<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1996
REGISTRATION NO. 333-03613
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERTRANZ WORLDWIDE HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4731 11-3309110
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
2001 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 326-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STUART HETTLEMAN
2001 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 326-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID I. FERBER, ESQ. DAVID ALAN MILLER, ESQ.
BRUCE E. FOGARTY, ESQ. GRAUBARD MOLLEN & MILLER
FERBER GREILSHEIMER CHAN & ESSNER 600 THIRD AVENUE
530 FIFTH AVENUE NEW YORK, NEW YORK 10016
NEW YORK, NEW YORK 10036 (212) 818-8800
(212) 944-2200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT BEING PRICE PER MAXIMUM AGGREGATE
OF SECURITY BEING REGISTERED REGISTERED(1) SHARE(2) OFFERING PRICE(2)
<S> <C> <C> <C>
Shares of Common Stock, $.01 par value ('Common Stock')(3)...... 2,012,500 Shares $6.00 $12,075,000
Warrants(3)..................................................... 2,012,500 Warrants 0.10 201,250
Shares of Common Stock underlying the Warrants(3)............... 2,012,500 Shares 6.00 12,075,000
Underwriters' Purchase Option................................... 175,000 .00057 100
Shares of Common Stock included as part of Underwriter's
Purchase Option(4)............................................ 175,000 Shares 6.60 1,155,000
Warrants included as part of Underwriter's Purchase Option(4)... 175,000 Warrants 0.11 19,250
Shares of Common Stock underlying the Warrants included in the
Underwriter's Purchase Option(4)(6)........................... 175,000 Shares 6.00 1,050,000
Warrants issued in connection with Bridge Financings(5)......... 1,312,500 Warrants -- --
Shares of Common Stock underlying Warrants issued in connection
with Bridge Financings........................................ 1,312,500 Shares 6.00 7,875,000
Shares of Common Stock issued in connection with Bridge
Financings(5)................................................. 656,250 Shares -- --
Shares of Common Stock issued in connection with Interim
Financing(6).................................................. 67,606 Shares -- --
Shares of Common Stock issued to founders and in other private
financings(6)................................................. 403,893 Shares -- --
Total Registration Fee...................................... $34,389,782
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITY BEING REGISTERED REGISTRATION FEE
<S> <C>
Shares of Common Stock, $.01 par value ('Common Stock')(3)...... $ 4,164
Warrants(3)..................................................... 69
Shares of Common Stock underlying the Warrants(3)............... 4,164
Underwriters' Purchase Option................................... 1
Shares of Common Stock included as part of Underwriter's
Purchase Option(4)............................................ 398
Warrants included as part of Underwriter's Purchase Option(4)... 7
Shares of Common Stock underlying the Warrants included in the
Underwriter's Purchase Option(4)(6)........................... 362
Warrants issued in connection with Bridge Financings(5)......... --
Shares of Common Stock underlying Warrants issued in connection
with Bridge Financings........................................ 2,716
Shares of Common Stock issued in connection with Bridge
Financings(5)................................................. --
Shares of Common Stock issued in connection with Interim
Financing(6).................................................. --
Shares of Common Stock issued to founders and in other private
financings(6)................................................. --
Total Registration Fee...................................... $11,881
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such indeterminable
additional securities as may be issued as a result of the anti-dilution
provisions.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Includes 262,500 Shares of Common Stock, 262,500 Warrants and 262,500 shares
of Common Stock underlying such Warrants which may be issued upon exercise
of a 45-day option granted to the Underwriter to cover overallotments, if
any. See 'Underwriting'.
(4) Such shares of Common Stock and Warrants are being registered for sale to
and for resale by the Underwriter and its assigns and transferees on a
delayed or continuous basis, pursuant to Rule 415 under the Securities Act
of 1933, as amended.
(5) Such shares of Common Stock and Warrants are being registered for resale by
certain securityholders on a delayed or continuous basis, pursuant to Rule
415 under the Securities Act of 1933, as amended. The shares of Common Stock
and Warrants were issued to such securityholders in connection with the
February 1996 and May 1996 bridge financings.
(6) The Registrant is registering for resale by certain securityholders shares
of Common Stock issued to such securityholders in connection with interim
financings and the formation of the Registrant.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
------------------------------------------------------ ------------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page of Prospectus and Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds....................................... Use of Proceeds
5. Determination of Offering Price....................... Cover Pages of the Prospectus; Underwriting
6. Dilution.............................................. Dilution
7. Selling Security Holders.............................. Selling Securityholders and Plan of Distribution
8. Plan of Distribution.................................. Cover Page of Prospectus; Underwriting; Selling
Securityholders and Plan of Distribution
9. Description of Securities to be Registered............ Description of Securities
10. Interests of Named Experts and Counsel................ Legal Matters; Experts
11. Information with Respect to the Registrant............ Outside Front Cover Page; Prospectus Summary;
Business; Risk Factors; Dividend Policy; Summary
Financial and Operating Data; Capitalization;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Management;
Historical Background; Certain Transactions;
Principal Stockholders; Shares Eligible for Future
Sale; Selling Securityholders and Plan of
Distribution; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Description of Securities
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 5, 1996
AMERTRANZ WORLDWIDE HOLDING CORP. [LOGO]
1,750,000 SHARES OF COMMON STOCK AND
1,750,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
All of the 1,750,000 shares of common stock ('Common Stock') and 1,750,000
Redeemable Common Stock Purchase Warrants ('Warrants') offered hereby
(collectively, the 'Securities') are being sold by Amertranz Worldwide Holding
Corp. ('Company'). Each Warrant entitles the holder to purchase one share of
Common Stock for $6.00 during the four-year period commencing one year from the
date of this Prospectus. The Company may redeem the Warrants at any time after
they become exercisable, at a price of $.01 per Warrant upon not less than 30
days' prior written notice if the last sale price of the Common Stock has been
at least $10.00 for each of the 20 consecutive trading days ending on the third
day prior to the date on which the notice of redemption is given. See
'Description of Securities.'
Prior to this offering ('Offering'), there has been no public market for the
Securities and there can be no assurance that any such market will develop. See
'Underwriting' for information relating to the factors considered in determining
the initial public offering price of the Securities and the exercise price of
the Warrants. The Company has applied to have the Common Stock and the Warrants
approved for quotation on the Nasdaq SmallCap Market under the symbols 'AMTZ'
and 'AMTZW', respectively.
This Prospectus also relates to the future resale (i) of 1,312,500 warrants
('Bridge Warrants') and 656,250 shares of Common Stock ('Bridge Shares') issued
to certain persons ('Bridge Holders') in connection with the Company's February
1996 bridge financing ('February Bridge Financing') and May 1996 bridge
financing ('May Bridge Financing', and, together with the February Bridge
Financing, 'Bridge Financings'), (ii) of 67,606 shares of Common Stock ('Interim
Financing Shares') issued to certain lenders ('Interim Financing Holders') in an
interim financing between November 1995 and January 1996 ('Interim Financing'),
and (iii) of 403,893 shares of Common Stock ('Insider Shares') issued to certain
other parties ('Insider Holders') in connection with private financings between
June 1995 and February 1996 and in connection with the founding of the Company.
The securities offered by the Bridge Holders, the Interim Financing Holders and
the Insider Holders (collectively, 'Selling Securityholders') are not part of
the underwritten Offering. The Selling Securityholders may not sell such
securities for a period of one year without the prior consent of the
Underwriter.
------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK AND SUBSTANTIAL DILUTION. SEE 'RISK FACTORS' AT PAGE 6 AND
'DILUTION' AT PAGE 11.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS (1) COMPANY (2)
Per Share............................... $6.00 $0.54 $5.46
Per Warrant............................. $0.10 $0.009 $0.091
Total (3)............................... $10,675,000 $960,750 $9,714,250
</TABLE>
(1) Does not include a 3% nonaccountable expense allowance which the Company has
agreed to pay to the Underwriter. The Company has also agreed to sell to the
Underwriter an option to purchase 175,000 shares of Common Stock and an
option to purchase 175,000 warrants (together, the 'Underwriter's Purchase
Option') and to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933. See 'Underwriting'.
(2) Before deducting expenses payable by the Company, including the
nonaccountable expense allowance in the amount of $320,250 ($368,287.50 if
the Underwriter's over-allotment option is exercised in full), estimated at
$820,350.
(3) The Company has granted the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 262,500 additional
shares of Common Stock and an option to purchase up to an additional 262,500
Warrants on the same terms set forth above, solely to cover over-allotments,
if any. If such over-allotment option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $12,276,250, $1,104,862.50 and $11,171,387.50, respectively. See
'Underwriting'.
The Securities are being offered by the Underwriter, subject to prior sale,
when, as and if delivered to and accepted by the Underwriter and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriter reserves the right to withdraw, cancel or modify this Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates representing the Securities will be made against payment therefor
at the offices of the Underwriter in New York City on or about , 1996.
GKN Securities
, 1996
<PAGE>
[Logo]
NORTH AMERICAN NETWORK OF TERMINALS
[Chart shows map of United States and Puerto Rico
with following cities pinpointed]
<TABLE>
<S> <C> <C> <C>
Atlanta Detroit Miami San Francisco
Boston Fort Worth Minneapolis St. Louis
Chicago Greensboro Newark
Cincinnati Hartford New York Aguadilla, Puerto Rico
Cleveland Houston Philadelphia San Juan, Puerto Rico
Dallas Kansas City Salt Lake City
Denver Los Angeles San Diego
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE COMMON STOCK
OR WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety.
Unless otherwise indicated, all share and option amounts have been adjusted to
give effect to the surrender of 298,004 shares of Common Stock and options to
purchase 153,131 shares of Common Stock effective as of February 7, 1966. See
'Certain Transactions'.
THE COMPANY
Amertranz Worldwide Holding Corp. ('Company') provides freight forwarding
services through its wholly owned subsidiaries, Amertranz Worldwide, Inc.
('Amertranz') and Caribbean Air Services, Inc. ('CAS'). The Company also
recently began providing logistics services. Since commencement of its
predecessors' operations in 1985, the Company has grown to a network of offices
in 25 cities throughout the United States and Puerto Rico. The Company believes
that it is one of the dominant freight forwarders between the continental United
States and Puerto Rico.
The Company combined the operations of Amertranz and CAS in a transaction
which occurred in February 1996 ('Combination'). On a pro forma basis for the 12
months ended December 31, 1995, the Company had operating revenues of $62.2
million and incurred operating losses of $3.1 million.
The Company's freight forwarding services involve all aspects of
transporting customers' freight from the shippers' locations to the designated
recipient, including the preparation of shipping documents and the providing of
handling, packing and containerization services. The Company concentrates on
cargo shipments weighing more than 50 pounds and generally requiring second-day
delivery, a segment of the freight forwarding market which the Company believes
will experience sustained growth. The Company's logistics services, which are
provided to large manufacturing companies, involve coordinating all of the
transportation requirements for a customer, including shipment to and from the
warehouse, warehousing and maintenance of customer inventory, individual order
organizing for shipment, and order packing and shipping.
The Company has approximately 2,000 customers. Its principal customers
include large manufacturers and distributors of pharmaceuticals, computers and
other electronic and high-technology equipment and computer software, and,
through its Fashion Air division, businesses in the garment industry.
The Company neither owns nor operates any cargo aircraft or significant
trucking equipment and relies on independent contractors for the movement of
cargo. In this manner, the Company is able to provide customized service without
the costs associated with equipment ownership, operation and maintenance.
The Company's objective is to become a leading provider of second-day
domestic freight forwarding services in all of its markets. Its strategy is to
maximize the synergies created by the combination of its Amertranz and CAS
businesses by (i) exploiting cross-selling opportunities, and (ii) taking
advantage of underutilized operations infrastructure and purchased freight
space. The Company also intends to maximize its use of its subsidiaries'
existing trucking networks to minimize its reliance on more expensive air
freight carriers.
The Company was incorporated in Delaware in January 1996 (in connection
with the February 1996 Combination) as the successor to operations commenced in
1985. See 'Historical Background'. Unless otherwise expressly stated, all
references to the 'Company' in this Prospectus include the Company, Amertranz,
CAS and their predecessors-in-operation, Integrity Logistics, Inc. and Amerford
Domestic, Inc., and the freight forwarding business of TIA, Inc. ('TIA'), and
its subsidiary, Caribbean Freight Systems, Inc. ('CFS'). The Company's executive
offices are located at 2001 Marcus Avenue, Lake Success, New York 11042, and its
telephone number is (516) 326-9000.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................ 1,750,000 shares of Common Stock and 1,750,000 Warrants. Each Warrant
entitles the holder thereof to purchase one share of Common Stock for
$6.00 during the four-year period commencing one year from the date
of this Prospectus. The Company may redeem the Warrants at a price of
$.01 per Warrant at any time after they become exercisable upon not
less than 30 days' prior written notice if the last sale price of the
Common Stock has been at least $10.00 for each of the 20 consecutive
trading days ending on the third day prior to the date on which the
notice of redemption is given. See 'Description of Securities'.
Common Stock Outstanding Prior to the
Offering................................ 3,597,368 shares
Common Stock to be Outstanding After the
Offering................................ 5,347,368 shares
Proposed Nasdaq SmallCap Market Symbols... Common Stock: AMTZ
Warrants: AMTZW
</TABLE>
USE OF PROCEEDS
The Company intends to apply the net proceeds of the Offering approximately
as follows: (i) $4,130,000 for the repayment of principal and accrued interest
on the promissory notes issued in connection with the Bridge Financings; (ii)
$2,000,000 in partial repayment of a promissory note made in connection with the
February 1996 Combination; (iii) $373,000 for the repayment of principal and
accrued interest on the promissory notes issued in connection with the Interim
Financing; (iv) $700,000 to repay overdue trade payables; and (v) $1,691,000 for
working capital and general corporate purposes. See 'Use of Proceeds'.
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. See 'Risk Factors'.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this Prospectus. This
information should be read in conjunction with such financial statements,
including the notes thereto. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations'.
<TABLE>
<CAPTION>
FREIGHT FORWARDING BUSINESS
OF THE COMPANY
TIA AND CFS(1) ---------------------------------------
YEAR ENDED DECEMBER 31 FOR THE PERIOD PRO FORMA
----------------------------- FEBRUARY 8 THRU 12 MONTHS ENDED
1993 1994 1995 MARCH 31, 1996 DECEMBER 31, 1995(2)
------- ------- ------- --------------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue.............................. $32,671 $38,576 $38,211 $10,105 $ 62,165
Cost of transportation......................... 24,232 30,254 30,300 7,351 47,594
Gross profit................................... 8,439 8,322 7,911 2,754 14,568
Selling, general & administrative expenses..... 6,505 4,634 4,513 3,032 17,231
Amortization of goodwill....................... 70 484
Operating income (loss)........................ 1,934 3,688 3,398 (348) (3,147)
Net income (loss) before taxes(3).............. 869 2,661 2,366 (744) (4,157)
Pro forma net loss per share(4)................ $ (.21) $ (1.25)
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
------------------------------------------------
MARCH 31, 1996
----------------------------
FEBRUARY 7, 1996 PRO FORMA
ACTUAL ACTUAL AS ADJUSTED(5)(6)
---------------- ------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................................... $ 21,114 $24,111 $25,564
Working capital (deficit)............................................. (5,340) (6,103) (1,584)
Short-term indebtedness............................................... 11,100 14,948 14,019
Long-term indebtedness................................................ 12,367 12,272 6,024
Stockholders' equity (deficit)........................................ $ (2,354) $(3,109) $ 5,521
</TABLE>
- ------------------
(1) The amounts for the freight forwarding business of TIA and CFS represent the
historical operations associated with the freight forwarding business of TIA
and CFS contributed to the Company in the Combination. The freight
forwarding business of TIA and CFS did not operate as a separate legal or
reporting entity during the periods presented. Although the Company did not
assume any of the historical debt obligations of TIA and CFS in the
Combination, the freight forwarding business constituted the majority of the
operations of TIA and CFS during the periods presented and, accordingly, all
of the interest expense incurred by TIA and CFS for such periods has been
allocated to the freight forwarding business of TIA and CFS. The operations
data for the fiscal year ended December 31, 1993 and for the first two
months of 1994 include the effect of the operation by TIA of its aviation
assets which it sold in March 1994. Management believes that if the
operations data were restated to exclude the operation of these aviation
assets, costs of sales would be higher but would be more than offset by a
reduction in operating expenses.
(2) Pro forma amounts give effect to the Combination whereby Amertranz and CAS
became wholly owned subsidiaries of the Company.
(3) The interest expense for the freight forwarding business of TIA and CFS for
the three-year period ended December 31, 1995 has been adjusted to the
amount of interest expense on the Exchange Note as if it were outstanding
for the periods presented.
(4) Based on the number of shares of Common Stock outstanding immediately prior
to the Offering.
(5) Pro forma amounts give effect to (i) the conversion by TIA and CFS on the
date of this Prospectus of $2,000,000 of long-term debt into 200,000 shares
of the Company's Class A 10% Cumulative Convertible Preferred Stock ('Class
A Preferred Stock'), and (ii) the consummation of the May Bridge Financing
(including $1,020,000 of debt issuance costs). See 'Certain Transactions'
and 'Description of Securities--Preferred Stock'.
(6) As adjusted to give effect to the sale of the Securities offered hereby and
the application of the net proceeds therefrom, including a write-off of
approximately $3,158,000 of debt issuance costs incurred in connection with
the Interim Financing and the Bridge Financings.
------------------
Unless otherwise indicated, the information in this Prospectus does not give
effect to the exercise of the Underwriter's over-allotment option, the
Underwriter's Purchase Option or the exercise of the Warrants offered hereby,
and does not include: (i) 402,348 shares of Common Stock reserved for issuance
upon the exercise of options granted or to be granted under the Company's stock
option plan; (ii) 230,399 shares of Common Stock reserved for issuance upon the
exercise of other options; (iii) 1,312,500 shares of Common Stock reserved for
issuance upon exercise of the Bridge Warrants; and (iv) shares of Common Stock
issuable upon conversion of the Company's Class A Preferred Stock. See
'Management', 'Description of Securities--Preferred Stock' and 'Description of
Securities--Warrants'.
5
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. Accordingly, in analyzing an investment in these securities,
prospective investors should carefully consider, along with other matters
referred to herein, the following risk factors. No investor should participate
in the Offering unless such investor can afford a complete loss of his or her
investment.
SUBSTANTIAL LOSSES; ACCUMULATED DEFICIT. Although the Amertranz business
generated approximately $24.0 million in operating revenues in the 12 months
ended December 31, 1995, it incurred operating losses of approximately $6.1
million for such period and had an accumulated deficit of approximately $7.2
million as of December 31, 1995. While the CAS business was profitable during
the year ended December 31, 1995, on a combined pro forma basis, the Company
incurred operating losses for such period of $3.1 million. As of February 7,
1996 (immediately following the Combination), the Company had, on a consolidated
basis, an accumulated deficit of $10.0 million. The Company will be unable to
achieve profitability unless it improves its operating results. There can be no
assurance that the Company will be able to increase revenues or achieve
profitability. Management anticipates that losses will continue for the
foreseeable future. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations', 'Business', and the Financial Statements
and Notes thereto.
WORKING CAPITAL DEFICIT; NEED FOR ADDITIONAL FUNDING. The Company's
current liabilities exceed its current assets. Although the CAS business has
generated positive cash flow from operations for the past three fiscal years,
the cash flow from the operations of the Amertranz business has not been
sufficient to finance trade payables, capital equipment requirements and new
office expansion and development. As a result, Amertranz has engaged in interim
borrowing from various sources. The Company anticipates, based on current plans
and assumptions relating to its operations, that the proceeds of the Offering,
together with existing resources and cash generated from operations, should be
sufficient to satisfy the Company's contemplated cash requirements for at least
12 months after completion of the Offering. After that time the Company
anticipates that cash generated from operations will be sufficient to meet its
capital requirements. There can be no assurance that the Company will not
require additional cash during or subsequent to such 12-month period. The
Company currently has no commitments from any prospective lenders with respect
to any such financing. The terms of the Company's current borrowings
substantially limit the Company's flexibility in obtaining additional financing.
There can be no assurance that any additional financing will be available to the
Company upon acceptable terms, if at all. The inability to obtain additional
financing if and when needed, would have a material adverse effect on the
Company's operating results. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources'.
PLEDGE OF ASSETS. Substantially all of the Company's assets are pledged to
secure its indebtedness. If one or more of the Company's secured creditors
foreclose upon its security interest in the Company's assets, such action would,
in all likelihood, result in the inability of the Company to continue in
business. TIA and CFS have agreed that they will forbear from foreclosing on
their security interests in such assets for a period of 12 months following the
consummation of the Offering, except in certain circumstances. The Company may
also be required to obtain the consent of these creditors in order to complete
future financings, and there can be no assurance that these consents would be
forthcoming. See 'Control of the Company by TIA and CFS; Conflicts of Interest',
below and 'Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources'.
'GOING CONCERN' QUALIFICATION. The reports of Arthur Andersen LLP on the
Company's consolidated financial statements as of February 7, 1996, and
Amertranz's financial statements for its fiscal year ended June 30, 1995,
contains their qualification that states that Amertranz 'has suffered a loss
from operations, has negative working capital, negative cash flows from
operations and negative stockholders' equity, that raise substantial doubt about
its ability to continue as a going concern.' There can be no assurance that the
Company's future financial statements will not include a similar explanatory
paragraph if the Company is unable to raise sufficient funds to cover the cost
of its operations. The factors leading to, and the existence of, the explanatory
paragraph may adversely affect the Company's relationship with customers and
suppliers and its ability to generate revenue and obtain financing. See Note 3
of Notes to the Company's Consolidated Financial Statements and Note 3 of Notes
to Amertranz Consolidated Financial Statements.
6
<PAGE>
PROCEEDS TO BE USED TO SATISFY CERTAIN INDEBTEDNESS AND OVERDUE PAYABLES;
BROAD DISCRETION IN APPLICATION OF REMAINING PROCEEDS. Approximately
$6,503,000, or 73%, of the net proceeds received by the Company from the
Offering will be used to repay outstanding indebtedness, including interest
thereon. Additionally, $700,000, or 8%, of such proceeds will be used to repay
overdue trade payables. Accordingly, such funds will not be available for use in
the Company's business. Furthermore, the Company will have broad discretion as
to the application of the remaining $1,691,000 allocated to working capital and
general corporate purposes. See 'Use of Proceeds'.
IMMEDIATE AND SUBSTANTIAL DILUTION. The Offering involves an immediate
dilution of $7.19 per share of Common Stock (approximately 120% of the per-share
offering price) between the pro forma net tangible book value per share of the
Common Stock immediately after the completion of the Offering and the offering
price per share. See 'Dilution'.
CONTROL OF THE COMPANY BY TIA AND CFS; CONFLICTS OF INTEREST. Immediately
following the Offering, TIA and CFS will together beneficially own approximately
41% of the outstanding shares of the Company's Common Stock. Furthermore, if TIA
and CFS were to convert the shares of the Company's Class A Preferred Stock
owned by them after the Offering, their collective beneficial ownership of
shares of Common Stock would increase to approximately 45%. In addition, certain
stockholders of the Company have given irrevocable proxies to TIA and CFS to
vote such stockholders' shares of Common Stock for up to five years for the
election of directors, and the proxy granted by one such stockholder includes
all matters submitted to stockholders for a vote. The stock ownership of TIA and
CFS, together with such proxies, allow TIA and CFS to control in excess of 51%
of the issued and outstanding shares of Common Stock. As a result, TIA and CFS
will be in a position to control the Company through their combined ability to
determine the outcome of elections of the Company's directors and to prevail in
matters submitted to a vote of shareholders. In addition, the Company has
significant outstanding indebtedness owed to TIA and CFS which is secured by the
Company's assets. The terms of the indebtedness require significant ongoing
monthly payments to TIA and CFS. There may be circumstances in which these
different relationships create material conflicts of interest which TIA and CFS
are under no obligation to resolve in favor of other shareholders or the
Company. See 'Management', 'Certain Transactions--Conflicts of Interest',
'Principal Stockholders' and 'Description of Securities--Preferred Stock'.
ABSENCE OF COMBINED OPERATING HISTORY. The combination of the businesses
of Amertranz and CAS occurred in February 1996. There can be no assurance that
management will be able to integrate these businesses profitably or will be
successful in combining and implementing the Company's operating or growth
strategies. Failure to properly integrate these businesses and to implement the
Company's strategies could have a material adverse effect on the Company's
operating results. See 'Business'.
DEPENDENCE ON TIMELY PAYMENTS BY CUSTOMERS. The Company depends on being
paid by its customers when such payments are due. However, the Company is not
able to ensure timely payment of its accounts receivable. In the past, some of
the Company's customers have delayed payment beyond the date when payment is
due, which has had an adverse effect on the Company's operating results. There
can be no assurance that customers will not delay payments in the future, which
would have a material adverse effect on the Company's operating results. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations'.
DELAY IN PAYMENT OF TRADE CREDITORS. In order to manage its working
capital resources, Amertranz has in the past paid and is currently paying many
of its trade creditors and service providers at rates slower than provided in
their respective invoices or agreements. While the Offering is intended to
provide sufficient working capital to allow the Company, together with existing
resources and cash generated from operations, to satisfy its contemplated cash
requirements for at least 12 months after the completion of the Offering, the
Company still may be required to delay payments to trade creditors in the
future. The Company's failure to pay these trade creditors in a timely fashion
has in the past adversely affected, and in the future could adversely affect,
its relationships with these trade creditors or result in a default under its
agreements with such trade creditors. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview'.
COMPETITION. The Company competes with a large number of firms, many of
which have facilities and financial resources far greater than the Company.
Competition within the freight industry is intense. In the freight forwarding
industry, the Company competes with a large and diverse group of national
freight forwarding
7
<PAGE>
concerns, commercial air and ocean carriers and a large number of locally
established companies in geographic areas where the Company does business or
intends to do business in the future. Insofar as inter-city trucking is a
portion of the Company's method of freight transport, the Company competes with
a large number of long-haul, medium-haul, truckload and less than truckload
carriers, and railroads. While the Company does not consider itself to be
competing with traditional small package delivery services such as Federal
Express Corporation, United Parcel Service of America, Inc., Airborne Freight
Corporation and DHL Worldwide Express, Inc., in the event that any of these
established businesses, with their goodwill, name, resources and trade
recognition, decide to expand into the heavy freight business, such
circumstances could have a material adverse effect upon the business of the
Company. See 'Business--Competition'.
EXPANSION OF BUSINESS. The Company intends to continue its program of
business expansion after completion of the Offering. There can be no assurance
that its financial condition will be sufficient to support the funding needs of
an expansion program, that acquisitions will be successfully consummated or will
enhance profitability, or that any expansion opportunities will be available
upon reasonable terms. See 'Business-- Company Strategy'.
DEPENDENCE ON KEY PERSONNEL. The Company believes that its future success
will be highly dependent upon its ability to attract and retain skilled
managers, salespersons, and other personnel. The inability to attract and retain
such managers and personnel could have a material adverse effect on the
Company's operating results. In addition, the Company believes that its success
will depend to a significant extent on the efforts and abilities of its senior
management, in particular those of Stuart Hettleman, President of the Company,
and Richard A. Faieta, Executive Vice President of the Company. Although the
Company has entered into a three-year employment agreement with each of Messrs.
Hettleman and Faieta, the loss of the services of either Mr. Hettleman or Mr.
Faieta could have a material adverse effect on the Company's operating results.
See 'Business--Company Strategy' and 'Management--Executive Compensation.'
POTENTIAL REDUCTION OF BUSINESS IN PUERTO RICO. There are significant
United States income tax benefits available to United States mainland companies
engaging in business in Puerto Rico. The CAS business historically has derived
substantial operating revenues from such companies, and, therefore, the
profitability of the Company's CAS business is largely dependent on such
customers. Congress reduced these benefits in 1993, and in recent budget
proposals both Congress and the Clinton Administration have proposed further
reduction of these tax benefits. In the event that there is any modification to
the tax benefits available to United States companies doing business in Puerto
Rico, it could result in those companies cutting back on the business which they
had been doing in Puerto Rico, which would have a material adverse effect upon
the Company's operating results.
DEPENDENCE ON CARRIERS; INABILITY TO CONTROL TRANSPORTATION FACILITIES.
The Company does not own or operate any trucks, nor does it own or operate any
aircraft (although it will have certain exclusive rights to the use of an L-1011
aircraft in connection with its CAS business until March 1998) for the movement
of either domestic or international freight. The Company does not have any
present or anticipated future plans to acquire, by lease or otherwise, or own or
operate any freight transportation equipment. The Company's ability to service
its customers depends on the availability of space on air passenger and cargo
airlines and trucking carriers. The quality and timeliness of the Company's
freight forwarding services will be dependent upon the services of these
independent contractors, over which the Company has no control. Shortages of
freight space are most likely to develop around holidays and on routes upon
which traffic is especially heavy. Furthermore, the Company will be competing
with others for the availability and utilization of freight space. In addition,
available air cargo space on passenger airlines could be reduced as a result of
changes in the types of aircraft or decreases in the number of passenger
airlines serving particular routes at particular times, which could occur as a
result of economic conditions and other factors beyond the control of the
Company. Although the Company does not believe that a lack of freight space has
had a significant impact on its ability to book space to date, significant
shortages of suitable space and associated increases in rates charged by
carriers could have a material adverse affect on the Company's future operating
results. See 'Business--Company Operations'.
VULNERABILITY TO ECONOMIC CONDITIONS. The Company's future operating
results are dependent upon the economic environments in which it operates.
Demand for the Company's services could be adversely affected by economic
conditions in the industries of the Company's customers. A number of the
principal customers of the Company's Amertranz business are in the fashion,
personal computer and electronics industries. The Company
8
<PAGE>
anticipates that CAS will continue to obtain substantial business from the
pharmaceutical industry. Adverse conditions in any of these industries or loss
of the major customers in such industries could have a material adverse impact
upon the Company. The Company expects the demand for its services (and
consequently its results of operations) to continue to be sensitive to domestic
and, increasingly, global economic conditions and other factors beyond its
control. In addition, the transport of freight, both domestically and
internationally, is highly competitive and price sensitive. Changes in the
volume of freight transported, shippers preferences as to the timing of
deliveries as a means to control shipping costs, economic and political
conditions, both in the United States and abroad, work stoppages, United States
and foreign laws relating to tariffs, trade restrictions, foreign investments
and taxation may all have significant impact on the overall business of the
Company, its growth and profitability. See 'Business'.
LITIGATION. Amertranz has been named as a defendant in a lawsuit initiated
by the trustee in bankruptcy of a company with which Amertranz engaged in
discussions concerning a prospective business combination during early 1994. The
complaint seeks damages in excess of $11 million for various alleged causes of
action. In February 1996, the plaintiff in this action offered to settle the
litigation for $125,000, which offer was rejected by the Company. The Company's
counsel in the action has filed a motion to dismiss the complaint in its
entirety. Management believes that the lawsuit is substantially without merit
and that the probability of any material loss is extremely small. Nevertheless,
the Company will be obligated to expend funds and management time and attention
which are needed elsewhere but which must be diverted to finance legal costs and
provide information requested to conduct a vigorous defense. Additionally, there
can be no assurance that either the cost of defense or the ultimate outcome of
the lawsuit will not result in substantial expense to the Company, which may
have a material adverse effect on the Company's operating results. See
'Business--Legal Proceedings'.
DIVIDENDS UNLIKELY. The Company has never declared or paid dividends on
its Common Stock and does not intend to pay dividends in the foreseeable future.
The payment of dividends in the future will be at the discretion of the Board of
Directors. In addition, the terms of the Company's Class A Preferred Stock
provide a dividend preference to the holders thereof. See 'Dividend Policy' and
'Description of Securities--Preferred Stock'.
REGULATORY COMPLIANCE. The Company's freight forwarding business as an
indirect air cargo carrier is subject to regulation by the United States
Department of Transportation (DOT) under the Federal Aviation Act. However, air
freight forwarders (including the Company) are exempted from most of such Act's
requirements by the Economic Aviation Regulations promulgated thereunder. The
Company's foreign air freight forwarding operations are subject to regulation by
the regulatory authorities of the respective foreign jurisdictions. The air
freight forwarding industry is subject to regulatory and legislative changes
which can affect the economics of the industry by requiring changes in operating
practices or influencing the demand for, and the costs of providing, services to
customers. The Company does not believe that costs of regulatory compliance have
had a material adverse impact on its operations to date. However, failure of the
Company to comply with any applicable regulations could have an adverse effect
on the Company. There can be no assurance that the adoption of future
regulations would not have a material adverse effect on the Company's business.
See 'Business--Regulation'.
NO PRIOR MARKET; POTENTIAL LIMITED TRADING MARKET; POSSIBLE VOLATILITY OF
STOCK PRICE. There has been no prior market for the Common Stock or Warrants.
The Common Stock and Warrants have been approved for trading on the Nasdaq
SmallCap Market although there can be no assurance that an active trading market
in the Company's securities will develop or be maintained. To continue to be
listed on Nasdaq after the Offering, the Company must satisfy certain
maintenance criteria. The public offering prices of the Securities and the
exercise price and other terms of the Warrants being offered hereby were
established by negotiation between the Company and the Underwriter and may not
be indicative of prices that will prevail in the trading market. In the absence
of an active trading market, purchasers of the Common Stock or Warrants may
experience substantial difficulty in selling their securities. The trading
prices of the Common Stock and Warrants are expected to be subject to
significant fluctuations in response to variations in quarterly operating
results, changes in analysts' earnings estimates, announcements of technological
innovations by the Company or its competitors, general conditions in the
forwarding industry and other factors. In addition, the stock market is subject
to price and volume fluctuations that affect the market prices for companies and
that are often unrelated to operating performance. See 'Distribution'.
9
<PAGE>
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such shares of Common Stock and only if such shares of Common Stock are
qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of the
Warrants reside. The Company has undertaken and intends to file and keep current
a prospectus which will permit the purchase and sale of the shares of Common
Stock underlying the Warrants, but there can be no assurance that the Company
will be able to do so. Although the Company intends to seek to qualify for sale
the shares of Common Stock underlying the Warrants in those states in which the
securities are to be offered, no assurance can be given that such qualification
will occur. The Warrants may be deprived of any value and the market for the
Warrants may be limited if a current prospectus covering the shares of Common
Stock issuable upon exercise of the Warrants is not kept effective or if such
shares of Common Stock are not qualified or exempt from qualification in the
jurisdictions in which the holders of the Warrants then reside. See 'Description
of Securities--Warrants'.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants may be
redeemed by the Company at any time after the Warrants become exercisable at a
redemption price of $.01 per Warrant upon not less than 30 days' prior written
notice if the last sale price of the Common Stock has been at least $10.00 per
share for each of the 20 consecutive trading days during a period ending on the
third trading day prior to the date of the notice of redemption. Notice of
redemption of the Warrants could force the holders to exercise the Warrants and
pay the exercise price at a time when it may be disadvantageous for them to do
so, to sell the Warrants at the current market price when they might otherwise
wish to hold the Warrants, or to accept the redemption price which would be
substantially less than the market value of the Warrants at the time of
redemption. See 'Description of Securities--Warrants'.
EFFECT OF OUTSTANDING OPTIONS AND WARRANTS. As of the date of this
Prospectus, there are outstanding stock options to purchase an aggregate of
230,399 shares of Common Stock at per share exercise prices ranging from $.16 to
$1.17, and the Company has reserved 402,348 shares of Common Stock for issuance
pursuant to the Company's Stock Option Plan. Upon consummation of the Offering,
the Company will have outstanding warrants to purchase 3,412,500 shares of
Common Stock (including the Warrants sold in the Offering). Furthermore,
outstanding shares of the Company's Class A Preferred Stock may be converted
into shares of Common Stock at any time. The exercise of such outstanding
securities will dilute the percentage ownership of the Company's stockholders,
and any sales in the public market of shares of Common Stock underlying such
securities may adversely affect prevailing market prices for the Common Stock.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of such outstanding
securities can be expected to exercise their respective rights therein at a time
when the Company would, in all likelihood, be able to obtain any needed capital
on terms more favorable to the Company than those provided in such securities.
See 'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources', 'Management--Stock Option Plan'
and 'Other Stock Options', 'Certain Transactions', 'Description of Securities'
and 'Selling Securityholders and Plan of Distribution'.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of the Company's Common Stock in
the public market after the Offering could adversely affect the market price of
the Common Stock or the Warrants. See 'Shares Eligible for Future Sale'.
LIMITED LIABILITY OF DIRECTORS. The Company's Certificate of Incorporation
limits the liability of directors to the maximum extent permitted by Delaware
law. See 'Description of Securities--Indemnification of Officers and Directors'.
ISSUANCE OF PREFERRED STOCK. Pursuant to its Certificate of Incorporation,
the Company has authorized a class of 2,000,000 shares of Preferred Stock which
may be issued by the Board of Directors with such preferences, limitations and
relative rights as the Board may determine without any vote of the stockholders.
Issuance of such Preferred Stock, depending upon the preferences, limitations
and relative rights thereof, may have the effect of delaying, deterring or
preventing a change in control of the Company. See 'Description of
Securities--Preferred Stock'.
10
<PAGE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share of Common Stock
after the Offering constitutes the dilution per share of Common Stock to
investors in the Offering. Net tangible book value per share is determined by
dividing the net tangible book value (total tangible assets less total
liabilities) by the number of outstanding shares of Common Stock.
At March 31, 1996, after giving effect to the conversion of $2,000,000 of
long-term debt into the Company's Class A Preferred Stock (see 'Certain
Transactions' and the consummation of the May Bridge Financing), the Company had
a consolidated negative net tangible book value of approximately $13.0 million,
or approximately $3.65 per share of Common Stock (based on 3,597,368 shares of
Common Stock outstanding). After giving effect to the sale of Securities offered
hereby (less underwriting discounts and estimated expenses of the Offering
including the write-off of debt issuance costs related to the Company's
financings), the negative net tangible book value at that date would have been
approximately $6.5 million, or approximately $1.22 per share. This represents an
immediate increase in net tangible book value of $2.43 per share to the existing
stockholders, and an immediate dilution of $7.22 per share to investors in the
Offering.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Public offering price of the Common Stock....................................... $6.00
Consolidated negative net tangible book value before the Offering............. $(3.65)
Increase attributable to new investors in the Offering........................ 2.43
------
Consolidated negative net tangible book value after the Offering................ (1.22)
-----
Dilution to investors in the Offering........................................... $7.22
-----
-----
</TABLE>
The following table summarizes the number and percentage of shares of
Common Stock purchased from the Company, the amount and percentage of
consideration paid and the average price per share paid by the existing
stockholders and by new investors pursuant to the Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.................... 3,597,368 67.3% $ 8,666,465 45.2% $2.41
New Investors............................ 1,750,000 32.7 10,500,000 54.8 6.00
--------- ------- ----------- -------
Total............................... 5,347,368 100.0% $19,166,465 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby are estimated to be approximately $8,894,000 (approximately $10,303,100
if the Underwriter's over-allotment option is exercised in full). The Company
intends to apply the net proceeds approximately as follows:
<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS AMOUNT PERCENT
- ----------------------------------------------------------------------- ---------- -------
<S> <C> <C>
Repayment of the February Bridge Notes(1).............................. $2,906,000 33%
Repayment of the May Bridge Notes(2)................................... 1,224,000 14
Partial repayment of the Exchange Note(3).............................. 2,000,000 22
Repayment of the Interim Notes(4)...................................... 373,000 4
Payment of Overdue Trade Payables(5)................................... 700,000 8
Working Capital and General Corporate Purposes(6)...................... 1,691,000 19
---------- -------
Total............................................................. $8,894,000 100%
---------- -------
---------- -------
</TABLE>
- ------------------
(1) The February Bridge Notes were issued in connection with the February Bridge
Financing consummated in February 1996, in which the Company also issued
416,250 shares of Common Stock and 832,500 Bridge Warrants. The February
Bridge Notes consist of 85 notes in the aggregate principal amount of $2.775
million, bearing interest at the rate of 10% per annum through April 30,
1996 and 15% per annum thereafter, and are payable upon the consummation of
the Offering. If the Offering is consummated on or about June 30, 1996, the
interest to be paid on the February Bridge Notes will be approximately
$131,000. The net proceeds from the sale of the February Bridge Notes were
used for working capital purposes.
(2) The May Bridge Notes were issued in connection with the May Bridge Financing
consummated in May 1996, in which the Company also issued 240,000 shares of
Common Stock and 480,000 Bridge Warrants. The May Bridge Notes consist of
five notes in the aggregate principal amount of $1.2 million, bearing
interest at the rate of 15% per annum, and are payable upon the consummation
of the Offering. If the Offering is consummated on or about June 30, 1996,
the interest to be paid on the May Bridge Notes will be approximately
$24,000. The net proceeds from the sale of the May Bridge Notes were used
for working capital purposes.
(3) The Exchange Note was issued to TIA and CFS in connection with the February
1996 Combination, in which the Company also issued to TIA and CFS an
aggregate of 2,100,000 shares of Common Stock. The Exchange Note is in the
original principal amount of $10,000,000, and bears interest at the rate of
8.0% per annum. Immediately prior to the consummation of the Offering, TIA
and CFS exchanged $2,000,000 principal amount of the Exchange Note for
200,000 shares of the Company's Class A Preferred Stock. The terms of the
Exchange Note provide that $2,000,000 of the amount due under the Exchange
Note are payable from the proceeds of the Offering, and the balance as
follows: five consecutive monthly payments of principal and interest in the
amount of $80,000 each, commencing March 1, 1996, and, thereafter, monthly
payments of principal and interest in the amount of $166,667 each until the
Exchange Note has been paid in full. TIA and CFS have agreed that, upon
consummation of the Offering and the payment of the $2,000,000 from the
proceeds of the Offering, the balance of payments on the Exchange Note will
be deferred as described later in this Prospectus. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources' and 'Description of
Securities--Preferred Stock'.
(4) The Interim Notes were issued in connection with the Interim Financing
consummated between November 1995 and January 1996, in which the Company
also issued 67,606 shares of Common Stock. The Interim Notes consist of four
notes in the aggregate principal amount of $350,000, bearing interest at the
rate of 12% per annum, and are payable upon the consummation of the
Offering. If the Offering is consummated on or about June 30, 1996, the
interest to be paid on the Interim Notes will be approximately $23,000. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources'.
(5) Overdue trade payables are owed to, among others, the Company's freight
carriage vendors. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview'.
(6) The remaining portion of the net proceeds allocated to working capital will
be used by the Company to fund operations as required. The specific uses of
the net proceeds allocated to working capital will be determined from time
to time based upon prevailing industry and market conditions and the future
needs of the Company. Working capital and general corporate purposes may
include, among other things, the expansion of the Company's office network
by the opening of new offices or the acquisition of smaller freight
forwarders, and enhancement of the Company's management information systems.
If the Underwriter exercises the over-allotment option in full, the Company
will realize additional net proceeds of $1,409,100 which also will be added to
the Company's working capital. See 'Business--Company Strategy'.
12
<PAGE>
The Company anticipates, based on current plans and assumptions relating to
its operations, that the proceeds of the Offering, together with existing
resources and cash generated from operations, should be sufficient to satisfy
the Company's contemplated cash requirements for at least 12 months after
completion of the Offering. After that time the Company anticipates that cash
generated from operations will be sufficient to meet its capital requirements,
although there can be no assurance that this will be the case. Proceeds not
immediately required for the purposes described above will be invested in United
States government securities, short-term certificates of deposit, money market
funds or other short-term interest-bearing government obligations.
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
March 31, 1996, and (ii) as adjusted to give effect to the sale of the
Securities offered hereby and the application of the estimated net proceeds
therefrom. See 'Use of Proceeds'.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)(2)
-------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion................................................ 12,272 6,024
Stockholders' equity (deficit):
Class A Preferred Stock, $10.00 par value;
500,000 shares authorized pro forma; 200,000 shares issued and outstanding pro
forma, as adjusted............................................................. -- 2,000
Preferred Stock, no par value; 2,000,000 shares authorized pro forma;
none issued and outstanding.................................................... -- --
Common Stock, $.01 par value; 15,000,000 shares authorized;
3,357,368 shares issued and outstanding actual; 5,347,368 shares
issued and outstanding, pro forma, as adjusted................................. 34 54
Additional paid-in capital........................................................ 7,613 17,507
Accumulated deficit............................................................... (10,744) (14,028)
-------- -----------------
Treasury stock, 106,304 shares held at cost....................................... (11) (11)
Total stockholders' equity (deficit)......................................... (3,108) 5,522
-------- -----------------
Total capitalization........................................................... $ 9,164 $ 11,546
-------- -----------------
-------- -----------------
</TABLE>
- ------------------
(1) Pro forma amounts give effect to (i) the conversion by TIA and CFS on the
date of this Prospectus of $2,000,000 of long-term debt into 200,000 shares
of the Company's Class A Preferred Stock, and (ii) the consummation of the
May Bridge Financing. See 'Certain Transactions' and 'Description of
Securities-- Preferred Stock'.
(2) As adjusted to give effect to the sale of the Securities offered hereby and
the application of the net proceeds therefrom, including a write-off of
approximately $3,158,000 of debt issuance costs incurred in connection with
the Interim Financing and the Bridge Financings.
DIVIDEND POLICY
The Company expects to retain all available earnings generated by its
operations for the development and growth of its business and it does not intend
to pay cash dividends on its Common Stock in the foreseeable future. Any future
declaration of cash dividends will be at the discretion of the Board of
Directors and will depend upon the earnings, capital requirements and financial
position of the Company, general economic conditions and other pertinent
factors. In addition, the terms of the Company's Class A Preferred Stock provide
a dividend preference to the holders thereof.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
As a result of the February 1996 Combination, Amertranz and CAS became
wholly-owned subsidiaries of the Company. The statement of operations data
presented below reflect the operations of the Company for the seven-week period
ended March 31, 1996, the historical operations of the air freight business of
TIA and CFS and the pro forma statement of operations data reflect the combined
results of the freight forwarding business of TIA and CFS and the Amertranz
business as if the Combination had been effective as of January 1, 1995, without
giving effect to the Offering. The pro forma data for 1995 represents a period
when TIA and CFS and Amertranz were not under common control or management.
Consequently, the pro forma data presented below may not be comparable to or
indicative of results to be achieved by the Company.
The following selected statement of operations data for each of the years
ended December 31, 1993, 1994 and 1995 have been derived from the statements of
operations of the freight forwarding business of TIA and CFS that have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected statement of operations data for the freight forwarding business of TIA
and CFS for the years ended December 31, 1991 and 1992 and for the Company for
the period February 8, 1996 through March 31, 1996 are unaudited, and in the
opinion of management, include all adjustments necessary for a fair presentation
of such data. The selected balance sheet data as at February 7, 1996 is derived
from a balance sheet of the Company that has been audited by Arthur Andersen
LLP, independent public accountants. The selected balance sheet data as at March
31, 1996 is unaudited and, in the opinion of management, include all adjustments
necessary for a fair presentation of such data. Results for the seven-week
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for a full year. Historical balance sheet data for TIA and CFS
has not been included herein, since only assets of insignificant historical
recorded value were transferred to the Company. The selected financial data
should be read in conjunction with the financial statements of the Company, the
financial statements of the freight forwarding business of TIA and CFS, the
financial statements of Amertranz, and related notes thereto, the pro forma
income statement and with 'Management's Discussion and Analysis of Financial
Condition and Results of Operations'.
<TABLE>
<CAPTION>
THE COMPANY
--------------
FREIGHT FORWARDING BUSINESS OF TIA AND CFS FOR THE PERIOD
YEARS ENDED DECEMBER 31(1) FEBRUARY 8
------------------------------------------------------- THROUGH
1991 1992 1993 1994 1995 MARCH 31, 1996
------- ------- ------- ------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue.................... $32,076 $29,201 $32,671 $38,576 $38,211 $ 10,105
Cost of transportation............... 26,353 24,103 24,232 30,254 30,300 7,351
------- ------- ------- ------- ------- -------
Gross profit......................... 5,723 5,098 8,439 8,322 7,911 2,754
Selling, general & administrative
expenses........................... 8,726 6,354 6,505 4,634 4,513 3,032
Amortization of goodwill............. -- -- -- -- -- 70
------- ------- ------- ------- ------- -------
Operating income (loss).............. (3,003) (1,256) 1,934 3,688 3,398 (348)
Net income (loss) before taxes (3)... (3,799) (2,149) 869 2,661 2,366 (744)
Pro forma net loss per share (4) $ (0.21)
OPERATING DATA:
Gross margin......................... 17.8% 17.5% 25.8% 21.6% 20.7% 27.3%
Operating margin..................... (9.4)% (4.3)% 5.9% 9.6% 8.9% (3.4)%
<CAPTION>
PRO FORMA
12 MONTHS
ENDED
DECEMBER
31,
1995(2)
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue.................... $62,165
Cost of transportation............... 47,594
-----------
Gross profit......................... 14,568
Selling, general & administrative
expenses........................... 17,231
Amortization of goodwill............. 484
-----------
Operating income (loss).............. (3,147)
Net income (loss) before taxes (3)... (4,157)
Pro forma net loss per share (4) $ (1.25)
OPERATING DATA:
Gross margin.........................
Operating margin.....................
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
--------------------------------------------------
MARCH 31, 1996
-----------------------------
FEBRUARY 7, 1996 PRO FORMA
ACTUAL ACTUAL AS ADJUSTED(5)(6)
---------------- ------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................................... $ 21,114 $24,111 $25,564
Working capital (deficit)............................................. (5,340) (6,103) (1,584)
Short-term indebtedness............................................... 11,100 14,948 14,019
Long-term indebtedness................................................ 12,367 12,272 6,024
Stockholders' equity (deficit)........................................ $ (2,354) $(3,109) $ 5,521
</TABLE>
- ------------------
(1) The amounts for the freight forwarding business of TIA and CFS represent the
historical operations associated with the freight forwarding business of TIA
and CFS contributed to the Company in the Combination. The freight
forwarding business of TIA and CFS did not operate as a separate legal or
reporting entity during the periods presented. Although the Company did not
assume any of the historical debt obligations of TIA and CFS in the
Combination, the freight forwarding business constituted the majority of the
operations of TIA and CFS during the periods presented and accordingly all
of the interest expense incurred by TIA and CFS for such periods has been
allocated to the freight forwarding business of TIA and CFS. The operations
data for the fiscal year ended December 31, 1993 and for the first two
months of 1994 include the effect of the operation by TIA of its aviation
assets which it sold in March 1994. Management believes that if the
operations data were restated to exclude the operation of these aviation
assets, costs of sales would be higher but would be more than offset by a
reduction in operating expenses.
(2) Pro forma amounts give effect to the Combination whereby Amertranz and CAS
became wholly owned subsidiaries of the Company.
(3) The interest expense for the freight forwarding business of TIA and CFS for
the three-year period ended December 31, 1995 has been adjusted to the
amount of interest expense on the Exchange Note as if it were outstanding
for the periods presented.
(4) Based on the number of shares of Common Stock outstanding immediately prior
to the Offering.
(5) Pro forma amounts give effect to (i) the conversion of $2,000,000 of
long-term debt owed to TIA and CFS into 200,000 shares of the Company's
Class A Preferred Stock, and (ii) the consummation of the May Bridge
Financing (including $1,020,000 of debt issuance costs). See 'Certain
Transactions' and 'Description of Securities--Preferred Stock'.
(6) Gives effect to the sale of the Securities offered hereby and the
application of the net proceeds therefrom, including a write-off of
approximately $3,158,000 of debt issuance costs incurred in connection with
the Interim Financing and the Bridge Financings.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in January 1996 to combine the freight forwarding
business of TIA and CFS and Amertranz. The Company generated operating revenues
of $10.1 million and had net losses before taxes of $744,000 for the period
February 8, 1996 (immediately following the Combination) through March 31, 1996.
The freight forwarding business of TIA and CFS generated operating revenues of
$38.6 million and $38.2 million and had net income before taxes of $2.7 million
and $2.4 million for the years ended December 31, 1994 and 1995, respectively.
For the year ended June 30, 1994, the Company's Amertranz business generated
operating revenues of $11.1 million and had net income before taxes of $245,000,
and for the year ended June 30, 1995, generated revenues of $25.0 million and
incurred net losses before taxes of $2.8 million. For the year ended December
31, 1995 on a pro forma consolidated basis, the Company generated revenues of
$62.2 million and incurred an operating loss of $3.1 million, such loss
resulting solely from the operation of the Amertranz business.
In February 1994, as a result of the settlement of litigation, Amertranz
obtained a 20-office domestic freight forwarding network. During the period from
February 1994 through December 1995, despite limited working capital, Amertranz
established a needed operations infrastructure for its new domestic freight
forwarding network, including data processing, communications, customer service
and accounting, and expanded the network with the addition of several offices.
Additionally, in June 1995 Amertranz established a major new division for
international freight forwarding which further diluted Amertranz's available
resources. Amertranz's initial emphasis was on the development of an operations
infrastructure, rather than on hiring sales and marketing personnel. Management
believes that the losses in the Amertranz business were caused primarily from
this sudden 20-office expansion without proper planning and without sufficient
capital or financing. This expansion of the Amertranz business resulted in an
existing domestic operations and administrative infrastructure that can support
a much higher revenue base. See 'Historical Background'.
Due to ensuing cash flow shortages, sufficient sales and marketing
personnel could not be hired and therefore operating revenues did not increase
sufficiently to attain profitability. Furthermore, prior to the closing of the
February Bridge Financing, cash shortages in the Amertranz business caused
delays in payments to Amertranz's trade creditors and transportation service
providers which affected Amertranz's ability to ship freight in a timely manner.
Since the closing of the Combination and the February Bridge Financing,
management has attracted and hired additional experienced sales personnel for
the domestic freight forwarding operation and thereby increased its sales team
by more than 30%. In addition, management has begun maximizing the synergies
created by the combination of its Amertranz and CAS businesses by (i) exploiting
cross-selling opportunities, and (ii) taking advantage of underutilized
operations infrastructure and purchased freight space. The Company has analyzed
its operations, decided to maximize use of its existing domestic operations
which can support a higher revenue base with slight additional cost to achieve
profitability, and reduced its international operations.
RESULTS OF OPERATIONS
THE COMPANY
The Company began operations as the combined operations of Amertranz and
the freight forwarding business of TIA and CFS on February 8, 1996. Prior to
such date, the operations of Amertranz and the freight forwarding business of
TIA and CFS were independent of each other. The following discussion relates to
the Company's results of operations for the period February 8, 1996 through
March 31, 1996.
Operating Revenues. Operating revenues for the period were $10.1 million.
Cost of Transportation. Cost of transportation was $7.4 million, or 72.7%
of operating revenues for the period.
Gross Profit. Gross profit was $2.8 million, or 27.3% of operating
revenues for the period.
15
<PAGE>
Selling, General and Administrative Expense. Selling, general and
administrative expenses were $3.1 million, or 31.0% of operating revenues for
the period.
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
The following discussion and analysis relates to the freight forwarding
business of TIA and CFS that was transferred to the Company as part of the
February 1996 Combination. The analysis focuses only on the historical results
of operations of the freight forwarding business (and no other) of TIA and CFS
for the years ended December 31, 1993, 1994 and 1995.
Years Ended December 31, 1994 and 1995
Operating Revenues. Operating revenues decreased 1.0% to $38.2 million in
1995 from $38.6 million in 1994. While TIA and CFS experienced volume increases
from most major customers, there were several major accounts that had
significant decreases in revenues in 1995 compared to 1994 revenues. Sales to
two major customers decreased by an aggregate of approximately $2.0 million in
1995 compared to 1994, which offset the gain in revenues by other accounts.
Furthermore, several major accounts had large volume increases in 1994 due to
unusual situations which did not recur in 1995. As an example, a major
pharmaceutical firm instituted a recall which necessitated substantial
additional air freight needs over normal business operations. Also, due to
market conditions, several major retail suppliers had to use air freight in
substantially greater volume than those used in normal market conditions.
Operating revenues in 1995 show an annual compounded growth rate of 8% per year
for the two years of 1994 and 1995.
Cost of Transportation. Cost of transportation increased to 79.3% of 1995
operating revenues from 78.4% of 1994 operating revenues.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the year ended December 31, 1995 decreased to 20.7%
from 21.6% of operating revenues in the comparable period of 1994.
Selling, General and Administrative Expense. Selling, general and
administrative expenses decreased slightly to 11.8% of operating revenues in the
year ended December 31, 1995 from 12.0% of operating revenues in the comparable
period in 1994.
Years Ended December 31, 1993 and 1994
Operating Revenues. Operating revenues increased 18.1% to $38.6 million in
1994 from $32.7 million in 1993. Most major customers had volume increases in
1994, including several major accounts that had unusually large volume increases
in 1994 due to non-recurring situations.
Cost of Transportation. Cost of transportation increased to 78.4% of 1994
operating revenues from 74.2% of 1993 operating revenues. This increase occurred
because TIA and CFS chartered a fully-staffed and maintained aircraft during the
last ten months of 1994, while TIA operated a leased aircraft during 1993. This
increase is more than offset by the corresponding decrease in selling, general
and administrative expense.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the year ended December 31, 1994 decreased to 21.6%
from 25.8% of operating revenues for the comparable period in 1993.
Selling, General and Administrative Expense. Selling, general and
administrative expenses decreased to 12.0% of operating revenues in the year
ended December 31, 1994 from 19.9% of operating revenues in the comparable
period in 1993. This decrease resulted from the cessation of TIA's operation of
its leased aircraft and the elimination of the expenses associated therewith.
THE AMERTRANZ BUSINESS
In February 1994, Amertranz acquired the 20-office domestic air freight
forwarding business of another freight forwarder, and began issuing its own
domestic air waybills. Thereafter, substantially all sales revenues from
Amertranz's operations were recorded as revenue of Amertranz. Prior to that,
Amertranz acted as agent of such other freight forwarder, and recorded as
revenue only Amertranz's share of the gross profits derived from its
16
<PAGE>
shipments (i.e., gross revenues less the costs associated with the pick-up and
delivery of Amertranz's customers' shipments). Therefore, Amertranz's operating
revenues and cost of transportation reported for the periods before and after
February 1994 are not comparable. See 'Historical Background'.
The following selected financial data for each of the years ended December
31, 1993, 1994 and 1995 has been derived from audited income statements of
Amertranz included elsewhere in this Prospectus. The following selected
financial data for each of the six-month periods ended December 31, 1994 and
1995 have been derived from unaudited income statements of Amertranz included
elsewhere in this Prospectus. The unaudited financial data, in the opinion of
management, include all adjustments necessary for a fair presentation of such
data. The selected financial data should be read in conjunction with the
Financial Statements of Amertranz, and related notes thereto.
<TABLE>
<CAPTION>
AMERTRANZ
AMERTRANZ SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------ -----------------------
1993 1994 1995 1994 1995
------ ------- ------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.............................. $3,354 $11,122 $24,963 $14,049 $13,040
Cost of transportation.......................... 620 6,445 17,514 9,735 9,518
------ ------- ------- --------- ---------
Gross profit.................................... 2,734 4,677 7,449 4,314 3,522
Selling, general & administrative expense....... 2,723 4,857 10,298 5,132 7,552
------ ------- ------- --------- ---------
Operating income (loss)......................... 11 (180) (2,849) (818) (4,030)
Other income (expense).......................... (5) 426 91 (166) (156)
Restructuring charge............................ (435)
Income before taxes............................. $ 6 $ 246 $(2,758) $ (984) $(4,621)
OPERATING DATA:
Gross margin.................................... 81.5% 42.1% 29.8% 30.7% 27.0%
Operating margin................................ 0.3% (1.6)% (11.4)% (5.8)% (30.9)%
</TABLE>
The following discussion and analysis relates to Amertranz's results of
operation for the years ended June 30, 1993, 1994 and 1995.
Years Ended June 30, 1994 and 1995
Operating Revenues. Operating revenues increased by 124% to $25 million
for the year ended June 30, 1995 from $11.1 million in the year ended June 30,
1994. This increase was primarily attributable to Amertranz's change in
operations in its domestic air freight forwarding activities in February 1994,
as described above.
Cost of Transportation. Cost of transportation increased to 70.2% of
operating revenues for the year ended June 30, 1995 from 57.9% of operating
revenues for the year ended June 30, 1994. This increase was primarily
attributable to the change in operations in Amertranz's domestic air freight
forwarding activities in February 1994, as described above.
Gross Profit. As a result of the change in domestic operations in February
1994 as described above, gross profit for the year ended June 30, 1995 increased
by 59.3% to $7.4 million from $4.7 million in the year ended June 30, 1994.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased to $10.3 million or 41.3% of operating
revenues, in the year ended June 30, 1995 from $4.9 million or 43.7% of
operating revenues, in the year ended June 30, 1994. The increase in total
expense was attributable to Amertranz's change in its domestic air freight
forwarding operation described above, the resulting increase in the size of its
office network and the establishment of its independent accounting, data
processing, communications and administrative capabilities.
17
<PAGE>
Years Ended June 30, 1993 and 1994
Operating Revenues. Operating revenues increased by 231.6% to $11.1
million in the year ended June 30, 1994 from $3.4 million in the year ended June
30, 1993. This increase was attributable to Amertranz's acquisition of the
domestic air freight forwarding business for which it previously acted as agent
in February 1994, as described above.
Cost of Transportation. Cost of transportation increased to 57.9% of
operating revenues for the year ended June 30, 1994 from 18.5% for the year
ended June 30, 1993. This increase was primarily attributable to Amertranz's
change in operations in its domestic air freight forwarding activities in
February 1994, as described above.
Gross Profit. As a result of the change in domestic operations in February
1994 as described above, gross profit for the year ended June 30, 1994 increased
by 71.1% to $4.7 million from $2.7 million in the year ended June 30, 1993.
Selling, General and Administrative Expense. Selling, general and
administrative expenses were $4.9 million, or 43.7% of operating revenues, in
the year ended June 30, 1994 and $2.7 million, or 81.2% of operating revenues,
in the year ended June 30, 1993. The increase in dollar amount and the decrease
in the amount as a percentage of operating revenues were attributable to
Amertranz's change in its domestic air freight forwarding operation described
above, the resulting increase in the size of its office network and the
establishment of its independent accounting, data processing, communications and
administrative capabilities. As an independent freight forwarder, the Company
required a larger staff and in-house infrastructure than were required when the
Company was an agent for others.
Six Months Ended December 31, 1994 and 1995
Operating Revenues. Operating revenues decreased by 7.2% to $13.0 million
for the six months ended December 31, 1995 from $14.0 million for the comparable
period of 1994. Domestic operating revenues decreased by 14.9% to $10.3 million
for the 1995 period from $12.1 million for the same period in 1994. Amertranz
began its independent international operations during the six-month period ended
December 31, 1995, and generated $2.8 million in international revenues for the
1995 period. Management believes that the start-up of Amertranz's international
division distracted Amertranz from its domestic efforts during the 1995 period.
Cost of Transportation. Cost of transportation increased to 73.0% for
revenues in the six months ended December 31, 1995 from 69.3% in 1994. This
change was primarily due to a major new account obtained by Amertranz in August
1995, as part of its logistics operation, which had lower profit margins than
its regular freight forwarding business.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the six months ended December 31, 1995 decreased by
18.6% to $3.5 million from $4.3 million for the same period in 1994.
Selling, General & Administrative Expense. Selling, general and
administrative expenses increased to $7.5 million, or 57.9% of operating
revenues, in the six months ended December 31,1995 from $5.1 million, or 36.5%
of operating revenues, for the same period in 1994. This increase in total
amount and percentage of operating revenues was primarily due to the start up of
the international division in June 1995 which accounted for approximately $1.2
million of additional expense for the period.
LIQUIDITY AND CAPITAL RESOURCES
Amertranz's internally generated cash flow has not been sufficient to
finance trade receivables and business expansion, or to support operations. In
addition, Amertranz obtained external financing later than assumed in its
operating plans. As a result, Amertranz experienced severe working capital
shortfalls which restricted its ability to conduct its business as anticipated.
Although the Company believes that funds raised in the Offering, cash flows
generated from operations and available funds under its existing loan facilities
will be sufficient to finance its operations and obligations through June 1997,
there can be no assurance that the Company will not require additional funding
prior to such date. Furthermore, Amertranz's auditors have included an
explanatory paragraph in their audit opinion with respect to Amertranz's 1995
financial statements which reflects substantial doubt
18
<PAGE>
about Amertranz's ability to continue as a going concern due to its need to
generate cash from operations and to obtain additional financing. There can be
no assurance that the future financial statements of the Company (as the
consolidation of the freight forwarding businesses of CAS and Amertranz) will
not include a similar explanatory paragraph if the Company is unable to raise
sufficient funds to cover the cost of its operations. The factors leading to,
and the existence of, the explanatory paragraph may adversely affect the
Company's relationship with customers and suppliers, its ability to generate
revenues and its ability to obtain financing.
Amertranz has met its capital requirements to date primarily through the
private sales of $2.775 million of equity and debt securities in the February
Bridge Financing, private sales of $1.2 million of equity and debt securities in
the May Bridge Financing, private sales of $350,000 of equity and debt
securities in the Interim Financing, private sales of $1,379,110 of equity and
debt securities to insiders, borrowings of $800,000 from TIA and borrowings
under an accounts receivable financing facility (see below). In addition, CAS
may borrow up to $4,000,000 from TIA and CFS under a revolving credit facility
(see below). At April 30, 1996, the aggregate principal balance outstanding
under all such borrowings was approximately $10,323,000.
Fidelity Facility. In March 1995, Amertranz entered into an accounts
receivable Purchase and Sale Agreement ('Fidelity Facility') with Fidelity
Funding of California, Inc. ('Fidelity'), as amended July 5, 1995, October 25,
1995, and February 7, 1996. The Fidelity Facility expires in March 1997. Under
the agreement, as amended, the Company can borrow the lesser of $3.125 million
or 75% of eligible accounts receivable. Amertranz's borrowings under the
Fidelity Facility are secured by a first lien on all of Amertranz's assets and
are guaranteed by the Company. At February 7, 1996, the Company had outstanding
borrowings of approximately $1,698,000 under the Fidelity Facility which
represented the full amount available thereunder.
TIA Loan. In October 1995, Amertranz obtained a $500,000 subordinated
secured loan from TIA, which was increased to $800,000 in January 1996 ('TIA
Loan'). The TIA Loan bears interest at the rate of 12% per annum and is
repayable in 12 equal, consecutive monthly payments of principal and interest
commencing 30 days after the closing of the Offering. However, TIA has agreed
that, upon consummation of the Offering, repayment of the TIA Loan will be
deferred as described below. The TIA Loan is secured by a lien on all of the
assets of Amertranz subordinated only to the lien granted to Fidelity in
connection with the Fidelity Facility.
Revolver Note. As part of the Combination, TIA and CFS agreed to advance
to CAS, on a revolving loan basis, the net collections of the accounts
receivable of TIA and CFS as of February 7, 1996 and additional amounts in the
discretion of TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding
at any time, pursuant to the terms of a Revolving Credit Promissory Note
('Revolver Note'). Funds advanced under the Revolver Note with respect to the
TIA and CFS accounts receivable do not bear interest prior to maturity.
Discretionary advances under the Revolver Note bear interest at the greater of
(i) 1% per month, or (ii) a fluctuating rate equal to the prime rate of interest
as published in The Wall Street Journal, plus 4%. Advances under the Revolver
Note may be used only for ordinary, current operating expenses of CAS unless TIA
and CFS consent to another use of such funds. The Revolver Note matures on July
6, 1996; however, TIA and CFS have agreed that, upon consummation of the
Offering, payment of the Revolver Note will be deferred as described below. All
obligations under the Revolver Note are guaranteed by the Company and Amertranz.
All obligations under the Revolver Note and the guarantees thereof are secured
by a first priority lien on all of the issued and outstanding shares of CAS, a
first priority lien on all of the assets of the Company and CAS, and a lien on
the accounts receivable of Amertranz, subordinate only to the first priority
lien granted to Fidelity in connection with the Fidelity Facility and the second
position lien granted to TIA in connection with the TIA Loan. As of March 31,
1996, the Company had outstanding borrowings of approximately $3,491,000 under
the Revolver Note.
Exchange Note. In the Combination, TIA and CFS transferred their freight
forwarding business to the Company. In consideration of such transfer, the
Company issued to TIA and CFS the Exchange Note in the original principal amount
of $10,000,000, which bears interest at the rate of 8% per annum, and an
aggregate of 2,100,000 shares of Common Stock. The Exchange Note is payable in
five consecutive monthly payments of principal and interest in the amount of
$80,000 each, commencing March 1, 1996, and, thereafter, monthly payments of
principal and interest in the amount of $166,667 each until the Exchange Note
has been paid in full. Of the proceeds of the Offering, $2,000,000 will be used
to repay a portion of the Exchange Note. Immediately prior to the consummation
of the Offering, TIA and CFS exchanged $2,000,000 principal amount of the
Exchange Note for 200,000 shares of the
19
<PAGE>
Company's Class A Preferred Stock. TIA and CFS have agreed that, upon
consummation of the Offering and the payment of the $2,000,000 from the proceeds
of the Offering, the balance of payments on the Exchange Note will be deferred
as described below. See 'Description of Securities--Preferred Stock'.
Forbearance by TIA and CFS. Upon consummation of the Offering, the
outstanding principal balances of the TIA Loan, the Exchange Note, and the
Revolver Note will be $800,000, $6,000,000, and approximately $4,000,000,
respectively, plus accrued interest thereon. All such obligations are secured by
virtually all of the assets of the Company, Amertranz and CAS. Under the terms
of these respective obligations, payments on the TIA Loan are to begin 30 days
following consummation of the Offering, payments on the Exchange Note were due
on March 1, 1996, April 1, 1996, May 1, 1996 and June 1, 1996, and additional
payments are due monthly thereafter, and the full outstanding balance of the
Revolver Note is due on July 6, 1996. TIA and CFS have agreed that, upon
consummation of the Offering, they will defer each payment on the TIA Loan and
the Exchange Note to the extent the aggregate of the payments thereon then due
exceeds 80% of the Company's earnings before interest, taxes, depreciation and
amortization ('EBITDA') for the month in respect of which such aggregate
payments are due. During any deferral period, interest will continue to accrue
on these obligations in accordance with their respective terms. Such deferral
will continue until the earlier of (i) the date after which the Company's EBITDA
exceeds the sum of $600,000 for any two consecutive month period, or (ii)
November 1, 1996. Furthermore, TIA and CFS have agreed that, upon consummation
of the Offering, they will defer collection of amounts due under the Revolver
Note until the earlier of (i) refinancing of Amertranz's and CAS's accounts
receivable working capital facilities, or (ii) December 31, 1996. TIA and CFS
have further agreed that, upon consummation of the Offering, they will not take
any action to foreclose on their security interests in the assets of the
Company, Amertranz or CAS until one year following the date of this Prospectus,
unless any other secured creditor of the Company, Amertranz or CAS takes action
to foreclose on its security interest or any creditor obtains a final judgement
against the Company, Amertranz or CAS in an amount of $50,000 or more which
judgement is not stayed.
Insider Loans. Between June 1995 and January 1996, Amertranz borrowed
$1,379,110 in net aggregate principal amount from persons affiliated with
Amertranz, and issued (i) $1,096,610 in net aggregate principal amount of
promissory notes which bear interest at the rate of 7% per annum, due June 30,
1996, and (ii) $282,500 in aggregate principal amount of promissory notes with
interest at the rate of 9.75% per annum, due August 15, 1996. In addition,
certain of these lenders received an aggregate of 3,135,000 options to purchase
shares of Amertranz common stock, some of which options were exercised prior to
the Combination at $.50 per share. As part of the transactions under the
Exchange Agreement, the holders of all of these promissory notes assigned to the
Company their notes and the shares of Amertranz common stock which were issued
upon the exercise of such options, in exchange for an aggregate of 296,669
shares of Common Stock, and the holders of unexercised Amertranz options
exchanged such options for an aggregate of 187,809 options to purchase shares of
the Company's Common Stock. See 'Certain Transactions' and 'Principal
Stockholders'.
Interim Financing. Between November 1995 and January 1996, Amertranz
obtained the Interim Financing and issued $350,000 in aggregate principal amount
of promissory notes ('Interim Notes') and the Interim Financing Shares.
Repayment of the principal amount of the Interim Notes, together with interest
at the rate of 12% per annum, is due upon the earlier to occur of (i) the
closing of the Offering, (ii) February 7, 1998, or (iii) a sale or merger of the
Company. All amounts due under the Interim Notes will be repaid from the
proceeds of the Offering. See 'Use of Proceeds' and 'Selling Securityholders and
Plan of Distribution'.
Bridge Financings. In February 1996, in connection with the February
Bridge Financing, the Company issued an aggregate of $2.775 million in principal
amount of its secured promissory notes ('February Bridge Notes'), 416,250 Bridge
Shares, and Bridge Warrants to purchase an aggregate of 832,500 shares of the
Company's Common Stock at an exercise price of $5.00 per share. The February
Bridge Notes bear interest at a rate of 10% per annum through April 30, 1996,
and thereafter at a rate of 15% per annum. In May 1996, in connection with the
May Bridge Financing, the Company issued an aggregate of $1.2 million in
principal amount of its secured promissory notes ('May Bridge Notes'), 240,000
Bridge Shares, and Bridge Warrants to purchase an aggregate of 480,000 shares of
the Company's Common Stock at an exercise price of $5.00 per share. The May
Bridge Notes bear interest at a rate of 15% per annum.
20
<PAGE>
Upon consummation of the Offering, the terms of the Bridge Warrants issued
in the Bridge Financings will be identical to the terms of the Warrants being
issued in the Offering. The Bridge Warrants are being registered by the Company
on behalf of the Bridge Holders in the Registration Statement of which this
Prospectus forms a part. All amounts due under the Bridge Notes will be repaid
out of the proceeds of the Offering. The Underwriter acted as Placement Agent
for the February Bridge Financing and received as compensation therefor 10% of
the aggregate proceeds and a nonaccountable expense allowance of 3% of the
aggregate proceeds therefrom. The Underwriter acted as Placement Agent for
$500,000 of the May Bridge Financing and received $50,000 as a commission and
nonaccountable expense allowance. The Company also agreed to pay certain costs
incurred in connection with the Bridge Financings and to indemnify the
Underwriter against certain liabilities in connection therewith. See 'Use of
Proceeds' and 'Selling Securityholders and Plan of Distribution'.
Working Capital Requirements. The Company may require additional working
capital from additional bank borrowings or through additional debt or equity
financings. The senior liens on the Company's assets granted pursuant to the
Fidelity Facility, TIA Loan, Revolver Note, and Exchange Note limit the
Company's flexibility in obtaining additional financing. The Amertranz business
historically has not generated cash flows from operations. However, the Company
believes that funds raised in the Offering, cash flows generated from operations
and available funds under its existing loan facilities will be sufficient to
finance its operations and obligations through June 1997. The Company's actual
working capital needs will depend upon numerous factors, including the Company's
operating results, the cost of increasing the Company's sales and marketing
activities, changes in law which affect doing business in Puerto Rico and
competition, none of which can be predicted with certainty. The Company
anticipates that it will experience periods of significant negative cash flow
through September 1996 as a result of the Company's planned growth in business.
As a result, there can be no assurance that the Company will not require
additional funding prior to June 1997. In addition, in the event the Company
requires additional funding before or after June 1997, there can be no assurance
that such additional financing will be available to the Company on acceptable
terms, if at all, when required by the Company. The inability to obtain such
financing would have a material adverse effect on the Company's operating
results and, as a result, the Company could be required to significantly reduce
or suspend its operations, seek a merger partner or sell additional securities
on terms that could be highly dilutive to investors in the Offering.
INFLATION
The Company does not believe that the relatively moderate rates of
inflation in the United States in recent years have had a significant effect on
its operations.
21
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company, through its wholly owned subsidiaries, Amertranz and CAS, is a
provider of freight forwarding services, and believes that it is one of the
dominant freight forwarders between the continental United States and Puerto
Rico. On a consolidated pro forma basis, the Company had 1995 operating revenues
of $62.2 million and incurred operating losses of $3.1 million.
The Company's freight forwarding services involve arranging for the total
transport of customers' freight from the shippers' locations to the designated
recipients, including the preparation of shipping documents and the providing of
handling, packing and containerization services. The Company concentrates on
cargo shipments weighing more than 50 pounds and generally requiring second-day
delivery. The Company also assembles bulk cargo and arranges for insurance. The
Company has a network of offices in 25 cities throughout the United States and
Puerto Rico, including exclusive agency relationships in two cities. The Company
has international freight forwarding operations consisting of strategic
relationships in five countries. The Company has recently begun to provide
logistics services to manufacturers for the movement of raw materials and
finished goods.
The Company's objective is to become a leading provider of second-day
domestic freight forwarding services in all of its markets. Since the
Combination, the Company has attracted and hired additional experienced sales
personnel thereby increasing its sales team by more than 30%. Its strategy is to
maximize the synergies created by the combination of its Amertranz and CAS
businesses by (i) exploiting cross-selling opportunities, and (ii) taking
advantage of underutilized administrative operations and purchased freight
space. The Company also intends to maximize its use of its subsidiaries'
existing trucking networks to minimize its reliance on more expensive air
freight carriers.
The Company's freight forwarding services are generally divided among
overnight, second-day and three- to five-day deferred service. Overnight service
typically consists of delivering time-sensitive freight, such as critical
pharmaceutical and just-in-time manufacturing goods. Second-day and deferred
service is provided on a recurring and often daily basis to many types of
shippers, including pharmaceutical, manufacturing and other retail suppliers
and, through its Fashion Air division, the garment industry.
The Company strives to provide customized service so that each client's
individual shipping needs are met. Once the requirements of an individual
shipment have been established, the Company actively manages the execution of
the delivery to perform within the customer's requirements. In this way, the
Company seeks to achieve maximum customer satisfaction, which will enable it to
maintain and grow its customer base.
The Company has more than 2,000 customers, although its top 20 customers
accounted for approximately 55% of revenues (on a consolidated pro forma basis)
for the fiscal year ended December 31, 1995. CAS has more than 200 customers
that are not customers of Amertranz's domestic freight forwarding operation.
Consistent with its strategy, the Company intends to actively market Amertranz's
services to these customers.
COMPANY STRATEGY
Prior to the Combination, Amertranz had rapidly increased the number of its
offices and the size of its operations staff. As a result, the Company now has
excess operations and administrative infrastructure, so that with only slight
increases in operating expenses, the Company can generate additional revenues
and profitability.
The Company's objective is to become a leading provider of second-day
freight forwarding services in all of its domestic markets. The Company's
strategy is to increase revenues and market share by expanding its service
locations through a combination of dedicated offices and lower-cost agency
relationships. Specifically, the Company plans to accomplish these objectives
by:
o Continuing to increase its existing direct sales force to increase sales
and exploit cross-selling opportunities.
o Capitalizing on synergies created by the combination of Amertranz and CAS
to take maximum advantage of underutilized operations infrastructure and
purchased freight space.
o Maximizing the advantage of the Company's dominant market position in the
Puerto Rico market to increase its domestic freight forwarding revenues.
The Company intends to cross-utilize its existing Puerto Rico sales force
to gain market share for its mainland United States freight forwarding
operation.
22
<PAGE>
o Expanding the use of the existing trucking network to minimize the use of
higher cost air transport.
o Continuing to emphasize customized freight forwarding service.
o Enhancing data processing and management information systems.
o Expanding the Company's United States and international network by
acquisition, office expansion and exclusive agency arrangements. The
Company intends to aggressively seek to acquire privately owned freight
forwarders by the issuance of stock, for cash, or a combination of both,
utilizing its potentially higher market valuation as a publicly traded
company.
o Developing international freight forwarding. In addition to shipping
freight from the United States to foreign destinations, the Company will
seek strategic alliances with foreign freight forwarders. Due to recent
consolidations in the United States freight forwarding industry, which
have reduced the number of freight forwarders of the Company's size and
market penetration, foreign freight forwarders are seeking strategic
partners in the United States.
o Expanding the Company's logistics services.
INDUSTRY OVERVIEW
As requirements for efficient and cost effective distribution services have
increased, so has the importance and complexity of effectively managed freight
movement. Businesses increasingly strive to reduce costs and increase profits by
minimizing inventory levels, performing manufacturing and assembly operations in
different locations and distributing their product to numerous locations. As a
result, companies frequently require expedited or time specific delivery
services. Time-sensitive shipments are required to be delivered within a
definite time frame, but not as quickly as expedited shipments, which may result
in lower rates for time-sensitive shipments than those usually generated by
expedited shipments. To assist in meeting their needs in the most efficient
method and at the lowest cost, many companies utilize freight forwarders. A
freight forwarder obtains shipments from customers, makes arrangements for
transportation of the cargo by air, land or sea carrier, and may be required to
arrange for both pick-up from the shipper to the carrier and delivery of the
shipment from the carrier to the consignee.
Companies generally have two principal alternatives to transport freight
which require either expedited or time specific handling: they may use a freight
forwarder or an integrated carrier. Freight forwarders arrange for movement to
the freight's final destination, often scheduling and routing each shipment to
meet price and service requirements of the customer. Fully integrated carriers
provide pick-up and delivery services, primarily through their own dedicated
fleets of trucks and aircraft. Freight forwarders select from various
transportation options available to meet the customer's requirements and,
therefore, are often able to provide service to their customers less expensively
and with greater flexibility than integrated carriers. In addition to high fixed
expenses associated with owning and maintaining fleets of aircraft, trucks and
related equipment, integrated carriers, which operate primarily through central
hubs, have significant restrictions on delivery schedules and shipment weight,
size and type. Freight forwarders generally handle shipments of any size and can
offer customized shipping options, providing an attractive alternative for
shippers of freight.
According to a survey by Colography Inc., a consulting firm to the air
freight industry, domestic air freight transportation revenues totaled $20.4
billion in 1994, which represented a 13.6% increase over 1993 levels, and $16
billion through the first three quarters of 1995, which represented a 7.2%
increase over the same period in 1994. Of these revenues, $15.6 billion in 1994
and $12.4 billion during the first three quarters of 1995 were attributable to
integrated carriers, most of which were small parcel shipments, while $4.8
billion in 1994 and $3.6 billion during the first three quarters of 1995 were
attributable to non-integrated carriers, including freight forwarders.
The domestic freight forwarding industry is made up of many different types
of operations. Most freight forwarders are small, private enterprises
specializing in specific areas of the United States. Therefore, many of these
companies are able to fulfill only part of a customer's transportation needs.
Some of the larger domestic air freight forwarders with a nationwide presence,
such as Pilot Air Freight, Inc., Seko Air Freight and Associated Air Freight,
rely on networks of offices, some of which they own and operate but the majority
of which are operated by franchisees or agents.
23
<PAGE>
Increasingly, many manufacturing and other customers require services in
addition to the actual movement of freight. These services include providing
information on the status of shipments throughout a manufacturing process,
including providing proof of delivery and performance reports. The growth of the
'just-in-time' manufacturing practice and the desire of retailers to reduce
inventories have also added to the demand for expedited and second-day shipment
of goods that are available through air freight. As a result of these needs and
the variety of methods for shipping goods, many companies are finding that they
cannot perform the freight transportation management functions as efficiently as
third-party providers specializing in this business, and are therefore relying
on partial or total outsourcing of these functions. Furthermore, due to
corporate downsizing and efforts to enhance productivity, major shippers are
seeking to utilize fewer firms to handle their transportation needs. The Company
believes that the trend toward outsourcing will continue and that customer
demands for additional services will offer significant opportunities to those
forwarders with an infrastructure able to fulfill the increased requirements.
COMPANY OPERATIONS
MOVEMENT OF FREIGHT
The Company does not own any airplanes or significant trucking equipment
and relies on independent contractors for the movement of its cargo. The Company
utilizes its expertise to provide forwarding services that are tailored to meet
customers' requirements. It arranges for transportation of customers' shipments
via commercial airlines and/or air cargo carriers and, if delivery schedules
permit, the Company makes use of lower cost inter-city truck transportation
services. The Company selects the carrier for a particular shipment on the basis
of cost, delivery time and available cargo capacity. Through the Company's
advanced data processing systems, it can provide, at no additional cost to the
customer, value-added services such as electronic data interchange, computer
based shipping and tracking systems and customized computer generated reports.
Additionally, the Company provides cargo assembly and warehousing services.
In the year ended December 31, 1995, the Company (on a consolidated pro
forma basis) moved approximately 150,000 shipments at an average weight per
shipment of approximately 850 pounds, ranging in size from small packages of
documents to 20,000 pound jet engines. Although there are no weight restrictions
on the shipments, the Company generally focuses on shipments weighing more than
50 pounds. As a result, the Company does not directly compete for most of its
business with overnight courier or small parcel companies, such as UPS and
Federal Express. Those companies use their own airplane fleets, which are
sometimes utilized by the Company as a source of cargo space for the Company's
freight forwarding operations.
The rates charged by the Company to its customers are based on destination,
shipment weight and required delivery time. The Company offers graduated
discounts for shipments with later scheduled delivery times and rates generally
decrease in inverse proportion to the increasing weight of shipments. Due to the
high volume of freight controlled by the Company, it is able to obtain favorable
contract rates from airlines and is often able to book freight space at times
when available space is limited. When possible, the Company consolidates
different customers' shipments to reduce its cost of transportation.
Under the terms of a Cargo Aircraft Charter Agreement dated February 28,
1994, as amended ('L-1011 Charter'), the Company has exclusive rights, until
March 1, 1998, to the use of a Lockheed L-1011 cargo aircraft that is operated
on behalf of Tradewinds Airlines, Inc. between the Company's Borinquen, Puerto
Rico location and its Greensboro, North Carolina and Hartford, Connecticut,
locations. The L-1011 aircraft carries a payload of 110,000 pounds. Under the
terms of the L-1011 Charter, the L-1011 aircraft must be available at all times
(except during scheduled maintenance) for use by the Company, as needed. While
the Company is guaranteed the use of the L-1011 aircraft as needed, the Company
pays only for its actual use of the aircraft at market rates. Freight
originating throughout the United States is generally transported by truck to
either Greensboro or Hartford for loading onto the aircraft. Similarly, freight
originating in Puerto Rico is flown on the L-1011 aircraft to either Greensboro
or Hartford, and then transported by truck to its destination. See 'Historical
Background' and 'Certain Transactions'.
INFORMATION SYSTEMS
An important component of the Company's business strategy is to provide
accurate and timely information to its management and customers. Accordingly,
the Company has invested, and will continue to invest, substantial management
and financial resources in developing these information systems.
24
<PAGE>
The Company has recently leased an IBM AS400 mainframe computer and
installed a new customized commercial (i.e., not proprietary to the Company)
freight forwarding software system which the Company has named 'Amertrax'.
Amertrax is an integrated freight forwarding and financial management data
processing system. It provides the Company with the information needed to manage
its sourcing and distribution activities by providing up-to-date information on
the status of shipments, both internally and to customers, through either
printed or electronic medium. Specifically, the Amertrax system permits the
Company to track the flow of a particular shipment from the point of origin
through the transportation process to the point of delivery. The Company intends
to continuously upgrade the Amertrax system to enhance its ability to maintain a
competitive advantage. The Company believes that this will allow it and its
customers to reduce transportation costs through the automation of many parts of
the shipping process. For example, the Company expects shortly to offer
customers the ability to receive shipping invoices electronically. This will
reduce the Company's cost of issuing invoices and the customer's cost of
processing these invoices and will reduce the time required for transmittal.
INTERNATIONAL OPERATIONS
The Company has recently reduced its international operations to re-focus
its efforts on its domestic markets. The Company's international freight
forwarding accounted for less than 4% of the Company's operating revenue during
the six months ended December 31, 1995. The Company has exclusive agents in
European countries, South Africa, and countries in South America.
LOGISTICS SERVICES
The Company, through its Amertranz Logistics, Inc. subsidiary, recently
began offering logistic services to large manufacturing companies. These
services consist of providing the total transportation requirements for a
customer, including shipment in and out of warehouse, maintenance of warehousing
of customer inventory, individual order organizing for shipment and order
packing and shipment. The Company currently provides these services to a large
computer hardware manufacturer. To properly provide its logistics services to
this customer, the Company has leased a warehouse adjacent to this customer's
manufacturing complex dedicated to the customer and its suppliers. While the
Company's logistics service is not currently a major component of the Company's
business, the Company intends to increase this portion of its business.
CUSTOMERS AND MARKETING
The Company's principal customers include large manufacturers and
distributors of pharmaceuticals, computers and other electronic and
high-technology equipment, computer software and wearing apparel. The Company
currently has more than 2,000 accounts, although its top 20 customers accounted
for approximately 55% of operating revenues for the year ended December 31,
1995.
The Company markets its services through an organization of approximately
30 full-time salespersons supported by the sales efforts of senior management,
the Company's five regional managers and the operations staff in the Company's
offices. The Company strongly promotes team selling, wherein the salesperson is
able to utilize expertise from other departments in the Company to provide
value-added services to gain a specific account. The Company has a national
sales account group that targets high-revenue national accounts with multiple
shipping locations. These industry specialists discern the specific freight
transportation requirements of the customer and are able to prepare customized
shipping programs to meet these specific requirements. The Company staffs each
office with operational employees to provide support for the sales team, develop
frequent contact with the customer's traffic department, and maintain customer
service. The Company believes that it is important to maintain frequent contact
with its customers to assure satisfaction and to immediately react to resolve
any problem as quickly as possible.
The Company has a specialized Fashion Air division for the garment
industry. This division targets customers from manufacturers to retail
establishments and provides specific expertise in handling fashion-related
shipments. Fashion Air specializes in the movement of wearing apparel for
manufacturing customers to their department store customers located throughout
the United States. This division accounted for approximately 8% of the Company's
operating revenues (on a combined consolidated pro forma basis) in 1995.
Many of the Company's customers utilize more than one air freight
transportation provider. In soliciting new accounts, the Company uses a strategy
of becoming an approved carrier in order to demonstrate the quality and
cost-effectiveness of its services. Using this approach, the Company has
advanced its relationships with several of its major customers, from serving as
a back-up freight service provider to primary freight forwarder.
25
<PAGE>
FACILITIES
The Company leases terminal facilities consisting of office and warehouse
space in 23 cities located in the United States and Puerto Rico, and also
utilizes two offices operated by exclusive agents. The Company's headquarters
are located in Lake Success, New York, in 7,000 square feet of leased office
space. The Company's 23 facilities range in size from 1,000 square feet to
26,000 square feet and consist of offices and warehouses with loading bays. All
of such properties are leased from third parties. In addition, the Company
leases approximately 25,000 square feet of warehouse space in Fort Worth, Texas,
for its logistics services business.
As of May 31, 1996, the Company's 23 terminal facilities and two exclusive
agency offices were maintained in the following locations:
<TABLE>
<S> <C>
Atlanta, Georgia Houston, Texas
Borinquen, Puerto Rico Kansas City, Missouri
*Boston, Massachusetts Los Angeles, California
Chicago, Illinois Miami, Florida
Cincinnati, Ohio Minneapolis, Minnesota
Cleveland, Ohio Newark, New Jersey
Dallas, Texas New York, New York
Denver, Colorado Philadelphia, Pennsylvania
Detroit, Michigan *Salt Lake City, Utah
Fort Worth, Texas San Diego, California
Greensboro, North Carolina San Francisco, California
Hartford, Connecticut San Juan, Puerto Rico
St. Louis, Missouri
</TABLE>
- ------------------
*Exclusive Agent Location
COMPETITION
Although there are no weight restrictions on the Company's shipments, the
Company focuses primarily on cargo shipments weighing more than 50 pounds and
requiring second-day delivery. As a result, the Company does not directly
compete for most of its business with overnight couriers and integrated shippers
of principally small parcels, such as United Parcel Service of America, Inc.,
Federal Express Corporation, DHL Worldwide Express, Inc., Airborne Freight
Corporation and the United States Postal Service. However, some integrated
carriers, such as Emery Air Freight Corporation and Burlington Air Express,
Inc., primarily solicit the shipment of heavy cargo in competition with
forwarders. Most air freight forwarders do not compete with the major commercial
airlines, which to a certain extent depend on forwarders to procure shipments
and supply freight for the available cargo space on their scheduled flights.
There is intense competition within the freight forwarding industry. While
the industry is highly fragmented, the Company most often competes with a
relatively small number of forwarders who have nationwide networks and the
capability to provide a full range of service similar to that offered by the
Company. These include Eagle USA Air Freight, Inc., Pilot Air Freight, Inc., and
LEP Profit International, Inc. There is also competition from passenger and
cargo air carriers and trucking companies. On the international side of the
business, the Company competes with forwarders that have a predominantly
international focus, such as Fritz Companies, Inc., Air Express International
Corporation and Harper Group, Inc. All of these companies, as well as many other
competitors of the Company, have substantially greater financial resources than
the Company. The Company also faces competition from regional and local air
freight forwarders, cargo sales agents and brokers, surface freight forwarders
and carriers and associations of shippers organized for the purpose of
consolidating their members' shipments to obtain lower freight rates from
carriers.
While the Company's logistics service is not currently a major component of
the Company's business, the Company intends to increase this portion of its
business. In logistics services, the Company competes with many well established
transportation and other firms, many of whom have facilities, resources, and
financial capabilities far greater than those of the Company.
26
<PAGE>
REGULATION
The Company's freight forwarding business as an indirect air cargo carrier
is subject to regulation by the DOT under the Federal Aviation Act. However, air
freight forwarders (including the Company) are exempted from most of such Act's
requirements by the Economic Aviation Regulations promulgated thereunder. The
Company's foreign air freight forwarding operations are subject to regulation by
the regulatory authorities of the respective foreign jurisdictions. The air
freight forwarding industry is subject to regulatory and legislative changes
which can affect the economics of the industry by requiring changes in operating
practices or influencing the demand for, and the costs of providing, services to
customers.
LEGAL PROCEEDINGS
Amertranz is a defendant in a lawsuit initiated by the trustee in
bankruptcy of Aeronautics Express, Inc., a company with whom Amertranz engaged
in discussions concerning a prospective business combination during the early
spring of 1994. The complaint was filed in the United States Bankruptcy Court
for the Southern District of New York in December 1995, and seeks damages in
excess of $11 million for various alleged causes of action. In February 1996,
the plaintiff in this action offered to settle the litigation for $125,000,
which offer was rejected by the Company. The Company's bankruptcy litigation
counsel has filed a motion to dismiss the complaint in its entirety. Management
believes that the lawsuit is substantially without merit and the probability of
any material loss is extremely small. Nevertheless, the Company will be
obligated to expend funds and management time and attention which are needed
elsewhere but which must be diverted to finance legal costs and provide
information requested to conduct a vigorous defense. Additionally, there can be
no assurance that either the cost of defense or the ultimate outcome of the
lawsuit will not result in substantial financial cost to the Company which will
have a material adverse effect on the Company's operating results.
The Company is periodically named as a party to routine litigation
incidental to its business, primarily involving claims for personal injury or
property damage incurred in the transportation of freight. As a freight
forwarder the Company assumes responsibility to its customers for the safe
delivery of the cargo, subject to a legal limitation on liability. Other
carriers of the Company's shipments are liable to the Company in the same manner
as the Company is liable to its customers. The Company maintains insurance in
amounts which management believes are customary for the industry and has a
deductible of $1,000 per occurrence for liability resulting from physical damage
claims.
EMPLOYEES
The Company and its subsidiaries had approximately 270 full-time employees
as of March 25, 1996. None of the Company's employees are currently covered by a
collective bargaining agreement. The Company has experienced no work stoppages
and considers its relations with its employees to be good.
27
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors, executive officers, and other significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Stuart Hettleman....................... 45 Director, President, Chief Executive Officer, Chief
Financial Officer
Richard A. Faieta...................... 50 Director, Executive Vice President; President of CAS;
Chief Executive Officer of Amertranz
Michael Barsa.......................... 51 Director, Vice President, Secretary
Bruce Brandi........................... 44 President of Amertranz
</TABLE>
STUART HETTLEMAN has been President, Chief Executive Officer, Chief
Financial Officer and a director of the Company and a director and Executive
Vice President of each of Amertranz and CAS, since February 7, 1996. He has been
a Vice President of TIA since 1990 and is currently the Executive Vice President
of TIA and has been Executive Vice President of CFS since 1991. Since the
Combination, the principal business activity of TIA and CFS is as a holding
company. Consequently, Mr. Hettleman's duties for TIA and CFS do not and will
not affect his duties on behalf of the Company.
RICHARD A. FAIETA has been Executive Vice President and a director of the
Company, a director and President of CAS, and a director and Chief Executive
Officer of Amertranz, since February 7, 1996. He has served as President and
Chief Executive Officer of each of TIA and CFS since April 1992. From 1987
through 1991 he served as Vice President-Operations of LEP Profit International
Corporation, a domestic and international freight forwarder and subsidiary of a
corporation the stock of which is traded on the London (U.K.) Stock Exchange.
Since the Combination, the principal business activity of TIA and CFS is as a
holding company. Consequently, Mr. Faieta's duties for TIA and CFS do not and
will not affect his duties on behalf of the Company.
MICHAEL BARSA has been Vice President, Secretary and a director of the
Company since February 7, 1996. Mr. Barsa served as Executive Vice President and
Chief Financial Officer of Amertranz from September 1994 until February 7, 1996.
From 1972 through September 1994, Mr. Barsa was employed by Allstate Legal
Supply Company, a privately owned legal stationary and supply company, where he
held successive positions as Controller, Chief Financial Officer and Senior Vice
President.
BRUCE BRANDI has been President of Amertranz since October 1994. From 1978
through October 1994, Mr. Brandi was employed by LEP Profit International
Corporation in various operations, sales, and marketing capacities, most
recently as Executive Vice President of Sales and Marketing.
The Company will maintain 'key person' life insurance policies in the
amount of $1 million on the lives of each of Messrs. Hettleman and Faieta.
The Company's executive officers are appointed annually by, and serve at
the discretion of, the Board of Directors. All directors are elected by the
Company's stockholders and hold office until the next annual meeting of
stockholders or until their successors have been duly elected and qualified.
Pursuant to the terms of the Assets Exchange Agreement entered into as part of
the February 1996 Combination ('Exchange Agreement'), the Company's stockholders
who are parties to the Exchange Agreement have granted a proxy to
representatives of TIA and CFS to vote the 580,370 shares of the Company's
Common Stock owned by such stockholders for the election of two directors
designated by TIA and CFS. TIA and CFS have designated Messrs. Hettleman and
Faieta to serve as directors and for whom all such shares have been voted.
The Company intends to invite an additional person to serve as an outside
director in the near future. The Underwriter is entitled to designate one member
for election to the Board of Directors, but has not yet selected a designee and
the Underwriter may designate different individuals to serve in this capacity
from time to time. See 'Underwriting'.
The Board of Directors will have a Compensation Committee to determine the
salaries and incentive compensation of the Company's executive officers. It is
anticipated that this committee will be composed of
28
<PAGE>
Messrs. Hettleman and Faieta and an outside director to be selected. The Company
intends to appoint an Audit Committee to consist of Mr. Hettleman, Mr. Barsa and
an outside director, and a Stock Option Committee to consist of Messrs Hettleman
and Faieta. There is currently no plan to compensate any outside director for
attendence at meetings.
There are no family relationships among any of the Executive Officers and
directors of the Company. See 'Principal Stockholders'.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
by the Company and its predecessors during the year ended December 31, 1995 to
the Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (collectively, the 'Named Officers').
Information with respect to options gives effect to adjustments made as part of
the Combination. See 'Certain Transactions':
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NUMBER
NAME AND PRINCIPAL POSITION SALARY OF OPTIONS
- --------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Stuart Hettleman
Chief Executive Officer of the Company(1)................................ $ -- --
Richard A. Faieta
Executive Vice President of the Company(1)............................... 132,400 --
Martin Hoffenberg
Former Chief Executive Officer of Amertranz(2)........................... 198,000 --
Michael Barsa
Former Chief Financial Officer of Amertranz(1)........................... 150,000 154,477
Bruce Brandi
President of Amertranz(1)................................................ 150,000 42,590
Philip S. Rosso, Jr.
Senior Vice President Operations of Amertranz............................ 198,000 --
S. Gary Friedman(3)
Former President, Fashion Air Division of Amertranz...................... 147,600 --
</TABLE>
- ------------------
(1) See 'Employment Agreements; Covenants Not-To-Compete', below.
(2) Mr. Hoffenberg resigned as an officer and director and terminated his
employment agreement with Amertranz, effective February 7, 1996. He has
entered into a six month consulting agreement with the Company.
(3) Mr. Friedman resigned as an employee effective October 20, 1995.
EMPLOYMENT AGREEMENTS; COVENANTS NOT-TO-COMPETE
Stuart Hettleman and Richard A. Faieta each entered into an employment
agreement with the Company effective upon the consummation of the Offering. Each
such employment agreement provides that the respective officer is employed for a
period of three years, at an annual salary of $130,000 for Mr. Hettleman and
$150,000 for Mr. Faieta. The respective employment agreements provide that if
the employee resigns voluntarily or is discharged for cause he may not solicit,
directly or indirectly, any existing customer or employee of the Company for a
period of two years. If the Company terminates either such officer's employment
for any other reason, it may enforce these restrictions if it continues to pay
his salary.
Pursuant to the terms of an Employment Agreement dated September 26, 1994,
as amended February 7, 1996, Bruce Brandi is employed by Amertranz for a term of
three years commencing October 10, 1994. The employment agreement provides for
an annual salary of $150,000, with an increase of $7,500 on the second
anniversary date. During 1995, Mr. Brandi deferred $30,250 of his salary which
amount will be paid by February 1999. The employment agreement provides that if
Mr. Brandi is discharged for cause he may not solicit, directly or indirectly,
any existing customer or employee of the Company for a period of two years. If
the Company
29
<PAGE>
terminates Mr. Brandi's employment for any other reason, it may enforce these
restrictions if it continues to pay his salary.
Messrs. Barsa and Rosso have signed agreements which provide that upon
termination of their employment they will not solicit any employees of the
Company for a period of one year and also will not solicit any existing customer
for a period of 90 days.
Pursuant to his consulting agreement with the Company, Mr. Hoffenberg has
agreed not to engage in any business which is in competition with the Company
nor to solicit any employee or customer of the Company, for a period of one year
after the termination of the agreement.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan ('Stock Option Plan') was adopted by
the Company's Board of Directors and approved by the stockholders in June 1996.
A total of 402,348 shares of Common Stock have been reserved for issuance under
the Stock Option Plan. Options may be granted under the Stock Option Plan to
employees, officers and directors of the Company and its subsidiaries. Prior to
the consummation of the Offering, options to purchase shares have been
granted under the Stock Option Plan.
The Stock Option Plan will be administered by the Stock Option Committee of
the Company's Board of Directors ('Options Committee'). The Options Committee
has the authority, within limitations as set forth in the Stock Option Plan, to
interpret the terms of the Stock Option Plan and establish rules and regulations
concerning the Stock Option Plan, to determine the persons to whom options may
be granted, the number of shares of Common Stock to be covered by each option,
and the terms and provisions of the option to be granted. In addition, the
Options Committee has the authority, subject to the terms of the Stock Option
Plan, to determine the appropriate adjustments in the terms of each outstanding
option in the event of a change in the Common Stock or the Company's capital
structure.
The President and Executive Vice President of the Company are eligible to
participate in the Stock Option Plan only to the extent of the automatic grants
provided in the Stock Option Plan. Each such officer has been automatically
granted an option ('Senior Executive Option') on June 3, 1996 (the 'Effective
Grant Date') to purchase shares of Common Stock. The Senior Executive
Option will vest over a period of three years, enabling each such officer to
purchase shares of Common Stock at any time within six months following
the end of each of the Company's fiscal years ending June 30, 1997, 1998 and
1999, if the Company's earnings before interest, taxes, depreciation and
amortization for such fiscal year exceeds $ , and if such officer is
then employed by the Company or one of its subsidiaries. The exercise price of
the Senior Executive Options is $6.00 per share. The Stock Option Plan provides
that the provisions relating to Senior Executive Options may not be amended more
than once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act (ERISA) or the rules
and regulations promulgated thereunder.
Options granted under the Stock Option Plan may be either incentive stock
options ('ISOs') within the meaning of Section 422 of the Internal Revenue Code,
or non-qualified stock options ('NQSOs'), as the Options Committee may
determine. The exercise price of an option will be fixed by the Options
Committee on the date of grant, except that (i) the exercise price of an ISO
granted to any individual who owns (directly or by attribution) shares of Common
Stock possessing more than 10% of the total combined voting power of all classes
of outstanding stock of the Company (a '10% Owner') must be at least equal to
110% of the fair market value of the Common Stock on the date of grant but in no
event less than $6.00 per share, and (ii) the exercise price of an ISO granted
to any individual other than a 10% Owner must be at least equal to the fair
market value of the Common Stock on the date of the grant but in no event less
than $6.00 per share. Any options granted must expire within ten years from the
date of grant (five years in the case of an ISO granted to a 10% Owner). Shares
subject to options granted under the Stock Option Plan which expire, terminate,
or are canceled without having been exercised in full become available again for
option grants. No options shall be granted under the Stock Option Plan more than
ten years after the adoption of the Stock Option Plan.
Options are exercisable by the holder subject to terms fixed by the Options
Committee. No option can be exercised until at least six months after the date
of grant. However, an option will be exercisable immediately upon the happening
of any of the following (but in no event during the six-month period following
the date of grant or subsequent to the expiration of the term of an option): (i)
the holder's retirement on or after attainment of age 65; (ii) the holder's
disability or death; or (iii) the occurrence of such special circumstances or
events as the
30
<PAGE>
Options Committee determines merits special consideration. Under the Stock
Option Plan, a holder generally may pay the exercise price in cash, by check, by
delivery to the Company of shares of Common Stock already owned by the holder
or, in certain circumstances, in shares issuable in connection with the options,
or by such other method as the Options Committee may permit from time to time.
Options granted under the Stock Option Plan will be non-transferable and
non-assignable; provided, however, that the estate of a deceased holder may
exercise any options held by the decedent. If an option holder terminates his
employment or consulting relationship with the Company or service as a director
of the Company while holding an unexercised option, the option will terminate
immediately.
OTHER STOCK OPTIONS
During the year ended December 31, 1995, the Company granted to Michael
Barsa options to purchase 154,477 shares of Common Stock in connection with a
loan made by Mr. Barsa to Amertranz pursuant to a convertible subordinated
promissory note (see 'Certain Transactions--Insider Loans'). In addition, during
the year ended December 31, 1995, the Company granted to Bruce Brandi options to
purchase 42,590 shares of Common Stock as compensation. See 'Option Grants in
Last Fiscal Year' and 'Option Exercises and Holdings', below.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
year ended December 31, 1995 to each of the Named Officers by Amertranz, as
exchanged in the Combination for options to purchase shares of Common Stock:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS EXERCISE ASSUMED ANNUAL RATE OF STOCK PRICE
NO. OF GRANTED TO OR BASE APPRECIATION FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 0%(2) 5% 10%
- ----------------------------- ------- ------------ --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Stuart Hettleman............. -- -- -- -- -- -- --
Richard A. Faieta............ -- -- -- -- -- -- --
Martin Hoffenberg............ -- -- -- -- -- -- --
Michael Barsa................ 154,477 67% $.408 2/7/99 $275,278 $292,193 $309,108
Bruce Brandi(3).............. 42,590 18.5 0.16 10/10/04 86,458 91,121 95,785
Philip S. Rosso, Jr.......... -- -- -- -- -- -- --
S. Gary Friedman............. -- -- -- -- -- -- --
</TABLE>
- ------------------
(1) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(2) Denotes realizable value at the date of grant which reflected a market value
of $2.19 per share, as determined by the Company's Board of Directors.
(3) 14,196 of such options have vested and are currently exercisable, and an
additional 14,197 of such options vest and become exercisable on each of
October 10, 1996 and 1997.
31
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the number and value
of unexercised options held by each of the Named Officers as of December 31,
1995, as exchanged in the Combination for options to purchase shares of Common
Stock:
AGGREGATED OPTION VALUES FOR FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stuart Hettleman................................. 0 0 -- --
Richard A. Faieta................................ 0 0 -- --
Martin Hoffenberg................................ 0 0 -- --
Michael Barsa.................................... 154,477 0 $ 275,278 $ --
Bruce Brandi..................................... 14,196 28,394 28,818 57,640
Philip S. Rosso, Jr.............................. 0 0 -- --
S. Gary Friedman................................. 0 0 -- --
</TABLE>
- ------------------
(1) This amount represents the $2.19 market value of the underlying securities
(as determined by the Company's Board of Directors) relating to
'in-the-money' options at December 31, 1995, minus the exercise price of
such options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1995, none of TIA, CFS, or the Company
had a compensation committee, and all deliberations concerning executive officer
compensation for each entity were had, and all determinations with respect
thereto were made, by the respective entity's board of directors. During such
period, Messrs. Hoffenberg, Barsa, Brandi and Rosso were executive officers and
directors of Amertranz, and Mr. Faieta was an executive officer and director of
CFS. See 'Certain Transactions'.
32
<PAGE>
HISTORICAL BACKGROUND
AMERTRANZ. Amertranz's business began in February 1985, with the formation
of Integrity Logistics, Inc., a New York corporation ('Integrity'). Integrity
began operations in June 1985 when it acquired from Amerford International
Corporation ('AIC'), a domestic and international air freight forwarder, the
right to open air freight forwarding offices under the 'Amerford' name in any
United States city in which AIC did not have an office. Integrity functioned as
an independently-owned exclusive agent of AIC, in exchange for which AIC paid
Integrity a share of the gross profits on shipments for which Integrity provided
services. During the next eight years, Integrity opened nine offices under the
Amerford name and established the Amerford Fashion Air Division of AIC,
specializing in freight forwarding services to the garment industry.
In October 1993, Integrity sued AIC, alleging failure to pay monies due,
breach of contract and other claims. The suit was settled in January 1994,
pursuant to which AIC paid Integrity the sum of $700,000 and Integrity's
affiliate, Amerford Domestic, Inc., a New York corporation formed in January
1994 ('Amerford Domestic'), acquired all of AIC's domestic air freight
forwarding business. Thereafter, AIC's business focused exclusively on
international air freight, and Integrity and AIC entered into an agreement
whereby Integrity acted as AIC's exclusive agent with respect to international
air freight in the markets where Integrity's original nine offices were located.
After acquiring AIC's domestic freight business, Amerford Domestic owned and
operated 20 offices located in the United States primarily focusing on the
movement of domestic freight and, in nine of those offices, Integrity continued
to act as AIC's agent for international air freight. As a freight operation
independent of AIC, it was necessary for Integrity to establish an internal
operations infrastructure for its 20-office network, including accounting, data
processing and communications departments. The creation of this infrastructure
consumed scarce corporate resources.
In March 1995, Amertranz was organized under Delaware law, as an affiliate
of Integrity. Pursuant to an Agreement of Merger dated March 13, 1995, Amerford
Domestic merged into Amertranz. Effective June 30, 1995, Integrity terminated
its relationship with AIC and ceased doing business. Thereafter, all of
Integrity's and Amerford Domestic's international and domestic freight
forwarding businesses were consolidated into and conducted by Amertranz.
In August 1995, Amertranz formed Amertranz Logistics, Inc., a Delaware
corporation, as a wholly-owned subsidiary to offer inventory movement and
shipping logistics services to large manufacturing companies.
TIA AND CFS. TIA's predecessor was formed in 1970 as an air freight
carrier, trading as the 'Wrangler Aviation' division of Blue Bell, Inc., a
manufacturer of jeans and other apparel, to transport raw materials to Blue Bell
facilities in Puerto Rico and return the finished goods to its facilities in
Greensboro, North Carolina. In 1981, Wrangler Aviation obtained a DOT
Certificate of Authority and qualified as an air carrier pursuant to Section 121
of the Federal Air Regulations. Thereafter, Wrangler Aviation offered fully
integrated air carrier services, providing the door-to-door movement of freight
between Puerto Rico and the continental United States for companies other than
Blue Bell, Inc. By 1986, freight transported for Blue Bell, Inc. represented
only a small portion of the freight carried by Wrangler Aviation.
In 1988, new owners of Blue Bell, Inc. separately incorporated the Wrangler
division in Delaware as Wrangler Aviation, Inc. ('Wrangler'), and sold all of
the issued and outstanding stock of Wrangler to a group experienced in the
freight forwarding business. This purchase was partially financed by the seller.
In 1990, as a result of a default under the financing, the seller repossessed
the Wrangler stock. In October 1990, Wrangler was sold to its current owners. At
that time, CFS was incorporated in Puerto Rico to act as the marketing arm of
Wrangler. From and after 1991, Wrangler operated under the tradename
'Tradewinds', and CFS did business under the name 'Caribbean Air Services'.
In December 1991, the current owners of Wrangler installed a new management
team following the discovery of certain improprieties which occurred under the
old management. As a result of investigations by the new management, it was
determined to reorganize both Wrangler and CFS under Chapter 11 of the United
States Bankruptcy Code. As part of this bankruptcy filing, the owners of
Wrangler arranged for an infusion of $3,000,000 into the Wrangler and CFS
business. CFS and Wrangler emerged from the Chapter 11 proceedings in November
1992, and June 1993, respectively, and have operated profitably since that time.
In January 1994, Wrangler Aviation, Inc. changed its name to TIA, Inc. At that
time, TIA owned 51% of the stock of CFS.
As a result of the bankruptcy reorganization, the management of TIA decided
to separate the air carrier and air freight forwarding divisions of TIA's
business. The air carrier division was sold by TIA in February 1994. As
33
<PAGE>
part of that transaction, TIA entered into the L-1011 Charter with the purchaser
to provide all air freight carriage required by TIA and CFS on terms TIA and CFS
believe are favorable. See 'Certain Transactions'.
TIA has an approximately 30% ownership interest in the parent of the
purchaser, Tradewinds Acquisition Corporation. Pending the approval of the
transfer of TIA's DOT authority and licenses, TIA currently operates the
aircraft chartered under the L-1011 Charter pursuant to the terms of an interim
operating agreement. See 'Business--Company Operations'.
Following the sale of its air carrier division, TIA and CFS continued to
operate the freight forwarding business, and remained a dominant freight
forwarder in the niche market between Puerto Rico and the continental United
States. TIA and CFS continued to specialize in the movement of large shipments
for manufacturers, with sales and/or full offices in Philadelphia, New York,
Chicago, Los Angeles, Hartford, and Greensboro, North Carolina, as well as a
network of sales persons in Puerto Rico.
The Assets Exchange Agreement. Pursuant to the terms of the Exchange
Agreement, the Company acquired all of the issued and outstanding stock of
Amertranz and received the freight forwarding business of TIA and CFS, and
contributed the TIA and CFS freight forwarding business to CAS. In consideration
of their transfer to the Company of all of the outstanding Amertranz shares and
convertible promissory notes, the former stockholders and convertible promissory
noteholders of Amertranz received an aggregate of 841,118 shares of Common
Stock. In consideration of the transfer to the Company of the freight forwarding
business of TIA and CFS, TIA and CFS received 2,100,000 shares of Common Stock,
and was issued the $10 million Exchange Note. See 'Certain Transactions'.
As a result of the Combination, Amertranz became a wholly-owned subsidiary
of the Company and continues to conduct Amertranz's freight forwarding and
logistics service businesses, and the freight forwarding business of TIA and CFS
was transferred to the Company and is conducted by CAS.
CERTAIN TRANSACTIONS
TIA LOAN
Commencing in October 1995, Amertranz received advances aggregating
$800,000 pursuant to the TIA Loan. The TIA Loan is secured by a lien on all of
the assets of Amertranz subordinated only to the lien granted to Fidelity in
connection with the Fidelity Facility. The TIA Loan bears interest at the rate
of 12% per annum and is repayable in 12 equal, consecutive monthly payments of
principal and interest commencing 30 days after the closing of the Offering. TIA
and CFS have agreed that, upon consummation of the Offering, repayment of the
TIA Loan will be deferred. (See 'MD&A--Liqidity and Capital Resources').
THE COMBINATION AND ASSETS EXCHANGE AGREEMENT
Pursuant to the terms of the Exchange Agreement, all of the stockholders of
Amertranz and the holders of certain convertible promissory notes of Amertranz
exchanged their respective shares, options and notes for 841,118 shares of
Common Stock and options to purchase 230,339 shares of Common Stock. Included in
this group are Martin Hoffenberg and Philip S. Rosso, Jr., who may be deemed to
be promoters of the Company, and Michael Barsa and Bruce Brandi (see 'Principal
Stockholders'). The terms of such conversions by these individuals were no more
favorable to these individuals than the terms of the conversions by all other
stockholders and convertible promissory noteholders of Amertranz (a total of 22
persons). See 'Insider Loans', below.
In the Combination, TIA and CFS contributed their freight forwarding
business to the Company. In consideration of such transfer, the Company issued
to TIA and CFS 2,100,000 shares of Common Stock (prior to adjustments made as of
February 7, 1996) and the Exchange Note in the original principal amount of
$10,000,000, which bears interest at the rate of 8% per annum. On the date of
this Prospectus, TIA and CFS exchanged $2,000,000 principal amount of the
Exchange Note for 200,000 shares of the Company's Class A Preferred Stock. See
'Description of Securities--Preferred Stock'. The Exchange Note is payable in
five consecutive monthly payments of principal and interest in the amount of
$80,000 each, commencing March 1, 1996, and, thereafter, monthly payments of
principal and interest in the amount of $166,667 each until the Exchange Note
has been paid in full. Of the proceeds of the Offering, $2,000,000 will be used
to repay a portion of the Exchange Note. TIA and CFS have agreed that, upon
consummation of the Offering and the payment of the $2,000,000 from the proceeds
of the Offering, the balance of payments on the Exchange Note will be deferred
See 'MD&A--Liquidity and Capital Resources'.
34
<PAGE>
In the Combination, TIA and CFS also agreed to advance to CAS, on a
revolving loan basis, an amount up to the net collections of TIA's and CFS's
accounts receivable as of February 7, 1996 and additional amounts in the
discretion of TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding
at any time, pursuant to the terms of the Revolver Note. Funds advanced under
the Revolver Note with respect to the TIA and CFS accounts receivable do not
bear interest prior to maturity. Discretionary advances under the Revolver Note
bear interest at the greater of (i) 1% per month, or (ii) a fluctuating rate
equal to the prime rate of interest as published in The Wall Street Journal,
plus 4%. Advances under the Revolver Note may be used only for ordinary, current
operating expenses of CAS unless TIA and CFS consent to another use of such
funds. The Revolver Note matures on July 6, 1996; however, TIA and CFS have
agreed that, upon consummation of the Offering, payment of the Revolver Note
will be deferred as described below. As of March 31, 1996, the outstanding
balance under the Revolver Note was $3,491,428. All obligations under the
Exchange Note are guaranteed by Amertranz and CAS, and all obligations under the
Revolver Note are guaranteed by the Company and Amertranz. All obligations under
the Exchange Note, the Revolver Note and such guarantees are secured by a first
priority lien on all of the issued and outstanding shares of CAS, a first
priority lien on all of the assets of the Company and CAS, and a lien on the
accounts receivable of Amertranz, subordinate only to the first priority lien
granted to Fidelity in connection with the Fidelity Facility and the second
position lien granted to TIA in connection with the TIA Loan.
Subsequent to the closing of the Combination, the Company requested that
TIA and CFS agree to certain modifications of the terms of the Exchange
Agreement relating to the TIA Loan, the Revolver Note and the Exchange Note (see
'Management's Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources'). As part of such revisions, to be
made as of February 7, 1996, the Company has obtained from the former
stockholders and convertible promissory noteholders of Amertranz prior to the
consummation of the Offering their agreement to surrender to the Company, as of
February 7, 1996, an aggregate of 266,225 shares of Common Stock and options to
purchase an aggregate of 184,910 shares of Common Stock, and an additional
150,000 shares of Common Stock in the aggregate will be issued to TIA and CFS.
Of such 184,910 options surrendered, Mr. Barsa surrendered 107,786 options and
Mr. Brandi surrendered 17,932 options. Unless otherwise specified, the
information set forth in this Prospectus gives effect to such adjustments.
Stuart Hettleman and Richard A. Faieta, directors and principal officers of
the Company and its subsidiaries, are principal officers of TIA and CFS, and Mr.
Faieta is a director of each of TIA and CFS. In addition, Mr. Hettleman is a
shareholder in a company which is in control of TIA and of CFS and Mr. Faieta is
a shareholder of TIA.
CONFLICTS OF INTEREST
TIA and CFS have been granted security interests in all of the assets of
the Company and CAS and in the accounts receivable of Amertranz. All of the
security interests are first priority, except for the security interest in
Amertranz's accounts receivable, which is subordinated only to Fidelity's lien
securing the Fidelity Financing. By virtue of their current stock ownership in
the Company and additional shares of Common Stock which may be issued upon
conversion of shares of Class A Preferred Stock, TIA and CFS retain control over
management of the business and affairs of the Company. In addition, pursuant to
the terms of the Exchange Agreement, certain stockholders of the Company have
given irrevocable proxies to TIA and CFS to vote such stockholders' shares of
Common Stock for up to five years, for the election of directors, and the proxy
granted by one such stockholder includes all matters submitted to stockholders
for a vote. The stock ownership of TIA and CFS, together with such proxies,
allow TIA and CFS to control in excess of 51% of the issued and outstanding
shares of Company Stock. There may be circumstances in which these different
relationships create material conflict to the possible detriment of other
shareholders of the Company. See 'Principal Stockholders' and 'Description of
Securities--Preferred Stock'.
FORBEARANCE BY TIA AND CFS
Upon consummation of the Offering, the outstanding principal balances of
the TIA Loan, the Exchange Note, and the Revolver Note will be $800,000,
$6,000,000, and approximately $4,000,000, respectively, plus accrued interest
thereon. All such obligations are secured by virtually all of the assets of the
Company, Amertranz and CAS. TIA and CFS have agreed that upon consummation of
the Offering and the application of the proceeds therefrom, the balance of
payments on these obligations will be deferred. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operation--Liquidity and Capital
Resources'.
35
<PAGE>
TRANSFER OF AMERTRANZ SHARES
As part of the Combination, one of the stockholders of Amertranz, S. Gary
Friedman, sold all of the shares of Amertranz common stock owned by him to
Philip S. Rosso, Jr. In connection with the Combination, the Company purchased
71,235 of such Amertranz shares from Mr. Rosso for an aggregate purchase price
of $11,250.
INSIDER LOANS
Between June 1995 and November 1995 Amertranz borrowed $1,379,110 in
aggregate principal amount from persons affiliated with Amertranz, including Mr.
Barsa, and issued (i) $1,096,610 in aggregate principal amount of promissory
notes with interest at the rate of 7% per annum, due June 30, 1996, and (ii)
$282,500 in aggregate principal amount of promissory notes with interest at the
rate of 9 3/4% per annum, due August 15, 1996. In addition, certain of these
lenders received options to purchase shares of Amertranz common stock at $.50
per share, some of which options were exercised prior to the Combination. As
part of the transactions under the Exchange Agreement, the holders of all of
these promissory notes assigned to the Company their notes and the shares of
Amertranz common stock which were issued upon the exercise of such options in
exchange for an aggregate of 296,669 shares of Common Stock, and the holders of
unexercised Amertranz options exchanged such options for an aggregate of 187,809
options to purchase shares of the Company's Common Stock. See 'Principal
Stockholders'.
BELGIUM AND BRAZIL AFFILIATES
Prior to the consummation of the Offering, the Company owned a majority
interest in Amertranz Worldwide, a private limited company existing under the
laws of Belgium, and a minority interest in Amertranz do Brasil LTDA, an entity
existing under the laws of Brazil. Both of these entities engaged in
international freight forwarding. As part of the Company's strategy to re-focus
its efforts on its domestic markets, the Company transferred all of its interest
in these two entities to a former employee, officer and convertible promissory
noteholder of Amertranz in exchange for the surrender by such individual of
previously-granted options to purchase 104,905 shares of Common Stock at $.048
per share and options to purchase 95,095 shares of Common Stock at $2.38 per
share.
OTHER TRANSACTIONS
Amertranz has historically engaged Horizon Forwarders, Inc. ('Horizon'), a
company owned by Messrs. Hoffenberg and Rosso, to provide ocean freight
forwarding services as needed by customers of Amertranz, at market rates and
terms. All amounts due to Horizon for its services were paid to Amertranz by the
freight shippers. The payments by Amertranz to Horizon during the year ended
December 31, 1995 totalled $2,640.
Under the terms of the L-1011 Charter, CAS has exclusive rights, until
March 1, 1998, to the use of a Lockheed L-1011 freighter aircraft that is
operated on behalf of Tradewinds Airlines, Inc. ('Tradewinds Air') between the
Company's Borinquen, Puerto Rico location and its Greensboro, North Carolina,
and Hartford, Connecticut, locations. Under the terms of the L-1011 Charter, the
L-1011 aircraft must be available at all times for use by the Company, as
needed. While the Company is guaranteed the use of the L-1011 aircraft as
needed, the Company pays only for its actual use of the aircraft at market
rates. Under the terms of the Exchange Agreement, all of the Company's freight
between Puerto Rico and the continental United States must be transported on the
L-1011 aircraft pursuant to the L-1011 Charter unless TIA and CFS consent to
other transport, and the L-1011 Charter may not be terminated without the
consent of TIA and CFS. The L-1011 aircraft is operated by TIA under its DOT
licenses and authority pursuant to an operating agreement between TIA and
Tradewinds Air. Payments to Tradewinds Air under the L-1011 Charter during the
year ended December 31, 1995 totalled $16.7 million. Tradewinds Air is owned by
Tradewinds Acquisition Corporation, of which TIA owns approximately 30%. To
date, Tradewinds Acquisition Corporation has not paid any dividends, but to the
extent it ever pays any dividends or makes any other distributions, TIA will
benefit from such dividends and/or distributions.
In the May Bridge Financing, (i) TIA purchased 100,000 shares of Common
Stock and 200,000 Bridge Warrants for an aggregate investment of $500,000, and
(ii) Michael Barsa purchased 25,000 shares of Common Stock and 50,000 Bridge
Warrants for an aggregate investment of $125,000.
36
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 31, 1996, and as adjusted to
reflect the sale of the Securities offered hereby, by (i) each person known by
the Company to be the beneficial owner of five percent or more of the
outstanding Common Stock of the Company, (ii) each of the Company's directors,
(iii) each of the Named Officers, and (iv) all directors and executive officers
as a group. In each case, the address of the beneficial owner is the address of
the principal executive offices of the Company.
<TABLE>
<CAPTION>
PERCENTAGE
--------------------
DIRECTORS, EXECUTIVE OFFICERS AND NUMBER OF SHARES BEFORE AFTER
FIVE PERCENT STOCKHOLDERS BENEFICIALLY OWNED OFFERING OFFERING
- -------------------------------------------------------------------------- ------------------ -------- --------
<S> <C> <C> <C>
TIA, Inc.(1)(2)........................................................... 2,780,370 77.3% 52.0%
Caribbean Freight Services, Inc.(1)(2).................................... 420,000 11.8 7.9
Michael Barsa(3)(4)....................................................... 281,010 7.5 5.1
Philip S. Rosso, Jr.(3)................................................... 198,669 5.5 3.7
Martin Hoffenberg(3)...................................................... 165,541 4.6 3.1
Bruce Brandi(3)(5)........................................................ 21,564 0.6 0.4
Stuart Hettleman(2)....................................................... 0 -- --
Richard A. Faieta(2)...................................................... 0 -- --
All directors and executive officers
as a group (4 persons)(1)(2)(3)(4)(5)................................... 2,477,574 66.5 45.4
</TABLE>
- ------------------
(1) Includes (i) 420,000 shares of Common Stock owned by CFS, and (ii) 548,591
shares of Common Stock with respect to which TIA and CFS have been granted
proxies. (See footnote 3, below). 51% of the issued and outstanding stock of
CFS, and voting control of all of the issued and outstanding shares of CFS,
is held by TIA. All of the issued and outstanding stock of TIA is owned and
controlled by Wrexham Aviation, Inc., a Delaware corporation, a majority of
which is owned by Swirnow Airways Corp., a Delaware corporation, of which
Stuart Hettleman, a Director and President of the Company, is a
non-controlling stockholder. Richard A. Swirnow is, indirectly, the
controlling stockholder of Swirnow Airways Corp. In addition, Richard A.
Faieta, a Director and Executive Vice President of the Company, is a
Director, President and non-controlling stockholder of TIA.
(2) Messrs. Barsa, Rosso and Brandi and certain other stockholders have granted
to TIA and CFS irrevocable proxies to vote their respective shares of Common
Stock for control of the Company's Board of Directors until the Revolver
Note has been repaid in full and the Exchange Note has been substantially
repaid. Mr. Hoffenberg has granted to TIA and CFS an irrevocable proxy to
vote his shares of Common Stock until February 6, 2001. As a result, TIA and
CFS may retain the right to vote certain of the shares of Common Stock owned
by those shareholders until at least February 6, 2001.
(3) Messrs. Hettleman and Faieta disclaim beneficial ownership of all shares of
Common Stock owned by TIA or CFS.
(4) Includes options to purchase 154,477 shares of Common Stock which are or
become exercisable within 60 days of May 31, 1996. See 'Management--Other
Stock Options'.
(5) Includes options to purchase 14,196 shares of Common Stock which are or
become exercisable within 60 days of May 31, 1996. See 'Management--Other
Stock Options'.
37
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of 15,000,000 shares
of Common Stock, $.01 par value per share, and 2,500,000 shares of Preferred
Stock, 500,000 shares of which have been designated Class A Preferred Stock. As
of the date of this Prospectus immediately prior to the Offering, 3,597,368
shares of Common Stock and 200,000 shares of Class A Preferred Stock are
outstanding. After the completion of the Offering there will be 5,347,368 shares
of Common Stock and 200,000 shares of Class A Preferred Stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted can elect all of the directors then
being elected. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available. In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any, having preference
over the Common Stock. Holders of shares of Common Stock, as such, have no
redemption, preemptive or other subscription rights, and there are no conversion
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are, and the shares of Common Stock to be issued upon completion of
the Offering, when issued and paid for as set forth in this Prospectus, will be,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
stockholders, to issue series of preferred stock from time-to-time and to
designate the rights, preferences, limitations and restrictions of and upon
shares of each series, including dividend, voting, redemption and conversion
rights. The Board of Directors also may designate par value, preferences in
liquidation, and the number of shares constituting any series. The Company
believes that the availability of preferred stock issuable in series will
provide increased flexibility for structuring possible future financings and
acquisitions, if any, and in meeting other corporate needs. The rights and
privileges of holders of preferred stock could adversely affect the voting power
of holders of Common Stock, and the authority of the Board of Directors to issue
preferred stock without further stockholder approval could have the effect of
delaying, deferring or preventing a change in control of the Company. Issuance
of preferred stock could also adversely effect the market price of the Common
Stock.
The following is a summary of the terms of the Class A Preferred Stock, par
value $10.00 per share:
Par Value. The shares of Class A Preferred Stock have a par or stated
value of $10.00 per share.
Dividends. Holders of Class A Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors out of legally available
funds, dividends at an annual rate of $1.00 per share, payable semi-annually in
arrears on June 30 and December 31 of each year, in cash or in shares of Class A
Preferred Stock at the rate of $10.00 per share. Dividends accrue and are
cumulative from the most recent date to which dividends have been paid. The
Class A Preferred Stock has priority as to dividends over the Common Stock and
all other series or classes of the Company's stock that rank junior to the Class
A Preferred Stock ('Junior Dividend Stock'). No dividend (other than dividends
payable solely in Common Stock, Junior Dividend Stock or warrants or other
rights to acquire Common Stock or Junior Dividend Stock) may be paid or set
apart for payment on, and no purchase, redemption or other acquisition may be
made by the Company of, the Common Stock or Junior Dividend Stock unless all
accrued and unpaid dividends on the Class A Preferred Stock, including the full
dividend for the then-current semi-annual dividend period, has been paid.
Preference on Liquidation. In a case of the voluntary or involuntary
liquidation, dissolution or winding up of the Company, holders of shares of
Class A Preferred Stock then outstanding will be entitled to be paid out of the
assets of the Company available for distribution to stockholders an amount in
cash equal to $10.00 per share, plus an amount equal to any accrued and unpaid
dividends, whether or not declared, to the payment date, before any payment or
distribution is made to the holders of Common Stock or any other series or class
of stock that ranks junior as to liquidation rights to the Class A Preferred
Stock.
38
<PAGE>
Voting. The holders of Class A Preferred Stock have no voting rights
except as required by law. In exercising any voting rights, each outstanding
share of Class A Preferred Stock will be entitled to one vote.
Conversion Rights. Each holder of Class A Preferred Stock has the right,
at the holder's option, at any time, to convert any or all shares into a number
of shares of Common Stock determined by dividing the stated value of the shares
to be converted by the lower of (i) the price per share of Common Stock in the
Offering, or (ii) 80% of the average of the closing bid and asked price per
share of Common Stock on the day prior to the conversion date.
The conversion rate is subject to adjustment in certain events, including
(i) the payment of a dividend on any class of the Company's capital stock in
shares of Common Stock or any other securities issued by the Company or any of
its subsidiaries; (ii) subdivisions or combinations of the Common Stock; (iii)
the issuance to all holders of Common Stock of rights or warrants to subscribe
for or purchase Common Stock or securities convertible into or exchangeable for
Common Stock, for a consideration per share of Common Stock less than the
current market price per share on the date of issuance of the securities.
Registration Rights. The Company has agreed to register for resale under
the Securities Act of 1933, as amended ('Securities Act') any shares of Common
Stock issued upon conversion of shares of the Class A Preferred Stock.
Registrar, Transfer Agent, Conversion Agent and Dividend Disbursing
Agent. The Company serves as the transfer agent, conversion agent, and dividend
disbursing agent of the Class A Preferred Stock.
WARRANTS
Each Warrant offered hereby, Bridge Warrant, and warrant included in the
Underwriter's Purchase Option (referred to collectively in this section as the
'Warrants') will entitle the registered holder to purchase one share of the
Company's Common Stock at an exercise price of $6.00 per share during the
four-year period commencing one year from the date of this Prospectus. No
fractional shares of Common Stock will be issued in connection with the exercise
of Warrants. Upon exercise, the Company will pay the holder the value of any
such fractional shares in cash, based upon the market value of the Common Stock
at such time.
Unless extended by the Company at its discretion, the Warrants will expire
at 5:00 p.m., New York time, on the fifth anniversary of the date of this
Prospectus. In the event that a holder of Warrants fails to exercise the
Warrants prior to their expiration, the Warrants will expire and the holder
thereof will have no further rights with respect to the Warrants.
The Company may redeem the Warrants at a price of $.01 per Warrant at any
time once they become exercisable but with the Underwriter's consent during the
first year, upon not less than 30 days' prior written notice, provided that the
last sales price of the Common Stock has been at least $10.00 per share on all
20 of the trading days ending on the third day prior to the day on which the
notice is given.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
qualification under the securities laws of the state of residence of the holder
of such Warrants. Although the Company intends to have all shares so qualified
for sale in those states where the Securities are being offered and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement, there can be no assurance that it
will do so.
A holder of Warrants will not have any rights, privileges or liabilities as
a stockholder of the Company prior to exercise of the Warrants. The Company is
required to keep available a sufficient number of authorized shares of Common
Stock to permit exercise of the Warrants.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions, and reclassifications. No assurance can be given that the market
price of the Common Stock will exceed the exercise price of the Warrants at any
time during the exercise period.
39
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York 1000 and its telephone number is
(212) 936-5100.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation provide that officers and directors
may be indemnified by the Company to the fullest extent permissible under
Delaware law. The General Corporation Law of the State of Delaware limits the
personal liability of a director or officer to the Company for monetary damages
for breach of fiduciary duty or care as a director. Liability is not limited for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or stock repurchases or redemptions, or (iv) any transaction from
which the director derived an improper personal benefit.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
5,347,368 shares of Common Stock, (3,859,868 shares of Common Stock if the
Underwriter's over-allotment option is exercised in full). Of those shares, the
1,750,000 shares of Common Stock sold to the public in the Offering (2,012,500
shares if the Underwriter's over-allotment option is exercised in full) may be
freely traded without restriction or further registration under the Securities
Act, except for any shares that may be held by an 'affiliate' of the Company (as
that term is defined in the rules and regulations under the Securities Act)
which will be subject to the limitations of Rule 144 ('Rule 144') promulgated
under the Securities Act. All of the remaining 3,597,368 shares of Common Stock
will be classified as 'restricted' securities under the Securities Act.
Restricted securities may not be sold unless they are registered under the
Securities Act or sold pursuant to an exemption from registration under the
Securities Act, including Rule 144.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned any
restricted shares for at least two years (including a stockholder who may be
deemed to be an affiliate of the Company), will be entitled to sell, within any
three-month period, that number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
date on which notice of such sale is given to the Commission, provided certain
public information, manner of sale and notice requirements are satisfied. A
stockholder who is deemed to be an affiliate of the Company, including members
of the Board of Directors and executive officers of the Company, will still need
to comply with the restrictions and requirements of Rule 144, other than the
two-year holding period requirement, in order to sell shares of Common Stock
that are not restricted securities, unless such sale is registered under the
Securities Act. A stockholder (or stockholders whose shares are aggregated) who
is deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale by such stockholder, and who has beneficially owned
restricted securities for at least three years, will be entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
Of such restricted shares, 1,127,749 shares have been included in the
Registration Statement of which this Prospectus forms a part and may be sold by
the holders thereof for their accounts not earlier than one year from the date
of this Prospectus without the consent of the Underwriter. Of the remaining
2,469,619 restricted shares, 86,869 shares and 2,382,750 shares will not be
available for sale until February 7, 1997 and February 7, 1998, respectively.
Notwithstanding the foregoing, TIA, CFS, all of the officers and directors of
the Company and certain others who were stockholders of the Company as of
February 7, 1996, have agreed that for a period of 24 months from the date of
this Prospectus, they will not sell any of such shares without the prior written
approval of the Underwriter. Such lock-up only extends for a period of 12 months
from the date of this Prospectus with respect to shares of Common Stock acquired
on the conversion by TIA and/or CFS of shares of Class A Preferred Stock.
In addition, any employee, officer or director of or consultant to the
Company who purchased his or her shares pursuant to a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701 under
the Securities Act ('Rule 701'). Rule 701 permits affiliates to sell their
shares which are subject to Rule 701 ('Rule 701 shares') under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell Rule 701 shares in reliance on Rule 144
without
40
<PAGE>
having to comply with the public information, volume limitation or notice
provisions of Rule 144. In both cases, a holder of Rule 701 shares is required
to wait until 90 days after the date of this Prospectus. All holders of stock
options under the Company's Stock Option Plan will be required to agree not to
dispose of Rule 701 shares for a period of 24 months from the date of this
Prospectus without the consent of the Underwriter.
Prior to the Offering, there has been no public trading market for the
Common Stock of the Company, and no predictions can be made of the effect, if
any, that future sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
the then-prevailing market price.
UNDERWRITING
The Underwriter has agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company a total of 1,750,000 shares
of Common Stock and 1,750,000 Warrants. The obligations of the Underwriter under
the Underwriting Agreement are subject to approval of certain legal matters by
counsel and various other conditions precedent, and the Underwriter is obligated
to purchase all of the Securities offered by this Prospectus (other than the
Securities covered by the over-allotment option described below), if any are
purchased.
The Underwriter has advised the Company that it proposes to offer the
Securities to the public at the initial offering price set forth on the cover
page of this Prospectus and to certain dealers at that price less a concession
not in excess of $ per share of Common Stock and $ per Warrant. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share of Common Stock and $ per Warrant to certain other
dealers. After the Offering, the offering price and other selling terms may be
changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter an expense allowance on a nonaccountable
basis equal to 3% of the gross proceeds derived from the sale of the Securities
underwritten (including the sale of any Securities subject to the Underwriter's
over-allotment option), $50,000 of which has been paid to date. The Company also
has agreed to pay all expenses in connection with qualifying the Securities
offered hereby for sale under the laws of such states as the Underwriter may
designate and registering the Offering with the National Association of
Securities Dealers, Inc., including fees and expenses of counsel retained for
such purposes by the Underwriter.
The Company has granted to the Underwriter an option to purchase from the
Company at the initial offering price up to an aggregate of 262,500 additional
shares of Common Stock and an option to purchase an aggregate of 262,500
additional Warrants for the sole purpose of covering over-allotments, if any.
Such options are exercisable during the 45-day period after the date of this
Prospectus.
The Company has engaged the Underwriter, on a non-exclusive basis, as its
agent for the solicitation of the exercise of the Warrants. Additionally, other
NASD members may be engaged by the Underwriter in its solicitation efforts. To
the extent not inconsistent with the guidelines of the NASD and the rules and
regulations of the Commission, the Company has agreed to pay the Underwriter for
bona fide services rendered a commission equal to 5% of the exercise price for
each Warrant exercised if the exercise was solicited by the Underwriter. In
addition to soliciting, either orally or in writing, the exercise of the
Warrants, such services may also include disseminating information, either
orally or in writing, to warrantholders about the Company or the market for the
Company's securities, and assisting in the processing of the exercise of
Warrants. No compensation will be paid to the Underwriter in connection with the
exercise of the Warrants if the market price of the underlying shares of Common
Stock is lower than the exercise price, the Warrants are held in a discretionary
account, the Warrants are exercised in an unsolicited transaction, the
warrantholder has not confirmed in writing that the Underwriter solicited such
exercise or the arrangement to pay the commission is not disclosed in the
prospectus provided to warrantholders at the time of exercise. In addition,
unless granted an exemption by the Commission from Rule 10b-6 under the Exchange
Act, while it is soliciting exercise of the Warrants, the Underwriter will be
prohibited from engaging in any market activities or solicited brokerage
activities with regard to the Company's securities unless the Underwriter has
waived its right to receive a fee for the exercise of the Warrants.
41
<PAGE>
In connection with the Offering, the Company has agreed to sell to the
Underwriter for an aggregate of $100 the Underwriter's Purchase Option,
consisting of the right to purchase up to an aggregate of 175,000 shares of
Common Stock and the right to purchase up to an aggregate of 175,000 Warrants.
The Underwriter's Purchase Option is exercisable initially at a price equal to
110% of the initial offering price of the Securities for a period of four years
commencing one year from the date hereof. The Underwriter's Purchase Option may
not be transferred, sold, assigned or hypothecated during the one-year period
following the date of this Prospectus except to officers of the Underwriter and
the selected dealers and their officers or partners. The Underwriter's Purchase
Option grants to the holders thereof certain 'piggyback' and demand rights for
periods of seven and five years, respectively, from the date of this Prospectus
with respect to the registration under the Securities Act of the securities
directly and indirectly issuable upon exercise of the Underwriter's Purchase
Option.
Prior to the Offering there has been no public market for any of the
Company's securities. Accordingly, the offering price of the Securities and the
terms of the Warrants have been arbitrarily determined by negotiation between
the Company and the Underwriter and do not necessarily bear any relation to
established valuation criteria. Factors considered in determining such prices
and terms, in addition to prevailing market conditions, include an assessment of
the prospects for the industry in which the Company competes, the Company's
management and the Company's capital structure.
Pursuant to the Underwriting Agreement, all of the officers and directors
of the Company, and TIA and CFS, the principal shareholders of the Company, have
agreed not to sell any of their shares of Common Stock for a period of 24 months
from the date of this Prospectus, subject to certain exceptions, without the
prior written consent of the Underwriter. For a period of three years following
the Offering, the Underwriter has the right, in certain circumstances, to
purchase for its account or to sell for the account of insiders of the Company
any securities sold by such insiders under Rule 144. In addition, the
Underwriting Agreement provides that, for a period of five years from the date
of this Prospectus, the Company will recommend and use its best efforts to elect
a designee of the Underwriter as a member of its Board of Directors. If the
Underwriter does not choose to designate a board member, the Company will permit
the Underwriter to send an individual to observe meetings of the Board of
Directors. Such observer will not be a member of the Board of Directors and will
not be entitled to vote on any matters before the Board. The Underwriter has not
yet selected a designee.
In February 1996, the Underwriter acted as placement agent for the February
Bridge Financing and was paid a commission of $277,500 and a nonaccountable
expense allowance of $83,250. In May 1996, the Underwriter acted as placement
agent for $500,000 of the May Bridge Financing and was paid a commission of
$50,000.
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
The Company has agreed to register for resale under the Securities Act
concurrently with the Offering, the Bridge Warrants, the Bridge Shares, the
Interim Financing Shares and the Insider Shares, and to pay all expenses in
connection therewith. An aggregate of 1,312,500 Bridge Warrants, 656,250 Bridge
Shares, 67,606 Interim Financing Shares and 403,893 Insider Shares may be
offered and sold pursuant to this Prospectus by the holders thereof. The
securities offered by the Bridge Holders, the Interim Financing Holders and the
Insider Holders (collectively, the 'Selling Securityholders') are not part of
the underwritten Offering. The Company will not receive any of the proceeds from
the sale of the Bridge Warrants, the shares of Common Stock issuable upon
exercise of the Bridge Warrants, the Bridge Shares, the Interim Financing
Shares, or the Insider Shares.
The Bridge Holders in the February Bridge Financing made loans to the
Company aggregating $2.775 million and received the February Bridge Notes,
416,250 Bridge Shares and 832,500 Bridge Warrants. The Bridge Holders in the May
Bridge Financing made loans to the Company aggregating $1.2 million and received
the May Bridge Notes, 240,000 Bridge Shares and 480,000 Bridge Warrants. Upon
the consummation of the Offering, each of the Bridge Warrants will be
automatically converted into a like number of Warrants. The Interim Financing
Holders made loans to Amertranz aggregating $350,000 in connection with the
Interim Financing and received the Interim Notes and the Interim Financing
Shares. The Insider Holders founded one of the Company's predecessors, made
loans to Amertranz at various times aggregating $1,379,110 and/or arranged for
the Combination, and received options to purchase shares of Amertranz common
stock, some of which options were exercised prior to the Combination. As part of
the transactions under the Exchange Agreement, these loans, options, and shares
were assigned by the Insider Holders to the Company in exchange for an aggregate
of 741,733 shares of Common Stock and other consideration. Of such 741,733
shares, 403,893 shares
42
<PAGE>
are being registered under the Registration Statement of which this Prospectus
forms a part. See 'Use of Proceeds' and 'Management's Discussion and Analysis of
Financial Condition on Results of Operations-- Liquidity and Capital Resources'
and 'Certain Transactions'.
The shares of Common Stock and the Warrants registered for sale on behalf
of the Selling Securityholders under the Registration Statement of which this
Prospectus forms a part may be offered and sold from time to time in
transactions (which may include block transactions) on the Nasdaq SmallCap
Market in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, or at negotiated prices. The Selling Securityholders have advised the
Company that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
Shares. The Selling Securityholders may effect such transactions by selling
their shares directly to purchasers or to or through broker-dealers (including
GKN), which may act as agents or principals. Such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
Selling Securityholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The Selling Securityholders and any broker-dealers that
act in connection with the sale of the shares might be deemed to be
'underwriters' within the meaning of Section 2(11) of the Securities Act. The
Selling Securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the
securities against certain liabilities, including liabilities arising under the
Securities Act. Notwithstanding that such shares are being registered, the
Selling Securityholders have agreed that none of such securities may be sold
prior to one year following the consummation of the Offering without the prior
written consent of the Underwriter.
The following table sets forth the name of each Selling Securityholder and
the number of Warrants and shares of Common Stock beneficially owned prior to
sale, including options exercisable for shares of Common Stock within 60 days of
the date of this Prospectus. Except as indicated, all of such shares and
warrants are being registered for sale under the Registration Statement of which
this Prospectus forms a part, and the Company believes that all such shares and
warrants will be owned by the respective Selling Securityholders thereof
following the consummation of the Offering and prior to resale. Except as
indicated, none of the Selling Securityholders has ever held any position or
office with the Company or had any other material relationship with the Company.
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Leon Abramson........................................................................... 3,750 7,500
John Aletti............................................................................. 3,750 7,500
ALSA, Inc............................................................................... 7,500 15,000
David Stephen Becker.................................................................... 3,750 7,500
Neil Bellett............................................................................ 3,750 7,500
Robert Bender........................................................................... 3,750 7,500
Stanley H. Blum......................................................................... 7,500 15,000
Eliot H. Brown.......................................................................... 3,750 7,500
Glenn Cadrez............................................................................ 3,750 7,500
William C. Clement...................................................................... 3,750 7,500
Kenneth D. Cole......................................................................... 7,500 15,000
Henri Cristini.......................................................................... 3,750 7,500
William J. Curtis....................................................................... 7,500 15,000
Dalewood Associates, L.P. .............................................................. 65,000(1) 130,000
Robert Dorskind......................................................................... 3,750 7,500
Craig Effron............................................................................ 7,500 15,000
Drew Effron............................................................................. 3,750 7,500
Kenneth M. Endelson..................................................................... 3,750 7,500
Richard Etra............................................................................ 3,750 7,500
Steven Etra............................................................................. 3,750 7,500
Melvin Finkelstein...................................................................... 3,750 7,500
Gordon M. Freeman....................................................................... 7,500 15,000
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Jack Gold............................................................................... 3,750 7,500
Lloyd Goldman........................................................................... 3,750 7,500
Ernest Gottdiener....................................................................... 3,750 7,500
Leigh Gove.............................................................................. 3,750 7,500
Paula Graff............................................................................. 3,750 7,500
Anthony S. Graffeo and Angelina Graffeo................................................. 3,750 7,500
Bruce Greenberg......................................................................... 15,000 30,000
Glenda Guttentag........................................................................ 3,750 7,500
Gary C. & Kathleen R. Hall JTWROS....................................................... 3,750 7,500
Robert L. Jacobs........................................................................ 3,750 7,500
Frank and Charlotte Joy JTWROS.......................................................... 3,750 7,500
Stuart Kahn & Company................................................................... 3,750 7,500
Daniel A. Kaplan........................................................................ 3,750 7,500
Delaware Charter Custodian for C. Daniel Karnes--IRA Account............................ 3,750 7,500
Rebecca Jane Karpoff and Stefan Shoup JTWROS............................................ 3,750 7,500
Richard C. Kaufman and Elaine J. Lenart JTWROS.......................................... 3,750 7,500
Donald M. Kleban........................................................................ 7,500 15,000
Michael Kremins......................................................................... 3,750 7,500
Norman Kurtz............................................................................ 3,750 7,500
David Kushner........................................................................... 3,750 7,500
Steven and Rona Landman JTWROS.......................................................... 1,875 3,750
Boris and Marina Laskin JTWROS.......................................................... 3,750 7,500
Alex Lauchlin........................................................................... 3,750 7,500
Donald R. Levin......................................................................... 3,750 7,500
William Levin........................................................................... 3,750 7,500
Paul D. Levitt & Leslie Levitt Revocable Trust.......................................... 3,750 7,500
Stephen Lewen........................................................................... 3,750 7,500
Irwin Lieber............................................................................ 3,750 7,500
Mariwood Investments.................................................................... 3,750 7,500
Joseph and Georgia Melnick JTWROS....................................................... 15,000 30,000
Eli Oxenhorn............................................................................ 3,750 7,500
Robert J. Parkes & Carol J. Parkes JTWROS............................................... 3,750 7,500
RJB Partners............................................................................ 3,750 7,500
Patricia Reyes.......................................................................... 3,750 7,500
Jonathan Robinson....................................................................... 7,500 15,000
Andrew Rosen............................................................................ 3,750 7,500
Martin Rosenman......................................................................... 3,750 7,500
William J. Rouhana, Jr. ................................................................ 3,750 7,500
The Marilyn and Barry Rubenstein Family Foundation...................................... 7,500 15,000
Alan J. Rubin........................................................................... 3,750 7,500
Jeff Rubin.............................................................................. 3,750 7,500
S.V. Construction Company............................................................... 3,750 7,500
Scott G. Sandler........................................................................ 3,750 7,500
John Sarracco........................................................................... 3,750 7,500
Curtis Schenker......................................................................... 3,750 7,500
Sharon Schneider........................................................................ 3,750 7,500
Carl E. Siegel.......................................................................... 3,750 7,500
Dean Spellman........................................................................... 1,875 3,750
Charles Stentiford...................................................................... 3,750 7,500
Mitchell Stern.......................................................................... 3,750 7,500
Craig Swift............................................................................. 3,750 7,500
David Thalheim.......................................................................... 7,500 15,000
Frank K. Turner......................................................................... 3,750 7,500
United Growth Fund Profit Sharing, Inc.................................................. 3,750 7,500
Marie E. Valdes......................................................................... 3,750 7,500
Richard Warren.......................................................................... 3,750 7,500
Charles Warshaw......................................................................... 3,750 7,500
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
BRIDGE HOLDERS OF SHARES OF WARRANTS
- ---------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Weiskopf Silver & Co.................................................................... 3,750 7,500
Michael Weissman........................................................................ 7,500 15,000
Lance Wolfson........................................................................... 3,750 7,500
William Wolfson......................................................................... 15,000 30,000
Woodland Partners....................................................................... 65,000(2) 130,000
Leonard Zelin........................................................................... 7,500 15,000
<CAPTION>
INTERIM FINANCING HOLDERS
MH Capital Partners..................................................................... 8,796 --
155964 Canada, Inc. .................................................................... 8,796 --
Clinton Company......................................................................... 8,796 --
Swan Alley Nominees..................................................................... 41,218 --
<CAPTION>
INSIDE HOLDERS
Philip S. Rosso, Jr.(3)................................................................. 198,667(3) --
Martin Hoffenberg(4).................................................................... 165,541(4) --
David R. Pulk(5)........................................................................ 117,111(5) --
Michael Barsa(6)........................................................................ 281,010(6) 50,000
Bruce Brandi(7)......................................................................... 21,564(7) --
Edward R. Reedy(8)...................................................................... 23,480(8) --
Anil K. Bhandari........................................................................ 14,363 --
Michael Kilzi........................................................................... 12,971 --
Allan Rubin Trust....................................................................... 57,771(9) --
Barrett Fischer......................................................................... 7,098 --
Jean Barsa.............................................................................. 40,965 30,000
Truck Net, Inc.......................................................................... 14,570 --
Brent Burns............................................................................. 3,617 --
TIA, Inc.(10)........................................................................... 1,780,000(10) 200,000
</TABLE>
- ------------------
(1) Represents 1.2% of the outstanding shares of Common Stock following
consummation of the Offering. Does not include 7,500 shares owned by David
Thalheim, a Selling Securityholder, who is a general partner of Dalewood
Associates, L.P.
(2) Represents 1.2% of the outstanding shares of Common Stock following
consummation of the Offering. Barry Rubenstein is a general partner of
Woodland Partners. Does not include 7,500 shares owned by the Marilyn and
Barry Rubenstein Family Foundation.
(3) Represents 3.7% of the outstanding shares of Common Stock following
consummation of the Offering. Only 41,460 of such shares are being
registered for sale under the Registration Statement of which this
Prospectus forms a part. Mr. Rosso serves as Senior Vice President
Operations of Amertranz.
(4) Represents 3.1% of the outstanding shares of Common Stock following
consummation of the Offering. Only 40,000 of such shares are being
registered for sale under the Registration Statement of which this
Prospectus forms a part. Mr. Hoffenberg is the former Chief Executive
Officer of Amertranz.
(5) Includes options to purchase 12,957 shares of Common Stock, and represents
2.2% of the outstanding shares of Common Stock following consummation of
the Offering. 104,154 of such shares are being registered for sale under
the Registration Statement of which this Prospectus forms a part. Mr. Pulk
is the former President, International Division of Amertranz.
(6) Includes options to purchase 154,477 shares of Common Stock, and represents
5.1% of the outstanding shares of Common Stock following consummation of
the Offering. Only 96,451 of such shares are being registered for sale
under the Registration Statement of which this Prospectus forms a part. Mr.
Barsa is the former Chief Financial Officer of Amertranz and is a director,
Vice President and Secretary of the Company.
(7) Includes options to purchase 14,196 shares of Common Stock. 7,368 of such
shares are being registered for sale under the Registration Statement of
which this Prospectus forms a part. Mr. Brandi serves as the President of
Amertranz.
(Footnotes continued on next page)
45
<PAGE>
(Footnotes continued from previous page)
(8) Includes options to purchase 21,295 shares of Common Stock. 2,185 of such
shares are being registered for sale under the Registration Statement of
which this Prospectus forms a part. Mr. Reedy is the former Senior Vice
President, International Division of Amertranz.
(9) Represents 1.1% of the outstanding shares of Common Stock following
consummation of the Offering.
(10) Represents 33.5% of the outstanding shares of Common Stock following
consummation of the Offering. Only 100,000 of such shares are being
registered for sale under the Registration Statement of which this
Prospectus forms a part. See footnote (2) under 'Principal Stockholders'.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Ferber Greilsheimer Chan & Essner, New York, New York. Graubard
Mollen & Miller, New York, New York, has acted as counsel for the Underwriter in
connection with the Offering.
EXPERTS
The consolidated financial statements and schedules included in this
prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of The Freight Forwarding Business of TIA and CFS
(the Air Freight Business of TIA, Inc. and Subsidiary) for each of the years in
the three-year period ended December 31, 1995, have been included herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act with respect to the Securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain portions having been omitted from
this Prospectus in accordance with the rules and regulations of the Commission.
For further information with respect to the Company, the securities offered by
this Prospectus and such omitted information, reference is made to the
Registration Statement, including any and all exhibits and amendments thereto.
Statements contained in this Prospectus concerning the provisions of any
document filed as an exhibit are of necessity brief descriptions thereof and are
not necessarily complete, and in each instance reference is made to the copy of
the document filed as an exhibit to the Registration Statement, each such
statement being qualified in its entirety by this reference.
Following the effectiveness of the Registration Statement, the Company will
be subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith the Company will file reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected and copied at public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of
such material, including the Registration Statement, can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
The Company's fiscal year ends on June 30 in each year. The Company intends
to furnish its stockholders with annual reports containing financial statements
which will be audited and reported on by its independent public accounting firm,
and such other periodic reports as the Company may determine to be appropriate
or as may be required by law.
46
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AMERTRANZ WORLDWIDE HOLDING CORP.
Report of Independent Public Accountants................................................................. F-2
Consolidated Balance Sheet as of February 7, 1996 and March 31, 1996 (unaudited)......................... F-3
Consolidated Statement of Operations for the Seven Weeks Ended March 31, 1996 (unaudited)................ F-4
Consolidated Statement of Stockholders' Deficit for the Seven Weeks Ended March 31, 1996 (unaudited)..... F-5
Consolidated Statement of Cash Flows for the Seven Weeks Ended March 31, 1996 (unaudited)................ F-6
Notes to Consolidated Balance Sheet...................................................................... F-7
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS (THE AIR FREIGHT BUSINESS OF TIA, INC.
AND SUBSIDIARY)
Independent Auditors' Report............................................................................. F-13
Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995............................ F-14
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995............................ F-15
Notes to Financial Statements............................................................................ F-16
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
Report of Independent Public Accountants................................................................. F-21
Consolidated Balance Sheets as of December 31, 1995 (unaudited) and June 30, 1994 and 1995............... F-22
Consolidated Statements of Operations for the Years Ended June 30, 1993, 1994 and 1995
and for the Six Months Ended December 31, 1994 and 1995 (unaudited)................................... F-23
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended June 30, 1994 and 1995 and
for the Six Months Ended December 31, 1995 (unaudited)................................................ F-24
Consolidated Statements of Cash Flows for the Years Ended June 30, 1993, 1994 and 1995
and for the Six Months Ended December 31, 1995 (unaudited)............................................ F-25
Notes to Consolidated Financial Statements............................................................... F-26
PRO FORMA FINANCIAL INFORMATION
Amertranz Worldwide Holding Corp. Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1995 (unaudited)...................................................... F-34
Notes to Management's Assumptions to Pro Forma Consolidated Statement of Operations (unaudited).......... F-35
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amertranz Worldwide Holding Corp.:
We have audited the accompanying consolidated balance sheet of Amertranz
Worldwide Holding Corp., a Delaware corporation, as of February 7, 1996. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Amertranz Worldwide Holding Corp.
as of February 7, 1996, in conformity with generally accepted accounting
principles.
The accompanying consolidated balance sheet has been prepared assuming that
the Company will continue as a going concern. As discussed in Note 3 to the
consolidated balance sheet, the Company has negative working capital and
negative tangible net worth at February 7, 1996. A subsidiary of the Company has
incurred significant losses that raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regards to these
matters are also discussed in Note 3. The consolidated balance sheet does not
include any adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
New York, New York
April 12, 1996, except with respect
to the matters discussed in Note 12 for
which the date is May 1, 1996
F-2
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 7, 1996 MARCH 31, 1996
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................................................... $ 2,420,926 $ 479,464
Accounts receivable........................................................... 2,804,896 7,535,575
Prepaid expenses and other current assets..................................... 475,026 745,738
Due from affiliates........................................................... 5,729 8,430
Taxes receivable.............................................................. 53,579 75,028
---------------- --------------
Total current assets....................................................... 5,760,156 8,844,235
PROPERTY AND EQUIPMENT, net (Note 5)............................................ 812,963 864,878
OTHER ASSETS.................................................................... 156,610 242,441
DEBT ISSUANCE COST (Note 6)..................................................... 2,292,273 2,137,984
GOODWILL (Notes 1 and 4)........................................................ 12,092,195 12,021,657
---------------- --------------
Total assets............................................................... $ 21,114,197 $ 24,111,195
---------------- --------------
---------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 6,001,366 $ 6,475,140
Accrued expenses.............................................................. 1,796,016 1,763,501
Note payable to affiliate..................................................... -- 3,491,428
Current portion of long-term debt (Note 6).................................... 3,282,798 3,197,314
Lease obligation--current portion (Note 8).................................... 20,143 20,494
---------------- --------------
Total current liabilities.................................................. 11,100,323 14,947,877
LONG-TERM DEBT (Note 6)......................................................... 12,340,064 12,248,154
LEASE OBLIGATION--LONG-TERM (Note 8)............................................ 27,345 23,780
---------------- --------------
Total liabilities.......................................................... 23,467,732 27,219,811
---------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value; 15,000,000 shares authorized, 3,357,368 shares
issued and outstanding..................................................... 33,574 33,574
Paid-in-capital............................................................... 7,612,891 7,612,891
Accumulated deficit........................................................... (10,000,000) (10,743,831)
Less: Treasury stock, 106,304 shares held at cost............................. -- (11,250)
---------------- --------------
Total stockholders' equity (deficit)....................................... (2,353,535) (3,108,616)
---------------- --------------
Total liabilities and stockholders' equity (deficit)....................... $ 21,114,197 $ 24,111,195
---------------- --------------
---------------- --------------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
7 WEEKS ENDED
MARCH 31,
1996
-------------
<S> <C>
OPERATING REVENUE....................................................................... $10,105,377
DIRECT COSTS............................................................................ 7,350,715
-------------
Gross Profit..................................................................... 2,754,662
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................ 3,102,638
-------------
Operating (loss)................................................................. (347,976)
OTHER INCOME (EXPENSE):
Other income (expense), net........................................................... 976
Interest expense...................................................................... (396,831)
-------------
(Loss) before (provision for) income taxes....................................... (743,831)
(PROVISION FOR) INCOME TAXES............................................................ --
-------------
Net (loss)....................................................................... $ (743,831)
-------------
-------------
Net loss per share............................................................... (.22)
-------------
-------------
Weighted Average Number of Common Shares......................................... 3,357,368
-------------
-------------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SEVEN WEEKS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------- PAID-IN ------------------ ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) TOTAL
--------- ------- ---------- ------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 8, 1996...... 3,357,368 $33,574 $7,612,891 -- $ -- $(10,000,000) $(2,353,535)
Purchase of treasury
stock..................... -- -- -- 106,304 (11,250) -- (11,250)
Net loss..................... -- -- -- -- -- (743,831) (743,831)
--------- ------- ---------- ------- -------- ------------ -----------
BALANCE, March 31,
1996......................... 3,357,368 $33,574 $7,612,891 106,304 $(11,250) $(10,743,831) $ 3,108,616
--------- ------- ---------- ------- -------- ------------ -----------
--------- ------- ---------- ------- -------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SEVEN WEEKS ENDED MARCH 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................................... $ (743,831)
Bad debt expense....................................................................... (181,122)
Depreciation and amortization.......................................................... 262,292
Changes in operating assets and liabilities
Increase in accounts receivable..................................................... (4,549,557)
Increase in prepaid expenses and other current assets............................... (270,712)
Increase in taxes receivable........................................................ (21,472)
Increase in due from affiliates..................................................... (2,701)
Increase in other assets............................................................ (85,831)
Increase in accounts payable and accrued expenses................................... 441,259
-----------
Net cash used in operating activities............................................. (5,151,675)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..................................................... (89,006)
-----------
Net cash used by investing activities............................................. (89,006)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable to affiliate................................................ 3,491,428
Proceeds from short-term debt.......................................................... 3,339,000
Payment of short-term debt............................................................. (3,516,394)
Payment of lease obligations........................................................... (3,565)
Purchase of treasury stock............................................................. (11,250)
-----------
Net cash provided by financing activities......................................... 3,299,219
-----------
Net increase in cash and cash equivalents......................................... (1,941,462)
CASH AND CASH EQUIVALENTS, beginning of the year......................................... 2,420,926
-----------
CASH AND CASH EQUIVALENTS, end of the year............................................... $ 479,464
-----------
-----------
CASH PAYMENTS FOR:
Interest............................................................................... $ 242,543
Income taxes........................................................................... --
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET
FEBRUARY 7, 1996
1. COMPANY BACKGROUND
In January 1996, Amertranz Worldwide Holding Corp. ('Holding' or the
'Company') was incorporated in the state of Delaware. Effective February 7,
1996, Holding concluded an Asset Exchange Agreement with TIA, Inc. ('TIA'),
Caribbean Freight Systems, Inc. ('CFS'), Amertranz Worldwide, Inc. ('Amertranz')
and the stockholders and convertible note holders of Amertranz. As part of this
transaction, Holding received (i) all of the issued and outstanding stock of
Amertranz, (ii) $1,379,110 in convertible notes of Amertranz, (iii) the air
freight forwarding business of TIA and CFS and (iv) 99% of the issued and
outstanding stock of Amertranz Belgium. Holding then contributed the air freight
forwarding business of TIA and CFS to Caribbean Air Services, Inc. ('CAS') in
return for all of the issued and outstanding shares of CAS. TIA and CFS received
a $10,000,000 promissory note, as discussed in Note 6, in addition to stock in
the Company.
CAS and Amertranz are wholly owned consolidated subsidiaries. The
transaction described above has been accounted for as a purchase of Amertranz in
exchange for stock in Holding. CFS and TIA are treated as predecessors and
accordingly their assets and liabilities are reflected in Holding at their
historical carrying values. CAS was incorporated in the state of Delaware in
January 1996 to continue the air freight forwarding business of TIA and CFS.
On November 20, 1995, the Company entered into a letter of intent with an
underwriter, as amended on January 23, 1996, to pursue an Initial Public
Offering of its common stock (the 'IPO'). The offering contemplates the sale of
1,750,000 shares of common stock and 1,750,000 redeemable common stock purchase
warrants ('Warrants'), exclusive of a 45-day option granted to the underwriter
to purchase an additional 15% of the Securities offered in the IPO. Each Warrant
entitles the holder to purchase one share of common stock at the initial public
offering price (subject to adjustment for anti-dilution in the event of stock
dividends, stock splits, combinations, sub divisions and reclassifications) and
is exercisable commencing one year from the effective date of the Company's
Registration Statement ('Effective Date'). The Warrants are redeemable by the
Company for $.01 per warrant, in the event that the last sale price of the
Company's common stock has been at least $10.00 per share for each of the 20
consecutive trading days ending on the third day prior to the date on which
notice of redemption is given.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Company, as summarized below, are in
conformity with generally accepted accounting principles. 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.
Principles of Consolidation
The consolidated financial statements include the accounts of Holding,
Amertranz and CAS. All significant intercompany accounts and transactions have
been eliminated.
Revenue Recognition
Revenue from freight forwarding is recognized upon delivery of goods and
expenses associated with the cost of transportation are accrued concurrently.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed under
the straight-line method over estimated useful lives ranging from 3 to 8 years.
Assets under capital leases are depreciated over the shorter of the estimated
useful life of the asset or the lease term. The Company utilizes a half-year
convention for assets in the year of acquisition and disposal.
F-7
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Goodwill
Goodwill represents the excess of cost over the net assets acquired and is
amortized on a straight-line basis over 25 years.
Recently Issued Accounting Standards
During March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ('SFAS') No. 121, 'Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.' This statement establishes financial accounting and reporting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of. This statement is
effective for financial statements for fiscal years beginning after December 15,
1995, although earlier application is encouraged. The Company does not expect
that the adoption of SFAS No. 121 will have a material adverse effect on its
consolidated financial statements.
Income Taxes
For income tax purposes, the Company follows the provisions of Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes' ('SFAS
109'). SFAS 109 requires an asset and liability approach for financial
accounting and reporting for income taxes. Under SFAS 109, deferred taxes are
provided for temporary differences between the carrying value of assets and
liabilities for financial reporting and tax purposes at the enacted rate at
which these differences are expected to reverse.
Stock Options
The Company grants stock options to certain officers and related parties.
Compensation expense is recognized based upon the aggregate difference between
the fair market value of the Company's stock at date of grant and the option
price. Compensation expense is recognized equally over the vesting period.
Per share Data:
Earnings per share is computed using the weighted average number of common
shares outstanding and, where applicable, common equivalent shares issuable upon
exercise of stock options.
Unaudited Interim Financial Information
The financial statements as of and for the seven weeks ended March 31, 1996
are unaudited. In the opinion of management, all adjustments necessary for a
fair presentation of the financial statements, which are of a normal recurring
nature, for these interim periods have been included. The results for the
interim periods are not necessarily indicative of the results to be obtained for
the full fiscal year.
3. GOING CONCERN
As reflected in the consolidated balance sheet, the Company has negative
working capital and negative tangible net worth at February 7, 1996. The
Company's continued existence is dependent upon its ability to achieve and
maintain profitable operations. (Refer to the 'Risk Factors' section in the
Company's IPO Prospectus for a further discussion of the factors which may
materially affect the Company's business.) The Company plans on capitalizing on
the synergies created by the combination of Amertranz and CAS to take advantage
of under utilized operations, infrastructure and purchased freight space.
Accordingly, with slight increases in operating expenses, the Company can
generate additional revenue and profitability. Furthermore, the Company has
signed a letter of intent with an underwriter with respect to the IPO to be
consummated in calendar 1996 which should provide the Company with approximately
$8,900,000 of which approximately $2,500,000 will be available to pay past due
trade payables and be used for working capital. The Company believes that its
cash resources augmented by the IPO will be sufficient to fund the Company's
operations through April 1997.
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
4. ACQUISITION
Pursuant to an Asset Exchange Agreement (the 'Agreement') dated February 7,
1996, Amertranz Worldwide Holding Corp., a newly created corporation, combined
the freight forwarding business of TIA and CFS with Amertranz. In exchange TIA
and CFS received 2,100,000 shares of common stock of the Company and a
promissory note in the original principal amount of $10,000,000 as described in
Note 6. Holding then contributed the acquired TIA and CFS freight forwarding
business to CAS. Holding also acquired all of the issued and outstanding stock
of Amertranz and the former stockholders of Amertranz received 809,339 shares of
Holding's common stock. The Amertranz transaction has been accounted for as a
purchase and resulted in goodwill of approximately $12.1 million which
represents the excess of the cost over the fair value of the assets acquired.
5. PROPERTY AND EQUIPMENT
Property and equipment, net consist of the following:
<TABLE>
<S> <C>
Furniture, fixtures and equipment............................. $993,339
Less--Accumulated depreciation and amortization............. (180,376)
--------
$812,963
--------
--------
</TABLE>
6. DEBT
As of February 7, 1996, long-term and short-term debt consisted of the
following:
<TABLE>
<S> <C> <C> <C>
Holding
-- Promissory note to TIA and $10,000,000
CFS(a)...........................
-- Bridge notes(b).................... 2,775,000
Amertranz
-- Asset-based financing(c)........... 1,697,862
-- Notes payable to TIA(d)............ 800,000
-- Interim financing(e)............... 350,000
-----------
Total debt.................................................. 15,622,862
Less: Current portion....................................... (3,282,798)
-----------
Long-term debt.............................................. $12,340,064
-----------
-----------
</TABLE>
Holding
Notes Payable
(a) On February 7, 1996, as part of the Agreement, Holding issued to TIA
and CFS a $10,000,000 promissory note which bears interest at the rate of 8.0%
per annum. The note is payable in five consecutive monthly payments of principal
and interest in the amount of $80,000 each, commencing March 1, 1996, and
thereafter monthly payments of principal and interest in the amount of $166,667
each until the note is paid in full. Upon the conclusion of the IPO by Holding,
$2,000,000 will be due and payable on the note. The Company intends to convert
an additional $2,000,000 of the note into Class A Preferred Stock as discussed
in Note 7. The note is secured by a first lien on all of the present and future
assets of Holding and is guaranteed by CAS and Amertranz.
(b) On February 7, 1996, Holding consummated a private placement with a
group of investors whereby Holding borrowed $2,775,000 and issued promissory
notes. The notes are due at the earlier of (i) the consummation of the IPO by
Holding or (ii) February 7, 1998 or (iii) the sale or merger of Holding. The
investors
F-9
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
6. DEBT--(CONTINUED)
also received 416,250 shares of common stock of Holding, as well as 832,500
warrants to purchase shares of common stock of Holding for five years at $5.00
per share. These warrants convert into warrants upon the completion of the IPO
by Holding and will be exercisable at the IPO price. The notes accrue interest
at 10% per annum until April 30, 1996 and thereafter at 15% per annum. The notes
are secured by a junior lien on all of the assets of the Company. The Company
has recorded deferred financing costs of approximately $1,770,000 in connection
with such bridge financing and will amortize the amount over the life of the
debt.
Amertranz
Asset-Based Financing
(c) On March 16, 1995, Amertranz entered into a Purchase and Sale Agreement
(as amended July 5, 1995, October 25, 1995 and February 7, 1996) with a lender
whereby it receives advances of up to 75% of the net amounts of eligible
accounts receivable outstanding to a maximum amount of $3,125,000. The loan is
subject to interest at a rate of 4% per annum over the prevailing prime rate
(12.25%). At February 7, 1996, the outstanding balance on the credit line was
$1,697,862, which represented the full amount available thereunder. The lender
has a security interest in all present and future accounts receivable, machinery
and equipment and other assets of Amertranz and the loan is guaranteed by
Holding.
Notes Payable
(d) In October 1995, Amertranz obtained a $500,000 subordinated secured
loan from TIA, which was increased to $800,000 in January 1996 ('TIA Loan'). The
original TIA Loan bears interest at the rate of 12% per annum and is repayable
in 12 equal, consecutive monthly payments of principal and interest commencing
30 days after the closing of the IPO. However, TIA has agreed that, upon
consummation of the IPO, repayment of the TIA Loan will be deferred. The TIA
Loan is secured by a lien on all of the assets of Amertranz subordinated only to
the lien granted to the asset-based financing lender described above.
(e) Between November 1995 and January 1996, Amertranz obtained financing of
$350,000 ('Interim Financing') and issued $350,000 in aggregate principal amount
of promissory notes. Repayment of the principal amount due under these notes,
together with interest at the rate of 12% per annum is due upon the earlier of
(i) the closing of the IPO by Holding or (ii) February 7, 1998 or (iii) the sale
or merger of Holding. The holders of these notes also received shares of
Amertranz common stock that were converted into 67,606 shares of Holding common
stock. The Company has recorded a deferred financing charge of $150,000 in
connection with the issuance of the stock and will amortize the amount over the
life of the debt.
Between June 1995 and November 1995, Amertranz borrowed $1,379,110 in
aggregate principal amount from persons affiliated with Amertranz and other
non-affiliated lenders and issued convertible notes therefor. All of these notes
were assigned to Holding as part of the Asset Exchange Agreement.
CAS
Asset-Based Financing. As part of the Agreement, TIA and CFS have agreed
to lend to CAS on a revolving loan basis, an amount up to the net cash
collections of TIA and CFS's accounts receivable as of February 7, 1996 and
additional amounts at the discretion of TIA and CFS, up to an aggregate maximum
of $4,000,000 outstanding at any time, pursuant to the terms of a Revolving
Credit Promissory Note. Only funds advanced at the discretion of TIA and CFS
bear interest, at the greater of (i) 1% per month or (ii) at a rate of 4% over
prime. The note is due July 6, 1996. The note is secured by all of the assets of
CAS and is guaranteed by Holding and Amertranz. As of March 31, 1996, CAS has
drawn $3,483,558 on this available line.
7. STOCKHOLDERS' EQUITY (DEFICIT)
Stock Options and Warrants
As of February 7, 1996, the Company had options outstanding to purchase a
total of 230,399 shares of common stock at exercise prices ranging from $.16 to
$1.17. These options replaced outstanding options of Amertranz. The Company also
had warrants outstanding to purchase 832,500 shares of common stock at an
exercise price equal to the exercise price of the Warrants issued in connection
with the Company's February bridge financing.
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
7. STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
Subsequent to the closing Asset Exchange Agreement, the Company requested
that TIA and CFS agree to certain modifications of the terms of the Asset
Exchange Agreement relating to the TIA Loan, the Revolver Note and the Exchange
Note. As part of such revisions, made as of February 7, 1996, the former
stockholders and convertible promissory noteholders of Amertranz agreed to
surrender to the Company, as of February 7, 1996, an aggregate of 266,225 shares
of Common Stock and options to purchase an aggregate of 382,747 shares of Common
Stock, and an additional 150,000 shares of Common Stock in the aggregate were
issued to TIA and CFS. All share amounts have been adjusted to give effect to
this transaction.
Preferred Stock
As of February 7, 1996, the Company does not have any preferred stock
authorized or issued. However, the Board of Directors is authorized without
further action by the stockholders, to issue series of preferred stock. The
Company intends to authorize a total of 200,000 shares of Class A, non-voting,
cumulative, convertible preferred stock with a par value of $10.00 ('Preferred
Stock') upon successful completion of the IPO in exchange for a paydown of
$2,000,000 on the $10,000,000 promissory note.
The Preferred Stock will pay cumulative cash dividends at an annual rate of
$1.00 per share. The Company is prohibited from paying any dividends on common
stock unless all required preferred dividends have been paid. Each share of
Preferred Stock may be converted at the option of the holder into common stock
at a conversion price of the lower of (i) the IPO price per share of common
stock or (ii) 80% of the average of the closing price per share of common stock
on the day prior to the conversion date. Preferred Stock holders are entitled to
a liquidation preference of $10.00 per share plus all accrued and unpaid
dividends.
Additional Paid-in-Capital
As of February 7, 1996, the Company had additional paid in capital ('APIC')
which was made up of the following:
<TABLE>
<S> <C>
Investment in Amertranz Worldwide........................... $4,414,767
Assigned notes.............................................. 1,379,110
Deferred financing costs.................................... 1,769,063
Investment in CAS........................................... 83,525
----------
7,646,465
Less: O/S Common Stock at par............................... (33,574)
----------
Total APIC.................................................. $7,612,891
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Leases
Future minimum lease payments for capital leases and operating leases
relating to equipment and rental premises are as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL LEASES OPERATING LEASES
- ------------------------------------------------------------- -------------- ----------------
<S> <C> <C>
1997......................................................... $ 24,053 $ 918,518
1998......................................................... 18,642 699,490
1999......................................................... 11,067 261,642
2000......................................................... -- 193,626
2001......................................................... -- 16,135
-------------- ----------------
Total minimum lease payments............................... 53,762 $2,089,411
----------------
----------------
Less--Amount representing interest........................... (6,274)
--------------
$ 47,488
--------------
--------------
</TABLE>
F-11
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
FEBRUARY 7, 1996
8. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Employment Agreements
Amertranz has employment agreements with certain employees expiring at
various times through July 2000. Such agreements provide for minimum salary
levels and for incentive bonuses which are payable if specified management goals
are attained. The aggregate commitment for future salaries at February 7, 1996,
excluding bonuses, was approximately $1,233,000.
Litigation
Amertranz has been named as a defendant in a lawsuit initiated by a trustee
in bankruptcy of a company with whom Amertranz engaged in discussions concerning
a prospective business combination during 1994. The complaint seeks charges in
excess of $11 million for various alleged causes of action. Amertranz has
retained bankruptcy litigation counsel to review the substance of the complaint.
In the opinion of management, the lawsuit is substantially without merit and the
probability of any material loss is extremely small.
9. INCOME TAXES
At February 7, 1996, the Company had a tax net operating loss carryforward
of approximately $7,757,000, available within statutory limits, to offset future
regular federal taxable income. In accordance with certain provisions of the Tax
Reform Act of 1986, a change in ownership of a corporation of greater than 50
percentage points within a three-year period places an annual limitation on the
corporation's ability to utilize its existing net operating loss carryforwards.
Such a change in ownership was deemed to have occurred in connection with the
Asset Exchange Agreement in which Amertranz became part of Holding, at which
time the Company's net operating loss carryforwards amounted to approximately
$7,757,000. The annual limitation of the utilization of such tax attributes is
approximately $206,000. To the extent the annual limitation is not utilized, it
may be carried forward for utilization in future years. This limitation could
affect the Company's future provisions for or payment of federal income tax
should the Company's operations produce increased amounts of taxable income in
the future.
Deferred tax benefits at February 7, 1996, which are fully offset by a
valuation allowance, primarily represent the estimated future tax effects of
federal net operating losses aggregating approximately $917,583.
10. RELATED PARTY TRANSACTIONS
Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. ('Tradewinds Air'), a subsidiary of Tradewinds Acquisition
Corporation, of which TIA owns approximately 30% of the outstanding common
stock, CAS has exclusive rights until March 1, 1998 to the use of a leased
L-1011 freighter aircraft. While CAS is guaranteed the use of the L-1011
aircraft as needed, it pays only for actual use of the aircraft at market rates.
At February 7, 1996, Amertranz owes approximately $124,000 to TIA for air
freight forwarding services.
11. SUBSEQUENT EVENT
On May 10, 1996, Holding consummated a private placement with a group of
investors whereby Holding borrowed $1,200,000 and issued promissory notes. The
notes are due at the earlier of (i) the closing of the IPO by Holding or (ii)
February 7, 1998 or (iii) the sale or merger of Holding. The investors also
received 240,000 shares of common stock of Holding, as well as 480,000 warrants
to purchase shares of common stock of Holding for five years at $5.00 per share.
These warrants convert into warrants upon the completion of the IPO by Holding
and will be exercisable at the IPO price. The notes accrue interest at 15% per
annum. The notes are secured by a lien on all of the assets of the Company. The
Company has recorded deferred financing costs of approximately $1,020,000 in
connection with such bridge financing and will amortize the amount over the life
of the debt.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TIA, Inc.:
We have audited the accompanying statements of operations and cash flows of
The Freight Forwarding Business of TIA and CFS (the Air Freight Business of TIA,
Inc. and Subsidiary) (note 1) for each of the years in the three-year period
ended December 31, 1995. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and the cash flows of The
Freight Forwarding Business of TIA and CFS (the Air Freight Business of TIA,
Inc. and Subsidiary) for each of the years in the three-year period ended
December 31, 1995 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
March 8, 1996, except with
respect to the last paragraph
under Asset Exchange Agreement
under note 2 for which the
date is May 1, 1996
F-13
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenue................................................... $32,670,727 $38,576,285 $38,211,306
Cost of transportation (Note 6)..................................... 24,231,379 30,254,733 30,300,476
----------- ----------- -----------
Gross profit................................................... 8,439,348 8,321,552 7,910,830
Selling, general and administrative expenses........................ 6,504,897 4,633,676 4,513,154
----------- ----------- -----------
Operating income............................................... 1,934,451 3,687,876 3,397,676
Other income (expense):
Interest expense (Note 3)......................................... (1,107,520) (1,143,787) (1,155,215)
Other, net........................................................ 41,928 117,214 123,668
----------- ----------- -----------
Total other expense............................................ (1,065,592) (1,026,573) (1,031,547)
----------- ----------- -----------
Income before income taxes..................................... 868,859 2,661,303 2,366,129
Income taxes (Note 4)............................................... -- 108,201 --
----------- ----------- -----------
Net income..................................................... $ 868,859 $ 2,553,102 $ 2,366,129
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to the financial statements.
F-14
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
--------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 868,859 $2,553,102 $2,366,129
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 416,830 377,569 367,111
Net disposals of property and equipment............................. -- 46,978 --
Bad debt expense.................................................... 153,574 70,000 41,000
Changes in assets and liabilities:
Increase in accounts receivable..................................... (771,087) (949,027) (224,790)
Increase in income taxes receivable................................. -- -- (65,000)
Increase in inventory............................................... (11,309) -- --
(Increase) decrease in prepaid expenses............................. (140,608) 581,376 26,961
Increase (decrease) in accounts payable............................. 487,518 (274,010) (9,167)
Decrease in accrued liabilities..................................... (706,398) (165,264) (243,925)
Increase (decrease) in income taxes payable......................... -- 68,201 (108,201)
--------- ---------- ----------
Total adjustments................................................. (571,480) (244,177) (216,011)
--------- ---------- ----------
Net cash provided by operating activities......................... 297,379 2,308,925 2,150,118
Cash flows from investing activities:
Purchases of furniture, fixtures and equipment......................... (95,567) (42,280) (102,829)
Increase (decrease) in other assets.................................... (7,393) (9,405) --
--------- ---------- ----------
Net cash used in investing activities............................. (102,960) (51,685) (102,829)
Cash flows from financing activities:
Repayments from CASD................................................... 128,814 225,406 69,782
Cash advances to CASD.................................................. (486,803) (37,811) (175,799)
Proceeds from Parent cash advance...................................... 400,000 -- --
Repayments on Parent cash advance...................................... (161,199) (238,801) --
Payments on note payable to affiliate.................................. -- -- (1,200,000)
Repayments on notes payable............................................ (274,162) (231,264) (25,000)
--------- ---------- ----------
Net cash used in financing activities............................. (393,350) (282,470) (1,331,017)
--------- ---------- ----------
Net increase (decrease) in cash.......................................... (198,931) 1,974,770 716,276
Cash at beginning of year................................................ 194,814 (4,117) 1,970,653
--------- ---------- ----------
Cash at end of year...................................................... (4,117) 1,970,653 2,686,925
--------- ---------- ----------
--------- ---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest................................. 586,056 1,666,950 946,155
--------- ---------- ----------
--------- ---------- ----------
Cash paid during the year for income taxes............................. $ -- $ -- $ 173,200
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See accompanying notes to the financial statements.
F-15
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
(1) SIGNIFICANT ACCOUNTING POLICIES
Basis of Statements of Operations and Cash Flows Presentation
The accompanying statements of operations and cash flows include the
accounts of the air freight business of TIA, Inc. (a wholly owned subsidiary of
Wrexham Aviation Corporation) and its 51% owned subsidiary, Caribbean Freight
System, Inc. ('CFS'), which have been combined for reporting purposes as The
Freight Forwarding Business of TIA and CFS (the 'Air Freight Business of TIA,
Inc. and Subsidiary')(the 'Business'). The Business is not a separate legal or
historical reporting entity.
All significant intrabusiness balances and transactions have been
eliminated in the financial statements.
Description of Business
The Business operates an air freight forwarding business primarily serving
the eastern half of the United States, Puerto Rico and the Dominican Republic.
Revenue Recognition
The Business is involved in brokering air cargo services for freight flown
between the United States, Puerto Rico and the Dominican Republic. Revenues are
recognized when cargo is shipped and invoiced to customers. Monthly provision is
made for doubtful receivables, discounts, returns and allowances.
Cash and Cash Equivalents
Cash at December 31, 1995 includes $2,290,000 of overnight repurchase
agreements.
Property and Equipment
Furniture, fixtures and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets.
Income Taxes
The operations of the Business are included in the federal and state income
tax returns of TIA, Inc. and CFS. Income taxes allocated to the Business are
based on the actual income taxes of TIA, Inc. and CFS for the periods presented.
Deferred tax assets and liabilities are recognized under the asset and
liability method for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Reclassifications
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform with the 1995 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ASSET EXCHANGE AGREEMENT
In anticipation of a public offering of securities, in February 1996 TIA,
Inc. and CFS entered into an asset exchange agreement in which the air freight
business of TIA, Inc. and CFS was acquired by Amertranz Worldwide Holding Corp.
('Holding'), which contributed the acquired business to a wholly owned
subsidiary.
The air freight business is defined by the agreement to include customer
lists and related business and marketing records; CFS's rights under the freight
handling agreement described in sale of subsidiary below; the
F-16
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
(2) ASSET EXCHANGE AGREEMENT--(CONTINUED)
use of the names 'Caribbean Air Services' and 'Tradewinds International
Airlines;' the operating leases for the Puerto Rico, Greensboro, North Carolina,
and Hartford Connecticut business facilities; furniture and fixtures of $86,830
as of December 31, 1995; and all assignable customer and sales representative
contracts of TIA, Inc. and CFS in connection with their air freight businesses.
The air freight business does not include any other assets of TIA, Inc. and CFS,
including cash, accounts receivable, notes receivable, securities, equipment,
aircraft, parts or tools, nor any liabilities of TIA, Inc. or CFS.
In exchange for the transfer of the air freight operating assets described
above, TIA, Inc. and CFS received a promissory note of $10,000,000 and 2,100,000
shares of Holding (allocated to TIA, Inc. and CFS as notes receivable of
$8,000,000 and $2,000,000, respectively, and 1,680,000 and 420,000 shares,
respectively). The promissory note bears interest at 8%, and is due from March
1, 1996 through July 1, 1996 in monthly payments of $80,000 and from August 1,
1996 in monthly payments of $166,667. In addition, Holding intends to apply
$2,000,000 of the net proceeds from the proposed public offering of securities
discussed in the first paragraph above against the promissory note.
Pursuant to the asset exchange agreement, TIA, Inc. and CFS agreed to
advance to the aforementioned subsidiary of Holding, on a revolving loan basis,
the net collections of TIA, Inc.'s and CFS's accounts receivable as of February
7, 1996 and additional amounts in the discretion of TIA, Inc. and CFS, up to an
aggregate maximum of $4,000,000 outstanding at any time. Funds advanced under
the revolving loan with respect to TIA, Inc.'s and CFS's accounts receivable do
not bear interest and discretionary advances bear interest at the greater of 1%
per month or the prime rate plus 4%. The revolving loan matures on July 6, 1996.
The promissory note and revolving loan are secured by a first priority lien
on all of the issued and outstanding shares of the aforementioned subsidiary of
Holding, a first priority lien on all of the assets of Holding and the
subsidiary of Holding, and a second lien on the accounts receivable of another
subsidiary of Holding.
TIA, Inc. and CFS have agreed that upon consummation of the public offering
of securities discussed above, they will defer repayment of the promissory note
and revolving loan until certain conditions have been met. TIA, Inc. and CFS
have further agreed that except upon the occurrence of certain events they will
not take any action to foreclose on their security interests in the assets of
Holding or its subsidiaries for one year.
Sale of Subsidiary
On January 1, 1996, CFS entered into an agreement whereby it will transfer
its 51% ownership in Caribbean Air Services Dominicana, Inc. ('CASD') to CASD's
minority stockholders and settle the amount due from CASD of $1,421,827 at
December 31, 1995 in exchange for a freight handling agreement and a note in the
amount of $1,260,000.
The freight handling agreement provides for CASD to carry through freight;
meaning air cargo shipments with an origin or destination in the Dominican
Republic and a destination or origin, respectively, in the mainland United
States; between Puerto Rico and the Dominican Republic at rates that approximate
or are slightly higher than market. The agreement also provides for CASD to pay
CFS a commission of 5% of the gross air cargo revenues generated by CASD for
shipments between Puerto Rico and the Dominican Republic, but not less than
$3,750 per month.
(3) INTEREST EXPENSE
Substantially all of TIA, Inc.'s and CFS's activities in 1993, 1994 and
1995 are related to their air freight business and, accordingly, all of the
historical interest expense related to the interest-bearing debt of TIA, Inc.
and CFS has been included in the accompanying financial statements.
F-17
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
(3) INTEREST EXPENSE--(CONTINUED)
Interest expense relates primarily to two notes payable as follows:
A note payable to Harborview Corporation Ltd. No. 1, a company affiliated
through common ownership to TIA, Inc., has balance outstanding at December 31,
1994 and 1995 of $3,387,808 and $2,187,808, respectively, bears interest at a
rate of 10%, is secured by a senior lien on all of the assets of TIA, Inc. and
is due on demand. Interest expense on this note amounted to approximately
$327,000, $343,000 and $252,000 in 1993, 1994 and 1995, respectively.
A note payable to Wrexham Aviation Corporation, Parent of TIA, Inc., has a
balance outstanding at both December 31, 1994 and 1995 of $8,940,336, bears
interest at prime plus 1% (9.5% at December 31, 1995), is secured by a second
lien on all assets of TIA, Inc. and is due on June 16, 1997. Interest expense on
this note amounted to approximately $740,000, $783,000 and $903,000 in 1993,
1994 and 1995, respectively.
(4) INCOME TAXES
The operations of the Business are included in the federal and state income
tax returns of TIA, Inc. and CFS. Income taxes allocated to the Business are
based on the actual income taxes of TIA, Inc. and CFS for the periods presented.
Income tax expense for 1993, 1994 and 1995 consists of:
<TABLE>
<CAPTION>
1993
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal.......................................................... $ -- $ -- $ --
State............................................................ -- -- --
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
1994
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal.......................................................... $ 79,494 $ -- $ 79,494
State............................................................ 28,707 -- 28,707
--------- --------- ---------
$ 108,201 $ -- $ 108,201
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
1995
-----------------------------------
CURRENT DEFERRED TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Federal.......................................................... $ -- $ -- $ --
State............................................................ -- -- --
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income tax expense for 1993, 1994 and 1995 differed from the 'expected' amount
for those years (computed by applying the federal corporate rate of 34% to
income before income taxes) for the following reasons:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Computed 'expected' tax expense.................................. $ 295,412 $ 904,843 $ 804,484
State income taxes, net of federal benefit....................... -- 18,947 --
Change in valuation allowance for deferred tax assets
allocated to income tax expense................................ (295,412) (861,672) (817,928)
Other............................................................ -- 46,083 13,444
--------- --------- ---------
$ -- $ 108,201 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
(4) INCOME TAXES--(CONTINUED)
The changes in the valuation allowance for 1993, 1994 and 1995 results from
the utilization of net operating loss carryforwards allocated to the Business.
At December 31, 1995, TIA, Inc. had federal and state net operating loss
carryforwards of approximately $11,235,000. The carryforwards expire in 2005
through 2008 for federal income tax purposes and 1996 through 1997 for state
income tax purposes. Due to the statutory limitation on net operating loss
carryforwards following an ownership change, the availability of approximately
$2,456,000 of these net operating loss carryforwards to reduce future taxable
income is substantially limited.
The excess of alternative minimum tax over regular tax is a credit which
can be carried forward to reduce regular tax liabilities in future years. At
December 31, 1995, TIA, Inc. and CFS have approximately $78,000 available for
carryforward.
(5) LEASES
The Business leases certain equipment under various noncancellable
operating leases expiring at various dates through 1997. Future minimum lease
payments are as follows:
<TABLE>
<S> <C>
1996............................... $43,332
1997............................... $20,865
</TABLE>
Rent expense for cancelable and noncancelable operating leases for the
years ended December 31, 1993, 1994 and 1995 was approximately $2,012,000,
$675,000 and $330,000, respectively.
(6) RELATED PARTY TRANSACTIONS
During the years ended December 31, 1993, 1994 and 1995, the Business
incurred purchased transportation costs of approximately $541,000, $848,000 and
$1,622,000, respectively, from companies partially owned by minority
stockholders of CASD.
Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. ('Tradewinds Air'), a subsidiary of Tradewinds Acquisition
Corporation, of which TIA, Inc. owns approximately 30% of the outstanding common
stock, TIA, Inc. has exclusive rights until March 1, 1998 to the use of a leased
L-1011 freighter aircraft. While TIA, Inc. is guaranteed the use of the L-1011
aircraft as needed, it pays only for actual use of the aircraft at market rates.
TIA, Inc. currently holds the United States Department of Transportation
licenses and certificates required for the operation of the L-1011 and is
operating the L-1011 aircraft on behalf of Tradewinds Air under an interim
operating agreement. Upon approval by the United States Department of
Transportation of the transfer of the licenses and certificates, TIA, Inc.
intends to assign the aircraft lease to Tradewinds Air.
The leased L-1011, along with assignment of the aforementioned cargo
aircraft charter agreement and interim operating agreement, was acquired in late
November 1995 by Tradewinds Air from Florida West Airlines, Inc. (FWA) upon
confirmation by the Bankruptcy Court of FWA's plan of reorganization. FWA had
acquired the leased L-1011 from and entered into the aforementioned cargo
aircraft charter agreement and interim operating agreement with TIA, Inc. in
March 1994. Prior to March 1994, TIA, Inc. had operated the L-1011. Accordingly,
the accompanying financial statements for the year ended December 31, 1993 and
for the first two months of 1994 include the operations of the aircraft.
Total transportation costs purchased from Tradewinds Air and FWA related to
these agreements amounted to approximately $14,959,000 and $16,691,000 in 1994
and 1995, respectively.
TIA, Inc. provides accounting services to Tradewinds Air for $5,720 per
month.
F-19
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
(7) SUPPLIER AND CREDIT CONCENTRATION
The Business charters the flight operations of an L-1011 from one supplier.
Although there are a limited number of companies that charter or lease L-1011
aircraft, management believes that other suppliers could provide similar
services on comparable terms. A change in suppliers, however, could cause a
delay in the air cargo operations and a possible loss of sales, which would
affect operating results adversely.
The air cargo industry is impacted by the general economy. Changes in the
marketplace of this industry may significantly affect management's estimates and
the Business's performance.
Most of the Business's customers are located primarily in the eastern half
of the United States, Puerto Rico, and the Dominican Republic. No single
customer accounted for more than 10% of the sales of the Business in 1993, 1994
and 1995. The Business estimates an allowance for doubtful accounts based on the
credit worthiness of its customers as well as general economic conditions.
Consequently, an adverse change in those factor could affect the Business's
estimate of its bad debts.
(8) CONTINGENCIES
TIA, Inc. is responsible for the clean-up of contaminated soil associated
with the removal of an underground storage tank in Greensboro, North Carolina.
TIA, Inc. removed the waste oil tank during 1994 and has performed a substantial
portion of the remediation procedures on the site. TIA, Inc., along with
Tradewinds Air, is responsible for any remaining soil clean-up required and the
State of North Carolina has a trust fund available to reimburse companies for
voluntary remediation expenses in excess of certain deductibles. Accordingly,
management believes that any remaining remediation costs will not have a
material effect on the financial statements.
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amertranz Worldwide, Inc.:
We have audited the accompanying consolidated balance sheets of Amertranz
Worldwide, Inc. (a Delaware corporation) and subsidiaries as of June 30, 1994
and 1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
June 30, 1995. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Amertranz Worldwide, Inc.
and subsidiaries as of June 30, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered a loss from
operations, has negative working capital, negative cash flows from operations
and negative stockholders' equity, that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
New York, New York
December 12, 1995, except with respect
to the matters discussed in Note 12 for
which the date is April 12, 1996
F-21
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------ ------------------------
1994 1995 1994 1995
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................................... $ 42,442 $ 91,778 $ 7,394 $ --
Accounts receivable, less allowance for doubtful accounts
of $53,617 and $139,196 for June 30, 1994 and 1995,
respectively.......................................... 3,411,556 2,525,106 3,461,650 3,482,451
Claim receivable, less allowance of $108,524 for 1994
(Note 8).............................................. 170,392 -- -- --
Prepaid expenses and other current assets................ 102,885 283,557 549,865 490,818
Due from affiliates...................................... 24,632 8,430 46,710 8,430
Taxes receivable......................................... -- 52,448 -- 53,579
---------- ---------- ---------- ----------
Total current assets....................................... 3,751,907 2,961,319 4,065,619 4,035,278
PROPERTY AND EQUIPMENT, net (Note 4)....................... 243,307 490,196 352,014 645,764
OTHER ASSETS............................................... 49,572 192,424 47,160 155,885
---------- ---------- ---------- ----------
Total assets............................................... $4,044,786 $3,643,939 $4,464,793 $4,836,927
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable......................................... $2,928,613 $4,575,736 $4,389,337 $6,156,446
Loan payable (Note 5).................................... 690,857 1,291,849 682,956 2,692,254
Notes payable to stockholders (Note 5)................... -- 140,000 -- 1,279,110
Bridge notes (Note 12)................................... -- -- -- 300,000
Income tax payable....................................... 101,254 -- -- --
Lease obligation--current portion (Note 6)............... 7,423 22,337 13,699 17,990
Accrued expenses......................................... 127,108 174,592 173,246 1,180,155
Due to affiliate......................................... -- -- 43,799 --
---------- ---------- ---------- ----------
Total current liabilities.................................. 3,855,255 6,204,514 5,303,037 11,625,955
---------- ---------- ---------- ----------
LEASE OBLIGATION--LONG-TERM (Note 6)....................... 33,368 35,967 52,7583 1,084
---------- ---------- ---------- ----------
Total liabilities..................................... 3,888,623 6,240,481 5,355,795 11,657,039
---------- ---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value; 2,500,000 shares
authorized, no shares issued and outstanding.......... -- -- -- --
Common stock, $.01 par value; 17,500,000 shares
authorized, 2,200 and 774,114 issued and outstanding
for June 30, 1994 and June 30, 1995, respectively
(Note 1).............................................. 1,010 7,741 7,741 7,664
Additional paid in capital............................... -- -- -- 397,577
Retained earnings (deficit).............................. 155,153 (2,604,283) (898,743) (7,225,353)
---------- ---------- ---------- ----------
Total stockholders' equity (deficit)....................... 156,163 (2,596,542) (891,002) (6,820,112)
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity (deficit)....... $4,044,786 $3,643,939 $4,464,793 $4,836,927
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-22
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
6 MONTHS ENDED DECEMBER
YEARS ENDED JUNE 30, 31,
---------------------------------------- --------------------------
1993 1994 1995 1994 1995
---------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE..................... $3,354,090 $11,122,297 $24,963,342 $14,049,283 $13,040,332
COST OF TRANSPORTATION................ 619,734 6,445,292 17,513,757 9,735,026 9,518,033
---------- ----------- ----------- ----------- -----------
Gross profit..................... 2,734,356 4,677,005 7,449,585 4,314,257 3,522,299
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 2,723,090 4,856,553 10,297,850 5,132,305 7,552,686
---------- ----------- ----------- ----------- -----------
Operating income (loss).......... 11,266 (179,548) (2,848,265) (818,048) (4,030,387)
---------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Start-up expense (Note 2)........... -- (321,268) -- -- --
Interest expense, net............... -- -- (172,682) (74,783) (157,363)
Other (expense) income, net (Note
9)............................... (5,031) 746,621 263,242 (91,540) 1,732
Restructuring charge (Note 12)...... -- -- -- -- (435,052)
---------- ----------- ----------- ----------- -----------
Income (loss) before (provision
for) benefit from income
taxes.......................... 6,235 245,805 (2,757,705) (984,371) (4,621,070)
(PROVISION FOR) BENEFIT FROM INCOME
TAXES (Note 7)...................... -- (113,860) 65,000 (2,727) --
---------- ----------- ----------- ----------- -----------
Net income (loss)................ $ 6,235 $ 131,945 $(2,692,705) $ (987,098) $(4,621,070)
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-23
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1994 AND 1995 AND FOR THE SIX MONTHS ENDED DECEMBER
31, 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
---------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY (DEFICIT)
---------- -------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1993.................... 1,200 $ 1,000 $ -- $ 103,208 $ 104,208
Issuance of Amerford Domestic, Inc.
shares............................... 1,000 10 -- -- 10
Distributions to stockholders........... -- -- -- (80,000) (80,000)
Net income.............................. -- -- -- 131,945 131,945
---------- -------- ----------- ----------- ----------------
BALANCE, June 30, 1994.................... 2,200 1,010 -- 155,153 156,163
Conversion of Amerford Domestic, Inc.
shares............................... (1,000) (10) -- -- (10)
Issuance of Amertranz shares related to
the Merger
(Notes 1 and 11)..................... 5,400,000 54,000 -- (53,990) 10
Conversion of Integrity Logistics and
Amerford De Caribe shares............ (1,200) (1,000) -- -- (1,000)
Issuance of shares to Amerford De Caribe
stockholders
(Notes 1 and 11)..................... 300,000 3,000 -- (2,000) 1,000
Issuance of shares to Integrity
Logistics stockholders
(Notes 1 and 11)..................... 300,000 3,000 -- (3,000) --
Reverse stock split--1 for 2 (Note
11).................................. (3,000,000) (30,000) -- 30,000 --
Reverse stock split--1 for 3.8754 (Note
12).................................. (2,225,886) (22,259) -- 22,259 --
Distributions to stockholders........... -- -- -- (60,000) (60,000)
Net loss................................ -- -- -- (2,692,705) (2,692,705)
---------- -------- ----------- ----------- ----------------
BALANCE, June 30, 1995.................... 774,114 7,741 -- (2,604,283) (2,596,542)
Sale of common stock.................... 12,902 129 49,871 -- 50,000
Common stock issued upon exercise of
stock options........................ 86,443 864 166,636 -- 167,500
Reverse stock split--1 for 1.27906 (Note
12).................................. (190,568) (1,906) 1,906 -- --
Common stock issued in connection with
Interim Bridge Financing............. 83,571 836 179,164 -- 180,000
Net loss................................ -- -- -- (4,621,070) (4,621,070)
---------- -------- ----------- ----------- ----------------
BALANCE, December 31, 1995 (unaudited).... 766,462 $ 7,664 $ 397,577 $(7,225,353) $ (6,820,112)
---------- -------- ----------- ----------- ----------------
---------- -------- ----------- ----------- ----------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-24
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
6 MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
-------------------------------------- ------------------------
1993 1994 1995 1994 1995
-------- ----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 6,235 $ 131,945 $(2,692,705) $(987,098) $(4,621,070)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities-
Bad debt expense............................. -- 53,336 136,001 155,676 301,791
Depreciation and amortization................ 14,403 19,446 82,948 33,388 83,637
Restructuring expense........................ -- -- -- -- 435,052
Non cash charge for stock options............ -- -- -- -- 30,000
Changes in operating assets and liabilities-
(Increase) decrease in accounts receivable... (148,583) (3,209,318) 750,449 (205,770) (1,259,136)
Decrease (increase) in prepaid expenses and
other current assets....................... 15,351 (70,772) (233,120) (446,980) (58,392)
(Increase) decrease in other assets.......... (4,362) (42,710) (142,852) 2,412 36,539
(Increase) decrease in claim receivable...... -- (170,392) 170,392 170,392 --
(Increase) decrease in due from affiliates... -- (24,632) 16,202 (22,078) --
Increase in accounts payable, accrued
expenses and income tax payable............ 148,538 2,998,697 1,593,353 1,405,608 2,151,221
Increase (decrease) in deferred income....... 116,851 (306,967) -- -- --
Increase in due to affiliates................ -- -- -- 43,799 --
-------- ----------- ----------- --------- -----------
Net cash provided by (used in) operating
activities..................................... 148,433 (621,367) (319,332) 149,349 (2,900,358)
-------- ----------- ----------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (13,459) (201,204) (296,778) (109,103) (239,205)
-------- ----------- ----------- --------- -----------
Net cash used in investing activities............ (13,459) (201,204) (296,778) (109,103) (239,205)
-------- ----------- ----------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders.................. (85,000) (80,000) (60,000) (60,000) --
Net borrowings from loan payable............... -- 690,857 600,992 (7,901) 1,400,405
Payment of loan payable........................ (5,309) (2,906) -- -- --
Proceeds from shareholder loan................. -- -- 140,000 -- 1,139,110
Proceeds from interim bridge loan.............. -- -- -- -- 300,000
Payment of lease obligations................... -- -- (15,546) (7,393) (9,230)
Proceeds from sale of common stock............. -- -- -- -- 50,000
Proceeds from exercise of stock options........ -- -- -- -- 167,500
-------- ----------- ----------- --------- -----------
Net cash provided by (used in) financing
activities..................................... (90,309) 607,951 665,446 (75,294) 3,047,785
-------- ----------- ----------- --------- -----------
Net increase (decrease) in cash and cash
equivalents.................................... 44,665 (214,620) 49,336 (35,048) (91,778)
CASH, beginning of the year...................... 212,397 257,062 42,442 42,442 91,778
-------- ----------- ----------- --------- -----------
CASH, end of the year............................ 257,062 42,442 91,778 7,394 --
-------- ----------- ----------- --------- -----------
-------- ----------- ----------- --------- -----------
SUPPLEMENTAL DATA
CASH PAYMENTS FOR:
Interest....................................... 483 1,726 172,682 74,783 164,890
Income taxes................................... 21,037 6,178 91,332 2,727 --
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital lease
obligation................................... -- -- 33,059 33,059 --
Deferred financing costs associated with the
Interim Bridge Financing..................... $ -- $ -- $ -- $ -- $ 150,000
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-25
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995
1. BUSINESS AND ORGANIZATION
Company Background
On January 13, 1995, Amertranz Worldwide, Inc. ('Amertranz') was
incorporated in the state of Delaware. Effective January 25, 1995, Amerford
Domestic Inc. was merged into Amertranz. On March 3, 1995, Amertranz issued
stock for all of the outstanding shares of Amerford De Caribe Inc. and Integrity
Logistics, Inc. Accordingly, the two entities are presented as wholly-owned
consolidated subsidiaries, and due to the common ownership, are accounted for
similar to a pooling of interests.
Integrity Logistics, Inc. ('Integrity') was incorporated on February 22,
1985, under the laws of the State of New York, to engage principally in the
business of air freight forwarding as an authorized agent for Amerford
International Corp. ('AIC'), an unrelated, wholly-owned subsidiary of Thyssen
Haniel Logistic GmbH.
Amerford De Caribe Inc. ('De Caribe') was incorporated on July 15, 1988,
pursuant to the laws of the Commonwealth of Puerto Rico, to engage principally
in the business of air freight forwarding.
In October 1993 Integrity brought a legal action against AIC wherein it
sought damages of $14 million for breach of contract. In January 1994, this
legal action was settled. As part of the settlement agreement, AIC paid
Integrity $700,000 and granted it a license to use the name 'Amerford' solely in
connection with the domestic air freight business and acquired all of AIC's
domestic air freight forwarding business, including a 20 station network. AIC
further agreed that it would cease its domestic business as of January 31, 1994,
in all cities with the exception of New York, Newark and Chicago. As a result, a
domestic entity called Amerford Domestic Inc. ('Amerford') was created. This new
company was incorporated in the state of New York on February 1, 1994. This
entity was formed to engage principally in the air freight forwarding business
domestically.
Prior to the formation of Amerford, Integrity had been providing freight
service to both domestic and international customers. Subsequent to the
formation of Amerford, Integrity provided international freight service solely
to AIC. On June 1, 1995, Integrity and AIC terminated the agreement to provide
international freight service for AIC.
Equity Structure
As of June 30, 1994, the equity of the Company consisted of 1,000 shares
authorized, issued and outstanding of Amerford common stock with a $.01 par
value, 200 shares authorized, issued and outstanding of Integrity common stock
with no par value and 250,000 shares authorized and 1,000 shares issued and
outstanding of De Caribe common stock with a $1.00 par value. Effective January
15, 1995, Amerford merged into Amertranz and the equity structure was changed as
discussed in Note 11.
In addition, the transport of freight, both domestically and
internationally, is highly competitive and price sensitive. Changes in the
volume of freight transported, shippers preferences as to the timing of
deliveries as a means to control shipping costs, economic and political
conditions, both in the United States and abroad, work stoppages, United States
and foreign laws relating to tariffs, trade restrictions, foreign investments
and taxation may all have a significant impact on the overall business of the
Company, its growth and profitability.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of the Company, as summarized below, are in
conformity with generally accepted accounting principles. 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.
Basis of Presentation
The consolidated financial statements include the accounts of Amertranz
Worldwide, Inc., Integrity Logistics, Inc. and Amerford De Caribe Inc. as of
June 30, 1995. All significant intercompany accounts and transactions have been
eliminated.
F-26
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
As of June 30, 1994, the financial statements combine the accounts of
Integrity, Amerford and De Caribe (collectively the 'Companies'). The companies
are wholly owned by the same three shareholders. All significant intercompany
accounts and transactions have been eliminated.
For the year ended June 30, 1993, the financial statements combine the
accounts of Integrity and De Caribe. All significant intercompany accounts and
transactions have been eliminated.
Revenue Recognition
Revenue from freight forwarding is recognized upon delivery of goods and
expenses associated with the cost of transportation are accrued upon shipment.
Deferred revenue is comprised of advances received prior to the rendering of the
service.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed under
the straight-line method over estimated useful lives ranging from 3 to 8 years.
Assets under capital leases are depreciated over the shorter of the estimated
useful life of the asset or the lease term. The Company utilizes a half-year
convention for assets in the year of acquisition and disposal.
Certain computer software costs related to a substantial revision of the
Company's pre-existing computer system, totaling approximately $111,250 and
$83,450 as of June 30, 1995 and 1994, respectively, have been capitalized and
are being amortized over five years.
Start-up Expenses
Start-up expenses include the costs related to the establishment of the
various offices and locations for Amerford and are expensed as incurred.
Recently Issued Accounting Standards
During March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ('SFAS') No. 121, 'Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of'. This statement establishes financial accounting and reporting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of. This statement is
effective for financial statements for fiscal years beginning after December 15,
1995, although earlier application is encouraged. The Company does not expect
that the adoption of SFAS No. 121 will have a material adverse effect on its
consolidated financial statements.
Income Taxes
As of June 30, 1993 and 1994, Integrity had elected to have its income
taxed under the provisions of Subchapter S of the Internal Revenue Code (the
'Code'). Under the provisions of the Code, the Company is not subject to Federal
corporate income taxes on its taxable income. The stockholders include their pro
rata share of the Company's income in their personal income tax returns. The
Company is, however, subject to certain corporate level state income taxes. No
pro-forma presentation has been presented as the effect would not be material.
For income tax purposes, the Company follows the provisions of Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes'. SFAS 109
requires an asset and liability approach for financial accounting and reporting
for income taxes. Under SFAS 109, deferred taxes are provided for temporary
differences between the carrying value of assets and liabilities for financial
reporting and tax purposes at the enacted rate at which these differences are
expected to reverse.
F-27
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Stock Options
The Company grants stock options to certain officers and related parties.
Compensation expense is recognized based on the aggregate difference between the
fair market value of the Company's stock at the date of issuance and the option
price. Compensation expense is recognized equally over the vesting period.
Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Unaudited Interim Financial Information
The financial statements as of and for the six months ended December 31,
1995 and 1994 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of the financial statements, which are of a
normal recurring nature, for these interim periods have been included. The
results for the interim periods are not necessarily indicative of the results to
be obtained for the full fiscal year.
3. GOING CONCERN
As reflected in the consolidated financial statements, the Company has
experienced a loss, negative cash flows from operations, and negative
stockholders' equity. The Company's continued existence is dependent upon its
ability to achieve and maintain profitable operations. Furthermore, the Company
has signed a letter of intent with an underwriter to provide a bridge financing
in the amount of $2,400,000 to be followed by an initial public offering ('IPO')
in calendar 1996. The Company believes that its cash resources, augmented by
these financings, at year-end will be sufficient to fund the Company's
operations through June 30, 1997 (Note 12).
4. PROPERTY AND EQUIPMENT
Property and equipment, net consist of the following:
<TABLE>
<CAPTION>
AS OF JUNE 30,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Furniture, fixtures and equipment............................................... $277,990 $603,331
Less--Accumulated depreciation and amortization................................. 34,683 113,135
-------- --------
$243,307 $490,196
-------- --------
-------- --------
</TABLE>
5. DEBT
Asset-Based Financing
On March 16, 1995, Amertranz entered into a Purchase and Sale Agreement as
amended July 5, 1995 and October 25, 1995, with a lender whereby it receives
advances of up to 75% of the net amounts of eligible accounts receivable
outstanding to a maximum line of credit of $3,125,000. This loan is subject to
interest at a rate of 4% per annum over the prevailing prime rate (13% at June
30, 1995). At June 30, 1995, the outstanding balance on the line of credit was
$1,291,849, and the interest expense in 1995 was $173,060. In consideration of
the loan, the lender has a security interest in all present and future accounts
receivable, machinery and equipment and other assets.
On April 1, 1994, Amerford entered into a security agreement with a lender
whereby it receives advances of up to 65% of the net amounts of eligible
accounts receivable outstanding to a maximum line of credit of $1,250,000. As of
June 30, 1994, the Company had $690,857 outstanding under this facility. This
loan was subject to interest at a rate of 4% per annum over the prevailing prime
rate. In consideration of the loan, the lender had a security interest in all
present and future accounts receivable, machinery and equipment and other
assets. In March 1995, the outstanding balance on this line was repaid and the
Company entered into the Purchase and Sale Agreement described above.
F-28
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
5. DEBT--(CONTINUED)
Notes Payable to Stockholders
In June 1995, the Company received cash and issued notes payable to an
officer of the Company and that officer's brother totaling $140,000. These notes
are due on June 30, 1996 and accrue interest at 7% annually. These notes are
convertible into common stock of Amertranz at a conversion rate of one share for
each $4.96 (after giving retroactive effect to all reverse stock splits) in
principal and interest.
6. COMMITMENTS AND CONTINGENCIES
Leases
Future minimum lease payments for capital leases and operating leases
relating to equipment and rental premises are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
Year ending
1996................................................................. $ 24,053 $ 641,418
1997................................................................. 24,053 608,473
1998................................................................. 13,232 401,677
1999................................................................. 6,456 246,117
2000................................................................. -- 106,096
-------------- ----------------
Total minimum lease payments...................................... 67,794 $2,003,781
----------------
----------------
Less--Amount representing interest................................ 9,490
--------------
$ 58,304
--------------
--------------
</TABLE>
Rent expense for the years ended June 30, 1993, 1994 and 1995 was $162,055,
$311,222 and $609,850, respectively.
Employment Agreements
The Company has employment agreements with certain employees expiring at
various times through July 2000. Such agreements provide for minimum salary
levels and for incentive bonuses which are payable if specified management goals
are attained. The aggregate commitment for future salaries at June 30, 1995,
excluding bonuses, was approximately $1,503,000.
Litigation
The Company has been named as a defendant in a lawsuit initiated by a
trustee in bankruptcy of a company with whom the Company engaged in discussions
concerning a prospective business combination during 1994. The complaint seeks
damages in excess of $11 million for various alleged causes of action. The
Company has retained bankruptcy litigation counsel to review the substance of
the complaint. In the opinion of management, the lawsuit is substantially
without merit and the probability of any material loss is extremely small.
7. INCOME TAXES
State and city minimum and capital taxes were immaterial for the year ended
June 30, 1995.
The Company has a net operating loss ('NOL') carryforward for income tax
purposes which is available to offset future taxable income through 2010. At
June 30, 1995, this NOL carryforward was $2,218,711. A valuation allowance of
$754,362 has been recorded by the Company for the deferred tax asset generated
by the NOL.
The provision for Amerford income taxes consisted of $76,435 for federal
taxes and $25,347 for state and city income taxes for the year ended June 30,
1994. In addition, Integrity had elected S Corporation status and remained
liable for New York State Subchapter S taxes which were approximately $12,078
for the year ended June 30, 1994.
F-29
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
7. INCOME TAXES--(CONTINUED)
No pro-forma presentation has been presented for the year ended June 30,
1993 as the effect would not be material.
The components of the provision for (benefit from) income taxes are as
follows:
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------
1994 1995
-------- ---------
<S> <C> <C>
Federal:
Current...................................................................... $ 76,435 $ (65,000)
Deferred..................................................................... -- --
State:
Current...................................................................... 37,425 --
Deferred..................................................................... -- --
-------- ---------
Provision for (benefit from) income taxes.................................... $113,860 $ (65,000)
-------- ---------
-------- ---------
</TABLE>
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
1994 1995
-------- ---------
<S> <C> <C>
Tax at statutory rate.......................................................... $ 20,138 $(841,194)
Add (deduct) the effect of:
State income taxes net of federal benefit.................................... 29,314 --
Non-deductible expenses and other, net....................................... 3,344 57,310
Valuation allowance.......................................................... 61,064 718,884
-------- ---------
$113,860 $ (65,000)
-------- ---------
-------- ---------
</TABLE>
Deferred income taxes arise from temporary differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. Deferred income tax liability components are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1994 1995
-------- ---------
<S> <C> <C>
Deferred tax assets:
Tax benefit of net operating loss carryforwards.............................. $ -- $ 754,362
Allowances and certain accrued expenses accrued expenses..................... 61,064 47,327
Other........................................................................ -- 34,186
-------- ---------
Total deferred tax assets...................................................... 61,064 835,875
Valuation allowance............................................................ (61,064) (835,875)
-------- ---------
Net deferred taxes............................................................. $ -- $ --
-------- ---------
-------- ---------
</TABLE>
8. CLAIM RECEIVABLE
In 1994, Amerford had recorded a receivable for funds which were paid to
the Company's lender but were erroneously applied to another company's account
and an allowance against the receivable in the amount of $108,524 related to
potential legal expenses. During fiscal year 1995, the Company collected this
amount and has included it in other income.
9. INCOME FROM SETTLEMENT
In October 1993, Integrity (as discussed in Note 1) brought a legal action
against AIC, wherein it sought damages of $14 million for breach of contract. In
January 1994, this legal action was settled. As part of the
F-30
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
9. INCOME FROM SETTLEMENT--(CONTINUED)
settlement agreement, AIC paid IL $700,000. This amount is included, net of
legal expenses, in other income (expense), net.
10. OTHER RELATED PARTY TRANSACTIONS
The Company enters into transactions in the normal course of business with
another corporation whose officer is also an officer of the Company. As of June
30, 1995 and 1994, amounts due from this other related party totaled $28,735 and
$16,203, respectively.
11. STOCKHOLDERS' EQUITY
Merger and Share Exchange
Effective January 25, 1995, Amerford merged into Amertranz. Each one of the
1,000 outstanding shares of Amerford (which represented all shares authorized)
was converted into 5,400 common shares of Amertranz, for a total of 5,400,000
common shares.
On March 3, 1995, the Company issued 600,000 shares of common stock
(300,000 for each entity) to the three shareholders of Integrity and De Caribe,
in exchange for all the outstanding stock of these companies.
As a result of the merger and share exchange described above, there is a
charge to the accumulated deficit of $58,990 at June 30, 1995. These
transactions were accounted for similar to a pooling of interests because of the
common ownership, and accordingly, are presented as if they were a consolidated
group as of July 1, 1994.
Reverse Stock Split
On June 29, 1995, the Board of Directors of the Company declared a 2 for 1
reverse stock split for all issued and outstanding shares. The split became
effective upon the Company's receipt of proceeds of borrowings aggregating
$1,500,000 from officers and directors of the Company and other lenders (Note
12). The consolidated financial statements have been prepared giving retroactive
effect to the stock split.
Stock Options
In June 1995, the Company granted options to purchase common stock to
certain key officers of the Company pursuant to board resolutions at exercise
prices ranging from $1.94 to $3.87. The vesting period of the options varies
from 2 to 4 years. The exercise price with respect to all of the options granted
was at least equal to the fair market value of the underlying common stock on
the grant date.
12. SUBSEQUENT EVENTS
Debt
Amertranz signed a letter of intent on May 10, 1995 to combine its business
with the air freight forwarding business and specific assets of Caribbean
Freight Systems, Inc. and TIA, Inc. ('CFS') and finalized an agreement.
Subsequent to year-end, TIA, Inc. has lent the Company an aggregate of $800,000
bearing an interest rate of 12% per annum and repayable in 12 equal, consecutive
monthly payments of principal and interest commencing 30 days subsequent to the
IPO. The $800,000 aggregate TIA, Inc. loan is secured by a lien on all of the
Amertranz assets subordinated only to the lien granted in connection with the
asset-based financing.
On November 20, 1995, Amertranz entered into a letter of intent with an
underwriter to provide bridge financing in the amount of $2,775,000 to be
followed by an IPO expected to take place in the second quarter of 1996.
Furthermore, subsequent to June 30, 1995, the Company received approximately
$1,900,000 from officers and directors of the Company and other unaffiliated
lenders, to be repaid within one year at interest rates varying from 7% to 12%.
Between November 1995 and January 1996 the Company obtained interim
financing and issued $350,000 in aggregate principal amount of promissory notes
('Interim Notes') as well as 67,606 shares of common stock (effected for all
reverse splits). Repayment of the principal amount due under the Interim Notes,
together with interest at the rate of 12% per annum, is due upon the earlier to
occur of (i) the closing of an initial public
F-31
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1993, 1994 AND 1995
12. SUBSEQUENT EVENTS--(CONTINUED)
offering, (ii) February 7, 1998, or (iii) a sale or merger of the Company. As of
December 31, 1995, the Company had received $300,000 in proceeds from the
Interim Notes and had issued 57,948 in common stock. The Company has recorded a
deferred financing charge of $150,000 in connection with the issuance of the
stock, and will amortize the amount over the life of the related debt.
Stockholder's Equity
An officer and member of the Board of Directors purchased, as a nominee for
Amertranz, substantially all of the outstanding shares of Concord Express, BVBA,
a Belgium company. Upon completion of the merger of the Company with CFS, these
shares will be contributed to the Company.
On December 5, 1995, the Board of Directors resolved to further reduce the
number of shares of its common stock presently issued and outstanding and the
number of shares issuable upon exercise of options, by means of a reverse stock
split, whereby each 3.8754 share of common stock is exchanged for one share of
common stock. In addition, on February 6, 1996, the Company declared a 1.27906
reverse stock split for all issued and outstanding shares.
In December 1995, the Company granted 800,000 options to purchase common
stock to parties that served as finders on behalf of the Company in the
transaction with CFS at an exercise price of $.01 par value. The options after
giving effect to all reverse splits total 80,696 options. The Company has
recorded a non cash charge of $30,000 in connection with the granting of the
options.
Restructuring Charge
Due to the reduction of international operations, the Company has written
off advances which were made as start-up funds for a Brazilian affiliate as part
of the international operations. The Company does not expect to realize such
advances and has accordingly recorded a charge of $435,052 for the six months
ended December 31, 1995.
F-32
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1995 has been prepared to reflect the combined results of The
Freight Forwarding Business of TIA and CFS and Amertranz Worldwide, Inc.
('Amertranz') business as if the Combination had been effective as of January 1,
1995, without giving effect to the Offering. The pro forma data for 1995
represents a period when The Freight Forwarding Business of TIA and CFS and
Amertranz were not under common control or management. The pro forma financial
information is unaudited and not necessarily indicative of the consolidated
results which actually would have occurred if the Combination had been
consummated at the beginning of the period presented, nor does it purport to
represent the future financial position and results of operations for future
periods.
F-33
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
AMERTRANZ PRO FORMA
THE FREIGHT WORLDWIDE, INC. AMERTRANZ
FORWARDING BUSINESS AND PRO FORMA WORLDWIDE
OF TIA AND CFS SUBSIDIARIES ADJUSTMENTS HOLDING, CORP.
------------------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue........................... $38,211,306 $23,954,391 $ -- $ 62,165,697
Cost of transportation...................... 30,300,476 17,296,764 -- 47,597,240
------------------- --------------- ----------- --------------
Gross profit............................. 7,910,830 6,657,627 -- 14,568,457
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................... 4,513,154 12,718,231 -- 17,231,385
AMORTIZATION OF GOODWILL...................... -- -- 483,688(a) 483,688
------------------- --------------- ----------- --------------
Operating income......................... 3,397,676 (6,060,604) (483,688) (3,146,616)
RESTRUCTURING CHARGE.......................... -- (435,052) -- (435,052)
INTEREST EXPENSE.............................. (1,155,215) (255,262) 355,215(b) (1,055,262)
OTHER INCOME.................................. 123,668 356,514 -- 480,182
------------------- --------------- ----------- --------------
NET INCOME.................................... $ 2,366,129 $(6,394,404) $(128,473) $ (4,156,748)
------------------- --------------- ----------- --------------
------------------- --------------- ----------- --------------
NET LOSS PER SHARE............................ $ (1.25)
</TABLE>
The accompanying notes and management's assumptions to the
pro forma consolidated statement of operations are an integral part of this
statement.
F-34
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
As a result of the February 1996 combination, Amertranz Worldwide, Inc. and
Subsidiaries and Caribbean Air Services, Inc. became wholly-owned subsidiaries
of Amertranz Worldwide Holding Corp. (the 'Company').
The accompanying unaudited pro forma statement of operations data reflects
the combined results of The Freight Forwarding Business of TIA and CFS and the
Amertranz business as if the Combination had been effective as of January 1,
1995, without giving effect to the Offering.
This pro forma financial statement should be read in conjunction with the
historical financial statements and notes thereto of The Freight Forwarding
Business of TIA and CFS and Amertranz Worldwide, Inc. and subsidiaries as of
December 31, 1995. In management's opinion, all material adjustments necessary
to reflect the effects of the Combination have been made.
The unaudited pro forma consolidated statement of operations is not
necessarily indicative of what actual results of operations of the Company would
have been assuming the Combination had been completed as of January 1, 1995, nor
is it necessarily indicative of the results of operations for future periods.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(a) To reflect amortization expense for goodwill over a 25 year useful
life.
(b) To reflect a reduction in interest expense to the amount of interest
due on the exchange note had it been outstanding for the full year.
F-35
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS
SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Dilution....................................... 11
Use of Proceeds................................ 12
Capitalization................................. 13
Dividend Policy................................ 13
Selected Consolidated Financial Data........... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 15
Business....................................... 22
Management..................................... 28
Historical Background.......................... 33
Certain Transactions........................... 34
Principal Stockholders......................... 37
Description of Securities...................... 38
Shares Eligible for Future Sale................ 40
Underwriting................................... 41
Selling Securityholders and Plan of
Distribution................................. 42
Legal Matters.................................. 46
Experts........................................ 46
Available Information.......................... 46
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[Logo]
1,750,000 SHARES OF COMMON STOCK
AND
1,750,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
---------------------
PROSPECTUS
---------------------
GKN Securities
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[Logo] This Prospectus is printed on recycled paper using soy-based inks.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by the Company in
connection with the offering described in this Registration Statement. All of
such amounts (except the SEC Registration Fee, the NASD Filing Fee and the
Nasdaq SmallCap Listing Fee) are estimated.
<TABLE>
<S> <C>
SEC Registration Fee.......................................... $
NASD Filing Fee...............................................
Nasdaq SmallCap Listing Fee...................................
Printing Expense..............................................
Legal Fees and Expenses.......................................
Accounting Fees and Expenses..................................
Blue Sky Fees and Expenses....................................
Stock Certificates and Transfer Agent Fees....................
Miscellaneous.................................................
--------
Total.................................................... $
--------
--------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws provide that the Company shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all person whom it may
indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by them in connection with any action, suit or proceeding brought by third
parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Seventh of the Company's Certificate of Incorporation provides that
the Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (a) for any breach of the duty of loyalty to the
Company or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law of the State of Delaware, which makes
directors liable for unlawful dividends or unlawful stock repurchases or
redemptions, or (d) for transactions from which directors derive improper
personal benefit.
Section of the Underwriting Agreement filed as Exhibit 1.1 provides that
the Underwriter named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act. Section
of such Underwriting Agreement also provides that such Underwriter will
contribute to certain liabilities of such persons under the
II-1
<PAGE>
Securities Act. The Company also expects to obtain director and officer
insurance coverage concurrently with the consummation of the Offering.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the Securities
Act.
Martin Hoffenberg, Philip S. Rosso, Jr. and S. Gary Friedman were the
founders and sole shareholders of Integrity Logistics, Inc., Amertranz Worldwide
de Caribe, Inc. and Amerford Domestic, Inc. In March, 1995, each of Messrs.
Hoffenberg, Rosso and Friedman exchanged all of their shares in Integrity
Logistics, Inc., Amertranz Worldwide de Caribe, Inc. and Amerford Domestic,
Inc., for 6,000,000 shares of Amertranz. Subsequently, Mr. Friedman transferred
all of his shares of Amertranz to Mr. Rosso. On February 7, 1996, as part of the
Combination, these shares were exchanged for 605,220 shares of Common Stock
which were subsequently adjusted as of such date to 425,904 shares of Common
Stock. These transactions were effected without registration of the Common Stock
under the Securities Act in reliance upon the exemptions provided by Section
4(2) of the Securities Act. Each of Messrs. Hoffenberg and Rosso made
representations to the Company with respect to his purchase to the effect that
it was made (i) for his or her own account and (ii) without a view to
distribution.
In August 1995 Amertranz sold 100,000 shares of its common stock, par value
$.01 per share, to Barrett Fisher, an accredited investor, for $50,000. On
February 7, 1996, those shares were exchanged for 10,087 shares of Common Stock
which were subsequently adjusted as of such date to 7,098 shares of Common
Stock. This transaction was effected without registration of the Common Stock
under the Securities Act in reliance upon the exemptions provided by Section
4(2) of the Securities Act. Mr. Fisher made representations to the Company with
respect to his purchase (pursuant to the exchange of shares) to the effect that
it was made (i) for his or her own account and (ii) without a view to
distribution.
Between June 1995 and January 1996, Amertranz borrowed $1,379,110 in net
aggregate principal amount from accredited investors in a private offering in
return for notes convertible into Amertranz common stock. In addition, certain
of these lenders received options to purchase shares of Amertranz common stock
at $.50 per share. In October and November 1995 Amertranz sold 335,000 shares of
its common stock to those accredited investors who exercised their options.
Thereafter, on February 7, 1996 the holders of all such convertible promissory
notes assigned their notes and the 335,000 shares of Amertranz common stock
which were issued upon their exercise of such options to the Company, in
exchange for an aggregate of 421,572 shares of Common Stock, which were
subsequently adjusted as of February 7, 1996 to 296,669 shares of Common Stock.
The exchange of such convertible promissory notes and shares of Amertranz common
stock for shares of Common Stock was effected without registration under the
Securities Act in reliance upon the exemption provided by Section 4(2) of the
Securities Act. Each of the accredited investors made representations to the
Company with respect to such person's purchase to the effect that is was made
(i) for his own account and (ii) without a view to distribution.
Between November 1995 and and January 1996, Amertranz issued 96,071 shares
of its common stock, par value $.01 per share, to accredited investors from whom
it had borrowed $350,000. These Amertranz shares were exchanged for 96,071
shares of Common Stock of the Company on February 7, 1996, which were
subsequently adjusted as of such date to 67,606 shares of Common Stock. This
issuance of shares of Common Stock was effected without registration under the
Securities Act in reliance upon the exemptions provided by Section 4(2) of the
Securities Act. Each of such accredited investors made representations to the
Company with respect to such person's purchase to the effect that it was made
(i) for his or her own account and (ii) without a view to distribution.
In February 1996, the Company issued an aggregate of $2.775 million in
principal amount of its secured promissory notes, 416,250 shares of Common
Stock, and warrants to purchase an aggregate of 832,500 shares of Common Stock.
Such notes bear interest at a rate of 10% per annum through April 30, 1996, and
thereafter at a rate of 15% per annum. In May 1996, the Company issued an
aggregate of $1.2 million in principal amount of its secured promissory notes,
240,000 shares of Common Stock, and warrants to purchase an aggregate of 480,000
shares of Common Stock. Such notes bear interest at a rate of 15% per annum.
Pursuant to the terms of the
II-2
<PAGE>
subscription agreements used in connection with these issuances, the warrants
which were issued are identical to the Warrants and are being registered hereby
by the Company on behalf of the holders thereof. The Underwriter acted as
Placement Agent for the February Bridge Financing and received as compensation
therefor 10% of the aggregate proceeds and a nonaccountable expense allowance of
3% of the aggregate proceeds therefrom. The Underwriter acted as Placement Agent
for $500,000 of the May Bridge Financing and received $50,000 as a commission
and nonaccountable expense allowance. These transactions were effected without
registration under the Securities Act in reliance upon the exemptions provided
by Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
As part of the Combination, the Company issued an aggregate of 1,950,000
shares of Common Stock to TIA and CFS on February 7, 1996, which were
subsequently adjusted as of such date to 2,100,000 shares of Common Stock. As
part of the Combination, the Company also issued to TIA and CFS the Exchange
Note in original principal amount of $10,000,000, of which $2,000,000 in
principal amount was exchanged as of such date for 200,000 shares of the
Company's Class A Preferred Stock. These transactions were effected without
registration under the Securities Act in reliance upon the exemption provided by
Section 4(2) of the Securities Act. Each of ITA and CFS made representations to
the Company with respect to each such purchase to the effect that it was made
(i) for its own account and (ii) without a view to distribution.
In December 1995 Amertranz issued to three accredited investors options to
purchase 400,000 shares of Amertranz common stock at an exercise price of $.01
per share in consideration for services rendered in connection with the
Combination. On February 7, 1996 the investors exchanged these options for an
aggregate of 80,696 options to purchase shares of Common Stock at $.01 per
share. The investors immediately exercised their options on such date and the
Company issued to them an aggregate of 80,696 shares of its Common Stock which
were subsequently adjusted as of February 7, 1996 to 56,787 shares of Common
Stock. The issuance of shares of Common Stock of the Company to such investors
was effected without registration under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act. Each of the accredited
investors made representations to the Company with respect to his purchase to
the effect that it was made (i) for his own account and (ii) without a view to
distribution.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between Amertranz Worldwide Holding Corp. and GKN Securities Corp.
1.2 Form of Selected Dealers Agreement
3.1 Certificate of Incorporation of AmerTranz Worldwide Holding Corp., as amended
3.2 By-Laws of Amertranz Worldwide Holding Corp.
4.1 Specimen Common Stock certificate*
4.2 Specimen Warrant certificate*
4.3 Form of Warrant Agent Agreement
4.4 Form of Underwriter's Purchase Option
5.1 Opinion of Ferber Greilsheimer Chan & Essner as to legality of Common Stock*
10.1 1996 Stock Option Plan of Amertranz Worldwide Holding Corp.
10.2 Purchase and Sale Agreement dated March 16, 1995, between Amertranz Worldwide, Inc. and Fidelity Funding
of California, Inc., as amended July 5, 1995, October 25, 1995, and February 7, 1996*
10.3 Form of 7% Convertible Subordinated Promissory Notes of Amertranz Worldwide, Inc. and form of document
evidencing the exchange thereof for shares of Common Stock, $.01 par value, of Amertranz Worldwide
Holding Corp.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------------------------------
<S> <C>
10.4 Form of 9 3/4% Convertible Subordinated Promissory Notes of Amertranz Worldwide, Inc. and form of
document evidencing the exchange thereof for shares of Common Stock, $.01 par value, of Amertranz
Worldwide Holding Corp.*
10.5 Loan and Security Agreement dated October 25, 1995 between Amertranz Worldwide, Inc. and TIA, Inc., as
amended January 24, 1996
10.6 Form of Amended and Restated Promissory Note of Amertranz Worldwide, Inc. payable to TIA, Inc. in
principal amount of $800,000
10.7 Form of 12% Subordinated Promissory Notes of Amertranz Worldwide, Inc. and form of document evidencing
the exchange thereof for Notes of Amertranz Worldwide Holding Corp. on the same terms and conditions*
10.8 Assets Exchange Agreement dated February 7, 1996 among Amertranz Worldwide Holding Corp., Caribbean Air
Services, Inc., Amertranz Worldwide, Inc., Caribbean Freight Systems, Inc. and TIA, Inc.
10.9 Revolving Credit Promissory Note dated February 7, 1996 of Caribbean Air Services, Inc. payable to TIA,
Inc. and Caribbean Freight Systems, Inc. in the principal amount of $4,000,000
10.10 Promissory Note dated February 7, 1996 of Amertranz Worldwide Holding Corp. payable to TIA, Inc. and
Caribbean Freight Systems, Inc. in the principal amount of $10,000,000*
10.11 Consulting Agreement dated February 7, 1996 among Amertranz Worldwide Holding Corp., Amertranz
Worldwide, Inc. and Martin Hoffenberg*
10.12 Employment Agreement dated September 27, 1994 between Amerford Domestic, Inc. and Bruce Brandi, as
modified February 7, 1996*
10.13 Employment Agreement dated , 1996 between Amertranz Worldwide Holding Corp. and Stuart
Hettleman*
10.14 Employment Agreement dated , 1996 between Amertranz Worldwide Holding Corp. and Richard A.
Faieta*
10.15 Cargo Aircraft Charter Agreement dated February 28, 1994 between TIA, Inc. and Florida West Airlines,
Inc., as amended and assigned November 29, 1995*
10.16 Lease Agreement dated March 31, 1994 between The Equitable Life Assurance Society of the U.S. and
Integrity Logistics, Inc. for the premises at 2001 Marcus Avenue, Lake Success, New York*
10.17 Lease Agreement dated August 7, 1990 between S Partners and Caribbean Freight Systems, Inc. for the
premises at 7001 Cessna Drive, Greensboro, North Carolina, as amended and extended April 9, 1994*
21. Subsidiaries of Amertranz Worldwide Holding Corp.*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Ferber Greilsheimer Chan & Essner (Contained in Exhibit 5.1)*
24. Power of Attorney (included in the signature page of the original filing of this Registration Statement)
</TABLE>
- ------------------
* To be filed by amendment
(B) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 14, or
II-4
<PAGE>
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(2) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, New York, on
the 5th of June, 1996.
AMERTRANZ WORLDWIDE HOLDING CORP.
By: _______/s/ STUART HETTLEMAN_______
STUART HETTLEMAN
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------------- -------------
<C> <S> <C>
/s/ STUART HETTLEMAN Director, President, Chief Executive Officer, June 5, 1996
STUART HETTLEMAN Chief Financial Officer and Principal Accounting
Officer
* Director and Executive Vice President June 5, 1996
RICHARD FAIETA
* Director and Vice President June 5, 1996
MICHAEL BARSA
*By: /s/ STUART HETTLEMAN June 5, 1996
STUART HETTLEMAN
Attorney-in-fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement between Amertranz Worldwide Holding Corp. and GKN Securities Corp.
1.2 Form of Selected Dealers Agreement
3.1 Certificate of Incorporation of AmerTranz Worldwide Holding Corp., as amended
3.2 By-Laws of Amertranz Worldwide Holding Corp.
4.1 Specimen Common Stock certificate*
4.2 Specimen Warrant certificate*
4.3 Form of Warrant Agent Agreement
4.4 Form of Underwriter's Purchase Option
5.1 Opinion of Ferber Greilsheimer Chan & Essner as to legality of Common Stock*
10.1 1996 Stock Option Plan of Amertranz Worldwide Holding Corp.
10.2 Purchase and Sale Agreement dated March 16, 1995, between Amertranz Worldwide, Inc. and Fidelity
Funding of California, Inc., as amended July 5, 1995, October 25, 1995, and February 7, 1996*
10.3 Form of 7% Convertible Subordinated Promissory Notes of Amertranz Worldwide, Inc. and form of
document evidencing the exchange thereof for shares of Common Stock, $.01 par value, of Amertranz
Worldwide Holding Corp.
10.4 Form of 9 3/4% Convertible Subordinated Promissory Notes of Amertranz Worldwide, Inc. and form of
document evidencing the exchange thereof for shares of Common Stock, $.01 par value, of Amertranz
Worldwide Holding Corp.*
10.5 Loan and Security Agreement dated October 25, 1995 between Amertranz Worldwide, Inc. and TIA,
Inc., as amended January 24, 1996
10.6 Form of Amended and Restated Promissory Note of Amertranz Worldwide, Inc. payable to TIA, Inc. in
principal amount of $800,000
10.7 Form of 12% Subordinated Promissory Notes of Amertranz Worldwide, Inc. and form of document
evidencing the exchange thereof for Notes of Amertranz Worldwide Holding Corp. on the same terms
and conditions*
10.8 Assets Exchange Agreement dated February 7, 1996 among Amertranz Worldwide Holding Corp.,
Caribbean Air Services, Inc., Amertranz Worldwide, Inc., Caribbean Freight Systems, Inc. and TIA,
Inc.
10.9 Revolving Credit Promissory Note dated February 7, 1996 of Caribbean Air Services, Inc. payable
to TIA, Inc. and Caribbean Freight Systems, Inc. in the principal amount of $4,000,000
10.10 Promissory Note dated February 7, 1996 of Amertranz Worldwide Holding Corp. payable to TIA, Inc.
and Caribbean Freight Systems, Inc. in the principal amount of $10,000,000
10.11 Consulting Agreement dated February 7, 1996 among Amertranz Worldwide Holding Corp., Amertranz
Worldwide, Inc. and Martin Hoffenberg*
10.12 Employment Agreement dated September 27, 1994 between Amerford Domestic, Inc. and Bruce Brandi,
as modified February 7, 1996*
10.13 Employment Agreement dated , 1996 between Amertranz Worldwide Holding Corp. and
Stuart Hettleman*
10.14 Employment Agreement dated , 1996 between Amertranz Worldwide Holding Corp. and
Richard A. Faieta*
10.15 Cargo Aircraft Charter Agreement dated February 28, 1994 between TIA, Inc. and Florida West
Airlines, Inc., as amended and assigned November 29, 1995*
10.16 Lease Agreement dated March 31, 1994 between The Equitable Life Assurance Society of the U.S. and
Integrity Logistics, Inc. for the premises at 2001 Marcus Avenue, Lake Success, New York*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------------------------------- ----
<S> <C> <C>
10.17 Lease Agreement dated August 7, 1990 between S Partners and Caribbean Freight Systems, Inc. for
the premises at 7001 Cessna Drive, Greensboro, North Carolina, as amended and extended April 9,
1994*
21. Subsidiaries of Amertranz Worldwide Holding Corp.*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Ferber Greilsheimer Chan & Essner (Contained in Exhibit 5.1)*
24. Power of Attorney (included in the signature page of the original filing of this Registration
Statement)
</TABLE>
- ------------------
* To be filed by amendment
UNDERWRITING AGREEMENT
between
AMERTRANZ WORLDWIDE HOLDING, CORP.
and
GKN SECURITIES CORP.
Dated: ________________, 1996
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
1,750,000 Shares of Common Stock
and
1,750,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
New York, New York
_______________, 1996
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
Ladies and Gentlemen:
The undersigned, AmerTranz Worldwide Holding Corp., a Delaware
corporation ("Company"), hereby confirms its agreement with GKN Securities Corp.
(being referred to herein variously as "you" or the "Underwriter"), as follows:
Purchase and Sale of Securities.
Firm Securities.
Purchase of Firm Securities. On the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the Underwriter and the
Underwriter agrees to purchase from the Company, 1,750,000 shares of the
Company's Common Stock, par value $.001 per share ("Common Stock"), at a
purchase price of $6.00 per share (or $5.46 per share net of commissions), and
1,750,000 Redeemable Common Stock Purchase Warrants ("Warrant(s)") at a purchase
price of $.10 per Warrant (or $.09 per Warrant net of commissions), each Warrant
to purchase one share of Common Stock at an initial exercise price of $6.00 per
share commencing on the Effective Date (as defined hereinafter) and ending on
the four-year anniversary of the Effective Date (such shares of Common Stock and
Warrants being referred to herein as the "Firm Securities").
Payment and Delivery. Delivery and payment for the Firm Securities shall be
made at 10:00 A.M., New York time, on the third business day following the day
that trading commences for the Firm Securities or at such earlier time as the
Underwriter shall determine, or at such other time as shall be agreed upon by
the Underwriter and the Company, at the offices of the Underwriter or at such
other place as shall be agreed upon by the Underwriter and
2
<PAGE>
the Company. The hour and date of delivery and payment for the Firm Securities
are called the "Closing Date." Payment for the Firm Securities shall be made on
the Closing Date at the Underwriter's election by certified or bank cashier's
check(s) in New York Clearing House funds, payable to the order of the Company
upon delivery to you of certificates (in form and substance satisfactory to the
Underwriter) representing the Firm Securities for the account of the
Underwriter. The Firm Securities shall be registered in such name or names and
in such authorized denominations as the Underwriter may request in writing at
least two full business days prior to the Closing Date. The Company will permit
the Underwriter to examine and package the Firm Securities for delivery at least
one full business day prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Securities except upon tender of payment
by the Underwriter for all the Firm Securities.
Over-Allotment Option.
Option Securities. For the purposes only of covering any over-allotments in
connection with the distribution and sale of the Firm Securities, the
Underwriter is hereby granted an option to purchase up to an additional 225,000
shares of Common Stock and an option to purchase up to an additional 225,000
Warrants from the Company ("Over-allotment Option"). Such additional 225,000
shares of Common Stock and 225,000 Warrants are hereinafter referred to as the
"Option Securities." The Firm Securities and the Option Securities are, together
with the shares of Common Stock issuable upon exercise of the Warrants,
hereinafter referred to collectively as the "Public Securities." The purchase
price to be paid for the Option Securities will be the same price per Option
Security as the price per Firm Security set forth in Section 1.1.1 hereof.
Exercise of Option. The Over-allotment Option granted pursuant to Section
1.2.1 hereof may be exercised by the Underwriter as to all or any part of the
Option Securities at any time, from time to time, within forty-five days
after the effective date of the Registration Statement ("Effective Date"). The
Underwriter will not be under any obligation to purchase any Option Securities
prior to the exercise of the Over-allotment Option. The Over- allotment Option
granted hereby may be exercised by the giving of oral notice to the Company from
the Underwriter, which must be confirmed by a letter or telecopy setting forth
the number and type of Option Securities to be purchased, the date and time for
delivery of and payment for the Option Securities and stating that the Option
Securities referred to therein are to be used only for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm
Securities. If such notice is given at least two full business days prior to the
Closing Date, the date set forth therein for such delivery and payment will be
the Closing Date. If such notice is given thereafter, the date set forth therein
for such delivery and payment will not be earlier than five full business days
after the date of the notice unless otherwise agreed to by the Underwriter and
the Company. If such delivery and payment for the Option Securities does not
occur on the Closing Date, the date and time of the closing for such Option
Securities will be as set forth in the notice (hereinafter the "Option Closing
Date"). Upon exercise of the Over- allotment Option, the Company will become
obligated to convey to the Underwriter, and, subject to the terms and conditions
set forth herein, the Underwriter will become obligated to purchase, the number
of Option Securities specified in such notice.
3
<PAGE>
Payment and Delivery. Payment for the Option Securities will be at the
Underwriter's election by certified or bank cashier's check(s) in New York
Clearing House funds, payable to the order of the Company at the offices of the
Underwriter or at such other place as shall be agreed upon by the Underwriter
and the Company upon delivery to you of certificates representing such
securities for the account of the Underwriter. The certificates representing the
Option Securities to be delivered will be in such denominations and registered
in such names as the Underwriter requests not less than two full business days
prior to the Closing Date or the Option Closing Date, as the case may be, and
will be made available to the Underwriter for inspection, checking and packaging
at the aforesaid office of the Company's transfer agent or correspondent not
less than one full business day prior to such Closing Date.
Underwriter's Purchase Option.
Purchase Option. The Company hereby agrees to issue and sell to the
Underwriter (and/or its designees) on the Closing Date, in exchange for a check
in the amount of $100, an option ("Underwriter's Purchase Option") to purchase
up to an aggregate of 175,000 shares of Common Stock ("Underwriter's Shares") at
an initial exercise price of $6.60 per share and an option to purchase up to an
aggregate of 175,000 Warrants ("Underwriter's Warrants") at an initial exercise
price of $.11 per Underwriter's Warrant. The Underwriter's Purchase Option is
exercisable for a four-year period commencing on the one-year anniversary of the
Effective Date. The Underwriter's Purchase Option, the Underwriter's Shares, the
Underwriter's Warrants and the shares of Common Stock issuable upon exercise of
the Underwriter's Warrants are hereinafter referred to collectively as the
"Underwriter's Securities." The Public Securities and the Underwriter's
Securities are hereinafter referred to collectively as the "Securities."
Payment and Delivery. Delivery and payment for the Underwriter's Purchase
Option in the names and denominations designated by the Underwriter shall be
made on the Closing Date.
Representations and Warranties of the Company. The Company represents
and warrants to the Underwriter as follows:
Filing of Registration Statement.
Pursuant to the Act. The Company has filed with the Securities and Exchange
Commission ("Commission") a registration statement and an amendment or
amendments thereto, on Form S-1 (Reg. No. 333-03613), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Public Securities under the Securities Act of 1933, as amended ("Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations ("Regulations") of the Commission under the Act. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "Registration
Statement," and the form of the final prospectus dated the Effective Date (or,
if applicable, the
4
<PAGE>
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration Statement
will be declared effective by the Commission on the date hereof.
Pursuant to the Exchange Act. The Company has filed with the Commission a
registration statement on Form 8-A (File No. __-_____) providing for the
registration under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), of the Public Securities. Such registration of the Public Securities will
be declared effective by the Commission on the date hereof.
No Stop Orders, Etc. Neither the Commission nor, to the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
Disclosures in Registration Statement. At the time the Registration
Statement became effective and at all times subsequent thereto up to the Closing
Date:
Securities Act Representation and 10b-5 Representation. The Registration
Statement and the Prospectus will contain, with respect to the Company,
Caribbean air Services, Inc. ("CAS") and AmerTranz Worldwide, Inc.
("AmerTranz"), all material statements which are required to be stated therein
in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations. Neither the
Registration Statement, nor any amendment or supplement thereto, on the
Effective Date, contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and that on the Closing Date, the
Prospectus and any amendment or supplement thereto will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. When any
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Securities or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus and any amendments thereof and supplements thereto,
at the time such filing was made, complied in all material respects with the
applicable provisions of the Act and the Regulations. The representation and
warranty made in this Section 2.3.1 does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company by the Underwriter expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto ("Underwriter's Information"). The parties acknowledge that the section
of the Prospectus entitled "Underwriting" constitutes the only Underwriter's
Information.
Disclosure of Contracts. The description in the Registration Statement and
the Prospectus of contracts and other documents is accurate and presents fairly
the information required to be disclosed and there are no contracts or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement which have not been so described or filed. Each contract or other
5
<PAGE>
instrument (however characterized or described) to which any of the Company, CAS
or AmerTranz is a party or by which its property or business is or may be bound
or affected and (i) which is referred to in the Prospectus, or (ii) is material
to the business of the Company, CAS and AmerTranz) has been duly and validly
executed, is in full force and effect in all material respects and is
enforceable against the parties thereto in accordance with its terms, and none
of such contracts or instruments has been assigned by the Company, CAS or
AmerTranz, as the case may be, and neither the Company, CAS or AmerTranz nor, to
the Company's knowledge, any other party is in default thereunder and, to the
Company's knowledge, no event has occurred which, with the lapse of time or the
giving of notice, or both, would constitute a default thereunder (except as
otherwise disclosed in the Prospectus). None of the material provisions of such
contracts or instruments violates or will result in a violation of any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court having jurisdiction over the Company, CAS or AmerTranz or any of
their respective assets or businesses, including, without limitation, those
relating to environmental laws and regulations.
Prior Securities Transactions. No securities of the Company have been sold
by the Company or by or on behalf of, or for the benefit of, any person or
persons controlling, controlled by, or under common control with the Company
within the three years prior to the date hereof, except as disclosed in the
Registration Statement.
Changes After Dates in Registration Statement.
No Material Adverse Change. At the time the Registration Statement becomes
effective and at all times subsequent thereto, up to the Closing Date, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise specifically stated therein,
(i) there has been no material adverse change in the condition, financial or
otherwise, or in the results of operations, business or business prospects of
any of the Company, CAS or AmerTranz ("Material Adverse Change"), including, but
not limited to, a material loss or interference with its business from fire,
storm, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
whether or not arising in the ordinary course of business, and (ii) there have
been no transactions entered into by any of the Company, CAS or AmerTranz, other
than those in the ordinary course of business, which are material with respect
to the condition, financial or otherwise, or to the results of its operations,
business or business prospects.
Recent Securities Transactions, Etc. Subsequent to the respective dates as
of which information is given in the Registration Statement and the Prospectus,
and except as may otherwise be indicated or contemplated herein or therein, the
Company has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money; or (ii) declared or paid
any dividend or made any other distribution on or in respect to its capital
stock.
Independent Accountants. Arthur Andersen LLP and KPMG Peat
Marwick LLP, whose reports are filed with the Commission as part of the
Registration Statement, are independent accountants as required by the Act and
the Regulations.
6
<PAGE>
Financial Statements. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company, CAS and AmerTranz at the dates and for the periods to
which they apply; and such financial statements have been prepared in conformity
with generally accepted accounting principles, consistently applied throughout
the periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The pro
forma consolidated financial information set forth in the Registration Statement
reflects all significant assumptions and adjustments relating to the business
and operations of the Company, CAS and AmerTranz, as described in the
Registration Statement.
Authorized Capital; Options; Etc. The Company had at the date
or dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date there are, and on the
Closing Date there will be, no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company, including any issuances pursuant to anti-dilution provisions, or any
security convertible into shares of Common Stock of the Company, or any
contracts or commitments to issue or sell shares of Common Stock or any such
options, warrants, rights or convertible securities.
Valid Issuance of Securities; Etc.
Outstanding Securities. All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto; and are not subject to personal liability by reason of being such
holders, and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The outstanding options and warrants to purchase
shares of Common Stock constitute the valid and binding obligations of the
Company, enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under federal and state laws, and
(iii) that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. The authorized
Common Stock and outstanding options and warrants to purchase shares of Common
Stock conform to all statements relating thereto contained in the Registration
Statement and the Prospectus. The offers and sales of the outstanding Common
Stock, options and warrants to purchase shares of Common Stock were at all
relevant times either registered under the Act and registered or qualified under
the applicable state securities or Blue Sky Laws or exempt from such
registration requirements.
Securities Sold Pursuant to this Agreement. The Securities have been duly
authorized and, when issued and paid for, will be validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to personal
liability by reason of being such
7
<PAGE>
holders; the Securities are not and will not be subject to the preemptive rights
of any holders of any security of the Company or similar contractual rights
granted by the Company; and all corporate actions required to be taken for the
authorization, issuance and sale of the Securities have been duly and validly
taken. When issued, the Underwriter's Purchase Option, the Underwriter's
Warrants and the Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and the
Underwriter's Purchase Option, the Underwriter's Warrants and the Warrants are
enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification provision may be limited under federal and
state laws, and (iii) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
Subsidiary Shares. All of the outstanding shares of capital stock of CAS
and AmerTranz are owned by the Company, free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature and there will be not
outstanding options, warrants or other rights to purchase or otherwise acquire
any shares of capital stock of CAS or AmerTranz.
Registration Rights of Third Parties. Except as set forth in
the Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company.
Validity and Binding Effect of Agreements. This Agreement, the
employment agreement with each of Stuart Hettleman, and Richard A. Faieta
("Employment Agreements"), the Underwriters' Purchase Options, and the Warrant
Agreement (as hereinafter defined) have been duly and validly authorized by the
Company and constitute, or when executed and delivered will constitute, the
valid and binding agreements of the Company, enforceable against it in
accordance with their respective terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
No Conflicts, Etc. The execution, delivery, and performance by
the Company of this Agreement, the Underwriter's Purchase Option and the Warrant
Agreement, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the lapse
of time or both, (i) result in a breach of, or conflict with any of the terms
and provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any of its
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property or assets pursuant to the terms of any indenture, mortgage, deed of
trust, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which it is a party or by which it may be bound or to which any of
its property or assets is subject; (ii) result in any violation of the
provisions of its Certificate of Incorporation or By-Laws; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over it
or its operations or any of its properties or business; or (iv) have a material
adverse effect on any permit, license, certificate, registration, approval,
consent, license or franchise concerning it or its operations; except in the
case of (i) or (iii), where such default, breach, violation or effect, either
singly or in the aggregate, would not have a material adverse effect on its
financial condition or results of operations.
No Defaults; Violations. Except as described in the
Prospectus, no default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company, CAS or AmerTranz is a party or by which the
Company, CAS or AmerTranz may be bound or to which any of the properties or
assets of the Company, CAS or AmerTranz is subject, except in each case where
such default would not have a material adverse effect on the Company's, CAS's or
AmerTranz's financial conditions or results of operations. Neither the Company,
CAS or AmerTranz is in violation of any term or provision of their respective
Certificate Incorporation or By-Laws or in violation of any franchise, license,
permit, applicable law, rule, regulation, judgment or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over any of them or
their respective operations, properties or business, except as described in the
Prospectus and except in each case where such violation would not have a
material adverse effect on any of their respective financial conditions or
results of operations.
Corporate Power; Licenses; Consents.
Conduct of Business. Each of the Company, CAS and AmerTranz has all
requisite corporate power and authority, and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies to own or lease its properties and
conduct its business as described in the Prospectus, and is and has been doing
business in compliance with all such material authorizations, approvals, orders,
licenses, certificates and permits and all federal, state and local laws, rules
and regulations. The disclosures in the Registration statement concerning the
effects of federal, state and local regulation on the Company's business as
currently contemplated are correct in all material respects and do not omit to
state a material fact.
Transactions Contemplated Herein. The Company has all corporate power and
authority to enter into this Agreement, the Underwriter's Purchase Option and
the Warrant Agreement and to carry out the provisions and conditions hereof and
thereof, and all consents, authorizations, approvals and orders required in
connection herewith and therewith have been obtained. No consent, authorization
or order of, and no filing with, any court, government agency or other body is
required for the valid issuance, sale and delivery of the Securities pursuant to
this Agreement, the Warrant Agreement and the Underwriter's Purchase Option, and
as
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contemplated by the Prospectus, except with respect to applicable federal and
state securities laws.
Title to Property; Insurance. Each of the Company, CAS and
AmerTranz has good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property (tangible and intangible)
owned or leased by it, free and clear of all liens, encumbrances, claims,
security interests, defects and restrictions of any material nature whatsoever,
other than those referred to in the Prospectus, liens for taxes not yet due and
payable and liens of an immaterial nature arising by operation of law. Each of
the Company, CAS and AmerTranz has adequately insured its properties against
loss or damage by fire, other casualty and other insurance in amounts and on
terms as is usually maintained by similarly situated companies engaged in the
same or similar business.
Litigation; Governmental Proceedings. Except as set forth in
the Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company's knowledge, threatened against, or involving the properties or business
of, the Company, CAS or AmerTranz which might materially and adversely affect
the financial position, prospects, value or the operation or the properties or
the business of the Company, CAS or AmerTranz or which question the validity of
the capital stock of the Company, CAS or AmerTranz or this Agreement or of any
action taken or to be taken by the Company, CAS or AmerTranz pursuant to, or in
connection with, this Agreement. There are no outstanding orders, judgments or
decrees of any court, governmental agency or other tribunal naming the Company,
CAS or AmerTranz and enjoining the Company, CAS or AmerTranz from taking, or
requiring the Company, CAS or AmerTranz to take, any action, or to which the
Company, CAS or AmerTranz, or their respective properties or business, is bound
or subject.
Good Standing. Each of the Company, CAS and AmerTranz has been
duly organized and is validly existing as a corporation and is in good standing
under the laws of its state of incorporation. Each of the Company, CAS and
AmerTranz is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which ownership or leasing of any properties
or the character of its operations requires such qualification or licensing,
except where the failure to qualify would not have a material adverse effect on
its financial condition or results of operations.
Taxes. Each of the Company, CAS and AmerTranz has filed all
returns (as hereinafter defined) required to be filed with taxing authorities
prior to the date hereof or has duly obtained extensions of time for the filing
thereof. Each of the Company, CAS and AmerTranz has paid all taxes (as
hereinafter defined) shown as due on such returns that were filed and has paid
all taxes imposed on or assessed against it. The provisions for taxes payable,
if any, shown on the financial statements filed with or as part of the
Registration Statement are sufficient for all accrued and unpaid taxes, whether
or not disputed, and for all periods to and including the dates of such
consolidated financial statements. No (i) issues have been raised (and are
currently pending) by any taxing authority in connection with any of the returns
or taxes asserted as due from the Company, CAS or AmerTranz, and (ii) waivers of
statutes of limitation with respect to the returns or collection of taxes have
been given by or requested from the Company, CAS or AmerTranz. The term "taxes"
mean all federal, state, local, foreign, and other net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
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lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever,
together with any interest and any penalties, additions to tax, or additional
amounts with respect thereto. The term "returns" means all returns,
declarations, reports, statements, and other documents required to be filed in
respect to taxes.
Employee Options. ___ shares of Common Stock are eligible for sale pursuant
to Rule 701 promulgated under the Act in the 12-month period following the
Effective Date.
Transactions Affecting Disclosure to NASD.
Finder's Fees. There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the Company
that may affect the Underwriter's compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
Payments Within Twelve Months. The Company has not made any direct or
indirect payments (in cash, securities or otherwise) to (i) any person, as a
finder's fee, investing fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) to any NASD member, or (iii) to any person
or entity that has any direct or indirect affiliation or association with any
NASD member, within the twelve month period prior to the date on which the
Registration Statement was filed with the Commission ("Filing Date") or
thereafter, other than payments to the Underwriter.
Use of Proceeds. None of the net proceeds of the offering will be paid by
the Company to any NASD member or any affiliate or associate of any NASD member,
except as specifically authorized herein.
Insiders' NASD Affiliation. No officer or director of the Company or owner
of any of the Company's unregistered securities has any direct or indirect
affiliation or association with any NASD member. The Company will advise the
Underwriter and the NASD if any stockholder of the Company is or becomes an
affiliate or associated person of an NASD member participating in the
distribution.
Foreign Corrupt Practices Act. Neither the Company nor any of
its subsidiaries, officers, directors, employees, agents or any other person
acting on behalf of the Company has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed transaction)
which (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding,
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(ii) if not given in the past, might have had a materially adverse effect on the
assets, business or operations of the Company as reflected in any of the
financial statements contained in the Prospectus or (iii) if not continued in
the future, might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
Nasdaq Eligibility. As of the Effective Date, the Public Securities have
been approved for quotation on the Nasdaq Small Cap Market.
Intangibles. Each of the Company, CAS and AmerTranz owns or
possesses the requisite licenses or rights to use all trademarks, service marks,
service names, trade names, patents and patent applications, copyrights and
other rights (collectively, "Intangibles") described as being licensed to or
owned by it in the Registration Statement. The Intangibles which have been
registered by the Company, CAS or AmerTranz, if any, in the United States Patent
and Trademark Office have been fully maintained and are in full force and
effect. There is no claim or action by any person pertaining to, or proceeding
pending or threatened and none of the Company, CAS or AmerTranz has received any
notice of conflict with the asserted rights of others which challenges its
exclusive right with respect to any Intangibles used in the conduct of its
business except as described in the Prospectus. To the Company's knowledge, the
Intangibles and the Company's, CAS's and AmerTranz's current products, services
and processes do not infringe on any intangibles held by any third party. To the
Company's knowledge, no others have infringed upon the Intangibles of the
Company, CAS or AmerTranz.
Relations With Employees.
Employee Matters. Each of the Company, CAS and AmerTranz has generally
enjoyed a satisfactory employer/employee relationship with its employees and is
in compliance in all material respects with all federal, state and local laws
and regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. There are no pending investigations involving the Company, CAS and
AmerTranz by the U.S. Department of Labor or any other governmental agency
responsible for the enforcement of such federal, state or local laws and
regulations. There is no unfair labor practice charge or complaint against the
Company, CAS or AmerTranz pending before the National Labor Relations Board or
any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, CAS or AmerTranz or any predecessor
entity, and none has ever occurred. No question concerning representation
exists respecting the employees of the Company, CAS or AmerTranz and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company, CAS or AmerTranz. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements, if any, of the Company, CAS or AmerTranz.
Employee Benefit Plans. Other than as set forth in the Registration
Statement, neither the Company, CAS or AmerTranz maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or arrangement
that is an "employee pension benefit plan," an "employee welfare benefit plan,"
or a, "multi-employer plan" as such terms are defined
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in Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). None of the
Company, CAS or AmerTranz has, at any time, maintained or contributed to a
defined benefit plan, as defined in Section 3(35) of ERISA. If any of the
Company, CAS or AmerTranz does maintain or contribute to a defined benefit plan,
any termination of the plan on the date hereof would not give rise to liability
under Title IV of ERISA. No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended ("Code"), which
could subject the Company, CAS or AmerTranz to any tax penalty for prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is in
compliance with all material reporting, disclosure and other requirements of the
Code and ERISA as they relate to any such ERISA Plan. Determination letters have
been received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. None of the Company, CAS
or AmerTranz has ever completely or partially withdrawn from a "multi-employer
plan."
Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company, CAS or AmerTranz and delivered to you or to
your counsel shall be deemed a representation and warranty by the Company to the
Underwriter as to the matters covered thereby.
Warrant Agreement. The Company has entered into a warrant
agreement with respect to the Warrants and the Underwriter's Warrants
substantially in the form filed as an exhibit to the Registration Statement
("Warrant Agreement") with American Stock Transfer & Trust Company, in form and
substance satisfactory to the Underwriter, providing for, among other things, no
redemption of the Warrants without the giving of prior written notice to the
Underwriter and in accordance with the Warrant Agreement for the payment of a
warrant solicitation fee, if applicable, as contemplated by Section 3.10 hereof.
Agreements With Insiders. The Company has caused to be duly
executed a legally binding and enforceable lock-up agreement, in substantially
the form provided by the Underwriter, pursuant to which all of the officers and
directors of the Company (including their family members and affiliates) and
persons (including their family members and affiliates) who beneficially own or
hold one percent or more of the outstanding Common Stock of the Company
(collectively, "Insiders") agree not to sell any shares of Common Stock owned by
them or their family members and affiliates (either pursuant to Rule 144 of the
Regulations or otherwise) for a period of 18 months following the Effective Date
except with the consent of the Underwriter and, if applicable, the Pennsylvania
Securities Commission.
Employment Agreement. The Company has entered into an
Employment Agreement with each of Messrs. Hettleman and Faieta in substantially
the same form as set forth in an exhibit to the Registration Statement, for a
term commencing on May __, 1996 and ending on May __, 1999.
Underwriter's Purchase Option. The Company has executed and delivered the
Underwriter's Purchase Option to the Underwriter substantially in the form filed
as an exhibit to the Registration Statement.
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Covenants of the Company. The Company covenants and agrees as follows:
Amendments to Registration Statement. The Company will deliver
to the Underwriter, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriter
shall reasonably object.
Federal Securities Laws.
Compliance. During the time when (i) a Prospectus is required to be
delivered under the Act so far as necessary to permit the continuance of sales
of or dealings in the Public Securities; and (ii) a Warrant Exercise Prospectus
is required to be delivered under the Act and until such time as the Warrants
are no longer exercisable ("Termination Date") so far as necessary to permit the
continuance of exercise of the Warrants, Underwriter's Warrants and the
Underwriter's Purchase Option; the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, in accordance with the provisions hereof and the Prospectus which
requires the Company to keep the Registration Statement effective until the
Termination Date. If at any time when a Prospectus or a Warrant Exercise
Prospectus relating to the Public Securities or the Underwriter's Securities is
required to be delivered under the Act and, in any event, until the Termination
Date, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriter, such Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.
Filing of Final Prospectus. The Company will file the Prospectus and
Warrant Exercise Prospectus with the Commission pursuant to the requirements of
Rule 424 of the Regulations.
Exchange Act Registration. For a period of five years from the Effective
Date, the Company will use its best efforts to maintain the registration of the
Common Stock and the Warrants under the provisions of the Exchange Act.
Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective to qualify the Public Securities, the securities
issued in the Company's February and May 1996 bridge financings ("Bridge
Securities") and the Underwriter's Securities for offering and sale under the
securities laws of such jurisdictions as the Underwriter may reasonably
designate, provided that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Company would be subject to service
of general process or to taxation as a foreign corporation doing
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business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriter agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
Delivery to Underwriter of Prospectuses. The Company will
deliver such number of (i) Prospectuses to the Underwriter and (ii) Warrant
Exercise Prospectuses to the Warrant holders as needed, without charge, from
time to time during the period when such prospectuses are required to be
delivered under the Act and, in any event, until the Termination Date.
Additionally, the Company will deliver, as soon as the Registration Statement or
any amendment or supplement thereto becomes effective, two original executed
Registration Statements, including exhibits, and all post-effective amendments
thereto and copies of all exhibits filed therewith or incorporated therein by
reference and all original executed consents of certified experts.
Events Requiring Notice to Underwriter. The Company will
notify the Underwriter immediately and confirm the notice in writing (i) filing
of any post-effective amendment to the Registration Statement, (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose, (iii) of the issuance by any
state securities commission of any proceedings for the suspension of the
qualification of the Public Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose,
(iv) of the mailing and delivery to the Commission for filing of any amendment
or supplement to the Registration Statement or Prospectus, (v) of the receipt of
any comments or request for any additional information from the Commission, and
(vi) of the happening of any event during the period described in Section 3.4
hereof which, in the judgment of the Company, makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or which
requires the making of any changes in the Prospectus in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or which requires the making of any changes in the Registration
Statement in order to make the statements therein not misleading. If the
Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
Review of Financial Statements. For a period of five years
from the Effective Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's Form 10-Q quarterly report and the mailing of quarterly financial
information to stockholders.
Unaudited Financials. The Company will furnish to the
Underwriter as early as practicable subsequent to the date hereof and at least
two full business days prior to the Closing Date, a copy of the latest available
unaudited interim financial statements ("Unaudited Financials") of the Company
(which in no event shall be as of a date more than thirty days prior to the
Effective Date) which have been read by the Company's independent accountants,
as stated in their letter to be furnished pursuant to Section 4.3 hereof.
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Secondary Market Trading and Standard & Poor's. The Company
will take all necessary and appropriate actions to achieve accelerated
publication in Standard and Poor's Corporation Records Corporate Descriptions
(within 20 days after the Effective Date) and to maintain such publication with
updated quarterly information for a period of five years from the Effective
Date, including the payment of any necessary fees and expenses. The Company
shall take such action as may be reasonably requested by the Underwriter to
obtain a secondary market trading exemption in such States as may be requested
by the Underwriter, including the payment of any necessary fees and expenses.
Nasdaq Maintenance. For a period of five years from the date
hereof, the Company will use its best efforts to maintain the quotation by the
Nasdaq Small Cap Market of the Common Stock and, if outstanding, the Warrants.
Warrant Solicitation and Registration of Common Stock Underlying the
Warrants.
The Company hereby engages the Underwriter on a non-exclusive
basis, as its agent for the solicitation of the exercise of the Warrants. The
Underwriter hereby accepts such engagement to solicit the exercise of the
Warrants at such times, and from time to time, that the Company or the
Underwriter may deem appropriate. The Company, at its cost, will (i) assist the
Underwriter with respect to such solicitation, if requested by the Underwriter
and will (ii) provide the Underwriter, and direct the Company's transfer and
warrant agent to provide to the Underwriter, lists of the record and, to the
extent known, beneficial owners of the Warrants. Commencing one year from the
Effective Date, the Company will pay the Underwriter a commission of five
percent of the Warrant exercise price for each Warrant exercised, payable on the
date of such exercise, on the terms provided for in the Warrant Agreement, if
allowed under the rules and regulations of the NASD and only if the Underwriter
has provided bona fide services to the Company in connection with the exercise
of such Warrant. In addition to soliciting, either orally or in writing, the
exercise of Warrants, such services may also include disseminating information,
either orally or in writing, to the Warrant holders about the Company or the
market for the Company's securities, and assisting in the processing of the
exercise of Warrants. The Underwriter may engage sub-agents in its solicitation
efforts. The Company will disclose the arrangement to pay such solicitation fees
to the Underwriter in the Warrant Exercise Prospectus.
Public Relations Firm. The Company shall retain a public
relations firm acceptable to the Underwriter for a period of five years from the
Effective Date.
Reports to the Underwriter.
Periodic Reports, Etc. For a period of five years from the Effective Date,
the Company will furnish to the Underwriter copies of such financial statements
and other periodic and special reports as the Company from time to time files
with any governmental authority or furnishes generally to holders of any class
of its securities, and promptly furnish to the Underwriter (i) a copy of each
periodic report the Company shall be required to file with the Commission, (ii)
a copy of every press release released by the Company, (iii) copies of each Form
SR, (iv) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received
or prepared by the Company, (v) a copy of monthly statements setting forth such
information
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regarding the Company's results of operations and financial position (including
balance sheet and profit and loss statements) as is regularly prepared by
management of this Company, and (vi) such additional documents and information
with respect to the Company and the affairs of any future subsidiaries of the
Company as the Underwriter may from time to time reasonably request.
Transfer Sheets and Weekly Position Listings. For a period of five years
from the Closing Date, the Company will furnish to the Underwriter at the
Company's sole expense such transfer sheets and position listings of the
Company's securities as the Underwriter may request, including the daily, weekly
and monthly consolidated transfer sheets of the transfer agent of the Company
and the weekly security position listings of the Depository Trust Co.
Secondary Market Trading Memorandum. Until such time as the Public
Securities are listed or quoted, as the case may be, on one of the following:
the New York Stock Exchange, the American Stock Exchange or Nasdaq National
Market, the Company shall cause the Underwriter's legal counsel to update and
deliver to the Underwriter a written memorandum detailing those states in which
Public securities may be traded in non issuer transactions under the blue Sky
laws of the fifty states ("Secondary Market Trading Memorandum") and to update
such memorandum and deliver same to the Underwriter on a timely basis, but in
any event on the Effective Date, and on the first day of every calendar quarter
thereafter. The Company shall pay to the Underwriter's legal counsel a one-time
fee of $5,000 for such services at the Closing.
[Reserved]
Disqualification of Form S-1 (or other appropriate form). For a
period equal to seven years from the date hereof, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form S-1
(or other appropriate form) for the registration of the Warrants and the
Underwriter's Warrants and the securities issuable upon exercise of those
securities under the Act.
Payment of Expenses.
General Expenses. The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date, if any, to the extent not paid at Closing
Date, all expenses incident to the performance of the obligations of the Company
under this Agreement, including but not limited to (i) the preparation,
printing, filing, delivery and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement, the Prospectus and the
Preliminary Prospectuses and the printing and mailing of this Agreement and
related documents, including the cost of all copies thereof and any amendments
thereof or supplements thereto supplied to the Underwriter in quantities as may
be required by the Underwriter, (ii) the printing, engraving, issuance and
delivery of the shares of Common Stock, the Warrants and the Underwriter's
Purchase Option, including any transfer or other taxes payable thereon, (iii)
the qualification of the Public Securities and Bridge Securities under state or
foreign securities or Blue Sky laws, including the filing fees under such Blue
Sky laws, the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," and all amendments and supplements thereto, fees of Underwriter's
Blue Sky counsel, which fees shall not exceed an aggregate of $35,000 and
disbursements of such counsel, and fees and disbursements of local counsel, if
any,
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retained for such purpose and approved by the Company, and a one-time fee of
$5,000 payable to the Underwriter's counsel for the preparation of the Secondary
Market Trading Memorandum, (iv) costs associated with applications for
assignments of a rating of the Public Securities by qualified rating agencies,
(v) filing fees, costs and expenses (including fees and disbursements for the
Underwriter's counsel) incurred in registering the offering with the NASD, (vi)
costs for placing "tombstone" advertisements in The Wall Street Journal, The New
York Times and a third publication which may be selected by the Underwriter and
transaction lucite cubes or similar commemorative items in a style and quantity
as requested by the Underwriter, (vii) fees and disbursements of the transfer
and warrant agent, (viii) the Company's expenses associated with "due diligence"
meetings arranged by the Underwriter; (ix) the preparation, binding and delivery
of five sets of transaction "bibles," in form and style satisfactory to the
Underwriter, (x) any listing of the Public Securities on Nasdaq Small Cap or
National Market, as the case may be, or any listing in Standard & Poor's, and
(xi) all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
3.15.1. Since an important part of the public offering process is for the
Company to appropriately and accurately describe both the background of the
principals of the Company and the Company's competitive position in its
industry, the Company has engaged and will pay for an investigative search firm
of the Underwriter's choice to conduct an investigation of principals of the
Company mutually selected by the Underwriter and the Company. The Underwriter
may deduct from the net proceeds of the offering payable to the Company on the
Closing Date, or the Option Closing Date, if any, the expenses set forth herein
to be paid by the Company to the Underwriter and/or to third parties.
Non-Accountable Expenses. The Company further agrees that, in addition to
the expenses payable pursuant to Section 3.15.1, it will pay to the Underwriter
a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Public
Securities, of which $50,000 has been paid to date, and the Company will pay the
balance on the Closing Date and any additional monies owed attributable to the
Option Securities or otherwise on the Option Closing Date by certified or bank
cashier's check or, at the election of the Underwriter, by deduction from the
proceeds of the offering contemplated herein. If the offering contemplated by
this Agreement is not consummated for any reason whatsoever then the Company's
liability for payment to the Underwriter of the non-accountable expense
allowance shall be equal to the sum of the Underwriter's actual out-of-pocket
expenses (including, but not limited to, counsel fees, "road- show" and due
diligence expenses). The Underwriter shall retain such part of the
non-accountable expense allowance previously paid as shall equal its actual
out-of-pocket expenses. If the amount previously paid is insufficient to cover
such actual out-of-pocket expenses, the Company shall remain liable for and
promptly pay any other actual out-of-pocket expenses. If the amount previously
paid exceeds the amount of the actual out-of-pocket expenses, the Underwriter
shall promptly remit to the Company any such excess.
Key Person Life Insurance. The Company will maintain key
person life insurance on the lives of each of Stuart Hettleman and Richard
Faieta and pay the annual premiums therefore naming the Company as the sole
beneficiary thereof for at least five years following the Effective Date.
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Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "USE OF PROCEEDS" in the Prospectus.
Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
Stabilization. Neither the Company, nor, to its knowledge, any
of its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
Internal Controls. Each of the Company, CAS and AmerTranz
maintains and will continue to maintain a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and to maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
[Reserved]
Transfer Agent. The Company shall retain American Stock
Transfer & Trust Company as its transfer agent for the Common Stock and the
Warrants. For a period of five years following the Effective Date, the Company
will not switch transfer agents without the Underwriter's consent, which shall
not be unreasonably withheld.
Sale of Securities. To the extent that the Company is legally
permitted to do so, it shall not permit or cause a private or public sale or
private or public offering of any of its securities (in any manner, including
pursuant to Rule 144 under the Act) owned nominally or beneficially by the
Insiders for a period of 24 months following the Effective Date.
Exercise Price of Options/Warrants. The Company will not grant
any option pursuant to the Company's Stock Option Plan at an exercise prices
less than the greater of $6.00 per share or the fair market value of the Common
Stock on the date of the grant.
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Conditions of Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:
Regulatory Matters.
Effectiveness of Registration Statement. The Registration Statement shall
have become effective not later than 5:00 P.M., New York time, on the date of
this Agreement and, at each of the Closing Date and the Option Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for the purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of Graubard Mollen & Miller, counsel to the
Underwriter.
NASD Clearance. By the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter as described in the Registration Statement.
No Blue Sky Stop Orders. No order suspending the sale of the Securities in
any jurisdiction designated by you pursuant to Section 3.3 hereof shall have
been issued on either on the Closing Date or the Option Closing Date, and no
proceedings for that purpose shall have been instituted or shall be
contemplated.
Company Counsel Matters.
Opinion of Counsel. On the Effective Date, the Underwriter shall have
received the favorable opinion of Ferber Greilsheimer Chan & Essner ("FGC&E"),
counsel to the Company, dated the Closing Date, addressed to the Underwriter,
and in form and substance satisfactory to Graubard Mollen & Miller, counsel to
the Underwriter, to the effect that:
(i) The Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which it owns or leases any
real property or the character of its operations requires such qualification or
licensing, except where the failure to qualify would not have a material adverse
effect on the Company.
(ii) The Company has all requisite corporate power and authority, and has
all necessary authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental or regulatory officials and bodies to own
or lease its properties and conduct its business as described in the Prospectus,
and the Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations. The Company has all
corporate power
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and authority to enter into this Agreement, Underwriter's Purchase Option and
the Warrant Agreement and to carry out the provisions and conditions hereof and
thereof, and all consents, authorizations, approvals and orders required in
connection herewith and therewith have been obtained. No consents, approvals,
authorizations or orders of, and no filing with any court or governmental agency
or body (other than such as may be required under the Act and applicable Blue
Sky laws), is required for the valid authorization, issuance, sale and delivery
of the Securities, and the consummation of the transactions and agreements
contemplated by this Agreement, the Warrant Agreement and the Underwriter's
Purchase Option, and as contemplated by the Prospectus or if so required, all
such authorizations, approvals, consents, orders, registrations, licenses and
permits have been duly obtained and are in full force and effect and have been
disclosed to the Underwriter.
(iii) All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The outstanding options and warrants to purchase shares of Common Stock
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms. The offers and sales of the outstanding Common
Stock and options and warrants to purchase shares of Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth under
the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and, when issued and paid
for, will be validly issued, fully paid and non-assessable; the holders thereof
are not and will not be subject to personal liability by reason of being such
holders. The Securities are not and will not be subject to the preemptive rights
of any holders of any security of the Company or, to the best of such counsel's
knowledge after due inquiry, similar contractual rights granted by the Company.
All corporate action required to be taken for the authorization, issuance and
sale of the Securities has been duly and validly taken. When issued, the
Underwriter's Purchase Option, the Underwriter's Warrants and the Warrants will
constitute valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of securities of the
Company called for thereby and such Warrants, the Underwriter's Purchase Option,
and the Underwriter's Warrants, when issued, in each case, will be enforceable
against the Company in accordance with their respective terms, except (a) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification provision may be limited under the federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form.
(v) To the best of such counsel's knowledge, after due inquiry, except as
set forth in the Prospectus and Registration Statement, no holders of any
securities of the Company or of any options, warrants or securities of the
Company exercisable for or convertible
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or exchangeable into securities of the Company have the right to require the
Company to register any such securities of the Company under the Act or to
include any such securities in a registration statement to be filed by the
Company.
(vi) To the best of such counsel's knowledge, after due inquiry, the shares
of Common Stock and the Warrants are eligible for quotation on Nasdaq Small Cap
and have been approved for listing on the Philadelphia Stock Exchange.
(vii) This Agreement, the Underwriter's Purchase Option, the Warrant
Agreement, have each been duly and validly authorized and, when executed and
delivered by the Company, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (b) as enforceability of any indemnification provisions may be
limited under the federal and state securities laws, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(viii) The execution, delivery and performance by the Company of this
Agreement, the Underwriter's Purchase Option, the Warrant Agreement, the
issuance and sale of the Securities, the consummation of the transactions
contemplated hereby and thereby and the compliance by the Company with the terms
and provisions hereof and thereof, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) conflict with, or result in
a breach of, any of the terms or provisions of, or constitute a default under,
or result in the creation or modification of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company pursuant to
the terms of, any material mortgage, deed of trust, note, indenture, loan,
contract, commitment or other material agreement or instrument, to which the
Company is a party or by which the Company or any of its properties or assets
may be bound, (b) result in any violation of the provisions of the Certificate
of Incorporation or the ByLaws of the Company, (c) violate any statute or any
judgment, order or decree, rule or regulation applicable to the Company of any
court, domestic or foreign, or of any federal, state or other regulatory
authority or other governmental body having jurisdiction over the Company, its
properties or assets, or (d) have a material effect on any permit,
certification, registration, approval, consent, license or franchise of the
Company.
(ix) The Registration Statement, each Preliminary Prospectus and the
Prospectus and any post-effective amendments or supplements thereto (other than
the financial statements included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and Regulations. The Securities and all other securities issued or
issuable by the Company conform in all respects to the description thereof
contained in the Registration Statement and the Prospectus. The descriptions in
the Registration Statement and Prospectus of statutes, regulations and other
laws and the statements in the Prospectus under "Business," "Management,"
"Certain Transactions," "Risk Factors," Principal Stockholders," "Selling
Securityholders," "Description of Securities" and "Shares Eligible for Future
Sale," have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions are correct in all material respects. No statute or regulation
or legal or governmental proceeding required to be
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described in the Prospectus is not described as required, nor are any contracts
or documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement not so described or filed as required.
(x) Counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriter at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed and although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as otherwise set
forth in this opinion), no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or the
Prospectus nor any amendment or supplement thereto, as of the date of such
opinion, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus).
(xi) The Registration Statement is effective under the Act, and, to the
best of such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act or applicable
state securities laws.
(xii) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
(tangible and intangible) stated in the Prospectus to be owned or leased by it,
free and clear of all liens, encumbrances, claims, security interests, defects
and restrictions of any material nature whatsoever, other than those referred to
in the Prospectus and liens for taxes not yet due and payable.
(xiii) Except as described in the Prospectus, no default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
any of the properties or assets of the Company is subject. The Company is not in
violation of any term or provision of its Certificate of Incorporation or
By-Laws or of any franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its properties or business,
except as described in the Prospectus.
(xiv) To the best of such counsel's knowledge after due inquiry, the
Company owns or possesses, free and clear of all liens or encumbrances and
rights thereto or therein by third parties, other than as described in the
Prospectus, the requisite licenses or other rights to use all Intangibles and
other rights necessary to conduct its business (including, without limitation,
any such licenses or rights described in the Prospectus as being licensed to,
owned or possessed by the Company), and there is no claim or action by any
person pertaining to, or
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proceeding, pending or to the best of such counsel's knowledge after due inquiry
threatened, which challenges the exclusive rights of the Company with respect to
any Intangibles used in the conduct of the its business (including without
limitation any such licenses or rights described in the Prospectus as being
owned or possessed by the Company); to the best of such counsel's knowledge
after due inquiry, the Company's current products, services and processes do not
infringe on any Intangibles held by third parties except as discussed in the
Prospectus; and the Company's Intangibles which have been registered in the
United States Patent and Trademark Office have been fully maintained and are in
full force and effect.
(xv) To the best of such counsel's knowledge, after due inquiry, except as
described in the Prospectus, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity.
(xvi) To the best of such counsel's knowledge, after due inquiry except as
set forth in the Prospectus, there is no action, suit or proceeding before or by
any court of governmental agency or body, domestic or foreign, now pending, or
threatened against the Company, which might result in any material and adverse
change in the condition (financial or otherwise), business or prospects of the
Company, or might materially and adversely affect the properties or assets
thereof.
(xvii) To the best of such counsel's knowledge after due inquiry, neither
the Company, nor its officers, employees, agents or other persons acting on
their behalf has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer or supplier, any employee or agent
of a customer or supplier, any official or employee of any governmental agency
or body (domestic or foreign), any political party or candidate for office
(domestic or foreign) or any other person who was, is or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (a) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (b) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company as reflected in the
financial statements contained in the Registration Statement or (c) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
(xviii) To the best of such counsel's knowledge after due inquiry except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
financial consulting arrangements or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriter's
compensation, as determined by the NASD.
Unless the context clearly indicates otherwise, the term "Company" as
used in this Section 4.2.1 shall include each subsidiary of the Company. The
opinion of counsel for the Company and any opinion relied upon by such counsel
for the Company shall include a
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statement to the effect that it may be relied upon by counsel for the
Underwriter in its opinion delivered to the Underwriter.
Closing Date and Option Closing Date Opinion of Counsel. On each of the
closing Date and any Option Closing Date, the Underwriter shall have received
the favorable opinions of BFSM&W, counsel to the Company, dated the Closing Date
or the Option Closing Date, as the case may be, addressed to the Underwriter and
in the form and substance satisfactory to Graubard Mollen & Miller, counsel to
the Underwriter.
Reliance. In rendering such opinion, such counsel may rely (i) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriter's counsel) of other counsel reasonably acceptable to Underwriter's
counsel, familiar with the applicable laws, and (ii) as to matters of fact, to
the extent they deem proper, on certificates or other written statements of
officers of departments of various jurisdiction having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to
Underwriter's counsel if requested. The opinion of counsel for the Company shall
include a statement to the effect that it may be relied upon by counsel for the
Underwriter in its opinion delivered to the Underwriter.
Secondary Market Trading Memorandum. On the Effective Date the Underwriter
shall have received the Secondary Market Trading Memorandum.
Cold Comfort Letter. At the time this Agreement is executed
and at each of the Closing Date and the Option Closing Date, if any, you shall
have received a letter, addressed to the Underwriter and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Graubard
Mollen & Miller, counsel for the Underwriter, from Arthur Andersen LLP and KPMG
Peat Marwick LLP dated, respectively, as of the date of this Agreement and as of
the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with respect to the
Company within the meaning of the Act and the applicable Regulations;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of the
Act and the published Regulations thereunder;
(iii) Stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a review
of the latest available unaudited interim financial statements of the Company
(as described in SAS No.71 Interim Financial Information), with an indication of
the date of the latest available unaudited interim financial statements, a
reading of the latest available minutes of the stockholders and board of
directors and the various committees of the board of directors, consultations
with officers and other employees of the Company responsible for financial and
accounting matters and other specified
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procedures and inquiries, nothing has come to their attention which would lead
them to believe that (a) the unaudited financial statements of the Company
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations or any material modification should be made to the unaudited interim
financial statements included in the Registration Statement for them to be in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements of the
Company included in the Registration Statement, (b) at a date not later than
five days prior to the Effective Date, Closing Date or Option Closing Date, as
the case may be, there was any change in the capital stock or long-term debt of
the Company, or any decrease in the stockholders' equity of the Company as
compared with amounts shown in the February 7, 1996 balance sheet included in
the Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth the amount
of such decrease, and (c) during the period from February 8, 1996 to a specified
date not later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any decrease in revenues, net
earnings or net earnings per share of Common Stock, in each case as compared
with the corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, and work sheets,
of the Company with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 -- "Communication of
Internal Control Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
Officers' Certificates.
Officers' Certificate. At each of the Closing Date and the Option Closing
Date, if any, the Underwriter shall have received a certificate of the Company
signed by the Chairman of the Board or the President, Chief Financial Officer
and the Secretary of the
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Company, dated the Closing Date or the Option Closing Date, as the case may be,
respectively, to the effect that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to and as of the Closing Date, or the Option
Closing Date, as the case may be, and that the conditions set forth in Section
4.5 hereof have been satisfied as of such date and that, as of Closing Date and
the Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct. In addition,
the Underwriter will have received a certificate signed by the President of the
Company in connection with information supplied to state securities commissions
and such further certificates of officers of the Company as the Underwriter may
reasonably request.
Secretary's Certificate. At each of the Closing Date and the Option Closing
Date, if any, the Underwriter shall have received a certificate of the Company
signed by the Secretary of the Company, dated the Closing Date or the Option
Date, as the case may be, respectively, certifying (i) that the By-Laws and
Certificate of Incorporation of the Company are true and complete, have not been
modified and are in full force and effect, (ii) that the resolutions relating to
the public offering contemplated by this Agreement are in full force and effect
and have not been modified, (iii) all correspondence between the Company or its
counsel and the Commission, (iv) all correspondence between the Company or its
counsel and the NASD concerning inclusion on Nasdaq and (v) as to the incumbency
of the officers of the Company. The documents referred to in such certificate
shall be attached to such certificate.
No Material Changes. Prior to and on each of the Closing Date
and the Option Closing Date, if any, (i) there shall have been no Material
Adverse Change since the Effective Date, (ii) the Company, CAS or AmerTranz
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness which default would have a material adverse effect on
the Company, CAS or AmerTranz, (iii) no material amount of the assets of the
Company, CAS or AmerTranz shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus, (iv) no action suit or
proceeding, at law or in equity, shall have been pending or threatened against
the Company, CAS or AmerTranz or affecting any of their respective property or
business before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, CAS or AmerTranz, except as set forth in the
Registration Statement and Prospectus, (v) no stop order shall have been issued
under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission, and (vi) the Registration Statement and the
Prospectus and any amendments or supplements thereto contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and conform in all material respects to the requirements of
the Act and the Regulations, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Delivery of Agreements. The Company has delivered to the Underwriter
executed copies of the Underwriter's Purchase Option.
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Opinion of Counsel for Underwriter. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Graubard Mollen & Miller, counsel to the Underwriter, and you shall have
received from such counsel a favorable opinion, dated the Closing Date and the
Option Closing Date, if any, with respect to such of these proceedings as you
may reasonably require. On or prior to the Effective Date, the Closing Date and
the Option Closing Date, as the case may be, counsel for the Underwriter shall
have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
Indemnification.
Indemnification of Underwriter.
General. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriter, its directors, officers, agents and
employees and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, whether arising out of any action
between the Underwriter and the Company or between the Underwriter and any third
party) to which they or any of them may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in (i) any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
each may be amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Underwriter's
Purchase Option; or (iii) any application or other document or written
communication (in this Section 5 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any securities exchange; or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any application, as
the case may be. The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the issue and sale
of the Securities or in connection with the Registration Statement or
Prospectus.
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Procedure. If any action is brought against the Underwriter or controlling
person in respect of which indemnity may be sought against the Company pursuant
to Section 5.1.1, the Underwriter shall promptly notify the Company in writing
of the institution of such action and the Company shall assume the defense of
such action, including the employment and fees of counsel (subject to the
approval of the Underwriter) and payment of actual expenses. The Underwriter or
controlling person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of the Underwriter or such controlling person unless (i) the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action, or (ii) the Company shall not have employed counsel
to have charge of the defense of such action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter and/or controlling person, shall be borne
by the Company. Notwithstanding anything to the contrary contained herein, if
the Underwriter or controlling person shall assume the defense of such action as
provided above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
Indemnification of the Company. The Underwriter agrees to
indemnify and hold harmless the Company against any and all loss, liability,
claim, damage and expense described in the foregoing indemnity from the Company
to the Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against the Underwriter, the Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Underwriter by the
provisions of Section 5.1.2.
Contribution.
Contribution Rights. In order to provide for just and equitable
contribution under the Act in any case in which (i) any person entitled to
indemnification under this Section 5 makes claim for indemnification pursuant
hereto but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Act, the Exchange
Act or otherwise may be required on the part of any such person in circumstances
for which indemnification is provided under this Section 5, then,
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<PAGE>
and in each such case, the Company and the Underwriter shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by the Company and the
Underwriter, as incurred, in such proportions that the Underwriter is
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which the Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each director,
officer and employee of the Underwriter, and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Act shall have the same
rights to contribution as the Underwriter.
Contribution Procedure. Within fifteen days after receipt by any party to
this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party ("contributing party"),
notify the contributing party of the commencement thereof, but the omission to
so notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or its representative of the commencement thereof
within the aforesaid fifteen days, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding which was effected by such party without the written consent of such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.
[Reserved]
30
<PAGE>
Additional Covenants.
Board Designee. For a period of five years from the Effective
Date, the Company will recommend and use its best efforts to elect a designee of
the Underwriter as a member of the Board of Directors of the Company. To the
extent permitted by law, the Company will agree to indemnify the Underwriter and
its designee for the actions of such designee as a director of the Company. In
the event the Company maintains a liability insurance policy affording coverage
for the acts of its officers and directors, it will, if possible, include each
of the Underwriter and its designee as an insured under such policy. If the
Underwriter does not exercise its option to designate a member of the Company's
Board of Directors, the Underwriter shall nevertheless have the right to send a
representative (who need not be the same individual from meeting to meeting) to
observe each meeting of the Board of Directors. The designee or representative,
as the case may be, shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings, including, but not limited
to, food, lodging and transportation. The Company agrees to give the Underwriter
written notice of each such meeting and to provide the Underwriter with an
agenda and minutes of the meeting no later than it gives such notice and
provides such items to the other directors.
[Reserved]
Rule 144 Sales. During the five year period following the
Effective Date, the Underwriter shall have the right to purchase for the
Underwriter's account or to sell for the account of the Company's officers,
directors and Principal Stockholders any securities sold pursuant to Rule 144
under the Act. Each of the officers, directors and Principal Stockholders ("144
Sellers") will agree to consult with the Underwriter with regard to any such
sales and will offer the Underwriter the exclusive opportunity to purchase or
sell such securities on terms at least as favorable to the 144 Sellers as they
can secure elsewhere. If the Underwriter fails to accept in writing any such
proposal for sale by the 144 Sellers within one business day after receipt of a
notice containing such proposal, then the Underwriter shall have no claim or
right with respect to any such sales contained in any such notice. If,
thereafter, such proposal is modified in any material respect, the 144 Sellers
shall adopt the same procedure as with respect to the original proposal
Press Releases. The Company will not issue a press release or
engage in any other publicity until 25 days after the Effective Date without the
Underwriter's prior written consent.
Form S-8 or any Similar Form. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period of
one year from the Effective Date without the Underwriter's written consent.
[Reserved]
Compensation and Other Arrangements. The Company hereby agrees
that for a period of three years from the Effective Date, all the compensation
and other arrangements between the Company and its officers, directors and
affiliates shall be determined by a
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compensation committee of the Company's Board of Directors, a majority of whom
are not employed by the Company.
Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriter and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Underwriter,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriter
until the earlier of the expiration of any applicable statute of limitations and
the seventh anniversary of the later of the Closing Date or the Option Closing
Date, if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
Effective Date of This Agreement and Termination Thereof.
Effective Date. This Agreement shall become effective on the Effective Date
at the time that the Registration Statement is declared effective.
Termination. The Underwriter shall have the right to terminate
this Agreement at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York Stock Exchange,
the American Stock Exchange or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States shall
have become involved in a war or major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v) if
a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Securities, or (vii) if Stuart
Hettleman shall no longer serve the Company in his present capacity, or (viii)
if the Company has breached any of its representations, warranties or
obligations hereunder, or (ix) if the Underwriter shall have become aware after
the date hereof of a Material Adverse Change, or such adverse material change in
general market conditions as in the Underwriter's judgment would make it
impracticable to proceed with the offering, sale and/or delivery of the
Securities or to enforce contracts made by the Underwriter for the sale of the
Securities.
Notice. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
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Expenses. In the event that this Agreement shall not be
carried out for any reason, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.15 hereof.
Indemnification. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 shall not be in any way effected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
Miscellaneous.
Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
If to the Underwriter:
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
Attn: David M. Nussbaum, Chairman
Fax: (212) 425-5861
Copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attn.: David Alan Miller, Esq.
Fax: (212) 818-8881
If to the Company:
AmerTranz Worldwide Holding Corp.
2001 Marcus Avenue
Lake Success, New York 11042
Attn.: Stuart Hettleman, President
Fax: (516) 326-2248
33
<PAGE>
Copy to:
Ferber Greilsheimer Chan & Essner
530 Fifth Avenue
23rd Floor
New York, New York 10036
Attn.: David I. Ferber, Esq.
Fax: (212) 944-7630
Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement and the Agency Agreements dated February 7, 1996 and May 3, 1996
between the Company and the Underwriter) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersede all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
Binding Effect. This Agreement shall inure solely to the
benefit of and shall be binding upon, the Underwriter, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
Governing Law; Jurisdiction. This Agreement shall be governed
by and construed and enforced in accordance with the law of the State of New
York, without giving effect to conflicts of law. The Company hereby agrees that
any action, proceeding or claim against it arising out of, relating in any way
to this Agreement shall be brought and enforced in the courts of the State of
New York of the United States of America for the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 10 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
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<PAGE>
Execution in Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
Waiver, Etc. The failure of any of the parties hereto to at
any time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
35
<PAGE>
If the foregoing correctly sets forth the understanding
between the Underwriter and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
AMERTRANZ WORLDWIDE HOLDING
CORP.
By:
Name: Stuart Hettleman
Title: President
Accepted as of the date first above written.
New York, New York
GKN SECURITIES CORP.
By:
Name: Deborah Schondorf Novick
Title: Executive Vice President
36
<PAGE>
GKN SECURITIES CORP.
61 BROADWAY
NEW YORK, NEW YORK 10006
(212) 509-3800
------------------------------------------------
SELECTED DEALERS AGREEMENT
------------------------------------------------
Dear Sirs:
Registration under the Securities Act of 1933, as amended ("Act"), of the
1,750,000 shares of Common Stock ("Common Stock") and 1,750,000 Redeemable
Common Stock Purchase Warrants ("Warrants," together with the Common Stock,
"Securities")* of AMERTRANZ WORLDWIDE HOLDING CORP.("Company"), as more fully
described in the Preliminary Prospectus, dated May ___, 1996, and in the final
prospectus ("Prospectus") which will be forwarded to you, will become effective
in the near future. We, as the Underwriter, are offering certain of the
Securities for purchase by a selected group of dealers ("Selected Dealers") on
the terms and conditions stated herein.
Authorized Public Offering Prices**: $____ per share of Common Stock.
$0.__ per Warrant.
Dealers' Selling Concession Not to exceed $0.__ per share of Common Stock and
$0.___ per Warrant payable upon termination of this Agreement, except as
provided below. We reserve the right not to pay such concessions on any of
the Securities purchased by any of the Selected Dealers from us and
repurchased by us at or below the price stated above prior to such
termination.
Reallowance: You may reallow not in excess of $0.__ per share of Common Stock
and $0.___ per Warrant as a selling concession to dealers who are members
in good standing of the National Association of Securities Dealers, Inc.
("NASD") or to foreign dealers who are not eligible for membership in the
NASD and who have agreed (i) not to sell the Securities within the United
States of America, its territories or possessions or to persons who are
citizens thereof or residents therein, and (ii) to abide by the applicable
Rules of Fair Practice of the NASD.
- --------
* Plus the over-allotment option available to the Underwriter to purchase
up to an additional 262,500 shares of Common Stock and/or up to an
additional 262,500 Warrants.
** The Securities may be purchased in the offering only together, on the
basis of one share of Common Stock and one Warrant.
<PAGE>
Delivery and Payment: Delivery of the Securities shall be made on or about
______ __, 1996 or such later date as we may advise on not less than one
day's notice to you, at the office of GKN Securities Corp., 61 Broadway,
12th Floor, New York, New York 10006 or at such other place as we shall
specify on not less than one day's notice to you. Payment for the
Securities is to be made, against delivery, at the authorized public
offering price stated above, or, if we shall so advise you, at the
authorized public offering price less the dealers' selling concession
stated above, by a certified or official bank check in New York Clearing
House Funds payable to the order of GKN Securities Corp.
Termination: This Agreement shall terminate at the close of business on the 45th
day following the effective date of the Registration Statement (of which
the enclosed Prospectus forms a part), unless extended at our discretion
for a period or periods not to exceed in the aggregate 30 additional days.
We may terminate this Agreement, whether or not extended, at any time
without notice.
Any of the Securities purchased by you hereunder are to be offered by you
to the public at the public offering prices, except as herein otherwise provided
and except that a reallowance from such public offering prices not in excess of
the amount set forth on the first page of this Agreement may be allowed as
consideration for services rendered in distribution to dealers that (a) are
actually engaged in the investment banking or securities business; (b) execute
the written agreement prescribed by Section 24(c) of Article III of the Rules of
Fair Practice of the NASD; and (c) are either members in good standing of the
NASD or foreign banks, dealers or institutions not eligible for membership in
the NASD which represent to you that they will promptly reoffer such Securities
at the public offering price and will abide by the conditions with respect to
foreign banks, dealers and institutions set forth in paragraph 9 below.
You, by becoming a member of the Selected Dealers, agree (a) upon
effectiveness of the Registration Statement, to take up and pay for the number
of Securities allotted and confirmed to you, (b) not to use any of the
Securities to reduce or cover any short position you may have, (c) upon our
request, to advise us of the number of Securities purchased from us as manager
of the Selected Dealers remaining unsold by you and to resell to us any or all
of such unsold Securities at the public offering prices stated above, less all
or such part of the concession allowed you as we may determine, and (d) to make
available a copy of the Prospectus to all persons who on your behalf will
solicit orders for the Securities prior to the making of such solicitations by
such persons. You are not authorized to give any information or to make any
representations other than those contained in the Prospectus or any supplements
or amendments thereto.
As contemplated by Rule 15c2-8 under the Securities Exchange Act of 1934,
as amended, we agree to mail a copy of the Prospectus to any person making a
written request therefor during the period referred to in the rules and
regulations adopted under such Act, the mailing to be made to the address given
in the request. You confirm that you have delivered all preliminary prospectuses
and revised preliminary prospectuses, if any, required to be delivered under the
provisions of Rule 15c2-8 and agree to deliver all copies of the Prospectus
required to be delivered thereunder. We have heretofore delivered to you such
preliminary prospectuses as have been required by you, receipt of which is
hereby acknowledged, and will deliver such further prospectuses as may be
requested by you.
2
<PAGE>
You agree that until termination of this Agreement you will not make
purchases or sales of the Securities except (a) pursuant to this Agreement, (b)
pursuant to authorization received from us, or (c) in the ordinary course of
business as broker or agent for a customer pursuant to any unsolicited order.
Additional copies of the Prospectus and any supplements or amendments
thereto shall be supplied in reasonable quantity upon request.
The Securities are offered by us for delivery when, as and if sold to, and
accepted by, us and subject to the terms herein and in the Prospectus or any
supplements or amendments thereto, to our right to vary the concessions and
terms of offering after their release for public sale, to approval of counsel as
to legal matters and to withdrawal, cancellation or modification of the offer
without notice.
Upon written application to us, you shall be informed as to the
jurisdictions under the securities or blue sky laws of which we believe the
Securities are eligible for sale, but we assume no responsibility as to such
eligibility or the right of any member of the Selected Dealers to sell any of
the Securities in any jurisdiction. We have caused to be filed a Further State
Notice relating to such of the Securities to be offered to the public in New
York in the form required by, and pursuant to, the provisions of Article 23A of
the General Business Law of the State of New York. Upon the completion of the
public offering contemplated herein, each member of the Selected Dealers agrees
to promptly furnish to us, upon our request, territorial distribution reports
setting forth each jurisdiction in which sales of the Securities were made by
such member, the number of Securities sold in such jurisdiction, and any further
information as we may request, in order to permit us to file on a timely basis
any report which we as the Underwriter of the offering or manager of the
Selected Dealers may be required to file pursuant to the securities or blue sky
laws of any jurisdiction.
You, by becoming a member of the Selected Dealers, represent that you
actually engaged in the investment banking or securities business and that you
are (a) a member in good standing of the NASD and will comply with Section 24 of
Article III of the NASD's Rule of Fair Practice, or (b) a foreign dealer or
institution which is not eligible for membership in the NASD and which has
agreed (i) not to sell Securities within the United States of America, its
territories or possessions or to persons who are citizens thereof or residents
therein; (ii) that any and all sales shall be in compliance with the NASD's
Interpretation with Respect to Free-Riding and Withholding; (iii) to comply, as
though it were a member of the NASD, with Sections 8, 24 and 36 of Article III
of the NASD's Rules of Fair Practice, and to comply with Section 25 thereof as
that Section applies to a non-member broker or dealer in a foreign country.
Nothing herein shall constitute any members of the Selected Dealers
partners with us or with each other, but you agree, notwithstanding any prior
settlement of accounts or termination of this Agreement, to bear your proper
proportion of any tax or other liability based upon the claim that the Selected
Dealers constitute a partnership, association, unincorporated business or other
separate entity and a like share of any expenses of resisting any such claim.
We are the Underwriter of the offering and manager of the Selected Dealers
and have full authority to take such action as we may deem advisable in respect
of all matters pertaining to the offering or the Selected Dealers or any members
of them. Except as expressly stated herein, or as may arise under the Act, we
shall be under no liability to any member of the Selected Dealers as such for,
or in respect of (i) the validity or value of the Securities (ii) the form of,
or the statements contained in, the Prospectus, the Registration Statement of
which the Prospectus forms a part, any supplements or amendments to the
Prospectus or such Registration Statement, any preliminary prospectus, any
instruments executed by, or obtained or any supplemental sales data or
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<PAGE>
other letters from, the Company, or others, (iii) the form or validity of the
Underwriting Agreement, or this Agreement, (iv) the eligibility of any of the
Securities for sale under the laws of any jurisdiction, (v) the delivery of the
Securities, (vi) the performance by the Company, or others of any agreement on
its or their part, (vii) or any matter in connection with any of the foregoing,
except our own want of good faith.
If for federal income tax purposes the Selected Dealers, among themselves
or with the Underwriter, should be deemed to constitute a partnership, then we
elect to be excluded from the application of Subchapter K, Chapter 1, Subtitle A
of the Internal Revenue Code of 1986, as amended, and we agree not to take any
position inconsistent with such selection. We authorize you, in your discretion,
to execute and file on our behalf such evidence of such selection as may be
required by the Internal Revenue Service.
All communications from you shall be addressed to GKN at 61 Broadway, New
York, New York 10006, Attention: Mr. Jeffrey C. Weber. Any notice from us to you
shall be deemed to have been fully authorized by the several underwriters and to
have been duly given if mailed, telegraphed or sent by facsimile transmittal to
you at the address to which this letter is mailed. This Agreement shall be
construed in accordance with the laws of the State of New York without giving
effect to conflict of laws. Time is of the essence in this Agreement.
If you desire to become a member of the Selected Dealers,
please advise us to that effect immediately by facsimile transmission and sign
and return to us the enclosed counterpart of this letter.
Very truly yours,
GKN SECURITIES CORP.
By: ________________________________
Lester Rosenkrantz
Executive Vice President
We accept membership in the Selected Dealers on the terms
specified above.
Dated: ____________, 1996
- -------------------------------------
By: __________________________________
4
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERTRANZ WORLDWIDE HOLDING CORP.
The undersigned, being of legal age, in order to form a
corporation under and pursuant to the laws of the State of Delaware, does hereby
set forth as follows:
FIRST: The name of the corporation is
AMERTRANZ WORLDWIDE HOLDING CORP.
SECOND: The address of the initial registered and principal
office of this corporation in this state is c/o United Corporate Services, Inc.,
15 East North Street, in the city of Dover, County of Kent, State of Delaware
19901 and the name of the registered agent at said address is United Corporate
Services, Inc.
THIRD: The purpose of the corporation is to engage in
any lawful act or activity for which corporations may be organized
under the corporation laws of the State of Delaware.
FOURTH: The corporation shall be authorized to issue the
following shares:
Class Number of Shares Par Value
COMMON 15,000,000 $ .01
FIFTH: The name and address of the incorporator are as
follows:
NAME ADDRESS
Ray A. Barr 10 Bank Street
White Plains, New fork 10606
SIXTH: The following provisions are inserted for the
management of the business ana for the conduct of the affairs of the
corporation, and for further definition, limitation and regulation of the powers
of the corporation and of its directors and stockholders:
(1) The number of directors of the corporation shall be such
as from time to time shall be fixed by, or in the manner provided in the
by-laws. Election of directors need not be by ballot unless the By-Laws so
provide.
(2) The Board of Directors shall have power without the
assent or vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the
By-Laws of the corporation; to fix and vary the amount to be
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reserved for any proper purpose; to authorize and cause
to be executed mortgages and liens upon all or any part of
the property of the corporation; to determine the use and
disposition of any surplus or net profits; and to fix the
times for the declaration and payment of dividends.
(b) To determine from time to time whether, and to what
times and places, and under what conditions the accounts and
books of the corporation (other than the stock ledger) or
any of them, shall be open to the inspection of the
stockholders.
(3) The directors in their discretion may submit any contract
or act for approval or ratification at any annual meeting of the stockholders,
at any meeting of the stockholders called for the purpose of considering any
such act or contract, or through a written consent in lieu of a meeting in
accordance with the requirements of the General Corporation Law of Delaware as
amended from time to time, and any contract or act that shall be so approved or
be 50 ratified by the vote of the holders of a majority of the stock of the
corporation which is represented in person or by proxy at such meeting, (or by
written consent whether received directly or through a proxy) and entitled to
vote thereon (provided that a lawful quorum of stockholders be there represented
in person or by proxy) shall be as valid and as binding upon the corporation and
upon all the stockholders as though it had been approved, ratified, or consented
to by every stockholder of the corporation, whether or not the contract or act
would otherwise be open to legal attack because of directors' interest, or for
any other reason.
(4) In addition to the powers and authorities hereinbefore or
by statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this certificate, and to any by-laws from time to time
made by the stockholders; provided, however, that no by-laws so made shall
invalidate any prior act of the directors which would have been valid if such
by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director's duty of loyalty
to the corporation or its stockholders, (2) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as
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amended from time to time. The corporation shall indemnify to the fullest extent
permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law,
as amended from time to time, each person that such Sections grant the
corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware, may, on the application in
a summary way of this corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case way be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained ln this certificate of incorporation in
the manner now or hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors and officers are subject to this
reserved power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this twelfth day of January, 1996.
S/RAY A. BARR
Ray A. Barr, Incorporator
C64892.198
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BY-LAWS
OF
AMERTRANZ WORLDWIDE HOLDING CORP.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be established
and maintained at c/o the corporation, 2001 Marcus Avenue, Lake Success,, New
York 11042 and the corporation shall be the registered agent of this corporation
in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the registered office of the
corporation in Delaware.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business day. At each
annual meeting, the stockholders entitled to vote shall elect a Board of
Directors and they may transact such other corporate business as shall be stated
in the notice of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
SECTION 3. VOTING. - Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such
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proxy provides for a longer period. Upon the demand of any stockholder, the vote
for directors and the vote upon any question before the meeting, shall be by
ballot. All elections for directors shall be decided by plurality vote; all
other questions shall be decided by majority vote except as otherwise provided
by the Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM . - Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote the meeting.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than
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that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be three (3).
The directors shall be elected at the annual meeting of the stockholders and
each director shall be elected to serve until his successor shall be elected and
shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES - If the office of any director, member of a committee
or other officer becomes vacant, the remaining directors in office, though less
than a quorum by a majority vote, may appoint any qualified person to fill such
vacancy, who shall hold office for the unexpired term and until his successor
shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
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SECTION 5. INCREASE OF NUMBER. - The number of directors may be increased
by amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors are elected and qualify.
SECTION 6. POWERS. - The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate
members-of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of any member
or such committee or committees, the member or members thereof present at any
such meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power of authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
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Unless restricted by the incorporation document or elsewhere in these
By-laws, members of the Board of Directors or any committee designated by such
Board may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by a resolution
adopted by the Board. The Chairman of the Board or the President or Secretary
may call, and if requested by any two directors, must call special meeting of
the Board and give five days' notice by mail, or two days' notice personally or
by telegraph or cable to each director. The Board of Directors may hold an
annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further notice thereof need
be given other than by announcement at the meeting which shall be so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any stated salary
for their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. - Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the board, or of such committee as the case
may be, and such written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In
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addition, the Board of Directors may elect a Chairman, one or more
Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they
may deem proper. None of the officers of the corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors. SECTION 4. PRESIDENT. - The President shall be the
chief executive officer of the corporation and shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation. He shall preside at all meetings of the stockholders if
present thereat, and in the absence or non-election of the Chairman of the Board
of Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation . Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. - The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, or the President, taking proper vouchers for such
disbursements. He shall render to the President and Board of Directors at the
regular meetings of the Board of Directors, or whenever they may request it, an
account of all his transactions as Treasurer and of the financial condition of
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the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by the law or by these By-Laws, and in case of his absence or refusal
or neglect so to do, any such notice may be given by any person thereunto
directed by the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these By-Laws. He shall record
all the proceedings of the meetings of the corporation and of the directors in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him by the directors or the President. He shall have the custody of
the seal of the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the President, and attest the
same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. - Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by the
Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or its
employee, or, (2) by a registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against any claim
that may be made against it on
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account of the alleged loss of any such certificate, or the issuance of any
such new certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the corporation
shall be transferrable only upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representatives, and upon such
transfer the old certificate shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjournment meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"Corporate Seal, Delaware, 1996". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall be
determined By resolution of the Board of Directors.
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SECTION 8. CHECKS. - All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage, prepaid, addressed to
the person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation of these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
No director shall be liable to the corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except with
respect to (1) a breach of the director's duty of loyalty to the corporation or
its stockholders,
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(2) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (3) liability which may be specifically defined
by law or (4) a transaction from which the director derived an improper personal
benefit, it being the intention of the foregoing provision to eliminate the
liability of the corporation's directors to the corporation or its stockholders
to the fullest extent permitted by law. The corporation shall indemnify to the
fullest extent permitted by law each person that such law grants the corPoration
the power to indemnify.
C64896.198
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DRAFT 5/22/96
WARRANT AGREEMENT
Agreement made as of ___________ __, 1996, between AmerTranz Worldwide
Holding Corp. a Delaware corporation with offices at 2001 Marcus Avenue, Lake
Success, New York, 11042 ("Company"), and American Stock Transfer & Trust
Company, a ___________ corporation, with offices at 40 Wall Street, 46th Floor,
New York, New York 10005 ("Warrant Agent").
WHEREAS, the Company is engaged in a public offering of Common Stock
and Warrants ("Public Offering") and in connection therewith, has determined to
issue and deliver up to (i) 3,325,000 Redeemable Common Stock Purchase Warrants
("Public Warrants") to the public investors which includes 1,312,500 Warrants
("Bridge Warrants") issuable to certain investors in the Company's May and
February 1996 bridge financings ("Bridge Financings") and (ii) 175,000 Warrants
to GKN Securities Corp. ("Underwriter" or its designees ("Underwriter's
Warrants") and together with the Public Warrants, the "Warrant(s)"), each of
such Warrants evidencing the right of the holder thereof to purchase one share
of common stock, $.01 par value per share, of the Company's Common Stock
("Common Stock") for $6.00; and
WHEREAS, the Company has filed with the Securities and Exchange
Commission a Registration Statement, No. 333-03613 on Form S-1 ("Registration
Statement") for the registration, under the Securities Act of 1933, as amended,
of, among others, the Warrants and the Common Stock issuable upon exercise of
the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of
the Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Company, and to authorize the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company for the Warrants, and the Warrant Agent
hereby accepts such appointment and agrees to perform the same in accordance
with the terms and conditions set forth in this Agreement.
Warrants.
Form of Warrant. Each Warrant certificate shall be issued in
registered form only, shall be in substantially the form of Exhibit A hereto the
provisions of which are incorporated herein and shall be signed by, or bear the
facsimile signature of, the Chairman of the Board or President and Secretary or
Assistant Secretary of the Company and shall bear a facsimile of the Company's
seal. In the event the person whose facsimile signature has been placed upon any
Warrant
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certificate shall have ceased to be Chairman of the Board or President and
Secretary or Assistant Secretary of the Company before such Warrant certificate
is issued, it may be issued with the same effect as if he had not ceased to be
such at the date of issuance. The Warrants represented by a Warrant certificate
may not be exercised until such certificate has been countersigned by the
Warrant Agent as provided in Section 2.3 hereof.
Effect of Countersignature. Unless and until countersigned by
the Warrant Agent pursuant to this Agreement, a Warrant certificate shall be
invalid and of no effect.
Events for Countersignature. The Warrant Agent shall
countersign a Warrant certificate only upon the occurrence of either of the
following events:
if the Warrant certificate is to be issued in exchange or substitution for
one or more previously countersigned Warrant certificates, as hereinafter
provided, or
if the Company instructs the Warrant Agent to do so.
Registration.
Warrant Register. The Warrant Agent shall maintain books ("Warrant
Register"), for the registration of original issuance and the registration of
transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant
Agent shall issue and register the Warrants in the names of the respective
holders thereof in such denominations and otherwise in accordance with
instructions delivered to the Warrant Agent by the Company.
Registered Holder. Prior to due presentment for registration of transfer of
any Warrant certificate, the Company and the Warrant Agent may deem and treat
the person in whose name such Warrant certificate shall be registered upon the
Warrant Register ("registered holder"), as the absolute owner of such Warrant
and of each Warrant represented thereby (notwithstanding any notation of
ownership or other writing on the Warrant certificate made by anyone other than
the Company or the Warrant Agent), for the purpose of any exercise thereof, and
for all other purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
Detachability of Warrants. The Warrant Agent understands that
until the completion of the Public Offering, the Warrants may only be purchased
and sold together with the Common Stock and, upon completion of the Public
Offering, are immediately separately transferrable.
Terms and Exercise of Warrants
Warrant Price. Each Warrant certificate shall, when
countersigned by the Warrant Agent, entitle the registered holder thereof,
subject to the provisions of such Warrant certificate and of this Warrant
Agreement, to purchase from the Company the number of shares of Common Stock
stated therein, at the price of $6.00 per whole share, subject to the
adjustments provided in Section 4 hereof. The term "Warrant Price" as used in
this Warrant Agreement refers to the price per share at which Common Stock may
be purchased at the time a Warrant is exercised.
Duration of Warrants. A Warrant may be exercised only during
the period ("Exercise Period") commencing on June ___, 1997, and terminating on
the earlier of June __, 2001 or the date fixed for redemption of the Warrant as
provided in Section 6 of this Agreement ("Expiration
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Date"). Each Warrant not exercised on or before its expiration date shall become
void, and all rights thereunder and all rights in respect thereof under this
Agreement shall cease at the close of business on its Expiration Date. The
Company in its sole discretion may extend the duration of the Warrants by
delaying the Expiration Date.
Exercise of Warrants.
Payment. A Warrant, when countersigned by the Warrant Agent, may be
exercised by the registered holder thereof by surrendering the certificate
representing such Warrant, at the office of the Warrant Agent, or at the office
of its successor as Warrant Agent, in the Borough of Manhattan, City and State
of New York, with the subscription form, as set forth on the Warrant certificate
and in substantially the form of Exhibit A hereto, duly executed, and by paying
in full, in lawful money of the United States, in cash, good certified check or
bank draft payable to the order of the Company, the Warrant Price for each full
share of Common Stock as to which the Warrant is exercised and any and all
applicable taxes due in connection with the exercise of the Warrant, the
exchange of the Warrant for the Common Stock, and the issuance of the Common
Stock. Upon receipt of the warrant subscription form and the funds for the
exercise of the Warrant, the Warrant Agent will promptly deliver to the holder a
letter acknowledging receipt of the same, accompanied by a current prospectus
relating to the exercise of the Company's Warrants ("Warrant Exercise
Prospectus"), and stating that the holder has one (1) business day to review the
prospectus and confirm or rescind the exercise. Lack of further communication
from the Warrant holder shall be deemed a confirmation and the Warrant Agent
shall thereafter promptly effect the exercise of the Warrant in accordance with
this Section 3.3.1. The Company hereby covenants to supply to the Warrant Agent
not less than once every fiscal quarter an adequate supply of current Warrant
Exercise Prospectuses and the Warrant Agent may assume that the most recently
delivered Warrant Exercise Prospectus is current, unless notified to the
contrary by the Company.
Issuance of Certificates. As soon as practicable after the exercise of any
Warrant and the clearance of the funds in payment of the Warrant Price, the
Company shall issue to the registered holder of such Warrant a certificate or
certificates for the number of full shares of Common Stock to which he is
entitled, registered in such name or names as may be directed by him, and if
such Warrant shall not have been exercised in full, a new countersigned Warrant
certificate for the number of shares as to which such Warrant shall not have
been exercised. Notwithstanding the foregoing, the Company shall not be
obligated to deliver any securities pursuant to the exercise of a Warrant unless
a registration statement under the Securities Act of 1933 with respect to the
securities is effective and delivery of a Prospectus. Warrants may not be
exercised by, or securities issued to, any registered holder in any state in
which such exercise would be unlawful.
Valid Issuance. All shares of Common Stock issued upon the proper exercise
of a Warrant in conformity with this Agreement shall be validly issued.
Date of Issuance. Each person in whose name any such certificate for shares
of Common Stock is issued shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant certificate
was surrendered and payment of the Warrant Price was made, irrespective of the
date of delivery of such certificate, except that, if the date of such surrender
and payment is a date when the stock transfer books of the Company
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<PAGE>
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open.
Warrant Solicitation and Warrant Solicitation Fee.
Engagement. The Company has engaged the Underwriter, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Underwriter hereby accepts such engagement to solicit the exercise
of the Warrants at such times, and from time to time, that the Company or the
Underwriter may deem appropriate. The Company, at its cost, will (i) assist the
Underwriter with respect to such solicitation, if requested by the Underwriter
and (ii) provide the Underwriter, and direct the Company's transfer and warrant
agent to deliver to the Underwriter, lists of the record, and to the extent
known, beneficial owners of the Company's Warrants. Accordingly, the Company
hereby instructs the Warrant Agent to cooperate with the Underwriter in every
respect in connection with the Underwriter's solicitation activities, including,
but not limited to, providing to the Underwriter, at the Company's cost, a list
of record and beneficial holders of the Warrants and circulating a prospectus or
offering circular disclosing the compensation arrangements referenced in Section
3.4.2 hereinbelow to holders of the Warrants at the time of exercise of the
Warrants. In addition to the conditions set forth in Section 3.4.2 hereinbelow,
the Underwriter shall only accept payment of the warrant solicitation fee
provided in Section 3.4.2 if it has provided bona fide services to the Company
in connection with the exercise of the Warrants. In addition to soliciting,
either orally or in writing, the exercise of Warrants by a Warrant holder, such
services may also include disseminating information, either orally or in
writing, to Warrant holders about the Company or the market for the Company's
securities, or assisting in the processing of the exercise of Warrants.
Warrant Agent Exercise Notice and Payment. In each instance
in which a Warrant is exercised, the Warrant Agent shall promptly give written
notice of such exercise to the Company and the Underwriter ("Warrant Agent's
Exercise Notice"). If, upon the exercise of any Warrant more than one year from
the Effective Date, (i) the market price of the Company's Common Stock is
greater than the Warrant Price, (ii) disclosure of compensation arrangements was
made both at the time of the original offering and at the time of exercise (by
delivery of the Prospectus or as otherwise required by applicable law, rule or
regulation), (iii) the exercise of the Warrant was solicited by the Underwriter,
(iv) the Warrant was not held in a discretionary account, and (v) the
solicitation of the exercise of the Warrant was not in violation of Rule 10b-6
(as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities Exchange Act of 1934, then the
Warrant Agent, simultaneously with the distribution of proceeds to the Company
received upon exercise of the Warrant(s) so exercised, shall, on behalf of the
Company, pay from the proceeds received upon exercise of the Warrant(s), a fee
of 5% of the Warrant Price to the Underwriter, provided that the Underwriter
delivers to the Warrant Agent within ten (10) business days from the date on
which the Underwriter has received the Warrant Agent's Exercise Notice, a
certificate that the conditions set forth in the preceding clauses (iii), (iv)
and (v) have been satisfied. The Underwriter and the Company may at any time
during business hours, examine the records of the Warrant Agent, including its
ledger of original Warrant certificates returned to the Warrant Agent upon
exercise of Warrants.
Consent of Underwriter. The provisions of this Section 3.4. may not be
modified, amended or deleted without the prior written consent of the
Underwriter.
Underwriter's Warrants. The Underwriter's Warrants shall have the same
terms as the Public Warrants.
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Adjustments.
Stock Dividends - Split-Ups. If after the date hereof, and
subject to the provisions of Section 4.5 below, the number of outstanding shares
of Common Stock is increased by a stock dividend payable in shares of Common
Stock or by a split-up of shares of Common Stock or other similar event, then,
on the effective date thereof, the number of shares issuable on exercise of each
Warrant shall be increased in proportion to such increase in outstanding shares
and the then applicable Warrant Price shall be correspondingly decreased.
Aggregation of Shares. If after the date hereof, and subject
to the provisions of Section 4.5, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination or reclassification of shares
of Common Stock or other similar event, then, upon the effective date of such
consolidation, combination or reclassification, the number of shares issuable on
exercise of each Warrant shall be decreased in proportion to such decrease in
outstanding shares and the then applicable Warrant Price shall be
correspondingly increased.
Replacement of Securities Upon Reorganization, etc. If after
the date hereof any capital reorganization or reclassification of the Common
Stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation or other similar event shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, or sale, lawful
and fair provision shall be made whereby the Warrant holders shall thereafter
have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in the Warrants and in lieu of the shares of Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented thereby, such shares of stock, securities, or
assets as may be issued or payable with respect to or in exchange for the number
of outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented by the Warrants, had such reorganization,
reclassification, consolidation, merger, or sale not taken place and in such
event appropriate provision shall be made with respect to the rights and
interests of the Warrant holders to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price
and of the number of shares purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be in relation to any share of stock,
securities, or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger, or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by written instrument executed and delivered to the Warrant
Agent the obligation to deliver to the Warrant holders such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase.
Notices of Changes in Warrant. Upon every adjustment of the
Warrant Price or the number of shares issuable on exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Sections 4.1., 4.2., or 4.3., then, in any
such event, the Company shall give written notice in the manner set forth above
of the record date for such dividend, distribution, or subscription rights, or
the effective date of such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, winding up or issuance. Such notice
shall also specify the date as of which the holders of Common Stock of
5
<PAGE>
record shall participate in such dividend, distribution, or subscription rights,
or shall be entitled to exchange their Common Stock for stock, securities, or
other assets deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding up or issuance.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such event.
No Fractional Shares. Notwithstanding any provision contained
in this Warrant Agreement to the contrary, the Company shall not issue
fractional shares upon exercise of Warrants. If, by reason of any adjustment
made pursuant to this Section 4, the holder of any Warrant would be entitled,
upon the exercise of such Warrant, to receive a fractional interest in a share,
the number of shares of Common Stock to be received shall be rounded off to the
nearest whole number.
Form of Warrant. The form of Warrant need not be changed
because of any adjustment pursuant to this Section 4, and Warrants issued after
such adjustment may state the same Warrant Price and the same number of shares
as is stated in the Warrants initially issued pursuant to this Agreement.
However, the Company may at any time in its sole discretion make any change in
the form of Warrant that the Company may deem appropriate and that does not
affect the substance thereof, and any Warrant thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant or
otherwise, may be in the form as so changed.
Transfer and Exchange of Warrants.
Registration of Transfer. The Warrant Agent shall register the
transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of a Warrant certificate for transfer, properly
endorsed with signatures properly guaranteed and accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant certificate
representing an equal aggregate number of Warrants shall be issued and the old
Warrant certificate shall be canceled by the Warrant Agent. The Warrant
certificate so cancelled shall be delivered by the Warrant Agent to the Company
from time to time upon request.
Procedure for Surrender of Warrants. Warrant certificates may
be surrendered to the Warrant Agent, together with a written request for
exchange, and thereupon the Warrant Agent shall issue in exchange therefor one
or more new Warrant certificates as requested by the registered holder of the
Warrant certificates so surrendered, representing an equal aggregate number of
Warrants; provided, however, that in the event that a Warrant certificate
surrendered for transfer bears a restrictive legend, the Warrant Agent shall not
cancel such Warrant certificate and issue new Warrant certificates in exchange
therefor until the Warrant Agent has received an opinion of counsel for the
Company stating that such transfer may be made and indicating whether the new
Warrant certificates must also bear a restrictive legend.
Fractional Warrants. The Warrant Agent shall not be required
to effect any registration of transfer or exchange which will result in the
issuance of a warrant certificate for a fraction of a warrant. The number of
Warrants to be delivered shall be rounded off to the nearest whole number.
Service Charges. No service charge shall be made for any exchange or
registration of transfer of Warrants.
6
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Warrant Execution and Countersignature. The Warrant Agent is
hereby authorized to countersign and to deliver, in accordance with the terms of
this Agreement, the Warrants required to be issued pursuant to the provisions
hereof, and the Company, whenever required by the Warrant Agent, will supply the
Warrant Agent with Warrant certificates duly executed on behalf of the Company
for such purpose.
Redemption.
Redemption. The Warrants may be redeemed, at the option of the
Company, as a whole at any time or in part from time to time, after they become
exercisable and prior to the Expiration Date, on a pro rata basis as the Company
in its sole discretion may determine, at the office of the Warrant Agent, upon
the notice referred to in Section 6.2., at the price of $.01 per Warrant
("Redemption Price"), provided that (a) the last sale price of the Common Stock
has been at least $10.00 on each of the twenty (20) consecutive trading days
ending on the third business day prior to the date on which notice of redemption
is given, the satisfaction of which condition shall be certified by the Company
and (b) the Company has obtained the prior written consent of the Underwriter.
The provisions of this Section 6.1 may not be modified, amended or deleted
without the prior written consent of the Underwriter.
Date Fixed for, and Notice of, Redemption. In the event the
Company shall elect to redeem all or any part of the Warrants, the Company shall
fix a date for the redemption. Notice of redemption shall be mailed by first
class mail, postage prepaid, by the Company or the Company's agent at its
direction not less than 30 days from the date fixed for redemption to the
registered holders of the Warrants to be redeemed at their last address as they
shall appear on the registration books. Any notice mailed in the manner herein
provided shall be conclusively presumed to have been duly given whether or not
the registered holder received such notice.
Exercise After Notice of Redemption. The Warrants may be
exercised in accordance with Section 3 of this Agreement at any time after
notice of redemption shall have been given by the Company pursuant to Section
6.2. hereof and prior to the date fixed for redemption. On and after the
redemption date, the record holder of the Warrants shall have no further rights
except to receive, upon surrender of the Warrants, the redemption price.
Other Provisions Relating to Rights of Holders of Warrants.
No Rights as Stockholder. A Warrant does not entitle the
registered holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to receive dividends, or other
distributions, exercise any preemptive rights to vote or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or the
election of directors of the Company or any other matter.
Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant
certificate is lost, stolen, mutilated, or destroyed, the Company and the
Warrant Agent may on such terms as to indemnity or otherwise as they may in
their discretion impose (which shall, in the case of a mutilated Warrant
certificate, include the surrender thereof), issue a new Warrant certificate of
like denomination, tenor, and date as the Warrant certificate so lost, stolen,
mutilated, or destroyed. Any such new Warrant certificate shall constitute a
substitute contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated, or destroyed Warrant certificate shall be at any time
enforceable by anyone.
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Reservation of Common Stock. The Company shall at all times
reserve and keep available a number of its authorized but unissued shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants issued pursuant to this Agreement.
Registration of Common Stock. During the time when (i) a
Warrant Exercise Prospectus is required to be delivered under the Act and until
such time as the Warrants are no longer exercisable ("Termination Date") so far
as necessary to permit the continuance of exercise of the Warrants; and (ii) a
Resale Prospectus is required to be delivered under the Act so far as necessary
to permit the resale of the Bridge Warrants, the Company will use its best
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, in accordance with the provisions hereof, the
Prospectus and the Subscription Agreement between the Company and each investor
in the Bridge Financings, which requires the Company to keep the Registration
Statement effective until the Termination Date. If at any time when a Warrant
Exercise Prospectus or Resale Prospectus relating to the Bridge Warrants or the
Underwriter's Warrants is required to be delivered under the Act and, in any
event, until the Termination Date, any event shall have occurred as a result of
which, in the opinion of counsel for the Company, such Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Transfer Agent promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act.
Concerning the Warrant Agent and Other Matters.
Payment of Taxes. The Company will from time to time promptly
pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon the
exercise of Warrants, but the Company shall not be obligated to pay any transfer
taxes in respect of the Warrants or such shares.
Resignation, Consolidation, or Merger of Warrant Agent.
Appointment of Successor Warrant Agent. The Warrant Agent, or any successor
to it hereafter appointed, may resign its duties and be discharged from all
further duties and liabilities (other than those incurred prior to such
resignation or discharge) hereunder after giving sixty (60) days' notice in
writing to the Company. If the office of the Warrant Agent becomes vacant by
resignation or incapacity to act or otherwise, the Company shall appoint in
writing a successor Warrant Agent in place of the Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation or incapacity by the Warrant Agent or by
a holder of Warrants (who shall, with such notice, submit his Warrant for
inspection by the Company), then the holder of any Warrant may apply to the
Supreme Court of the State of New York for the County of New York for the
appointment of a successor Warrant Agent. Any successor Warrant Agent, whether
appointed by the Company or by such court, shall be a corporation organized,
existing and in good standing and authorized under the laws of the state in
which it was incorporated to exercise corporate trust powers, shall maintain an
office in the Borough of Manhattan, City and State of New York for the transfer
of the Warrants and, if not incorporated in the State of New York, shall be
authorized to do business in the State of New York as a foreign corporation, and
subject to supervision or examination by federal or state
8
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authority and shall be authorized to serve as Warrant Agent for the Warrants
under the Securities Exchange Act of 1934, as amended. After appointment, any
successor Warrant Agent shall be vested with all the authority, powers, rights,
immunities, duties, and obligations of its predecessor Warrant Agent with like
effect as if originally named as Warrant Agent hereunder, without any further
act or deed; but if for any reason it becomes necessary or appropriate, the
predecessor Warrant Agent shall execute and deliver, at the expense of the
Company, an instrument transferring to such successor Warrant Agent all the
authority, powers, and rights of such predecessor Warrant Agent hereunder; and
upon request of any successor Warrant Agent the Company shall make, exe-
cute, acknowledge, and deliver any and all instruments in writing for more fully
and effectually vesting in and confirming to such successor Warrant Agent all
such authority, powers, rights, immunities, duties, and obligations.
Notice of Successor Warrant Agent. In the event a successor Warrant Agent
shall be appointed, the Company shall give notice thereof to the predecessor
Warrant Agent and the transfer agent for the Common Stock not later than the
effective date of any such appointment.
Merger or Consolidation of Warrant Agent. Any corporation into which the
Warrant Agent may be merged or with which it may be consolidated or any
corporation resulting from any merger or consolidation to which the Warrant
Agent shall be a party, if it shall be eligible to serve as Warrant Agent under
Section 8.2.1, shall be the successor Warrant Agent under this Agreement without
any further act.
Fees and Expenses of Warrant Agent.
Remuneration. The Company agrees to pay the Warrant Agent reasonable
remuneration for its services as such Warrant Agent hereunder and will reimburse
the Warrant Agent upon demand for all expenditures that the Warrant Agent may
reasonably incur in the execution of its duties hereunder.
Further Assurances. The Company agrees to perform, execute, acknowledge,
and deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments, and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
of the provisions of this Agreement.
Liability of Warrant Agent.
Reliance on Company Statement. Whenever in the performance of its duties
under this Warrant Agreement, the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a statement signed by the President of
the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon
such statement for any action taken or suffered in good faith by it pursuant to
the provisions of this Agreement.
Indemnity. The Warrant Agent shall be liable hereunder only for its own
negligence or willful misconduct. The Company agrees to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence, willful misconduct, or bad faith.
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Exclusions. The Warrant Agent shall have no responsibility with respect to
the validity of this Agreement or with respect to the validity or execution of
any Warrant (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant; nor shall it be responsible to make any adjustments
required under the provisions of Section 4. hereof or responsible for the
manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment; nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Warrant or as to whether any shares of Common Stock
will when issued be valid and fully paid and nonassessable.
Acceptance of Agency. The Warrant Agent hereby accepts the
agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth and among other things, shall account
promptly to the Company with respect to Warrants exercised and concurrently
account for, and pay to the Company, all moneys received by the Warrant Agent
for the purchase of shares of the Company's Common Stock through the exercise of
Warrants.
Miscellaneous Provisions.
Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns.
Notices. Any notice, statement or demand authorized by this
Warrant Agreement to be given or made by the Warrant Agent or by the holder of
any Warrant to or by the Company or to the Warrant Agent shall be sufficiently
given or made if sent by certified mail, or private courier service, postage
prepaid, addressed (until another address is filed in writing with the Warrant
Agent), as follows:
To the Company: AmerTranz Worldwide Holding Corp.
2001 Marcus Avenue
Lake Success, New York 11042
Telephone: (516) 326-9000
Telefax: (516) 326-2248
Att: Mr. Stuart Hettleman
President and Chief Executive Officer
With a copy to: Ferber Greilsheimer Chan & Essner
530 Fifth Avenue, 23rd Floor
New York, New York 10036
Telephone: (212) 944-2200
Telefax: (212) 944-7630
Att: David I. Ferber, Esq.
To the Warrant Agent: American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
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To GKN: GKN Securities Corp.
61 Broadway
New York, New York 10006
Telephone: (212) 509-3800
Telefax: (212) 425-5861
Att: David M. Nussbaum
Chairman
With a copy to: Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Telephone: (212) 818-8800
Telefax: (212) 818-8881
Att: David Alan Miller, Esq.
Applicable law; Jurisdiction. The validity, interpretation,
and performance of this Agreement and of the Warrants shall be governed in all
respects by the law of the State of New York, without giving effect to
principles of conflicts of law. The Company hereby agrees that any action,
proceeding or claim against it arising out of or relating in any way to this
Agreement shall be brought and enforced in the courts of the State of New York
or the United States District Court for the Southern District of New York, and
irrevocably submits, to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenience forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 9.2 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim.
Persons Having Rights Under This Agreement. Nothing in this
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties hereto and the registered holders
of the Warrants and, for the purposes of Sections 3.4, 6.1 through 6.3 and 7.4
hereof, the Underwriter, any right, remedy, or claim under or by reason of this
Warrant Agreement or of any covenant, condition, stipulation, promise, or
agreement hereof. Underwriter shall be deemed to be a third-party beneficiary of
this Agreement with respect to such Sections. All covenants, conditions,
stipulations, promises, and agreements contained in this Warrant Agreement shall
be for the sole and exclusive benefit of the parties hereto (and the Underwriter
to the extent set forth above) and their successors and assigns and of the
registered holders of the Warrants.
Examination of the Warrant Agreement. A copy of this Agreement
shall be available at all reasonable times at the office of the Warrant Agent in
the Borough of Manhattan, City and State of New York, for inspection by the
registered holder of any Warrant. The Warrant Agent may require any such holder
to submit his or her Warrant for inspection by it.
Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
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Effect of Headings. The Section headings herein are for
convenience only and are not part of this Warrant Agreement and shall not affect
the interpretation thereof.
12
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under their respective corporate seals as of the day and year
first above written.
Attest: AMERTRANZ WORLDWIDE HOLDING CORP.
By:
Name: Name:
Title: Title:
AMERICAN STOCK TRANSFER & TRUST
Attest: COMPANY
By:
Name: Name:
Title: Title:
With respect to Sections 3.4, 6.1 and 7.4 only:
GKN SECURITIES CORP.
By: _________________________
Name:
Title:
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<PAGE>
DRAFT 5/29/96
THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION
EXCEPT AS HEREIN PROVIDED.
NOT EXERCISABLE PRIOR TO JUNE ___, 1997. VOID AFTER 5:00 P.M. EASTERN TIME,
JUNE ___, 2001.
PURCHASE OPTION
For the Purchase of
175,000 Shares of Common Stock
and
175,000 Common Stock Purchase Warrants
of
AMERTRANZ WORLDWIDE HOLDING CORP.
(A Delaware Corporation)
1. Purchase Option.
THIS CERTIFIES THAT, in consideration of $.00057 per option
duly paid by or on behalf of GKN Securities Corp. ("Holder"), as registered
owner of this Purchase Option, to Amertranz Worldwide Holding Corp. ("Company"),
Holder is entitled, at any time or from time to time at or after June ___, 1997
("Commencement Date"), and at or before 5:00 p.m., Eastern Time, June ___, 2001
("Expiration Date"), but not thereafter, to subscribe for, purchase and receive,
in whole or in part, up to One Hundred Seventy-Five Thousand (175,000) shares of
Common Stock of the Company, $0.01 par value ("Common Stock") and/or One Hundred
Seventy-Five Thousand (175,000) Common Stock Purchase Warrants, each to purchase
one share of Common Stock ("Warrants") during the period commencing on one year
and expiring five years from the effective date of the registration statement on
Form No. S-1 No. 333-03613 ("Registration Statement") pursuant to which the
Company has registered shares of Common Stock and warrants to purchase Common
Stock ("Effective Date"). Each Warrant is the same as the warrants that have
been registered for sale to the public pursuant to the Registration Statement
("Public Warrants") The shares of Common Stock and Warrants are sometimes
collectively referred to herein as the "Securities." The Holder can purchase,
upon exercise of the Purchase Option, either shares of Common Stock or Warrants
or both. If the Expiration Date is a day on which banking institutions are
authorized by law to close, then this Purchase Option may be exercised on the
next succeeding day which is not such a day in accordance with the terms herein.
During the period ending on the Expiration Date, the Company agrees not to take
<PAGE>
any action that would terminate the Purchase Option. This Purchase Option is
initially exercisable at $6.60 per share of Common Stock and $0.11 per Warrant
purchased; provided, however, that upon the occurrence of any of the events
specified in Section 6 hereof, the rights granted by this Purchase Option,
including the exercise price and the number of shares of Common Stock and
Warrants to be received upon such exercise, shall be adjusted as therein
specified. The term "Exercise Price" shall mean the initial exercise price or
the adjusted exercise price, depending on the context of a share of Common Stock
or a Warrant.
2. Exercise.
2.1 Exercise Form. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise
Price in cash or by certified check or official bank check for the Securities
being purchased. If the subscription rights represented hereby shall not be
exercised at or before 5:00 p.m., Eastern time, on the Expiration Date this
Purchase Option shall become and be void without further force or effect, and
all rights represented hereby shall cease and expire.
2.2 Legend. Unless registered under the Act, each certificate for
Securities purchased under this Purchase Option shall bear a legend as follows
unless such Securities have been registered under the Securities Act of 1933, as
amended:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act") or applicable state law. The securities may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act,
or pursuant to an exemption from registration under the Act
and applicable state law."
2.3 Cashless Exercise.
2.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price in the manner required by Section 2.1, the Holder shall have the
right (but not the obligation) to pay the Exercise Price for the Common Stock or
Warrants being purchased with this Purchase Option upon exercise by the
surrender to the Company of any exercisable but unexercised portion of this
Purchase Option having a "Stock Value" or "Warrant Value" (as defined below), as
the case may be, at the close of trading on the last trading day immediately
preceding the exercise of this Purchase Option, equal to the Exercise Price
multiplied by the number of Securities being purchased upon exercise ("Cashless
Exercise Right").
(1) Common Stock. Upon exercise of the Cashless Exercise Right with respect
to the Common Stock, the Company shall deliver to the Holder (without
payment by the Holder of any of the Exercise Price) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the "Stock Value"
(as defined below) of the portion of the Purchase Option being converted at the
time the Cashless Exercise Right is exercised by (y) the Exercise Price;
provided however, that the aggregate number of shares of Common Stock which may
be issued upon exercise of the Purchase Option, including upon cashless
exercise, may not exceed that number of shares set forth on the first page of
this Purchase Option, except as may be adjusted pursuant to Section 6 hereof.
The "Stock Value" of the portion of the Purchase Option being converted shall
equal the remainder derived from subtracting (a) the Exercise Price multiplied
by the number of shares of Common Stock underlying the portion of the Purchase
2
<PAGE>
Option being converted from (b) the market price of the Common Stock ("Stock
Market Price") multiplied by the number of shares of Common Stock underlying the
portion of the Purchase Option being converted. As used herein, the term "Stock
Market Price" at any date shall be deemed to be the last reported sale price of
the Common Stock on such date, or, in case no such reported sale takes place on
such day, the average of the last reported sale prices for the immediately
preceding three trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or if any such exchange on which the Common Stock
is listed is not its principal trading market, the last reported sale price as
furnished by the NASD through the Nasdaq National Market or SmallCap Market, or,
if applicable, the OTC Bulletin Board, or if the Common Stock is not listed or
admitted to trading on any of the foregoing markets, or similar organization, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it.
(2) Warrants. Upon exercise of the Cashless Exercise Right with respect to
the Warrants, the Company shall deliver to the Holder (without
payment by the Holder of any of the Exercise Price) that number of Warrants
equal to the quotient obtained by dividing (x) the "Warrant Value" (as defined
below) of the portion of the Purchase Option being converted at the time the
Cashless Exercise Right is exercised by (y) the Exercise Price; provided
however, that the aggregate number of Warrants which may be issued upon exercise
of the Purchase Option, including upon cashless exercise, may not exceed that
number of Warrants set forth on the first page of this Purchase Option, except
as may be adjusted pursuant to Section 6 hereof. The "Warrant Value" of the
portion of the Purchase Option being converted shall equal the remainder derived
from subtracting (a) the Exercise Price multiplied by the number of Warrants
underlying the portion of the Purchase Option being converted from (b) the
market price of the Warrants ("Warrant Market Price") multiplied by the number
of Warrants underlying the portion of the Purchase Option being converted. As
used herein, the term "Warrant Market Price" at any date shall be deemed to be
the last reported sale price of the Warrants on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Warrants
are listed or admitted to trading, or, if the Warrants are not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Warrants are listed is not its principal trading market, the last
reported sale price as furnished by the NASD through the Nasdaq National Market
or SmallCap Market, or, if applicable, the OTC Bulletin Board, or if the
Warrants are not listed or admitted to trading on any of the foregoing markets,
or similar organization, as determined in good faith by resolution of the Board
of Directors of the Company, based on the best information available to it.
2.3.2 Mechanics of Cashless Exercise. The Cashless Exercise
Right may be exercised by the Holder on any business day on or after the
Commencement Date and not later than the Expiration Date by delivering the
Purchase Option with a duly executed exercise form attached hereto with the
cashless exercise section completed to the Company, exercising the Cashless
Exercise Right and specifying the total number of Securities will purchase
pursuant to such Cashless Exercise Right.
3. Transfer.
3.1 General Restrictions. The registered Holder of this Purchase Option, by
its acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Purchase Option prior to the Commencement Date to anyone other
than (i) an officer or partner of such
3
<PAGE>
Holder, (ii) an officer of GKN Securities Corp. ("Underwriter") or an officer or
partner of any Selected Dealer or member of the underwriting syndicate in
connection with the Company's public offering with respect to which this
Purchase Option has been issued, or (iii) any Selected Dealer or member of the
underwriting syndicate. On and after the Commencement Date, transfers to others
may be made subject to compliance with or exemptions from applicable securities
laws. In order to make any permitted assignment, the Holder must deliver to the
Company the assignment form attached hereto duly executed and completed,
together with the Purchase Option and payment of all transfer taxes, if any,
payable in connection therewith. The Company shall immediately transfer this
Purchase Option on the books of the Company and shall execute and deliver a new
Purchase Option or Purchase Options of like tenor to the appropriate assignee(s)
expressly evidencing the right to purchase the aggregate number of shares of
Common Stock and Warrants purchasable hereunder or such portion of such number
as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Act. This Purchase Option and
the Securities underlying this Purchase Option shall not be transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Purchase Option or the Securities, as the case may be, may be
transferred pursuant to an exemption from registration under the Act and
applicable state law, the availability of which is established to the reasonable
satisfaction of the Company (the Company hereby agreeing that the opinion of
Graubard Mollen & Miller shall be deemed satisfactory evidence of the
availability of an exemption), or (ii) a registration statement relating to such
Purchase Option or Securities, as the case may be, has been filed by the Company
and declared effective by the Securities and Exchange Commission and compliance
with applicable state law.
4. New Purchase Options to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Purchase Option may be exercised or assigned in whole or
in part. In the event of the exercise or assignment hereof in part only, upon
surrender of this Purchase Option for cancellation, together with the duly
executed exercise or assignment form and funds sufficient to pay any Exercise
Price and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Purchase Option of like tenor to this Purchase Option in
the name of the Holder evidencing the right of the Holder to purchase the
aggregate number of shares of Common Stock and Warrants purchasable hereunder as
to which this Purchase Option has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification, the Company
shall execute and deliver a new Purchase Option of like tenor and date. Any such
new Purchase Option executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.
5. Registration Rights.
5.1 Demand Registration.
5.1.1 Grant of Right. The Company, upon written demand ("Initial Demand
Notice") of the Holder(s) of at least 51% of the Purchase Options and/or the
underlying shares
4
<PAGE>
of Common Stock and Warrants ("Majority Holders"), agrees to register on one
occasion, all or any portion of the Purchase Options requested by the Majority
Holders in the Initial Demand Notice and all of the Securities underlying such
Purchase Options, including the Common Stock, the Warrants and the Common Stock
underlying the Warrants (collectively the "Registrable Securities"). On such
occasion, the Company will file a Registration Statement covering the
Registrable Securities within sixty days after receipt of the Initial Demand
Notice and use its best efforts to have such registration statement declared
effective promptly thereafter. Should this registration or the effectiveness
thereof be delayed by the Company, the exercisability of the Purchase Options
shall be extended for a period of time equal to the delay in registering the
Registrable Securities provided, however, that such extension date shall not
extend beyond five years from the Effective Date. Moreover, if the Company fails
to comply with the provisions of this Section 5.1.1, the Company shall, in
addition to any other equitable or other relief available to the Holder(s), be
liable for any and all incidental, special and consequential damages sustained
by the Holder(s). The demand for registration may be made at any time during a
period of four years beginning one year from the Effective Date. The Company
covenants and agrees to give written notice of its receipt of any Initial Demand
Notice by any Holder(s) to all other registered Holders of the Purchase Options
and/or the Registrable Securities within ten days from the date of the receipt
of any such Initial Demand Notice.
5.1.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. The Company agrees to use its best efforts to cause the
filing required herein to become effective promptly and to qualify or register
the Registrable Securities in such States as are reasonably requested by the
Holder(s); provided, however, that in no event shall the Company be required to
register the Registrable Securities in a State in which such registration would
cause (i) the Company to be obligated to register or license to do business in
such State, or (ii) the principal stockholders of the Company to be obligated to
escrow their shares of capital stock of the Company. The Company shall cause any
registration statement filed pursuant to the demand rights granted under Section
5.1.1 to remain effective for a period of at least nine consecutive months from
the date that the Holders of the Registrable Securities covered by such
registration statement are first given the opportunity to sell all of such
securities.
5.2 "Piggy-Back" Registration.
5.2.1 Grant of Right. In addition to the demand right of
registration, the Holders of the Purchase Options shall have the right for a
period of six years commencing one year from the Effective Date, to include the
Registrable Securities as part of any other registration of securities filed by
the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8.
5.2.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed regis-
tration, the Company shall furnish the then Holders of outstanding Registrable
Securities with not less than thirty days written notice prior to the proposed
date of filing of such registration statement. Such notice to the Holders shall
continue to be given for each registration statement filed by the Company until
such time as all of the Registrable Securities have been sold by the Holder. The
holders of the Registrable Securities shall exercise the "piggy-back" rights
provided
5
<PAGE>
for herein by giving written notice, within twenty days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggyback"
rights to remain effective for at least nine months from the date that the
Holders of the Registrable Securities are first given the opportunity to sell
all of such securities.
5.3 General Terms.
5.3.1 Indemnification. The Company shall indemnify the
Holder(s) of the Registrable Securities to be sold pursuant to any registration
statement hereunder and each person, if any, who controls such Holders within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriter contained in Section 5 of the
Underwriting Agreement between the Underwriter and the Company, dated the
Effective Date. The Holder(s) of the Registrable Securities to be sold pursuant
to such registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holders, or their successors or assigns, in writing, for specific inclusion
in such registration statement to the same extent and with the same effect as
the provisions contained in Section 5 of the Underwriting Agreement pursuant to
which the Underwriter has agreed to indemnify the Company.
5.3.2 Exercise of Warrants. Nothing contained in this Purchase
Option shall be construed as requiring the Holder(s) to exercise their Purchase
Options or Warrants prior to or after the initial filing of any registration
statement or the effectiveness thereof.
5.3.3 Exclusivity. The Company shall not permit the inclusion
of any securities other than the Registrable Securities to be included in any
registration statement filed pursuant to Section 5.1 hereof without the prior
written consent of the Majority Holders of the Registrable Securities.
5.3.4 Documents Delivered to Holders. The Company shall
furnish to each Holder participating in any of the foregoing offerings and to
each underwriter of any such offering, if any, a signed counterpart, addressed
to such Holder or underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting agreement related thereto), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in
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<PAGE>
accountants' letters delivered to underwriters in underwritten public offerings
of securities. The Company shall also deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
shall reasonably request.
5.3.5 Underwriting Agreement. The Company shall enter into an
underwriting agreement with the managing underwriter(s) selected by any Holders
whose Registrable Securities are being registered pursuant to this Section 5.
Such agreement shall be reasonably satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Registrable Securities and may, at their
option, require that any or all the representations, warranties and covenants of
the Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders, their shares and their
intended methods of distribution.
5.3.6 Documents to be Delivered by Holder(s). Each of the
Holder(s) participating in any of the foregoing offerings shall furnish to the
Company a completed and executed questionnaire provided by the Company
requesting information customarily sought of selling securityholders.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities. The Exercise
Price and the number of shares of Common Stock and Warrants underlying the
Purchase Option shall be subject to adjustment from time to time as hereinafter
set forth:
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If after the date hereof, and subject to the provisions of Section
6.3 below, the number of outstanding shares of Common Stock is increased by a
stock dividend payable in shares of Common Stock or by a split-up,
recapitalization or reclassification of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of shares of Common Stock
issuable on exercise of the Purchase Option and the Warrants underlying the
Purchase Option shall be increased in proportion to such increase in outstanding
shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable
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<PAGE>
on exercise of the Purchase Option and the Warrants underlying the Purchase
Option shall be decreased in proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Purchase Option is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Purchase Option
immediately prior to such adjustment, and (y) the denominator of which shall be
the number of shares of Common Stock so purchasable immediately thereafter. If
it is determined that such Exercise Price and number of shares of Common Stock
must be adjusted, then the Exercise Price of the Purchase Option with respect to
the underlying Warrants and the number of Warrants purchasable hereunder shall
also be adjusted pro rata.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Purchase Option shall have the right thereafter
(until the expiration of the right of exercise of this Purchase Option) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution
following any such sale or other transfer, by a Holder of the number of shares
of Common Stock of the Company obtainable upon exercise of this Purchase Option
immediately prior to such event; and if any reclassification also results in a
change in shares of Common Stock covered by Section 6.1.1, then such adjustment
shall be made pursuant to Sections 6.1.1, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Purchase Option. This form of
Purchase Option need not be changed because of any change pursuant to this
Section, and Purchase Options issued after such change may state the same
Exercise Price and the same number of shares of Common Stock and Warrants as are
stated in the Purchase Options initially issued pursuant to this Agreement. The
acceptance by any Holder of the issuance of new Purchase Options reflecting a
required or permissive change shall not be deemed to waive any rights to a prior
adjustment or the computation thereof.
6.1.6 Changes in Underlying Warrants. The Company agrees that
the Warrants are governed by the terms of the Company's Warrant Agreement, dated
_________, 1996, including the anti-dilution provisions contained therein.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or Warrants upon the exercise or transfer of the Purchase Option, nor shall it
be required to issue scrip or pay cash in lieu of any fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated
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<PAGE>
by rounding any fraction up or down to the nearest whole number of Warrants,
shares of Common Stock or other securities, properties or rights.
7. Reservation and Listing.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon
exercise of the Purchase Options or the Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Purchase Options and payment of the Exercise Price therefor, all shares of
Common Stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable and not subject to preemptive
rights of any stockholder. The Company further covenants and agrees that upon
exercise of the Warrants underlying the Purchase Options and payment of the
respective Warrant exercise price therefor, all shares of Common Stock and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Purchase Options shall be outstanding, the Company shall use its
best efforts to cause all (i) shares of Common Stock issuable upon exercise of
the Purchase Options and the Warrants, and (ii) the Warrants underlying the
Purchase Options to be listed (subject to official notice of issuance) on all
securities exchanges (or, if applicable on Nasdaq) on which the Common Stock or
the Public Warrants issued to the public in connection herewith are then listed
and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Purchase Options and their exercise, any of the
events described in Section 8.2 shall occur, then, in one or more of said
events, the Company shall give written notice of such event at least fifteen
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of the
closing of the transfer books, as the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
9
<PAGE>
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made on the date of delivery if delivered personally or
sent by overnight courier, with acknowledgement of receipt to the party to which
notice is given, or on the fifth day after mailing if mailed to the party to
whom notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of the Purchase Option, to the address of such Holder as shown
on the books of the Company, or (ii) if to the Company, to its principal
executive office.
9. Miscellaneous.
9.1 Amendments. The Company and the Underwriter may from time to time
supplement or amend this Purchase Option without the approval of any of the
Holders in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem shall not
adversely affect the interest of the Holders. All other modifications or
amendments shall require the written consent of the party against whom
enforcement of the modification or amendment is sought.
9.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Purchase Option.
9.3 Entire Agreement. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with this
Purchase Option) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
9.4 Binding Effect. This Purchase Option shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Purchase Option or any provisions
herein contained.
9.5 Governing Law; Submission to Jurisdiction. This Purchase Option
shall be governed by and construed and enforced in accordance with the laws of
the State of New York, without giving effect to conflict of laws. The Company
hereby agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Purchase Option shall be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and
10
<PAGE>
that such courts represent an inconvenient forum. Any process or summons to be
served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 8 hereof. Such mailing shall
be deemed personal service and shall be legal and binding upon the Company in
any action, proceeding or claim. The Company agrees that the prevailing
party(ies) in any such action shall be entitled to recover from the other
party(ies) all of its reasonable attor-
neys' fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
9.6 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Purchase Option shall not be deemed
or construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of the provisions of this Purchase Option shall be effective unless set
forth in a written instrument executed by the party or parties against whom or
which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
9.7 Execution in Counterparts. This Purchase Option may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.
IN WITNESS WHEREOF, the Company has caused this Purchase
Option to be signed by its duly authorized officer as of the ____ day of June
___, 1996.
AMERTRANZ WORLDWIDE HOLDING CORP.
By:__________________________
Name: Stuart Hettleman
Title: President
11
<PAGE>
Form to be used to exercise Purchase Option:
AMERTRANZ WORLDWIDE HOLDING CORP.
Date:_________________, 19__
The undersigned hereby elects irrevocably to exercise the
within Purchase Option and to purchase ____ shares of Common Stock and Warrants
to purchase shares of Common Stock of Amertranz Worldwide Holding Corp. and
hereby makes payment of $____________ (at the rate of $_________ per share of
Common Stock and $ per Warrant) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock and Warrants as to which this Purchase
Option is exercised in accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to exercise the
within Purchase Option and to purchase _________ Securities of Amertranz
Worldwide Holding Corp. by surrender of the unexercised portion of the within
Purchase Option (with a "Value" of $__________ based on a "Market Price" of
$___________). Please issue the Common Stock and Warrants comprising the
Securities in accordance with the instructions given below.
------------------------------
Signature
- ------------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Purchase Option in every particular
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by a
firm having membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
12
<PAGE>
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Purchase Option):
FOR VALUE RECEIVED,____________________________________ does
hereby sell, assign and transfer unto_______________________ the right to
purchase _______________________ shares of Common Stock and/or Warrants to
purchase shares of Common Stock of Amertranz Worldwide Holding Corp. ("Company")
evidenced by the within Purchase Option and does hereby authorize the Company to
transfer such right on the books of the Company.
Dated:___________________, 199_
------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Purchase Option in every particular
without alteration or enlargement or any change whatsoever.
13
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
1996 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1996 Stock Option Plan of Amertranz Worldwide Holding
Corp. (the "Plan") is to promote the financial interests of Amertranz Worldwide
Holding Corp. (the "Company"), including its growth and performance, by
encouraging directors, officers and employees of the Company and its
subsidiaries to acquire an ownership position in the Company, enhancing the
ability of the Company and its subsidiaries to attract and retain employees of
outstanding ability, and providing employees with a way to acquire or increase
their proprietary interest in the Company's success.
2. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 13 hereof, up to 402,348 of
shares of common stock, par value $.01 per share, of the Company (the "Shares")
shall be available for the grant of options under the Plan. The Shares issued
under the Plan may be authorized and unissued Shares or treasury Shares, as the
Company may from time to time determine. The Company shall reserve and keep
available such number of Shares as will satisfy the requirements of all
outstanding options granted under the Plan.
Shares subject to an option that expires unexercised, that is forfeited,
terminated or canceled, in whole or in part, or is paid in cash in lieu of
Shares, shall thereafter again be available for grant under the Plan, provided
that if such option was granted to an officer or director subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") who received benefits of ownership of such Shares for purposes
of Section 16(b) of the Exchange Act, such Shares shall not thereafter be
available for grant under the Plan to officers or directors except in accordance
with the provisions of Section 16(b) of the Exchange Act.
3. ADMINISTRATION.
The Plan shall be administered by the Stock Option Committee (the
"Committee") of the Board of Directors of the Company. A majority of the
Committee shall constitute a quorum, and the acts of a majority shall be the
acts of the Committee.
Subject to the provisions of the Plan, the Committee shall (i) from time to
time select directors, officers and employees of the Company and its
subsidiaries who will participate in the Plan (the "Participants"), determine
the type of options to be granted to Participants, determine the Shares subject
to option, and (ii) have the authority to interpret the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan, determine the
terms and provisions of any agreements entered into hereunder, and make all
other determinations necessary or advisable for the administration of the Plan.
The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any option in the manner
<PAGE>
and to the extent it shall deem desirable to carry it into effect. The
determinations of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive.
4. ELIGIBILITY.
All directors, officers and employees of the Company and its subsidiaries,
as determined by the Committee, are eligible to be Participants in the Plan,
provided, however, that the President and Executive Vice President of the
Company are eligible to participate in the Plan only to the extent set forth in
Section 6 hereof.
5. OPTIONS; EXERCISE PRICE.
Options under the Plan may consist of either incentive stock options within
the meaning of Section 422 of the Internal Revenue Code or non-qualified stock
options.
The Committee shall establish the option price at the time each stock
option is granted, which price shall not be less than 100% of the fair market
value of the Shares on the date of grant; provided, however, that with respect
to incentive stock options, if the optionee, at the time the option is granted,
owns Shares possessing more than 10% of the total voting power of stock of the
Company, then the option exercise price shall be 110% of the fair market value
of the Shares on the date of grant.
6. SENIOR EXECUTIVE GRANTS.
The President and Executive Vice President of the Company are eligible to
participate in the Plan only to the extent of the automatic grants as
hereinafter provided. Each such officer has been granted an option ("Senior
Executive Option") on _______, 1996 (the "Effective Grant Date") to purchase
_______ Shares. The Senior Executive Option will vest over a period of three
years, enabling each such officer to purchase _______ Shares at any time within
six months following the end of each of the Company's fiscal years ending June
30, 1997, 1998 and 1999, if the Company's earnings before interest, taxes,
depreciation and amortization for such fiscal year exceeds $_______, and if such
officer is then employed by the Company or one of its subsidiaries. The exercise
price of the Senior Executive Options will be the fair market value of the
Shares of Common Stock on the Effective Grant Date.
Shares acquired upon the exercise of all or part of a Senior Executive
Option may not be sold or otherwise disposed of by the optionee for a period of
six months from and after the date the Senior Executive Option with respect to
such Shares was exercised, except in the event of death of the optionee, in
which event all vested Senior Executive Options will be exercisable and may be
sold at any time after the date of death.
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<PAGE>
The provisions of this Section 6 may not be amended or modified more than
once every six months except as may be required to comply with the provisions of
the Internal Revenue Code of 1986, as amended, or the Employee Retirement Income
Security Act of 1974, as amended.
7. EXERCISE OF OPTIONS.
Except as herein provided, options shall be exercisable for such period as
specified by the Committee. In no event may options be exercisable until at
least six months following the date of grant. In no event may options be
exercisable more than 10 years after their date of grant or, in the case of an
incentive stock option granted to an optionee who, at the time the option is
granted, owns stock possessing more than 10% of the total voting power of stock
of the Company, more than five years after the date of grant.
The option price of each Share as to which a stock option is exercised
shall be paid in full at the time of such exercise. Such payment shall be made
in cash, by tender of Shares owned by the Participant valued at fair market
value as of the date of exercise and in such other consideration as the
Committee deems appropriate, or by a combination of cash, Shares and such other
consideration.
To exercise the option, the optionee or his successor shall give written
notice to the Company's Chief Financial Officer at the Company's principal
office, setting forth the number of Shares being purchased and the date of
exercise of the option, which date shall be at least five days after the giving
of such notice unless otherwise agreed to by the Committee and the optionee.
Such notice shall be accompanied by full payment of the option exercise price
for Shares being purchased and a written statement that the Shares are purchased
for investment and not with a view toward distribution. However, this statement
shall not be required in the event the Shares subject to the option are
registered with the Securities and Exchange Commission. If the option is
exercised by the successor of the optionee, following his death, proof shall be
submitted, satisfactory to the Committee, of the right of the successor to
exercise the option.
Shares issued pursuant to this Plan which have not been registered with the
Securities and Exchange Commission shall be appropriately legended.
No Shares shall be issued pursuant to the Plan until full payment for such
Shares has been made. The optionee shall have no rights as a shareholder with
respect to optioned Shares until the date of exercise of the option with respect
to such Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to such date of exercise,
except as otherwise provided herein.
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<PAGE>
The Company shall not be required to transfer or deliver any certificates
for Shares purchased upon any exercise of any option until after compliance with
all then applicable requirements of law. Any fraction of a Share required to
satisfy such obligation shall be disregarded and the amount due shall instead be
paid in cash to the Participant.
8. OPTION AGREEMENTS.
The granting of an option (except Senior Executive Options as described in
Section 6 hereof) shall take place only when a written Option Agreement
substantially in the form of Exhibit A hereto is executed by the Company and the
optionee and delivered to the optionee. All options under this Plan (except
Senior Executive Options) shall be evidenced by such written Option Agreement
between the Company and the optionee. Such Option Agreement shall contain such
further terms and conditions, not inconsistent with the foregoing, related to
the grant or the time or times of exercise of options as the Committee shall
prescribe.
9. WITHHOLDING.
The Company shall have the right to deduct from any payment to be made
pursuant to the Plan, or to require prior to the issuance or delivery of any
Shares or the payment of cash under the Plan, any taxes required by law to be
withheld therefrom. The Committee, in its sole discretion, may permit a
Participant to elect to satisfy such withholding obligation by having the
Company retain the number of Shares the fair market value of which equals the
amount required to be withheld.
10. NONTRANSFERABILITY.
No option shall be assignable or transferable, and no right or interest of
any Participant shall be subject to any lien, obligation or liability of the
Participant, except by will or the laws of descent and distribution.
11. NO RIGHT TO EMPLOYMENT.
No person shall have any claim or right to be granted an option, and the
grant of an option shall not be construed as giving a Participant the right to
be retained in the employ or as a director of the Company or its subsidiaries.
Further, the Company and its subsidiaries expressly reserve the right at any
time to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any agreement entered into hereunder.
- 4 -
<PAGE>
12. TERMINATION OF RIGHTS; DEATH.
All unexercised or unexpired options granted or awarded under this Plan
will terminate, be forfeited and will lapse immediately if such Participant's
employment or relationship with the Company and its subsidiaries is terminated
for any reason, unless the Committee permits the exercise of such options for a
period not to exceed 90 days after the date of such termination. If a
Participant's employment or relationship with the Company is terminated by
reason of his death, such Participant's personal representatives, estate or
heirs (as the case may be) may exercise, subject to any restrictions imposed by
the Committee at the time of the grant, any option which was exercisable by the
Participant as of the date of his death for a period of 180 days after the date
of the Participant's death.
13. REGISTRATION.
If the Company shall be advised by its counsel that any Shares deliverable
upon any exercise of an option are required to be registered under the
Securities Act of 1933, or that the consent of any other authority is required
for the issuance of such Shares, the Company may effect registration or obtain
such consent, and delivery of Shares by the Company may be deferred until
registration is effected or such consent is obtained.
14. ADJUSTMENT OF AND CHANGES IN SHARES.
In the event of any change in the outstanding Shares by reason of any Share
dividend or split, recapitalization, merger, consolidation, spinoff, combination
or exchange of Shares or other corporate change, or any distributions to
shareholders other than regular cash dividends, the Committee may make such
substitution or adjustment, if any, as it deems to be equitable, as to the
exercise price, number or kind of Shares or other securities issued or reserved
for issuance pursuant to the Plan and to outstanding options.
15. AMENDMENT.
The Board of Directors may amend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be made without
shareholder approval if such approval is necessary in order for the Plan to
continue to comply with Rule 16b-3 under the Exchange Act.
16. COMPLIANCE WITH EXCHANGE ACT.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by
- 5 -
<PAGE>
the Committee fails to comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
17. EFFECTIVE DATE.
The Plan has been adopted by the Board of Directors and Shareholders of the
Company on, and shall be effective as of, _________, 1996. Unless extended or
earlier terminated by the Board of Directors, the Plan shall continue in effect
until, and shall terminate on, the tenth anniversary of the effective date of
the Plan. Unless so extended, no additional options may be granted on or after
the tenth anniversary of the effective date of the Plan.
C63580.198
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<PAGE>
EXHIBIT A
AMERTRANZ WORLDWIDE HOLDING CORP.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made this ________________, 199__, by and
between AMERTRANZ WORLDWIDE HOLDING CORP., a Delaware corporation (the
"Company"), and _____________________________ (the "Optionee).
WHEREAS, the Board of Directors of the Company considers it desirable and
in the Company's interest that the Optionee be given an opportunity to purchase
its shares of common stock, par value $.01 per share (the "Shares"), pursuant to
the terms and conditions of the Company's 1996 Stock Option Plan (the "Plan") to
provide an incentive for the Optionee and to promote the interests of the
Company.
NOW, THEREFORE, it is agreed as follows:
1. Incorporation of the Terms of the Plan. This Stock Option Agreement
is subject to all of the terms and conditions of the Plan, and the terms of the
Plan are hereby incorporated herein by reference and made a part hereof.
2. Grant of Option. The Company hereby grants to Optionee an option to
purchase from the Company ________ Shares ("Option Shares") at the exercise
price per Share set forth below. Subject to earlier expiration or termination of
the option granted hereunder, this option shall expire on the 10th anniversary
of the date hereof.
3. Period of Exercise of Option. The Optionee shall be entitled to exercise
the option granted hereunder to purchase Option Shares as follows:
Exercise Date No. of Shares Exercise Price Per Share
in each case, together with the number of Option Shares which Optionee was
theretofore entitled to purchase.
4. Additional Exercise Periods. In the event of the death of the Optionee,
or if the Optionee's employment or relationship with the Company or its
subsidiaries is terminated for any reason, the option granted hereunder may be
exercised as set forth in the Plan.
5. Method of Exercise. In order to exercise the options granted hereunder,
Optionee must give written notice to the Chief Financial Officer of the Company
at the Company's principal place of business, substantially in the form of
Exhibit A hereto, accompanied by full
<PAGE>
payment of the exercise price for the Option Shares being purchased, in
accordance with the terms and provisions of the Plan.
6. Manner of Payment. An Optionee may pay the option price for Shares
purchased upon exercise of the option as set forth in the Plan.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal, intending this to be a sealed instrument, as of the date
first above written.
ATTEST: AMERTRANZ WORLDWIDE HOLDING CORP.
______________________________ By:_____________________________(SEAL)
WITNESS: OPTIONEE:
______________________________ ________________________________(SEAL)
C63580.198
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<PAGE>
EXHIBIT A
Date:_____________________
TO THE CHIEF FINANCIAL OFFICER
AMERTRANZ WORLDWIDE HOLDING CORP.
Reference is made to the Stock Option Agreement entered into
between me and Amertranz Worldwide Holding Corp. (the "Company"), dated
_________, _____ (the "Option Agreement").
I hereby exercise my option to purchase _____ shares of the
Company's Common Stock, par value $.01 per share (the "Shares") in accordance
with the terms of the Option Agreement. The date on which this exercise is
effective is the date this notice is received by the Company.
In full payment for such exercise, please find enclosed
|_| check in the amount of $____________
|_| Shares having a fair market value of $__________
|_| other consideration approved by the Company's Stock Option Committee
consisting of ____________________
|_| a combination of the above.
I authorize the Company to withhold a number of Shares equal
to any withholding obligation applicable to me.
If the Shares to be issued to me by reason of my option
exercise are not registered under the Securities Act of 1933 (the "Act") and
applicable state securities laws (the "State Acts"), this confirms my
understanding with respect to such Shares, as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares are being issued without registration under the
Act and the State Acts in reliance by the Company upon exemptions therefrom.
Such reliance is based in part on the above representation.
<PAGE>
(c) Since the Shares have not been registered under the Act or
State Acts, they must be held indefinitely until exemptions from the
registration requirements of the Act and State Acts are available or the Shares
are subsequently registered, in which event the representation in Paragraph (a)
hereof shall terminate. The Company is not obligated to comply with the
registration requirements of the Act or the State Acts or with the requirements
for an exemption thereunder for my benefit.
Very truly yours,
-----------------------------------
-----------------------------------
Print Name
C63580.198
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NEITHER THIS NOTE, THE SHARES OF COMMON STOCK INTO WHICH THIS NOTE IS
CONVERTIBLE, NOR THE SHARES OF COMMON STOCK ISSUABLE IN PAYMENT OF INTEREST HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN NOTE PURCHASE
AGREEMENT OF EVEN DATE (THE "NOTE PURCHASE AGREEMENT").
7% Convertible Subordinated Promissory Note
Due June 30, 1996
$____________________________ _______________________, 1995
Amertranz Worldwide, Inc., a Delaware corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to
___________________________________________________________ or registered
assigns, on the 30th day of June, 1996 (the "Due Date"), the principal amount of
_________________________________________ Dollars ($__________) and to pay
interest on the Due Date (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid portion of said principal amount from the date
hereof at the rate of 7% per annum.* Both the principal hereof and Interest
Shares are payable at the principal office of the Company in Lake Success, New
York, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts.
1. Authorized Issue. This Note is one of a duly authorized issue of 7%
Convertible Subordinated Promissory Notes due June 30, 1996 (herein called the
"Notes") made or to be made by the Company in aggregate amount of up to
$2,000,000, in original authorized principal amount, similar in terms except for
dates, principal amounts and named payees, offered by the Company pursuant to a
Note Purchase Agreement dated July ____, 1995.
2. (a) Mandatory Conversion. This Note shall cease to be debt or obligation
of the Company and shall, without any affirmative act by either the Company or
the holder hereof, be converted into and shall represent one (1) share of the
Company's Common Stock, $.01 par value, for each $.50 principal amount of Note
upon the Company concluding, on or before the due date, a transaction with
Caribbean Freight Systems, Inc. and/or TIA, Inc. (collectively "CAS") (the
"Transaction Event") on substantially the terms provided for in the Letter of
Intent dated May 10, 1995, between the company and CAS attached as Exhibit A to
the Note -------- * The interest provided for herein shall be paid in kind by
the Company by the Delivery of one (1) shares of the Company's Common Stock,
$.01 par value, for each $.50 of accrued interest (the "Interest Shares").
<PAGE>
Purchase Agreement, or upon such other and different conditions as the Company,
in its sole discretion shall negotiate.
(b) Optional Conversion. Any Note may be converted in full or in part by
the holder thereof by surrender of such Note with the notice of conversion
thereon duly executed by such holder (specifying the portion or the principal
amount thereof, and accrued interest thereon, to be converted in the case of a
partial conversion) to the Company at its principal office, or at the office of
the agency maintained for such purpose. Upon any partial conversion of a Note,
the Company at its expense will forthwith issue and deliver to or upon the order
o(pound) the holder thereof a new Note or Notes in principal amount equal to the
unpaid and unconverted principal amount of such surrendered Note, such new Note
or Notes to be dated and to bear Lnterest from the date to which interest has
been paid on such surrendered Note. Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which such
Note shall have been so surrendered to the Company or such agency; and at such
time the rights of the holder or such Note as such shall, to the extent of the
principal amount thereof, and accrued interest thereon, converted, cease, and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record thereof.
(c) As promptly as practicable after the conversion (whether mandatory or
optional) of any Note in full or in part, and in any event within 15 calendar
days thereafter, the Company at its expense (including the payment by it or any
applicable issue taxes) will issue and deliver to the holder of such Note, or as
such holder (upon payment of such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion.
(d) The Company will at all times reserve and keep available,
solely for issuance and delivery upon the conversion of the Notes, all shares of
Common Stock from time to time issuable upon the conversion of the Notes. All
shares of Common Stock issuable upon conversion of the Notes shall be duly
authorized and, when issued, validly issued, fully paid and nonassessable with
no liability on the part of the holders thereof.
3. Restrictions on Transfer. (a)(i) Unless a Registration Statement with
respect thereto under the Securities Act is at the time in effect, this Note,
the shares of Common Stock into which the Note may be converted, and the
Interest Shares shall not be transferred (such term to include any disposition
which would constitute a sale within the meaning of the Securities Act), except
upon compliance with the conditions specified in this subsection 3(a) and unless
such Registration Statement is effective or such
- 2 -
<PAGE>
conditions are complied with, the company may issue or cause to be issued stop
orders preventing any such transfer.
(ii) The holder of this Note by the acceptance thereof agrees, prior to any
transfer or attempted transfer of this Note, that it shall not transfer this
Note unless a Registration Statement under the Securities Act is in effect with
respect to such transfer or, prior to such transfer, it shall have delivered to
the company an opinion of counsel experienced in Securities Act matters
reasonably acceptable to the Company and counsel to the Company in a form
reasonably acceptable to the Company, or a "no action" letter from the
Securities and Exchange Commission, to the effect that the proposed transfer may
be effected without registration under the Securities Act. The legend set forth
on the facing page of this Note shall be removed from any such Note to be
disposed of in accordance with this clause (ii) unless, in the opinion of
counsel f or the company, such legend is required by the applicable provisions
of the Securities Act.
4. Subordination of Indebtedness.
(a) This Note is issued subject to the provisions of this Section 4; and
each person taking or holding this Note, accepts and agrees to be bound by these
provisions.
(b) Attached hereto and made a part hereof and incorporated by reference
herein as if fully set forth at length is a Subordination Agreement (the
"Subordination Agreement") by and between Fidelity Funding of California, Inc.
("Fidelity") and the company. The holder of this Note adopts the Subordination
Agreement as if an original party thereto. To the extent that the provisions of
this Note or of the Note Purchase Agreement conflict with the Subordination
Agreement, the terms os the Subordination Agreement shall control.
(c) This Note is a junior secured obligation of the Company and is fully
subordinated to all "senior indebtedness" of the Company now existing or
hereafter incurred. Senior indebtedness is all indebtedness, liabilities and
obligations of the Company for money borrowed from or advanced by Fidelity or
any obligation owed by the Company to Fidelity as a senior obligation as defined
in the Subordination Agreement, and any deferrals, renewals or extensions of any
such senior indebtedness and notes or other instruments or evidences of
indebtedness issued in respect of or in exchange for any such senior
indebtedness or any funding to pay or replace any such senior indebtedness or
credit unless in the instrument creating or evidencing the same, or pursuant to
which it is outstanding, it is provided that such indebtedness or such deferral,
renewal or extension thereof is not senior in right of payment to this Note. No
payment or distribution of any kind or
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character on account of principal, premium any, or interest on this Note shall
be permitted during the continuance of any default in the payment of principal,
premium, if any, or interest on any senior indebtedness.
5. Default. If one or more of the following events (herein called
"Events of Default") shall occur for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body), and the holder of any Note shall have given fifteen (15)
days prior written notice to the Company by certified or registered mail, return
receipt requested, and the Company shall not have cured shall default within
such period:
(i) default in the due and punctual payment of the principal or, or
interest on, any Note when and as the same shall become due and payable, whether
at maturity or at a date fixed for prepayment or by acceleration or otherwise;
(ii) breach by the Company of any covenant contained m this Note and/or
default by the Company in any provision of the Note Purchase Agreement executed
in connection with the sale and purchase of the Notes; or
(iii) the Company makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due;
or
(iv) an order, judgment or decree is entered adjudicating the Company or
any subsidiary bankrupt or insolvent; or
(v) the Company petitions or applies to any tribunal for the appointment of
a trustee or receiver of the Company, or of any substantial part of the assets
of the Company, or commences any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a subsidiary) relating to the Company
or an subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction whether
now or hereafter in effect; or
(vi) any such petition or application is filed, or any such proceedings are
commenced, against the Company, and the Company by any act indicates its
approval thereof, consent or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee or receiver, or approving the
petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for wore than 60 days; or
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(vii) any order, judgment or decree is entered in any proceedings against
the company or any subsidiary decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
or
(viii) any order, judgment or decree is entered in any proceedings against
the Company or any subsidiary decreeing a split-up of the Company which requires
the divestiture of a substantial part of the consolidated assets of the Company
and its subsidiaries, or the divestiture of the stock of a subsidiary and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
Then and in each and every such case, so long as such Event of Default shall not
have been remedied, the holder of any Note, by notice in writing to the Company,
may declare the principal of this Note then outstanding and the interest accrued
thereon if not already due and payable, to be due and payable immediately, or
convertible pursuant to paragraph 2 hereof, and upon any such declaration the
same shall become and shall be immediately due and payable, anything in this
Note contained to the contrary notwithstanding, the declaration of a default by
any holder shall constitute and operate as a declaration of default of all
Notes.
6. Miscellaneous. (a) To the extent permitted by applicable law, the
Company hereby agrees to waive, and does hereby absolutely and irrevocably waive
and relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption law now existing or which may hereafter exist, which,
but for this provision, might be applicable to any sale made under the judgment,
order or decree of any court, or otherwise, based on the Notes or on any claim
for principal or interest on the Notes.
(b) Each Note is issued upon the express condition, to which each
successive holder expressly assents and by receiving the same agrees, that no
recourse under or upon any obligation, covenant or agreement of the Notes, or
for the payment of the principal of, or premium, if any, or the interest on, a
Note, or for any claim based on a Note, or otherwise in respect hereof, shall be
had against any incorporator or any past, present or future stockholder, officer
or director, as such, of the Company or of any successor corporation, whether by
virtue of the constitution, statute or rule of law or by any assessment or
penalty or otherwise howsoever, all such individual liability being hereby
expressly waived and released as a condition of and as a part of the
consideration for the execution and issue of the Notes; provided, however, that
nothing herein shall prevent enforcement of the liability, if any, of any
stockholder or subscriber to capital stock upon or in respect of capital stock
not fully paid.
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(c) Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of any Note and of indemnity reasonably
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of any such
Note if mutilated, the Company will make and deliver a new Note of like tenor in
lieu of any such Note so lost, stolen, destroyed or mutilated. Any new Note made
and delivered in accordance with the provisions or this subsection 8(c) shall be
dated as of the date from which unpaid interest has then accrued on the Note so
lost, stolen, destroyed or mutilated.
(d) Any notice or demand which by any provision of the Notes is required or
provided to be given or served to or upon the Company shall be deemed to have
been sufficiently given or served for all purposes by being sent as registered
mail, postage prepaid, addressed to the Company at its principal office.
(e) No course of dealing between the Company and the holder of any Note or
any delay on the part of the holder in exercising any rights under a Note shall
operate as a waiver of any rights of any holder of the Note.
(f) Any and all covenants or events of default under the Notes, except Ror
the due and punctual payment of principal and interest, way be waived by the
holders of a majority Ln interest of the principal amount of outstanding Notes
sold (the "Majority Noteholders").
7. Binding Effect. The Company agrees that the provisions of this Note
shall bind and shall inure to the benefit of the parties hereto and their
successors and assigns.
8. Amendment and Waiver. Except as otherwise provided herein, this Note may
be amended, and the performance and observance of any term of this Note may be
waived, with (and only with) the written consent of the Company and such Note
purchaser as to whom performance is to be waived.
9. Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
10. Communications. All notices and other communications provided for
hereunder or under the Notes shall be in writing, and, if to you, shall be
delivered or mailed by registered mail addressed to you at your address as shown
in the records of the Company in this Note hereto or to such other address as
you may designate to the Company in writing and, if to the Company, shall be
delivered or mailed by registered mail to the Company at 2001
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Marcus Avenue, Lake Success, New York 11042-1011, or to such other address as
the Company may designate to you in writing.
11. New York Law. This Note shall be construed in accordance with and
governed by the lass of the State of New York without regard to principles of
conflicts of law, and cannot be changed, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement of
any change, discharge or termination is sought.
12. Headings. The headings of the sections of this Note are inserted for
convenience only-and do not affect the meaning of such section.
IN WITNESS WHEREOF, AMERTRANZ WORLDWIDE, INC. has caused this Note to be
signed in its corporate name by a duly authorized officer and to be dated the
date and year first above written.
AMERTRANZ WORLDWIDE, INC.
By: _______________________________
Martin Hoffenberg
Vice Chairman
C64895.198
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made on and as of
October 25, 1995 by and between the AmerTranz Worldwide, Inc. ("Borrower") and
TIA, Inc. (the "Lender").
Recitals
Borrower desires to obtain certain credit facilities from Lender for the
purposes stated herein. Lender has agreed to extend certain credit facilities to
Borrower, for the purposes and upon the terms and subject to the conditions
stated herein. To induce Lender to extend such credit facilities to Borrower,
Borrower has agreed to make certain covenants, promises, agreements,
representations and warranties, as stated herein.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, Borrower hereby covenants, promises, agrees, represents
and warrants, with and for the benefit of Lender, and Lender agrees, as follows:
1. Definitions. Certain capitalized terms used in this Agreement are
defined in the text of this Agreement. In addition, the following terms shall
have the following meanings when used herein:
a. "Affiliate" of any Person means: (i) any Person who directly owns,
controls, or holds with power to vote, 5% or more of the outstanding voting
securities of that Person; (ii) any Person 5% or more of the outstanding voting
securities of which are owned, controlled, or held with power to vote, directly
or indirectly, by that Person; (iii) any Person 5% or more of the outstanding
voting securities of which are owned, controlled or held with power to vote,
directly or indirectly, by a Person which would be an Affiliate of that Person
by virtue of (i) or (ii) ; (iv) any partner, director, officer or employee of
that Person; and (v) any relative within the third degree of kinship (by blood,
adoption or marriage) of any Person who is an Affiliate of that Person by virtue
of (i) through (iv) hereof.
b. "Banking Day" means any day on which Provident Bank of Maryland is open
for business.
c. "Closing" means the meeting of the parties at which this Agreement and
the other Loan Documents are executed and delivered.
d. "Collateral" means the collateral pledged to Lender under this Agreement
and any other property of Borrower in which Lender now has or hereafter acquires
a security interest.
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e. "ERISA" means collectively the Employee Retirement Income Security Act
of 1974, as amended, and the regulations adopted pursuant thereto.
f. "Indebtedness for Borrowed Money" of a Person means at any time the sum
at such time of (a) indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services; (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person; (c) lease
obligations of such Person with respect to capital leases; (d) all liabilities
secured by any lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof; (e) obligations of
third parties which are being guaranteed or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person under an employee stock ownership plan or other similar employee benefit
plan; and (f) any obligation of such Person or a commonly controlled entity to a
multiemployer plan; but excluding trade and other accounts payable in the
ordinary course of business in accordance with customary trade terms and which
are not overdue (as determined in accordance with customary trade practices) or
which are being disputed in good faith by such Person and for which adequate
reserves are being provided on the books of such Person in accordance with
generally accepted accounting principles.
g. "Liabilities" means all debts, liabilities and obligations of Borrower
to Lender of every kind, nature and description, without regard to enforcement
of any guaranty or any other obligations or security, which are now existing or
hereafter incurred pursuant to this Agreement, whether matured or unmatured,
direct or indirect, primary or secondary, secured or unsecured, joint or
several, absolute or contingent, including without limitation any liability of
Lender as endorser of any checks or other drafts of customers of Borrower and
transmitted by Lender for collection pursuant to this Agreement, due or to
become due, regardless of how the same may be evidenced, and whether
participated to or from Lender in whole or in part, and including any extensions
and renewals or a part thereof, together with interest, fees, charges, expenses
and costs of collection (including reasonable attorney's fees).
h. "Loan Documents" means this Agreement, the Note, and each other document
executed and delivered by Borrower or any Person to Lender at the Closing, and
each other document, instrument or agreement now or hereafter evidencing,
guarantying, securing or modifying any of the Liabilities or Lender's security
interest in the Collateral or the Stock Collateral.
i. "Person" means any individual, corporation, partnership, limited
liability company, trust or other legal entity.
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j. "Pledgors" mean Michael Barsa, Edward Reedy and David Pulk.
k. "Pledge Agreement" means collectively all pledge agreements executed and
delivered by the Pledgors and Borrower to Lender pursuant to this Agreement.
l. "Stock Collateral" means the shares of AmerTranz Belgium, NV, and
AmerTranz do Brasil LTDA pledged to Lender pursuant to the Pledge Agreement.
m. "Subordinate Creditors" means Michael Barsa, David Pulk, Bruce Brandi,
the Allen Rubin Trust, Jean Barsa and Michael Kilzi.
n.. "Subsidiary" means any corporation the majority of the voting shares of
which at the time are owned directly by Borrower and/or by one or more
Subsidiaries of Borrower.
o. "Wholly Owned Subsidiary" means any domestic United States corporation
all the shares of stock of all classes of which (other than directors'
qualifying shares) at the time are owned directly or indirectly by Borrower
and/or by one or more Wholly Owned Subsidiaries of Borrower.
Any capitalized term used in this Agreement which is not specifically
defined herein but is defined in the Uniform Commercial Code of the State of
Maryland (the "UCC") shall have the UCC meaning when used herein.
2. The Loan. Subject to and upon the provisions of this Agreement, Lender
agrees to make a loan to Borrower not later than November 3, 1995, in the
principal amount of Five Hundred Thousand Dollars ($500,000) (the "Loan"). The
obligation of Borrower to pay the Loan with interest shall be evidenced by two
or more promissory notes (collectively, as from time to time extended, amended,
restated, supplemented or otherwise modified, the "Note") substantially in the
form of EXHIBIT A attached hereto and made a part hereof with appropriate
insertions.
3. Advances. Provided that no Event of Default has occurred, Lender agrees
to advance the Loan to Borrower as follows. Lender shall advance $250,000 to
Borrower upon delivery to Lender of proof satisfactory to Lender that at least
$250,000 has been advanced by others in net new funds to Borrower subordinated
to the Loan since October 1, 1995. Lender shall make a second advance of
$250,000 to Borrower upon delivery to Lender of proof satisfactory to Lender
that at least $500,000 has been advanced to Borrower by others in net new funds
subordinated to the Loan since October 1, 1995.
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4. Repayment Terms.
a. Principal. Beginning March 1, 1996, and on the first day of each month
thereafter, the unpaid balance of the Loan shall be paid in equal installments
of $100,000 each, together with accrued interest. The entire unpaid balance of
the Loan, together with all accrued and unpaid interest and all other amounts
due hereunder, if not sooner paid, shall be due and payable on August 15, 1996.
b. Interest.
(1) The Loan shall bear and accrue interest from the date of the advance
until repaid to Lender at the rate of twelve percent (12%) per year based upon a
360 day year and shall be payable for the actual number of days elapsed,
including any time extended by reason of Saturdays, Sundays and holidays.
(2) Interest shall be payable monthly in advance, on the first day of each
month.
c. Purposes. Unless the Lender shall otherwise consent in writing, the Loan
shall be used only for Borrower's short term working capital needs and to retire
accounts payable other than accounts payable to Borrower's Affiliates.
d. Prepayment. Borrower shall have the right to prepay any amount due under
the Loan without penalty or premium.
e. Requests for Advances. Each request for an advance under the Loan shall
constitute a representation and warranty by Borrower that as of the date of such
request all of the representations and warranties made by Borrower herein are
true on and as such date as if made on and as of such date, and that no Event of
Default and no condition, event or act which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default, exists.
5. Closing Documents. As a condition to Lender making any advance under the
Loan, the following shall occur, and each document referred to below shall be in
form and substance satisfactory to Lender:
a. Execution of Loan Documents. Borrower shall execute, seal and deliver to
Lender the Loan Documents.
b. Certificate of Secretary. Borrower shall execute and deliver to Lender a
certificate of the corporate secretary of Borrower certifying that (i) attached
thereto
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are true and correct copies of the articles of incorporation and by-laws of
Borrower, (ii) attached thereto are true and correct copies of resolutions duly
adopted by the board of directors of Borrower authorizing the execution,
delivery and performance of the Loan Documents, (iii) the persons named therein
are the duly elected directors and officers of Borrower, and (iv) the persons
named therein are the stockholders of Borrower, stating the number of shares
owned by each.
c. Pledge Agreement. Pledgors and Borrower shall execute, seal and deliver
to Lender the Pledge Agreement.
d. Status Certificate. Borrower shall deliver to the Lender a status
certificate signed by its president indicating that Borrower is a corporation
duly incorporated and in good standing and authorized to transact business in
its state of incorporation.
e. Subordination Agreement. Each of the Subordinate Creditors shall execute
and deliver to Lender a subordination agreement in form satisfactory to Lender.
f. Financing Statements. Borrower shall execute and deliver to Lender
financing statements covering the Collateral in form satisfactory to Lender (the
"Financing Statements"), and shall pay to Lender the filing fees, including
recordation taxes, for each of the Financing Statements.
g. Financial Information. Borrower shall deliver to Lender such information
as Lender may reasonably request, which information is satisfactory to Lender in
Lender's sole discretion, demonstrating that there has been no material adverse
change to the financial condition of Borrower since July 31, 1995, including any
additional pledge of assets or increase in the amount of debt secured by pledges
of assets.
h. Compliance with Agreement. No advance shall be made hereunder unless
Borrower shall be in compliance with all of the terms and conditions of this
Agreement and Borrower and Pledgors are in compliance with all of the terms and
conditions of the Loan Documents, all of the representations and warranties made
by Borrower herein shall be true on and as of the date of such advance as if
made on and as of the date of such advance, no Event of Default, and no
condition, event or act which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default, shall exist.
i. Opinion of Borrower's Counsel. Lender shall have received the favorable
opinion of counsel for Borrower addressed to Lender in form satisfactory to
Lender.
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j. Certificate of Chief Financial Officer. Borrower's chief financial
officer shall execute and deliver to Lender a certificate substantially in the
form of Exhibit B certifying that the requisite funds have been advanced to
Borrower as required by Section 3 hereof.
6. Security Interest in Collateral. As security for the payment and
performance of the Liabilities, Borrower hereby grants to Lender a security
interest in and lien on all of the assets and property of Borrower, whether such
assets and property are now owned or existing or are owned, acquired or arise
hereafter, and the products and proceeds thereof, including but not limited to
the following:
a. Accounts, including, without limitation, all domestic and foreign trade
and other accounts and accounts receivable and all rights to any form of
payment, whether as compensation or payment for services or goods or letting of
space or otherwise, reimbursement or repayment, in money or otherwise, for any
reason whatsoever, and all returned, rejected, or repossessed goods, the sale or
lease of which shall have given or shall give rise to an account and all cash
and non-cash proceeds and products of all such goods ("Accounts").
b. Chattel paper and all rights resulting therefrom or arising in
connection therewith, both now owned and hereafter existing, acquired or
created, together with (i) all moneys due and to become due thereunder, and (ii)
all returned, rejected, or repossessed goods, the sale or lease of which shall
have given or shall give rise to chattel paper and all cash and non-cash
proceeds and products of all such goods. Additionally, Borrower assigns and
grants to Lender a security interest in all property and goods both now owned
and hereafter acquired by Borrower which are sold, leased, secured, subject of,
or otherwise covered by, Borrower's chattel paper, together with all rights
incident to such property and goods ("Chattel Paper").
c. Inventory, including, but not limited to raw materials, supplies, work
in progress and finished goods produced or consumed in Borrower's business,
together with Borrower's inventory left for sale with others on consignment or
on a sale or return or sale on approval basis, and returned or repossessed
inventory wherever located ("Inventory").
d. Equipment and fixtures, together with (i) all additions, parts,
fittings, accessories, special tools, attachments and accessions now and
hereafter affixed thereto and/or used in connection therewith, and (ii) all
replacements thereof and substitutions therefor ("Equipment").
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e. All other goods of Borrower, together with all additions, parts,
fittings, accessories, attachments and accessions, now or hereafter affixed
thereto and/or used in connection therewith ("Goods").
f. Instruments, including, without limitation, all notes, notes receivable,
drafts, checks, acceptances, bonds, debentures, stock certificates and other
certificated securities, and similar negotiable and non-negotiable instruments
and documents, both now owned and hereafter acquired, together with (i) all
monies due and to become due thereunder and all rights incident thereto, and
(ii) all returned, rejected or repossessed goods, the sale or lease of which
shall have given or shall give rise to an instrument and all cash and non-cash
proceeds and products of all such goods ("Instruments").
g. General intangibles, including but not limited to all rights, claims,
choses in action and other intangible entitlements of Borrower, and including
all earned and unearned and return insurance premiums and proceeds of any and
all insurance policies, trademarks, trade names and logos, together with (i) all
monies due and to become due thereunder and all rights incident thereto, and
(ii) all returned, rejected or repossessed goods, the sale or lease of which
shall have given or shall give rise to a general intangible and all cash and
non-cash proceeds and products of all such goods ("General Intangibles").
h. Documents, evidencing or relating to property of Borrower or any
property now or hereafter to become property of Borrower or to which Borrower
may now or hereafter assert any claim or right, and including all books and
records of and regarding the business of Borrower, all financial and corporate
data, whether such records are on paper or other writing or on any data
processing materials in any form (such as software, tapes, disks and the like)
documenting, describing, or in any manner relating to Borrower's business and/or
the Collateral, wherever located, whether now owned or hereafter acquired or
created ("Documents").
i. All other assets of Borrower, including but not limited to all deposit
accounts and all similar accounts, and all cash, securities (whether or not
certificated), investments, rights, interests and other assets of Borrower,
including any of the foregoing now or in the future to be credited to, contained
in or payable to Borrower, and the stock of all subsidiaries and interests in
any ventures or partnerships of the Borrower.
7. Borrower's Covenants with Respect to Collateral. Borrower hereby
covenants and agrees with Lender as follows:
a. Statements of Accounts. At such times or intervals as Lender may
reasonably request, Borrower shall submit to Lender reports respecting the
Collateral in
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form satisfactory to Lender. Such reports shall be in form and shall
contain the information requested by Lender.
b. Other Information. Borrower shall provide to Lender such other
information about the Collateral as Lender may reasonably request from time to
time.
c. Preservation of Collateral. Borrower shall not, without prior written
consent of Lender, sell, lease, pledge, assign or grant any security interest in
any of the Collateral to any person or other entity (other than Lender), except
that Equipment and Inventory may be sold or otherwise disposed of in the
ordinary course of business.
d. Location of Collateral. Borrower shall not remove any of the Collateral,
or any records pertaining to any of the Collateral, from Borrower's principal
place of business, other than in the ordinary course of the Borrower's business.
Borrower shall at all times afford Lender access to all of the Collateral and
all of Borrower's records pertaining to the Collateral, wherever located.
e. Protection of Security Interest. Upon Lender's request, Borrower shall
furnish to Lender such further information, and shall execute and deliver to
Lender such financing statements and other documents, and shall do all such
other acts, as may be reasonably necessary or appropriate to establish and
maintain Lender's valid security interest in the Collateral (including the
evidencing of Lender's security interest on all books and records pertaining
thereto) and to protect such security interest from the claims of all other
persons. In the event that Borrower fails or refuses to execute any financing
statement or other document necessary to perfect or continue the perfection of
Lender's security interest in the Collateral, Borrower hereby appoints Lender as
the Borrower's attorney-in-fact, which power shall be deemed coupled with an
interest, to execute such financing statement or other document in Borrower's
name.
f. Consents. Borrower shall use its best efforts to obtain the consent of
any Person, governmental instrumentality or agency, or public body or official
to the assignment hereunder of any Collateral if such consent may be required by
the terms of any contract or statute or if Lender so requests, and shall
immediately notify Lender if such consent is not obtained.
g. Filing Costs. Borrower shall pay all costs (including recordation tax,
if applicable) of filing and recording documents in all public offices where
filing or recording is deemed by Lender to be necessary or desirable to perfect
or continue the perfection of Lender's security interest in the Collateral.
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h. Change in Location. Borrower shall not, without prior notice to Lender,
change the location of its chief executive office. Borrower shall provide
Lender, upon Lender's request from time to time, with a complete list of all of
Borrower's business locations.
i. Defend Collateral. Borrower shall defend the Collateral against all
claims and demands of all other Persons at any time claiming the same or an
interest therein and shall pay promptly when due all taxes and assessments upon
the Collateral or upon its use or sale. At its option Lender may discharge
taxes, liens or other encumbrances at any time levied against or placed on the
Collateral and charge the amount thereof as an advance under the Line.
j. Disputes. Borrower shall notify Lender promptly of any dispute or claim
pertaining to any of the Collateral.
k. Records and Inspection. Borrower shall at all times keep accurate and
complete records of Borrower's Accounts, General Intangibles, Goods, Equipment,
Inventory, Chattel Paper, Documents, Instruments, and money, at Borrower's
principal place of business, and shall deliver such reports, reconciliations and
other financial information to Lender as Lender may at any time reasonably
request. Such reports and records shall be maintained in accordance with
generally accepted accounting principles and in a manner consistent with past
practices.
l. Inspection by Lender. Lender and any of its agents shall be permitted to
call at Borrower's place or places of business at intervals to be determined by
Lender without prior notice, and without hindrance or delay, to inspect, audit,
make test verifications and otherwise check and make extracts from the books,
records, journals, orders, receipts, correspondence and other data relating to
the Collateral or to any other transactions between the parties thereto, and to
inspect the Collateral, wherever situated.
m. Endorsement and Delivery of Documents. If Lender so requests, Borrower
shall deliver immediately to Lender all Instruments, Chattel Paper, Documents,
and any promissory notes, trade acceptances or other instruments for the payment
of money evidencing Borrower's Accounts, appropriately endorsed to Lender's
order, and, regardless of the form of such endorsement, Borrower hereby waives
presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto. Until so delivered, Borrower shall hold the
same separate and apart and upon an express trust for Lender.
n. Insurance/Notice of Loss. Borrower shall have and maintain insurance at
Borrower's expense at all times with respect to the Inventory and the Equipment
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in amounts at least as great as the full replacement costs. Borrower shall also
maintain such other policies of insurance, in such amounts, covering such risks,
and written by such insurance companies, as may be reasonably required by the
Lender from time to time. Borrower's primary property and casualty insurance
policy shall name Lender as loss payee and additional insured, and shall provide
for at least 30 days' prior written notice to Lender of cancellation, material
modification or non-renewal. Upon Lender's request, Borrower shall deliver to
Lender the original policies of insurance or certificates thereof (except
liability insurance). Borrower shall not cancel any such insurance, and shall
not settle or compromise any claim thereunder except with Lender's prior written
approval. All insurance proceeds received by Borrower shall be received in trust
for Lender, and Borrower shall forthwith transmit all such proceeds in the form
received (with any necessary endorsements) to Lender to the extent of the
Liabilities. Lender may apply any insurance proceeds received by it to the
Liabilities, whether due or not. Borrower shall immediately notify Lender of any
damage to or loss of any Collateral. In the event of failure to provide and
maintain insurance as herein provided Lender may, at its option, provide such
insurance and charge the amount thereof as an advance under the Line.
o. Exoneration of Lender. Borrower exonerates Lender from any liability for
any loss, depreciation or other damage to the Collateral unless caused by
Lender's gross negligence or willful misconduct.
p. Costs Incurred with Respect to Collateral. Borrower shall pay to Lender,
upon demand:
(1) the amount of any and all reasonable out-of-pocket expenses (including
attorneys' fees and expenses) which Lender may incur in connection with the
exercise by Lender of any of the powers conferred under this Section;
(2) the amount of any taxes which Lender may have been required to pay
either by reason of any assessment made against it as the assignee hereunder of
any Collateral or to free any Collateral from a lien thereon;
(3) interest on any amounts expended under this Section from the date of
expenditure to the date of repayment in full to Lender, at the rate of interest
payable under the Line.
8. Lender's Rights and Powers with Respect to the Collateral.
a. Collection. Subject to the prior rights of Fidelity Funding of
California, Inc. ("Fidelity"), upon and after the occurrence of an Event of
Default hereunder, Lender shall have the right at all times to notify, and at
Lender's request Borrower shall
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notify, at Borrower's expense, all debtors obligated on any or all of the
Borrower's Accounts, Instruments, Documents or Chattel Paper, that the same have
been assigned to Lender and to make payment thereof to Lender directly, in such
manner and at such place as Lender may direct. Lender shall also have the right
to take control of all proceeds of any Accounts, Instruments, Documents and
Chattel Paper, which right Lender may exercise at any time after the occurrence
of an Event of Default.
b. Attorney-in-Fact. Borrower hereby irrevocably appoints Lender as
Borrower's attorney-in-fact, which power shall be deemed coupled with an
interest, in Lender's name or in Borrower's name or otherwise, at Borrower's
cost and expense, to exercise at any time after the occurrence of an Event of
Default hereunder, subject to the prior rights of Fidelity, all or any of the
following powers with respect to all or any of the Collateral:
(1) to demand, sue for, collect, receive, and give acquittance for any and
all monies due or to become due upon or by virtue thereof;
(2) to receive, take, endorse, assign and deliver any and all checks,
notes, money orders, drafts and other negotiable and non-negotiable instruments
taken or received by Lender in connection therewith;
(3) to sign Borrower's name on any invoice or bill of lading relating to
any Account, on schedules of assignments of Accounts, on notices of assignment,
financing statements under the UCC and other public records, on verifications of
Accounts, and on notices to customers;
(4) to file or record in any public office financing statements, notices of
lending, notices of assignment, or any other public notice required to effect
this Agreement;
(5) to send requests for verification of Accounts to customers;
(6) to discharge taxes, liens or other encumbrances at any time levied
against or placed on any Collateral;
(7) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect to any Collateral;
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(8) to sell, transfer, assign or otherwise deal in or with the same or the
proceeds of any Collateral, as fully and effectually as if Lender were the
absolute owner thereof;
(9) to extend the time of payment of any or all of the Collateral, and to
make any allowances and other adjustments with reference thereto; and
(10) to do all other things Lender deems reasonably necessary or desirable
to carry out the purposes of this Agreement.
c. Effect of Lender's Action. The exercise by Lender of, or failure of
Lender to exercise, any power granted in this Section or under this Agreement
shall not affect Borrower's liability to Lender hereunder. In addition, Lender
shall be under no obligation or duty to exercise any of the powers conferred
upon Lender hereunder, and Lender shall have no liability for any act or failure
to act in connection with the collection of, or the preservation of any rights
under, any of the Collateral.
9. Borrower's Representations and Warranties. Borrower represents and
warrants to Lender that:
a. Corporate Status. Borrower is duly incorporated, validly existing and in
good standing under the laws of Delaware, and is duly qualified and authorized
to do business as a foreign corporation and is in good standing in each other
jurisdiction wherein the character of the property it owns or the nature of the
business it transacts makes such qualification necessary. All of the authorized
and outstanding shares of the common stock of Borrower are issued to the
shareholders identified on Exhibit C to the Certificate of Secretary of Borrower
of even date herewith.
b. Corporate Authority. Borrower has the corporate power and authority to
execute, deliver and perform the Loan Documents. The execution, delivery and
performance of the Loan Documents by Borrower has been duly authorized by all
necessary corporate action of Borrower, and do not require the consent or
approval of any governmental agency, instrumentality or other Person. The Loan
Documents have been duly and validly executed and delivered by Borrower and
constitute the legal, valid and binding agreement of Borrower enforceable
against Borrower in accordance with their terms.
c. No Conflict. The execution, delivery and performance of the Loan
Documents by Borrower will not conflict with or result in a breach of any of the
terms, conditions or provisions of the articles of incorporation or by-laws of
Borrower, or of any law or any regulation, or any order, writ, injunction or
decree of any court or governmental instrumentality, or of any agreement or
instrument to which Borrower is subject, or
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constitute a default thereunder, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of Borrower's
property or assets pursuant to the terms of any such agreement or instrument or
otherwise except pursuant to and under this Agreement.
d. Financial Statements.
(1) Borrower's consolidated audited financial statements delivered to
Lender dated as of June 30, 1994, and Borrower's unaudited balance sheet dated
July 31, 1995, (the "Financials") fairly present the consolidated financial
condition (including contingent liabilities) of Borrower at the dates thereof
and the results of Borrower's operations for the periods stated therein, all in
accordance with generally accepted accounting principles applied in a manner
consistent with past practices and fully and accurately disclose all fixed,
contingent and other liabilities of Borrower as of such dates.
(2) No material adverse change has occurred in the financial condition or
business operations of Borrower since October 10, 1995.
e. Collateral. No financing statement (other than those which have been
filed on behalf of Lender and on behalf of Fidelity and on behalf of any other
creditor listed on Schedule 9(e) hereto) covering any of the Collateral under
any name is on file in any public office. Borrower is the lawful owner of the
Collateral, free of all liens and claims whatsoever, other than security and
other interests in favor of Lender, Fidelity and the creditors listed on
Schedule 9(e). Lender has a valid security interest in and lien on all of the
Collateral subject only to the prior security interest of Fidelity and the
creditors listed on Schedule 9(e) hereto. All information with respect to the
Collateral set forth in any schedule, certificate or other writing furnished by
Borrower to Lender, is true and correct as of the date furnished. Borrower will
have good title to all Collateral acquired by Borrower in the future and Lender
will acquire through this Agreement a valid perfected prior security interest
therein. As of October 10, 1995, the total balance of receivable Accounts of
Borrower exceeds $3,500,000. Not more than 90 days have elapsed since the date
of the invoice for at least $3,500,000 of the receivable Accounts which are
currently due and payable to Borrower.
f. Location. The Borrower's chief executive office is as stated in Section
14(g) of this Agreement.
g. Trade Names. All business and sales of Borrower are and shall be
conducted solely under Borrower's corporate name as first hereinabove written or
in the trade names listed on Schedule 9(g) hereto .
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h. Litigation and Investigations. Borrower has provided to Lender a
complete list of each investigation, suit, proceeding, action or claim
(including claims for taxes) which is now pending or which has been threatened
in writing against Borrower by any private or governmental Persons, stating the
parties thereto, the subject matter thereof and the amount claimed, if any.
i. Taxes. Borrower has filed all tax returns required to be filed and has
paid all taxes, assessments and other governmental charges required to be paid,
including, but not limited to, federal, state and foreign income taxes, ad
valorem, excise, VAT, sales and use taxes, and payroll taxes, except those taxes
which are presently being or to be contested by Borrower in good faith in the
ordinary course of business for which adequate reserves have been established.
j. Commercial Loan. All amounts loaned by Lender to Borrower pursuant to
this Agreement are and will be a "commercial loan" within the meaning of Title
12 of the Commercial Law Article of the Annotated Code of Maryland.
k. Employee Benefit Plans. Each employee benefit plan as defined in Section
3(3) of ERISA as to which Borrower has any liability complies in all material
respects with all applicable requirements of law and regulations, and (i) no
Reportable Event or Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated the steps necessary to do so, (iii) no steps have been taken
to terminate any such plan, (iv) Borrower has not incurred any accumulated
funding deficiency within the meaning of ERISA with respect to any such plan,
(v) Borrower has no material unfunded vested liability under any such plan, and
(vi) Borrower has not incurred any material liability to the Pension Benefit
Guaranty Corporation in connection with any such plan other than liability for
premiums payable in the ordinary course.
l. Hazardous Substances. Other than hazardous substances found in
manufactured articles and commercial and consumer products used by Borrower in a
customary or ordinary fashion and in customary and ordinary amounts, and the
waste generated by such use, Borrower does not use, generate, manufacture,
store, transport, treat, dispose or release any hazardous waste or substance as
those terms are defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, or other applicable federal and state
laws, rules and regulations.
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m. Fidelity Indebtedness. As of October 10, 1995, Borrower is indebted to
Fidelity in an amount less than $2,200,000.00, including interest, principal,
penalties and all other charges.
n. Subsidiaries. Borrower has the Subsidiaries listed on Schedule 9(n)
attached hereto and made a part hereof and no others. Each of the Subsidiaries
is a Wholly Owned Subsidiary except as shown on Schedule 9(n), which correctly
indicates the nature and amount of Borrower's ownership interest therein.
o. Indebtedness for Borrowed Money. Except for the Liabilities and except
as set forth in Schedule 9(o) attached to and made a part of this Agreement,
Borrower has no Indebtedness for Borrowed Money. The Lender has received
photocopies of all promissory notes evidencing any Indebtedness for Borrowed
Money set forth in Schedule 9(o), together with any and all subordination
agreements, other agreements, documents, or instruments securing, evidencing,
guarantying or otherwise executed and delivered in connection therewith.
10. General Covenants of the Borrower. Borrower covenants, promises and
agrees, with and for the benefit of Lender, as follows:
a. Other Obligations. Borrower shall pay all other material debts and
discharge all other material obligations when due, including all taxes, except
for debts and obligations which are being contested in good faith by Borrower.
b. Financial Records. Borrower shall maintain its financial records in
accordance with generally accepted accounting principles applied on a basis
consistent with past practices.
c. Corporate Status. Borrower shall maintain its corporate existence in
good standing in its state of incorporation and shall maintain qualification as
a foreign corporation and good standing in each other jurisdiction where the
location of Borrower's property or the nature of Borrower's business requires
qualification.
d. Compliance with Law. Borrower shall comply with all laws, rules and
regulations, and all orders, writs, injunctions and decrees of all courts and
governmental agencies and instrumentalities, to which Borrower is subject and
which, if violated, would have a material adverse effect on Borrower.
e. Performance of Contracts. Borrower shall perform and comply in all
material respects with the provisions of all material contracts to which
Borrower is a party.
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f. Use of Loan Proceeds. Borrower shall use the proceeds of all advances
under the Loan only for the purposes set forth in this Agreement.
g. Notice of Litigation and Claims. Borrower shall promptly inform Lender
in writing of the commencement of any litigation, proceeding, action, suit or
investigation, or the written threat thereof, which could have a material
adverse effect on Borrower, Borrower shall notify Lender of any judgment entered
against Borrower.
h. Insurance. The Borrower shall maintain casualty, general commercial
liability, public liability, workers compensation and such other insurance
coverages in such amounts as Lender may reasonably request from such insurers as
may be reasonably satisfactory to Lender.
i. Loans, Advances and Guaranties. Borrower shall not make any loan or
advance money to, or guarantee, endorse or otherwise be or become liable or
contingently liable in connection with the obligations of, any Person, except
advances to employees for business-related expenses in accordance with Section
10(t) hereof..
j. Stock Issuances. Borrower shall not issue any shares of capital stock or
rights thereto or enter into any agreement to do so without Lender's prior
written consent except as otherwise set forth in Schedule 10(j)..
k. Dividends and Distributions. Except as may be approved by Lender, in
writing, Borrower shall not declare or pay any cash dividends, retire or
otherwise acquire for value any or all of its capital stock, or return any
capital or make any distribution of its assets to its shareholders.
l. Other Businesses. Borrower shall not materially change the nature of its
business, or purchase or invest in, directly or indirectly, any assets or
property other than assets or property useful and to be used in Borrower's
business as presently conducted. Borrower shall not acquire any capital asset
for a total purchase price in excess of $50,000 or total capital assets for an
aggregate purchase price in excess of $100,000.
m. Transactions with Affiliates. Borrower shall not purchase, acquire or
lease property from, or sell, transfer or lease any property to, or otherwise
deal with any Affiliate of the Borrower except on terms obtainable if no
affiliate relationship existed.
n. New Subsidiaries. Except as may be approved by Lender in writing,
Borrower shall not form, acquire or invest in any subsidiary, or purchase, lease
or otherwise acquire the obligations, assets or stock of any Person.
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o. Name; Extraordinary Corporate Transactions. Borrower shall not change
its name, dissolve or become a party to any merger, consolidation,
reorganization or exchange of stock or assets, or other business combination or
extraordinary corporate transaction.
p. Change in Control. There shall be any change in control of the Borrower,
which shall include any one or more transfers of more than forty-nine percent
(49%) of Borrower's voting securities.
q. Taxes, Charges and Liens. Borrower shall pay when due all taxes,
governmental charges, levies and liens, of every kind, imposed upon Borrower or
its properties, income or profits, prior to the date on which penalties would
attach, except those presently being or to be contested by Borrower in good
faith in the ordinary course of business for which adequate reserves have been
established.
r. ERISA Plans. Borrower shall notify Lender of the creation of any
employee benefit plans subject to Title IV of ERISA, and shall furnish to Lender
(i) promptly and in any event within thirty (30) days after the Borrower knows,
or has reason to know, that any "Termination Event" (a reportable event as
defined in Section 4043(b) of ERISA) or any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of (or for
the appointment of a trustee to administer) any such plan, has occurred, a
statement of an executive officer of Borrower describing such Termination Event
and the action, if any, which Borrower proposes to take with respect thereto;
(ii) promptly after receipt hereof by Borrower, copies of each notice received
from the Pension Benefit Guaranty Corporation of such corporation's intention to
terminate any such plan or to have a trustee appointed to administer any such
plan; and (iii) promptly after Lender's request, such other documents and
information relating to any such employee benefit plan as Lender may reasonably
request from time to time.
s. Notice of Defaults. Borrower shall promptly notify Lender of the
occurrence of any Event of Default or of any event which with notice or lapse of
time or both would constitute an Event of Default.
t. Compensation. Borrower shall not pay any employee or officer direct or
indirect compensation, in any form, at a rate exceeding $150,000 per year plus
medical benefits, car allowance and reimbursement in accordance with Borrower's
standard policy for reimbursement of business related expenses and only to the
extent deductible for federal income tax purposes until Borrower has operated at
a net profit for at least two consecutive months.
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u. Financial Reports. Borrower shall deliver financial reports to Lender at
least monthly and from time to time as Lender shall request.
v. Indebtedness. Without the prior written consent of Lender, Borrower will
not and will not permit any Subsidiary to, create, incur, assume or suffer to
exist any Indebtedness for Borrowed Money, or permit any Subsidiary so to do,
except:
(a) the Liabilities;
(b) current accounts payable arising in the ordinary course;
(c) Indebtedness of the Borrower existing on the date hereof and reflected
on Schedule 9(o).
(d) Loans from subordinated lenders pursuant to Section 3 hereof.
11. Lender's Costs and Expenses. Borrower shall pay directly or reimburse
Lender for all costs and expenses of, and all amounts advanced by, Lender in
connection with the transactions contemplated by this Agreement, including
without limitation (i) the costs and expenses of negotiating and preparing the
Loan Documents, including attorneys' fees and expenses, (ii) costs, expenses and
advances incurred in the protection of Lender's security interests (including
but not limited to out-of-pocket expenses incurred in checking the status of
such security interests and examinations to determine the value of Collateral),
(iii) costs, expenses and advances incurred in the enforcement and collection of
any of the Loan Documents, including attorneys' fees and expenses, (iv) the
amount of any taxes which Lender may have been required to pay either by reason
of any assessment made against it as to the assignee hereunder of any Collateral
or to free any Collateral from a lien thereon, and (iv) the amount of any and
all out-of-pocket expenses which Lender may incur in connection with the
collection of any item deposited in the Collateral Account or received by Lender
in connection with any Collateral; together with interest on any of the above
from the date of such expenditure to the date of repayment in full to Lender at
the rate of interest payable under the Line. At its option, Lender may deduct or
charge such costs, expenses and amounts to advances made under the Loan.
12. Events of Default. Without limitation of any of Lender's rights as
provided elsewhere in this Agreement, upon the occurrence of any of the
following, an "Event of Default" shall have occurred and, at Lender's option,
all Liabilities shall become immediately due and payable:
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a. Failure to Pay Liabilities. Borrower fails to pay on the due date any
monetary obligation of Borrower hereunder and, except for repayment of the
principal amount of the Loan, such failure continues for five (5) days after
Lender notifies Borrower.
b. Other Obligations. Borrower breaches or violates any covenant, promise,
agreement, term or condition contained in any Loan Document and such breach or
violation is not cured within five (5) days after Lender notifies Borrower.
c. Breach of Representation. Any material representation or warranty made
by Borrower in the Loan Documents, or any statement of material information
given by Borrower to Lender pursuant to the Loan Documents, shall be false or
shall omit to state a fact necessary under the circumstances to make the
representation or warranty not misleading.
d. Other Loan Documents. An Event of Default shall occur under any other
Loan Document and such breach or violation is not cured within five (5) days
after Lender notifies Borrower.
e. Inability to Pay Debts. Borrower shall become insolvent or shall
generally fail to pay, or shall admit in writing its inability to pay, its debts
when due.
f. Voluntary Insolvency Proceeding. Borrower commences or voluntarily
becomes the debtor party in a case in bankruptcy, or commences or voluntarily
becomes the debtor party in any proceeding under any receivership,
reorganization, moratorium or other similar law.
g. Involuntary Insolvency Proceeding. Borrower involuntarily becomes the
debtor party to a case in bankruptcy, or involuntarily becomes the debtor party
in any proceeding under any receivership, reorganization, moratorium or other
similar law, if such case or proceeding is not dismissed within forty-five (45)
days.
h. Trustee, etc. A trustee, receiver or agent is appointed or authorized to
take charge of substantially all of the property of Borrower for the purpose of
enforcing a lien against such property or for the purpose of causing an
involuntary liquidation or general administration of such property for the
benefit of creditors.
i. Assignment for Creditors. Borrower shall make a general assignment for
the benefit of creditors.
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j. Judgments. Any final judgment or judgments are entered against Borrower,
and not satisfied, bonded or stayed pending appeal or other action within thirty
(30) days after the entry thereof.
k. Attachment. Any property of Borrower or Pledgors in Lender's possession,
custody or control is attached, levied upon or garnished by any creditor and
such attachment, levy or garnishment is not released within five (5) days after
Lender notifies Borrower.
l. Suspension of Business. Borrower discontinues or suspends business.
m. Material Adverse Change. A material adverse change shall occur in
Borrower's financial condition which is not cured within five (5) days after
Lender notifies Borrower.
n. Lender Insecure. Lender shall determine that (i) the ability of Borrower
to repay the Loan or to fully satisfy any Liability is impaired, or (ii) Lender
otherwise deems itself insecure and each of such conditions is not cured within
five (5) days after Lender notifies Borrower.
o. Default Under Other Borrowings. Default shall be made by Borrower with
respect to any Indebtedness for Borrowed Money (other than the Loan) if the
effect of such default is to accelerate the maturity of such Indebtedness for
Borrowed Money or to permit the holder or obligee thereof or other party thereto
to cause any such Indebtedness for Borrowed Money to become due prior to its
stated maturity.
13. Lender's Rights and Remedies Upon an Event of Default.
Upon the occurrence of any Event of Default, Lender shall have the right to
declare all of the Liabilities immediately due and payable, and shall have all
of the rights, powers and remedies of a secured party under the UCC, under other
applicable law, in equity, and otherwise, including without limitation, the
right to dispose of any or all of the Collateral. Lender shall have the right,
with or without legal process and without prior notice or demand, to enter
peaceably any premises on which the Collateral or any part thereof may be
situated to take possession and remove the same therefrom and Borrower shall not
resist or interfere with such action. Lender may require Borrower to assemble
the Collateral and make it available to Lender at Borrower's place of business
or such other place to be designated by Lender. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender will give Borrower reasonable notice of the
time and place of any public sale or reasonable notice of
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the time after which any private sale or any other disposition thereof is to be
made. The requirement of giving reasonable notice shall be met if such notice is
mailed, postage prepaid, to Borrower at least ten (10) days before the time of
the sale or disposition, but no other method of giving notice is hereby
precluded. Lender may at any time after the expiration of the ten (10) day
notice period, without further demand, advertisement or notice negotiate or sell
and deliver any or all of the Collateral, at public or private sale, for cash,
or upon credit, or otherwise, at such prices and upon such terms as Lender may
deem advisable and as are commercially reasonable, at such place or places as
Lender may designate, in each case in its sole discretion, and Lender may be the
purchaser at any public sale free from any right of redemption. Lender may
conduct any such sale in its name or in Borrower's name, as Lender may elect,
and may cause invoices to be payable directly to Lender. After deducting all
expenses incurred by Lender in protecting or enforcing its rights in the
Collateral, the residue of any proceeds of collection or sale of the Collateral
shall be applied to the payment of principal, interest and other obligations
constituting the Liabilities in such order as Lender may determine, and any
excess shall be returned to Borrower or such other Person as may lawfully be
entitled thereto, and Borrower shall remain liable for any deficiency. Lender
may exercise its rights with respect to any or all of the Collateral without
resorting or regard to any other collateral, guarantee, or other sources of
reimbursement for the Liabilities. Insofar as Collateral shall consist of
Accounts, Instruments, Documents, Chattel Paper, choses in action or the like,
and without limitation of any other power or right granted to Lender under this
Agreement, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose or realize upon collateral as Lender may determine, for the
purpose of realizing Lender's rights therein. Lender may receive, open and
dispose of mail addressed to Borrower, may take possession of all of Borrower's
books and records pertaining to Accounts or other Collateral, and may endorse
notes, checks, drafts, money orders, documents of title or other evidences of
payment, shipment or storage of any form of Collateral on behalf of and in the
name of Borrower. Lender's rights, powers and remedies hereunder shall be
cumulative and may be exercised singularly or concurrently. Election to exercise
any remedy shall not preclude exercise of any other remedy.
14. Miscellaneous.
a. Waivers and Enforcement of Rights. To the extent permitted by law,
Borrower expressly waives all rights to any notice of hearing and to any hearing
prior to the taking of any action by Lender under and pursuant to this
Agreement, including, without limitation, the taking of possession by Lender of
the Collateral by court process or otherwise. Borrower waives demand, notice of
default, protest, presentment, notice of acceptance of this Agreement, notice of
loans made, credit extended, the Collateral received or delivered or other
action taken in reliance hereon and all other demands and notices of any
description except as otherwise expressly provided herein. With respect to any
or all of the Liabilities and Collateral, Borrower assents to any extension or
postponement of the time of
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payment or any other indulgence, to any substitution, exchange or release of the
Collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial payments thereon and the
settlement, compromising or adjusting thereof, all at such time or times as
Lender may deem advisable, and Borrower agrees that Lender may so act without
regard to any requests or demands by Borrower and without thereby incurring any
liability to Borrower or releasing Borrower hereunder. Borrower acknowledges
that Lender does not intend to perfect its security interest in all of the
Collateral and agrees that Lender may so act without releasing Borrower
hereunder. Lender shall have no duty as to collection or protection of the
Collateral or any income thereon, nor as to the preservation of any rights
pertaining thereto, provided Lender acts in a commercially reasonable manner.
Borrower hereby waives promptness by Lender in making any demands upon Borrower,
and agrees that no delay or omission by Lender in exercising any of its rights
hereunder or under any other Loan Document shall be deemed to constitute a
waiver thereof. Failure by Lender to exercise any right, remedy or option under
any Loan Document or delay by Lender in exercising the same will not operate as
a waiver. No waiver by Lender will be effective unless it is confirmed in
writing and then only to the extent specifically stated therein. All rights and
remedies of Lender hereunder shall be cumulative and may be exercised singularly
or concurrently.
b. Successors and Assigns. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns. Borrower may not assign this Agreement or any right or interest herein.
The purchaser, assignee, transferee or pledgee of any of the Liabilities and
Lender's security interest hereunder shall become vested with and entitled to
exercise all the powers and rights given by this Agreement to Lender, as if said
purchaser, assignee, transferee or pledgee were originally named herein.
Borrower hereby consents to Lender selling participations in the Liabilities.
c. Entire Agreement; Amendment; Separability. This Agreement and the other
Loan Documents constitute the entire agreement between the parties with respect
to the subject matter hereof, and supersede all prior agreements, communications
and understandings with respect to the subject matter hereof. The commitment
letter from Lender to Borrower dated October 10, 1995, shall survive the
execution of this Agreement and shall be superseded by the terms of this
Agreement only to the extent of any inconsistency with this Agreement.
d. Maryland Law. This Agreement is made in, and shall be governed by,
construed and enforced in accordance with the laws of, the State of Maryland,
excluding any conflict of laws principle which would apply the law of another
jurisdiction.
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F961d.597 S
1:10/25/95
e. Amendments. This Agreement may only be amended by an instrument in
writing signed by Lender and Borrower.
f. Severability. If at any time one or more provisions of this Agreement,
any amendment or supplement thereto or any related writing is or becomes
invalid, illegal or unenforceable in whole or in part, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
g. Notices. All notices, statements, requests and demands required or
permitted herein shall be addressed as follows:
If to Borrower:
AmerTranz Worldwide, Inc.
Suite West 288
2001 Marcus Avenue
Lake Success, New York 11042
Attn: Martin Hoffenberg
With a Copy To: David I. Ferber, Esquire
Ferber, Greilsheimar, Chan & Essner
530 Fifth Avenue
23rd Floor
New York, New York 10036-5101
If to the Lender: TIA, Inc.
112 East 25th Street
Baltimore, Maryland 21202
Attn: Mr. Stuart Hettleman
With a copy to: Zelig Robinson, Esquire
Gordon, Feinblatt, Rothman, Hoffberger &
Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 20202
All written communications addressed as set forth above shall be deemed given:
(i) on the date hand delivered to the addressee at the address set forth above,
(ii) one Banking Day after the date deposited, delivery charges prepaid, with a
recognized overnight delivery service which gives confirmation of delivery, and
(iii) five Banking Days after the date mailed by certified or registered U.S.
mail, postage prepaid, return receipt requested. Any party may change its
address for notice by giving written notice in accordance with this
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F961d.597 S
1:10/25/95
subsection. No other method of giving or making notices, statements,
requests or demands is hereby precluded.
h. No Marshalling. Lender shall not be required to marshall any present or
future security for (including but not limited to this Agreement and the
Collateral pledged hereunder), or guarantees of, the Liabilities or any of them,
or to resort to such security or guarantees in any particular order; all of its
rights hereunder and in respect of such securities and guarantees shall be
cumulative and in addition to all other rights, however existing or arising.
i. Waiver of Jury Trial. IN THE EVENT ANY LAWSUIT, PROCEEDING OR OTHER
LITIGATION IS COMMENCED IN CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, BORROWER AND LENDER
MUTUALLY WAIVE ALL RIGHTS TO HAVE SUCH LAWSUIT, PROCEEDING OR OTHER LITIGATION
TRIED BEFORE A JURY, AND AGREE THAT ALL SUCH LAWSUITS, PROCEEDINGS AND OTHER
LITIGATION SHALL BE HEARD BY A COURT SITTING AS THE TRIER OF FACT AND LAW.
j. Forum Selection. All lawsuits, proceedings and other litigation which
may be commenced in connection with this Agreement, any other Loan Document or
the transactions contemplated hereby or thereby, shall be brought in the state
or federal courts situate in the State of Maryland except to the extent
necessary to enforce Lender's rights, powers and remedies in another
jurisdiction. Borrower hereby consents to the personal jurisdiction of all state
and federal courts situate in the State of Maryland.
k. Service of Process. Service of process may be made on any party to this
Agreement by mailing a copy of such process to such party, by certified mail, at
its address for notice as set forth above.
l. Usury. Notwithstanding any other provision of this Agreement, Borrower
shall not be required to pay any amount pursuant to this Agreement which is in
excess of the maximum amount permitted under applicable law. It is the intention
of the parties hereto to conform strictly to any applicable usury law, and it is
agreed that if any amount contracted for, chargeable or receivable under this
Agreement shall exceed the maximum amount permitted under any such law, any such
excess shall be deemed a mistake and if theretofore paid, shall be refunded.
m. Set-off. Nothing in this Agreement shall be deemed a waiver of Lender's
right to exercise any right to set-off which the Lender has at law or in equity.
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<PAGE>
F961d.597 S
1:10/25/95
n. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
o. Headings. The section headings appearing in this Agreement have been
inserted for the purpose of convenience and reference and are not substantive
parts hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date and year
first above written.
BORROWER:
Attest: AMERTRANZ WORLDWIDE, INC.
By: ______/s/__________________ By: _____________/s/______________(Seal)
Name: Philip S. Rosso, Jr. Name: Martin Hoffenberg
Title: Secreatry Title: Chairman
LENDER:
TIA, INC.
By: ________/s/__________________(Seal)
Name: Stuart Hettleman
Title: Vice President
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<PAGE>
F961d.597 S
1:10/25/95
Schedule 9(e)
Creditor List
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<PAGE>
F961d.597 S
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Schedule 9(g)
Trade Names List
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<PAGE>
F961d.597 S
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Schedule 9(n)
Subsidiaries List
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<PAGE>
F961d.597 S
1:10/25/95
Schedule 10(j)
Stock Issuance List
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<PAGE>
F1246.597
1:01/23/96
Amendment to Loan and Security Agreement
This Amendment to Loan and Security Agreement ("Amendment") is made this
24th day of January, 1996, by and between AmerTranz Worldwide, Inc. ("Borrower")
and TIA, INC. ("Lender").
RECITALS
A. On October 25, 1995, Borrower and Lender made a Loan and Security
Agreement ("Agreement") concerning a loan to be made by Lender to Borrower in
the maximum principal amount of five-hundred thousand dollars ($500,000.00) (the
"Loan"). The Loan was evidenced by and to be repaid with interest in accordance
with the provisions of three Promissory Notes from Borrower payable to Lender in
the principal amount of the Loan.
B. Borrower has applied to Lender for an additional loan in the maximum
principal amount of three hundred thousand dollars ($300,000.00) and may, from
time to time, apply to Lender for additional credit accommodations.
C. The parties wish to amend the Agreement to accommodate all additional
credit accommodations that may be made by Lender for Borrower at any time.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound thereby, Borrower and Lender agree as follows:
1. The "Liabilities" as defined in the Agreement include all debts,
liabilities and obligations of Borrower to Lender of every kind, nature and
description, without regard to enforcement of any guaranty or any other
obligations or security, and whether or not such debts, liabilities or
obligations arise under the Agreement or otherwise, are now existing or
hereafter incurred, matured or unmatured, direct or indirect, primary or
secondary, secured or unsecured, joint or several, absolute or contingent,
including without limitation any liability of Lender as endorser of any checks
or other drafts of customers of Borrower and transmitted by Lender for
collection, due or to become due, regardless of how the same may be evidenced,
and whether participated to or from Lender in whole or in part, and including
any extensions and renewals thereof, together with interest, fees, charges,
expenses and costs of collection (including reasonable attorney's fees).
2. "Loan Documents" as defined in the Agreement means the Agreement, the
Note, all other notes executed by the Borrower in favor of Lender, and each
other document executed and delivered by Borrower or any Person to Lender in
connection with the Liabilities, and each other document, instrument or
agreement now or hereafter evidencing, guarantying, securing or modifying any of
the Liabilities or Lender's security interest in the Collateral or the Stock
Collateral.
3. Upon Lender's request, Borrower shall furnish to Lender and shall
execute and deliver to Lender such financing statements and other documents, and
shall do all such other
<PAGE>
F1246.597
1:01/23/96
acts, as may be necessary in the sole judgment of Lender to establish and
maintain Lender's valid security interest in the Collateral or to carry out the
terms of this Amendment. In the event that Borrower fails or refuses to execute
any such document, Borrower hereby appoints Lender as Borrower's
attorney-in-fact, which power shall be deemed coupled with an interest, to
execute such documents in Borrower's name.
4. Terms used in this Amendment which are not defined herein have the same
meaning as in the Agreement.
5. The Agreement remains unchanged except as modified by this Amendment.
The signatures and seals of the Borrower and Lender are subscribed to this
Amendment as of the day and year first written above.
BORROWER:
Attest: AMERTRANZ WORLDWIDE, INC.
By: ______/s/__________________ By: ___________/s/_______________(Seal)
Name: Philip S. Rosso, Jr. Name: Martin Hoffenberg
Title: Secretary Title: Chairman
LENDER:
TIA, INC.
By: ____________/s/______________(Seal)
Name: Stuart Hettleman
Title: Vice President
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<PAGE>
THIS NOTE AND THE DEBT EVIDENCED HEREBY ARE SUBORDINATE TO THE PAYMENT OF
CERTAIN INDEBTEDNESS OF THE BORROWER TO FIDELITY FUNDING OF CALIFORNIA, INC.
("FIDELITY), PURSUANT TO THE SUBORDINATION AGREEMENT BETWEEN FIDELITY AND LENDER
DATED OCTOBER 25, 1995.
AMENDED AND RESTATED PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE is made this _______ day of
_______, 1996, by and between AMERTRANZ WORLDWIDE, INC., a Delaware corporation
(the "Borrower") and TIA, INC. (the "Lender").
Background
1. Borrower made a promissory note in the principal amount of $250,000
payable to Lender on October 25, 1995.
2. Borrower made a promissory note in the principal amount of $100,000
payable to Lender on November 10, 1995.
3. Borrower made a promissory note in the principal amount of $150,000
payable to Lender on November 21, 1995.
4. Borrower made a promissory note in the principal amount of $300,000
payable to Lender on _______________, 1996.
5. Borrower and Lender desire to consolidate the foregoing promissory notes
("Notes") and to provide for a repayment schedule for same.
NOW, THEREFORE, in consideration of the Background and other good and
valuable consideration, Borrower and Lender agree that the Notes are
consolidated, amended and restated as follows:
AMENDED AND RESTATED PROMISSORY NOTE
$800,000.00 Baltimore, Maryland
__________, 1996
FOR VALUE RECEIVED, AMERTRANZ WORLDWIDE, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of TIA, INC. (the "Lender"),
the principal sum of EIGHT HUNDRED THOUSAND DOLLARS ($800,000.00) (the
"Principal Sum"), together with interest on the unpaid balance of the Principal
Sum at a rate of interest equal to twelve percent (12%) per year, with interest
calculated on the basis of a 365 day year, as follows:
(a) The Principal Sum plus accrued interest on the unpaid balance of the
Principal Sum shall be due and payable in
<PAGE>
12 equal monthly installments of $71,079.03 each, beginning on July 1,
1996, and continuing on the same day of each following month.
(b) The entire unpaid balance of the Principal Sum, together with all
accrued and unpaid interest and all other amounts due hereunder, if not sooner
paid, shall be due and payable on July 1, 1997.
All payments shall be made in lawful money of the United States of America
in good funds at 112 East 25th Street, Baltimore, MD 21218, or at such other
place as may be designated by the holder hereof.
The Borrower hereby waives presentment, protest, demand, notice of demand,
notice of non-payment and notice of dishonor.
The Borrower shall have the right to prepay the whole or any part of the
unpaid balance of the Principal Sum at any time and from time to time without
penalty or premium. Unless the holder hereof shall designate a different order
of application, which the holder hereof may do in its sole discretion, all
payments made under this Note shall be applied first to costs of collection,
then to unpaid late fees, then to accrued and unpaid interest, and the
remainder, if any, to the outstanding balance of the Principal Sum.
In the event that any payment due under this Note shall not be paid on the
date due, the Borrower promises to pay to the order of the Lender, immediately
and without demand, a late fee equal to five percent (5%) of such amount due and
unpaid.
Upon the occurrence of any Event of Default under that certain Loan and
Security Agreement by and between Borrower and Lender dated October 25, 1995
(the "Loan Agreement"), or upon the occurrence of any default under any other
promissory note made by Borrower and payable to the order of Lender pursuant to
the Loan Agreement (an "Event of Default"), the entire unpaid balance of the
Principal Sum, together with all costs of collection, late fees and accrued and
unpaid interest due under this Note, shall, at the option of the holder hereof,
be accelerated and become immediately due and payable.
No failure or delay by the holder hereof to insist upon the strict
performance of any provision of this Note or to exercise any right, power or
remedy consequent upon an Event of Default shall constitute a waiver of any such
provision or of any such Event of Default, or preclude the holder hereof from
exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Note, the
holder hereof shall not be deemed to have waived the right either to require
prompt payment when due of all other amounts due under this Note, to declare an
Event of Default or to exercise any other available right, power or remedy.
- 2 -
<PAGE>
The Borrower promises to pay to the order of the Lender, upon demand, all
costs and expenses of collection of this Note, including, but not limited to,
attorneys' fees and expenses, plus interest on all such costs and expenses from
the date of demand at the rate in effect from time to time under this Note.
The Borrower hereby empowers any attorney or the clerk of any court of
record within the United States or elsewhere to appear for the Borrower before
any court having jurisdiction upon an Event of Default and to confess judgment
against the Borrower for the then unpaid amount of the Principal Sum, all late
fees then due, all accrued and unpaid interest, plus attorneys' fees in the
amount of ten percent (10%) of the sum of the foregoing amounts, together with
costs of suit, hereby waiving and releasing presentment, demand for payment,
protest, notice of non-payment or error and all rights of exemption, appeal,
modification, vacation, stay of execution, inquisition and extension upon any
levy on real estate or personal property to which Borrower may be entitled under
the laws of any state or territory of the United States now in force or which
hereafter may be passed. The inclusion of a fixed amount of attorneys' fees in
any confessed judgment shall not limit the Borrower's liability under this Note
for all costs of collection, including attorneys' fees and expenses.
The Borrower hereby consents to the exercise of personal jurisdiction over
the Borrower by all state and federal courts situate in Baltimore City, Maryland
and consents to the laying of venue in such jurisdiction.
The obligations of the Borrower under this Note are irrevocable, absolute
and unconditional, and are not subject to any claim or right of setoff. The
Borrower hereby waives all rights to assert any setoff or counterclaim in any
proceeding brought to enforce this Note. THE BORROWER HEREBY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT TO ENFORCE OR OTHERWISE
RELATING TO THIS NOTE.
Borrower acknowledges and warrants that this Note evidences a "commercial
loan" within the meaning of Section 12-101(c) of the Commercial Law Article of
the Annotated Code of Maryland.
No modification, change, waiver or amendment of this Note shall be
effective unless in writing and signed by the Lender or other holder hereof.
This Note is delivered in the State of Maryland, and shall be governed by,
construed and enforced in accordance with the laws of the State of Maryland.
This Note shall be binding upon the Borrower and the Borrower's successors
and assigns.
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<PAGE>
IN WITNESS WHEREOF, this Note has been executed, under seal, with the
intention of making this a sealed instrument, on the day and year first above
written.
Attest: AMERTRANZ WORLDWIDE, INC.
By: _________________________ By: ____________________________(Seal)
Name: ______________________ Name: __________________________
Title: _______________________ Title: __________________________
Attest: TIA, INC.
By: _________________________ By: ____________________________(Seal)
Name: ______________________ Name: __________________________
Title: _______________________ Title:__________________________
F1419.597
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<PAGE>
ASSETS EXCHANGE AGREEMENT
THIS ASSETS EXCHANGE AGREEMENT (the "Agreement") is made and entered into
as of the 7th day of February, 1996 by and among AMERTRANZ WORLDWIDE, INC., a
Delaware corporation ("Amertranz"); AMERTRANZ WORLDWIDE HOLDING CORP., a
Delaware corporation ("Holding"); CARIBBEAN AIR SERVICES, INC., a Delaware
corporation ("Caribbean"); the individuals listed on the "Schedule of Amertranz
Stockholders and Option Holders" attached hereto (collectively, the "Amertranz
Stockholders"); CARIBBEAN FREIGHT SYSTEMS, INC., a corporation organized under
the laws of Puerto Rico and doing business as Caribbean Air Services ("CAS");
and TIA, INC., a Delaware corporation doing business as Tradewinds International
Airlines ("Tradewinds"). CAS and Tradewinds are hereinafter individually or
collectively referred to as the "Freight Group".
EXPLANATORY STATEMENT
Amertranz desires to acquire all of the air freight forwarding business of
the Freight Group.
In furtherance thereof, Amertranz, Tradewinds and CAS have caused Holding
and Caribbean to be formed as Delaware corporations. Upon the Closing (as
hereinafter defined), all of the issued and outstanding capital stock of Holding
will be owned by Tradewinds, CAS, and the stockholders of Amertranz. Upon the
Closing, (i) each of Tradewinds and CAS will contribute to Holding its
respective Air Freight Assets, as hereinafter set forth, and (ii) the
stockholders of Amertranz will contribute to Holding all of the issued and
outstanding shares of stock of Amertranz. Immediately thereafter, Holding will
contribute to Caribbean all of the assets contributed to Holding by Tradewinds
and CAS, in exchange for all of the issued and outstanding shares of stock of
Caribbean. The parties intend that the transactions contemplated by this
Agreement be accomplished in a tax-free exchange under Section 351 of the
Internal Revenue Code of 1986, as amended.
NOW THEREFORE, for the mutual consideration set out herein, the parties
hereto agree as follows:
1. Definitions; Rules of Construction.
1.1. For purposes of this Agreement, the terms set forth below shall have
the following meanings:
Air Freight Assets - All of the respective air freight forwarding
businesses of CAS and Tradewinds, including the active, prospective, and
historical customer lists for the past five years of each of CAS and Tradewinds,
related current and historical business records relating to the prospective,
active and inactive customers of each of CAS and Tradewinds and their air
freight forwarding business for the preceding five years (including pricing
information, costing and vendor information as to trucking and air); all
associated computerized information relating to CAS's and Tradewinds' air
freight forwarding business and customers (including computer disks and tapes);
all information relating to current,
<PAGE>
historical, and planned marketing and sale by CAS and Tradewinds of their
respective air freight forwarding services; all of Tradewinds' rights under the
Freight Handling Agreement; all of CAS's rights under the CAS-D Freight Handling
Agreement (including the right to receive commissions thereunder); all of the
Freight Group's interest in the name "Caribbean Air Services", and, to the
extent Tradewinds has rights thereto (as more particularly described on Schedule
7.1.3), a perpetual, exclusive royalty-free license to use the name "Tradewinds
International Airlines", and all variations thereof and all service marks
utilized in connection therewith; all local, 800 and international telephone and
telefax numbers utilized by CAS and Tradewinds in connection with their
respective air freight businesses; the leases for CAS's Puerto Rico and
Greensboro, North Carolina, Hartford, Connecticut, business facilities,
including all furniture and fixtures owned by Tradewinds or CAS and used in each
respective facility or in connection therewith as set forth on Schedule 1.1
(subject to dispositions or replacements prior to Closing in the ordinary course
of business); all assignable customer and sales representative contracts of
Tradewinds or CAS in connection with their respective air freight businesses;
and all other assignable contracts of Tradewinds or CAS in connection with their
respective air freight businesses, unless Amertranz notifies Tradewinds in
writing five days before the Due Diligence End Date that such other assignable
contracts will not be assumed by Holding. "Air Freight Assets" shall not include
any other asset of CAS or Tradewinds, including cash on hand, cash in
depositories, cash equivalents, accounts receivable, notes receivable,
securities, or equipment, aircraft, parts, tools, or assets of Tradewinds
Airlines, Inc. not set forth on Schedule 1.1.
Air Freight Assets' Business - The air freight forwarding business(es)
heretofore operated by Tradewinds and/or CAS other than the operation of
aircraft between Puerto Rico and mainland United States.
Amertranz - As defined in the introductory paragraph of this Agreement.
Amertranz Belgium - Amertranz Worldwide, a private limited company existing
under the laws of Belgium, Brussels Trade Register Number 554.547, Value Added
tax Number 446.536.134.
Amertranz Brazil - AmerTranz do Brasil LTDA, existing under the laws of
Brazil.
Amertranz Options - Options to purchase Amertranz Shares.
Amertranz Shares - Shares of Common Stock of Amertranz, par value $.01 per
share.
Amertranz Stockholders - As defined in the introductory paragraph of this
Agreement.
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<PAGE>
Bridge Financing - The Bridge Financing on the terms described in the
Underwriter's Letter of Intent, as such terms may be modified with the consent
of the Freight Group.
Bridge Lender - The lender(s) of the Bridge Financing.
Caribbean - As defined in the introductory paragraph of this Agreement.
Caribbean Air Freight Business - Air freight forwarding business that has
its point of origin or destination in Puerto Rico or the Dominican Republic.
CAS - As defined in the introductory paragraph of this Agreement.
CAS-D Freight Handling Agreement - The Freight Handling Agreement, dated
January 1, 1996, between CAS, Dominica, and the stockholders of Dominica.
Closing - The closing of the transactions contemplated by this Agreement.
Closing Date - The day on which the Closing is held, to be mutually agreed
upon among the parties, but in no event later than February 15, 1996.
Dominica - Caribbean Air Services Dominica, Inc., a corporation organized
under the laws of Puerto Rico.
Due Diligence End Date - The Closing Date.
ERISA - The Employee Retirement Income Security Act of 1974, as amended,
and the regulations issued thereunder.
Executive Management - With respect to each entity for which such term is
used, the management of such entity, consisting of the Chairman, Presidents,
Executive Vice President, one or more Vice Presidents and the Chief Financial
Officer, up to a maximum of nine individuals.
Freight Group - As defined in the introductory paragraph of this Agreement.
Freight Group Holding Shares - The Holding Shares issued to Tradewinds and
CAS pursuant to Section 2.2 hereof.
Freight Handling Agreement - The Cargo Aircraft Charter Agreement, dated
February 28, 1994, between Florida West Airlines, Inc. and Tradewinds, and
assigned by Florida West Airlines, Inc. to Tradewinds Airlines, Inc.
GAAP - Generally accepted accounting principles.
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<PAGE>
Guarantee - The Guarantee Agreements attached hereto as Exhibit A.
Holding - As defined in the introductory paragraph of this Agreement.
Holding Board Control Termination Date - The date by which all obligations
under the Net Cash Receipts Note have been repaid in full and the first of the
following occurs: (i) payments of principal and interest on the Holding
Promissory Note total $8,000,000 if such total is paid within 30 months
following the Closing Date; and (ii) payments of principal on the Holding
Promissory Note total $5,900,000, and all accrued interest and other charges
then due under the Holding Promissory Note have been paid.
Holding Board Election Proxy - The Limited Proxy attached hereto as Exhibit
C, with respect to the election of Holding Directors.
Holding Board Structure Termination Date - The date by which all
obligations under the Net Cash Receipts Note have been repaid in full and both
of the following shall have occurred: (i) the Freight Group owns, in the
aggregate, less than 15% of the issued and outstanding Holding Shares; and (ii)
all amounts then due under the Holding Promissory Note shall have been paid in
full.
Holding Directors - Members of Holding's Board of Directors elected by the
holders of Holding Shares, including pursuant to the Holding Board Election
Proxy.
Holding Freight Group Directors - Members of Holding's Board of Directors
designated by the Freight Group.
Holding Options - Options to purchase Holding Shares.
Holding Promissory Note - The Promissory Note in the principal amount of
$10,000,000, attached hereto as Exhibit D.
Holding Shares - Shares of Common Stock of Holding, par value $.01 per
share.
IPO - The initial public offering of Holding Shares on the terms described
in the Underwriter's Letter of Intent, as such terms may be modified with the
consent of the Freight Group.
IPO Price - The price per share to be sold in the IPO.
Net Cash Receipts Loan - As defined in Section 5.3 of this Agreement.
Net Cash Receipts Note - The Promissory Note attached hereto as Exhibit B.
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<PAGE>
SEC - United States Securities and Exchange Commission.
Securities Act - The Securities Act of 1933, as amended.
Security Agreement - The Security Agreement attached hereto as Exhibit E.
Stock Pledge Agreement - The Stock Pledge Agreement attached hereto as
Exhibit F.
Tradewinds - As defined in the introductory paragraph of this Agreement.
Tradewinds Airlines, Inc. - Tradewinds Airlines, Inc., a Delaware
corporation and wholly-owned subsidiary of Tradewinds Acquisition Corporation, a
Delaware corporation of which Tradewinds owns approximately 30% of the issued
and outstanding common stock and of which a principal executive officer of
Tradewinds is a director.
Underwriter's Letter of Intent - The Letter of Intent, dated November 20,
1995, as amended January 23, 1996, from GKN Securities Corp. to Amertranz with
respect to the IPO and the Bridge Financing, attached hereto as Exhibit G.
1.2. The Explanatory Statement is hereby incorpo- rated into this Agreement
and made a part hereof.
1.3. The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
1.4. References in this Agreement to the "knowl- edge" of an entity shall
mean the knowledge of the chief executive officer, chief operating officer, and
chief financial officer of such entity, to the extent applicable, following due
inquiry to all personnel associated with such entity who can be reasonably
expected to have knowledge of the subject matter.
1.5. Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular, to the singular include the
plural, to the part include the whole, and to the male gender shall also pertain
to the female and neuter genders and vice versa. The term "including" is not
limiting, and the term "or" has the inclusive meaning represented by the phrase
"and/or". The words "hereof," "herein," "hereby,", "hereto", "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, Schedule, Exhibit and
clause references are to this Agreement unless otherwise specified.
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2. Closing Transactions.
2.1. At the Closing, the following transactions shall be deemed to
simultaneously occur:
(i) All of the Amertranz Stockholders shall contribute their respective
Amertranz Shares to Holding, free and clear of all liens and encumbrances of any
kind and nature, and shall deliver to Holding the certificates representing such
Amertranz Shares duly endorsed in blank, in exchange for Holding Shares in such
amounts as set forth on Schedule 2.1(i).
(ii) Tradewinds and CAS will contribute to Holding their respective Air
Freight Assets, free and clear of all liens and encumbrances of any kind and
nature, except those set forth in Schedules 4 and 7.1.2, in exchange for (i)
1,950,000 Holding Shares, and (ii) the Holding Promissory Note.
(iii) Holding will contribute to Caribbean all of the Air Freight Assets,
free and clear of all liens and encumbrances of any kind and nature, except
those set forth in Schedules 4 and 7.1.2, in exchange for 100 shares of
Caribbean's common stock, par value $.01 per share, which constitutes all of the
issued and outstanding stock of Caribbean.
2.2. The Holding Promissory Note shall be allocated between, and the
Freight Group Holding Shares shall be issued to, Tradewinds and CAS as follows:
Freight Group Member Holding Promissory Note Holding Shares
Tradewinds $8,000,000 1,560,000 Shares
CAS $2,000,000 390,000 Shares
3. Security for Amertranz, Holding, and Caribbean Obligations.
The obligations under the Holding Promissory Note and the Net Cash Receipts
Promissory Note shall be guaranteed by Amertranz, Holding, and Caribbean, in
accordance with the terms of the respective Guarantees, and shall be secured
pursuant to the terms of the Security Agreement and the Stock Pledge Agreement.
4. Assumption of Liabilities and Transfer of Rights.
4.1. As of the Closing, Holding and Caribbean shall assume the obligations
of Tradewinds or CAS under the Freight Handling Agreement and the CAS-D Freight
Handling Agreement, under leases of property included in the Air Freight Assets,
under other assignable contracts assigned to and assumed by Holding as part of
the Air Freight Assets, and for obligations for accrued vacation, sick days,
personal days or other such benefits for all employees of Tradewinds or CAS as
of the Closing Date, all as listed on Schedule 4.
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4.2. To the extent the assignability of any rights under agreements listed
on Schedule 4 by the Freight Group to Holding and by Holding to Caribbean, and
the respective assumptions by Holding and Caribbean of the obligations
thereunder, require the consent of another party thereunder, the Freight Group
and Holding will take all reasonable actions to obtain such consent as soon as
practicable following the Closing. In the event any such consent is not
obtained, the Freight Group agrees to exercise all rights under such agreement
for the benefit of Caribbean, and Holding and Caribbean agree to pay all amounts
and assume all obligations of the Freight Group thereunder. Prior to or upon the
expiration of any such agreement which remains in the name of the Freight Group,
Caribbean shall have the exclusive right to buy out the remaining term of such
agreement or to determine whether or not to exercise any end-of-term option with
respect thereto, and the Freight Group agrees to comply with Caribbean's
instructions with respect to such determination.
5. Accounts Receivable.
5.1. All of the Freight Group's trade receivables for services rendered by
the Freight Group on or before the Closing Date shall be and remain the property
of the Freight Group member which generated such receivable. Provided, however,
that if, prior to the Closing Date, the Freight Group has entered into an
agreement with a customer to provide freight services but such services have not
yet been provided on or before the Closing Date, Caribbean will assume
responsibility for providing such service (or the remaining portion thereof) and
will be entitled to receive the compensation for such services (or the remaining
portion thereof) performed by Caribbean, equal to the direct costs relating
thereto (including commissions) paid or incurred by Caribbean following the
Closing Date. Caribbean will not be responsible for damages arising from claims
for untimely performance with respect to services due to be performed by the
Freight Group prior to the Closing Date but not performed by the Freight Group
in a timely manner.
5.2. From and after the Closing Date, Holding and Caribbean shall, as agent
of Tradewinds and CAS, and without further compensation or remuneration from
Tradewinds or CAS, exercise their reasonable best efforts to diligently collect
all receivables owned by the Freight Group as of the Closing Date. To the extent
so collected, Holding and Caribbean shall pay over and remit daily (or, if less
than $5,000 is so collected on any day, at such time(s) as such collections
aggregate $5,000) to Tradewinds or CAS, as the case may be, the cash receipts of
their respective receivables, as collected, together with an accounting of such
amount, showing, for receivable collected, the payor, the services performed to
generate such receivable, the amount of the payment, and any balance due. All
such cash receipts shall be received by, and held in trust by Holding and
Caribbean for the benefit of the Freight Group. Neither Holding nor Caribbean
shall resolve any disputed receivables with any account debtor without the
consent of
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Tradewinds or CAS, as the case may be. In the event that any such dispute is not
resolved, Holding or Caribbean, as agent for the Freight Group, shall, at the
discretion of the Freight Group, place such receivable for collection and the
cost and the expenses of collection shall be the exclusive responsibility of the
entity on whose behalf collection is being made.
5.3. Notwithstanding the foregoing, provided that Amertranz, Holding, and
Caribbean are complying with all other material terms and conditions of this
Agreement, for a period of 150 days following the Closing Date, the Freight
Group shall make available to Caribbean, as an interest-free loan for the
exclusive purpose of paying the ordinary, then-current operating expenses of
Caribbean, the net cash collections (i.e., the amount of the gross cash
collections less all unpaid costs arising out of or resulting from the services
which generated such cash collections, including income taxes payable by the
beneficiary of such cash collections attributable thereto) from the receivables
collected pursuant to Section 5.2, up to a maximum of $4,000,000 outstanding at
any time (hereinafter the "Net Cash Receipts Loan"). Draws on the Net Cash
Receipts Loan shall be made by written request from Caribbean to the Freight
Group specifying the need for, applications of, and amounts of such funds, and
disbursements of the Net Cash Receipts Loan shall be made no more than one time
per week. The Net Cash Receipts Loan shall be repaid each Monday to the extent
of all revenues of Caribbean in excess of the then-current operating expenses of
Caribbean, and, in any event, must be repaid in full 150 days following the
Closing Date. The obligations of Caribbean to repay the Net Cash Receipts Loan
shall be evidenced by the Net Cash Receipts Note, shall be guaranteed by
Amertranz and Holding pursuant to the terms of the Guarantee, and shall be
secured pursuant to the terms of the Security Agreement and the Stock Pledge
Agreement. The proceeds from the Net Cash Receipts Loan shall be used
exclusively for ordinary, then-current operating expenses of Caribbean and may
not be used for any other purpose, unless otherwise agreed to in writing by the
Freight Group.
6. Closing.
The Closing shall take place at the offices of Ferber Greilsheimer Chan &
Essner, New York, New York, on the Closing Date at 10:00 a.m., Eastern Time, or
at such other time and place as shall be agreed upon by the parties hereto. Time
is of the essence of this Agreement.
7. Representations and Warranties of Tradewinds and CAS.
7.1. Representations and Warranties with respect to the Air Freight Assets.
Tradewinds and CAS, jointly and severally, represent and warrant to Amertranz as
follows:
7.1.1. Approvals Required. Except for the approvals of other parties to
agreements listed on Schedule 4, and
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any restriction or requirement to which Amertranz (and, by extension of such
restriction on Amertranz, Holding or Caribbean) is subject, no approval,
authorization, consent, order or other action of, or filing with, any person,
firm or corporation, or any court, administrative agency or other governmental
authority, is required in connection with the contribution of the Air Freight
Assets by the Freight Group to Holding or by Holding to Caribbean.
7.1.2. Title to Property and Related Matters. At the time of the Closing
Holding will have good and marketable title to all of the Air Freight Assets,
free and clear of any liens or encumbrance, except those set forth in Schedule
7.1.2. Except as set forth in Schedule 7.1.2 and except for matters that may
arise in the ordinary course of business, the Air Freight Assets are in good
operating condition and repair, reasonable wear and tear excepted. To the best
of the knowledge of the Freight Group, there does not exist any condition or
agreement that will materially interfere with the use of the Air Freight Assets
in the conduct of Caribbean's business in the ordinary course.
7.1.3. Licenses; Trademarks; Trade Names. Except for any rights in the name
"Tradewinds" as described on Schedule 7.1.3, and in the name "Caribbean Air
Services", the Air Freight Assets do not include any licenses, registered
trademarks, registered trade names, registered service marks, copyrights,
patents or applications for any of the foregoing, and, except for licenses to
use "off-the-shelf" commercial software included with the equipment that
constitute part of the Air Freight Assets (none of which licenses are material),
none is required or used in the Air Freight Assets' Business.
7.1.4. Material Adverse Change. Except (A) as set forth in Schedule 7.1.4,
or (B) as otherwise reflected herein, since March 31, 1995, the Air Freight
Assets' Business has been operated in the ordinary course and there has not
been:
(i) To the knowledge of Tradewinds or CAS, any material adverse change in
the business, condition (financial or otherwise), results of operations,
prospects, properties, assets, liabilities, earnings, net worth, or prospects
thereof, except for the general effects of present economic conditions;
(ii) To the knowledge of Tradewinds or CAS, any material damage,
destruction or casualty loss (whether or not covered by insurance) affecting the
Air Freight Assets;
(iii) To the knowledge of Tradewinds or CAS, any statute, rule, regulation
or order adopted (including orders of regulatory authorities with jurisdiction
over such entity or its business) that materially and adversely affects such
entity or its business;
(iv) Any material increase in the rate of compensation or in bonus or
commission payments payable or to
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become payable to any of Tradewinds' or CAS's salaried employees; provided,
however, that this paragraph shall not restrict or limit in any way the hiring
of additional personnel who are reasonably required for Tradewinds' or CAS's
operations; or
(v) To the knowledge of Tradewinds or CAS, any other events or conditions
of any character specifically related to the business or operations of the Air
Freight Assets' Business that may reasonably be expected to have a material
adverse effect on Holding or its business or financial condition, except for the
general effects of present or future economic conditions.
7.1.5. Tax Matters. The Freight Group has filed all federal, state and
local tax or related returns and reports due or required to be filed, which
reports accurately reflect in all material respects the amount of taxes due. The
Freight Group has paid all taxes or assessments that have become due, other than
taxes or charges being contested in good faith or not yet finally determined.
There are no tax liens with respect to the Freight Group or any of the Air
Freight Assets.
7.1.6. Agreements. Schedule 7.1.6 contains a true and complete list and
brief description of all written or oral contracts, agreements, mortgages,
obligations, understandings, arrangements, restrictions, and other instruments
to which any of the Freight Group or the Air Freight Assets may be bound
involving payments in any consecutive 12-month period or otherwise representing
annualized costs of $25,000 or more or representing aggregate payments of
$50,000 over the term of any such agreement or arrangement (without regard to
the amount of annualized payments or costs). True and correct copies of all
items set forth on Schedule 7.1.6 have been or will have been made available to
Amertranz five days before the Due Diligence End Date. No event has occurred
that (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a material default by Tradewinds
or CAS under any of the agreements or arrangements set forth in Schedule 7.1.6.
The Freight Group is not aware of any material default by the other parties to
such agreements. In addition, no material violations have occurred pursuant to
any loan agreements to which Tradewinds or CAS is a party.
7.1.7. Compliance; Governmental Authoriza- tions. To the knowledge of
Tradewinds or CAS: (i) the Freight Group has heretofore complied with all
federal, state, local or foreign laws, ordinances, regulations and orders
applicable to the Air Freight Assets' Business, including federal and state
aviation laws that, if not complied with, would materially and adversely affect
the Air Freight Assets' Business; (ii) the Freight Group has all federal, state,
local and foreign governmental licenses and permits necessary for the conduct of
the Air Freight Assets' Business; and (iii) such licenses and permits are in
full force and effect. The Freight Group knows of no violations of any such
licenses or permits. No proceedings are pending or, to the Freight
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Group's knowledge, threatened to revoke or limit the use of such licenses or
permits.
7.1.8. Environmental. The Freight Group has operated the Air Freight Assets
in compliance with all applicable environmental laws and regulations in all
material respects.
7.1.9. Litigation. Except as set forth in Schedule 7.1.9, to the knowledge
of Tradewinds or CAS, there are no actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending or threatened with
respect to or concerning the Air Freight Assets, whether at law or in equity, or
before or by any federal, state, municipal, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor does
Tradewinds or CAS know of any basis for, any such action, suit, claim,
investigation or proceeding.
7.1.10. Knowledge of Adverse Conditions. Except for changes in federal tax
laws affecting business in Puerto Rico and general present and future economic
conditions, to the knowledge of the Freight Group, there are no present or
future conditions, state of facts or circumstances which has affected or may in
the aggregate have a material adverse effect upon the business or prospects of
the Air Freight Assets' Business taken as a whole.
7.1.11. Accuracy of Representations. All representations and warranties
with respect to the Freight Group or the Air Freight Assets are true and correct
as of the date hereof. This Agreement does not contain any untrue statement of a
material fact with respect to the Freight Group or the Air Freight Assets or
omit to state any material fact with respect to the Freight Group or the Air
Freight Assets necessary to make the statements contained herein not misleading.
7.2. Representations and Warranties with respect to Tradewinds. Tradewinds
represents and warrants to Amertranz as follows:
7.2.1. Existence and Good Standing. Trade- winds: (i) is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware; (ii) has the corporate power and authority to own, lease, and operate
its properties and carry on its business as now being conducted by it; and (iii)
is duly licensed, qualified and authorized to do business as a foreign
corporation in, and is in good standing in, each jurisdiction in which failure
to be so licensed, qualified, authorized, or in good standing will have a
material adverse effect on the business or properties (owned, leased, or
operated) of Tradewinds.
7.2.2. Power and Authority; Authorization. Tradewinds has full power and
authority to enter into, execute and deliver this Agreement, and to perform each
of its obligations
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hereunder. The execution and delivery of this Agreement by Tradewinds have been
duly authorized and approved by the Board of Directors of Tradewinds subject to
all contingencies set forth herein. This Agreement has been, and each of the
Exhibits hereto and other documents required hereunder (if applicable) will be,
on the Closing Date, duly executed and delivered by or on behalf of Tradewinds
and are the legal, valid, and binding obligations of Tradewinds in accordance
with their respective terms, subject (as to the enforcement of remedies) to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and (as to the availability of equitable remedies) to the discretion of
the equity tribunal having jurisdiction.
7.2.3. No Violations. The execution, delivery, and performance of this
Agreement by Tradewinds
(i) will not violate (with or without the giving of notice or the lapse of
time, or both) or require any registration, qualification, consent, approval, or
filing under, any law, ordinance or regulation binding on Tradewinds,
(ii) will not (a) conflict with, require any consent or approval under,
result in the breach of any provision of, constitute a default under, result in
the acceleration of the performance of the obligations under, cause or allow for
the termination of, or (b) result in the creation of any claim, lien, charge, or
encumbrance upon, any of its properties, assets, or businesses, pursuant to its
certificate of incorporation or by-laws, any debt instrument, mortgage, deed of
trust, license, permit, franchise, lease, contract, or other instrument or
agreement to which Tradewinds is a party, or any judgment, order, writ or decree
of any court, arbitrator or governmental agency by which Tradewinds or any of
its assets or properties is bound, subject to the approvals of parties to
agreements listed on Schedule 4. Neither Tradewinds nor any of its assets or
properties is subject to or bound or affected by any article of incorporation or
by-law provision, debt instrument, mortgage, deed of trust, license, permit,
franchise, lease, contract, other instrument or agreement, judgment, order,
writ, decree, injunction, law, statute, ordinance or regulation, or any other
restriction of any kind or character, which would prevent Tradewinds from
entering into, or performing its obligations under, this Agreement, except for
such instruments the violation(s) of which can be cured at an aggregate
immaterial cost or expense and, with or without being cured, will not prevent
the continuation of the Air Freight Assets' Business in the ordinary course.
7.2.4. Approvals Required. Except for the approvals of lessors of property
and other parties to contracts included in the Air Freight Assets, no approval,
authorization, consent, order or other action of, or filing with, any person,
firm or corporation, or any court, administrative agency or other governmental
authority, is required in connection with the
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execution and delivery by Tradewinds of this Agreement or the performance
of the transactions described herein.
7.2.5. Financial Statements. All financial statements of Tradewinds
delivered or to be delivered prior to Closing pursuant to the terms hereof and
all other financial materials regarding the Freight Group delivered to Amertranz
are accurate and complete in all material respects and fairly present the
Freight Group's financial position as at the dates set forth therein and the
results of its operations for the periods reflected therein. All such audited
financial statements have been prepared in conformity with GAAP applied on a
basis consistent with that of prior periods. All such unaudited financial
statements have been prepared in conformity with GAAP applied on a basis
consistent with that of prior periods, except that such unaudited financial
statements will not contain footnotes, may not conform to principles of
consolidation, may treat the items set forth on Schedule 7.2.5 in a manner
inconsistent with GAAP, and will contain reasonable estimates, subject to
adjustment, of accruals, deferrals, and reserves consistent with past practices.
Without limiting the generality of the foregoing, such financial statements do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make such financial statements not misleading. Since
1991, Tradewinds has used the fiscal year ending December 31 as its taxable
year.
7.2.6. Compliance; Governmental Authorizations. To the knowledge of
Tradewinds, Tradewinds has heretofore complied with all federal, state, local or
foreign laws, ordinances, regulations and orders applicable to its business,
including federal and state securities laws.
7.2.7. Employees. Neither Tradewinds nor any of its employees is subject to
any collective bargaining agreement, no petition for certification or union
election is pending with respect to the employees of Tradewinds, and no union or
collective bargaining representative has sought, to the knowledge of Tradewinds,
such certification or recognition with respect to the employees of Tradewinds at
any time during the past three years.
7.2.8. Investment Intent. The Holding Shares being acquired by Tradewinds
are being acquired for investment purposes only, and not with a view to public
resale or distribution until such time as a registration statement with respect
to such shares shall be declared effective by the SEC.
7.2.9. Accuracy of Representations. All representations and warranties with
respect to Tradewinds are true and correct as of the date hereof. This Agreement
does not contain any untrue statement of a material fact with respect to
Tradewinds or omit to state any material fact with respect to Tradewinds
necessary to make the statements contained herein not misleading.
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7.3. Representations and Warranties with respect to CAS. CAS represents and
warrants to Amertranz as follows:
7.3.1. Existence and Good Standing. CAS: (i) is a corporation duly
organized, validly existing, and in good standing under the laws of Puerto Rico;
(ii) has the corporate power and authority to own, lease, and operate its
properties and carry on its business as now being conducted by it; and (iii) is
duly licensed, qualified and authorized to do business as a foreign corporation
in, and is in good standing in, each jurisdiction in which failure to be so
licensed, qualified, authorized, or in good standing will have a material
adverse effect on the business or properties (owned, leased, or operated) of
CAS.
7.3.2. Power and Authority; Authorization. CAS has full power and authority
to enter into, execute and deliver this Agreement, and to perform each of its
obligations hereunder. The execution and delivery of this Agreement by CAS have
been duly authorized and approved by the Board of Directors of CAS subject to
all contingencies set forth herein. This Agreement has been, and each of the
Exhibits hereto and other documents required hereunder (if applicable) will be,
on the Closing Date, duly executed and delivered by or on behalf of CAS and are
the legal, valid, and binding obligations of CAS in accordance with their
respective terms, subject (as to the enforcement of remedies) to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and (as
to the availability of equitable remedies) to the discretion of the equity
tribunal having jurisdiction.
7.3.3. No Violations. The execution, delivery, and performance of this
Agreement by CAS
(i) will not violate (with or without the giving of notice or the lapse of
time, or both) or require any registration, qualification, consent, approval, or
filing under, any law, ordinance or regulation binding on CAS,
(ii) will not (a) conflict with, require any consent or approval under,
result in the breach of any provision of, constitute a default under, result in
the acceleration of the performance of its obligations under, cause or allow for
the termination of, or (b) result in the creation of any claim, lien, charge, or
encumbrance upon, its properties, assets, or businesses, pursuant to its
certificate of incorporation or by-laws, any debt instrument, mortgage, deed of
trust, license, permit, franchise, lease, contract, or other instrument or
agreement to which CAS is a party, or any judgment, order, writ or decree of any
court, arbitrator or governmental agency by which CAS or any of its assets or
properties is bound, subject to the approvals of parties to agreements listed on
Schedule 4. Neither CAS nor any of its assets or properties is subject to or
bound or affected by any article of incorporation or
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by-law provision, debt instrument, mortgage, deed of trust, license, permit,
franchise, lease, contract, other instrument or agreement, judgment, order,
writ, decree, injunction, law, statute, ordinance or regulation, or any other
restriction of any kind or character, which would prevent CAS from entering
into, or performing its obligations under, this Agreement, except for such
instruments the violation(s) of which can be cured at an aggregate immaterial
cost or expense to CAS and, with or without being cured, will not prevent CAS
from continuing its business in the ordinary course.
7.3.4. Approvals Required. Except for the approvals of lessors of property
and other parties to contracts included in the Air Freight Assets, no approval,
authorization, consent, order or other action of, or filing with, any person,
firm or corporation, or any court, administrative agency or other governmental
authority, is required in connection with the execution and delivery by CAS of
this Agreement or the performance of the transactions described herein.
7.3.5. Financial Statements. All financial statements of CAS delivered or
to be delivered prior to Closing pursuant to the terms hereof and all other
financial materials regarding the Freight Group delivered to Amertranz are
accurate and complete in all material respects and fairly present the Freight
Group's financial position as at the dates set forth therein and the results of
its operations for the periods reflected therein. All such audited financial
statements have been prepared in conformity with GAAP applied on a basis
consistent with that of prior periods. All such unaudited financial statements
have been prepared in conformity with GAAP applied on a basis consistent with
that of prior periods, except that such unaudited financial statements will not
contain footnotes, may not conform to principles of consolidation, may treat the
items set forth on Schedule 7.2.5 in a manner inconsistent with GAAP, and will
contain reasonable estimates, subject to adjustment, of accruals, deferrals, and
reserves consistent with past practices. Without limiting the generality of the
foregoing, such financial statements do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make such
financial statements not misleading. Since 1991, CAS has used the fiscal year
ending December 31 as its taxable year.
7.3.6. Compliance; Governmental Authorizations. To the knowledge of CAS,
CAS has heretofore complied with all federal, state, local or foreign laws,
ordinances, regulations and orders applicable to its business, including federal
and state securities laws.
7.3.7. Employees. Neither CAS nor any of its employees is subject to any
collective bargaining agreement, no petition for certification or union election
is pending with respect to the employees of CAS, and no union or collective
bargaining representative has sought, to the knowledge of CAS, such
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certification or recognition with respect to the employees of CAS at any time
during the past three years.
7.3.8. Investment Intent. The Holding Shares being acquired by CAS are
being acquired for investment purposes only, and not with a view to public
resale or distribution until such time as a registration statement with respect
to such shares shall be declared effective by the SEC.
7.3.9. Accuracy of Representations. All representations and warranties with
respect to CAS are true and correct as of the date hereof. This Agreement does
not contain any untrue statement of a material fact with respect to CAS or omit
to state any material fact with respect to CAS necessary to make the statements
contained herein not misleading.
8. Representations and Warranties of Amertranz and the Amertranz
Stockholders.
8.1. Amertranz represents and warrants to Trade- winds and CAS as follows:
8.1.1. Existence and Good Standing. Each of Amertranz, Amertranz Belgium,
and Amertranz Brazil, and each of their respective subsidiaries: (i) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (ii) has the corporate power and
authority to own, lease, and operate its properties and carry on its business as
now being conducted by it; and (iii) is, or has filed for qualification to be,
duly licensed, qualified and authorized to do business as a foreign corporation
in, and in good standing in, each jurisdiction in which failure to be so
licensed, qualified, authorized, or in good standing will have a material
adverse effect on the business or properties (owned, leased, or operated) of
such entity, and is not aware of any reason for which any such filing for
qualification will not be effective without cost above customary filing fees and
expenses.
8.1.2. Capitalization.
(i) Amertranz. Amertranz's authorized capital stock consists exclusively of
17,500,000 Amertranz Shares, and 2,500,000 shares of Preferred Stock, par value
$.01 per share. No shares of such Preferred Stock are issued or outstanding. All
outstanding Amertranz Shares are duly authorized, validly issued, fully paid,
nonassessable, and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Prior to the Closing, all issued and
outstanding Amertranz Shares are held of record and beneficially by the
Amertranz Stockholders in such amounts as set forth on Schedule 8.1.2(i)
attached hereto. To the knowledge of Amertranz, each of the Amertranz
Stockholders has good and marketable title to his Amertranz Shares free and
clear of any lien, claim or encumbrance.
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(ii) Amertranz Belgium. Amertranz Belgium's authorized capital stock
consists exclusively of 756 no par bearer shares. All such outstanding shares
are duly authorized, validly issued, fully paid, nonassessable, and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Prior to the Closing, all such issued and outstanding shares are held
of record and beneficially by the persons and in such amounts as set forth on
Schedule 8.1.2(ii) attached hereto. Each such person has good and marketable
title to such shares owned by him free and clear of any lien, claim or
encumbrance, except claims of Amertranz to beneficial ownership of such shares.
(iii) Amertranz Brazil. Amertranz Brazil's authorized capital stock
consists exclusively of 100,000 quotas. All such outstanding quotas are duly
authorized, validly issued, fully paid, nonassessable, and free of preemptive
rights, with no personal liability attaching to the ownership thereof. Prior to
the Closing, all such issued and outstanding quotas are held of record and
beneficially by the persons and in such amounts as set forth on Schedule
8.1.2(iii) attached hereto. Each such person has good and marketable title to
such quotas owned by him free and clear of any lien, claim or encumbrance,
except claims of Amertranz to beneficial ownership of such shares.
8.1.3. Options. Except as set forth on Schedule 8.1.3, there are no
outstanding or authorized options, warrants, calls, subscriptions, rights,
convertible securities, commitments, agreements, or understandings of any
character obligating Amertranz, Amertranz Belgium, or Amertranz Brazil, or any
of their respective subsidiaries to issue any shares of capital stock of any
class or securities convertible into, or evidencing the right to purchase, any
shares of capital stock of any class.
8.1.4. Subsidiaries. Except as set forth on Schedule 8.1.4, neither
Amertranz nor Amertranz Belgium nor Amertranz Brazil has any subsidiaries and
does not, directly or indirectly, own any interest in or control any
corporation, partnership, joint venture or other business association.
8.1.5. Charter Documents and By-laws. Copies of each of Amertranz's,
Amertranz Belgium's, and Amertranz Brazil's, and each of their respective
subsidiaries'
(i) Certificate of Incorporation, as amended to date, certified within 30
days prior to the date hereof by the Secretary of State of the state of its
incorporation,
(ii) By-laws, as amended to date, certified by its Secretary not more than
30 days prior to the date hereof, and
(iii) authorizations to do business as a foreign corporation in
jurisdictions other than its state of incorporation
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are attached hereto as Schedule 8.1.5 and are complete and correct in all
respects, are in full force and effect, and none of such entities is in
violation of any of the provisions thereof. The minute books of each such entity
are complete and accurately reflect all proceedings of its stockholders and
directors (and all committees thereof).
8.1.6. Power and Authority; Authorization. Amertranz has full power and
authority to enter into, execute and deliver this Agreement, and to perform each
of its obligations hereunder. The execution and delivery of this Agreement by
Amertranz have been duly authorized and approved by the Board of Directors of
Amertranz subject to all contingencies set forth herein. This Agreement has
been, and each of the Exhibits hereto and other documents required hereunder (if
applicable) will be, on the Closing Date, duly executed and delivered by or on
behalf of Amertranz and are the legal, valid, and binding obligations of
Amertranz in accordance with their respective terms, subject (as to the
enforcement of remedies) to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (as to the availability of equitable
remedies) to the discretion of the equity tribunal having jurisdiction.
8.1.7. No Violations. The execution, delivery, and performance of this
Agreement by Amertranz
(i) will not violate (with or without the giving of notice or the lapse of
time, or both) or require any registration, qualification, consent, approval, or
filing under, any law, ordinance or regulation binding on Amertranz,
(ii) will not (a) conflict with, require any consent or approval under,
result in the breach of any provision of, constitute a default under, result in
the acceleration of the performance of its obligations under, cause or allow for
the termination of, or (b) result in the creation of any claim, lien, charge, or
encumbrance upon, the Amertranz Shares or any of its properties, assets, or
businesses, pursuant to its or any of its subsidiaries'
certificate of incorporation or by-laws, any debt instrument, mortgage, deed of
trust, license, permit, franchise, lease, contract, or other instrument or
agreement to which Amertranz or any of its subsidiaries is a party, or any
judgment, order, writ or decree of any court, arbitrator or governmental agency
by which Amertranz, any of its subsidiaries, or any of their respective assets
or properties is bound. Neither Amertranz, nor any of its subsidiaries, nor any
of their respective assets or properties is subject to or bound or affected by
any article of incorporation or by-law provision, debt instrument, mortgage,
deed of trust, license, permit, franchise, lease, contract, other instrument or
agreement, judgment, order, writ, decree, injunction, law, statute, ordinance or
regulation, or any other restriction of any kind or character, which would
prevent Amertranz from entering into, or
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performing its obligations under, this Agreement, except for such instruments
the violation(s) of which can be cured at an aggregate immaterial cost or
expense to Amertranz and, with or without being cured, will not prevent
Amertranz from continuing its business in the ordinary course.
8.1.8. Approvals Required. Except as set forth on Schedule 8.1.8, no
approval, authorization, consent, order or other action of, or filing with, any
person, firm or corporation, or any court, administrative agency or other
governmental authority, is required in connection with the execution and
delivery by Amertranz of this Agreement or the performance of the transactions
described herein.
8.1.9. Title to Property and Related Matters. On the date hereof, each of
Amertranz, Amertranz Belgium, and Amertranz Brazil, and their respective
subsidiaries, as the case may be, has, and on the Closing Date will have, good
and marketable title to all assets and properties, real, personal and mixed,
owned by it at the date of this Agreement as reflected on the latest financial
statements referred to in Section 8.1.10 (subject to dispositions or
replacements prior to Closing in the ordinary course of business), or acquired
by it after the date of this Agreement, of any kind or character, free and clear
of any liens or encumbrances, except those set forth in Schedule 8.1.9. Except
as set forth in Schedule 8.1.9 and except for matters that may arise in the
ordinary course of business, each such entity's assets are in good operating
condition and repair, reasonable wear and tear excepted. To the best of the
knowledge of Amertranz, there does not exist any condition or agreement that
materially interferes with the use thereof in the conduct of each such entity's
business in the ordinary course.
8.1.10. Financial Statements. All financial statements of Amertranz,
Amertranz Belgium, and Amertranz Brazil delivered or to be delivered to the
Freight Group prior to the Closing pursuant to the terms hereof and all other
financial materials regarding Amertranz, Amertranz Belgium, and Amertranz Brazil
delivered to the Freight Group are accurate and complete in all material
respects and fairly present each such entity's financial position (consolidated
as to Amertranz) as at the dates set forth therein and the results of its
operations for the periods reflected therein. All such audited financial
statements of Ametranz have been prepared in conformity with GAAP applied on a
basis consistent with that of prior periods. All such unaudited financial
statements of Amertranz have been prepared in conformity with GAAP applied on a
basis consistent with that of prior periods, except that such unaudited
financial statements will not contain footnotes and will contain reasonable
estimates, subject to adjustment, of accruals, deferrals, and reserves
consistent with past practices. Without limiting the generality of the
foregoing, such financial statements do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make
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such financial statements not misleading. Amertranz has always used the fiscal
year ending June 30, as its taxable year.
8.1.11. Undisclosed Liabilities. Except as disclosed in the financial
statements referred to in Section 8.1.10, as of the dates referred to in such
financial statements neither Amertranz nor Amertranz Belgium nor Amertranz
Brazil nor any of their respective subsidiaries had any known liabilities or
obligations of any kind, whether accrued, absolute, contingent or otherwise, and
whether or not required to be disclosed on a balance sheet prepared in
conformity with GAAP, and since the date of the last such financial statement,
each of Amertranz, Amertranz Belgium, and Amertranz Brazil have incurred no such
liability or obligation other than (i) as set forth on Schedule 8.1.11, and (ii)
in the ordinary course of business and in amounts consistent with historic
business operations.
8.1.12. Accounts Receivable. All accounts receivable reflected on the "A/R
Aged Trial Balance" delivered to the Freight Group on the date hereof and dated
January 31, 1996, with an approximate total of $3,500,000, are bona fide
receivables, the full amount of which were, when recorded, actually owing to the
entity recording such receivable for goods or services delivered or rendered for
fair consideration, are not subject to any counterclaim or set-off, were
generated in the ordinary course of business, are accurately dated and are good
and collectible, less expected reserves of $150,000, in accordance with their
terms.
8.1.13. Material Adverse Change. Except as set forth in Schedule 8.1.13 or
as otherwise reflected herein, since June 30, 1995, the businesses of Amertranz,
Amertranz Belgium, and Amertranz Brazil have been operated in the ordinary
course and there has not been:
(i) To the knowledge of Amertranz, any material adverse change in the
business, condition (financial or otherwise), results of operations, prospects,
properties, assets, liabilities, earnings, net worth, or prospects thereof,
except for the general effects of present economic conditions;
(ii) To the knowledge of Amertranz, any material damage, destruction or
casualty loss (whether or not covered by insurance) affecting such entity or its
assets, properties or businesses;
(iii) Any declaration, setting aside, or payment of any dividend or other
distribution in respect of any shares of capital stock of such entity, or any
direct or indirect redemption, purchase or other acquisition of any such stock;
(iv) Any issuance or sale by such entity or any of its subsidiaries or
agreement by Amertranz or any of its subsidiaries to sell or pledge any of its
securities, nor, to
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Amertranz's knowledge, have any irrevocable proxies been given with respect to
such entity's or any of its subsidiaries' securities;
(v) To the knowledge of Amertranz, any statute, rule, regulation or order
adopted (including orders of regulatory authorities with jurisdiction over such
entity or its business) that materially and adversely affects such entity or its
business;
(vi) Any material increase in the rate of compensation or in bonus or
commission payments payable or to become payable to any of such entity's
salaried employees; provided, however, that this paragraph shall not restrict or
limit such entity in any way from hiring additional personnel who are required
for its operations; or
(vii) To the knowledge of Amertranz, any other events or conditions of any
character specifically related to the business or operations of such entity that
may reasonably be expected to have a material adverse effect on such entity or
its business or financial condition, except for the general effects of present
economic conditions.
8.1.14. Tax Matters. Other than federal, state, and local withholding and
FICA taxes in an amount not in excess of $250,000 plus penalties and interest
thereon since December 31, 1995, each of Amertranz, Amertranz Belgium, and
Amertranz Brazil has filed all foreign, federal, state and local tax or related
returns and reports due or required to be filed, which reports accurately
reflect in all material respects the amount of taxes due. Each such entity has
paid all taxes or assessments that have become due, other than taxes or charges
being contested in good faith or not yet finally determined. There are no tax
liens or governmental claims with respect to any properties owned by Amertranz,
Amertranz Belgium, or Amertranz Brazil.
8.1.15. Compliance; Governmental Authoriza- tions. To the knowledge of
Amertranz: (i) Amertranz, Amertranz Belgium, and Amertranz Brazil, and each of
its respective subsidiaries has heretofore complied with all U.S. and foreign
federal, state, local or foreign laws, ordinances, regulations and orders
applicable to its business, including without limitation, federal and state
securities laws and federal and state aviation laws that, if not complied with,
would materially and adversely affect its business; (ii) each such entity has
all federal, state, local and foreign governmental licenses and permits
necessary for the conduct of its business;and (iii) such licenses and permits
are in full force and effect. Amertranz knows of no violations of any such
licenses or permits. No proceedings are pending or, to Amertranz's knowledge,
threatened to revoke or limit the use of such licenses or permits.
8.1.16. Agreements. Schedule 8.1.16 contains a true and complete list and
brief description of all written or
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oral contracts, agreements, mortgages, obligations, understandings,
arrangements, restrictions, and other instruments to which Amertranz, Amertranz
Belgium, Amertranz Brazil, or any of their respective subsidiaries is a party or
by which any such entity or their respective assets may be bound involving
payments in any consecutive 12-month period or otherwise representing annualized
costs of $25,000 or more or representing aggregate payments of $50,000 over the
term of any such agreement or arrangement (without regard to the amount of
annualized payments or costs). True and correct copies of all items set forth on
Schedule 8.1.16 have been or will have been made available to the Freight Group
five days before the Due Diligence End Date. No event has occurred that (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default by any such entity under any of
the agreements or arrangements set forth in Schedule 8.1.16. Amertranz is not
aware of any material default by the other parties to such agreements. In
addition, no material violations have occurred pursuant to any loan agreements
to which Amertranz, Amertranz Belgium, Amertranz Brazil, is a party.
8.1.17. Litigation. Except as set forth in Schedule 8.1.17, except for
customer claims respecting cargo received in the ordinary course of business,
and except for claims of vendors the accounts of which are included in the
payables included in the latest dated financial statements referred to in
Section 8.1.10 and incurred since such date as set forth in Section 8.1.11,
there are no actions, suits, claims, investigations or legal, administrative or
arbitration proceedings pending against Amertranz, Amertranz Belgium, Amertranz
Brazil, any of their respective their respective assets or business, whether at
law or in equity, or before or by any federal, state, municipal, local, foreign
or other governmental department, commission, board, bureau, agency or
instrumentality, nor does Amertranz know of a threat of, or any basis for, any
such action, suit, claim, investigation or proceeding.
8.1.18. Shareholder Claims.
(i) Amertranz. By executing this Agreement, each of the Amertranz
Stockholders confirms that he has no claims or causes of action against
Amertranz, except for accrued salary, benefits, and other claims as set forth on
Schedule 8.1.18(i) attached hereto, and hereby releases Amertranz from any claim
or cause of action arising prior to the Closing except as set forth on such
Schedule.
(ii) Amertranz Belgium. By executing this Agreement, Amertranz Belgium
confirms that no shareholder of Amertranz Belgium has any claim or cause of
action against Amertranz Belgium, except for accrued salary and benefits as set
forth on Schedule 8.1.18(ii) attached hereto.
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(iii) Amertranz Brazil. By executing this Agreement, Amertranz Brazil
confirms that no shareholder of Amertranz Belgium has any claim or cause of
action against Amertranz Brazil, except for accrued salary and benefits as set
forth on Schedule 8.1.18(iii) attached hereto.
8.1.19. Severance Obligations. Except as set forth on Schedule 8.1.19,
neither Amertranz, nor Amertranz Belgium, nor Amertranz Brazil, nor any of their
respective subsidiaries has any obligation to past or present employees for any
severance payments or benefits.
8.1.20. ERISA. Neither Amertranz nor Amertranz Belgium, nor Amertranz
Brazil, nor any entity that together with Amertranz, Amertranz Belgium, or
Amertranz Brazil is treated as a single employer pursuant to the provisions of
ERISA, sponsors any employee benefit plan subject to the provisions of ERISA,
and none of the employees of any such entity participate in any such plan.
8.1.21. Environmental. Each of Amertranz, Amertranz Belgium, and Amertranz
Brazil has operated its business and maintained its assets (owned or leased) in
compliance with all applicable environmental laws and regulations in all
material respects.
8.1.22. Knowledge of Adverse Conditions. To the knowledge of Amertranz,
except as set forth on Schedule 8.1.13, there are no present or future
conditions, state of facts or circumstances which has affected or may in the
aggregate have a material adverse effect upon the business or prospects of
Amertranz, Amertranz Belgium or Amertranz Brazil taken as a whole.
8.1.23. Accuracy of Representations. All representations and warranties
with respect to Amertranz, its subsidiaries, and the Amertranz Stockholders are
true and correct as of the date hereof. This Agreement does not contain any
untrue statement of a material fact with respect to Amertranz, its subsidiaries,
and the Amertranz Stockholders or omit to state any material fact with respect
thereto necessary to make the statements contained herein not misleading.
8.2. Each of the Amertranz Stockholders severally represents and warrants
to Tradewinds and CAS as follows:
8.2.1. Title to Amertranz Shares or Amertranz Options. Such Amertranz
Stockholder has good and marketable title to his Amertranz Shares or Amertranz
Options free and clear of any lien, claim or encumbrance (except pursuant to the
terms of grant of such Amertranz Options).
8.2.2. Power and Authority; Authorization. This Agreement has been duly
executed and delivered by or on behalf of such Amertranz Stockholder and is the
legal, valid, and binding
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obligation of such Amertranz Stockholder in accordance with its terms, subject
(as to the enforcement of remedies) to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and (as to the availability of
equitable remedies) to the discretion of the equity tribunal having
jurisdiction.
8.2.3. No Violations. The execution, delivery, and performance of this
Agreement by such Amertranz Stockholder
(i) will not violate (with or without the giving of notice or the lapse of
time, or both) or require any registration, qualification, consent, approval, or
filing under, any law, ordinance or regulation binding on such Amertranz
Stockholder,
(ii) will not (a) conflict with, require any consent or approval under,
result in the breach of any provision of, constitute a default under, result in
the acceleration of the performance of its obligations under, cause or allow for
the termination of, or (b) result in the creation of any claim, lien, charge, or
encumbrance upon, the Amertranz Shares or Amertranz Options owned by such
Amertranz Stockholder pursuant to
any debt instrument, mortgage, deed of trust, license, permit, franchise, lease,
contract, or other instrument or agreement to which such Amertranz Stockholder
is a party, or any judgment, order, writ or decree of any court, arbitrator or
governmental agency by which such Amertranz Stockholder or any of his assets or
properties is bound. Neither such Amertranz Stockholder, nor any of his assets
or properties is subject to or bound or affected by any debt instrument,
mortgage, deed of trust, license, permit, franchise, lease, contract, other
instrument or agreement, judgment, order, writ, decree, injunction, law,
statute, ordinance or regulation, or any other restriction of any kind or
character, which would prevent such Amertranz Stockholder from entering into, or
performing his obligations under, this Agreement.
8.2.4. Approvals Required. No approval, au- thorization, consent, order or
other action of, or filing with, any person, firm or corporation, or any court,
administrative agency or other governmental authority, is required in connection
with the execution and delivery by such Amertranz Stockholder of this Agreement
or his performance of the transactions described herein.
8.2.5. Investment Intent. The Holding Shares or Holding Options being
acquired by such Amertranz Stockholder are being acquired for investment
purposes only, and not with a view to public resale or distribution until such
time as a registration statement with respect to such shares shall be declared
effective by the SEC.
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9. Freight Group Employees.
9.1. All employees of Tradewinds and CAS at their Puerto Rico, Greensboro,
North Carolina, Hartford, Connecticut, and other locations, shall become
employees of Caribbean from and after the Closing. All such employees shall
become employees of Caribbean as of the Closing Date at their then-current rates
of salary and with employee benefits similar to those currently offered by
Tradewinds or CAS.
9.2. At the Closing, Holding and Caribbean shall assume all obligations for
accrued vacation, sick days, personal days or other such benefits for all
employees of Tradewinds and CAS, as set forth on Schedule 9.2. Each of CAS and
Tradewinds shall be responsible, to the extent applicable to it, for complying
with the federal WARN statute relating to business termination, as well as any
similar state or local statute, as determined by Tradewinds and CAS. To the
extent that any ERISA obligation exists to the employees of Tradewinds or CAS,
singly or as a group, prior to the Closing Date, other than as assumed pursuant
to this Section, such liability shall continue to be the liability of Tradewinds
or CAS, as the case may be.
10. Covenants of Tradewinds and CAS.
Each of Tradewinds and CAS covenants and agrees as follows:
10.1. Other than Tradewinds' or CAS's obligations under the Freight
Handling Agreement, the CAS-D Freight Handling Agreement, under leases of
property included in the Air Freight Assets, under other assignable contracts
assigned to and assumed by Holding as part of the Air Freight Assets, and for
obligations for accrued vacation, sick days, personal days or other such
benefits for all employees of Tradewinds or CAS as of the Closing Date, all of
which are set forth on Schedule 4 and Schedule 9.2, neither Amertranz nor
Holding nor Caribbean shall assume or become liable for any debt, obligation or
liability of Tradewinds or CAS as of the Closing Date, including environmental
remediation, whether liquidated or unliquidated, absolute or contingent, and
whether or not arising out of the ordinary course of business of CAS or
Trade-winds, unless disclosed to Amertranz prior to the Closing and specifically
accepted by Holding and Caribbean in writing.
10.2. Prior to the Closing, it will hold in strict confidence and not
disclose to others (except its professional advisors and lenders), and will not
use or permit others to use, any data or information obtained from Amertranz
concerning Amertranz or its business, except to the extent such information can
be obtained from public or published information or trade sources. If the
transactions contemplated by this Agreement are not concluded, each will (i)
return to Amertranz all such data or information then held by it or its
representatives and will continue to maintain such information in strict
confidence as set
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forth above, and (ii) not disclose to any other party (except its professional
advisors and lenders who have a "need to know"), the existence of this Agreement
or any letters of intent with respect thereto. It will maintain all negotiations
and other information with respect to the transactions contemplated herein in
confidence and, except with the consent of Amertranz, will not make any
announcement thereof or disclose such negotiations to any other party other than
its professional advisors and lenders. Without limiting the foregoing,
Tradewinds and CAS hereby reaffirm the terms of the Confidentiality Agreement
entered into by the parties hereto by letter dated November 21, 1994. This
covenant shall survive termination of this Agreement.
10.3. Prior to the Closing Date, neither CAS nor Tradewinds will engage in
any practice, take or omit to take any action, or enter into any transaction
outside the ordinary course of business with respect to the Air Freight Assets.
10.4. Prior to the Closing Date, the Freight Group will continue to operate
the Air Freight Assets' Business in the ordinary course of business, and will
preserve, and enforce in the ordinary course of business, all rights with
respect to, the Air Freight Assets, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers and employees.
10.5. Prior to the Closing Date, neither Tradewinds nor CAS will authorize
any salary, bonus, or compensation increase, dividends or loans to officers,
directors, employees, or agents, other than in the ordinary course of its
business and consistent with prior practice, without the prior written consent
of Amertranz.
10.6. During the period commencing on the date hereof and ending on the
Closing Date, Tradewinds and CAS will each (i) provide Amertranz and its
representatives with full access during normal business hours to all of the
Freight Group's properties, assets, books, records, contracts, leases,
mortgages, commitments, instruments and agreements with respect to the Air
Freight Assets, (ii) provide Amertranz and its representatives with such tax,
financial and operating data and other information with respect to the Air
Freight Assets' Business as Tradewinds or CAS shall possess and which Amertranz
shall from time to time reasonably request, and (iii) permit Amertranz and its
representatives to consult with the Freight Group's representatives, officers,
attorneys, accountants, and, with the prior knowledge of the chief executive
officer of Tradewinds, suppliers and customers.
10.7. For a period of five years following the Closing, neither Tradewinds,
nor CAS, nor any person or entity controlling, controlled by, or under common
control with Tradewinds or CAS, shall, directly or indirectly, for compensation,
in competition with Caribbean, conduct any Caribbean Air Freight Business other
than the operation of aircraft between Puerto Rico and
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mainland United States; provided, that business conducted by Tradewinds
Airlines, Inc. shall be excluded from such restriction so long as Tradewinds or
its affiliates owns, directly or indirectly, less than a majority of the issued
and outstanding stock of Tradewinds Airlines, Inc. In the event any provision of
this Section is determined by a court of competent jurisdiction to be
unenforceable, the parties hereby consent to the enforcement of the provisions
of this Section to the maximum extent permitted by applicable law. The parties
recognize that the provisions of this Section are of particular importance for
the protection and promotion of their existing and future interests, and that in
the event of any breach of this Section, a claim for monetary damages may not
constitute an adequate remedy; and that it may, therefore, be necessary to
implement the provisions of this Section, in the event of a breach thereof, to
apply for specific performance thereof. It is, accordingly, hereby agreed that
no objection shall be raised to the form of the action or to the form of relief
prayed for in any proceeding for specific performance of this Section.
11. Covenants of Amertranz, Amertranz Stockholders, Holding and Caribbean.
11.1. Amertranz, the Amertranz Stockholders, Holding and Caribbean each
covenants and agrees that prior to the Closing, it will hold in strict
confidence and not disclose to others (except its professional advisors and
lenders), and will not use or permit others to use, any data or information
obtained from the Freight Group concerning the Freight Group or its business,
except to the extent such information can be obtained from public or published
information or trade sources. If the transactions contemplated by this Agreement
are not concluded, it will (i) return to the Freight Group all such data or
information then held by it or its representatives and will continue to maintain
such information in strict confidence as set forth above, and (ii) not disclose
to any other party (except its professional advisors and lenders who have a
"need to know"), the existence of this Agreement or any letters of intent with
respect thereto. It will maintain all negotiations and other information with
respect to the transactions contemplated herein in confidence and, except with
the consent of the Freight Group, will not make any announcement thereof or
disclose such negotiations to any other party other than its professional
advisors and lenders. Without limiting the foregoing, Amertranz hereby reaffirms
the terms of the Confidentiality Agreement entered into by the parties hereto by
letter dated November 21, 1994. This covenant shall survive termination of this
Agreement.
11.2. Amertranz, Holding and Caribbean each covenants and agrees as
follows:
11.2.1. Prior to the Closing, the respective Certificates of Incorporation
and By-laws of each of Holding, Caribbean, Amertranz and their respective
subsidiaries and affili-
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ated companies shall include such provisions as are necessary to implement the
corporate structures provided for in Section 14.
11.2.2. Prior to the Closing Date, each of Amertranz and its subsidiaries
will not engage in any practice, take or omit to take any action, or enter into
any transaction outside the ordinary course of business.
11.2.3. Prior to the Closing Date, each of Amertranz and its subsidiaries
will continue to operate its business and properties in the ordinary course of
business, and will preserve, and enforce, in the ordinary course of business,
all rights with respect thereto, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers and employees.
11.2.4. Prior to the Closing Date, without the prior written consent of
Tradewinds, each of Amertranz and its subsidiaries will not authorize any
salary, bonus, or compensation increase, other than in the ordinary course of
its business and consistent with prior practice, or any dividends or loans to
officers or directors.
11.2.5. During the period commencing on the date hereof and ending on the
Closing Date, Amertranz will (i) provide the Freight Group and its
representatives with full access during normal business hours to all of
Amertranz's and its subsidiaries' respective properties, assets, books, records,
contracts, leases, mortgages, commitments, instruments and agreements, (ii)
provide the Freight Group and its representatives with such tax, financial and
operating data and other information with respect to Amertranz's and its
subsidiaries' respective business and properties as the Freight Group shall from
time to time request, and (iii) permit the Freight Group and its representatives
to consult with Amertranz and its subsidiaries' respective representatives,
officers, employees, bankers, attorneys, accountants, and, with the prior
knowledge of the chief executive officer of Amertranz, suppliers, and customers.
11.2.6. Until all amounts due under the Holding Promissory Note are paid in
full, Holding shall deliver to the Freight Group: (i) within 120 days following
the end of each fiscal year of Amertranz, Holding, and Caribbean, audited
consolidated annual financial statements of Holding for such fiscal year,
prepared in accordance with GAAP applied on a consistent basis with prior
periods; (ii) within 15 days following the end of each month, unaudited monthly
interim financial statements for each such entity for the previous month,
certified by the chief financial officer of such entity, each prepared in
accordance with GAAP applied on a consistent basis with prior periods, except
that such unaudited financial statements will not contain footnotes, may not
conform to principles of consolidation, and will contain reasonable estimates,
subject to adjustment, of accruals, deferrals, and reserves consistent with past
practices; and (iii) immediately upon prepara-
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tion or receipt by any such entity, copies of all securities filings and all
underwriting letters of intent and agreements with respect to any class of
securities of Holding.
11.2.7. For a period of five years following the Closing or for so long as
any amounts remain outstanding under the Holding Promissory Note, whichever is
longer, neither Amertranz, nor any person or entity controlling, controlled by,
or under common control with Amertranz shall, directly or indirectly, conduct
any Caribbean Air Freight Business, except through and by Caribbean. It is the
intention of the parties that all Caribbean Air Freight Business of Amertranz
and any person or entity controlling, controlled by, or under common control
with Amertranz shall be conducted exclusively through Caribbean. Provided,
however, that Amertranz may continue to conduct Caribbean Air Freight Business
only for parties who are Caribbean Air Freight Business customers on the Closing
Date at current sales levels. In the event any provision of this Section is
determined by a court of competent jurisdiction to be unenforceable, the parties
hereby consent to the enforcement of the provisions of this Section to the
maximum extent permitted by applicable law. The parties recognize that the
provisions of this Section are of particular importance for the protection and
promotion of their existing and future interests, and that in the event of any
breach of this Section, a claim for monetary damages may not constitute an
adequate remedy; and that it may, therefore, be necessary to implement the
provisions of this Section, in the event of a breach thereof, to apply for
specific performance thereof. It is, accordingly, hereby agreed that no
objection shall be raised to the form of the action or to the form of relief
prayed for in any proceeding for specific performance of this Section.
11.2.8. For a period of four years following the Closing, except with the
consent of the Freight Group, all Caribbean Air Freight Business of Holding and
Caribbean shall be conducted utilizing the air transportation services of
Tradewinds Airlines, Inc. (or its successor-in-interest) in accordance with the
terms of the Freight Handling Agreement. The parties acknowledge and agree that
the Freight Group is not responsible for the actions or the failure to perform
of Tradewinds Airlines, Inc. under the Freight Handling Agreement. The parties
acknowledge and agree that the Freight Group is not responsible for the actions
or the failure to perform of CAS-D under the CAS-D Freight Handling Agreement.
11.2.9. For a period of four years following the Closing, except with the
consent of the Freight Group, neither Holding nor Caribbean, directly or
indirectly, shall terminate the Freight Handling Agreement.
11.2.10. At the Closing, Amertranz will deliver to the Freight Group an
instrument, in form and substance reasonably satisfactory to the Freight Group,
which releases each of Amertranz Belgium and Amertranz Brazil, respectively,
from all
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claims or causes of action by each stockholder of each such respective entity,
except for accrued salary and benefits as set forth on Schedule 8.1.18, arising
prior to the Closing.
11.3. Each of the Amertranz Stockholders severally covenants and agrees
that:
11.3.1. For so long as he is associated with Holding, Amertranz, or
Caribbean, and for a period of 90 days following the termination of such
association, he will not solicit the business of any party who was a customer of
Amertranz or Caribbean at any time during the 12 months preceding such
termination of association. In the event any provision of this Section is
determined by a court of competent jurisdiction to be unenforce-able, the
parties hereby consent to the enforcement of the provisions of this Section to
the maximum extent permitted by applicable law.
11.3.2. For so long as he is associated with Holding, Amertranz, or
Caribbean, and for a period of one year following the termination of such
association, he will not solicit the employment or other affiliation of any
person who was an employee, of Amertranz or Caribbean at any time during the 12
months preceding such termination of association.
11.3.3. For a period of four years following the Closing Date, no transfer,
with or without consideration, by him of any Holding Shares will be made unless
the transferee executes and delivers to the Freight Group the Holding Board
Election Proxy with respect to the transferred Holding Shares. Provided,
however, that the parties hereto agree that the transfer restrictions and
requirements set forth in this Section 11.3.3 (including restrictions and
requirements with respect to shares acquired as contemplated by Section 11.3.4)
will be removed with respect to the following transfers, provided that Holding
receives advance notice of such sale which notice shall include either the
identity of the purchaser and the terms of such sale, or, if the sale is made in
a broker's transaction (as defined in Rule 144 promulgated by the SEC under the
Securities Act), the identity of such broker:
(i) Transfers by each of Martin Hoffenberg and Philip S. Rosso, Jr., as
follows: (a) from and after the second anniversary of the Closing Date, 10% of
the Holding Shares owned by him, and (b) from and after the third anniversary of
the Closing Date, an additional 10% (20% cumulatively) of the Holding Shares
owned by him as of the Closing.
(ii) Transfers by each of David Pulk and Michael Barsa of up to 80,000
Holding Shares to an unrelated third party in a bona fide sale for the fair
value of such shares.
(iii) Transfers by each of Edward R. Reedy and Bruce Brandi of the Holding
Shares owned by him as of the
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Closing, plus additional Holding Shares as follows: (a) from and after the
second anniversary of the Closing Date, 10% of the Holding Shares owned by him,
and (b) from and after the third anniversary of the Closing Date, and additional
10% (20% cumulatively) of the Holding Shares owned by him.
11.3.4. In the event he receives or is issued any additional Holding Shares
(whether by exercise of Holding Options or otherwise) at any time prior to the
Holding Board Structure Termination Date, he will execute and deliver to the
Freight Group the Holding Board Election Proxy with respect to and as a
condition of receiving such additional Holding Shares, and the certificate(s)
representing such shares will be legended as provided in Section 11.4.
The parties recognize that the provisions of this Section are of particular
importance for the protection and promotion of their existing and future
interests, and that in the event of any breach of this Section, a claim for
monetary damages may not constitute an adequate remedy; and that it may,
therefore, be necessary to implement the provisions of this Section, in the
event of a breach thereof, to apply for specific performance thereof. It is,
accordingly, hereby agreed that no objection shall be raised to the form of the
action or to the form of relief prayed for in any proceeding for specific
performance of this Section.
11.4. At the Closing, Amertranz will deliver to the Freight Group the
Holding Board Election Proxy, duly executed by each of the Amertranz
Stockholders, David Pulk and Michael Barsa. From and after the Closing, each
certificate representing Holding Shares which are subject to the Holding Board
Election Proxy will be legended to reflect that such shares are so subject. The
parties agree to remove such legend from each certificate representing Holding
Shares which are transferred pursuant to the removal of the transfer
restrictions and requirements as set forth in Section 11.12.3.
11.5. [INTENTIONALLY OMITTED]
[THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK]
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12. Conditions Precedent to Obligations of the Freight Group.
The Freight Group's obligation to close the transac- tions pursuant to this
Agreement is contingent on the fulfillment, at or prior to the Closing Date, of
each of the following conditions to the reasonable satisfaction of the Freight
Group in the Freight Group's judgement, which judgement will not be unreasonably
exercised (except with respect to the satisfaction with the results of the
investigation under Section 12.15), any of which conditions may be waived in
writing, in whole or in part, by the Freight Group:
12.1. The representations and warranties made by or on behalf of Amertranz
or the Amertranz Stockholders contained in this Agreement or in any certificate
or document delivered by, or at the direction of, Amertranz or the Amertranz
Stockholders to the Freight Group pursuant to the provisions hereof shall be
true in all respects at and as of the time of the Closing as though such
representations and warranties were made at and as of such time.
12.2. Amertranz, the Amertranz Stockholders, Holding and Caribbean shall
have each performed and complied in all material respects with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to the Closing.
12.3. Amertranz shall have delivered to the Freight Group all of the
exhibits and schedules required herein to be delivered by Amertranz or the
Amertranz Stockholders, and copies of the documents referred to therein, each
duly executed, if required, and each such exhibit, schedule and document shall
have been reasonably acceptable to Tradewinds.
12.4. Since June 30, 1995, no material adverse change in the condition
(financial or otherwise), business, earnings or, to the knowledge of Amertranz
and the Amertranz Stockholders, prospects of Amertranz has occurred, except as
disclosed on Schedule 8.1.13.
12.5. The transactions contemplated by this Agreement shall have been duly
approved by the respective Boards of Directors and stockholders (if necessary)
of Amertranz, Holding, Caribbean, Tradewinds and CAS, as required by the laws of
their respective jurisdictions of incorporation.
12.6. Prior to the Closing, (i) all of the issued and outstanding shares of
Amertranz Belgium and Amertranz Brazil shall have been contributed to Amertranz,
free and clear of all liens and encumbrances of any kind and nature, in exchange
for Amertranz Shares, (ii) each of the stockholders of Amertranz Belgium or
Amertranz Brazil shall have agreed to be bound by all of the terms and
conditions of this Agreement with respect to the contribution of Amertranz
Shares to Holding in exchange for Holding
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Shares, and (iii) each of the stockholders of Amertranz Belgium or Amertranz
Brazil shall have agreed to be bound by all of the terms and conditions of this
Agreement with respect to corporate matters concerning Amertranz or Holding
following the Closing.
12.7. At the Closing: (i) all of the indebtedness of Amertranz, as set
forth on Schedule 12.7, which is convertible into Amertranz Shares shall have
been assigned to Holding in exchange for Holding Shares; (ii) each of the
stockholders of Holding pursuant to such exchanges shall have agreed to be bound
by all of the terms and conditions of this Agreement with respect to corporate
matters concerning Caribbean, Amertranz, or Holding following the Closing,
pursuant to the instrument in the form of Exhibit H, or, if applicable, Exhibit
M; and (iii) all the indebtedness received by Holding pursuant to such exchanges
shall be pledged to the Freight Group pursuant to the terms of the Security
Agreement. Furthermore, all outstanding indebtedness of Amertranz as reflected
on Schedule 8.1.11 will be exchanged for indebtedness of Holding on repayment
terms substantially identical to the repayment terms of the Notes included in
the Bridge Financing or such other terms as are acceptable to the Freight Group.
12.8. As of the Closing, Holding's authorized capital stock will consist of
15,000,000 shares of Common Stock, par value $.01 per share; (ii) no more than
3,502,951 Holding Shares will be issued and outstanding; (iii) all outstanding
Holding Shares will be duly authorized, validly issued, fully paid,
nonassessable, and free of preemptive rights, with no personal liability
attaching to the ownership thereof; and (iv) the record and beneficial owners of
all of the issued and outstanding Holding Shares will be as set forth on
Schedule 12.8.
12.9. As of the Closing, there will be no outstand- ing or authorized
options, warrants, calls, subscriptions, rights, convertible securities,
commitments, agreements, or understandings of any character obligating Amertranz
or Holding to issue any shares of capital stock of any class or securities
convertible into, or evidencing the right to purchase, any shares of capital
stock of any class, except for (i) options to purchase up to 250,000 Holding
Shares at the IPO Price pursuant to Holding's Employee Stock Option Plan, (ii)
options or warrants to purchase up to 840,000 Holding Shares at the IPO Price
and callable by Holding at $10.00 per option/warrant, granted to the Bridge
Lender, and (iii) options or warrants to purchase up to 817,049 Holding Shares
exercisable by such persons on such terms as set forth on Schedule 12.9,
including certain Holding Options granted in exchange for the surrender of
certain Amertranz Options.
12.10. The Bridge Financing shall have closed on or before the Closing
Date.
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12.11. The Bridge Lender shall have subordinated the obligations due under
the Bridge Financing in the manner attached hereto as Exhibit I.
12.12. The Freight Group shall have received a cer- tificate signed by the
chief executive officer of Amertranz and dated the Closing Date, to the effect
that the conditions specified in Sections 12.1 through 12.11 inclusive (other
than the approval of the respective Boards of Directors of Tradewinds and CAS)
have been fulfilled.
12.13. The terms of each employment agreement to which Amertranz, any of
its subsidiaries, Amertranz Belgium or Amertranz Brazil is a party shall be
approved by the Freight Group.
12.14. The Freight Group shall have obtained the consent of all required
governmental bodies and all third parties as required for the conclusion of the
transactions contemplated by this Agreement, including approval of third parties
under leases of property included in the Air Freight Assets and under other
assignable contracts assigned to and assumed by Holding or Caribbean as part of
the Air Freight Assets. In addition, Tradewinds, CAS and their respective
shareholders shall be released by such third parties from all liability, if any,
for obligations under leases of property included in the Air Freight Assets and
under other assignable contracts assigned to and assumed by Holding as part of
the Air Freight Assets, other than obligations which accrued prior to the
Closing Date.
12.15. Amertranz shall have obtained the consent of all third parties
required for the conclusion of the transactions contemplated by this Agreement,
as set forth on Schedule 8.1.8.
12.16. The Freight Group shall have completed a due diligence investigation
and review of the assets, liabilities, properties, management, material
contracts, arrangements, prospects, financial statements, financial outlook,
capitalization, trade reputation, licenses and goodwill of Amertranz;
notwithstanding the introductory language to this Section 12, the results of
such investigation must be satisfactory to the Freight Group in their exclusive
discretion. Provided, however, that the due diligence condition precedent
contained in this Section shall be deemed satisfied on the Due Diligence End
Date unless the Freight Group notifies Amertranz by the Due Diligence End Date
that the Freight Group is not satisfied with the results of such due diligence
investigation.
12.17. The Freight Group shall have received the following:
12.17.1. With respect to each of Amertranz, Amertranz Belgium, and
Amertranz Brazil, a certificate from the Secretary of State (or similar office)
of such entity's jurisdiction of incorporation, dated at or about the Closing
Date, to the
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effect that such entity is in good standing under the laws of said jurisdiction.
12.17.2. An incumbency certificate for Amertranz signed by all of the
officers thereof dated at or about the Closing Date.
12.17.3. With respect to each of Amertranz, Amertranz Belgium, and
Amertranz Brazil, a certified Certificate of Incorporation (or similar
instrument), as amended to date, dated at or about the Closing Date, and a copy
of its By-laws certified by the Secretary of such entity dated at or about the
Closing Date.
12.17.4. Resolutions of the Board of Directors and stockholders of
Amertranz, certified by the Secretary of Amertranz dated at or about the Closing
Date, authorizing the transactions contemplated under this Agreement.
12.17.5. No later than five days before the Due Diligence End Date,
Amertranz's: (i) audited financial statements for the fiscal year ended June 30,
1994 and June 30, 1995; (ii) unaudited monthly interim financial statements for
the periods July 1, 1995 through the last day of the month ending more than 15
days prior to the Closing Date, each certified by the chief financial officer of
Amertranz and each prepared in accordance with GAAP applied on a consistent
basis with prior periods, except that such unaudited financial statements will
not contain footnotes and will contain reasonable estimates, subject to
adjustment, of accruals, deferrals, and reserves consistent with past practices;
and (iii) unaudited annual financial statements for the years ending June 30,
1991, June 30, 1992 and June 30, 1993, certified by the chief financial officer
of Amertranz, each prepared in accordance with GAAP applied on a consistent
basis with prior periods, except that such unaudited financial statements will
not contain footnotes and will contain reasonable estimates, subject to
adjustment, of accruals, deferrals, and reserves consistent with past practices.
12.17.6. An opinion of Amertranz's counsel, dated the Closing Date, in the
form attached hereto as Exhibit J.
12.17.7. Information as of the Closing Date concerning Amertranz Belgium as
set forth on Exhibit K.
12.17.8. Information as of the Closing Date concerning Amertranz Brazil as
set forth on Exhibit L.
12.17.9. All other instruments, documents and certificates as are required
to be delivered by or on behalf of Amertranz or the Amertranz Stockholders
pursuant to the provisions of this Agreement or that may be reasonably requested
in furtherance of the provisions of this Agreement.
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13. Conditions Precedent to Obligations of Amertranz and the Amertranz
Stockholders.
Amertranz's and the Amertranz Stockholders' obligations to close the
transactions pursuant to this Agreement is contingent on the fulfillment, at or
prior to the Closing Date, of each of the following conditions to the reasonable
satisfaction of Amertranz in Amertranz's judgement, which judgement will not be
unreasonably exercised (except with respect to the satisfaction with the results
of the investigation under Section 13.9), any of which conditions may be waived
in writing, in whole or in part, by Amertranz:
13.1. The representations and warranties by Tradewinds and CAS contained in
this Agreement or in any certificate or document delivered by, or at the
direction of the Freight Group to Amertranz pursuant to the provisions hereof
shall be true in all respects at and as of the time of the Closing as though
such representations and warranties were made at and as of such time.
13.2. The Freight Group shall have performed and complied in all material
respects with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to the Closing.
13.3. The Freight Group shall have delivered to Amertranz all of the
exhibits and schedules required herein to be delivered by the Freight Group, and
copies of the documents referred to therein, each duly executed, if required,
and such exhibits, schedules and documents shall have been reasonably acceptable
to Amertranz.
13.4. Since March 31, 1995, no material adverse change in the condition
(financial or otherwise), business, earnings or, to the knowledge of the Freight
Group, prospects of the Air Freight Assets' Business has occurred.
13.5. The transactions contemplated by this Agreement shall have been duly
approved by the respective Boards of Directors and stockholders (if necessary)
of Amertranz, Holding, Caribbean, Tradewinds and CAS, as required by the laws of
their respective jurisdictions of incorporation.
13.6. Amertranz shall have received a certificate signed by the Executive
Vice President of each of Tradewinds, and CAS and dated the Closing Date, to the
effect that (i) the conditions specified in Sections 13.1 through 13.5 inclusive
(other than the approval of the respective Boards of Directors of Amertranz,
Holding, and Caribbean) have been fulfilled.
13.7. Caribbean shall have entered into an employ- ment agreement with
Richard Faieta on such terms as shall be approved by Amertranz.
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13.8. The Freight Group shall have obtained the consent of all required
governmental bodies and all third parties as required for the conclusion of the
transactions contemplated by this Agreement, including approval of third parties
under leases of property included in the Air Freight Assets and under other
assignable contracts assigned to and assumed by Holding or Caribbean as part of
the Air Freight Assets.
13.9. Amertranz shall have completed a due diligence investigation and
review of the assets, liabilities, properties, management, material contracts,
arrangements, prospects, financial statements, financial outlook,
capitalization, trade reputation, licenses and goodwill of the Air Freight
Assets' Business; notwithstanding the introductory language to this Section 13,
the results of such investigation must be satisfactory to Amertranz in its
exclusive discretion. Provided, however, that the due diligence condition
precedent contained in this Section shall be deemed satisfied on the Due
Diligence End Date unless Amertranz notifies the Freight Group by the Due
Diligence End Date that Amertranz is not satisfied with the results of such due
diligence investigation.
13.10. Amertranz shall have received the following:
13.10.1. Certificates from the Secretary of State of CAS' and Tradewinds'
respective jurisdictions of incorporation, dated at or about the Closing Date,
to the effect that it is in good standing under the laws of said state.
13.10.2. An incumbency certificate for each of Tradewinds and CAS signed by
all of the respective officers thereof dated at or about the Closing Date.
13.10.3. A certified Certificate of Incorpora- tion of each of Tradewinds,
and CAS, as amended to date, dated at or about the Closing Date, and a copy of
the By-laws of each such entity certified by the Secretary thereof dated at or
about the Closing Date.
13.10.4. Resolutions of the Board of Directors and stockholders of
Tradewinds and CAS, certified by the Secretary of each such entity dated at or
about the Closing Date, authorizing the transactions contemplated under this
Agreement.
13.10.5. No later than the Due Diligence End Date, each of Tradewinds' and
CAS's (i) audited financial statements for its fiscal years ended December 31,
1992, 1993, and 1994; and (ii) unaudited financial statements for its most
recent interim period, each prepared in accordance with GAAP applied on a
consistent basis with prior periods, except that such unaudited financial
statements will not contain footnotes, may not conform to principles of
consolidation, may treat the items set forth on Schedule 7.2.5 in a manner
inconsistent with GAAP, and will contain reasonable estimates, subject to
adjustment, of accruals, defer-
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rals, and reserves consistent with past practices, certified by its chief
financial officer.
13.10.6. An opinion of the Freight Group's counsel, dated the Closing Date,
in the form attached hereto as Exhibit M.
13.10.7. All other instruments, documents and certificates as are required
to be delivered by or on behalf of the Freight Group pursuant to the provisions
of this Agreement or that may be reasonably requested in furtherance of the
provisions of this Agreement.
14. Amertranz, Holding, and Caribbean Corporate Matters Following Closing.
From and after the Closing, except as otherwise consented to in writing by
Tradewinds, CAS, and Holding neither Caribbean nor Holding nor Amertranz will
take any action which will result in non-compliance with one or more of the
following:
14.1. Holding Capitalization. (i) Holding's autho- rized capital stock will
consist of 15,000,000 shares of Common Stock, par value $.01 per share; (ii) no
more than 3,502,951 Holding Shares will be issued and outstanding; and (iii) all
outstanding Holding Shares will be duly authorized, validly issued, fully paid,
nonassessable, and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
14.2. Caribbean Capitalization. (i) Caribbean's authorized capital stock
will consist of 100 shares of Common Stock, par value $.01 per share; (ii) all
outstanding shares of Caribbean will be duly authorized, validly issued, fully
paid, nonassessable, and free of preemptive rights, with no personal liability
attaching to the ownership thereof; and (iii) Holding will be the record and
beneficial owner of all of the issued and outstanding shares of Caribbean.
14.3. Amertranz Capitalization. (i) Amertranz's authorized capital stock
will consist of 17,500,000 shares of Common Stock, par value $.01 per share, and
2,500,000 shares of Preferred Stock, par value $.01 per share; (ii) no shares of
such Preferred Stock will be issued or outstanding; (iii) all outstanding
Amertranz Shares will be duly authorized, validly issued, fully paid,
nonassessable, and free of preemptive rights, with no personal liability
attaching to the ownership thereof; and (iv) Holding will be the record and
beneficial owner of all of the issued and outstanding Amertranz Shares.
14.4. Holding Options. There will be no outstand- ing or authorized
options, warrants, calls, subscriptions, rights, convertible securities,
commitments, agreements, or understandings of any character obligating Holding
to issue any shares of capital stock of any class or securities convertible
into, or evidencing
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the right to purchase, any shares of capital stock of any class, except for (i)
options to purchase up to 250,000 Holding Shares at the IPO Price pursuant to
Holding's Employee Stock Option Plan, (ii) options or warrants granted to the
Bridge Lender to purchase up to 840,000 Holding Shares at the IPO Price and
callable by Holding at $10.00 per option/warrant, and (iii) options or warrants
to purchase up to 817,049 Holding Shares exercisable by such persons on such
terms as set forth on Schedule 12.9.
14.5. Caribbean Options. There will be no out- standing or authorized
options, warrants, calls, subscriptions, rights, convertible securities,
commitments, agreements, or understandings of any character obligating Caribbean
to issue any shares of capital stock of any class or securities convertible
into, or evidencing the right to purchase, any shares of capital stock of any
class.
14.6. Amertranz Options. There will be no outstanding or authorized
options, warrants, calls, subscriptions, rights, convertible securities,
commitments, agreements, or understandings of any character obligating Amertranz
to issue any shares of capital stock of any class or securities convertible
into, or evidencing the right to purchase, any shares of capital stock of any
class.
14.7. Holding Subsidiaries. Holding will not have any subsidiaries and will
not, directly or indirectly, own any interest in or control any corporation,
partnership, joint venture or other business association, except (i) 100%
ownership of Amertranz, (ii) 100% ownership of Caribbean, (iii) 100% beneficial
ownership of Amertranz Brazil, and (iv) 100% beneficial ownership of Amertranz
Belgium.
14.8. Caribbean Subsidiaries. Caribbean will not have any subsidiaries and
will not, directly or indirectly, own any interest in or control any
corporation, partnership, joint venture or other business association.
14.9. Amertranz Subsidiaries. Amertranz will not have any subsidiaries and
will not, directly or indirectly, own any interest in or control any
corporation, partnership, joint venture or other business association, except as
set forth on Schedule 8.1.4.
14.10. Holding's and Subsidiaries' Boards Struc- ture.
14.10.1. From and after the Closing until the Holding Board Control
Termination Date, the Board of Directors of Holding shall be comprised initially
of three persons, two of whom shall be Holding Freight Group Directors. The
number of Directors may be increased or decreased by the unanimous agreement of
the Board, provided that the ratio of Holding Freight Group Directors to Holding
Directors shall remain at least 2:3.
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14.10.2. From and after the Holding Board Control Termination Date and
until the Holding Board Structure Termination Date, the respective Boards of
Directors of Holding and each of its subsidiaries shall include at least one
director designated by the Freight Group. By executing this Agreement, Holding
hereby designates Richard A. Swirnow and Stuart Hettleman, and each of them, as
proxies, each with full power of substitution, to vote all shares of each
subsidiary of Holding in accordance with this Section.
14.10.3. [INTENTIONALLY OMITTED]
14.10.4. Subject to the provisions of Section 14.10.2, all Directors of
each Holding subsidiary shall be selected by Holding's Board of Directors.
14.10.5. All Directors of Holding and its subsidiaries shall be entitled to
indemnification from Holding or its subsidiaries, as the case may be, to the
maximum extent permitted by the General Corporation Law of the State of
Delaware.
14.10.6. From and after the Closing, the By- laws and, if necessary, the
Certificate of Incorporation of Holding (and its subsidiaries, if applicable)
shall provide for the structure set forth in this Section.
14.11. Amertranz and Caribbean Executive Manage- ment; Holding, Amertranz
and Caribbean Officers. From and after the Closing and until the Holding Board
Control Termination Date, (i) the Executive Management of each of Amertranz and
Caribbean shall be vested with full authority for day-to-day operations of such
entity, respectively, in the ordinary course of its business, subject to the
authority of its Board of Directors, (ii) the Executive Vice President of each
such entity shall be selected by the holders of the Freight Group and such
entity shall cause the person so selected to be elected as Executive Vice
President, and (iii) no action of the Executive Management of each such
respective entity shall be taken without the concurrence of such entity's
Executive Vice President or its Board of Directors. All officers and employees
of Amertranz, Holding and Caribbean, respectively, and their respective
subsidiaries, shall be entitled to indemnification from the respective entities,
as the case may be, to the maximum extent permitted by the General Corporation
Law of the State of Delaware. From and after the Closing, the By-laws of each
such entity shall provide for the structure set forth in this Section.
15. Public Offering of Holding Shares.
15.1. It is contemplated by the parties that Holding will effect an initial
public offering of Holding Shares in accordance with the terms of the
Underwriter's Letter of Intent.
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15.2. At the time of such public offering, Holding, and all shareholders of
Holding will take all actions necessary to amend its Certificate of
Incorporation and By-laws and other documents relating thereto to restructure
the classes of Holding Shares to the extent deemed reasonably necessary by the
underwriter of such offering to better effect such offering. Provided, however,
that the structures of the respective Boards of Directors of Holding and each of
its subsidiaries as set forth in Section 14.10, shall be preserved following any
such restructure.
16. Indemnification.
16.1. Indemnification by Tradewinds and CAS. Tradewinds and CAS hereby
agree to jointly and severally indemnify and hold harmless Amertranz, its
shareholders, directors, officers, agents and employees, from and against any
and all Losses (as hereinafter defined) up to a maximum aggregate of $2,000,000
of such Losses, to the extent such Losses arise out of, result from, or are in
connection with: (i) any breach by the Freight Group of any of the terms of this
Agreement, (ii) any failure of any warranty or representation of the Freight
Group made herein, (iii) any failure by the Freight Group to perform or comply
with any of their covenants or obligations under this Agreement, (iv) the
conduct of the Air Freight Assets' Business prior to the Closing Date, or (v)
the liabilities and obligations of the Freight Group other than the liabilities
and obligations assumed by Amertranz, Holding, or Caribbean hereunder.
16.2. Indemnification by Amertranz. Amertranz and, following the Closing,
Holding and Caribbean hereby agree to jointly and severally indemnify and hold
harmless Tradewinds and CAS, their respective shareholders, directors, officers,
agents and employees, from and against any and all Losses, to the extent such
Losses arise out of, result from, or are in connection with: (i) any breach by
Amertranz or the Amertranz Stockholders of any of the terms of this Agreement,
(ii) any failure of any warranty or representation of Amertranz or the Amertranz
Stockholders made herein, (iii) any failure by Amertranz, the Amertranz
Stockholders or, following the Closing, Holding or Caribbean to perform or
comply with any of its covenants or obligations under this Agreement except for
actions or omissions by Amertranz, Holding, or Caribbean controlled by the
Freight Group, or (iv) the liabilities and obligations of the Freight Group
assumed by Amertranz, Holding, or Caribbean hereunder.
16.3. For purposes of this Agreement, "Losses" shall mean the aggregate of
any and all payments for claims, liabilities, suits, actions, demands, charges,
damages, losses, costs, or expenses (including reasonable attorneys' fees,
expert witness fees and court costs) of every kind and nature if and to the
extent that the cumulative amount thereof exceeds $50,000, incurred by the
indemnified party, net of all reserves with respect to such item, tax benefits,
insurance proceeds and any indemnity, contribution or other similar payment from
third parties. Tax
- 41 -
<PAGE>
benefits will be considered to be realized for purposes of this Section in the
year in which an indemnity payment occurs, taking into account the present value
of any such tax benefits, and the amount of tax benefits shall be determined by
assuming the person entitled to be indemnified is in the maximum applicable
foreign, federal, state and local income tax bracket. Indemnification shall only
be available to any indemnified party to the extent its Losses exceed $50,000 in
the aggregate.
16.4. If any claim is made, or any suit or proceeding is instituted, which,
if valid or prosecuted successfully would entitle a party to indemnification
under this Section (a "Claim"), the indemnified party shall promptly give notice
thereof to the others in writing. At the election of the indemnifying party, the
indemnifying party shall, at its own cost and expense, assume the defense of
such Claim or participate either directly or through their counsel with the
indemnified party in the resolution, by litigation or otherwise, of any Claim.
The indemnified party agrees to cooperate (and to cause parties within its
control to cooperate) with the indemnifying party in determining the validity of
any Claim or assertion of any Losses including giving (and causing parties
within its control to give) the indemnifying party full access to information
within its possession. The indemnified party agrees that it will not (and will
cause parties within its control not to) settle any Claim without the prior
written consent of the indemnifying party and to exercise its best efforts to
avoid or minimize the Losses resulting from any Claim.
17. No Brokerage.
Except as hereinafter provided, none of the parties hereto has incurred any
obligation or liability, contingent or otherwise, for brokerage fees, finder's
fees, agent's commissions, or the like in connection with this Agreement or the
transactions contemplated hereby. Amertranz has incurred an obligation for a
brokerage fee or finder's fee, and such fee has been paid in full by the
issuance of Holding Options as reflected on Schedule 12.9, and other than with
respect to such fee, each party hereto agrees to indemnify and hold the other
party hereto harmless against and in respect of any such obligation or liability
based on agreements, arrangements, or understandings claimed to have been made
by such party with any third party.
18. Nature of Representations and Warranties.
All of the parties hereto are executing and carrying out the provisions of
this Agreement in reliance on the representations, warranties, covenants and
agreements contained in this Agreement or at the closing of the transactions
contemplated hereunder, and any investigation that they might have made or any
other representations, warranties, covenants, agreements, promises or
information, written or oral, made by the other party or any other person shall
not be deemed a waiver of any breach of any such representation, warranty,
covenant or agreement.
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<PAGE>
19. Binding Agreement; Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. This Agreement shall
not be assignable by any party hereto except as provided herein or with the
prior written consent of the other parties.
20. Further Assurances.
20.1. Each of the parties hereto agrees to execute, acknowledge, seal and
deliver, after the date hereof and after the Closing, such further assurances,
instruments and documents and to take such further actions as the other may
reasonably request in order to fulfill the intent of this Agreement and the
transactions contemplated hereby.
20.2. The parties agree that before, on, or after the Closing Date, each
will take all actions reasonably necessary or required so that the transactions
contemplated by this Agreement be accomplished in a tax-free exchange under
Section 351 of the Internal Revenue Code of 1986, as amended, as if originally
so accomplished. The parties intend that, in the event the transactions
contemplated by this Agreement cannot be so accomplished despite all such
reasonable efforts, the transactions contemplated by this Agreement will not be
amended.
21. Notices.
All notices, writings and other communications required or permitted to be
given pursuant to this Agreement shall be in writing, and if such notices are
hand-delivered or faxed, return fax acknowledgement requested, to the address
set forth below, they shall be deemed to have been received on the business day
so delivered or transmitted; if such notices are transmitted by overnight
courier, to the address set forth below, they shall be deemed to have been
received on the business day following the date on which so transmitted,
provided that any notice, writing or other communication received after 5:00
p.m., Eastern Time, shall be deemed to have been received on the next business
day:
Amertranz: Amertranz Worldwide, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Fax (516) 326-2248
Attn: Chairman
With a copy to: David I. Ferber, Esquire
Ferber Greilsheimer Chan & Essner
530 Fifth Avenue
New York, New York 10036
Fax (212) 944-7630
- 43 -
<PAGE>
Freight Group: TIA, Inc.
112 East 25th Street
Baltimore, Maryland 21218
Attn: Richard Swirnow, Chairman
Stuart Hettleman, VP
Fax (410) 338-1105
With a copy to: Zelig Robinson, Esquire
Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Fax (410) 576-4167
Holding and Caribbean: By transmittal to Amertranz and
the Freight Group
Messrs. Barsa, Pulk, and
Reedy (included in the
Amertranz Stockholders): c/o Jonathan S. Bristol, Esquire
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, New Jersey 07962
Fax (201) 966-1550
Any party may change its address for notice purposes by giving notice the other
parties as hereinabove provided.
22. Expenses.
22.1. Holding shall reimburse Amertranz and the Freight Group for their
respective legal, accounting and other expenses in connection with the
negotiation, due diligence, and closing of this Agreement and the transactions
contemplated hereby.
22.2. Amertranz shall pay all documentary stamp and transfer or sales
taxes, if any, and other fees arising from the purchase of the Air Freight
Assets. The Freight Group shall pay all income taxes and other taxes based on
its taxable income which may be required as a result of the transactions
contemplated hereby.
23. Survival.
Except as otherwise provided herein, the representa- tions, warranties,
covenants and agreements herein contained shall survive the execution, and
delivery of this Agreement and the closing of the transactions contemplated
hereby, and shall continue for a period of two years following the Closing Date,
except for breaches of the representations and warranties set forth in Sections
7.1.5, 7.1.8, 8.1.14, and 8.1.21, which shall survive until the expiration of
all applicable statutes of limitation with respect thereto.
- 44 -
<PAGE>
24. Termination of Agreement.
In the event the Closing does not take place on the Closing Date, the
obligations of the parties hereto to proceed to Closing will terminate.
25. Effect of Waiver.
The failure of any party at any time or times to re- quire performance of
any provision of this Agreement will in no manner affect the right to enforce
the same. The waiver by any party of any breach of any provision of this
Agreement will not be construed to be a waiver by any such party of any
succeeding breach of that provision or a waiver by such party of any breach of
any other provision.
26. Severability.
The invalidity, illegality or unenforceability of any provision or
provisions of this Agreement will not affect any other provision of this
Agreement, which will remain in full force and effect, nor will the invalidity,
illegality or unenforceability of a portion of any provision of this Agreement
affect the balance of such provision. In the event that any one or more of the
provisions contained in this Agreement or any portion thereof shall for any
reason be held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be reformed, construed and enforced as if such invalid, illegal
or unenforceable provision had never been contained herein.
27. Enforcement.
Any suit, action or proceeding with respect to this Agreement shall be
brought in the courts of Baltimore City or Baltimore County in the State of
Maryland or in the U.S. District Court for the District of Maryland. The parties
hereto hereby accept the exclusive jurisdiction of those courts, as set forth
above, for the purpose of any such suit, action or proceeding.
The parties hereto hereby irrevocably waive, to the fullest extent
permitted by law, any objection that any of them may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Agreement or any judgment entered by any court in respect thereof
brought as set forth above, and hereby further irrevocably waive any claim that
any suit, action or proceeding so brought, has been brought in an inconvenient
forum.
The parties hereto acknowledge and agree that any party's remedy at law for
a breach or threatened breach of any of the provisions of this Agreement would
be inadequate and such breach or threatened breach shall be per se deemed as
causing irreparable harm to such party. Therefore, in the event of such breach
or threatened breach, the parties hereto agree that, in
- 45 -
<PAGE>
addition to any available remedy at law, including but not limited to monetary
damages, an aggrieved party, without posting any bond, shall be entitled to
obtain, and the offending party agrees not to oppose the aggrieved party's
request for, equitable relief in the form of specific enforcement, temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy that may then be available to the aggrieved party.
28. Counterparts.
28.1. This Agreement may be executed in counter- parts, all of which taken
together shall constitute one instrument.
28.2. In lieu of executing this Agreement, one or more of the Amertranz
Stockholders may execute an instrument in the form attached hereto as Exhibit N,
pursuant to which each such Amertranz Stockholder agrees to be bound by the
terms of this Agreement with the same force and effect as if he executed this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
AMERTRANZ:
AMERTRANZ WORLDWIDE, INC.
By: _________/s/_______________
Name: Bruce Brandi
Its: President
TRADEWINDS:
TIA, INC.
By:___________/s/_____________
Name: Stuart Hettleman
Its: Executive Vice President
CAS
CARIBBEAN FREIGHT SYSTEMS, INC.
By:__________/s/______________
Name: Stuart Hettleman
Its: Executive Vice President
HOLDING:
AMERTRANZ WORLDWIDE HOLDING CORP.
By: _________/s/_______________
Name: Michael Barsa
Its: Vice President
- 46 -
<PAGE>
CARIBBEAN:
CARIBBEAN AIR SERVICES, INC.
By: _________/s/_______________
Name: Michael Barsa
Its: Vice President
The undersigned join in the execution of this Agreement for the purposes
stated hereinabove.
AMERTRANZ BELGIUM:
AMERTRANZ WORLDWIDE, a private
limited company
By: _________/s/_______________
Name: Michael Barsa
Its: Vice President
AMERTRANZ BRAZIL:
AMERTRANZ do BRASIL LTDA
By: _________/s/_______________
Name: David R. Pulk
Its: Quota Holder
C59727H.198
- 47 -
<PAGE>
ASSETS EXCHANGE AGREEMENT
AMERTRANZ STOCKHOLDER
COUNTERPART SIGNATURE PAGE
THE UNDERSIGNED AMERTRANZ STOCKHOLDER has executed this
Agreement to be effective as of the day and year first above written.
_____________/s/________________
Name: David R. Pulk
<PAGE>
ASSETS EXCHANGE AGREEMENT
AMERTRANZ STOCKHOLDER
COUNTERPART SIGNATURE PAGE
THE UNDERSIGNED AMERTRANZ STOCKHOLDER has executed this
Agreement to be effective as of the day and year first above written.
_____________/s/________________
Name: Bruce Brandi
<PAGE>
ASSETS EXCHANGE AGREEMENT
AMERTRANZ STOCKHOLDER
COUNTERPART SIGNATURE PAGE
THE UNDERSIGNED AMERTRANZ STOCKHOLDER has executed this
Agreement to be effective as of the day and year first above written.
_____________/s/________________
Name: Martin Hoffenberg
<PAGE>
ASSETS EXCHANGE AGREEMENT
AMERTRANZ STOCKHOLDER
COUNTERPART SIGNATURE PAGE
THE UNDERSIGNED AMERTRANZ STOCKHOLDER has executed this
Agreement to be effective as of the day and year first above written.
_____________/s/________________
Name: Philip S. Rosso, Jr.
<PAGE>
ASSETS EXCHANGE AGREEMENT
AMERTRANZ STOCKHOLDER
COUNTERPART SIGNATURE PAGE
THE UNDERSIGNED AMERTRANZ STOCKHOLDER has executed this
Agreement to be effective as of the day and year first above written.
_____________/s/________________
Name: Michael Barsa
<PAGE>
ASSETS EXCHANGE AGREEMENT
AMERTRANZ STOCKHOLDER
COUNTERPART SIGNATURE PAGE
THE UNDERSIGNED AMERTRANZ STOCKHOLDER has executed this
Agreement to be effective as of the day and year first above written.
_____________/s/________________
Name: Edward R. Reedy
<PAGE>
ASSETS EXCHANGE AGREEMENT
INDEX OF SCHEDULES AND EXHIBITS
Schedule of Amertranz Stockholders and Option Holders
Schedule
1.1 - Air Freight Assets
2.1(i) - Proportions of Distribution of Holding Shares to Amertranz
Stockholders
4 - Assumed Obligations
7.1.2 - Exceptions to Title to Air Freight Assets
7.1.3 - Description of "Tradewinds" mark ownership
7.1.4 - Material Adverse Changes to Air Freight Assets
7.1.6 - Freight Group Agreements
7.1.9 - Freight Group Litigation
7.2.5 - Freight Group Transactions Excepted from GAAP
8.1.2(i) - Amertranz Stockholders' Amertranz Ownership
8.1.2(ii) - Amertranz Belgium Ownership
8.1.2(iii) - Amertranz Brazil Ownership
8.1.3 - Amertranz, Amertranz Belgium, Amertranz Brazil Options
8.1.4 - Amertranz, Amertranz Belgium, Amertranz Brazil Subsidiaries
8.1.5 - Amertranz, Amertranz Belgium, Amertranz Brazil Corporate
Documents
8.1.8 - Amertranz Approvals
8.1.9 - Exceptions to Title to Amertranz's Assets
8.1.11 - Post-Financial Statement Date Amertranz Liabilities
8.1.13 - Material Adverse Changes to Amertranz
8.1.16 - Amertranz Agreements
8.1.17 - Amertranz Litigation
8.1.18(i) - Accrued Salaries and Benefits to Amertranz Stockholders
8.1.18(ii) - Accrued Salaries and Benefits to Amertranz Belgium stockhold-
ers
8.1.18(iii) - Accrued Salaries and Benefits to Amertranz Brazil stockholders
8.1.19 - Severance Obligations of Amertranz, Amertranz Belgium, and
Amertranz Brazil
9.2 - Accrued Employee Freight Group Obligations
12.7 - Convertible and Exchanged Amertranz Indebtedness
12.8 - Closing Holding Shares' Ownership
12.9 - Other options to Purchase Holding Shares
Exhibit
A - Guarantee Agreement
B - Net Cash Receipts Note
C - Holding Board Election Proxy
D - Holding Promissory Note
E - Security Agreement
F - Stock Pledge Agreement
G - Underwriter's Letter of Intent
H - Assets Exchange Agreement Assumption Concerning Corporate
Matters
I - Subordination of Bridge Lender
J - Amertranz's Counsel's Opinion
K - Amertranz Belgium Information
L - Amertranz Brazil Information
M - Freight Group's Counsel's Opinion
N - Amertranz Stockholder Sign-On Agreement
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE OF AMERTRANZ STOCKHOLDERS AND OPTION HOLDERS
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 1.1
AIR FREIGHT ASSETS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 2.1(i)
PROPORTIONS OF DISTRIBUTION OF HOLDING
SHARES TO AMERTRANZ STOCKHOLDERS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 4
ASSUMED OBLIGATIONS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 7.1.2
EXCEPTIONS TO TITLE TO AIR FREIGHT ASSETS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
SCHEDULE 7.1.2
EXCEPTIONS TO TITLE TO AIR FREIGHT ASSETS
1. Lien of Harborview Corporation Ltd. I on all of the assets of
Tradewinds.
2. Lien of Wrexham Aviation Corporation on all of the assets of
Tradewinds.
3. Lien of Tradewinds on all of the assets of CAS.
All of the above liens have been released with respect to the Freight Group
Assets.
4. North Carolina Secretary of State and Guilford County, North Carolina
informational filings with respect to the lease by Tradewinds of two
Nissan forklifts from Western Carolina Forklift, assigned to Associates
Leasing, Inc.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 7.1.3
DESCRIPTION OF "TRADEWINDS" MARK OWNERSHIP
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 7.1.4
MATERIAL ADVERSE CHANGES TO AIR FREIGHT ASSETS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
SCHEDULE 7.1.4
MATERIAL ADVERSE CHANGES TO AIR FREIGHT ASSETS
None.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 7.1.6
FREIGHT GROUP AGREEMENTS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 7.1.9
FREIGHT GROUP LITIGATION
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 7.2.5
FREIGHT GROUP TRANSACTIONS EXCEPTED FROM GAAP
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.2(i)
AMERTRANZ STOCKHOLDERS' AMERTRANZ OWNERSHIP
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.2(ii)
AMERTRANZ BELGIUM OWNERSHIP
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.2(iii)
AMERTRANZ BRAZIL OWNERSHIP
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.3
AMERTRANZ, AMERTRANZ BELGIUM, AMERTRANZ BRAZIL OPTIONS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.4
AMERTRANZ, AMERTRANZ BELGIUM, AMERTRANZ BRAZIL SUBSIDIARIES
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.5
AMERTRANZ, AMERTRANZ BELGIUM,
AMERTRANZ BRAZIL CORPORATE DOCUMENTS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.8
AMERTRANZ APPROVALS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.9
EXCEPTIONS TO TITLE TO AMERTRANZ'S ASSETS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.11
POST-FINANCIAL STATEMENT DATE
AMERTRANZ LIABILITIES
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.13
MATERIAL ADVERSE CHANGES TO AMERTRANZ
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.16
AMERTRANZ AGREEMENTS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.17
AMERTRANZ LITIGATION
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.18(i)
ACCRUED SALARIES AND BENEFITS
TO AMERTRANZ STOCKHOLDERS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.18(ii)
ACCRUED SALARIES AND BENEFITS
TO AMERTRANZ BELGIUM STOCKHOLDERS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.18(iii)
ACCRUED SALARIES AND BENEFITS
TO AMERTRANZ BRAZIL STOCKHOLDERS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 8.1.19
SEVERANCE OBLIGATIONS OF AMERTRANZ,
AMERTRANZ BELGIUM, AND AMERTRANZ BRAZIL
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 9.2
ACCRUED EMPLOYEE FREIGHT GROUP OBLIGATIONS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 12.7
CONVERTIBLE AMERTRANZ INDEBTEDNESS
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 12.8
CLOSING HOLDING SHARES' OWNERSHIP
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
SCHEDULE 12.9
OTHER OPTIONS TO PURCHASE HOLDING SHARES
The information disclosed on this Schedule is deemed to be disclosed on all
other relevant Schedules to this Agreement.
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT A
GUARANTEE AGREEMENT
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT B
NET CASH RECEIPTS NOTE
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT C
HOLDING BOARD ELECTION PROXY
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT D
HOLDING PROMISSORY NOTE
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT E
SECURITY AGREEMENT
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT F
STOCK PLEDGE AGREEMENT
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT G
UNDERWRITER'S LETTER OF INTENT
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT H
ASSETS EXCHANGE AGREEMENT ASSUMPTION
CONCERNING CORPORATE MATTERS
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT I
SUBORDINATION OF BRIDGE LENDER
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT J
AMERTRANZ'S COUNSEL'S OPINION
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT K
AMERTRANZ BELGIUM INFORMATION
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT L
AMERTRANZ BRAZIL INFORMATION
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT M
FREIGHT GROUP'S COUNSEL'S OPINION
<PAGE>
ASSETS EXCHANGE AGREEMENT
EXHIBIT N
AMERTRANZ STOCKHOLDER SIGN-ON AGREEMENT
REVOLVING CREDIT PROMISSORY NOTE
$4,000,000 Baltimore, Maryland
February 7, 1996
Pursuant to the terms of an Assets Exchange Agreement, dated the date
hereof, by and among Amertranz Worldwide Holding Corp., TIA, Inc. ("Tradewinds")
and Caribbean Freight Systems, Inc. ("CAS"), among others (the "Assets Exchange
Agreement"), Tradewinds and CAS agreed to make available to Caribbean Air
Services, Inc., for a period of 150 days following the date hereof, the net cash
collections (i.e., the amount of the gross cash collections less all unpaid
costs arising out of or resulting from the services which generated such cash
collections, including income taxes payable by the beneficiary of such cash
collections attributable thereto) from the receivables collected pursuant to
Section 5.2 of the Assets Exchange Agreement, up to a maximum of $4,000,000
outstanding at any time (hereinafter, the "Net Cash Collections"). In addition,
Tradewinds and/or CAS may, in their or its discretion, advance other funds to
Caribbean Air Services, Inc. during such period (the "Lender Discretionary
Advances"), provided that the total of the Lender Discretionary Advances and the
Net Cash Collections outstanding at any time does not exceed $4,000,000.
NOW THEREFORE, FOR VALUE RECEIVED, CARIBBEAN AIR SERVICES, INC., a Delaware
corporation (the "Borrower") hereby promises to pay to the order of TIA, INC., a
Delaware corporation and CARIBBEAN FREIGHT SYSTEMS, INC., a Delaware
corporation, jointly (collectively, the "Lender"), in lawful money of the United
States of America and in immediately available funds, at 112 East 25th Street,
Baltimore, Maryland 21218, or at such other place as may be designated by notice
given by the holder hereof at least five days prior to the date such payment is
due, the principal sum of $4,000,000, or such portion of such amount which has
been advanced by Lender to Borrower pursuant to the terms hereof and is then
currently outstanding. The following terms shall apply to this Note.
1. Terms of Revolving Credit. The loan evidenced by this Note shall be a
revolving credit facility (hereinafter, the "Revolving Credit") in the amount of
the Net Cash Collections plus the Lender Discretionary Advances, up to a maximum
total of $4,000,000, on the following terms and conditions:
a. The term of the Revolving Credit shall begin on the date hereof and
shall end on the 151st day following the date hereof or sooner upon the
occurrence of a Default hereunder.
b. No interest shall accrue on advances which are Net Cash Collections
until maturity. Interest on advances which are Lender Discretionary Advances
shall accrue from the date of each such advance at the greater of (i) 1.0% per
month, or (ii) the floating and fluctuating per annum rate of interest equal to
the prime rate of interest as published in The Wall Street Journal or any
successor publication from time to time (or the average of such rates if more
than one such rate is so published) (the "Prime Rate") plus 4.0%, with changes
in the Prime Rate effective as of the effective date of each change in the Prime
Rate.
c. Advances under the Revolving Credit may be made in accordance with the
terms of this Note, upon receipt by Lender of a written request therefor signed
by Borrower,
<PAGE>
specifying the need for, applications of, and amounts of such funds; and
disbursements of such advances shall be made no more than one time per week. At
no time shall the aggregate obligation of Borrower to Lender exceed $4,000,000
at any time outstanding. Borrower may at any time repay all or any part of said
loans under the Revolving Credit. Thereafter, Borrower may receive further
advances, consistent with the terms and conditions hereof.
d. Borrower may prepay under this Note at any time in any amount without
premium or penalty.
e. Amounts borrowed under the Revolving Credit shall be used for the
purposes specified in Section 5.3 of the Assets Exchange Agreement.
2. Repayment. Amounts advanced under this Note shall be repaid each Monday
to the extent of all revenues of the Borrower in excess of the then-current
operating expenses of the Borrower. The entire unpaid balance due under this
Note together with all accrued and unpaid interest and other charges hereunder
shall be paid in full on the 151st day following the date hereof ("maturity") or
sooner upon the occurrence of a Default hereunder.
The Borrower covenants and agrees to use its reasonable best efforts to
replace the credit facility provided by the terms of this Note and, upon such
replacement, to repay all amounts due under this Note as soon as possible prior
to maturity.
3. Conditions of Lending. This Note and any and all advances under the
Revolving Credit are and shall at all times be subject to the following:
a. The representations and warranties of Borrower to Lender herein and in
the Assets Exchange Agreement shall be complete and accurate on the date hereof
and on and as of the date of each advance under the Revolving Credit with the
same effect as though such representations and warranties had been made on and
as the such date.
b. All covenants and agreements required to be performed by Borrower
hereunder and under the Assets Exchange Agreement shall have been performed to
the satisfaction of Lender as and when required.
c. On the date hereof and on and as of the date of each advance under the
Revolving Credit, no Default shall have occurred and no condition, event or act
which, with the giving of notice or the lapse of time or both, would constitute
a Default shall have occurred or shall exist.
4. Application of Payments. All payments made hereunder shall be applied
first to unpaid expenses and other charges hereunder, next to accrued and unpaid
interest, and then to principal.
5. Security. The obligations of the Borrower under this Note are guaranteed
by the Guarantors pursuant to the terms of the Guarantee Agreements of even date
herewith,
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<PAGE>
copies of which are attached hereto (collectively, the "Guarantee"), and are
secured pursuant to the terms of the Security Agreements of even date herewith
and the Stock Pledge Agreement of even date herewith, copies of which are
attached hereto (collectively, the "Security Agreements").
6. Default. All amounts due under this Note shall, at the option of Lender,
be immediately due and payable upon the occurrence of any of the following
events of default (each of which shall be hereinafter referred to as a
"Default"): (a) a default in the payment, when due or payable, of any obligation
of Borrower under this Note; (b) the Borrower shall (i) apply for or consent to
the appointment of, or there shall be a taking of possession by, a receiver,
custodian, trustee or liquidator for the Borrower, or a substantial portion of
the Borrower's property, (ii) become generally unable to pay the Borrower's
debts as they become due, (iii) make a general assignment for the benefit of
creditors or become insolvent, or (iv) become the debtor party, voluntarily or
involuntarily, to any proceeding under the U.S. Bankruptcy Code or any similar
federal or state statute; (c) a default by any Obligor or Amertranz (as those
terms are defined in the Security Agreements) shall occur or event of default
shall be continuing under any of the Security Agreements; (d) a default by any
Guarantor (as defined in the Guarantee) shall occur or event of default shall be
continuing under the Guarantee; (e) a default shall occur under the Holding
Promissory Note (as defined in the Assets Exchange Agreement); (f) the Borrower
liquidates, dissolves, or otherwise terminates or ceases to exist, merges,
consolidates or enters into a share exchange, or ceases to engage in business;
(g) the Borrower sells, assigns, pledges or otherwise transfers, distributes,
encumbers or leases all or any substantial portion of its assets outside the
ordinary course of the Borrower's business, except with the Lender's consent;
(h) failure of a "Condition of Lending" described hereinabove in Section 3.
7. Acceleration Upon Default. Upon the occurrence of a Default, Lender may,
at its option, in its sole and absolute discretion and without notice or demand,
declare the entire unpaid balance of principal plus accrued interest and any
other sums payable hereunder immediately due and payable.
8. Expenses of Collection. The Borrower promises to pay to the order of the
Lender, upon demand, all reasonable costs and expenses of collection of this
Note, including, but not limited to, attorneys' fees and expenses, plus interest
on all such costs and expenses from the date of demand at the rate in effect
from time to time under this Note.
9. Default Interest Rate. Upon the occurrence of a Default other than a
default in the payment at maturity of all amounts due under this Note, the rate
of interest accruing on the disbursed unpaid principal balance shall
automatically and without further action by Lender be increased to the default
rate of interest under the Holding Promissory Note, independent of whether
Lender elects to accelerate the unpaid principal balance as a result of such
default. Upon the occurrence of a Default due to a default in the payment at
maturity of all amounts due under this Note, whether or not Lender elects to
accelerate the unpaid principal balance as a result of such default, the per
annum rate of interest accruing on the unpaid principal balance shall
automatically and without further action by Lender be increased to the
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<PAGE>
lower of (i) the rate of interest accruing on the credit facility pursuant to
the Purchase and Sale Agreement dated March 16, 1995, as amended, between
Fidelity Funding of California, Inc., and Amertranz Worldwide, Inc. (one of the
Guarantors hereunder), or the successor to such credit facility, plus 4.0%, or
(ii) the maximum rate permitted by applicable law.
10. Confession of Judgment. The Borrower hereby empowers any attorney or
the clerk of any court of record within the United States or elsewhere to appear
for the Borrower before any court having jurisdiction upon a Default and to
confess judgment against the Borrower for the then unpaid amount of the
Principal Sum, all late charges then due, all accrued and unpaid interest, plus
reasonable attorneys' fees, together with costs of suit, hereby waiving and
releasing presentment, demand for payment, protest, notice of non-payment or
error and all rights of exemption, appeal, modification, vacation, stay of
execution, inquisition and extension upon any levy on real estate or personal
property to which Borrower may be entitled under the laws of any state or
territory of the United States now in force or which hereafter may be passed.
The inclusion of a fixed amount of attorneys' fees in any confessed judgment
shall not limit the Borrower's liability under this Note for all costs of
collection, including attorneys' fees and expenses.
11. Interest Rate After Judgment. If judgment is entered against Borrower
on this Note, the amount of the judgment entered (which may include principal,
interest, default interest, late charges, fees and costs) shall bear interest at
the higher of (i) the highest rate authorized under this Note as of the date of
entry of the judgment, or (ii) the highest rate permitted by law as of the date
of entry of judgment.
12. Waiver of Protest. Borrower hereby waives presentment, notice, protest,
notice of acceptance of this Note, notice of loans made, credit extended, and
all other action taken in reliance hereon and all other demands and notices of
any type.
13. Waiver. No failure or delay by the holder hereof to insist upon the
strict performance of any term, provision, or agreement of this Note, or to
exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, provision or agreement or of any such
breach, or preclude the holder hereof from exercising any such right, power or
remedy at any later time or times. By accepting payment after the due date of
any amount payable under this Note, the holder hereof shall not be deemed to
have waived the right either to require prompt payment when due of all other
amounts due under this Note, or to declare a default hereunder.
14. Notices. All notices and demands required or permitted hereunder shall
be sufficiently given and deemed received by the Borrower on the date hand
delivered to the Borrower or, if delivered after 5:00 p.m., on the next business
day, on the business day following the day transmitted to the Borrower by
overnight courier, or two business days after the date mailed in the U.S., first
class, certified, return receipt requested, postage prepaid, addressed as
follows:
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<PAGE>
Caribbean Air Services, Inc.
c/o Amertranz Worldwide Holding, Inc.,
2001 Marcus Avenue
Lake Success, New York 11042
Fax (516) 326-2248
Attn: Chairman
or to such other address as the Borrower may notify the Lender or other holder
hereof in writing mailed by certified mail, return receipt requested, to the
address of the Lender as set forth above or such other address as then may have
been designated for payment hereunder. No other method of giving notice or
demand is hereby precluded.
15. Choice of Law; Jurisdiction. This Note shall be governed, construed and
enforced in accordance with the laws of the State of Maryland. The Borrower
hereby consents to the exercise of personal jurisdiction over the Borrower by
all state and federal courts situate in Baltimore City or Baltimore County,
Maryland, and consents to the laying of venue in each such jurisdiction.
16. Absolute Obligations. The obligations of the Borrower under this Note
are irrevocable, absolute and unconditional, and are not subject to any claim or
right of setoff. The Borrower hereby waives all rights to assert any setoff or
counterclaim in any proceeding brought to enforce this Note.
17. Waiver of Jury Trial. THE BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT TO ENFORCE OR OTHERWISE RELATING
TO THIS NOTE.
18. Modification. No modification, change, waiver or amendment of this Note
shall be effective unless in writing and signed by the Borrower and the Lender
or other holder hereof.
19. Binding Effect. This Note shall be binding upon Borrower and its
successors and assigns.
20. Headings. The section headings in this Note are for reference only, and
shall not limit or otherwise affect any of the terms hereof.
21. Signature. This Note shall be binding upon the Borrower and the
Borrower's successors and assigns.
[SIGNATURE APPEARS ON NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note under seal, with
the intention that it be a sealed instrument on the day and year first above
written.
WITNESS/ATTEST: BORROWER:
CARIBBEAN AIR SERVICES, INC.
_______/s/________________ By: ______/s/________________(SEAL)
Michael Barsa
Vice President
STATE OF NEW YORK)
CITY/COUNTY OF NEW YORK)
I HEREBY CERTIFY, that on this 7th day of February, 1996, before me, the
subscriber, a Notary Public of the State aforesaid, personally appeared Michael
Barsa, who acknowledged himself to be the Vice President of Caribbean Air
Services, Inc., a Delaware corporation, and that he, being authorized to do so,
executed this Revolving Credit Promissory Note for the purposes contained
therein by signing the Revolving Credit Promissory Note on behalf of such
entity, in my presence.
__________/s/________________(SEAL)
Notary Public
My Commission Expires:______/_____
C62599C.198
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement filed on Form S-1 registering 1,750,000 shares of common
stock and 1,500,000 redeemable common stock purchase warrants.
ARTHUR ANDERSEN LLP
New York, New York
June 5, 1996
<PAGE>
EXHIBIT 23.2
Consent of Independent Auditors
The Board of Directors
TIA, Inc.:
We consent to the use of our report included herein and to the references to our
firm under the headings "Selected Consolidated Financial Data" and "Experts" in
the prospectus.
/s/ KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
Greensboro, North Carolina
June 4, 1996
