the
"GUARANTORS," and singly called a Guarantor); and,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "BANK").
RECITALS
Golden Eagle Group, Daher, World Trade, WTT and the Bank entered into an
Amended and Restated Credit Agreement (the "PRIOR AGREEMENT") dated March 2,
1997, pursuant to the terms of which the Bank agreed to make certain loans to
Daher, World Trade, and WTT. The Borrowers represent to the Bank that Golden
Eagle Group has entered into and will, effective contemporaneous with the
execution of this Agreement, consummate the Stock Purchase Agreement. The
Borrowers have requested the Bank to further increase the amount of the Loans to
enable the Borrowers to consummate the Stock Purchase Agreement and provide
working capital to the Borrowers. Conditioned on the terms of this Agreement,
the Bank is willing to increase the amount of and to make the Loans available
for the purposes herein set out to the Borrowers.
AGREEMENT
In consideration of the premises, for other good, fair and valuable
considerations, the receipt, adequacy and reasonable equivalency of which are
acknowledged, and for other valuable consideration, the parties agree as set out
herein.
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For the purposes of this Agreement, unless the context
requires otherwise, the following terms shall have the respective meanings
ascribed to them in this Article or in the Sections referred to below:
"ACCOUNT DEBTORS" means all, and "ACCOUNT DEBTOR" means any account debtor,
customer or other obligor
1
<PAGE>
with respect to any of the Accounts.
"ACCOUNTS," "CHATTEL PAPER," "CONTRACTS," "CONTRACT RIGHTS," "DOCUMENTS,"
"GENERAL INTANGIBLES," "GOODS," and "INSTRUMENTS" shall have the meanings
ascribed to such terms in the UCC, and shall mean the Accounts, Chattel Paper,
Contracts, Contract Rights, Documents, General Intangibles, Goods, and
Instruments of the Loan Parties in which the Bank is granted security interests
pursuant to the Loan Documents.
"ADVANCES" means all, and "ADVANCE" means any, of the disbursements by the Bank
of the sums loaned to the Borrowers pursuant to this Agreement.
"AFFILIATE" of any Person means any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person and,
without limiting the generality of the foregoing, includes (i) any Person which
beneficially owns or holds five per cent or more of any class of Voting Shares
of such Person or five per cent or more of the equity interest in such Person,
(ii) any Person of which such Person beneficially owns or holds five per cent or
more of any class of Voting Shares or in which such Person beneficially owns or
holds five per cent or more of the equity interest in such Person and (iii) any
director, officer, member, manager or employee of such Person. For the purposes
of this definition, the term "CONTROL" (including, with correlative meanings,
the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Shares or by contract or otherwise.
"AGREEMENT" means this Agreement, as it may, from time to time, be amended.
"APPLICABLE MARGIN" shall have the meaning ascribed to such term in Section 4.3.
"APPLICATION FOR LETTER OF CREDIT" shall have the meaning ascribed to such term
in Section 2.2.
"AVAILABILITY" means, at any time, with respect to the Loans, the Total
Commitment (as such amount may be reduced or increased in accordance with the
provisions of this Agreement), MINUS the sum, at such time, of (i) the unpaid
principal balance of, and accrued interest and fees on, the Loans, and (ii) the
Reserves established by the Bank pursuant to Section 2.3.
"BASE RATE" means the variable rate of interest announced from time to time by
the Bank as the prime rate, and thereafter entered in the minutes of the Bank's
Loan and Discount Committee, and used by the Bank as a general reference rate of
interest, but which rate of interest may not be the lowest rate charged by the
Bank on similar loans. Each change in the Base Rate shall become effective
without prior notice to the Borrowers automatically as of the opening of
business on the date of a change in the Base Rate. If the Bank shall, during the
term of this Agreement, abolish or abandon the practice of announcing or
publishing a "PRIME RATE," then the "PRIME RATE" used during the remaining term
of this Agreement shall be that interest rate or other general reference rate
then in effect and used by the Bank, which, from time to time, in the judgment
of the Bank, most effectively approximates the initial definition of the "PRIME
RATE."
"BOARD" means the Board of Governors of the Federal Reserve System of the U.S.
"BORROWERS" means all of, and "BORROWER" means any of, Golden Eagle Group,
Daher, World Trade, WTT, Columbia Shipping, Columbia West, Columbia Chicago,
Freight and any other Consolidated Subsidiary of any of the Borrowers which the
Bank may require, at the time of its acquisition or formation
2
<PAGE>
by a Borrower, become a Borrower hereunder.
"BORROWING BASE CERTIFICATE" means any of the certificates delivered by the
Borrowers to the Bank calculating the Borrowing Base pursuant to Section 2.3.
"BORROWING BASE" means the amount calculated pursuant to Section 2.3 to
determine Availability which the Borrowers shall be entitled to borrow as an
Advance.
"BORROWING DATE" means the Business Day specified in (i) any Notice of Revolving
Credit Advance, (ii) the Notice of Term Loan Advance, or (iii) the Application
for Letter of Credit, as a date on which the Borrowers request the Bank make an
Advance or issue a Letter of Credit.
"BORROWING" means any amount disbursed by the Bank to or on behalf of the
Borrowers under the Loan Documents, whether such amount advanced constitutes an
original disbursement of funds, the continuation of an amount outstanding,
amounts advanced and outstanding under a Letter of Credit (until such payment is
reimbursed in accordance with the applicable Application for Letter of Credit or
the Letter of Credit is returned to the Bank), or a disbursement of funds in
accordance with and to satisfy the Obligations.
"BUSINESS DAY" means a day on which the Bank is open for business, except for
Saturdays, Sundays and holidays recognized by the Bank.
"CAPITAL EXPENDITURE" means any expenditure by a Person for an asset which will
be used in a year or years subsequent to the year in which the expenditure is
made and which asset is properly classifiable in relevant financial statements
of such Person as equipment, real property, improvements, fixed assets, or a
similar type of capitalized asset in accordance with GAAP.
"CAPITAL LEASE" means, as of any date, any lease of property, real or personal,
which would be capitalized on a balance sheet of the lessee prepared as of such
date in accordance with GAAP, together with any other lease by such lessee which
is in substance a financing lease, including, without limitation, any lease
under which (i) such lessee has or will have an option to purchase the property
subject thereto at a nominal amount or at an amount less than a reasonable
estimate of the fair market value of such property as of the date such lease is
entered into, or (ii) the term of the lease approximates or exceeds the expected
useful life of the property leased thereunder.
"CASH FLOW" means, for any monthly period, for Golden Eagle Group and the
Consolidated Subsidiaries, annualized EBITDA for the preceding twelve (12)
months, LESS cash income taxes paid reduced by the proceeds received, if any,
from the letter of credit established pursuant to the Stock Purchase Agreement.
"CERTIFICATE OF COMPLIANCE" means any of the certificates delivered by the
Borrowers pursuant to Section 7.1.A.(5).
"CHANGE OF CONTROL" means (i) if any Person, or group of Persons acting together
shall acquire sufficient stock ownership of Golden Eagle Group or any of the
Consolidated Subsidiaries to permit such Person or group to elect a majority of
the Board of Directors of Golden Eagle Group or any of the Consolidated
Subsidiaries or otherwise control Golden Eagle Group or any of the Consolidated
Subsidiaries, (ii) if there shall occur any merger, consolidation or dissolution
of Golden Eagle Group or any of the Consolidated Subsidiaries with any other
Person, or (iii) if there shall occur any sale, lease or other disposition of
all or substantially all of the assets or capital stock of Golden Eagle Group or
any of the Consolidated Subsidiaries to any other Person.
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"CODE" means the Internal Revenue Code of 1986, as amended from time to time.
"COLLATERAL DOCUMENTS" means all security agreements, guaranty agreements and
any other agreements or documents executed or delivered to secure the repayment
of the Obligations or any part thereof.
"COLLECTION AND FUNDING ACCOUNT" means the non-interest bearing cash collateral
account established with the Bank in the names of the Borrowers pursuant to
Section 2.4.
"COMMITMENT" means the obligation of the Bank to extend credit to the Borrowers
under this Agreement in an aggregate principal amount not to exceed the Total
Commitment.
"CONSOLIDATED SUBSIDIARIES" means Daher, World Trade, WTT, Columbia Group,
Dacom, Golden Eagle International, Golden Eagle Customs, Bridgeport, Columbia
Shipping, Columbia West, Columbia Chicago, Columbia SFO, Freight and any other
Person, the capital stock of which is owned in its entirety by Golden Eagle
Group or a wholly owned direct subsidiary of Golden Eagle Group, and the term
"CONSOLIDATED SUBSIDIARY" means any of them.
"CONTRACT RATE" means each, as applicable, of the rates of interest described in
Section 4.4.
"CONTROLLED GROUP" means (i) the controlled group of corporations as defined in
"1563 of the Code, or (ii) the group of trades or businesses under common
control as defined in "414(c) of the Code, of which the Borrowers are or may
become a part.
"CURRENT ASSETS" means, as of any date, the current assets which would be
reflected on the balance sheet, prepared as of such date in accordance with
GAAP, of Golden Eagle Group and the Consolidated Subsidiaries on a consolidated
basis.
"CURRENT LIABILITIES" means, as of any date, the current liabilities which would
be reflected on the balance sheet, prepared as of such date in accordance with
GAAP, of Golden Eagle Group and the Consolidated Subsidiaries on a consolidated
basis.
"CURRENT RATIO" means, with respect to any Person for any period, Currents
Assets divided by Current Liabilities.
"DEBT COVERAGE RATIO" means Funded Debt divided by EBITDA.
"DEBT SERVICE EXPENSE" means, with respect to any Person for any period, the
aggregate of principal payments of all long-term Indebtedness (including,
without limitation, Subordinated Indebtedness) made by such Person during such
period in accordance with GAAP.
"DEBTOR LAWS" means all applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization or similar
laws, from time to time in effect, affecting the rights of creditors generally.
"DEFAULT" shall have the meaning ascribed to such term in Section 10.1.
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"DIVIDENDS" means in respect of any corporation, including tax-option
corporations, (i) cash distributions or any other distributions (or the setting
aside of any amounts for any such purpose) on, or in respect of, any class of
capital stock of such corporation, except for distributions made solely in
shares of stock of the same class, and (ii) any and all funds, cash or other
payments made in respect of the redemption, repurchase or acquisition of such
stock and whether by reduction of capital or otherwise, unless such stock shall
be redeemed or acquired through the exchange of such stock with stock of the
same class. "DOLLARS" and the symbol "$" shall refer to currency of the U.S.
"EBITDA" means, for any monthly period of Golden Eagle Group and the
Consolidated Subsidiaries, the sum of the following for the preceding twelve
(12) months which would be reflected on the consolidated income statement of
Golden Eagle Group and the Consolidated Subsidiaries prepared in accordance with
GAAP, (i) net income; PLUS, (ii) income taxes; PLUS (iii) Capital Lease
payments; PLUS (iii) Interest Expense; PLUS, (iv) non-cash charges in respect of
depreciation and amortization.
"ELIGIBLE ACCOUNTS" has the meaning set out in Section 2.3.
"EMPLOYEE PLAN" means any, and "EMPLOYEE PLANS" means all, employee benefit or
other plans maintained, in whole or in part, for the employees of Golden Eagle
Group and the Consolidated Subsidiaries or any ERISA Affiliate, and covered by
Title IV of ERISA, or subject to the minimum funding standards under "412 of the
Code.
"ERISA AFFILIATE" means any Person which, together with the Borrower or any
subsidiary, would be treated as a single employer under the provisions of Title
I or Title IV of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
together with all regulations issued pursuant thereto.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in Section 10.1.
"FACILITY FEES" shall have the meaning ascribed to such term in Section 4.13.
"FINANCIAL OFFICER" means, with respect to any Person, the President or chief
financial officer of such Person.
"FINANCIAL STATEMENTS" means all, and "FINANCIAL STATEMENT" means each, of the
balance sheets, income statements, stockholders statements, and statements of
cash flow and contingent liabilities of any Loan Party.
"FINANCING STATEMENT" means each UCC-1 financing statement sufficient for
purposes of perfecting the Bank's security interest in the Collateral pursuant
to the UCC.
"FISCAL YEAR" means the fiscal year of Golden Eagle Group for accounting
purposes ending each December 31.
"FIXED CHARGE COVERAGE RATIO" means Cash Flow divided by Fixed Charges.
"FIXED CHARGES" means, for any fiscal period of Golden Eagle Group and the
Consolidated Subsidiaries, the sum of the following which would be reflected on
the consolidated income statement prepared in
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accordance with GAAP of Golden Eagle Group and the Consolidated Subsidiaries,
(i) Interest Expense, (ii) Capital Lease payments, (iii) scheduled payments of
principal on Indebtedness, (iv) non-financed Capital Expenditures and (v)
Dividends.
"FREE CASH FLOW" means, with respect to Golden Eagle Group and the Consolidated
Subsidiaries for any period, the amount, if any, by which Funds Flow From
Operations for such period exceeds the sum of (i) non-financed Capital
Expenditures, PLUS (ii) Dividends, PLUS (iii) Debt Service Expense for such
period, PLUS (iv) Capital Lease payments during such period, PLUS (v) changes in
working capital.
"FUNDED DEBT" means all interest bearing or discounted Indebtedness, including
Subordinated Indebtedness, other than accounts payable and other similar
obligations incurred in the ordinary course of business by Golden Eagle Group
and the Consolidated Subsidiaries and accruals and deferred income tax
liability.
"FUNDS FLOW FROM OPERATIONS" means Net Income PLUS depreciation and
amortization.
"GAAP" means those generally accepted accounting principles and practices which
are recognized as such by the American Institute of Certified Public Accountants
acting through its Accounting Principles Board or by the Financial Accounting
Standards Board ("FASB") or through other appropriate boards or committees
thereof and which are consistently applied for all periods after the Effective
Date so as to properly reflect the financial condition, and the results of
operations and cash flows, of Golden Eagle Group and the Consolidated
Subsidiaries, except that any accounting principle or practice required to be
changed by the Accounting Principles Board or FASB (or other appropriate board
or committee of the boards) in order to continue as a generally accepted
accounting principle or practice, may be so changed. In the event of a change in
GAAP, the Bank and the Borrowers will thereafter negotiate in good faith to
revise any covenants of this Agreement affected thereby in order to make such
covenants consistent with GAAP then in effect. If no agreement is reached, the
financial covenants shall be calculated based on GAAP before any change in GAAP.
"GOVERNMENTAL AUTHORITY" means any government (or any political subdivision or
jurisdiction thereof), court, bureau, agency or other governmental authority
having jurisdiction over any Loan Party or any Loan Party's business or
properties.
"GUARANTY AGREEMENT" means each guaranty agreement executed by a Guarantor
pursuant to Section 8.1.F for the benefit of the Bank.
"GUARANTY" means any contract, agreement or understanding of any Person pursuant
to which such Person guarantees, or in effect guarantees, any Indebtedness of
any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, agreements: (i) To purchase such
Indebtedness or any property constituting security therefor; (ii) to advance or
supply funds (a) for the purchase or payment of such Indebtedness, or (b) to
maintain net worth or working capital or other balance sheet conditions, or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness; (iii) to purchase property, securities or service primarily for
the purpose of assuring the holder of such Indebtedness of the ability of the
Primary Obligor to make payment of the Indebtedness; or, (iv) otherwise to
assure the holder of the Indebtedness of the Primary Obligor against loss in
respect thereof. "GUARANTY" shall not include, however, the indorsement of
negotiable instruments or documents for deposit or collection by any Loan Party
in the ordinary course of business.
"INDEBTEDNESS" means, with respect to any Person, all indebtedness, obligations
and liabilities of such
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Person, including, without limitation: (i) All liabilities which would be
reflected on a balance sheet of such Person prepared in accordance with GAAP;
(ii) all obligations of such Person in respect of any Guaranty; (iii) all
obligations, indebtedness and liabilities secured by any Lien or any security
interest on any property or assets of such Person; and, (iv) all preferred
stock, which is redeemable by the holder of such stock, of such Person valued at
the greater of its voluntary or involuntary liquidation preference plus accrued
and unpaid dividends.
"INTANGIBLE ASSETS" means those assets of any Person which are (i) deferred
assets, other than prepaid insurance and prepaid taxes, (ii) patents,
copyrights, trademarks, trade names, franchises, goodwill, experimental expenses
and other similar assets which would be classified as intangible assets on a
balance sheet of such Person, prepared in accordance with GAAP, (iii)
unamortized debt discount and expense, and (iv) assets located, and notes and
receivables due from obligors domiciled, outside of the U.S.
"INTEREST EXPENSE" means for any fiscal period of Golden Eagle Group and the
Consolidated Subsidiaries, the interest charges paid or accrued during such
period (including imputed interest on Capital Lease obligations, but excluding
amortization of debt discount and expense) on the Indebtedness of Golden Eagle
Group and the Consolidated Subsidiaries.
"INVESTMENT" means any investment in any period, whether by means of share
purchase, loan, advance, extension of credit, capital contribution or otherwise,
in or to a Person, the Guaranty of any Indebtedness of such Person, or the
subordination of any claim against such Person to other Indebtedness of such
Person.
"IRS" means the Internal Revenue Service, Department of the U.S. Treasury, an
agency of the U.S. government.
"LANDLORD AGREEMENT" means any agreement executed pursuant to the provisions
Section 8.1.E.
"LEASEHOLDS" means all, and "LEASEHOLD" means any, (i) of the leases described
in Schedule 8.1.E by which a Loan Party is entitled to occupy and use the
premises described therein, and (ii) any and all other leases, subleases,
licenses, concessions or other agreements, written or verbal, now or hereafter
in effect, which grant a possessory interest in and to, or the right to use, all
or any portion of the premises and any other leased real property.
"LETTERS OF CREDIT" means all, and "LETTER OF CREDIT" means any, of the letters
of credit issued by the Bank for the benefit of any of the Borrowers pursuant to
Section 2.2.
"LIEN" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness, whether
arising by agreement, under any statute or law, or otherwise.
"LOAN DOCUMENTS" means this Agreement, the Notes, including any renewals,
extensions and modifications thereof, each Guaranty Agreement, the Collateral
Documents and any agreements or documents executed or delivered pursuant to the
terms of this Agreement, and with respect to this Agreement, and such other
agreements and documents, any amendments or supplements thereto or modifications
thereof.
"LOAN PARTIES" means the Borrowers and the Guarantors, and the term "LOAN PARTY"
means any of them.
"LOANS" means the Revolving Credit Loans and the Term Loans, and the term "LOAN"
means any of them.
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"MANDATORY PREPAYMENT" means an amount equal to fifty (50) per cent of Free Cash
Flow, if any, of Golden Eagle Group and the Consolidated Subsidiaries for each
semi-annual period commencing on each January 1 and ending on each June 30 and
commencing on each July 1 and ending on each December 31.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the validity,
performance, or enforceability of any of the Loan Documents, (ii) the financial
condition or business operations of any Loan Party, and/or (iii) the ability of
any Loan Party to fulfill the Obligations.
"MAXIMUM RATE" and "MAXIMUM AMOUNT" respectively mean the maximum non-usurious
rate and the maximum non-usurious amount of interest permitted by applicable
laws that, at any time or from time to time, may be contracted for, taken,
reserved, charged or received on the Obligations under the laws which are
presently in effect of the U.S. and the State of Texas and applicable to the
holders of the Notes or, to the extent permitted by law, under such applicable
laws of the U.S. and the State of Texas which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable laws now
allow.
"NET INCOME" or "NET LOSS" means, with respect to any Person for any period, the
aggregate income (or loss) of such Person for such period which shall be an
amount equal to net revenues and other proper items of income for such Person
less the aggregate for such Person of any and all expenses, and less Federal,
state and local income taxes, but excluding any extraordinary gains or losses or
any gains or losses from the sale or disposition of assets other than in the
ordinary course of business, all of the foregoing being computed and calculated
in accordance with GAAP.
"NOTES" means the Revolving Credit Note and the Term Note, together with any
renewals, extensions or modifications thereof.
"NOTICE OF REVOLVING CREDIT ADVANCE" shall have the meaning ascribed to such
term in Section 2.1.
"NOTICE OF TERM LOAN ADVANCE" shall have the meaning ascribed to such term in
Section 3.1.
"OBLIGATIONS" mean:
A. All present and future indebtedness, obligations and liabilities of any
Loan Party to the Bank arising pursuant to any of the Loan Documents,
regardless of whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, joint, several, or joint and
several;
B. All costs incurred by the Bank to obtain, preserve, perfect and enforce
the Liens and security interests securing payment of such indebtedness,
liabilities and obligations, and to maintain, preserve and collect the
property in which the Bank has been granted a Lien to secure payment of
the Loans, or any part thereof, including but not limited to, taxes,
assessments, insurance premiums, repairs, reasonable attorneys' fees and
legal expenses, rent, storage charges, advertising costs, brokerage fees
and expenses of sale; and,
C. All other Indebtedness of whatever kind or character owing, or which may
hereafter become owing, by any Loan Party to the Bank, whether the
Indebtedness is direct or indirect, primary or secondary, fixed or
contingent, or arises out of or is evidenced by note, deed of trust,
open account, overdraft, indorsement, surety agreement, guaranty, or
otherwise, and it is specifically contemplated that any Loan Party may
hereafter become indebted to the Bank in further sum or sums; and,
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D. All renewals, extensions and modifications of the Indebtedness referred
to in the foregoing clauses, or any part thereof.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor to all
or any of the Pension Benefit Guaranty Corporation's functions under ERISA.
"PENSION PLAN" means any Employee Plan which is subject to the provisions of
Title IV of ERISA.
"PERMITTED LIENS" means: (i) Liens granted to the Bank to secure the
Obligations; and, (ii) pledges or deposits made to secure payment of worker's
compensation insurance (or to participate in any fund in connection with
worker's compensation insurance), unemployment insurance, pensions or social
security programs; and, (iii) Liens imposed by mandatory provisions of law such
as for materialmen's, mechanics', warehousemen's and other like Liens arising in
the ordinary course of business securing Indebtedness the payment for which is
not yet due, or if same is due, it is being contested in good faith and as to
which a bond has been provided; and, (iv) Liens for taxes, assessments and
governmental charges or levies imposed upon a Person or upon such Person's
income or profits or property, if the same are not yet due and payable or if the
same are being contested in good faith and as to which adequate cash reserves
have been provided; and, (v) Liens arising from good faith deposits in
connection with tenders, leases, real estate bids or contracts (other than
contracts involving the borrowing of money), pledges or deposits to secure
public or statutory obligations and deposits to secure (or in lieu of) surety,
stay, appearance or customs bonds and deposits to secure the payment of taxes,
assessments, customs duties or other similar charges; and, (vi) encumbrances
consisting of zoning restrictions, easements, or other restrictions on the use
of real property, provided that such items do not impair the use of such
property for the purposes intended, and none of which is violated by existing or
proposed structures or land use.
"PERSON" shall include an individual, a corporation, non-profit corporation, a
professional association, a joint venture, a general partnership, a limited
partnership, a limited liability company, a limited liability partnership, a
trust, an unincorporated organization or a government or any agency or political
subdivision thereof.
"REGULATION G", "REGULATION U" and "REGULATION X" respectively mean Regulation
G, Regulation U and Regulation X promulgated by the Board, 12 C.F.R., Parts 207,
221, or 224, as applicable or any successor or other regulation hereafter
promulgated by the Board to replace the prior Regulation and having
substantially the same function.
"REGULATORY DEFECTS" means the failure by any Loan Party to comply with all
laws, statutes, orders, rules and regulations of any Governmental Authority, and
such failure to comply has a Material Adverse Effect.
"RENTALS" of any Person means, as of any date, the aggregate amount of the
obligations and liabilities, including future obligations and liabilities not
yet due and payable, of such Person to make payments under leases, subleases and
similar arrangements for the use of real, personal or mixed property, other than
leases which are Capital Leases.
"REPORTABLE EVENT" shall have the meaning ascribed to such term in Title IV of
ERISA.
"REQUIREMENTS" means (i) any and all present and future judicial decisions,
statutes, rulings, rules, regulations, orders, permits, certificates or
ordinances of any Governmental Authority in any manner applicable to the
Borrowers, and (ii) any and all contracts, written or oral, of any nature to
which the
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Borrowers may be bound.
"RESPONSIBLE OFFICER" means, with respect to any Person, the chief executive
officer, the president, the chief financial officer or the controller, of such
Person.
"REVOLVING CREDIT COMMITMENT PERIOD" means the period beginning on the Effective
Date and ending on the earlier of (i) the Revolving Credit Commitment
Termination Date, or (ii) the date on which the obligations of the Bank to fund
Advances hereunder terminates after the occurrence of an Event of Default.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE" means October 27, 1998, or if
such date is not a Business Day, then the Business Day preceding such date.
"REVOLVING CREDIT COMMITMENT" means $2,000,000.00.
"REVOLVING CREDIT LOANS" means the aggregate unpaid principal balance of all
Borrowing made under Section 2.1.
"REVOLVING CREDIT NOTE" shall have the meaning ascribed to such term in Section
4.1.
"REVOLVING LOAN CONTRACT RATE" means the rates of interest on the Loans
calculated as set out in Section 4.4.A.
"SECURITY AGREEMENT" means each first priority Security Agreement executed
pursuant to Section 5.1.A.
"SELLERS" means all of, and "SELLER" means any of, Lawrence F. Bauer, Michael
McAdam, Dan Morrel, and the Trustee(s) of the Columbia Shipping Group Trust.
"SOLVENT" means, with respect to any Person on a particular date, that on such
date (i) the fair value of the property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent liabilities, of
such Person, (ii) the present fair salable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on the Person's Indebtedness as they become absolute and matured,
(iii) such Person is able to realize upon the Person's assets and pay the
Person's Indebtedness, contingent obligations and other commitments as they
mature in the normal course of business, (iv) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement dated October 27,
1997, among Golden Eagle Group, Columbia Group, the Seller Corporations therein
named, and the Sellers pursuant to the terms of which Golden Eagle Group has or
will purchase all of the outstanding and issued capital stock of Columbia Group.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of Golden Eagle Group or a
Consolidated Subsidiary
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which expressly contains in the instruments evidencing the Indebtedness or in
the indenture or other similar instrument under which Indebtedness is issued
(which indenture or other similar instrument shall be binding on all holders of
the Indebtedness), subordination provisions (in form and substance satisfactory
to the Bank) substantially to the effect that the holders agree that the
Indebtedness evidenced by such instrument, any renewals or extensions thereof,
shall at all times and in all respects be subordinate and junior in right of
payment to the Obligations and is subject to a Subordination Agreement.
"SUBORDINATION AGREEMENT" means each Subordination Agreement executed pursuant
to Section 8.1.D.
"TANGIBLE NET WORTH" means, as of any date, the total shareholder's equity
(including capital stock, additional paid in capital and retained earnings after
deducting treasury stock) which would appear on a consolidated balance sheet of
Golden Eagle Group and the Consolidated Subsidiaries prepared as of such date in
accordance with GAAP, LESS the aggregate book value of Intangible Assets shown
on such consolidated balance sheet PLUS Subordinated Indebtedness shown on such
consolidated balance sheet.
"TERM COMMITMENT PERIOD" means the period beginning on the Effective Date and
ending on the earlier of (i) the Term Commitment Termination Date, or (ii) the
date on which the obligations of the Bank to fund Advances hereunder terminates
upon the occurrence of an Event of Default.
"TERM COMMITMENT TERMINATION DATE" means November 14, 1997.
"TERM COMMITTED SUM" means $3,833,333.00.
"TERM LOAN CONTRACT RATE" means the rates of interest on the Loans calculated as
set out in Section 4.4.B.
"TERM LOANS" means the aggregate unpaid principal balance of all Borrowing made
under Section 3.1.
"TERM MATURITY DATE" means October 27, 2002.
"TERM NOTE" shall have the meaning ascribed to such term in Section 4.2.
"TITLE DOCUMENTS" means any and all warehouse receipts, bills of lading or
similar documents of title relating to goods in which a Loan Party at any time
has an interest, whether now, or at any time or times hereafter, issued to the
Loan Party or the Bank by any Person, and whether covering Inventory or
otherwise.
"TOTAL COMMITMENT" means the total of the Revolving Credit Commitment and the
Term Committed Sum.
"TRANSACTIONS" shall have the meaning ascribed to such term in Section 9.1.B.
"UCC" means the Uniform Commercial Code in effect in the applicable jurisdiction
in which any of the Collateral is located and includes the Texas Business and
Commerce Code Annotated ""1.101-11.108 (Vernon Supp. 1992), as amended.
"UNITED STATES" and "U.S." each means the United States of America.
"VOTING SHARES" of any corporation or limited liability company means shares,
membership certificates or interests of any class or classes, however
designated, having ordinary voting power for the election of at least a majority
of the members of the Board of Directors, or other governing bodies, of such
corporation
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<PAGE>
or limited liability company.
1.2 OTHER DEFINITIONS.
A. All terms defined in this Agreement shall have the above-defined
meanings when used in any of the Loan Documents, certificates, reports
or other documents made or delivered pursuant to this Agreement, unless
the context therein shall require otherwise.
B. Defined terms used herein in the singular shall import the plural and
vice versa.
C. The words "HEREOF," "HEREIN," "HEREUNDER" and similar terms when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
D. Unless specifically otherwise noted, references to statutes by Popular
Names are reference to the United States Code Annotated, including the
regulations promulgated thereunder, and all amendments thereof.
E. References to any obligations or liabilities of the "BORROWERS,
GUARANTORS AND LOAN PARTIES" or the "BORROWERS, GUARANTORS OR LOAN
Parties" shall refer to the joint and several obligations of such
Persons.
ARTICLE II
REVOLVING CREDIT LOANS AND LETTERS OF CREDIT
2.1 REVOLVING LOAN COMMITMENT. Subject to the terms and conditions of this
Agreement, the Bank agrees to lend to the Borrowers on a revolving basis, in one
or more Advances from time to time during the Revolving Credit Commitment
Period, an amount equal to the amounts requested by the Borrowers in each Notice
of Revolving Credit Advance in the form of Exhibit 2.1 attached hereto. The
Notice of Revolving Credit Advance shall specify (i) the aggregate amount of
such Borrowing, and (ii) the requested Borrowing Date of such Borrowing. The
Bank shall not be obligated to make Advances, however, (i) in an amount in
excess of the Revolving Credit Commitment, (ii) if an Event of Default shall
exist, and/or, (iii) to the extent, if any, the Advance, when taken together
with the total amount of the Obligations, including Letters of Credit, then
outstanding, would exceed Availability except as specifically permitted in
Section 2.3. Within the limits of this Article and during the Revolving Credit
Commitment Period, the Borrowers may borrow, repay and re-borrow in accordance
with the terms and conditions of this Agreement. The Bank may, but shall not be
required to, make or continue any Loan hereunder if a Default has occurred or if
there shall have occurred a breach of a covenant under any other agreement among
any Loan Party and the Bank.
2.2 LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement,
the Bank agrees to issue, from time to time, during the Revolving Credit
Commitment Period, Letters of Credit on behalf of one or more of the Borrowers
in amounts equal to the amounts requested by Golden Eagle Group in each
Application for Letter of Credit. The Bank shall not be obligated to make
Letters of Credit, however, (i) if the total amounts of outstanding Letters of
Credit exceed or would exceed $500,000.00, (ii) if an Event of Default shall
exist, and/or, (iii) to the extent, if any, the Advance, when taken together
with the total amount of the Obligations, including Letters of Credit, then
outstanding, would exceed Availability except as specifically permitted in
Section 2.3.
A. Golden Eagle Group, for and on behalf of the Borrowers, shall execute
and deliver the Bank's then current Application for Letter of Credit.
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B. To induce the Bank to issue and maintain Letters of Credit, the
Borrowers agree to pay or reimburse the Bank on the date when any draft
or draw request is presented under any Letter of Credit, the amount paid
or to be paid by the Bank. If the Borrowers have not reimbursed the Bank
for any drafts or draws paid or to be paid within twenty-four (24) hours
following the Bank's demand for reimbursement, the Bank is irrevocably
authorized to fund the Borrowers' reimbursement obligations as an
Advance pursuant to Section 2.1 if proceeds are available and the
proceeds of such Borrowing shall be in payment of the Borrowers' unpaid
reimbursement obligations. If an Advance cannot be made, then the
Borrowers' reimbursement obligation shall constitute a demand
obligation. The Borrowers' obligations under this Section are absolute
and unconditional under any and all circumstances and irrespective of
any set off, counterclaim, or defense to payment that the Borrowers may
have at any time against the Bank or any other Person. From the date
that a draw has occurred to the date paid, unpaid reimbursement amounts
shall accrue interest as set out in Section 4.4. No Letter of Credit
will be issued with a expiry date beyond the Revolving Credit Commitment
Termination Date.
C. Bank shall notify the Borrowers of the date and amount of any draft or
draw request presented for honor under any Letter of Credit, but failure
to give notice will not affect the Obligations of the Borrowers or any
other Loan Party. The Bank shall pay the requested amount upon
presentment of a draft or draw request unless presentment on its face
does not comply with the terms of the applicable Letter of Credit. When
making payment, the Bank may disregard, (i) any Default or Event of
Default that has occurred, and (ii) obligations under any other
agreement that have or have not been performed by the beneficiary of the
Letter of Credit or any other Person. The Bank is not responsible for,
and the Borrowers' reimbursement obligations for honored drafts and
draws will not be affected by, any matter or event whatsoever,
including, without limitation, the validity or genuineness of documents
or indorsements, even if the documents should in fact prove to be in any
respect invalid, fraudulent, or forged, or any dispute among Borrowers
and the beneficiary of any Letter of Credit, or any other Person to whom
any Letter of Credit may be transferred, or any claims whatsoever of the
Borrowers against any beneficiary of any Letter of Credit or its
transferee.
D. The Borrowers acknowledge that each Letter of Credit is deemed issued
upon delivery to the beneficiary or the Borrowers. If Golden Eagle Group
requests that any Letter of Credit be delivered to a Borrower rather
than the beneficiary, and the Borrower subsequently cancels that Letter
of Credit, the Borrower agrees to return the Letter of Credit to the
Bank together with the Borrowers' certification that the Letter of
Credit has never been delivered to its beneficiary. If any Letter of
Credit is delivered to its beneficiary under a Borrower's instructions,
the cancellation shall be ineffective without the Bank's receipt of the
beneficiary's written consent and the Letter of Credit.
E. Although this Agreement may be referenced in any Letter of Credit, the
terms of an agreement related thereto or other obligation to the
beneficiary of the Letter of Credit, such other agreements are not
incorporated into this Agreement in any manner.
2.3 BORROWING BASE. The aggregate principal amount at any time remaining
unpaid on the Revolving Credit Loans and the Term Loans will not be in excess of
the amount arrived at by the computation provided for in the following borrowing
formula (the "BORROWING BASE"), which will be calculated in a Borrowing Base
Certificate in the form of Exhibit 2.3 to determine Availability.
Notwithstanding the foregoing, for the period commencing on the Effective Date
and ending on October 16, 1998, the Borrowers may have outstanding Loans in
excess of the Borrowing Base not to exceed,
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however, in the aggregate, $200,000.00. The Borrowing Base, the computation
thereof and Availability shall be eighty (80) per cent of the aggregate amount
of Eligible Accounts. The Bank retains the right to establish reasonable
reserves ("RESERVES") as it deems appropriate under the Total Commitment, based
on such factors as the Bank deems appropriate, including, but not limited to,
increases in dilution of Accounts or if the Borrowers shall fail to obtain
Landlord Agreements. The Borrowers acknowledge that the establishment of
Reserves will have the effect of limiting or restricting Advances. The term
"ELIGIBLE ACCOUNTS" means, at the time of any determination thereof, each
Account of Golden Eagle Group and the Consolidated Subsidiaries as to which the
following requirements have been fulfilled to the satisfaction of the Bank.
A. Golden Eagle Group or a Consolidated Subsidiary has lawful and absolute
title to the Account.
B. The Account is a valid, legally enforceable obligation of an Account
Debtor who is obligated under the Account for goods or services
previously delivered or rendered to the Person for which payment is due
within thirty (30) days of invoice date and the Account has not been
outstanding for more than one hundred twenty (120) days from invoice
date.
C. There has been excluded from the Account any portion that is subject to
any dispute, set off, counterclaim or other claim or defense on the part
of the Account Debtor or any claim on the part of the Account Debtor
denying liability under the Account.
D. Golden Eagle Group or a Consolidated Subsidiary has the full and
unqualified right to assign and grant a security interest in the Account
to the Bank as security for the Obligations.
E. The Account is evidenced by an invoice rendered to the Account Debtor
and the Account is not evidenced by any chattel paper, promissory note,
or other instrument.
F. The Account is subject to a fully perfected first priority security
interest and Lien in favor of the Bank pursuant to the Loan Documents,
prior to the rights of, and enforceable as such, against any other
Person.
G. The Account is not subject to any Lien in favor of any Person other than
the Lien of the Bank pursuant to the Loan Documents.
H. The Account arose from a transaction in the ordinary course of business
of Golden Eagle Group or a Consolidated Subsidiary.
I. An Eligible Account shall not include Accounts from an Account Debtor if
twenty (20) per cent or more of the dollar amounts of that Account
Debtor are more than one hundred twenty (120) days from invoice date
J. An Eligible Account shall not include Accounts from an Account Debtor to
the extent the Accounts from that Account Debtor exceeds ten (10) per
cent or more of the Eligible Accounts except for Accounts due from York,
Amoco, Aerospatiale, Forasol, Elf Aquitaine and such other Account
Debtors as may be specifically approved in writing by the Bank.
K. An Eligible Account shall not include any Account from any steamship or
like company which, under applicable law, has the right to set off
against the Account.
L. An Eligible Account shall not include any Account or portion of any
Account from U.S. Customs in excess of an aggregate of $500,000.00.
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M. An Eligible Account shall not include any Account from any Affiliate.
N. No Account Debtor in respect of the Account is (i) primarily conducting
business in any jurisdiction located outside the U.S., except those
Accounts secured by letters of credit specifically approved by the Bank
and except for Account of Aerospatiale, Forasol, Elf Aquitaine, (ii) an
Affiliate of Golden Eagle Group or a Consolidated Subsidiary, (iii) any
Governmental Authority, domestic or foreign, or (iv) the subject of a
proceeding under any Debtor Laws.
O. An Eligible Account shall not include an Account from or among any of
the Loan Parties or an Account which arises out of a transaction in
which any Loan Party shall have provided any surety or guaranty bond to
the Account Debtor or other Person.
2.4 BORROWING PROCEDURE. Borrowers will maintain a joint bank account (the
"COLLECTION AND FUNDING ACCOUNT") into which account all Advances on the
Revolving Credits Loans will be deposited.
A. Advances on the Revolving Credit Loans shall be made pursuant to a
Notice of Revolving Credit Advance signed by a Responsible Officer of
Golden Eagle Group, specifying, (i) the aggregate amount of the
Borrowing, and (ii) the requested date of the Borrowing. Each Borrowing
shall be made on a Business Day. Borrowing shall be made in increments
of not less than $50,000.00. The Bank is entitled to rely and act upon
requests made or purportedly made by a Responsible Officer of Golden
Eagle Group. Borrowers shall be unconditionally and absolutely estopped
from denying (i) the authenticity and validity of any such transaction
so acted upon by the Bank once the Bank has made an Advance and has
deposited or transferred such funds as requested in any such Notice of
Revolving Credit Advance, and (ii) the Borrowers' liability and
responsibility therefor.
B. Each Notice of Revolving Credit Advance shall be irrevocable and binding
on the Borrowers. Borrowers covenant and agree to assume liability for
and to protect, indemnify and save the Bank harmless from any and all
liabilities, obligations, damages, penalties, claims, causes of action,
costs, charges and expenses, including attorneys' fees, which may be
imposed upon, incurred by or asserted against the Bank by reason of any
loss, damage or claim howsoever arising or incurred because of, out of
or in connection with (i) any action of the Bank pursuant to a Notice of
Revolving Credit Advance or any other request for an Advance under the
Revolving Credit Loans, (ii) the breach of any provisions of this
Agreement by any Loan Party, or (iii) the transfer of funds pursuant to
(i) and/or (ii) above.
C. After receiving a Notice of Revolving Credit Advance in the manner
provided herein, the Bank will, before 2:00 p.m. (Houston, Texas time)
on the requested Borrowing Date which shall not be earlier than the
first Business Day after a Borrowing is requested as specified in a
Notice of Revolving Credit Advance, deposit the Advance in immediately
available funds in the Collection and Funding Account.
D. If the Bank shall receive an Application for Letter of Credit in the
manner provided herein before 2:00 p.m. (Houston, Texas time) the Bank
shall, on the requested Borrowing Date which shall not be earlier than
the second Business Day after receipt, issue the Letter of Credit as
specified by Golden Eagle Group and deliver same as directed by the
Golden Eagle Group.
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2.5 USE OF PROCEEDS. The proceeds of each Borrowing under the Revolving
Credit Commitment shall be used for the general working capital purposes of the
Borrowers in the ordinary course of business and for no other purposes.
2.6 COLLECTION AND FUNDING ACCOUNT. All payments made on Accounts will be
deposited into the Collection and Funding Account. The Borrowers will provide
written notification to each Account Debtor to remit all payments to the
Collection and Funding Account. Bank will transfer from the Collection and
Funding Account all collected amounts and deposit same to another account of the
Borrowers designated by Golden Eagle Group.
ARTICLE III
TERM LOANS
3.1 TERM LOANS. Subject to the terms and conditions of this Agreement, the
Bank agrees to lend to the Borrowers, in one Advance from time to time during
the Term Commitment Period, an amount equal to the amounts requested by the
Borrowers in a Notice of Term Loan Advance in the form of Exhibit 3.1 attached
hereto. The Notice of Term Loan Advance shall specify (i) the aggregate amount
of such Borrowing, and (ii) the requested Borrowing Date of such Borrowing. The
Bank shall not be obligated to make Term Loan Advances, however, (i) in an
amount in excess of the Term Committed Sum, (ii) if an Event of Default shall
exist, and/or, (iii) to the extent, if any, the Advance, when taken together
with the total amount of the Obligations, including Letters of Credit, then
outstanding, would exceed Availability except as specifically permitted in
Section 2.3.
3.2 BORROWING PROCEDURE. It is contemplated that the Borrowers will request
the Advance of the Term Committed Sum to pay a portion of the acquisition price
for the stock being acquired pursuant to the Stock Purchase Agreement. Upon the
making of a Term Loan Advance, the Borrowers must perfect in the Bank a valid
first priority lien on all Collateral, including the assets of the entities
whose stock is being acquired, directly or indirectly.
A. The Advance on the Term Loans shall be made pursuant to the Notice of
Term Loan Advance signed by a Responsible Officer of Golden Eagle Group,
specifying (i) the aggregate amount of the Borrowing, and (ii) the
requested Borrowing Date of the Borrowing. The Bank is entitled to rely
and act upon requests made or purportedly made by a Responsible Officer
of Golden Eagle Group. The Borrowers shall be unconditionally and
absolutely estopped from denying (i) the authenticity and validity of
any such transaction so acted upon by the Bank once the Bank has made
the Advance and has deposited, transferred or paid such funds as
requested in the Notice of Term Loan Advance, and (ii) the Borrowers'
liability and responsibility therefor.
B. The Notice of Term Loan Advance shall be irrevocable and bind ing on the
Borrowers. The Borrowers covenant and agree to assume liability for and
to protect, indemnify and save the Bank harmless from any and all
liabilities, obligations, damages, penalties, claims, causes of action,
costs, charges and expenses, including attorneys' fees, which may be
imposed upon, incurred by or asserted against the Bank by reason of any
loss, damage or claim howsoever arising or incurred because of, out of
or in connection with (i) any action of the Bank pursuant to the Notice
of Term Loan Advance, (ii) the breach of any provisions of this
Agreement by the Borrowers, or (iii) the transfer of funds pursuant to
(i) and/or (ii) above.
3.3 USE OF PROCEEDS. Borrowing under the Term Committed Sum will be used
solely in payment of a portion of the purchase price of the stock being acquired
pursuant to the Stock Purchase Agreement and for no other purposes.
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3.4 CONDITIONS PRECEDENT. Borrowers shall, as conditions precedent to
receiving an Advance under the provisions hereof, deliver to the Bank, at the
time of the Notice of Term Loan Advance, the following:
A. True and correct final copies of the Stock Purchase Agreement duly
executed by each party thereto, together with true and correct final
copies of all documents mentioned or described in the Stock Purchase
Agreement, duly executed by the appropriate parties thereto.
B. Duly executed and filed UCC-1 Financing Statements to perfect the Bank's
first priority security interest in the Collateral, and searches of the
Office of the Secretary of States of Texas, New York, Colorado,
Illinois, Pennsylvania, Florida, Arizona, California and such other
jurisdictions as any of the Loan Parties is doing business or that the
Bank may require reflecting no other perfected Liens on the Collateral.
C. Financial and other information, including, but specifically not limited
to, audited financial statements, concerning the Persons being directly
or indirectly acquired pursuant to the Stock Purchase Agreement, and the
Stock Purchase Agreement, all of which must be in form, content and
detail as required by the Bank and in the sole and absolute discretion
of the Bank, satisfactory to the Bank.
D. A landlord's lien waiver on the Leasehold in New York, and other
Leaseholds when requested by the Bank, and a waiver of lien executed by
any mortgagee holding a Lien on the real property of which the Leasehold
is a part, both being in form and content satisfactory to the Bank. The
Bank will be provided with such title information as will be reasonably
necessary to determine the status of title to any such real property.
ARTICLE IV
NOTES
4.1 REVOLVING CREDIT NOTE. The Revolving Credit Advances made under Section
2.1 by the Bank shall be evidenced by the Revolving Credit Note executed by the
Borrowers, which shall (i) be dated the Effective Date, (ii) be in the amount of
the Revolving Credit Commitment, (iii) be payable to the order of the Bank at
the office of the Bank, (iv) bear interest in accordance with Section 4.4, and
(v) be in the form of Exhibit 4.1 attached hereto. Notwithstanding the principal
amount of the Revolving Credit Note as stated on the face thereof, the amount of
principal actually owing thereon, at any given time, shall be the aggregate of
all Revolving Credit Advances made to the Borrowers hereunder, less all payments
of principal actually received by the Bank. The records of the Bank evidencing
the date and amount of each Revolving Credit Advance, as well as the amount of
each payment made by the Borrowers, shall be rebuttably presumptive evidence of
the amounts owing and unpaid on the Revolving Credit Note. Borrowers shall
repay, and shall pay interest on, the unpaid principal amount of the Revolving
Credit Loans in accordance with the terms of the Revolving Credit Note and this
Agreement.
4.2 TERM NOTE. The Term Advance made under Section 3.1 by the Bank shall be
evidenced by the Term Note executed by the Borrowers, which shall (i) be dated
the Effective Date, (ii) be in the amount of the Term Committed Sum, (iii) be
payable to the order of the Bank at the office of the Bank, (iv) bear interest
in accordance with Section 4.4, and (v) be in the form of Exhibit 4.2 attached
hereto. Borrowers shall repay, and shall pay interest on, the unpaid principal
amount of the Term Loans in accordance with the terms of the Term Note and this
Agreement.
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4.3 APPLICABLE MARGIN. With respect to Term Loans, the Applicable Margin
shall be determined as a function of the Debt Coverage Ratio and shall be
calculated as set forth below.
DEBT COVERAGE RATIO APPLICABLE MARGIN
Equal to or greater
than 1.50:1.00 0.50 %
Equal to or greater
than 1.00:1.00, but
less than 1.50:1.00 0.25 %
Less than 1.00:1.00 (-.25) %
The Debt Coverage Ratio shall be deemed to be 1.50:1.00 from the Effective
Date to and including December 31, 1997. Any change in the Applicable Margin
after December 31, 1997, shall be effective upon the date of delivery of,
(i) the annual audited Financial Statements to be delivered pursuant to
Section 7.1.A.(1), and (ii) thereafter shall be determined quarterly from
the Financial Statements of Golden Eagle Group and the Consolidated
Subsidiaries most recently delivered pursuant to Section 7.1.A.(4) at the
end of each fiscal quarter for the preceding consecutive twelve (12) month
period. If Golden Eagle Group shall fail to deliver any such Financial
Statements within the times specified in Section 7.1.A.(1) or Section
7.1.A.(4), the Debt Coverage Ratio shall be deemed to be 1.50:1.00 until the
delivery of such Financial Statements to the Bank.
4.4 INTEREST RATES. The unpaid principal of the Loans shall bear interest
from the date of Advance as follows:
A. Prior to Default, the Revolving Credit Loans shall bear interest at a
rate (the "REVOLVING LOAN CONTRACT RATE") per annum which shall, from
day to day, be an amount equal to the lesser of: (i) The Base Rate in
effect from day to day; or, (ii) the Maximum Rate.
B. Prior to Default, the Term Loans shall bear interest at a rate (the
"TERM LOAN CONTRACT RATE") per annum which shall, from day to day, be
an amount equal to the lesser of: (i) The Base Rate in effect from day
to day plus the Applicable Margin; or, (ii) the Maximum Rate.
C. Past due principal and interest on the Loans shall bear interest, to
the extent permitted by applicable law, at a rate per annum equal to
the lesser of: (i) The Maximum Rate; or, (ii) if no Maximum Rate
exists, then eighteen (18) per cent per annum.
D. Notwithstanding the terms of Section 4.4.A or Section 4.4.B, if on any
interest payment date, the Bank does not receive interest at the
applicable Contract Rate because the applicable Contract Rate exceeds or
has exceeded the Maximum Rate, then the Borrowers shall, upon the demand
of the Bank, pay to the Bank, in addition to interest otherwise required
hereunder, on each interest payment date thereafter, interest at the
Maximum Rate until the cumulative interest received by the Bank equals
the interest which would have been received at the applicable Contract
Rate. In no event, however, shall the Borrowers be required to pay, for
any appropriate computation period, interest at a rate exceeding the
Maximum Rate effective during such period.
4.5 MAXIMUM INTEREST. It is the intention of the parties to comply with all
applicable usury laws.
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Accordingly, it is agreed that notwithstanding any provision apparently to the
contrary in the Loan Documents, no such provision shall require the payment or
permit the collection of interest in excess of the Maximum Amount or the Maximum
Rate. If any excess of interest in such respect is provided for, or shall be
adjudicated to be so provided for, in the Loan Documents, then in such event the
provisions of this Section shall govern and control and (i) no Loan Party liable
for the payment of any sums to become due under the Loan Documents shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the Maximum Amount or the Maximum Rate, and (ii) any such excess which may
have been collected shall be first applied as a credit against the then unpaid
principal amount on the Notes and the excess, if any, refunded to the Borrowers
or such other Loan Party and the effective rate of interest shall be
automatically reduced to the Maximum Rate. Without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged or received
under the Loan Documents which are made for the purpose of determining whether
such rate exceeds the Maximum Rate, shall be made, to the extent permitted by
applicable usury laws, by amortizing, prorating, allocating and spreading in
equal parts during the period of the full stated term of the Loans, all interest
at any time contracted for, charged or received by the holder or holders of the
Notes in connection with the Loans. The Bank notifies and discloses to the
Borrowers that, for purposes of TEX. REV. CIV. STAT. ANN. Art. 5069-1.04 (Vernon
1989), as it may, from time to time, be amended, the "APPLICABLE RATE CEILING"
shall be the "INDICATED RATE" ceiling, from time to time, in effect as limited
by Art. 5069-1.04(b). To the extent provided by applicable law, however, the
Bank reserves the right to change the "APPLICABLE RATE CEILING," from time to
time, by further notice and disclosure to the Borrowers. The "HIGHEST
NON-USURIOUS RATE OF INTEREST PERMITTED BY APPLICABLE LAW" for purposes of this
Agreement and the Notes shall not be limited to the applicable rate ceiling
under Art. 5069-1.04 if federal laws or other state laws now or hereafter in
effect and applicable to this Agreement and the Notes (and the interest
contracted for, charged and collected hereunder or thereunder) shall permit a
higher rate of interest. The Loan Parties and the Bank agree that, except for
"15.10(b), the provisions of TEX. REV. CIV. STA. ANN. Art. 5069-15.01 ET.SEQ.
Vernon (1987), as amended (regulating certain revolving credit loans and
revolving tri-party accounts) shall not apply to the Loan Documents.
4.6 PAYMENTS ON THE NOTES. The Notes will be paid and prepaid in accordance
with the terms set out in this Section.
A. The unpaid principal amount of the Revolving Credit Note, together with
all accrued but unpaid interest thereon, unpaid Facility Fees and
Letters of Credit Fees, if not, for any reason previously paid, shall be
due and payable on the Revolving Credit Commitment Termination Date.
Interest on the Revolving Credit Note shall be due and payable monthly
as it accrues, commencing on November 27, 1997, and continuing on the
same day of each month during the Revolving Credit Commitment Period and
on the Revolving Credit Commitment Termination Date.
B. The unpaid principal amount of the Term Note shall be due and payable
quarterly in consecutive installments of $191,667.00, commencing on
January 27, 1998, and continuing on each April 27, July 27, October 27
and January 27 thereafter, and in one final installment on the Term
Maturity Date, when the balance of all principal on the Term Note shall
be payable in full. Interest on the Term Note shall be due and payable
quarterly, as interest accrues, commencing on January 27, 1998, and
continuing on each April 27, July 27, October 27 and January 27
thereafter until the Term Maturity Date, when the balance of all accrued
and unpaid interest on the Term Note shall be payable in full.
C. In addition to the payments required under Section 4.6.A and Section
4.6.B, the Borrowers shall, from time to time, make prepayments of
principal and interest on the Notes, first of the
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Revolving Credit Loans and secondly of the Term Loans, such that
Availability equals or exceeds zero at all times except as specifically
permitted in Section 2.3.
D. In addition to the payments required under Section 4.6.A, Section 4.6.B
and Section 4.6.C, the Borrowers shall, not later than each July 31 and
January 31, commencing with the period ending June 30, 1998, make a
Mandatory Prepayment for the prior period ended, such prepayment to be
applied as set forth in Section 4.8.
E. In addition to the payments required under Section 4.6.A, Section 4.6.B,
Section 4.6.C and Section 4.6.D, the Borrowers shall, not later than
three (3) days of, (i) the sale of any assets of the Borrowers
(excluding sales of assets in the ordinary course of business), (ii) the
completion of any debt or equity offerings or the realization of
proceeds of any prior debt or equity offerings, or (iii) a Change of
Control, make a prepayment of the Loans in an amount equal to one
hundred (100) per cent of the proceeds received or realized (net of
taxes due and any expenses of sale) by the Borrowers, or in the case of
a Change of Control, by the sellers of any Loan Party's stock, which
proceeds shall be applied as set forth in Section 4.8.
F. On the Revolving Credit Commitment Termination Date or upon the
occurrence of any Event of Default, the Borrowers shall provide to the
Bank cash collateral in an amount equal to the then-existing
outstanding amounts of Letters of Credit. The Bank agrees to return the
cash collateral to the Borrowers upon the subsequent payment in full of
all Obligations or the cure of the applicable Default.
4.7 CALCULATION OF INTEREST RATES. Interest on the unpaid principal of the
Notes shall be calculated on the basis of the actual days elapsed in a year
consisting of three hundred sixty (360) days.
4.8 PREPAYMENTS. The Borrowers may, upon prior notice to the Bank, make
prepayments on the Notes in whole at any time or in part, from time to time,
without premium or penalty, however:
A. Any prepayment of the Notes shall be made together with interest accrued
through the date of the prepayment on the principal amount prepaid; and,
B. If no Default shall have occurred, prepayments shall be applied (i)
first to the discharge of any expenses for which the Bank may be
entitled to receive reimbursement under any agreement with the
Borrowers, (ii) next to accrued interest on the Notes, (iii) next to the
reduction of installments of principal, in inverse order of maturity, on
the Term Note, and (iv) the balance remaining, if any, shall be applied
to the reduction of principal on the Revolving Credit Note.
C. If, however, a Default has occurred and is continuing at the time of a
prepayment, the Bank shall be entitled to apply the prepayment in any
manner the Bank shall deem appropriate.
4.9 LETTERS OF CREDIT FEES. At the time a Letter of Credit is issued, the
Borrowers agree to pay to the Bank fees for the issuing of Letters of Credit:
A. In a sum equal to the greater of one (1) per cent per annum of the face
amount of the Letter of Credit, and an annual fee of $350.00 for each
year or part year a Letter of Credit is outstanding.
B. The Borrowers additionally agree to pay promptly upon demand the amount
of any customary fees and expenses the Bank charges for amending letters
of credit, for honoring drafts and draw requests, and taking similar
action in connection with letters of credit.
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4.10 MANNER AND APPLICATION OF PAYMENTS. All payments and prepayments of
principal of, and interest on, the Notes shall be made by the Borrowers to the
Bank before 2:00 p.m. (Houston, Texas time) in immediately available funds at
the Bank's office. Any payment or prepayment received by the Bank after 2:00
p.m. (Houston, Texas time), shall be deemed to have been received by the Bank on
the next succeeding Business Day.
4.11 RENEWALS OF NOTES. All renewals and rearrangements, if any, of the
Notes shall be deemed to be made pursuant to this Agreement, and accordingly,
shall be subject to the terms and provisions hereof. Each Loan Party shall be
deemed to have ratified, as of the date of such renewal or rearrangement, all of
the representations, covenants and agreements herein and in the Loan Documents
set forth.
4.12 TAXES.
A. Any and all payments by the Borrowers hereunder or under the Notes shall
be made free and clear of, and without deduction for, any and all
present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto ("TAXES"),
excluding taxes imposed upon the Bank's income, and franchise taxes
imposed upon the Bank by any Governmental Authority. If the Borrowers
shall be required by law to deduct any Taxes for which the Borrowers are
responsible under the preceding sentence from or in respect of any sum
payable hereunder or under any Note, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section) the Bank receives an amount equal to the sum the
Bank would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions, and (iii) the Borrowers shall pay
the full amount deducted to the relevant Governmental Authority or other
authority in accordance with applicable law.
B. Borrowers shall pay any present or future stamp or documentary taxes,
or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under the Loan Documents or
from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or the other Loan Documents ("OTHER TAXES").
C. Each Loan Party indemnifies and agrees to hold the Bank harmless for
the full amount of Taxes and Other Taxes paid by the Bank or any
liability, including penalties and interest, arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted.
D. Upon request of the Bank and within thirty (30) days thereafter, the
Borrowers shall furnish to the Bank the original or a certified copy of
a receipt evidencing payment therefor.
E. Without prejudice to the survival of any other agreement, the agreements
and obligations of each Loan Party contained in this Section shall
survive the payment in full of the Obligations.
4.13 FACILITY FEES. Borrowers agree to pay to the Bank facility fees for the
granting of the Revolving Credit Loans computed at a rate per annum (based on a
360 day year) equal to one hundred twenty-five thousandths (.125) per cent on
the average daily un-borrowed amount of the Revolving Credit Commitment in
effect during the period for which payment is made. Commencing on December 31,
1997, the commitment fees shall be payable semi-annually, in arrears, on the
last day of each June and December during the Revolving Credit Commitment
Period, and on the Revolving Credit Commitment
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Termination Date, within five (5) days of the Bank's demand therefor on the
Borrowers. Additionally, the Borrowers agree to pay to the Bank a facility fee
in the amount of $19,167.00, for the granting of the Term Loans which shall be
due and payable on the Effective Date.
ARTICLE V
COLLATERAL FOR LOANS
5.1 COLLATERAL FOR LOANS. The Loans shall be secured by the following
property of each of the Loan Parties (collectively, the "COLLATERAL") and Liens
in the Collateral shall be created by or in the Collateral Documents, including,
but not limited to, those described as follows:
A. Security Agreement in the form of Exhibit 5.1.A, creating a first
priority lien, mortgage and security interest in and upon all present
and future Accounts, General Intangibles, Instruments, margin accounts,
tax refunds, Chattel Paper, drafts, acceptances, Contracts and Contract
Rights, Documents, Title Documents, notes, and all other personal
property or interests in personal property, together with all
accessions to, substitutions for, and all replacements, products and
proceeds of the foregoing (including, without limitation, proceeds of
insurance policies insuring any of the foregoing), all books and
records (including, without limitation, customer lists, credit files,
computer programs, printouts and other computer materials and records)
pertaining to any of the foregoing, and all insurance policies insuring
any of the foregoing, whether now owned or hereafter acquired, and
wherever located.
5.2 FURTHER ASSURANCES. Each Loan Party shall make, execute or endorse, and
acknowledge and deliver or file or cause the same to be done, all vouchers,
invoices, notices, certifications and additional agreements, undertakings,
conveyances, deeds of trust, mortgages, transfers, assignments, Financing
Statements or other assurances, and take any and all such other action, as the
Bank may, from time to time, deem reasonably necessary or proper in connection
with any of the Loan Documents, or for better assuring and confirming unto the
Bank all or any part of the security for any of the Obligations, or for granting
to the Bank any security for the Obligations which the Bank reasonably may
request from time to time.
5.3 COLLATERAL DOCUMENTS. Each of the Collateral Documents will be duly
executed by the parties thereto. Each document, including, without limitation,
any Financing Statement, required by the Collateral Documents, under law or
requested by the Bank to be filed, registered or recorded in order to create, in
favor of and for the benefit of the Bank, a perfected first Lien on the
Collateral described therein, shall be properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation thereof is so
required or requested. The Bank shall receive an acknowledgment copy, or other
evidence satisfactory to the Bank, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto.
5.4 DESCRIPTION OF ASSETS. The Collateral Documents will contain a
description of the Collateral sufficient to grant to the Bank for the benefit of
the Bank perfected Liens therein pursuant to applicable law. Upon the filing of
the UCC-1's, the Bank will have, for the benefit of the Bank, perfected first
priority Liens in all Collateral.
5.5 OTHER LOANS. It is agreed that the Collateral given to secure the Loans
shall secure all Obligations, regardless of how same may arise and all
collateral given to secure any other obligations of each Loan Party shall
additionally secure the Obligations. Any Default shall constitute an event of
default in all Obligations and the Liens securing the payment of same.
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ARTICLE VI
CUSTODY, INSPECTION, AND MAINTENANCE OF COLLATERAL
6.1 DISPOSITION. Borrowers will safeguard and protect all Collateral for the
Bank's general account and make no disposition thereof except in the ordinary
course of business.
6.2 INSPECTION. At all times, the Bank shall have full access to, and the
right to examine, check, inspect and make abstracts and copies from the books,
records, audits, correspondence and all other papers relating to the Collateral.
The Bank and the Bank's agents may enter upon any of the premises of the
Borrowers at any time during business hours and at any other reasonable time,
and from time to time, for the purpose of inspecting the Collateral and any and
all records pertaining thereto. On an annual basis, the Bank may, at the
Borrowers' expense make field examinations of the Borrowers' books, records,
Title Documents and Inventory. The costs of the field examinations will be
reimbursed to the Bank on receipt of a statement therefor.
6.3 AUTHORIZATION. Borrowers irrevocably authorize and direct all
accountants and auditors employed by the Borrowers to exhibit and deliver to the
Bank at any time during the term of this Agreement copies of any of the
Financial Statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession of the Borrowers, and to disclose to
the Bank any information they may have concerning the financial status and
business operations. Borrowers authorize all Governmental Authority to furnish
to the Bank copies of reports or examinations relating to the Borrowers, whether
made by the Borrowers or otherwise.
6.4 REPORTS. Borrowers will, immediately upon learning thereof, report to
the Bank all matters materially affecting the value, en forceability or
collectibility of any of the Collateral such as the reclamation, repossession or
return to the Borrowers of goods and claims or disputes asserted by any customer
or Account Debtor.
6.5 COMPLIANCE WITH LAW. Borrowers shall comply with all actions, rules,
regulations and orders of any Governmental Authority applicable to the
Collateral or any part thereof or to the operation of the business of the
Borrowers. Borrowers may, however, contest or dispute any actions, rules,
regulations, orders and directions of a Governmental Authority in any reasonable
manner, provided the Bank is satisfied that the contest or dispute does not
affect the Bank's Liens or have a Material Adverse Effect.
6.6 PROTECTION. At any time there shall be an Event of Default, the Bank may
take such steps as the Bank deems necessary to protect the Bank's interest in
and to preserve the Collateral, including the hiring of security guards or the
placing of other security protection measures as the Bank may deem appropriate.
The Bank may elect to employ and maintain at any of the Borrowers' premises a
custodian who shall have full authority to do all acts necessary to protect the
Bank's interest in the Collateral. The Bank may lease warehouse facilities to
which the Bank may move all or part of the Collateral. Borrowers agree to
cooperate fully with all of the Bank's efforts to preserve the Collateral and
will take such actions to preserve the Collateral as the Bank may direct. All of
the Bank's reasonable expenses of preserving the Collateral, including any
expenses relating to the bonding of a custodian, shall be charged to the
Borrowers' account and added to the Revolving Credit Note.
6.7 CREATION OF ACCOUNTS. Upon the Bank's request, the Borrowers will upon
the creation of Accounts, or at such intervals as the Bank may require, provide
the Bank with (i) confirmatory assignment schedules, (ii) copies of customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Accounts as the Bank may
require. The Bank shall have the right to confirm and verify all Accounts and do
whatever the Bank may deem necessary to
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protect the Bank's interests. The items to be provided under this Section are to
be in forms satisfactory to the Bank and executed by the Borrowers and delivered
to the Bank, from time to time, solely for the Bank's convenience in maintaining
records of the Collateral. The failure to deliver any of such items to the Bank
shall not affect, terminate, modify or otherwise limit the Bank's Liens.
6.8 RIGHT TO RECEIVE. The Bank shall have the right to receive, endorse,
assign and/or deliver in the name of the Bank and the Borrowers, any and all
checks, drafts and other instruments for the payment of money relating to the
Accounts. Borrowers waive notice of presentment, protest and of non-payment of
any instrument so endorsed. Borrowers constitute the Bank or the Bank's designee
as the Borrowers' attorney with power to (i) endorse the Borrowers' names upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral that may come into the Bank's possession; (ii) send
verifications of Accounts to any customer; (iii) notify the postal authorities
to change the address for delivery of mail addressed to the Borrowers to such
address as the Bank may designate; and, (iv) sign all Financing Statements or
any other documents or instruments deemed necessary or appropriate by the Bank
to preserve, collect, or perfect the Bank's interest in the Collateral and file
same. All acts of the attorney or designee are hereby ratified and approved, and
the attorney or designee shall not be liable for any acts of omission or
commission, or for any error of judgment or mistake of fact or law. This power
is coupled with an interest and is irrevocable while any of the Obligations
remain unpaid.
ARTICLE VII
COVENANTS
7.1 AFFIRMATIVE COVENANTS. Until the fulfillment of all Obligations, unless
the Bank shall otherwise consent in writing, each Loan Party, respectively as
indicated, will perform and comply with the following covenants:
A. Golden Eagle Group shall furnish to the Bank:
(1) As soon as possible, but in any event within one hundred twenty
(120) days after the end of each Fiscal Year, audited, consolidated
Financial Statements of Golden Eagle Group and the Consolidated
Subsidiaries consisting of statements of income, stockholder's equity
and cash flows for such Fiscal Year and a balance sheet as of the end
of such Fiscal Year, setting forth, in each case, in comparative form,
corresponding figures from the immediately preceding annual audit, and
if requested by the Bank the supporting schedules therefor, all in
reasonable detail and satisfactory in scope to the Bank, as fairly
presenting the financial position of Golden Eagle Group and the
Consolidated Subsidiaries as of the dates indicated in accordance with
GAAP, together with an opinion thereon, without qualifications or
exceptions, certified by independent certified public accountants
selected by the Borrowers and satisfactory to the Bank;
(2) As soon as possible, but in any event within one hundred twenty
(120) days after the end of each Fiscal Year, the auditors' management
report;
(3) As soon as possible, but in any event within thirty (30) days after
the end of each calendar month, a consolidated aging and listing of all
Accounts, Eligible Accounts, all accounts payable, agent report and a
steamship payable report for such month certified as being true and
correct by a Financial Officer of Golden Eagle Group;
(4) Within thirty (30) days after the end of each calendar month, a
consolidated balance sheet as of the end of such calendar month and the
related statement of income, all in reasonable detail and setting forth
in comparative form the amounts for such calendar month
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and the Fiscal Year to date, and the amounts for the corresponding
periods in the prior year, prepared in a manner satisfactory to the
Bank and certified by a Financial Officer of Golden Eagle Group as
fairly presenting the consolidated financial position of Golden Eagle
Group and the Consolidated Subsidiaries as of the dates indicated,
subject to changes resulting from audit and normal year-end adjustment;
(5) On the Effective Date, the Borrowers will provide the Bank, (i) a
Certificate of Compliance in the form of Exhibit 7.1.A.(5), with a
proforma Borrowing Base Certificate for Golden Eagle Group and the
Consolidated Subsidiaries based on June 30, 1997, Financial Statements,
together supporting data regarding Eligible Accounts derived from each
Loan Party, signed by a Financial Officer of Golden Eagle Group
certifying that no Events of Default have occurred and the Loan Parties
are in compliance with the covenants set out in Section 7.2,
calculating the Borrowing Base. On November 15, 1997, the Borrowers
will provide the Bank, (i) a Certificate of Compliance in the form of
Exhibit 7.1.A.(5), with a Borrowing Base Certificate for Golden Eagle
Group and the Consolidated Subsidiaries based on September 30, 1997,
Financial Statements, together supporting data regarding Eligible
Accounts derived from each Loan Party, signed by a Financial Officer of
Golden Eagle Group certifying that no Events of Default have occurred
and the Loan Parties are in compliance with the covenants set out in
Section 7.2, calculating the Borrowing Base. Thereafter, within thirty
(30) days after the end of each calendar month, the Borrowers will
provide the Bank, (i) a Certificate of Compliance in the form of
Exhibit 7.1.A.(5), with an attached Borrowing Base Certificate,
together supporting data regarding Eligible Accounts derived from each
Loan Party, signed by a Financial Officer of Golden Eagle Group
certifying that no Events of Default have occurred and the Loan Parties
are in compliance with the covenants set out in Section 7.2,
calculating the Borrowing Base, and demonstrating compliance as at the
end of such month with the Availability requirements, and (ii) together
with such payment, if any, as may be necessary to bring the
Availability to zero except as specifically permitted in Section 2.3;
and,
(6) From time to time, such further information regarding the business,
affairs and financial condition of the Borrowers as the Bank may
request.
B. Borrowers shall furnish to the Bank, within forty-five (45) days after
the end of the first, second and third Fiscal quarter, a copy of the
Form 10Q filed with the Securities and Exchange Commission, and within
one hundred twenty (120) days of the end of each Fiscal Year, a copy of
the Form 10K filed with the Securities and Exchange Commission, each
certified by a Financial Officer of Golden Eagle Group as being true
and correct.
C. Golden Eagle Group shall furnish to the Bank, promptly when same is
being available, a copy of each Financial Statement, report, notice or
proxy statement sent by Golden Eagle Group to stockholders generally
and of each regular or periodic report, registration statement or
prospectus filed by the Borrowers with any securities exchange or the
Securities and Exchange Commission, and of any order issued by any
Governmental Authority in any proceeding to which any of the Borrowers
are a party. Golden Eagle Group will notify the Bank of changes in the
ownership of stock of Golden Eagle Group by any Insider, as defined in
the Securities Act of 1934, of any single change or aggregate change of
ownership of five (5) or more per cent of the outstanding or issued
shares of Golden Eagle Group.
D. Each Loan Party shall, promptly upon learning thereof: (i) inform the
Bank, in writing, of any material delay in the Loan Party's performance
of any obligations to any Account Debtor or of any assertion of any
claims, set offs or counterclaims by any Account Debtor; and, (ii)
furnish
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to and inform the Bank of all material adverse information relating to
the financial condition of any Account Debtor.
E. Each Loan Party shall comply with all Requirements of any Governmental
Authority.
F. Each Loan Party shall act prudently and in accordance with customary
industry standards in managing or operating the Loan Party's assets,
properties, business and investments. Each Loan Party shall keep in
good working order and condition, ordinary wear and tear excepted, all
of the Loan Party's assets and properties which are necessary to the
conduct of the Loan Party's business. Each Loan Party shall obtain and
maintain at the Loan Party's expense, all governmental licenses,
authorizations, consents, permits and approvals as may be required to
enable the Loan Party to operate the Loan Party's business and to
comply with the Loan Party's obligations hereunder and under the other
Loan Documents.
G. Each Loan Party will maintain with financially sound, responsible and
reputable insurance companies, insurance against such risks, and in
such amounts (and with co-insurance and deductibles), as are usually
carried by owners of similar businesses and properties in the same
general areas in which the Loan Party operates, and at least in the
amounts and types presently carried by the Loan Party. Each Loan Party
will specifically maintain, (i) all insurance required by state
statutes for protection of employees against work-related injuries,
(ii) comprehensive general liability coverage in such amounts as are
appropriate for the operations of the Loan Party, and (iii) all other
insurance required by applicable law. All such policies shall be
non-cancelable without ten (10) days prior written notice to the Bank.
Each Loan Party shall cause the insurance policies or proper
certificates evidencing the same to be delivered to the Bank. If any
Loan Party shall fail to obtain insurance as herein provided, or to
keep the same in force, the Bank may obtain such insurance and pay the
premiums therefor and charge the Borrowers' account therefor, and such
expenses so paid shall be part of the Obligations.
H. Each Loan Party shall continue to be a corporation duly incorporated
and existing in good standing under the laws of the State of its
incorporation and each will continue to be duly licensed or qualified
in all jurisdictions wherein the character of the property owned or
leased by the Loan Party or the nature of the business transacted by
the Loan Party makes licensing or qualification necessary, and the
failure to do so would have a Material Adverse Effect.
I. From time to time each of the Loan Parties shall also furnish to the
Bank copies of income tax returns and such other information regarding
the business, affairs and financial condition of the Loan Party as the
Bank reasonably may request.
J. Each Loan Party shall pay and discharge all taxes, assessments and
governmental charges or levies including, but expressly not limited to,
income, excise and ad valorem taxes, prior to the date on which
penalties or liens attach thereto and become of public record, except
such taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided.
K. Each Loan Party shall promptly give notice in writing to the Bank of
(i) any IRS audit of the Loan Party, (ii) the filing or commencement of
any action, suit, or administrative proceeding against the Loan Party,
whether at law or in equity or by or before any Governmental Authority,
(iii) violations of any Requirement, or (iv) any Reportable Event, any
of which events (a) is material and is brought by or on behalf of any
Person, or in which injunctive or other equitable
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relief is sought, and (b) it is probable (within the meaning of
Statement of Financial Accounting Standards No. 5 promulgated by FASB)
that there will be an adverse determination and which, if adversely
determined, would materially impair the ability of such Person to
perform its obligations under any of the Loan Documents to which it is
a party.
L. Each Loan Party shall furnish to the Bank immediately upon becoming
aware of the existence of any condition or event which constitutes a
Default or an Event of Default, or which, with notice or lapse of time,
would become a Default or an Event of Default, notice specifying the
nature and period of existence thereof and the action which the Loan
Party is taking or proposes to take with respect thereto.
M. Each Loan Party shall pay in full all expenses, including reasonable
legal expenses and attorney's fees, of the Bank which have been or may
be incurred by the Bank in connection with the preparation of the Loan
Documents, the lending hereunder, the collection or enforcement of the
Obligations and the recording and filing and re-recording and re-filing
of any such document.
7.2 FINANCIAL COVENANTS. Until the fulfillment of all Obligations unless the
Bank shall otherwise consent in writing, Golden Eagle Group and the Consolidated
Subsidiaries shall, on a consolidated basis, maintain the following financial
covenants calculated monthly for the immediately preceding twelve (12) months.
A. CURRENT RATIO. Golden Eagle Group and the Consolidated Subsidiaries
shall have, as of the Effective Date and thereafter maintain, a Current
Ratio of at least 1.20:1.00.
B. TANGIBLE NET WORTH. Golden Eagle Group and the Consolidated
Subsidiaries shall have, as of the Effective Date and shall thereafter
maintain, a Tangible Net Worth of at least the Tangible Net Worth of
Golden Eagle Group and the Consolidated Subsidiaries, including
specifically Columbia Group, LESS, $100,000.00. Thereafter, Tangible
Net Worth must increase semi-annually on each June 30 and December 31
by seventy-five (75) per cent of Net Income for the prior six (6) month
period plus the net amount of proceeds received from any equity
offering during such each period.
C. DEBT COVERAGE RATIO. Golden Eagle Group and the Consolidated
Subsidiaries shall have, as of the Effective Date and shall thereafter
maintain during each period, a Debt Coverage Ratio not exceeding
3.00:1.00 for the first twelve (12) months after the Effective Date, a
Debt Coverage Ratio not exceeding 1.75.0:1.00 for the second twelve
(12) months after the Effective Date, and a Debt Coverage Ratio not
exceeding 1.25:1.00 thereafter.
D. FIXED CHARGE COVERAGE RATIO. Golden Eagle Group and the Consolidated
Subsidiaries shall have, as of the Effective Date and shall thereafter
maintain, a Fixed Charge Coverage Ratio of at least 1.25:1.00.
E. CERTIFICATE OF COMPLIANCE. On the Effective Date and within thirty (30)
days after the end of each month, the Borrowers will provide to the
Bank a Certificate of Compliance in the form of Exhibit 7.2.E, signed
by a Financial Officer of Golded Eagle Group, (i) calculating or
stating the financial covenants set out in Section 7.2, (ii) certifying
that no Events of Default have occurred, and (iii) that Golden Eagle
Group and the Consolidated Subsidiaries are in compliance with the
covenants set out in this Section.
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7.3 OTHER COVENANTS. Until the fulfillment of all Obligations, unless the
Bank shall otherwise consent in writing, the Loan Parties, respectively as
indicated, will perform and comply with the following covenants:
A. Golden Eagle Group and the Consolidated Subsidiaries will not create,
incur, assume or suffer to exist Indebtedness, except (i) the Loans;
(ii) current accounts payable and other current obligations (other than
for borrowed money) arising out of transactions in the ordinary course
of business; (iii) subject to Section 7.3.C, Indebtedness incurred in
connection with the acquisition of equipment or other assets and, (iv)
Subordinated Indebtedness not in excess of $1,083,333.00 created in
favor of the Sellers in connection with the Stock Purchase Agreement.
B. Golden Eagle Group and the Consolidated Subsidiaries will not pay any
Subordinated Indebtedness (except as permitted in the Subordination
Agreement), execute a Guaranty (except in favor of the Bank), or
create, incur, assume or suffer to exist any Lien, except a Permitted
Lien. Columbia Shipping is presently being audited by the IRS. Pursuant
to the term of the Stock Purchase Agreement, Golden Eagle Group will
receive a letter of credit from the Sellers to secure to Golden Eagle
Group that any tax assessment will be paid. The Borrowers will use the
proceeds of the letter of credit, if drafted, only for purposes of
paying any tax assessment made against Columbia Shipping.
C. Golden Eagle Group and the Consolidated Subsidiaries will not expend or
enter into the commitment to expend, whether by Capital Lease or
Capital Expenditure or for Rentals during any twelve (12) month period,
an amount in the aggregate exceeding $600,000.00, on a consolidated
basis, in the first twelve (12) months after the Effective Date, and an
amount in the aggregate exceeding $450,000.00, on a consolidated basis,
in any succeeding twelve (12) month period thereafter during the term
hereof.
D. No Loan Party will pay any Dividends, make any distribution on the Loan
Party's capital stock or purchase or retire any capital stock, dissolve
or liquidate, or become a party to any merger or consolidation, or
purchase, lease or otherwise acquire all or substantially all of the
assets or capital stock of any Person, or sell, transfer, lease or
otherwise dispose of all or any substantial part of the Loan Party's
properties, assets or business.
E. No Loan Party will amend its organizational documents, including but
not limited to, Articles or Certificate of Incorporation and bylaws.
F. No Loan Party will change its name, fiscal year or method of accounting
except as required by GAAP. A Loan Party may change its name if the
Borrowers have given the Bank sixty (60) days prior notice of such name
change and there shall have been taken such action as the Bank deems
necessary to continue the perfection of the Liens securing payment of
the Obligations.
G. Golden Eagle Group and the Consolidated Subsidiaries will not enter
into any transaction with any Affiliates, other than transactions in
the ordinary course of business and upon fair and reasonable terms not
materially less favorable than could be obtained in an arm's-length
transaction with a Person that was not an Affiliate. No assets of any
Loan Party will be transferred to any other Loan Party without the
express written consent of the Bank.
H. Golden Eagle Group and the Consolidated Subsidiaries will not engage in
any other line of business or business venture other than those
presently engaged or those which are directly related thereto, or
change any method of operation or manner of doing business in any
material respect.
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I. Borrowers will not use proceeds of any Loan to acquire any security in
any transaction which is subject to "13 or "14 of the Securities
Exchange Act of 1934, including particularly (but without limitation)
"13(d) and "14(d) thereof.
J. No Loan Party will sell, assign, convey, exchange, lease or otherwise
dispose of any of the Loan Party's respective properties, rights,
assets or business, whether now owned or hereafter acquired, except in
the ordinary course of business and for a fair consideration.
7.4 ERISA COMPLIANCE. Golden Eagle Group and the Consolidated Subsidiaries
shall, and shall cause each ERISA Affiliate to:
A. At all times, make prompt payment of all contributions required under
all Employee Plans and required to meet the minimum funding standard
set forth in ERISA with respect to all Employee Plans;
B. With respect to any Pension Plan, not permit to exist any material
"ACCUMULATED FUNDING DEFICIENCY" (within the meaning of "302 of ERISA
and "412 of the Code), whether or not waived, with respect thereto;
C. Not engage in any transaction in connection with which the Borrower or
any ERISA Affiliate could be subject to either a material civil penalty
assessed pursuant to the provisions of "502 of ERISA or a material tax
imposed under the provisions of "4975 of the Code;
D. Not terminate any Pension Plan in a "DISTRESS TERMINATION" under "4041
of ERISA, or take any other action which could result in a material
liability of the Borrower or any ERISA Affiliate to the PBGC;
E. Not adopt an amendment to any Pension Plan requiring the provision of
security under "307 of ERISA or "40(a)(29) of the Code;
F. Upon request and within thirty (30) days thereafter, furnish to the
Bank each annual report/return (Form 5500 Series), as well as all
schedules and attachments required to be filed with the Department of
Labor and/or the IRS pursuant to ERISA, and the regulations promulgated
thereunder, in connection with each Employee Plan for each Employee
Plan year;
G. Notify the Bank immediately of any fact, including, but not limited to,
any Reportable Event arising in connection with any Employee Plan,
which might constitute grounds for termination thereof by the PBGC or
for the appointment by the appropriate U.S. District Court of a trustee
to administer an Employee Plan, together with a statement, if requested
by the Bank, as to the reason therefor and the action, if any, proposed
to be taken with respect thereto; and,
H. Furnish to the Bank, upon request, such additional information
concerning any Employee Plan as may be reasonably requested.
7.5 INDEMNITY. EACH LOAN PARTY, JOINTLY AND SEVERALLY, INDEMNIFY AND SHALL
SAVE, AND HOLD THE BANK AND THE BANK'S DIRECTORS, OFFICERS, ATTORNEYS, AND
EMPLOYEES (INDIVIDUALLY, AN
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"INDEMNITEE" AND COLLECTIVELY, THE "INDEMNITEES") HARMLESS FROM AND AGAINST THE
FOLLOWING (EACH A "CLAIM"): (I) ANY AND ALL CLAIMS, DEMANDS, ACTIONS, OR CAUSES
OF ACTION THAT ARE ASSERTED AGAINST ANY INDEMNITEE BY ANY PERSON IF THE CLAIM,
DEMAND, ACTION, OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY RELATES TO A CLAIM,
DEMAND, ACTION, OR CAUSE OF ACTION THAT THE PERSON ASSERTS OR MAY ASSERT AGAINST
A LOAN PARTY (II) ANY AND ALL CLAIMS, DEMANDS, ACTIONS OR CAUSES OF ACTION THAT
ARE ASSERTED AGAINST ANY INDEMNITEE IF THE CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION DIRECTLY OR INDIRECTLY RELATES TO THE TOTAL COMMITMENT, THE USE OF
PROCEEDS OF THE LOANS, OR THE RELATIONSHIP OF A LOAN PARTY AND THE BANK UNDER
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED PURSUANT TO THIS AGREEMENT; (III)
ANY ADMINISTRATIVE OR INVESTIGATIVE PROCEEDING BY ANY GOVERNMENTAL AUTHORITY
DIRECTLY OR INDIRECTLY RELATED TO A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
DESCRIBED IN CLAUSES (I) OR (II) ABOVE; AND, (IV) ANY AND ALL LIABILITIES,
LOSSES, COSTS OR EXPENSES (INCLUDING ATTORNEYS' FEES AND DISBURSEMENTS) THAT ANY
INDEMNITEE SUFFERS OR INCURS AS A RESULT OF ANY OF THE FOREGOING. If any claim
is asserted against any Indemnitee, the Indemnitee shall promptly notify the
Borrowers, but the failure to so promptly notify the Borrowers shall not affect
the Loan Parties' obligations under this Section unless such failure materially
prejudices the Loan Parties' right to participate in the contest of the Claim.
The obligations and liabilities of the Loan Parties to any Indemnitee under this
Section shall survive the expiration or termination of this Agreement and the
repayment of the Obligations.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 INITIAL ADVANCES. The obligation of the Bank to make any Advance on the
Loans is subject to the conditions precedent that, on or before the date of the
initial Advance, the Bank shall have received the following:
A. As to the Revolving Credit Loans:
(1) The duly executed Revolving Credit Note.
(2) A duly executed Notice of Revolving Credit Advance.
(3) The duly executed Application for Letter of Credit, if the Advance
requested is for a Letter of Credit.
B. As to the Term Loans:
(1) The duly executed Term Note.
(2) The duly executed Notice of Term Loan Advance.
C. Each of the Collateral Documents duly executed by the parties thereto.
Each document, including, without limitation, any Financing Statement,
required by the Collateral Documents, under law or requested by the
Bank to be filed, registered or recorded in order to create, in favor
of the Bank, a perfected first priority Lien on the Collateral
described therein shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, the Bank shall have
received an acknowledgment copy, or other evidence satisfactory to the
Bank, of each such filing, registration or recordation and satisfactory
evidence of the payment of any necessary fee, tax or expense relating
thereto. The Bank shall have received the possession of any Collateral
for which possession is required to perfect a Lien.
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D. A Subordination Agreement in the form of Exhibit 8.1.D, duly executed
by each of the Sellers.
E. A Landlord Agreement in the form of Exhibit 8.1.E, duly executed by the
landlord of the New York Leasehold and to the extent requested by the
Bank, any other landlord under any lease pursuant to which a Loan Party
possesses any Leasehold on which any portion of the Loan Party's
business is operated.
F. A Guaranty Agreement in the form of Exhibit 8.1.F duly executed by each
Guarantor in favor of the Bank.
G. Favorable opinions of legal counsel for the Loan Parties in form and
substance satisfactory to the Bank. Copies of the legal opinions
rendered by the Sellers' legal counsel in connection with the Stock
Purchase Agreement, together with a letter to the Bank authorizing and
permitting the Bank to rely thereon.
H. An Officers Certificate in the form of Exhibit 8.1.H certified by the
President and the Secretary of Golden Eagle Group, stating that (i) no
litigation is pending or threatened which would have a Material Adverse
Effect; (ii) no investigation or proceeding before any Governmental
Authority is continuing or threatened against Golden Eagle Group or a
Consolidated Subsidiary, or any officer, director or Affiliate of
Golden Eagle Group or a Consolidated Subsidiary with respect to this
Agreement, any Loan Documents or any of the Transactions which could
have a Material Adverse Effect; and, (iii) to the best knowledge and
belief of such Persons, after reasonable and due investigation and
review of matters pertinent to the subject matter of such certificate
(a) all of the representations and warranties contained herein and the
other Loan Documents are true and correct as of the date of the
Advance, and (b) no event has occurred and is continuing, or would
result from the Advance, which constitutes a Default or an Event of
Default. The Bank shall also receive either a summary and analysis of
all litigation in which Golden Eagle Group or a Consolidated Subsidiary
is involved or an opinion of counsel, in form and substance acceptable
to the Bank, to the effect that no litigation in which Golden Eagle
Group or a Consolidated Subsidiary is involved would, in the event of
an adverse determination, have a Material Adverse Effect.
I. Resolutions of each of the Loan Parties approving the execution,
delivery and performance of this Agreement, the other Loan Documents
and the transactions contemplated herein and therein, duly adopted by
each Loan Party's board of directors and accompanied by a certificate
of the Secretary of the Loan Party stating that the resolutions are
true and correct, have not been altered or repealed and are in full
force and effect. The resolutions shall certify the name of each
officer of the Loan Party authorized to sign the Loan Documents to be
executed by the Loan Party and the other documents or certificates to
be delivered by the Loan Party pursuant to the Loan Documents, together
with the true signa ture of each such officer. The Bank may
conclusively rely on the certificate until the Bank receives a further
certificate of the Secretary of the Loan Party canceling or amending
the prior certificate and submitting the name and signature of each
officer named in such further certificate.
J. A Certificate of Incorporation, Certificate of Existence and
Certificate of Account Status (or other similar instruments) for each
of the Loan Parties issued by the appropriate official of the state of
incorporation of each of the Loan Parties, and Certificates of
Qualification, Certificates of Authorization or other similar
instruments for each of the Loan Parties, issued by the
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Secretary of State of each of the states wherein a Loan Party is
qualified to do business, each dated within ten (10) days of the
Effective Date.
K. A copy of the Articles or Certificate of Incorporation of each of the
Loan Parties and all amendments thereto, certified by the Secretary of
State of the state of the Loan Party's incorporation, and dated within
ten (10) days of Effective Date, and a copy of the bylaws of each of
the Loan Parties, and all amendments thereto, certified by the
Secretary of theLoan Party, as being true, correct and complete as of
the date of such certification.
L. Evidence satisfactory to the Bank that the insurance policies required
by this Agreement and the Collateral Documents are in force and effect
and that premiums therefore have been paid, and, if requested by the
Bank, the originals or copies of all such policies.
M. Such other information and documents as reasonably may be required by
the Bank and the Bank's counsel.
8.2 SUBSEQUENT ADVANCES. The obligation of the Bank to make any subsequent
Advance under this Agreement shall be subject to the following additional
conditions precedent:
A. As of the date of the making of such Advance, there shall not exist any
Default or Event of Default.
B. Each Loan Party shall have performed and complied with all agreements
and conditions contained herein and in each of the Loan Documents which
are required to be performed or complied with before or on the date of
such Advance.
C. As of the date of making such Advance, no change that would cause a
Material Adverse Effect shall have occurred.
D. In the case of any Borrowing, the Bank shall have received an
appropriate Notice of Revolving Credit Advance, Application for Letter
of Credit or Notice of Term Loan Advance dated as of the date of a
Borrowing signed by Golden Eagle Group.
E. The representations and warranties contained in each of the Loan
Documents shall be true in all respects on the date of making of such
Advance, with the same force and effect as though made on and as of
that date.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
9.1 REPRESENTATIONS AND WARRANTIES CONCERNING BORROWERS. The Loan Parties
represent and warrant the following matters concerning the Borrowers.
A. As to the respective Borrowers:
(1) Golden Eagle Group is a corporation duly incorporated and existing
in good standing under the laws of the State of Delaware. Golden Eagle
Group is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Golden Eagle Group or the
nature of the business transacted by Golden Eagle Group makes licensing
or qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Golden Eagle Group.
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(2) Daher is a corporation duly incorporated and existing in good
standing under the laws of the State of Delaware. Daher is duly
licensed or qualified in all jurisdictions wherein the character of the
property owned or leased by Daher or the nature of the business
transacted by Daher makes licensing or qualification necessary by
foreign corporations and where failure to become so licensed or
qualified would have a Material Adverse Effect on the financial
condition of Daher.
(3) World Trade is a corporation duly incorporated and existing in good
standing under the laws of the Commonwealth of Virginia. World Trade is
duly licensed or qualified in all jurisdictions wherein the character
of the property owned or leased by World Trade or the nature of the
business transacted by World Trade makes licensing or qualification
necessary by foreign corporations and where failure to become so
licensed or qualified would have a Material Adverse Effect on the
financial condition of World Trade.
(4) WTT is a corporation duly incorporated and existing in good
standing under the laws of the Commonwealth of Virginia. WTT is duly
licensed or qualified in all jurisdictions wherein the character of the
property owned or leased by WTT or the nature of the business
transacted by WTT makes licensing or qualification necessary by foreign
corporations and where failure to become so licensed or qualified would
have a Material Adverse Effect on the financial condition of WTT.
(5) Columbia West is a corporation duly incorporated and existing in
good standing under the laws of the State of California. Columbia West
is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Columbia West or the
nature of the business transacted by Columbia West makes licensing or
qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Columbia West.
(6) Columbia Chicago is a corporation duly incorporated and existing in
good standing under the laws of the State of Illinois. Columbia Chicago
is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Columbia Chicago or the
nature of the business transacted by Columbia Chicago makes licensing
or qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Columbia Chicago.
(7) Freight Express is a corporation duly incorporated and existing in
good standing under the laws of the State of New York. Freight Express
is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Freight Express or the
nature of the business transacted by Freight Express makes licensing or
qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Freight Express.
(8) Columbia New York is a corporation duly incorporated and existing
in good standing under the laws of the State of New York. Columbia New
York is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Columbia New York or the
nature of the business transacted by Columbia New York makes licensing
or qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Columbia New York.
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B. The execution of the Loan Documents and the performance of the
Obligations thereunder by each of the Borrowers (collectively, the
"TRANSACTIONS") have been duly authorized by all necessary corporate
action. Such actions will not (i) violate any provision of law, any
Borrower's Articles or Certificate of Incorporation or any Borrower's
bylaws, or (ii) result in the breach of or constitute a default under
any other agreement or instrument to which any Borrower is a party. No
consent of any Borrower's shareholders or any holder of Indebtedness of
any Borrower is required as a condition to the validity of this
Agreement.
C. The Loan Documents, when duly executed and delivered in accordance with
this Agreement, will constitute legal, valid and binding obligations of
each of the Borrowers in accordance with their respective terms.
D. Golden Eagle Group has furnished to the Bank an audited Fiscal Year-end
consolidated balance sheet as of December 31, 1996, an interim
consolidated balance sheet as of August 31, 1997, and related
statements of income, stockholders equity and cash flows of Golden
Eagle Group and the Consolidated Subsidiaries as of such dates. The
Financial Statements are true and correct and have been prepared in
accordance with GAAP throughout the periods involved. The balance
sheets fairly present the financial condition of Golden Eagle Group and
the Consolidated Subsidiaries as of the dates thereof, and the income
and surplus statements fairly present the results of the operations of
Golden Eagle Group and the Consolidated Subsidiaries for the periods
indicated. There have been no changes in the condition, financial or
otherwise, of Golden Eagle Group and the Consolidated Subsidiaries
since the dates of such Financial Statements which would have a
Material Adverse Effect.
E. Except as disclosed in the Financial Statements referenced in Section
9.1.D, the Borrowers have no (i) Investment in any other Person, or
(ii) agreements in effect providing for or relating to extensions of
credit in respect of which the Borrowers are or may become directly or
contingently obligated.
F. There is no material fact that the Borrowers have failed to disclose to
the Bank which could have a Material Adverse Effect. Neither the
Financial Statements referenced in Section 9.1.D, nor any certificate
or statement delivered herewith or heretofore by the Borrowers to the
Bank in connection with negotiations of the Loan Documents, contains
any untrue statement of a material fact or omits to state any material
fact necessary to keep the statements contained herein or therein from
being misleading.
G. Borrowers have good title to the assets pledged or given as Collateral
to secure the Loans as of the date that such pledge or lien is created,
free and clear of all Liens except the Permitted Liens.
H. Set forth in Schedule 9.1.H hereto is a complete and accurate list of
all shareholders of Golden Eagle Group owning or controlling ten (10)
per cent or more of the shares of Golden Eagle Group as of the
Effective Date and the number of shares of each class of capital stock
owned by each. All of the outstanding capital stock of each of the
Borrowers has been validly issued, is fully paid and non-assessable and
is owned by the shareholders free and clear of all Liens.
I. Each of the Borrowers is and, after consummation of this Agreement and
after giving effect to all Indebtedness incurred and the Liens in
connection herewith, will be Solvent.
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J. Except as disclosed in writing to the Bank, none of the Borrowers is a
party to a transaction with any Affiliate. All Affiliate transactions
are in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than could be obtained in an
arm's-length transaction with a Person that was not an Affiliate.
K. None of the Borrowers is in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security
agreement or other material agreement or obligation to which the
Borrower is a party or by which the Borrower's property is bound.
L. Neither the business nor the property of any of the Borrowers are,
affected by any fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail, earthquake, embargo, act of God or
other casualty (whether or not covered by insurance), which could have
a Material Adverse Effect.
M. None of the Borrowers has, during the preceding five (5) years, been
known as or used any fictitious, assumed or trade names except as
disclosed in writing to the Bank. The principal office, chief executive
office and principal place of business of each of the Borrowers are at
the addresses set out in Schedule 9.1.M. Each of the Borrowers maintain
the its principal records and books at such respective address.
9.2 REPRESENTATIONS AND WARRANTIES CONCERNING THE GUARANTORS. The Loan
Parties represent and warrant the following matters concerning the Guarantors.
A. As to the respective Guarantors:
(1) Dacom Line is a corporation duly incorporated and existing in good
standing under the laws of the State of Texas. Dacom Line is duly
licensed or qualified in all jurisdictions wherein the character of the
property owned or leased by Dacom Line or the nature of the business
transacted by Dacom Line makes licensing or qualification necessary by
foreign corporations and where failure to become so licensed or
qualified would have a Material Adverse Effect on the financial
condition of Dacom Line.
(2) Golden Eagle International is a corporation duly incorporated and
existing in good standing under the laws of the State of Florida.
Golden Eagle International is duly licensed or qualified in all
jurisdictions wherein the character of the property owned or leased by
Golden Eagle International or the nature of the business transacted by
Golden Eagle International makes licensing or qualification necessary
by foreign corporations and where failure to become so licensed or
qualified would have a Material Adverse Effect on the financial
condition of Golden Eagle International.
(3) Golden Eagle Customs is a corporation duly incorporated and
existing in good standing under the laws of the State of Florida.
Golden Eagle Customs is duly licensed or qualified in all jurisdictions
wherein the character of the property owned or leased by Golden Eagle
Customs or the nature of the business transacted by Golden Eagle
Customs makes licensing or qualification necessary by foreign
corporations and where failure to become so licensed or qualified would
have a Material Adverse Effect on the financial condition of Golden
Eagle Customs.
(4) Bridgeport is a corporation duly incorporated and existing in good
standing under the laws of the State of Florida. Bridgeport is duly
licensed or qualified in all jurisdictions wherein
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the character of the property owned or leased by Bridgeport or the
nature of the business transacted by Bridgeport makes licensing or
qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Bridgeport.
(5) Columbia SFO is a corporation duly incorporated and existing in
good standing under the laws of the State of California. Columbia SFO
is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Columbia SFO or the nature
of the business transacted by Columbia SFO makes licensing or
qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Columbia SFO.
(6) Columbia Group is a corporation duly incorporated and existing in
good standing under the laws of the State of Delaware. Columbia Group
is duly licensed or qualified in all jurisdictions wherein the
character of the property owned or leased by Columbia Group or the
nature of the business transacted by Columbia Group makes licensing or
qualification necessary by foreign corporations and where failure to
become so licensed or qualified would have a Material Adverse Effect on
the financial condition of Columbia Group.
B. The execution of the Loan Documents and the performance of the
Obligations thereunder by each of the Guarantors have been duly
authorized by all necessary corporate action. Such actions will not (i)
violate any provision of law or the respective Articles or Certificate
of Incorporation or bylaws of each Guarantor, or (ii) result in the
breach of or constitute a default under any other agreement or
instrument to which any Guarantor is a party. No consent of the
shareholders of any Guarantor or of any holder of Indebtedness of any
Guarantor York is required as a condition to the validity of this
Agreement.
C. The Loan Documents, when duly executed and delivered in accordance with
this Agreement, will constitute legal, valid and binding obligations of
each Guarantor in accordance with their respective terms.
D. Each Guarantor has furnished to the Bank current year-end Financial
Statements which fairly present the financial condition of the
Guarantor as of the date thereof. There have been no Material Adverse
Change in the condition, financial or otherwise, of any Guarantor since
the date of the respective Financial Statements.
E. Except as disclosed in the Financial Statements referenced in Section
9.2.D, none of the Guarantors has any (i) Investment in any other
Person, or (ii) agreements in effect providing for or relating to
extensions of credit in respect of which any of the Guarantors is or
may become directly or contingently obligated.
F. There is no material fact that any Guarantor has failed to disclose to
the Bank which could have a Material Adverse Effect on the Guarantor.
Neither the Financial Statements referenced in Section 9.2.D, nor any
certificate or statement delivered herewith or heretofore by any
Guarantor to the Bank in connection with negotiations of the Loan
Documents, contains any untrue statement of a material fact or omits to
state any material fact necessary to keep the statements contained
herein or therein from being misleading.
G. Each Guarantor has good title to the assets pledged or given as
Collateral to secure the Loans as of the date that such pledge or lien
is created, free and clear of all Liens except the Permitted Liens.
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H. Golden Eagle Group is, directly or indirectly, the sole shareholder of
each of the other Loan Parties. All of the outstanding capital stock of
all of the other Loan Parties have been validly issued, are fully paid
and non-assessable and are owned free and clear of all Liens.
I. Each of the Guarantors is and, after consummation of this Agreement and
after giving effect to all Indebtedness incurred and the Liens in
connection herewith, will be Solvent.
J. Except as disclosed in writing to the Bank, none of the Guarantors is a
party to a transaction with any Affiliate. All such transactions are in
the ordinary course of business and upon fair and reasonable terms not
materially less favorable than could be obtained in an arm's-length
transaction with a Person that was not an Affiliate.
K. None of the Guarantors is in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security
agreement or other material agreement or obligation to which such
Person is a party or by which any of such Person's properties is bound.
L. Neither the business nor the properties of any Guarantor are affected
by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or other
casualty (whether or not covered by insurance), which could have a
Material Adverse Effect.
M. None of the Guarantors has, during the preceding five (5) years, been
known as or used any corporate, fictitious, assumed or trade names
except as disclosed in writing to the Bank. The principal office, chief
executive office and principal place of business of each Guarantor is
as set out in Schedule 9.1.M. Each Guarantor maintains its principal
records and books at its respective address.
9.3 REGULATORY MATTERS. Each Loan Party represents and warrants that as of
the Effective Date, no Regulatory Defects exist, and specifically the following
matters.
A. The proceeds of the Loans will be used by the Borrowers solely for the
purposes herein set out and for no other purpose whatsoever. None of
such proceeds will be used for the purpose of purchasing or carrying
any "MARGIN STOCK" as defined in Regulation U, Regulation X, or
Regulation G, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry a
"MARGIN STOCK" or for any other purpose which might constitute this
transaction a "PURPOSE CREDIT" within the meaning of such Regulation U,
Regulation X, or Regulation G. None of the Borrowers are engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stocks. Neither the Borrowers nor any Person acting on behalf of
the Borrowers has taken or will take any action which might cause the
Notes or any of the other Loan Documents, including this Agreement, to
violate Regulation U, Regulation X, or Regulation G or any other
regulations of the board of governors of the Federal Reserve System or
to violate "8 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
B. No Loan Party or any Person having "CONTROL" (as that term is defined
in 12 U.S.C. "375(b)(5) or in regulations promulgated pursuant thereto)
of a Loan Party, is an "EXECUTIVE OFFICER," "DIRECTOR," or "PRINCIPAL
SHAREHOLDER" (as those terms are defined in 12 U.S.C. "375(b) or in
regulations promulgated pursuant thereto) of the Bank, of a bank
holding company of which the
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Bank is a subsidiary, or of any subsidiary of a bank holding company of
which the Bank is a subsidiary, or of any bank at which the Bank
maintains a "CORRESPONDENT ACCOUNT" (as such term is defined in such
statute or regulations), or of any bank which maintains a correspondent
account with the Bank.
C. There are no suits or proceedings pending, or to the knowledge of any
Loan Party, threatened, in any court or before any Governmental
Authority against or affecting a Loan Party which, if adversely
determined, would have a Material Adverse Effect.
D. Each Loan Party has filed all U.S. tax returns and all state and
foreign tax returns which are required to be filed. The returns
properly reflect the U.S. income tax, foreign tax and/or state taxes of
the Loan Party for the period covered thereby. Each Loan Party has
paid, or made provisions for the payment of, all taxes which have
become due pursuant to the returns or pursuant to any assessment
received by the Loan Party, except such taxes, if any, as are being
contested in good faith and as to which, adequate reserves have been
provided. Except for Columbia Shipping, no Federal income tax returns
of any Loan Party have been audited by the IRS. No Loan Party has, as
of the Effective Date, requested or been granted any extension of time
to file any Federal, state, local or foreign tax return. None of the
Borrowers is a party to or has any obligation under any tax sharing
agreement.
E. (i) No Reportable Event has occurred and is continuing with respect to
any Employee Plan; (ii) PBGC has not instituted proceedings to
terminate any Employee Plan; (iii) neither the Borrowers, any member of
the Controlled Group, nor any duly-appointed administrator of an
Employee Plan have (a) incurred any liability to PBGC with respect to
any Employee Plan other than for premiums not yet due or payable, or
(b) instituted or intends to institute proceedings to terminate any
Employee Plan under "4041 or "4041A of ERISA or withdraw from any
Multi-Employer Plan (as that term is defined in "3(37) of ERISA); and,
(iv) each Employee Plan has been maintained and funded in all material
respects in accordance with its terms and with all provisions of ERISA
applicable thereto.
F. None of the Borrowers are subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940, the Interstate Commerce Act (as any of
the preceding acts have been amended), or any other law (other than
Regulation X) which regulates the incurring by the Borrowers of
Indebtedness, including but not limited to laws relating to common
contract carriers or the sale of electricity, gas, steam, water, or
other public utility services.
G. Each of the Borrowers has complied with, and will continue to comply
with, the provisions of the Fair Labor Standards Act of 1938, 29 U.S.C.
""200 ET.SEQ., as amended from time to time (the "FLSA"), including
specifically, but without limitation, 29 U.S.C. "215(a). This
representation and warranty, and each reconfirmation thereof, shall
constitute assurance from the Borrowers, given as of the Effective Date
and as of the date of each re-confirmation, that the Borrowers have
complied with the requirements of the FLSA, in general, and 29 U.S.C.
"215(a)(1), thereof, in particular.
H. No Loan Party has been accused of being in violation of Title IX, of
the Organized Crime Control Act of 1970, entitled "RACKETEER INFLUENCED
AND CORRUPT ORGANIZATIONS" (RICO), 18 U.S.C. ""1961 ET.SEQ.
9.4 REPRESENTATIONS REGARDING ACCOUNTS. Borrowers make the following
representations and
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warranties which shall be deemed to be incorporated by reference in each Notice
of Revolving Credit Advance and shall be deemed repeated and confirmed with
respect to each item of Collateral as it is created or otherwise acquired by the
Borrowers.
A. Each Account Debtor named in an Eligible Account or on an invoice is,
to the best of the Borrowers' knowledge, Solvent and will continue to
be fully able to pay in full when due all Accounts on which the Account
Debtor is obligated.
B. Each Eligible Account shall be a good and valid account representing an
undisputed bona fide indebtedness incurred by the Account Debtor
therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to an absolute sale and delivery upon the
satisfied terms of goods sold by the Borrowers, or work, labor and/or
services therefor rendered by the Borrowers.
C. No Eligible Account is or shall be subject to any defense, set off,
counterclaim, discount or allowances except as may be stated in the
copy of the invoice delivered to the Bank.
D. No note, trade acceptance, draft or other instrument or chattel paper
has been or will be received with respect to merchandise giving rise to
any Eligible Account unless the same is assigned and delivered to the
Bank.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All represen tations and
warranties by a Loan Party shall survive delivery of the Loan Documents. Any
investigation at any time made by or on behalf of the Bank shall not diminish
the Bank's right to rely on the representations and warranties made by any Loan
Party.
ARTICLE X
DEFAULTS AND REMEDIES
10.1 EVENTS OF DEFAULT. Borrowers shall be in Default hereunder if any one
of the following shall occur:
A. If any installment of principal or interest on either of the Notes,
shall not be paid when due and payable, or if there shall occur a
failure to pay, when due, any Obligations owed to the Bank.
B. If any representation, statement, warranty or certification made by a
Loan Party in the Loan Documents, or furnished to the Bank in
connection with the Loans, shall prove to have been incorrect in any
material respect at the time of making or issuance thereof.
C. If there shall occur any one of the following events (each an "EVENT OF
DEFAULT"), and if the event shall continue uncured after ten (10) days
from the earlier to occur of (i) the date such event becomes known to
any Loan Party, or (ii) the date the Bank shall have given notice to
the Borrowers that such event has occurred; provided, however, the Bank
shall not be required to give notice of any such failure or event:
(1) If any Loan Party shall fail to comply with any of the covenants
and agreements set forth in Section 7.1 (other than Section 7.1.G);
and/or,
(2) Both the following events shall occur: (i) Either (a) process shall
have been instituted to terminate, or a notice of termination shall
have been filed with respect to, any Employee Plan
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(other than a Multi-Employer Plan as that term is defined in "3(37) of
ERISA) by the Borrowers, any ERISA Affiliate, any subsidiary, any
member of the Controlled Group, PBGC or any representative of any
thereof, or any such Employee Plan shall be terminated in any such case
under "4041 or "4042 of ERISA, or (b) a Reportable Event, the
occurrence of which would cause the imposition of a lien under "4068 of
ERISA, shall have occurred with respect to any Employee Plan (other
than a Multi-Employer Plan as that term is defined in "3(37) of ERISA)
and be continuing for a period of sixty (60) days; and, (ii) the sum of
the estimated liability to PBGC under "4062 of ERISA and the currently
payable obligations of the Borrowers or any ERISA Affiliate to fund
liabilities (in excess of amounts required to be paid to satisfy the
minimum funding standard of "412 of the Code) under the Employee Plan
or Employee Plans subject to such event shall exceed ten (10) per cent
of Tangible Net Worth at such time; and/or,
(3) Any or all of the following events (each an "EVENT OF DEFAULT")
shall occur with respect to any Multi-Employer Plan (as that term is
defined in "3(37) of ERISA) to which the Borrowers or any ERISA
Affiliate contributes or contributed on behalf of its employees: (i)
the Borrowers or any ERISA Affiliate incurs a withdrawal liability
under "4201 of ERISA; (ii) any such plan is "IN REORGANIZATION" as that
term is defined in "4241 of ERISA; or, (iii) any such Employee Plan is
terminated under "4041A of ERISA and the Bank determines in good faith
that the aggregate liability likely to be incurred by theBorrowers or
any ERISA Affiliate, as a result of all or any of the events specified
in subsections (i), (ii) and (iii) above occurring, shall have a
Material Adverse Effect.
D. If any event shall occur which would constitute a Default under Section
7.1.G, Section 7.2, Section 7.3 or Section 7.5.
E. If there shall occur any change in the condition (financial or
otherwise) of any Loan Party which, in the opinion of the Bank, has a
Material Adverse Effect.
F. If any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against any Loan Party executing the same in
accordance with the respective terms thereof or shall in any manner be
terminated or become or be declared ineffective or inoperative or shall
in any manner whatsoever cease to give or provide the Liens, security
interests, rights, titles, interests, remedies, powers or privileges
intended to be created thereby.
G. If there shall occur a failure by any Loan Party in the observance or
performance of any other provision of the Loan Documents. The
provisions of this Agreement shall control in the event that any
provision of any other Loan Document is in conflict with the provisions
of any other instrument executed pursuant hereto and all of such
provisions in such other instruments shall be deemed to be cumulative
of the provisions hereof to the extent such provisions are not
inconsistent herewith.
H. If there shall occur a failure beyond any period of grace, if any, by
any Loan Party in the payment, when due, of the interest on or the
principal of any Indebtedness.
I. If there shall be any change in the ownership of the Voting Shares of
the Borrowers or if there shall be any other Change of Control of the
Borrowers.
40
<PAGE>
J. If any Loan Party shall:
(1) Apply for, consent to or acquiesce in the appointment of a
receiver, trustee or liquidator of such Person, or of such Person's
property; and/or,
(2) Admit in writing such Person's inability to pay debts as they
mature; and/or,
(3) Make a general assignment for the benefit of creditors; and/or,
(4) Be adjudicated to be bankrupt or insolvent by any court having
jurisdiction; and/or,
(5) File a voluntary petition in bankruptcy or a petition or answer
seeking reorganization, composition, readjustment, an arrangement or
similar relief with creditors under any present or future Debtor Laws
or file an answer admitting the material allegations of a petition
filed against such Person in bankruptcy, reorganization or insolvency
proceeding, or corporate action shall be taken for the purpose of
effecting any of the foregoing; and/or,
(6) Have a receiver or trustee or assignee in bankruptcy or insolvency
appointed for such Person or such Person's property without such
Person's application or consent.
K. If an involuntary petition or complaint shall be filed against any Loan
Party seeking bankruptcy or reorganization of such Person or the
appointment of a receiver, custodian, trustee, intervenor or liquidator
of such Person, or of all or substantially all of such Person's assets,
and such petition or complaint shall not have been dismissed within
sixty (60) days of the filing thereof; or, if an order, order for
relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or
complaint seeking reorganization of a Loan Party or appointing a
receiver, custodian, trustee, intervenor or liquidator of such Person,
or of all or substantially all of such Person's assets.
L. If the Bank is served with, or becomes subject to, a court order,
injunction or other process or decree restraining or seeking to
restrain the Bank from paying any amount under any Letter of Credit
and, (i) either (a) a drawing has occurred under the Letter of Credit
for which the Borrowers have refused to reimburse the Bank for payment,
or (b) the expiration date of the Letter of Credit has occurred but the
right of any beneficiary thereunder to draw under the Letter of Credit
has been extended past the expiration date in connection with the
pendency of the related court action or proceeding, and (ii) the
Borrowers have failed to deposit with the Bank cash collateral in an
amount equal to the Bank's obligations under the Letter of Credit.
10.2 REMEDIES. Upon the occurrence of an Event of Default, and in any such
event, the obligation of the Bank to extend credit to the Borrowers pursuant
hereto shall immediately terminate. If a Default shall occur, the Bank may, at
the Bank's option, without notice to any Loan Party, declare the principal of
and interest accrued on the Obligations to be forthwith due and payable,
whereupon the same shall become due and payable without any presentment, demand,
protest, notice of protest, notice of intent to accelerate the maturity of the
Obligations, notice of acceleration of the maturity of the Obligations or notice
of any kind, all of which are hereby waived, and thereafter, the Bank may
exercise all remedies available to the Bank as provided in any of the Loan
Documents and at law or in equity. None of the provisions contained in any of
the Loan Documents shall, or shall be deemed to, give the Bank the right to
exercise control over the assets, including, without limitation, real property,
affairs, or management of any Loan Party. The rights of the Bank are limited to
the exercise the remedies provided in this Agreement and the other Loan
Documents.
41
<PAGE>
10.3 NOTICE OF DEFAULT. Upon becoming aware of the existence of any
condition or event which constitutes a Default or an Event of Default, each Loan
Party shall immediately furnish to the Bank notice specifying the nature and
period of existence thereof and the action taken or proposed to be taken with
respect thereto.
10.4 OTHER NOTICES. Each Loan Party shall promptly notify the Bank of, (i)
any change in such Person's financial condition or business which would have a
Material Adverse Effect, (ii) any default under any agreement, contract or other
instrument of which such Person is a party or by which any of such Person's
properties are bound, or any acceleration of the maturity of any Indebtedness,
any of which would have a Material Adverse Effect, (iii) any claim against or
affecting any Loan Party or any Loan Party's property which would have a
Material Adverse Effect, and (iv) the commencement of, and any determination in,
any litigation with any third party or any proceeding before any Governmental
Authority affecting any Loan Party which would have a Material Adverse Effect.
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. Any notice required or permitted to be given hereunder shall
be in writing, shall be addressed to the parties hereto at the respective
addresses set out below, which may be changed by the giving of written notice to
that effect pursuant hereto, and shall be deemed effectively given if (i)
delivered personally, or (ii) upon being deposited with the U.S. Postal Service,
postage prepaid, certified mail, return receipt requested:
If to any of the
Borrowers or the Guarantors: Golden Eagle Group, Inc.
120 Standifer Drive
Humble, Texas 77338
If to Bank: Texas Commerce Bank National Association
545 West 19th Street
Houston, Texas 77008
11.2 SEVERABILITY. In the event any one or more of the provisions contained
in the Loan Documents should be held to be invalid, illegal or unenforceable in
any respect, the validity, enforceability and legality of the remaining
provisions contained in the Loan Documents shall not in any manner be affected
thereby and shall be enforceable in accordance with their terms.
11.3 CAPTIONS. The captions, headings, and arrangements used in this
Agreement are for convenience only and do not in any manner affect, limit,
amplify, or modify the terms and provisions hereof.
11.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrowers, any ERISA Affiliate, the other Loan Parties and the Bank and shall
inure to the benefit of the Borrowers, any ERISA Affiliate, the other Loan
Parties and the Bank and the successors and assigns of the Bank. No Loan Party
may, without the prior consent of the Bank, assign any rights, powers, duties or
obliga tions hereunder.
11.5 PARTICIPATION. Each Loan Party recognizes and agrees that the Bank may,
from time to time, assign to one or more banks or other entities all or any part
of, or may grant a participation to one or more banks or other entities, in or
to all or any part of, the Loans, the Notes and the Bank's rights in respect of
the Loan Documents. Borrowers shall have no obligation for any costs incurred by
the Bank in the participation of the Loans.
42
<PAGE>
11.6 NON-LIABILITY OF BANK. The relationship among the Loan Parties and the
Bank is, and shall at all times remain, solely that of debtors and creditor. The
Bank does not undertake or assume any responsibility or duty to any Person to
review, inspect, supervise, pass judgment upon, or inform any Person of any
matter in connection with any phase of such Person's business, operations, or
condition, financial or otherwise. Each Person shall rely entirely upon such
Person's own judgment with respect to such matters. Any review, inspection,
supervision, exercise of judgment, or information supplied to any Person by the
Bank in connection with any such matter is for the protection of the Bank, and
no Person is entitled to rely thereon.
11.7 FINANCING STATEMENTS. Any carbon, photographic or other reproduction of
any Financing Statement signed by any Loan Party is sufficient as a financing
statement for all purposes, including, without limitation, filing in any state
pursuant to the provisions of the UCC.
11.8 LIST OF EXHIBITS. The following Exhibits are attached hereto and made a
part hereof for all purposes:
Exhibit 2.1 Notice of Revolving Credit Advance
Exhibit 2.3 Borrowing Base Certificate
Exhibit 3.1 Notice of Term Loan Advance
Exhibit 4.1 Revolving Credit Note
Exhibit 4.2 Term Note
Exhibit 5.1.A Security Agreement
Exhibit 7.1.A.(5) Certificate of Compliance
Exhibit 8.1.D Subordination Agreement
Exhibit 8.1.E Landlord Agreement
Exhibit 8.1.F Guaranty Agreement
Exhibit 8.1.H Officers Certificate
Schedule 9.1.H Ten (10) per cent or more Shareholders of Golden
Eagle Group
Schedule 8.1.E Leaseholds
Schedule 9.1.M Principal Offices
11.9 MODIFICATION. All modifications, consents, amendments or waivers of any
provision of any Loan Document, or consent to any departure by any Loan Party
therefrom, shall be effective only if the same shall be in writing and agreed to
by the Bank and then shall be effective only in the specific instance and for
the purpose for which given.
11.10 WAIVER. The acceptance by the Bank of any partial payment on the
Obligations shall not be deemed to be a waiver of any Event of Default then
existing. No waiver by the Bank of any Event of Default shall be deemed to be a
waiver of any other then existing or subsequent Event of Default, or Default. No
delay or omission by the Bank in exercising any right under the Loan Documents
shall impair that right or be construed as a waiver thereof or any acquiescence
therein, or shall any single or partial exercise of any right preclude other or
further exercise thereof or the exercise of any other right under the Loan
Documents or otherwise. The rights of the Bank hereunder and under the Loan
Documents shall be in addition to all other rights provided by law.
43
<PAGE>
11.11 GOVERNING LAW. THIS AGREEMENT AND THE LOAN DOCUMENTS HAVE BEEN
PREPARED, ARE BEING EXECUTED AND DELIVERED, AND ARE INTENDED TO BE PERFORMED IN
THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO THE CONFLICTS-OF-LAW RULES AND PRINCIPLES OF THE STATE OF
TEXAS, AND THE APPLICABLE LAWS OF THE U.S. SHALL GOVERN THE VALIDITY,
CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ALL OF THE
LOAN DOCUMENTS.
11.12 CHOICE OF FORUM, SERVICE OF PROCESS AND JURISDICTION. Any suit, action
or proceeding against any Loan Party with respect to the Loan Documents, or the
enforcement of any judgment entered by any court in respect thereof, shall be
brought in the courts of the State of Texas, Harris County, Texas, or in the
U.S. courts located in Southern District of Texas as the Bank, in the Bank's
sole discretion, may elect. The Bank and each of the Loan Parties submit to the
non-exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding.
A. The Bank and each of the Loan Parties irrevocably waive, in connection
with any such suit, action or proceeding, any objection, including,
without limitation, any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to
the bringing of any such action or proceeding in such respective
jurisdictions.
B. The Bank and each of the Loan Parties irrevocably consent to the service
of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to each such Person, as the case may be, at its
address set forth in Section 11.1.
C. Nothing herein shall affect the right of any party to serve process in
any other manner permitted by law.
11.13 AGENCY. Nothing herein contained shall be construed to constitute any
Loan Party as the Bank's agent for any purpose whatsoever.
11.14 NO THIRD PARTY BENEFICIARY. The parties do not intend for this
Agreement to inure to the benefit of any third party, or for this Agreement to
be construed to make or render the Bank liable to any mechanic, materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by any Loan Party for debts or claims accruing to any such Persons against a
Loan Party. The Bank does not, by anything herein or in any of the other Loan
Documents, assume any Indebtedness of any Loan Party under any contract or
agreement assigned to the Bank, and the Bank shall not be responsible in any
manner for the performance by a Loan Party of any of the terms and conditions
thereof.
11.15 PAYMENT OF EXPENSES. Borrowers shall pay all expenses, charges, costs
and fees provided for in this Agreement or relating to the Loans or the
Collateral, including fees, charges, and taxes in connection with recording or
filing any of the Loan Documents, title insurance premiums and charges, fees of
any consultants, fees and expenses of the Bank's counsel (which attorneys may be
employees of the Bank), fees and expenses of the Bank's special counsel, which
may include fees billed for law clerks, paralegals and other persons not
admitted to the Bar but performing services under the supervision of an
attorney, printing, photocopying and duplicating expenses, air freight charges,
escrow fees, costs of surveys, premiums of insurance policies and surety bonds
and fees for any appraisal, market or feasibility study required by the Bank.
All such expenses, charges, costs and fees shall be the Borrowers' obligations
regardless of whether or not the Borrowers have requested and met the conditions
for the Loans. This obligation
44
<PAGE>
on the part of the Borrowers shall survive the execution and delivery of the
Loan Documents and the repayment of the Obligations. Borrowers authorize the
Bank, in its discretion, to pay such expenses, charges, costs and fees at any
time by a disbursement of the Loans.
11.16 CONFLICTS. If there shall exist any conflict among this Agreement and
any of the other Loan Documents, the provisions of this Agreement shall control.
11.17 DECEPTIVE TRADE PRACTICES ACT. Each Loan Party acknowledges that the
Borrowers are each a "BUSINESS CONSUMER" as defined under the Deceptive Trade
Practices-Consumer Protection Act, Subchapter E of Chapter 17 of the Texas
Business and Commerce Code, a law that gives consumers special rights and
protections. Each Loan Party acknowledges that the Deceptive Trade
Practices-Consumer Protection Act is not applicable to the Transactions.
11.18 ENTIRETY. The Loan Documents embody the entire agreement among the
parties and supersede all prior agreements and understandings, if any, relating
to the subject matter hereof and thereof. Any previous agreement among the
parties hereto with respect to the Transactions is superseded by the Loan
Documents. Except as expressly provided herein or the Loan Documents (other than
this Agreement), nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement or the other Loan Documents.
11.19 MULTIPLE COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
A CREDIT AGREEMENT IN WHICH THE AMOUNT INVOLVED EXCEEDS $50,000 IN VALUE IS NOT
ENFORCEABLE UNLESS THE AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY TO BE
BOUND OR BY THAT PARTY'S AUTHORIZED REPRESENTATIVE. THE RIGHTS AND OBLIGATIONS
OF BORROWERS, THE OTHER LOAN PARTIES AND THE BANK SHALL BE DETERMINED SOLELY
FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS. ANY PRIOR ORAL AGREEMENTS
AMONG THE PARTIES ARE SUPERSEDED BY AND MERGED INTO THOSE WRITINGS. THIS
AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS (AS SAME MAY, FROM TIME TO TIME,
BE AMENDED IN WRITING) EXECUTED BY BORROWERS, ANY OTHER LOAN PARTY OR THE BANK
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. THIS
PARAGRAPH IS INCLUDED IN THIS AGREEMENT UNDER "26.02 OF THE TEXAS BUSINESS AND
COMMERCE CODE, AS AMENDED FROM TIME TO TIME.
In witness whereof, the parties have duly executed this Agreement on the day
and year hereinabove first set forth.
GOLDEN EAGLE GROUP, INC. DAHER AMERICA, INC.
BY: BY:
PATRICK H. WESTON, PRESIDENT PATRICK H. WESTON, PRESIDENT
WORLD TRADE TRANSPORT OF WTT CUSTOMS HOUSE BROKERAGE, INC.
VIRGINIA, INC.
45
<PAGE>
BY: BY:
PATRICK H. WESTON PATRICK H. WESTON
CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER
COLUMBIA SHIPPING, INC. COLUMBIA SHIPPING, INC. (WEST)
BY: BY:
PATRICK H. WESTON, PRESIDENT PATRICK H. WESTON, PRESIDENT
COLUMBIA SHIPPING, INC. FREIGHT EXPRESS
(CHICAGO) INTERNATIONAL, INC.
BY: BY:
PATRICK H. WESTON, PRESIDENT PATRICK H. WESTON, PRESIDENT
DACOM LINE, INC. GOLDEN EAGLE INTERNATIONAL
FORWARDING, INC.
BY: BY:
PATRICK H. WESTON, PRESIDENT PATRICK H. WESTON, PRESIDENT
(SIGNATURES CONTINUE ON NEXT PAGE)
46
<PAGE>
(CONTINUED SIGNATURES TO CREDIT AGREEMENT)
OCTOBER 27, 1997
GOLDEN EAGLE GROUP, INC., DAHER AMERICA, INC.,
WORLD TRADE TRANSPORT OF VIRGINIA, INC.,
WTT CUSTOMS HOUSE BROKERAGE, INC., and
COLUMBIA SHIPPING GROUP, INC. ("BORROWERS")
DACOM LINE, INC., GOLDEN EAGLE INTERNATIONAL FORWARDING, INC.,
GOLDEN EAGLE CUSTOMS BROKERS, INC., BRIDGEPORT SHIPPING LINES, INC.,
COLUMBIA SHIPPING, INC., COLUMBIA SHIPPING, INC. (WEST),
COLUMBIA SHIPPING, INC. (CHICAGO), COLUMBIA SHIPPING, INC. (SFO)
and FREIGHT EXPRESS INTERNATIONAL, INC. ("GUARANTORS")
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("BANK")
GOLDEN EAGLE CUSTOMS BRIDGEPORT SHIPPING LINES, INC.
BROKERS, INC.
BY: BY:
PATRICK H. WESTON, PRESIDENT PATRICK H. WESTON, PRESIDENT
COLUMBIA SHIPPING GROUP, INC. COLUMBIA SHIPPING, INC. (SFO)
BY: BY:
PATRICK H. WESTON, PRESIDENT PATRICK H. WESTON, PRESIDENT
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
BY:
ELIZABETH BURGER
VICE PRESIDENT
47
<PAGE>
Exhibit 2.1
Notice of Revolving Credit Advance
<PAGE>
Exhibit 2.3
Borrowing Base Certificate
<PAGE>
Exhibit 3.1
Notice of Term Loan Advance
<PAGE>
Exhibit 4.1
Revolving Credit Note
<PAGE>
Exhibit 4.2
Term Note
<PAGE>
Exhibit 5.1.A
Security Agreement
<PAGE>
Exhibit 7.1.A.(5)
Certificate of Compliance
<PAGE>
Exhibit 8.1.D
Subordination Agreement
<PAGE>
Exhibit 8.1.E
Landlord Agreement
<PAGE>
Exhibit 8.1.F
Guaranty Agreement
<PAGE>
Exhibit 8.1.H
Officers Certificate
<PAGE>
Schedule 9.1.H
Ten (10) per cent or more Shareholders of Golden Eagle Group
Compagnie DAHER et Gerance de Armenent
<PAGE>
Schedule 8.1.E
Leaseholds
120 Standifer Drive
Humble, Texas 77338
325 Lake Trail Court
Double Oak, Texas 75067
4460 Trade Center
Laredo, Texas 78041
22 Export Drive, Technology Trade Center
Sterling, Virginia 20164
138-01 Springfield Boulevard
Jamaica, New York 11413
149-23 182nd Street
Jamaica, New York 11413
200 Center Street
El Seguendo, California 90245
2801-03 Coyle Avenue
Elk Grove Village, Illinois 60007
(vacating the premises by November 31, 1997)
2311 W. Touby Ave.
Elk Grove Village, Illinois 60007
333 Oyster Point Boulevard, #6
South San Francisco, California 90245
11700 N.W. 100 Road
Medley, Florida 33178
3904 E. Air Lane
Phoenix, Arizona 85034
3390 Peoria St., #300
Aurora, Colorado 80010
<PAGE>
Schedule 9.1.M
Principal Offices
NAME OF LOAN PARTY PRINCIPAL OFFICE
------------------ ----------------
Golden Eagle Group 120 Standifer Drive
Humble, Texas 77338
Daher 120 Standifer Drive
Humble, Texas 77338
World Trade 22 Export Drive, Technology Trade
Center
Sterling, Virginia 20164
WTT 22 Export Drive, Technology Trade
Center
Sterling, Virginia 20164
Columbia Shipping 138-01 Springfiled Boulevard
Jamaica, New York 11413
Columbia West 200 Center Street
El Seguendo, California 90245
Columbia Chicago 2801-03 Coyle Avenue
Elk Grove Village, Illinois 60007
Freight 138-01 Springfiled Boulevard
Jamaica, New York 11413
Dacom 120 Standifer Drive
Humble, Texas 77338
Golden Eagle International 120 Standifer Drive
Humble, Texas 77338
Golden Eagle Customs 120 Standifer Drive
Humble, Texas 77338
Bridgeport 120 Standifer Drive
Humble, Texas 77338
Columbia SFO 333 Oyster Point Boulevard, #6
South San Francisco, California 90245
Columbia Group 138-01 Springfiled Boulevard
Jamaica, New York 11413
EXHIBIT 22 - SUBSIDIARIES OF THE COMPANY
COMPANY STATE OF INCORPORATION
- --------------------------------------------------------------------------------
Daher America, Inc. Delaware
Dacom Lines, Inc. Texas
Golden Eagle International Forwarding, Inc. Florida
Golden Eagle Customs Brokers, Inc. Florida
Bridgeport Shipping, Inc. Florida
World Trade Transport of Virginia, Inc. Virginia
WTT Customs Brokers, Inc. Virginia
Columbia Shipping Group, Inc. Delaware
Columbia Shipping, Inc. (NY) New York
Columbia Shipping, Inc. (WEST) California
Columbia Shipping, Inc. (SFO) California
Columbia Shipping, Inc. (Chicago) Illinois
Freight Express International, Inc. New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 755,632
<SECURITIES> 0
<RECEIVABLES> 14,457,569
<ALLOWANCES> 815,000
<INVENTORY> 0
<CURRENT-ASSETS> 15,819,809
<PP&E> 1,240,848
<DEPRECIATION> 2,901,679
<TOTAL-ASSETS> 25,920,770
<CURRENT-LIABILITIES> 11,424,831
<BONDS> 0
0
0
<COMMON> 64,102
<OTHER-SE> 10,096,487
<TOTAL-LIABILITY-AND-EQUITY> 25,920,770
<SALES> 83,798,680
<TOTAL-REVENUES> 83,798,680
<CGS> 64,025,476
<TOTAL-COSTS> 64,025,476
<OTHER-EXPENSES> 19,059,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,907
<INCOME-PRETAX> 685,045
<INCOME-TAX> 129,241
<INCOME-CONTINUING> 528,804
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 528,804
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
